Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 09, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Sep. 30, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-11476 | |
Entity Registrant Name | VERTEX ENERGY, INC. | |
Entity Incorporation, State | NV | |
Entity Tax Identification Number | 94-3439569 | |
Entity Address, Street | 1331 Gemini Street | |
Entity Address, Suite | Suite 250 | |
Entity Address, City | Houston | |
Entity Address, State | TX | |
Entity Address, Postal Zip Code | 77058 | |
City Area Code | 866 | |
Local Phone Number | 660-8156 | |
Title of each class | Common Stock,$0.001 Par Value Per Share | |
Trading Symbol(s) | VTNR | |
Name of each exchange on which registered | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 45,554,841 | |
Entity Central Index Key | 0000890447 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets | ||
Cash and cash equivalents | $ 15,552,980 | $ 4,099,655 |
Restricted cash | 100,125 | 100,170 |
Accounts receivable, net | 9,090,927 | 12,138,078 |
Federal income tax receivable | 0 | 68,606 |
Inventory | 3,584,317 | 6,547,479 |
Prepaid expenses and other current assets | 4,597,361 | 4,452,920 |
Total current assets | 32,925,710 | 27,406,908 |
Noncurrent assets | ||
Fixed assets, at cost | 73,444,184 | 69,469,548 |
Less accumulated depreciation | (28,175,982) | (24,708,151) |
Fixed assets, net | 45,268,202 | 44,761,397 |
Finance lease right-of-use assets | 1,640,694 | 851,570 |
Operating lease right-of use assets | 34,014,076 | 35,586,885 |
Intangible assets, net | 9,880,310 | 11,243,800 |
Deferred income taxes | 0 | 68,605 |
Other assets | 1,424,288 | 840,754 |
TOTAL ASSETS | 125,153,280 | 120,759,919 |
Current liabilities | ||
Accounts payable | 8,275,862 | 7,620,098 |
Accrued expenses | 3,312,018 | 5,016,132 |
Dividends payable | 591,763 | 389,176 |
Finance lease liability-current | 489,974 | 217,164 |
Operating lease liability-current | 5,830,681 | 5,885,304 |
Current portion of long-term debt, net of unamortized finance costs | 4,867,167 | 2,017,345 |
Derivative commodity liability | 23,995 | 375,850 |
Revolving note | 0 | 3,276,230 |
Total current liabilities | 23,391,460 | 24,797,299 |
Long-term liabilities | ||
Long-term debt, net of unamortized finance costs | 8,297,605 | 12,433,000 |
Finance lease liability-long-term | 1,072,623 | 610,450 |
Operating lease liability-long-term | 28,183,395 | 29,701,581 |
Derivative warrant liability | 124,847 | 1,969,216 |
Total liabilities | 61,069,930 | 69,511,546 |
COMMITMENTS AND CONTINGENCIES (Note 3) | 0 | 0 |
TEMPORARY EQUITY | ||
Series B and B-1 preferred shares | 52,903,491 | 28,146,347 |
Redeemable non-controlling interest | 29,928,211 | 4,396,894 |
EQUITY | ||
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 45,554,841 and 43,395,563 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively. | 45,555 | 43,396 |
Additional paid-in capital | 94,404,520 | 81,527,351 |
Accumulated deficit | (84,323,362) | (59,246,514) |
Total Vertex Energy, Inc. stockholders' equity | 10,127,133 | 22,324,653 |
Non-controlling interest | 1,052,726 | 777,373 |
Total Equity | 11,179,859 | 23,102,026 |
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY | 125,153,280 | 120,759,919 |
Series B Preferred Stock | ||
TEMPORARY EQUITY | ||
Series B and B-1 preferred shares | 12,408,119 | 11,006,406 |
Series B1 Preferred Stock | ||
TEMPORARY EQUITY | ||
Series B and B-1 preferred shares | 10,567,161 | 12,743,047 |
Series A Preferred Stock | ||
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 June 30, 2020 and December 31, 2019, respectively with a liquidation preference of $625,590 and $625,590 at June 30, 2020 and December 31, 2019, respectively. | 420 | 420 |
Series C Preferred Stock | ||
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 June 30, 2020 and December 31, 2019, respectively with a liquidation preference of $625,590 and $625,590 at June 30, 2020 and December 31, 2019, respectively. | $ 0 | $ 0 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Preferred stock, par value (in dollars per share) | $ 0.001 | |
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 |
Common stock, shares issued (in shares) | 45,554,841 | 43,395,563 |
Common stock, shares outstanding (in shares) | 45,554,841 | 43,395,563 |
Series B Preferred Stock | ||
Temporary equity, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Temporary equity, shares designated (in shares) | 10,000,000 | 10,000,000 |
Temporary equity, shares issued (in shares) | 4,002,619 | 3,826,055 |
Temporary equity, shares outstanding (in shares) | 4,002,619 | 3,826,055 |
Temporary equity, liquidation preference | $ 12,408,119 | $ 11,860,771 |
Series B1 Preferred Stock | ||
Temporary equity, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Temporary equity, shares designated (in shares) | 17,000,000 | 17,000,000 |
Temporary equity, shares issued (in shares) | 7,219,164 | 9,028,085 |
Temporary equity, shares outstanding (in shares) | 7,219,164 | 9,028,085 |
Temporary equity, liquidation preference | $ 11,261,896 | $ 14,083,813 |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares issued (in shares) | 419,859 | 419,859 |
Preferred stock, shares outstanding (in shares) | 419,859 | 419,859 |
Preferred stock, liquidation preference | $ 625,590 | $ 625,590 |
Series C Preferred Stock | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 44,000 | 44,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenues | $ 37,383,632 | $ 37,799,259 | $ 94,961,188 | $ 120,777,263 |
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 31,186,684 | 32,372,316 | 80,221,343 | 103,732,086 |
Depreciation and amortization attributable to costs of revenues | 1,313,162 | 1,359,629 | 3,731,320 | 3,965,626 |
Gross profit | 4,883,786 | 4,067,314 | 11,008,525 | 13,079,551 |
Operating expenses: | ||||
Selling, general and administrative expenses | 6,241,570 | 6,153,184 | 18,972,648 | 17,529,784 |
Depreciation and amortization attributable to operating expenses | 482,869 | 455,953 | 1,412,719 | 1,367,859 |
Total operating expenses | 6,724,439 | 6,609,137 | 20,385,367 | 18,897,643 |
Loss from operations | (1,840,653) | (2,541,823) | (9,376,842) | (5,818,092) |
Other income (expense): | ||||
Other income | 1 | 918,153 | 101 | 920,071 |
Gain (loss) on sale of assets | (136,434) | 0 | (124,090) | 31,443 |
Gain on change in value of derivative warrant liability | 256,587 | 1,290,792 | 1,844,369 | 331,715 |
Interest expense | (234,671) | (826,005) | (796,930) | (2,322,780) |
Total other income (expense) | (114,517) | 1,382,940 | 923,450 | (1,039,551) |
Loss before income taxes | (1,955,170) | (1,158,883) | (8,453,392) | (6,857,643) |
Income tax benefit (expense) | 0 | 0 | 0 | 0 |
Net loss | (1,955,170) | (1,158,883) | (8,453,392) | (6,857,643) |
Net income (loss) attributable to non-controlling interest and redeemable non-controlling interest | 480,215 | (67,102) | 190,771 | (374,862) |
Net loss attributable to Vertex Energy, Inc. | (2,435,385) | (1,091,781) | (8,644,163) | (6,482,781) |
Accretion of redeemable noncontrolling interest to redemption value | (1,287,559) | (1,849,930) | (13,635,797) | (1,849,930) |
Accretion of discount on Series B and B1 Preferred Stock | (29,157) | (550,774) | (1,500,395) | (1,644,374) |
Dividends on Series B and B1 Preferred Stock | (591,777) | (419,096) | (1,296,493) | (1,238,766) |
Net loss available to common shareholders | $ (4,343,878) | $ (3,911,581) | $ (25,076,848) | $ (11,215,851) |
Loss per common share | ||||
Basic (in dollars per share) | $ (0.10) | $ (0.09) | $ (0.55) | $ (0.28) |
Diluted (in dollars per share) | $ (0.10) | $ (0.09) | $ (0.55) | $ (0.28) |
Shares used in computing earnings per share | ||||
Basic (in shares) | 45,554,841 | 41,376,335 | 45,494,235 | 40,626,700 |
Diluted (in shares) | 45,554,841 | 41,376,335 | 45,494,235 | 40,626,700 |
CONSOLIDATED STATEMENTS OF EQUI
CONSOLIDATED STATEMENTS OF EQUITY - USD ($) | Total | Common Stock | Preferred stockSeries A Preferred | Preferred stockSeries C Preferred | Additional Paid-In Capital | Retained Earnings | Non-controlling Interest |
Beginning balance at Dec. 31, 2018 | $ 28,809,044 | $ 40,175 | $ 420 | $ 0 | $ 75,131,122 | $ (47,800,886) | $ 1,438,213 |
Beginning balance (in shares) at Dec. 31, 2018 | 40,174,821 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Share based compensation expense | 143,063 | 143,063 | |||||
Conversion of Series B1 Preferred stock to common | 150,010 | $ 96 | 149,914 | ||||
Conversion of Series B1 Preferred stock to common (in shares) | 96,160 | ||||||
Dividends on Series B and B1 | (406,795) | (406,795) | |||||
Accretion of discount on Series B and B1 | (560,675) | (560,675) | |||||
Net income (loss) | (5,068,995) | (4,963,564) | (105,431) | ||||
Ending balance at Mar. 31, 2019 | 23,065,652 | $ 40,271 | $ 420 | $ 0 | 75,424,099 | (53,731,920) | 1,332,782 |
Ending balance (in shares) at Mar. 31, 2019 | 40,270,981 | 419,859 | 0 | ||||
Beginning balance at Dec. 31, 2018 | 28,809,044 | $ 40,175 | $ 420 | $ 0 | 75,131,122 | (47,800,886) | 1,438,213 |
Beginning balance (in shares) at Dec. 31, 2018 | 40,174,821 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Exercise of options to purchase common stock (in shares) | 78,425 | ||||||
Ending balance at Sep. 30, 2019 | 20,780,014 | $ 41,850 | $ 420 | 79,719,745 | (59,788,939) | 806,938 | |
Ending balance (in shares) at Sep. 30, 2019 | 41,849,406 | 419,859 | |||||
Beginning balance at Mar. 31, 2019 | 23,065,652 | $ 40,271 | $ 420 | $ 0 | 75,424,099 | (53,731,920) | 1,332,782 |
Beginning balance (in shares) at Mar. 31, 2019 | 40,270,981 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Exercise of options to purchase common stock | 4,500 | $ 76 | 4,424 | ||||
Exercise of options to purchase common stock (in shares) | 75,925 | ||||||
Share based compensation expense | 171,002 | 171,002 | |||||
Distribution to noncontrolling | (285,534) | (285,534) | |||||
Dividends on Series B and B1 | (412,875) | (412,875) | |||||
Accretion of discount on Series B and B1 | (532,925) | (532,925) | |||||
Net income (loss) | (629,765) | (427,436) | (202,329) | ||||
Ending balance at Jun. 30, 2019 | 21,380,055 | $ 40,347 | $ 420 | $ 0 | 75,599,525 | (55,105,156) | 844,919 |
Ending balance (in shares) at Jun. 30, 2019 | 40,346,906 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Exercise of options to purchase common stock | 2,575 | $ 3 | 2,572 | ||||
Exercise of options to purchase common stock (in shares) | 2,500 | ||||||
Adjustment of carrying mount of non-controlling interest | 970,809 | 970,809 | |||||
Share based compensation expense | 159,426 | 159,426 | |||||
Accretion of redeemable non-controlling interest to redemption value | (1,849,930) | (1,849,930) | |||||
Issuance of common stock and warrants | 2,216,711 | $ 1,500 | 2,987,413 | (772,202) | |||
Issuance of common stock and warrants (in shares) | 1,500,000 | ||||||
Dividends on Series B and B1 | (419,096) | (419,096) | |||||
Accretion of discount on Series B and B1 | (550,774) | (550,774) | |||||
Net income (loss) | (1,129,762) | (1,091,781) | (37,981) | ||||
Ending balance at Sep. 30, 2019 | 20,780,014 | $ 41,850 | $ 420 | 79,719,745 | (59,788,939) | 806,938 | |
Ending balance (in shares) at Sep. 30, 2019 | 41,849,406 | 419,859 | |||||
Beginning balance at Dec. 31, 2019 | 23,102,026 | $ 43,396 | $ 420 | $ 0 | 81,527,351 | (59,246,514) | 777,373 |
Beginning balance (in shares) at Dec. 31, 2019 | 43,395,563 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Purchase of shares of consolidated subsidiary | (71,171) | (71,171) | |||||
Adjustment of carrying mount of non-controlling interest | 9,091,068 | 9,091,068 | |||||
Share based compensation expense | 163,269 | 163,269 | |||||
Conversion of Series B1 Preferred stock to common | 3,368,474 | $ 2,159 | 3,366,315 | ||||
Conversion of Series B1 Preferred stock to common (in shares) | 2,159,278 | ||||||
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 (loss) | 2,908,128 | 2,788,860 | 119,268 | ||||
Ending balance at Mar. 31, 2020 | 26,318,943 | $ 45,555 | $ 420 | $ 0 | 94,076,832 | (68,700,505) | 896,641 |
Ending balance (in shares) at Mar. 31, 2020 | 45,554,841 | 419,859 | 0 | ||||
Beginning balance at Dec. 31, 2019 | 23,102,026 | $ 43,396 | $ 420 | $ 0 | 81,527,351 | (59,246,514) | 777,373 |
Beginning balance (in shares) at Dec. 31, 2019 | 43,395,563 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Purchase of shares of consolidated subsidiary | (71,171) | ||||||
Adjustment of carrying mount of non-controlling interest | 9,091,068 | ||||||
Ending balance at Sep. 30, 2020 | 11,179,859 | $ 45,555 | $ 420 | $ 0 | 94,404,520 | (84,323,362) | 1,052,726 |
Ending balance (in shares) at Sep. 30, 2020 | 45,554,841 | 419,859 | 0 | ||||
Beginning balance at Mar. 31, 2020 | 26,318,943 | $ 45,555 | $ 420 | $ 0 | 94,076,832 | (68,700,505) | 896,641 |
Beginning balance (in shares) at Mar. 31, 2020 | 45,554,841 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
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) | (9,015,517) | (8,997,638) | (17,879) | ||||
Ending balance at Jun. 30, 2020 | 15,178,624 | $ 45,555 | $ 420 | $ 0 | 94,233,371 | (79,979,484) | 878,762 |
Ending balance (in shares) at Jun. 30, 2020 | 45,554,841 | 419,859 | 0 | ||||
Increase (Decrease) in Stockholders' Equity | |||||||
Share based compensation expense | 171,149 | 171,149 | |||||
Dividends on Series B and B1 | (591,777) | (591,777) | |||||
Accretion of discount on Series B and B1 | (29,157) | (29,157) | |||||
Accretion of redeemable non-controlling interest to redemption value | (1,287,559) | (1,287,559) | |||||
Net income (loss) | (2,261,421) | (2,435,385) | 173,964 | ||||
Ending balance at Sep. 30, 2020 | $ 11,179,859 | $ 45,555 | $ 420 | $ 0 | $ 94,404,520 | $ (84,323,362) | $ 1,052,726 |
Ending balance (in shares) at Sep. 30, 2020 | 45,554,841 | 419,859 | 0 |
CONSOLIDATED STATEMENTS OF EQ_2
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, par value (in dollars per share) | 0.001 | |
Series A Preferred Stock | ||
Preferred stock, par value (in dollars per share) | 0.001 | 0.001 |
Series C Preferred Stock | ||
Preferred stock, par value (in dollars per share) | 0.001 | $ 0.001 |
Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.001 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities | ||
Net loss | $ (8,453,392) | $ (6,857,643) |
Adjustments to reconcile net loss to cash provided by operating activities | ||
Stock based compensation expense | 490,957 | 473,491 |
Depreciation and amortization | 5,144,039 | 5,333,485 |
Loss (gain) on sale of assets | 124,090 | (31,443) |
Contingent consideration reduction | 0 | (15,564) |
Bad debt and reduction in allowance for bad debt | 34,127 | (389,943) |
(Decrease) increase in fair value of derivative warrant liability | (1,844,369) | (331,715) |
(Gain) loss on commodity derivative contracts | (4,489,355) | 2,691,833 |
Net cash settlements on commodity derivatives | 5,484,734 | (3,446,274) |
Amortization of debt discount and deferred costs | 47,826 | 430,431 |
Changes in operating assets and liabilities, net of effect of acquisition | ||
Accounts receivable | 4,952,388 | (987,778) |
Inventory | 3,939,674 | 2,212,989 |
Prepaid expenses | (1,477,191) | (833,485) |
Accounts payable | (367,327) | (1,046,149) |
Accrued expenses | (1,788,693) | (260,341) |
Other assets | (446,324) | 0 |
Net cash provided by (used in) operating activities | 1,351,184 | (3,058,106) |
Cash flows from investing activities | ||
Acquisition | (1,822,690) | 0 |
Internally developed software | (49,229) | (380,216) |
Purchase of fixed assets | (4,170,166) | (2,907,330) |
Proceeds from sale of fixed assets | 36,465 | 86,846 |
Net cash used in investing activities | (6,005,620) | (3,200,700) |
Cash flows from financing activities | ||
Payments on finance leases | (282,655) | (113,241) |
Proceeds from exercise of stock options | 0 | 7,075 |
Distribution VRM LA | 0 | (285,534) |
Contributions received from redeemable noncontrolling interest | 21,000,000 | 3,150,000 |
Proceeds received from issuance of common stock and warrants | 0 | 2,216,711 |
Line of credit (payments) proceeds, net | (3,276,230) | 1,543,003 |
Proceeds from note payable (includes proceeds from PPP note) | 7,992,346 | 2,809,139 |
Payments on note payable | (9,325,745) | (3,514,365) |
Net cash provided by financing activities | 16,107,716 | 5,812,788 |
Net change in cash, cash equivalents and restricted cash | 11,453,280 | (446,018) |
Cash, cash equivalents, and restricted cash at beginning of the period | 4,199,825 | 2,849,831 |
Cash, cash equivalents, and restricted cash at end of period | 15,653,105 | 2,403,813 |
SUPPLEMENTAL INFORMATION | ||
Cash paid for interest | 812,887 | 1,887,012 |
Cash paid for taxes | 0 | 0 |
NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||
Accretion of discount on Series B and B1 Preferred Stock | 1,500,395 | 1,644,374 |
Dividends-in-kind accrued on Series B and B1 Preferred Stock | 1,296,493 | 1,238,766 |
Equipment acquired under finance leases | 1,017,638 | 621,000 |
Initial adjustment of carrying amount redeemable noncontrolling interests | 9,091,068 | 970,809 |
Accretion of redeemable noncontrolling interest to redemption value | 13,635,797 | 1,849,930 |
Series B1 Preferred Stock | ||
NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||
Conversion of Series B1 Preferred Stock into common stock | 3,368,474 | $ 149,914 |
Dividends-in-kind accrued on Series B and B1 Preferred Stock | $ 281,557 |
BASIS OF PRESENTATION AND NATUR
BASIS OF PRESENTATION AND NATURE OF OPERATIONS | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BASIS OF PRESENTATION AND NATURE OF OPERATIONS | BASIS OF PRESENTATION AND NATURE OF OPERATIONS The accompanying unaudited consolidated interim financial statements of Vertex Energy, Inc. (the " Company " or " Vertex Energy ") have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (" SEC ") and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2019, contained in the Company's annual report, as filed with the SEC on Form 10-K on March 4, 2020 (the " Form 10-K "). The December 31, 2019 balance sheet was derived from the audited financial statements of our 2019 Form 10-K. In the opinion of management all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim periods presented, have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal year 2019 as reported in Form 10-K have been omitted. Novel Coronavirus (COVID-19) In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April, many U.S. states and local jurisdictions began issuing ‘stay-at-home’ orders, which continue in various forms as of the date of this report. Notwithstanding such ‘stay-at-home’ orders, to date, our operations have for the most part been deemed an essential business under applicable governmental orders based on the critical nature of the products we offer. We sell products and services primarily in the U.S. domestic oil and gas commodity markets. Throughout the first quarter of 2020, the industry experienced multiple factors which lowered both the demand for, and prices of, oil and gas. First, the COVID-19 pandemic lowered global demand for hydrocarbons, as social distancing and travel restrictions were implemented across the world. Second, the lifting of Organization of the Petroleum Exporting Countries (OPEC)+ supply curtailments, and the associated increase in production of oil, drove the global supply of hydrocarbons higher through the first quarter of 2020. As a result of both dynamics, prices for hydrocarbons declined 67% from peak prices within the first quarter of 2020. While global gross domestic product (GDP) growth was impacted by COVID-19 during the first nine months of 2020, we expect GDP to continue to decline globally in the fourth quarter of 2020 and for at least the early part of 2021, as a result of the COVID-19 pandemic. As a result, we expect oil and gas related markets will continue to experience significant volatility in 2020 and 2021. Our goal through this downturn has been to remain disciplined in allocating capital and to focus on liquidity and cash preservation. We are taking the necessary actions to right-size the business for expected activity levels. As a result of the impact of the COVID-19 outbreak, some of our feedstock suppliers have permanently or temporarily closed their businesses, limited our access to their businesses, and/or have experienced a decreased demand for services. As a result of the above, and due to ‘stay-at-home’ and other social distancing orders, as well as the decline in U.S. travel caused by COVID-19, we have seen a significant decline in the volume of feedstocks (specifically used oil) that we have been able to collect, and therefore process through our facilities. A prolonged economic slowdown, period of social quarantine (imposed by the government or otherwise), or a prolonged period of decreased travel due to COVID-19 or the responses thereto, will likely continue to have a material negative adverse impact on our ability to produce products, and consequently our revenues and results of operations. The full extent of the impact of COVID-19 on our business and operations currently cannot be estimated and will depend on a number of factors including the scope and duration of the global pandemic. Currently we believe that we have sufficient cash on hand and will generate sufficient cash through operations to support our operations for the foreseeable future; however, we will continue to evaluate our business operations based on new information as it becomes available and will make changes that we consider necessary in light of any new developments regarding the pandemic. |
SUMMARY OF CRITICAL ACCOUNTING
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES | SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES Cash, Cash Equivalents and Restricted Cash The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows. September 30, 2020 unaudited September 30, 2019 Cash and cash equivalents $ 15,552,980 $ 2,303,725 Restricted cash 100,125 100,088 Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows $ 15,653,105 $ 2,403,813 The Company placed all the restricted cash in a money market account, to serve as collateral for payment of a credit card. Inventory Inventories of products consist of feedstocks, refined petroleum products and recovered ferrous and non-ferrous metals and are reported at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“ FIFO ”) method. The Company reviews its inventory commodities for impairment whenever events or circumstances indicate that the value may not be recoverable. Impairment of long-lived assets The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (" ASC ") regarding long-lived assets. It requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company determined that no long-lived asset impairment existed during the nine months ended September 30, 2020. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates. Any effects on the business, financial position or results of operations from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. Reclassification of Prior Year Presentation Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on the reported results of operations. Redeemable Noncontrolling Interests As more fully described in " Note 14. Share Purchase and Subscription Agreements ", the Company is party to put/call option agreements with the holder of MG SPV’s and Heartland SPV's non-controlling interests. The put options permit MG SPV's and Heartland SPV's non-controlling interest holders, at any time on or after the earlier of (a) the fifth anniversary of the applicable closing date of such issuances and (ii) the occurrence of certain triggering events (an “MG Redemption” and "Heartland Redemption", as applicable) to require MG SPV and Heartland SPV to redeem the non-controlling interest from the holder of such interest. Per the agreements, the cash purchase price for such redeemed Class B Units (MG SPV) and Class A Units (Heartland SPV) is the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking an MG SPV Redemption and Heartland SPV Redemption and Vertex Operating, LLC, our wholly-owned subsidiary (“Vertex Operating”) (provided that Vertex Operating still owns Class A Units (as to MG SPV) or Class B Units (as to Heartland SPV) on such date, as applicable) and (z) the original per-unit price for such Class B Units/Class A Units plus any unpaid Class A/Class B preference. The preference is defined as the greater of (A) the aggregate unpaid “Class B/Class A Yield” (equal to an annual return of 22.5% per annum) and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class B/Class A Unit holders. The agreements also permit the Company to acquire the non-controlling interest from the holders thereof upon certain events. Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer. Based on this guidance, the Company has classified the MG SPV and Heartland SPV non-controlling interests between the liabilities and equity sections of the accompanying September 30, 2020 and December 31, 2019 consolidated balance sheets (provided that the Heartland SPV interest was not outstanding until January 2020). If an equity instrument subject to the guidance is currently redeemable, the instrument is adjusted to its maximum redemption amount at the balance sheet date. If the equity instrument subject to the guidance is not currently redeemable but it is probable that the equity instrument will become redeemable (for example, when the redemption depends solely on the passage of time), the guidance permits either of the following measurement methods: (a) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument using an appropriate methodology, or (b) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The amount presented in temporary equity should be no less than the initial amount reported in temporary equity for the instrument. Because the MG SPV and Heartland SPV equity instruments will become redeemable solely based on the passage of time, the Company determined that it is probable that the MG SPV and Heartland SPV equity instruments will become redeemable. The Company has elected to apply the second of the two measurement options described above. An adjustment to the carrying amount of a non-controlling interest from the application of the above guidance does not impact net income in the consolidated financial statements. Rather, such adjustments are treated as equity transactions. Variable Interest Entities The Company accounts for the investments it makes in certain legal entities in which equity investors do not have (1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, (2) as a group (the holders of the equity investment at risk), either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impacts the entity’s economic performance, or (3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. These certain legal entities are referred to as “variable interest entities” or “VIEs.” The Company consolidates the results of any such entity in which it determines that it has a controlling financial interest. The Company has a “controlling financial interest” in such an entity if the Company has both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, the Company reassesses whether it has a controlling financial interest in any investments it has in these certain legal entities. |
CONCENTRATIONS, SIGNIFICANT CUS
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2020 | |
Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract] | |
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES | CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES At September 30, 2020 and 2019 and for each of the nine months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations: Nine Months Ended September 30, 2020 Nine Months Ended % of % of % of % of Customer 1 35% 11% 35% 25% Customer 2 11% 13% 8% 15% Customer 3 3% 11% —% —% Customer 4 —% —% 12% —% For each of the nine months ended September 30, 2020 and 2019, the Company's segment revenues were comprised of the following customer concentrations: % of Revenue by Segment % Revenue by Segment Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Black Oil Refining Recovery Black Oil Refining Recovery Customer 1 54% —% —% 41% —% —% Customer 2 17% —% —% 10% —% —% Customer 3 —% —% 25% —% —% —% Customer 4 —% —% —% 14% —% —% The Company had one and no vendors that represented 10% of total purchases or payables for the nine months ended September 30, 2020 and 2019, respectively. The vendor represents 19% of total purchases for the nine months ended September 30, 2020 and 17% of accounts payable at September 30, 2020. The Company’s revenue, profitability and future rate of growth are substantially dependent on prevailing prices for petroleum-based products. Historically, the energy markets have been very volatile, and there can be no assurance that these prices will not be subject to wide fluctuations in the future. A substantial or extended decline in such prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows, access to capital, and the quantities of petroleum-based products that the Company can economically produce. Litigation The Company, in its normal course of business, is involved in various claims and legal action. In the opinion of management, the outcome of these claims and actions will not have a material adverse impact upon the financial position of the Company. We are currently party to the following material litigation proceedings: Vertex Refining LA, LLC (" Vertex Refining LA "), the wholly-owned subsidiary of Vertex Operating was named as a defendant, along with numerous other parties, in five lawsuits filed on or about February 12, 2016, in the Second Parish Court for the Parish of Jefferson, State of Louisiana, Case No. 121749, by Russell Doucet et. al., Case No. 121750, by Kendra Cannon et. al., Case No. 121751, by Lashawn Jones et. al., Case No. 121752, by Joan Strauss et. al. and Case No. 121753, by Donna Allen et. al. The suits relate to alleged noxious and harmful emissions from our facility located in Marrero, Louisiana. The suits seek damages for physical and emotional injuries, pain and suffering, medical expenses and deprivation of the use and enjoyment of plaintiffs’ homes. We intend to vigorously defend ourselves and oppose the relief sought in the complaints, provided that at this stage of the litigation, the Company has no basis for determining whether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation. Related Parties From time to time, the Company consults with a related party law firm. During the nine months ended September 30, 2020 and 2019, we paid $56,971 and $62,239, respectively, to such law firm for services rendered. |
REVENUES
REVENUES | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
REVENUES | REVENUES Disaggregation of Revenue The following tables present our revenues disaggregated by geographical market and revenue source: Three Months Ended September 30, 2020 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 7,484,798 $ — $ — $ 7,484,798 Southern United States 12,503,324 13,501,749 3,893,761 29,898,834 $ 19,988,122 $ 13,501,749 $ 3,893,761 $ 37,383,632 Sources of Revenue Base oil $ 5,632,592 $ — $ 733,180 $ 6,365,772 Pygas — 1,184,433 — 1,184,433 Industrial fuel 21,190 82,644 — 103,834 Distillates — 12,234,672 — 12,234,672 Oil collection services 2,449,454 — — 2,449,454 Metals — — 3,160,581 3,160,581 Other re-refinery products 834,438 — — 834,438 VGO/Marine fuel sales 11,050,448 — — 11,050,448 Total revenues $ 19,988,122 $ 13,501,749 $ 3,893,761 $ 37,383,632 Nine Months Ended September 30, 2020 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 23,210,428 $ — $ — $ 23,210,428 Southern United States 37,852,200 22,309,670 11,588,890 71,750,760 $ 61,062,628 $ 22,309,670 $ 11,588,890 $ 94,961,188 Sources of Revenue Base oil $ 17,914,941 $ — $ 2,091,430 $ 20,006,371 Pygas — 4,815,040 — 4,815,040 Industrial fuel 1,262,266 135,396 — 1,397,662 Distillates — 17,359,234 — 17,359,234 Oil collection services 5,707,017 — — 5,707,017 Metals — — 9,549,144 9,549,144 Other re-refinery products 4,341,027 — (51,684) 4,289,343 VGO/Marine fuel sales 31,837,377 — — 31,837,377 Total revenues $ 61,062,628 $ 22,309,670 $ 11,588,890 $ 94,961,188 Three Months Ended September 30, 2019 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 12,325,941 $ — $ — $ 12,325,941 Southern United States 20,004,590 3,076,454 2,392,274 25,473,318 $ 32,330,531 $ 3,076,454 $ 2,392,274 $ 37,799,259 Sources of Revenue Base oil $ 9,135,650 $ — $ 640,642 $ 9,776,292 Pygas — 2,741,557 — 2,741,557 Industrial fuel 891,676 334,897 — 1,226,573 Distillates — — — — Oil collection services 1,953,924 — — 1,953,924 Metals — — 1,724,025 1,724,025 Other re-refinery products 3,057,171 — 27,607 3,084,778 VGO/Marine fuel sales 17,292,110 — — 17,292,110 Total revenues $ 32,330,531 $ 3,076,454 $ 2,392,274 $ 37,799,259 Nine Months Ended September 30, 2019 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 31,530,289 $ — $ — $ 31,530,289 Southern United States 71,523,240 9,212,477 8,511,257 89,246,974 $ 103,053,529 $ 9,212,477 $ 8,511,257 $ 120,777,263 Sources of Revenue Base oil $ 23,918,490 $ — $ 2,439,071 $ 26,357,561 Pygas — 7,656,125 — 7,656,125 Industrial fuel 5,714,478 1,501,655 — 7,216,133 Distillates — 54,697 — 54,697 Oil collection services 4,261,391 — — 4,261,391 Metals — — 5,988,895 5,988,895 Other re-refinery products 10,399,007 — 83,291 10,482,298 VGO/Marine fuel sales 58,760,163 — — 58,760,163 Total revenues $ 103,053,529 $ 9,212,477 $ 8,511,257 $ 120,777,263 |
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
ACCOUNTS RECEIVABLE | ACCOUNTS RECEIVABLE Accounts receivable, net, consists of the following at September 30, 2020 and December 31, 2019: September 30, 2020 Unaudited December 31, 2019 Accounts receivable trade $ 9,441,141 $ 12,540,553 Allowance for doubtful accounts (350,214) (402,475) Accounts receivable trade, net $ 9,090,927 $ 12,138,078 |
LINE OF CREDIT AND LONG-TERM DE
LINE OF CREDIT AND LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT AND LONG-TERM DEBT | LINE OF CREDIT AND LONG-TERM DEBT On April 24, 2020, (a) Encina Business Credit, LLC (“EBC”) and the lenders under our Revolving Credit Agreement with EBC (the “EBC Lenders”), and Vertex Operating, entered into a Fourth Amendment and Limited Waiver to Credit Agreement, effective on April 24, 2020, pursuant to which the EBC Lenders agreed to amend the EBC Credit Agreement; and (b) the EBC Lenders and Vertex Operating entered into a Fourth Amendment and Limited Waiver to ABL Credit Agreement, effective on April 24, 2020, pursuant to which the EBC Lenders agreed to amend the Revolving Credit Agreement (collectively, the “ Waivers ”). The Waivers amended the credit agreements to extend the due date of amounts owed thereunder from February 1, 2021 to February 1, 2022. On August 7, 2020, the Company and Vertex Operating entered into a Fifth Amendment to Credit Agreement with EBC (the “ Fifth Amendment ”), which amended the EBC Credit Agreement to provide the Company up to a $2 million term loan to be used for capital expenditures (the “ CapEx Loan ”), which amounts may be requested from time to time by the Company, provided that not more than four advances of such amount may be requested, with each advance being not less than $500,000 (in multiples of $100,000). The amendment also provided that any prepayments of the EBC Credit Agreement would first be applied to the term loan and then to the CapEx Loan. The CapEx Loan bears interest at the rate of LIBOR (1.55% at September 30, 2020) plus 7%, or to the extent that LIBOR is not available, the highest of the prime rate and the Federal Funds Rate plus 0.50%, in each case, plus 6%. We are required to repay the CapEx Loan in monthly installments of 1/48 th of the amount borrowed, each month that the CapEx Loan is outstanding, with a final balloon payment due at maturity. The obligation of EBC to fund the CapEx Loan is subject to customary conditions and requirements set forth in the Fifth Amendment, including the requirement that the Company has maintained daily availability under the ABL Credit Agreement greater than $1 million for the last thirty days, and that such availability would remain over $1 million, on a pro forma basis with such new loan. We are also required to provide the agent for the EBC Credit Agreement, a first priority security interest in the rolling stock collection assets or other assets acquired with the CapEx Loan. Loan Agreements On May 4, 2020, the Company applied for a loan from Texas Citizens Bank in the principal amount of $4.22 million, pursuant to the Paycheck Protection Program (the “ PPP ”) under the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act ”), which was enacted on March 27, 2020. On May 5, 2020, the Company received the loan funds. The Note is unsecured, matures on April 28, 2022, and bears interest at a rate of 1.00% per annum, payable monthly commencing on February 2021, following an initial deferral period as specified under the PPP. Under the terms of the PPP, the entire amount may be forgiven to the extent loan proceeds are used for qualifying expenses. As of the date of this report, the Company believes it has used the PPP funds for qualifying expenses. On May 27, 2020, the Company entered into a loan contract security agreement with John Deere to finance $152,643 to purchase equipment. The Note matures on June 27, 2024, and bears interest at a rate of 2.45% per annum, payable monthly commencing on June 27, 2020. The payment of the note is secured by the equipment purchased. Insurance Premiums The Company financed insurance premiums through various financial institutions bearing interest rates from 4.00% to 4.90% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $1,893,668 at September 30, 2020 and $1,165,172 at December 31, 2019. Finance Leases On April 2, 2020, the Company obtained one finance lease with payments of $9,322 per month for three years and on July 28, 2020, the Company entered into another finance lease with payments of $3,545 per month for three years. The amo unt of the finance lease obligation has been reduced to $410,928 at September 30, 2020. On May 22, 2020, the Company entered into one finance lease. Payments are $15,078 per month for three years and the amount of the finance lease obligation has been reduced to $485,745 at September 30, 2020. The Company's outstanding debt facilities as of September 30, 2020 and December 31, 2019 are summarized as follows: Creditor Loan Type Origination Date Maturity Date Loan Amount Balance on September 30, 2020 Balance on December 31, 2019 Encina Business Credit, LLC Term Loan February 1, 2017 February 1, 2022 $ 20,000,000 $ 5,658,000 $ 13,333,000 Encina Business Credit SPV, LLC Revolving Note February 1, 2017 February 1, 2022 $ 10,000,000 — 3,276,230 Encina Business Credit, LLC Capex Loan August 7, 2020 February 1, 2022 $ 2,000,000 1,250,617 — Wells Fargo Equipment Lease-Ohio Finance Lease April-May, 2019 April-May, 2024 $ 621,000 465,678 551,260 AVT Equipment Lease-Ohio Finance Lease April 2, 2020 April 2, 2023 $ 337,155 410,928 — AVT Equipment Lease-HH Finance Lease May 22, 2020 May 22, 2023 $ 551,609 485,745 — John Deere Note Note May 27, 2020 June 24, 2024 $ 152,643 140,487 — Tetra Capital Lease Finance Lease May, 2018 May, 2022 $ 419,690 195,761 264,014 Well Fargo Equipment Lease-VRM LA Finance Lease March, 2018 March, 2021 $ 30,408 4,485 12,341 Texas Citizens Bank PPP Loan May 5, 2020 April 28, 2022 $ 4,222,000 4,222,000 — Various institutions Insurance premiums financed Various < 1 year $ 2,902,428 1,893,668 1,165,172 Total 14,727,369 18,602,017 Deferred finance costs — (47,826) Total, net of deferred finance costs $ 14,727,369 $ 18,554,191 Future contractual maturities of notes payable as of September 30, 2020 are summarized as follows: Creditor Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Encina Business Credit, LLC $ 900,000 $ 4,758,000 $ — $ — $ — $ — Encina Business Credit SPV, LLC — — — — — — Encina Business Credit, LLC 158,966 1,091,651 — — — — John Deere Note 37,071 37,991 38,934 26,491 — — Well Fargo Equipment Lease- Ohio 119,356 125,643 132,261 88,418 — — AVT Equipment Lease-Ohio 124,308 135,272 151,348 — — — AVT Equipment Lease-HH 145,296 158,111 182,338 — — — Tetra Capital Lease 96,530 99,231 — — — — Well Fargo Equipment Lease- VRM LA 4,485 — — — — — Texas Citizens Bank 1,877,461 2,344,539 — — — — Various institutions 1,893,668 — — — — — Totals $ 5,357,141 $ 8,750,438 $ 504,881 $ 114,909 $ — $ — |
EARNINGS PER SHARE
EARNINGS PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
Earnings Per Share [Abstract] | |
EARNINGS PER SHARE | EARNINGS PER SHARE Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities. Due to their anti-dilutive effect, the calculation of diluted earnings per share for the three and nine months ended September 30, 2020 and 2019 excludes: 1) options to purchase 5,104,288 and 4,218,250 shares, respectively, of common stock, 2) warrants to purchase 8,633,193 and 8,853,056 shares, respectively, of common stock, 3) Series B Preferred Stock which is convertible int o 4,002,619 and 3,769,505 shares, respectively, of common stock, 4) Series B1 Preferred Stock which is convertible into 7,219,164 a |
COMMON STOCK
COMMON STOCK | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
COMMON STOCK | COMMON STOCK The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2020, there were 45,554,841 common shares issued and outstanding. During the nine months ended September 30, 2020, the Company issued 2,159,278 shares of common stock in connection with the conversion of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. During the nine months ended September 30, 2019, the Company issued 1,596,160 shares of common stock in connection with the July 2019 Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“Tensile”), Share Purchase and Subscription Agreement and conversions of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. In addition, during the nine months ended September 30, 2019, the Company issued 78,425 shares of common stock in connection with the exercise of options. Stock Option Agreements On June 19, 2020, the Board of Directors approved the grant to three employees and one officer/director (Benjamin P. Cowart, the Company’s Chief Executive Officer) of options to purchase an aggregate of 416,885 and 269,153 shares of common stock, respectively, at an exercise price of $0.78 and $0.86 per share, respectively, with a ten year and five year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first four anniversaries of the grant, under our 2019 Stock Incentive Plan, as amended, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $355,404 which amount is being amortized at the rate of $7,404 per month starting in July 2020. The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Convertible Preferred Stock is 5,000,000 (“ Series A Preferred ”). The total number of designated shares of the Company’s Series B Convertible Preferred Stock is 10,000,000. The total number of designated shares of the Company’s Series B1 Convertible Preferred Stock is 17,000,000. As of September 30, 2020 and December 31, 2019, there were 419,859 shares of Series A Preferred Stock issued and outstanding. As of September 30, 2020 and December 31, 2019, there were 4,002,619 and 3,826,055 shares of Series B Preferred Stock issued and outstanding, respectively. As of September 30, 2020 and December 31, 2019, there were 7,219,164 and 9,028,085 shares of Series B1 Preferred Stock issued and outstanding, respectively. Series B Preferred Stock and Temporary Equity The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, during the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 11,006,406 $ 8,900,208 Plus: discount accretion 854,364 1,031,483 Plus: dividends in kind 547,349 510,502 Balance at end of period $ 12,408,119 $ 10,442,193 The Series B Warrants and Series B1 Warrants were revalued at September 30, 2020 and December 31, 2019 using the Dynamic Black Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares at approximately $124,847 and $1,969,216, respectively. At September 30, 2020, the Series B Warrants and Series B1 Warrants were valued at approximately $0 and $124,847, respectively. The Dynamic Black Scholes Merton inputs used were: expected dividend rate of 0%, expected volatility of 66%-100%, risk free interest rate of 0.11% (Series B Warrants) and 0.13% (Series B1 Warrants), and expected term of 0.25 years (Series B Warrants) and 1.25 years (Series B1 Warrants). At September 30, 2020 and December 31, 2019, a total of $310,220 and $177,921 of dividends were accrued on our outstanding Series B Preferred Stock, respectively. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B Preferred Stock of $188,837 and $175,305, respectively. Because such preferred stock was not redeemed on June 24, 2020, the preferred stock accrues a 10% per annum dividend (payable in-kind at the option of the Company), until such preferred stock is redeemed or converted into common stock. Series B1 Preferred Stock and Temporary Equity The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, for the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 12,743,047 $ 13,279,755 Less: conversions of shares to common (3,368,474) (119,768) Plus: discount accretion 646,031 582,649 Plus: dividends in kind 546,557 712,185 Balance at end of period $ 10,567,161 $ 14,454,821 As of September 30, 2020 and December 31, 2019, respectively, a total of $281,557 and $211,269 of dividends were accrued on our outstanding Series B1 Preferred Stock. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B1 Preferred Stock of $171,380 and $240,185, respectively. The following is an analysis of changes in the derivative liability for the nine months ended June 30: Level Three Roll-Forward 2020 2019 Balance at beginning of period $ 1,969,216 $ 1,481,692 Change in valuation of warrants (1,844,369) (331,715) Balance at end of period $ 124,847 $ 1,149,977 Myrtle Grove Share Purchase and Subscription Agreement Amounts received by MG SPV from its direct sale of Class B Units to Tensile-MG may only be used for additional investments in the MG refinery or for day to day operations at the MG refinery. At September 30, 2020, $2.0 million reported as cash and cash equivalents on the balance sheet is restricted to MG refinery investments or operating expenses. The Class B Unit holders may force MG SPV to redeem the outstanding Class B Units at any time on or after the earlier of (a) the fifth anniversary of the Closing Date and (ii) the occurrence of a Triggering Event (defined below)(an “ MG Redemption ”). The cash purchase price for such redeemed Class B Units is the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking an MG Redemption and Vertex Operating (provided that Vertex Operating still owns Class A Units on such date) and (z) the original per-unit price for such Class B Units plus any unpaid Class B preference. The preference is defined as the greater of (A) the aggregate unpaid “Class B Yield” (equal to an annual return of 22.5% per annum) and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class B Unit holders. The Company did not pay the preferential yield during the three and nine months ended September 30, 2020. “ Triggering Events ” mean (a) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (b) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the MG Company Agreement, (d) the failure to consummate the Heartland Closing (defined below) by June 30, 2020 (a “ Failure to Close ”), provided that such Heartland Closing was consummated by June 30, 2020, (e) the failure of Vertex Operating to operate MG SPV in good faith with appropriate resources, or (f) the material failure of the Company and its affiliates to comply with the terms of the contribution agreement, whereby the Company contributed assets and operations to MG SPV. No triggering events occurred during the nine months ended September 30, 2020. Myrtle Grove Redeemable Noncontrolling Interest As a result of the MG Share Purchase, Tensile, through Tensile-Myrtle Grove Acquisition Corporation, acquired an approximate 15.58% ownership interest in Vertex Refining Myrtle Grove LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $970,809 between the fair value of the consideration received of $3,150,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $2,179,191, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with MG SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net loss of $120,031 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $833,354 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $5,181,388. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to MG SPV as of September 30, 2020. September 30, 2020 Beginning balance $ 4,396,894 Net loss attributable to redeemable non-controlling interest (120,031) Change in ownership 71,171 Accretion of non-controlling interest to redemption value 833,354 Ending balance $ 5,181,388 Heartland Share Purchase and Subscription Agreement On January 17, 2020 (the “Heartland Closing Date”), Vertex Operating, Tensile-Heartland, and solely for the purposes of the Heartland Guaranty (defined below), the Company, and HPRM LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions, described in greater detail below (“Heartland SPV”), entered into a Share Purchase and Subscription Agreement (the “Heartland Share Purchase”). Prior to entering into the Heartland Share Purchase, the Company transferred 100% of the ownership of Vertex Refining OH, LLC, its indirect wholly-owned subsidiary (“Vertex OH”) to Heartland SPV in consideration for 13,500 Class A Units, 13,500 Class A-1 Preferred Units and 11,300 Class B Units of Heartland SPV and immediately thereafter contributed 248 Class B Units to the Company’s wholly-owned subsidiary, Vertex Splitter Corporation, a Delaware corporation (“Vertex Splitter”), as a contribution to capital. Vertex OH owned the Company’s Columbus, Ohio, Heartland facility, which produces a base oil product that is sold to lubricant packagers and distributors. Pursuant to the Heartland Share Purchase, Vertex Operating sold Tensile-Heartland the 13,500 Class A Units and 13,500 Class A-1 Preferred Units of Heartland SPV in consideration for $13.5 million. Also, on the Heartland Closing Date, Tensile-Heartland purchased 7,500 Class A Units and 7,500 Class A-1 Units in consideration for $7.5 million (less the expenses of Tensile-Heartland in connection with the transaction) directly from Heartland SPV. The approximate $7.5 million purchase amount and future free cash flows from the operation of Heartland SPV are planned to be available for investments at the Heartland facility to increase self-collections, maximize the throughput of the refinery, enhance the quality of the output and complete other projects. Concurrently with the closing of the transactions described above, and pursuant to the terms of the Heartland Share Purchase, the Company, through Vertex Operating, purchased 1,000 newly issued Class A Units from MG SPV at a cost of $1,000 per unit ($1 million in aggregate). As a result of this transaction, MG SPV is owned 85.00% by Vertex Operating and 15.00% by Tensile-MG. The Heartland Share Purchase provides Tensile-Heartland an option, exercisable at its election, at any time, subject to the terms of the Heartland Share Purchase, to purchase up to an additional 7,000 Class A-2 Preferred Units at a cost of $1,000 per Class A-2 Preferred Unit from Heartland SPV. The Heartland SPV is currently owned 35% by Vertex Operating and 65% by Tensile-Heartland. Heartland SPV is managed by a five-member Board of Managers, of which three members are appointed by Tensile-Heartland and two are appointed by the Company. The Class A Units held by Tensile-Heartland are convertible into Class B Units as provided in the Limited Liability Company Agreement of Heartland SPV (the “Heartland Company Agreement”), based on a conversion price (initially one-for-one) which may be reduced from time to time if new Units of Heartland SPV are issued and will automatically convert into Series B Units upon certain events described in the Heartland Company Agreement. The Class A-1 and A-2 Preferred Units (“Class A Preferred Units”), which are 100% owned by Tensile-Heartland, accrue a 22.5% per annum preferred return subject to terms of the Heartland Company Agreement (the “Class A Yield”). Additionally, the Class A Unit holders (common and preferred) may force Heartland SPV to redeem the outstanding Class A Units at any time on or after the earlier of (a) the fifth anniversary of the Heartland Closing Date and (ii) the occurrence of a Heartland Triggering Event (defined below)(a “Heartland Redemption”). The cash purchase price for such redeemed Class A Unit will be the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking Heartland Redemption and Vertex Operating (provided that Vertex Operating still owns Class B Units on such date) and (z) the original per-unit price for such Class A Units plus fifty percent (50%) of the aggregate capital invested by the Class A Unit holders through such Heartland Redemption date. “Heartland Triggering Events” include (a) any termination of an Administrative Services Agreement entered into with Tensile, pursuant to its terms and/or any material breach by us of the environmental remediation and indemnity agreement entered into with Tensile, (b) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, or (d) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Heartland Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the Heartland Company Agreement. In the event that Heartland SPV fails to redeem such Class A Units within 180 days after a redemption is triggered, the Class A Yield is increased to 25% until such time as such redemption is completed (with such increase being effective back to the original date of a notice of redemption). In addition, in such event, the Class A Unit holders may cause Heartland SPV to initiate a process intended to result in a sale of Heartland SPV. Distributions of available cash of Heartland SPV pursuant to the Heartland Company Agreement (including pursuant to liquidations of Heartland SPV), subject to certain exceptions set forth therein, are to be made (a) first, to the holders of the Class A Preferred Units, in amount equal to the greater of (A) the aggregate unpaid Class A Yield and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class A Preferred Unit holders (initially Tensile-Heartland)(such aggregate capital invested by the Class A Preferred Unit holders, the “ Heartland Invested Capital ”, which totaled approximately $21 million as of the Heartland Closing Date, subject to adjustment as provided in the Heartland Share Purchase), less prior distributions (such greater amount of (A) and (B), the “ Class A Preferred Priority Distributions ”); (b) second, the Class A Preferred Unit holders, together as a separate and distinct class, are entitled to receive an amount equal to the aggregate Heartland Invested Capital; (c) third, the Class B Unitholders (other than Class B Unitholders which received Class B Units upon conversion of Class A Preferred Units), together as a separate and distinct class, are entitled to receive all or a portion of any distribution equal to the sum of all distributions made under sections (a) and (b) above; and (d) fourth, to the holders of Units who are eligible to receive such distributions in proportion to the number of Units held by such holders. Heartland Variable interest entity The Company has assessed the Heartland SPV under the variable interest guidance in ASC 810. The Company determined that the Class A Units are not at risk due to a 22.5% preferred return and a redemption provision that, if elected, would require Heartland SPV to repurchase the Class A Units at their original cost plus the preferred return. The Company further determined that as a minority shareholder, holding only 35% of the voting rights, the Company does not have the ability to direct the activities of Heartland SPV that most significantly impact the entity’s performance. Based on this assessment, the Company concluded that Heartland SPV is a variable interest entity. In assessing if the Company is the primary beneficiary of Heartland SPV, the Company determined that certain provisions of the Heartland Company Agreement prohibiting the transfer of its Class B Units result in the Class A Unit holders being related parties under the de facto agents criteria in ASC 810. The Company and the Class A Unit holders, as a group, have the power to direct the significant activities of Heartland SPV and the obligations to absorb the losses and the right to receive the benefits that could potentially be significant to Heartland SPV. The Company concluded that substantially all of the activities of Heartland SPV are conducted on its behalf, and not on behalf of the Class A Unit holders, the decision maker, thus the Company is the primary beneficiary and required to consolidate Heartland SPV in accordance with ASC 810. The Company's consolidated financial statements include the assets, liabilities and results of operations of Heartland SPV for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in net loss attributable to noncontrolling interests and redeemable noncontrolling interest in the consolidated statements of income and noncontrolling interests in the consolidated balance sheets. The following table summarizes the carrying amounts of Heartland SPV's assets and liabilities included in the Company’s consolidated balance sheets at September 30, 2020: September 30, 2020 Cash and cash equivalents $ 8,072,347 Accounts receivable, net 2,879,431 Inventory 310,596 Prepaid expense and other current assets 1,968,335 Total current assets 13,230,709 Fixed assets, net 5,619,248 Finance lease right-of-use assets 1,106,671 Operating lease right-of-use assets 369,333 Intangible assets, net 1,127,352 Other assets 108,643 Total assets $ 21,561,956 Accounts payable $ 1,413,378 Accrued expenses 335,267 Finance lease liability-current 340,193 Operating lease liability-current 268,437 Total current liabilities 2,357,275 Finance lease liability-long term 732,174 Operating lease liability-long term 100,896 Total liabilities $ 3,190,345 The assets of Heartland SPV may only be used to settle the obligations of Heartland SPV, and may not be used for other consolidated entities. The liabilities of Heartland SPV are non-recourse to the general credit of the Company’s other consolidated entities. Heartland Redeemable Noncontrolling Interest As a result of the Heartland Share Purchase (as defined and discussed above), Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“ Tensile ”), through Tensile-Heartland, acquired an approximate 65.00% ownership interest in Heartland SPV, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $9,091,068 between the fair value of the consideration received of $21,000,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $11,908,932, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with Heartland SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net gain of $35,449 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $12,802,442 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $24,746,823. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of September 30, 2020. September 30, 2020 Beginning balance $ — Initial adjustment of carrying amount of non-controlling interest 11,908,932 Net gain attributable to redeemable non-controlling interest 35,449 Accretion of non-controlling interest to redemption value 12,802,442 Ending balance $ 24,746,823 |
PREFERRED STOCK AND DETACHABLE
PREFERRED STOCK AND DETACHABLE WARRANTS | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
PREFERRED STOCK AND DETACHABLE WARRANTS | COMMON STOCK The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2020, there were 45,554,841 common shares issued and outstanding. During the nine months ended September 30, 2020, the Company issued 2,159,278 shares of common stock in connection with the conversion of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. During the nine months ended September 30, 2019, the Company issued 1,596,160 shares of common stock in connection with the July 2019 Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“Tensile”), Share Purchase and Subscription Agreement and conversions of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. In addition, during the nine months ended September 30, 2019, the Company issued 78,425 shares of common stock in connection with the exercise of options. Stock Option Agreements On June 19, 2020, the Board of Directors approved the grant to three employees and one officer/director (Benjamin P. Cowart, the Company’s Chief Executive Officer) of options to purchase an aggregate of 416,885 and 269,153 shares of common stock, respectively, at an exercise price of $0.78 and $0.86 per share, respectively, with a ten year and five year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first four anniversaries of the grant, under our 2019 Stock Incentive Plan, as amended, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $355,404 which amount is being amortized at the rate of $7,404 per month starting in July 2020. The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Convertible Preferred Stock is 5,000,000 (“ Series A Preferred ”). The total number of designated shares of the Company’s Series B Convertible Preferred Stock is 10,000,000. The total number of designated shares of the Company’s Series B1 Convertible Preferred Stock is 17,000,000. As of September 30, 2020 and December 31, 2019, there were 419,859 shares of Series A Preferred Stock issued and outstanding. As of September 30, 2020 and December 31, 2019, there were 4,002,619 and 3,826,055 shares of Series B Preferred Stock issued and outstanding, respectively. As of September 30, 2020 and December 31, 2019, there were 7,219,164 and 9,028,085 shares of Series B1 Preferred Stock issued and outstanding, respectively. Series B Preferred Stock and Temporary Equity The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, during the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 11,006,406 $ 8,900,208 Plus: discount accretion 854,364 1,031,483 Plus: dividends in kind 547,349 510,502 Balance at end of period $ 12,408,119 $ 10,442,193 The Series B Warrants and Series B1 Warrants were revalued at September 30, 2020 and December 31, 2019 using the Dynamic Black Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares at approximately $124,847 and $1,969,216, respectively. At September 30, 2020, the Series B Warrants and Series B1 Warrants were valued at approximately $0 and $124,847, respectively. The Dynamic Black Scholes Merton inputs used were: expected dividend rate of 0%, expected volatility of 66%-100%, risk free interest rate of 0.11% (Series B Warrants) and 0.13% (Series B1 Warrants), and expected term of 0.25 years (Series B Warrants) and 1.25 years (Series B1 Warrants). At September 30, 2020 and December 31, 2019, a total of $310,220 and $177,921 of dividends were accrued on our outstanding Series B Preferred Stock, respectively. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B Preferred Stock of $188,837 and $175,305, respectively. Because such preferred stock was not redeemed on June 24, 2020, the preferred stock accrues a 10% per annum dividend (payable in-kind at the option of the Company), until such preferred stock is redeemed or converted into common stock. Series B1 Preferred Stock and Temporary Equity The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, for the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 12,743,047 $ 13,279,755 Less: conversions of shares to common (3,368,474) (119,768) Plus: discount accretion 646,031 582,649 Plus: dividends in kind 546,557 712,185 Balance at end of period $ 10,567,161 $ 14,454,821 As of September 30, 2020 and December 31, 2019, respectively, a total of $281,557 and $211,269 of dividends were accrued on our outstanding Series B1 Preferred Stock. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B1 Preferred Stock of $171,380 and $240,185, respectively. The following is an analysis of changes in the derivative liability for the nine months ended June 30: Level Three Roll-Forward 2020 2019 Balance at beginning of period $ 1,969,216 $ 1,481,692 Change in valuation of warrants (1,844,369) (331,715) Balance at end of period $ 124,847 $ 1,149,977 Myrtle Grove Share Purchase and Subscription Agreement Amounts received by MG SPV from its direct sale of Class B Units to Tensile-MG may only be used for additional investments in the MG refinery or for day to day operations at the MG refinery. At September 30, 2020, $2.0 million reported as cash and cash equivalents on the balance sheet is restricted to MG refinery investments or operating expenses. The Class B Unit holders may force MG SPV to redeem the outstanding Class B Units at any time on or after the earlier of (a) the fifth anniversary of the Closing Date and (ii) the occurrence of a Triggering Event (defined below)(an “ MG Redemption ”). The cash purchase price for such redeemed Class B Units is the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking an MG Redemption and Vertex Operating (provided that Vertex Operating still owns Class A Units on such date) and (z) the original per-unit price for such Class B Units plus any unpaid Class B preference. The preference is defined as the greater of (A) the aggregate unpaid “Class B Yield” (equal to an annual return of 22.5% per annum) and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class B Unit holders. The Company did not pay the preferential yield during the three and nine months ended September 30, 2020. “ Triggering Events ” mean (a) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (b) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the MG Company Agreement, (d) the failure to consummate the Heartland Closing (defined below) by June 30, 2020 (a “ Failure to Close ”), provided that such Heartland Closing was consummated by June 30, 2020, (e) the failure of Vertex Operating to operate MG SPV in good faith with appropriate resources, or (f) the material failure of the Company and its affiliates to comply with the terms of the contribution agreement, whereby the Company contributed assets and operations to MG SPV. No triggering events occurred during the nine months ended September 30, 2020. Myrtle Grove Redeemable Noncontrolling Interest As a result of the MG Share Purchase, Tensile, through Tensile-Myrtle Grove Acquisition Corporation, acquired an approximate 15.58% ownership interest in Vertex Refining Myrtle Grove LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $970,809 between the fair value of the consideration received of $3,150,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $2,179,191, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with MG SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net loss of $120,031 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $833,354 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $5,181,388. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to MG SPV as of September 30, 2020. September 30, 2020 Beginning balance $ 4,396,894 Net loss attributable to redeemable non-controlling interest (120,031) Change in ownership 71,171 Accretion of non-controlling interest to redemption value 833,354 Ending balance $ 5,181,388 Heartland Share Purchase and Subscription Agreement On January 17, 2020 (the “Heartland Closing Date”), Vertex Operating, Tensile-Heartland, and solely for the purposes of the Heartland Guaranty (defined below), the Company, and HPRM LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions, described in greater detail below (“Heartland SPV”), entered into a Share Purchase and Subscription Agreement (the “Heartland Share Purchase”). Prior to entering into the Heartland Share Purchase, the Company transferred 100% of the ownership of Vertex Refining OH, LLC, its indirect wholly-owned subsidiary (“Vertex OH”) to Heartland SPV in consideration for 13,500 Class A Units, 13,500 Class A-1 Preferred Units and 11,300 Class B Units of Heartland SPV and immediately thereafter contributed 248 Class B Units to the Company’s wholly-owned subsidiary, Vertex Splitter Corporation, a Delaware corporation (“Vertex Splitter”), as a contribution to capital. Vertex OH owned the Company’s Columbus, Ohio, Heartland facility, which produces a base oil product that is sold to lubricant packagers and distributors. Pursuant to the Heartland Share Purchase, Vertex Operating sold Tensile-Heartland the 13,500 Class A Units and 13,500 Class A-1 Preferred Units of Heartland SPV in consideration for $13.5 million. Also, on the Heartland Closing Date, Tensile-Heartland purchased 7,500 Class A Units and 7,500 Class A-1 Units in consideration for $7.5 million (less the expenses of Tensile-Heartland in connection with the transaction) directly from Heartland SPV. The approximate $7.5 million purchase amount and future free cash flows from the operation of Heartland SPV are planned to be available for investments at the Heartland facility to increase self-collections, maximize the throughput of the refinery, enhance the quality of the output and complete other projects. Concurrently with the closing of the transactions described above, and pursuant to the terms of the Heartland Share Purchase, the Company, through Vertex Operating, purchased 1,000 newly issued Class A Units from MG SPV at a cost of $1,000 per unit ($1 million in aggregate). As a result of this transaction, MG SPV is owned 85.00% by Vertex Operating and 15.00% by Tensile-MG. The Heartland Share Purchase provides Tensile-Heartland an option, exercisable at its election, at any time, subject to the terms of the Heartland Share Purchase, to purchase up to an additional 7,000 Class A-2 Preferred Units at a cost of $1,000 per Class A-2 Preferred Unit from Heartland SPV. The Heartland SPV is currently owned 35% by Vertex Operating and 65% by Tensile-Heartland. Heartland SPV is managed by a five-member Board of Managers, of which three members are appointed by Tensile-Heartland and two are appointed by the Company. The Class A Units held by Tensile-Heartland are convertible into Class B Units as provided in the Limited Liability Company Agreement of Heartland SPV (the “Heartland Company Agreement”), based on a conversion price (initially one-for-one) which may be reduced from time to time if new Units of Heartland SPV are issued and will automatically convert into Series B Units upon certain events described in the Heartland Company Agreement. The Class A-1 and A-2 Preferred Units (“Class A Preferred Units”), which are 100% owned by Tensile-Heartland, accrue a 22.5% per annum preferred return subject to terms of the Heartland Company Agreement (the “Class A Yield”). Additionally, the Class A Unit holders (common and preferred) may force Heartland SPV to redeem the outstanding Class A Units at any time on or after the earlier of (a) the fifth anniversary of the Heartland Closing Date and (ii) the occurrence of a Heartland Triggering Event (defined below)(a “Heartland Redemption”). The cash purchase price for such redeemed Class A Unit will be the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking Heartland Redemption and Vertex Operating (provided that Vertex Operating still owns Class B Units on such date) and (z) the original per-unit price for such Class A Units plus fifty percent (50%) of the aggregate capital invested by the Class A Unit holders through such Heartland Redemption date. “Heartland Triggering Events” include (a) any termination of an Administrative Services Agreement entered into with Tensile, pursuant to its terms and/or any material breach by us of the environmental remediation and indemnity agreement entered into with Tensile, (b) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, or (d) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Heartland Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the Heartland Company Agreement. In the event that Heartland SPV fails to redeem such Class A Units within 180 days after a redemption is triggered, the Class A Yield is increased to 25% until such time as such redemption is completed (with such increase being effective back to the original date of a notice of redemption). In addition, in such event, the Class A Unit holders may cause Heartland SPV to initiate a process intended to result in a sale of Heartland SPV. Distributions of available cash of Heartland SPV pursuant to the Heartland Company Agreement (including pursuant to liquidations of Heartland SPV), subject to certain exceptions set forth therein, are to be made (a) first, to the holders of the Class A Preferred Units, in amount equal to the greater of (A) the aggregate unpaid Class A Yield and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class A Preferred Unit holders (initially Tensile-Heartland)(such aggregate capital invested by the Class A Preferred Unit holders, the “ Heartland Invested Capital ”, which totaled approximately $21 million as of the Heartland Closing Date, subject to adjustment as provided in the Heartland Share Purchase), less prior distributions (such greater amount of (A) and (B), the “ Class A Preferred Priority Distributions ”); (b) second, the Class A Preferred Unit holders, together as a separate and distinct class, are entitled to receive an amount equal to the aggregate Heartland Invested Capital; (c) third, the Class B Unitholders (other than Class B Unitholders which received Class B Units upon conversion of Class A Preferred Units), together as a separate and distinct class, are entitled to receive all or a portion of any distribution equal to the sum of all distributions made under sections (a) and (b) above; and (d) fourth, to the holders of Units who are eligible to receive such distributions in proportion to the number of Units held by such holders. Heartland Variable interest entity The Company has assessed the Heartland SPV under the variable interest guidance in ASC 810. The Company determined that the Class A Units are not at risk due to a 22.5% preferred return and a redemption provision that, if elected, would require Heartland SPV to repurchase the Class A Units at their original cost plus the preferred return. The Company further determined that as a minority shareholder, holding only 35% of the voting rights, the Company does not have the ability to direct the activities of Heartland SPV that most significantly impact the entity’s performance. Based on this assessment, the Company concluded that Heartland SPV is a variable interest entity. In assessing if the Company is the primary beneficiary of Heartland SPV, the Company determined that certain provisions of the Heartland Company Agreement prohibiting the transfer of its Class B Units result in the Class A Unit holders being related parties under the de facto agents criteria in ASC 810. The Company and the Class A Unit holders, as a group, have the power to direct the significant activities of Heartland SPV and the obligations to absorb the losses and the right to receive the benefits that could potentially be significant to Heartland SPV. The Company concluded that substantially all of the activities of Heartland SPV are conducted on its behalf, and not on behalf of the Class A Unit holders, the decision maker, thus the Company is the primary beneficiary and required to consolidate Heartland SPV in accordance with ASC 810. The Company's consolidated financial statements include the assets, liabilities and results of operations of Heartland SPV for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in net loss attributable to noncontrolling interests and redeemable noncontrolling interest in the consolidated statements of income and noncontrolling interests in the consolidated balance sheets. The following table summarizes the carrying amounts of Heartland SPV's assets and liabilities included in the Company’s consolidated balance sheets at September 30, 2020: September 30, 2020 Cash and cash equivalents $ 8,072,347 Accounts receivable, net 2,879,431 Inventory 310,596 Prepaid expense and other current assets 1,968,335 Total current assets 13,230,709 Fixed assets, net 5,619,248 Finance lease right-of-use assets 1,106,671 Operating lease right-of-use assets 369,333 Intangible assets, net 1,127,352 Other assets 108,643 Total assets $ 21,561,956 Accounts payable $ 1,413,378 Accrued expenses 335,267 Finance lease liability-current 340,193 Operating lease liability-current 268,437 Total current liabilities 2,357,275 Finance lease liability-long term 732,174 Operating lease liability-long term 100,896 Total liabilities $ 3,190,345 The assets of Heartland SPV may only be used to settle the obligations of Heartland SPV, and may not be used for other consolidated entities. The liabilities of Heartland SPV are non-recourse to the general credit of the Company’s other consolidated entities. Heartland Redeemable Noncontrolling Interest As a result of the Heartland Share Purchase (as defined and discussed above), Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“ Tensile ”), through Tensile-Heartland, acquired an approximate 65.00% ownership interest in Heartland SPV, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $9,091,068 between the fair value of the consideration received of $21,000,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $11,908,932, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with Heartland SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net gain of $35,449 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $12,802,442 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $24,746,823. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of September 30, 2020. September 30, 2020 Beginning balance $ — Initial adjustment of carrying amount of non-controlling interest 11,908,932 Net gain attributable to redeemable non-controlling interest 35,449 Accretion of non-controlling interest to redemption value 12,802,442 Ending balance $ 24,746,823 |
SEGMENT REPORTING
SEGMENT REPORTING | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
SEGMENT REPORTING | SEGMENT REPORTING The Company’s reportable segments include the (1) Black Oil, (2) Refining and Marketing, and (3) Recovery segments. (1) The Black Oil segment consists primary of the sale of (a) petroleum products which include base oil and industrial fuels—which consist of used motor oils, cutterstock and fuel oil generated by our facilities; (b) oil collection services—which consist of used oil sales, burner fuel sales, antifreeze sales and service charges; (c) the sale of other re-refinery products including asphalt, condensate, recovered products, and used motor oil; (d) transportation revenues; and (e) the sale of VGO (vacuum gas oil)/marine fuel. (2) The Refining and Marketing segment consists primarily of the sale of pygas; industrial fuels, which are produced at a third-party facility; and distillates (3) The Recovery segment consists primarily of revenues generated from the sale of ferrous and non-ferrous recyclable Metal(s) products that are recovered from manufacturing and consumption. It also includes revenues generated from trading/marketing of Group III Base Oils. We also disaggregate our revenue by product category for each of our segments, as we believe such disaggregation helps depict how our revenue and cash flows are affected by economic factors. Segment information for the three and nine months ended September 30, 2020 and 2019 is as follows: THREE MONTHS ENDED SEPTEMBER 30, 2020 Black Oil Refining & Recovery Total Revenues: Base oil $ 5,632,592 $ — $ 733,180 $ 6,365,772 Pygas — 1,184,433 — 1,184,433 Industrial fuel 21,190 82,644 — 103,834 Distillates (1) — 12,234,672 — 12,234,672 Oil collection services 2,449,454 — — 2,449,454 Metals (2) — — 3,160,581 3,160,581 Other re-refinery products (3) 834,438 — — 834,438 VGO/Marine fuel sales 11,050,448 — — 11,050,448 Total revenues 19,988,122 13,501,749 3,893,761 37,383,632 Cost of revenues (exclusive of depreciation and amortization shown separately below) 14,687,141 13,217,757 3,281,786 31,186,684 Depreciation and amortization attributable to costs of revenues 1,041,719 121,744 149,699 1,313,162 Gross profit 4,259,262 162,248 462,276 4,883,786 Selling, general and administrative expenses 4,899,956 696,611 645,003 6,241,570 Depreciation and amortization attributable to operating expenses 390,105 72,314 20,450 482,869 Loss from operations $ (1,030,799) $ (606,677) $ (203,177) $ (1,840,653) THREE MONTHS ENDED SEPTEMBER 30, 2019 Black Oil Refining & Recovery Total Revenues: Base oil $ 9,135,650 $ — $ 640,642 $ 9,776,292 Pygas — 2,741,557 — 2,741,557 Industrial fuel 891,676 334,897 — 1,226,573 Distillates (1) — — — — Oil collection services 1,953,924 — — 1,953,924 Metals (2) — — 1,724,025 1,724,025 Other re-refinery products (3) 3,057,171 — 27,607 3,084,778 VGO/Marine fuel sales 17,292,110 — — 17,292,110 Total revenues 32,330,531 3,076,454 2,392,274 37,799,259 Cost of revenues (exclusive of depreciation and amortization shown separately below) 27,663,983 2,511,314 2,197,019 32,372,316 Depreciation and amortization attributable to costs of revenues 1,073,520 147,658 138,451 1,359,629 Gross profit 3,593,028 417,482 56,804 4,067,314 Selling, general and administrative expenses 5,040,772 494,781 617,631 6,153,184 Depreciation and amortization attributable to operating expenses 335,105 100,398 20,450 455,953 Loss from operations $ (1,782,849) $ (177,697) $ (581,277) $ (2,541,823) NINE MONTHS ENDED SEPTEMBER 30, 2020 Black Oil Refining & Recovery Total Revenues: Base oil $ 17,914,941 $ — $ 2,091,430 $ 20,006,371 Pygas — 4,815,040 — 4,815,040 Industrial fuel 1,262,266 135,396 — 1,397,662 Distillates (1) — 17,359,234 — 17,359,234 Oil collection services 5,707,017 — — 5,707,017 Metals (2) — — 9,549,144 9,549,144 Other re-refinery products (3) 4,341,027 — (51,684) 4,289,343 VGO/Marine fuel sales 31,837,377 — — 31,837,377 Total revenues 61,062,628 22,309,670 11,588,890 94,961,188 Cost of revenues (exclusive of depreciation and amortization shown separately below) 46,601,716 21,772,587 11,847,040 80,221,343 Depreciation and amortization attributable to costs of revenues 2,960,699 341,498 429,123 3,731,320 Gross profit (loss) 11,500,213 195,585 (687,273) 11,008,525 Selling, general and administrative expenses 15,180,569 1,867,027 1,925,052 18,972,648 Depreciation and amortization attributable to operating expenses 1,072,877 278,492 61,350 1,412,719 Loss from operations $ (4,753,233) $ (1,949,934) $ (2,673,675) $ (9,376,842) NINE MONTHS ENDED SEPTEMBER 30, 2019 Black Oil Refining & Recovery Total Revenues: Base oil $ 23,918,490 $ — $ 2,439,071 $ 26,357,561 Pygas — 7,656,125 — 7,656,125 Industrial fuel 5,714,478 1,501,655 — 7,216,133 Distillates (1) — 54,697 — 54,697 Oil collection services 4,261,391 — — 4,261,391 Metals (2) — — 5,988,895 5,988,895 Other re-refinery products (3) 10,399,007 — 83,291 10,482,298 VGO/Marine fuel sales 58,760,163 — — 58,760,163 Total revenues 103,053,529 9,212,477 8,511,257 120,777,263 Cost of revenues (exclusive of depreciation and amortization shown separately below) 88,374,446 7,767,882 7,589,758 103,732,086 Depreciation and amortization attributable to costs of revenues 3,122,664 431,948 411,014 3,965,626 Gross profit 11,556,419 1,012,647 510,485 13,079,551 Selling, general and administrative expenses 14,500,306 1,424,572 1,604,906 17,529,784 Depreciation and amortization attributable to operating expenses 1,005,315 301,194 61,350 1,367,859 Loss from operations $ (3,949,202) $ (713,119) $ (1,155,771) $ (5,818,092) (1) Distillates are finished fuel products such as gasoline and diesel fuels. (2) Metals consist of recoverable ferrous and non-ferrous recyclable metals from manufacturing and consumption. Scrap metal can be recovered from pipes, barges, boats, building supplies, surplus equipment, tanks, and other items consisting of metal composition. These materials are segregated, processed, cut-up and sent back to a steel mill for re-purposing. (3) Other re-refinery products include the sales of asphalt, condensate, recovered products, and other petroleum products. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Our effective tax rate of 0% on pretax income differs from the U.S. federal income tax rate of 21% because of the change in our valuation allowance. The year to date loss at September 30, 2020 puts the Company in an accumulated loss position for the cumulative 12 quarters then ended. For tax reporting purposes, we have net operating losses ("NOLs") of approximately $55.2 million as of September 30, 2020 that are available to reduce future taxable income. In determining the carrying value of our net deferred tax asset, the Company considered all negative and positive evidence. The Company has generated pre-tax loss of approximately $8.5 million from January 1, 2020 through September 30, 2020. |
COMMODITY DERIVATIVE INSTRUMENT
COMMODITY DERIVATIVE INSTRUMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
COMMODITY DERIVATIVE INSTRUMENTS | COMMODITY DERIVATIVE INSTRUMENTS The Company utilizes derivative instruments to manage its exposure to fluctuations in the underlying commodity prices of its inventory. The Company's management sets and implements hedging policies, including volumes, types of instruments and counterparties, to support oil prices at targeted levels and manage its exposure to fluctuating prices. The Company’s derivative instruments consist of swap and futures arrangements for oil. In a commodity swap agreement, if the agreed-upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For futures arrangements, the Company receives the difference positive or negative between an agreed-upon strike price and the market price. The mark-to-market effects of these contracts as of September 30, 2020 and December 31, 2019, are summarized in the following table. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of the crude oil swap agreements is based on the difference between the strike price and the New York Mercantile Exchange futures price for the applicable trading months. As of September 30, 2020 Contract Type Contract Period Weighted Average Strike Price (Barrels) Remaining Volume (Barrels) Fair Value Swap Sep. 2020- Oct. 2020 $ 37.10 10,000 $ 9,000 Swap Sep. 2020- Oct. 2020 $ 46.33 10,000 (28,896) Futures Sep. 2020- Dec. 2020 $ 48.67 26,000 (4,099) $ (23,995) As of December 31, 2019 Contract Type Contract Period Weighted Average Strike Price (Barrels) Remaining Volume (Barrels) Fair Value Swap Dec. 2019-Mar. 2020 $ 40.88 130,000 $ 539,800 Swap Dec. 2019-Mar. 2020 $ 81.19 130,000 (673,428) Futures Dec. 2019-Mar. 2020 $ 84.53 105,000 (242,222) $ (375,850) The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 are presented in the table below. Balance Sheet Classification Contract Type 2020 2019 Crude oil swaps $ (19,896) $ (133,628) Crude oil futures (4,099) (242,222) Derivative commodity liability $ (23,995) $ (375,850) |
LEASES
LEASES | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
LEASES | LEASES Finance Leases Finance leases are included in finance lease right-of-use lease assets and finance lease liability current and long-term liabilities on the unaudited consolidated balance sheets. The associated amortization expenses for the three months ended September 30, 2020 and 2019 were $101,841 and $53,121, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the three months ended September 30, 2020 and 2019 were $33,077 and $12,436, respectively, and are included in interest expense on the unaudited consolidated statements of operations. The associated amortization expense for the nine months ended September 30, 2020 and 2019 were $228,514 and $113,825, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the nine months ended September 30, 2020 and 2019 were $66,014 and $30,206, respectively, and are included in interest expense on the unaudited consolidated statements of operations. Please see “ Note 6. Line of Credit and Long-Term Debt ” for more details. Operating Leases Operating leases are included in operating lease right-of-use lease assets, and operating current and long-term lease liabilities on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense for equipment is included in cost of revenues and other rents are included in selling, general and administrative expense on the consolidated statements of operations and are reported net of lease income. Lease income is not material to the results of operations for the three and nine months ended September 30, 2020 and 2019. Total operating lease costs for the three months ended September 30, 2020 and 2019 were $1.5 million and $1.6 million, respectively. Total operating lease costs, including some small leases with initial terms less than twelve months, for the nine months ended September 30, 2020 and 2019 were $4.5 million and $4.7 million, respectively. Cash Flows An initial right-of-use asset of $37.8 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. Cash paid for amounts included in operating lease liabilities, including some small leases with initial terms less than twelve months was $1.6 million during the nine months ended September 30, 2020 and 2019, and is included in operating cash flows. Cash paid for amounts included in finance lease was $282,655 and $113,241 during the nine months ended September 30, 2020 and 2019, respectively, and is included in financing cash flows. Maturities of our lease liabilities for all operating leases are as follows as of September 30, 2020: September 30, 2020 Facilities Equipment Plant Railcar Total Year 1 $ 710,879 $ 161,539 $ 4,060,417 $ 897,846 $ 5,830,681 Year 2 446,869 67,338 4,060,417 229,656 4,804,280 Year 3 346,733 — 4,060,417 56,712 4,463,862 Year 4 300,000 — 4,060,417 — 4,360,417 Year 5 300,000 — 4,060,417 — 4,360,417 Thereafter 2,150,000 — 30,479,594 — 32,629,594 Total lease payments $ 4,254,481 $ 228,877 $ 50,781,679 $ 1,184,214 $ 56,449,251 Less: interest (1,510,219) (10,024) (20,856,360) (58,572) (22,435,175) Present value of lease liabilities $ 2,744,262 $ 218,853 $ 29,925,319 $ 1,125,642 $ 34,014,076 The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of September 30, 2020: Remaining lease term and discount rate: September 30, 2020 Weighted average remaining lease terms (years) Lease facilities 5.53 Lease equipment 1.42 Lease plant 12.51 Lease railcar 1.15 Weighted average discount rate Lease facilities 9.19 % Lease equipment 8.00 % Lease plant 9.37 % Lease railcar 8.00 % Significant Judgments Significant judgments include the discount rates applied, the expected lease terms, lease renewal options and residual value guarantees. There are several leases with renewal options or purchase options. Using the practical expedient, the Company utilized existing lease classifications as of September 30, 2020 and 2019. The purchase options are not expected to have a material impact on the lease obligation. There are several facility and plant leases which have lease renewal options from one The largest facility lease has an initial term through 2032. That lease does not have an extension option. The two plant leases both have multiple 5-year extension options for a total of 20 years. Two extension options have been included in the lease right-of-use asset and lease obligation at January 1, 2019. The Company will reassess the lease terms and purchase options when there is a significant change in circumstances or when the Company elects to exercise an option that had previously been determined that it was not reasonably certain to do so. |
LEASES | LEASES Finance Leases Finance leases are included in finance lease right-of-use lease assets and finance lease liability current and long-term liabilities on the unaudited consolidated balance sheets. The associated amortization expenses for the three months ended September 30, 2020 and 2019 were $101,841 and $53,121, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the three months ended September 30, 2020 and 2019 were $33,077 and $12,436, respectively, and are included in interest expense on the unaudited consolidated statements of operations. The associated amortization expense for the nine months ended September 30, 2020 and 2019 were $228,514 and $113,825, respectively, and are included in depreciation and amortization on the unaudited consolidated statements of operations. The associated interest expense for the nine months ended September 30, 2020 and 2019 were $66,014 and $30,206, respectively, and are included in interest expense on the unaudited consolidated statements of operations. Please see “ Note 6. Line of Credit and Long-Term Debt ” for more details. Operating Leases Operating leases are included in operating lease right-of-use lease assets, and operating current and long-term lease liabilities on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense for equipment is included in cost of revenues and other rents are included in selling, general and administrative expense on the consolidated statements of operations and are reported net of lease income. Lease income is not material to the results of operations for the three and nine months ended September 30, 2020 and 2019. Total operating lease costs for the three months ended September 30, 2020 and 2019 were $1.5 million and $1.6 million, respectively. Total operating lease costs, including some small leases with initial terms less than twelve months, for the nine months ended September 30, 2020 and 2019 were $4.5 million and $4.7 million, respectively. Cash Flows An initial right-of-use asset of $37.8 million was recognized as a non-cash asset addition with the adoption of the new lease accounting standard. Cash paid for amounts included in operating lease liabilities, including some small leases with initial terms less than twelve months was $1.6 million during the nine months ended September 30, 2020 and 2019, and is included in operating cash flows. Cash paid for amounts included in finance lease was $282,655 and $113,241 during the nine months ended September 30, 2020 and 2019, respectively, and is included in financing cash flows. Maturities of our lease liabilities for all operating leases are as follows as of September 30, 2020: September 30, 2020 Facilities Equipment Plant Railcar Total Year 1 $ 710,879 $ 161,539 $ 4,060,417 $ 897,846 $ 5,830,681 Year 2 446,869 67,338 4,060,417 229,656 4,804,280 Year 3 346,733 — 4,060,417 56,712 4,463,862 Year 4 300,000 — 4,060,417 — 4,360,417 Year 5 300,000 — 4,060,417 — 4,360,417 Thereafter 2,150,000 — 30,479,594 — 32,629,594 Total lease payments $ 4,254,481 $ 228,877 $ 50,781,679 $ 1,184,214 $ 56,449,251 Less: interest (1,510,219) (10,024) (20,856,360) (58,572) (22,435,175) Present value of lease liabilities $ 2,744,262 $ 218,853 $ 29,925,319 $ 1,125,642 $ 34,014,076 The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of September 30, 2020: Remaining lease term and discount rate: September 30, 2020 Weighted average remaining lease terms (years) Lease facilities 5.53 Lease equipment 1.42 Lease plant 12.51 Lease railcar 1.15 Weighted average discount rate Lease facilities 9.19 % Lease equipment 8.00 % Lease plant 9.37 % Lease railcar 8.00 % Significant Judgments Significant judgments include the discount rates applied, the expected lease terms, lease renewal options and residual value guarantees. There are several leases with renewal options or purchase options. Using the practical expedient, the Company utilized existing lease classifications as of September 30, 2020 and 2019. The purchase options are not expected to have a material impact on the lease obligation. There are several facility and plant leases which have lease renewal options from one The largest facility lease has an initial term through 2032. That lease does not have an extension option. The two plant leases both have multiple 5-year extension options for a total of 20 years. Two extension options have been included in the lease right-of-use asset and lease obligation at January 1, 2019. The Company will reassess the lease terms and purchase options when there is a significant change in circumstances or when the Company elects to exercise an option that had previously been determined that it was not reasonably certain to do so. |
SHARE PURCHASE AND SUBSCRIPTION
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS | COMMON STOCK The total number of authorized shares of the Company’s common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2020, there were 45,554,841 common shares issued and outstanding. During the nine months ended September 30, 2020, the Company issued 2,159,278 shares of common stock in connection with the conversion of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. During the nine months ended September 30, 2019, the Company issued 1,596,160 shares of common stock in connection with the July 2019 Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“Tensile”), Share Purchase and Subscription Agreement and conversions of Series B1 Convertible Preferred Stock into common stock of the Company, pursuant to the terms of such securities. In addition, during the nine months ended September 30, 2019, the Company issued 78,425 shares of common stock in connection with the exercise of options. Stock Option Agreements On June 19, 2020, the Board of Directors approved the grant to three employees and one officer/director (Benjamin P. Cowart, the Company’s Chief Executive Officer) of options to purchase an aggregate of 416,885 and 269,153 shares of common stock, respectively, at an exercise price of $0.78 and $0.86 per share, respectively, with a ten year and five year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first four anniversaries of the grant, under our 2019 Stock Incentive Plan, as amended, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $355,404 which amount is being amortized at the rate of $7,404 per month starting in July 2020. The total number of authorized shares of the Company’s preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Convertible Preferred Stock is 5,000,000 (“ Series A Preferred ”). The total number of designated shares of the Company’s Series B Convertible Preferred Stock is 10,000,000. The total number of designated shares of the Company’s Series B1 Convertible Preferred Stock is 17,000,000. As of September 30, 2020 and December 31, 2019, there were 419,859 shares of Series A Preferred Stock issued and outstanding. As of September 30, 2020 and December 31, 2019, there were 4,002,619 and 3,826,055 shares of Series B Preferred Stock issued and outstanding, respectively. As of September 30, 2020 and December 31, 2019, there were 7,219,164 and 9,028,085 shares of Series B1 Preferred Stock issued and outstanding, respectively. Series B Preferred Stock and Temporary Equity The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, during the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 11,006,406 $ 8,900,208 Plus: discount accretion 854,364 1,031,483 Plus: dividends in kind 547,349 510,502 Balance at end of period $ 12,408,119 $ 10,442,193 The Series B Warrants and Series B1 Warrants were revalued at September 30, 2020 and December 31, 2019 using the Dynamic Black Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares at approximately $124,847 and $1,969,216, respectively. At September 30, 2020, the Series B Warrants and Series B1 Warrants were valued at approximately $0 and $124,847, respectively. The Dynamic Black Scholes Merton inputs used were: expected dividend rate of 0%, expected volatility of 66%-100%, risk free interest rate of 0.11% (Series B Warrants) and 0.13% (Series B1 Warrants), and expected term of 0.25 years (Series B Warrants) and 1.25 years (Series B1 Warrants). At September 30, 2020 and December 31, 2019, a total of $310,220 and $177,921 of dividends were accrued on our outstanding Series B Preferred Stock, respectively. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B Preferred Stock of $188,837 and $175,305, respectively. Because such preferred stock was not redeemed on June 24, 2020, the preferred stock accrues a 10% per annum dividend (payable in-kind at the option of the Company), until such preferred stock is redeemed or converted into common stock. Series B1 Preferred Stock and Temporary Equity The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, for the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 12,743,047 $ 13,279,755 Less: conversions of shares to common (3,368,474) (119,768) Plus: discount accretion 646,031 582,649 Plus: dividends in kind 546,557 712,185 Balance at end of period $ 10,567,161 $ 14,454,821 As of September 30, 2020 and December 31, 2019, respectively, a total of $281,557 and $211,269 of dividends were accrued on our outstanding Series B1 Preferred Stock. During the three months ended September 30, 2020 and 2019, we paid dividends in-kind in additional shares of Series B1 Preferred Stock of $171,380 and $240,185, respectively. The following is an analysis of changes in the derivative liability for the nine months ended June 30: Level Three Roll-Forward 2020 2019 Balance at beginning of period $ 1,969,216 $ 1,481,692 Change in valuation of warrants (1,844,369) (331,715) Balance at end of period $ 124,847 $ 1,149,977 Myrtle Grove Share Purchase and Subscription Agreement Amounts received by MG SPV from its direct sale of Class B Units to Tensile-MG may only be used for additional investments in the MG refinery or for day to day operations at the MG refinery. At September 30, 2020, $2.0 million reported as cash and cash equivalents on the balance sheet is restricted to MG refinery investments or operating expenses. The Class B Unit holders may force MG SPV to redeem the outstanding Class B Units at any time on or after the earlier of (a) the fifth anniversary of the Closing Date and (ii) the occurrence of a Triggering Event (defined below)(an “ MG Redemption ”). The cash purchase price for such redeemed Class B Units is the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking an MG Redemption and Vertex Operating (provided that Vertex Operating still owns Class A Units on such date) and (z) the original per-unit price for such Class B Units plus any unpaid Class B preference. The preference is defined as the greater of (A) the aggregate unpaid “Class B Yield” (equal to an annual return of 22.5% per annum) and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class B Unit holders. The Company did not pay the preferential yield during the three and nine months ended September 30, 2020. “ Triggering Events ” mean (a) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (b) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the MG Company Agreement, (d) the failure to consummate the Heartland Closing (defined below) by June 30, 2020 (a “ Failure to Close ”), provided that such Heartland Closing was consummated by June 30, 2020, (e) the failure of Vertex Operating to operate MG SPV in good faith with appropriate resources, or (f) the material failure of the Company and its affiliates to comply with the terms of the contribution agreement, whereby the Company contributed assets and operations to MG SPV. No triggering events occurred during the nine months ended September 30, 2020. Myrtle Grove Redeemable Noncontrolling Interest As a result of the MG Share Purchase, Tensile, through Tensile-Myrtle Grove Acquisition Corporation, acquired an approximate 15.58% ownership interest in Vertex Refining Myrtle Grove LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $970,809 between the fair value of the consideration received of $3,150,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $2,179,191, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with MG SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net loss of $120,031 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $833,354 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $5,181,388. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to MG SPV as of September 30, 2020. September 30, 2020 Beginning balance $ 4,396,894 Net loss attributable to redeemable non-controlling interest (120,031) Change in ownership 71,171 Accretion of non-controlling interest to redemption value 833,354 Ending balance $ 5,181,388 Heartland Share Purchase and Subscription Agreement On January 17, 2020 (the “Heartland Closing Date”), Vertex Operating, Tensile-Heartland, and solely for the purposes of the Heartland Guaranty (defined below), the Company, and HPRM LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions, described in greater detail below (“Heartland SPV”), entered into a Share Purchase and Subscription Agreement (the “Heartland Share Purchase”). Prior to entering into the Heartland Share Purchase, the Company transferred 100% of the ownership of Vertex Refining OH, LLC, its indirect wholly-owned subsidiary (“Vertex OH”) to Heartland SPV in consideration for 13,500 Class A Units, 13,500 Class A-1 Preferred Units and 11,300 Class B Units of Heartland SPV and immediately thereafter contributed 248 Class B Units to the Company’s wholly-owned subsidiary, Vertex Splitter Corporation, a Delaware corporation (“Vertex Splitter”), as a contribution to capital. Vertex OH owned the Company’s Columbus, Ohio, Heartland facility, which produces a base oil product that is sold to lubricant packagers and distributors. Pursuant to the Heartland Share Purchase, Vertex Operating sold Tensile-Heartland the 13,500 Class A Units and 13,500 Class A-1 Preferred Units of Heartland SPV in consideration for $13.5 million. Also, on the Heartland Closing Date, Tensile-Heartland purchased 7,500 Class A Units and 7,500 Class A-1 Units in consideration for $7.5 million (less the expenses of Tensile-Heartland in connection with the transaction) directly from Heartland SPV. The approximate $7.5 million purchase amount and future free cash flows from the operation of Heartland SPV are planned to be available for investments at the Heartland facility to increase self-collections, maximize the throughput of the refinery, enhance the quality of the output and complete other projects. Concurrently with the closing of the transactions described above, and pursuant to the terms of the Heartland Share Purchase, the Company, through Vertex Operating, purchased 1,000 newly issued Class A Units from MG SPV at a cost of $1,000 per unit ($1 million in aggregate). As a result of this transaction, MG SPV is owned 85.00% by Vertex Operating and 15.00% by Tensile-MG. The Heartland Share Purchase provides Tensile-Heartland an option, exercisable at its election, at any time, subject to the terms of the Heartland Share Purchase, to purchase up to an additional 7,000 Class A-2 Preferred Units at a cost of $1,000 per Class A-2 Preferred Unit from Heartland SPV. The Heartland SPV is currently owned 35% by Vertex Operating and 65% by Tensile-Heartland. Heartland SPV is managed by a five-member Board of Managers, of which three members are appointed by Tensile-Heartland and two are appointed by the Company. The Class A Units held by Tensile-Heartland are convertible into Class B Units as provided in the Limited Liability Company Agreement of Heartland SPV (the “Heartland Company Agreement”), based on a conversion price (initially one-for-one) which may be reduced from time to time if new Units of Heartland SPV are issued and will automatically convert into Series B Units upon certain events described in the Heartland Company Agreement. The Class A-1 and A-2 Preferred Units (“Class A Preferred Units”), which are 100% owned by Tensile-Heartland, accrue a 22.5% per annum preferred return subject to terms of the Heartland Company Agreement (the “Class A Yield”). Additionally, the Class A Unit holders (common and preferred) may force Heartland SPV to redeem the outstanding Class A Units at any time on or after the earlier of (a) the fifth anniversary of the Heartland Closing Date and (ii) the occurrence of a Heartland Triggering Event (defined below)(a “Heartland Redemption”). The cash purchase price for such redeemed Class A Unit will be the greater of (y) the fair market value of such units (without discount for illiquidity, minority status or otherwise) as determined by a qualified third party agreed to in writing by a majority of the holders seeking Heartland Redemption and Vertex Operating (provided that Vertex Operating still owns Class B Units on such date) and (z) the original per-unit price for such Class A Units plus fifty percent (50%) of the aggregate capital invested by the Class A Unit holders through such Heartland Redemption date. “Heartland Triggering Events” include (a) any termination of an Administrative Services Agreement entered into with Tensile, pursuant to its terms and/or any material breach by us of the environmental remediation and indemnity agreement entered into with Tensile, (b) any dissolution, winding up or liquidation of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, (c) any sale, lease, license or disposition of any material assets of the Company, Vertex Operating or any significant subsidiary of Vertex Operating, or (d) any transaction or series of related transactions (whether by merger, exchange, contribution, recapitalization, consolidation, reorganization, combination or otherwise) involving the Company, Vertex Operating or any significant subsidiary of Vertex Operating, the result of which is that the holders of the voting securities of the relevant entity as of the Heartland Closing Date are no longer the beneficial owners, in the aggregate, after giving effect to such transaction or series of transactions, directly or indirectly, of more than fifty percent (50%) of the voting power of the outstanding voting securities of the entity, subject to certain other requirements set forth in the Heartland Company Agreement. In the event that Heartland SPV fails to redeem such Class A Units within 180 days after a redemption is triggered, the Class A Yield is increased to 25% until such time as such redemption is completed (with such increase being effective back to the original date of a notice of redemption). In addition, in such event, the Class A Unit holders may cause Heartland SPV to initiate a process intended to result in a sale of Heartland SPV. Distributions of available cash of Heartland SPV pursuant to the Heartland Company Agreement (including pursuant to liquidations of Heartland SPV), subject to certain exceptions set forth therein, are to be made (a) first, to the holders of the Class A Preferred Units, in amount equal to the greater of (A) the aggregate unpaid Class A Yield and (B) an amount equal to fifty percent (50%) of the aggregate capital invested by the Class A Preferred Unit holders (initially Tensile-Heartland)(such aggregate capital invested by the Class A Preferred Unit holders, the “ Heartland Invested Capital ”, which totaled approximately $21 million as of the Heartland Closing Date, subject to adjustment as provided in the Heartland Share Purchase), less prior distributions (such greater amount of (A) and (B), the “ Class A Preferred Priority Distributions ”); (b) second, the Class A Preferred Unit holders, together as a separate and distinct class, are entitled to receive an amount equal to the aggregate Heartland Invested Capital; (c) third, the Class B Unitholders (other than Class B Unitholders which received Class B Units upon conversion of Class A Preferred Units), together as a separate and distinct class, are entitled to receive all or a portion of any distribution equal to the sum of all distributions made under sections (a) and (b) above; and (d) fourth, to the holders of Units who are eligible to receive such distributions in proportion to the number of Units held by such holders. Heartland Variable interest entity The Company has assessed the Heartland SPV under the variable interest guidance in ASC 810. The Company determined that the Class A Units are not at risk due to a 22.5% preferred return and a redemption provision that, if elected, would require Heartland SPV to repurchase the Class A Units at their original cost plus the preferred return. The Company further determined that as a minority shareholder, holding only 35% of the voting rights, the Company does not have the ability to direct the activities of Heartland SPV that most significantly impact the entity’s performance. Based on this assessment, the Company concluded that Heartland SPV is a variable interest entity. In assessing if the Company is the primary beneficiary of Heartland SPV, the Company determined that certain provisions of the Heartland Company Agreement prohibiting the transfer of its Class B Units result in the Class A Unit holders being related parties under the de facto agents criteria in ASC 810. The Company and the Class A Unit holders, as a group, have the power to direct the significant activities of Heartland SPV and the obligations to absorb the losses and the right to receive the benefits that could potentially be significant to Heartland SPV. The Company concluded that substantially all of the activities of Heartland SPV are conducted on its behalf, and not on behalf of the Class A Unit holders, the decision maker, thus the Company is the primary beneficiary and required to consolidate Heartland SPV in accordance with ASC 810. The Company's consolidated financial statements include the assets, liabilities and results of operations of Heartland SPV for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in net loss attributable to noncontrolling interests and redeemable noncontrolling interest in the consolidated statements of income and noncontrolling interests in the consolidated balance sheets. The following table summarizes the carrying amounts of Heartland SPV's assets and liabilities included in the Company’s consolidated balance sheets at September 30, 2020: September 30, 2020 Cash and cash equivalents $ 8,072,347 Accounts receivable, net 2,879,431 Inventory 310,596 Prepaid expense and other current assets 1,968,335 Total current assets 13,230,709 Fixed assets, net 5,619,248 Finance lease right-of-use assets 1,106,671 Operating lease right-of-use assets 369,333 Intangible assets, net 1,127,352 Other assets 108,643 Total assets $ 21,561,956 Accounts payable $ 1,413,378 Accrued expenses 335,267 Finance lease liability-current 340,193 Operating lease liability-current 268,437 Total current liabilities 2,357,275 Finance lease liability-long term 732,174 Operating lease liability-long term 100,896 Total liabilities $ 3,190,345 The assets of Heartland SPV may only be used to settle the obligations of Heartland SPV, and may not be used for other consolidated entities. The liabilities of Heartland SPV are non-recourse to the general credit of the Company’s other consolidated entities. Heartland Redeemable Noncontrolling Interest As a result of the Heartland Share Purchase (as defined and discussed above), Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“ Tensile ”), through Tensile-Heartland, acquired an approximate 65.00% ownership interest in Heartland SPV, a Delaware limited liability company, which entity was formed as a special purpose vehicle in connection with the transactions. This is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The initial carrying amount that is recognized in temporary equity for redeemable noncontrolling interests is the initial carrying amount determined in accordance with the accounting requirements for noncontrolling interests in ASC 810-10. In accordance with ASC 810-10-45-23, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary are accounted for as equity transactions. Therefore, the Company recognized no gain or loss in consolidated net income and the carrying amount of the noncontrolling interest was adjusted to reflect the change in our ownership interest of the subsidiary. The difference of $9,091,068 between the fair value of the consideration received of $21,000,000 and the carrying amount of the noncontrolling interest determined in accordance with ASC 810-10 of $11,908,932, was recognized in additional paid in capital. After initial recognition, in accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with Heartland SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary's net gain of $35,449 to the noncontrolling interest. Second, the Company applied the subsequent measurement guidance in ASC 480-10-S99-3A, which indicates that the noncontrolling interest’s carrying amount is the higher of (1) the cumulative amount that would result from applying the measurement guidance in ASC 810-10 in the first step or (2) the redemption value. Pursuant to ASC 480-10-S99-3A, for a security that is probable of becoming redeemable in the future, the Company adjusted the carrying amount of the redeemable noncontrolling interests to what would be the redemption value assuming the security was redeemable at the balance sheet date. This adjustment of $12,802,442 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of September 30, 2020 of $24,746,823. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings. The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of September 30, 2020. September 30, 2020 Beginning balance $ — Initial adjustment of carrying amount of non-controlling interest 11,908,932 Net gain attributable to redeemable non-controlling interest 35,449 Accretion of non-controlling interest to redemption value 12,802,442 Ending balance $ 24,746,823 |
ACQUISITIONS
ACQUISITIONS | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
ACQUISITIONS | ACQUISITION Crystal Energy, LLC On June 1, 2020, the Company entered into and closed a Member Interest Purchase Agreement with Crystal Energy, LLC (" Crystal ") pursuant to which the Company agreed to buy all of the outstanding membership interests of Crystal for aggregate cash consideration of $1,822,690. This resulted in the recognition of $1,939,364 in accounts receivable, $976,512 in inventory, $14,484 in other current assets, and $1,107,670 in current liabilities. Upon the closing of the acquisition, Crystal became a wholly-owned subsidiary of the Company. The acquisition was accounted for as a business combination. Crystal is an Alabama limited liability company that was organized on September 7, 2016, for the purpose of purchasing, storing, selling, and distributing refined motor fuels. These activities include the wholesale distribution of gasoline, blended gasoline, and diesel for use as engine fuel to operate automobiles, trucks, locomotives, and construction equipment. Crystal markets its products to third-party customers, and customers will typically resell these products to retailers, end use consumers, and others. These assets are used in our Refining division. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS Issuance of Series B and B1 Preferred Stock Shares In-Kind and Common Stock We paid the accrued dividends on our Series B Preferred Stock and Series B1 Preferred Stock, which were accrued as of September 30, 2020, in-kind by way of the issuance of 100,071 restricted shares of Series B Preferred Stock pro rata to each of the then holders of our Series B Preferred Stock in October 2020 and the issuance of 180,485 restricted shares of Series B1 Preferred Stock pro rata to each of the then holders of our Series B1 Preferred Stock in October 2020. If converted in full, the 100,071 shares of Series B Preferred Stock would convert into 100,071 shares of common stock and the 180,485 shares of Series B1 Preferred Stock would convert into 180,485 shares of common stock. Marrero Refinery Fire On October 7, 2020, we had a fire at our Marrero refinery which took the facility offline for repairs for about two weeks. The refinery suffered some minor structural damage along with piping, valves and instrumentation in the immediate area of the fire. The largest impact was the damage to the electrical conduit that feeds the power to the refinery equipment. As of October 26, 2020 , the facility was back up and running and in the process of filing a claim with our insurance company. The Company believes that it maintains adequate insurance coverage. |
SUMMARY OF CRITICAL ACCOUNTIN_2
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Cash, Cash Equivalents and Restricted Cash | Cash, Cash Equivalents and Restricted CashThe Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. |
Inventory | Inventory Inventories of products consist of feedstocks, refined petroleum products and recovered ferrous and non-ferrous metals and are reported at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“ FIFO ”) method. The Company reviews its inventory commodities for impairment whenever events or circumstances indicate that the value may not be recoverable. |
Impairment of long-lived assets | Impairment of long-lived assets The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (" ASC |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates. Any effects on the business, financial position or results of operations from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known. |
Reclassification of Prior Year Presentation | Reclassification of Prior Year PresentationCertain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on the reported results of operations. |
Redeemable Noncontrolling Interest | Redeemable Noncontrolling Interests As more fully described in " Note 14. Share Purchase and Subscription Agreements ", the Company is party to put/call option agreements with the holder of MG SPV’s and Heartland SPV's non-controlling interests. The put options permit MG SPV's and Heartland SPV's non-controlling interest holders, at any time on or after the earlier of (a) the fifth anniversary of the applicable closing date of such issuances and (ii) the occurrence of certain triggering events (an “MG Redemption” and "Heartland |
Variable Interest Entities | Variable Interest Entities The Company accounts for the investments it makes in certain legal entities in which equity investors do not have (1) sufficient equity at risk for the legal entity to finance its activities without additional subordinated financial support, (2) as a group (the holders of the equity investment at risk), either the power, through voting or similar rights, to direct the activities of the legal entity that most significantly impacts the entity’s economic performance, or (3) the obligation to absorb the expected losses of the legal entity or the right to receive expected residual returns of the legal entity. These certain legal entities are referred to as “variable interest entities” or “VIEs.” The Company consolidates the results of any such entity in which it determines that it has a controlling financial interest. The Company has a “controlling financial interest” in such an entity if the Company has both the power to direct the activities that most significantly affect the VIE’s economic performance and the obligation to absorb the losses of, or right to receive benefits from, the VIE that could be potentially significant to the VIE. On a quarterly basis, the Company reassesses whether it has a controlling financial interest in any investments it has in these certain legal entities. |
SUMMARY OF CRITICAL ACCOUNTIN_3
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Summary of restrictions on cash and cash equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows. September 30, 2020 unaudited September 30, 2019 Cash and cash equivalents $ 15,552,980 $ 2,303,725 Restricted cash 100,125 100,088 Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows $ 15,653,105 $ 2,403,813 |
Schedule of cash and cash equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows. September 30, 2020 unaudited September 30, 2019 Cash and cash equivalents $ 15,552,980 $ 2,303,725 Restricted cash 100,125 100,088 Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows $ 15,653,105 $ 2,403,813 |
CONCENTRATIONS, SIGNIFICANT C_2
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract] | |
Schedule of concentrations | At September 30, 2020 and 2019 and for each of the nine months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations: Nine Months Ended September 30, 2020 Nine Months Ended % of % of % of % of Customer 1 35% 11% 35% 25% Customer 2 11% 13% 8% 15% Customer 3 3% 11% —% —% Customer 4 —% —% 12% —% For each of the nine months ended September 30, 2020 and 2019, the Company's segment revenues were comprised of the following customer concentrations: % of Revenue by Segment % Revenue by Segment Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019 Black Oil Refining Recovery Black Oil Refining Recovery Customer 1 54% —% —% 41% —% —% Customer 2 17% —% —% 10% —% —% Customer 3 —% —% 25% —% —% —% Customer 4 —% —% —% 14% —% —% |
REVENUES (Tables)
REVENUES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Disaggregation of revenue | The following tables present our revenues disaggregated by geographical market and revenue source: Three Months Ended September 30, 2020 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 7,484,798 $ — $ — $ 7,484,798 Southern United States 12,503,324 13,501,749 3,893,761 29,898,834 $ 19,988,122 $ 13,501,749 $ 3,893,761 $ 37,383,632 Sources of Revenue Base oil $ 5,632,592 $ — $ 733,180 $ 6,365,772 Pygas — 1,184,433 — 1,184,433 Industrial fuel 21,190 82,644 — 103,834 Distillates — 12,234,672 — 12,234,672 Oil collection services 2,449,454 — — 2,449,454 Metals — — 3,160,581 3,160,581 Other re-refinery products 834,438 — — 834,438 VGO/Marine fuel sales 11,050,448 — — 11,050,448 Total revenues $ 19,988,122 $ 13,501,749 $ 3,893,761 $ 37,383,632 Nine Months Ended September 30, 2020 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 23,210,428 $ — $ — $ 23,210,428 Southern United States 37,852,200 22,309,670 11,588,890 71,750,760 $ 61,062,628 $ 22,309,670 $ 11,588,890 $ 94,961,188 Sources of Revenue Base oil $ 17,914,941 $ — $ 2,091,430 $ 20,006,371 Pygas — 4,815,040 — 4,815,040 Industrial fuel 1,262,266 135,396 — 1,397,662 Distillates — 17,359,234 — 17,359,234 Oil collection services 5,707,017 — — 5,707,017 Metals — — 9,549,144 9,549,144 Other re-refinery products 4,341,027 — (51,684) 4,289,343 VGO/Marine fuel sales 31,837,377 — — 31,837,377 Total revenues $ 61,062,628 $ 22,309,670 $ 11,588,890 $ 94,961,188 Three Months Ended September 30, 2019 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 12,325,941 $ — $ — $ 12,325,941 Southern United States 20,004,590 3,076,454 2,392,274 25,473,318 $ 32,330,531 $ 3,076,454 $ 2,392,274 $ 37,799,259 Sources of Revenue Base oil $ 9,135,650 $ — $ 640,642 $ 9,776,292 Pygas — 2,741,557 — 2,741,557 Industrial fuel 891,676 334,897 — 1,226,573 Distillates — — — — Oil collection services 1,953,924 — — 1,953,924 Metals — — 1,724,025 1,724,025 Other re-refinery products 3,057,171 — 27,607 3,084,778 VGO/Marine fuel sales 17,292,110 — — 17,292,110 Total revenues $ 32,330,531 $ 3,076,454 $ 2,392,274 $ 37,799,259 Nine Months Ended September 30, 2019 Black Oil Refining & Marketing Recovery Total Primary Geographical Markets Northern United States $ 31,530,289 $ — $ — $ 31,530,289 Southern United States 71,523,240 9,212,477 8,511,257 89,246,974 $ 103,053,529 $ 9,212,477 $ 8,511,257 $ 120,777,263 Sources of Revenue Base oil $ 23,918,490 $ — $ 2,439,071 $ 26,357,561 Pygas — 7,656,125 — 7,656,125 Industrial fuel 5,714,478 1,501,655 — 7,216,133 Distillates — 54,697 — 54,697 Oil collection services 4,261,391 — — 4,261,391 Metals — — 5,988,895 5,988,895 Other re-refinery products 10,399,007 — 83,291 10,482,298 VGO/Marine fuel sales 58,760,163 — — 58,760,163 Total revenues $ 103,053,529 $ 9,212,477 $ 8,511,257 $ 120,777,263 |
ACCOUNTS RECEIVABLE (Tables)
ACCOUNTS RECEIVABLE (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Receivables [Abstract] | |
Schedule of accounts receivable | Accounts receivable, net, consists of the following at September 30, 2020 and December 31, 2019: September 30, 2020 Unaudited December 31, 2019 Accounts receivable trade $ 9,441,141 $ 12,540,553 Allowance for doubtful accounts (350,214) (402,475) Accounts receivable trade, net $ 9,090,927 $ 12,138,078 |
LINE OF CREDIT AND LONG-TERM _2
LINE OF CREDIT AND LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of outstanding debt facilities | The Company's outstanding debt facilities as of September 30, 2020 and December 31, 2019 are summarized as follows: Creditor Loan Type Origination Date Maturity Date Loan Amount Balance on September 30, 2020 Balance on December 31, 2019 Encina Business Credit, LLC Term Loan February 1, 2017 February 1, 2022 $ 20,000,000 $ 5,658,000 $ 13,333,000 Encina Business Credit SPV, LLC Revolving Note February 1, 2017 February 1, 2022 $ 10,000,000 — 3,276,230 Encina Business Credit, LLC Capex Loan August 7, 2020 February 1, 2022 $ 2,000,000 1,250,617 — Wells Fargo Equipment Lease-Ohio Finance Lease April-May, 2019 April-May, 2024 $ 621,000 465,678 551,260 AVT Equipment Lease-Ohio Finance Lease April 2, 2020 April 2, 2023 $ 337,155 410,928 — AVT Equipment Lease-HH Finance Lease May 22, 2020 May 22, 2023 $ 551,609 485,745 — John Deere Note Note May 27, 2020 June 24, 2024 $ 152,643 140,487 — Tetra Capital Lease Finance Lease May, 2018 May, 2022 $ 419,690 195,761 264,014 Well Fargo Equipment Lease-VRM LA Finance Lease March, 2018 March, 2021 $ 30,408 4,485 12,341 Texas Citizens Bank PPP Loan May 5, 2020 April 28, 2022 $ 4,222,000 4,222,000 — Various institutions Insurance premiums financed Various < 1 year $ 2,902,428 1,893,668 1,165,172 Total 14,727,369 18,602,017 Deferred finance costs — (47,826) Total, net of deferred finance costs $ 14,727,369 $ 18,554,191 |
Schedule of future maturities of notes payable | Future contractual maturities of notes payable as of September 30, 2020 are summarized as follows: Creditor Year 1 Year 2 Year 3 Year 4 Year 5 Thereafter Encina Business Credit, LLC $ 900,000 $ 4,758,000 $ — $ — $ — $ — Encina Business Credit SPV, LLC — — — — — — Encina Business Credit, LLC 158,966 1,091,651 — — — — John Deere Note 37,071 37,991 38,934 26,491 — — Well Fargo Equipment Lease- Ohio 119,356 125,643 132,261 88,418 — — AVT Equipment Lease-Ohio 124,308 135,272 151,348 — — — AVT Equipment Lease-HH 145,296 158,111 182,338 — — — Tetra Capital Lease 96,530 99,231 — — — — Well Fargo Equipment Lease- VRM LA 4,485 — — — — — Texas Citizens Bank 1,877,461 2,344,539 — — — — Various institutions 1,893,668 — — — — — Totals $ 5,357,141 $ 8,750,438 $ 504,881 $ 114,909 $ — $ — |
PREFERRED STOCK AND DETACHABL_2
PREFERRED STOCK AND DETACHABLE WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Summary of temporary equity | The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, during the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 11,006,406 $ 8,900,208 Plus: discount accretion 854,364 1,031,483 Plus: dividends in kind 547,349 510,502 Balance at end of period $ 12,408,119 $ 10,442,193 The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity on the accompanying unaudited consolidated balance sheet, for the nine months ended September 30, 2020 and 2019: 2020 2019 Balance at beginning of period $ 12,743,047 $ 13,279,755 Less: conversions of shares to common (3,368,474) (119,768) Plus: discount accretion 646,031 582,649 Plus: dividends in kind 546,557 712,185 Balance at end of period $ 10,567,161 $ 14,454,821 |
Schedule of liabilities with unobservable inputs | The following is an analysis of changes in the derivative liability for the nine months ended June 30: Level Three Roll-Forward 2020 2019 Balance at beginning of period $ 1,969,216 $ 1,481,692 Change in valuation of warrants (1,844,369) (331,715) Balance at end of period $ 124,847 $ 1,149,977 |
SEGMENT REPORTING (Tables)
SEGMENT REPORTING (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Segment Reporting [Abstract] | |
Schedule of the company's reportable segment information | Segment information for the three and nine months ended September 30, 2020 and 2019 is as follows: THREE MONTHS ENDED SEPTEMBER 30, 2020 Black Oil Refining & Recovery Total Revenues: Base oil $ 5,632,592 $ — $ 733,180 $ 6,365,772 Pygas — 1,184,433 — 1,184,433 Industrial fuel 21,190 82,644 — 103,834 Distillates (1) — 12,234,672 — 12,234,672 Oil collection services 2,449,454 — — 2,449,454 Metals (2) — — 3,160,581 3,160,581 Other re-refinery products (3) 834,438 — — 834,438 VGO/Marine fuel sales 11,050,448 — — 11,050,448 Total revenues 19,988,122 13,501,749 3,893,761 37,383,632 Cost of revenues (exclusive of depreciation and amortization shown separately below) 14,687,141 13,217,757 3,281,786 31,186,684 Depreciation and amortization attributable to costs of revenues 1,041,719 121,744 149,699 1,313,162 Gross profit 4,259,262 162,248 462,276 4,883,786 Selling, general and administrative expenses 4,899,956 696,611 645,003 6,241,570 Depreciation and amortization attributable to operating expenses 390,105 72,314 20,450 482,869 Loss from operations $ (1,030,799) $ (606,677) $ (203,177) $ (1,840,653) THREE MONTHS ENDED SEPTEMBER 30, 2019 Black Oil Refining & Recovery Total Revenues: Base oil $ 9,135,650 $ — $ 640,642 $ 9,776,292 Pygas — 2,741,557 — 2,741,557 Industrial fuel 891,676 334,897 — 1,226,573 Distillates (1) — — — — Oil collection services 1,953,924 — — 1,953,924 Metals (2) — — 1,724,025 1,724,025 Other re-refinery products (3) 3,057,171 — 27,607 3,084,778 VGO/Marine fuel sales 17,292,110 — — 17,292,110 Total revenues 32,330,531 3,076,454 2,392,274 37,799,259 Cost of revenues (exclusive of depreciation and amortization shown separately below) 27,663,983 2,511,314 2,197,019 32,372,316 Depreciation and amortization attributable to costs of revenues 1,073,520 147,658 138,451 1,359,629 Gross profit 3,593,028 417,482 56,804 4,067,314 Selling, general and administrative expenses 5,040,772 494,781 617,631 6,153,184 Depreciation and amortization attributable to operating expenses 335,105 100,398 20,450 455,953 Loss from operations $ (1,782,849) $ (177,697) $ (581,277) $ (2,541,823) NINE MONTHS ENDED SEPTEMBER 30, 2020 Black Oil Refining & Recovery Total Revenues: Base oil $ 17,914,941 $ — $ 2,091,430 $ 20,006,371 Pygas — 4,815,040 — 4,815,040 Industrial fuel 1,262,266 135,396 — 1,397,662 Distillates (1) — 17,359,234 — 17,359,234 Oil collection services 5,707,017 — — 5,707,017 Metals (2) — — 9,549,144 9,549,144 Other re-refinery products (3) 4,341,027 — (51,684) 4,289,343 VGO/Marine fuel sales 31,837,377 — — 31,837,377 Total revenues 61,062,628 22,309,670 11,588,890 94,961,188 Cost of revenues (exclusive of depreciation and amortization shown separately below) 46,601,716 21,772,587 11,847,040 80,221,343 Depreciation and amortization attributable to costs of revenues 2,960,699 341,498 429,123 3,731,320 Gross profit (loss) 11,500,213 195,585 (687,273) 11,008,525 Selling, general and administrative expenses 15,180,569 1,867,027 1,925,052 18,972,648 Depreciation and amortization attributable to operating expenses 1,072,877 278,492 61,350 1,412,719 Loss from operations $ (4,753,233) $ (1,949,934) $ (2,673,675) $ (9,376,842) NINE MONTHS ENDED SEPTEMBER 30, 2019 Black Oil Refining & Recovery Total Revenues: Base oil $ 23,918,490 $ — $ 2,439,071 $ 26,357,561 Pygas — 7,656,125 — 7,656,125 Industrial fuel 5,714,478 1,501,655 — 7,216,133 Distillates (1) — 54,697 — 54,697 Oil collection services 4,261,391 — — 4,261,391 Metals (2) — — 5,988,895 5,988,895 Other re-refinery products (3) 10,399,007 — 83,291 10,482,298 VGO/Marine fuel sales 58,760,163 — — 58,760,163 Total revenues 103,053,529 9,212,477 8,511,257 120,777,263 Cost of revenues (exclusive of depreciation and amortization shown separately below) 88,374,446 7,767,882 7,589,758 103,732,086 Depreciation and amortization attributable to costs of revenues 3,122,664 431,948 411,014 3,965,626 Gross profit 11,556,419 1,012,647 510,485 13,079,551 Selling, general and administrative expenses 14,500,306 1,424,572 1,604,906 17,529,784 Depreciation and amortization attributable to operating expenses 1,005,315 301,194 61,350 1,367,859 Loss from operations $ (3,949,202) $ (713,119) $ (1,155,771) $ (5,818,092) (1) Distillates are finished fuel products such as gasoline and diesel fuels. (2) Metals consist of recoverable ferrous and non-ferrous recyclable metals from manufacturing and consumption. Scrap metal can be recovered from pipes, barges, boats, building supplies, surplus equipment, tanks, and other items consisting of metal composition. These materials are segregated, processed, cut-up and sent back to a steel mill for re-purposing. (3) Other re-refinery products include the sales of asphalt, condensate, recovered products, and other petroleum products. |
COMMODITY DERIVATIVE INSTRUME_2
COMMODITY DERIVATIVE INSTRUMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of derivative instruments | The fair value of the crude oil swap agreements is based on the difference between the strike price and the New York Mercantile Exchange futures price for the applicable trading months. As of September 30, 2020 Contract Type Contract Period Weighted Average Strike Price (Barrels) Remaining Volume (Barrels) Fair Value Swap Sep. 2020- Oct. 2020 $ 37.10 10,000 $ 9,000 Swap Sep. 2020- Oct. 2020 $ 46.33 10,000 (28,896) Futures Sep. 2020- Dec. 2020 $ 48.67 26,000 (4,099) $ (23,995) As of December 31, 2019 Contract Type Contract Period Weighted Average Strike Price (Barrels) Remaining Volume (Barrels) Fair Value Swap Dec. 2019-Mar. 2020 $ 40.88 130,000 $ 539,800 Swap Dec. 2019-Mar. 2020 $ 81.19 130,000 (673,428) Futures Dec. 2019-Mar. 2020 $ 84.53 105,000 (242,222) $ (375,850) |
Schedule of fair value of derivative instruments within balance sheet | The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of September 30, 2020 and December 31, 2019 are presented in the table below. Balance Sheet Classification Contract Type 2020 2019 Crude oil swaps $ (19,896) $ (133,628) Crude oil futures (4,099) (242,222) Derivative commodity liability $ (23,995) $ (375,850) |
LEASES (Tables)
LEASES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Leases [Abstract] | |
Schedule of maturities of operating lease liabilities | Maturities of our lease liabilities for all operating leases are as follows as of September 30, 2020: September 30, 2020 Facilities Equipment Plant Railcar Total Year 1 $ 710,879 $ 161,539 $ 4,060,417 $ 897,846 $ 5,830,681 Year 2 446,869 67,338 4,060,417 229,656 4,804,280 Year 3 346,733 — 4,060,417 56,712 4,463,862 Year 4 300,000 — 4,060,417 — 4,360,417 Year 5 300,000 — 4,060,417 — 4,360,417 Thereafter 2,150,000 — 30,479,594 — 32,629,594 Total lease payments $ 4,254,481 $ 228,877 $ 50,781,679 $ 1,184,214 $ 56,449,251 Less: interest (1,510,219) (10,024) (20,856,360) (58,572) (22,435,175) Present value of lease liabilities $ 2,744,262 $ 218,853 $ 29,925,319 $ 1,125,642 $ 34,014,076 |
Schedule of operating lease weighted average remaining lease terms and discount rates | The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of September 30, 2020: Remaining lease term and discount rate: September 30, 2020 Weighted average remaining lease terms (years) Lease facilities 5.53 Lease equipment 1.42 Lease plant 12.51 Lease railcar 1.15 Weighted average discount rate Lease facilities 9.19 % Lease equipment 8.00 % Lease plant 9.37 % Lease railcar 8.00 % |
SHARE PURCHASE AND SUBSCRIPTI_2
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Equity [Abstract] | |
Reconciliation of changes in redeemable noncontrolling interest | The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to MG SPV as of September 30, 2020. September 30, 2020 Beginning balance $ 4,396,894 Net loss attributable to redeemable non-controlling interest (120,031) Change in ownership 71,171 Accretion of non-controlling interest to redemption value 833,354 Ending balance $ 5,181,388 The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of September 30, 2020. September 30, 2020 Beginning balance $ — Initial adjustment of carrying amount of non-controlling interest 11,908,932 Net gain attributable to redeemable non-controlling interest 35,449 Accretion of non-controlling interest to redemption value 12,802,442 Ending balance $ 24,746,823 |
Schedule of variable interest entities | The following table summarizes the carrying amounts of Heartland SPV's assets and liabilities included in the Company’s consolidated balance sheets at September 30, 2020: September 30, 2020 Cash and cash equivalents $ 8,072,347 Accounts receivable, net 2,879,431 Inventory 310,596 Prepaid expense and other current assets 1,968,335 Total current assets 13,230,709 Fixed assets, net 5,619,248 Finance lease right-of-use assets 1,106,671 Operating lease right-of-use assets 369,333 Intangible assets, net 1,127,352 Other assets 108,643 Total assets $ 21,561,956 Accounts payable $ 1,413,378 Accrued expenses 335,267 Finance lease liability-current 340,193 Operating lease liability-current 268,437 Total current liabilities 2,357,275 Finance lease liability-long term 732,174 Operating lease liability-long term 100,896 Total liabilities $ 3,190,345 |
BASIS OF PRESENTATION AND NAT_2
BASIS OF PRESENTATION AND NATURE OF OPERATIONS (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Hydrocarbons | |
Product Information | |
Percentage of decrease in prices (as a percent) | 67.00% |
SUMMARY OF CRITICAL ACCOUNTIN_4
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES - Summary of Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 15,552,980 | $ 4,099,655 | $ 2,303,725 | |
Restricted cash | 100,125 | 100,170 | 100,088 | |
Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows | $ 15,653,105 | $ 4,199,825 | $ 2,403,813 | $ 2,849,831 |
SUMMARY OF CRITICAL ACCOUNTIN_5
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES - Narrative (Details) - USD ($) | Jul. 25, 2019 | Sep. 30, 2020 |
New Accounting Pronouncements or Change in Accounting Principle | ||
Asset impairment | $ 0 | |
Common Class B and Class A | ||
New Accounting Pronouncements or Change in Accounting Principle | ||
Annual return (as a percent) | 22.50% | |
Percentage of aggregate capital investment to be added to original per-unit price to determine cash purchase price (as a percent) | 50.00% | 50.00% |
CONCENTRATIONS, SIGNIFICANT C_3
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES - Customer Concentrations (Details) - Customer concentration risk | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | Customer 1 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 35.00% | 35.00% |
Revenues | Customer 1 | Black Oil | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 54.00% | 41.00% |
Revenues | Customer 1 | Refining | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 1 | Recovery | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 2 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 11.00% | 8.00% |
Revenues | Customer 2 | Black Oil | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 17.00% | 10.00% |
Revenues | Customer 2 | Refining | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 2 | Recovery | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 3 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 3.00% | 0.00% |
Revenues | Customer 3 | Black Oil | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 3 | Refining | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 3 | Recovery | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 25.00% | 0.00% |
Revenues | Customer 4 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 12.00% |
Revenues | Customer 4 | Black Oil | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 14.00% |
Revenues | Customer 4 | Refining | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Revenues | Customer 4 | Recovery | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
Receivables | Customer 1 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 11.00% | 25.00% |
Receivables | Customer 2 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 13.00% | 15.00% |
Receivables | Customer 3 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 11.00% | 0.00% |
Receivables | Customer 4 | ||
Revenue, Major Customer | ||
Concentration percentage (as a percent) | 0.00% | 0.00% |
CONCENTRATIONS, SIGNIFICANT C_4
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES - Narrative (Details) | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Feb. 12, 2016lawsuit | |
Revenue, Major Customer | |||
Related party payments | $ | $ 56,971 | $ 62,239 | |
Purchases | Vendor | Vendor one | |||
Revenue, Major Customer | |||
Concentration percentage (as a percent) | 19.00% | ||
Accounts payable | Vendor | Vendor one | |||
Revenue, Major Customer | |||
Concentration percentage (as a percent) | 17.00% | ||
Vertex Refining LA, LLC | |||
Revenue, Major Customer | |||
Number of lawsuits named as defendant | lawsuit | 5 |
REVENUES (Details)
REVENUES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Disaggregation of Revenue | ||||
Total revenues | $ 37,383,632 | $ 37,799,259 | $ 94,961,188 | $ 120,777,263 |
Base oil | ||||
Disaggregation of Revenue | ||||
Total revenues | 6,365,772 | 9,776,292 | 20,006,371 | 26,357,561 |
Pygas | ||||
Disaggregation of Revenue | ||||
Total revenues | 1,184,433 | 2,741,557 | 4,815,040 | 7,656,125 |
Industrial fuel | ||||
Disaggregation of Revenue | ||||
Total revenues | 103,834 | 1,226,573 | 1,397,662 | 7,216,133 |
Distillates | ||||
Disaggregation of Revenue | ||||
Total revenues | 12,234,672 | 0 | 17,359,234 | 54,697 |
Oil collection services | ||||
Disaggregation of Revenue | ||||
Total revenues | 2,449,454 | 1,953,924 | 5,707,017 | 4,261,391 |
Metals | ||||
Disaggregation of Revenue | ||||
Total revenues | 3,160,581 | 1,724,025 | 9,549,144 | 5,988,895 |
Other Re-refinery Products | ||||
Disaggregation of Revenue | ||||
Total revenues | 834,438 | 3,084,778 | 4,289,343 | 10,482,298 |
VGO/Marine fuel sales | ||||
Disaggregation of Revenue | ||||
Total revenues | 11,050,448 | 17,292,110 | 31,837,377 | 58,760,163 |
Northern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 7,484,798 | 12,325,941 | 23,210,428 | 31,530,289 |
Southern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 29,898,834 | 25,473,318 | 71,750,760 | 89,246,974 |
Black Oil | ||||
Disaggregation of Revenue | ||||
Total revenues | 19,988,122 | 32,330,531 | 61,062,628 | 103,053,529 |
Black Oil | Base oil | ||||
Disaggregation of Revenue | ||||
Total revenues | 5,632,592 | 9,135,650 | 17,914,941 | 23,918,490 |
Black Oil | Pygas | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Industrial fuel | ||||
Disaggregation of Revenue | ||||
Total revenues | 21,190 | 891,676 | 1,262,266 | 5,714,478 |
Black Oil | Distillates | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Oil collection services | ||||
Disaggregation of Revenue | ||||
Total revenues | 2,449,454 | 1,953,924 | 5,707,017 | 4,261,391 |
Black Oil | Metals | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Other Re-refinery Products | ||||
Disaggregation of Revenue | ||||
Total revenues | 834,438 | 3,057,171 | 4,341,027 | 10,399,007 |
Black Oil | VGO/Marine fuel sales | ||||
Disaggregation of Revenue | ||||
Total revenues | 11,050,448 | 17,292,110 | 31,837,377 | 58,760,163 |
Black Oil | Northern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 7,484,798 | 12,325,941 | 23,210,428 | 31,530,289 |
Black Oil | Southern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 12,503,324 | 20,004,590 | 37,852,200 | 71,523,240 |
Refining & Marketing | ||||
Disaggregation of Revenue | ||||
Total revenues | 13,501,749 | 3,076,454 | 22,309,670 | 9,212,477 |
Refining & Marketing | Base oil | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Pygas | ||||
Disaggregation of Revenue | ||||
Total revenues | 1,184,433 | 2,741,557 | 4,815,040 | 7,656,125 |
Refining & Marketing | Industrial fuel | ||||
Disaggregation of Revenue | ||||
Total revenues | 82,644 | 334,897 | 135,396 | 1,501,655 |
Refining & Marketing | Distillates | ||||
Disaggregation of Revenue | ||||
Total revenues | 12,234,672 | 0 | 17,359,234 | 54,697 |
Refining & Marketing | Oil collection services | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Metals | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Other Re-refinery Products | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | VGO/Marine fuel sales | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Northern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Southern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 13,501,749 | 3,076,454 | 22,309,670 | 9,212,477 |
Recovery | ||||
Disaggregation of Revenue | ||||
Total revenues | 3,893,761 | 2,392,274 | 11,588,890 | 8,511,257 |
Recovery | Base oil | ||||
Disaggregation of Revenue | ||||
Total revenues | 733,180 | 640,642 | 2,091,430 | 2,439,071 |
Recovery | Pygas | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Industrial fuel | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Distillates | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Oil collection services | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Metals | ||||
Disaggregation of Revenue | ||||
Total revenues | 3,160,581 | 1,724,025 | 9,549,144 | 5,988,895 |
Recovery | Other Re-refinery Products | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 27,607 | (51,684) | 83,291 |
Recovery | VGO/Marine fuel sales | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Northern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Southern United States | ||||
Disaggregation of Revenue | ||||
Total revenues | $ 3,893,761 | $ 2,392,274 | $ 11,588,890 | $ 8,511,257 |
ACCOUNTS RECEIVABLE (Details)
ACCOUNTS RECEIVABLE (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts Receivable, after Allowance for Credit Loss, Current [Abstract] | ||
Accounts receivable trade | $ 9,441,141 | $ 12,540,553 |
Allowance for doubtful accounts | (350,214) | (402,475) |
Accounts receivable trade, net | $ 9,090,927 | $ 12,138,078 |
LINE OF CREDIT AND LONG-TERM _3
LINE OF CREDIT AND LONG-TERM DEBT (Details) - EBC Credit Agreement - Capex Loan - USD ($) | Aug. 07, 2020 | Sep. 30, 2020 |
Debt Instrument | ||
Line of credit, maximum borrowing capacity | $ 2,000,000 | |
Minimum advance request | 500,000 | |
Advance request multiples | 100,000 | |
Daily availability requirements | $ 1,000,000 | |
Debt instrument interest rate effective percentage | 1.55% | |
LIBOR | ||
Debt Instrument | ||
Interest rate (percentage) | 7.00% | |
Prime Rate | ||
Debt Instrument | ||
Interest rate (percentage) | 0.50% | |
Federal fund rate | ||
Debt Instrument | ||
Interest rate (percentage) | 6.00% |
LINE OF CREDIT AND LONG-TERM _4
LINE OF CREDIT AND LONG-TERM DEBT - Loan Agreement (Details) - USD ($) | May 27, 2020 | May 04, 2020 |
Secured debt | Contract Security Agreement | ||
Debt Instrument | ||
Amount borrowed | $ 152,643 | |
Debt instrument, stated rate (as a percent) | 2.45% | |
Unsecured Debt | Paycheck Protection Program | ||
Debt Instrument | ||
Amount borrowed | $ 4,220,000 | |
Debt instrument, stated rate (as a percent) | 1.00% |
LINE OF CREDIT AND LONG-TERM _5
LINE OF CREDIT AND LONG-TERM DEBT - Insurance Premiums (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Instrument | ||
Long-term debt | $ 14,727,369 | $ 18,602,017 |
Insurance premiums financed | Various institutions | ||
Debt Instrument | ||
Long-term debt | $ 1,893,668 | $ 1,165,172 |
Insurance premiums financed | Various institutions | Minimum | ||
Debt Instrument | ||
Debt instrument, stated rate (as a percent) | 4.00% | |
Insurance premiums financed | Various institutions | Maximum | ||
Debt Instrument | ||
Debt instrument, stated rate (as a percent) | 4.90% |
LINE OF CREDIT AND LONG-TERM _6
LINE OF CREDIT AND LONG-TERM DEBT - Finance Leases (Details) | Jul. 28, 2020USD ($) | May 22, 2020USD ($)contract | Apr. 02, 2020USD ($)contract | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) |
Lessee, Lease, Description | ||||||
Finance lease payment | $ 282,655 | $ 113,241 | ||||
Secured debt | AVT Equipment Lease-Ohio | ||||||
Lessee, Lease, Description | ||||||
Number of finance leases assumed | contract | 1 | |||||
Finance lease payment | $ 9,322 | |||||
Finance lease term | 3 years | |||||
Finance lease obligation | 410,928 | $ 0 | ||||
Secured debt | AVT Equipment Lease-HH | ||||||
Lessee, Lease, Description | ||||||
Number of finance leases assumed | contract | 1 | |||||
Finance lease payment | $ 15,078 | |||||
Finance lease term | 3 years | |||||
Finance lease obligation | $ 485,745 | $ 0 | ||||
Secured debt | Finance Lease Originated July 28, 2020 | ||||||
Lessee, Lease, Description | ||||||
Finance lease payment | $ 3,545 | |||||
Finance lease term | 3 years |
LINE OF CREDIT AND LONG-TERM _7
LINE OF CREDIT AND LONG-TERM DEBT - Outstanding Debt Facilities (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Long-term Debt | ||
Long-term debt | $ 14,727,369 | $ 18,602,017 |
Deferred finance costs | 0 | (47,826) |
Total, net of deferred finance costs | 14,727,369 | 18,554,191 |
Term Loan | AVT Equipment Lease-Ohio | ||
Long-term Debt | ||
Loan Amount | 337,155 | |
Finance lease obligation | 410,928 | 0 |
Term Loan | AVT Equipment Lease-HH | ||
Long-term Debt | ||
Loan Amount | 551,609 | |
Finance lease obligation | 485,745 | 0 |
Term Loan | Encina Business Credit, LLC | ||
Long-term Debt | ||
Loan Amount | 20,000,000 | |
Long-term debt | 5,658,000 | 13,333,000 |
Term Loan | John Deere Note | ||
Long-term Debt | ||
Loan Amount | 152,643 | |
Long-term debt | 140,487 | 0 |
Revolving Note | Encina Business Credit SPV, LLC | ||
Long-term Debt | ||
Loan Amount | 10,000,000 | |
Long-term debt | 0 | 3,276,230 |
Capex Loan | Encina Business Credit, LLC | ||
Long-term Debt | ||
Loan Amount | 2,000,000 | |
Long-term debt | 1,250,617 | 0 |
Finance Lease | Wells Fargo Equipment Lease-Ohio | ||
Long-term Debt | ||
Loan Amount | 621,000 | |
Finance lease obligation | 465,678 | 551,260 |
Finance Lease | Tetra Capital Lease | ||
Long-term Debt | ||
Loan Amount | 419,690 | |
Finance lease obligation | 195,761 | 264,014 |
Finance Lease | Well Fargo Equipment Lease-VRM LA | ||
Long-term Debt | ||
Loan Amount | 30,408 | |
Finance lease obligation | 4,485 | 12,341 |
PPP Loan | Texas Citizens Bank | ||
Long-term Debt | ||
Loan Amount | 4,222,000 | |
Long-term debt | 4,222,000 | 0 |
Insurance premiums financed | Various institutions | ||
Long-term Debt | ||
Loan Amount | 2,902,428 | |
Long-term debt | $ 1,893,668 | $ 1,165,172 |
LINE OF CREDIT AND LONG-TERM _8
LINE OF CREDIT AND LONG-TERM DEBT - Future Contractual Maturities (Details) | Sep. 30, 2020USD ($) |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | $ 5,357,141 |
Total, Year 2 | 8,750,438 |
Total, Year 3 | 504,881 |
Total, Year 4 | 114,909 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Encina Business Credit, LLC | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 900,000 |
Total, Year 2 | 4,758,000 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Encina Business Credit SPV, LLC | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 0 |
Total, Year 2 | 0 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Encina Business Credit, LLC I | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 158,966 |
Total, Year 2 | 1,091,651 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
John Deere Note | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 37,071 |
Total, Year 2 | 37,991 |
Total, Year 3 | 38,934 |
Total, Year 4 | 26,491 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Well Fargo Equipment Lease- Ohio | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 119,356 |
Total, Year 2 | 125,643 |
Total, Year 3 | 132,261 |
Total, Year 4 | 88,418 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
AVT Equipment Lease-Ohio | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 124,308 |
Total, Year 2 | 135,272 |
Total, Year 3 | 151,348 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
AVT Equipment Lease-HH | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 145,296 |
Total, Year 2 | 158,111 |
Total, Year 3 | 182,338 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Tetra Capital Lease | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 96,530 |
Total, Year 2 | 99,231 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Well Fargo Equipment Lease- VRM LA | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 4,485 |
Total, Year 2 | 0 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Texas Citizens Bank | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 1,877,461 |
Total, Year 2 | 2,344,539 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | 0 |
Various institutions | |
Maturities of Long-term Debt and Capital Lease Obligations [Abstract] | |
Total, Year 1 | 1,893,668 |
Total, Year 2 | 0 |
Total, Year 3 | 0 |
Total, Year 4 | 0 |
Total, Year 5 | 0 |
Total, Thereafter | $ 0 |
EARNINGS PER SHARE - Narrative
EARNINGS PER SHARE - Narrative (Details) - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Options to purchase (in shares) | 5,104,288 | 4,218,250 | ||
Warrants to purchase (in shares) | 8,633,193 | 8,853,056 | ||
Series B Preferred Stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Convertible preferred stock, common stock issuable upon conversion (in shares) | 4,002,619 | 3,769,505 | ||
Series B1 Preferred Stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Convertible preferred stock, common stock issuable upon conversion (in shares) | 7,219,164 | 10,417,966 | ||
Series A Preferred Stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share | ||||
Conversion of stock, shares issued (in shares) | 419,859 | 419,859 |
COMMON STOCK (Details)
COMMON STOCK (Details) | Jun. 19, 2020USD ($)employee$ / sharesshares | Sep. 30, 2019shares | Jun. 30, 2019shares | Sep. 30, 2020$ / sharesshares | Sep. 30, 2019shares | Dec. 31, 2019$ / sharesshares |
Conversion of Stock | ||||||
Common stock, shares authorized (in shares) | 750,000,000 | 750,000,000 | ||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | ||||
Common stock, shares issued (in shares) | 45,554,841 | 43,395,563 | ||||
Common stock, shares outstanding (in shares) | 45,554,841 | 43,395,563 | ||||
Common Stock | ||||||
Conversion of Stock | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | |||||
Shares issued as result of share conversion (in shares) | 2,159,278 | 1,596,160 | ||||
Exercise of options to purchase common stock (in shares) | 2,500 | 75,925 | 78,425 | |||
2019 Stock Incentive Plan | ||||||
Conversion of Stock | ||||||
Grant date fair value | $ / shares | $ 355,404 | |||||
Amortization rate | $ | $ 7,404 | |||||
2019 Stock Incentive Plan | Officer/Director | ||||||
Conversion of Stock | ||||||
Options granted (in shares) | 269,153 | |||||
Exercise price of options (in dollars per share) | $ / shares | $ 0.86 | |||||
Term of stock option | 5 years | |||||
2019 Stock Incentive Plan | Year 1 | Officer/Director | ||||||
Conversion of Stock | ||||||
Vesting award percentage (as a percent) | 25.00% | |||||
Employee | 2019 Stock Incentive Plan | ||||||
Conversion of Stock | ||||||
Number of employees granted with options | employee | 3 | |||||
Options granted (in shares) | 416,885 | |||||
Exercise price of options (in dollars per share) | $ / shares | $ 0.78 | |||||
Term of stock option | 10 years | |||||
Employee | 2019 Stock Incentive Plan | Year 1 | ||||||
Conversion of Stock | ||||||
Vesting award percentage (as a percent) | 25.00% | |||||
Employee | 2019 Stock Incentive Plan | Year 2 | ||||||
Conversion of Stock | ||||||
Vesting award percentage (as a percent) | 25.00% | |||||
Employee | 2019 Stock Incentive Plan | Year 3 | ||||||
Conversion of Stock | ||||||
Vesting award percentage (as a percent) | 25.00% | |||||
Employee | 2019 Stock Incentive Plan | Year 4 | ||||||
Conversion of Stock | ||||||
Vesting award percentage (as a percent) | 25.00% | |||||
Nonemployee | 2019 Stock Incentive Plan | Officer/Director | ||||||
Conversion of Stock | ||||||
Number of employees granted with options | employee | 1 |
PREFERRED STOCK AND DETACHABL_3
PREFERRED STOCK AND DETACHABLE WARRANTS - Narrative (Details) | Jun. 24, 2020 | Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)$ / sharesshares | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($)$ / sharesshares |
Class of Stock | ||||||
Preferred stock, shares authorized (in shares) | 50,000,000 | 50,000,000 | 50,000,000 | |||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | ||||
Liabilities at fair value | $ | $ 124,847 | $ 124,847 | $ 1,969,216 | |||
Dividends payable | $ | $ 1,296,493 | $ 1,238,766 | $ 1,296,493 | $ 1,238,766 | ||
Series A Preferred Stock | ||||||
Class of Stock | ||||||
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 | 5,000,000 | |||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||
Preferred stock, shares issued (in shares) | 419,859 | 419,859 | 419,859 | |||
Preferred stock, shares outstanding (in shares) | 419,859 | 419,859 | 419,859 | |||
Series B Preferred Stock | ||||||
Class of Stock | ||||||
Temporary equity, shares authorized (in shares) | 10,000,000 | 10,000,000 | 10,000,000 | |||
Temporary equity, shares outstanding (in shares) | 4,002,619 | 4,002,619 | 3,826,055 | |||
Temporary equity, shares issued (in shares) | 4,002,619 | 4,002,619 | 3,826,055 | |||
Temporary equity, warrants issued | $ | $ 0 | $ 0 | ||||
Dividends payable | $ | 310,220 | 310,220 | $ 177,921 | |||
Dividends paid in kind | $ | $ 188,837 | 175,305 | $ 547,349 | 510,502 | ||
Preferred stock, dividend percentage (as a percent) | 10.00% | |||||
Series B Preferred Stock | Liability | ||||||
Class of Stock | ||||||
Expected term (years) | 3 months | 3 months | ||||
Series B Preferred Stock | Liability | Expected Dividend Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0 | 0 | ||||
Series B Preferred Stock | Liability | Risk Free Interest Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0.0011 | 0.0011 | ||||
Series B Preferred Stock | Liability | Minimum | Expected Volatility Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0.66 | 0.66 | ||||
Series B Preferred Stock | Liability | Maximum | Expected Volatility Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 1 | 1 | ||||
Series B1 Preferred Stock | ||||||
Class of Stock | ||||||
Temporary equity, shares authorized (in shares) | 17,000,000 | 17,000,000 | 17,000,000 | |||
Temporary equity, shares outstanding (in shares) | 7,219,164 | 7,219,164 | 9,028,085 | |||
Temporary equity, shares issued (in shares) | 7,219,164 | 7,219,164 | 9,028,085 | |||
Temporary equity, warrants issued | $ | $ 124,847 | $ 124,847 | ||||
Dividends payable | $ | 281,557 | 281,557 | $ 211,269 | |||
Dividends paid in kind | $ | $ 171,380 | $ 240,185 | $ 546,557 | $ 712,185 | ||
Series B1 Preferred Stock | Liability | ||||||
Class of Stock | ||||||
Expected term (years) | 1 year 3 months | 1 year 3 months | ||||
Series B1 Preferred Stock | Liability | Expected Dividend Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0 | 0 | ||||
Series B1 Preferred Stock | Liability | Risk Free Interest Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0.0013 | 0.0013 | ||||
Series B1 Preferred Stock | Liability | Minimum | Expected Volatility Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 0.66 | 0.66 | ||||
Series B1 Preferred Stock | Liability | Maximum | Expected Volatility Rate | ||||||
Class of Stock | ||||||
Warrant measurement input (as a percent) | 1 | 1 |
PREFERRED STOCK AND DETACHABL_4
PREFERRED STOCK AND DETACHABLE WARRANTS - Activity in Preferred Stock (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Increase (Decrease) in Temporary Equity | ||||||||
Balance at beginning of period | $ 28,146,347 | $ 28,146,347 | ||||||
Plus: discount accretion | $ 29,157 | $ 539,235 | 932,003 | $ 550,774 | $ 532,925 | $ 560,675 | ||
Balance at end of period | 52,903,491 | 52,903,491 | ||||||
Series B Preferred Stock | ||||||||
Increase (Decrease) in Temporary Equity | ||||||||
Balance at beginning of period | 11,006,406 | 8,900,208 | 11,006,406 | $ 8,900,208 | ||||
Plus: discount accretion | 854,364 | 1,031,483 | ||||||
Plus: dividends in kind | 188,837 | 175,305 | 547,349 | 510,502 | ||||
Balance at end of period | 12,408,119 | 10,442,193 | 12,408,119 | 10,442,193 | ||||
Series B1 Preferred Stock | ||||||||
Increase (Decrease) in Temporary Equity | ||||||||
Balance at beginning of period | $ 12,743,047 | $ 13,279,755 | 12,743,047 | 13,279,755 | ||||
Less: conversions of shares to common | (3,368,474) | (119,768) | ||||||
Plus: discount accretion | 646,031 | 582,649 | ||||||
Plus: dividends in kind | 171,380 | 240,185 | 546,557 | 712,185 | ||||
Balance at end of period | $ 10,567,161 | $ 14,454,821 | $ 10,567,161 | $ 14,454,821 |
PREFERRED STOCK AND DETACHABL_5
PREFERRED STOCK AND DETACHABLE WARRANTS - Changes in Derivative Liability (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation | ||
Balance at beginning of period | $ 1,969,216 | $ 1,481,692 |
Change in valuation of warrants | (1,844,369) | (331,715) |
Balance at end of period | $ 124,847 | $ 1,149,977 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Segment Reporting Information | ||||
Total revenues | $ 37,383,632 | $ 37,799,259 | $ 94,961,188 | $ 120,777,263 |
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 31,186,684 | 32,372,316 | 80,221,343 | 103,732,086 |
Depreciation and amortization attributable to costs of revenues | 1,313,162 | 1,359,629 | 3,731,320 | 3,965,626 |
Gross profit | 4,883,786 | 4,067,314 | 11,008,525 | 13,079,551 |
Selling, general and administrative expenses | 6,241,570 | 6,153,184 | 18,972,648 | 17,529,784 |
Depreciation and amortization attributable to operating expenses | 482,869 | 455,953 | 1,412,719 | 1,367,859 |
Loss from operations | (1,840,653) | (2,541,823) | (9,376,842) | (5,818,092) |
Base oil | ||||
Segment Reporting Information | ||||
Total revenues | 6,365,772 | 9,776,292 | 20,006,371 | 26,357,561 |
Pygas | ||||
Segment Reporting Information | ||||
Total revenues | 1,184,433 | 2,741,557 | 4,815,040 | 7,656,125 |
Industrial fuel | ||||
Segment Reporting Information | ||||
Total revenues | 103,834 | 1,226,573 | 1,397,662 | 7,216,133 |
Distillates | ||||
Segment Reporting Information | ||||
Total revenues | 12,234,672 | 0 | 17,359,234 | 54,697 |
Oil collection services | ||||
Segment Reporting Information | ||||
Total revenues | 2,449,454 | 1,953,924 | 5,707,017 | 4,261,391 |
Metals | ||||
Segment Reporting Information | ||||
Total revenues | 3,160,581 | 1,724,025 | 9,549,144 | 5,988,895 |
Other Re-refinery Products | ||||
Segment Reporting Information | ||||
Total revenues | 834,438 | 3,084,778 | 4,289,343 | 10,482,298 |
VGO/Marine fuel sales | ||||
Segment Reporting Information | ||||
Total revenues | 11,050,448 | 17,292,110 | 31,837,377 | 58,760,163 |
Black Oil | ||||
Segment Reporting Information | ||||
Total revenues | 19,988,122 | 32,330,531 | 61,062,628 | 103,053,529 |
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 14,687,141 | 27,663,983 | 46,601,716 | 88,374,446 |
Depreciation and amortization attributable to costs of revenues | 1,041,719 | 1,073,520 | 2,960,699 | 3,122,664 |
Gross profit | 4,259,262 | 3,593,028 | 11,500,213 | 11,556,419 |
Selling, general and administrative expenses | 4,899,956 | 5,040,772 | 15,180,569 | 14,500,306 |
Depreciation and amortization attributable to operating expenses | 390,105 | 335,105 | 1,072,877 | 1,005,315 |
Loss from operations | (1,030,799) | (1,782,849) | (4,753,233) | (3,949,202) |
Black Oil | Base oil | ||||
Segment Reporting Information | ||||
Total revenues | 5,632,592 | 9,135,650 | 17,914,941 | 23,918,490 |
Black Oil | Pygas | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Industrial fuel | ||||
Segment Reporting Information | ||||
Total revenues | 21,190 | 891,676 | 1,262,266 | 5,714,478 |
Black Oil | Distillates | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Oil collection services | ||||
Segment Reporting Information | ||||
Total revenues | 2,449,454 | 1,953,924 | 5,707,017 | 4,261,391 |
Black Oil | Metals | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Black Oil | Other Re-refinery Products | ||||
Segment Reporting Information | ||||
Total revenues | 834,438 | 3,057,171 | 4,341,027 | 10,399,007 |
Black Oil | VGO/Marine fuel sales | ||||
Segment Reporting Information | ||||
Total revenues | 11,050,448 | 17,292,110 | 31,837,377 | 58,760,163 |
Refining & Marketing | ||||
Segment Reporting Information | ||||
Total revenues | 13,501,749 | 3,076,454 | 22,309,670 | 9,212,477 |
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 13,217,757 | 2,511,314 | 21,772,587 | 7,767,882 |
Depreciation and amortization attributable to costs of revenues | 121,744 | 147,658 | 341,498 | 431,948 |
Gross profit | 162,248 | 417,482 | 195,585 | 1,012,647 |
Selling, general and administrative expenses | 696,611 | 494,781 | 1,867,027 | 1,424,572 |
Depreciation and amortization attributable to operating expenses | 72,314 | 100,398 | 278,492 | 301,194 |
Loss from operations | (606,677) | (177,697) | (1,949,934) | (713,119) |
Refining & Marketing | Base oil | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Pygas | ||||
Segment Reporting Information | ||||
Total revenues | 1,184,433 | 2,741,557 | 4,815,040 | 7,656,125 |
Refining & Marketing | Industrial fuel | ||||
Segment Reporting Information | ||||
Total revenues | 82,644 | 334,897 | 135,396 | 1,501,655 |
Refining & Marketing | Distillates | ||||
Segment Reporting Information | ||||
Total revenues | 12,234,672 | 0 | 17,359,234 | 54,697 |
Refining & Marketing | Oil collection services | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Metals | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | Other Re-refinery Products | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Refining & Marketing | VGO/Marine fuel sales | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | ||||
Segment Reporting Information | ||||
Total revenues | 3,893,761 | 2,392,274 | 11,588,890 | 8,511,257 |
Cost of revenues (exclusive of depreciation and amortization shown separately below) | 3,281,786 | 2,197,019 | 11,847,040 | 7,589,758 |
Depreciation and amortization attributable to costs of revenues | 149,699 | 138,451 | 429,123 | 411,014 |
Gross profit | 462,276 | 56,804 | (687,273) | 510,485 |
Selling, general and administrative expenses | 645,003 | 617,631 | 1,925,052 | 1,604,906 |
Depreciation and amortization attributable to operating expenses | 20,450 | 20,450 | 61,350 | 61,350 |
Loss from operations | (203,177) | (581,277) | (2,673,675) | (1,155,771) |
Recovery | Base oil | ||||
Segment Reporting Information | ||||
Total revenues | 733,180 | 640,642 | 2,091,430 | 2,439,071 |
Recovery | Pygas | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Industrial fuel | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Distillates | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Oil collection services | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 0 | 0 | 0 |
Recovery | Metals | ||||
Segment Reporting Information | ||||
Total revenues | 3,160,581 | 1,724,025 | 9,549,144 | 5,988,895 |
Recovery | Other Re-refinery Products | ||||
Segment Reporting Information | ||||
Total revenues | 0 | 27,607 | (51,684) | 83,291 |
Recovery | VGO/Marine fuel sales | ||||
Segment Reporting Information | ||||
Total revenues | $ 0 | $ 0 | $ 0 | $ 0 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)quarter | Sep. 30, 2019USD ($) | |
Income Tax Disclosure [Abstract] | ||||
Effective income tax rate (as a percent) | 0.00% | |||
U.S. federal income tax rate (as a percent) | 21.00% | |||
Number of quarters of cumulative loss | quarter | 12 | |||
Operating loss carryforwards | $ 55,200,000 | $ 55,200,000 | ||
Loss before income tax | $ 1,955,170 | $ 1,158,883 | $ 8,453,392 | $ 6,857,643 |
COMMODITY DERIVATIVE INSTRUME_3
COMMODITY DERIVATIVE INSTRUMENTS - Schedule of Derivative Instruments (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020USD ($)$ / bblbbl | Dec. 31, 2019USD ($)$ / bblbbl | |
Derivative | ||
Fair Value | $ (23,995) | $ (375,850) |
Sep. 2020- Oct. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 37.10 | |
Remaining Volume (Barrels) | bbl | 10,000 | |
Fair Value | $ 9,000 | |
Sep. 2020- Oct. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 46.33 | |
Remaining Volume (Barrels) | bbl | 10,000 | |
Fair Value | $ (28,896) | |
Sep. 2020- Dec. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 48.67 | |
Remaining Volume (Barrels) | bbl | 26,000 | |
Fair Value | $ (4,099) | |
Dec. 2019-Mar. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 40.88 | |
Remaining Volume (Barrels) | bbl | 130,000 | |
Fair Value | $ 539,800 | |
Dec. 2019-Mar. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 81.19 | |
Remaining Volume (Barrels) | bbl | 130,000 | |
Fair Value | $ (673,428) | |
Dec. 2019-Mar. 2020 | ||
Derivative | ||
Weighted average strike price (in usd per barrel) | $ / bbl | 84.53 | |
Remaining Volume (Barrels) | bbl | 105,000 | |
Fair Value | $ (242,222) |
COMMODITY DERIVATIVE INSTRUME_4
COMMODITY DERIVATIVE INSTRUMENTS - Fair Value of Derivative Instruments within Balance Sheet (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Derivative | ||
Derivative commodity liability | $ (23,995) | $ (375,850) |
Crude oil swaps | ||
Derivative | ||
Derivative commodity liability | (19,896) | (133,628) |
Crude oil futures | ||
Derivative | ||
Derivative commodity liability | $ (4,099) | $ (242,222) |
COMMODITY DERIVATIVE INSTRUME_5
COMMODITY DERIVATIVE INSTRUMENTS - Narrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Gain on commodity derivative contracts | $ 4,557 | $ 4,489,355 | ||
Loss on commodity derivative contracts | $ 1,622,056 | $ 2,691,833 |
LEASES - Narrative (Details)
LEASES - Narrative (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)renewal_optionlease | Sep. 30, 2019USD ($) | Jan. 01, 2019USD ($) | |
New Accounting Pronouncements or Change in Accounting Principle | |||||
Finance lase cost | $ 101,841 | $ 53,121 | $ 228,514 | $ 113,825 | |
Finance lease, interest expense | 33,077 | 12,436 | 66,014 | 30,206 | |
Operating lease cost | $ 1,500,000 | $ 1,600,000 | 4,500,000 | 4,700,000 | |
Operating lease payments | 1,600,000 | 1,600,000 | |||
Finance lease payment | $ 282,655 | $ 113,241 | |||
Number of extension options | renewal_option | 2 | ||||
Plant | |||||
New Accounting Pronouncements or Change in Accounting Principle | |||||
Lease renewal term | 5 years | 5 years | |||
Number of operating leases | lease | 2 | ||||
Lease renewal term, total | 20 years | ||||
Minimum | |||||
New Accounting Pronouncements or Change in Accounting Principle | |||||
Lease renewal term | 1 year | 1 year | |||
Maximum | |||||
New Accounting Pronouncements or Change in Accounting Principle | |||||
Lease renewal term | 20 years | 20 years | |||
Cumulative Effect, Period of Adoption, Adjustment | |||||
New Accounting Pronouncements or Change in Accounting Principle | |||||
Right-of-use asset | $ 37,800,000 |
LEASES - Schedule of Maturities
LEASES - Schedule of Maturities of Operating Lease Liabilities (Details) | Sep. 30, 2020USD ($) |
Lessee, Lease, Description | |
Year 1 | $ 5,830,681 |
Year 2 | 4,804,280 |
Year 3 | 4,463,862 |
Year 4 | 4,360,417 |
Year 5 | 4,360,417 |
Thereafter | 32,629,594 |
Total lease payments | 56,449,251 |
Less: interest | (22,435,175) |
Present value of lease liabilities | 34,014,076 |
Facilities | |
Lessee, Lease, Description | |
Year 1 | 710,879 |
Year 2 | 446,869 |
Year 3 | 346,733 |
Year 4 | 300,000 |
Year 5 | 300,000 |
Thereafter | 2,150,000 |
Total lease payments | 4,254,481 |
Less: interest | (1,510,219) |
Present value of lease liabilities | 2,744,262 |
Equipment | |
Lessee, Lease, Description | |
Year 1 | 161,539 |
Year 2 | 67,338 |
Year 3 | 0 |
Year 4 | 0 |
Year 5 | 0 |
Thereafter | 0 |
Total lease payments | 228,877 |
Less: interest | (10,024) |
Present value of lease liabilities | 218,853 |
Plant | |
Lessee, Lease, Description | |
Year 1 | 4,060,417 |
Year 2 | 4,060,417 |
Year 3 | 4,060,417 |
Year 4 | 4,060,417 |
Year 5 | 4,060,417 |
Thereafter | 30,479,594 |
Total lease payments | 50,781,679 |
Less: interest | (20,856,360) |
Present value of lease liabilities | 29,925,319 |
Railcar | |
Lessee, Lease, Description | |
Year 1 | 897,846 |
Year 2 | 229,656 |
Year 3 | 56,712 |
Year 4 | 0 |
Year 5 | 0 |
Thereafter | 0 |
Total lease payments | 1,184,214 |
Less: interest | (58,572) |
Present value of lease liabilities | $ 1,125,642 |
LEASES - Schedule of Operating
LEASES - Schedule of Operating Lease Weighted Average Remaining Lease Terms and Discount Rates (Details) | Sep. 30, 2020 |
Lease facilities | |
Lessee, Lease, Description | |
Weighted average remaining lease terms (years) | 5 years 6 months 10 days |
Weighted average discount rate (as a percent) | 9.19% |
Lease equipment | |
Lessee, Lease, Description | |
Weighted average remaining lease terms (years) | 1 year 5 months 1 day |
Weighted average discount rate (as a percent) | 8.00% |
Lease plant | |
Lessee, Lease, Description | |
Weighted average remaining lease terms (years) | 12 years 6 months 3 days |
Weighted average discount rate (as a percent) | 9.37% |
Lease railcar | |
Lessee, Lease, Description | |
Weighted average remaining lease terms (years) | 1 year 1 month 24 days |
Weighted average discount rate (as a percent) | 8.00% |
SHARE PURCHASE AND SUBSCRIPTI_3
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS - Myrtle Grove Share Purchase and Subscription Agreement (Details) - USD ($) $ in Millions | Jul. 25, 2019 | Sep. 30, 2020 |
Common Class B and Class A | ||
Class of Stock | ||
Annual return (as a percent) | 22.50% | |
Percentage of aggregate capital investment to be added to original per-unit price to determine cash purchase price (as a percent) | 50.00% | 50.00% |
Tensile-MG | Common Class B | ||
Class of Stock | ||
Percentage of voting power of the outstanding voting securities (more than) (as a percent) | 50.00% | |
Tensile-MG | MG SPV | Common Class B | ||
Class of Stock | ||
Restricted cash and cash equivalents | $ 2 |
SHARE PURCHASE AND SUBSCRIPTI_4
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS - Redeemable Noncontrolling Interest (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2020 | Mar. 31, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Jan. 17, 2020 | Jul. 26, 2019 | |
Increase (Decrease) in Temporary Equity | ||||||
Beginning balance | $ 4,396,894 | $ 4,396,894 | ||||
Capital contribution from non-controlling interest | 21,000,000 | $ 3,150,000 | ||||
Initial adjustment of carrying amount of non-controlling interest | 9,091,068 | $ 970,809 | ||||
Change in ownership | 71,171 | 71,171 | ||||
Accretion of non-controlling interest to redemption value | $ 1,287,559 | 13,635,797 | ||||
Ending balance | 29,928,211 | 29,928,211 | ||||
MG SPV | ||||||
Redeemable Noncontrolling Interest | ||||||
Adjustment in noncontrolling interest | 2,179,191 | |||||
Increase (Decrease) in Temporary Equity | ||||||
Beginning balance | 4,396,894 | 4,396,894 | ||||
Capital contribution from non-controlling interest | 3,150,000 | |||||
Initial adjustment of carrying amount of non-controlling interest | 970,809 | |||||
Net income (loss) attributable to redeemable non-controlling interest | (120,031) | |||||
Accretion of non-controlling interest to redemption value | 833,354 | |||||
Ending balance | 5,181,388 | 5,181,388 | ||||
Heartland SPV | ||||||
Redeemable Noncontrolling Interest | ||||||
Percentage acquired (as a percent) | 50.00% | |||||
Increase (Decrease) in Temporary Equity | ||||||
Beginning balance | $ 0 | 0 | ||||
Initial adjustment of carrying amount of non-controlling interest | 11,908,932 | |||||
Net income (loss) attributable to redeemable non-controlling interest | 35,449 | |||||
Accretion of non-controlling interest to redemption value | 12,802,442 | |||||
Ending balance | $ 24,746,823 | $ 24,746,823 | ||||
Tensile-MG | MG SPV | ||||||
Redeemable Noncontrolling Interest | ||||||
Percentage acquired (as a percent) | 15.58% |
SHARE PURCHASE AND SUBSCRIPTI_5
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS - Heartland Share Purchase and Subscription Agreement (Details) | Jan. 17, 2020USD ($)member$ / sharesshares | Mar. 31, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Dec. 31, 2019 |
Class of Stock | |||||
Adjustment of carrying mount of non-controlling interest | $ | $ 9,091,068 | $ 970,809 | $ 9,091,068 | ||
Common Class A | |||||
Class of Stock | |||||
Capital investment, percentage (as a percent) | 50.00% | ||||
Heartland SPV | |||||
Class of Stock | |||||
Ownership percentage (as a percent) | 35.00% | ||||
Number of managers | member | 5 | ||||
Conversion basis ratio (in shares) | 1 | ||||
Annual return (as a percent) | 22.50% | ||||
Vertex Refining OH, LLC | |||||
Class of Stock | |||||
Ownership percentage (as a percent) | 100.00% | ||||
Tensile-Heartland | Preferred Class A | |||||
Class of Stock | |||||
Preferred stock, dividend percentage (as a percent) | 22.50% | ||||
Tensile-Heartland | Heartland SPV | |||||
Class of Stock | |||||
Ownership percentage (as a percent) | 65.00% | ||||
Number of managers | member | 3 | ||||
Tensile-Heartland | Heartland SPV | Preferred Class A | |||||
Class of Stock | |||||
Ownership percentage (as a percent) | 100.00% | ||||
Vertex Operating | Heartland SPV | |||||
Class of Stock | |||||
Ownership percentage (as a percent) | 35.00% | ||||
Number of managers | member | 2 | ||||
Heartland SPV | |||||
Class of Stock | |||||
Purchase amount | $ | $ 7,500,000 | ||||
Percentage acquired (as a percent) | 50.00% | ||||
Heartland SPV | Common Class A | |||||
Class of Stock | |||||
Redemption period | 180 days | ||||
Redemption price, percentage (as a percent) | 25.00% | ||||
Percentage of aggregate capital investment to be added to original per-unit price to determine cash purchase price (as a percent) | 50.00% | ||||
Aggregate unpaid annual return | $ | $ 21,000,000 | ||||
Heartland SPV | Tensile-Heartland | Class A-2 Preferred Units | |||||
Class of Stock | |||||
Share price (in usd per share) | $ / shares | $ 1,000 | ||||
Additional consideration (in shares) | 7,000 | ||||
Vertex Refining OH, LLC | Heartland SPV | Common Class A | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 13,500 | ||||
Vertex Refining OH, LLC | Heartland SPV | A-1 Preferred Units | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 13,500 | ||||
Vertex Refining OH, LLC | Heartland SPV | Common Class B | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 11,300 | ||||
Vertex Splitter Corporation | Vertex Refining OH, LLC | Heartland SPV | Common Class B | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 248 | ||||
Vertex Operating | MG SPV | Common Class A | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 1,000 | ||||
Share price (in usd per share) | $ / shares | $ 1,000 | ||||
Equity interest issued or issuable | $ | $ 1,000,000 | ||||
Vertex Operating | Heartland SPV | Tensile-Heartland | Common Class A | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 13,500 | ||||
Total purchase price | $ | $ 13,500,000 | ||||
Vertex Operating | Heartland SPV | Tensile-Heartland | A-1 Preferred Units | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 13,500 | ||||
Heartland SPV | Heartland SPV | Tensile-Heartland | Common Class A | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 7,500 | ||||
Total purchase price | $ | $ 7,500,000 | ||||
Heartland SPV | Heartland SPV | Tensile-Heartland | A-1 Preferred Units | |||||
Class of Stock | |||||
Consideration transferred (in shares) | 7,500 | ||||
MG SPV | Tensile-MG | |||||
Class of Stock | |||||
Ownership interest (as a percent) | 15.00% | ||||
MG SPV | Vertex Operating | |||||
Class of Stock | |||||
Ownership interest (as a percent) | 85.00% |
SHARE PURCHASE AND SUBSCRIPTI_6
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS - Variable Interest Entities (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Sep. 30, 2019 |
Variable Interest Entity | |||
Cash and cash equivalents | $ 15,552,980 | $ 4,099,655 | $ 2,303,725 |
Accounts receivable, net | 9,090,927 | 12,138,078 | |
Inventory | 3,584,317 | 6,547,479 | |
Prepaid expense and other current assets | 4,597,361 | 4,452,920 | |
Total current assets | 32,925,710 | 27,406,908 | |
Fixed assets, net | 45,268,202 | 44,761,397 | |
Finance lease right-of-use assets | 1,640,694 | 851,570 | |
Operating lease right-of-use assets | 34,014,076 | 35,586,885 | |
Intangible assets, net | 9,880,310 | 11,243,800 | |
Other assets | 1,424,288 | 840,754 | |
TOTAL ASSETS | 125,153,280 | 120,759,919 | |
Accounts payable | 8,275,862 | 7,620,098 | |
Accrued expenses | 3,312,018 | 5,016,132 | |
Finance lease liability-current | 5,830,681 | 5,885,304 | |
Operating lease liability-current | 4,867,167 | 2,017,345 | |
Total current liabilities | 23,391,460 | 24,797,299 | |
Finance lease liability-long term | 1,072,623 | 610,450 | |
Operating lease liability-long term | 28,183,395 | 29,701,581 | |
Total liabilities | 61,069,930 | $ 69,511,546 | |
Variable Interest Entity, Primary Beneficiary | |||
Variable Interest Entity | |||
Cash and cash equivalents | 8,072,347 | ||
Accounts receivable, net | 2,879,431 | ||
Inventory | 310,596 | ||
Prepaid expense and other current assets | 1,968,335 | ||
Total current assets | 13,230,709 | ||
Fixed assets, net | 5,619,248 | ||
Finance lease right-of-use assets | 1,106,671 | ||
Operating lease right-of-use assets | 369,333 | ||
Intangible assets, net | 1,127,352 | ||
Other assets | 108,643 | ||
TOTAL ASSETS | 21,561,956 | ||
Accounts payable | 1,413,378 | ||
Accrued expenses | 335,267 | ||
Finance lease liability-current | 340,193 | ||
Operating lease liability-current | 268,437 | ||
Total current liabilities | 2,357,275 | ||
Finance lease liability-long term | 732,174 | ||
Operating lease liability-long term | 100,896 | ||
Total liabilities | $ 3,190,345 |
ACQUISITIONS (Details)
ACQUISITIONS (Details) - Crystal Energy, LLC | Jun. 01, 2020USD ($) |
Business Acquisition | |
Aggregate cash consideration | $ 1,822,690 |
Accounts receivable | 1,939,364 |
Inventory | 976,512 |
Other current assets | 14,484 |
Current liabilities | $ 1,107,670 |
SUBSEQUENT EVENTS - Issuance of
SUBSEQUENT EVENTS - Issuance of Series B and B1 Preferred Stock Shares In-Kind and Common Stock (Details) - Subsequent Event | 1 Months Ended |
Oct. 31, 2020shares | |
Series B Preferred Stock | |
Subsequent Event [Line Items] | |
Restricted shares issued (in shares) | 100,071 |
Number of shares converted into common stock (in shares) | 100,071 |
Series B1 Preferred Stock | |
Subsequent Event [Line Items] | |
Restricted shares issued (in shares) | 180,485 |
Number of shares converted into common stock (in shares) | 180,485 |