Vertex Energy Reports Third Quarter 2021 Results and Provides Strategic Update

HOUSTON, TX / ACCESSWIRE / November 9, 2021 / Vertex Energy, Inc. (NASDAQ:VTNR) "Vertex" or the "Company", a leading specialty refiner and marketer of high-quality refined products, today announced its financial results for the third quarter 2021 ended September 30, 2021.

THIRD QUARTER 2021 RESULTS

(As compared to the third quarter 2020)

  • Net income of $10.6 million, an increase of $12.6 million

  • Adjusted EBITDA of $1.5 million, an increase of $2.0 million

  • Completed $155.0 million offering of 6.25% convertible senior notes in November 2021 due 2027

  • Intend to complete Mobile refinery acquisition during the first quarter of 2022

  • Raising base case revenue and gross profit forecast on Mobile refinery for the full-year 2022 and 2023

For the three months ended September 30, 2021, the Company reported net income of $10.6 million, versus a net loss of $2.0 million in the third quarter 2020. The Company reported Adjusted EBITDA of $1.5 million in the third quarter 2021, versus ($0.5) million in the prior-year period. A schedule reconciling the Company's GAAP and non-GAAP financial results, including Free Cash Flow, EBITDA and Adjusted EBITDA, is included later in this release (see also "Non-GAAP Financial Measures", below).

Third quarter results benefited from a combination of improved refined product margins and used motor oil collections growth, which offset a 14-day, weather-related outage at the Marrero refinery in September and a temporary hydrogen shortage at the Heartland refinery due to a force majeure event. Currently, both the Marrero and Heartland refineries are fully operational. Fourth quarter to-date, refined product margins are at or above third quarter levels.

MOBILE REFINERY ACQUISITION UPDATE

As previously disclosed, Vertex has entered into a definitive agreement to acquire a refinery (the "Mobile Refinery") located in Mobile, Alabama from Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell Oil Company and Shell Chemical LP ("Shell"), subsidiaries of Royal Dutch Shell plc, for $75 million.

In conjunction with the planned financing of a portion of the funds for this transaction, Vertex completed a $155.0 million offering of 6.25% convertible senior notes due 2027 on November 1, 2021. Vertex expects to use the net cash proceeds from this transaction, together with a planned $125.0 secured term loan and a planned $125.0 million secured working capital facility, to complete its financing of the Mobile refinery acquisition and related capital projects. Vertex expects to close both the term loan and working capital facility in conjunction with the closing of the Mobile refinery acquisition, which is expected to close in the first quarter 2022, subject to various closing conditions. In the interim, Vertex is proceeding with initial design, engineering and procurement activities related to capital projects at the refinery, while continuing to collaborate with its planned feedstock supply and product offtake partners in advance of the ownership transition.

Net cash proceeds from the notes offering, term loan and working capital facility are expected to fully fund the acquisition of the Mobile refinery, the purchase of feedstock and product inventories, together with capital required to support initial development of its planned renewable diesel conversion project.

Today, the Company updated its base case financial forecast on the Mobile refinery for the full-year 2022 and 2023. All guidance is current as of the time provided and is subject to change:

Full-Year 2022 (Estimate)

Revenue ($Bil)

Gross Profit ($MM)

Capital Expenditures ($MM)

Prior Forecast

$2.2 to $2.4 billion

$200-$220 million

$75 million

Current Forecast

$2.4-$2.5 billion

$230-$240 million

$110-$120 million

Full-Year 2023 (Estimate)

Revenue ($Bil)

Gross Profit ($MM)

Capital Expenditures ($MM)

Prior Forecast

$3.0 billion

$400-$420 million

$30 million

Current Forecast

$3.4-$3.5 billion

$460-$470 million

$25-$35 million

The increase in estimated 2022 and 2023 revenue and gross profit is related to expectations for improved conventional refining economics, offset by lower economics on renewable diesel production. The increase in estimated total capital expenditures in 2022 is due to a shift of capital spending initially planned for 2021 into 2022 to coincide with the planned closing of the Mobile refinery acquisition in the first quarter 2022. All estimates assume the completion of the acquisition on previously disclosed terms during the first quarter 2022.

USED MOTOR OIL COLLECTION & RECYCLING ASSETS DIVESTITURE UPDATE

On September 28, 2021, Vertex shareholders approved the proposed sale of its portfolio of used motor oil collection and recycling assets to Safety-Kleen Systems, Inc. ("Safety-Kleen"), a subsidiary of Clean Harbors, Inc. ("Clean Harbors") for total cash consideration of $140 million, subject to working capital and other adjustments, and subject to certain closing conditions, including regulatory approvals. After the payment of transaction-related fees and financial obligations, total net cash proceeds from the transaction to Vertex are expected to be approximately $90 to $100 million.

During November 2021, Vertex intends to respond to a previously disclosed second request for additional information and documentary materials from the U.S. Federal Trade Commission ("FTC") in conjunction with its proposed asset sale to Safety-Kleen. Vertex and Safety-Kleen currently expect the transaction to close during the first half of 2022, subject to regulatory clearance.

MANAGEMENT COMMENTARY

"In recent months, we successfully completed a major recapitalization of our balance sheet, one that we believe positions Vertex to fully fund the planned acquisition of the Mobile refinery, while continuing to pursue high-return energy transition opportunities that leverage our expertise within the specialty refining and renewable fuels markets," stated Benjamin P. Cowart, President and CEO of Vertex, who continued, "With the recent sale of our convertible notes in November, we've secured access to long-term capital at an attractive fixed rate, and increased our exposure to new institutional investors, while mitigating near-term dilution risk for existing shareholders. We look forward to closing on the Mobile transaction during the first quarter 2022."

"We continued to execute on-plan during the third quarter, as elevated product margins and improved growth in used motor oil collections contributed to strong profitability," continued Cowart, "Importantly, we achieved these strong operating results despite a 14-day weather-related outage at our Marrero refinery in September and a temporary hydrogen supply shortage at our Heartland refinery in Ohio."

"During November, we intend to respond to the FTC's request for additional information in conjunction with the planned divestiture of our UMO and recycling operations to Safety-Kleen," continued Cowart, "At this time, we anticipate the transaction should close during the first half of 2022, subject to regulatory approval. At closing, we expect this asset divestiture will generate approximately $90 to $100 million in net cash proceeds that will be used to further enhance our liquidity profile, execute on our feedstock pre-treatment unit and further the development of renewable refining technology at the Mobile Refinery."

"Our team continues to demonstrate a consistent track record of execution and value creation within our legacy operations," continued Cowart, "Operationally, we've nurtured a culture of safety and reliability throughout our refining system. Looking ahead, we've made significant progress to ensure that, upon the closing of the Mobile acquisition, we will have the people, systems and processes in place to support a seamless transition of commercial operations. Our balance sheet is stronger than it has ever been, bolstered by recent cash proceeds from the convertible offering, together with expectations for additional availability under a planned term loan and working capital facility, all of which are expected to support our plans for growth."

BALANCE SHEET

On November 1, 2021, Vertex sold $155.0 million of 6.25% convertible senior notes due in 2027. The sale of the notes resulted in approximately $133.9 million in net proceeds to Vertex, after deducting placement agent fees and estimated offering expenses payable by Vertex.

As of September 30, 2021, the Company had total cash and availability on its lending facility of $12.1 million and $2.9 million, respectively. Total cash and availability as of September 30, 2021 included $7.2 million of total cash limited to use by the two special purpose vehicles (SPVs). Vertex had total term or senior secured debt outstanding of $10.8 million as of September 30, 2021. Following the completion of the convertible offering in November 2021, the Company paid-off its outstanding term loan balance, which resulted in the termination of its prior lending facilities.

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:

To participate in the live teleconference:

Domestic Live: 888-506-0062

To listen to a replay of the teleconference, which will be available through November 16, 2021:

Domestic Replay: 877-481-4010

Conference ID: 43075

ABOUT VERTEX ENERGY

Houston-based Vertex Energy, Inc. (NASDAQ: VTNR) is a specialty refiner of alternative feedstocks and marketer of high-quality refined 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+ Base Oils to the lubricant manufacturing industry throughout North America.

FORWARD-LOOKING STATEMENTS

Certain of the matters discussed in this communication which are not statements of historical fact constitute forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Words such as " strategy, " " expects, " " continues, " " plans, " " anticipates, " " believes, " " would, " " will, " " estimates, " " intends, " " projects, " " goals, " " targets " and other words of similar meaning are intended to identify forward-looking statements but are not the exclusive means of identifying these statements 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.

The Important factors that may cause actual results and outcomes to differ materially from those contained in such forward-looking statements include, without limitation, the Company's ability to obtain shareholder approval for the conversion of the recently sold convertible notes, certain mandatory redemption provisions thereof, the conversion rights associated therewith, dilution caused by such conversions, and the Company's ability to repay amounts due under such senior notes; the ability of the parties to close the previously announced sale agreement with Safety-Kleen (the " sale agreement ") on the terms set forth in, and pursuant to the required timing set forth in, the sale agreement, if at all; the occurrence of any event, change or other circumstances that could give rise to the right of Safety-Kleen or the Company (collectively, the " Sale Agreement Parties ") to terminate the sale agreement and the potential break-fee payable in connection therewith; the effect of such termination, including breakup and other fees potentially payable in connection therewith; the outcome of any legal proceedings that may be instituted against Sale Agreement Parties or their respective directors or officers; the ability to obtain regulatory and other approvals and meet other closing conditions to the sale agreement on a timely basis or at all, including the risk that regulatory and other approvals required for the sale agreement are not obtained on a timely basis or at all, or are obtained subject to conditions that are not anticipated or the expected benefits of the transaction; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the sale agreement; the ability of the Company to retain and hire key personnel; the diversion of management's attention from ongoing business operations; uncertainty as to the long-term value of the common stock of the Company following the closing of the sale agreement; the business, economic and political conditions in the markets in which Sale Agreement Parties operate; risks associated with the ability of Vertex to complete current plans for expansion and growth of the new operations and other conditions to the completion of the transaction; the level of competition in our industry and our ability to compete; our ability to respond to changes in our industry; the loss of key personnel or failure to attract, integrate and retain additional personnel; our ability to protect our intellectual property and not infringe on others' intellectual property; our ability to scale our business; our ability to maintain supplier relationships and obtain adequate supplies of feedstocks; our ability to obtain and retain customers; our ability to produce our products at competitive rates; our ability to execute our business strategy in a very competitive environment; trends in, and the market for, the price of oil and gas and alternative energy sources; our ability to maintain our relationships with KMTEX and Bunker One (USA), Inc.; the impact of competitive services and products; our ability to integrate acquisitions; our ability to complete future acquisitions; our ability to maintain insurance; the outcome of pending and potential future litigation, judgments and settlements; rules and regulations making our operations more costly or restrictive, including IMO 2020; changes in environmental and other laws and regulations and risks associated with such laws and regulations; economic downturns both in the United States and globally; risk of increased regulation of our operations and products; negative publicity and public opposition to our operations; disruptions in the infrastructure that we and our partners rely on; an inability to identify attractive acquisition opportunities and successfully negotiate acquisition terms; our ability to effectively integrate acquired assets, companies, employees or businesses; liabilities associated with acquired companies, assets or businesses; interruptions at our facilities; unexpected changes in our anticipated capital expenditures resulting from unforeseen required maintenance, repairs, or upgrades; our ability to acquire and construct new facilities; our ability to effectively manage our growth; decreases in global demand for, and the price of, oil, due to COVID-19, state, federal and foreign responses thereto; our ability to acquire sufficient amounts of used oil feedstock through our collection routes, to produce finished products, and in the absence of such internally collected feedstocks, our ability to acquire third-party feedstocks on commercially reasonable terms; risks associated with COVID-19, the global efforts to stop the spread of COVID-19, potential downturns in the U.S. and global economies due to COVID-19 and the efforts to stop the spread of the virus, and COVID-19 in general; the lack of capital available on acceptable terms to finance the Company's continued growth; risks associated with the Company's ability to complete the proposed purchase transaction of the Mobile refinery, as previously disclosed on anticipated terms and timing, if at all, including obtaining regulatory approvals, unforeseen liabilities, future capital expenditures, the ability to recognize synergies, and the ability of Vertex to complete current plans for expansion and growth of the new operations and other conditions to the completion of pending transactions; the expected benefits, output, financial metrics and production of proposed transactions; Vertex's ability to satisfy closing conditions associated with the previously disclosed Mobile refinery acquisition; the Company's ability to raise sufficient capital to complete the Mobile refinery acquisition and planned capital projects and the terms of such funding; the occurrence of any event, change or other circumstances that could give rise to the parties failing to complete the Mobile refinery acquisition transaction on the terms disclosed, if at all, the right of one or both of Vertex or the counterparty to the Mobile refinery acquisition agreement to terminate the acquisition agreement and the result of such termination, including a termination fee of $10 million payable by Vertex under certain conditions; the outcome of any legal proceedings that may be instituted against any parties or their respective directors in connection with such planned Mobile Refinery acquisition transaction; the ability to obtain regulatory approvals and other consents, and meet other closing conditions to the Mobile refinery acquisition on a timely basis or at all, including the risk that regulatory approvals or other consents required for the acquisition are not obtained on a timely basis or at all, or which are obtained subject to conditions that are not anticipated or that could adversely affect Vertex's Mobile refinery acquisition or the expected benefits of the transaction; difficulties and delays in integrating the Mobile refinery; and the Company's plans for financing the Mobile refinery acquisition and planned projects. Other important factors that may cause actual results and outcomes to differ materially from those contained in the forward-looking statements included in this communication are described in the Company's publicly filed reports, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2020, and the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021. These reports are available at www.sec.gov.

The Company cautions that the foregoing list of important factors is not complete. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on behalf of the Company are expressly qualified in their entirety by the cautionary statements referenced above. Other unknown or unpredictable factors also could have material adverse effects on Vertex's future results. The forward-looking statements included in this press release are made only as of the date hereof. Vertex cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, Vertex 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. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

NON-GAAP FINANCIAL MEASURES

In addition to our results calculated under generally accepted accounting principles in the United States ("GAAP"), in this earnings release we also present Free Cash Flow, EBITDA and Adjusted EBITDA. Free Cash Flow, EBITDA and Adjusted EBITDA are "non-GAAP financial measures" presented as supplemental measures of the Company's performance. They are not presented in accordance with accounting principles generally accepted in the United States, or GAAP. Free cash flow represents net cash provided by (used in) operating activities, less capital expenditures for continued and discontinued operations. EBITDA represents net income before interest, taxes, depreciation and amortization for continued and discontinued operations. 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 for continued and discontinued operations. Free Cash Flow, 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. Free Cash Flow, EBITDA and Adjusted EBITDA are also frequently used by analysts, investors and other interested parties to evaluate companies in our industry. We use Free Cash Flow, EBITDA and Adjusted EBITDA as supplements to GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions, to allocate resources and to compare our performance relative to our peers. Additionally, these measures, when used in conjunction with related GAAP financial measures, provide investors with an additional financial analytical framework which management uses, in addition to historical operating results, as the basis for financial, operational and planning decisions and present measurements that third parties have indicated are useful in assessing the Company and its results of operations. Free Cash Flow, 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: Free Cash Flow, EBITDA and Adjusted EBITDA do not reflect cash expenditures, or future requirements for capital expenditures, or contractual commitments; Free Cash Flow, EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, working capital needs; Free Cash Flow, 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 Free Cash Flow, EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements; and other companies in this industry may calculate Free Cash Flow, EBITDA and Adjusted EBITDA differently than Vertex does, limiting its usefulness as a comparative measure. For example, adjusted Free Cash Flow does not reflect our future contractual commitments or the total increase or decrease in our cash balances for a given period. Free Cash Flow, EBITDA and Adjusted EBITDA are not recognized in accordance with GAAP, are unaudited, and have limitations as analytical tools, and you should not consider them in isolation, or as substitutes for analysis of the Company's results as reported under GAAP. The Company's presentation of these measures should not be construed as an inference that future results will be unaffected by unusual or nonrecurring items. We compensate for these limitations by providing a reconciliation of each of these non-GAAP measures to the most comparable GAAP measure. We encourage investors and others to review our business, results of operations, and financial information in their entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measure. For more information on these non-GAAP financial measures, please see the section titled "Consolidated Continued and Discontinued Operations Reconciliations of Free Cash Flow and Net Loss attributable to Vertex Energy, Inc., to Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA" included at the end of this release.

CONTACT

Investor Relations
720.778.2415
IR@vertexenergy.com

VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)



September 30,
2021

December 31,
2020

ASSETS

Current assets

Cash and cash equivalents

$

12,112,577

$

10,895,044

Restricted cash

100,125

100,125

Accounts receivable, net

5,796,484

4,858,847

Inventory

2,402,126

1,458,288

Prepaid expenses and other current assets

5,062,889

1,942,137

Assets held for sale, current

87,670,167

10,530,947

Total current assets

113,144,368

29,785,388

Noncurrent assets

Fixed assets, at cost

16,508,660

15,495,562

Less accumulated depreciation

(1,926,886

)

(1,573,025

)

Fixed assets, net

14,581,774

13,922,537

Finance lease right-of-use assets

14,842

18,100

Operating lease right-of use assets

4,850,112

4,734,497

Intangible assets, net

385,798

466,546

Other assets

11,708,732

1,008,733

Assets held for sale, noncurrent

-

72,164,157

TOTAL ASSETS

$

144,685,626

$

122,099,958


LIABILITIES, TEMPORARY EQUITY, AND EQUITY

Current liabilities

Accounts payable

$

5,673,876

$

2,419,543

Accrued expenses

2,185,282

980,233

Dividends payable

-

606,550

Liabilities held for sale, current

38,765,716

14,342,808

Finance lease liability-current

346,322

122,702

Operating lease liability-current

872,694

783,747

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

14,398,267

4,367,169

Revolving note

-

133,446

Derivative commodity liability

155,929

94,214

Total current liabilities

62,398,086

23,850,412

Long-term liabilities

Long-term debt, net of unamortized finance costs

124,124

7,981,496

Finance lease liability-long-term

-

315,513

Operating lease liability-long-term

3,977,418

3,950,750

Liabilities held for sale, noncurrent

-

24,380,440

Derivative warrant liability

1,072,620

330,412

Total liabilities

67,572,248

60,809,023

COMMITMENTS AND CONTINGENCIES (Note 3)

-

-

TEMPORARY EQUITY

Series B Convertible Preferred Stock, $0.001 par value per share; 10,000,000 shares designated, 4,102,690 and 4,102,690 shares issued and 0 and 4,102,690 shares outstanding issued at September 30, 2021 and December 31, 2020, respectively with a liquidation preference of $- and $12,718,339 at September 30, 2021 and December 31, 2020, respectively.

-

12,718,339

Series B1 Convertible Preferred Stock, $0.001 par value per share; 17,000,000 shares designated, 7,399,649 and 7,399,649 shares issued and 0 and 7,399,649 shares outstanding at September 30, 2021 and December 31, 2020, respectively with a liquidation preference of $- and $11,543,452 at September 30, 2021 and December 31, 2020, respectively.

-

11,036,173

Redeemable non-controlling interest

39,771,408

31,611,674

Total temporary equity

39,771,408

55,366,186

EQUITY

50,000,000 of total Preferred shares authorized:

Series A Convertible Preferred Stock, $0.001 par value; 5,000,000 shares designated, 385,601 and 419,859 shares issued and outstanding at September 30, 2021 and December 31, 2020, with a liquidation preference of $574,545 and $625,590 at September 30, 2021 and December 31, 2020.

386

420

Series C Convertible Preferred Stock, $0.001 par value; 44,000 shares designated, no shares issued or outstanding.

-

-

Common stock, $0.001 par value per share; 750,000,000 shares authorized; 63,003,766 and 45,554,841 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively.

63,004

45,555

Additional paid-in capital

136,905,764

94,569,674

Accumulated deficit

(101,475,299

)

(90,008,778

)

Total Vertex Energy, Inc. stockholders' equity

35,493,855

4,606,871

Non-controlling interest

1,848,115

1,317,878

Total equity

37,341,970

5,924,749

TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY

$

144,685,626

$

122,099,958

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

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenues

$

28,974,471

$

16,249,312

$

84,823,476

$

30,460,606

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

28,061,498

15,324,914

79,319,678

28,598,874

Depreciation and amortization attributable to costs of revenues

126,795

115,562

358,905

327,672

Gross profit

786,178

808,836

5,144,893

1,534,060

Operating expenses:

Selling, general and administrative expenses

4,944,719

1,832,067

12,111,951

6,044,050

Depreciation and amortization attributable to operating expenses

26,916

28,002

80,748

48,118

Total operating expenses

4,971,635

1,860,069

12,192,699

6,092,168

Loss from operations

(4,185,457

)

(1,051,233

)

(7,047,806

)

(4,558,108

)

Other income (expense):

Other income

-

-

4,222,000

-

Loss on sale of assets

(3,351

)

(136,434

)

(1,927

)

(124,090

)

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

11,907,413

256,587

(11,380,122

)

1,844,369

Interest expense

(352,587

)

(97,157

)

(603,398

)

(291,933

)

Total other income (expense)

11,551,475

22,996

(7,763,447

)

1,428,346

Income (loss) from continuing operations before income tax

7,366,018

(1,028,237

)

(14,811,253

)

(3,129,762

)

Income tax benefit (expense)

-

-

-

-

Income (loss) from continuing operations

7,366,018

(1,028,237

)

(14,811,253

)

(3,129,762

)

Income (loss) from discontinued operations, net of tax

3,278,498

(926,933

)

12,464,445

(5,323,630

)

Net income (loss)

10,644,516

(1,955,170

)

(2,346,808

)

(8,453,392

)

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

(115,131

)

136,334

510,618

155,322

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

2,400,141

343,881

7,183,268

35,449

Net income (loss) attributable to Vertex Energy, Inc.

8,359,506

(2,435,385

)

(10,040,694

)

(8,644,163

)

Accretion of redeemable noncontrolling interest to redemption value from continued operations

(414,690

)

(1,287,559

)

(1,176,683

)

(13,635,797

)

Accretion of discount on Series B and B1 Preferred Stock

-

(29,157

)

(507,282

)

(1,500,395

)

Dividends on Series B and B1 Preferred Stock

-

(591,777

)

258,138

(1,296,493

)

Net income (loss) available to shareholders from continuing operations

7,066,459

(3,073,064

)

(16,747,698

)

(19,717,769

)

Net income (loss) available to shareholders from discontinued operations, net of tax

878,357

(1,270,814

)

5,281,177

(5,359,079

)

Net income (loss) available to common shareholders

$

7,944,816

$

(4,343,878

)

$

(11,466,521

)

$

(25,076,848

)

Basic income (loss) per common share

Continuing operations

$

0.12

$

(0.07

)

$

(0.31

)

$

(0.43

)

Discontinued operations, net of tax

$

0.01

$

(0.03

)

$

0.10

$

(0.12

)

Basic income (loss) per common share

$

0.13

$

(0.10

)

$

(0.21

)

$

(0.55

)

Diluted income (loss) per common share

Continuing operations

$

0.11

$

(0.07

)

$

(0.31

)

$

(0.43

)

Discontinued operations, net of tax

$

0.01

$

(0.03

)

$

0.10

$

(0.12

)

Diluted income (loss) per common share

$

0.12

$

(0.10

)

$

(0.21

)

$

(0.55

)

Shares used in computing earnings per share

Basic

61,348,508

45,554,841

53,963,617

45,494,235

Diluted

64,605,326

45,554,841

53,963,617

45,494,235

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)

Nine Months Ended September 30, 2021

Common Stock

Series A Preferred

Series C Preferred





Shares

$0.001 Par

Shares

$0.001 Par

Shares

$0.001 Par

Additional Paid-In Capital

Retained Earnings

Non-controlling Interest

Total Equity

Balance on January 1, 2021

45,554,841

$

45,555

419,859

$

420

-

$

-

$

94,569,674

$

(90,008,778

)

$

1,317,878

$

5,924,749

Exercise of options

22,992

23

-

-

-

-

(23

)

-

-

-

Exercise of B1 warrants

1,079,753

1,080

-

-

-

-

2,756,877

-

-

2,757,957

Exchanges of Series B Preferred stock to common

2,359,494

2,359

-

-

-

-

4,114,570

630,321

-

4,747,250

Share based compensation expense

-

-

-

-

-

-

150,514

-

-

150,514

Conversion of Series B Preferred stock to common

638,224

638

-

-

-

-

1,977,856

-

-

1,978,494

Conversion of Series B1 Preferred stock to common

2,087,195

2,087

-

-

-

-

3,253,937

-

-

3,256,024

Dividends on Series B and B1

-

-

-

-

-

-

-

(372,183

)

-

(372,183

)

Accretion of discount on Series B and B1

-

-

-

-

-

-

-

(223,727

)

-

(223,727

)

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(373,748

)

-

(373,748

)

Net income

-

-

-

-

-

-

-

974,369

1,990,969

2,965,338

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

(1,542,402

)

(1,542,402

)

Balance on March 31, 2021

51,742,499

$

51,742

419,859

$

420

-

$

-

$

106,823,405

$

(89,373,746

)

$

1,766,445

$

19,268,266

Exercise of options to common

505,376

505

-

-

-

-

229,007

-

-

229,512

Exercise of options to common- unissued

-

-

-

-

-

-

474,866

-

-

474,866

Leverage Lubricants contribution

-

-

-

-

-

-

-

-

(13,491

)

(13,491

)

Exercise of B1 warrants

156,792

157

-

-

-

-

1,634,409

-

-

1,634,566

Exercise of B1 warrants-unissued

-

-

-

-

-

-

1,185,831

-

-

1,185,831

Share based compensation expense

-

-

-

-

-

-

205,039

-

-

205,039

Conversion of Series A Preferred stock to common

28,257

28

(28,257

)

(28

)

-

-

-

-

-

-

Conversion of Series B Preferred stock to common

1,841,406

1,842

-

-

-

-

5,706,517

-

-

5,708,359

Conversion of Series B Preferred stock to common-unissued

-

-

-

-

-

-

759,983

-

-

759,983

Conversion of Series B1 Preferred stock to common

5,634,889

5,635

-

-

-

-

8,784,782

-

-

8,790,417

Accretion of discount on Series B and B1

-

-

-

-

-

-

-

(283,555

)

-

(283,555

)

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(388,245

)

-

(388,245

)

Net loss

-

-

-

-

-

-

-

(19,374,569

)

3,417,907

(15,956,662

)

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

(3,111,743

)

(3,111,743

)

Balance on June 30, 2021

59,909,219

$

59,909

391,602

$

392

-

$

-

$

125,803,839

$

(109,420,115

)

$

2,059,118

$

18,503,143

Exercise of options to common

1,267,472

1,268

-

-

1,481,119

-

-

1,482,387

Exercise of options to common- unissued

-

-

-

-

-

-

2,925

-

-

2,925

Exercise of B1 warrants

1,575,918

1,576

-

-

-

-

9,361,053

-

-

9,362,629

Conversion of Series B Preferred stock to common

245,156

245

-

-

-

-

(245

)

-

-

-

Conversion of Series A Preferred stock to common

6,001

6

(6,001

)

(6

)

-

-

-

-

-

-

Leverage Lubricants contribution

-

-

-

-

-

-

-

-

2,260

2,260

Distribution from VRM LA

-

-

-

-

-

-

-

-

(169,368

)

(169,368

)

Share based compensation expense

-

-

-

-

-

-

257,073

-

-

257,073

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(414,690

)

-

(414,690

)

Net loss

-

-

-

-

-

-

8,359,506

2,285,010

10,644,516

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

$

(2,328,905

)

$

(2,328,905

)

Balance on September 30, 2021

63,003,766

$

63,004

385,601

$

386

$

-

$

-

$

136,905,764

$

(101,475,299

)

$

1,848,115

$

37,341,970

Nine Months Ended September 30, 2020

Common Stock

Series A Preferred

Series C Preferred





Shares

$0.001 Par

Shares

$0.001 Par

Shares

$0.001 Par

Additional Paid-In Capital

Retained Earnings

Non-controlling Interest

Total Equity

Balance on January 1, 2020

43,395,563

$

43,396

419,859

$

420

-

$

-

$

81,527,351

$

(59,246,514

)

$

777,373

$

23,102,026

Purchase of shares of consolidated subsidiary

-

-

-

-

-

-

(71,171

)

-

-

(71,171

)

Share based compensation expense

-

-

-

-

-

-

163,269

-

-

163,269

Adjustment of carrying amount of non-controlling interest

-

-

-

-

-

-

9,091,068

-

-

9,091,068

Conversion of Series B1 Preferred stock to common

2,159,278

2,159

-

-

-

-

3,366,315

-

-

3,368,474

Dividends on Series B and B1

-

-

-

-

-

-

-

(344,499

)

-

(344,499

)

Accretion of discount on Series B and B1

-

-

-

-

-

-

-

(932,003

)

-

(932,003

)

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(10,966,349

)

-

(10,966,349

)

Net income

-

-

-

-

-

-

-

2,788,860

(398,609

)

2,390,251

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

517,877

517,877

Balance on March 31, 2020

45,554,841

$

45,555

419,859

$

420

-

$

-

$

94,076,832

$

(68,700,505

)

$

896,641

$

26,318,943

Share based compensation expense

-

-

-

-

-

-

156,539

-

-

156,539

Dividends on Series B and B1

-

-

-

-

-

-

-

(360,217

)

-

(360,217

)

Accretion of discount on Series B and B1

-

-

-

-

-

-

-

(539,235

)

-

(539,235

)

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(1,381,889

)

-

(1,381,889

)

Net income (loss)

(8,997,638

)

109,165

(8,888,473

)

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

(127,044

)

(127,044

)

Balance on June 30, 2020

45,554,841

$

45,555

419,859

$

420

-

$

-

$

94,233,371

$

(79,979,484

)

$

878,762

$

15,178,624

Share based compensation expense

-

-

-

-

-

-

171,149

-

-

171,149

Accretion of redeemable non-controlling interest to redemption value

-

-

-

-

-

-

-

(1,287,559

)

-

(1,287,559

)

Dividends on Series B and B1

-

-

-

-

-

-

-

(591,777

)

(591,777

)

Accretion of discount on Series B and B1

-

-

-

-

-

-

-

(29,157

)

(29,157

)

Net income

-

-

-

-

-

-

-

(2,435,385

)

480,215

(1,955,170

)

Less: amount attributable to redeemable non-controlling interest

-

-

-

-

-

-

-

-

(306,251

)

(306,251

)

Balance on September 30, 2020

45,554,841

$

45,555

419,859

$

420

-

$

-

$

94,404,520

$

(84,323,362

)

$

1,052,726

$

11,179,859

VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020 (UNAUDITED)

Nine Months Ended

September 30,2021

September 30,2020

Cash flows from operating activities

Net income (loss) before adjustment for non-controlling interest

$

(2,346,808

)

$

(8,453,392

)

Income (loss) from discontinued operations, net of tax

12,464,445

(5,323,630

)

Income (loss) from continuing operations

(14,811,253

)

(3,129,762

)

Adjustments to reconcile net loss from continuing operations to cash used in operating activities, net of acquisitions

Stock based compensation expense

612,626

490,958

Depreciation and amortization

439,653

375,790

Gain on forgiveness of debt

(4,222,000

)

-

Loss on sale of assets

1,927

124,090

Bad debt expense

629,791

(9,875

)

Increase (decrease) in fair value of derivative warrant liability

11,380,122

(1,844,369

)

Loss (gain) on commodity derivative contracts

2,204,606

(4,489,355

)

Net cash settlements on commodity derivatives

(1,998,707

)

5,484,734

Amortization of debt discount and deferred costs

37,500

47,826

Changes in operating assets and liabilities, net of effect of acquisition

Accounts receivable and other receivables

(1,513,058

)

206,352

Inventory

(911,980

)

1,008,343

Prepaid expenses and other current assets

(3,232,253

)

(1,186,023

)

Accounts payable

3,184,965

1,729,129

Accrued expenses

1,203,283

(1,207,230

)

Other assets

(699,999

)

(581,534

)

Net cash used by operating activities

(7,694,777

)

(2,980,926

)

Cash flows from investing activities

Acquisition of business, net of cash

2,058

(1,822,690

)

Internally developed software

-

(49,229

)

Purchase of fixed assets

(1,060,039

)

(642,186

)

Deposit for Refinery Purchase

(10,000,000

)

-

Proceeds from sale of fixed assets

74,991

36,465

Net cash used in investing activities

(10,982,990

)

(2,477,640

)

Cash flows from financing activities

Payments on finance leases

(91,893

)

(93,438

)

Proceeds from exercise of options and warrants to common stock

6,492,759

-

Distributions to noncontrolling interest

(169,368

)

-

Contributions received from noncontrolling interest and redeemable noncontrolling interest

2,260

21,000,000

Line of credit (payments) proceeds, net

(166,129

)

-

Proceeds from note payable (includes proceeds from PPP note)

10,078,115

7,992,346

Payments on note payable

(3,778,589

)

(12,601,976

)

Net cash provided by financing activities

12,367,155

16,296,932

Discontinued operations:

Net cash provided (used) by operation activities

11,014,236

4,370,152

Net cash used in investing activities

(3,168,865

)

(3,527,980

)

Net cash provided (used) by financing activities

(317,226

)

(227,259

)

Net cash provided by discontinued operations

7,528,145

614,913

Net change in cash, cash equivalents and restricted cash

1,217,533

11,453,279

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

10,995,169

4,199,825

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

$

12,212,702

$

15,653,104

SUPPLEMENTAL INFORMATION

Cash paid for interest

$

843,523

$

812,887

Cash paid for taxes

$

-

$

-

NON-CASH INVESTING AND FINANCING TRANSACTIONS

Exchanges of Series B Preferred Stock into common stock

$

4,747,250

$

-

Conversion of Series A Preferred Stock into common stock

$

34

$

-

Conversion of Series B Preferred Stock into common stock

$

8,446,836

$

-

Conversion of Series B1 Preferred Stock into common stock

$

12,046,441

$

3,368,474

Accretion of discount on Series B and B1 Preferred Stock

$

507,282

$

1,500,395

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

$

(258,138

)

$

1,296,493

Option exercised

$

650

$

-

Equipment acquired under finance leases

$

-

$

1,017,638

Initial adjustment of carrying amount redeemable noncontrolling interests

$

-

$

9,091,068

Accretion of redeemable noncontrolling interest to redemption value

$

1,176,683

$

13,635,797

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the three and nine months ended September 30, 2021, and 2020.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Revenues

$

36,950,919

$

21,422,320

$

104,956,817

$

65,364,581

Cost of revenues (exclusive of depreciation shown separately below)

26,867,718

15,861,769

71,860,804

51,622,468

Depreciation and amortization attributable to costs of revenues

1,294,157

971,258

3,803,216

3,175,134

Gross profit

8,789,044

4,589,293

29,292,797

10,566,979

Operating expenses:

Selling, general and administrative expenses

(exclusive of acquisition related expenses)

4,938,494

4,697,503

15,099,782

13,792,598

Depreciation and amortization expense attributable to operating expenses

455,953

681,209

1,367,859

1,593,115

Total Operating expenses

5,394,447

5,378,712

16,467,641

15,385,713

Income (loss) from operations

3,394,597

(789,419

)

12,825,156

(4,818,734

)

Other income (expense)

Other income (expense)

-

-

-

101

Interest expense

(116,099

)

(137,514

)

(360,711

)

(504,997

)

Total other income (expense)

(116,099

)

(137,514

)

(360,711

)

(504,896

)

Income (loss) before income tax

3,278,498

(926,933

)

12,464,445

(5,323,630

)

Income tax benefit (expense)

-

-

-

-

Income (loss) from discontinued operations, net of tax

3,278,498

$

(926,933

)

$

12,464,445

$

(5,323,630

)

Consolidated Continued and Discontinued Operations Reconciliations of Free Cash Flow and 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, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Net income (loss)

$

10,644,516

$

(1,955,170

)

$

(5,289,591

)

$

(7,081,302

)

Add (deduct):

Interest Income

-

-

-

(226

)

Interest Expense

468,686

234,671

1,210,020

1,544,221

Depreciation and amortization

1,903,821

1,796,031

7,452,630

6,990,643

EBITDA

13,017,023

75,532

3,373,059

1,453,336


Add (deduct):

Other income

-

-

(4,222,000

)

-

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

(11,907,413

)

(256,587

)

11,585,687

(1,025,130

)

Unrealized (gain) loss on derivative instruments

147,223

(514,302

)

131,935

782,867

Stock-based compensation

257,073

171,149

777,781

660,307

Adjusted EBITDA *

$

1,513,906

$

(524,208

)

$

11,646,462

$

1,871,380


Net cash provided by (used in) operating activities

(1,726,758

)

(2,360,983

)

1,891,878

6,882,457

Deduct: capital expenditures

(2,499,355

)

(2,643,787

)

(7,714,172

)

(4,790,309

)

Free cash flow

(4,226,113

)

(5,004,770

)

(5,822,294

)

2,092,148

* EBITDA, Adjusted EBITDA, and free cash flow are non-GAAP financial measures. EBITDA represents net income before interest, taxes, depreciation and amortization for continued and discontinued operations. 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 for continued and discontinued operations. Free cash flow represents net cash provided by (used in) operating activities for continued and discontinued operations, less capital expenditures for continued and discontinued operations. 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. See also "Use of Non-GAAP Financial Measures", above.

SOURCE: Vertex Energy, Inc.



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