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COMMON STOCK
 3 Months Ended
Mar. 31, 2022
Equity [Abstract]  
COMMON STOCK COMMON STOCK
During the three months ended March 31, 2022, the Company issued 5,041 shares of common stock in connection with the conversion of Series A Convertible Preferred Stock, pursuant to the terms of such securities, and 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. In addition, the Company issued 60,000 shares of common stock in connection with the exercise of options.

During the three months ended March 31, 2021, the Company issued 6,164,666 shares of common stock in connection with the conversion and exercises of Series B & B1 Convertible Preferred Stock and warrants into common stock of the Company, pursuant to the terms of such securities. In addition, the Company issued 22,992 shares of common stock in connection with the exercise of options.

Warrant Exchange Agreement

On March 24, 2022, the Company entered into an Exchange Agreement with Tensile Capital Partners Master Fund LP (the “Holder” and "Tensile"). Pursuant to the Exchange Agreement, the Holder agreed to exchange outstanding warrants to purchase 1,500,000 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.
PREFERRED STOCK AND DETACHABLE WARRANTS
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 Convertible Preferred Stock is 5,000,000 (“Series A Preferred”). The total number of designated shares of the Company’s Series B Convertible Preferred Stock is 10,000,000. The total number of designated shares of the Company’s Series B1 Convertible Preferred Stock is 17,000,000. As of March 31, 2022 and December 31, 2021, there were 380,560 and 385,601 shares, respectively, of Series A Preferred Stock issued and outstanding. As of March 31, 2022 and December 31, 2021, there were 0 shares of Series B and B1 Preferred Stock outstanding, respectively.
Series B Preferred Stock and Temporary Equity
The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity for the three months ended March 31, 2021:
March 31, 2021
Balance at beginning of period$12,718,339 
Less: conversions of shares to common(1,978,494)
Less: exchanges of shares to common(4,747,250)
Plus: dividends in kind317,970 
Balance at end of period$6,310,565 

During the three months ended March 31, 2021 we paid dividends in-kind in additional shares of Series B Preferred Stock of $317,970. Because such preferred stock was not redeemed on June 24, 2020, the preferred stock accrued a 10% per annum dividend (payable in-kind at the option of the Company), until such preferred stock was redeemed or converted into common stock. Effective on June 25, 2021, the automatic conversion provisions of the Series B Preferred Stock were triggered, and the outstanding shares of the Company’s Series B Preferred Stock automatically converted into common stock of the Company.
Series B1 Preferred Stock and Temporary Equity

The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity, for the three months ended March 31, 2021:
March 31, 2021
Balance at beginning of period$11,036,173 
Less: conversions of shares to common(3,256,024)
Plus: discount accretion223,727 
Plus: dividends in kind288,594 
Balance at end of period$8,292,470 

During the three months ended March 31, 2021 we paid dividends in-kind in additional shares of Series B1 Preferred Stock of 288,594. Because such preferred stock was not redeemed on June 24, 2020, the preferred stock accrued a 10% per annum dividend (payable in-kind at the option of the Company), until such preferred stock was redeemed or converted into common stock. Effective on June 24, 2021, the automatic conversion provisions of the Series B1 Preferred Stock were triggered, and the outstanding shares of the Company’s Series B1 Preferred Stock automatically converted into common stock of the Company.
The following is an analysis of changes in the derivative liability for the three months ended March 31, 2021:
Level Three Roll-Forward
March 31, 2021
Balance at beginning of period$330,412 
Value of warrants exercised(1,105,935)
Change in valuation of warrants1,780,203 
Balance at end of period$1,004,680 

The Series B Warrants expired pursuant to their terms on December 24, 2020. The Series B1 Warrants expired pursuant to their terms on November 13, 2021.
SHARE PURCHASE AND SUBSCRIPTION AGREEMENTS
Myrtle Grove Share Purchase and Subscription Agreement
MG SPV was owned 85.00% by Vertex Operating and 15.00% by Tensile-MG at March 31, 2022. At March 31, 2022, $0.10 million reported as cash and cash equivalents on the balance sheet is restricted to MG Refinery investments or operating expenses.
Myrtle Grove Redeemable Noncontrolling Interest
In accordance with ASC 480-10-S99-3A, the Company applied a two-step approach to measure noncontrolling interests associated with MG SPV at the balance sheet date. First, the Company applied the measurement guidance in ASC 810-10 by attributing a portion of the subsidiary’s net loss of $38,219 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 adjustment of $421,399 increased the carrying amount of redeemable noncontrolling interests to the redemption value as of March 31, 2022 of $7,195,260. Adjustments to the carrying amount of redeemable noncontrolling interests to redemption value are reflected in retained earnings.
The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to MG SPV as of March 31, 2022 and 2021.
March 31, 2022March 31, 2021
Beginning balance$6,812,080 $5,472,841 
Net loss attributable to redeemable non-controlling interest(38,219)(65,901)
Accretion of non-controlling interest to redemption value421,399 373,748 
Ending balance$7,195,260 $5,780,688 
On April 1, 2022, the Company acquired a 15% interest in MG SPV from Tensile for $7.2 million.

Heartland Share Purchase and Subscription Agreement
The Heartland SPV is currently owned 35% by Vertex Operating and 65% by Tensile-Heartland Acquisition Corporation ("Tensile-Heartland"), an affiliate of Tensile. Heartland SPV is managed by a five-member Board of Managers, of which three members are appointed by Tensile-Heartland and two are appointed by the Company.
Heartland Variable interest entity

The Company has assessed the Heartland SPV under the variable interest guidance in ASC 810, and concluded that Heartland SPV is a variable interest entity. The Company’s consolidated financial statements include the assets, liabilities and results of operations of Heartland SPV for which the Company is the primary beneficiary. The other equity holders’ interests are reflected in net loss attributable to noncontrolling interests and redeemable noncontrolling interest in the consolidated statements of income and redeemable noncontrolling interests in the consolidated balance sheets.
The following table summarizes the carrying amounts of Heartland SPV’s assets and liabilities included in assets held for sale and liabilities held for sale in the Company’s consolidated balance sheets at March 31, 2022 and December 31, 2021:
March 31, 2022December 31, 2021
Cash and cash equivalents$17,089,714 $13,322,507 
Accounts receivable, net10,103,011 7,078,559 
Inventory1,369,203 1,654,706 
Prepaid expense and other current assets7,729,233 8,078,890 
   Total current assets36,291,161 30,134,662 
Fixed assets, net7,068,164 7,404,375 
Finance lease right-of-use assets391,483 436,039 
Operating lease right-of-use assets110,028 166,362 
Intangible assets, net750,985 813,713 
Other assets106,643 106,643 
Total assets$44,718,464 $39,061,794 
Accounts payable $2,393,475 $2,051,721 
Accrued expenses1,232,177 1,658,427 
Finance lease liability-current236,890 295,935 
Operating lease liability-current110,028 166,362 
Total liabilities$3,972,570 $4,172,445 

The assets of Heartland SPV may only be used to settle the obligations of Heartland SPV, and may not be used for other consolidated entities. The liabilities of Heartland SPV are non-recourse to the general credit of the Company’s other consolidated entities.

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 $3,806,753 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 March 31, 2022, the cumulative amount resulting from the application of the measurement guidance in ASC 810-10 exceeded the redemption value of $34,365,273.
The table below presents the reconciliation of changes in redeemable noncontrolling interest relating to Heartland SPV as of March 31, 2022 and 2021.
March 31, 2022March 31, 2021
Beginning balance$36,634,604 $26,138,833 
Net income attributable to redeemable non-controlling interest3,806,753 1,608,303 
Accretion of non-controlling interest to redemption value— — 
Ending balance$40,441,357 $27,747,136 

The amount of accretion of redeemable noncontrolling interest to redemption value of $421,399 and $373,748 are presented as an adjustment to net income (loss) attributable to Vertex Energy, Inc., to arrive at net income (loss) 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 three months ended March 31, 2022 and 2021, respectively.
Heartland and Myrtle Grove Purchase Agreements
On February 25, 2022, Vertex Splitter entered into (1) a Purchase and Sale Agreement with Tensile-Vertex Holdings LLC (“Tensile-Vertex”), an affiliate of Tensile and Tensile-Heartland (the “Heartland Purchase Agreement”); and (2) a Purchase and Sale Agreement with Tensile-Vertex and Tensile-MG (the “Myrtle Grove Purchase Agreement”, and together with the Heartland Purchase Agreement, the “Purchase Agreements”).
As discussed above, Tensile-Heartland holds 65% of Heartland SPV and Tensile-MG owned 15% of MG SPV, and Tensile-Vertex holds 100% of both Tensile-Heartland and Tensile-MG.
Pursuant to the Heartland Purchase Agreement, the Company, through Vertex Splitter, agreed to acquire 100% of the outstanding securities of Tensile-Heartland and pursuant to the Myrtle Grove Purchase Agreement, the Company, through Vertex Splitter, agreed to acquire 100% of the outstanding securities of Tensile-MG, from Vertex-Tensile, the result of which will be that Vertex Splitter will own 100% of each of Heartland SPV and MG SPV.
Pursuant to the Heartland Purchase Agreement, the purchase price payable by Vertex Splitter to Vertex-Tensile, for 100% of Tensile-Heartland is $35 million (the “Base Amount”), plus an amount accrued and accruing from and after May 31, 2021, on the Base Amount on a daily basis at the rate of 22.5% per annum compounded on the last day of each calendar quarter plus an amount equal to any and all cash and cash equivalents of Tensile-Heartland, as of the closing date, which we currently anticipate will total an aggregate of approximately $44 million. The purchase contemplated by the Heartland Purchase Agreement is required to take place on June 30, 2022, or earlier as mutually agreed by the parties, subject to customary conditions to closing. The Heartland Purchase Agreement includes customary representations of the parties, requires Vertex Splitter to maintain officer and director insurance for Tensile-Heartland for at least six years following the closing; requires that they bear their own fees and expenses, except that each party is required to pay the fees and expenses of the other party upon termination of the agreement in certain situations; includes customary indemnification obligations; and includes mutual releases of the parties, effective upon closing.
The Heartland Purchase Agreement may be terminated prior to closing, by the mutual consent of the parties; by Vertex Splitter if Vertex-Tensile has failed to consummate the agreement, or breached a covenant, representation or warranty set forth in the agreement, that prevents such closing, and such breach is not cured, if capable of being cured, within 30 days after notice thereof; by Vertex-Tensile if Vertex Splitter has failed to consummate the agreement, or breached a covenant, representation or warranty set forth in the agreement, that prevents such closing, and such breach is not cured, if capable of being cured, within 30 days after notice thereof; or by either party if there is a final, non-appealable judgment preventing the closing.
Pursuant to the Myrtle Grove Purchase Agreement, the purchase price payable by Vertex Splitter to Vertex-Tensile, for 100% of Tensile-MG was approximately $7.2 million. The Myrtle Grove Purchase closed on April 1, 2022 and the parties waived the requirement that the closing occur prior to March 31, 2022.
Tensile-Vertex, Vertex Splitter and the Company (collectively, Vertex Splitter and the Company, the “Vertex Parties”) also entered into a Side Letter Re Purchase and Sale Agreements (the “Side Letter”), pursuant to which the parties agreed that in the event that (i) the closing of the transactions contemplated by the Myrtle Grove Purchase Agreement does not occur on or prior to March 31, 2022 (provided that the parties waived such requirement in connection with the April 1, 2022 closing of the
Myrtle Grove Purchase Agreement), and/or (ii) the closing of the transactions contemplated by the Heartland Purchase Agreement does not occur on or prior to June 30, 2022, then, in addition to any of the rights of Tensile-Vertex under the Purchase Agreements: (a) the Vertex Parties will use their best efforts to cause the closings under the Purchase Agreements to occur, including without limitation by raising debt financing, selling equity in a private or public transaction, selling assets and/or otherwise doing all things necessary or appropriate to raise the funds necessary to make the payments required to be made by Vertex Splitter under the Purchase Agreements, in each case on commercially reasonable terms and conditions, subject to certain exceptions; (b) upon the written election of Tensile-Vertex, the Vertex Parties will and will cause their affiliates to consent to the distribution or other payment of any and all cash and cash equivalents of Heartland SPV (including any proceeds from the repayment of that certain $7,000,000 promissory note, issued by Vertex Operating to Heartland SPV on July 1, 2021, as amended to date (the “Heartland Note”)) and any direct and indirect subsidiaries to Tensile-Vertex, with such distribution or other payment to be structured as specified by Tensile-Vertex so as to be tax efficient for Tensile-Vertex; and (c) Tensile-Vertex may, with written notice, cause Heartland SPV to initiate a process intended to result in a sale of Heartland SPV, with Tensile-Vertex being entitled, upon the consummation of such sale, of the greater of (i) 65% of the total net equity proceeds of such sale, and (ii) the amount due to Tensile-Vertex under the Heartland Purchase Agreement as of the date of the consummation of such sale.
Tensile Transactions

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 accrues 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 originally due ninety days after the date of the note, or within five (5) days of the closing of the Sale Agreement relating to our UMO Business (whichever was earlier), and may 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.

Also on February 25, 2022, Vertex Operating, the Company and Heartland SPV, entered into a Second Amendment to Promissory Note (the “Second Note Amendment”), which amended the Heartland Note to extend the due date of the Heartland Note until the earlier of (i) June 30, 2022; and (ii) five calendar days following the closing of a sale of substantially all the assets of Vertex OH, and/or the sale of membership interests in Vertex OH possessing voting control (with the consent of the Company), provided that the Heartland Note may be prepaid in whole or in part at any time without premium or penalty and without the consent of Heartland SPV. The Heartland Note accrues interest at the applicable federal rate of interest from time to time, increasing to 12% upon an event of default.