Vertex Energy, Inc. Reports Fourth Quarter And Full-Year 2019 Results

HOUSTON, TX / ACCESSWIRE /  March 4, 2020 / Vertex Energy, Inc. (NASDAQ:VTNR, "Vertex" or the "Company"), a leading specialty refiner and marketer of high-quality hydrocarbon products, today announced financial results for the fourth quarter and full-year 2019.

4Q19 FINANCIAL HIGHLIGHTS

Total direct collections +19.1% year-over-year (y/y)
Total revenue of $42.6 million (+$0.8 million y/y)
Total net income of $1.4 million (+$1.6 million y/y)
Total adjusted EBITDA of $3.9 million (+$5.5 million y/y)

FULL-YEAR 2019 HIGHLIGHTS

Total direct collections +20.6% y/y
Completed Tensile Capital Joint-Venture
Completed Bunker One Strategic Partnership

For the three months ended December 31, 2019, the Company reported net income available to common shareholders of $1.4 million, or $0.04 per diluted share, versus a net loss of ($0.2) million, or ($0.01) per basic share, in the fourth quarter of 2018. Vertex reported Adjusted EBITDA of $3.9 million in the fourth quarter of 2019, versus ($1.6) million in the prior-year period. For the full-year 2019, the Company reported a net loss available to common shareholders of ($11.4) million, or ($0.28) per basic share, versus a net loss of ($8.0) million, or ($0.23) per basic share, in 2018. Vertex reported Adjusted EBITDA of $7.4 million for the full-year 2019, versus $7.3 million in the prior-year period. A schedule reconciling the Company's GAAP and non-GAAP financial results (including Adjusted EBITDA) is included later in this release.

Fourth quarter results benefited from a combination of increased sales volumes and elevated product margins, resulting in improved profitability in the period. In advance of the January 1, 2020 low-sulfur marine fuel mandate set forth by the International Maritime Organization, the spread between high-sulfur fuel oil and corresponding middle distillate values widened materially. In response to improved market conditions, the Company's Marrero, Louisiana refinery operated near peak capacity during the fourth quarter of 2019, capitalizing on favorable refining economics evident in the market. During the fourth quarter of 2019, Marrero sold near-record volumes of middle distillate to the Company's long-term distribution partner, Bunker One USA. At the Company's Ohio-based Heartland refinery, increased sales volumes of high-purity base oils also contributed to the year-over-year improvement in fourth quarter results.

Direct collections of used motor oil (UMO) increased 19.1% in the fourth quarter of 2019, when compared to the prior-year's period. UMO collections represented approximately 44.5% of overall feedstock processed at the Company's refineries in the fourth quarter of 2019, versus 36.5% in the fourth quarter of 2018, with the remaining feedstock being sourced from third-party UMO suppliers.

MANAGEMENT COMMENTARY

"Fourth quarter results exceeded our guidance range, given strong performances at both our Marrero and Heartland refineries," stated Benjamin P. Cowart, President and CEO of Vertex, who continued, "In expectation of improved product spreads leading up to the January 1, 2020 IMO transition, we operated our Marrero refinery at capacity, while building inventories of middle distillates. This strategy served us well in the fourth quarter, positioning us to sell increased volumes at elevated margins. Improved refining economics at Marrero, together with increased sales of high-purity base oils at Heartland, resulted in a return to profitable growth in the period.

"During 2019, we entered into two major strategic partnerships that we believe will position us to achieve material growth in profitability over a multi-year horizon. Our recently announced relationship with Bunker One USA, which provides for a long-term supply-offtake agreement and a net profit-sharing arrangement, represents the single most significant opportunity for growth in 2020. This relationship, together with our previously disclosed joint-venture with Tensile Capital, which positions us to become a leading producer and marketer of high-purity base oils at the Heartland refinery, are both transformational opportunities that we feel position us to create significant value for shareholders, over time.

"During the first quarter 2020, product spreads narrowed from near-record fourth quarter levels, as global trade slowed in reaction to concerns around a novel coronavirus strain. Importantly, we have hedges in place to protect some of our product margins, which we expect will serve to offset part of the recent volatility evident in the market. Even as refining margins are expected to revert back toward long-term averages, contributions from the Bunker One agreement, together with strong demand for high-purity base oils, support our positive outlook for the full-year 2020," continued Cowart.

CONFERENCE CALL AND WEBCAST

A conference call will be held today at 9:00 A.M. ET to review the Company's financial results, discuss recent events and conduct a question-and-answer session.

A webcast of the conference call and accompanying presentation materials will be available in the Investor Relations section of Vertex's website at www.vertexenergy.com. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register, download, and install any necessary audio software.

To participate in the live teleconference:

Domestic Live: 844-369-8770

To listen to a replay of the teleconference, which will be available through April 4, 2020:

Domestic Replay: 877-481-4010

Conference ID: 33255

ABOUT VERTEX ENERGY

Houston-based Vertex Energy, Inc. (NASDAQ: VTNR) is a specialty refiner of alternative feedstocks and marketer of high-purity petroleum products. Vertex is one of the largest processors of used motor oil in the U.S., with operations located in Houston and Port Arthur (TX), Marrero (LA) and Heartland (OH). Vertex also co-owns a facility, Myrtle Grove, located on a 41-acre industrial complex along the Gulf Coast in Belle Chasse, LA, with existing hydro-processing and plant infrastructure assets, that include nine million gallons of storage. The Company has built a reputation as a key supplier of Group II+ and Group III base oils to the lubricant manufacturing industry throughout North America.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements, including information about management's view of Vertex Energy's future expectations, plans and prospects, within the safe harbor provisions under The Private Securities Litigation Reform Act of 1995 (the "Act"). In particular, when used in the preceding discussion, the words "believes," "hopes," "expects," "intends," "plans," "anticipates," or "may," and similar conditional expressions are intended to identify forward-looking statements within the meaning of the Act, and are subject to the safe harbor created by the Act. Any statements made in this news release other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of Vertex Energy, its divisions and concepts to be materially different than those expressed or implied in such statements. These risk factors and others are included from time to time in documents Vertex Energy files with the Securities and Exchange Commission, including, but not limited to, its Form 10-Ks, Form 10-Qs and Form 8-Ks. Other unknown or unpredictable factors also could have material adverse effects on Vertex Energy's future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex Energy cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex Energy undertakes no obligation to update these statements after the date of this release, except as required by law, and takes no obligation to update or correct information prepared by third parties that are not paid for by Vertex Energy.

CONTACT

Noel Ryan, IRC
720.778.2415
IR@vertexenergy.com

Reconciliation of Net Loss attributable to Vertex Energy, Inc., to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA*

 
For the Three Months Ended
 
 
For the Twelve Months
 

 
December 31, 2019
 
 
December 31, 2018
 
 
December 31, 2019
 
 
December 31, 2018
 

Net income (loss)

attributable to Vertex Energy, Inc.

 
$
1,434,202
 
 
$
(201,333
)
 
$
(5,048,579
)
 
$
(2,217,767
)

Add (deduct):

Interest Income

 
 
(126
)
 
 
–
 
 
 
(2,697
)
 
 
(659
)

Interest Expense

 
 
747,291
 
 
 
833,084
 
 
 
3,070,071
 
 
 
3,281,855
 

Depreciation and amortization

 
 
1,846,604
 
 
 
1,756,996
 
 
 
7,180,089
 
 
 
6,991,010
 

EBITDA

 
 
4,027,971
 
 
 
2,388,747
 
 
 
5,198,884
 
 
 
8,054,439
 

Add (deduct):

Loss (gain) on change in value of derivative warrant liability

 
 
819,239
 
 
 
(2,888,687
)
 
 
487,524
 
 
 
(763,716
)

Unrealized (gain) loss on derivative instruments

 
 
(1,134,723
)
 
 
(1,297,475
)
 
 
1,071,792
 
 
 
(695,992
)

Stock-based compensation

 
 
169,350
 
 
 
165,057
 
 
 
642,841
 
 
 
659,836
 

Adjusted EBITDA *

 
$
3,881,837
 
 
$
(1,632,358)
 
 
$
7,401,039
 
 
$
7,254,567
 

* EBITDA and Adjusted EBITDA are non-GAAP financial measures. These measurements are not recognized in accordance with GAAP and should not be viewed as an alternative to GAAP measures of performance.

EBITDA represents net income before interest, taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA before stock-based compensation expense and gain (loss) on change in value of derivative warrant liability and unrealized gains and losses on derivative instruments for hedging activities. EBITDA and Adjusted EBITDA are presented because we believe they provide additional useful information to investors due to the various noncash items during the period. EBITDA and Adjusted EBITDA have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results as reported under GAAP. Some of these limitations are:

EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments;
EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs;
EBITDA and Adjusted EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on debt or cash income tax payments;
Although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and
Other companies in this industry may calculate EBITDA and Adjusted EBITDA differently than Vertex Energy does, limiting its usefulness as a comparative measure.

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS

 
December 31, 2019
 
 
December 31, 2018
 

ASSETS

Current assets

Cash and cash equivalents

 
$
4,099,655
 
 
$
1,249,831
 

Restricted cash

 
 
100,170
 
 
 
1,600,000
 

Accounts receivable, net

 
 
12,138,078
 
 
 
9,027,990
 

Federal income tax receivable

 
 
68,606
 
 
 
137,212
 

Inventory

 
 
6,547,479
 
 
 
8,091,397
 

Derivative commodity asset

 
 
–
 
 
 
695,941
 

Prepaid expenses and other current assets

 
 
4,452,920
 
 
 
2,740,541
 

Total current assets

 
 
27,406,908
 
 
 
23,542,912
 

Fixed assets, at cost

 
 
69,469,548
 
 
 
66,762,388
 

Less accumulated depreciation

 
 
(24,708,151
)
 
 
(19,874,896
)

Fixed assets, net

 
 
44,761,397
 
 
 
46,887,492
 

Finance lease right-of-use assets

 
 
851,570
 
 
 
397,515
 

Operating lease right-of-use assets

 
 
35,586,885
 
 
 
–
 

Intangible assets, net

 
 
11,243,800
 
 
 
12,578,519
 

Deferred income taxes

 
 
68,605
 
 
 
137,211
 

Other assets

 
 
840,754
 
 
 
616,759
 

TOTAL ASSETS

 
$
120,759,919
 
 
$
84,160,408
 

LIABILITIES, TEMPORARY EQUITY AND EQUITY

Current liabilities

Accounts payable

 
$
7,620,098
 
 
$
8,791,529
 

Accrued expenses

 
 
5,016,132
 
 
 
2,535,347
 

Dividends payable

 
 
389,176
 
 
 
403,002
 

Finance lease-current

 
 
217,164
 
 
 
95,857
 

Operating lease-current

 
 
5,885,304
 
 
 
–
 

Current portion of long-term debt, net of unamortized finance costs

 
 
2,017,345
 
 
 
1,325,240
 

Revolving note

 
 
3,276,230
 
 
 
3,844,636
 

Derivative commodity liability

 
 
375,850
 
 
 
–
 

Total current liabilities

 
 
24,797,299
 
 
 
16,995,611
 

Long-term debt, net of unamortized finance costs

 
 
12,433,000
 
 
 
14,402,179
 

Finance lease-long-term

 
 
610,450
 
 
 
276,355
 

Operating lease-long-term

 
 
29,701,581
 
 
 
–
 

Contingent consideration

 
 
–
 
 
 
15,564
 

Derivative warrant liability

 
 
1,969,216
 
 
 
1,481,692
 

Total liabilities

 
 
69,511,546
 
 
 
33,171,401
 

COMMITMENTS AND CONTINGENCIES (Note 4)

 
 
–
 
 
 
–
 

TEMPORARY EQUITY

Series B Preferred Stock, $0.001 par value per share;
10,000,000 shares authorized, 3,826,055 and 3,604,827 shares issued
and outstanding at December 31, 2019 and 2018, respectively with liquidation preference of $11,860,771 and $11,174,964 at December 31, 2019 and 2018, respectively.

 
 
11,006,406
 
 
 
8,900,208
 

Series B1 Preferred Stock, $0.001 par value per share;
17,000,000 shares authorized, 9,028,085 and 10,057,597 shares issued
and outstanding at December 31, 2019 and 2018, respectively with liquidation preference of $14,083,813 and $15,689,851 at December 31, 2019 and 2018, respectively.

 
 
12,743,047
 
 
 
13,279,755
 

Redeemable non-controlling interest

 
 
4,396,894
 
 
 
–
 

Total Temporary Equity

 
 
28,146,347
 
 
 
22,179,963
 

EQUITY

Series A Convertible Preferred stock, $0.001 par value;
5,000,000 shares authorized and 419,859 and 419,859 shares issued
and outstanding at December 31, 2019 and 2018, respectively, with a liquidation preference of $625,590 and $625,590 at December 31, 2019 and December 31, 2018, respectively.

 
 
420
 
 
 
420
 

Series C Convertible Preferred stock, $0.001 par value per share;
44,000 shares designated; zero and zero
issued and outstanding at December 31, 2019 and 2018, respectively with a liquidation preference of zero and zero at December 31, 2019 and December 31, 2018, respectively.

 
 
–
 
 
 
–
 

Common stock, $0.001 par value per share;
750,000,000 shares authorized; 43,395,563 and 40,174,821
issued and outstanding at December 31, 2019 and 2018, respectively.

 
 
43,396
 
 
 
40,175
 

Additional paid-in capital

 
 
81,527,351
 
 
 
75,131,122
 

Accumulated deficit

 
 
(59,246,514
)
 
 
(47,800,886
)

Total Vertex Energy, Inc. stockholders' equity

 
 
22,324,653
 
 
 
27,370,831
 

Non-controlling interest

 
 
777,373
 
 
 
1,438,213
 

Total Equity

 
 
23,102,026
 
 
 
28,809,044
 

TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY

 
$
120,759,919
 
 
$
84,160,408
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2019 and 2018

 
2019
 
 
2018
 

Revenues

 
$
163,365,565
 
 
$
180,720,661
 

Cost of revenues (exclusive of depreciation and amortization shown separately below)

 
 
134,777,113
 
 
 
151,314,039
 

Gross profit

 
 
28,588,452
 
 
 
29,406,622
 

Operating expenses:

Selling, general and administrative expenses

 
 
24,182,407
 
 
 
21,927,264
 

Depreciation and amortization

 
 
7,180,089
 
 
 
6,991,010
 

Total operating expenses

 
 
31,362,496
 
 
 
28,918,274
 

Income (loss) from operations

 
 
(2,774,044
)
 
 
488,348
 

Other income (expense):

Other income

 
 
920,197
 
 
 
659
 

Gain (loss) on sale of assets

 
 
(74,111
)
 
 
45,553
 

Gain (loss) on change in value of derivative warrant liability

 
 
(487,524
)
 
 
763,716
 

Interest expense

 
 
(3,070,071
)
 
 
(3,281,855
)

Total other expense

 
 
(2,711,509
)
 
 
(2,471,927
)

Loss before income taxes

 
 
(5,485,553
)
 
 
(1,983,579
)

Income tax benefit

 
 
–
 
 
 
–
 

Net loss

 
 
(5,485,553
)
 
 
(1,983,579
)

Net income (loss) attributable to non-controlling interest and redeemable non-controlling interest

 
 
(436,974
)
 
 
234,188
 

Net loss attributable to Vertex Energy, Inc.

 
 
(5,048,579
)
 
 
(2,217,767
)

Accretion of redeemable noncontrolling interest to redemption value

 
 
(2,279,371
)
 
 
–
 

Accretion of discount on series B and B-1 Preferred Stock

 
 
(2,489,722
)
 
 
(3,132,414
)

Dividends on series B and B-1 Preferred Stock

 
 
(1,627,956
)
 
 
(2,687,123
)

Net loss available to common stockholders

 
$
(11,445,628
)
 
$
(8,037,304
)

Loss per common share

Basic

 
$
(0.28
)
 
$
(0.23
)

Diluted

 
$
(0.28
)
 
$
(0.23
)

Shares used in computing loss per share

Basic

 
 
40,988,946
 
 
 
35,411,264
 

Diluted

 
 
40,988,946
 
 
 
35,411,264
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE YEARS ENDING DECEMBER 31, 2019 AND 2018

 
Common Stock
 
 
Series A Preferred
 
 
Series C Preferred
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Shares
 
 
$.001 Par
 
 
Shares
 
 
$.001 Par
 
 
Shares
 
 
$.001 Par
 
 
Additional Paid-in Capital
 
 
Retained Earnings
 
 
Non-controlling Interest
 
 
Total Equity
 

Balance on December 31, 2017

 
 
32,658,176
 
 
$ 
32,658
 
 
 
453,567
 
 
$ 
454
 
 
 
31,568
 
 
$ 
32
 
 
$ 
67,768,509
 
 
$ 
(39,816,300
)
 
$ 
399,005
 
 
$ 
28,384,358
 

Correction of non-controlling interest

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
52,718
 
 
 
(52,718
)
 
 
–
 

Dividends and Series B and B1 Preferred Stock

 
 
166,630
 
 
 
167
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
313,097
 
 
 
(2,687,123
)
 
 
–
 
 
 
(2,373,859
)

Accretion of discount on Series B and B1 Preferred Stock

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1,960,013
)
 
 
–
 
 
 
(1,960,013
)

Conversion of Series B Preferred stock to common

 
 
32,149
 
 
 
33
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
99,629
 
 
 
(36,700
)
 
 
–
 
 
 
62,962
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
659,836
 
 
 
–
 
 
 
–
 
 
 
659,836
 

Exercise of options to common

 
 
241
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 

Conversion of Series A Preferred stock to common

 
 
33,708
 
 
 
34
 
 
 
(33,708
)
 
 
(34
)
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 

Conversion of Series C Preferred Stock to common

 
 
3,156,800
 
 
 
3,157
 
 
 
–
 
 
 
–
 
 
 
(31,568
)
 
 
(32
)
 
 
(3,125
)
 
 
–
 
 
 
–
 
 
 
–
 

Conversion of Series B1 Preferred stock to common

 
 
3,977,117
 
 
 
3,976
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
6,200,326
 
 
 
(1,135,701
)
 
 
–
 
 
 
5,068,601
 

Fixed assets contributed by noncontrolling interest

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
857,738
 
 
 
857,738
 

Issue of common stock from Nickco contingent consideration

 
 
150,000
 
 
 
150
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
92,850
 
 
 
–
 
 
 
–
 
 
 
93,000
 

Net income (loss)

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(2,217,767
)
 
 
234,188
 
 
 
(1,983,579
)

Balance on December 31, 2018

 
 
40,174,821
 
 
 
40,175
 
 
 
419,859
 
 
 
420
 
 
 
–
 
 
 
–
 
 
 
75,131,122
 
 
 
(47,800,886
)
 
 
1,438,213
 
 
 
28,809,044
 

Dividends on Series B and B1 Preferred Stock

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1,627,956
)
 
 
–
 
 
 
(1,627,956
)

Accretion of discount on Series B and B1 Preferred Stock

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(2,169,597
)
 
 
–
 
 
 
(2,169,597
)

Conversion of B1 Preferred Stock to common

 
 
1,642,317
 
 
 
1,642
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
2,560,373
 
 
 
(320,125
)
 
 
–
 
 
 
2,241,890
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
642,840
 
 
 
–
 
 
 
–
 
 
 
642,840
 

Exercise of options to common

 
 
78,425
 
 
 
79
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
6,996
 
 
 
–
 
 
 
–
 
 
 
7,075
 

Distribution to noncontrolling

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(285,534
)
 
 
(285,534
)

Adjustment of redeemable noncontrolling interest to redemption value

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(2,217,703
)
 
 
–
 
 
 
(2,217,703
)

Adjustment of carrying amount of noncontrolling interest

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
970,809
 
 
 
–
 
 
 
–
 
 
 
970,809
 

Issue of common stock and warrants

 
 
1,500,000
 
 
 
1,500
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
2,215,211
 
 
 
–
 
 
 
–
 
 
 
2,216,711
 

Net loss

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(5,110,247
)
 
 
(375,306
)
 
 
(5,485,553
)

Balance on December 31, 2019

 
 
43,395,563
 
 
$ 
43,396
 
 
 
419,859
 
 
$ 
420
 
 
 
–
 
 
$ 
–
 
 
$ 
81,527,351
 
 
$ 
(59,246,514
)
 
$ 
777,373
 
 
$ 
23,102,026
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDING DECEMBER 31, 2019 AND 2018

 
2019
 
 
2018
 

Cash flows from operating activities

Net loss

 
$
(5,485,553
)
 
$
(1,983,579
)

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

Stock-based compensation expense

 
 
642,840
 
 
 
659,836
 

Depreciation and amortization

 
 
7,180,089
 
 
 
6,991,010
 

Reduction in allowance for bad debt

 
 
(320,013
)
 
 
(299,110
)

Gain on commodity derivative contracts

 
 
2,458,359
 
 
 
(1,062,682
)

Net cash settlement on commodity derivatives

 
 
(2,841,052
)
 
 
369,188
 

Gain on sale of assets

 
 
74,111
 
 
 
(45,553
)

Gain on disposition

 
 
–
 
 
 
(241,416
)

Amortization of debt discount and deferred costs

 
 
573,908
 
 
 
584,336
 

Deferred federal income tax

 
 
–
 
 
 
–
 

Decrease in fair value of derivative liability

 
 
487,524
 
 
 
(763,716
)

Reduction in contingent consideration

 
 
(15,564
)
 
 
(128,116
)

Impairment of goodwill

 
 
–
 
 
 
176,349
 

Changes in operating assets and liabilities:

Accounts receivable

 
 
(2,652,864
)
 
 
2,143,834
 

Inventory

 
 
1,543,918
 
 
 
(1,786,555
)

Prepaid expenses

 
 
(257,894
)
 
 
(597,146
)

Accounts payable

 
 
(1,171,433
)
 
 
1,493,324
 

Accrued expenses

 
 
2,480,786
 
 
 
42,625
 

Other assets

 
 
(223,995
)
 
 
(176,342
)

Net cash provided by operating activities

 
 
2,473,167
 
 
 
5,376,287
 

Cash flows from investing activities

Internally developed software

 
 
(489,093
)
 
 
–
 

Proceeds from the sale of assets

 
 
232,020
 
 
 
–
 

Acquisitions

 
 
–
 
 
 
(269,826
)

Purchase of fixed assets

 
 
(3,369,367
)
 
 
(2,499,117
)

Net cash used in investing activities

 
 
(3,626,440
)
 
 
(2,768,943
)

Cash flows from financing activities

Line of credit proceeds (payments), net

 
 
(568,406
)
 
 
(746,891
)

Proceeds received from issuance of common stock and warrants

 
 
2,216,711
 
 
 
–
 

Proceeds from exercise of stock options

 
 
7,075
 
 
 
–
 

Distribution VRM LA

 
 
(285,534
)
 
 
–
 

Contribution received from redeemable noncontrolling interest

 
 
3,150,000
 
 
 
–
 

Payments on finance leases

 
 
(165,598
)
 
 
(77,886
)

Proceeds from notes payable

 
 
2,809,139
 
 
 
4,024,964
 

Payments made on notes payable

 
 
(4,660,120
)
 
 
(4,063,487
)

Net cash provided by (used in) financing activities

 
 
2,503,267
 
 
 
(863,300
)

Net change in cash and cash equivalents and restricted cash

 
 
1,349,994
 
 
 
1,744,044
 

Cash and cash equivalents and restricted cash at beginning of the year

 
 
2,849,831
 
 
 
1,105,787
 

Cash and cash equivalents and restricted cash at end of year

 
$
4,199,825
 
 
$
2,849,831
 

SUPPLEMENTAL INFORMATION

Cash paid for interest

 
$
2,505,852
 
 
$
2,722,542
 

Cash paid for income taxes

 
$
–
 
 
$
–
 

NON-CASH INVESTING AND FINANCING TRANSACTIONS

Conversion of Series A Preferred Stock into common stock

 
$
–
 
 
$
34
 

Conversion of Series B and B1 Preferred Stock into common stock

 
$
2,560,373
 
 
$
6,613,052
 

Dividends on Series B and B-1 Preferred Stock

 
$
1,627,956
 
 
$
2,687,123
 

Initial adjustment of carrying amount of redeemable noncontrolling interest

 
$
970,809
 
 
$
–
 

Accretion of discount on Series B and B-1 Preferred Stock

 
$
2,489,722
 
 
$
3,132,414
 

Accretion of redeemable noncontrolling interest to redemption value

 
$
2,279,371
 
 
$
–
 

Equipment acquired under capital leases

 
$
621,000
 
 
$
450,098
 

Contributed assets Vertex Recovery Management LA from non-controlling interest

 
$
–
 
 
$
857,738
 

Common restricted shares for Nickco acquisition

 
$
–
 
 
$
93,000
 

SOURCE: Vertex Energy, Inc. 

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