DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2021

Discontinued Operations and Disposal Groups [Abstract]

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 September 28, 2021, the shareholders approved the proposed sale of its portfolio of used motor oil collection and recycling assets to Safety-Kleen.

The Company met all of the criteria to classify the UMO Business’s assets and liabilities as held for sale in the third quarter 2021. The Company has classified the assets, liabilities, and results of operations for this business as “Discontinued Operations” for all periods presented.

Disposal of the UMO Business represented a strategic shift that will have a major effect on the Company’s operations and financial results.

On June 29, 2021, the Company announced that it had entered into a definitive agreement to sell its portfolio of used motor oil collection and recycling assets (the UMO business) to Safety-Kleen, a subsidiary of Clean Harbors, Inc. (“Clean Harbors”) for total cash consideration of $140 million, subject to working capital and other adjustments, and subject to certain closing conditions, including regulatory approvals and a shareholder vote. After retiring term debt, together with the payment of transaction-related fees and financial obligations, total net cash proceeds from the transaction to Vertex are expected to be approximately $90 million.

The following summarized financial information has been segregated from continuing operations and reported as Discontinued Operations for the three and nine months ended September 30, 2021, and 2020.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	36,950,919	$	21,422,320	$	104,956,817	$	65,364,581
Cost of revenues (exclusive of depreciation shown separately below)	26,867,718		15,861,769		71,860,804		51,622,468
Depreciation and amortization attributable to costs of revenues	1,294,157		971,258		3,803,216		3,175,134
Gross profit	8,789,044		4,589,293		29,292,797		10,566,979
Operating expenses:
Selling, general and administrative expenses (exclusive of acquisition related expenses)	4,938,494		4,697,503		15,099,782		13,792,598
Depreciation and amortization expense attributable to operating expenses	455,953		681,209		1,367,859		1,593,115
Total Operating expenses	5,394,447		5,378,712		16,467,641		15,385,713
Income (loss) from operations	3,394,597		(789,419)		12,825,156		(4,818,734)
Other income (expense)
Other income (expense)	—		—		—		101

Interest expense	(116,099)		(137,514)		(360,711)		(504,997)
Total other income (expense)	(116,099)		(137,514)		(360,711)		(504,896)
Income (loss) before income tax	3,278,498		(926,933)		12,464,445		(5,323,630)
Income tax benefit (expense)	—		—		—		—
Income (loss) from discontinued operations, net of tax	3,278,498		$	(926,933)	$	12,464,445	$	(5,323,630)

The assets and liabilities held for sale on the Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 are as follows


	September 30, 2021		December 31, 2020
ASSETS
Accounts receivable, net	$	10,756,838	$	6,280,086
Inventory	6,119,150		2,981,551
Prepaid expenses	370,184		1,269,310
Property and equipment, at cost	32,188,708		—
Finance lease right-of-use assets	1,209,827		—
Operating lease right-of use assets	28,898,931		—
Intangible assets, net	7,563,036		—
Other assets	563,493		—
Total current assets	87,670,167		10,530,947

Property and equipment, at cost	—		32,517,979
Finance lease right-of-use assets	—		1,518,611
Operating lease right-of use assets	—		28,581,379
Intangible assets, net	—		8,930,895
Other assets	—		615,293
Total noncurrent assets	—		72,164,157

Assets held for sale	$	87,670,167	$	82,695,104

LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	6,824,664	$	8,065,368
Accrued expenses	2,355,719		1,072,873

Finance lease liability-current	686,402		373,529
Operating lease liability-current	28,898,931		4,831,038


Total current liabilities	38,765,716		14,342,808

Finance lease liability-noncurrent	—		630,099
Operating lease liability-noncurrent	—		23,750,341

Total noncurrent liabilities	—		24,380,440

Liabilities held for sale	$	38,765,716	$	38,723,248

The Board of Directors considered a number of factors before deciding to enter into the Sale Agreement, including, among other factors, the price to be paid by Safety-Kleen for the UMO Business, the scope of the sale process with respect to the UMO Business that led to entering into the Sale Agreement, the future business prospects of the UMO Business, including the costs to remain competitive and grow, the opinion of H.C. Wainwright & Co., LLC that the terms were fair, from a financial point of view, the planned acquisition of the Mobile Refinery, and the planned change in business focus associated therewith, and the terms and conditions of the Sale Agreement.

Disposal of the UMO business represented a strategic shift that would have a major effect on the Company’s operations and financial results.