Sable Natural Resources (SNREQ) 10-Q 2012 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

Commission File Number: 53915

NYTEX ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware	84-1080045
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

12222 Merit Drive, Suite 1850 Dallas, Texas	75251
(Address of principal executive offices)	(Zip Code)

972-770-4700

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common Stock, $0.001 par value per share

(Title of class)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of October 31, 2012, the registrant had 26,653,158 shares of common stock outstanding.

TABLE OF CONTENTS

		Page
PART I
FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements (Unaudited):
	Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011	4
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2011	5
	Consolidated Statements of Comprehensive Loss for the Three and Nine Months Ended September 30, 2012 and 2011	6
	Consolidated Statements of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2012 and 2011	7
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2011	8
	Notes to Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	30
PART II
OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
Signatures		39

FORWARD-LOOKING STATEMENTS

The statements contained in all parts of this document relate to future events, including, but not limited to, any and all statements regarding future operations, financial results, business plans and cash needs and other statements that are not historical facts are forward looking statements.  When used in this document, the words “anticipate,” “budgeted,” “planned,” “targeted,” “potential,” “estimate,” “expect,” “may,” “project,” “believe” and similar expressions are intended to be among the statements that identify forward looking statements. Such statements involve known and unknown risks and uncertainties, including, but not limited to, those relating to the current economic downturn and credit crisis, the volatility of natural gas and oil prices, our dependence on our key personnel, factors that affect our ability to manage our growth and achieve our business strategy, technological changes, our significant capital requirements, the potential impact of government regulations, adverse regulatory determinations, litigation, competition, business and equipment acquisition risks, availability of equipment, weather, availability of financing, financial condition of our industry partners, ability of industry partners/customers to obtain permits and other factors detailed herein. Some of the factors that could cause actual results to differ from those expressed or implied in forward-looking statements are described under “Risk Factors” and in our Form 10-K for the year ended December 31, 2011 filed with the U.S. Securities and Exchange Commission.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties. You should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement and we undertake no obligation to update or revise any forward-looking statement.

3

PART I

Item 1.  Financial Statements

NYTEX ENERGY HOLDINGS, INC.

Consolidated Balance Sheets

	September 30, 2012 (Unaudited)			December 31, 2011
Assets
Current assets:
Cash and cash equivalents	$	2,056,060		$	72
Accounts receivable, net	2,335,128			77,159
Marketable securities	511,280			—
Prepaid expenses and other	14,550			31,632
Deferred tax asset, net	1,702			—
Assets from discontinued operations	—			80,733,006
Total current assets	4,918,720			80,841,869
Restricted cash	6,250,205			—
Property and equipment, net	421,368			66,112
Deferred financing costs	—			1,023,269
Deposits and other	9,296			9,296
Total assets	$	11,599,589		$	81,940,546
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	1,196,454		$	1,330,121
Deposits held in trust	3,158,650			—
Revenues payable	162,702			7,700
Wells in progress	89,237			502,106
Debt - current portion	155,022			2,577,484
Liabilities from discontinued operations	—			60,179,495
Total current liabilities	4,762,065			64,596,906
Other liabilities:
Debt	288,266			1,445,935
Derivative liabilities	3,070			2,740
Deferred tax liabilities	1,702			662,297
Total liabilities	5,055,103			66,707,878
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, Series A convertible, $0.001 par value; 10,000,000 shares authorized; 5,763,869 and 5,761,028 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively	5,764			5,761
Common stock, $0.001 par value; 200,000,000 shares authorized; 27,652,749 issued and 23,421,854 outstanding at September 30, 2012 and 27,467,723 shares issued and outstanding at December 31, 2011	27,653			27,468
Additional paid-in capital	27,234,399			25,974,600
Treasury stock, at cost: 4,230,895 and no shares at September 30, 2012 and December 31, 2011, respectively	(2,732,342		)	—
Accumulated deficit	(17,948,728		)	(10,775,161		)
Accumulated other comprehensive income	9,349			—
Total stockholders’ equity	6,596,095			15,232,668
Non-controlling interest	(51,609		)	—
Total equity	6,544,486			15,232,668
Total liabilities and stockholders’ equity	$	11,599,589		$	81,940,546

See accompanying Notes to Consolidated Financial Statements

4

NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues:
Land services	$	864,882		$	140,674		$	3,015,853		$	271,164
Oil and gas sales	54,026			40,796			78,450			332,022
Staffing services	11,120			—			14,023			—
Other	1,640			—			4,885			—
Total revenues	931,668			181,470			3,113,211			603,186
Operating expenses:
Oil & gas lease operating expenses	39,214			9,313			77,542			66,157
Depreciation, depletion, and amortization	4,789			6,122			29,402			47,800
Selling, general, and administrative expenses	946,893			779,800			1,982,106			3,671,722
Loss on litigation settlement	—			—			—			965,065
(Gain) loss on sale of assets, net	(419,834		)	—			(419,834		)	5,004
Total operating expenses	571,062			795,235			1,669,216			4,755,748
Income (loss) from operations	360,606			(613,765		)	1,443,995			(4,152,562		)
Other income (expense):
Interest and dividend income	4,022			843			5,206			1,229
Interest expense	(15,714		)	(213,259		)	(335,314		)	(601,286		)
Change in fair value of derivative liabilities	13,230			1,301			(3,070		)	1,690,561
Total other income (expense)	1,538			(211,115		)	(333,178		)	1,090,504
Income (loss) from continuing operations before income taxes	362,144			(824,880		)	1,110,817			(3,062,058		)
Income tax benefit (provision)	(118,018		)	—			267,773			—
Income (loss) from continuing operations	244,126			(824,880		)	1,378,590			(3,062,058		)
Discontinued Operations
Loss from discontinued operations, before taxes	—			(1,329,141		)	(8,728,028		)	(5,232,041		)
Loss on sale of discontinued operation	(811,895		)	—			(665,017		)	—
Income tax benefit	279,736			693,321			1,433,108			1,426,806
Loss from discontinued operations	(532,159		)	(635,820		)	(7,959,937		)	(3,805,235		)
Net loss	(288,033		)	(1,460,700		)	(6,581,347		)	(6,867,293		)
Non-controlling interest	25,156			—			51,609			—
Net loss attributable to NYTEX Energy Holdings, Inc.	(262,877		)	(1,460,700		)	(6,529,738		)	(6,867,293		)
Preferred stock dividends	(385,290		)	(131,906		)	(643,829		)	(399,436		)
Net loss to common stockholders	$	(648,167	)	$	(1,592,606	)	$	(7,173,567	)	$	(7,266,729	)
Basic earnings per share:
Earnings (loss) from continuing operations	$	0.01		$	(0.03	)	$	0.05		$	(0.12	)
Earnings (loss) from discontinued operations	$	(0.02	)	$	(0.02	)	$	(0.31	)	$	(0.14	)
Net income (loss)	$	(0.01	)	$	(0.05	)	$	(0.26	)	$	(0.26	)
Net income (loss) attributable to common stockholders	$	(0.03	)	$	(0.06	)	$	(0.28	)	$	(0.28	)
Diluted earnings per share:
Earnings (loss) from continuing operations	$	0.01		$	(0.03	)	$	0.06		$	(0.12	)
Earnings (loss) from discontinued operations	$	(0.02	)	$	(0.02	)	$	(0.31	)	$	(0.14	)
Net income (loss)	$	(0.01	)	$	(0.05	)	$	(0.25	)	$	(0.26	)
Net income (loss) attributable to common stockholders	$	0.01		$	(0.06	)	$	(0.23	)	$	(0.28	)
Weighted average shares outstanding
Basic	24,431,299			26,940,633			25,598,110			26,481,719
Diluted	24,841,171			26,940,633			26,012,852			26,481,719

See accompanying Notes to Consolidated Financial Statements

5

NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Comprehensive Loss

(Unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended Septenber 30,
	2012			2011			2012			2011
Net loss to common stockholders	$	(648,167	)	$	(1,592,606	)	$	(7,173,567	)	$	(7,266,729	)
Other comprehensive income
Unrealized holding gains on securities available for sale	9,302			—			9,349			—
Other comprehensive income	9,302			—			9,349			—
Comprehensive loss to common stockholders	$	(638,865	)	$	(1,592,606	)	$	(7,164,218	)	$	(7,266,729	)

See accompanying Notes to Consolidated Financial Statements

6

NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

(Unaudited)

																			Accumulated
	Series A Convertible								Additional										Other		Non-
	Preferred Stock					Common Stock			Paid-In			Treasury Stock				Accumulated			Comprehensive		Controlling
	Shares		Amounts			Shares	Amounts		Capital			Shares	Amounts			Deficit			Income		Interest			Total
Balance at December 31, 2010	5,580,000		$	5,580		26,219,665	$	26,219	$	24,750,200		—	$	—		$	(26,997,299	)	$	—	$	—		$	(2,215,300	)
Issuance of Series A Convertible Preferred Stock	420,000		420						369,050															369,470
Shares issued for share-based compensation and services						177,417	178		700,498															700,676
Shares issued for debt converted						76,667	77		114,922															114,999
Shares issued for warrants exercised						504,124	504		12,733															13,237
Issuance of warrant derivative									(118,440		)													(118,440		)
Shares of Preferred Stock issued for warrants exercised	97,523		97						(97		)													—
Preferred Stock converted to common shares	(336,495	)	(336		)	336,495	336																	—
Dividend declared																(399,436		)						(399,436		)
Net loss																(6,867,293		)						(6,867,293		)
Balance at September 30, 2011	5,761,028		$	5,761		27,314,368	$	27,314	$	25,828,866		—	$	—		$	(34,264,028	)	$	—	$	—		$	(8,402,087	)
Balance at December 31, 2011	5,761,028		$	5,761		27,467,723	$	27,468	$	25,974,600		—	$	—		$	(10,775,161	)	$	—	$	—		$	15,232,668
Shares issued for debt						20,000	20		32,980															33,000
Share-based compensation						137,526	138		34,219															34,357
Shares issued for services						27,500	27		61,647															61,674
Shares for warrants exercised	2,841		3						(3		)													—
Treasury Shares acquired												4,230,895	(2,732,342		)									(2,732,342		)
Stock dividend declared on Series A convertible preferred stock to be issued									1,130,956															1,130,956
Comprehensive income (loss):
Unrealized gain on marketable securities																			9,349					9,349
Dividends declared																(643,829		)						(643,829		)
Net loss																(6,529,738		)			(51,609		)	(6,581,347		)
Comprehensive loss to common stockholders																								(7,215,827		)
Balance at September 30, 2012	5,763,869		$	5,764		27,652,749	$	27,653	$	27,234,399		4,230,895	$	(2,732,342	)	$	(17,948,728	)	$	9,349	$	(51,609	)	$	6,544,486

See accompanying Notes to Consolidated Financial Statements

7

NYTEX ENERGY HOLDINGS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:
Net Loss	$	(6,581,347	)	$	(6,867,293	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation, depletion, and amortization	3,155,353			6,597,544
Bad debt expense	59,906			159,213
Share-based compensation	96,031			700,676
Deferred income taxes	(1,700,881		)	(1,555,649		)
Accretion of discount on asset retirement obligations	—			(50,078		)
Amortization of debt discount	45,334			134,121
Amortization of deferred financing fees	163,127			297,364
Accretion of Senior Series A redeemable preferred stock liability	1,299,495			2,829,545
Change in fair value of derivative liabilities	4,270,070			(355,387		)
Loss on litigation settlement	—			965,065
Gain on sale of assets, net	(344,142		)	(16,878		)
Loss on disposal of discontinued operations	665,017			—
Change in working capital:
Accounts receivable	(243,355		)	(3,796,871		)
Inventories	(219,055		)	(111,487		)
Prepaid expenses and other	1,518,032			(1,587,510		)
Accounts payable and accrued expenses	(1,235,518		)	3,138,829
Deposits held in trust	3,127,786			—
Other liabilities	155,002			68,181
Net cash provided by operating activities	4,230,855			549,385
Cash flows from investing activities:
Additions to property and equipment	(358,037		)	(4,997,362		)
Proceeds from sale of property and equipment	23,000			1,298,679
Investments in oil and gas properties	(389,618		)	—
Disposition of FDF	11,653,786			—
Restricted cash	(6,250,205		)	—
Purchase of marketable securities	(501,931		)	—
Net cash provided by (used in) investing activities	4,176,995			(3,698,683		)
Cash flows from financing activities:
Redemption of convertible debentures	(3,208,014		)	—
Proceeds from the issuance of common stock and warrants	—			12,500
Proceeds from the issuance of Series A convertible preferred stock	—			369,470
Proceeds from the issuance of 9% convertible debentures	—			936,000
Borrowings under senior facility	29,345,714			63,120,440
Payments under senior facility	(31,112,386		)	(63,401,026		)
Borrowings under notes payable	303,051			3,883,773
Payments on notes payable	(1,690,972		)	(1,918,150		)
Net cash provided by (used in) financing activities	(6,362,607		)	3,003,007
Net increase (decrease) in cash and cash equivalents	2,045,243			(146,291		)
Cash and cash equivalents at beginning of period	10,817			209,498
Cash and cash equivalents at end of period	$	2,056,060		$	63,207

See accompanying Notes to Consolidated Financial Statements

8

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1.  NATURE OF BUSINESS

NYTEX Energy Holdings, Inc. (“NYTEX Energy”) is an energy holding company with operations centralized in two subsidiaries, NYTEX Petroleum, Inc. (“NYTEX Petroleum”), a wholly-owned exploration and production company engaged in the acquisition, development, and production of oil and natural gas reserves from low-risk, high rate-of-return wells in shallow carbonate reservoirs, and Petro Staffing Group, LLC, (“PSG”), a full-service staffing agency formed in March 2012 providing the energy marketplace with temporary and full-time professionals.  PSG sources, evaluates, and delivers quality candidates to address the demand for personnel within the oil & gas industry.  NYTEX Energy owns 80% of PSG resulting in a non-controlling interest.

Prior to May 4, 2012, NYTEX Energy, through its wholly-owned subsidiary, NYTEX FDF Acquisition, Inc. (“Acquisition Inc.”), owned a 100% membership interest in New Francis Oaks, LLC (“New Francis Oaks”) and its wholly-owned operating subsidiary, Francis Drilling Fluids, Ltd. (“Francis Drilling Fluids,” or “FDF” and, together with New Francis Oaks, the “Francis Group”), a full-service provider of drilling, completion, and specialized fluids, dry drilling and completion products, technical services, industrial cleaning services, and equipment rental for the oil and gas industry.    On May 4, 2012, certain subsidiaries of ours entered into an Agreement and Plan of Merger (the “Merger Agreement”) with an unaffiliated third party, FDF Resources Holdings LLC (the “Purchaser”).  Pursuant to the Merger Agreement, New Francis Oaks was merged into the Purchaser and, as a result, FDF is now owned by an unaffiliated third party.  See below for further discussion.

NYTEX Energy and subsidiaries are collectively referred to herein as the “Company,” “we,” “us,” and “our.”

NYTEX Energy and its subsidiaries are headquartered in Dallas, Texas.

Disposition of FDF

As more fully reported on Form 8-K on May 10, 2012, on May 4, 2012, (the “Closing Date”), Acquisition Inc., together with New Francis Oaks, entered into the Merger Agreement with the Purchaser.  Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into the Purchaser, and the Purchaser continued as the surviving entity after the merger (the “Disposition” or the “Merger”).  New Francis Oaks owns 100% of the outstanding shares of FDF, and, as a result of the Disposition, we no longer own FDF.

The total consideration for the Merger paid by the Purchaser on the Closing Date was $62,500,000 (the “Merger Proceeds”).  After: (i) an adjustment to the amount of the Merger Proceeds based upon the level of estimated working capital of the Francis Group on the Closing Date; (ii) the payment or provision for payment of all indebtedness of the Francis Group on the Closing Date; (iii) the payment of all indebtedness of Acquisition Inc. on the Closing Date (including under its senior secured credit facility with PNC Bank; (iv) the payment of the Put Payment Amount (as defined below) due to WayPoint Nytex, LLC (“WayPoint”) under the WayPoint Purchase Agreement (as defined below); (v) the payment of all transaction expenses relating to the Merger; (vi) the payment to the Company of $812,500 of accrued management fees and $110,279 of expense reimbursement due and payable to the Company under the Management Services Agreement, dated November 23, 2010, between the Company and FDF (the “Management Agreement”); (vii) the payment of certain transaction bonuses payable to certain FDF employees; and (viii) the Purchaser’s delivery of $6,250,000 of the Merger Proceeds (the “Escrow Fund”) to The Bank of New York Mellon Trust Company, N.A., as escrow agent, to be held in escrow under the Escrow Agreement (as defined below) and reported as restricted cash on the accompanying consolidated balance sheet at September 30, 2012, Acquisition Inc. received on the Closing Date remaining cash transaction proceeds in the amount of approximately $4,481,000.  The Merger Agreement provides that, to the extent that the final amount of working capital of the Francis Group on the Closing Date is greater than the estimated amount of working capital, as determined under the Merger Agreement, the Purchaser will pay to Acquisition Inc. the amount of such working capital surplus, provided that, pursuant to the Omnibus Agreement (as defined below), WayPoint is entitled to receive 87.5% of any such working capital surplus payment.  To the extent that the final amount of working capital of the Francis Group on the Closing Date is less than the estimated amount of working capital, Acquisition Inc. will pay to the Purchaser the amount of such working capital deficit, which payment will be made out of the Escrow Fund, provided that, pursuant to the Omnibus Agreement, WayPoint is obligated to pay to Acquisition Inc. 87.5% of the amount of any such working capital deficit.

As previously disclosed, on April 13, 2011, we received a letter from PNC, notifying the Company of the occurrence and continued existence of certain events of default (the “PNC Default”) under the Revolving Credit, Term Loan and Security Agreement (the “Senior Facility”).  On November 3, 2011, the Company entered into a First Amendment to Revolving Credit, Term Loan and Security Agreement and Limited Waiver (the “First Amendment”) with PNC, which was effective as of November 1, 2011.  Under the First Amendment, PNC waived each of the events of default under the Senior

9

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Facility.  However, as a result of the PNC Default, on April 14, 2011, the Company received a letter from WayPoint, as the holder of all of the outstanding shares of the Senior Series A Redeemable Preferred Stock of NYTEX Acquisition, stating that the Company was in default under the Preferred Stock and Warrant Purchase Agreement, by and among the Company, Acquisition Inc., and WayPoint (the “WayPoint Purchase Agreement”), for defaults similar to the PNC Default plus for our failure to pay dividends to WayPoint when due under the terms of the WayPoint Purchase Agreement.  On May 4, 2011, WayPoint demanded, pursuant to a “Put Election Notice” delivered under the WayPoint Purchase Agreement (the “Put Election Notice”), that, as a result of those defaults, the Company and Acquisition Inc. repurchase from WayPoint, for an aggregate purchase price of $30,000,000, all of the securities of Acquisition Inc. and the Company originally acquired by WayPoint pursuant to the WayPoint Purchase Agreement, which securities consisted of: (i) 20,750 shares of Senior Series A Redeemable Preferred Stock of NYTEX Acquisition (the “WayPoint Series A Shares”); (ii) one (1) share of Series B Redeemable Preferred Stock of the Company (the “WayPoint Series B Share”); (iii) the Purchaser Warrant (as defined in the WayPoint Purchase Agreement); and (iv) the Control Warrant (as defined in the WayPoint Purchase Agreement) (collectively, the “WayPoint Securities”).  Our failure to repurchase the WayPoint Securities in accordance with the Put Election Notice resulted in an additional event of default under the WayPoint Purchase Agreement.  Thereafter, pursuant to the terms of the Forbearance Agreement, dated as of September 30, 2011 (the “Forbearance Agreement”), by and among the Company, Acquisition Inc., and WayPoint, WayPoint agreed to forbear, for a period of 60 days, from exercising its rights and remedies under the WayPoint Purchase Agreement.  On November 14, 2011, WayPoint provided a formal written notice to the Company that the Company was in default under the Forbearance Agreement.  Due to cross-default provisions, the default under the Forbearance Agreement also constituted a default under the First Amendment. As a result of the defaults under the WayPoint Purchase Agreement and the Forbearance Agreement, WayPoint initiated certain remedies afforded to it under the WayPoint Purchase Agreement and the Forbearance Agreement, including the sale of FDF to a third party.  WayPoint directed the FDF sale process and, although we participated in the process, we did not control the ultimate disposition of FDF, including, but not limited to, the timing of the Merger and the Merger consideration.  As a result of the transactions associated with the Merger, we are no longer in default under the First Amendment with PNC.

In connection with the consummation of the Merger, we entered into an Omnibus Agreement (the “Omnibus Agreement”) with WayPoint and the Francis Group.  The Omnibus Agreement became effective upon the consummation of the Merger.

Pursuant to the Omnibus Agreement, upon the consummation of the Merger:

(i)            the Management Agreement was terminated;

(ii)           Waypoint paid $150,000 to the Company out of the Put Payment Amount due and payable to WayPoint;

(iii)          the Company was paid $812,500 from the Merger Proceeds, which sum represented accrued management fees due and payable to the Company from FDF under the Management Agreement; and

(iv)          the Company was paid $110,279 from the Merger Proceeds, which sum represented reimbursement by FDF of certain expenses previously incurred by the Company in respect of certain professional services provided, and which reimbursement was due and payable to the Company from FDF under the Management Agreement.

In the Omnibus Agreement, the Company, WayPoint, and the Francis Group also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties.  The releases also covered claims that any of the parties could assert against any employees of the FDF Group.  In addition, the parties agreed that WayPoint would bear 87.5% of any post-closing working capital deficit under the Merger Agreement and WayPoint would receive 87.5% of any post-closing working capital surplus under the Merger Agreement.

Further, in connection with the consummation of the Merger, we entered into a Settlement Agreement (the “Settlement Agreement”) with WayPoint, the Francis Group, and Michael G. Francis and Bryan Francis (together,  the “Francises”).  The Settlement Agreement became effective upon the consummation of the Merger.

Pursuant to the Settlement Agreement, upon the consummation of the Merger:

(i)            WayPoint paid out of the Put Payment Amount a $100,000 bonus to Michael G. Francis, the President of NYTEX Acquisition, and a $25,000 bonus to Jude N. Gregory, the Vice President and Chief Financial Officer of Acquisition Inc.;

(ii)           (A) the Company caused the release of the $1,800,000 of  Escrowed Cash (as defined in the Escrow Agreement, dated as of November 23, 2010, by and among Acquisition Inc., Bryan Francis and The F&M Bank &

10

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Trust Company (the “Francis Escrow Agreement”)) then being held in escrow pursuant to the Francis Escrow Agreement, in accordance with the terms of the Francis Escrow Agreement, and (B) Michael G. Francis transferred and assigned back to the Company 625,000 shares of common stock of the Company then owned by Michael G. Francis and originally issued to him pursuant to the Membership Interest Purchase Agreement, dated as of November 23, 2010 (the “Francis Purchase Agreement”), and then being held in escrow pursuant to the Francis Escrow Agreement;

(iii)          (A) Michael G. Francis transferred and assigned back to the Company all of the remaining 2,197,063 shares of common stock then owned by him and originally issued to him pursuant to the Francis Purchase Agreement, and (B) Bryan Francis transferred and assigned back to the Company all of the 381,607 shares of common stock originally issued to him pursuant to the Francis Purchase Agreement, as well as all of the 27,225 shares of NYTEX Common Stock issued to him in connection with his employment by FDF;

(iv)          the employment agreements of Michael G. Francis and Bryan Francis terminated and they became at-will employees of the FDF Group;

(v)           each of the three designees of WayPoint then serving as directors of Acquisition Inc., which included John Henry Moulton, Thomas Drechsler and Lee Buchwald, resigned as directors of Acquisition Inc., effective immediately upon the consummation of the Merger; and

(vi)          in exchange for receipt by WayPoint of the Put Payment Amount (which consisted of $30,000,000, less an aggregate of $306,639 of dividends previously received by WayPoint on account of the WayPoint Senior Series A Redeemable Preferred Stock, less an aggregate of $275,000 payable by WayPoint to the Company, Michael G. Francis and Jude N. Gregory pursuant to the Settlement Agreement, less an additional $449,072 (representing 87.5% of the estimated working capital deficit of the Francis Companies on the Closing Date, but subject to the right of WayPoint to subsequently receive 87.5% of any final working capital surplus of the Francis Companies on the Closing Date and the obligation of WayPoint to subsequently pay 87.5% of any final working capital deficit of the Francis Companies on the Closing Date, pursuant to the Omnibus Agreement); the “Put Payment Amount”), WayPoint transferred and assigned (A) the Senior Series A Redeemable Preferred Stock back to Acquisition Inc., (B) the Purchaser Warrant and the Control Warrant back to the Company, and (C) the WayPoint Series B Share back to the Company, and all such securities were cancelled.

In the Settlement Agreement, the Company, WayPoint, the Francis Group, and the Francises also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties, including in connection with any employment agreements or arrangements of the Francises.  The releases also covered claims that any of the parties could assert against any employees of the FDF Group.

NOTE 2.  PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information.  These financial statements include the accounts of NYTEX Energy and entities in which it holds a controlling interest.  All significant intercompany accounts and transactions have been eliminated in consolidation.  Investments in non-controlled entities over which we have the ability to exercise significant influence over operating and financial policies are accounted for using the equity method.  In applying the equity method of accounting, the investments are initially recognized at cost, and subsequently adjusted for our proportionate share of earnings and losses and distributions.

The interim financial data as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 is unaudited; in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments, necessary to a fair statement of the results for the interim periods.  The consolidated results of operations for the three and nine months ended September 30, 2012 and 2011 are not necessarily indicative of the results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto as filed in our Annual Report on Form 10-K for the year ended December 31, 2011.  Certain prior-period amounts have been reclassified to conform to the current-year presentation.    Land services revenues consists of fees

11

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

generated from analyzing land and mineral title reports, leasehold title analysis and reports, land title runsheets, sourcing, negotiating and acquiring leases, document preparation and performing title curative functions.  Such revenues had previously been reported as Other revenues on the consolidated statement of operations.

All references to the Company’s outstanding common shares and per share information have been adjusted to give effect to the one-for-two reverse stock split effective November 1, 2010.

Discontinued Operation

The consolidated financial statements present the operations of our former oilfield services segment (FDF) as discontinued operations in accordance with ASC 205-20-55 for all periods presented.

NOTE 3.  DERIVATIVE LIABILITIES

At September 30, 2012, we had one derivative on our consolidated balance sheet which was related to the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock.  The agreement setting forth the terms of the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock include an anti-dilution provision that requires a reduction in the instrument’s exercise price should subsequent at-market issuances of the Company’s common stock be issued below the instrument’s original exercise price of $2.00 per share.  Accordingly, we consider the warrants to be a derivative; and, as a result, the fair value of the derivative is included as a derivative liability on the accompanying consolidated balance sheets.  At September 30, 2012 and December 31, 2011, the fair value of the warrants issued to the holders of the Series A Convertible Preferred Stock was $3,070 and $0, respectively.

Changes in fair value of the derivative liabilities are included as a separate line item within other income (expense) in the accompanying consolidated statement of operations for the three months ended September 30, 2012 and 2011, and are not taxable or deductible for income tax purposes.

NOTE 4.  DEBT

A summary of our outstanding debt obligations as of September 30, 2012 and December 31, 2011 is presented as follows:

	September 30, 2012			December 31, 2011
18% Demand Note due November 2011	$	—		$	244,000
6% Related Party Loan due September 2012	—			138,000
12% Convertible Debentures due October 2012	—			2,032,501
9% Convertible Debentures due February 2014	—			1,173,013
Revolving Line of Credit due July 2014	108,355			—
Francis Promissory Note (non-interest bearing) due October 2015	316,159			385,824
7.5% Secured Equipment Loan due February 2016	—			27,781
7.5% Secured Equipment Loan due March 2016	18,774			22,300
Total debt	443,288			4,023,419
Less: current maturities	(155,022		)	(2,577,484		)
Total long-term debt	$	288,266		$	1,445,935

Carrying values in the table above include net unamortized debt discount of $171,341 and $216,676 as of September 30, 2012 and December 31, 2011, respectively, which is amortized to interest expense over the terms of the related debt.

12

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Francis Promissory Note

In connection with the FDF acquisition, on November 23, 2010, we entered into a promissory note payable to a former interest holder of FDF (“Francis Promissory Note”) in the face amount of $750,000.  The Francis Promissory Note is an unsecured, non-interest bearing loan that requires quarterly payments of $37,500 and matures October 1, 2015.  At September 30, 2012 and December 31, 2011, we have recorded the Francis Promissory Note as a discounted debt of $316,159 and $385,824 respectively, using an imputed interest rate of 9%.

Related Party Loan

In September 2012, we paid in full, the outstanding balance due on the 6% Related Party loan.  During the nine months ended September 30, 2012 and 2011, interest expense related to the 6% Related Party Loan totaled $5,233 and $5,625, respectively.

Other Loans

On July 11, 2012, we entered into a revolving line of credit agreement with a commercial bank providing for loans up to $325,000.  The revolving credit line bears an annual interest rate based on the 30 day LIBOR plus 1.95% and matures on July 11, 2014.   Payments of interest only are payable monthly with any outstanding principal and interest due in full, at maturity.  The revolving line of credit is secured by our marketable securities.  We pay no fee for the unused portion of the revolving line of credit nor are there any prepayment penalties.  In September 2012, we drew $108,355 from the revolving line of credit, primarily to pay in full, the 6% Related Party Loan.  At September 30, 2012, amounts available under the revolving line of credit were $216,645.

In July 2012, we disposed of a company-owned automobile that secured the 7.5% secured equipment loan due February 2016 and paid in full, the outstanding balance due under the loan.  We are no longer obligated under such loan.

NOTE 5.  COMMITMENTS AND CONTINGENCIES

Leases

The Company leases office space under a non-cancelable operating lease which provides for minimum annual rentals.  At September 30, 2012, future minimum obligations under this lease agreement are as follows:

September 1, 2012 - December 31, 2012	$	19,829
2013	80,234
2014	81,583
2015	71,791
2016	58,283
Thereafter	—
	$	311,720

Total lease rental expense related to continuing operations for the nine months ended September 30, 2012 and 2011 was $58,745 and $39,727 respectively.  Included in discontinued operations for the nine months ended September 30, 2012 and 2011 is $1,585,140 and $1,669,979, respectively, of lease rental expense related to the FDF operations.

Litigation

We may become involved from time to time in litigation on various matters, which are routine to the conduct of our business.  We believe that none of these actions, individually or in the aggregate, will have a material adverse effect on our financial position or operations, although any adverse decision in these cases, or the costs of defending or settling such claims, could have a material adverse effect on our financial position, operations, and cash flows.

NOTE 6.  STOCKHOLDERS’ EQUITY

The authorized capital of NYTEX Energy consists of 200 million shares of common stock, par value $0.001 per share; 10 million shares of Series A Convertible Preferred Stock, par value $0.001 per share; and one share of Series B

13

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

Preferred Stock, par value $0.001 per share.  The holders of Series A Convertible Preferred Stock have the same voting rights and powers as the holders of common stock.  Each holder of Series A Convertible Preferred Stock may, at any time, convert their shares of Series A Convertible Preferred Stock into shares of common stock at an initial conversion ratio of one-to-one.  For the three and nine months ended September 30, 2012, we did not issue any shares of common stock related to conversions of the Company’s Series A Convertible Preferred Stock.   The outstanding Series B Preferred Stock was cancelled as of May 4, 2012 in connection with the disposition of FDF.

Restructuring of Series A Convertible Preferred Stock

On August 31, 2012, NYTEX’s Amended and Restated Certificate of Designation in respect of the Series A Convertible Preferred Stock was approved by written consent of the holders of a majority of the total outstanding voting power of NYTEX’s voting securities (the “Restructuring”).  On September 12, 2012, we commenced mailing to all holders of the Company’s common stock and Series A Convertible Preferred Stock, a definitive information statement related to NYTEX’s Amended and Restated Certificate of Designation.   On October 2, 2012 (“Effective Date”), we filed the Amended and Restated Certificate of Designation with the Secretary of State of the State of Delaware.  The Amended and Restated Certificate of Designation amended the terms of our Series A Convertible Preferred Stock as follows:

(i)The 9% dividend payable with respect to the shares of Series A Convertible Preferred Stock ceased to accrue effective as of June 15, 2012 (the “Termination Date”) and, thereafter, no dividends will be payable with respect to such shares unless declared by the Company’s board of directors;

(ii)In exchange for all accrued and unpaid dividends as of the Termination Date, each holder of Series A Convertible Preferred Stock (a “Series A Holder”), as of the record date of July 24, 2012 (the “Record Date”), was issued shares of our common stock at a rate of one (1) share of our common stock for each $1.00 of accrued and unpaid dividends due such holder (collectively, the “Dividend Common Shares”). As a result, in October 2012 the Company issued an aggregate of approximately 768,090 Dividend Common Shares to the Series A Holders;

(iii)The original terms of the Series A Convertible Preferred Stock also provided for a liquidation preference of $1.50 per share which would have been payable on a liquidation event involving the Company.   As part of the Restructuring and in consideration for reducing the liquidation preference to $1.00 per share and eliminating the right to declare a deemed liquidation event, in October 2012 the Company issued to the Series A Holders, as of the Record Date, shares of our common stock at a rate of 0.42735 shares for each share of Series A Preferred held by them, or an aggregate of approximately 2,463,214 common shares (the “Liquidation Adjustment Common Shares”);

(iv)As part of the Restructuring, in October 2012 we paid to the Series A Holders as of the Record Date, a restructuring fee in the amount of 0.0075% of the original $1.00 per share purchase price of the Series A Convertible Preferred Stock, with such fee totaling approximately $43,230; and

(v)At any time following the Effective Date of the Restructuring, the Company has the right to redeem any or all of the outstanding shares of Series A Convertible Preferred Stock at the original purchase price of $1.00 per share.  Further, the Company is required to redeem outstanding shares of Series A Convertible Preferred Stock, from time-to-time, upon any release to the Company of any portion of the $6,250,205 currently being held in the post-closing escrow fund (reported as restricted cash on the accompanying balance sheet at September 30, 2012) in connection with the sale of FDF on May 4, 2012, which mandatory redemption would be made by the Company out of funds legally available therefor to the extent of 100% of the amount of funds released at that time.  Each redemption would be applied pro rata among all Series A Holders.

In October 2012, we issued the Dividend Common Shares and Liquidation Adjustment Common Shares to the Series A Holders along with the payment of the restructuring fee were recognized as a charge to retained earnings as a dividend and a reduction to earnings available to common shareholders for the period ended September 30, 2012.  Accordingly, at September 30, 2012, the Series A Convertible Preferred Stock was carried as permanent equity.  Subsequent to the Effective Date, the Series A Convertible Preferred Stock will be presented outside of permanent equity as mezzanine equity.

Treasury Stock

As more fully discussed in Note 1, on May 4, 2012, in accordance with the Settlement Agreement effective with the disposition of FDF, we received as an assignment a total of 3,230,895 shares of the Company’s common stock.  On June 5,

14

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

2012, Michael K. Galvis, the Company’s President and Chief Executive Officer, surrendered one million shares of common stock pursuant to an agreement entered into with the Company on November 23, 2010.  All such shares are being held as treasury stock at cost.  In October 2012, 3,231,304 shares were re-issued from treasury to Series A Holders in connection with the Restructuring described above.

Warrants

In connection with the private placement offering of Series A Convertible Preferred Stock, during the nine months ended September 30, 2011, we issued warrants to the holders to purchase up to 126,000 shares of common stock at an exercise price of $2.00 per share.  The warrants may be exercised for a period of three years from the date of grant.  The aggregate fair value of warrants issued during the nine months ended September 30, 2011 was $118,440.  There were no warrants issued during the nine months ended September 30, 2012.

In addition, during the nine months ended September 30, 2011, we issued warrants to purchase up to 16,800 shares of Series A Convertible Preferred Stock to the placement agent of the private placement offering of Series A Convertible Preferred Stock.  The warrants may be exercised for a period of three years from date of grant at an exercise price of $1.00 per share.  The aggregate fair value of these warrants on the date of grant was approximately $15,792 using the Monte Carlo simulation.

For the nine months ended September 30, 2012, we did not issue any shares of common stock related to the exercise of warrants granted in connection with the issuance of Series A Convertible Preferred Stock.  During the first quarter 2012, we extended the exercise dates on these warrants for an additional 24 months from the original effective date of the warrant.

On May 4, 2012, as a condition to the disposition of FDF, the Purchaser and Control Warrants held by WayPoint were forfeited and terminated.

The fair value of our warrants is determined using the Black-Scholes option pricing model and the Monte Carlo simulation.  The expected term of each warrant is estimated based on the contractual term or an expected time-to-liquidity event.  The volatility assumption is estimated based on expectations of volatility over the term of the warrant as indicated by implied volatility.  The risk-free interest rate is based on the U.S. Treasury rate for a term commensurate with the expected term of the warrant.  A summary of warrant activity for the nine months ended September 30, 2012 and 2011 is as follows:

	Nine Months Ended September 30,
	2012				2011
	Warrants		Weighted Average Exercise Price		Warrants		Weighted Average Exercise Price
Outstanding at beginning of period	46,335,949		$	0.13	44,061,330		$	0.18
Issued	—		—		142,800		1.88
Adjustment for WayPoint Warrant	—		—		3,175,363		0.01
Exercised	(3,600	)	1.27		(1,072,968	)	1.87
Forfeited or expired	(41,583,659	)	0.01		—		—
Outstanding at end of period	4,748,690		$	1.18	46,306,525		$	0.13

NOTE 7.  FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Our financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, derivative liabilities, and long-term debt. Because of their short maturity, the carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value.  The fair value of debt is the estimated amount we would have to pay to repurchase our debt, including any premium or discount attributable to the difference between the stated interest rate and market rate of interest at each balance sheet date.  Debt fair values are based on quoted market prices for identical instruments, if available, or based on valuations of similar debt instruments.  As of September 30, 2012 and December 31, 2011, we estimate the fair value of our debt to be $443,288 and $4,023,419, respectively.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs.  We utilize a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

15

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

·Level 1 — Quoted prices in active markets for identical assets or liabilities.  These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

·Level 2 — Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.  These are typically obtained from readily-available pricing sources for comparable instruments.

·Level 3 — Unobservable inputs, where there is little or no market activity for the asset or liability.  These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

As discussed in Notes 3 and 6, we consider certain of our warrants to be derivatives, and, as a result, the fair value of the derivative liabilities are reported on the accompanying consolidated balance sheets.  We value the derivative liabilities using a Monte Carlo simulation which contains significant unobservable, or Level 3, inputs.  The use of valuation techniques requires us to make various key assumptions for inputs into the model, including assumptions about the expected behavior of the instruments’ holders and expected future volatility of the price of our common stock.  At certain common stock price points within the Monte Carlo simulation, we assume holders of the instruments will convert into shares of our common stock.  In estimating the fair value, we estimated future volatility by considering the historic volatility of the stock of a selected peer group over a five year period.

For the nine months ended September 30, 2012 and 2011, the fair value of the derivative liabilities from continuing operations increased by an aggregate of $3,070 and $702, respectively.  These amounts were recorded within other income (expense) in the accompanying consolidated statements of operations.

We classify our marketable securities as available-for-sale, which are reported at fair value. Unrealized holding gains and losses, net of the related income tax effect, if any, on available-for-sale securities are excluded from income and are reported as accumulated other comprehensive income in stockholders’ equity.  Realized gains and losses from securities classified as available-for-sale are included in income.  We measure the fair value of our marketable securities based on quoted prices for identical securities in active markets, or Level 1 inputs.  As of September 30, 2012, available-for-sale securities consisted of the following:

	Cost		Gross Unrealized				Fair
Available For Sale	Basis		Gains		Losses		Value
Fixed-income mutual funds	$	490,000	$	9,349	$	—	$	499,349
Money-market funds	11,931		—		—		11,931
	$	501,931	$	9,349	$	—	$	511,280

The realized earnings from our marketable securities portfolio include realized gains and losses, based upon specific identification, and dividend and interest income.  Realized earnings were $3,865 and $4,595 respectively, for the three and nine months ended September 30, 2012. We did not have any marketable securities during the three and nine month periods ended September 30, 2011.

In accordance with ASC Topic 320, Investments — Debt and Equity Securities, we review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary. Should the decline be considered other than temporary, we write down the cost basis of the security and include the loss in current earnings as opposed to an unrealized holding loss. No losses for other than temporary impairments in our marketable securities portfolio were recognized during the three and nine months ended September 30, 2012.

Financial assets and liabilities measured at fair value on a recurring basis are summarized below:

16

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

September 30, 2012	Carrying Amount		Level 1		Level 2		Level 3
Marketable securities	$	511,280	$	511,280	$	—	$	—
Derivative liabilities	$	3,070	$	—	$	—	$	3,070

September 30, 2011	Carrying Amount		Level 1		Level 2		Level 3
Derivative liabilities	$	702	$	—	$	—	$	702

Included below is a summary of the changes in our Level 3 fair value measurements:

Balance, December 31, 2011	$	5,343,000
Change in derivative liabilities	(5,339,930		)
Issuance of warrant derivative	—
Balance, September 30, 2012	$	3,070
Balance, December 31, 2010	$	1,510,000
Change in derivative liabilities	(1,509,298		)
Issuance of warrant derivative	—
Balance, September 30, 2011	$	702

NOTE 8.  INCOME TAXES

Income tax provision from continuing operations for the three months ended September 30, 2012 was $118,018 and the income tax benefit from continuing operations for the nine months ended September 30, 2012 was $267,773.  The income tax benefit for continuing operations for the three and nine months ended September 30, 2011 was $0.  The change in income tax benefit in the third quarter of 2012, compared to the third quarter of 2011, was primarily the result of the differences in the mix of our pre-tax earnings and losses.  At September 30, 2012, we had deferred income tax assets of $4,275,576 and a valuation allowance of $4,130,071 resulting in an estimated recoverable amount of deferred income tax assets of $145,505.  This reflects a net increase of the valuation allowance of $1,207,984 from the December 31, 2011 balance of $2,922,087.  At September 30, 2012, we had deferred income tax liabilities of $147,207.

The balances of the valuation allowance as of September 30, 2012 and December 31, 2011 were $4,130,071 and $2,922,087, respectively.  The anticipated effective income tax rate is expected to continue to differ from the Federal statutory rate primarily due to the effect of state income taxes, permanent differences between book and taxable income, changes to the valuation allowance, and certain discrete items.

17

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 9.  EARNINGS PER SHARE

Net loss per common share is calculated by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding.  The following table reconciles net loss and common shares outstanding used in the calculations of basic and diluted net loss per share.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2012			2011			2012			2011
Basic net income (loss) per share:
Net earnings (loss) from continuing operations	$	244,126		$	(824,880	)	$	1,378,590		$	(3,062,058	)
Net earnings (loss) from discontinued operations	(532,159		)	(635,820		)	(7,959,937		)	(3,805,235		)
Net earnings (loss)	$	(288,033	)	$	(1,460,700	)	$	(6,581,347	)	$	(6,867,293	)
Noncontrolling interest	25,156			—			51,609			—
Attributable to preferred stockholders	(385,290		)	(131,906		)	(643,829		)	(399,436		)
Net income (loss) attributable to common stockholders	$	(648,167	)	$	(1,592,606	)	$	(7,173,567	)	$	(7,266,729	)
Weighted average common shares outstanding, basic	24,431,299			26,940,633			25,598,110			26,481,719
Basic earnings per share:
Continuing operations	$	0.01		$	(0.03	)	$	0.05		$	(0.12	)
Discontinued operations	(0.02		)	(0.02		)	(0.31		)	(0.14		)
Net income (loss)	$	(0.01	)	$	(0.05	)	$	(0.26	)	$	(0.26	)
Net loss attirbutable to noncontrolling interest	0.00			0.00			0.00			0.00
Attributable to preferred shareholders	(0.02		)	(0.01		)	(0.02		)	(0.02		)
Net income (loss) attributable to common stockholders	$	(0.03	)	$	(0.06	)	$	(0.28	)	$	(0.28	)
Diluted net income (loss) per share:
Net earnings (loss) from continuing operations	$	244,126		$	(824,880	)	$	1,378,590		$	(3,062,058	)
Net earnings (loss) from discontinued operations	(532,159		)	(635,820		)	(7,959,937		)	(3,805,235		)
Net earnings (loss)	$	(288,033	)	$	(1,460,700	)	$	(6,581,347	)	$	(6,867,293	)
Noncontrolling interest	25,156			—			51,609			—
Plus: income impact of assumed conversions
Attributable to preferred stockholders	385,290			131,906			643,829			399,436
Convertible debenture interest, net of tax	—			100,121			—			—
Net income (loss) attributable to common stockholders	$	122,413		$	(1,228,673	)	$	(5,885,909	)	$	(6,467,857	)
Weighted average common shares outstanding, basic	24,431,299			26,940,633			25,598,110			26,481,719
Plus: incremental shares from assumed conversions
Effect of dilutive warrants	409,872			—			414,742			—
Effect of dilutive convertible preferred stock	—			—			—			—
Effect of dilutive convertible debentures	—			—			—			—
Shares used in calcuating diluted loss per share	24,841,171			26,940,633			26,012,852			26,481,719
Diluted earnings per share:
Continuing operations	$	0.01		$	(0.03	)	$	0.06		$	(0.12	)
Discontinued operations	(0.02		)	(0.02		)	(0.31		)	(0.14		)
Net income (loss)	$	(0.01	)	$	(0.05	)	$	(0.25	)	$	(0.26	)
Net loss attirbutable to noncontrolling interest	0.00			0.00			0.00			0.00
Attributable to preferred shareholders	0.02			(0.01		)	0.02			(0.02		)
Convertible debenture interest, net of tax	0.00			0.00			0.00			0.00
Net income (loss) attributable to common stockholders	$	0.01		$	(0.06	)	$	(0.23	)	$	(0.28	)
Earnings per share amounts may not foot due to rounding

Basic earnings per share amounts are computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share amounts are computed by dividing net income or loss by the weighted average number of common shares and dilutive common share equivalents outstanding during the period.  Diluted earnings per share amounts assume the conversion, exercise, or issuance of all potential common stock instruments unless the effect is anti-dilutive, thereby reducing the loss or increasing the income per common share.

18

NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

For the three and nine months ended September 30, 2012, certain common share equivalents were excluded from the calculation of diluted earnings per share as their effect on earnings per share was antidilutive.  These excluded shares totaled 10,089,315 for the three and nine months ended September 30, 2012.  Because a net loss was incurred during the nine months ended September 30, 2011, dilutive instruments including the warrants produce an antidilutive net loss per share result.  These excluded shares totaled 48,440,448 for the nine months ended September 30, 2011.

NOTE 10.  DISCONTINUED OPERATIONS

On May 4, 2012, Acquisition Inc., together with New Francis Oaks, a wholly-owned subsidiary of Acquisition Inc., entered into the Merger Agreement with an unaffiliated third party, FDF Resources Holdings LLC, a Delaware limited liability company (“FDF Resources”).  Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into FDF Resources, and FDF Resources continued as the surviving entity after the Disposition.  New Francis Oaks owns 100% of the outstanding shares of FDF, and, as a result of the disposition, we no longer own FDF.

We recognized a net after-tax loss of approximately $665,000 from the sale transaction during the second quarter of 2012, which represents the excess of the sale price over the book value of the assets sold.

We determined that the disposition of FDF met the definition of a discontinued operation.  As a result, this business has been presented as a discontinued operation for all periods.  Financial information for the discontinued operation was as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012 (1)		2011			2012 (1)			2011
Revenues
Oilfield Services	$	—	$	20,718,655		$	24,077,027		$	56,121,485
Drilling Fluids	—		2,707,156			3,576,111			7,333,898
Total revenues	—		23,425,811			27,653,138			63,455,383
Expenses	—
Cost of goods sold - drilling fluids	—		679,728			1,325,674			2,148,044
Depreciation and amortization	—		2,229,991			3,126,243			6,549,744
Selling, general, and administrative expenses	—		19,760,009			24,605,436			52,744,242
(Gain) loss on sale of assets	—		5,772			75,692			(21,882		)
Interest expense	—		1,162,254			1,687,504			3,120,840
Change in fair value of derivative liabilities	—		10,000			4,267,000			2,829,545
Accretion of preferred stock liability	—		943,182			1,299,495			1,335,174
Other	—		(35,983		)	(5,878		)	(18,283		)
Total expenses	—		24,754,953			36,381,166			68,687,424
Income (loss) before income taxes	$	—	$	(1,329,142	)	$	(8,728,028	)	$	(5,232,041	)

(1) Activity for 2012 is through May 4, 2012, the date of the FDF disposition.

NOTE 11.  SEGMENT INFORMATION

Our primary business segments are vertically integrated within the oil and gas industry. These segments are separately managed due to distinct operational differences and unique technology, distribution, and marketing requirements.  Our two reportable operating segments are oil and gas exploration and professional staffing services. The oil and gas exploration and production segment explores for and produces natural gas, crude oil, condensate, and NGLs.  The energy staffing segment consists of our Petro Staffing Group business, which is a full-service staffing agency providing the energy marketplace with temporary and full-time professionals.  The oilfield services segment, which consisted solely of the operations of FDF, was disposed of on May 4, 2012, and is no longer reflected within segment information.

The following tables present selected financial information of our operating segments for the three and nine months ended September 30, 2012 and 2011.  Information presented below as “Corporate, Other, and Intersegment Eliminations” includes results from operating activities that are not considered operating segments, as well as corporate and certain financing activities.

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

For the three months ended September 30, 2012, we had two customers that accounted for more than 10% of our total consolidated revenues at a rate of 39% and 38% respectively. For the nine months ended September 30, 2012, we had one customer that accounted for more than 10% of our total consolidated revenues at a rate of 89%.

	Oil & Gas		Energy Staffing		Corporate and Intersegment Eliminations		Total
As of September 30, 2012:
Current Assets	$	4,271,573	$	5,478	$	641,669	$	4,918,720
Restricted cash	—		—		6,250,205		6,250,205
Property, plant, and equipment, net	411,988		4,395		4,985		421,368
Other assets	9,296		—		—		9,296
Total assets	$	4,692,857	$	9,873	$	6,896,859	$	11,599,589
Current liabilities	$	3,467,312	$	—	$	1,294,753	$	4,762,065
Long-term debt	13,752		—		274,514		288,266
Derivative liabilities	—		—		3,070		3,070
Deferred income taxes	1,702		—		—		1,702
Stockholder’s equity	1,210,091		9,873		5,324,522		6,544,486
Total liabilities and stockholder’s deficit	$	4,692,857	$	9,873	$	6,896,859	$	11,599,589
Additions to long-lived assets	$	389,618	$	2,186	$	392	$	392,196

	Oil & Gas			Energy Staffing			Corporate and Intersegment Eliminations			Total
Three Months Ended September 30, 2012:
Revenues:
Land services	$	864,882		$	—		$	—		$	864,882
Oil & gas sales	55,666			—			—			55,666
Staffing services	—			11,120			—			11,120
Total Revenues	920,548			11,120			—			931,668
Expenses and other, net:
Lease operating expenses	39,214			—			—			39,214
Depreciation, depletion, and amortization	4,215			292			282			4,789
Selling, general and administrative expenses	110,878			136,604			699,411			946,893
Gain on sale of assets	(419,834		)	—			—			(419,834		)
Change in fair value of derivative liabilities	—			—			(13,230		)	(13,230		)
Interest and dividend income	—			—			(4,022		)	(4,022		)
Interest expense	1,302			—			14,412			15,714
Total expenses and other, net	(264,225		)	136,896			696,853			569,524
Income (loss) before income taxes	1,184,773			(125,776		)	(696,853		)	362,144
Income tax provision	—			—			(118,018		)	(118,018		)
Income (loss) from continuing operations	$	1,184,773		$	(125,776	)	$	(814,871	)	$	244,126

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NYTEX ENERGY HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

	Oil & Gas			Energy Staffing			Corporate and Intersegment Eliminations			Total
Nine Months Ended September 30, 2012:
Revenues:
Land services	$	3,015,853		$	—		$	—		$	3,015,853
Oil & gas sales	83,335			—			—			83,335
Staffing services	—			14,023			—			14,023
Total Revenues	3,099,188			14,023			—			3,113,211
Expenses and other, net:
Lease operating expenses	77,542			—			—			77,542
Depreciation, depletion, and amortization	28,266			292			844			29,402
Selling, general and administrative expenses	210,296			271,774			1,500,036			1,982,106
Gain on sale of assets	(419,834		)	—			—			(419,834		)
Change in fair value of derivative liabilities	—			—			3,070			3,070
Interest and dividend income	—			—			(5,206		)	(5,206		)
Interest expense	56,335			—			278,979			335,314
Total expenses and other, net	(47,395		)	272,066			1,777,723			2,002,394
Income (loss) before income taxes	3,146,583			(258,043		)	(1,777,723		)	1,110,817
Income tax benefit (provision)	(9,547		)	—			277,320			267,773
Income (loss) from continuing operations	$	3,137,036		$	(258,043	)	$	(1,500,403	)	$	1,378,590

NOTE 12.  SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Additional cash flow information was as follows for the nine months ended September 30, 2012 and 2011:

	2012		2011
Supplemental disclosures of cash flow information:
Total cash paid for interest	$	250,208	$	979,329
Total cash paid for taxes	$	—	$	1,825,998
Cash paid for interest — related party	$	6,598	$	4,815
Supplemental disclosure of non-cash information:
Exchange of 12% debentures for common stock	$	—	$	114,999
Issuance of derivative liability	$	—	$	118,440
Treasury shares received	$	2,732,342	$	—
Shares issued to retire debt	$	33,000	$	—
Dividend declared	$	643,829	$	399,436

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto.

Overview

NYTEX Energy Holdings, Inc. is an early-stage exploration and production (E&P) company engaged in the acquisition, development, and production of oil and gas reserves from low-risk, high rate-of-return wells in shallow carbonate reservoirs. Our strategy is to enhance value for our shareholders through the development of a well-balanced portfolio of natural resource-based assets at discounted acquisition and development costs.  Further, we may acquire oilfield service companies at below-market acquisition prices that complements our portfolio of natural resource-based assets and leverages the inherent synergies across the energy industry.

We are an energy holding company consisting of two operating segments:

Oil and Gas -consisting of our wholly-owned subsidiary, NYTEX Petroleum, Inc. (“NYTEX Petroleum”), an early-stage E&P company engaged in the acquisition, development, and production of oil and gas reserves from low-risk, high rate-of-return wells in shallow carbonate reservoirs; and

Energy Staffing -consisting of our 80%-owned subsidiary, Petro Staffing Group, LLC, (“PSG”), a full-service staffing agency formed in March 2012 providing the energy marketplace with temporary and full-time professionals.  PSG sources, evaluates, and delivers quality candidates to address the demand for personnel within the oil & gas industry.

NYTEX Energy Holdings, Inc. and subsidiaries are collectively referred to herein as “NYTEX Energy,” “we,” “us,” “our,” “its,” and the “Company”.

Oil and Gas

NYTEX Petroleum, Inc. is an exploration and production company focusing on early-stage development of shale-based, “tight” oil and gas resource plays.

With our recent increased focus on the acquisition, development, and resale of oil and gas leasehold properties in Texas, we have acquired overriding and/or working interests in approximately 90,000 leasehold acres in Young, Jack, Palo Pinto, Throckmorton, and Stephens Counties of Texas.  We believe these plays can be developed uniformly over expansive geographical areas with a high rate of success due to the recent advancements in horizontal drilling and multi-stage hydraulic fracturing technologies.  We also hold acreage positions totaling approximately 1,300 acres for future development along with interests in nine producing oil and gas wells.

Operating and Financial Highlights

·During the third quarter of 2012, we acquired an average 1% overriding royalty interest (ORRI) in approximately 30,000 leasehold acres in North Texas.

·For the nine months ended September 30, 2012, we have acquired an average 8.5% working interest in approximately 7,600 leasehold acres in North Texas and an average 1% ORRI in approximately 68,000 leasehold acres in North Texas.

·Since 2011, we have acquired an average 11.4% working interest in approximately 22,900 leasehold acres in North Texas.

·We currently hold leasehold ownership in approximately 1,300 acres with 32 drilling locations.

·During the third quarter, we substantially completed the restructuring of our Series A Convertible Preferred Stock, eliminating accrued cash dividends of $767,570 as well as the future cash obligation of a 9% cumulative preferred dividend of approximately $520,000 annually.

·For the third quarter of 2012, revenues from oil and gas sales increased 350% to $54,026 as compared to the second quarter of 2012 as we completed the first of six 5,500’ vertical Marble Falls wells at an initial rate of 75 barrels of oil per day and 1.8 million cubic feet of high btu, liquids rich gas per day.  We have an average 9.8% net revenues interest in the six wells that have been drilled to-date.  We expect to complete the remaining five wells during the fourth quarter.

·Revenues from land services were down 28% to $864,882 during the third quarter of 2012 compared to $1,200,861 for the second quarter of 2012.   Land services revenues consist of fees generated from analyzing land and mineral

22

title reports, leasehold title analysis and reports, land title run sheets, sourcing, negotiating and acquiring leases, document preparation and performing title curative functions.

·Income from continuing operations was $1,378,590 for the nine months ended September 30, 2012.  We incurred a income from continuing operations of $244,126 for the three months ended September 30, 2012.

Discontinued Operations - Oilfield Services

Disposition of FDF

As more fully reported on Form 8-K on May 10, 2012, on May 4, 2012, (the “Closing Date”), Acquisition Inc., together with New Francis Oaks, LLC, a Delaware limited liability company (“New Francis Oaks”, formerly Francis Oaks, LLC ) and a wholly-owned subsidiary of Acquisition Inc., entered into an Agreement and Plan of Merger (the “Merger Agreement”) with an unaffiliated third party, FDF Resources Holdings LLC, a Delaware limited liability company (the “Purchaser”).  Pursuant to the terms of the Merger Agreement, New Francis Oaks merged with and into the Purchaser, and the Purchaser continued as the surviving entity after the merger (the “Disposition” or the “Merger”).  New Francis Oaks owns 100% of the outstanding shares of Francis Drilling Fluids, Ltd. (“FDF” and together with New Francis Oaks, the “Francis Group”), and, as a result of the Disposition, we no longer own FDF.

The total consideration for the Merger paid by the Purchaser on the Closing Date was $62,500,000 (the “Merger Proceeds”).  After: (i) an adjustment to the amount of the Merger Proceeds based upon the level of estimated working capital of the Francis Group on the Closing Date; (ii) the payment or provision for payment of all indebtedness of the Francis Group on the Closing Date; (iii) the payment of all indebtedness of Acquisition Inc. on the Closing Date (including under its senior secured credit facility with PNC Bank; (iv) the payment of the Put Payment Amount (as defined below) due to WayPoint Nytex, LLC (“WayPoint”) under the WayPoint Purchase Agreement (as defined below); (v) the payment of all transaction expenses relating to the Merger; (vi) the payment to the Company of $812,500 of accrued management fees and $110,279 of expense reimbursement due and payable to the Company under the Management Services Agreement, dated November 23, 2010, between the Company and FDF (the “Management Agreement”); (vii) the payment of certain transaction bonuses payable to certain FDF employees; and (viii) the Purchaser’s delivery of $6,250,000 of the Merger Proceeds (the “Escrow Fund”) to The Bank of New York Mellon Trust Company, N.A., as escrow agent, to be held in escrow under the Escrow Agreement (as defined below), Acquisition Inc. received on the Closing Date remaining cash transaction proceeds in the amount of approximately $4,481,000.  The Merger Agreement provides that, to the extent that the final amount of working capital of the Francis Group on the Closing Date is greater than the estimated amount of working capital, as determined under the Merger Agreement, the Purchaser will pay to Acquisition Inc. the amount of such working capital surplus, provided that, pursuant to the Omnibus Agreement (as defined below), WayPoint is entitled to receive 87.5% of any such working capital surplus payment.  To the extent that the final amount of working capital of the Francis Group on the Closing Date is less than the estimated amount of working capital, Acquisition Inc. will pay to the Purchaser the amount of such working capital deficit, which payment will be made out of the Escrow Fund, provided that, pursuant to the Omnibus Agreement, WayPoint is obligated to pay to Acquisition Inc. 87.5% of the amount of any such working capital deficit.

As previously disclosed, on April 13, 2011, we received a letter from PNC, notifying the Company of the occurrence and continued existence of certain events of default (the “PNC Default”) under the Revolving Credit, Term Loan and Security Agreement (the “Senior Facility”).  On November 3, 2011, the Company entered into a First Amendment to Revolving Credit, Term Loan and Security Agreement and Limited Waiver (the “First Amendment”) with PNC, which was effective as of November 1, 2011.  Under the First Amendment, PNC waived each of the events of default under the Senior Facility.  However, as a result of the PNC Default, on April 14, 2011, the Company received a letter from WayPoint, as the holder of all of the outstanding shares of the Senior Series A Redeemable Preferred Stock of NYTEX Acquisition, stating that the Company was in default under the Preferred Stock and Warrant Purchase Agreement, by and among the Company, Acquisition Inc., and WayPoint (the “WayPoint Purchase Agreement”), for defaults similar to the PNC Default plus for our failure to pay dividends to WayPoint when due under the terms of the WayPoint Purchase Agreement.  On May 4, 2011, WayPoint demanded, pursuant to a “Put Election Notice” delivered under the WayPoint Purchase Agreement (the “Put Election Notice”), that, as a result of those defaults, the Company and Acquisition Inc. repurchase from WayPoint, for an aggregate purchase price of $30,000,000, all of the securities of Acquisition Inc. and the Company originally acquired by WayPoint pursuant to the WayPoint Purchase Agreement, which securities consisted of: (i) 20,750 shares of Senior Series A Redeemable Preferred Stock of NYTEX Acquisition (the “WayPoint Series A Shares”); (ii) one (1) share of Series B Redeemable Preferred Stock of the Company (the “WayPoint Series B Share”); (iii) the Purchaser Warrant (as defined in the WayPoint Purchase Agreement); and (iv) the Control Warrant (as defined in the WayPoint Purchase Agreement) (collectively, the “WayPoint Securities”).  Our failure to repurchase the WayPoint Securities in accordance with the Put Election Notice resulted in an additional event of default under the WayPoint Purchase Agreement.  Thereafter, pursuant to the terms of the Forbearance Agreement, dated as of September 30, 2011 (the “Forbearance Agreement”), by and among the Company, Acquisition Inc., and WayPoint, WayPoint agreed to forbear, for a period of 60 days, from exercising its rights

23

and remedies under the WayPoint Purchase Agreement.  On November 14, 2011, WayPoint provided a formal written notice to the Company that the Company was in default under the Forbearance Agreement.  Due to cross-default provisions, the default under the Forbearance Agreement also constituted a default under the First Amendment. As a result of the defaults under the WayPoint Purchase Agreement and the Forbearance Agreement, WayPoint initiated certain remedies afforded to it under the WayPoint Purchase Agreement and the Forbearance Agreement, including the sale of FDF to a third party.  WayPoint directed the FDF sale process and, although we participated in the process, we did not control the ultimate disposition of FDF, including, but not limited to, the timing of the Merger and the Merger consideration.  As a result of the transactions associated with the Merger, we are no longer in default under the First Amendment with PNC.

In connection with the consummation of the Merger, we entered into an Omnibus Agreement (the “Omnibus Agreement”) with WayPoint and Francis Group.  The Omnibus Agreement became effective upon the consummation of the Merger.

Pursuant to the Omnibus Agreement, upon the consummation of the Merger:

(i)the Management Agreement was terminated;

(ii)Waypoint paid $150,000 to the Company out of the Put Payment Amount due and payable to WayPoint;

(iii)the Company was paid $812,500 from the Merger Proceeds, which sum represented accrued management fees due and payable to the Company from FDF under the Management Agreement; and

(iv)the Company was paid $110,279 from the Merger Proceeds, which sum represented reimbursement by FDF of certain expenses previously incurred by the Company in respect of certain professional services provided, and which reimbursement was due and payable to the Company from FDF under the Management Agreement.

In the Omnibus Agreement, the Company, WayPoint, and the Francis Group also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties.  The releases also covered claims that any of the parties could assert against any employees of Acquisition Inc., New Francis Oaks, FDF and related parties (the “FDF Group”).  In addition, the parties agreed that WayPoint would bear 87.5% of any post-closing working capital deficit under the Merger Agreement and WayPoint would receive 87.5% of any post-closing working capital surplus under the Merger Agreement.

Further, in connection with the consummation of the Merger, we entered into a Settlement Agreement (the “Settlement Agreement”) with WayPoint, the Francis Group, and Michael G. Francis and Bryan Francis (together, the “Francises”).  The Settlement Agreement became effective upon the consummation of the Merger.

Pursuant to the Settlement Agreement, upon the consummation of the Merger:

(i)WayPoint paid out of the Put Payment Amount a $100,000 bonus to Michael G. Francis, the President of NYTEX Acquisition, and a $25,000 bonus to Jude N. Gregory, the Vice President and Chief Financial Officer of Acquisition Inc.;

(ii)(A) the Company caused the release of the $1,800,000 of Escrowed Cash (as defined in the Escrow Agreement, dated as of November 23, 2010, by and among Acquisition Inc., Bryan Francis and The F&M Bank & Trust Company (the “Francis Escrow Agreement”)) then being held in escrow pursuant to the Francis Escrow Agreement, in accordance with the terms of the Francis Escrow Agreement, and (B) Michael G. Francis transferred and assigned back to the Company 625,000 shares of common stock of the Company then owned by Michael G. Francis and originally issued to him pursuant to the Membership Interest Purchase Agreement, dated as of November 23, 2010 (the “Francis Purchase Agreement”), and then being held in escrow pursuant to the Francis Escrow Agreement;

(iii)(A) Michael G. Francis transferred and assigned back to the Company all of the remaining 2,197,063 shares of common stock then owned by him and originally issued to him pursuant to the Francis Purchase Agreement, and such shares were cancelled, and (B) Bryan Francis transferred and assigned back to the Company all of the 381,607 shares of common stock originally issued to him pursuant to the Francis Purchase Agreement, as well as all of the 27,225 shares of common stock issued to him in connection with his employment by FDF;

(iv)the employment agreements of Michael G. Francis and Bryan Francis terminated and they became at-will employees of the FDF Group;

(v)each of the three designees of WayPoint then serving as directors of Acquisition Inc., which included John Henry Moulton, Thomas Drechsler and Lee Buchwald, resigned as directors of Acquisition Inc., effective immediately upon the consummation of the Merger; and

24

(vi)in exchange for receipt by WayPoint of the Put Payment Amount (which consisted of $30,000,000, less an aggregate of $306,639 of dividends previously received by WayPoint on account of the WayPoint Senior Series A Redeemable Preferred Stock, less an aggregate of $275,000 payable by WayPoint to the Company, Michael G. Francis and Jude N. Gregory pursuant to the Settlement Agreement, less an additional $449,072 (representing 87.5% of the estimated working capital deficit of the Francis Companies on the Closing Date, but subject to the right of WayPoint to subsequently receive 87.5% of any final working capital surplus of the Francis Companies on the Closing Date and the obligation of WayPoint to subsequently pay 87.5% of any final working capital deficit of the Francis Companies on the Closing Date, pursuant to the Omnibus Agreement); the “Put Payment Amount”), WayPoint transferred and assigned (A) the Senior Series A Redeemable Preferred Stock back to Acquisition Inc., (B) the Purchaser Warrant and the Control Warrant back to the Company, and (C) the WayPoint Series B Share back to the Company, and all such securities were cancelled.

In the Settlement Agreement, the Company, WayPoint, the Francis Group, and the Francises also agreed to mutual releases from and to each other, and their related parties, relating to facts existing on or before the Closing Date that relate to the Merger, the WayPoint Purchase Agreement, the related documents, and the relations among the parties, including in connection with any employment agreements or arrangements of the Francises.  The releases also covered claims that any of the parties could assert against any employees of the FDF Group.

Results of Operations

Selected Data

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Financial Results
Reveneus - Land Lease	$	864,882		$	140,674		$	3,015,853		$	271,164
Revenues - Oil and Gas sales	55,666			40,796			83,335			332,022
Revenues - Staffing	11,120			—			14,023			—
Total revenues	931,668			181,470			3,113,211			603,186
Total operating expenses	571,062			795,235			1,669,216			4,755,748
Total other (income) expense	(1,538		)	211,115			333,178			(1,090,504		)
Income (loss) before income taxes	362,144			(824,880		)	1,110,817			(3,062,058		)
Income tax provision	(118,018		)	—			267,773			—
Income (loss) from continuing operations	$	244,126		$	(824,880	)	$	1,378,590		$	(3,062,058	)
Operating Results
Adjusted EBITDA - Oil and Gas	$	770,456				(2)	$	2,811,350				(2)
Adjusted EBITDA - Staffing Services	(125,484		)			(2)	(257,751		)			(2)
Adjusted EBITDA - Corporate and Intersegment Eliminations	(695,389		)			(2)	(1,494,830		)			(2)
Consolidated Adjusted EBITDA(1)	$	(50,417	)	$	(606,800	)	$	1,058,769		$	(4,098,529	)

(1)See Results of Operations—Adjusted EBITDA for a description of Adjusted EBITDA, which is not a U.S. Generally Accepted Accounting Principles (“GAAP”) measure, and a reconciliation of Adjusted EBITDA to net loss, which is presented in accordance with GAAP.

(2)Due to the disposition of FDF, the Company operated as a single segment for the three and nine months ended September 30, 2011.

Three and nine months ended September 30, 2012 compared to the three and nine months ended September 30, 2011

On May 4, 2012, our subsidiary, FDF, was sold to an unaffiliated third party and is accounted for as a discontinued operation.  As a result, all financial information included in this report including information contained within Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read and considered in such context.

Revenues.  Revenues from continuing operations increased for the three and nine months ended September 30, 2012 compared to the prior year period. Revenues from land services increased nearly 515% to $864,882 for the three months ended September 30, 2012 compared to $140,674 for the three months ended September 30, 2011.  Similarly, for the nine months ended September 30, 2012, revenues from land services increased more than a 1,000% to $3,015,853 compared to $271,164 for the same period in the prior year. The increase in land services revenue is directly related to our focus on the purchase and sale of oil and gas leasehold properties in North Texas.  Our land services provide focused project management for companies looking to acquire and build positions in lease plays throughout North and West Texas.  From generating land

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and mineral title reports, leasehold title analysis and reports, and land title run sheets to sourcing, negotiating and acquiring leases, document preparation, and performing title curative functions. We anticipate revenues from land services and oil & gas sales to increase over time as we continue to focus on opportunities in recently discovered resource plays in Texas.

Revenues from oil and gas sales increased 32% to $54,026 for the three months ended September 30, 2012, compared to $40,796 for the three months ended September 30, 2011.  The increase in oil and gas revenue is related to the continued growth of our oil and gas business as we seek to actively participate in oil and gas drilling projects in the lease plays we have identified throughout North Texas.  The decrease in oil and gas revenues for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 is due to the disposition of the Panhandle Field Producing Property in May 2011.

We recognized $11,120 of revenue from our Energy Staffing business for the three months ended September 30, 2012 and $14,023 of revenue for the nine months ended September 30, 2012.  The Energy Staffing business was created in March 2012.  We expect revenues from staffing services to increase as our backlog of unfilled permanent placement opportunities continues to build and we place qualified candidates.

Oil & gas lease operating expenses.  Lease operating expenses from continuing operations increased $29,901 and $11,385 for the three and nine months ended September 30, 2012 compared to the prior three and nine months ended September 30, 2011.  The change is due to an overall increase related to drilling activity on wells in which we have a working interest.

Depreciation, depletion, and amortization.  Depreciation, depletion, and amortization (“DD&A”) from continuing operations decreased over the prior period primarily as a result of certain long-lived assets that became fully depreciated during 2011.

Selling, general, and administrative expenses.  Selling, general, and administrative (“SG&A”) expenses from continuing operations increased for the three months ended September 30, 2012 compared to the prior year three months ended September 30, 2011.  This increase was due to an overall increase in audit and accounting expenses as well as an increase in payroll related costs due in part to the growth in personnel within the Energy Staffing business.  SG&A expenses from continuing operations decreased for the nine months ended September 30, 2012 compared to the prior year nine months ended September 30, 2011, due principally to a decrease in consulting services and legal fees.  SG&A consists primarily of salary and wages, contract labor, professional fees, lease rental costs, and insurance costs.

Litigation loss on settlement.  The litigation loss on settlement for the nine months ended September 30, 2011 is a result of the settlement of two lawsuits related to the Panhandle Field Producing Property.  In exchange for the release of all claims to these two suits by the plaintiffs, concurrent with entering into a Compromise Settlement Agreement and Release of All Claims, the Company entered into a Purchase and Sale Agreement whereby the Company sold its entire interest in the Panhandle Field Producing Property to the plaintiffs for the purchase price of $782,000, resulting in a loss on litigation settlement totaling $965,065 for the nine months ended September 30, 2011.  There was no such activity for the nine months ended September 30, 2012.

Gain on disposal of assets.  For the three and nine months ended September 30, 2012, we recognized a gain of $412,869 related to the sale of certain carried working interests in Marble Falls wells in North Texas.

Interest expense.  Interest expense associated with continuing operations decreased for the three and nine months ended September 30, 2012 compared to the prior year period due to (i) a general reduction in the outstanding principal balances of our outstanding debt, and (ii) in June 2012, an early redemption of the 9% and 12% convertible debentures.

Change in fair value of derivative liabilities.  For the three months ended September 30, 2012, the fair value of the derivative liability related to the warrants issued to the holders of the Company’s Series A Convertible Preferred Stock decreased by an aggregate of $13,230. For the nine months ended September 30, 2012, the fair value of the derivative liability increased by an aggregate of $3,070.  We recognize changes in the fair value of the derivative in the consolidated statements of operations.

Income tax benefit.  The income tax provision from continuing operations for the three months ended September 30, 2012 of $118,018 and income tax benefit from continuing operations for the nine months ended September 30, 2012 of $267,773 is the result of utilizing existing and current net operating losses to offset taxable income generated by our oil and gas segment.  The provision of $118,018 for the three months ended September 30, 2012 is due to limitations placed on our ability to fully offset taxable income by available net operating loss carryforwards.

Adjusted EBITDA

To assess the continuing operating results of our segments, our chief operating decision maker analyzes net income (loss) before income taxes, interest expense, DD&A, impairments, gains or losses resulting from the sale of assets or resolution of commercial disputes, changes in fair value attributable to derivative liabilities, and discontinued operations

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(“Adjusted EBITDA”).  Our definition of Adjusted EBITDA, which is not a GAAP measure, excludes interest expense to allow for assessment of segment operating results without regard to our financing methods or capital structure.  Similarly, DD&A and impairments are excluded from Adjusted EBITDA as a measure of segment operating performance because capital expenditures are evaluated at the time capital costs are incurred.  In addition, changes in fair value attributable to derivative liabilities and the accretion of preferred stock liability are excluded from Adjusted EBITDA since these unrealized (gains) losses are not considered to be a measure of asset-operating performance. Management believes that the presentation of Adjusted EBITDA provides information useful in assessing the Company’s financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions to stockholders.

Adjusted EBITDA, as we define it, may not be comparable to similarly titled measures used by other companies. Therefore, our consolidated Adjusted EBITDA should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP, such as operating income or cash flow from operating activities. Adjusted EBITDA has important limitations as an analytical tool because it excludes certain items that affect net income (loss) and net cash provided by operating activities.  Adjusted EBITDA should not be considered in isolation or as a substitute for an analysis of our results as reported under GAAP.  Below is a reconciliation of consolidated Adjusted EBITDA to consolidated net income (loss) to common stockholders as reported on our consolidated statements of operations.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Reconciliation of Adjusted EBITDA to GAAP Net Income (Loss):
Net income (loss)	$	(288,033	)	$	(1,460,700	)	$	(6,581,347	)	$	(6,867,293	)
Discontinued operations	532,159			635,820			7,959,937			3,805,235
Income tax provision (benefit)	118,018			—			(267,773		)	—
Interest expense	15,714			213,259			335,314			601,286
DD&A	4,789			6,122			29,402			47,800
(Gain) loss on sale of asset	(419,834		)	—			(419,834		)	5,004
Change in fair value of derivative liabilities	(13,230		)	(1,301		)	3,070			(1,690,561		)
Consolidated Adjusted EBITDA	$	(50,417	)	$	(606,800	)	$	1,058,769		$	(4,098,529	)

Liquidity and Capital Resources

Our working capital needs have historically been satisfied through operations, equity and debt investments from private investors, loans with financial institutions, and through the sale of assets.  Historically, our primary use of cash has been to pay for acquisitions and investments, service our debt, and for general working capital requirements.  As of September 30, 2012, we have cash and marketable securities less the cash portion of deposits held in trust totaling $1,112,581 that we have available, along with cash flow from operations, to provide capital to support the growth of our business, service our debt, and for general working capital requirements.

On July 11, 2012, we entered into a revolving line of credit agreement with a commercial bank providing for loans up to $325,000.  The revolving credit line bears an annual interest rate based on the 30 day LIBOR plus 1.95% and matures on July 11, 2014.  The line of credit is secured by our marketable securities.  We pay no fee for the unused portion of the revolving line of credit.  At September 30, 2012 and as of the date of this report, amounts available under the revolving line of credit were $216,645.

Restructuring of Series A Convertible Preferred Stock

On August 31, 2012, NYTEX’s Amended and Restated Certificate of Designation in respect of the Series A Convertible Preferred Stock was approved by written consent of the holders of a majority of the total outstanding voting power of NYTEX’s voting securities (the “Restructuring”).  On September 12, 2012, we commenced mailing to all holders of the Company’s common stock and Series A Convertible Preferred Stock, a definitive information statement related to NYTEX’s Amended and Restated Certificate of Designation.  On October 2, 2012 (“Effective Date”), we filed the Amended and Restated Certificate of Designation with the Secretary of State of the State of Delaware.  Upon the filing of the Amended and Restated Certificate of Designation, the original Certificate of Designation was amended, among other things, as follows:

(i)The 9% dividend payable with respect to the shares of Series A Convertible Preferred Stock ceased to accrue effective as of June 15, 2012 (the “Termination Date”) and, thereafter, no dividends will be payable with respect to such shares unless declared by the Company’s board of directors;

(ii)In exchange for all accrued and unpaid dividends as of the Termination Date, each holder of Series A Convertible Preferred Stock (a “Series A Holder”), as of the record date of July 24, 2012 (the “Record Date”), was issued shares of NYTEX common stock at a rate of one (1) share of NYTEX common stock for each $1.00 of accrued and unpaid dividends due such holder (collectively, the “Dividend Common

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Shares”). As a result, in October 2012 the Company issued an aggregate of approximately 768,090 Dividend Common Shares to the Series A Holders;

(iii)The original terms of the Series A Convertible Preferred Stock also provided for a liquidation preference of $1.50 per share which would have been payable on a deemed liquidation event involving the Company.  As part of the Restructuring and in consideration for eliminating the liquidation preference, in October 2012 the Company issued to the Series A Holders, as of the Record Date, shares of NYTEX common stock at a rate of 0.42735 shares for each share of Series A Preferred held by them, or an aggregate of approximately 2,463,214 NYTEX common shares (the “Liquidation Adjustment Common Shares”);

(iv)As part of the Restructuring, in October 2012 we paid to the Series A Holders as of the Record Date, a restructuring fee in the amount of 0.0075% of the original $1.00 per share purchase price of the Series A Convertible Preferred Stock, with such fee totaling approximately $43,230; and

(v)At any time following the Effective Date of the Restructuring, the Company has the right to redeem any or all of the outstanding shares of Series A Convertible Preferred Stock at its original purchase price of $1.00 per share.  Further, the Company is required to redeem outstanding shares of Series A Convertible Preferred Stock, from time-to-time, upon any release to the Company any portion of the $6,250,000 in cash currently being held in the post-closing escrow fund (reported as restricted cash on the accompanying balance sheet at September 30, 2012) in connection with the sale of FDF on May 4, 2012, which mandatory redemption would be made by the Company out of funds legally available therefor to the extent of 100% of the amount of funds released at that time.  Each redemption would be applied pro rata among all Series A Holders.

In October 2012, we issued the Dividend Common Shares and Liquidation Adjustment Common Shares to the Series A Holders along with the payment of the restructuring fee were recognized as a charge to retained earnings as a dividend and a reduction to earnings available to common shareholders for the period ended September 30, 2012.  Accordingly, at September 30, 2012, the Series A Convertible Preferred Stock was carried as permanent equity.  Subsequent to the Effective Date, the Series A Convertible Preferred Stock will be presented outside of permanent equity as mezzanine equity.

Cash Flows

The following table summarizes our cash flows and has been derived from our unaudited financial statements for the nine months ended September 30, 2012 and 2011.

	Nine Months Ended September 30,
	2012			2011
Cash flow provided by operating activities	$	4,230,855		$	549,385
Cash flow provided by (used in) investing activities	4,176,995			(3,698,683		)
Cash flow provided by (used in) financing activities	(6,362,607		)	3,003,007
Net increase (decrease) in cash and cash equivalents	2,045,243			(146,291		)
Beginning cash and cash equivalents	10,817			209,498
Ending cash and cash equivalents	$	2,056,060		$	63,207

Cash flows from operating activities increased for the nine months ended September 30, 2012 by $3,681,470 compared to cash flows from operating activities for the nine months ended September 30, 2011. This increase was mainly due to cash inflows from the collection of accounts receivable of $3.6 million, which is offset by cash outflows related to the reduction of accounts payable and accrued expenses of approximately $4.4 million.  We also had an increase in cash inflows from deposits held in trust of approximately $3.1 million related to funds received from third-parties to acquire interests in certain oil and gas wells.

Cash flows provided by investing activities for the nine months ended September 30, 2012 were $4,176,995 compared to cash used of $3,698,683 for the nine months ended September 30, 2011.  The change primarily represents cash inflows of $11.7 million from the disposition of FDF on May 4, 2012.  These inflows were offset by cash outflows of $6.25 million related to the creation of an escrow account accounted for as restricted cash in connection with the disposition of FDF plus the purchase of marketable securities of $501,931 and investments in oil and gas properties totaling $389,618.

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Cash flows used in financing activities were $6,362,607 for the nine months ended September 30, 2012 compared to cash provided by financing activities of $3,003,007 for the nine months ended September 30, 2011.  For the nine months ended September 30, 2012, we redeemed the 12% and 9% convertible debentures totaling $3.2 million. In addition, in connection with the disposition of FDF, the Senior Facility was paid in full.  Also, in September 2012, we paid in full, the outstanding balance due on the 6% Related Party loan.  For the nine months ended September 30, 2011, the financing activity consisted primarily of borrowings on notes payable, which was offset by repayment of financing arrangements and the issuance of warrants related to the private placement offering of our Series A Convertible Preferred Stock.  In addition, during the nine months ended September 30, 2011, we received proceeds totaling $369,470 from the sale of additional shares of the Series A Convertible Preferred Stock and $936,000 from the issuance of the 9% convertible debentures.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Critical Accounting Policies

Preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.  We believe the most complex and sensitive judgments, because of their significance to the Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain.  Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2011, describe the significant accounting estimates and policies used in preparation of the Consolidated Financial Statements.  Actual results in these areas could differ from management’s estimates.  Except as discussed below, there have been no significant changes in our critical accounting estimates during the first nine months of 2012.

Marketable Securities

We determine the appropriate classification of our investments in marketable securities at the time of acquisition and reevaluate such determinations at each balance sheet date. Marketable securities are classified as held to maturity when we have the positive intent and ability to hold securities to maturity. Marketable securities that are bought and held principally for the purpose of selling them in the near term are classified as trading securities and are reported at fair value, with the unrealized gains and losses recognized in earnings. Marketable securities not classified as held to maturity or as trading, are classified as available for sale, and are carried at fair market value, with the unrealized gains and losses, net of tax, included in the determination of comprehensive income (loss) and reported in shareholders’ equity.  We have classified all of our marketable securities as available for sale. The fair value of substantially all securities is determined by quoted market prices. The estimated fair value of securities for which there are no quoted market prices is based on similar types of securities that are traded in the market.

We review our marketable securities on a regular basis to determine if any security has experienced an other-than-temporary decline in fair value.  We consider several factors including the length of the time and the extent to which the fair value has been below cost, the financial condition and near-term prospects of the affiliated entity, and other factors, in our review.  If we determine that an other-than-temporary decline exists in a marketable security, we write down the investment to its market value and record the related write-down as an investment loss in our Consolidated Statement of Operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The information is not required under Regulation S-K for “smaller reporting companies.”

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Item 4.  Controls and Procedures

Disclosure Controls and Procedures

Our management performed an evaluation of the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and to ensure that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, management has concluded that the Company’s disclosure controls and procedures are effective as of September 30, 2012.

Remediation and Changes in Internal Controls

We developed and are in the process of implementing remediation plans to address our material weaknesses as reported in our Form 10-K for the year ended December 31, 2011.  In the nine months ended September 30, 2012, the following specific remedial actions have been put in place:

·Engaged a third-party accounting firm to assist us in tax accounting and reporting and to support and assist in the execution of our remediation plans.

As a result, we believe that there are no material inaccuracies or omissions of material fact and, to the best of our knowledge, believe that the consolidated financial statements as of and for the three and nine months ended September 30, 2012, fairly present in all material respects the financial condition and results of operations in conformity with accounting principles generally accepted in the United States of America.

Other than as described above, there have not been any other changes in our internal control over financial reporting in the nine months ended September 30, 2012, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system cannot provide absolute assurance due to its inherent limitations; it is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. A control system also can be circumvented by collusion or improper management override. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of such limitations, disclosure controls and internal control over financial reporting cannot prevent or detect all misstatements, whether unintentional errors or fraud. However, these inherent limitations are known features of the financial reporting process, therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.

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PART II

Item 1.  Legal Proceedings

At September 30, 2012, the Company was a party to lawsuits that were incurred in the normal course of business, none of which individually or in the aggregate is considered material by management in relation to the Company’s financial position or results of operations.  In management’s opinion, the Company’s consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments, or asserted claims.

Item 1A.  Risk Factors

An investment in our common stock involves a high degree of risk.  In evaluating our business, you should carefully consider all of the risks described or incorporated by reference in this Quarterly Report.  If any of the risks discussed in this report actually occur, our business, financial condition and results of operations could be materially and adversely affected.  If this were to happen the value of our common stock could decline significantly and you may lose all or a part of your investment.  These risk factors are provided for investors as permitted by the Private Securities Litigation Reform Act of 1995.  It is not possible to identify or predict all such factors and, therefore, you should not consider these risks to be a complete statement of all the uncertainties we face.

Our business model has substantially changed as a result of the sale of FDF.

Prior to its sale on May 4, 2012, FDF accounted for approximately 99 percent of our current revenues and approximately 97 percent of our assets and the provision of drilling fluids and oil and gas well fracturing proppants through FDF had been our primary business strategy since we acquired FDF.  As a result of the sale of FDF, we will need to consider either further acquisitions in the oilfield services arena, expand our development of oil and gas reserves, or consider other potential business opportunities.  In exploring different opportunities, some may prove not to be viable or advisable and we will not develop every business we evaluate.  Further, exploring new business models and opportunities can be time consuming, result in significant expenses that may never be recouped and may divert management’s attention from our existing businesses.  Even if we determine to further develop a business, the integration of any new business into our existing structure will likely be complex, time consuming and potentially expensive and could disrupt business operations if not completed in a timely and efficient manner.  Any failure to identify new business opportunities, successfully integrate any new businesses with our current structure or receiving the anticipated benefits of any new business could have a material adverse effect on our business, financial condition and operating results.

Our historical financial results are not indicative of future results as a result of the sale of FDF.

Prior to its sale on May 4, 2012, FDF represented the most significant proportion of our assets and revenues.  Because FDF was sold to satisfy our obligations to WayPoint, our historical financial results will provide only a limited basis for you to assess our business and our historical financial results are not indicative of future financial results.

Our independent auditors have expressed doubt about our ability to continue our activities as a going concern, which may hinder our ability to obtain future financing.

The continuation of our business is dependent upon us raising additional financial support and maintaining profitable operations.  In addition, the sale of FDF has a significant impact on our operations and our ability to continue as a going concern.  If we should fail to continue as a going concern, you may lose all or a part of the value of your entire investment in us.

Due to the uncertainty of our ability to meet our current operating expenses and the defaults under our loan agreements noted above, (which defaults have been subsequently addressed), in their report on the annual financial statements for the years ended December 31, 2011and 2010, our independent auditors included an explanatory paragraph regarding the doubt about our ability to continue as a going concern.  This “going concern” opinion could impair our ability to access certain types of financing or may prevent us from obtaining financing.

Our continuation as a going concern is dependent upon our attaining and maintaining profitable operations, and raising additional capital.  The issuance of additional equity securities by us could result in a substantial dilution in the equity interests of our current stockholders. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our company discontinue operations.

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Our indebtedness and other payment obligations could restrict our operations and make us more vulnerable to adverse economic conditions.

Subsequent to the disposition of FDF, our outstanding indebtedness includes one secured equipment loan, a revolving line of credit, and the Francis Promissory Note.

Our current and future indebtedness could have important consequences. For example, those levels of indebtedness and obligations could:

·impair our ability to make investments and obtain additional financing for working capital, capital expenditures, acquisitions or other general corporate purposes;

·limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to make payments on our indebtedness and obligations; and

·make us more vulnerable to a downturn in our business, our industry or the economy in general as a substantial portion of our operating cash flow will be required to make payments.

We may need additional capital to pursue future strategic plans, and the sale of additional shares or other equity securities would result in additional dilution to our stockholders.

We cannot be certain that our existing sources of cash will be adequate to meet our liquidity requirements.  If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain an additional credit facility.  We cannot assure you that any additional equity sales or financing will be available in amounts or on terms acceptable to us, if at all.  The sale of additional equity securities would result in additional dilution to our stockholders and, depending on the amount of securities sold, could result in a significant reduction of your percentage interest in us. The incurrence of additional indebtedness would result in increased debt service obligations and could result in additional operating and financing covenants that would further restrict our operations. There can be no assurance that we will be successful with our plans or that our results of operations will materially improve in either the short-term or long-term and accordingly, we may be unable to meet our obligations as they become due.

Our business depends on domestic spending by the oil and gas industry, and this spending and our business have been, and may continue to be, adversely affected by industry and financial market conditions that are beyond our control.

We depend on our customers’ willingness to make operating and capital expenditures to explore for, develop and produce oil and gas in the United States.  Customers’ expectations of lower market prices for oil and gas, as well as the availability of capital for operating and capital expenditures, may cause them to curtail spending, thereby reducing demand for our services and equipment.

Industry conditions are influenced by numerous factors over which we have no control, such as the supply of and demand for oil and gas, domestic and worldwide economic conditions, political instability in oil and gas producing countries and merger and divestiture activity among oil and gas producers.  The volatility of the oil and gas industry and the consequent impact on exploration and production activity could adversely impact the level of drilling and workover activity by some of our customers.  This reduction may cause a decline in the demand for our services or adversely affect the price of our services.  Reduced discovery rates of new oil and gas reserves in our market areas also may have a negative long-term impact on our business, even in an environment of stronger oil and gas prices, to the extent existing production is not replaced and the number of producing wells for us to service declines.

Limitations on the availability of capital, or higher costs of capital, for financing expenditures have caused, and may continue to cause, oil and gas producers to make additional reductions to capital budgets in the future even if commodity prices increase from current levels.  These cuts in spending may curtail drilling programs as well as discretionary spending on well services, which could result in a reduction in the demand for our services, the rates we can charge and our utilization.  In addition, certain of our customers could become unable to pay their suppliers, including us.  As a result of these conditions, our customers’ spending patterns have become increasingly unpredictable, making it difficult for us to predict our future operating results.  Additionally, any of these conditions or events could adversely affect our operating results.

We cannot control activities on properties that we do not operate and are unable to control their proper operation and profitability.

We do not operate the properties in which we own an ownership interest.  As a result, we have limited ability to exercise influence over, and control the risks associated with, the operations of these properties.  The failure of an operator on these properties to adequately perform operations, an operator’s breach of the applicable agreements or an operator’s failure to act in ways that are in our best interests could negatively impact our operations.  The success and timing of drilling and development activities on properties operated by others therefore depend upon a number of factors outside of our control, including:

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·the nature and timing of the operator’s drilling and other activities;

·the timing and amount of required capital expenditures;

·the operator’s geological and engineering expertise and financial resources;

·the approval of other participants in drilling wells; and

·the operator’s selection of suitable technology.

If oil and gas prices remain volatile, or decline, the demand for our services could be adversely affected.

The demand for our services is primarily determined by current and anticipated oil and gas prices and the related general production spending and level of drilling activity in the areas in which we have operations.  Volatility or weakness in oil and gas prices (or the perception that oil and gas prices will decrease) affects the spending patterns of our customers and may result in the drilling of fewer new wells or lower production spending on existing wells.  This, in turn, could result in lower demand for our services and may cause lower rates and lower utilization of our well service equipment.  Continued volatility in oil and gas prices or a reduction in drilling activities could materially and adversely affect the demand for our services and our results of operations.

We may not be able to grow successfully through future acquisitions or successfully manage future growth, and we may not be able to effectively integrate the businesses we do acquire.

Our business strategy includes growth through the acquisitions of other businesses.  We may not be able to identify attractive acquisition opportunities or successfully acquire identified targets.  Furthermore, competition for acquisition opportunities may escalate, increasing our cost of making further acquisitions or causing us to refrain from making additional acquisitions.  This strategy may require external financing, which we may not be able to secure at all, or on favorable conditions.

In addition, we may not be successful in integrating our current or future acquisitions into our existing operations, which may result in unforeseen operational difficulties or diminished financial performance or require a disproportionate amount of our management’s attention.  Even if we are successful in integrating our current or future acquisitions into our existing operations, we may not derive the benefits, such as operational or administrative synergies, that we expected from such acquisitions, which may result in the commitment of our capital resources without the expected returns on such capital.

Our results of operations depend on our ability to acquire properties with adequate reserves which produce results.

Our future operations depend on our ability to find, develop, or acquire oil and natural gas reserves that are economically producible.  In general, properties produce oil and natural gas at a declining rate over time.  In order to maintain production rates, we must locate and develop or acquire new oil and natural gas reserves to replace those being depleted by production.  In addition, competition for oil and natural gas properties is intense and many of our competitors have financial, technical, human, and other resources needed to evaluate and integrate acquisitions that are substantially greater than ours.  Without successful drilling or acquisition activities, our reserves and production will decline over time.

In the event we do complete an acquisition, its successful impact on our business will depend on a number of factors, many of which are beyond our control. These factors include the purchase price, future oil and natural gas prices, the ability to reasonably estimate or assess the recoverable volumes of reserves, rates of future production and future net revenues attainable from reserves, future operating and capital costs, results of future exploration, exploitation and development activities on the acquired properties, and future abandonment and possible future environmental or other liabilities.  There are numerous uncertainties inherent in estimating quantities of proved oil and gas reserves, actual future production rates, and associated costs and potential liabilities with respect to prospective acquisition targets.  Actual results may vary substantially from those assumed in the estimates.  A customary review of subject properties will not necessarily reveal all existing or potential problems.

Additionally, significant acquisitions can change the nature of our operations and business depending upon the character of the acquired properties if they have substantially different operating and geological characteristics or are in different geographic locations than our existing properties.  To the extent acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such transactions may be limited.

Our property acquisitions may not be worth what we paid due to uncertainties in evaluating recoverable reserves and other expected benefits, as well as potential liabilities.

Successful property acquisitions require an assessment of a number of factors sometimes beyond our control.  These factors include exploration potential, future crude oil and natural gas prices, operating costs, and potential environmental and other liabilities.  These assessments are not precise and their accuracy is inherently uncertain.

In connection with our acquisitions, we typically perform a customary review of the acquired properties that will not

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necessarily reveal all existing or potential problems and may not allow us to fully assess the potential deficiencies of a property.

In addition, significant acquisitions can change the nature of our operations and business if the acquired properties have substantially different operating and geological characteristics or are in different geographic locations than our existing properties. To the extent acquired properties are substantially different than our existing properties, our ability to efficiently realize the expected economic benefits of such acquisitions may be limited.

Integrating acquired properties and businesses involves a number of other special risks, including the risk that management may be distracted from normal business concerns by the need to integrate operations and systems as well as retain and assimilate additional employees. Therefore, we may not be able to realize all of the anticipated benefits of any acquisitions.

Exploration and development drilling may not result in commercially producible reserves.

Crude oil and natural gas drilling and production activities are subject to numerous risks, including the risk that no commercially producible oil or natural gas will be found.  The cost of drilling and completing wells is often uncertain, and oil and natural gas drilling and production activities may be shortened, delayed, or canceled as a result of a variety of factors, many of which are beyond our control. These factors include:

·unexpected drilling conditions;

·title problems;

·disputes with owners or holders of surface interests on or near areas where we operate;

·pressure or geologic irregularities in formations;

·engineering and construction delays;

·equipment failures or accidents;

·compliance with environmental and other governmental requirements; and

·shortages or delays in the availability of, or increases in the cost of, drilling rigs and crews, equipment, pipe, chemicals, water and other drilling supplies.

The prevailing prices for crude oil and natural gas affect the cost of and the demand for drilling rigs, completion and production equipment, and other related services.  However, changes in costs may not occur simultaneously with corresponding changes in commodity prices.  The availability of drilling rigs can vary significantly from region to region at any particular time. Although land drilling rigs can be moved from one region to another in response to changes in levels of demand, an undersupply of rigs in any region may result in drilling delays and higher drilling costs for the rigs that are available in that region.  In addition, the recent economic and financial downturn has adversely affected the financial condition of some drilling contractors, which may constrain the availability of drilling services in some areas.

We may elect to conduct drilling operations and such operations may not be productive.

If we determine to drill wells, the wells we drill may not be productive and we may not recover all or any portion of our investment in such wells. The seismic data and other technologies we use do not allow us to know conclusively prior to drilling a well if oil or natural gas is present, or whether they can be produced economically.  The cost of drilling, completing, and operating a well is often uncertain, and cost factors can adversely affect the economics of a project.  Drilling activities can result in dry holes or wells that are productive but do not produce sufficient net revenues after operating and other costs to cover initial drilling and completion costs.

Any future drilling activities may not be successful.  Our overall drilling success rate or our drilling success rate within a particular area may decline.  In addition, we may not be able to obtain any options or lease rights in potential drilling locations that we identify.  Although we have identified numerous potential drilling locations, we may not be able to economically produce oil or natural gas from all of them.

Another significant risk inherent in any drilling plan is the need to obtain drilling permits from state, local, and other governmental authorities.  Delays in obtaining regulatory approvals and drilling permits, including delays that jeopardize our ability to realize the potential benefits from leased properties within the applicable lease periods, the failure to obtain a drilling permit for a well, or the receipt of a permit with unreasonable conditions or costs could have a materially adverse effect on our ability to explore on or develop our properties.

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Our success depends on key members of our management, the loss of any of whom could disrupt our business operations.

We depend to a large extent on the services of some of our executive officers.  The loss of the services of Michael K. Galvis, our President and Chief Executive Officer or other key personnel could disrupt our operations. Although we have entered into employment agreements with Mr. Galvis and certain other executive officers that contain, among other provisions, non-compete agreements, we may not be able to retain the executives past the terms of their employment agreements or enforce the non-compete provisions in the employment agreements.  As part of the disposition of FDF in May 2012, the employment agreements with Michael Francis and Bryan Francis were terminated and they, along with Jude Gregory, a former FDF officer, exchanged mutual releases with us.

Our operations are subject to inherent risks, some of which are beyond our control. These risks may be self-insured, or may not be fully covered under our insurance policies.

Our operations are subject to hazards inherent in the oil and gas industry, such as, but not limited to, accidents, blowouts, explosions, craterings, fires and oil spills.  These conditions can cause:

·personal injury or loss of life;

·damage to or destruction of property and equipment (including the collateral securing our indebtedness) and the environment;

·suspension of our operations; and

·lost profits.

The occurrence of a significant event or adverse claim in excess of the insurance coverage we maintain or which is not covered by insurance could have a material adverse effect on our financial condition and results of operations.  In addition, claims for loss of oil and gas production and damage to formations can occur in the well services industry.  Litigation arising from a catastrophic occurrence at a location where our equipment and services are being used may result in our being named as a defendant in lawsuits asserting large claims.

We maintain insurance coverage we believe to be customary in the industry against these hazards.  However, we do not have insurance against all foreseeable risks, either because insurance is not available or because of the high premium costs.  As a result, not all of our property is insured.

We maintain accruals in our consolidated balance sheets related to self-insurance retentions by using third-party data and historical claims history.  The occurrence of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result in substantial losses.  In addition, we may not be able to maintain adequate insurance in the future at rates we consider reasonable.  Insurance may not be available to cover any or all of the risks we are exposed to, or, even if available, it may be inadequate, or prohibitively expensive. It is likely that, in the future, our insurance renewals, our premiums and deductibles will be higher, and certain insurance coverage either will be unavailable or considerably more expensive than it has been in the recent past.  In addition, our insurance is subject to coverage limits, and some policies exclude coverage for damages resulting from environmental contamination.  Our insurance program is administered by an officer of the Company, is reviewed not less than annually with our insurance brokers and underwriters, and is reviewed by our Board of Directors on an annual basis.

We are subject to federal, state and local regulations regarding issues of health, safety and protection of the environment.  Under these regulations, we may become liable for penalties, damages or costs of remediation. Any changes in these laws and government regulations could increase our costs of doing business.

Our operations are subject to federal, state and local laws and regulations relating to protection of natural resources and the environment, health and safety, waste management, and transportation of waste and other materials.  Our fluid services segment includes disposal operations into injection wells that pose some risks of environmental liability, including leakage from the wells to surface or subsurface soils, surface water or groundwater.  Liability under these laws and regulations could result in cancellation of well operations, fines and penalties, expenditures for remediation, and liability for property damage and personal injuries.  Sanctions for noncompliance with applicable environmental laws and regulations also may include assessment of administrative, civil and criminal penalties, revocation of permits and issuance of corrective action orders.

Risk factors relating to an investment in our securities

The issuance of shares of common stock upon conversion of the Series A Preferred Stock, as well as upon exercise of outstanding warrants may cause immediate and substantial dilution to our existing stockholders.

If the market price per share of our common stock at the time of conversion of our Series A Preferred Stock and

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exercise of any warrants, options, or any other convertible securities is in excess of the various conversion or exercise prices of these derivative securities, conversion or exercise of these derivative securities would have a dilutive effect on our common stock.

As of September 30, 2012, we had outstanding (i) 5,763,869 shares of Series A Preferred Stock which are convertible into an aggregate of 5,763,869 shares of our common stock at $1.00 per share, and (ii) warrants to purchase 1,262,500 shares of our Common Stock at an exercise price of $2.00 per share.

Further, any additional financing we may secure could require the granting of rights, preferences or privileges senior to those of our common stock, which may result in additional dilution of the existing ownership interests of our common stockholders.

We are subject to the reporting requirements of federal securities laws, compliance with which is expensive.

We are a public reporting company in the U.S. and, accordingly, subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended and other federal securities laws, and the compliance obligations of the Sarbanes-Oxley Act of 2002.  The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the SEC and furnishing audited reports to stockholders will cause our expenses to be higher than they would be if we were a privately held company.

Our compliance with the Sarbanes Oxley Act and SEC rules concerning internal controls are time consuming, difficult, and costly.

As a reporting company, it is time consuming, difficult and costly for us to develop and implement the internal controls and reporting procedures required by the Sarbanes-Oxley Act.  In order to comply with our obligations, we hired additional financial reporting, internal control, and other finance staff in order to develop and implement appropriate internal controls and reporting procedures.  If we are unable to comply with the Sarbanes-Oxley Act’s requirements regarding internal controls, we may not be able to obtain the independent accountant certifications that the Sarbanes-Oxley Act requires publicly traded companies to obtain.

If we fail to maintain the adequacy of our internal controls, our ability to provide accurate financial statements and comply with the requirements of the Sarbanes-Oxley Act could be impaired, which could cause the market price of our common stock to decrease substantially.

We have committed limited personnel and resources to the development of the external reporting and compliance obligations that are required of a public company.  We have taken measures to address and improve our financial reporting and compliance capabilities and we are in the process of instituting changes to satisfy our obligations in connection with being a public company, when and as such requirements become applicable to us. If our financial and managerial controls, reporting systems, or procedures fail, we may not be able to provide accurate financial statements on a timely basis or comply with the Sarbanes-Oxley Act as it applies to us. Any failure of our internal controls or our ability to provide accurate financial statements could cause the trading price of our common stock to decline substantially.

Our stock price may be volatile, which may result in losses to our stockholders.

Domestic and international stock markets often experience significant price and volume fluctuations especially in times of economic uncertainty.  In particular, the market prices of companies quoted on the Over-The-Counter Bulletin Board, where our shares of common stock are quoted, generally have been very volatile and have experienced sharp share-price and trading-volume changes. The public trading price of our common stock is likely to be volatile and could fluctuate widely in response to the following factors, some of which are beyond our control:

·variations in our operating results;

·changes in expectations of our future financial performance, including financial estimates by securities analysts and investors;

·changes in operating and stock price performance of other companies in our industry;

·additions or departures of key personnel;

·future sales of our common stock; and

·general economic and political conditions.

The market price for our common stock may be particularly volatile given our status as a smaller reporting company with a relatively small and thinly-traded “float.”  You may be unable to sell your common stock at or above your purchase price, if at all, which may result in substantial losses to you.

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The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect our share price will be more volatile than a seasoned issuer for the indefinite future.  The potential volatility in our share price is attributable to a number of factors.  As noted above, our common stock may be sporadically and/or thinly traded.  As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction.  The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price.

Our common stock is thinly-traded.  You may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate such shares.

We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a smaller reporting company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume.  Even if we come to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable.  As a consequence, there may be periods of several days or more when trading activity in our common stock is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.  We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained or that current trading levels will be sustained.

Our common stock may be subject to penny stock rules, which may make it more difficult for our stockholders to sell their common stock.

Broker-dealer practices in connection with transactions in “penny stocks” are regulated by certain penny stock rules adopted by the SEC.  Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a purchase or sale of a penny stock not otherwise exempt from the rules, to deliver to the customer a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market.  The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account.  In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules.

We do not anticipate paying any dividends.

We presently do not anticipate we will pay any dividends on our common stock in the foreseeable future.  The payment of dividends on our common stock, if any, would be contingent upon our revenues, earnings, capital requirements, and our general financial condition.  We will pay dividends on our common stock only if and when declared by our board of directors.  The ability of our board of directors to declare a dividend is subject to restrictions imposed by Delaware law.  In determining whether to declare dividends, our board of directors will consider these restrictions as well as our financial condition, results of operations, working capital requirements, future prospects and other factors it considers relevant.

We have a substantial number of authorized common shares available for future issuance that could cause dilution of our stockholders’ interest and adversely impact the rights of holders of our common stock.

We have a total of 200,000,000 shares of common stock authorized for issuance. As of September 30, 2012, we had 172,347,251 shares of common stock available for issuance.  We have reserved 5,763,869 shares for conversion of our Series A Preferred Stock and 1,331,095 shares for issuance upon the exercise of outstanding warrants held by these security holders. Subsequent to the Merger Agreement, we have also reserved approximately 116,667 shares of common stock in connection with stock grants to our employees.  We may seek financing that could result in the issuance of additional shares of our capital stock and/or rights to acquire additional shares of our capital stock.  We may also make acquisitions that result in issuances of additional shares of our capital stock. Furthermore, the book value per share of our common stock may be reduced.

The introduction of a substantial number of shares of our common stock into the market or by the registration of any of our other securities under the Securities Act may significantly and negatively affect the prevailing market price for our common stock.  The future sales of shares of our common stock issuable upon the exercise of outstanding warrants and options may have a depressive effect on the market price of our common stock, as such warrants and options are likely to be

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exercised only at a time when the price of our common stock is greater than the exercise price.

Other risk factors

Reserve data of our oil and gas operations are estimates based on assumptions that may be inaccurate.

There are uncertainties inherent in estimating natural gas and oil reserves and their estimated value, including many factors beyond our control as producer. Reservoir engineering is a subjective and inexact process of estimating underground accumulations of natural gas and oil that cannot be measured in an exact manner and is based on assumptions that may vary considerably from actual results.

Accordingly, reserve estimates and actual production, revenue and expenditures likely will vary, possibly materially, from estimates. Additionally, there recently has been increased debate and disagreement over the classification of reserves, with particular focus on proved undeveloped reserves. Changes in interpretations as to classification standards or disagreements with our interpretations could cause us to write down these reserves.

The extent to which we can benefit from successful acquisition and development activities or acquire profitable oil and natural gas producing properties with development potential is highly dependent on the level of success in finding or acquiring reserves.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

On August 1, 2012, we issued 100,000 shares of common stock to Kerri Scano in connection with the initiation of her employment with our subsidiary, Petro Staffing Group, LLC.  Fifty thousand of these shares vested as of such date and the remaining fifty thousand will vest if Ms. Scano remains employed with Petro Staffing on the first anniversary of such date.  The securities were issued pursuant to the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended.

Item 3.Defaults Upon Senior Securities

None

Item 4.Mine Safety Disclosures

None

Item 5.Other Information

None

Item 6.Exhibits

The exhibits set forth on the accompanying Exhibit Index have been filed as part of this Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NYTEX Energy Holdings, Inc.
	By:	/s/ Michael K. Galvis
		Michael K. Galvis
		President and Chief Executive Officer
November 6, 2012

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EXHIBIT INDEX

Exhibit	Document
2.1	Agreement and Plan of Merger, dated as of May 4, 2012, by and among FDF Resources Holdings LLC, New Francis Oaks, LLC and NYTEX FDF Acquisition, Inc. (filed as Exhibit 2.1 to the Registrant’s Form 8-K filed May 10, 2012 and incorporated herein by reference)
3.1	Certificate of Incorporation of the Registrant, as amended (filed as Exhibit 3.1 to the Registrant’s Form 10-12G/A filed August 12, 2010 and incorporated herein by reference)
3.2	Bylaws of Registrant, as amended (filed as Exhibit 3.2 to the Registrant’s Form 10-12G/A filed August 12, 2010 and incorporated herein by reference)
4.1	Amended and Restated Certificate of Designation in respect of Senior Series A Redeemable Preferred Stock (filed as Exhibit 10.9 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)
4.2	Amended and Restated Certificate of Designation in respect of Senior Series B Redeemable Preferred Stock (filed as Exhibit 10.10 to the Registrant’s Form 8-K filed November 30, 2010 and incorporated herein by reference)
4.3*	Amended and Restated Certificate of Designation in respect of Series A Convertible Preferred Stock
31.1*	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002***
101.INS**	XBRL Instance Document.
101.SCH**	XBRL Taxonomy Extension Schema.
101.CAL**	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF**	XBRL Taxonomy Extension Definition Linkbase.
101.LAB**	XBRL Taxonomy Extension Label Linkbase.
101.PRE**	XBRL Taxonomy Extension Presentation Linkbase.

*Filed herewith

**   Furnished herewith

***In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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