Vertex Energy (VTNRQ) Financial Report Summaries

Risks

• Uncertainty and illiquidity in credit and capital markets can impair our ability to obtain credit and financing on acceptable terms and can adversely affect the financial strength of our business partners.
• Our obligations under the Loan and Security Agreement and Supply and Offtake Agreements are secured by a first priority security interest in substantially all of our assets and various Company guarantees.
• Our arrangement with Macquarie exposes us to Macquarie-related credit and performance risk as well as potential refinancing risks.
• Economic uncertainty may affect our access to capital and/or increase the costs of such capital.
• Our financial results are affected by changing commodity prices and margins for refined petroleum and other finished products.
• If we are unable to obtain crude oil supplies, soybean oil and other renewable diesel raw materials, for our Mobile Refinery without the benefit of certain intermediation agreements, the capital required to finance our crude oil supply and/or the lack of the supply of soybean oil and other renewable diesel raw materials could negatively impact our liquidity.
• The prices of crude oil and refined and finished lubricant products materially affect our profitability, and are dependent upon many factors that are beyond our control, including general market demand and economic conditions, seasonal and weather-related factors, regional and grade differentials and governmental regulations and policies.
• To successfully operate our facilities, we are required to expend significant amounts for capital outlays and operating expenditures. If we are unable to complete capital projects at their expected costs or in a timely manner, or if the market conditions assumed in our project economics deteriorate, our financial condition, results of operations, or cash flows could be materially and adversely affected.
• Competition in the refining industry is intense, and an increase in competition in the markets in which we sell our products could adversely affect our earnings and profitability.
• The market for our lubricants is highly competitive and requires us to continuously develop and introduce new products and product enhancements.
• A material decrease in the supply, or a material increase in the price, of crude oil or other raw materials or equipment available to our refineries and other facilities could significantly reduce our production levels and negatively affect our operations.
• We depend upon Shell for a substantial portion of the crude supply and distribution network that serve our Mobile Refinery.
• Continued increases in interest rates will cause our debt service obligations to increase and may have an adverse effect on our operations.
• We have been and may in the future be negatively impacted by inflation.
• A decline in expected profitability of the Company or any of our business segments could result in the impairment of assets and other long-lived assets.
• Large capital projects can take many years to complete, and the political and regulatory environments or other market conditions may change or deteriorate over time, negatively impacting project returns.
• Our industry and the broader US economy experienced higher than typical inflationary pressures since 2022, related to continued supply chain disruptions, labor shortages and geopolitical instability. Should these conditions persist, our business, results of operations and cash flows could be materially and adversely affected.
• The price of oil and fluctuations in oil prices have in the past and may in the future have a negative effect on our results of operations.
• The prices of many of our products are subject to significant volatility.
• Downturns and volatility in global economies and commodity and credit markets could materially adversely affect our business, results of operations and financial condition.
• We are dependent on third parties for the disposal of our waste streams.
• We are dependent on third party generators and collectors for our feedstock.
• Worsening economic recessions and economic conditions and trends and downturns in the business cycles of the industries we serve and which we provide services to, impact our business and operating results.
• Our operating margins and profitability may be negatively impacted by changes in fuel and energy costs.
• We are vulnerable to the potential difficulties associated with rapid growth.
• Our re-refining contracts may not be renewed and our existing re-refining relationships may not continue, which could be exacerbated by the fact that a limited number of our customers represent a significant portion of our re-refining sales.
• We operate in competitive markets, and there can be no certainty that we will maintain our current relationships or that our operating margins will not be impacted by competition.
• Disruptions in the supply of feedstock and/or increases in the cost of feedstock could have an adverse effect on our business.
• The renewable diesel refining industry is a feedstock limited industry. As more plants are developed and go into production there may not be an adequate supply of feedstock to supply the demands of the industry, which could threaten the viability of our renewable diesel operations.
• We could be affected by higher than anticipated renewable diesel feedstock costs, including but not limited to increased prices for soybeans.
• Unanticipated problems at, or downtime effecting, our facilities and those operated by third parties on which we rely, could have a material adverse effect on our results of operations.
• Unanticipated problems or delays, or increases in costs, in connection with the ongoing capital project at the Mobile Refinery may harm our business and viability.
• The fees charged to customers under our agreements with them may not escalate sufficiently to cover increases in costs and the agreements may be suspended in some circumstances, which would affect our profitability.
• Improvements in or new discoveries of alternative energy technologies and/or government mandated use of such technologies and/or government restrictions or quotas on the use of oil and gas, could have a material adverse effect on our financial condition and results of operations.
• Our business is subject to operational and safety risks, including the risk of personal injury to employees and others.
• We may be subject to citizen opposition and negative publicity due to public concerns over our operations and planned future operations, which could have a material adverse effect on our business, financial condition or results of operations.
• We depend heavily on the services of our senior management, including our Chief Executive Officer and Chairman, Benjamin P. Cowart, and our Chief Operating Officer, James Rhame.
• Unanticipated problems or delays in building our facilities to the proper specifications may harm our business and viability.
• Strategic relationships on which we rely are subject to change.
• Disruptions to infrastructure at our and our partner’s facilities could materially and adversely affect our business.
• Negative publicity may harm our operations and we may face additional expenses due to such negative publicity.
• Our commercial success will depend in part on our ability to obtain and maintain protection of our intellectual property.
• Competition may impair our success.
• Potential competition from our existing executive officers, after they leave their employment with us, and subject to the non-compete terms of their employment agreements, could negatively impact our profitability.
• Certain of our material agreements have been negotiated and drafted by a legal firm of which our former director and current General Counsel and Secretary is a partner, which could create conflicts of interest and/or limit our ability to seek damages for legal claims.
• Competition due to advances in renewable fuels may lessen the demand for our products and negatively impact our profitability.
• Our business is subject to local, legal, political, and economic factors which are beyond our control.
• Our business may be harmed by anti-terrorism measures.
• Our business is geographically concentrated and is therefore subject to regional economic downturns.
• Our insurance policies do not cover all losses, costs or liabilities that we may experience and if we cannot maintain adequate insurance coverage, we will be unable to continue certain operations.
• Claims above our insurance limits, or significant increases in our insurance premiums, may reduce our profitability.
• Litigation related to personal injury from the operation of our business may result in significant liabilities and limit our profitability.
• Our hedging activities have in the past and may in the future prevent us from benefiting fully from increases in oil prices and may expose us to other risks, including counterparty risk.
• We depend on certain third-party pipelines for transportation of feedstocks and products, and if these pipelines become unavailable to us, our revenues and cash available for payment of our debt obligations could decline.
• From time to time, we may seek to divest portions of our business, which could materially affect our results of operations and result in disruption to other parts of the business.
• The litigation environment in which we operate poses a significant risk to our businesses.
• We operate our business through many locations, and if we are unable to effectively oversee all of these locations, our business reputation and operating results could be materially adversely affected.
• Increases in energy costs will affect our operating results and financial condition.
• Fluctuations in fuel costs could impact our operating expenses and results.
• Competitors that produce their own supply of feedstocks, have more extensive retail outlets, or have greater financial resources may have a competitive advantage.
• Our financial results are affected by changing commodity prices and margins for refined petroleum and other finished products.
• We incur significant costs as a result of operating as a fully reporting company in connection with Section 404 of the Sarbanes Oxley Act, and our management is required to devote substantial time to compliance initiatives.
• Our ability to use our net operating loss carry-forwards may be subject to limitation.
• Our inventory is subject to significant impairment charges in the event the prices of oil and gas fall sharply after such inventory is acquired.
• We have identified material weaknesses in our disclosure controls and procedures and internal control over financial reporting. If not remediated, our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse effect on our financial condition and the trading price of our common stock.
• We may enter into joint ventures or sell all or portions of our facilities, assets or operations in the future.
• Our strategy includes pursuing acquisitions, partnerships and joint ventures and our potential inability to successfully integrate newly-acquired companies or businesses, or successfully manage our partnerships and joint ventures may adversely affect our financial results.
• We may not successfully identify and complete acquisitions on favorable terms or achieve anticipated synergies relating to any acquisitions, and such acquisitions could result in unforeseen operating difficulties and expenditures and require significant management resources.
• Our ability to make acquisitions may be adversely impacted by our outstanding indebtedness and by the price of our stock.
• Our acquisitions may expose us to unknown liabilities.
• We expect to continue to incur substantial capital expenditures and operating costs as a result of our compliance with existing and future environmental laws and regulations.
• Currently pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.
• Continuing political and social concerns about the issues of climate change may result in changes to our business and significant expenditures, including litigation-related expenses.
• We are subject to numerous environmental and other laws and regulations and, to the extent we are found to be in violation of any such laws and regulations, or agree that we violated such laws and regulations (as we have in the past), our business could be materially and adversely affected.
• We are subject to various federal, state, and local rules requiring us to control the release of pollutants into the environment, which may require us to incur material liabilities.
• Environmental risks and regulations may adversely affect our business.
• We may incur significant environmental remediation costs and liabilities in the operation of our refineries, facilities, terminals and related facilities.
• The nature of our operations exposes us, and the communities in which we work, to a wide range of health, safety, security and environment risks.
• The availability and cost of renewable identification numbers, Low Carbon Fuel Standard (LCFS) credits, and other credits and/or changes in laws associated therewith, our current and future RINs liability and expected requirement that we purchase RINs in the future, could have an adverse effect on our financial condition and results of operations.
• Climate change legislation or regulations restricting emissions of greenhouse gases could result in increased operating and capital costs and reduced demand for our products.
• The adoption of regulations implementing recent financial reform legislation could impede our ability to manage business and financial risks by restricting our use of derivative instruments as hedges against fluctuating commodity prices.
• We could be subject to involuntary shutdowns or be required to pay significant monetary damages or remediation costs if we are found to be a responsible party for the improper handling or the release of hazardous substances.
• We currently have an extremely volatile market for our common stock, and the market for our common stock is and may remain volatile in the future.
• Our outstanding options and convertible securities may adversely affect the trading price of our common stock.
• A significant number of our shares of common stock are eligible for sale and their sale or potential sale may depress the market price of our common stock.
• Our outstanding warrants have certain anti-dilutive rights, put and call rights upon the occurrence of a fundamental transaction, and include a limitation on the number of shares of common stock which may be issued upon exercise thereof without shareholder approval.
• We face significant penalties and damages in the event registration statements registering the resale of the shares of common stock issuable upon exercise of the outstanding warrants is not available for the sale of such shares.
• Servicing our debt will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial debt.
• We may not have enough available funds or the ability to raise the funds necessary to repurchase the Convertible Senior Notes for cash upon a fundamental change or to settle conversions of the Convertible Senior Notes in cash, and our future indebtedness may contain limitations on our ability to pay cash upon conversion or repurchase of the Convertible Senior Notes.
• The conditional conversion feature of the Convertible Senior Notes, if triggered, may adversely affect our financial condition and liquidity.
• The accounting method for reflecting the Convertible Senior Notes on our balance sheet, accruing interest expense for the Convertible Senior Notes and reflecting the underlying shares of our common stock in our reported diluted earnings per share may adversely affect our reported earnings and financial condition.
• The conversion rate for Convertible Senior Notes converted in connection with a make-whole fundamental change or a notice of redemption for an optional redemption may be increased.
• Our Common Stock may be delisted from The Nasdaq Capital Market if we cannot satisfy Nasdaq’s continued listing requirements.
• If we are delisted from The Nasdaq Capital Market, our ability to sell our shares of our common stock could also be limited by the penny stock restrictions, which could further limit the marketability of our shares.
• Due to the fact that our common stock is listed on The Nasdaq Capital Market, we are subject to financial and other reporting and corporate governance requirements which increase our costs and expenses.
• Our Articles of Incorporation and Bylaws provide for indemnification of officers and directors at our expense, which may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers or directors.
• Our Articles of Incorporation contain a specific provision that limits the liability of our directors and officers for monetary damages to the Company and the Company’s shareholders to the fullest extent permitted by Nevada law and we are required, under certain circumstances, to indemnify officers, directors and employees.
• Anti-takeover provisions in our Articles of Incorporation, as amended and our Bylaws, as well as provisions of Nevada law, might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
• Our authorized preferred stock can be designated by the Board of Directors without shareholder approval.
• There may be future sales and issuances of our common stock, which could adversely affect the market price of our common stock and dilute stockholders’ ownership of common stock.
• Shareholders may be diluted significantly through our efforts to obtain financing and satisfy obligations through the issuance of additional shares of our common stock.
• Securities analysts may not cover our common stock and this may have a negative impact on our common stock’s market price.
• We do not intend to pay cash dividends on our common stock in the foreseeable future, and therefore only appreciation of the price of our common stock will provide a return to our stockholders.
• We may be subject in the normal course of business to judicial, administrative or other third-party proceedings that could interrupt or limit our operations, require expensive remediation, result in adverse judgments, settlements or fines and create negative publicity.
• Our hedging activities may prevent us from benefiting fully from increases in oil prices and may expose us to other risks, including counterparty risk.
• The threat and impact of terrorist attacks, cyber-attacks or similar hostilities may adversely impact our operations.
• We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.
• Anti-takeover provisions contained in our governing documents, applicable laws and our Convertible Senior Notes could impair a takeover attempt.
• We may be adversely affected by climate change or by legal, regulatory or market responses to such change.
• We might be adversely impacted by changes in accounting standards.