# EDGAR Filing Document

**Accession Number:** 0000890447
**File Stem:** 0001387131-23-002682
**Filing Date:** 2023-3
**Character Count:** 314739
**Document Hash:** 9a71909d495e5482de207fcbd3657921
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001387131-23-002682.hdr.sgml**: 20230301

**ACCESSION NUMBER**: 0001387131-23-002682

**CONFORMED SUBMISSION TYPE**: POSASR

**PUBLIC DOCUMENT COUNT**: 9

**FILED AS OF DATE**: 20230301

**DATE AS OF CHANGE**: 20230301

**EFFECTIVENESS DATE**: 20230301

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Vertex Energy Inc.
- **CENTRAL INDEX KEY:** 0000890447
- **STANDARD INDUSTRIAL CLASSIFICATION:** PETROLEUM REFINING [2911]
- **IRS NUMBER:** 943439569
- **STATE OF INCORPORATION:** NV
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** POSASR
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-266056
- **FILM NUMBER:** 23693989

**BUSINESS ADDRESS:**
- **STREET 1:** 1331 GEMINI STREET
- **STREET 2:** SUITE 250
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77058
- **BUSINESS PHONE:** 866-660-8156

**MAIL ADDRESS:**
- **STREET 1:** 1331 GEMINI STREET
- **STREET 2:** SUITE 250
- **CITY:** HOUSTON
- **STATE:** TX
- **ZIP:** 77058

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** WORLD WASTE TECHNOLOGIES INC
- **DATE OF NAME CHANGE:** 20040830

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** VOICE POWERED TECHNOLOGY INTERNATIONAL INC
- **DATE OF NAME CHANGE:** 19940831

**As filed with the Securities and Exchange Commission on March 1, 2023**

**Registration No. 333-266056**

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

**POST-EFFECTIVE AMENDMENT NO. 1**

**TO** 

**FORM S-3**

**REGISTRATION STATEMENT**

**UNDER**

**THE SECURITIES ACT OF 1933**

**VERTEX ENERGY, INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Nevada** | **94-3439569** |
| (State or other jurisdiction of<br> incorporation or organization) | (I.R.S. Employer <br> Identification Number) |

---

**1331 Gemini Street** 

**Suite 250**

**Houston, Texas 77058**

**(866) 660-8156**

(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

---

| |
|:---|
| **Benjamin P. Cowart**<br> **Chief Executive Officer**<br> **Vertex Energy, Inc.**<br> **1331 Gemini Street, Suite 250**<br> **Houston, Texas 77058**<br> **(866) 660-8156**<br> (Name, Address, including Zip Code, and Telephone Number, including Area Code, of Agent for Service)  |
| <br> ***Copies To:***<br> **David M. Loev, Esq.**<br> **John S. Gillies, Esq.**<br> **The Loev Law Firm, PC**<br> **6300 West Loop South, Suite 280**<br> **Bellaire, Texas 77401**<br> **Telephone: (713) 524-4110** |

---

Approximate date of commencement of proposed sale to the public: **From time to time after this registration statement becomes effective.**

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: ☐

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☑

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registrations statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box. ☑

If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to Rule 413(b) under the Securities Act, check the following box. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "<u>large accelerated filer,</u>" "<u>accelerated filer,</u>" "<u>smaller reporting company,</u>" and "<u>emerging growth company</u>" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☑ Accelerated filer ☐ <br> Non-accelerated filer ☐ Smaller reporting company ☐ <br> 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 7(a)(2)(B) of the Securities Act. ¨☐

**EXPLANATORY NOTE**

This Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (File No. 333-266056) ("<u>Post-Effective Amendment No. 1</u>") of Vertex Energy, Inc. (the "<u>Company</u>") is being filed because the Company expects that it will no longer be a "well-known seasoned issuer" (as such term is defined in Rule 405 of the Securities Act of 1933, as amended) when it files its Annual Report on Form 10-K for the fiscal year ended December 31, 2022. Accordingly, the Company is filing this Post-Effective Amendment No. 1 for the purpose of including disclosure required for a registrant other than a well-known seasoned issuer. No additional securities are being registered under this Post-Effective Amendment No. 1. All filing fees payable in connection with the registration of the shares covered by this Post-Effective Amendment No. 1 were paid by the Company at the time of the initial filing of the Registration Statement.

This Post-Effective Amendment No. 1 also updates certain information regarding the securities being offered pursuant to the prospectus contained herein.

**PROSPECTUS**

**2,834,900 Shares**

![](vexposasr030123001.jpg)

**Common Stock**

This prospectus relates to the possible resale or other disposition, from time to time, of up to 2,834,900 shares of our common stock issuable upon exercise of warrants to purchase shares of our common stock by the selling stockholders named in this prospectus or in supplements to this prospectus. See "[Selling Stockholders](#vtnrs3asr070122a008)." We are registering the applicable shares of our common stock to allow the selling stockholders, together with any additional selling stockholders listed in any applicable prospectus supplement, to sell the shares of common stock pursuant to the registration statement of which this prospectus forms a part. The registration of the shares of our common stock covered by this prospectus does not necessarily mean that any shares of our common stock will be sold by any of the selling stockholders, and we cannot predict when or in what amounts any of the selling stockholders may sell any of our shares of common stock offered by this prospectus. The prices at which the selling stockholders may sell the shares of our common stock will be determined by prevailing market prices or at prices that may be obtained in negotiated transactions. We are filing the registration statement of which this prospectus is a part pursuant to contractual obligations that exist with the selling stockholders, as described in more detail in this prospectus under "[Warrant Grants and Related Transactions](#vtnrs3asr070122a006)."

We are not selling any shares of our common stock under this prospectus, and prospectus supplement, and will not receive any proceeds from any sale or disposition by the selling stockholders of the shares of our common stock covered by this prospectus and any prospectus supplement. We are registering shares of common stock on behalf of the selling stockholders. However, we will receive proceeds in connection with the applicable exercise price of the warrants to purchase shares of our common stock to the extent such warrants are exercised for cash. The selling stockholders may offer and sell the shares in a variety of transactions as described under the heading "[Plan of Distribution](#vtnrs3asr070122a009)", including by them directly or through one or more underwriters, broker-dealers or agents on terms to be determined at the time of sale. We have no basis for estimating either the number of shares of our common stock that will ultimately be sold by the selling stockholders or the prices at which such shares will be sold.

We are bearing all of the expenses in connection with the registration of the shares of common stock, but all selling and other expenses incurred by the selling stockholders, including commissions and discounts, if any, attributable to the sale or disposition of the shares will be borne by them.

The selling stockholders and intermediaries through whom such securities are sold may be deemed "<u>underwriters</u>" within the meaning of the Securities Act of 1933, as amended (the "<u>Securities Act</u>"), with respect to the securities offered hereby, and any profits realized or commissions received may be deemed underwriting compensation.

In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus.

Our common stock trades on the Nasdaq Capital Market, or Nasdaq, under the symbol "<u>VTNR.</u>" On February 28, 2023, the last reported sale price of our common stock on Nasdaq was $9.47 per share.

**Investing in our securities involves risks. You should carefully consider the risk factors incorporated by reference herein as discussed in the "**[**Risk Factors**](#a_RISK_FACTORS)**" section beginning on page 4 of this prospectus and set forth in the documents incorporated by reference herein before making any decision to invest in our securities.**

**Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.**

**THE DATE OF THIS PROSPECTUS IS MARCH 1, 2023**

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| **[ABOUT THIS PROSPECTUS](#a_Toc127877631)** | **[1](#a_Toc127877631)** |
| **[PROSPECTUS SUMMARY](#a_Toc127877632)** | **[2](#a_Toc127877632)** |
| **[THE OFFERING](#a_Toc127877633)** | **[3](#a_Toc127877633)** |
| **[RISK FACTORS](#a_Toc127877634)** | **[4](#a_Toc127877634)** |
| **[CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION](#a_Toc127877635)** | **[5](#a_Toc127877635)** |
| **[WARRANT GRANTS AND RELATED TRANSACTIONS](#a_Toc127877636)** | **[7](#a_Toc127877636)** |
| **[USE OF PROCEEDS](#a_Toc127877637)** | **[10](#a_Toc127877637)** |
| **[SELLING STOCKHOLDERS](#a_Toc127877638)** | **[10](#a_Toc127877638)** |
| **[PLAN OF DISTRIBUTION](#a_Toc127877639)** | **[12](#a_Toc127877639)** |
| **[LEGAL MATTERS](#a_Toc127877640)** | **[15](#a_Toc127877640)** |
| **[EXPERTS](#a_Toc127877641)** | **[15](#a_Toc127877641)** |
| **[WHERE YOU CAN FIND MORE INFORMATION](#a_Toc127877642)** | **[16](#a_Toc127877642)** |
| **[INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE](#a_Toc127877643)** | **[16](#a_Toc127877643)** |
| **[INDEX TO FINANCIAL STATEMENTS](#a_Toc127877644)** | **[17](#a_Toc127877644)** |

---

**ABOUT THIS PROSPECTUS**

This prospectus is part of an automatic shelf registration statement that we filed with the Securities and Exchange Commission (the "<u>SEC</u>") as a "<u>well-known seasoned issuer</u>" as defined in Rule 405 under the Securities Act of 1933, as amended (the "<u>Securities Act</u>"), utilizing a "<u>shelf</u>" registration process. Under this process, selling stockholders named in this prospectus or in one or more supplements to this prospectus may sell shares of common stock from time to time. Each time any selling stockholder not named herein sells shares of common stock under the registration statement of which this prospectus is a part, such selling stockholder will provide a copy of this prospectus and any applicable prospectus supplement, as required by law. Any applicable prospectus supplement may add, update, or change information contained in this prospectus. To the extent that any statement that we or the selling stockholders make in a prospectus supplement is inconsistent with statements made in this prospectus or in documents incorporated by reference in this prospectus, the statements made or incorporated by reference in this prospectus will be deemed modified or superseded by those made in the prospectus supplement.

This prospectus relates to the resale by the selling stockholders listed in this prospectus of up to 2,834,900 shares of our common stock. We will not receive any proceeds from the resale of any of the shares by the selling stockholders. However, we will receive proceeds in connection with the applicable exercise price of the warrants to purchase shares of our common stock to the extent such warrants are exercised for cash. We have agreed to pay for the expenses related to the registration of the shares being offered by the selling stockholders.

You should read this prospectus, including all documents incorporated herein by reference, together with additional information described under "[Where You Can Find More Information](#a_WHERE_YOU_CAN)" and "[Incorporation of Certain Information by Reference](#a_INCORPORATION_OF_CERTAIN)", before making an investment decision.

This prospectus does not contain all the information provided in the registration statement we filed with the SEC. For further information about us or our securities offered hereby, you should refer to that registration statement, which you can obtain from the SEC as described below under "[Where You Can Find More Information](#vtnrs3asr070122a012)".

You should rely only on the information contained or incorporated by reference in this prospectus, any accompanying prospectus supplement and any applicable "free writing prospectus." We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. This prospectus is not an offer to sell or the solicitation of an offer to buy any securities other than the securities to which it relates and is not an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make an offer or solicitation in that jurisdiction. You should assume that the information appearing in this prospectus, as well as information we have previously filed with the SEC and incorporated herein by reference, is accurate as of the date of those documents only. Our business, financial condition, results of operations and prospects may have changed since those dates.

We do not imply or represent by delivering this prospectus that Vertex Energy, Inc., or its business, financial condition or results of operations, are unchanged after the date on the front of this prospectus or that the information in this prospectus is correct at any time after such date, provided that we will amend or supplement this prospectus to disclose any material events which occur after the date of such prospectus to the extent required by applicable law.

In this prospectus, we may rely on and refer to information regarding the refining, re-refining, used oil and oil and gas industries in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it. Some data is also based on our good faith estimates. In addition, assumptions and estimates of our and our industry's future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in, or incorporated by reference into, the "[Risk Factors](#a_RISK_FACTORS)" section of this prospectus. These and other factors could cause our future performance to differ materially from our assumptions and estimates.

The selling stockholders may from time to time offer and sell, transfer or otherwise dispose of any or all of the shares of our common stock covered by this prospectus directly or through one or more underwriters, broker-dealers or agents on terms to be determined at the time of sale. A prospectus supplement may describe the terms of the plan of distribution and set forth the names of any underwriters involved in the sale of our common stock. See "[Plan of Distribution](#a_PLAN_OF_DISTRIBUTION)" for more information.

Please see the "<u>Glossary of Selected Terms</u>" beginning on page 4 of our Annual Report on Form 10-K for the year ended December 31, 2021, which is incorporated by reference herein (see "[Incorporation of Certain Documents By Reference](#vtnrs3asr070122a013)"), for a list of abbreviations and definitions used throughout this prospectus.

You should carefully read the entire prospectus, as well as the documents incorporated by reference in the prospectus, any applicable prospectus supplement and any applicable "<u>free writing prospectus</u>" before making an investment decision.

Unless the context otherwise requires, references in this prospectus to "<u>we,</u>" "<u>us,</u>" "<u>our,</u>" the "<u>Registrant</u>", the "<u>Company,</u>" "<u>Vertex</u>" and "<u>Vertex Energy</u>" refer to Vertex Energy, Inc. and its consolidated subsidiaries. All dollar amounts in this prospectus are in U.S. dollars unless otherwise stated.

**PROSPECTUS SUMMARY**

*This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our securities. You should read this entire prospectus carefully, including the "*[*Risk Factors*](#a_RISK_FACTORS)*" section, as well as our historical financial statements and the notes thereto which are incorporated by reference in this prospectus.*

**Our Company**

We are an energy transition company specializing in refining and marketing high-value conventional and lower-carbon alternative transportation fuels. We are engaged in operations across the petroleum value chain, including refining, collection, aggregation, transportation, storage and sales of aggregated feedstock and refined products to end-users.

**Warrant Grants and Related Transactions**

On April 1, 2022 and May 26, 2022, we granted warrants to purchase shares of common stock to the selling stockholders, who are lenders (or their affiliates) under the Loan and Security Agreement and subsequent amendment thereto, which shares of common stock issuable upon exercise of such warrants are being registered in the registration statement of which this prospectus forms a part. See "[Warrant Grants and Related Transactions](#a_WARRANT_GRANTS_AND)<u>.</u>"

**Corporate Information**

We were formed as a Nevada corporation in May 2008. Our principal executive offices are located at 1331 Gemini Street, Suite 250, Houston, Texas 77058. Our telephone number is (866) 660-8156. We file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings (reports, proxy and information statements, and other information) are available to the public over the Internet at the SEC's website at www.sec.gov and are available for download, free of charge, soon after such reports are filed with or furnished to the SEC, on the "<u>Investor Relations,</u>" "<u>SEC Filings</u>" page of our website at www.vertexenergy.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus. We have included our web address as an inactive textual reference only. We make our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports available free of charge on our website as soon as reasonably practicable after we file these reports with the Securities and Exchange Commission.

**THE OFFERING**

---

| | |
|:---|:---|
| **Securities to be Offered by the Selling Stockholders** | Up to 2,834,900 shares of our common stock issuable upon exercise of warrants. |
| **Common Stock Outstanding Prior to this Offering** | 75,668,826 shares of our common stock |
| **Common Stock to be Outstanding Immediately after this Offering, Assuming Cash Exercise of the Warrants** | 78,253,726 shares of our common stock |
| **Use of Proceeds** | All proceeds from the sale of the shares of common stock under this prospectus will be for the account of the selling stockholders. We will not receive any proceeds from the sale of our shares of common stock offered pursuant to this prospectus. However, we will receive proceeds in connection with the applicable exercise price of the warrants to purchase shares of our common stock to the extent such warrants are exercised for cash. See the section entitled "[Use of Proceeds](#a_USE_OF_PROCEEDS)" in this prospectus. |
| **Risk Factors** | You should read the section entitled "[Risk Factors](#a_RISK_FACTORS)" in this prospectus for a discussion of the risk factors to consider carefully before deciding to invest in shares of our common stock. |
| **Nasdaq Capital Market Symbol** | VTNR |

---

The number of shares of our common stock shown as issued and outstanding in the table above is based on 75,668,826 shares of our common stock outstanding as of March 1, 2023 and excludes:

● 3,633,033 shares of our common stock issuable upon exercise of outstanding options, at a weighted average exercise price of $2.46 per share, of which 1,921,770 shares were vested as of such date; and

● 1,500,000 shares of our common stock were reserved for future issuance under our 2020 Equity Incentive Plan; 792,500 shares of our common stock were reserved for future issuance under our 2019 Equity Incentive Plan; and 74,250 shares of our common stock were reserved for future issuance under our Amended and Restated 2013 Stock Incentive Plan.

**RISK FACTORS**

Investing in our common stock involves a high degree of risk. Before you decide to invest in our common stock, you should carefully consider the risks described in the section captioned "<u>Risk Factors</u>" in our most recent Annual Report on Form 10-K and our most recent Quarterly Report on Form 10-Q, which are incorporated by reference herein in their entirety, and those risk factors set forth below, together with the other information in this prospectus or any prospectus supplement and documents incorporated by reference in this prospectus or any prospectus supplement. The risks described in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and below are not the only ones facing our company. Additional risks and uncertainties may also impair our business operations. If any of the risks described in our most recent Annual Report on Form 10-K, our most recent Quarterly Report on Form 10-Q and the other filings incorporated by reference herein, or below, occurs, our business, financial condition, results of operations and future growth prospects could be harmed. In these circumstances, the market price of our common stock could decline, and you may lose all or part of your investment.

***If the selling stockholders immediately exercise their warrants and sell their shares of our common stock included in the prospectus which forms a part of this registration statement, they could cause our common stock price to decline.***

The sale and issuance of our common stock upon exercise of the Initial Warrants and Additional Warrants (as defined below) could have the effect of depressing the market price for our common stock, through dilution of earnings per share or otherwise. Once the registration statement, of which this prospectus is a part, is declared effective, all of the shares of common stock issuable upon exercise of the Initial Warrants and Additional Warrants will be available for resale in the public market. If the Initial Warrants and Additional Warrants are exercised by the holders thereof, and such shares are sold in the public market, such sales of our common stock could have the effect of depressing the market price for our common stock. In addition, future events and conditions could increase the dilution that is currently projected, including anti-dilution rights associated with such Initial Warrants and Additional Warrants. Any dilution of, or delay of any accretion to, our earnings per share could cause the price of shares of our common stock to decline or to grow at a reduced rate. These sales may also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate to raise funds through future offerings of our common stock.

***We have established preferred stock which can be designated by the Board of Directors without shareholder approval.***

We have 50 million shares of preferred stock authorized, of which no shares of preferred stock are issued and outstanding. Because the Board of Directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of the Company's shareholders (subject to applicable Nasdaq rules and requirements), shareholders of the Company will have no control over what designations and preferences the Company's preferred stock will have. The issuance of shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock which we may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our shareholders. As a result, the issuance of shares of preferred stock may cause the value of our securities to decrease.

**CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION**

This prospectus and the documents or information incorporated by reference herein contain, and any prospectus supplement and the documents incorporated therein may contain, forward-looking statements within the meaning of the federal securities laws, including Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "<u>Exchange Act</u>"), and the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements. You should not unduly rely on these statements. Factors, risks, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements include, among others:

● our need for additional funding, the availability of, and terms of, such funding, our ability to pay amounts due on such indebtedness, covenants of such indebtedness and security interests in connection therewith;

● risks associated with our outstanding indebtedness, including our outstanding convertible senior notes, including amounts owed, restrictive covenants and security interests in connection therewith, and our ability to repay such debts and amounts due thereon (including interest) when due, and mandatory and special redemption provisions thereof, and conversion rights associated therewith, including dilution caused thereby (in connection with the convertible senior notes);

● security interests, guarantees and pledges associated with our outstanding Loan and Security Agreement and Supply and Offtake Agreement, and risks associated with such agreements in general;

● risks associated with the capital project currently in process at our Mobile, Alabama refinery, including costs, timing, delays and unanticipated problems associated therewith;

● health, safety, security and environment risks;

● risks associated with an offtake agreement which will only become effective upon the occurrence of certain events, including the completion of the capital project at the Mobile, Alabama refinery, which may not be completed timely;

● the level of competition in our industry and our ability to compete;

● our ability to respond to changes in our industry;

● the loss of key personnel or failure to attract, integrate and retain additional personnel;

● our ability to protect our intellectual property and not infringe on others' intellectual property;

● our ability to scale our business;

● our ability to maintain supplier relationships and obtain adequate supplies of feedstocks;

● our ability to obtain and retain customers;

● our ability to produce our products at competitive rates;

● our ability to execute our business strategy in a very competitive environment;

● trends in, and the market for, the price of oil and gas and alternative energy sources;

● our ability to maintain our relationships with third parties;

● the impact of competitive services and products;

● our ability to complete and integrate future acquisitions;

● our ability to complete future acquisitions;

● our ability to maintain insurance;

● potential future litigation, judgments and settlements;

● rules and regulations making our operations more costly or restrictive;

● changes in environmental and other laws and regulations and risks associated with such laws and regulations;

● economic downturns both in the United States and globally;

● risk of increased regulation of our operations and products;

● negative publicity and public opposition to our operations;

● disruptions in the infrastructure that we and our partners rely on;

● an inability to identify attractive acquisition opportunities and successfully negotiate acquisition terms;

● liabilities associated with acquired companies, assets or businesses;

● interruptions at our facilities;

● unexpected changes in our anticipated capital expenditures resulting from unforeseen required maintenance, repairs, or upgrades;

● our ability to acquire and construct new facilities;

● prohibitions on borrowing and other covenants of our debt facilities;

● our ability to effectively manage our growth;

● decreases in global demand for, and the price of, oil;

● repayment of and covenants in our future debt facilities;

● rising inflation, rising interest rates, the effects of war, and governmental responses thereto and possible recessions caused thereby; and

● the lack of capital available on acceptable terms to finance our continued growth.

We identify forward-looking statements by use of terms such as "<u>may,</u>" "<u>will,</u>" "<u>expect,</u>" "<u>anticipate,</u>" "<u>estimate,</u>" "<u>hope,</u>" "<u>plan,</u>" "<u>believe,</u>" "<u>predict,</u>" "<u>envision,</u>" "<u>intend,</u>" "<u>will,</u>" "<u>continue,</u>" "<u>potential,</u>" "<u>should,</u>" "<u>confident,</u>" "<u>could</u>" and similar words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual results could differ materially from those contained in the forward-looking statements. You should consider carefully the statements included in and incorporated by reference in this prospectus which describe factors that could cause our actual results to differ from those set forth in the forward-looking statements.

The above statements are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained or incorporated by reference in this prospectus reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual outcomes may differ materially from the results and outcomes discussed in the forward-looking statements.

Forward-looking statements speak only as of the date of this prospectus or the date of any document incorporated by reference in this prospectus, and any prospectus supplement and the documents incorporated therein, as applicable. Except to the extent required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date of this prospectus, or any prospectus supplement, or to reflect the occurrence of unanticipated events.

You should also consider carefully the statements under "[Risk Factors](#a_RISK_FACTORS)" and other sections of this prospectus, and the documents we incorporate by reference, and any prospectus supplement and the documents incorporated therein, which address additional facts that could cause our actual results to differ from those set forth in the forward-looking statements. We caution investors not to place significant reliance on the forward-looking statements contained in this prospectus, and the documents we incorporate by reference, or any prospectus supplement and the documents incorporated therein. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise, except as otherwise required by law.

You should read this prospectus and the documents that we reference in this prospectus, and any prospectus supplement and the documents incorporated therein, and those documents we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

**WARRANT GRANTS AND RELATED TRANSACTIONS**

*<u>Loan and Security Agreement (as amended)</u>*

On April 1, 2022 (the "<u>Closing Date</u>"), Vertex Refining Alabama LLC, a Delaware limited liability company ("<u>Vertex Refining</u>") which is indirectly wholly-owned by the Company; the Company, as a guarantor; substantially all of the Company's direct and indirect wholly-owned subsidiaries, as guarantors (together with the Company, the "<u>Initial Guarantors</u>"); certain funds and accounts under management by BlackRock Financial Management, Inc. or its affiliates, as lenders ("<u>BlackRock</u>"), certain funds managed or advised by Whitebox Advisors, LLC, as lenders ("<u>Whitebox</u>"), certain funds managed by Highbridge Capital Management, LLC, as lenders ("<u>Highbridge</u>"), Chambers Energy Capital IV, LP, as a lender ("<u>Chambers</u>"), CrowdOut Capital LLC, as a lender ("<u>CrowdOut Capital</u>"), CrowdOut Credit Opportunities Fund LLC, as a lender (collectively with BlackRock, Whitebox, Highbridge, Chambers and CrowdOut Capital, the "<u>Initial Lenders</u>"); and Cantor Fitzgerald Securities, in its capacity as administrative agent and collateral agent for the Lenders (the "<u>Agent</u>"), entered into a Loan and Security Agreement (as amended to date, the "<u>Loan and Security Agreement</u>").

Pursuant to the Loan and Security Agreement, the Initial Lenders provided a $125 million term loan to Vertex Refining (the "<u>Initial Term Loan</u>"), the proceeds of which, less agreed upon fees and original issue discount, were held in escrow prior to the Closing Date, pursuant to that certain escrow agreement, entered into between Vertex Refining, the Initial Lenders and Cantor Fitzgerald Securities, in its capacity as escrow agent on March 2, 2022. On the Closing Date, the net proceeds of the Initial Term Loan, less certain transaction expenses, were released from escrow to Vertex Refining in an aggregate amount of $94,309,958.

Vertex Refining used a portion of the proceeds from the Initial Term Loan borrowing to pay a portion of the purchase price associated with the acquisition of the Mobile, Alabama refinery (the "<u>Mobile Refinery</u>") acquired by Vertex Refining on April 1, 2022, and to pay certain fees and expenses associated with the closing of the Loan and Security Agreement and is required to use the remainder of the proceeds for (i) the planned renewable diesel conversion of the Mobile Refinery, and (ii) general working capital and liquidity needs.

In connection with the Loan and Security Agreement, and as additional consideration for the Initial Lenders agreeing to loan funds to Vertex Refining thereunder, the Company granted warrants to purchase 2,750,000 shares of common stock of the Company to the Initial Lenders (and/or their affiliates) on the Closing Date (the "<u>Initial Warrants</u>").

On May 26, 2022, each of the Initial Guarantors (including the Company), and certain other direct and indirect wholly-owned subsidiaries of the Company (the "<u>Additional Guarantors</u>", and the Additional Guarantors, together with the Initial Guarantors, the "<u>Guarantors</u>"), entered into an Amendment Number One to Loan and Security Agreement ("<u>Amendment No. 1 to Loan Agreement</u>"), with the Initial Lenders and the Agent, pursuant to which, the amount of the Term Loan was increased from $125 million to $165 million, with the Initial Lenders providing an additional term loan in the amount of $40 million (the "<u>Additional Term Loan</u>", and together with the Initial Term Loan, the "<u>Term Loan</u>").

In connection with the Additional Term Loan, and as additional consideration to the Initial Lenders for loaning funds to Vertex Refining in connection therewith, the Company granted warrants to purchase 250,000 shares of common stock of the Company to the Initial Lenders (and/or their affiliates) (the "<u>Additional Warrants</u>", and together with the Initial Warrants, the "<u>Warrants</u>").

*<u>Warrant Agreements and Registration Rights Agreement</u>*

In connection with the entry into the Loan and Security Agreement, and as a required term and condition thereof, on April 1, 2022, the Company granted the Initial Warrants to purchase 2,750,000 shares of the Company's common stock to the Initial Lenders and their assigns. The terms of the Warrants are set forth in a Warrant Agreement entered into on April 1, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent (the "<u>Initial Warrant Agreement</u>").

The Initial Warrants have a five-year term and a $4.50 per share exercise price, and include weighted average anti-dilutive rights in the event any shares of common stock or other equity or equity equivalent securities payable in common stock are granted, issued or sold (or the Company enters into any agreement to grant, issue or sell), or in accordance with the terms of the Initial Warrant Agreement, are deemed to have granted, issued or sold, in each case, at a price less than the exercise price, which automatically decreases the exercise price of the Initial Warrants upon the occurrence of such event, as described in greater detail in the Initial Warrant Agreement, and increases the number of shares of common stock issuable upon exercise of the Initial Warrants, such that the aggregate exercise price of all Initial Warrants remains the same before and after any such dilutive event.

In connection with the entry into the Amendment No. 1 to Loan Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted the Additional Warrants to purchase 250,000 shares of the Company's common stock to the Initial Lenders and their assigns. The terms of the Additional Warrants are set forth in a Warrant Agreement entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent (the "<u>Additional Warrant Agreement</u>", and together with the Initial Warrant Agreement, the "<u>Warrant Agreements</u>").

The Additional Warrants have a five and one-half-year term and a $9.25 per share exercise price, and include weighted average anti-dilutive rights in the event any shares of common stock or other equity or equity equivalent securities payable in common stock are granted, issued or sold (or the Company enters into any agreement to grant, issue or sell), or in accordance with the terms of the Additional Warrant Agreement, are deemed to have granted, issued or sold, subject to certain exceptions, in each case, at a price less than the exercise price, which automatically decreases the exercise price of the Additional Warrants upon the occurrence of such event, as described in greater detail in the Additional Warrant Agreement, and increases the number of shares of common stock issuable upon exercise of the Additional Warrants, such that the aggregate exercise price of all Additional Warrants remains the same before and after any such dilutive event.

Until or unless the Company receives shareholder approval under applicable Nasdaq listing rules for the issuance of more than 19.9% of the Company's outstanding shares of common stock on April 1, 2022, pursuant to the exercise of the Warrants (i.e., 12,828,681 shares of common stock, based on 64,465,734 shares of outstanding common stock on such date)(the "<u>Share Cap</u>"), the Company may not issue more shares of common stock upon exercise of the Warrants than totals the Share Cap, and is required to pay the Initial Lenders cash, based on the fair market value of any shares required to be issued upon exercise of the Warrants (as calculated in the Warrant Agreements), which would exceed the Share Cap.

Upon the occurrence of a fundamental transaction (as described in the Warrant Agreements), the Warrant Agreements (a) provide each holder a put right and (b) provide the Company with a call right in respect of the Warrants. Upon the exercise of a put right by the holder or a call right by the Company, the Company is obligated to repurchase the Warrants for the Black Scholes Value of the Warrants repurchased, as calculated in the Warrant Agreements. The Warrants also include cashless exercise rights and a provision preventing each holder of the Warrants from exercising any portion of their Warrants if such holder (together with its affiliates) would beneficially own in excess of 4.99% or 9.99% (as applicable pursuant to the Warrant Agreements) of the number of shares of Company common stock outstanding immediately after giving effect to the exercise, subject to certain rights of the holders to increase or decrease such percentage.

In connection with the grant of the Warrants, the Company and the holders of such Initial Warrants entered into a Registration Rights Agreement dated April 1, 2022, which was amended and restated by the entry into an Amended and Restated Registration Rights Agreement dated May 26, 2022, entered into between the Company and the holders of the Warrants (as amended and restated, the "<u>Registration Rights Agreement</u>"). Under the Registration Rights Agreement, the Company agreed to file a registration statement (the "<u>Initial Registration Statement</u>") with the SEC as soon as reasonably practicable and in no event later than 75 days following April 1, 2022 (i.e., on or before June 15, 2022), for purposes of registering the resale of the shares of common stock issuable upon exercise of the Warrants. The Company also agreed to use commercially reasonable efforts to cause the SEC to declare the Registration Statement effective as soon as practicable and no later than 45 days following the filing of the Initial Registration Statement; provided, that such date is extended until 120 days after the filing date if the Initial Registration Statement is reviewed by the staff of the Commission. The Registration Rights Agreement also provides the holders of the Warrants certain piggyback and demand registration rights (including pursuant to an underwritten offering, in the event the gross proceeds from such underwritten offering are expected to exceed $35 million). The registration statement of which this prospectus forms a part is the Initial Registration Statement.

If, subject to certain limited exceptions described in the Registration Rights Agreement, (i) the Initial Registration Statement required to be filed pursuant to the Registration Rights Agreement is not filed on or prior to the required filing deadline (or without complying with the terms of the Registration Rights Agreement), (ii) a registration statement registering for resale all of the registrable securities is not declared effective by the Commission by the required effectiveness deadline, or (iii) during the period commencing on the effective date of the Initial Registration Statement and ending on the earlier of the date when there are no registrable securities or the five and one half anniversary of the effective date of the Initial Registration Statement, a registration statement is not continuously effective to allow the sale of the shares underlying the Warrants, for more than 10 consecutive calendar days or more than an aggregate of 15 calendar days (which need not be consecutive) during any 12-month period, then, in addition to any other rights such holder of Warrants may have under the Registration Rights Agreement or applicable law, (x) on the first such applicable default date, the Company shall pay to such holder of Warrants an amount in cash, as partial liquidated damages and not as a penalty, equal to 1.0% of the fair market value (such fair market value calculated as required under the Registration Rights Agreement) of the registrable securities held by such holder (the "<u>1% Penalty</u>"), and (y) on each monthly anniversary of such default date until all applicable defaults have been cured, shall pay the 1% Penalty, subject to a maximum penalty of 10% of the fair market value of the registrable securities held by each applicable holder of Warrants (such fair market value calculated as required under the Registration Rights Agreement).

The Company has agreed, among other things, to indemnify the holders of the Warrants and their affiliates with respect to certain liabilities and to pay all fees and expenses incident to the Company's obligations under the Registration Rights Agreement.

On June 15, 2022, the Company and the then holders of the Warrants (the "<u>Warrant Holders</u>") entered into an Amendment No. 1 to the First Amended and Restated Registration Rights Agreement (the "<u>Amendment</u>"), which amended the required filing date of the initial registration statement that the Company was required to use commercially reasonable efforts to file pursuant to the terms of the Registration Rights Agreement, to register the resale of the shares of common stock underlying the Warrants, from no later than June 15, 2022, to on July 1, 2022, or, if the Company is then ineligible to file a registration statement on such date, to require the Company to use commercially reasonable efforts to cause such registration statement to be declared effective under the Securities Act, as promptly as reasonably practicable after the initial filing thereof (including, if then a "<u>well-known seasoned issuer</u>" (as defined in Rule 405 of the Securities Act, a "<u>WKSI</u>") by filing such registration statement as an automatically effective shelf registration statement). The Amendment also included various representations from the Company regarding its satisfaction of the requirements for being a WKSI.

The registration statement of which this prospectus forms a part is the registration statement required pursuant to the terms of the Registration Rights Agreement, as amended, which was timely filed and was declared effective within the time period required by the Registration Rights Agreement.

**USE OF PROCEEDS**

We will not receive any proceeds from the sale of the shares of our common stock issuable upon exercise of the Warrants by the selling stockholders from time to time pursuant to this prospectus. The proceeds from the offering are solely for the account of the selling stockholders. See "[Selling Stockholders](#a_SELLING_STOCKHOLDERS)<u>.</u>"

We will, however, receive proceeds in connection with the exercise of the Warrants (to the extent such warrants are exercised for cash). We plan to use such proceeds, if any, for general working capital. We have also agreed to bear all fees and expenses incident to our obligation to register the shares of our common stock being offered by this prospectus.

**SELLING STOCKHOLDERS**

The shares of common stock being offered by the selling stockholders are those previously issued and issuable to the selling stockholders upon exercise of the Initial Warrants and Additional Warrants. For additional information regarding the warrants, see "[Warrant Grants and Related Transactions](#vtnrs3asr070122a006)" above. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale or other disposition from time to time.

We have prepared this table based on information furnished to us by or on behalf of the selling stockholders. Under the rules of the SEC, beneficial ownership includes shares over which the indicated beneficial owner exercises voting or investment power. Beneficial ownership is determined under Section 13(d) of the Exchange Act, and generally includes voting or investment power with respect to securities, including any securities that grant the selling stockholders the right to acquire common stock within 60 days of March 1, 2023. We believe that the selling stockholders have sole voting and investment power with respect to all shares beneficially owned. To our knowledge, none of the selling stockholders are affiliated with a broker-dealer registered under the Exchange Act, except as set forth in the footnotes below.

The shares may be sold by the selling stockholders, by those persons or entities to whom they transfer, donate, devise, pledge or distribute shares or by other successors in interest. The information regarding shares beneficially owned after this offering assumes the sale of all shares offered by the selling stockholders in this prospectus. The selling stockholders may sell less than all of the shares listed in the table. In addition, the shares listed below may be sold pursuant to this prospectus or in privately negotiated transactions. Accordingly, we cannot estimate the number of shares the selling stockholders will sell under this prospectus.

The selling stockholders have not held any position or office or had any other material relationship with us or any of our predecessors or affiliates within the past three years, other than beneficial ownership of the shares described in the table below and as lenders to a wholly-owned subsidiary of the Company, Vertex Refining, pursuant to the terms of the Loan and Security Agreement, as discussed above "[Warrant Grants and Related Transactions](#vtnrs3asr070122a006)".

The selling stockholders have represented to us that they purchased the shares of common stock offered herein for their own account, for investment only and not with a view toward selling or distributing them in violation of the Securities Act, except in sales either registered under the Securities Act, or sales that are exempt from registration. In recognition of the fact that the selling stockholders, even though purchasing its shares for investment, may wish to be legally permitted to sell their shares when they deemed appropriate, we agreed with the selling stockholders to file a registration statement to register the resale of the shares. Information regarding the selling stockholders may change from time to time. Any such changed information will be set forth in supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part, if required.

The table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling stockholders. Our knowledge is based on information provided by the selling stockholders as of March 1, 2023.

The selling stockholders may have sold, transferred or otherwise disposed of some or all of the shares of our common stock listed below in exempt or registered transactions since the date on which the information below was provided to us and may in the future sell, transfer or otherwise dispose of some or all of the shares in private placement transactions exempt from, or not subject to the registration requirements of, the Securities Act. We have assumed for purposes of the table below that the selling stockholders will sell all of the common stock being offered hereby pursuant to this prospectus.

Information about the selling stockholders may change from time to time, including by addition of additional selling stockholders, and if necessary, we will supplement this prospectus accordingly.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Number of Shares of**<br> **Common Stock Beneficially**<br> **Owned Prior to this**<br> **Offering (1)(2)** | **Number of Shares of**<br> **Common Stock Beneficially**<br> **Owned Prior to this**<br> **Offering (1)(2)** | **Number of**<br> **Shares of**<br> **Common**<br> **Stock**<br> **Being**<br> **Offered** |  | **Beneficial Ownership of**<br> **Common Stock After this**<br> **Offering (2)** | **Beneficial Ownership of**<br> **Common Stock After this**<br> **Offering (2)** |
| <br>&nbsp;&nbsp;**Name of Selling Stockholders** | **Number** | **Percentage** | **Number of**<br> **Shares of**<br> **Common**<br> **Stock**<br> **Being**<br> **Offered** |  | **Number** | **Percentage** |
| &nbsp;&nbsp;BlackRock, Inc. (a) | 1560000 | 2.0% | 1560000 | &nbsp;&nbsp;(3) |  |  |
| &nbsp;&nbsp;Chambers Energy Capital IV, LP (b) | 180000 | \* | 180000 | &nbsp;&nbsp;(4) |  |  |
| &nbsp;&nbsp;CrowdOut Credit Opportunities Fund LLC (c) | 15000 | \* | 15000 | &nbsp;&nbsp;(5) |  |  |
| &nbsp;&nbsp;Highbridge Tactical Credit Master Fund, L.P. (d) | 539900 | \* | 539900 | &nbsp;&nbsp;(6) |  |  |
| &nbsp;&nbsp;Pandora Select Partners, LP (e) | 24200 | \* | 24200 | &nbsp;&nbsp;(7) |  |  |
| &nbsp;&nbsp;Whitebox GT Fund, LP (e) | 28900 | \* | 28900 | &nbsp;&nbsp;(8) |  |  |
| &nbsp;&nbsp;Whitebox Multi-Strategy Partners, LP (e) | 318875 | \* | 318875 | &nbsp;&nbsp;(9) |  |  |
| &nbsp;&nbsp;Whitebox Relative Value Partners, LP (e) | 168025 | \* | 168025 | &nbsp;&nbsp;(10) |  |  |
|  |  |  | **2834900** |  |  |  |

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| |
|:---|
| \* Less than 1%. |
| (1) ""<u>Beneficial ownership</u>" means that a person, directly or indirectly, has or shares voting or investment power with respect to a security or has the right to acquire such power within 60 days. The number of shares beneficially owned is as of March 1, 2023, and the percentage is based upon 75,668,826 shares of our common stock outstanding as of March 1, 2023. |
| (2) Assumes for purposes of the "<u>Beneficial Ownership of Common Stock After this Offering</u>" that (i) all of the shares of common stock to be registered by the registration statement of which this prospectus is a part are sold in this offering and (ii) the selling stockholders do not acquire additional shares of our common stock after the date of this prospectus and prior to completion of this offering. The registration of this offering of shares does not necessarily mean that the selling stockholders will sell all or any portion of the shares covered by this prospectus. |
| (3) Includes 1,430,000 Initial Warrants and 130,000 Additional Warrants. |
| (4) Includes 165,000 Initial Warrants and 15,000 Additional Warrants. |
| (5) Includes 15,000 Additional Warrants. |
| (6) Includes 494,900 Initial Warrants and 45,000 Additional Warrants. |
| (7) Includes 24,200 Initial Warrants. |
| (8) Includes 26,400 Initial Warrants and 2,500 Additional Warrants. |
| (9) Includes 297,000 Initial Warrants and 21,875 Additional Warrants. |
| (10) Includes 147,400 Initial Warrants and 20,625 Additional Warrants. |
| (a) The registered holders of the referenced shares are the following funds and accounts under management by subsidiaries of BlackRock, Inc.: BlackRock Diversified Private Debt Fund Master LP; GCO II Fund B (Investment 2), L.P. and Global Credit Opportunities II Fund A Master SCSp. BlackRock, Inc. is the ultimate parent holding company of such subsidiaries. On behalf of such subsidiaries, the applicable portfolio managers, as managing directors (or in other capacities) of such entities, and/or the applicable investment committee members of such funds and accounts, have voting and investment power over the shares held by the funds and accounts which are the registered holders of the referenced shares. Such portfolio managers and/or investment committee members expressly disclaim beneficial ownership of all shares held by such funds and accounts. The address of such funds and accounts, such subsidiaries and such portfolio managers and/or investment committee members is 50 Hudson Yards, New York, NY 10001. Shares shown include only the securities being registered for resale and may not incorporate all shares deemed to be beneficially held by the registered holders or BlackRock, Inc. |
| (b) J. Robert Chambers, Kyle Kettler and Robert Hendricks, each partners of Chambers Energy Capital IV, LP's general partner, CEC Fund IV GP, LLC, have voting and dispositive power with respect to the securities held by Chambers Energy Capital IV, LP. and may be deemed to beneficially own such securities. |
| (c) Alexander Schoenbaum, the Chief Executive Officer of CrowdOut Credit Opportunities Fund LLC holds voting and dispositive power with respect to the securities held by CrowdOut Credit Opportunities Fund LLC and may be deemed to beneficially own such securities. |
| (d) Highbridge Capital Management, LLC is the trading manager of Highbridge Tactical Credit Master Fund, L.P. Highbridge Tactical Credit Master Fund, L.P. disclaims beneficial ownership over these securities. The address of Highbridge Capital Management, LLC is 277 Park Avenue, 23rd Floor, New York, NY 10172, and the address of Highbridge Tactical Credit Master Fund, L.P. is c/o Maples Corporate Services Limited #309 Ugland House, South Church Street, George Town, Grand Cayman KY1-1104, Cayman Islands. |
| (e) Whitebox Advisors LLC is the investment manager of the selling stockholder and has the power to vote and dispose of the securities described in the table above as held by Pandora Select Partners, LP, Whitebox GT Fund, LP, Whitebox Multi-Strategy Partners, LP, and Whitebox Relative Value Partners, LP (the "<u>Whitebox Funds</u>"). Whitebox Advisors LLC is owned by the following members: Robert Vogel, Jacob Mercer, Nick Stukas, Brian Lutz, Paul Roos and Dyal Capital Partners II (A), LP, a non-voting member, and such individuals and entity disclaim beneficial ownership of the securities described in the table above held by the Whitebox Funds, except to the extent of its or his direct or indirect economic interest in Whitebox Advisors LLC or the selling stockholder. |

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**PLAN OF DISTRIBUTION**

We are registering shares of common stock issuable upon exercise of the warrants to purchase shares of our common stock to permit the resale of these shares of common stock by the holders thereof and holders of the shares of common stock and warrants from time to time after the date of this prospectus. We will receive proceeds in connection with the applicable exercise price of the warrants to purchase shares of our common stock. Other than such exercise price, we will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

Each selling stockholder of the securities and any of their donees, pledgees, assignees, transferees and other successors-in-interest may, from time to time, in one or more transactions on the NASDAQ Stock Market or any other organized market where our shares of common stock may be traded or in private transactions, sell any or all of their securities covered hereby through underwriters, dealers or agents, directly to one or more purchasers or through a combination of any such methods of sale. These sales may be at fixed or negotiated prices. The selling stockholders may distribute the shares of our common stock offered hereby from time to time in one or more transactions:

● at a fixed price or prices, which may be changed;

● at market prices prevailing at the time of sale;

● at varying prices determined at the time of sale;

● at prices related to such prevailing market prices; or

● at negotiated prices.

The selling stockholders may use any one or more of the following methods when selling the shares offered hereby:

● ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

● one or more block trades in which the broker-dealer will attempt to sell such shares as agent or principal of all of such shares held by the selling stockholder;

● purchases by a broker-dealer as principal and resale by such broker-dealer for its account;

● an exchange distribution in accordance with the rules of the applicable exchange;

● privately negotiated transactions;

● put or call options transactions;

● through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

● short sales;

● agreements between broker-dealers and the selling stockholder to sell a specified number of such shares at a stipulated price per share; and

● a combination of any such methods of sale; or

● any other method permitted pursuant to applicable law.

If the selling stockholders effect such transactions by selling shares of common stock offered hereby to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock offered hereby for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock offered hereby or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock offered hereby in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock offered hereby short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock offered hereby to broker-dealers that in turn may sell such shares.

The selling stockholders may pledge or grant a security interest in some or all of the shares of common stock offered hereby and owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell such shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock offered hereby in other circumstances, in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock offered hereby may be deemed to be "<u>underwriters</u>" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock offered hereby is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock offered hereby may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock offered hereby may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

There can be no assurance that the selling stockholders will sell any or all of the shares of common stock registered pursuant to the registration statement of which this prospectus forms a part.

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock offered hereby by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock offered hereby to engage in market-making activities with respect to the shares of common stock offered hereby. All of the foregoing may affect the marketability of the shares of common stock offered hereby and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock offered hereby.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock offered hereby will be freely tradable in the hands of persons other than our affiliates.

The shares of common stock may also be sold under Rule 144 under the Securities Act, or any other exemption from registration under the Securities Act, if available for a Selling Stockholder, rather than under this prospectus. Each selling stockholder has the sole and absolute discretion not to accept any purchase offer or make any sale of shares of common stock if it deems the purchase price to be unsatisfactory at any particular time.

The selling stockholders also may transfer the shares of common stock offered hereby in other circumstances, in which case the transferees or other successors-in-interest will be the selling beneficial owners for purposes of this prospectus.

We agreed to use commercially reasonable efforts to keep the registration statement of which this prospectus is a part effective at all times until the earlier of the five and one half year anniversary of the effective date of this registration statement or such time as the selling stockholders no longer own any Warrants or shares of common stock issuable upon the exercise thereof. The shares of common stock will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the shares of common stock covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the selling stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

**LEGAL MATTERS**

The validity of the securities offered by this prospectus have been passed upon for us by The Loev Law Firm, PC. David M. Loev, the President and sole owner of The Loev Law Firm, PC, beneficially owns less than 1% of the outstanding shares of our common stock.

**EXPERTS**

The consolidated financial statements of Vertex Energy, Inc. and subsidiaries as of December 31, 2022 and 2021, and for each of the years in the three-year period ended December 31, 2022 and the effectiveness of internal control over financial reporting as of December 31, 2022, included herein, have been audited by Ham, Langston & Brezina, L.L.P., an independent registered public accounting firm, as set forth in their reports thereon, and have included in this Prospectus and Registration Statement in reliance upon such reports given on the authority of such firm as an expert in accounting and auditing.

The report of Ham, Langston & Brezina, L.L.P. dated March 1, 2023, on the effectiveness of internal control over financial reporting as of December 31, 2022, expressed an opinion that Vertex Energy, Inc. and subsidiaries had not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

The combined financial statements of Mobile Refinery and Logistics Assets as of December 31, 2021 and 2020, and for each of the years then ended appearing in Vertex Energy, Inc.'s Current Report on Form 8-K/A, filed with the SEC on June 15, 2022, have been audited by RSM US LLP, as set forth in their report thereon, and incorporated herein by reference. Such combined financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such firm as an experts in accounting and auditing.

Except as set forth under "[Legal Matters](#a_LEGAL_MATTERS)", no expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the securities was employed on a contingency basis, or had, or is to receive, any interest, directly or indirectly, in our Company or any of our parents or subsidiaries, nor was any such person connected with us or any of our parents or subsidiaries, if any, as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.

**WHERE YOU CAN FIND MORE INFORMATION**

We are a reporting company and file annual, quarterly, and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on the "<u>Investor Relations,</u>" "<u>SEC Filings</u>" page of our website at <u>www.vertexenergy.com</u>. Information on our web site is not part of this prospectus, and we do not desire to incorporate by reference such information herein. The SEC maintains a website that contains reports, proxy and information statements and other information about issuers, such as us, who file electronically with the SEC. Our SEC filings are available to the public from the SEC's website at www.sec.gov.

**INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE**

The SEC allows us to "incorporate by reference" into this prospectus the information in other documents that we file with it. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede information contained in documents filed earlier with the SEC or contained in this prospectus.

We incorporate by reference in this prospectus (i) the documents listed below, (ii) all documents that we file with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial filing of the registration statement of which this prospectus is included and prior to the effectiveness of such registration statement, and (iii) any future filings that we may make with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act prior to the termination of the offering under this prospectus; provided, however, that we are not incorporating, in each case, any documents or information deemed to have been furnished and not filed in accordance with SEC rules (including Items 2.02 and 7.01 of Form 8-K):

● Our [Annual Report on Form 10-K](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000162828022005958/vtnr-20211231.htm) for the year ended December 31, 2021, filed with the SEC on March 14, 2022;

● Our [Quarterly Report on Form 10-Q](http://www.sec.gov/Archives/edgar/data/890447/000162828022013397/vtnr-20220331.htm) for the quarter ended March 31, 2022, filed with the SEC on May 10, 2022, our [Quarterly Report on Form 10-Q](http://www.sec.gov/Archives/edgar/data/890447/000162828022021666/vtnr-20220630.htm) for the quarter ended June 30, 2022, filed with the SEC on August 9, 2022, and our [Quarterly Report on Form 10-Q](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000162828022028702/vtnr-20220930.htm) for the quarter ended September 30, 2022, filed with the SEC on November 8, 2022;

● Our [Definitive Proxy Statement on Schedule 14A](http://www.sec.gov/Archives/edgar/data/890447/000158069522000041/vtnr-def14a_062322.htm) (to the extent incorporated by reference into our Annual Report on Form 10-K), filed with the SEC on May 2, 2022;

● Our Current Reports on Form 8-K and Form 8-K/A (as applicable) filed with the SEC on [January 21, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000009/vtnr-8k_012022.htm) ; [January 25, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000012/vtnr-8k_012422.htm) ; [February 17, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000023/vtnr-8k_021422.htm) ; [February 22, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000025/vtnr-8k_021722.htm) ; [March 3, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000027/vtnr-8k_022522.htm) ; [March 25, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122003964/vtnr-8k_032422.htm) ; [April 7, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000037/vtnr-8k_040122.htm) ; [April 26, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000039/vtnr-8ka_040122.htm) ; [May 17, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000049/vtnr-8k_051222.htm) ; [May 27, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000055/vtnr-8k_052622.htm) ; [June 2, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122006727/vtnr-8k_052622.htm) ; [June 14, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122006980/vertex_8k-061022.htm) ; [June 15, 2022](http://www.sec.gov/Archives/edgar/data/890447/000158069522000064/vtnr-8ka_040122.htm) ; [June 21, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122007093/vtnr-8k_061522.htm) ; [June 23, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122007157/vtnr-8k_062322.htm) ; [July 8, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122007519/vtnr-8ka_040122.htm) ; [August 25, 2022](http://www.sec.gov/Archives/edgar/data/890447/000138713122009050/vtnr-8k_082422.htm) , [October 5, 2022](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000138713122010287/vtnr-8k_093022.htm) , [December 14, 2022](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000138713122012383/vtnr-8k_120922.htm) , [January 12, 2023](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000138713123000341/vtnr-8k_011723.htm) and [February 1, 2023](http://www.sec.gov/ix?doc=/Archives/edgar/data/890447/000138713123001160/vtnr-8k_020123.htm) ; and

● The description of our common stock contained in our [Registration Statement on Form 8-A](http://www.sec.gov/Archives/edgar/data/890447/000121478213000090/vertex8a12b.htm) , filed with the SEC on February 12, 2013 (File No. 001-11476) pursuant to Section 12(b) of the Exchange Act, including any amendment or report filed for the purpose of updating such description.

Upon request, we will provide, without charge, to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, a copy of the documents incorporated by reference into this prospectus but not delivered with the prospectus. You may make a request for copies of these filings, and any exhibits we have specifically incorporated by reference as an exhibit in this prospectus, at no cost by writing or by telephone. Requests should be directed to:

Vertex Energy, Inc.

1331 Gemini Street

Suite 250

Houston, Texas 77058

Attn: Chris Carlson, Secretary

<u>chrisc@vertexenergy.com</u>

Phone: (866) 660-8156

Fax: (281) 754-4185

You may also access these documents, free of charge on the SEC's website at www.sec.gov or on our website at www.vertexenergy.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information on, or that can be accessed from, our website as part of this prospectus or any accompanying prospectus supplement.

**INDEX TO FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
|  | Page |
| **Consolidated Financial Statements** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Report](#Section18)[s](#Section18)[of Independent Registered Public Accounting Firm](#Section18) (Ham, Langston & Brezina, L.L.P., Houston, Texas; PCAOB ID#298) | F-1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Balance Sheets](#Section19) | F-6 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Operations](#Section20) | F-7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Equity](#Section21) | F-8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Consolidated Statements of Cash Flows](#Section22) | F-9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Notes to Consolidated Financial Statements](#Section23) | F-10 |

---

**Report of Independent Registered Public Accounting Firm**

To the Shareholders and the Board of Directors of Vertex Energy, Inc.

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Vertex Energy, Inc. and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. Our report dated March 1, 2023, expressed an opinion that the Company had not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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***Income Tax and Valuation Allowances - Refer to Note 2 and Note 22 to the financial statements***

*Critical Audit Matter Description*

The Company accounts for income taxes using the asset and liability method, under which the Company recognizes deferred income taxes for the tax consequences attributable to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities, as well as for tax loss carryforwards in accordance with ASC 740. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period when the new rate is enacted. The Company provides a valuation allowance against deferred tax assets if it is more likely than not that a portion will not be realized. In assessing whether it is more likely than not that deferred tax assets will be realized, the Company considers all available evidence, both positive and negative, including three-year cumulative earnings/loss and expectations of future available taxable income of the appropriate character by taxing jurisdiction, tax attribute carryback and carry forward periods available for tax reporting purposes, and prudent and feasible tax planning strategies. The Company's valuation allowances were $20.9 million as of December 31, 2021, and $505 thousand as of December 31, 2022. The Company released $20.4 million of valuation allowances in 2022, of which $2.5 million was an income tax benefit on the income statement.

The Company's valuation allowances have historically been material. Additionally, the analysis of valuation allowances is a subjective area of ASC 740 as the analysis includes the weighting of positive and negative evidence that is both objective and subjective in nature. Further, the Company's profitability profile changed in the current year as the Company completed a significant acquisition during 2022 and completed a significant divestiture in February 2023. As a result, certain valuation allowances were released in the current year.

We identified valuation allowances as a critical audit matter due to the significant judgments and assumptions management utilizes to estimate valuation allowances, including the release of current year valuation allowances that were established in prior years. This requires a high degree of auditor judgment and an increased level of effort, including the need to involve income tax specialists, when performing audit procedures to evaluate the reasonableness of management's judgements and estimates of taxable income.

*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to valuation allowances included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated the reasonableness of management's assessment of the significance
and weighting of negative evidence and positive evidence that is objectively verifiable, particularly, the Company's three-year cumulative
income / loss analysis.

&nbsp;&nbsp;&nbsp;&nbsp;• With the assistance of our income tax specialists, we assessed the reasonableness
of management's estimates of taxable income by considering the four sources of income as prescribed
under ASC 740:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Future reversals of existing taxable temporary differences (i.e., assessing
the reasonableness of the Company's estimate of the turning of its most significant deferred tax liabilities)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Future taxable income exclusion of reversing of temporary differences,
leveraging the historic three-year cumulative income / loss analysis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The impact of the estimated taxable gain on the divestiture of the assets
on February 1, 2023.

&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated whether the estimates of future taxable income were consistent
with evidence obtained in other areas of the audit (i.e., forecasted pre-tax income, if source
applicable).

&nbsp;&nbsp;&nbsp;&nbsp;• Based on the above, with the assistance of our income tax specialists,
we evaluated management's assessment that sufficient taxable income will likely be generated in the future to realize their net deferred
tax assets.

&nbsp;&nbsp;&nbsp;&nbsp;• We assessed the appropriateness of the timing of any
significant valuation allowance accrual or release to determine whether
management has accounted for any change in evidence in the appropriate period.

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&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated whether management has included disclosures,
beyond those specifically required by ASC 740, that are necessary to achieve the fair presentation of the financial statements as a whole
or whether the disclosures are those that are necessary for the financial statements not to be misleading.

***Renewable Identification Numbers ("RINs") Obligation*** - ***Refer to Note*** *2 **and Note 14 to the financial statements***

*Critical Audit Matter Description*

During 2022, the Company acquired a refinery in Mobile, Alabama. With the acquisition, the Company is now required to meet certain standards of the U.S. Environmental Protection Agency's ("EPA") as it pertains to blending renewable fuels into certain transportation fuel products pursuant to the Renewable Fuel Standard. As described in Notes 2 and 14 to the consolidated financial statements, the RINs obligation is an estimated provision for the purchase of RINs in order to satisfy the EPA annual requirement. At December 31, 2022, the Company's estimated RINs obligation was $51.4 million.

Auditing management's RINs obligation was complex and judgmental due to estimation uncertainty in the Company's determination of the fair value of the RINs obligation under the Renewable Fuel Standard. The complexity and estimation uncertainty was primarily due to the calculation of the RINs shortage and the independent pricing assumptions, respectively.

*How We Addressed the Matter in Our Audit*

 

We obtained an understanding and evaluated the design of controls over the RINs obligation estimation process. For example, we interviewed management responsible for the controls over the review of the methodology used to calculate the obligation and the RINs shortage and independent pricing assumptions.

To audit the Company's RINs obligation, our audit procedures included, among others, evaluating the appropriateness of management's methodology to calculate the RINs obligation under the Renewable Fuel Standard including testing the completeness and accuracy of the underlying data used by management in estimating the fair value of the obligation. Additionally, we compared the spot prices utilized by the Company in their estimate of the RINs obligation.to an independent pricing source.

/s/ Ham, Langston & Brezina, L.L.P.

We have served as the Company's auditor since 2017.

Houston, Texas

March 1, 2023

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**Report of Independent Registered Public Accounting Firm**

To the Shareholders and the Board of Directors of Vertex Energy Inc.

**Opinion on the Internal Control Over Financial Reporting**

We have audited Vertex Energy Inc.'s (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the material weaknesses described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated March 1, 2023, expressed an unqualified opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and described in management's assessment. The material weaknesses related to control activities include: (i) ineffective controls over certain IT general controls for information systems relevant to the preparation of financial statements, (ii) lack of controls relating to documentation of the accounting for revenue transactions. These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the 2022 financial statements, and this report does not affect our report dated March 1, 2023, on those financial statements.

As described in <u>"Item 9A, Management's Report on Internal Control Over Financial Reporting"</u>, management has excluded Vertex Refining Alabama, LLC ("VRA") from its assessment of internal control over financial reporting as of December 31, 2022, because it was acquired by the Company in a purchase business combination in the second quarter of 2022. We have also excluded VRA from our audit of internal control over financial reporting. VRA is a wholly owned subsidiary whose total assets and net income represent approximately 72% and 86%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

**Basis for Opinion**

The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying <u>"Item 9A, Management's Report on Internal Control Over Financial Reporting"</u>. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

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**Definition and Limitations of Internal Control Over Financial Reporting**

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ham, Langston & Brezina, L.L.P.

Houston, Texas

March 1, 2023

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---

| | | |
|:---|:---|:---|
| **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** |
| **CONSOLIDATED BALANCE SHEETS** | **CONSOLIDATED BALANCE SHEETS** | **CONSOLIDATED BALANCE SHEETS** |
| **(in thousands, except number of shares and par value)** | **(in thousands, except number of shares and par value)** | **(in thousands, except number of shares and par value)** |
|  | **December 31, 2022** | **December 31, 2021** |
| **ASSETS** | | |
| Current assets |  |  |
| &nbsp;&nbsp;Cash and cash equivalents | $141258 | $36130 |
| &nbsp;&nbsp;Restricted cash | 4929 | 100497 |
| &nbsp;&nbsp;Accounts receivable, net | 34548 | 7607 |
| &nbsp;&nbsp;Inventory | 135473 | 7839 |
| &nbsp;&nbsp;Derivative commodity asset |  | 96 |
| &nbsp;&nbsp;Prepaid expenses and other current assets | 36660 | 4595 |
| &nbsp;&nbsp;Assets held for sale | 20560 | 8852 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 373428 | 165616 |
| &nbsp;&nbsp;Fixed assets, net | 201749 | 36131 |
| &nbsp;&nbsp;Finance lease right-of-use assets, net | 44081 | 377 |
| &nbsp;&nbsp;Operating lease right-of-use assets, net | 53557 | 33105 |
| &nbsp;&nbsp;Intangible assets, net | 11827 | 6652 |
| &nbsp;&nbsp;Deferred tax assets | 2498 |  |
| &nbsp;&nbsp;Other assets | 2245 | 15335 |
| &nbsp;&nbsp;Assets held for sale, noncurrent |  | 8844 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-current assets | 315957 | 100444 |
| TOTAL ASSETS | $689385 | $266060 |
| **LIABILITIES, TEMPORARY EQUITY AND EQUITY** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;Accounts payable | $20997 | $10149 |
| &nbsp;&nbsp;Accrued expenses | 81711 | 4399 |
| &nbsp;&nbsp;Finance lease-current | 1363 | 598 |
| &nbsp;&nbsp;Operating lease-current | 9012 | 5721 |
| &nbsp;&nbsp;Current portion of long-term debt, net | 13911 | 2414 |
| &nbsp;&nbsp;Obligations under inventory financing agreements, net | 117939 |  |
| &nbsp;&nbsp;Derivative commodity liability | 242 |  |
| &nbsp;&nbsp;Liabilities held for sale, current | 3424 | 2502 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 248599 | 25783 |
| &nbsp;&nbsp;Long-term debt, net | 170010 | 64130 |
| &nbsp;&nbsp;Finance lease-non-current | 45164 |  |
| &nbsp;&nbsp;Operating lease-non-current | 44545 | 27384 |
| &nbsp;&nbsp;Derivative warrant liability | 14270 | 75211 |
| &nbsp;&nbsp;Other liabilities | 1377 |  |
| &nbsp;&nbsp;Liabilities held for sale, noncurrent |  | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 523965 | 192547 |
| **COMMITMENTS AND CONTINGENCIES (Note 4)** |  |  |
| **TEMPORARY EQUITY** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Redeemable non-controlling interest |  | 43447 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total temporary equity |  | 43447 |
| **EQUITY** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50,000,000 of total Preferred shares authorized: |  |  |
| &nbsp;&nbsp;&nbsp;Series A Convertible Preferred stock, $0.001 par value; 5,000,000 shares authorized and 0 and 385,601 shares issued and outstanding at December 31, 2022 and 2021, respectively, with a liquidation preference of $— and $575 thousand at December 31, 2022 and December 31, 2021, respectively. |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, $0.001 par value per share; 750,000,000 shares authorized; 75,668,826 and 63,287,965 issued and outstanding at December 31, 2022 and 2021, respectively.  | 76 | 63 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additional paid-in capital | 279552 | 138620 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated deficit | (115893) | (110614) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total Vertex Energy, Inc. stockholders' equity | 163735 | 28069 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest | 1685 | 1997 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total equity | 165420 | 30066 |
| TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY | $689385 | $266060 |

---

See accompanying notes to the consolidated financial statements

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| | | | |
|:---|:---|:---|:---|
| **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** |
| **CONSOLIDATED STATEMENTS OF OPERATIONS** | **CONSOLIDATED STATEMENTS OF OPERATIONS** | **CONSOLIDATED STATEMENTS OF OPERATIONS** | **CONSOLIDATED STATEMENTS OF OPERATIONS** |
| **FOR THE YEARS ENDED DECEMBER 31,** | **FOR THE YEARS ENDED DECEMBER 31,** | **FOR THE YEARS ENDED DECEMBER 31,** | **FOR THE YEARS ENDED DECEMBER 31,** |
| **(in thousands, except per share amounts)** | **(in thousands, except per share amounts)** | **(in thousands, except per share amounts)** | **(in thousands, except per share amounts)** |
|  | **2022** | **2021** | **2020** |
| Revenues | $2791715 | $207760 | $103810 |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 2598276 | 178786 | 91630 |
| Depreciation and amortization attributable to costs of revenues | 13429 | 4043 | 3667 |
| Gross profit | 180010 | 24931 | 8513 |
| Operating expenses: |  |  |  |
| Selling, general and administrative expenses | 127782 | 30606 | 20376 |
| Loss on assets impairment |  | 2124 |  |
| Depreciation and amortization attributable to operating expenses | 3673 | 1681 | 1645 |
| Total operating expenses | 131455 | 34411 | 22021 |
| Income (loss) from operations | 48555 | (9480) | (13508) |
| Other income (expense): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income (expense) | (306) | 4158 | (125) |
| &nbsp;&nbsp;&nbsp;&nbsp;Gain (loss) on change in value of derivative warrant liability | 7821 | (15685) | 1639 |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest expense | (79911) | (3832) | (980) |
| Total other income (expense) | (72396) | (15359) | 534 |
| Loss from continuing operations before income tax | (23841) | (24839) | (12974) |
| Income tax benefit | 7171 |  |  |
| Loss from continuing operations | (16670) | (24839) | (12974) |
| Income from discontinued operations, net of tax | 18667 | 17178 | 1578 |
| Net income (loss) | 1997 | (7661) | (11396) |
| Net income (loss) attributable to non-controlling interest and redeemable non-controlling interest from continuing operations | (63) | 207 | 364 |
| Net income attributable to non-controlling interest and redeemable non-controlling interest from discontinued operations | 6882 | 10496 | 276 |
| Net loss attributable to Vertex Energy, Inc. | (4822) | (18364) | (12036) |
| Accretion of redeemable noncontrolling interest to redemption value | (428) | (1992) | (15135) |
| Accretion of discount on Series B and B-1 Preferred Stock |  | (507) | (1688) |
| Dividends on Series B and B-1 Preferred Stock |  | 258 | (1903) |
| Net loss attributable to stockholders from continuing operations | (17035) | (27287) | (32064) |
| Net income available to stockholders from discontinued operations, net of tax | 11785 | 6682 | 1302 |
| Net loss attributable to common stockholders | $(5250) | $(20605) | $(30762) |
| Basic income (loss) per common share |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.24) | $(0.48) | $(0.70) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations, net of tax | 0.17 | 0.12 | 0.03 |
| Basic loss per common share | $(0.07) | $(0.36) | $(0.67) |
| Diluted income (loss) per common share |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.24) | $(0.48) | $(0.70) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations, net of tax | 0.17 | 0.12 | 0.03 |
| Diluted loss per common share | $(0.07) | $(0.36) | $(0.67) |
| Shares used in computing income (loss) per share |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic | 70686 | 56303 | 45509 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted | 70686 | 56303 | 45509 |

---

See accompanying notes to the consolidated financial statements

[**Table of Contents**](#a_Toc127876977)

**VERTEX ENERGY, INC.**

**CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY**

**FOR THE YEARS ENDING DECEMBER 31, 2022, 2021 AND 2020**

**(in thousands except par value)**

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Common Stock** | **Common Stock** | **Series A Preferred** | **Series A Preferred** | **Series C Preferred** | **Series C Preferred** | | | | |
|  | **Shares** | **$0.001 Par** | **Shares** | **$0.001 Par** | **Shares** | **$0.001 Par** | **Additional <br> Paid-in**<br>**Capital** | **Accumulated**<br>**Deficit** | **Non-<br> controlling**<br>**Interest** | **Total <br> Stockholders'**<br>**Equity** |
| Balance on December 31, 2019 | 43396 | $44 | 420 | $— |  | $— | $81528 | $(59247) | $777 | $23102 |
| Dividends on Series B and B1 Preferred Stock |  |  |  |  |  |  |  | (1903) |  | (1903) |
| Accretion of discount on Series B and B1 Preferred Stock |  |  |  |  |  |  |  | (1688) |  | (1688) |
| Purchase of shares of consolidated subsidiary |  |  |  |  |  |  | (71) |  |  | (71) |
| Share based compensation expense |  |  |  |  |  |  | 656 |  |  | 656 |
| Adjustment of carrying amount of noncontrolling interest |  |  |  |  |  |  | 9091 |  |  | 9091 |
| Conversion of Series B1 Preferred stock to common | 2159 | 2 |  |  |  |  | 3366 |  |  | 3368 |
| Adjustment of redeemable noncontrolling interest to redemption value |  |  |  |  |  |  |  | (15135) |  | (15135) |
| Net loss |  |  |  |  |  |  |  | (12036) | 640 | (11396) |
| Less: amount attributable to redeemable non-controlling interest |  |  |  |  |  |  |  |  | (99) | (99) |
| Balance on December 31, 2020 | 45555 | 46 | 420 |  |  |  | 94570 | (90009) | 1318 | 5925 |
| Dividends on Series B and B1 Preferred Stock |  |  |  |  |  |  |  | (372) |  | (372) |
| Accretion of discount on Series B and B1 Preferred Stock |  |  |  |  |  |  |  | (507) |  | (507) |
| Conversion of B1 Preferred Stock to common | 7722 | 7 |  |  |  |  | 12038 |  |  | 12045 |
| Share based compensation expense |  |  |  |  |  |  | 863 |  |  | 863 |
| Exercise of B1 warrants | 3093 | 3 |  |  |  |  | 16402 |  |  | 16405 |
| Exercise of options | 1800 | 2 |  |  |  |  | 2188 |  |  | 2190 |
| Conversion of Series A Preferred stock to common stock | 34 |  | (34) |  |  |  |  |  |  |  |
| Distribution to noncontrolling |  |  |  |  |  |  |  |  | (169) | (169) |
| Adjustment of redeemable noncontrolling interest to redemption value |  |  |  |  |  |  |  | (1992) |  | (1992) |
| Conversion of Series B Preferred Stock to common stock | 5084 | 5 |  |  |  |  | 12559 | 630 |  | 13194 |
| Contribution from noncontrolling interest |  |  |  |  |  |  |  |  | (11) | (11) |
| Net loss |  |  |  |  |  |  |  | (18364) | 10703 | (7661) |
| Less: amount attributable to redeemable non-controlling interest |  |  |  |  |  |  |  |  | (9844) | (9844) |
| Balance on December 31, 2021 | 63288 | 63 | 386 |  |  |  | 138620 | (110614) | 1997 | 30066 |
| Reclass of derivative liabilities |  |  |  |  |  |  | 78789 |  |  | 78789 |
| Exercise of warrants | 1209 | 1 |  |  |  |  | (1) |  |  |  |
| Exercise of options | 622 | 1 |  |  |  |  | 729 |  |  | 730 |
| Share based compensation expense |  |  |  |  |  |  | 1574 |  |  | 1574 |
| Conversion of Series A Preferred stock to common stock | 386 | 1 | (386) |  |  |  |  |  |  | 1 |
| Conversion of Convertible Senior Notes to common, net | 10165 | 10 |  |  |  |  | 59812 |  |  | 59822 |
| Adjustment of redeemable non controlling interest |  |  |  |  |  |  | 29 | (29) |  |  |
| Distribution to noncontrolling interest |  |  |  |  |  |  |  |  | (380) | (380) |
| Adjustment of redeemable noncontrolling interest to redemption value |  |  |  |  |  |  |  | (428) |  | (428) |
| Redemption of noncontrolling interest |  |  |  |  |  |  |  |  | 41 | 41 |
| Net income (loss) |  |  |  |  |  |  |  | (4822) | 6819 | 1997 |
| Less: amount attributable to redeemable non-controlling interest |  |  |  |  |  |  |  |  | (6792) | (6792) |
| Balance on December 31, 2022 | 75670 | $76 |  | $— |  | $— | $279552 | $(115893) | $1685 | $165420 |

---

See accompanying notes to the consolidated financial statements

[**Table of Contents**](#a_Toc127876977)

---

| | | | |
|:---|:---|:---|:---|
| **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** |
| **CONSOLIDATED STATEMENTS OF CASH FLOWS** | **CONSOLIDATED STATEMENTS OF CASH FLOWS** | **CONSOLIDATED STATEMENTS OF CASH FLOWS** | **CONSOLIDATED STATEMENTS OF CASH FLOWS** |
| **FOR THE YEARS ENDING DECEMBER 31, 2022, 2021 AND 2020** | **FOR THE YEARS ENDING DECEMBER 31, 2022, 2021 AND 2020** | **FOR THE YEARS ENDING DECEMBER 31, 2022, 2021 AND 2020** | **FOR THE YEARS ENDING DECEMBER 31, 2022, 2021 AND 2020** |
|  | **2022** | **2021** | **2020** |
| Cash flows from operating activities |  |  |  |
| &nbsp;&nbsp;Net income (loss) | $1997 | $(7661) | $(11396) |
| &nbsp;&nbsp;Net income from discontinued operations, net of tax | 18667 | 17178 | 1578 |
| &nbsp;&nbsp;Net loss from continuing operations | (16670) | (24839) | (12974) |
| Adjustments to reconcile net income (loss) from continuing operations to cash used in operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock-based compensation expense | 1574 | 862 | 656 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 17102 | 5724 | 5312 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for bad debt | 242 | 826 | 239 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on commodity derivative contracts | 87978 | 2258 | (3477) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provision for environment clean up | 1428 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on forgiveness of debt |  | (4222) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash settlement on commodity derivatives | (92556) | (2436) | 4253 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on sale of assets | 220 | 64 | 125 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on assets impairment |  | 2124 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization of debt discount and deferred costs | 49251 | 1231 | 48 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income tax benefit | (7171) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss (gain) on change in value of derivative warrant liability | (7821) | 15685 | (1639) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities, net of acquisitions: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | (27183) | (821) | 1984 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventory | 2586 | (3997) | 2705 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | (26724) | (1615) | 53 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | 10850 | 1054 | 2884 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | 77647 | 2551 | (2992) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 56 | (48) | (868) |
| &nbsp;&nbsp;Net cash provided by (used in) operating activities from continuing operations | 70809 | (5599) | (3691) |
| Cash flows from investing activities |  |  |  |
| &nbsp;&nbsp;Internally developed or purchased software | (149) |  | (50) |
| &nbsp;&nbsp;Deposit for refinery purchase and related costs |  | (13663) |  |
| &nbsp;&nbsp;Redemption of noncontrolling entity | 556 |  |  |
| &nbsp;&nbsp;Proceeds from the sale of assets | 395 | 75 | 75 |
| &nbsp;&nbsp;Acquisition of business, net of cash | (227525) | 2 | (1822) |
| &nbsp;&nbsp;Purchase of fixed assets | (75512) | (2331) | (5550) |
| &nbsp;&nbsp;Net cash used in investing activities from continuing operations | (302235) | (15917) | (7347) |
| Cash flows from financing activities |  |  |  |
| &nbsp;&nbsp;Line of credit payments, net |  | (133) | (3143) |
| &nbsp;&nbsp;Proceeds received from exercise options and warrants | 730 | 6921 |  |
| &nbsp;&nbsp;Net borrowings on inventory financing agreements | 117189 |  |  |
| &nbsp;&nbsp;Contribution received from stockholder |  | 2 |  |
| &nbsp;&nbsp;Distribution to non-controlling interest | (380) | (169) |  |
| &nbsp;&nbsp;Contribution received from redeemable noncontrolling interest |  |  | 21000 |
| &nbsp;&nbsp;Redemption of redeemable noncontrolling interest | (50666) |  |  |
| &nbsp;&nbsp;Payments on finance leases | (819) | (844) | (403) |
| &nbsp;&nbsp;Proceeds from issuance of notes payable | 173256 | 143831 | 8217 |
| &nbsp;&nbsp;Payments made on notes payable | (18948) | (15836) | (10367) |
| Net cash provided by financing activities from continuing operations | 220362 | 133772 | 15304 |
| **Discontinued operations:** |  |  |  |
| &nbsp;&nbsp;Net cash provided by operating activities | 25287 | 15349 | 3675 |
| &nbsp;&nbsp;Net cash used in investing activities | (4663) | (1973) | (1146) |
| &nbsp;&nbsp;Net cash used in financing activities |  |  |  |
| &nbsp;&nbsp;Net cash provided by discontinued operations | 20624 | 13376 | 2529 |
| Net change in cash and cash equivalents and restricted cash | 9560 | 125632 | 6795 |
| Cash and cash equivalents and restricted cash at beginning of the year | 136627 | 10995 | 4200 |
| Cash and cash equivalents and restricted cash at end of year | $146187 | $136627 | $10995 |
| Cash and cash equivalents | $141258 | $36130 | $10895 |
| Restricted cash | 4929 | 100497 | 100 |
| Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows | $146187 | $136627 | $10995 |
| SUPPLEMENTAL INFORMATION |  |  |  |
| &nbsp;&nbsp;Cash paid for interest | $33901 | $2273 | $1051 |
| &nbsp;&nbsp;Cash paid for income taxes |  |  |  |
| NON-CASH INVESTING AND FINANCING TRANSACTIONS |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Conversion of Series B and B1 Preferred Stock into common stock | $— | $24610 | $3368 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends on Series B and B-1 Preferred Stock | $— | $(258) | $1903 |
| &nbsp;&nbsp;&nbsp;&nbsp;Initial adjustment of carrying amount of redeemable noncontrolling interest | $— | $— | $9091 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of discount on Series B and B-1 Preferred Stock | $— | $507 | $1688 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accretion of redeemable noncontrolling interest to redemption value | $428 | $1992 | $15135 |
| &nbsp;&nbsp;&nbsp;&nbsp;Equipment acquired under capital leases standard | $46351 | $552 | $1018 |
| &nbsp;&nbsp;&nbsp;&nbsp;Equipment acquired under operating leases standard | $20452 | $89 | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclass derivative liabilities | $78789 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;Conversion of Senior note | $59822 | $— | $— |

---

See accompanying notes to the consolidated financial statements

[**Table of Contents**](#a_Toc127876977)

**VERTEX ENERGY, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**DECEMBER 31, 2022**

**NOTE 1. BASIS OF PRESENTATION AND NATURE OF OPERATIONS**

Vertex Energy, Inc. (the "Company" or "Vertex Energy") is an energy transition company specializing in refining and marketing high-value conventional and lower-carbon alternative transportation fuels. We operate used motor oil processing plants in Houston, Texas, Port Arthur, Texas, Marrero, Louisiana, and Columbus, Ohio.

As of April 1, 2022, we own a refinery in Mobile, Alabama (the "Mobile Refinery") with an operable refining capacity of 75,000 barrels per day ("bpd") and more than 600,000 barrels of storage capacity. The total purchase consideration was $75.0 million in cash plus $16.3 million in previously agreed upon capital expenditures and miscellaneous prepaid and reimbursable items. At the time of the acquisition, the Company also purchased $130.0 million in hydrocarbon inventories of which $124.0 were financed under an inventory financing agreement. See [Note 3 "Mobile Refinery Acquisition"](#Section26) and [Note 10 "Inventory Financing Agreement"](#Section33) for additional information.

**Used Motor Oils Business ("UMO Business")**

Our UMO Business consists of our used oil refinery in Marrero, Louisiana, our Heartland used oil refinery in Ohio, our H&H and Heartland used motor oil (UMO) collections business; our oil filters and absorbent materials recycling facility in East Texas; and the rights to a lease at the Cedar Marine terminal in Baytown, Texas. The UMO Business is presented as part of our Black Oil segment in our consolidated financial statements. On June 29, 2021, the Company, through certain of its subsidiaries, entered into an Asset Purchase Agreement (the "UMO Sale Agreement") with Safety-Kleen Systems, Inc. ("Safety-Kleen") by which Safety-Kleen agreed to acquire the Company's UMO Business. Assets which form a part of our Black Oil Segment which were not part of the UMO Sale Agreement consists of (1) our re-refining complex located in Belle Chasse, Louisiana, which we refer to as our Myrtle Grove Facility; (2) our Marine division established in 2022, which consists of blending and distribution of fuels to the marine market; and (3) our finished lubricants and metal operations, including the distribution and blending of lubricants as well as a metal recovery operation.

On January 24, 2022, the Company and its subsidiaries that were party to the UMO Sale Agreement and Safety-Kleen, entered into an Asset Purchase Termination Agreement (the "UMO <u>Termination Agreement</u>") pursuant to which the UMO Sale Agreement was terminated. Under the terms of the UMO Termination Agreement, the Company paid a termination fee to Safety-Kleen of $3.0 million. Immediately upon receipt of such termination fee, which the Company paid simultaneously with the execution of the UMO Termination Agreement, the UMO Sale Agreement was terminated.

On February 1, 2023, HPRM LLC ("<u>HPRM</u>"), which is indirectly wholly-owned by the Company, entered into a Sale and Purchase Agreement (the "<u>Sale Agreement</u>") with GFL Environmental Services USA, Inc. ("<u>GFL</u>") whereby HPRM agreed to sell to GFL, and GFL agreed to purchase from HPRM, all of HPRM's equity interest in Vertex OH. Vertex Operating and GFL Environmental Inc. ("<u>GFL Environmental</u>"), an affiliate of GFL, were also parties to the Sale Agreement, solely for the purpose of providing certain guarantees of the obligations of HPRM and GFL as discussed in greater detail below.

Pursuant to the Sale Agreement, HPRM agreed to sell GFL all of its equity interests in Vertex OH, which owns the Heartland refinery located in Columbus, Ohio (the "<u>Heartland Refinery</u>"). The sale also includes all property and assets owned by Vertex OH, including inventory associated with the Heartland Refinery, and all real and leased property and permits owned by Vertex OH, and all used motor oil collection and recycling assets and operations owned by Vertex OH (collectively with the Heartland Refinery, the "<u>Heartland Assets and Operations</u>").

The transactions contemplated by the Sale Agreement closed on February 1, 2023.

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The purchase price for the transaction was $90 million in an all cash agreement, subject to certain customary adjustments for net working capital, taxes and assumed liabilities. We also entered into a transition services agreement, restrictive covenant agreement and, through our subsidiary Vertex LA, a used motor oil supply agreement with GFL in connection with the sale.

Vertex Operating guaranteed all of the obligations of HPRM pursuant to the terms of the Sale Agreement and GFL Environmental guaranteed all of the obligations of GFL pursuant to the terms of the Sale Agreement.

As a result of the above, the Company has determined to present the Company's Heartland refinery and all used motor oil collection and recycling assets and operations owned by Vertex OH as discontinued operations.

***Refining and Marketing***

Effective April 1, 2022, we completed the acquisition of a 75,000 bpd crude oil refinery ten miles north of Mobile, in Saraland, Alabama (the "<u>Mobile Refinery</u>") and related logistics assets, which include a deep-water draft, bulk loading terminal facility with 600,000 barrels (bbls) of storage capacity for crude oil and associated refined petroleum products located in Mobile, Alabama (the "<u>Blakeley Island Terminal</u>"). The terminal includes a dock for loading and unloading vessels with a pipeline tie-in, as well as the related logistics infrastructure of a high-capacity truck rack with 3-4 loading heads per truck, each rated at 600 gallons per minute (the "<u>Mobile Truck Rack</u>"). The Mobile Refinery currently processes heavy and sour crude to produce heavy olefin feed, regular gasoline, premium gasoline, jet fuel, and diesel fuel.

Additionally, Vertex Energy aggregates used motor oil, petroleum distillates, transmix and other off-specification chemical products. These feedstock streams are purchased from pipeline operators, refineries, chemical processing facilities and third-party providers. The Company has a toll-based processing agreement in place with Monument Chemical Port Arthur, LLC ("<u>Monument Chemical</u>") to re-refine these feedstock streams, under the Company's direction, into various end products. Monument Chemical uses industry standard processing technologies to re-refine the feedstock into pygas, gasoline blendstock and marine fuel cutterstock. The Company sells the re-refined products directly to end customers or to processing facilities for further refinement. In addition, we are distributing refined motor fuels such as gasoline, blended gasoline products and diesel used as engine fuels, to third party customers who typically resell these products to retailers and end consumers.

***Black Oil and Recovery***

Through its Black Oil segment, which has been operational since 2001, Vertex Energy aggregates and sells used motor oil. The Company has a network of approximately 30 suppliers that collect used oil from businesses such as oil change service stations, automotive repair shops, manufacturing facilities, petroleum refineries, and petrochemical manufacturing operations. The Company procures the used oil from collectors and manages the logistics of transport, storage and delivery to its customers. Typically, the used oil is sold in bulk to ensure the efficient delivery by truck, rail, or barge. In many cases, there are contractual procurement and sale agreements with the suppliers and customers, respectively. The Company believes these contracts are beneficial to all parties involved because they help ensure a minimum volume is procured from collectors, a minimum volume is sold to the customers, and the Company is insulated from inventory risk by a spread between the costs to acquire used oil and the revenues received from the sale and delivery of used oil. In addition, the Company operates its own re-refining operations at the Cedar Marine Terminal, in Baytown, Texas, which uses the Company's proprietary Thermal Chemical Extraction Process ("<u>TCEP</u>") technology to re-refine the used oil into marine fuel cutterstock (when such use makes economic sense) and a higher-value feedstock for further processing. The finished product can then be sold by barge as a fuel oil cutterstock and a feedstock component for major refineries. Through the operations at our Marrero, Louisiana facility, we produce a Vacuum Gas Oil (VGO) product from used oil re-refining which is then sold via barge to end users to utilize in a refining process or a fuel oil blend. Through the operations at our Columbus, Ohio facility, we produce a base oil finished product which is then sold via truck or rail car to end users for blending, packaging and marketing of lubricants.

Discontinued operations of Vertex include our Heartland Assets and Operations. Refer to [Note 24, "Discontinued Operations](#Section47)" for additional information.

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Through its Recovery segment, Vertex Energy aggregates and sells ferrous and non-ferrous recyclable metal products that are recovered from manufacturing and consumption.

**NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Principles of Consolidation**

The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, entities controlled by the Company through a greater than 50% voting interest and certain variable interest entities ("VIE") for which the Company is the primary beneficiary. All intercompany transactions have been eliminated. For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in the consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties.

The Company assesses whether it is the primary beneficiary of a VIE at the inception of the arrangement and at each reporting date. This assessment is based on the Company's power to direct the activities of the VIE that most significantly impact the VIE's economic performance and its obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The following is a description of the Company's consolidated wholly-owned subsidiaries and consolidated VIEs:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cedar Marine Terminals, L.P. (" <u>CMT</u> ")
 operates a 19-acre bulk liquid storage facility on the Houston Ship Channel. The
 terminal serves as a truck-in, barge-out facility and provides throughput terminal operations.
 CMT is also the site of the TCEP.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Crossroad Carriers, L.P. (" <u>Crossroad</u> ")
 is a common carrier that provides transportation and logistical services for liquid petroleum
 products, as well as other hazardous materials and product streams.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Recovery, L.P. (" <u>Vertex Recovery</u> ") is a generator solutions company for the recycling and collection
 of used oil and oil-related residual materials from large regional and national customers
 throughout the U.S. It facilitates its services through a network of independent
 recyclers and franchise collectors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• H&H Oil, L.P. (" <u>H&H Oil</u> ") collects and recycles used oil and residual materials from customers
 based in Austin, Baytown, Dallas, San Antonio and Corpus Christi, Texas.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Refining, LA, LLC which
 owns a used oil re-refinery based in Marrero, Louisiana.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Refining, NV, LLC (" <u>Vertex Refining</u> ") is a base oil marketing and distribution company with customers
 throughout the United States.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Recovery Management, LLC
 currently buys and prepares ferrous and non-ferrous scrap intended for large haul barge
 sales.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Refining, OH, LLC (" <u>Vertex OH</u> ") collects and re-refines used oil and residual materials from customers
 throughout the Midwest. Refinery operations are based in Columbus, Ohio with collection
 branches located in Norwalk, Ohio, Zanesville, Ohio, Ravenswood, West Virginia, and Mt.
 Sterling, Kentucky. Effective May 26, 2022, the ownership of 65% of the assets of Vertex
 OH, LLC were acquired from Vertex Operating, Tensile-Heartland
 Acquisition Corporation (" <u>Tensile-Heartland</u> "), an affiliate of Tensile
 Capital Partners Master Fund LP, an investment fund based in San Francisco, California
 (" <u>Tensile</u> ") in connection with the Vertex Splitter Corporation (" <u>Vertex Splitter</u> "), a wholly-owned subsidiary of the Company, transaction (discussed
 below under ["Note 23. Non-Controlling Interest"](#Section46) - "Heartland Re-refining Complex"), making Vertex OH a wholly-owned subsidiary
 of the Company.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• HPRM
 LLC (" Heartland SPV "),
 a Delaware Limited Liability Company. Heartland SPV is currently owned 100% by
 Vertex Operating.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Refining Myrtle Grove LLC
 ("MG SPV"), is a special purpose entity formed to hold the Belle Chasse,
 Louisiana, re-refining complex, which entity is currently 100% owned by Vertex Operating
 as a result of the transaction which closed on April 1, 2022, as discussed below under
 " [Note 23. Non-Controlling Interest](#Section46) " - " <u>Myrtle Grove Facility</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Crystal Energy, LLC (" <u>Crystal Energy</u> ") purchases, stores, sells, and distributes refined motor fuels. These
 activities include the wholesale distribution of gasoline, blended gasoline, and diesel
 for use as engine fuel to operate automobiles, trucks, locomotives, and construction
 equipment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Energy Operating, LLC (" <u>Vertex Operating</u> "), is a holding company for various of the subsidiaries described
 above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vertex Refining Alabama, LLC, ("VRA"),
 owns and operates a refinery located in Mobile, AL, which produces multiple hydrocarbon
 products.

**Cash and Cash Equivalents and Restricted Cash**

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Restricted cash as of December 31, 2022, consisted of a $4.8 million deposit in a bank for financing of a short-term equipment lease, and a $0.1 million deposit in a money market account to serve as collateral for payment of a credit card. As of December 31, 2021, a total of $100.4 million was held in an escrow account in connection with the issuance of certain convertible notes (see [Note 15. "Financing Arrangements"](#Section38)). The funds were released on April 1, 2022 and used in the purchase of the Mobile Refinery. See [Note 3 "Mobile Refinery Acquisition"](#Section26).

**Accounts Receivable**

Accounts receivable represents amounts due from customers. Accounts receivable are recorded at invoiced amounts, net of reserves and allowances, do not bear interest and are not collateralized. The Company uses its best estimate to determine the required allowance for doubtful accounts based on a variety of factors, including the length of time receivables are past due, economic trends and conditions affecting its customer base, significant one-time events, and historical write-off experience. Specific provisions are recorded for individual receivables when we become aware of a customer's inability to meet its financial obligations. The Company reviews the adequacy of its reserves and allowances quarterly.

Receivable balances greater than 90 days past due are individually reviewed for collectability and if deemed uncollectible, are charged off against the allowance accounts after all means of collection have been exhausted and the potential for recovery is considered remote.

**Inventory and Obligations Under Inventory Financing Agreements**

*Mobile Refinery.* Inventories at the Mobile Refinery consist of crude oil and refined petroleum products. Simultaneously with the acquisition of the Mobile Refinery in April 2022, the Company entered into an inventory financing agreement with Macquarie Energy North America Trading Inc. ("Macquarie") under which Macquarie agreed to finance all the crude oil utilized at the Mobile Refinery under procurement contracts. In addition, the Company became a party to a Supply and Offtake Agreement with Macquarie. Under this arrangement, the Company purchases crude oil supplied from third-party suppliers and Macquarie provides credit support for certain of these purchases. Macquarie holds title to all crude oil and refined products inventories at all times, except for liquefied petroleum gases and sulfur, which the Company has pledged, together with all receivables arising from the sales of such inventories.

The crude oil remains in the legal title of Macquarie and is stored in our storage tanks governed by a storage agreement. Legal title to the crude oil passes to us at the tank outlet. After processing, Macquarie takes title to the refined products stored in our storage tanks until they are sold to our retail locations or to third parties. We record the inventory owned by Macquarie on our behalf as inventory with a corresponding accrued liability on our balance sheet because we maintain the risk of loss until the refined products are sold to third parties and we have an obligation to repurchase it. The valuation of our repurchase obligation requires that we make estimates of the prices and differentials assuming settlement occurs at the end of the reporting period.

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Throughout the term of the agreement, when Vertex repurchases the crude and refined products from Macquarie or otherwise directs Macquarie to sell such crude and refined products to third parties, the Company should decrease the product financing liability balance accordingly.

Hydrocarbon inventories at the Mobile Refinery are stated at the lower of cost or net realizable value using the weighted average inventory accounting method. Estimating the net realizable value of our inventory requires management to make assumptions about the timing of sales and the expected proceeds that will be realized for these sales. See [Note 9 "Inventory"](#Section32) and [Note 10 "Inventory Financing Agreement"](#Section33) for more information.

*Other locations.* Inventories from our legacy business consist of feedstocks and refined petroleum products and recovered ferrous and non-ferrous metals. These commodity inventories are stated at the lower of cost or net realizable value using the first-in, first-out ("FIFO") accounting method.

**RINs**

The Company is subject to obligations to purchase Renewable Identification Numbers ("RINs") required to comply with the renewable fuel standard implemented by Environmental Protection Agency ("EPA"), which sets annual quotas for the quantity of renewable fuels (such as ethanol) that must be blended into motor fuels consumed in the United States (the "Renewable Fuel Standard"). The Company's overall RINs obligation is based on a percentage of domestic shipments of on-road fuels as established by the EPA. To the degree the Company is unable to blend the required amount of biofuels to satisfy its RIN obligations, RINs must be purchased on the open market to avoid penalties and fines. The Company records its RIN obligations on a net basis in accrued expenses when its RIN liability is greater than the amount of RINs earned and purchased in a given period and in prepaid and other current assets when the amount of RINs earned and purchased is greater than the RIN liability.

**Fixed Assets**

Fixed assets are stated at historical costs, or at fair value if purchased in a business acquisition. Depreciation of fixed assets placed in operations is provided using the straight-line method over the estimated useful lives of the assets. The policy of the Company is to charge amounts for major maintenance and repairs to expenses, and to capitalize expenditures for major replacements and betterments.

Turnarounds represent major maintenance activities that require the shutdown of significant parts of a plant to perform necessary inspection, cleaning, repairs, and replacements of assets. Planned turnaround activities vary in frequency dependent on refinery units, and follow the deferral method of accounting. Under the deferral method, the costs of turnarounds are deferred and amortized on a straight-line basis over a four-year period of time, which represents the estimated time until the next turnaround occurs.

**Internal-Use Software and Cloud Computing Costs**

The Company incurs costs related to internal-use software and cloud computing implementation costs, including purchased software and internally-developed software. Costs incurred in the planning and evaluation stage of internally-developed software and cloud computing development are expensed as incurred. Certain costs incurred and accumulated during the application development stage are capitalized and included within intangibles, net on the consolidated balance sheets. Amortization of internal-use software is recognized on a straight-line basis over the estimated useful life of the assets.

The Company has non-cancellable cloud computing hosting arrangements for which it incurs implementation costs. Costs incurred in the planning and evaluation stage of the cloud computing hosting arrangement are expensed as incurred. Costs incurred during the application development stage related to implementation of the hosting arrangement are capitalized and included within prepaid expenses on the consolidated balance sheets. Amortization of implementation costs is recognized on a straight-line basis over the term of the associated hosting arrangement for each module or component of the related hosting arrangement when it is ready for its intended use. Amortization costs are presented in selling, general and administrative expense on the consolidated statements of operations.

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**Asset Retirement Obligations**

The Company records an asset retirement obligation at fair value for the estimated cost to retire a tangible long-lived asset at the time the Company incurs that liability, which is generally when the asset is purchased, constructed, or leased. The Company records the liability when it has a legal obligation to incur costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a reasonable estimate cannot be made at the time the liability is incurred, the Company records the liability when sufficient information is available to estimate the liability's fair value. Certain of the Company's asset retirement obligations are based on its legal obligation to perform remedial activity at its refinery sites when it permanently ceases operations of the long-lived assets. The Company therefore considers the settlement date of these obligations to be indeterminable. Accordingly, the Company cannot calculate an associated asset retirement liability for these obligations at this time. The Company will measure and recognize the fair value of these asset retirement obligations when the settlement date is determinable.

**Intangible Assets**

Intangible assets are amortized over their estimated useful lives. Amortizable intangible assets are reviewed at least annually to determine whether events and circumstances warrant a revision to the remaining period of amortization or an impairment.

**Business Combinations**

The Company accounts for business combinations using the acquisition method of accounting. The results of operations for the acquired entities are included in the Company's consolidated financial results from their associated acquisition dates. The Company allocates the purchase price of acquisitions to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. A portion of the purchase price for certain of our acquisitions is contingent upon the realization of certain operating results. The fair values assigned to identifiable intangible assets acquired and contingent consideration were determined by third party specialists engaged by the Company on a case-by-case basis. The excess of the purchase price over the fair value of the identified assets and liabilities is recorded as goodwill. If the fair value of the identified assets and liabilities exceeds the purchase price, a bargain purchase is recognized and included in income from continuing operations.

**Environmental Obligations**

We accrue for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. The liability represents the expected costs of remediating contaminated soil and groundwater at the site. Costs of future expenditures for environmental remediation obligations are discounted to their present value.

**Fair Value of Financial Instruments**

Under the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (ASC), the Company is permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. The Company has elected not to measure any eligible items using the fair value option. Consistent with the Fair Value Measurement Topic of the FASB ASC, the Company implemented guidelines relating to the disclosure of its methodology for periodic measurement of our assets and liabilities recorded at fair market value.

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-tier fair value hierarchy prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 1, defined as observable
 inputs such as quoted prices for identical instruments in active markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 2, defined as inputs other
 than quoted prices in active markets that are either directly or indirectly observable
 such as quoted prices for similar instruments in active markets or quoted prices for
 identical or similar instruments in markets that are not active; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Level 3, defined as unobservable
 inputs in which little or no market data exists, therefore requiring an entity to develop
 its own assumptions, such as valuations derived from valuation techniques in which one
 or more significant inputs or significant value drivers are unobservable.

Our Level 1 assets primarily include our cash and cash equivalents. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. The carrying amounts of accounts receivable, accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturities of these financial instruments.

Our Level 2 liabilities include our marked to market changes in the estimated value of our open derivative commodity contracts held at the balance sheet date. The Company estimates the fair values of the crude oil swaps and collars based on published forward commodity price curves for the underlying commodity as of the date of the estimate for which published forward pricing is readily available. The determination of the fair values above incorporates various factors including the impact of the Company's non-performance risk and the credit standing of the counterparty involved in the Company's derivative commodity contracts. In addition, the Company routinely monitors the creditworthiness of its counterparty.

Our Level 3 liabilities include our marked to market changes in the estimated value of our derivative warrants issued in connection with our Series B Preferred Stock and Series B1 Preferred Stock, all of which have expired, been exercised, or converted into common stock as of December 31, 2021, Convertible Senior Notes which were sold in November 2021, and Term Loans which were issued on April 1 and May 26, 2022.

Nonfinancial assets and liabilities measured at fair value on a nonrecurring basis include certain nonfinancial assets and liabilities as may be acquired in a business combination and thereby measured initially at fair value. See ["Note 3. Mobile Refinery Acquisition"](#Section26) of assets purchased according to the agreement.

**Debt Issuance Costs**

The Company follows the accounting guidance of ASC 835-30, Interest-Imputation of Interest, which requires that debt issuance costs related to a recognized debt liability be reported on the Consolidated Balance Sheet as a direct reduction from the carrying amount of that debt liability, and amortized over the debt term using the effective interest rate method.

**Revenue Recognition**

Our revenues are primarily generated from contracts with customers through the sale of refined petroleum products. The Company recognizes revenue from product sales at prevailing market rates at the point in time in which the customer obtains control of the product. The time at which delivery and transfer of title occurs is the point when the Company's control of the products is transferred to the Company's customers and when its performance obligation to its customers is fulfilled. Delivery and transfer of title are specifically agreed to between the Company and customers within the contracts. The timing of our revenue recognition may differ from the timing of payment from our customers. A receivable is recorded when revenue is recognized prior to payment and we have an unconditional right to payment.

Commodity sales contracts may meet the definition of a derivative or may contain embedded derivatives that may require bifurcation from the host contract with the customer. ASC 815-10-15 provides criteria that must be met in order for purchases and sales contracts to qualify for "normal purchase normal sale" (NPNS) scope exception. Per ASC 815-10-15-22, NPNS are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold by the reporting entity over a reasonable period in the normal course of business. The Company is elected the NPNS since no net settlement has occurred in the past or is anticipated in the future.

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**Reclassification of Prior Year Presentation**

Certain prior period amounts have been reclassified to conform to current period presentation. These reclassifications had no effect on the reported stockholders' equity. The Company reclassified $66.4 million of assets held for sale to assets held and used and $35.1 million of liabilities held for sale to liabilities held and paid in the accompanying 2021 Consolidated Balance Sheet, accordingly, reclassified $5.6 million of net income and $6.9 million of net loss to continued operation in the accompanying 2021 and 2020 Consolidated Statement of Operations, respectively.

**Use of Estimates**

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenue and expenses. Actual results could differ from these estimates. Any effects on the business, financial position or results of operations from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, deferred tax assets, derivative liabilities, and redemption value of noncontrolling interest.

**Leases**

The Company determines whether a contract is or contains a lease when we have the right to control the use of the identified asset in exchange for consideration. Lease liabilities and right-of-use assets ("ROU assets") are recognized at the commencement date based on the present value of lease payments over the lease term. According to ASU No. 2016-02, *Leases (Topic 842), the Company* elected certain practical expedients which permit us to not reassess whether existing contracts are or contain leases, to not reassess the lease classification of any existing leases, to not reassess initial direct costs for any existing leases, and to not separate lease and nonlease components for all classes of underlying assets. We also made an accounting policy election to keep leases with an initial term of 12 months or less off of the balance sheet for all classes of underlying assets. Additional information and disclosures required by this new standard are contained in "[Note 16. Leases](#Section39)".

**Impairment of Long-Lived Assets**

The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company determined that no long-lived asset impairment existed during the years ended December 31, 2022 and 2020.

During August 2021, Hurricane Ida made landfall in southeast Louisiana, approximately 30 miles directly south and west of the Myrtle Grove facility, which resulted in the entire 42 acre Myrtle Grove site to be covered with 4-6 feet of storm surge. The Company determined that the hurricane triggered the uncertainty around the recoverability of some construction-in-progress assets and impaired these assets at December 31, 2021. Refer to "[Note 12. Fixed Assets, Net](#Section35)" for detailed information.

**Income Taxes**

The Company accounts for income taxes in accordance with the FASB ASC Topic 740. The Company records a valuation allowance against net deferred tax assets if, based upon the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and when temporary differences become deductible. The Company considers, among other available information, uncertainties surrounding the recoverability of deferred tax assets, scheduled reversals of deferred tax liabilities, projected future taxable income, and other matters in making this assessment.

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As part of the process of preparing its consolidated financial statements, the Company is required to estimate its income taxes in each of the jurisdictions in which it operates. This process requires the Company to estimate its actual current tax liability and to assess temporary differences resulting from differing book versus tax treatment of items, such as deferred revenue, compensation and benefits expense and depreciation. These temporary differences result in deferred tax assets and liabilities, which are included within the Company's consolidated balance sheet. Significant management judgment is required in determining the Company's provision for income taxes, its deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax assets. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized and, when necessary, valuation allowances are established. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the level of historical taxable income, scheduled reversals of deferred taxes, projected future taxable income and tax planning strategies that can be implemented by the Company in making this assessment. If actual results differ from these estimates or the Company adjusts these estimates in future periods, the Company may need to adjust its valuation allowance, which could materially impact the Company's consolidated financial position and results of operations.

Tax contingencies can involve complex issues and may require an extended period of time to resolve. Changes in the level of annual pre-tax income can affect the Company's overall effective tax rate. Until all net operating losses are utilized, there is no impact on the effective tax rate. Furthermore, the Company's interpretation of complex tax laws may impact its recognition and measurement of current and deferred income taxes.

The Company recognizes and measures a tax benefit from uncertain tax positions when it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company recognizes a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate or future recognition of an unrecognized benefit. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations. Accrued interest and penalties are included within deferred taxes, unrecognized tax benefits and other long-term liabilities line in the consolidated balance sheet.

**Derivative Transactions**

All derivative instruments are recorded on the accompanying balance sheets at fair value. Commodity derivative transactions are not designated as cash flow hedges under FASB ASC 815, Derivatives and Hedges. Accordingly, these commodity derivative contracts are marked-to-market and any changes in the estimated value of commodity derivative contracts held at the balance sheet date are recognized in the accompanying statements of operations as increases (losses) or decreases (gains) in cost of revenues. The derivative assets or liabilities are classified as either current or noncurrent assets or liabilities based on their anticipated settlement date. The Company nets derivative assets and liabilities for counterparties where it has a legal right of offset.

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In accordance with ASC 815-40-25 and ASC 815-10-15, Derivatives and Hedging and ASC 480-10-25, Liabilities-Distinguishing from Equity, convertible preferred shares are accounted for net, outside of shareholders' equity and warrants are accounted for as liabilities at their fair value during periods where they can be net cash settled in case of a change in control transaction. The warrants are accounted for as a liability at their fair value at each reporting period. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded in earnings. To derive an estimate of the fair value of these warrants, a Dynamic Black Scholes model is utilized which computes the impact of a possible change in control transaction upon the exercise of the warrant shares. This process relies upon inputs such as shares outstanding, our quoted stock prices, strike price and volatility assumptions to dynamically adjust the payoff of the warrants in the presence of the dilution effect.

**Preferred Stock Classification**

A mandatorily redeemable financial instrument shall be classified as a liability unless the redemption is required to occur only upon the liquidation or termination of the reporting entity. A financial instrument issued in the form of shares is mandatorily redeemable if it embodies an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event certain to occur. A financial instrument that embodies a conditional obligation to redeem the instrument by transferring assets upon an event not certain to occur becomes mandatory redeemable-and, therefore, becomes a liability-if that event occurs, the condition is resolved, or the event becomes certain to occur. The Series B Preferred Stock and Series B1 Preferred Stock required the Company to redeem such preferred stock on the fifth anniversary of the issuance of the Series B Preferred Stock if the redemption would not be subject to the existing restrictions under the Company's senior credit agreement and if the Company was not prohibited from completing such redemption under Nevada law. SEC reporting requirements provide that any possible redemption outside of the control of the Company requires the preferred stock to be classified outside of permanent equity. The Series B and B1 Preferred Stock were automatically converted into common stock pursuant to their terms in June 2021.

**Stock Based Compensation**

The Company accounts for stock-based expense and activity in accordance with FASB ASC Topic 718, which establishes accounting for equity instruments exchanged for services. Under this topic, stock-based compensation costs are measured at the grant date, based on the calculated fair value of the award, and are recognized as an expense over both the employee and non-employee's requisite service period, generally the vesting period of the equity grant.

The Company estimates the fair value of stock options using the Black-Scholes valuation model. Key input assumptions used to estimate the fair value of stock options include the exercise price of the award, expected option term, expected volatility of the stock over the option's expected term, risk-free interest rate over the option's expected term, and the expected annual dividend yield. The Company believes that the valuation technique and approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the stock options granted.

**Earnings Per Share**

Basic earnings per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares outstanding for the periods presented. The calculation of basic earnings per share for the years ended December 31, 2022, 2021 and 2020, respectively, includes the weighted average of common shares outstanding. Diluted net income (loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common and common equivalent shares outstanding during the period. 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.

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**Redeemable Noncontrolling Interests**

As more fully described in "[Note 23. Non-Controlling Interests](#Section46)", the Company was party to put/call option agreements with the holder of Vertex Refining Myrtle Grove LLC ("<u>MG SPV</u>") and HPRM LLC, a Delaware limited liability company ("<u>Heartland SPV</u>"), which entities were formed as special purpose vehicles in connection with certain transactions described in greater detail in "[Note 23. Non-Controlling Interests](#Section46)". The put options permitted MG SPV's and Heartland SPV's non-controlling interest holders, at any time on or after the earlier of (a) the fifth anniversary of the applicable closing date of such issuances and (ii) the occurrence of certain triggering events (an "<u>MG Redemption</u>" and "<u>Heartland Redemption</u>", as applicable) to require MG SPV and Heartland SPV to redeem the non-controlling interest from the holder of such interest. Applicable accounting guidance requires an equity instrument that is redeemable for cash or other assets to be classified outside of permanent equity if it is redeemable (a) at a fixed or determinable price on a fixed or determinable date, (b) at the option of the holder, or (c) upon the occurrence of an event that is not solely within the control of the issuer. Based on this guidance, the Company classified the MG SPV and Heartland SPV non-controlling interests between the liabilities and equity sections of the accompanying consolidated balance sheets. If an equity instrument subject to the guidance is currently redeemable, the instrument is adjusted to its maximum redemption amount at the balance sheet date. If the equity instrument subject to the guidance is not currently redeemable but it is probable that the equity instrument will become redeemable (for example, when the redemption depends solely on the passage of time), the guidance permits either of the following measurement methods: (a) accrete changes in the redemption value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption date of the instrument using an appropriate methodology, or (b) recognize changes in the redemption value immediately as they occur and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The amount presented in temporary equity should be no less than the initial amount reported in temporary equity for the instrument. Because the MG SPV and Heartland SPV equity instruments were to become redeemable solely based on the passage of time, the Company determined that it was probable that the MG SPV and Heartland SPV equity instruments would become redeemable. The Company elected to apply the second of the two measurement options described above. An adjustment to the carrying amount of a non-controlling interest from the application of the above guidance does not impact net loss in the consolidated financial statements. Rather, such adjustments are treated as equity transactions and adjustment to net loss in determining net loss available to common stockholders for the purpose of calculating earnings per share. On April 1, 2022, the Company redeemed the non-controlling interest holder's interest of MG SPV, and on May 26, 2022, the Company redeemed the non-controlling interest holder's interest of Heartland SPV.

**Assets and Liabilities Held for Sale**

The Company classifies disposal groups as held for sale in the period in which all of the following criteria are met: (1) management, having the authority to approve the action, commits to a plan to sell the disposal group; (2) the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such disposal groups; (3) an active program to locate a buyer or buyers and other actions required to complete the plan to sell the disposal group have been initiated; (4) the sale of the disposal group is probable, and transfer of the disposal group is expected to qualify for recognition as a completed sale, within one year, except if events or circumstances beyond the Company's control extend the period of time required to sell the disposal group beyond one year; (5) the disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

A disposal group that is classified as held for sale is initially measured at the lower of its carrying amount or fair value less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met. No loss was recognized during the periods presented.

Subsequent changes in the fair value of a disposal group less any costs to sell are reported as an adjustment to the carrying amount of the disposal group, as long as the new carrying amount does not exceed the carrying amount of the asset at the time it was initially classified as held for sale. Upon determining that a disposal group meets the criteria to be classified as held for sale, the Company reports the assets and liabilities of the disposal group for all periods presented in the line items assets held for sale and liabilities held for sale, respectively, in the Consolidated Balance Sheets.

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**Discontinued Operations**

The results of operations of a component of the Company that can be clearly distinguished, operationally and for financial reporting purposes, that either has been disposed of or is classified as held for sale is reported in discontinued operations, if the disposal represents a strategic shift that has, or will have, a major effect on the Company's operations and financial results.

**New Accounting Pronouncements**

*Accounting pronouncements adopted by the Company in 2022*.

In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity to simplify the accounting for convertible debt and other equity-linked instruments. The new guidance simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity. Instead, the entity will account for the convertible debt or convertible preferred stock securities as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The Company adopted this new guidance as of January 1, 2022, under the modified retrospective method. On January 20, 2022, our shareholders approved the issuance of shares of our common stock issuable upon the conversion of our then $155 million aggregate principal amount at maturity 6.25% Convertible Senior Notes due 2027 (the "Convertible Senior Notes"), and at that time, the $79 million derivative liabilities were recorded as additional paid-in capital.

*Accounting pronouncements not yet adopted.*

The Company has not identified any recent accounting pronouncements that are expected to have a material impact on our financial condition, results of operations or cash flows upon adoption.

**NOTE 3. MOBILE REFINERY ACQUISITION**

On May 26, 2021, Vertex Operating entered into a Sale and Purchase Agreement with Equilon Enterprises LLC d/b/a Shell Oil Products US, Shell Oil Company and Shell Chemical LP, subsidiaries of Shell plc ("<u>Shell</u>") (the "<u>Refinery Purchase Agreement</u>"). On April 1, 2022 (the "Effective Date"), Vertex Operating assigned its rights to the Refinery Purchase Agreement to Vertex Refining Alabama LLC, a Delaware limited liability company ("<u>Vertex Refining</u>") which is indirectly wholly-owned by the Company, and on the same date, Vertex Refining completed the acquisition of a Mobile, Alabama refinery (the "<u>Mobile Refinery</u>") from Shell (the "<u>Mobile Acquisition</u>"). 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 was subject to customary purchase price adjustments and reimbursement for certain capital expenditures in the amount of approximately $0.4 million, $15.9 million for previously agreed upon capital expenditures and miscellaneous prepaid and reimbursable items, and $130 million 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. 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 "<u>Swapkit Agreement</u>"), 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 "<u>Swapkit</u>"). The Company incurred acquisition related costs consisting primarily of consulting and legal, which totaled $12.0 million in the years ended December 31, 2022 and were included in the Consolidated Statements of Operations in selling, general and administrative expenses.

The total $227.5 million purchase price and $12 million acquisition costs were funded by the $113 million proceeds from the $125 million of Term Loan, which issued on April 1, 2022, $100 million restricted cash which is the proceeds from the Convertible Senior Notes held in escrow and released on April 1, 2022 and $124.3 million of proceeds from Macquarie as a result of the simultaneous sale of such inventory to Macquarie pursuant to an Inventory Sales Agreement between Vertex Refining and Macquarie. Referred to "[Note 15. Financing Arrangement](#Section38)" for more detailed information.

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The following table summarizes the determination and recognition of assets acquired (in thousands):

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| | | | |
|:---|:---|:---|:---|
|  | **Financing <br> Agreement** | **Vertex <br> Acquisition** | **Total** |
| Inventory | $124311 | $5909 | $130220 |
| Prepaid assets |  | 147 | 147 |
| Fixed assets |  | 97158 | 97158 |
| Total purchase price | $124311 | $103214 | $227525 |

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The following table presents summarized results of operations of the Mobile Refinery for the period from April 1, 2022 to December 31, 2022, which are included in the accompanying consolidated statement of operations for the period ended December 31, 2022 (in thousands):

---

| | |
|:---|:---|
|  | **For Nine Months Ended <br> December 31, 2022** |
| Revenue | $2465385 |
| Net Income | $51247 |

---

The following table presents unaudited pro forma results of operations reflecting the acquisition of the Mobile Refinery as if the acquisition had occurred as of January 1, 2020. 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 the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2022** | **2021** |
| Revenue | $3216285 | $1975500 |
| Net income (loss) | $77336 | $(25800) |

---

**NOTE 4. COMMITMENTS AND CONTINGENCIES**

**Litigation**

The Company, in its normal course of business, is involved in various claims and legal action. In the opinion of management, the outcome of these claims and actions will not have a material adverse impact upon the financial position of the Company. We are currently party to the following material litigation proceedings:

Vertex Refining LA, LLC ("<u>Vertex Refining LA</u>"), the wholly-owned subsidiary of Vertex Operating was named as a defendant, along with numerous other parties, in five lawsuits filed on or about February 12, 2016, in the Second Parish Court for the Parish of Jefferson, State of Louisiana, Case No. 121749, by Russell Doucet et. al., Case No. 121750, by Kendra Cannon et. al., Case No. 121751, by Lashawn Jones et. al., Case No. 121752, by Joan Strauss et. al. and Case No. 121753, by Donna Allen et. al. The suits relate to alleged noxious and harmful emissions from our facility located in Marrero, Louisiana. The suits seek damages for physical and emotional injuries, pain and suffering, medical expenses and deprivation of the use and enjoyment of plaintiffs' homes. We intend to vigorously defend ourselves and oppose the relief sought in the complaints, provided that at this stage of the litigation, the Company has no basis for determining whether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.

On November 17, 2020, Vertex filed a lawsuit against Penthol LLC ("Penthol") in the 61st Judicial District Court of Harris County, Texas, Cause No. 2020-65269, for breach of contract and simultaneously sought a Temporary Restraining Order and Temporary Injunction enjoining Penthol from, among other things, circumventing Vertex in violation of the terms of that certain June 5, 2016 Sales Representative and Marketing Agreement entered into between Vertex Operating and Penthol (the "Penthol Agreement"). Vertex seeks damages, attorney's fees, costs of court, and all other relief to which it may be entitled.

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On February 8, 2021, Penthol filed a complaint against Vertex Operating in the United States District Court for the Southern District of Texas; Civil Action No. 4:21-CV-416 (the "Complaint"). Penthol's Complaint sought damages from Vertex Operating for alleged violations of the Sherman Act, breach of contract, business disparagement, and misappropriation of trade secrets under the Defend Trade Secrets Act and Texas Uniform Trade Secrets Act. On August 12, 2021, United States District Judge Andrew S. Hanen dismissed Penthol's Sherman Act claim. Penthol's remaining claims are pending. Penthol is seeking a declaration that Vertex has materially breached the agreement; an injunction that prohibits Vertex from using Penthol's alleged trade secrets and requires Vertex to return any of Penthol's alleged trade secrets; awards of actual, consequential and exemplary damages, attorneys' fees and costs of court; and other relief to which it may be entitled. Vertex denies Penthol's allegations in the Complaint. Vertex contends Penthol's claims are completely without merit, and that Penthol's termination of the Penthol Agreement was wrongful and resulted in damages to Vertex that it is seeking to recover in the Harris County lawsuit. Further, Vertex contends that Penthol's termination of the Penthol Agreement constitutes a breach by Penthol under the express terms of the Penthol Agreement, and that Vertex remains entitled to payment of the amounts due Vertex under the Penthol Agreement for unpaid commissions and unpaid performance incentives. Vertex disputes Penthol's allegations of wrongdoing and intends to vigorously defend itself in this matter. On February 26, 2021, Penthol filed its second amended answer and counterclaims, alleging that Vertex improperly terminated the Penthol Agreement and that Vertex tortiously interfered with Penthol's prospective and existing business relationships. Vertex denies these allegations and is vigorously defending them.

Recently, the parties agreed to move the pending claims and defenses in the Texas state court lawsuit into the federal court lawsuit (i.e., Civil Action No. 4:21-CV-416). Both parties also sought to amend their pleadings to add additional claims. By order dated October 18, 2022, the Judge in the lawsuit, Judge Hanen largely granted these requests. As a result, Vertex was granted leave to add Penthol C.V. as a defendant. Penthol was granted leave to add claims for fraud and breach of contract relating to an assignment agreement, and add claims for misappropriation of trade secrets. All pending claims between the parties are now in the federal court action.

The parties recently conducted numerous depositions and substantial document discovery. Vertex has filed a motion for summary judgment, and Penthol has filed a motion for partial summary judgment, both of which are pending.

This case is pending, but is currently set for trial during the first quarter of 2023.

We cannot predict the impact (if any) that any of the matters described above may have on our business, results of operations, financial position, or cash flows. Because of the inherent uncertainties of such matters, including the early stage and lack of specific damage claims in the Penthol matter, we cannot estimate the range of possible losses from them (except as otherwise indicated).

**Environmental Matters**

Like other petroleum refiners, we are subject to federal, state, and local environmental laws and regulations. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal. These governmental entities may also propose or assess fines or require corrective actions for these asserted violations. Except as disclosed below, we do not anticipate that any such matters currently known to management will have a material impact on our financial condition, results of operations, or cash flows. On April 1, 2022, we acquired the Mobile Refinery and during the nine months ended December 31, 2022, we reserved $1.4 million for environment clean up.

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**NOTE 5. REVENUES**

The following tables present our revenues disaggregated by geographical market and revenue source (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31, 2022** | **Year ended December 31, 2022** | **Year ended December 31, 2022** |
| | **Refining &**<br> **Marketing** | **Black Oil & <br> Recovery \*** | **Consolidated** |
| <br>**Primary Geographical Markets** |  |  |  |
| Gulf Coast | $2606644 | $185071 | $2791715 |
| **Sources of Revenue** |  |  |  |
| Refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gasolines | $627081 | $— | 627081 |
| &nbsp;&nbsp;&nbsp;&nbsp;Jet Fuels | 438999 |  | 438999 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diesel | 940095 |  | 940095 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other refinery products <sup>(1)</sup> | 364065 | 163095 | 527160 |
| Re-refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pygas | 51154 |  | 51154 |
| &nbsp;&nbsp;&nbsp;&nbsp;Metals <sup>(2)</sup> |  | 16356 | 16356 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other re-refined products <sup>(3)</sup> | 178639 | 2749 | 181388 |
| Services: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Terminalling | 6611 |  | 6611 |
| &nbsp;&nbsp;&nbsp;&nbsp;Oil collection services |  | 2871 | 2871 |
| Total revenues | $**2606644** | $**185071** | $**2791715** |

---

---

| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31, 2021** | **Year ended December 31, 2021** | **Year ended December 31, 2021** |
| | **Refining &**<br> **Marketing**  | **Black Oil & <br> Recovery \*** | **Consolidated** |
| <br>**Primary Geographical Markets** |  |  |  |
| Gulf Coast | $93230 | $114530 | $207760 |
| **Sources of Revenue** |  |  |  |
| Refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gasolines | $23928 | $— | 23928 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diesel | 54263 |  | 54263 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other refinery products <sup>(1)</sup> |  | 85253 | 85253 |
| Re-refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pygas | 13438 |  | 13438 |
| &nbsp;&nbsp;&nbsp;&nbsp;Metals <sup>(2)</sup> |  | 23707 | 23707 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other re-refined products <sup>(3)</sup> | 1601 | 1904 | 3505 |
| Services: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Oil collection services |  | 3666 | 3666 |
| Total revenues | $**93230** | $**114530** | $**207760** |

---

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---

| | | | |
|:---|:---|:---|:---|
| | **Year ended December 31, 2020** | **Year ended December 31, 2020** | **Year ended December 31, 2020** |
| | **Refining &**<br> **Marketing** | **Black Oil & <br> Recovery \*** | **Consolidated** |
| <br>**Primary Geographical Markets** |  |  |  |
| Gulf Coast | $35805 | $68005 | $103810 |
| **Sources of Revenue** |  |  |  |
| Refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Gasolines | $8658 | $— | $8658 |
| &nbsp;&nbsp;&nbsp;&nbsp;Diesel | 20285 |  | 20285 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other refinery products <sup>(1)</sup> |  | 45904 | 45904 |
| Re-refined products: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Pygas | 6627 |  | 6627 |
| &nbsp;&nbsp;&nbsp;&nbsp;Metals <sup>(2)</sup> |  | 14142 | 14142 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other re-refined products <sup>(3)</sup> | 235 | 3593 | 3828 |
| Services: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Oil collection services |  | 4366 | 4366 |
| Total revenues | $**35805** | $**68005** | $**103810** |

---

\* The Company has determined to combine the Black Oil and Recovery segments in the presentation above due to the revenue from such segment being less than 10% of the Company's total revenue after the Mobile Refinery acquisition. The Black Oil segment does not include the Heartland Assets and Operations and Leverage Lubricant Operations, which are presented herein as discontinued operations.

(1) Other refinery products include the sales of base oil, VGO (vacuum gas oil), cutterstock and Hydrotreated VGO and other petroleum products.

(2) Metals consist of recoverable ferrous and non-ferrous recyclable metals from manufacturing and consumption. Scrap metal can be recovered from pipes, barges, boats, building supplies, surplus equipment, tanks, and other items consisting of metal composition. These materials are segregated, processed, cut-up and sent back to a steel mill for re-purposing.

(3) Other re-refinery products include the sales of asphalt, condensate, recovered products, and other petroleum products.

**NOTE 6. SEGMENT REPORTING**

The Refining and Marketing segment consists primarily of the sale of gasoline, diesel and jet fuel produced at the Mobile Refinery as well as pygas and industrial fuels, which are produced at a third-party facility.

The Black Oil and Recovery segment consists primarily of the sale of (a) petroleum products which include base oil and industrial fuels—which consist of used motor oils, cutterstock and fuel oil generated by our facilities; (b) oil collection services—which consist of used oil sales, burner fuel sales, antifreeze sales and service charges; (c) the sale of other re-refinery products including asphalt, condensate, recovered products, and used motor oil; (d) transportation revenues; (e) the sale of VGO/marine fuel; (f) the sale of ferrous and non-ferrous recyclable Metal(s) products that are recovered from manufacturing and consumption; and (g) revenues generated from trading/marketing of Group III Base Oils. The Black Oil and Recovery segment includes the Heartland Assets and Operations, which are presented herein as discontinued operations.

We also disaggregate our revenue by product category for each of our segments, as we believe such disaggregation helps depict how our revenue and cash flows are affected by economic factors.

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Segment information for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **YEAR ENDED DECEMBER 31, 2022** | **YEAR ENDED DECEMBER 31, 2022** | **YEAR ENDED DECEMBER 31, 2022** | **YEAR ENDED DECEMBER 31, 2022** | **YEAR ENDED DECEMBER 31, 2022** |
|  | Refining and <br> Marketing | Black Oil & <br> Recovery | Corporate and <br> Eliminations | Total |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;Refined products | $2370240 | $163095 | $— | $2533335 |
| &nbsp;&nbsp;Re-refined products | 229793 | 19105 |  | 248898 |
| &nbsp;&nbsp;Services | 6611 | 2871 |  | 9482 |
| Total revenues | 2606644 | 185071 |  | 2791715 |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 2453809 | 144467 |  | 2598276 |
| Depreciation and amortization attributable to costs of revenues | 9605 | 3824 |  | 13429 |
| Gross profit | 143230 | 36780 |  | 180010 |
| Selling, general and administrative expenses | 83001 | 17241 | 27540 | 127782 |
| Depreciation and amortization attributable to operating expenses | 2593 | 180 | 900 | 3673 |
| Income (loss) from operations | $57636 | $19359 | $(28440) | $48555 |
| Total capital expenditures | $72588 | $2924 | $— | $75512 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **YEAR ENDED DECEMBER 31, 2021** | **YEAR ENDED DECEMBER 31, 2021** | **YEAR ENDED DECEMBER 31, 2021** | **YEAR ENDED DECEMBER 31, 2021** | **YEAR ENDED DECEMBER 31, 2021** |
|  | Refining and <br> Marketing | Black Oil & <br> Recovery | Corporate and <br> Eliminations | Total |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;Refined products | $78191 | $85253 | $— | $163444 |
| &nbsp;&nbsp;Re-refined products | 15039 | 25611 |  | 40650 |
| &nbsp;&nbsp;Services |  | 3666 |  | 3666 |
| Total revenues | 93230 | 114530 |  | 207760 |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 89570 | 89216 |  | 178786 |
| Depreciation and amortization attributable to costs of revenues | 509 | 3534 |  | 4043 |
| Gross profit | 3151 | 21780 |  | 24931 |
| Selling, general and administrative expenses | 3277 | 14444 | 12885 | 30606 |
| Loss on assets impairment |  | 2124 |  | 2124 |
| Depreciation and amortization attributable to operating expenses | 434 | 234 | 1013 | 1681 |
| Income (loss) from operations | $(560) | $4978 | $(13898) | $(9480) |
| Total capital expenditures | $— | $2331 | $— | $2331 |

---

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---

| | | | | |
|:---|:---|:---|:---|:---|
| **YEAR ENDED DECEMBER 31, 2020** | **YEAR ENDED DECEMBER 31, 2020** | **YEAR ENDED DECEMBER 31, 2020** | **YEAR ENDED DECEMBER 31, 2020** | **YEAR ENDED DECEMBER 31, 2020** |
|  | Refining and <br> Marketing | Black Oil & <br> Recovery | Corporate and <br> Eliminations | Total |
| Revenues: |  |  |  |  |
| &nbsp;&nbsp;Refined products | $28943 | $45905 | $— | $74848 |
| &nbsp;&nbsp;Re-refined products | 6862 | 17734 |  | 24596 |
| &nbsp;&nbsp;Services |  | 4366 |  | 4366 |
| Total revenues | 35805 | 68005 |  | 103810 |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 35208 | 56422 |  | 91630 |
| Depreciation and amortization attributable to costs of revenues | 470 | 3197 |  | 3667 |
| Gross profit | 127 | 8386 |  | 8513 |
| Selling, general and administrative expenses | 2529 | 12953 | 4894 | 20376 |
| Depreciation and amortization attributable to operating expenses | 387 | 234 | 1024 | 1645 |
| Loss from operations | (2789) | (4801) | (5918) | (13508) |
| Total capital expenditures | $— | $5550 | $— | $5550 |

---

Total assets by segment were as follows (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **AS OF DECEMBER 31, 2022** | **AS OF DECEMBER 31, 2022** | **AS OF DECEMBER 31, 2022** | **AS OF DECEMBER 31, 2022** | **AS OF DECEMBER 31, 2022** |
|  | **Refining &**<br> **Marketing** | **Black Oil & <br> Recovery** | **Corporate and <br> Eliminations** | **Consolidated** |
| Total assets | $410975 | $105109 | $173301 | $689385 |

---

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| | | | | |
|:---|:---|:---|:---|:---|
| **AS OF DECEMBER 31, 2021** | **AS OF DECEMBER 31, 2021** | **AS OF DECEMBER 31, 2021** | **AS OF DECEMBER 31, 2021** | **AS OF DECEMBER 31, 2021** |
|  | **Refining &**<br> **Marketing** | **Black Oil & <br> Recovery** | **Corporate and <br> Eliminations** | **Consolidated** |
| Total assets | $16012 | $90518 | $159530 | $266060 |

---

Segment assets for the Refining and Marketing and Black Oil and Recovery segments consist of property, plant, and equipment, right-of-use assets, intangible assets, accounts receivable, inventories and other assets. Assets for the corporate unallocated amounts consist of property, plant, and equipment used at the corporate headquarters, intangible assets, certain prepaid assets, assets held for sale as well as cash.

**NOTE 7. ACCOUNTS RECEIVABLE** 

Accounts receivable, net, consists of the following at December 31 (in thousands):

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Accounts receivable trade | $36098 | $8945 |
| Allowance for doubtful accounts | $(1550) | $(1338) |
| Accounts receivable, net | $34548 | $7607 |

---

Accounts receivable trade represents amounts due from customers. Accounts receivable trade are recorded at invoiced amounts, net of reserves and allowances and do not bear interest.

Bad debt expense was $241.8 thousand, $825.6 thousand and $239.0 thousand for the years ended December 31, 2022, 2021 and 2020, respectively for the continued operations.

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**NOTE 8. CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS**

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 years ended December 31, 2022 and 2021, the Company's cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration.

For the years ended December 31, 2022, 2021, and 2020, the Company's revenues and receivables were comprised of the following customer concentrations:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
|  | **% of<br> Revenues** | **% of <br> Receivables** | **% of<br> Revenues** | **% of <br> Receivables** | **% of<br> Revenues** | **% of Receivables** |
| Customer 1 | 39% | 11% | —% | —% | —% | —% |
| Customer 2 | 28% | 23% | —% | —% | —% | —% |
| Customer 3 | 9% | 28% | 39% | 26% | 44% | 16% |
| Customer 4 | —% | —% | 12% | 9% | 10% | 6% |
| Customer 5 | —% | —% | 9% | 8% | 6% | 7% |

---

At December 31, 2022, 2021 and 2020, and for the years then ended, the Company's segment revenues were comprised of the following customer concentrations:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **% of Revenue by Segment 2022** | **% of Revenue by Segment 2022** | **% of Revenue by Segment 2021** | **% of Revenue by Segment 2021** | **% of Revenue by Segment 2020** | **% of Revenue by Segment 2020** |
|  | **Refining** | **Black Oil and <br> Recovery** | **Refining** | **Black Oil and <br> Recovery** | **Refining** | **Black Oil and <br> Recovery** |
| Customer 1 | 42% | —% | —% | —% | —% | —% |
| Customer 2 | 30% | —% | —% | —% | —% | —% |
| Customer 3 | 4% | 85% | —% | 71% | 3% | 66% |
| Customer 4 | —% | —% | 27% | —% | 28% | —% |
| Customer 5 | —% | —% | 20% | —% | 17% | —% |

---

As of and for the year ended December 31, 2022, the Company had one vendor which accounted for 49% of total purchases and 0% of total payables. One vendor represented 35% of total purchases and 20% payables as of and for the year ended December 31, 2021. As of and for the year ended December 31, 2020, the Company had two vendors which accounted for 22%, and 14% of total purchases and 32% and 0% of total payables, respectively.

The Company's revenue, profitability and future rate of growth are substantially dependent on prevailing prices for petroleum-based products. Historically, the energy markets have been very volatile, and there can be no assurance that these prices will not be subject to wide fluctuations in the future. A substantial or extended decline in such prices could have a material adverse effect on the Company's financial position, results of operations, cash flows, and access to capital and on the quantities of petroleum-based products that the Company can economically produce.

**NOTE 9. INVENTORY**

The following table describes the Company's inventory balances by category as of December 31, (in thousands):

---

| | | |
|:---|:---|:---|
|  | **As of December 31 <br> 2022** | **As of December 31,<br> 2021** |
| Crude oil | $59131 | $926 |
| Refined products | 74311 | 4729 |
| Re-refined products | 2031 | 2184 |
| Total inventories | $135473 | $7839 |

---

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**NOTE 10. INVENTORY FINANCING AGREEMENT**

On April 1, 2022, pursuant to an Inventory Sales Agreement entered into between Vertex Refining and Macquarie, Macquarie purchased all the Mobile Refinery inventory from Vertex Refining for $130 million (which funds, together with cash on hand, were used by Vertex Refining to purchase the Mobile Refinery Inventory from Shell), which Mobile Refinery Inventory then became subject to the terms of the Supply and Offtake Agreement, discussed in detail below. The following table summarizes our outstanding obligations under our inventory financing agreements as of December 31, 2022 (in thousands):

---

| | |
|:---|:---|
|  | **December 31, 2022** |
| Obligations under inventory financing agreement | $119189 |
| Unamortized financing cost | (1250) |
| Obligations under inventory financing agreement, net | $117939 |

---

The valuation of our obligations at the end of each reporting period requires that we make estimates of the prices and differentials for our then monthly forward purchase obligations.

**Supply and Offtake Agreement**

On April 1, 2022 (the "<u>Commencement Date</u>"), Vertex Refining entered into a Supply and Offtake Agreement (the "<u>Supply and Offtake Agreement</u>") with Macquarie, pertaining to crude oil supply and offtake of finished products located at the Mobile Refinery acquired on April 1, 2022. On the Commencement Date, pursuant to the Inventory Sales Agreement discussed above, and in connection with the Supply and Offtake Agreement, Macquarie purchased from Vertex Refining all crude oil and finished products within the categories covered by the Supply and Offtake Agreement and the Inventory Sales Agreement, which were held at the Mobile Refinery and a certain specified third party storage terminal, which were previously purchased by Vertex Refining as part of the acquisition of the Mobile Refinery as discussed in greater detail above in [Note 3. "Mobile Refinery Acquisition"](#Section26).

Pursuant to the Supply and Offtake Agreement, beginning on the Commencement Date and subject to certain exceptions, substantially all of the crude oil located at the Mobile Refinery and at a specified third party storage terminal from time to time will be owned by Macquarie prior to its sale to Vertex Refining for consumption within the Mobile Refinery processing units. Also pursuant to the Supply and Offtake Agreement, and subject to the terms and conditions and certain exceptions set forth therein, Macquarie will purchase from Vertex Refining substantially all of the Mobile Refinery's output of certain refined products and will own such refined products while they are located within certain specified locations at the Mobile Refinery. Macquarie takes title to the refined products stored in our storage tanks until they are sold. We record the inventory owned by Macquarie on our behalf as inventory with a corresponding accrued liability on our balance sheet because we maintain the risk of loss until the refined products are sold to third parties and we have an obligation to repurchase it.

Pursuant to the Supply and Offtake Agreement and subject to the terms and conditions therein, Macquarie may during the term of the Supply and Offtake Agreement procure crude oil and refined products from certain third parties which may be sold to Vertex Refining or third parties pursuant to the Supply and Offtake Agreement and may sell Refined Products to Vertex Refining or third parties (including customers of Vertex Refining).

The obligations of Vertex Refining and any of its subsidiaries under the Supply and Offtake Agreement and related transaction documents are guaranteed by the Company. The obligations of Vertex Refining and any of its subsidiaries under the Supply and Offtake Agreement and related transaction documents are also secured by a Pledge and Security Agreement in favor of Macquarie, discussed below, executed by Vertex Refining. In addition, the Supply and Offtake Agreement also requires that Vertex Refining post and maintain cash collateral (in the form of an independent amount) as security for Vertex Refining's obligations under the Supply and Offtake Agreement and the related transaction documents. The amount of cash collateral is subject to adjustments during the term.

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Pursuant to the Supply and Offtake Agreement, Vertex Refining and Macquarie are in discussions to cooperate to develop and document, procedures relating to the unwinding and termination of the agreement and related agreements, in the event of the expiration or early termination of the Supply and Offtake Agreement. The parties also agreed to use commercially reasonable efforts to negotiate mutually agreeable terms for Macquarie's intermediating of renewable feedstocks and renewable diesel that will be utilized and/or produced by Vertex Refining in connection with and following the ongoing renewable diesel conversion project at the Mobile Refinery (including providing Macquarie a right of first refusal in connection therewith), for 90 days after the Commencement Date (the "RD Period"), which discussions are ongoing. If, by the end of the RD Period, Macquarie and Vertex Refining, each acting in good faith and in a commercially reasonable manner, have not been able to reach commercial agreement regarding the entry into a renewable diesel intermediation, Vertex Refining may elect to terminate the Supply and Offtake Agreement by providing notice of any such election to Macquarie; provided that no such election may be effective earlier than the date falling 90 calendar days following the date on which such notice is delivered. The agreement is also subject to termination upon the occurrence of certain events, including the termination of certain agreements relating to the delivery of crude oil to and the offtake of products from the Mobile Refinery. Upon an early termination of the Supply and Offtake Agreement, Vertex Refining is required to pay amounts relating to such termination to Macquarie including, among other things, outstanding unpaid amounts, amounts owing with respect to terminating transactions under the Supply and Offtake Agreement and related transaction documents, unpaid ancillary costs, and breakage costs, losses and out-of-pocket costs with respect to the termination, liquidation, maintenance or reestablishment, or redeployment of certain hedges put in place by Macquarie in connection with the transactions contemplated by the agreement, and Vertex Refining is required to pay other termination fees and amounts to Macquarie in the event of any termination of the agreement. Additionally, upon the termination of the Supply and Offtake Agreement, the outstanding obligations of Vertex Refining and Macquarie to each other will be calculated and reduced to an estimated net settlement payment which will be subject to true-up when the final settlement payment has been calculated following termination.

The Supply and Offtake Agreement requires Vertex Refining to prepare and deliver certain forecasts, projections and estimates and comply with financial statement delivery obligations and other disclosure obligations. The agreement also requires Vertex Refining to provide Macquarie notice of certain estimated monthly crude oil delivery, crude oil consumption, product production, target inventory levels and product offtake terms, which Macquarie has the right to reject, subject to certain disclosure requirements.

The Supply and Offtake Agreement has a 24 month term following the Commencement Date, subject to the performance of customary covenants, and certain events of default and termination events provided therein (certain of which are discussed in greater detail below), for a facility of this size and type. Additionally, either party may terminate the agreement at any time, for any reason, with no less than 180 days prior notice to the other.

The Supply and Offtake Agreement includes certain customary representations, warranties, indemnification obligations and limitations of liability of the parties for a facility of this size and type, and also requires Vertex Refining to be responsible for certain ancillary costs relating to the Supply and Offtake Agreement and the transactions contemplated thereby. The Supply and Offtake Agreement requires Vertex Refining to comply with various indemnity, insurance and tax obligations, and also includes a prohibition on any amendments to Vertex Refining's financing agreements which, among other things, adversely affect Macquarie's rights and remedies under the Supply and Offtake Agreement and related transaction documents without the prior consent of Macquarie; a prohibition on Vertex Refining entering into any financing agreement which would cause Vertex Refining's specified indebtedness to exceed $10 million without Macquarie's prior consent, subject to certain exceptions; and a requirement that Vertex Refining not have less than $17.5 million in unrestricted cash for any period of more than three consecutive business days. The Supply and Offtake Agreement includes events of default and termination events, including if the Company ceases to beneficially own, directly or indirectly, 100% of the capital stock of Vertex Refining; the change in ownership of the Company or Vertex Refining resulting in one person or group acquiring 50% or more of the capital stock of the Company or Vertex Refining (as applicable); or a change in a majority of the Board of Directors of the Company or Vertex Refining during any 12 consecutive months, without certain approvals, including the approval of the Board of Directors of the Company or Vertex Refining (as applicable) immediately prior to such change; and a cross default to indebtedness (other than indebtedness under financing agreements) of the Company or Vertex Refining for over $20 million, a cross default to indebtedness under financing agreements of Vertex Refining or the Company, or a final judgment or order being rendered against Vertex Refining or the Company in an amount exceeding $20 million.

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The price for crude oil purchased by the Company from Macquarie and for products sold by the Company to Macquarie within each agreed product group, in each case, is equal to a pre-determined benchmark, plus a pre-agreed upon differential, subject to adjustments and monthly true-ups.

*Tripartite Agreements*

Also on the Commencement Date, Vertex Refining, Macquarie and certain parties subject to crude oil supply and products offtake agreements with Vertex Refining, relating to the Mobile Refinery, entered into various tripartite agreements (the "<u>Tripartite Agreements</u>"), whereby Vertex Refining granted Macquarie the right, on a rolling daily or monthly basis, as applicable, to elect to assume Vertex Refining's rights and obligations under such crude oil supply and products offtake agreements in connection with the performance of the Supply and Offtake Agreement, and the counterparties thereto are deemed to have consented to Macquarie's assuming such obligations. Such Tripartite Agreements also provided for certain interpretations of the provisions of such supply and offtake agreements between Vertex Refining and such third parties in connection with Macquarie's right to elect to assume Vertex Refining's rights and obligations under such agreements. The Tripartite Agreements remain in place until the termination of the agreements to which they relate, or the earlier termination thereof as set forth in the Tripartite Agreements, including in the event of certain events of default by the parties thereto under the modified crude oil supply and products offtake agreements or the Supply and Offtake Agreement and related transaction documents and also in the event of the termination of the Supply and Offtake Agreement. Macquarie, Vertex Refining and a third party offtaker also entered into a tripartite agreement pursuant to which certain storage capacity within the Mobile Refinery which Macquarie had leased pursuant to the Storage and Services Agreement was effectively made available to such third party consistent with the terms agreed by such party and Vertex Refining in its underlying products offtake agreement. Macquarie, Vertex Refining and a third party storage terminal operator also entered into a tripartite agreement relating to the storage of Macquarie-owned crude oil in such terminal in connection with the Supply and Offtake Agreement.

*Guaranty*

Vertex Refining's obligations under the Supply and Offtake Agreement and related transaction documents (other than the hedges which are secured and guaranteed on a pari passu basis under the Loan and Security Agreement) were unconditionally guaranteed by the Company pursuant to the terms of a Guaranty entered into on April 1, 2022, by the Company in favor of Macquarie (the "<u>Guaranty</u>").

**NOT** **E 11. PREPAID EXPENSES AND OTHER CURRENT ASSETS**

The following table describes the Company's prepaid expenses and other current assets balances (in thousands):

---

| | | |
|:---|:---|:---|
|  | **As of December 31, <br> 2022** | **As of December 31, <br> 2021** |
| Prepaid insurance | $8356 | $2638 |
| Commodity derivative advance | 5472 | 556 |
| Renewable volume obligation (RVO) assets | 2001 |  |
| Other prepaid expenses | 5160 | 1401 |
| Independent deposit | 10329 |  |
| Other current assets | 5342 | $— |
| Total prepaid expenses & other current assets | $36660 | $4595 |

---

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**NOTE 12. FIXED ASSETS, NET** 

Fixed assets consist of the following (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **Useful Life**<br> **(in years)** | **December 31, <br> 2022** | **December 31, <br> 2021** |
| Equipment | 7-20 | $97120 | $38654 |
| Furniture and fixtures | 7 | 86 | 106 |
| Leasehold improvements | 15 | 2852 | 2473 |
| Office equipment | 5 | 1433 | 1184 |
| Vehicles | 5 | 9212 | 6999 |
| Building | 20 | 2334 | 274 |
| Turnarounds | 4 | 18964 |  |
| Construction in progress |  | 96765 | 10484 |
| Land |  | 9168 | 1995 |
| Total fixed assets |  | 237934 | 62169 |
| Less accumulated depreciation |  | (36185) | (26038) |
| Net fixed assets |  | $201749 | $36131 |

---

Capitalized interest was $2.1 million, which related to a major construction project at Mobile Refinery, for the year ended December 31, 2022.

Depreciation expense was $11.1 million, $3.9 million and $3.6 million for the years ended December 31, 2022, 2021 and 2020, respectively for the continued operations.

Construction in progress is related to refining equipment at our various facilities. During August 2021, Hurricane Ida made landfall in southeast Louisiana, approximately 30 miles directly south and west of the Myrtle Grove facility, which resulted in the entire 42 acre Myrtle Grove site to be covered with 4-6 feet of storm surge and thus damages of assets and equipment. The Company reviewed the inspection report and related information from insurance companies and a third party engineer, and determined that there is no 100% certainty around the recoverability of some Construction-In-Progress assets such as fire heaters and pumps and instrumentation. The original values of identical or similar assets are used to determine the impairment amount. The Company recorded $2.1 million of loss on assets impairment within other operating expenses on the Consolidated Statements of Operations in the fourth quarter of 2021, of which the entire amount is related to our Black Oil segment.

**Asset Retirement Obligations:**

The Company has asset retirement obligations with respect to certain of its refinery assets due to various legal obligations to clean and/or dispose of various component parts of each refinery at the time they are retired. However, these component parts can be used for extended and indeterminate periods of time as long as they are properly maintained and/or upgraded. It is the Company's practice and current intent to maintain its refinery assets and continue making improvements to those assets based on technological advances. As a result, the Company believes that its refinery assets have indeterminate lives for purposes of estimating asset retirement obligations because dates, or ranges of dates, upon which the Company would retire refinery assets cannot reasonably be estimated. When a date or range of dates can reasonably be estimated for the retirement of any component part of a refinery, the Company estimates the cost of performing the retirement activities and records a liability for the fair value of that cost using established present value techniques.

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**NOTE 13. INTANGIBLE ASSETS, NET**

Components of intangible assets (subject to amortization) consist of the following items (in thousands):

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
|  |<br>**Useful Life**<br> **(in years)** | **Gross** <br> **Carrying**<br> **Amount** | **Accumulated <br> Amortization** | **Net**<br> **Carrying**<br> **Amount** | **Gross**<br> **Carrying**<br> **Amount** | **Accumulated <br> Amortization** | **Net**<br> **Carrying**<br> **Amount** |
| Customer relations | 5 | $978 | $974 | $4 | $978 | $940 | $38 |
| Vendor relations | 10 | 4778 | 4575 | 203 | 4778 | 4199 | 579 |
| Trademark/Trade name | 15 | 887 | 608 | 279 | 887 | 550 | 337 |
| TCEP Technology/Patent | 15 | 13287 | 8838 | 4449 | 13287 | 7952 | 5335 |
| Non-compete agreements | 3 | 197 | 197 |  | 197 | 192 | 5 |
| Software and cloud | 3 | 9387 | 2495 | 6892 | 538 | 180 | 358 |
|  |  | $29514 | $17687 | $11827 | $20665 | $14013 | $6652 |

---

Intangible assets are amortized on a straight-line basis. We continually evaluate the amortization period and carrying basis of intangible assets to determine whether subsequent events and circumstances warrant a revised estimated useful life or reduction in value.

Total amortization expense of intangibles was $3.7 million, $1.7 million and $1.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Estimated future amortization expense is as follows:

---

| | |
|:---|:---|
| 2023 | $4060 |
| 2024 | 4056 |
| 2025 | 1761 |
| 2026 | 950 |
| 2027 | 760 |
| Thereafter | 240 |
|  | $11827 |

---

**NOTE 14. ACCRUED LIABILITIES**

Accrued expenses and other current liabilities consisted of the following (in thousands):

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| Accrued purchases | $21185 | $1380 |
| Accrued interest | 1488 | 1594 |
| Accrued compensation and benefits | 6530 | 1082 |
| Accrued income, real estate, sales and other taxes | 1102 | 343 |
| RINS liabilities | 51355 |  |
| Environmental liabilities - current | 51 |  |
|  | $81711 | $4399 |

---

The increase in accrued liabilities from December 31, 2022 is due to the operation of the Mobile Refinery, which was acquired on April 1, 2022.

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**NOTE 15. FINANCING ARRANGEMENTS**

The Company's outstanding debt as of December 31, 2022 and December 31, 2021 is summarized as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| **Creditor** | **Loan Type** | **Balance on <br> December 31, 2022** | **Balance on <br> December 31, 2021** |
| Convertible Senior Note | Note | $95178 | $155000 |
| Term Loan 2025 | Loan | 165000 |  |
| John Deere Note | Note |  | 94 |
| SBA Loan | SBA Loan | 59 | 59 |
| Various institutions | Insurance premiums financed | 5602 | 2375 |
| Principal amount of long-term debt |  | **265839** | **157528** |
| Less: unamortized discount and deferred financing costs |  | (81918) | (90984) |
| Total debt, net of unamortized discount and deferred financing costs |  | 183921 | 66544 |
| Less: current maturities, net of unamortized discount and deferred financing costs |  | **(13911)** | (2414) |
| Long term debt, net of current maturities |  | $**170010** | $**64130** |

---

Future maturities of long-term debt, excluding financing lease obligations, as of December 31, 2022 are summarized as follows (in thousands):

---

| | |
|:---|:---|
| **Period Ended December 31,** | **Amount Due** |
| 2023 | $13911 |
| 2024 | 8250 |
| 2025 | 148500 |
| 2026 |  |
| 2027 | 95178 |
| Total | $265839 |

---

**<u>Insurance Premiums</u>**

The Company financed insurance premiums through various financial institutions bearing interest at rates ranging from 3.24% to 5.25% per annum. All such premium finance agreements have maturities of less than one year and have a balance of $5,602 thousand at December 31, 2022 and $2,375 thousand at December 31, 2021.

**<u>Term Loan</u>**

On April 1, 2022 (the "<u>Closing Date</u>"), Vertex Refining; the Company, as a guarantor; substantially all of the Company's direct and indirect subsidiaries, as guarantors (together with the Company, the "<u>Initial Guarantors</u>"); certain funds and accounts under management by BlackRock Financial Management, Inc. or its affiliates, as lenders ("BlackRock"), certain funds managed or advised by Whitebox Advisors, LLC, as lenders ("<u>Whitebox</u>"), certain funds managed by Highbridge Capital Management, LLC, as lenders ("<u>Highbridge</u>"), Chambers Energy Capital IV, LP, as a lender ("<u>Chambers</u>"), CrowdOut Capital LLC, as a lender ("<u>CrowdOut Capital</u>"), CrowdOut Credit Opportunities Fund LLC, as a lender (collectively with BlackRock, Whitebox, Highbridge, Chambers and CrowdOut Capital, the "<u>Initial Lenders</u>"); and Cantor Fitzgerald Securities, in its capacity as administrative agent and collateral agent for the Lenders (the "<u>Agent</u>"), entered into a Loan and Security Agreement (the "<u>Loan and Security Agreement</u>").

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Pursuant to the Loan and Security Agreement, the Initial Lenders agreed to provide a $125 million term loan to Vertex Refining (the "Initial Term Loan"), the proceeds of which, less agreed upon fees and discounts, were held in escrow prior to the Closing Date, pursuant to an Escrow Agreement. On the Closing Date, net proceeds from the term loans, less the agreed upon fees and discounts, as well as certain transaction expenses, were released from escrow to Vertex Refining in an aggregate amount of $94 million. Applicable interest rate is the Base Rate plus 9.25% per annum. The Base Rate is, for any day, the greater of (i) the per annum rate publicly quoted from time to time by The Wall Street Journal as the "Prime Rate" in the United States minus 1.50% as in effect on such day and (ii) the sum of the Federal Funds Rate for such day plus 1/2 of 1.0%. In no event shall the Base Rate be less than 1.0%.

On May 26, 2022, each of the Initial Guarantors (including the Company), Vertex OH, which is indirectly wholly-owned by the Company, Heartland SPV, and Tensile-Heartland ("Tensile-Heartland" together with Vertex OH and Heartland SPV, the "Additional Guarantors", and the Additional Guarantors, together with the Initial Guarantors, the "Guarantors", and the Guarantors, together with Vertex Refining, the "Loan Parties"), entered into an Amendment Number One to Loan and Security Agreement ("Amendment No. One to Loan Agreement"), with certain of the Lenders and CrowdOut Warehouse LLC, as a lender (the "Additional Lenders" and together with the Initial Lenders, the "Lenders") and the Agent, pursuant to which, the amount of the Term Loan (as defined below) was increased from $125 million to $165 million, with the Additional Lenders providing an additional term loan in the amount of $40 million (the "Additional Term Loan", and together with the Initial Term Loan, the "Term Loan").

Pursuant to the Loan and Security Agreement, on the last day of March, June, September and December of each year (or if such day is not a business day, the next succeeding business day), beginning on March 31, 2023 and ending on December 31, 2024, Vertex Refining is required to repay $2 million of the principal amount owed under the Loan and Security Agreement (i.e., 1.25% of the original principal amount per quarter), subject to reductions in the event of any prepayment of the Loan and Security Agreement.

The Company used a portion of the proceeds from the Term Loan borrowing to pay a portion of the purchase price associated with the acquisition of the Mobile Refinery (see [Note 3. "Mobile Refinery Acquisition"](#Section26)) acquired by Vertex Refining on April 1, 2022, and to pay certain fees and expenses associated with the closing of the Loan and Security Agreement and is required to use the remainder of the funds for (i) the planned renewable diesel conversion of the Mobile Refinery, and (ii) working capital and liquidity needs.

On September 30, 2022, Vertex Refining; the Company, as a guarantor; substantially all of the Company's direct and indirect subsidiaries, as guarantors; Vertex Marine Fuel Services LLC ("<u>Vertex Marine</u>") and Vertex Refining Texas LLC ("<u>Vertex Texas</u>," and together with Vertex Marine, the "<u>New Subsidiary Guarantors</u>"), which are indirectly wholly-owned by the Company; the lenders thereto; and the Agent, entered into a second amendment ("<u>Amendment No. Two</u>") to the Loan and Security Agreement.

Amendment No. Two (a) extended the date that the Company was required to begin initial commercial production of renewable diesel at the Mobile Refinery, from February 28, 2023 to April 28, 2023, and provided other corresponding extensions of the milestones required to complete the Company's capital project designed to modify the Mobile Refinery's existing hydrocracking unit to produce renewable diesel fuel on a standalone basis, which as previously described, is currently anticipated for mechanical completion during the first quarter of 2023; and (b) waived and extends certain deadlines and time periods for the Company to take other actions in connection with the Loan and Security Agreement.

In addition, each of the New Subsidiary Guarantors also entered into a Guarantor Joinder, agreeing to be bound by the terms of the Loan and Security Agreement, and to guaranty the amounts owed thereunder.

*Warrant Agreements and Derivative Liabilities*

In connection with the Loan and Security Agreement, and as additional consideration for the Lenders agreeing to loan funds to the Company thereunder, the Company granted warrants to purchase 2.75 million shares of common stock of the Company to the Lenders (and/or their affiliates) on the Closing Date (the "<u>Initial Warrants</u>"). The terms of the warrants are set forth in a Warrant Agreement (the "<u>April 2022 Warrant Agreement</u>") entered into on April 1, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

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In connection with the entry into the Amendment No. One to Loan Agreement, and as a required term and condition thereof, on May 26, 2022, the Company granted warrants (the "<u>Additional Warrants</u>" and together with the Initial Warrants, the "<u>Warrants</u>") to purchase 250 thousand shares of the Company's common stock to the Additional Lenders and their affiliates. The terms of the Additional Warrants are set forth in a Warrant Agreement (the "<u>May 2022 Warrant Agreement</u>" and together with the April 2022 Warrant Agreement, the "<u>Warrant Agreements</u>") entered into on May 26, 2022, between the Company and Continental Stock Transfer & Trust Company as warrant agent.

Each Warrant holder has a put right to require the Company to repurchase any portion of the warrants held by such holder concurrently with the consummation of such fundamental transaction. The fundamental transaction clause requires the warrants to be classified as liabilities. The fair value of the warrants is presented in "[Note](#Section43)[20. Fair Value](#Section43)[M](#Section43)[easurements](#Section43)", and warrant activities are presented in "[Note 18. Stock](#Section41)[Based Compensation](#Section41)[and Warrant](#Section41)[s](#Section41)".

**<u>Indenture and Convertible Senior Notes</u>**

On November 1, 2021, we issued $155 million aggregate principal amount at maturity of our 6.25% Convertible Senior Notes due 2027 (the "<u>Convertible Senior Notes</u>") pursuant to an Indenture (the "<u>Indenture</u>"), dated November 1, 2021, between the Company and U.S. Bank National Association, as trustee (the "<u>Trustee</u>"), in a private offering (the "<u>Note Offering</u>") to persons reasonably believed to be "qualified institutional buyers" and/or to "accredited investors" in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (<u>the "Securities Act"</u>), pursuant to Securities Purchase Agreements. The issue price was 90% of the face amount of each note. Interest payments on the Notes are paid semiannually on April 1 and October 1 of each year, beginning on April 1, 2022.

A total of seventy-five percent (75%) of the net proceeds from the offering was placed into an escrow account to be released to the Company, upon the satisfaction of certain conditions, including the satisfaction or waiver of all of the conditions precedent to the Company's obligation to consummate the Mobile Acquisition (collectively, the "<u>Escrow Release Conditions</u>"). The Mobile Acquisition was consummated on April 1, 2022, and the proceeds from the sale of the Convertible Senior Notes which were held in escrow were released on April 1, 2022.

Prior to July 1, 2027, the Convertible Senior Notes are convertible at the option of the holders of the Convertible Senior Notes only upon the satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date.

Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election, provided that until such time as the Company's stockholders had approved the issuance of more than 19.99% of our common stock issuable upon conversion of the Convertible Senior Notes in accordance with the rules of The Nasdaq Capital Market, such Convertible Senior Notes were not convertible.

Initially, a maximum of 36 million shares of common stock can be issued upon conversion of the Convertible Senior Notes, based on the initial maximum conversion rate of 233.6449 shares of the Company's common stock per $1,000 principal amount of Convertible Senior Notes, which is subject to customary and other adjustments described in the Indenture.

On January 20, 2022, our shareholders approved the issuance of shares of our common stock issuable upon conversion of the Convertible Senior Notes, in accordance with Nasdaq Listing Rules 5635 (a) and (d). Accordingly, $79 million of derivative Convertible Senior Note liabilities were reclassified to additional paid in capital.

On May 26, 2022, May 27, 2022, May 31, 2022, and June 1, 2022, holders of an aggregate of $60 million of the 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. Upon the conversion, the Company recognized $33.9 million unamortized deferred loan cost and discount as interest expense.

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The components of the Convertible Senior Notes are presented as follows (in thousands):

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| | |
|:---|:---|
|  | **December 31, 2022** |
| Principal Amounts | $155000 |
| Conversion of principal into common stock | (59822) |
| Outstanding principal amount | 95178 |
| Unamortized discount and issuance costs | (51005) |
| Net Carrying Amount | $44173 |

---

Our Convertible Senior Notes will mature on October 1, 2027, unless earlier repurchased, redeemed or converted. Interest is payable semiannually in arrears on April 1 and October 1 of each year, beginning on April 1, 2022.

**NOTE 16. LEASES**

**Finance Leases**

The Company's finance leases liabilities consisted of the following as of December 31, 2022 and 2021 (in thousands):

---

| | | |
|:---|:---|:---|
| **Creditor** | **Balance on <br> December 31, 2022** | **Balance on <br> December 31, 2021** |
| AVT Equipment Lease-Ohio | $— | $296 |
| AVT Equipment Lease-HH |  | 302 |
| VRA Finance lease | 45311 |  |
| Plaquemines | 1169 |  |
| Harvey Ford | 47 |  |
|  | $46527 | $598 |

---

Future maturities of finance lease obligations, as of December 31, 2022 are summarized as follows (in thousands):

---

| | |
|:---|:---|
| **Year Ended December 31,** | **Amount Due** |
| 2023 | $1363 |
| 2024 | 1555 |
| 2025 | 1743 |
| 2026 | 1954 |
| 2027 | 2152 |
| Thereafter | 37760 |
| Total | $46527 |

---

On April 1, 2022, the Company entered into one finance lease. Base payments are $0.4 million per month for the first six months, increasing to $0.5 million per month for the next 180 months. The amount of the right of use assets is $43.2 million at December 31, 2022, and the finance lease obligation is $45.3 million at December 31, 2022.

On November 1, 2022, the Company entered into two finance leases. Payments are $25.5 thousand per month for five years and the amount of the finance lease obligation is $1.2 million at December 31, 2022. The amount of the right of use assets is $1.2 million at December 31, 2022.

On November 15, 2022, the Company entered into one finance lease. Payments are $931 per month for five year and the amount of the finance lease obligation is $47 thousand at December 31, 2022. The amount of the right of use assets is $54 thousand at December 31, 2022.

The associated amortization expense of continued operations for the years ended December 31, 2022, 2021 and 2020 were $2,290.7 thousand, $114 thousand and $68.7 thousand, respectively, and are included in depreciation and amortization on the audited consolidated statements of operations. The associated interest expense for the years ended December 31, 2022, 2021 and 2020, were $4,117.4 thousand, $99 thousand and $91.1 thousand, respectively, and are included in interest expense on the audited consolidated statements of operations.

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**Operating Leases**

Operating leases are included in operating lease right-of-use lease assets, and operating current and long-term lease liabilities on the consolidated balance sheets. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Variable lease expense is recognized in the period in which the obligation for those payments is incurred. Lease expense for equipment is included in cost of revenues and other rents are included in selling, general and administrative expense on the unaudited consolidated statements of operations and are reported net of lease income. Lease income is not material to the results of operations for the years ended December 31, 2022 and 2021.

On November 15, 2022, the Company entered into one operating lease. Base payments are $0.2 million per month for 15 months, then the lease is automatically renewable until either party provides a termination notice at least 90 days prior to the end of the then term. The Company elected 20 years for the lease term to estimate the total amount of the right of use assets and operating lease liabilities, which is $20 million as of December 31, 2022, respectively.

The following table summarizes the operating lease costs recognized (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| <br>**Lease Cost Type** | **2022** | **2021** | **2020** |
| Operating lease cost | $8349 | $5566 | $5788 |
| Variable lease cost | 1032 | 225 | 39 |
| Short-term lease cost | 950 | 1322 | 1398 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net lease cost | $10331 | $7113 | $7225 |

---

**Cash Flows**

During the years ended December 31, 2022, 2021 and 2020, cash paid for amounts included in operating lease liabilities was $8.3 million, $5.6 million and $5.8 million, respectively, and is included in operating cash flows. Cash paid for amounts included in finance lease was $819 thousand, $844 thousand and $403 thousand during the years ended December 31, 2022, 2021 and 2020, respectively, and is included in financing cash flows.

Maturities of our lease liabilities for all operating leases are as follows as of December 31, 2022 (in thousands):

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Facilities** | **Equipment** | **Plant** | **Railcar** | **Total** |
| Year 1 | $612 | $262 | $6776 | $1362 | $9012 |
| Year 2 | 464 | 262 | 6775 | 1014 | 8515 |
| Year 3 | 363 | 258 | 6775 | 484 | 7880 |
| Year 4 | 302 | 255 | 6776 | 375 | 7708 |
| Year 5 | 300 | 170 | 6775 | 219 | 7464 |
| Thereafter | 1475 |  | 58969 |  | 60444 |
| Total lease payments | 3516 | 1207 | 92846 | 3454 | 101023 |
| Less: interest | (1079) | (194) | (45934) | (259) | (47466) |
| Present value of lease liabilities | $2437 | $1013 | $46912 | $3195 | $53557 |

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The weighted average remaining lease terms and discount rates for all of our operating leases were as follows as of December 31, 2022:

---

| | |
|:---|:---|
| Remaining lease term and discount rate: | **December 31, 2022** |
| Weighted average remaining lease terms (years) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease facilities | 5.00 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease equipment | 10.08 |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease plant | 14.72 |
| &nbsp;&nbsp;Lease railcar | 2.86 |
| Weighted average discount rate |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease facilities | 9.17% |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease equipment | 7.63% |
| &nbsp;&nbsp;&nbsp;&nbsp;Lease plant | 10.49% |
| &nbsp;&nbsp;Lease railcar | 8.00% |

---

**Significant Judgments**

Significant judgments include the discount rates applied, the expected lease terms, lease renewal options and residual value guarantees. There are several leases with renewal options or purchase options.

The purchase options are not expected to have a material impact on the lease obligation. There are several facility and plant leases which have lease renewal options from one to twenty years.

The largest facility lease has an initial term through 2032. That lease does not have an extension option. For the two plant leases both have multiple 5-year extension options for a total of 20 years. Two extension options have been included in the lease right to use asset and lease obligation at January 1, 2019. One terminal lease has an initial term through 2024, with an automatic extension option, unless terminated prior to 150 days before the end of the then current term, thus the lease has an estimated term of a total of 20 years.

The Company will reassess the lease terms and purchase options when there is a significant change in circumstances or when the Company elects to exercise an option that had previously been determined that it was not reasonably certain to do so.

**NOTE 17. EQUITY**

**Common Stock**

The total number of authorized shares of the Company's common stock is 750,000,000 shares, $0.001 par value per share. As of December 31, 2022 and December 31, 2021, there were 75,668,826 and 63,287,965, respectively, shares of common stock issued and outstanding.

Each share of the Company's common stock is entitled to equal dividends and distributions per share with respect to the common stock when, as and if declared by the Company's board of directors. No holder of any shares of the Company's common stock has a preemptive right to subscribe for any of the Company's securities, nor are any shares of the Company's common stock subject to redemption or convertible into other securities. Upon liquidation, dissolution or winding-up of the Company and after payment of creditors and preferred shareholders of the Company, if any, the assets of the Company will be divided pro rata on a share-for-share basis among the holders of the Company's common stock. Each share of the Company's common stock is entitled to one vote. Shares of the Company's common stock do not possess any cumulative voting rights.

During the year ended December 31, 2022, the Company issued 385,593 shares of common stock in connection with the conversion of Series A Convertible Preferred Stock into common stock, pursuant to the terms of such securities, issued 1,112,728 shares of the Company's common stock in exchange for warrants to purchase 1,500,000 shares of the Company's common stock with an exercise price of $2.25 per share, issued 96,074 shares of the Company's common stock upon the exercise of warrants to purchase 165,100 shares of the Company's common stock with an exercise price of $4.50 per share on a cash and cashless basis, and issued 10,165,149 shares of the Company's common stock upon conversion of $59,822,000 in Convertible Senior Notes. In addition, the Company issued 621,317 shares of common stock in connection with the exercise of options.

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During the year ended December 31, 2021, the Company issued 12,840,622 shares of common stock in connection with the conversion and exchange of Series B1 and Series B Preferred Stock. In addition, the Company issued 1,799,590 shares of common stock in connection with the exercise of options. Also, the Company issued 3,092,912 shares of common stock in connection with the exercise of warrants.

During the year ended December 31, 2020, the Company issued 2,159,278 shares of common stock in connection with the conversion of Series B1 Preferred Stock into common stock, pursuant to the terms of such securities.

**Warrant Exchange Agreement**

On March 24, 2022, the Company entered into an Exchange Agreement with Tensile Capital Partners Master Fund LP ("<u>Tensile</u>"). Pursuant to the agreement, Tensile agreed to exchange outstanding warrants to purchase 1,500,000 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 1,112,728 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.

**Warrant Exercise**

On July 11, 2022, the holders of warrants to purchase 165,000 shares of the Company's common stock exercised warrants to purchase 165,000 shares of the Company's common stock with an exercise price of $4.50 per share and an expiration date of April 1, 2027, on a cashless basis, and were issued 95,974 shares of the Company's common stock, with the value of such surrendered shares based on the five day trailing volume weighted average price of the Company's common stock.

On July 22, 2022, the holders of warrants to purchase 100 shares of common stock exercised warrants to purchase 100 shares of the Company's common stock with an exercise price of $4.50 per share for cash and were issued 100 shares of common stock.

**Conversion of Convertible Senior Notes**

On May 26, 2022, May 27, 2022, May 31, 2022, and June 1, 2022, holders of an aggregate of $59,822,000 of the Company's 6.25% Convertible Senior Notes due 2027, converted such notes into 10,165,149 shares of common stock of the Company pursuant to the terms of the Indenture.

**Preferred Stock and Temporary Equity**

The total number of authorized shares of the Company's preferred stock is 50,000,000 shares, $0.001 par value per share. The total number of designated shares of the Company's Series A Preferred Stock was 5,000,000 ("<u>Series A Preferred</u>"). The total number of designated shares of the Company's Series B Preferred Stock was 10,000,000. The total number of designated shares of the Company's Series B1 Preferred Stock was 17,000,000. As of December 31, 2022 and December 31, 2021, there were 0 and 385,601 shares of Series A Preferred Stock issued and outstanding. As of December 31, 2022 and December 31, 2021, there were no Series B Preferred shares issued and outstanding. As of December 31, 2022 and December 31, 2021, there were no shares of Series B1 Preferred Stock issued and outstanding. There were no shares of Series C Preferred Stock issued or outstanding as of December 31, 2022 or 2021.

The Company filed Certificates of Withdrawal relating to each series of Preferred Stock previously designated with the Secretary of State of Nevada and terminated the designation of its Series A Preferred Stock (on August 24, 2022); Series B Preferred Stock (on August 24, 2022); Series B1 Preferred Stock (on August 23, 2022) and Series C Preferred Stock (on August 23, 2022). At the time of the filing of the Certificates of Withdrawal, no shares of any of the previously designated series of Preferred Stock were outstanding. The Certificates of Withdrawal were effective upon filing, and eliminated from our Articles of Incorporation all matters set forth in the previously-filed Certificates of Designation with respect to the previously designated series of Preferred Stock.

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**NOTE 18. STOCK BASED COMPENSATION AND WARRANTS**

The stock based compensation cost that has been charged against income by the Company was $1,574 thousand, $863 thousand and $656 thousand for the years ended December 31, 2022, 2021 and 2020, respectively, for options awarded by the Company.

Stock option activity for the years ended December 31, 2022, 2021 and 2020 is summarized as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| OPTIONS ISSUED FOR COMPENSATION: | **Shares**<br> **(in thousands)** | **Weighted Average<br> Exercise Price** | **Weighted Average** <br> **Remaining** <br> **Contractual Life**<br> **(in Years)** | **Grant Date**<br> **Fair Value**<br> **(in thousands)** | **Aggregate <br> Intrinsic Value <br> <u>(in thousands)</u>** |
| Outstanding at December 31, 2019 | 4418 | $1.95 | 6.25 | $4547 | $3420 |
| Options granted | 686 | 0.81 | 7.51 | 355 |  |
| Options exercised |  |  |  |  |  |
| Options cancelled/forfeited/expired |  |  |  |  |  |
| Outstanding at December 31, 2020 | 5104 | $1.80 | 5.55 | $4902 | $1433 |
| Exercisable at December 31, 2020 | 3096 | $2.14 | 4.84 | $3111 | $1433 |
| Outstanding at December 31, 2020 | 5104 | $1.80 | 5.55 | $4902 | $1433 |
| Options granted | 1321 | 1.93 | 9.00 | 2067 |  |
| Options exercised | (2042) | 1.50 |  | (2140) |  |
| Options cancelled/forfeited/expired | (189) | 1.40 |  | (147) |  |
| Outstanding at December 31, 2021 | 4194 | $1.73 | 6.37 | $4682 | $15951 |
| Exercisable at December 31, 2021 | 1716 | $1.98 | 3.94 | $1707 | 15951 |
| Outstanding at December 31, 2021 | 4194 | $1.73 | 6.37 | $4682 | $15951 |
| Options granted | 305 | 10.03 | 7.25 | 2982 |  |
| Options exercised | (653) | 1.65 | 6.20 | (756) |  |
| Options cancelled/forfeited/expired | (214) | 1.48 |  | (294) |  |
| Outstanding at December 31, 2022 | 3632 | $2.46 | 5.62 | 6614 | 19069 |
| Exercisable at December 31, 2022 | 1922 | $1.87 | 3.75 | $2138 | $19069 |

---

On December 31, 2022, the Board of Directors accelerated the vesting in full of options to purchase 15,000 shares of common stock at an exercise price of $1.45 per share and 45,000 shares of common stock at an exercise price of $1.92 per share, which was part of the severance payable to a resigning director. The grant date fair value is $349.8 thousand which amount was expensed on December 31, 2022.

On May 12, 2022, the Board of Directors granted 27 employees and 1 officer/director (Benjamin P. Cowart, the Company's Chief Executive Officer) options to purchase an aggregate of 212,021 and 28,813 shares of common stock, respectively, at an exercise price of $11.90 and $13.09 per share, respectively, with a ten year and five year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first 4 anniversaries of the grant date, under our 2019 Equity Incentive Plan, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $2,586.8 thousand which amount is being amortized at the rate of $53.9 thousand per month.

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On May 14, 2021, the Board of Directors granted 21 employees, 1 officer/director (Benjamin P. Cowart, the Company's Chief Executive Officer), and 5 board members options to purchase an aggregate of 924,720, 96,520 and 300,000 shares of common stock, respectively, at an exercise price of $1.92, $2.12, and $1.92 per share, respectively, with a ten year, five year, and ten year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first 4 anniversaries of the grant date, under our 2019 Equity Incentive Plan, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $2,066,590 which amount is being amortized at the rate of $18,223 per month.

On June 19, 2020, the Board of Directors approved the grant to three employees and one officer/director (Benjamin P. Cowart, the Company's Chief Executive Officer) of options to purchase an aggregate of 416,885 and 269,153 shares of common stock, respectively, at an exercise price of $0.78 and $0.86 per share, respectively, with a ten year and five year term, respectively (subject to continued employment/directorship), vesting at the rate of 1/4th of such options per year on the first four anniversaries of the grant date, under our 2019 Stock Incentive Plan, as amended, in consideration for services rendered and to be rendered to the Company. The grant date fair value is $355,404 which amount is being amortized at the rate of $7,404 per month starting in July 2020.

As of December 31, 2022, there was $3.5 million of total unrecognized compensation cost. This cost is expected to be recognized over a weighted average period of 3.75 years.

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A summary of the Company's stock warrant activity and related information for the years ended December 31, 2022, 2021 and 2020 is as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
| WARRANTS ISSUED AND OTHER<br> THAN SERIES B AND B1 <br> PREFERRED STOCK: | **Warrants**<br> **(in thousands)** | **Weighted Average <br> Exercise Price** | **Weighted Average** <br> **Remaining** <br> **Contractual Life** <br> **(in Years)** | **Grant Date**<br> **Fair Value**<br> **(in thousands)**  |
| Outstanding at December 31, 2019 | 1500 | $2.25 | 8.70 | $1496 |
| Warrants granted |  |  | 0.00 |  |
| Warrants exercised |  |  | 0.00 |  |
| Warrants canceled/forfeited/expired |  |  | 0.00 |  |
| Warrants at December 31, 2020 | 1500 | $2.25 | 7.70 | $1496 |
| Exercisable at December 31, 2020 |  | $— | 7.70 | $— |
| Outstanding at December 31, 2020 | 1500 | $2.25 | 7.70 | $1496 |
| Warrants granted |  |  | 0.00 |  |
| Warrants exercised |  |  | 0.00 |  |
| Warrants canceled/forfeited/expired |  |  | 0.00 |  |
| Warrants at December 31, 2021 | 1500 | $2.25 | 6.70 | $1496 |
| Exercisable at December 31, 2021 |  | $— | 6.70 | $— |
| Outstanding at December 31, 2021 | 1500 | $2.25 | 6.70 | $1496 |
| Warrants granted | 3000 | 5.30 | 4.77 | 25670 |
| Warrants exercised/exchanged | (1665) | 2.47 | 0.00 | (2865) |
| Warrants canceled/forfeited/expired |  |  | 0.00 |  |
| Warrants at December 31, 2022 | 2835 | $5.35 | 4.27 | $24301 |
| Exercisable at December 31, 2022 | 2835 | $5.35 | 4.27 | $24301 |

---

See "[Note 15. Financing Agreements](#Section38)" for a description of the warrants that were granted in conjunction with our Term loan.

**NOTE 19. EARNINGS PER SHARE**

Basic earnings per share includes no dilution and is computed by dividing income (loss) 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 years ended December 31, 2022, 2021 and 2020, respectively, 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. Due to their anti-dilutive effect, the calculation of diluted earnings per share for the years ended December 31, 2022, 2021, 2020, excludes: 1) options to purchase 3,633,303, 4,195,168 and 5,104,288 shares, respectively, of common stock, 2) warrants to purchase 2,834,900, 0 and 4,600,921 shares, respectively, of common stock, 3) Series B Preferred Stock which is convertible into 4,102,690 shares of common stock, 4) Series B1 Preferred Stock which is convertible into 7,399,649 shares of common stock, 5) Series A Preferred Stock which is convertible into 0, 385,601 and 419,859 shares of common stock, respectively, and 6) 22,237,854, 36,214,960 and 0 shares of common stock, respectively, which may be issued upon conversion of the Convertible Senior Notes, based on the initial maximum conversion rate of 233.6449 shares of the Company's common stock per $1,000 principal amount of Convertible Senior Notes.

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The following is a reconciliation of the numerator and denominator for basic and diluted income (loss) per share for the year ended December 31, 2022, 2021 and 2020 (in thousands, except per share amounts):

---

| | | | |
|:---|:---|:---|:---|
|  | **2022** | **2021** | **2020** |
| **Basic income (loss) per Share** |  |  |  |
| Numerator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to shareholders from continuing operations | $(17035) | $(27287) | $(32064) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income attributable to shareholders from discontinued operations, net of tax | 11785 | 6682 | 1302 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to common shareholders | $(5250) | $(20605) | $(30762) |
| Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted-average common shares outstanding | 70686 | 56303 | 45509 |
| Basic income (loss) per common shares |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.24) | $(0.48) | $(0.70) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations, net of tax | 0.17 | 0.12 | 0.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic loss per share | $(0.07) | $(0.36) | $(0.67) |
| **Diluted Income (Loss) per Share** |  |  |  |
| Numerator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loss attributable to shareholders from continuing operations | $(17035) | $(27287) | $(32064) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income available to shareholders from discontinued operations, net of tax | 11785 | 6682 | 1302 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss available to common shareholders | $(5250) | $(20605) | $(30762) |
| Denominator: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Weighted-average shares outstanding | 70686 | 56303 | 45509 |
| &nbsp;&nbsp;&nbsp;&nbsp;Effect of dilutive securities |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock options and warrants |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted weighted-average shares outstanding | 70686 | 56303 | 45509 |
| Diluted income (loss) per common shares |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Continuing operations | $(0.24) | $(0.48) | $(0.70) |
| &nbsp;&nbsp;&nbsp;&nbsp;Discontinued operations, net of tax | 0.17 | 0.12 | 0.03 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diluted loss per share | $(0.07) | $(0.36) | $(0.67) |

---

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**NOTE 20. FAIR VALUE MEASUREMENTS**

The following tables present assets and liabilities accounted for at fair value on a recurring basis as of December 31, 2022 and 2021 (in thousands):

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** | **As of December 31, 2022** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| &nbsp;&nbsp;&nbsp;**Derivative instruments, assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodity | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative instruments, assets |  |  |  |  |
| &nbsp;&nbsp;&nbsp;**Derivative instruments, liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodity | 242 |  |  | 242 |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative warrants |  |  | 14270 | 14270 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative warrants, liabilities | 242 |  | 14270 | 14512 |
| &nbsp;&nbsp;&nbsp;Total | $(242) | $— | $(14270) | $(14512) |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2021** | **As of December 31, 2021** | **As of December 31, 2021** | **As of December 31, 2021** |
|  | **Level 1** | **Level 2** | **Level 3** | **Total** |
| &nbsp;&nbsp;&nbsp;**Derivative instruments, assets** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Commodity | $96 | $— | $— | $96 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative instruments, assets | 96 |  |  | 96 |
| &nbsp;&nbsp;&nbsp;**Derivative instruments, liabilities** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Derivative warrants |  |  | 75211 | 75211 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Derivative warrants, liabilities |  |  | 75211 | 75211 |
| &nbsp;&nbsp;&nbsp;Total | $96 | $— | $(75211) | $(75115) |

---

Level 3 instruments include Initial Warrants and Additional Warrants granted in connection with the Loan and Security Agreement, see [Note 15 "Financing arrangements"](#Section38). We revalued the 2,835 thousand warrants granted and outstanding at December 31, 2022 using the Dynamic Black-Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares. The Dynamic Black-Scholes Merton unobservable inputs used were as follows:

---

| | | |
|:---|:---|:---|
| **Dynamic Black-Scholes Merton Unobservable Inputs** | | |
|  |<br>**Initial Warrants** |<br>**Additional Warrants** |
| Expected dividend rate | —% | —% |
| Expected volatility | 105% | 102% |
| Risk free interest rate | 3.99% | 3.99% |
| Expected term | 5.0 | 5.5 |

---

The following is an analysis of changes in the derivative liability classified as level 3 in the fair value hierarchy for the nine months ended December 31, 2022 (in thousands):

---

| | |
|:---|:---|
| **Level Three Roll-Forward** | |
|  | **2022** |
| Balance at beginning of period | $75211 |
| April 1 warrants granted | 22795 |
| May 26 warrants granted | 2874 |
| Equity component of the convertible senior note | (78789) |
| Change in valuation of warrants included in net income | (7821) |
| Balance at end of period | $14270 |

---

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See [Note 21 "Commodity Derivative Instruments"](#Section44), below for information on the impact on results of operations of our commodity derivative instruments.

**NOTE 21. COMMODITY DERIVATIVE INSTRUMENTS**

The Company utilizes derivative instruments to manage its exposure to fluctuations in the underlying commodity prices of its inventory. The Company's management sets and implements hedging policies, including volumes, types of instruments and counterparties, to support oil prices at targeted levels and manage its exposure to fluctuating prices.

The Company's derivative instruments consist of option and futures arrangements for oil. For option and futures arrangements, the Company receives the difference positive or negative between an agreed-upon strike price and the market price.

The mark-to-market effects of these contracts as of December 31, 2022 and December 31, 2021 are summarized in the following table. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of the crude oil options and future agreements is based on the difference between the strike price and the New York Mercantile Exchange and Brent Complex futures price for the applicable trading months.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| **Contract Type** | **Contract Period** | **Weighted <br> Average Trade <br> Price (Barrels)** | **Remaining <br> Volume <br> (Barrels)** | **Fair Value** |
|  |  |  | (in thousands) | (in thousands) |
| Swap | Nov. 2022 - Feb. 2023 | $4.19 | 5 | (42) |
| Swap | Nov. 2022 - Feb. 2023 | $5.51 | 3 | (27) |
| Future | Sept. 2022 - Dec. 2022 | $32.14 | 25 | 76 |
| Future | Sept. 2022 - Dec. 2022 | $23.57 | 35 | (92) |
| Future | Nov. 2022 - Feb. 2023 | $33.71 | 10 | (23) |
| Futures | Sept. 2022 - Dec. 2022 | $23.75 | 10 | 30 |
| Futures | Dec. 2022 - Mar. 2023 | $36.08 | 35 | (74) |
| Futures | Dec. 2022 - Apr. 2023 | $35.97 | 1000 | (1100) |
| Futures | Dec. 2022 - May. 2023 | $35.81 | 1000 | (1070) |
| Futures | Dec. 2022 - Jun. 2023 | $35.60 | 1000 | 2080 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| **Contract Type** | **Contract Period** | **Weighted<br> Average Trade <br> Price (Barrels)** | **Remaining <br> Volume <br> (Barrels)** | **Fair Value** |
|  |  |  | (in thousands) | (in thousands) |
| Options | Dec. 2021-Mar. 2022 | $3.18 | 18 | $136 |
| Futures | Dec. 2021-Mar. 2022 | $31.59 | 20 | $71 |
| Futures | Dec. 2021-Mar. 2022 | $32.48 | 50 | $(111) |

---

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The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of December 31, 2022 and 2021 are presented in the table below (in thousands):

---

| | | | |
|:---|:---|:---|:---|
| **Balance Sheet Classification** | **Contract Type** | **2022** | **2021** |
|  | Crude oil future | $2186 | $— |
|  | Crude oil options | $— | $136 |
|  | Crude oil swaps | $(69) | $— |
|  | Crude oil futures | $(2359) | $(40) |
| Derivative commodity asset (liability) |  | $(242) | $96 |

---

For the years ended December 31, 2022, 2021 and 2020, we recognized an $87,978 thousand loss, $2,258 thousand loss and $3,477 thousand gain, respectively, on commodity derivative contracts on the consolidated statements of operations as part of our costs of revenues.

**NOTE 22. INCOME TAXES**

The components of income tax (benefit) expense for the years ended December 31, 2022, 2021 and 2020 are as follows (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** | **December 31, 2020** |
| Current: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal tax expense | $— | $— | $(69) |
| &nbsp;&nbsp;&nbsp;&nbsp;State tax expense | (9) |  |  |
| Deferred: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Federal tax benefit | 5313 |  | 69 |
| &nbsp;&nbsp;&nbsp;&nbsp;State tax benefit | 1867 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total federal tax benefit | $7171 | $— | $— |

---

Reconciliation between the amount determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations and income tax expense presented in the accompanying consolidated statements of operations was as follows for the years ended December 31, 2022, 2021, and 2020 (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** | **December 31, 2020** |
| Statutory tax on book income | $(5007) | $(5216) | $(2725) |
| Permanent differences | (293) | (574) | 7 |
| Change in derivative liability |  | 2382 | (344) |
| Tensile transaction gain |  |  | 1745 |
| Change in valuation allowance | 325 | 7930 | 1236 |
| PPP Loan Forgiveness |  | (887) |  |
| Non-Controlling Interest | (1432) | (2247) |  |
| State Income Tax Expense | (977) | (1388) |  |
| Other | 213 |  | 81 |
| Income tax benefit | $(7171) | $— | $— |

---

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The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2022 and 2021 is presented below (in thousands):

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** |
| <br>***Deferred tax assets:*** | | |
| State net operating loss carry forwards | $1411 | $1206 |
| Accrued bonus and stock-based compensation | 499 | 339 |
| Basis of intangible assets | 2010 | 1611 |
| Bad debt/environmental reserve | 771 | 329 |
| Contribution carryover | 75 | 60 |
| Acquisition costs | 1807 | 884 |
| Derivative liability - convertible note |  | 18884 |
| Interest expense carryforward | 13215 | 926 |
| Right to use asset | 25766 |  |
| Partnership income | 2844 |  |
| Net operating loss carry forwards | 17160 | 18609 |
| Less valuation allowance | (505) | (20927) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax assets | $65053 | $21921 |

---

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** |
| <br>***Deferred tax liabilities:*** | | |
| Basis of fixed assets | $(21393) | $(2772) |
| Discount on convertible note | (11820) | (17576) |
| Right of use liability | (25129) |  |
| Derivative liability | (2970) |  |
| Partnership income | (1243) | (1573) |
| Total deferred tax liabilities | $(62555) | $(21921) |
| Net deferred tax assets | $2498 | $— |

---

The Company provides a valuation allowance when it is more likely than not that some portion of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. Based on this evaluation, as of December 31, 2022 and 2021, valuation allowances of approximately $0.5 million and $20.9 million, respectively, have been recorded to reduce net deferred tax assets to an amount that management believes is more than likely not to be realized.

The Company is subject to examination by Federal and State tax authorities for fiscal years 2018 through 2022, except for utilization of net operating losses.

At December 31, 2022, the Company had federal net operating loss carry-forwards ("<u>NOLs</u>") of approximately $81.7 million acquired as part of the April 2009 merger between World Waste Technologies, Inc. and the Company's wholly-owned subsidiary Vertex Merger Sub, LLC and subsequent operating losses incurred by the Company. IRC Sections 382 and 383 provide an annual limitation with respect to the ability of a corporation to utilize its tax attributes against future U.S. taxable income in the event of a change in ownership. The net operating loss carry-forwards at December 31, 2022 reflect a reduction of approximately $24.1 million as a result of an ownership change triggering event in May 2016, as defined under IRC Section 382. The net operating loss carryforward will begin to expire in 2026. Those arising in tax years after 2017 will never expire.

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**NOTE 23. NON-CONTROLLING INTERESTS**

**<u>Myrtle Grove Facility</u>**

On April 1, 2022, the Company, through Vertex Splitter Corporation ("<u>Vertex Splitter</u>"), a wholly-owned subsidiary of the Company, acquired the 15% noncontrolling interest of Vertex Refining Myrtle Grove LLC ("<u>MG SPV</u>") held by Tensile-Myrtle Grove Acquisition Corporation ("<u>Tensile-MG</u>"), an affiliate of Tensile Capital Partners Master Fund LP, an investment fund based in San Francisco, California ("<u>Tensile</u>") 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.

*<u>Myrtle Grove Redeemable Noncontrolling Interest.</u>* 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 during the years ended December 31, 2022, 2021, and 2020 (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2022** | **2021** | **2020** |
| Beginning balance | $6812 | $5473 | $4397 |
| Net loss attributable to redeemable non-controlling interest | (38) | (653) | (177) |
| Change in ownership |  |  | 71 |
| Accretion of non-controlling interest to redemption value | 428 | 1992 | 1182 |
| Redemption of non-controlling interest | (7202) |  |  |
| Ending balance | $— | $6812 | $5473 |

---

**<u>Heartland Re-refining Complex</u>**

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 ("<u>Tensile-Vertex</u>"), 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 owned 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.

[**Table of Contents**](#a_Toc127876977)

The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV for the years ended December 31, 2022, 2021 and 2020 (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **2022** | **2021** | **2020** |
| Beginning balance | $36635 | $26139 | $— |
| Initial carrying amount of non-controlling interest |  |  | 11909 |
| Net income attributable to redeemable non-controlling interest | 6829 | 10496 | 276 |
| Accretion of non-controlling interest to redemption value |  |  | 13954 |
| Redemption of non-controlling interest | (43464) |  |  |
| Ending balance | $— | $36635 | $26139 |

---

The amount of accretion of redeemable noncontrolling interest to redemption value of $428 thousand and $1,992 thousand for 2022 and 2021, respectively, was presented as an adjustment to net income attributable to Vertex Energy to arrive at net income available 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 period when the noncontrolling interest redeemed on April 1 and May 26, 2022, and the year ended December 31, 2021, respectively.

**<u>Tensile Transactions</u>**

On July 1, 2021, the Operating Agreement of MG SPV was amended to provide that from the date of such agreement until December 31, 2021, the Company (through Vertex Operating), was required to fund the working capital requirements of MG SPV, which advances are initially characterized as debt, but that Tensile MG may convert such debt into additional Class A Units of MG SPV (after December 31, 2021), at $1,000 per unit (the "MG SPV Amendment").

On July 1, 2021, Heartland SPV loaned Vertex Operating $7,000,000, which was evidenced by a Promissory Note (the "Heartland Note"). The Heartland Note accrued interest at the applicable federal rate of interest from time to time, increasing to 12% upon an event of default. Amounts borrowed under the Heartland Note were due on June 30, 2022 or within five (5) days of the closing of the UMO Sale Agreement described below (whichever is earlier), and could be prepaid at any time without penalty. In the event the Heartland Note is not paid on or before the applicable due date, we agreed to use our best efforts to raise the funds necessary to repay the note as soon as possible. The Heartland Note was repaid in full on May 26, 2022.

**NOTE 24. DISCONTINUED OPERATIONS**

During the third quarter of 2021, the Company initiated and began executing a strategic plan to sell its UMO Business. An investment banking advisory services firm was engaged and actively marketed this segment. On June 29, 2021, we entered into an Asset Purchase Agreement (the "<u>UMO Sale Agreement</u>" and the transactions contemplated therein, the "<u>UMO Sale Transaction</u>" or the "<u>UMO Sale</u>") with Vertex Operating, Vertex LA, Vertex OH, CMT, H&H Oil, as sellers, and Safety-Kleen Systems, Inc., as purchaser ("<u>Safety-Kleen</u>"), dated as of June 28, 2021. On September 28, 2021, the shareholders approved the proposed sale of its portfolio of used motor oil collection and recycling assets to Safety-Kleen pursuant to the UMO Sale Agreement.

On January 25, 2022, the Company entered into a mutual agreement with Safety-Kleen to terminate the UMO Sale Agreement. In connection with the termination agreement, the Company paid Safety-Kleen a break-up fee of $3 million.

Vertex continued to explore opportunities for the sale of the UMO Business. Subsequent to the April 1, 2022 acquisition of the Mobile Refinery, our UMO Business operations no longer consist of 'all or substantially all' of our assets and as such, we determined that the sale of such operations does not reach a level that would require shareholder approval if sold under Nevada law. As such, the requirement to obtain shareholder approval for any subsequent sale of the UMO Business is no longer necessary.

[**Table of Contents**](#a_Toc127876977)

The Company continued exploring opportunities to sell the UMO Business and believed it would sell such assets within a year. As described below under "<u>Note 27. Subsequent Events</u>", on February 1, 2023, the Company sold all of its equity interests in Vertex OH, which owns our Heartland refinery located in Columbus, Ohio (the "<u>Heartland Refinery</u>"). The sale also included all property and assets owned by Vertex OH, including inventory associated with the Heartland Refinery, and all real and leased property and permits owned by Vertex OH, and all used motor oil collection and recycling assets and operations owned by Vertex OH (collectively with the Heartland Refinery, the "<u>Heartland Assets and Operations</u>").

Accordingly, the Company has presented this division (i.e., the Heartland Assets and Operations) as discontinued operations while reclassifying the other UMO Business operations out of assets held for sale, and all liabilities of the UMO Business out of liabilities held for sale, other than in connection with the Heartland Assets and Operations. See "[Note 2. Summary of Significant Accounting Policies - Reclassification of Prior Year Presentation](#Section25)" for financial information that has been reclassified as continued operations.

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the years ended December 31, 2022, 2021 and 2020 (in thousands):

---

| | | | |
|:---|:---|:---|:---|
|  | **For The Year Ended December 31** | **For The Year Ended December 31** | **For The Year Ended December 31** |
|  | **2022** | **2021** | **2020** |
| Revenues | $85495 | $58248 | $31330 |
| Cost of revenues (exclusive of depreciation shown separately below) | 51815 | 32467 | 22248 |
| Depreciation and amortization attributable to costs of revenues | 1566 | 1566 | 1423 |
| Gross profit | 32114 | 24215 | 7659 |
| Operating expenses: |  |  |  |
| Selling, general and administrative expenses (exclusive of acquisition related expenses) | 8501 | 6727 | 5767 |
| Depreciation and amortization expense attributable to operating expenses | 251 | 251 | 251 |
| Total Operating expenses | 8752 | 6978 | 6018 |
| Income from operations | 23362 | 17237 | 1641 |
| Other income (expense) |  |  |  |
| &nbsp;&nbsp;Interest expense | (39) | (59) | (63) |
| Total other expense | (39) | (59) | (63) |
| Income before income tax | 23323 | 17178 | 1578 |
| Income tax expense | (4683) |  |  |
| Net gain on sale of discontinued operations | 27 |  |  |
| Income from discontinued operations, net of tax | $18667 | $17178 | $1578 |

---

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The assets and liabilities held for sale on the Consolidated Balance Sheets as of December 31, 2022 and 2021 are as follows.

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2021** |
| **ASSETS** |  |  |
| &nbsp;&nbsp;Accounts receivable, net | $7490 | $7273 |
| &nbsp;&nbsp;Inventory | 1674 | 1444 |
| &nbsp;&nbsp;Prepaid expenses | 183 | 135 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 9347 | 8852 |
| &nbsp;&nbsp;Property and equipment, at cost | 19746 | 15480 |
| &nbsp;&nbsp;Less accumulated depreciation | (9140) | (8052) |
| &nbsp;&nbsp;Property and equipment, net | 10606 | 7428 |
| &nbsp;&nbsp;Finance lease right-of-use assets |  | 436 |
| &nbsp;&nbsp;Operating lease right-of use assets | 44 | 166 |
| &nbsp;&nbsp;Intangible assets, net | 563 | 814 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noncurrent assets | 11213 | 8844 |
| &nbsp;&nbsp;Assets held for sale | $20560 | $17696 |
| **LIABILITIES AND EQUITY** |  |  |
| Current liabilities |  |  |
| &nbsp;&nbsp;Accounts payable | $2750 | $1831 |
| &nbsp;&nbsp;Accrued expenses | 629 | 543 |
| &nbsp;&nbsp;Finance lease liability-current |  |  |
| &nbsp;&nbsp;Operating lease liability-current | 45 | 128 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 3424 | 2502 |
| &nbsp;&nbsp;Operating lease liability-noncurrent |  | 39 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total noncurrent liabilities |  | 39 |
| &nbsp;&nbsp;Liabilities held for sale | $3424 | $2541 |

---

**NOTE 25. RELATED PARTY TRANSACTIONS**

The Company has a Related Party Transaction committee including at least two independent directors who review and pre-approve all related party transactions.

From time to time, the Company consults Ruddy Gregory, PLLC., a related party law firm of which James Gregory, a member of the Board of Directors and the Secretary of the Company, serves as a partner. During the years ended December 31, 2022, 2021 and 2020, we paid $607 thousand, $742 thousand, and $63 thousand, respectively, to such law firm for services rendered, which included the review and the drafting of documentation in connection with the Mobile Refinery purchase agreement.

**NOTE 26. JOINT VENTURES**

**Vertex Recovery Management LA, LLC**

On May 25, 2016, Vertex Recovery Management, LLC, our wholly-owned subsidiary ("<u>VRM</u>") and Industrial Pipe, Inc. ("<u>Industrial Pipe</u>"), formed a joint venture Louisiana limited liability company, Vertex Recovery Management LA, LLC ("<u>VRMLA</u>"). VRM owns 51% and Industrial Pipe owns 49% of VRMLA. VRMLA is currently buying and preparing ferrous and non-ferrous scrap intended for large haul barge sales. We consolidated 100% of VRMLA's net income of $49.7 thousand, $1.9 million and $1.1 million, respectively for the years ended December 31, 2022, 2021 and 2020, respectively, and then deducted the 49% or $24.4 thousand, $0.9 million and $0.5 million, respectively, of income attributable to the non-controlling interest back to the Company's "<u>Net income attributable to Vertex Energy, Inc.</u>" in the Consolidated Statement of Operations.

[**Table of Contents**](#a_Toc127876977)

**NOTE 27. SUBSEQUENT EVENTS**

<u>Heartland Business Sale Agreement</u>

On February 1, 2023, HPRM LLC ("<u>HPRM</u>"), which is indirectly wholly-owned by the Company, entered into a Sale and Purchase Agreement (the "<u>Sale Agreement</u>") with GFL Environmental Services USA, Inc. ("<u>GFL</u>") whereby HPRM agreed to sell to GFL, and GFL agreed to purchase from HPRM, all of HPRM's equity interest in Vertex OH. Vertex Operating and GFL Environmental Inc. ("<u>GFL Environmental</u>"), an affiliate of GFL, were also parties to the Sale Agreement, solely for the purpose of providing certain guarantees of the obligations of HPRM and GFL as discussed in greater detail below.

Pursuant to the Sale Agreement, HPRM agreed to sell GFL all of its equity interests in Vertex OH, which owns our Heartland refinery located in Columbus, Ohio (the "<u>Heartland Refinery</u>"). The sale also included all property and assets owned by Vertex OH, including inventory associated with the Heartland Refinery, and all real and leased property and permits owned by Vertex OH, and all used motor oil collection and recycling assets and operations owned by Vertex OH (collectively with the Heartland Refinery, the "<u>Heartland Assets and Operations</u>").

The transactions contemplated by the Sale Agreement closed on February 1, 2023.

The purchase price for the transaction was $90 million (the "<u>Purchase Price</u>"), paid in cash, subject to certain customary adjustments for net working capital, taxes and assumed liabilities. We also entered into a transition services agreement, restrictive covenant agreement and, through our subsidiary Vertex Refining LA, LLC, a used motor oil supply agreement with GFL in connection with the sale.

The Sale Agreement includes representations and warranties, confidentiality obligations, and covenants of the parties customary for a transaction of this nature and size. The Sale Agreement also provides for indemnification rights of the parties with respect to, among other things, breaches of representations, warranties or covenants by the parties; failures to perform covenants or agreements; transfer taxes; and pre (HPRM)-and-post (GFL) closing operations of the Heartland Refinery, subject to certain limitations, caps and minimum thresholds.

Vertex Operating guaranteed all of the obligations of HPRM pursuant to the terms of the Sale Agreement and GFL Environmental guaranteed all of the obligations of GFL pursuant to the terms of the Sale Agreement.

<u>Term Loans Paydown</u>

On February 7, 2023, the Company made a paydown of $11.1 million to the Term Loan.

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**PART II**

**INFORMATION NOT REQUIRED IN PROSPECTUS**

**Item 14.** **Other Expenses of Issuance and Distribution**

The following table sets forth the costs and expenses that have and will be paid by us in connection with the issuance and distribution of the securities being registered. We will not receive any proceeds from the sale of shares of common stock by the selling stockholders pursuant to this prospectus. However, we will pay the expenses, other than underwriting discounts and commissions and certain expenses incurred by the selling stockholders in disposing of the securities, associated with the sale of securities pursuant to this prospectus. In addition, we may incur additional expenses in the future in connection with the offering of our securities pursuant to this prospectus. If required, any such additional expenses will be disclosed in a prospectus supplement.

*All amounts are estimates, except for the SEC registration fee:*

---

| | |
|:---|:---|
| Registration Fee Under the Securities Act of 1933 | $3198 |
| Financial Printing and Miscellaneous Expenses (1) | $10000 |
| Accounting Fees and Expenses (1) | $12350 |
| Legal Fees and Expenses (1) | $225000 |
| Total | $250548 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) Estimated.

**Item 15.** **Indemnification of Directors and Officers**

As authorized by <u>Section 78.751</u> of the Nevada Revised Statutes, we may indemnify our officers and directors against expenses incurred by such persons in connection with any threatened, pending or completed action, suit or proceedings, whether civil, criminal, administrative or investigative, involving such persons in their capacities as officers and directors, so long as such persons acted in good faith and in a manner which they reasonably believed to be in our best interests. If the legal proceeding, however, is by or in our right, the director or officer may not be indemnified in respect of any claim, issue or matter as to which he is adjudged to be liable for negligence or misconduct in the performance of his duty to us unless a court determines otherwise.

Under Nevada law, corporations may also purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director or officer (or is serving at our request as a director or officer of another corporation) for any liability asserted against such person and any expenses incurred by him in his capacity as a director or officer. These financial arrangements may include trust funds, self-insurance programs, guarantees and insurance policies.

Additionally, our Bylaws, as amended ("<u>Bylaws</u>"), state that we shall indemnify every (i) present or former director, advisory director or officer of us, (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) the Board of Directors or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) (each an "<u>Indemnitee</u>").

Our Bylaws provide that we shall indemnify an Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any proceeding in which he was, is or is threatened to be named as a defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, if it is determined that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his official capacity, that his conduct was in our best interests and, in all other cases, that his conduct was at least not opposed to our best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that in the event that an Indemnitee is found liable to us or is found liable on the basis that personal benefit was improperly received by the Indemnitee, the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the proceeding and (ii) shall not be made in respect of any proceeding in which the Indemnitee shall have been found liable for willful or intentional misconduct in the performance of his duty to us.

Except as provided above, the Bylaws provide that no indemnification shall be made in respect to any proceeding in which such Indemnitee has been (a) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Indemnitee's official capacity, or (b) found liable to us. The termination of any proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements set forth in clauses (a) or (b) above. An Indemnitee shall be deemed to have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall include, without limitation, all court costs and all fees and disbursements of attorneys' fees for the Indemnitee. The indemnification provided shall be applicable whether or not negligence or gross negligence of the Indemnitee is alleged or proven.

Neither our Bylaws nor our Articles of Incorporation include any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In addition, we have entered into separate indemnification agreements with our executive officers and directors. Such agreements require us, among other things, to advance expenses and otherwise indemnify our executive officers and directors against certain liabilities that may arise by reason of their status or service as executive officers or directors, to the fullest extent permitted by law. We also intend to enter into indemnification agreements with any new directors and executive officers in the future.

We have purchased and intend to maintain insurance on behalf of us and any person who is or was a director or officer against any loss arising from any claim asserted against him or her and incurred by him or her in that capacity, subject to certain exclusions and limits of the amount of coverage.

**Item 16.** **Exhibits.**

&nbsp;&nbsp;&nbsp;&nbsp;(a) Exhibits.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| <br>**Exhibit**<br>**Number** | | **Filed or**<br>**Furnished**<br>**Herewith** | <br>**Form** | <br>**Exhibit** | <br>**Filing Date** | <br>**File No.** |
| &nbsp;&nbsp;4.1 | [Restated Articles of Incorporation of Vertex Energy, Inc.\*](ex4-1.htm) | X |  |  |  |  |
| 4.2 | [Amended and Restated Bylaws of Vertex Energy, Inc.](http://www.sec.gov/Archives/edgar/data/890447/000158069519000156/ex3-1.htm) |  | 8-K | 3.1 | 4/29/2019 | 001-11476 |
| 4.3 | [Indenture, dated as of November 1, 2021, by and between Vertex Energy, Inc. and U.S. Bank National Association, as Trustee.](http://www.sec.gov/Archives/edgar/data/890447/000158069521000336/ex4-1.htm) |  | 8-K | 4.1 | 11/2/2021 | 001-11476 |
| 4.4 | [Form of Global Note, representing Vertex Energy, Inc.'s 6.25% Convertible Senior Notes due 2027 (included as Exhibit A to the Indenture incorporated by reference as Exhibit 4.1).](http://www.sec.gov/Archives/edgar/data/890447/000158069521000336/ex4-1.htm) |  | 8-K | 4.2 | 11/2/2021 | 001-11476 |
| 4.5 | [Warrant Agreement dated April 1, 2022, by and among Vertex Energy, Inc. and Continental Stock Transfer & Trust Company, as warrant agent](http://www.sec.gov/Archives/edgar/data/890447/000158069522000037/ex4-1.htm) |  | 8-K | 4.1 | 4/7/2022 | 001-11476 |
| 4.6 | [Warrant Agreement dated May 26, 2022, by and among Vertex Energy Inc. and Continental Stock Transfer & Trust Company, as warrant agent](http://www.sec.gov/Archives/edgar/data/890447/000158069522000055/ex4-1.htm) |  | 8-K | 4.1 | 5/27/2022 | 001-11476 |
| 4.7 | [Description of Securities of the Registrant](http://www.sec.gov/Archives/edgar/data/890447/000162828022005958/a12312021-ex41.htm) |  | 10-K | 4.1 | 3/4/2020 | 001-11476 |
| &nbsp;&nbsp;4.8% | [Loan and Security Agreement dated April 1, 2022, by and among Vertex Refining Alabama LLC, as borrower, Vertex Energy, Inc., as parent and as a guarantor, certain direct and indirect subsidiaries of Vertex Energy, Inc., as guarantors, the lenders party thereto, and Cantor Fitzgerald Securities, as administrative agent and collateral agent for the lenders](http://www.sec.gov/Archives/edgar/data/890447/000158069522000037/ex10-1.htm) |  | 8-K | 10.1 | 4/7/2022 | 001-11476 |
| 4.9 | [Registration Rights Agreement dated April 1, 2022, between Vertex Energy, Inc. and each of the holders of the Lender Warrants](http://www.sec.gov/Archives/edgar/data/890447/000158069522000037/ex10-8.htm) |  | 8-K | 10.8 | 4/7/2022 | 001-11476 |
| 4.10 | [Amended and Restated Registration Rights Agreement dated May 26, 2022, between Vertex Energy Inc. and each of the holders of the Lender Warrants](http://www.sec.gov/Archives/edgar/data/890447/000158069522000055/ex10-2.htm) |  | 8-K | 10.2 | 5/27/2022 | 001-11476 |
| 4.11 | [Amendment No. 1 to the First Amended and Restated Registration Rights Agreement dated June 15, 2022, between Vertex Energy, Inc. and each of the holders of the Lender Warrants](http://www.sec.gov/Archives/edgar/data/890447/000138713122007093/ex10-2.htm) |  | 8-K | 10.1 | 6/21/2022 | 001-11476 |
| &nbsp;&nbsp;4.12% | [Amendment Number Two to Loan and Security Agreement dated September 30, 2022, by and among Vertex Refining Alabama LLC, as borrower, Vertex Energy, Inc., as parent and as a guarantor, certain direct and indirect subsidiaries of Vertex Energy, Inc., as guarantors, the lenders party thereto, and Cantor Fitzgerald Securities, as administrative agent and collateral agent for the lenders](http://www.sec.gov/Archives/edgar/data/890447/000138713122010287/ex10-1.htm) |  | 8-K | 10.1 | 10/5/2022 | 001-11476 |
| &nbsp;&nbsp;4.13% | [Amendment Number Three to Loan and Security Agreement dated January 8, 2023, by and among Vertex Refining Alabama LLC, as borrower, Vertex Energy, Inc., as parent and as a guarantor, certain direct and indirect subsidiaries of Vertex Energy, Inc., as guarantors, the lenders party thereto, and Cantor Fitzgerald Securities, as administrative agent and collateral agent for the lenders](http://www.sec.gov/Archives/edgar/data/890447/000138713123000291/ex10-1.htm) |  | 8-K | 10.1 | 1/12/2023 | 001-11476 |
| 5.1 | [Opinion of The Loev Law Firm, PC (included with this registration statement)\*](ex5-1.htm) | X |  |  |  |  |
| 23.1 | [Consent of Ham, Langston & Brezina, L.L.P.\*](ex23-1.htm) | X |  |  |  |  |
| 23.2 | [Consent of RSM US LLP\*](ex23-2.htm) | X |  |  |  |  |
| 23.3 | [Consent of The Loev Law Firm, PC (included in the opinion filed as Exhibit 5.1)\*](ex5-1.htm) | X |  |  |  |  |
| 24.1 | [Power of Attorney (included on the signature page of the original registration statement)](https://www.sec.gov/Archives/edgar/data/890447/000138713122007521/vtnr-s3asr_070822.htm) |  | S-3ASR | 24.1 | 7/8/2022 | 333-266056 |
| 107 | [Filing Fee Table](http://www.sec.gov/Archives/edgar/data/890447/000138713122007521/ex107.htm) |  | S-3ASR | 107 | 7/8/2022 | 333-266056 |

---

\* Filed herewith.

% Certain schedules, annexes and similar attachments have been omitted pursuant to Item 601(a)(5) 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.

**Item 17.** **Undertakings**

We hereby undertake:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "<u>Securities Act</u>");

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "<u>Calculation of Registration Fee</u>" table in the effective registration statement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

*provided, however,* that paragraphs (1)(i), (l)(ii) and (l)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "<u>Exchange Act</u>") that are incorporated by reference in the registration statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) That, for the purpose of determining liability under the Securities Act to any purchaser,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described under Item 15 above, or otherwise, the registrant has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

**SIGNATURES**

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Post-Effective Amendment No. 1 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas on the 1st day of March 2023.

---

| | |
|:---|:---|
| **VERTEX ENERGY, INC.** | **VERTEX ENERGY, INC.** |
| *By:* | */s/ Benjamin P. Cowart* |
| Benjamin P. Cowart | Benjamin P. Cowart |
| Chief Executive Officer | Chief Executive Officer |
| (Principal Executive Officer) | (Principal Executive Officer) |
| *By:* | */s/ Chris Carlson* |
| Chris Carlson | Chris Carlson |
| Chief Financial Officer | Chief Financial Officer |
| (Principal Financial and Accounting Officer) | (Principal Financial and Accounting Officer) |

---

Pursuant to the requirements of the Securities Act of 1933, as amended this registration statement has been signed by the following persons in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Signature** | **Title** | **Date** |
| <br> */s/ Benjamin P. Cowart* | <br> Chief Executive Officer | <br> March 1, 2023 |
| Benjamin P. Cowart | (Principal Executive Officer) and Chairman |  |
| */s/ Chris Carlson* | Chief Financial Officer | March 1, 2023 |
| Chris Carlson | (Principal Financial and Accounting Officer) |  |
| \* | Director | March 1, 2023 |
| Dan Borgen |  |  |
| */s/ Odeh Khoury* | Director | March 1, 2023 |
| Odeh Khoury |  |  |
| \* | Director | March 1, 2023 |
| Timothy C. Harvey |  |  |
| \* |  |  |
| Christopher Stratton | Director | March 1, 2023 |
| *<u>/s/ Karen Maston</u>* | Director | March 1, 2023 |
| Karen Maston |  |  |

---

 

\* Mr. Chris Carlson hereby signs this Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 on behalf of the indicated persons for whom he is attorney-in-fact on March 1, 2023, pursuant to powers of attorney previously filed as Exhibit 24.1 to the Registration Statement on Form S-3 of Vertex Energy, Inc. filed with the Securities and Exchange Commission on July 8, 2022.

 

By: *<u>/s/ Chris Carlson</u>*

Chris Carlson

Attorney-in-fact

## Exhibit 4.1

[VERTEX ENERGY, INC. POSASR](vex-posasr_030123.htm)

**Exhibit 4.1**

![](vexposasr030123001a.jpg)

![](vexposasr030123001b.jpg)

**RESTATED ARTICLES OF INCORPORATION**

**OF**

**VERTEX ENERGY, INC.**

**ARTICLE I.**

The name of the corporation (hereinafter called the "Corporation") is:

Vertex Energy, Inc.

**ARTICLE II.**

*[Omitted pursuant to Nevada Revised Statutes 78.403]*

**ARTICLE III.**

The nature of the business of the Corporation and the objects or the purposes to be transacted, promoted, or carried on by it are as follows:

To engage in any lawful activity for which Corporations may be incorporated under the Nevada Revised Statutes.

**ARTICLE IV.**

The total number of shares of stock that the Corporation shall have authority to issue is 800,000,000, consisting of 750,000,000 shares of common stock, par value $0.001 per share ("Common Stock"), and 50,000,000 shares of "blank check" preferred stock par value $0.001 per share ("Preferred Stock").

Shares of Preferred Stock of the Corporation may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by the Board of Directors of the Corporation ("Board of Directors") prior to the issuance of any shares thereof. Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of the capital stock of the corporation entitled to vote generally in the election of the directors (the "Voting Stock"), voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation.

Page 1 of 3

Restated Articles of Incorporation

Vertex Energy, Inc.

**ARTICLE V.**

The governing Board of the Corporation shall be styled as a "Board of Directors," and any member of said Board shall be styled as a "director."

The number of directors of the Corporation may be increased or decreased in the manner provided in the Bylaws of the Corporation; provided, that the number of directors shall never be less than one. In the interim between elections of directors by stockholders entitled to vote, all vacancies, including vacancies caused by an increase in the number of directors and including vacancies resulting from the removal of directors by the stockholders entitled to vote which are not filled by said stockholders, may be filled by the remaining directors, though less than a quorum.

**ARTICLE VI.**

No fully paid shares of any class of stock of the Corporation shall be subject to any further call or assessment in any manner or for any cause. The good faith determination of the Board of Directors of the Corporation shall be final as to the value received in consideration of the issuance of fully paid shares.

**ARTICLE VII.**

*[Omitted pursuant to Nevada Revised Statutes 78.403]*

**ARTICLE VIII.**

The Corporation shall have perpetual existence.

**ARTICLE IX.**

In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to fix the amount to be reserved as working capital over and above its paid-in capital stock, and to authorize and cause to be executed, mortgages and liens upon the real and personal property of the Corporation.

**ARTICLE X.**

The personal liability of the directors of the Corporation is hereby eliminated to the fullest extent permitted by the Nevada Revised Statutes, as the same may be amended and supplemented.

**ARTICLE XI.**

The Corporation shall, to the fullest extent permitted by the Nevada Revised Statutes, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said Law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said Law, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

Page 2 of 3

Restated Articles of Incorporation

Vertex Energy, Inc.

**ARTICLE XII.**

The Corporation reserves the right to amend, alter, change, or repeal any provision contained in these Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

**ARTICLE XIII.**

Shareholders of the Corporation shall not have cumulative voting rights nor preemptive rights.

**ARTICLE XIV.**

The Corporation, pursuant to Nevada Revised Statutes ("NRS") 78.434, elects not to be governed by NRS 78.411 to 78.444, inclusive.

\* \* \* \* \*

Pursuant to Section 78.403 of the Nevada Revised Statutes, the undersigned, Chief Financial Officer of Vertex Energy, Inc., a Nevada corporation, certifies that the Restated Articles of Incorporation of the Corporation, above**,** correctly sets forth the text of the Articles of Incorporation of the Corporation as amended to the date of this Certificate, and that he has been duly authorized to sign this Certificate by resolution of the Board of Directors pursuant to a resolution of the Board of Directors dated January 31, 2023.

**IN WITNESS WHEREOF**, the undersigned has executed this Certificate on this 31st day of January 2023, to be effective upon its filing with the Nevada Secretary of State.

---

| |
|:---|
| */s/ Chris Carlson* |
| Chris Carlson |
| Chief Financial Officer |

---

Page 3 of 3

Restated Articles of Incorporation

Vertex Energy, Inc.

## Exhibit 5.1

[VERTEX ENERGY, INC. POSASR](vex-posasr_030123.htm)

**Exhibit 5.1**

![](ex51001.jpg)

March 1, 2023

Vertex Energy, Inc.

1331 Gemini Street, Suite 250

Houston, Texas 77058

**Re: <u>Form S-3 Resale Registration Statement</u>**

Ladies and Gentlemen:

We have acted as counsel to Vertex Energy, Inc., a Nevada corporation (the "<u>Company</u>"), in connection with the filing, with the Securities and Exchange Commission (the "<u>Commission</u>"), by the Company, of Post-Effective No. 1 to Registration Statement on Form S-3 (the "<u>Registration Statement</u>") under the Securities Act of 1933, as amended (the "<u>Securities Act</u>"), relating to the resale from time to time by the selling stockholders identified in the prospectus constituting a part of the Registration Statement of up to 2,834,900 shares of common stock, par value $0.001 per share of the Company (the "<u>Common Stock</u>"), representing shares of Common Stock that are issuable in connection with the exercise of outstanding warrants to purchase 2,834,900 shares of Common Stock at exercise prices of $4.50 per share (2,584,900) and $9.25 per share (250,000) (the "<u>Warrants</u>" and the shares of Common Stock issuable upon exercise thereof, the "<u>Shares</u>"), each held, by or issuable to, the selling stockholders named in the Registration Statement and as described in greater detail in the Registration Statement to which this opinion has been filed as an exhibit. This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K.

In reaching the opinions set forth herein, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of such documents and records of the Company and such statutes, regulations and other instruments as we deemed necessary or advisable for purposes of this opinion, including (i) the Company's Articles of Incorporation, as amended to date, (ii) the Company's Amended and Restated Bylaws, (iii) the Registration Statement and the exhibits thereto, (iv) certain resolutions adopted by the Board of Directors of the Company, (v) the warrant agreements evidencing the Warrants (collectively, the "<u>Warrant Agreements</u>"); (vi) the minutes and applicable agreements relating to the sale, issuance and grant, of the Warrants and Shares; and (vii) such other certificates, instruments, agreements, and documents as we have considered necessary for purposes of this opinion letter. We have also reviewed such matters of law as we considered necessary or appropriate as a basis for the opinion expressed below.

As to various questions of fact material to the opinions expressed below, we have, without independent third party verification of their accuracy, relied in part, and to the extent we deemed reasonably necessary or appropriate, upon the representations and warranties of the Company contained in such documents, records, certificates, instruments or representations furnished or made available to us by the Company, including the Registration Statement and, to the extent that we deemed such reliance proper, upon certificates of public officials and officers or other representatives of the Company.

With your permission, we have made and relied upon the following assumptions, without any independent investigation or inquiry by us, and our opinion expressed below is subject to, and limited and qualified by the effect of, such assumptions: (1) all corporate records furnished to us by the Company are accurate and complete; (2) the Registration Statement to be filed by the Company with the Commission will be identical to the form of the document that we have reviewed; (3) all statements as to factual matters that are contained in the Registration Statement (including the exhibits to the Registration Statement) are accurate and complete; and (4) in connection with each issuance of any Shares, the Company will duly execute and deliver a stock certificate evidencing the Shares or, with respect to any Shares issued on an uncertificated basis, the Company will comply with applicable laws regarding the documentation of uncertificated securities.

We have also assumed (i) the legal capacity of all natural persons, (ii) the genuineness of all signatures, (iii) the authority of all persons signing all documents submitted to us on behalf of the parties to such documents, (iv) the authenticity of all documents submitted to us as originals, (v) the conformity to authentic original documents of all documents submitted to us as copies, and (vi) that all information contained in all documents reviewed by us is true, correct and complete.

Based upon the foregoing, and subject to the qualifications, assumptions and limitations, and exceptions set forth stated herein, and having due regard for the legal considerations we deem relevant, we are of the opinion that upon issuance of the Shares when, when issued upon exercise of the Warrants, in accordance and pursuant to the terms and conditions of the Warrant Agreements (including, without limitation, the payment of the exercise price for the Warrant Shares), will be validly issued, fully paid and non-assessable.

This opinion is expressly limited in scope to the Shares enumerated herein which are to be expressly covered by the referenced Registration Statement. Without limiting the generality of the foregoing, we neither express nor imply any opinion regarding the contents of the Registration Statement, other than as expressly stated above with respect to the Shares.

We express no opinion as to the laws of any state or jurisdiction other than the State of Nevada and the federal laws of the United States of America. No opinion is expressed herein with respect to the qualification of the Shares under the securities or blue sky laws of any state or any foreign jurisdiction. We have made such examination of Nevada law as we have deemed relevant for purposes of this opinion. We express no opinion as to any county, municipal, city, town or village ordinance, rule, regulation or administrative decision. The references and limitations to the laws of the "<u>State of Nevada</u>" include all applicable Nevada statutory provisions of law and reported judicial decisions interpreting these laws.

This opinion (i) is rendered in connection with the filing of the Registration Statement, (ii) is rendered as of the date hereof, and we undertake no, and hereby disclaim any kind of, obligation to advise you of any change or any new developments that might affect any matters or opinions set forth herein, and (iii) is limited to the matters stated herein and no opinions may be inferred or implied beyond the matters expressly stated herein.

We hereby consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement and further consent to statements made therein regarding our firm and use of our name under the heading "<u>Legal Matters</u>" in the prospectus constituting a part of such Registration Statement. In giving this consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission promulgated thereunder.

Very truly yours,

*/s/ The Loev Law Firm, PC*

## Exhibit 23.1

[VERTEX ENERGY, INC. POSASR](vex-posasr_030123.htm)

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We hereby consent to inclusion in this Post-Effective Amendment No. 1 to Registration Statement on Form S-3 and related prospectus of Vertex Energy, Inc. of our reports dated March 1, 2023, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting of Vertex Energy, Inc. for the year ended December 31, 2022. Our report on the effectiveness of internal control over financial reporting expresses an adverse opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022.

We also consent to the reference to our firm under the heading "Experts" in such registration statement.

*/s/ Ham, Langston & Brezina L.L.P.*

Houston, Texas

March 1, 2023

## Exhibit 23.2

[VERTEX ENERGY, INC. POSASR](vex-posasr_030123.htm)

**Exhibit 23.2**

We consent to the incorporation by reference in this Post-Effective Amendment No. 1 to Registration Statement (333-266056) on Form S-3 of Vertex Energy, Inc. of our report dated May 31, 2022, relating to the combined financial statements of Mobile Refinery and Logistics Assets, appearing in the Current Report on Form 8-K/A filed by Vertex Energy, Inc. on June 15, 2022.

We also consent to the reference to our firm under the heading "Experts" in such registration statement.

*/s/ RSM US LLP*

Houston, Texas

March 1, 2023