NEVADA
|
94-3439569
|
(State or other jurisdiction of
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
1331 GEMINI STREET
SUITE 250
HOUSTON, TEXAS
|
77058
|
(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
|
¨
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Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
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Smaller reporting company
|
x
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Page | ||
PART I
|
||
Item 1.
|
Consolidated Financial Statements
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F-1
|
|
Consolidated Balance Sheets
|
F-2 |
|
Consolidated Statements of Operations (unaudited)
|
F-3
|
|
Consolidated Statements of Cash Flows (unaudited)
|
F-4 |
|
Notes to Consolidated Financial Statements (unaudited)
|
F-5 |
Item 2.
|
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
|
5 |
Item 3.
|
Quantitative And Qualitative Disclosures About Market Risk
|
23 |
Item 4.
|
Controls and Procedures
|
23 |
PART II
|
||
Item 1.
|
Legal Proceedings
|
24 |
Item 1A:
|
Risk Factors
|
24 |
Item 2.
|
Unregistered Sales Of Equity Securities And Use Of Proceeds
|
24 |
Item 3.
|
Defaults Upon Senior Securities
|
25 |
Item 4.
|
(Removed and Reserved)
|
25 |
Item 5.
|
Other Information
|
25 |
Item 6.
|
Exhibits
|
25 |
Page
|
||
Consolidated Financial Statements
|
||
Consolidated Balance Sheets
|
F-2
|
|
Consolidated Statements of Operations
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F-3
|
|
Consolidated Statements of Cash Flows
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F-4
|
|
Notes to Consolidated Financial Statements
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F-5
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VERTEX ENERGY, INC.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 1,317,177 | $ | 744,313 | ||||
Accounts receivable, net
|
5,493,475 | 1,482,510 | ||||||
Accounts receivable- related party
|
10,967 | - | ||||||
Inventory
|
8,766,030 | 3,901,781 | ||||||
Prepaid expenses
|
111,866 | 100,485 | ||||||
Total current assets
|
15,699,515 | 6,229,089 | ||||||
Noncurrent assets
|
||||||||
Licensing agreement, net
|
1,957,967 | 1,833,966 | ||||||
Fixed assets, net
|
156,415 | 76,290 | ||||||
Total noncurrent assets
|
2,114,382 | 1,910,256 | ||||||
TOTAL ASSETS
|
$ | 17,813,897 | $ | 8,139,345 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued expenses
|
$ | 7,465,838 | $ | 4,593,199 | ||||
Accounts payable-related party
|
1,093,241 | 407,273 | ||||||
Deposits
|
1,080,277 | - | ||||||
Line of Credit
|
1,000,000 | - | ||||||
Total current liabilities
|
10,639,356 | 5,000,472 | ||||||
Long-term liabilities
|
||||||||
Mandatorily redeemable preferred stock, Series B, $.001 par value, 2,000,000 shares authorized, 0 and 600,000 issued and outstanding as of September 30, 2011 and December 31, 2010 (includes $150,000 to a related party)
|
- | 600,000 | ||||||
Total liabilities
|
10,639,356 | 5,600,472 | ||||||
Commitments and contingencies
|
||||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Preferred stock, $0.001 par value per share:
|
||||||||
50,000,000 shares authorized
|
||||||||
Series A Convertible Preferred stock, $0.001 par value,
5,000,000 authorized and 4,452,167 and 4,675,716 issued
and outstanding at September 30, 2011 and December 31,
2010, respectively
|
4,452 | 4,676 | ||||||
Common stock, $0.001 par value per share;
|
||||||||
750,000,000 shares authorized; 9,239,398 and 8,370,849
issued and outstanding at September 30, 2011 and
December 31, 2010, respectively
|
9,239 | 8,371 | ||||||
Additional paid-in capital
|
3,275,037 | 2,275,074 | ||||||
Retained earnings
|
3,885,813 | 250,752 | ||||||
Total stockholders’ equity
|
7,174,541 | 2,538,873 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 17,813,897 | $ | 8,139,345 |
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
|
||||||||||||||||
(UNAUDITED)
|
||||||||||||||||
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues
|
$ | 30,301,326 | $ | 13,288,600 | $ | 78,383,111 | $ | 42,428,741 | ||||||||
Revenues – related parties
|
- | 1,828 | 17,978 | 5,578 | ||||||||||||
30,301,326 | 13,290,428 | 78,401,089 | 42,434,319 | |||||||||||||
Cost of revenues
|
28,268,785 | 12,471,821 | 71,632,067 | 39,679,178 | ||||||||||||
Gross profit
|
2,032,541 | 818,607 | 6,769,022 | 2,755,141 | ||||||||||||
Selling, general and
administrative expenses
|
997,723 | 667,339 | 3,030,461 | 2,118,708 | ||||||||||||
Income from operations
|
1,034,818 | 151,268 | 3,738,561 | 636,433 | ||||||||||||
Other income (expense)
|
||||||||||||||||
Other income
|
- | 89,333 | - | 219,333 | ||||||||||||
Interest expense
|
(3,593 | ) | (26,521 | ) | (57,811 | ) | (89,119 | ) | ||||||||
Total other income (expense)
|
(3,593 | ) | 62,812 | (57,811 | ) | 130,214 | ||||||||||
Income before income tax
|
1,031,225 | 214,080 | 3,680,750 | 766,647 | ||||||||||||
Income tax expense
|
(3,000 | ) | (5,500 | ) | (45,689 | ) | (5,500 | ) | ||||||||
Net income
|
$ | 1,028,225 | $ | 208,580 | $ | 3,635,061 | $ | 761,147 | ||||||||
Earnings per common share
|
||||||||||||||||
Basic
|
$ | 0.11 | $ | 0.03 | $ | 0.42 | $ | 0.09 | ||||||||
Diluted
|
$ | 0.06 | $ | 0.02 | $ | 0.25 | $ | 0.06 | ||||||||
Shares used in computing earnings per share
|
||||||||||||||||
Basic
|
9,187,227 | 8,315,309 | 8,722,642 | 8,276,184 | ||||||||||||
Diluted
|
15,851,393 | 13,581,067 | 14,503,882 | 13,540,455 | ||||||||||||
VERTEX ENERGY, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010
|
||||||||
(UNAUDITED)
|
||||||||
Nine Months Ended
|
||||||||
September 30,
2011
|
September 30,
2010
|
|||||||
Cash flows operating activities
|
||||||||
Net income
|
$ | 3,635,061 | $ | 761,147 | ||||
Adjustments to reconcile net income to cash
|
||||||||
provided by (used in) operating activities
|
||||||||
Stock based compensation expense
|
94,358 | 135,923 | ||||||
Depreciation and amortization
|
120,138 | 107,781 | ||||||
Changes in assets and liabilities
|
||||||||
Accounts receivable
|
(4,010,965 | ) | (400,132 | ) | ||||
Accounts receivable- related parties
|
(10,967 | ) | - | |||||
Inventory
|
(4,864,249 | ) | 558,543 | |||||
Prepaid expenses
|
(11,381 | ) | 29,253 | |||||
Accounts payable
|
2,872,639 | (1,216,988 | ) | |||||
Accounts payable-related parties
|
685,968 | 39,840 | ||||||
Other deposits
|
1,080,277 | - | ||||||
Net cash provided by (used in) operating activities
|
(409,121 | ) | 15,367 | |||||
Cash flows from investing activities
|
||||||||
Purchase of intangible assets
|
(232,214 | ) | (260,401 | ) | ||||
Purchase of fixed assets
|
(92,051 | ) | (8,653 | ) | ||||
Net cash used in investing activities
|
(324,265 | ) | (269,054 | ) | ||||
Cash flows from financing activities
|
||||||||
Proceeds from sale of Series B Preferred “B” stock
|
- | 600,000 | ||||||
Proceeds from exercise of common stock warrants
|
306,250 | 33 | ||||||
Line of credit proceeds, net
|
1,000,000 | 1,000,000 | ||||||
Payments on due to related party balance
|
- | (841,855 | ) | |||||
Net cash provided by financing activities
|
1,306,250 | 758,178 | ||||||
Net increase in cash and cash equivalents
|
572,864 | 504,491 | ||||||
Cash and cash equivalents at beginning of the period
|
744,313 | 514,136 | ||||||
Cash and cash equivalents at end of period
|
$ | 1,317,177 | $ | 1,018,627 | ||||
SUPPLEMENTAL INFORMATION
|
||||||||
Cash paid for interest during the period
|
$ | 78,505 | $ | 70,719 | ||||
Cash paid for income taxes during the period
|
$ | 56,000 | $ | 5,500 | ||||
NON-CASH TRANSACTIONS
|
||||||||
Conversion of Series A Preferred Stock into common stock
|
$ | 224 | $ | 55 |
Conversion of Series B Preferred Stock into common stock
|
$ | 600,000 | $ | - |
2011
|
2010
|
||||||
% of
|
% of
|
% of
|
% of
|
||||
Revenues
|
Receivables
|
Revenues
|
Receivables
|
||||
Customer 1
|
48%
|
46%
|
19%
|
0%
|
|||
Customer 2
|
12%
|
16%
|
19%
|
25%
|
|||
Customer 3
|
10%
|
7%
|
8%
|
14%
|
|||
Customer 4
|
10%
|
0%
|
19%
|
37%
|
|||
Customer 5
|
1%
|
15%
|
0%
|
0%
|
|||
Customer 6
|
6%
|
0%
|
8%
|
25%
|
|||
Customer 7
|
0%
|
0%
|
11%
|
0%
|
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (in Years)
|
Grant Date Fair Value
|
|||||||||||||
Outstanding at December 31, 2010
|
2,703,334 | $ | 5.81 | 7.60 | $ | 715,826 | ||||||||||
Options granted
|
390,000 | 2.77 | 10.00 | 283,591 | ||||||||||||
Options exercised
|
(5,000 | ) | (.45 | ) | - | (1,800 | ) | |||||||||
Options cancelled/forfeited/expired
|
(15,000 | ) | (.62 | ) | - | (6,622 | ) | |||||||||
Outstanding at September 30, 2011
|
3,073,334 | $ | 5.46 | 7.25 | $ | 990,995 | ||||||||||
Vested at September 30, 2011
|
1,836,964 | $ | 8.24 | 6.43 | $ | 363,211 | ||||||||||
Exercisable at September 30, 2011
|
1,836,964 | $ | 8.24 | 6.43 | $ | 363,211 | ||||||||||
Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Life (in Years)
|
Grant Date Fair Value
|
|||||||||||||
Outstanding at December 31, 2010
|
1,773,457 | $ | 14.24 | 1.96 | $ | 172,973 | ||||||||||
Warrants granted
|
25,000 | 1.75 | 4 | 11,201 | ||||||||||||
Warrants exercised
|
(40,000 | ) | (.10 | ) | (2.04 | ) | (2,342 | ) | ||||||||
Warrants cancelled/forfeited/expired
|
(363,146 | ) | (26.02 | ) | - | (21,789 | ) | |||||||||
Warrants at September 30, 2011
|
1,395,311 | $ | 11.35 | 1.65 | $ | 160,043 | ||||||||||
Vested at September 30, 2011
|
1,303,651 | $ | 12.15 | 1.76 | $ | 135,475 | ||||||||||
Exercisable at September 30, 2011
|
1,303,651 | $ | 12.15 | 1.76 | $ | 135,475 | ||||||||||
2011 | 2010 | |||||||
Basic Earnings per Share
|
||||||||
Numerator:
|
||||||||
Income available to common shareholders
|
$ | 3,635,061 | $ | 761,147 | ||||
Denominator:
|
||||||||
Weighted-average shares outstanding
|
8,722,642 | 8,276,184 | ||||||
Basic earnings per share
|
$ | 0.42 | $ | 0.09 | ||||
|
||||||||
Diluted Earnings per Share
|
||||||||
Numerator:
|
||||||||
Income
|
$ | 3,635,061 | $ | 761,147 | ||||
Denominator:
|
||||||||
Weighted-average shares outstanding
|
8,722,642 | 8,276,184 | ||||||
Effect of dilutive securities
|
||||||||
Stock options and warrants
|
1,329,073 | 563,998 | ||||||
Preferred stock
|
4,452,167 | 4,700,273 | ||||||
Diluted weighted-average shares outstanding
|
14,503,882 | 13,540,455 | ||||||
Diluted earnings per share
|
$ | 0.25 | $ | 0.06 |
NINE MONTHS ENDED SEPTEMBER 30, 2011
|
||||||||||||
Refining &
|
||||||||||||
Black Oil
|
Marketing
|
Total
|
||||||||||
Revenues
|
$ | 15,101,466 | $ | 63,299,623 | $ | 78,401,089 | ||||||
Net income from operations
|
$ | 330,072 | $ | 3,408,489 | $ | 3,738,561 | ||||||
Total Assets
|
$ | 5,816,438 | $ | 11,997,459 | $ | 17,813,897 | ||||||
NINE MONTHS ENDED SEPTEMBER 30, 2010
|
||||||||||||
Refining &
|
||||||||||||
Black Oil
|
Marketing
|
Total
|
||||||||||
Revenues
|
$ | 14,726,733 | $ | 27,707,586 | $ | 42,434,319 | ||||||
Net income (loss) from operations
|
$ | 867,248 | $ | (230,815 | ) | $ | 636,433 | |||||
THREE MONTHS ENDED SEPTEMBER 30, 2011
|
||||||||||||
Refining &
|
||||||||||||
Black Oil
|
Marketing
|
Total
|
||||||||||
Revenues
|
$ | 6,253,317 | $ | 24,048,009 | $ | 30,301,326 | ||||||
Net income from operations
|
$ | 290,823 | $ | 743,995 | $ | 1,034,818 | ||||||
THREE MONTHS ENDED SEPTEMBER 30, 2010
|
||||||||||||
Refining &
|
||||||||||||
Black Oil
|
Marketing
|
Total
|
||||||||||
Revenues
|
$ | 6,673,791 | $ | 6,616,637 | $ | 13,290,428 | ||||||
Net income (loss) from operations
|
$ | 618,060 | $ | (466,792 | ) | $ | 151,268 | |||||
|
·
|
Grow our Core Business. Our focus is to continue to supply used motor oil and other petroleum by-product feedstock, as well as our re-refined products to existing customers and to cultivate additional feedstock supply volume by expanding relationships with existing
suppliers and developing new supplier relationships. We will seek to maintain good relations with existing suppliers, customers and vendors and the high levels of customer service necessary to maintain these businesses. We also plan to seek to develop relationships with additional re-refining facilities to serve as such facilities’ primary and exclusive feedstock provider.
|
|
·
|
Re-Refine Higher Value End Products. We intend to develop, lease, or acquire technologies to re-refine our feedstock supply into higher-value end products, including assets or technologies which complement TCEP. Currently, we are using TCEP to re-refine used oil feedstock into cutterstock for use in the marine fuel market. We believe that the expansion of TCEP facilities and our technology, and investments in additional technologies, will enable us to upgrade feedstock into end products, including lubricating base oil, that command higher market prices than the current re-refined products we
produce.
|
|
·
|
Expand TCEP Re-Refinement Capacity. We intend to expand our licensed TCEP capacity by building our own TCEP facilities to re-refine feedstock. We believe the TCEP process has a distinct competitive advantage over conventional re-refining technology because it produces a high-quality, fuel oil product, and the capital expenditures required to build a TCEP processing plant are significantly lower than a comparable conventional re-refining facility. By continuing the transition from our historical role as a value-added logistics provider to operating as a re-refiner, we believe we will be able to leverage our
existing feedstock supply network and aggregation capabilities to upgrade a larger percentage of our feedstock inventory into higher value end products which we believe should drive increased revenue and gross margins. We intend to build TCEP facilities near the geographic location of substantial feedstock sources where we have relationships with through our aggregation business. By establishing TCEP facilities near proven feedstock sources, we seek to lower our transportation costs and lower the risk of operating plants at low capacity.
|
|
|
·
|
Pursue Selective Strategic Relationships Or Acquisitions. We plan to grow market share by consolidating feedstock supply through partnering with or acquiring collection and aggregation assets. Such acquisitions and/or partnerships could increase our revenue and provide better control over the quality and quantity of feedstock available for resale and/or upgrading as well as providing additional locations for the implementation of TCEP.
|
Three Months Ended September 30,
|
||||||||||||||||
2011
|
2010
|
$ Change
|
% Change
|
|||||||||||||
(unaudited)
|
||||||||||||||||
Revenues
|
$ | 30,301,326 | $ | 13,290,428 | $ | 17,010,898 | 128 | % | ||||||||
Cost of Revenues
|
28,268,785 | 12,471,821 | (15,796,964 | ) | (127 | )% | ||||||||||
Gross Profit
|
2,032,541 | 818,607 | 1,213,934 | 148 | % | |||||||||||
Selling, general and administrative expenses
|
997,723 | 667,339 | (330,384 | ) | (50 | )% | ||||||||||
Income (loss) from operations
|
1,034,818 | 151,268 | 883,550 | 584 | % | |||||||||||
Other Income
|
- | 89,333 | (89,333 | ) | (100 | )% | ||||||||||
Interest Expense
|
(3,593 | ) | (26,521 | ) | 22,928 | 86 | % | |||||||||
Income Tax
|
(3,000 | ) | (5,500 | ) | 2,500 | 45 | % | |||||||||
Net income
|
$ | 1,028,225 | $ | 208,580 | $ | 819,645 | 393 | % |
Three Months Ended September 30,
|
||||||||||||||||
2011 | 2010 | $ Change | $ Change | |||||||||||||
Black Oil Segment
|
(unaudited) | |||||||||||||||
Total revenue
|
$ | 6,253,317 | $ | 6,673,791 | $ | (420,474 | ) | (6 | )% | |||||||
Total cost of revenue
|
$ | 5,610,880 | $ | 5,802,650 | 191,770 | 3 | % | |||||||||
Gross profit
|
$ | 642,437 | $ | 871,141 | $ | (228,704 | ) | (26 | )% | |||||||
Refining Segment
|
||||||||||||||||
Total revenue
|
$ | 24,048,009 | $ | 6,616,637 | $ | 17,431,372 | 263 | % | ||||||||
Total cost of revenue
|
$ | 22,657,905 | $ | 6,669,171 | (15,988,734 | ) | (240 | )% | ||||||||
Gross profit
|
$ | 1,390,104 | $ | (52,534 | ) | $ | 1,442,638 | 2,746 | % |
Benchmark
|
High
|
Date
|
Low
|
Date
|
||||||
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)
|
$ | 2.29 |
May 3
|
$ | 1.84 |
February 8
|
||||
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)
|
$ | 2.40 |
May 3
|
$ | 1.86 |
February 8
|
||||
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)
|
$ | 75.70 |
January 6
|
$ | 60.55 |
May 25
|
||||
NYMEX Crude oil (dollars per barrel)
|
$ | 86.84 |
April 6
|
$ | 68.01 |
May 20
|
||||
Reported in Platt's US Marketscan (Gulf Coast)
|
Benchmark
|
High
|
Date
|
Low
|
Date
|
||||||
U.S. Gulfcoast No. 2 Waterborne (dollars per gallon)
|
$ | 3.30 |
April 8
|
$ | 2.44 |
January 4
|
||||
U.S. Gulfcoast Unleaded 87 Waterborne (dollars per gallon)
|
$ | 3.52 |
May 9
|
$ | 2.33 |
January 25
|
||||
U.S. Gulfcoast Residual Fuel No. 6 3% (dollars per barrel)
|
$ | 104.35 |
April 8
|
$ | 76.70 |
January 4
|
||||
NYMEX Crude oil (dollars per barrel)
|
$ | 113.93 |
April 29
|
$ | 79.20 |
September 3
|
||||
Reported in Platt's US Marketscan (Gulf Coast)
|
Nine Months Ended September 30,
|
||||||||||||||||
2011
|
2010
|
$ Change
|
% Change
|
|||||||||||||
(unaudited)
|
||||||||||||||||
Total Revenues
|
$ | 78,401,089 | $ | 42,434,319 | $ | 35,966,770 | 85 | % | ||||||||
Cost of Revenues
|
71,632,067 | 39,679,178 | (31,952,889 | ) | (81 | )% | ||||||||||
Gross Profit
|
6,769,022 | 2,755,141 | 4,013,881 | 146 | % | |||||||||||
Selling, general and administrative expenses
|
3,030,461 | 2,118,708 | (911,753 | ) | (43 | )% | ||||||||||
Income (loss) from operations
|
3,738,561 | 636,433 | 3,102,128 | 487 | % | |||||||||||
Other Income
|
- | 219,333 | (219,333 | ) | (100 | %) | ||||||||||
Interest Expense
|
(57,811 | ) | (89,119 | ) | 31,308 | 35 | % | |||||||||
Income Tax
|
(45,689 | ) | (5,500 | ) | (40,189 | ) | (731 | )% | ||||||||
Net income
|
$ | 3,635,061 | $ | 761,147 | $ | 2,873,914 | 378 | % |
Nine Months Ended September 30,
|
||||||||||||||||
2011
|
2010
|
$ Change
|
$ Change
|
|||||||||||||
(unaudited)
|
||||||||||||||||
Black Oil Segment
|
||||||||||||||||
Total revenue
|
$ | 15,101,466 | $ | 14,726,733 | $ | 374,733 | 3 | % | ||||||||
Total cost of revenue
|
$ | 13,633,621 | $ | 13,030,818 | (602,803 | ) | (5 | )% | ||||||||
Gross profit
|
$ | 1,467,845 | $ | 1,695,915 | $ | (228,070 | ) | (13 | )% | |||||||
Refining Segment
|
||||||||||||||||
Total revenue
|
$ | 63,299,623 | $ | 27,707,586 | $ | 35,592,037 | 128 | % | ||||||||
Total cost of revenue
|
$ | 57,998,446 | $ | 26,648,360 | (31,350,086 | ) | (118 | )% | ||||||||
Gross profit
|
$ | 5,301,177 | $ | 1,059,226 | $ | 4,241,951 | (400 | )% |
(1)
|
actual or anticipated variations in our results of operations;
|
(2)
|
our ability or inability to generate new revenues; and
|
(3)
|
the number of shares in our public float.
|
Nine Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
(unaudited)
|
||||||||
Beginning cash and cash equivalents
|
$ | 744,313 | $ | 514,136 | ||||
Net cash provided by (used in):
|
||||||||
Operating activities
|
(409,121 | ) | 15,367 | |||||
Investing activities
|
(324,265 | ) | (269,054 | ) | ||||
Financing activities
|
1,306,250 | 758,178 | ||||||
Net increase in cash and cash equivalents
|
572,864 | 504,491 | ||||||
Ending cash and cash equivalents
|
$ | 1,317,177 | $ | 1,018,627 |
EXHIBIT NO.
|
DESCRIPTION
|
2.1(7)
|
Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart
|
2.2(7)
|
Amendment No. 1, dated December 2008, to Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart
|
2.3(7)
|
Amendment No. 2, dated December 2008, to Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart
|
2.4(7)
|
Amendment No. 3, dated January 28, 2009, to Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart
|
2.5(7)
|
Amendment No. 4, dated February 2, 2009, to Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart
|
2.6(1)
|
Amendment No. 5, dated as of March 31, 2009, to Amended and Restated Agreement and Plan of Merger by and among World Waste Technologies, Inc., Vertex Holdings, L.P. (formerly Vertex Energy, L.P.), Vertex Energy, Inc., Vertex Merger Sub, LLC and Benjamin P. Cowart.
|
3.1(2)
|
Articles of Incorporation (and amendments thereto) of Vertex Energy, Inc.
|
3.2(5)
|
Amended and Restated Certificate of Designation of Rights, Preferences and Privileges of Vertex Energy, Inc.'s Series A Convertible Preferred Stock.
|
3.3(2)
|
Withdrawal of Designation of the Company’s Series B Preferred Stock
|
3.4(4)
|
Series B Convertible Preferred Stock Filing
|
3.5(2)
|
Bylaws of Vertex Energy, Inc.
|
4.1(2)
|
Vertex Energy, Inc., 2008 Stock Incentive Plan
|
4.2(3)
|
2009 Stock Incentive Plan of Vertex Energy, Inc.
|
10.1(2)
|
Asset Transfer Agreement
|
10.2(2)
|
Services Agreement
|
10.3(2)
|
Right of First Refusal Agreement
|
10.4(2)
|
Operating and Licensing Agreement
|
10.5(2)
|
Employment Agreement with Benjamin P. Cowart
|
10.6(2)
|
Employment Agreement with John Pimentel
|
10.7(2)
|
Employment Agreement with Matthew Lieb
|
10.8(2)
|
Letter Loan Agreement with Regions Bank
|
10.9(2)
|
Line of Credit with Regions Bank
|
10.10(2)
|
Security Agreement with Regions Bank
|
10.11(3)
|
Letter Agreement with Christopher Stratton
|
10.12(6)
|
Loan Agreement with Bank of America
|
10.13(6)
|
Security Agreement
|
10.14(8)(+)
|
Tolling (Processing) Agreement with KMTEX
|
10.15(8)(+)
|
First Amendment to Processing Agreement with KMTEX
|
10.16(8)
|
Form of Voting Agreement
|
10.17(8)
|
Form of Lock-Up Agreement
|
10.18(8)
|
Amended and Restated Employment Agreement with Chris Carlson
|
10.19(8)
|
First Amendment to Employment Agreement with Benjamin P. Cowart
|
10.20(8)
|
First Amendment to Employment Agreement with Matt Lieb
|
10.21*
|
Addendum to The Employment Agreement Between Vertex Energy, Inc. and Greg Wallace (July 5, 2011)
|
14.1(2)
|
Code of Ethics
|
16.1(2)
|
Letter from Stonefield Josephson, Inc.
|
21.1(8)
|
Subsidiaries
|
31.1*
|
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
31.2*
|
Certification of Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act.
|
32.1*
|
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
|
32.2*
|
Certification of Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
|
99.1(2)
|
Audited Financial Statements of Vertex Holdings, L.P. formerly Vertex Energy, L.P. (certain assets, liabilities and operations related to its black oil division and certain assets, liabilities and operations of the refining and marketing division) for the years ended December 31, 2008 and 2007
|
99.2(2)
|
Unaudited Financial Statements of Vertex Holdings, L.P. formerly Vertex Energy, L.P. (certain assets, liabilities and operations related to its black oil division and certain assets, liabilities and operations of the refining and marketing division) for the three months ended March 31, 2009 and 2008
|
99.3(2)
|
Audited Financial Statements of Vertex Energy, Inc. as of December 31, 2008
|
99.4(2)
|
Unaudited Interim Financial Statements of Vertex Energy, Inc. for the three months ended March 31, 2009 and 2008
|
99.5(2)
|
Pro Forma Financial Statements of Vertex Energy, Inc.
|
99.6(2)
|
Glossary of Selected Terms
|
101.INS**
|
XBRL Instance Document
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF**
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
VERTEX ENERGY, INC.
|
Date: November 1, 2011
|
By: /s/ Benjamin P. Cowart
|
Benjamin P. Cowart
|
|
Chief Executive Officer
|
|
(Principal Executive Officer)
|
|
Date: November 1, 2011
|
By: /s/ Chris Carlson
|
Chris Carlson
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
1. First Installment shall be Payable on May 25, 2012, in the amount of 25% of the 2011 Earned Bonus Commission; however, such bonus will be limited in payment on April 1, 2012 to 50% of the First Quarter 2012 Adjusted Gross Margin. Any excess 2011 Commission due and payable on May 25, 2012, limited in payment shall be accumulated and carried forward for payment calculations applicable to the Second Installment accruing interest at 6% from May 25, 2012 until paid.
|
2. Second Installment shall be Payable on August 25, 2012, in the amount of 25% of the 2011 Earned Bonus Commission, plus any accumulated and unpaid carried forward bonus not paid in the First Installment. However, such bonus will be limited in payment on August 25, 2012 to 50% of the first Half 2012 Adjusted Gross Margin. Any excess 2011 Commission due and payable on August 25, 2012, limited in payment shall be accumulated and carried forward for payment calculations applicable to the Third Installment accruing interest at 6% from August 25, 2012 until paid.
|
3. Third Installment shall be Payable on November 25, 2012, in the amount of 50% of the 2011 Earned Bonus Commission, plus any accumulated and unpaid carried forward bonus not paid in the First and Second Installments. However, such bonus will be limited in payment on November 25, 2012 to 50% of the cumulative third quarter 2012 Adjusted Gross Margin. Any excess 2011 Commission due and payable on November 25, 2012, limited in payment shall be accumulated and carried forward for payment calculations applicable to the First Installment due in Bonus Commission year 2012, payable during 2013, accruing interest at 6% from November 25, 2012 until
paid.
|
COMPANY:
|
|
Vertex Energy Inc.
|
|
By: /s/ Benjamin P. Cowart
|
|
Name: Benjamin P. Cowart
|
|
Title: President
|
|
Greg Wallace
/s/ Greg Wallace
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Vertex Energy, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 1, 2011
|
By:
|
/s/ Benjamin P. Cowart
|
Benjamin P. Cowart
|
||
Chief Executive Officer
|
||
(Principal Executive Officer)
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Vertex Energy, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an Quarterly Report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: November 1, 2011
|
|
|||
By:
|
/s/ Chris Carlson
|
|||
Chris Carlson
|
||||
Chief Financial Officer
(Principal Accounting Officer)
|
November 1, 2011
|
/s/ Benjamin P. Cowart
|
||
Benjamin P. Cowart
|
|||
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
November 1, 2011
|
/s/ Chris Carlson
|
||
Chris Carlson
|
|||
Chief Financial Officer
(Principal Accounting Officer)
|
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 750,000,000 | 750,000,000 |
Common stock, shares issued | 9,239,398 | 8,370,849 |
Common stock, shares outstanding | 9,239,398 | 8,370,849 |
Preferred Stock | ||
Par value | $ 0.001 | $ 0.001 |
Shares authorized | 50,000,000 | 50,000,000 |
Shares issued | ||
Shares outstanding | ||
Series A Preferred Stock | ||
Par value | $ 0.001 | $ 0.001 |
Shares authorized | 5,000,000 | 5,000,000 |
Shares issued | 4,452,167 | 4,675,716 |
Shares outstanding | 4,452,167 | 4,675,716 |
Series B Preferred Stock | ||
Par value | $ 0.001 | $ 0.001 |
Shares authorized | 2,000,000 | 2,000,000 |
Shares issued | 600,000 | |
Shares outstanding | 600,000 | |
Due to related party - mandatorily redeemable preferred stock balance | $ 150,000 |
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Statement of Cash Flows [Abstract] | ||||
Revenues | $ 30,301,326 | $ 13,288,600 | $ 78,383,111 | $ 42,428,741 |
Revenues - related parties | 1,828 | 17,978 | 5,578 | |
[Revenues] | 30,301,326 | 13,290,428 | 78,401,089 | 42,434,319 |
Cost of revenues | 28,268,785 | 12,471,821 | 71,632,067 | 39,679,178 |
Gross profit | 2,032,541 | 818,607 | 6,769,022 | 2,755,141 |
Selling, general and administrative expenses | 997,723 | 667,339 | 3,030,461 | 2,118,708 |
Income from operations | 1,034,818 | 151,268 | 3,738,561 | 636,433 |
Other income (expense) | ||||
Other income | 89,333 | 219,333 | ||
Interest expense | (3,593) | (26,521) | (57,811) | (89,119) |
Total other income (expense) | (3,593) | 62,812 | (57,811) | 130,214 |
Income before income tax | 1,031,225 | 214,080 | 3,680,750 | 766,647 |
Income tax expense | (3,000) | (5,500) | (45,689) | (5,500) |
Net income | $ 1,028,225 | $ 208,580 | $ 3,635,061 | $ 761,147 |
Earnings per common share | ||||
Basic | $ 0.11 | $ 0.03 | $ 0.42 | $ 0.09 |
Diluted | $ 0.06 | $ 0.02 | $ 0.25 | $ 0.06 |
Shares used in computing earnings per share | ||||
Basic | 9,187,227 | 8,315,309 | 8,722,642 | 8,276,184 |
Diluted | 15,851,393 | 13,581,067 | 14,503,882 | 13,540,455 |
Document and Entity Information | 9 Months Ended | |
---|---|---|
Sep. 30, 2011 | Oct. 21, 2011 | |
Document And Entity Information | ||
Entity Registrant Name | Vertex Energy Inc. | |
Entity Central Index Key | 0000890447 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2011 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,391,084 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2011 |
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COMMON STOCK | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Common Stock | |
COMMON STOCK | NOTE 7. COMMON STOCK
The total number of authorized shares of the Companys common stock is 750,000,000 shares, $0.001 par value per share. As of September 30, 2011 there were 9,239,398 common shares issued and outstanding.
During the nine months ending September 30, 2011 there were 223,549 shares of the Company's Series A Preferred Stock converted into the Company's common stock and warrants and options to purchase 45,000 shares of the Company's common stock were exercised for cash proceeds of $6,250. In addition, 600,000 shares of the Series B Preferred Stock were converted into the Company's common stock as discussed in note 8.
During September 2011, $300,000 was received for warrants to purchase 150,000 shares that were in the process of being exercised for shares of common stock, but which have not been issued as of September 30, 2011.
|
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentrations Significant Customers Commitments And Contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES | NOTE 3. CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES
The Company has concentrated credit risk for cash by maintaining deposits in one bank. These balances are insured by the Federal Deposit Insurance Corporation up to $250,000. From time to time during the nine months ended September 30, 2011, the Companys cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.
At September 30, 2011 and 2010 and for each of the nine months then ended, the Companys revenues and receivables were comprised of the following customer concentrations:
The Company purchases goods and services from two companies that represented 22% and 12% of total purchases for the nine months ended September 30, 2011.
The Company has several purchase agreements with suppliers that require purchases of minimum quantities of the Companys products. The agreements generally have a one year term, after which they become month-to-month agreements. There are no penalties associated with these agreements. Minimum future purchases under these contracts are approximately $17,547,426 through March 31, 2012 based on forward contract pricing as of October 21, 2011. .
The Company has one debt facility available for use, of which there was $1,000,000 and $0 outstanding as of September 30, 2011 and December 31, 2010, respectively. See note 4 for further details.
On August 2, 2011, the Company entered into an engagement with a merchant banking firm to assist in certain acquisitions and financial advisory services that the Company might contemplate. The Company paid an initial advisory fee of $20,000. In addition, the Company has agreed to pay certain other fees based on the success of closing an actual transaction.
The Companys 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 Companys financial position, results of operations, cash flows, and access to capital and on the quantities of petroleum-based product that the Company can economically produce.
The Company, in its normal course of business, is involved in various other 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 intend to take advantage of any potential tax benefits related to net operating losses (NOLs) acquired as part of the World Waste merger. As a result of the merger we acquired approximately $42 million of net operating losses that may be used to offset taxable income generated by the Company in future periods.
It is possible that the Company may be unable to use these NOLs in their entirety. The extent to which the Company will be able to utilize these carry-forwards in future periods is subject to limitations based on a number of factors, including the number of shares issued within a three-year look-back period, whether the merger is deemed to be a change in control, whether there is deemed to be a continuity of World Wastes historical business, and the extent of the Companys subsequent income. As of December 31, 2010, the company had utilized $1,616,638 of these NOLs leaving approximately $39.8 million of potential NOLs of which we expect to utilize approximately $3.6 million for the nine months ended September 30, 2011.
|
LICENSING AGREEMENT | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Licensing Agreement | |
LICENSING AGREEMENT | NOTE 9. LICENSING AGREEMENT
The Company operates under an operating and licensing agreement with a related party that is majority-owned and controlled by the Companys Chief Executive Officer and Chairman, Benjamin P. Cowart, that provides for an irrevocable, non-transferable, royalty-free, perpetual right to use TCEP to re-refine certain used oil feedstock and associated operations of this technology on a global basis. This includes the right to utilize the technology in any future production facilities built by the Company. If the related entity is unable to continue operations, the Company would not have a source of its TCEP products to sell to customers, which could negatively impact sales. The Company must approve any research and development costs that are performed by the related party and this may affect the related partys ability to maintain technological feasibility of the technology which could impact the value of the license. The Company will continue to make expenditures on the development of the process in the foreseeable future, which could be significant. We believe the license is technologically feasible; however, we believe we can make improvements that will enhance the TCEP process and design.
The initial valuation of the license was based upon the cost to acquire the use of TCEP and its processes. It will be assessed over time for changes in the valuation. Additional development costs capitalized during the nine months ended September 30, 2011 and 2010 were $232,214 and $260,401, respectively. The Company is amortizing the value of the license agreement over a fifteen year period. Amortization expense was $108,212 and $95,581 for the nine months ending September 30, 2011 and 2010, respectively. No indications of impairment of the license existed as of September 30, 2011.
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SEGMENT REPORTING | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | NOTE 10. SEGMENT REPORTING
The Companys reportable segments include the Black Oil and Refining & Marketing divisions. Segment information for the three and nine months ended September 30, 2011 and 2010, are as follows:
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PREFERRED STOCK | 9 Months Ended |
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Sep. 30, 2011 | |
PreferredStockAbstract | |
PREFERRED STOCK | NOTE 8. PREFERRED STOCK
The total number of authorized shares of the Companys preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Companys Series A Preferred Stock is 5,000,000 (Series A Preferred). The total number of designated shares of the Companys Series B Preferred Stock is 2,000,000. As of September 30, 2011, there were 4,452,167 shares of Series A Preferred Stock issued and outstanding and no Series B Preferred shares issued and outstanding.
From June 2, 2011 to June 15, 2011(ten consecutive trading days) the trading price of the Companys common stock on the Over-The-Counter Bulletin Board closed at equal to or greater than $2.00 per share, which triggered the Automatic Conversion Provision of the Series B Preferred Stock. As a result, effective June 15, 2011, all 600,000 previously outstanding shares of Series B Preferred Stock automatically converted, without any required action by any holder, into 600,000 shares of the Companys common stock. The Company recognized $33,200 of interest expense related to the Series B Preferred Stock liability during the nine months ending September 30, 2011. |
BASIS OF PRESENTATION | 9 Months Ended |
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Sep. 30, 2011 | |
Basis Of Presentation | |
BASIS OF PRESENTATION | NOTE 1. BASIS OF PRESENTATION
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 contained in the Companys annual consolidated financial statements as filed with the SEC on Form 10-K on March 31, 2011 (the 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. Certain prior period amounts have been reclassified to conform to current period presentation. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements for the most recent fiscal year 2010 as reported in Form 10-K, have been omitted. |
NOTES PAYABLE | 9 Months Ended |
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Sep. 30, 2011 | |
Notes Payable [Abstract] | |
NOTES PAYABLE | NOTE 4. NOTES PAYABLE
In September 2010, the Company entered into a loan agreement and obtained a line of credit with Bank of America Merrill Lynch. The balance on the line of credit was $1,000,000 and $2,350,000 was available at September 30, 2011. On September 22, 2011 Bank of America provided an extension on the line of credit through December 31, 2011 and the Company will renegotiate the terms of the loan agreement at this date. The loan agreement is guaranteed by CMT, a related party of the Company. The most restrictive covenant of the loan requires an interest coverage ratio of at least 1.5 to 1. The Company believes it was in compliance of all aspects of the agreement at September 30, 2011.
The financing arrangement discussed above is secured by all of the assets of the Company. Management of Vertex Energy believes that with the financing arrangements, in addition to projected earnings, it will have sufficient liquidity to fund the Companys operations for the foreseeable future, although it may seek additional financing to fund acquisitions or other development in the future.
On October 15, 2010, we entered into a sales/purchase agreement with a supplier requiring the Company to provide a standby letter of credit in the amount of $900,000, which was amended to $550,000 on May 20, 2011 and to $150,000 on August 26, 2011. The expiration date was amended from October 14, 2011 to November 30, 2011. |
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Stock Based Compensation | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK BASED COMPENSATION | NOTE 5. STOCK BASED COMPENSATION
The stock based compensation cost that has been charged against income by the Company was $94,358 and $135,923 for the nine months ended September 30, 2011 and 2010, respectively, for options previously awarded by the Company.
In June 2011, we extended our consulting agreement for investor relations services. The agreement was made effective as of April 15, 2011 and remained in effect until October 14, 2011. We agreed to compensate the consultant with a monthly fee and reimbursement of expenses incurred in connection with and pursuant to the agreement. The agreement may be terminated by either party at any time upon 30 days written notice. In addition the Company granted the consultant warrants to purchase 25,000 shares of our common stock, with cashless exercise rights, at an exercise price of $1.75 per share. On May 10, 2011, the date of grant, 6,250 shares vested immediately and the remainder vest at 33 1/3% per year over the next three years. The fair value of these warrants on the date of grant was $11,201.
Effective September 23, 2011, the Companys Board of Directors approved the grant of 390,000 incentive stock options to certain employees, directors and officers of the Company in connection with the Companys 2009 Stock Incentive Plan. The 390,000 options vest in equal portions annually over four years and are exercisable for ten years. The exercise price of 365,000 options is $2.75 per share and their fair value on the issuance date was $267,579. The exercise price of 25,000 options is $3.03 and their fair value on the issuance date was $16,012. The Company expensed $5,907 related to these options during the quarter ended September 30, 2011.
Stock option activity for the nine months ended September 30, 2011 is summarized as follows:
A summary of the Companys stock warrant activity and related information for the nine months ended September 30, 2011 is as follows:
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EARNINGS (LOSS) PER SHARE | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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EARNINGS (LOSS) PER SHARE | NOTE 6. EARNINGS (LOSS) 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. The calculation of basic earnings per share for the nine months ended September 30, 2011 includes the weighted average of common shares outstanding. Diluted earnings per share reflect 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. The calculation of diluted earnings per share for the nine months ended September 30, 2011 does not include options to purchase 1,910,858 shares and warrants to purchase 1,228,714 shares due to their anti-dilutive effect.
The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the nine months ended September 30, 2011 and 2010:
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RELATED PARTIES | 9 Months Ended |
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Sep. 30, 2011 | |
Related Parties | |
RELATED PARTIES | NOTE 2. RELATED PARTIES
The Company has numerous transactions with Vertex Holdings, L.P., formerly Vertex Energy, L.P. (also defined herein as the Partnership or Vertex LP), including the lease of the Partnerships storage facility, subletting of office space, transportation of feedstock to re-refiners and the Companys storage facility, and delivery from the Companys re-refinery to end customers. The pricing under these contracts is with certain wholly-owned subsidiaries of the Partnership and is priced at market, and is reviewed periodically from time to time by the Board of Directors Related Party Transaction committee. The Related Party Transaction committee includes at least two independent directors and will review and pre-approve any and all related party transactions.
The consolidated financial statements include revenues from related parties of $17,978 and $5,578 and inventory purchases from related parties of $9,632,599 and $4,012,026 for the nine months ended September 30, 2011 and 2010, respectively. As of September 30, 2011, the Company owes $1,093,241 of accounts payable to related parties including Cedar Marine Terminal (CMT), H&H Oil Baytown, H&H Oil Austin and H&H Oil Corpus. These entities are majority-owned and controlled by our Chief Executive Officer and Chairman, Benjamin P. Cowart. The Company also incurred process costs of $5,204,117 and $4,384,251 for the nine months ended September 30, 2011 and 2010, respectively. The costs arise from the Thermal Chemical Extraction Process (TCEP) operating agreement with CMT, whereby we pay up to $0.40 per gallon of processing costs. In the past, both parties have agreed to share increased costs.
The Company subleases office space from Vertex L.P. Rental payments under the lease are $6,600 per month and the lease will expire in June 2012.
The Company leases approximately 30,000 barrels in storage capacity for its Black Oil division at Cedar Marine Terminal, located in Baytown, Texas. The monthly lease expense is $22,500 and the lease expired in March 2011; however, the parties have agreed to an extension of the lease with the same terms and conditions through June 2012; provided that the terms of such extension are still subject to the approval of the Related Party Transaction Committee.
The Company leases approximately 45,000 barrels in storage capacity for its TCEP division at CMT, located in Baytown, Texas. The monthly lease expense is $45,000 and the lease expired in March 2011; however, the parties have agreed to an extension of the leases with thesame terms and conditions, other than an increase in the monthly lease expense to $49,500 in consideration for an additional rental of 3,000 barrels of capacity. Through June 2012; provided that the terms of such extension are still subject to the approval of the Related Party Transaction Committee. |
SUBSEQUENT EVENTS | 9 Months Ended |
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Sep. 30, 2011 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 11. SUBSEQUENT EVENTS
Subsequent to September 30, 2011, the available credit on the Line of Credit is $3,500,000 of which $150,000 has been allocated to the outstanding letter of credit. As of October 24, 2011 the outstanding balance drawn on the line of credit is $0 leaving an available balance for draw downs of $3,350,000.
Subsequent to September 30, 2011, a total of 1,686 shares of the Companys Series A Preferred Stock were converted into 1,686 shares of the Companys common stock and warrants to purchase 150,000 shares of the Companys common stock at an exercise price of $2 per share were exercised for $300,000 and the Company issued 150,000 shares of the Companys common stock.
In October 2011, the Company entered into an agreement with the Craig-Hallum Capital Group LLC (C-H) pursuant to which C-H agreed to provide underwriting services to the Company in connection with a proposed firm commitment underwritten offering of securities. Pursuant to the agreement, we paid C-H a retained fee of $5,000, agreed to pay C-H an underwriting discount equal to 7% of the shares sold in the proposed offering, and reimburse C-H and its counsel for up to $150,000 in legal fees. The agreement has a term through March 8, 2012, unless terminated earlier pursuant to the terms of the agreement.
In October 2011, the Company entered into an agreement to supply used oil feedstock to a third party. The agreement provides for the Company to supply a minimum of 210,000 gallons of used oil feedstock per month at purchase prices based on a discount to the Platts Oilgram Price Report, with such discount reviewed and agreed upon monthly. The agreement continues in effect until April 5, 2012.
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