ACQUISITION

Omega Refining Transaction

On May 2, 2014, the Company completed its acquisition of substantially all of the assets of Omega Refining, LLC (including the Marrero, Louisiana re-refinery and Omega’s Myrtle Grove complex in Belle Chaise, Louisiana) and ownership of Golden State Lubricant Works, LLC for the purpose of re-refining used lubricating oils into processed oils and other products for the distribution, supply and sale to end-customers with related products and support services. The purchase price paid at the closing was approximately $28,764,000 in cash, 500,000 shares of our restricted common stock (valued at $3,266,000) and the assumption of certain capital lease obligations and other liabilities relating to contracts and leases of Omega Refining in connection with the initial closing. We also agreed to provide Omega a loan in the amount of up to approximately $13.8 million.

The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration paid by the Company was allocated to Omega Refining's net tangible assets and intangible assets based on their estimated fair values as of May 2, 2014. The transaction resulted in a bargain purchase of $6,481,051 recognized in net income as an acquisition-date gain. The Omega purchase qualifies as a bargain purchase since the acquisition date amounts of the identifiable net asset acquired, excluding goodwill ($38.92 million), exceed the value of the consideration transferred ($32.44 million). The difference of $6.48 million is a gain as of the acquisition date. The bargain purchase resulted from the financial distress that Omega was in due to the large amount of debt held by Omega and the unexpected decrease in crack spreads that made the debt level overbearing. Evidence that a bargain purchase exists was seen in the common stock price of the Company, which increased from $3.82 (on March 19, 2014) when the transaction was announced) to $8.10 (on May 2, 2014 when the initial closing occurred). The Company retained an independent third party to assist management in determining the fair value of tangible and intangible assets transferred and liabilities assumed. The allocation of the purchase price is based on the best estimates of management.

The following information summarizes the allocation of the fair values assigned to the assets at the purchase date. The allocation of fair values are preliminary and are subject to change in the future during the measurement period.



	(in thousands)
Cash and cash equivalents	$	406
Accounts receivable	950
Inventory	4,192
Prepaid expenses	71
Property, plant and equipment	30,000
Deposits	400
Bango secured note issued to Vertex	8,308
Technology	2,287
Non-compete agreements	66
Total identifiable net assets	$	46,680
Less liabilities assumed, including contingent consideration	(7,763		)
Gain on purchase	(6,481		)
Total purchase price	$	32,436

The Company incurred $2,559,830 in costs associated with the Omega Refining acquisition. These included legal, accounting, environmental and investment banking.

The following table summarizes the cost of amortizable intangible assets related to the Omega Refining acquisition:

The results of Omega Refining are included in the consolidated financial statements subsequent to May 2, 2014. The following schedule contains pro forma results from operations as if the acquisition had occurred on January 1, 2013. The pro forma results do not report actual results that would have occurred had the merger taken place on January 1, 2013 nor do they necessarily suggest future operating results.



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Revenues	$	79,747,665	$	68,597,653	$	127,097,323	$	140,850,582
Income from operations	498,141		335,135		1,454,728		3,899,588

Net income	6,284,339		116,145		7,165,485		3,346,949

Net loss attributable to non-controlling interest	344,380		—		325,399		—

Net income attributable to Vertex Energy, Inc.	$	6,628,719	$	116,145	$	7,490,884	$	3,346,949

Earnings per common share
Basic	$	0.29	$	0.01	$	0.34	$	0.19
Diluted	$	0.27	$	0.01	$	0.31	$	0.17

Estimated Cost
(in thousands)

Useful life
(years)

Non-Competes

Technology