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SHARE PURCHASE, SUBSCRIPTION AGREEMENTS AND MOBILE REFINERY ACQUISITION
 6 Months Ended
Jun. 30, 2022
Equity [Abstract]  
SHARE PURCHASE, SUBSCRIPTION AGREEMENTS AND MOBILE REFINERY ACQUISITION COMMON STOCK
During the six months ended June 30, 2022, the Company issued 386 thousand shares of common stock in connection with the conversion of Series A Convertible Preferred Stock, pursuant to the terms of such securities, issued 1.1 million shares of the Company's common stock in exchange for warrants to purchase 1.5 million shares of the Company's common stock with an exercise price of $2.25 per share on a cashless basis, and issued 10.2 million shares of the Company's common stock in conversion of $59.8 million in Convertible Senior Notes. In addition, the Company issued 0.6 million shares of common stock in connection with the exercise of options.

During the six months ended June 30, 2021, the Company issued 13.8 million shares of common stock in connection with the conversion of Series A, Series B & B1 Convertible Preferred Stock and exercises of warrants into common stock of the Company, pursuant to the terms of such securities. In addition, the Company issued 0.5 million shares of common stock in connection with the exercise of options.

Warrant Exchange Agreement

On March 24, 2022, the Company entered into an Exchange Agreement with Tensile Capital Partners Master Fund LP (the “Holder” and "Tensile"). Pursuant to the Exchange Agreement, the Holder agreed to exchange outstanding warrants to purchase 1.5 million shares of the Company’s common stock with an exercise price of $2.25 per share and an expiration date of July 25, 2029, for 1.1 million shares of the Company’s common stock, effectively resulting in a net cashless exercise of the warrants (which were cancelled in connection with the transaction), with the value of such surrendered shares based on the five day trailing volume weighted average price of the Company’s common stock.
Conversion of Convertible Senior Notes
On May 26, 2022, May 27, 2022, May 31, 2022, and June 1, 2022, holders of $59.8 million of the Company’s 6.25% Convertible Senior Notes due 2027, converted such notes into 10.2 million shares of common stock of the Company pursuant to the terms of the Indenture.

Conversion of Series A Preferred Stock

Pursuant to the designation of the rights and preferences of the Series A Convertible Preferred Stock of the Company, each share of Series A Convertible Preferred Stock is automatically converted into shares of common stock of the Company (on a one-for-one basis), automatically and without further action by the Company or any holder, upon the first to occur of certain events, including if the closing price of the Company’s common stock on the Nasdaq Capital Market averages at least $15.00 per share over a period of 20 consecutive trading days and the daily trading volume over the same 20-day period averages at least 7,500 shares (the “Automatic Conversion Provision”).

Effective on June 10, 2022, the Automatic Conversion Provision of the Series A Convertible Preferred Stock was triggered, and the 374,337 outstanding shares of the Company’s Series A Convertible Preferred Stock automatically converted into 374,337 shares of common stock of the Company and on June 10, 2022, all rights of any holder with respect to the shares of the Series A Convertible Preferred Stock so converted, including the rights, if any, to receive distributions of the Company’s assets terminated, except only for the rights of such holders to receive certificates for the number of whole shares of common stock into which such shares of the Series A Convertible Preferred Stock were converted.
PREFERRED STOCK AND DETACHABLE WARRANTSThe total number of authorized shares of the Company’s preferred stock is 50 million shares, $0.001 par value per share. The total number of designated shares of the Company’s Series A Convertible Preferred Stock is 5 million (“Series A Preferred”). The total number of designated shares of the Company’s Series B Convertible Preferred Stock is 10 million. The total number of designated shares of the Company’s Series B1 Convertible Preferred Stock is 17 million. The total number of designated shares of Series C Convertible Preferred Stock is 44,000. As of June 30, 2022 and December 31, 2021, there were 0 and 386 thousand shares, respectively, of Series A Preferred Stock issued and outstanding. As of June 30, 2022 and December 31, 2021, there were no shares of Series B , B1 and C Preferred Stock outstanding. SHARE PURCHASE, SUBSCRIPTION AGREEMENTS AND MOBILE REFINERY ACQUISITION
Completion of Myrtle Grove Purchase Agreement
On April 1, 2022, the Company, through Vertex Splitter Corporation (“Vertex Splitter”), a wholly-owned subsidiary of the Company acquired the 15% noncontrolling interest of Vertex Refining Myrtle Grove LLC (“MG SPV”) held by Tensile-Myrtle Grove Acquisition Corporation (“Tensile-MG”), an affiliate of Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California (“Tensile”) from Tensile-Vertex for $7.2 million, which was based on the value of the Class B Unit preference of MG SPV held by Tensile-MG, plus capital invested by Tensile-MG in MG SPV (which had not been returned as of the date of payment), plus cash and cash equivalents held by Tensile-MG as of the closing date. As a result, the Company acquired 100% of MG SPV, which in turn owns the Company’s Belle Chasse, Louisiana, re-refining complex.

Myrtle Grove Redeemable Noncontrolling Interest
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 $38 thousand 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 accretion adjustment of $0.4 million increased the carrying amount of redeemable noncontrolling interests to the redemption value as of April 1, 2022 of $7.2 million. 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 June 30, 2022 and 2021 (in thousands):
June 30, 2022June 30, 2021
Beginning balance$6,812 $5,473 
Net loss attributable to redeemable non-controlling interest(38)(129)
Accretion of non-controlling interest to redemption value428 762 
Redemption of non-controlling interest(7,202)
Ending balance$— $6,106 

Completion of Heartland Purchase Agreement
On May 26, 2022, the Company, through Vertex Splitter acquired the 65% noncontrolling interest of Heartland SPV held by Tensile-Heartland from Tensile-Vertex Holdings LLC (“Tensile-Vertex”), an affiliate of Tensile for $43.5 million, which was based on the value of the Class B Unit preference of Heartland SPV held by Tensile-Heartland, plus capital invested by Tensile-Heartland in Heartland SPV (which had not been returned as of the date of payment), plus cash and cash equivalents held by Tensile-Heartland as of the closing date. As a result, the Company acquired 100% of Heartland SPV, which in turn owns the Company’s Columbus, Ohio, re-refining complex.
Heartland Redeemable Noncontrolling Interest

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 income of $6.8 million 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. At May 26, 2022, the cumulative amount resulting from the application of the measurement guidance in ASC 810-10 was $43.5 million. On May 26, 2022, the Company acquired a 65% interest in Heartland SPV from Tensile for $43.5 million.
The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of June 30, 2022 and 2021 (in thousands):
June 30, 2022June 30, 2021
Beginning balance$36,635 $26,139 
Net income attributable to redeemable non-controlling interest6,829 4,783 
Redemption of non-controlling interest(43,464)— 
Ending balance$— $30,922 

The amount of accretion of redeemable noncontrolling interest to redemption value of $0.4 million and $0.8 million are presented as an adjustment to net income (loss) attributable to Vertex Energy, Inc., to arrive at net income (loss) attributable to common shareholders on the consolidated statements of operations which represent the MG SPV and Heartland SPV accretion of redeemable noncontrolling interest to redemption value combined for the six months ended June 30, 2022 and 2021, respectively.
Mobile Refinery Acquisition
On April 1, 2022, Vertex Operating assigned its rights to the May 26, 2021 Sale and Purchase Agreement between Vertex Operating and Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell Oil Company and Shell Chemical LP, subsidiaries of Shell plc (“Shell”) (the “Refinery Purchase Agreement”), to Vertex Refining and on the same date, Vertex Refining completed the acquisition of a Mobile, Alabama refinery (the “Mobile Refinery”) from Shell (the “Mobile Acquisition”). On the Effective Date, a total of $75 million (less $10 million previously paid) was paid by Vertex Refining in consideration for the acquisition of the Mobile Refinery, which amount is subject to customary purchase price adjustments and reimbursement for certain capital expenditures in the amount of approximately $0.4 million, $15.9 million was paid to Shell for previously agreed upon capital expenditures and miscellaneous prepaid and reimbursable items, and $130 million was paid to Shell by Vertex Refining in connection with the purchase of certain crude oil inventory and finished products owned by Shell and located at the Mobile Refinery on April 1, 2022 (approximately $124 million of which was funded by Macquarie (defined below) as a result of the simultaneous sale of such inventory to Macquarie pursuant to an Inventory Sales Agreement between Vertex Refining and Macquarie). The Company also paid $8.7 million at closing pursuant to the terms of a Swapkit Purchase Agreement entered into with Shell on May 26, 2021 (the “Swapkit Agreement”), pursuant to which the Company agreed to fund a technology solution comprising the ecosystem required for the Company to run the Mobile Refinery after closing (the “Swapkit”).

The purchase price allocation is preliminary and subject to change based upon the finalization of our valuation report. The following table summarizes the preliminary determination and recognition of assets acquired (in thousands):

Financing agreementVertex acquisitionTotal
Inventory$124,311 $5,909 $130,220 
Prepaid assets— 147 147 
Fixed assets— 97,158 97,158 
Total purchase price$124,311 $103,214 $227,525 
    


The following table presents summarized results of operations of Mobile Refinery for the period from April 1, 2022 to June 30, 2022, and are included in the accompanying consolidated statement of operations for the period ended June 30, 2022 (in thousands):

For Three Months Ended June 30, 2022
Revenue$922,196 
Net loss$(24,271)
The following table presents unaudited pro forma results of operations reflecting the acquisition of Mobile Refinery as if the acquisition had occurred as of January 1, 2021. This information has been compiled from current and historical financial statements and is not necessarily indicative of the results that actually would have been achieved had the transaction occurred at the beginning of the periods presented or that may be achieved in the future (in thousands):

For Six Months Ended June 30,
20222021
Revenue$1,670,800 $942,900 
Net income (loss)$30,200 $(24,900)