UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): January 17, 2020
VERTEX ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Nevada | 001-11476 | 94-3439569 |
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
|
1331 Gemini Street Suite 250 Houston, Texas 77058 | ||
| (Address of principal executive offices) (Zip Code) | ||
Registrant’s telephone number, including area code: (866) 660-8156
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|
Common Stock, $01 Par Value Per Share |
VTNR |
The NASDAQ Stock Market LLC (Nasdaq Capital Market) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
EXPLANATORY NOTE
On January 22, 2020, Vertex Energy, Inc. (the “Company”, “we” and “us”) filed a Current Report on Form 8-K (the “Original Report”) to report, among other things, the closing, on January 17, 2020, and effective on January 1, 2020, of the transactions contemplated by a Share Purchase and Subscription Agreement (the “Heartland Share Purchase”) by and among HPRM LLC, a Delaware limited liability company, which entity was formed as a special purpose vehicle (“Heartland SPV”), Vertex Operating, LLC, the Company’s wholly-owned subsidiary (“Vertex Operating”), and Tensile-Heartland Acquisition Corporation (“Tensile-Heartland”), an affiliate of Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“Tensile”), and solely for the purposes of a guaranty, the Company. As part of the Heartland Share Purchase and related transactions, the Company transferred ownership of Vertex Refining OH, LLC, its indirect wholly-owned subsidiary (“Vertex OH”), which owned the Company’s Columbus, Ohio, Heartland facility, which produces a base oil product that is sold to lubricant packagers and distributors, to Heartland SPV and as a result of the sale and purchase of various membership units of Heartland SPV, Heartland SPV is currently owned 35% by Vertex Operating and 65% by Tensile-Heartland. At the time of the filing of the Original Report, the Company stated that it intended to file the required pro forma financial information associated with the Heartland Share Purchase transactions within 4 business days from the date that such Original Report was required to be filed. By this Amendment No. 1 to the Original Report, the Company is amending and restating Item 9.01 thereof to include the required pro forma financial information. This Current Report on Form 8-K does not amend or modify the Original Report, except as to Item 9.01.
Item 9.01 Financial Statements and Exhibits.
(b) Pro forma.
An unaudited pro forma consolidated and combined balance sheet of the Company as of September 30, 2019 and unaudited pro forma consolidated and combined statement of operations of the Company for the nine months ended September 30, 2019 and the year ended December 31, 2018 are filed as Exhibit 99.2 to this Current Report on Form 8-K and incorporated into this Item 9.01 by reference. The unaudited pro forma balance sheet as of September 30, 2019 gives effect to the disposition of Vertex OH in connection with the Heartland Share Purchase and the other transactions contemplated thereby and therewith, as discussed above (collectively, the “Joint Venture Disposition”), as if it had occurred on September 30, 2019. The unaudited pro forma statement of operations for the nine months ended September 30, 2019 and the year ended December 31, 2018 give effect to the Joint Venture Disposition as if they had occurred on January 1, 2018. These unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and do not purport to represent what the Company’s actual results of operations or financial position would have been if the Joint Venture Disposition had occurred on the dates indicated, nor are they necessarily indicative of the Company’s future operating results or financial position.
(d) Exhibits.
| Exhibit No. | Description | ||
| 2.1*+ | Share Purchase and Subscription Agreement dated January 17, 2020, by and among HPRM LLC, Vertex Energy Operating LLC, Tensile-Heartland Acquisition Corporation, and solely for the purposes of Section 9.1, Vertex Energy, Inc. | ||
| 10.2* | Limited Liability Company Agreement of HPRM LLC dated January 17, 2020 | ||
| 99.1* | Press Release of Vertex Energy, Inc., dated January 22, 2020 | ||
| 99.2** | Unaudited Pro Forma Condensed Consolidated Financial Information of Vertex Energy, Inc. | ||
* Filed or furnished as exhibits to the Original Report.
** Filed herewith.
+ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Vertex Energy, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
| VERTEX ENERGY, INC. | |||
| Date: January 24, 2020 | By: | /s/ Chris Carlson | |
| Chris Carlson | |||
| Chief Financial Officer | |||
EXHIBIT INDEX
| Exhibit No. | Description | ||
| 2.1*+ | Share Purchase and Subscription Agreement dated January 17, 2020, by and among HPRM LLC, Vertex Energy Operating LLC, Tensile-Heartland Acquisition Corporation, and solely for the purposes of Section 9.1, Vertex Energy, Inc. | ||
| 10.2* | Limited Liability Company Agreement of HPRM LLC dated January 17, 2020 | ||
| 99.1* | Press Release of Vertex Energy, Inc., dated January 22, 2020 | ||
| 99.2** | Unaudited Pro Forma Condensed Consolidated Financial Information of Vertex Energy, Inc. | ||
* Filed or furnished as exhibits to the Original Report.
** Filed herewith.
+ Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that Vertex Energy, Inc. may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished.
Exhibit 99.2
VERTEX ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
On January 1, 2020 (the “Closing Date”), Vertex Refining OH, LLC (“Vertex OH”), a wholly-owned subsidiary of Vertex Energy Operating, LLC (“Vertex Operating”), a wholly-owned subsidiary of Vertex Energy, Inc. (the “Company”); Vertex Operating; and HPRM LLC, which entity was formed as a special purpose vehicle (“Heartland SPV”), completed the transactions described in greater detail below.
On the Closing Date, Vertex Operating transferred ownership of Vertex OH to Heartland SPV, which entity owned and operated the Company’s Columbus, Ohio, Heartland facility, which produces a base oil product that is sold to lubricant packagers and distributors (the “Vertex OH Disposition”). The Company has one refining location in Ohio and collection and storage facilities in Ohio, Kentucky, and West Virginia.
Also on the Closing Date, the transactions contemplated by a Share Purchase and Subscription Agreement (the “Share Purchase Agreement”) by and among Heartland SPV, Vertex Operating, Tensile-Heartland Acquisition Corporation (“Tensile-Heartland”), an affiliate of Tensile Capital Management, an investment fund based in San Francisco, California (“Tensile”), and solely for the purposes of a guaranty in the Share Purchase Agreement, the Company, closed. The transactions contemplated by the Share Purchase Agreement were effective for all purposes as of January 1, 2020.
Pursuant to the Share Purchase Agreement, Tensile-Heartland acquired from the Company and Heartland SPV, a 65% interest in Heartland SPV.
The following unaudited pro forma financial information is based on the Company’s historical consolidated financial statements after giving effect to the Share Purchase Agreement (the “Disposition”).
The unaudited pro forma consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and accompanying notes and “Management's Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and the unaudited condensed consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Quarterly Report on Form 10-Q for the period ended September 29, 2019.
The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of what the Company’s financial performance and financial position would have been had the transaction been completed on the dates assumed, nor is the unaudited pro forma financial information necessarily indicative of the results to be expected in any future period.
VERTEX ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2019
ASSETS
| (unaudited) | Historical | Pro
Forma Adjustments Ohio | Pro
Forma Balance Sheet | |||||||||
| Current Assets | ||||||||||||
| Cash and cash equivalents | $ | 2,303,725 | $ | 6,313,653 | (a) | $ | 8,617,378 | |||||
| Restricted cash | 100,088 | — | 100,088 | |||||||||
| Accounts receivable, net | 10,405,711 | (4,605,565 | )(b) | 5,800,146 | ||||||||
| Equity Method Investment | — | 6,200,000 | (c) | 6,200,000 | ||||||||
| FIT receivable | 205,818 | — | 205,818 | |||||||||
| Inventory | 5,878,408 | (473,960 | )(b) | 5,404,448 | ||||||||
| Prepaid expenses | 6,534,981 | (153,700 | )(b) | 6,381,281 | ||||||||
| Total current assets | 25,428,731 | 7,280,428 | 32,709,159 | |||||||||
| Non-current Assets | ||||||||||||
| Fixed assets | 69,437,842 | (11,852,901 | )(b) | 57,584,941 | ||||||||
| Less accumulated depreciation | (23,550,224 | ) | 5,542,047 | (b) | (18,008,177 | ) | ||||||
| Fixed assets, net | 45,887,618 | (6,310,854 | ) | 39,576,764 | ||||||||
| Finance lease right-of-use assets | 904,691 | (881,161 | )(b) | 23,530 | ||||||||
| Operating lease right-of-use assets | 36,242,861 | (603,711 | )(b) | 35,639,150 | ||||||||
| Intangible assets, net | 11,590,876 | (1,378,263 | )(b) | 10,212,613 | ||||||||
| Federal income tax receivable | 68,605 | — | 68,605 | |||||||||
| Other assets | 616,759 | (106,643 | )(b) | 510,116 | ||||||||
| TOTAL ASSETS | $ | 120,740,141 | $ | (2,000,204 | ) | $ | 118,739,937 | |||||
VERTEX ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2019
LIABILITIES, TEMPORARY EQUITY AND EQUITY
| (unaudited) | Historical | Pro
Forma Adjustments Ohio | Pro
Forma Balance Sheet | |||||||||
| Current liabilities | ||||||||||||
| Accounts payable | $ | 7,745,380 | $ | (2,024,190 | )(b) | $ | 5,721,190 | |||||
| Accrued expenses | 2,275,006 | — | 2,275,006 | |||||||||
| Dividends payable | 419,082 | — | 419,082 | |||||||||
| Finance lease liability - current | 214,045 | (203,632 | )(b) | 10,413 | ||||||||
| Operating lease liability - current | 6,005,502 | (286,937 | )(b) | 5,718,565 | ||||||||
| Current portion of long-term debt | 2,794,624 | (1,265,958 | )(d) | 1,528,666 | ||||||||
| Derivative commodity liability | 1,510,573 | — | 1,510,573 | |||||||||
| Revolving note | 5,387,639 | — | 5,387,639 | |||||||||
| Total current liabilities | 26,351,851 | (3,780,717 | ) | 22,571,134 | ||||||||
| Long-term liabilities | ||||||||||||
| Long-term debt | 12,658,000 | (5,734,042 | )(d) | 6,923,958 | ||||||||
| Finance lease liability - long-term | 665,926 | (661,441 | )(b) | 4,485 | ||||||||
| Operating lease liability - long-term | 30,237,359 | (316,774 | )(b) | 29,920,585 | ||||||||
| Derivative warrant liability | 1,149,977 | — | 1,149,977 | |||||||||
| Total liabilities | 71,063,113 | (10,492,974 | ) | 60,570,139 | ||||||||
| TEMPORARY EQUITY | ||||||||||||
| Series B Preferred shares | 10,442,193 | — | 10,442,193 | |||||||||
| Series B-1 Preferred shares | 14,454,821 | — | 14,454,821 | |||||||||
| Redeemable non-controlling interest | 4,000,000 | — | 4,000,000 | |||||||||
| EQUITY | ||||||||||||
| Series A Convertible Preferred stock | 420 | — | 420 | |||||||||
| Common stock | 41,850 | — | 41,850 | |||||||||
| Additional paid-in capital | 79,719,745 | — | 79,719,745 | |||||||||
| Retained earnings (accumulated deficit) | (59,788,939 | ) | 8,492,770 | (e) | (51,296,169 | ) | ||||||
| Total Vertex Energy, Inc. stockholders' equity | 19,973,076 | 8,492,770 | 28,465,846 | |||||||||
| Non-controlling interest | 806,938 | — | 806,938 | |||||||||
| Total equity | 20,780,014 | 8,492,770 | 29,272,784 | |||||||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY | $ | 120,740,141 | $ | (2,000,204 | ) | $ | 118,739,937 | |||||
VERTEX ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
| (unaudited) | Historical | Pro
Forma Adjustments Ohio | Pro
Forma Statement of Operations | |||||||||
| Revenues | $ | 120,777,263 | $ | (31,530,289 | )(f) | $ | 89,246,974 | |||||
| Cost of revenues | 103,732,086 | (24,325,025 | )(f) | 79,407,061 | ||||||||
| Gross profit | 17,045,177 | (7,205,264 | ) | 9,839,913 | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative expenses | 17,529,784 | (4,894,650 | )(f) | 12,635,134 | ||||||||
| Depreciation and amortization expense | 5,333,485 | (1,377,412 | )(f) | 3,956,073 | ||||||||
| Total operating expenses | 22,863,269 | (6,272,062 | ) | 16,591,207 | ||||||||
| Income (loss) from operations | (5,818,092 | ) | (933,202 | ) | (6,751,294 | ) | ||||||
| Other income (expense) | ||||||||||||
| Other income (expense) | 920,071 | (2,044 | )(f) | 918,027 | ||||||||
| Gain on sale of assets | 31,443 | — | 31,443 | |||||||||
| Gain(loss) on change in derivative liability | 331,715 | (59,346 | )(f) | 272,369 | ||||||||
| Interest expense | (2,322,780 | ) | 542,716 | (f) | (1,780,064 | ) | ||||||
| Total other income (expense) | (1,039,551 | ) | 481,326 | (558,225 | ) | |||||||
| Income (loss) before income tax | (6,857,643 | ) | (451,876 | ) | (7,309,519 | ) | ||||||
| Income tax benefit (expense) | — | — | — | |||||||||
| Minority Interest in Subsidiary | — | — | — | |||||||||
| Net income (loss) | (6,857,643 | ) | (451,876 | ) | (7,309,519 | ) | ||||||
| Net income (loss) attributable to non-controlling interest | (374,862 | ) | — | (374,862 | ) | |||||||
| Net income (loss) attributable to Vertex Energy, Inc. | $ | (6,482,781 | ) | $ | (451,876 | ) | $ | (6,934,657 | ) | |||
| Loss per common share | ||||||||||||
| Basic | $ | (0.28 | ) | $ | (0.01 | ) | $ | (0.29 | ) | |||
| Diluted | $ | (0.28 | ) | $ | (0.01 | ) | $ | (0.29 | ) | |||
| Shares used in computing earnings/(loss) per common share | ||||||||||||
| Basic | 40,626,700 | 40,626,700 | 40,626,700 | |||||||||
| Diluted | 40,626,700 | 40,626,700 | 40,626,700 | |||||||||
VERTEX ENERGY, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
| (unaudited) | Historical | Pro
Forma Adjustments Ohio | Pro
Forma Statement of Operations | |||||||||
| Revenues | $ | 180,720,661 | $ | (41,207,747 | )(f) | $ | 139,512,914 | |||||
| Cost of revenues | 151,314,039 | (32,083,426 | )(f) | 119,230,613 | ||||||||
| Gross profit | 29,406,622 | (9,124,321 | ) | 20,282,301 | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative expenses | 21,927,264 | (6,622,407 | )(f) | 15,304,857 | ||||||||
| Depreciation and amortization expense | 6,991,010 | (1,561,018 | )(f) | 5,429,992 | ||||||||
| Total operating expenses | 28,918,274 | (8,183,425 | ) | 20,734,849 | ||||||||
| Income (loss) from operations | 488,348 | (940,896 | ) | (452,548 | ) | |||||||
| Other income (expense) | ||||||||||||
| Other income (expense) | 659 | (659 | )(f) | — | ||||||||
| Gain(loss) on change in derivative liability | 763,716 | — | 763,716 | |||||||||
| Gain/(Loss) on sale of assets | 45,553 | — | 45,553 | |||||||||
| Interest expense | (3,281,855 | ) | 765,176 | (f) | (2,516,679 | ) | ||||||
| Total other income (expense) | (2,471,927 | ) | 764,517 | (1,707,410 | ) | |||||||
| Income (loss) before income tax | (1,983,579 | ) | (176,379 | ) | (2,159,958 | ) | ||||||
| Income tax benefit (expense) | — | — | — | |||||||||
| Net income (loss) | (1,983,579 | ) | (176,379 | ) | (2,159,958 | ) | ||||||
| Net income (loss) attributable to non-controlling interest | 234,188 | — | 234,188 | |||||||||
| Net income (loss) attributable to Vertex Energy, Inc. | $ | (2,217,767 | ) | $ | (176,379 | ) | $ | (2,394,146 | ) | |||
| Loss per common share | ||||||||||||
| Basic | $ | (0.23 | ) | $ | (0.00 | ) | $ | (0.23 | ) | |||
| Diluted | $ | (0.23 | ) | $ | (0.00 | ) | $ | (0.23 | ) | |||
| Shares used in computing earnings/(loss) per common share | ||||||||||||
| Basic | 35,411,264 | 35,411,264 | 35,411,264 | |||||||||
| Diluted | 35,411,264 | 35,411,264 | 35,411,264 | |||||||||
VERTEX ENERGY, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
| 1. | BASIS OF PRESENTATION |
The accompanying unaudited pro forma consolidated financial statements give effect to the pro forma adjustments necessary to reflect the Share Purchase and Subscription Agreement between Vertex Energy, Inc. (the “Company”) and Tensile Capital Management (“Tensile”) as if the transaction occurred at the beginning of the periods presented in the pro forma statements of operations and as of September 30, 2019, in the pro forma balance sheet.
| 2. | PRO FORMA ADJUSTMENTS |
The unaudited pro forma consolidated statements of operations and balance sheet reflect the effect of the following pro forma adjustments:
| (a) | Estimated total cash proceeds received for the Vertex OH sale net of Vertex OH’s cash balance included in the sale and the repayment of outstanding term loans. |
| (b) | Elimination of assets and liabilities associated with the Vertex OH sale. |
| (c) | Estimated increase in equity method investment for the remaining fair value of the non-controlling financial interest in Vertex OH of 35%. |
| (d) | Estimated paydown of outstanding term loans |
| (e) | Estimated gain on the Vertex OH sale, reflected as an addition to the Company’s retained earnings as of September 30, 2019. |
| (f) | Reduction of revenue and expenses associated with the Vertex OH sale. |