Vertex Energy, Inc. Reports Third Quarter 2019 Results

Direct UMO Collections Increased 24.5% Y/Y in 3Q19
Widening in Product Spreads Entering 4Q19 in Advance of IMO 2020 Mandate
Commencing TCEP Operations at Baytown Texas Facility in November 2019
Targeting Successful Completion of UMO-to-High Purity Base Oil Pilot Test by Year-End 2019
Introducing Full-Year 2020 Adjusted EBITDA Guidance of $15 million to $20 million

HOUSTON, TX / ACCESSWIRE / November 8, 2019 / 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 third quarter 2019.

For the three months ended September 30, 2019, the Company reported revenue of $37.8 million, versus $50.6 million in the prior-year period. Vertex reported an operating loss of ($2.5) million in the third quarter of 2019, versus $0.6 million of operating income in the prior-year period. The Company reported a net loss available to common shareholders of ($3.9) million, or ($0.09) per basic share, in the third quarter 2019, versus a net loss of ($4.6) million, or ($0.13) per basic share, in the third quarter 2018. Vertex reported Adjusted EBITDA of $1.8 million in the third quarter 2019, versus $3.2 million in the quarter 2018. A schedule reconciling the Company's GAAP and non-GAAP financial results (including Adjusted EBITDA) is included later in this release.

During the third quarter 2019, the Company benefited from strong growth in used motor oil (UMO) collections and widening product spreads on middle distillates ahead of the January 1, 2020 transition to low-sulfur marine fuels mandated by the International Maritime Organization (IMO). Despite favorable market conditions, Hurricane Barry extended the duration of a planned turnaround at the Marrero (Louisiana) refinery during July, resulting in an additional negative $1.5 million impact in the third quarter. The Company's Marrero and Heartland (Ohio) refineries are currently operating near peak nameplate capacity, given strong demand for the Company's specialty products.

Direct collections of UMO increased 24.5% in the third quarter of 2019, when compared to the prior-year's period. UMO collections represented approximately 48.6% of overall feedstock processed at the Company's refineries in the third quarter of 2019, versus 38.7% in the third quarter of 2018, with the remaining feedstock being sourced from third-party UMO suppliers.

"During the past four years, we have invested significant time and resources preparing Vertex to capitalize on the International Maritime Organization's low sulfur marine fuel mandate that comes into effect January 1, 2020," stated Benjamin P. Cowart, President and CEO of Vertex. "With the IMO transition now just weeks away, our facilities are now ready to execute on this opportunity. We have seen product spreads widen versus prior-year levels, supported by a decline in feedstock costs together with a corresponding increase in distillate values. Current market conditions are setting up favorably as we look ahead to the fourth quarter and into 2020."

"Our Marrero and Heartland refineries operated near peak capacity since August," continued Cowart. "This month, we will recommence TCEP production at our Baytown facility as we seek to capitalize on improved demand for lower sulfur marine fuels, continued Cowart. "Our TCEP technology converts feedstock into a low sulfur marine fuel that can be sold into the new 0.5% low sulfur marine fuel specification mandated under IMO 2020."

As announced on July 31, 2019, Vertex has entered into a joint venture with Tensile Capital Management LLC, as referred to in previous public disclosures. Subject in part to a successful pilot program that is expected to reach completion by year-end 2019, Vertex will receive approximately $13.5 million of non-recourse funding that it intends to use for debt reduction, investment in organic UMO collections growth, and the targeted acquisition of third-party UMO collections operations.

TCEP Update

Vertex operates a tank terminal facility in Baytown, TX where the Company collects and processes used motor oil into higher value feedstocks through its patented Thermal Chemical Extraction Process (TCEP) technology.

In the fourth quarter 2019, the Company expects to produce approximately 30,000 barrels of marine fuel using the TCEP technology, the first such production since the third quarter 2015. All required capital investments have been made in the facility, which is now prepared to commence operations.

Financial Guidance

For the fourth quarter 2019, the Company anticipates Adjusted EBITDA in the range of $2.5 million to $3.0 million. For the full-year 2020, the Company anticipates Adjusted EBITDA in the range of $15 million to $20 million. All guidance is current as of the time provided and is subject to change.

Conference Call and Webcast

A conference call will be held on November 8, 2019 at 9:00 AM 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 the Company'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 December 8, 2019:

Domestic Replay: 877-481-4010
Conference ID: 54092

About Vertex Energy Inc.

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.

Cautionary Statement 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.

Investor/Media 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 Trailing Twelve Months
 

 
September 30, 2019
 
 
September 30, 2018
 
 
September 30, 2019
 
 
September 30, 2018
 

Net loss

attributable to Vertex Energy, Inc.

 
$ 
(1,091,781
)
 
$ 
(2,287,880
)
 
$ 
(6,684,114
)
 
$ 
(2,401,821
)

Add (deduct):

Interest Income

 
 
(653
)
 
 
–
 
 
 
(2,571
)
 
 
(659
)

Interest Expense

 
 
826,005
 
 
 
798,800
 
 
 
3,155,864
 
 
 
3,243,439
 

Depreciation and amortization

 
 
1,815,582
 
 
 
1,806,839
 
 
 
7,090,481
 
 
 
6,934,427
 

EBITDA

 
 
1,549,153
 
 
 
317,759
 
 
 
3,559,660
 
 
 
7,775,386
 

Add (deduct):

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

 
 
(1,290,792
)
 
 
2,169,133
 
 
 
(3,220,402
)
 
 
2,681,289
 

Unrealized (gain) loss on derivative instruments

 
 
1,402,017
 
 
 
554,921
 
 
 
909,040
 
 
 
601,483
 

Stock-based compensation

 
 
159,426
 
 
 
165,058
 
 
 
638,548
 
 
 
678,529
 

Adjusted EBITDA *

 
$ 
1,819,804
 
 
$ 
3,206,871
 
 
$ 
1,886,846
 
 
$ 
11,736,687
 

* 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
Other companies in this industry may calculate EBITDA and Adjusted EBITDA differently than Vertex Energy does, limiting its usefulness as a comparative measure; and
Trailing Twelve Months September 30, 2019 reflects amounts for the Fiscal Year Ended 2018 plus Q1, Q2 and Q3 2019 minus Q1, Q2 and Q3 2018. Trailing Twelve Months September 30, 2018 reflects amounts for the Fiscal Year Ended 2017 plus Q1, Q2 and Q3 2018 minus Q1, Q2 and Q3 2017.

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

 
September 30, 2019
 
 
December 31,
2018
 

ASSETS

Current assets

Cash and cash equivalents

 
$ 
2,303,725
 
 
$ 
1,249,831
 

Restricted cash

 
 
100,088
 
 
 
1,600,000
 

Accounts receivable, net

 
 
10,405,711
 
 
 
9,027,990
 

Federal income tax receivable

 
 
205,818
 
 
 
137,212
 

Inventory

 
 
5,878,408
 
 
 
8,091,397
 

Derivative commodity asset

 
 
–
 
 
 
695,941
 

Prepaid expenses

 
 
6,534,981
 
 
 
2,740,541
 

Total current assets

 
 
25,428,731
 
 
 
23,542,912
 

Noncurrent assets

Fixed assets, at cost

 
 
69,437,842
 
 
 
66,762,388
 

Less accumulated depreciation

 
 
(23,550,224
)
 
 
(19,874,896
)

Fixed assets, net

 
 
45,887,618
 
 
 
46,887,492
 

Finance lease right-of-use assets

 
 
904,691
 
 
 
397,515
 

Operating lease right-of use assets

 
 
36,242,861
 
 
 
–
 

Intangible assets, net

 
 
11,590,876
 
 
 
12,578,519
 

Federal income tax receivable

 
 
68,605
 
 
 
137,211
 

Other assets

 
 
616,759
 
 
 
616,759
 

TOTAL ASSETS

 
$ 
120,740,141
 
 
$ 
84,160,408
 

LIABILITIES, TEMPORARY EQUITY, AND EQUITY

Current liabilities

Accounts payable

 
$ 
7,745,380
 
 
$ 
8,791,529
 

Accrued expenses

 
 
2,275,006
 
 
 
2,535,347
 

Dividends payable

 
 
419,082
 
 
 
403,002
 

Finance lease liability-current

 
 
214,045
 
 
 
95,857
 

Operating lease liability-current

 
 
6,005,502
 
 
 
–
 

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

 
 
2,794,624
 
 
 
1,325,240
 

Derivative commodity liability

 
 
1,510,573
 
 
 
–
 

Revolving note

 
 
5,387,639
 
 
 
3,844,636
 

Total current liabilities

 
 
26,351,851
 
 
 
16,995,611
 

Long-term liabilities

Long-term debt, net of unamortized finance costs

 
 
12,658,000
 
 
 
14,402,179
 

Finance lease liability-long-term

 
 
665,926
 
 
 
276,355
 

Operating lease liability-long-term

 
 
30,237,359
 
 
 
–
 

Contingent consideration

 
 
–
 
 
 
15,564
 

Derivative warrant liability

 
 
1,149,977
 
 
 
1,481,692
 

Total liabilities

 
 
71,063,113
 
 
 
33,171,401
 

COMMITMENTS AND CONTINGENCIES (Note 3)

 
 
–
 
 
 
–
 

TEMPORARY EQUITY

Series B Convertible Preferred Stock, $0.001 par value per share;10,000,000 shares designated, 3,769,505 and 3,604,827 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively with a liquidation preference of $11,685,466 and $11,174,964 at September 30, 2019 and December 31, 2018, respectively.

 
 
10,442,193
 
 
 
8,900,208
 

Series B1 Convertible Preferred Stock, $0.001 par value per share;17,000,000 shares designated, 10,417,966 and 10,057,597 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively with a liquidation preference of $16,252,027 and $15,689,851 at September 30, 2019 and December 31, 2018, respectively.

 
 
14,454,821
 
 
 
13,279,755
 

Redeemable non-controlling interest

 
 
4,000,000
 
 
 
–
 

Total Temporary Equity

 
 
28,897,014
 
 
 
22,179,963
 

EQUITY

50,000,000 of total Preferred shares authorized:

Series A Convertible Preferred Stock, $0.001 par value;5,000,000 shares designated, 419,859 and 419,859 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively with a liquidation preference of $625,590 and $625,590 at September 30, 2019 and December 31, 2018, respectively.

 
 
420
 
 
 
420
 

Common stock, $0.001 par value per share;750,000,000 shares authorized; 41,849,406 and 40,174,821 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively.

 
 
41,850
 
 
 
40,175
 

Additional paid-in capital

 
 
79,719,745
 
 
 
75,131,122
 

Accumulated deficit

 
 
(59,788,939
)
 
 
(47,800,886
)

Total Vertex Energy, Inc. stockholders' equity

 
 
19,973,076
 
 
 
27,370,831
 

Non-controlling interest

 
 
806,938
 
 
 
1,438,213
 

Total Equity

 
 
20,780,014
 
 
 
28,809,044
 

TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY

 
$ 
120,740,141
 
 
$ 
84,160,408
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 

 
2019
 
 
2018
 
 
2019
 
 
2018
 

Revenues

 
$ 
37,799,259
 
 
$ 
50,632,948
 
 
$ 
120,777,263
 
 
$ 
138,918,913
 

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

 
 
32,372,316
 
 
 
42,593,367
 
 
 
103,732,086
 
 
 
114,434,776
 

Gross profit

 
 
5,426,943
 
 
 
8,039,581
 
 
 
17,045,177
 
 
 
24,484,137
 

Operating expenses:

Selling, general and administrative expenses

 
 
6,153,184
 
 
 
5,658,659
 
 
 
17,529,784
 
 
 
16,668,692
 

Depreciation and amortization

 
 
1,815,582
 
 
 
1,806,839
 
 
 
5,333,485
 
 
 
5,234,014
 

Total operating expenses

 
 
7,968,766
 
 
 
7,465,498
 
 
 
22,863,269
 
 
 
21,902,706
 

Income (loss) from operations

 
 
(2,541,823
)
 
 
574,083
 
 
 
(5,818,092
)
 
 
2,581,431
 

Other income (expense):

Other income

 
 
918,153
 
 
 
–
 
 
 
920,071
 
 
 
659
 

Gain on sale of assets

 
 
–
 
 
 
–
 
 
 
31,443
 
 
 
51,523
 

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

 
 
1,290,792
 
 
 
(2,169,133
)
 
 
331,715
 
 
 
(2,124,971
)

Interest expense

 
 
(826,005
)
 
 
(798,800
)
 
 
(2,322,780
)
 
 
(2,448,771
)

Total other income (expense)

 
 
1,382,940
 
 
 
(2,967,933
)
 
 
(1,039,551
)
 
 
(4,521,560
)

Loss before income tax

 
 
(1,158,883
)
 
 
(2,393,850
)
 
 
(6,857,643
)
 
 
(1,940,129
)

Income tax benefit (expense)

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 

Net loss

 
 
(1,158,883
)
 
 
(2,393,850
)
 
 
(6,857,643
)
 
 
(1,940,129
)

Net loss attributable to non-controlling interest

 
 
(67,102
)
 
 
(105,970
)
 
 
(374,862
)
 
 
76,305
 

Net loss attributable to Vertex Energy, Inc.

 
 
(1,091,781
)
 
 
(2,287,880
)
 
 
(6,482,781
)
 
 
(2,016,434
)

Accretion of redeemable noncontrolling interest to redemption value

 
 
(1,849,930
)
 
 
–
 
 
 
(1,849,930
)
 
 
–
 

Accretion of discount on Series B and B1 Preferred Stock

 
 
(550,774
)
 
 
(1,152,968
)
 
 
(1,644,374
)
 
 
(2,351,472
)

Dividends on Series B and B1 Preferred Stock

 
 
(419,096
)
 
 
(1,194,524
)
 
 
(1,238,766
)
 
 
(2,284,121
)

Net loss available to common shareholders

 
$ 
(3,911,581
)
 
$ 
(4,635,372
)
 
$ 
(11,215,851
)
 
$ 
(6,652,027
)

Loss per common share

Basic

 
$ 
(0.09
)
 
$ 
(0.13
)
 
$ 
(0.28
)
 
$ 
(0.20
)

Diluted

 
$ 
(0.09
)
 
$ 
(0.13
)
 
$ 
(0.28
)
 
$ 
(0.20
)

Shares used in computing earnings per share

Basic

 
 
41,376,335
 
 
 
35,144,113
 
 
 
40,626,700
 
 
 
33,843,721
 

Diluted

 
 
41,376,335
 
 
 
35,144,113
 
 
 
40,626,700
 
 
 
33,843,721
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018
(UNAUDITED)

 
Nine Months Ended September 30, 2019
 

 
Common Stock
 
 
Series A Preferred
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Shares
 
 
$.001 Par
 
 
Shares
 
 
$0.001 Par
 
 
Additional Paid-In Capital
 
 
Retained Earnings
 
 
Non-controlling Interest
 
 
Total Equity
 

Balance on January 1, 2019

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

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
143,063
 
 
 
–
 
 
 
–
 
 
 
143,063
 

Conversion of Series B1 Preferred stock to common

 
 
96,160
 
 
 
96
 
 
 
–
 
 
 
–
 
 
 
149,914
 
 
 
(30,242
)
 
 
–
 
 
 
119,768
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(406,795
)
 
 
–
 
 
 
(406,795
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(530,433
)
 
 
–
 
 
 
(530,433
)

Net loss

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(4,963,564
)
 
 
(105,431
)
 
 
(5,068,995
)

Balance on March 31, 2019

 
 
40,270,981
 
 
$ 
40,271
 
 
 
419,859
 
 
$ 
420
 
 
$ 
75,424,099
 
 
$ 
(53,731,920
)
 
$ 
1,332,782
 
 
$ 
23,065,652
 

Exercise of options to common

 
 
75,925
 
 
 
76
 
 
 
–
 
 
 
–
 
 
 
4,424
 
 
 
–
 
 
 
–
 
 
 
4,500
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
171,002
 
 
 
–
 
 
 
–
 
 
 
171,002
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(412,875
)
 
 
–
 
 
 
(412,875
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(532,925
)
 
 
–
 
 
 
(532,925
)

VRM LA distribution

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

Net loss

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(427,436
)
 
 
(202,329
)
 
 
(629,765
)

Balance on June 30, 2019

 
 
40,346,906
 
 
$ 
40,347
 
 
 
419,859
 
 
$ 
420
 
 
$ 
75,599,525
 
 
$ 
(55,105,156
)
 
$ 
844,919
 
 
$ 
21,380,055
 

Exercise of options to common

 
 
2,500
 
 
 
3
 
 
 
–
 
 
 
–
 
 
 
2,572
 
 
 
–
 
 
 
–
 
 
 
2,575
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
159,426
 
 
 
–
 
 
 
–
 
 
 
159,426
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(419,096
)
 
 
–
 
 
 
(419,096
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(550,774
)
 
 
–
 
 
 
(550,774
)

Adjustment of carrying mount of non-controlling interest

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
970,809
 
 
 
–
 
 
 
 
 
 
 
970,809
 

Accretion of redeemable non-controlling interest to redemption value

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1,849,930
)
 
 
–
 
 
 
(1,849,930
)

Issuance of common stock and warrants

 
 
1,500,000
 
 
 
1,500
 
 
 
–
 
 
 
–
 
 
 
2,987,413
 
 
 
(772,202
)
 
 
–
 
 
 
2,216,711
 

Net loss

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1,091,781
)
 
 
(37,981
)
 
 
(1,129,762
)

Balance on September 30, 2019

 
 
41,849,406
 
 
$ 
41,850
 
 
 
419,859
 
 
$ 
420
 
 
$ 
79,719,745
 
 
$ 
(59,788,939
)
 
$ 
806,938
 
 
$ 
20,780,014
 

 
Nine Months Ended September 30, 2018
 

 
Common Stock
 
 
Series A Preferred
 
 
Series C Preferred
 
 
 
 
 
 
 
 
 
 
 
 
 

 
Shares
 
 
$.001 Par
 
 
Shares
 
 
$.001 Par
 
 
Shares
 
 
$0.001 Par
 
 
Additional Paid-In Capital
 
 
Retained Earnings
 
 
Non-controlling Interest
 
 
Total Equity
 

Balance on January 1, 2018

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

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
145,971
 
 
 
–
 
 
 
–
 
 
 
145,971
 

Conversion of Series B1 Preferred stock to common

 
 
500,000
 
 
 
500
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
779,500
 
 
 
(184,437
)
 
 
–
 
 
 
595,563
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(554,917
)
 
 
–
 
 
 
(554,917
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(457,853
)
 
 
–
 
 
 
(457,853
)

Net income (loss)

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(2,258,622
)
 
 
50,539
 
 
 
(2,208,083
)

Balance on March 31, 2018

 
 
33,158,176
 
 
$ 
33,158
 
 
 
453,567
 
 
$ 
454
 
 
 
31,568
 
 
$ 
32
 
 
$ 
68,693,980
 
 
$ 
(43,272,129
)
 
$ 
449,544
 
 
$ 
25,905,039
 

Exercise of options to common

 
 
241
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
183,750
 
 
 
–
 
 
 
–
 
 
 
183,750
 

Conversion of Series A Preferred stock to common

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

Conversion of Series B Preferred stock to common

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

Conversion of Series B1 Preferred stock to common

 
 
133,264
 
 
 
133
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
207,759
 
 
 
(48,689
)
 
 
–
 
 
 
159,203
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(534,680
)
 
 
–
 
 
 
(534,680
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(470,825
)
 
 
–
 
 
 
(470,825
)

Net income

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
2,530,068
 
 
 
131,736
 
 
 
2,661,804
 

Balance on June 30, 2018

 
 
33,357,538
 
 
$ 
33,358
 
 
 
419,859
 
 
$ 
420
 
 
 
31,568
 
 
$ 
32
 
 
$ 
69,185,118
 
 
$ 
(41,832,955
)
 
$ 
581,280
 
 
$ 
27,967,253
 

Correction of non-controlling interest

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
101,718
 
 
 
(101,718
)
 
 
–
 

Share based compensation expense, total

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
165,058
 
 
 
–
 
 
 
–
 
 
 
165,058
 

Fixed assets contributed capital VRMLA

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

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

 
 
2,326,552
 
 
 
2,326
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
3,627,095
 
 
 
(637,270
)
 
 
–
 
 
 
2,992,151
 

Dividends on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(1,194,524
)
 
 
–
 
 
 
(1,194,524
)

Accretion of discount on Series B and B1

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(515,698
)
 
 
–
 
 
 
(515,698
)

Net income

 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
–
 
 
 
(2,287,880
)
 
 
(105,970
)
 
 
(2,393,850
)

Balance on September 30, 2018

 
 
38,840,890
 
 
$ 
38,841
 
 
 
419,859
 
 
$ 
420
 
 
 
–
 
 
$ 
–
 
 
$ 
72,974,146
 
 
$ 
(46,366,609
)
 
$ 
1,231,330
 
 
$ 
27,878,128
 

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018 (UNAUDITED)

 
Nine Months Ended
 

 
September 30, 2019
 
 
September 30, 2018
 

Cash flows from operating activities

Net loss

 
$ 
(6,857,643
)
 
$ 
(1,940,129
)

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

Stock based compensation expense

 
 
473,491
 
 
 
494,779
 

Depreciation and amortization

 
 
5,333,485
 
 
 
5,234,014
 

Gain on sale of assets

 
 
(31,443
)
 
 
(51,523
)

Contingent consideration reduction

 
 
(15,564
)
 
 
–
 

Reduction in allowance for bad debt

 
 
(389,943
)
 
 
–
 

(Decrease) increase in fair value of derivative warrant liability

 
 
(331,715
)
 
 
2,124,971
 

Loss on commodity derivative contracts

 
 
2,691,833
 
 
 
1,859,234
 

Net cash settlements on commodity derivatives

 
 
(3,446,274
)
 
 
(2,386,897
)

Amortization of debt discount and deferred costs

 
 
430,431
 
 
 
474,360
 

Changes in operating assets and liabilities

Accounts receivable

 
 
(987,778
)
 
 
(3,091,273
)

Inventory

 
 
2,212,989
 
 
 
(341,329
)

Prepaid expenses

 
 
(833,485
)
 
 
(1,072,076
)

Accounts payable

 
 
(1,046,149
)
 
 
534,689
 

Accrued expenses

 
 
(260,341
)
 
 
(1,175,692
)

Other assets

 
 
–
 
 
 
(253,642
)

Net cash (used in) provided by operating activities

 
 
(3,058,106
)
 
 
409,486
 

Cash flows from investing activities

Acquisition of SES

 
 
–
 
 
 
(269,826
)

Internally developed software

 
 
(380,216
)
 
 
–
 

Purchase of fixed assets

 
 
(2,907,330
)
 
 
(1,813,904
)

Proceeds from sale of fixed assets

 
 
86,846
 
 
 
6,848
 

Net cash used in investing activities

 
 
(3,200,700
)
 
 
(2,076,882
)

Cash flows from financing activities

Payments on finance leases

 
 
(113,241
)
 
 
(34,660
)

Proceeds from exercise of stock options

 
 
7,075
 
 
 
–
 

Distribution VRM LA

 
 
(285,534
)
 
 
–
 

Contributions received from redeemable noncontrolling interest

 
 
3,150,000
 
 
 
–
 

Proceeds received from issuance of common stock and warrants

 
 
2,216,711
 
 
 
–
 

Line of credit (payments) proceeds, net

 
 
1,543,003
 
 
 
1,408,206
 

Proceeds from note payable

 
 
2,809,139
 
 
 
4,024,964
 

Payments on note payable

 
 
(3,514,365
)
 
 
(2,996,556
)

Net cash provided by financing activities

 
 
5,812,788
 
 
 
2,401,954
 

Net change in cash, cash equivalents and restricted cash

 
 
(446,018
)
 
 
734,558
 

Cash, cash equivalents, and restricted cash at beginning of the period

 
 
2,849,831
 
 
 
1,105,787
 

Cash, cash equivalents, and restricted cash at end of period

 
$ 
2,403,813
 
 
$ 
1,840,345
 

SUPPLEMENTAL INFORMATION

Cash paid for interest

 
$ 
1,887,012
 
 
$ 
2,034,275
 

Cash paid for taxes

 
$ 
–
 
 
$ 
–
 

NON-CASH INVESTING AND FINANCING TRANSACTIONS

Conversion of Series A Preferred Stock into common stock

 
$ 
–
 
 
$ 
34
 

Conversion of Series B Preferred Stock into common stock

 
$ 
–
 
 
$ 
99,629
 

Conversion of Series B1 Preferred Stock into common stock

 
$ 
149,914
 
 
$ 
4,614,354
 

Accretion of discount on Series B and B1 Preferred Stock

 
$ 
1,644,374
 
 
$ 
2,351,472
 

Dividends-in-kind accrued on Series B and B1 Preferred Stock

 
$ 
1,238,766
 
 
$ 
2,284,121
 

Equipment acquired under finance leases

 
$ 
621,000
 
 
$ 
450,098
 

Initial adjustment of carrying amount redeemable noncontrolling interest

 
$ 
970,809
 
 
$ 
–
 

Accretion of redeemable noncontrolling interest to redemption value

 
$ 
1,849,930
 
 
$ 
–
 

SOURCE: Vertex Energy, Inc.

ReleaseID: 565798