10-Q 1 vtnr-20240331.htm 10-Q vtnr-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024
  
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM _____________ TO _____________
 
Commission File Number 001-11476
———————
VERTEX ENERGY, INC.
(Exact name of registrant as specified in its charter)
———————
Nevada94-3439569
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
1331 Gemini Street, Suite 250, Houston, Texas 77058
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: 866-660-8156

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock,
$0.001 Par Value Per Share
VTNR
The NASDAQ Stock Market LLC
(Nasdaq Capital Market)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes  ¨ No   
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).      Yes  ¨ No

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 “large accelerated filer,” “accelerated filer” and “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ¨
1



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
¨ Yes   No

As of May 9, 2024, there were 93,514,346 shares of common stock issued and outstanding.
2


TABLE OF CONTENTS

 
 
  Page
 PART I 
Item 1.
   
 
   
 
   
 
   
 
   
Item 2
   
Item 3.
   
Item 4.
   
 PART II 
Item 1.
   
Item 1A.
   
Item 2.
   
Item 3.
   
Item 4.
   
Item 5.
   
Item 6.
3


GLOSSARY OF TERMS
Please see the “Glossary” beginning on page 6 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on March 7, 2024 (the "Annual Report"), for a list of abbreviations and definitions used throughout this Report. In addition, unless the context otherwise requires and for the purposes of this report only:
“No. 2 Oil” is a high sulfur diesel oil, which is used in off-road equipment and in the marine industry such as tug boats and ships. It is also used to blend fuel oil and has multiple applications to fuel furnaces (“boilers”). It is a low viscosity, flammable liquid petroleum product.
“No. 6 Oil” is a lesser grade of oil than No. 2 oil, it is used only in certain applications.
“Adjusted gross margin” is gross profit (loss) plus or minus unrealized gain or losses on hedging activities and inventory adjustments.
“Adjusted gross margin per barrel of throughput” is calculated as adjusted gross margin divided by total throughput barrels for the period presented.
“Adjusted EBITDA” represents net income (loss) from operations plus or minus unrealized gain or losses on hedging activities, RFS costs (mainly RINs), and inventory adjustments, depreciation and amortization, interest expense, taxes, and certain other unusual or non-recurring charges included in selling, general, and administrative expenses.
“Base oil” is a lubricant grade oil initially produced from refining crude oil or through chemical synthesis used in manufacturing lubricant products such as lubricating greases, motor oil, and metal processing fluids.
BBL” (also “bbl” or “Bbl”) is the abbreviated form for one barrel, 42 U.S. gallons of liquid volume.
“BCD” (also “bcd”, “b/cd”) is the abbreviated form of barrels per calendar day; meaning the total number of barrels of actual throughput processed within 24 hours under typical operating conditions.
“Black Oil” is a term used to describe used lubricating oils, which may be visually characterized as dark in color due to carbon and other residual elements and compounds which accumulate through use. This term can also refer to the business segment within the Company, which manages used motor oil related operations and processes such as purchase, sales, aggregation, processing, and re-refining.
“Blendstock” is a bulk liquid component combined with other materials to produce a finished petroleum product.
“BPD” (also “bpd”) is the abbreviated form for barrels per day. This can refer to designed or actual capacity/throughput.
“Collectors” are typically local businesses that purchase used oil from generators and provide on-site collection services.
“Crack” means breaking apart crude oil into its component products, including gases like propane, heating fuel, gasoline, light distillates like jet fuel, intermediate distillates like diesel fuel and heavy distillates like grease.
“Cracking” refers to the process of breaking down larger, heavier, and more complex hydrocarbon molecules into simpler and lighter molecules through the use of heat, pressure, and sometimes a catalyst.
“Crack spread” is a measure of the difference between market prices for refined products and crude oil, commonly used by the refining industry. We use crack spreads as a performance benchmark for our fuel gross margin and as a comparison with other industry participants. Crack spreads can fluctuate significantly, particularly when prices of refined products do not move in the same direction as the cost of crude oil.
4


“Crack Spread USGC 2-1-1” represents the calculation of the crack spread that we believe most closely relates to the crude intakes and products at the Mobile Refinery. We use two barrels of Louisiana Light Sweet crude oil, producing one barrel of USGC CBOB gasoline and one barrel of USGC ULSD.
“Cutterstock” also known as “cutter stock”, refers to any stream that is blended to adjust various properties of the resulting blend.
“Distillates” are finished fuel products such as diesel fuels, jet fuel and kerosene.
“Feedstock” is a product or a combination of products derived from crude oil and destined for further processing in the refining or re-refining industries. It is transformed into one or more components and/or finished products.
“Fuel Gross Margin” is defined as gross profit (loss) plus or minus operating expenses and depreciation attributable to cost of revenues and other non-fuel items included in cost of revenues including realized and unrealized gain or losses on hedging activities, Renewable Fuel Standard (RFS) costs (mainly related to Renewable Identification Numbers (RINs)), inventory adjustments, fuel financing costs and other revenues and cost of sales items.
“Fuel Gross Margin Per Barrel of Throughput” is calculated as fuel gross margin divided by total throughput barrels for the period presented.
“Gasoline Blendstock” is naphthas and various distillate products used for blending or compounding into finished motor gasoline. These components can include reformulated gasoline blendstock for oxygenate blending (RBOB) but exclude oxygenates (alcohols and ethers), butane, and pentanes (an organic compound with properties similar to a butane).
“Generator” means any person, by site, whose act or process produces used oil or whose act first causes used oil to become subject to regulation. Generators can be service stations, governments or other businesses that produce or receive used oil.
“Group III base oils” are greater than 90 percent saturates, with less than 0.03 percent sulfur and with a viscosity index above 120. Although made from crude oil, Group III base oils are sometimes described as synthesized hydrocarbons.
“Hydrocarbons” are an organic compound consisting entirely of hydrogen and carbon. When used in the Company’s filings the term generally refers to crude oil and its derivatives.
“Hydrotreating” means processing feedstock with hydrogen to remove impurities such as sulfur, chlorine, and oxygen and to stabilize the end product.
“Industrial fuel” is a distillate fuel oil, typically a blend of lower-quality fuel oils. It can include diesel fuels and fuel oils such as No. 1, No. 2, and No. 4 diesel fuels that are historically used for space heating and power generation. Industrial fuel is typically a fuel with low viscosity, as well as low sulfur, ash, and heavy metal content, making it an ideal blending agent.
“LLS” means Louisiana Light Sweet Crude and is a grade of crude oil classified by its low sulfur content.
“LPG” means liquefied petroleum gases.
“Lubricant” or “lube” means a solvent-neutral paraffinic product used in commercial heavy-duty engine oils, passenger car oils, and specialty products for industrial applications such as heat transfer, metalworking, rubber, and other general process oil.
“Lubricating Base Oil” is a crude oil derivative used for lubrication.
“Marine Diesel Oil” is a blend of petroleum products that is used as a fuel in the marine industry.
5


“MBL” means one thousand barrels.
“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.
“Naphthas” refers to any of various volatile, highly flammable liquid hydrocarbon mixtures used chiefly as solvents and diluents and as raw materials for conversion to gasoline.
“Oil collection services” include the collection, handling, treatment, and transacting of used motor oil and related products which contain used motor oil (such as oil filters and absorbents) acquired from customers.
“Olefins” are hydrotreated VGO.
“Other refinery products” include the sales of asphalt, condensate, recovered products, and other petroleum products.
“Processors” are entities (usually re-refineries) which utilize a processing technology to convert used oil or petroleum by-products into a higher-value feedstock or end-product.
“Pygas” or pyrolysis gasoline, is a product that can be blended with gasoline as an octane booster or distilled and separated into its components, including benzene and other hydrocarbons.
“Re-Refined Base Oil” is the end product of used oil that is first cleansed of its contaminants, such as dirt, water, fuel, and used additives through vacuum distillation. The oil is also generally hydrotreated to remove any remaining chemicals. This process is very similar to what traditional oil refineries do to remove base oil from crude oil. Finally, the re-refined oil is combined with a fresh additive package by blenders to bring it up to industry performance levels.
“Re-Refining” refers to the process or industry which uses refining processes and technology with used oil as a feedstock to produce high-quality base stocks and intermediate feedstocks for lubricants, fuels, and other petroleum products.
“Refining” is the process of purification of a substance. The refining of liquids is often accomplished by distillation or fractionation. Gases can be refined in this way as well, by being cooled and/or compressed until they liquefy. Gases and liquids can also be refined by extraction with a selective solvent that dissolves away either the substance of interest, or the unwanted impurities.
“Refining Adjusted EBITDA” represents income (loss) from operations plus or minus unrealized gain or losses on hedging activities, RFS costs (mainly RINs), and inventory adjustments, depreciation and amortization, interest expense, taxes, acquisition costs, environmental reserves and certain other unusual or non-recurring charges included in selling, general, and administrative expenses.

“Reformate” is a gasoline blending stock produced by catalytic reforming.
“Renewable Diesel” or “RD” means a diesel fuel derived from vegetable oils or animal fats that is produced through various processes, most commonly through hydrotreating, reacting the feedstock with hydrogen under temperatures and pressure in the presence of a catalyst.
“RINs” means renewable identification numbers and refers to serial numbers assigned to credits generated from renewable fuel production under the Environmental Protection Agency’s Renewable Fuel Standard (“RFS”) regulations, which require blending renewable fuels into the nation’s fuel supply. In lieu of blending, refiners may purchase these transferable credits to comply with the regulations.
“Sour Crude Oil” refers to crude oil containing quantities of sulfur greater than 0.4 percent by weight.
6


“Sweet Crude Oil” refers to crude oil containing quantities of sulfur equal to or less than 0.4 percent by weight.
“Toll Processing/Third Party Processing” is refining or petrochemicals production done on a fee basis. A plant owner puts another party’s feedstock through his equipment and charges for this service. A portion of the product retained by the processor may constitute payment. This form of compensation occurs frequently in refining because the feedstock supplier often is interested in retaining only one part of the output slate.
“Transmix” is a mix of transportation fuels, usually gasoline and diesel, created by mixing different specification products during pipeline transportation, stripping fuels from barges and bulk fuel terminals. Transmix processing plants distill the transmix back into specification products, such as unleaded gasoline and diesel fuel.
“UMO” is the abbreviation for used motor oil.
“USGC CBOB” is the abbreviation for U.S. Gulf Coast Conventional Blendstock for Oxygenate Blending, which means conventional gasoline blendstock intended for blending with oxygenates downstream of the refinery where it was produced.
“USGC ULSD” is the abbreviation for U.S. Gulf Coast Ultra-low sulfur diesel (ULSD), which is diesel fuel containing a maximum of 15 parts per million (ppm) of sulfur.
“Used Oil” is any oil that has been refined from crude oil, or any synthetic oil that has been used, and as a result of use or as a consequence of extended storage or spillage has been contaminated with physical or chemical impurities. Examples of used oil include used motor oil, hydraulic oil, transmission fluid, and diesel and transformer oil.
“Vacuum Distillation” is the process of distilling vapor from liquid crudes, usually by heating and condensing the vapor below atmospheric pressure turning it back to a liquid in order to purify, fractionate or form the desired products.
“Vacuum Gas Oil” or “VGO” is a product produced from a vacuum distillation column which is predominately used as an intermediate feedstock to produce transportation fuels and other by-products such as gasoline, diesel and marine fuels.
“VTB” refers to vacuum tower bottoms, the leftover bottom product of distillation, which can be processed in cokers and used for upgrading into gasoline, diesel, and gas oil.
7


PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
 VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares and par value)
(UNAUDITED)
 March 31,
2024
December 31,
2023
ASSETS  
Current assets  
Cash and cash equivalents$62,140 $76,967 
Restricted cash 3,609 3,606 
Accounts receivable, net41,559 36,164 
Inventory198,979 182,120 
Prepaid expenses and other current assets38,673 53,174 
Total current assets344,960 352,031 
Fixed assets, net332,949 326,111 
Finance lease right-of-use assets63,524 64,499 
Operating lease right-of use assets78,802 96,394 
Intangible assets, net10,789 11,541 
Other assets4,029 4,048 
TOTAL ASSETS$835,053 $854,624 
LIABILITIES AND EQUITY  
Current liabilities  
Accounts payable $69,796 $75,004 
Accrued expenses and other current liabilities69,240 73,636 
Finance lease liability-current2,497 2,435 
Operating lease liability-current13,281 20,296 
Current portion of long-term debt, net12,524 16,362 
Obligations under inventory financing agreements, net169,656 141,093 
        Total current liabilities
336,994 328,826 
  
   Long-term debt, net177,772 170,701 
Finance lease liability-long-term65,576 66,206 
Operating lease liability-long-term64,345 74,444 
Deferred tax liabilities2,776 2,776 
Derivative warrant liability3,249 9,907 
Other liabilities1,377 1,377 
Total liabilities652,089 654,237 
8


 VERTEX ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except number of shares and par value)
(UNAUDITED)
 March 31,
2024
December 31,
2023
EQUITY  
Common stock, $0.001 par value per share;
750,000,000 shares authorized; 93,514,346 and 93,514,346 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively.
94 94 
Additional paid-in capital384,063 383,632 
Accumulated deficit (205,113)(187,379)
Total Vertex Energy, Inc. shareholders' equity 179,044 196,347 
Non-controlling interest 3,920 4,040 
Total equity 182,964 200,387 
TOTAL LIABILITIES AND EQUITY$835,053 $854,624 








































See accompanying condensed notes to the consolidated financial statements.
9


VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(UNAUDITED)
 Three Months Ended March 31,
 20242023
Revenues$695,326 $691,142 
Cost of revenues (exclusive of depreciation and amortization shown separately below)652,034 619,352 
Depreciation and amortization attributable to costs of revenues8,186 4,337 
Gross profit35,106 67,453 
Operating expenses:
Selling, general and administrative expenses (exclusive of depreciation and amortization shown separately below)39,782 41,942 
Depreciation and amortization attributable to operating expenses1,104 1,016 
Total operating expenses40,886 42,958 
Income (loss) from operations(5,780)24,495 
Other income (expense):  
Other income (expenses)(1,049)1,653 
Gain (loss) on change in value of derivative warrant liability6,658 (9,185)
Interest expense(17,683)(12,477)
Total other expense(12,074)(20,009)
Income (loss) from continuing operations before income tax(17,854)4,486 
Income tax expense (1,013)
Income (loss) from continuing operations(17,854)3,473 
Income from discontinued operations, net of tax (see note 22) 50,340 
Net income (loss) (17,854)53,813 
Net loss attributable to non-controlling interest from continuing operations(120)(50)
Net income (loss) attributable to Vertex Energy, Inc. (17,734)53,863 
Net income (loss) attributable to common shareholders from continuing operations(17,734)3,523 
Net income attributable to common shareholders from discontinued operations, net of tax 50,340 
Net income (loss) attributable to common shareholders$(17,734)$53,863 
Basic income (loss) per common share  
Continuing operations$(0.19)$0.05 
Discontinued operations, net of tax 0.66 
Basic income (loss) per common share$(0.19)$0.71 
Diluted income (loss) per common share
Continuing operations$(0.19)$0.04 
Discontinued operations, net of tax 0.64 
Diluted income (loss) per common share$(0.19)$0.68 
Shares used in computing earnings per share  
Basic 93,514 75,689 
Diluted93,514 78,996 




See accompanying condensed notes to the consolidated financial statements.
10


VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except par value)
(UNAUDITED)

Three Months Ended March 31, 2024
Common Stock
 Shares
$0.001 Par
Additional Paid-In CapitalAccumulated DeficitNon-controlling InterestTotal Equity
Balance on January 1, 202493,515 $94 $383,632 $(187,379)$4,040 $200,387 
Stock based compensation expense— — 431 — — 431 
Net loss— — — (17,734)(120)(17,854)
Balance on March 31, 202493,515 $94 $384,063 $(205,113)$3,920 $182,964 



Three Months Ended March 31, 2023
Common Stock
 Shares
$0.001 Par
Additional Paid-In CapitalAccumulated DeficitNon-controlling InterestTotal Equity
Balance on January 1, 202375,670 $76 $279,552 $(115,893)$1,685 $165,420 
Exercise of options166  209 — — 209 
Stock based compensation expense— — 365 — — 365 
Non-controlling shareholder contribution— — — — 980 980 
Net income (loss)— — — 53,863 (50)53,813 
Balance on March 31, 202375,836 $76 $280,126 $(62,030)$2,615 $220,787 
























See accompanying condensed notes to the consolidated financial statements.
11


VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
 Three Months Ended
 March 31,
2024
March 31,
2023
Cash flows from operating activities  
Net income (loss)$(17,854)$53,813 
Income from discontinued operations, net of tax 50,340 
Income (loss) from continuing operations(17,854)3,473 
  Adjustments to reconcile net income (loss) from continuing operations to cash
    used in operating activities
  
Stock based compensation expense431 365 
Depreciation and amortization9,290 5,353 
Deferred income tax expense 1,013 
Loss on lease modification35  
Loss on sale of assets691 3 
Increase in allowance for credit losses19 882 
Increase (decrease) in fair value of derivative warrant liability(6,658)9,185 
(Gain) loss on commodity derivative contracts1,322 (1,516)
     Net cash settlements on commodity derivatives(2,292)3,519 
     Amortization of debt discount and deferred costs 4,758 4,572 
Changes in operating assets and liabilities
Accounts receivable and other receivables(4,180)(26,291)
Inventory(16,859)(52,553)
Prepaid expenses and other current assets14,710 (18,103)
Accounts payable(5,250)11,005 
Accrued expenses(7,308)22,486 
     Other assets19 (44)
Net cash used in operating activities from continuing operations(29,126)(36,651)
Cash flows from investing activities  
Purchase of fixed assets(14,726)(73,936)
Proceeds from sale of discontinued operation 87,238 
Proceeds from sale of fixed assets2,576  
Net cash provided by (used in) investing activities from continuing operations(12,150)13,302 
Cash flows from financing activities  
Payments on finance leases(586)(310)
Proceeds from exercise of options and warrants to common stock 209 
Contributions received from noncontrolling interest  980 
Net change on inventory financing agreements28,313 (11,284)
Proceeds from note payable3,175  
Payments on note payable(4,450)(17,165)
Net cash provided by (used in) financing activities from continuing operations26,452 (27,570)
Discontinued operations:
Net cash provided by (used in) operating activities (150)
Net cash provided by (used in) discontinued operations (150)
Net decrease in cash, cash equivalents and restricted cash(14,824)(51,069)
Cash, cash equivalents, and restricted cash at beginning of the period80,573 146,187 
Cash, cash equivalents, and restricted cash at end of period$65,749 $95,118 


See accompanying condensed notes to the consolidated financial statements.
12


VERTEX ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
(Continued)

The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to the same amounts shown in the consolidated statements of cash flows (in thousands).

Three Months Ended
March 31,
2024
March 31,
2023
Cash and cash equivalents$62,140 $86,689 
Restricted cash3,609 8,429 
Cash and cash equivalents and restricted cash as shown in the consolidated statements of cash flows$65,749 $95,118 
SUPPLEMENTAL INFORMATION  
Cash paid for interest$4,811 $10,124 
Cash paid for taxes$ $ 
NON-CASH INVESTING AND FINANCING TRANSACTIONS  
ROU assets obtained from new finance leases$18 $15,024 
ROU assets obtained from new operating leases$74 $15,078 
ROU assets disposed under operating leases$(17,666)$ 





























See accompanying notes to the consolidated financial statements.
13


VERTEX ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2024
(UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION AND NATURE OF OPERATIONS
Vertex Energy, Inc. (the "Company" or "Vertex Energy") is an energy transition company focused on the production and distribution of conventional and alternative fuels. We operate used motor oil processing plants in Houston, Texas, Port Arthur, Texas, and Marrero, Louisiana.
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 3.2 million barrels of storage capacity. At the time of the acquisition, the Company also entered into an inventory financing agreement. See Note 10 “Inventory Financing Agreement” for additional information.
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2023, contained in the Company's annual report, as filed with the SEC on Form 10-K on March 7, 2024 (the "Form 10-K").
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 “Mobile Refinery”) and related logistics assets, which include a deep-water draft, bulk loading terminal facility with 3.2 million barrels (bbls) of storage capacity for crude oil and associated refined petroleum products located in Mobile, Alabama (the “Blakeley Island Terminal”). 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 “Mobile Truck Rack”). 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 (“Monument Chemical”) 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 (“TCEP”) 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.
14


Discontinued operations of Vertex include our Heartland Assets and Operations. Refer to Note 22, "Discontinued Operations" for additional information.

Through its Recovery segment, Vertex Energy aggregates and sells ferrous and non-ferrous recyclable metal products that are recovered from manufacturing and consumption.
Use of Estimates
The preparation of financial statements conforming with generally accepted accounting principles in the United States (“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.
NOTE 2.  SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

With the exception of the accounting policies below, there have been no new or material changes to the significant accounting policies discussed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Liquidity

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company has cash and cash equivalents of $62.1 million as of March 31, 2024. As shown in the accompanying unaudited consolidated financial statements, the Company generated a net loss from continuing operations of $17.9 million during the three months ended March 31, 2024. The Company had cash outflows from operating activities from continuing operations, which were $29.1 million during the three months ended March 31, 2024. The Company has cash outflows from investing activities from continuing operations due to its investments in capital expenditures partially offset by proceeds of real property sales. The Company has generated significant cash inflows from financing activities from continuing operations, primarily attributed to proceeds from inventory financing agreement.

Restricted cash as of March 31, 2024, and December 31, 2023, consisted of a $2.0 million deposit in a bank for financing of a short-term equipment lease, and $1.5 million held in an escrow account in connection with the sale of Vertex Refining OH, LLC (“Vertex OH”), and $0.1 million deposit in a money market account to serve as collateral for payment of a credit card.
Going Concern
The accompanying consolidated financial statements of the Company have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue in operation one year after the date these financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The evaluation of going concern under the accounting guidance requires significant judgment which involves the Company considering that it has historically incurred losses in recent years as it has prepared to grow its business through acquisition opportunities. The Company must also consider its current liquidity as well as future market and economic conditions that may be deemed outside the control of the Company as it relates to obtaining financing and generating future profits.
As of March 31, 2024, the Company has evaluated its ability to continue as a going concern. Management has considered various factors, including historical operating results, liquidity, financial condition, and other relevant conditions and events. Based on this evaluation, management has determined that there is substantial doubt about the Company's ability to continue as a going concern within one year of the financial statement issuance date primarily due to the Term Loan (see below Note 15. Financing Agreements) maturing on April 1, 2025. Management's plans to mitigate the going concern risk include current efforts to refinance the debt of the Company with a new lender group, and the various efforts underway to reduce and minimize costs throughout the organization. In addition, the Company believes it has the ability, if necessary, to raise additional capital through the capital equity markets. However, there can be no assurance that these plans will be successful.
The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Investors and other users of the financial statements are encouraged to consider this information when assessing the Company's financial position and prospects.
15


New Accounting Pronouncements
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. 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:
Doucet litigation:
Vertex Refining LA, LLC (“Vertex Refining LA”), the wholly-owned subsidiary of Vertex Operating, LLC (“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.
Penthol litigation:
On November 17, 2020, Vertex Energy Operating, LLC (“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.
On February 8, 2021, Penthol filed a complaint against Vertex in the United States District Court for the Southern District of Texas; Civil Action No. 4:21-CV- 416 (the “Complaint”). The parties agreed to move the pending claims and defenses in the Texas state court lawsuit into the federal court lawsuit.
On March 7, 2024, the Judge in the action issued a Final Judgment and Findings of Fact & Conclusions of Law. In sum, Penthol lost all of its claims against Vertex, including all of its breach of contract theories. Vertex won its unpaid commission claim in the amount of $1.4 million plus five percent interest on the unpaid claim amount.
Vertex is presently considering whether to appeal the judgment and it is also possible that Penthol appeals the judgment against it.

Putative Class Action Litigation:
On April 13, 2023, William C. Passmore filed a putative class action lawsuit against the Company; Benjamin P. Cowart, our Chief Executive Officer and Chairman; and Chris Carlson, our Chief Financial Officer; in the United States District Court for the Southern District of Alabama (Southern Division). In May 2023 and June 2023, additional plaintiffs filed virtually identical putative class action lawsuits against the same three defendants, the first of which was filed in the same courthouse and the second of which was filed in the United States District Court for the Southern District of Texas (Houston Division). These three putative class action lawsuits are substantially similar and allege that the Company, through Messrs. Cowart and Carlson, issued materially false and misleading statements, or omitted material information, regarding the projected future financial performance of the Mobile Refinery in 2022. The plaintiffs have asserted claims for violations of Section 10(b) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and Section 20(a) of the Exchange Act, against all defendants. On January 24, 2024, after considering party briefing, the United States District Court for the Southern District of Alabama ordered that the three putative class action lawsuits be consolidated and transferred to the Southern District of Texas for further proceedings. On February 1, 2024, the court issued an order appointing lead plaintiffs and lead counsel for the putative class, who then filed a consolidated amended complaint. The Company anticipates moving to dismiss the claims in the consolidated amended complaint, with briefing on the motion currently scheduled to be complete by August 20, 2024.
16


Shareholder Derivative Lawsuits:
In June 2023, two plaintiffs filed shareholder derivative lawsuits against certain Directors (both current and former) and Officers in the state courts of Texas and Nevada. The suits are substantially similar and allege that the Directors and Officers of the Company breached duties owed to the Company by allowing the Company to issue materially false and misleading statements, or failing to disclose material information, regarding the projected future financial performance of the Mobile Refinery in 2022. Both the Texas and Nevada plaintiffs have asserted claims for breach of fiduciary duty, and the Texas plaintiff has asserted an additional claim for unjust enrichment. Plaintiffs seek multiple forms of relief, including high-level resolutions for amendments to the Company’s corporate governance documents. On July 19, 2023, the Texas court granted the plaintiff’s notice of non-suit as to two current Directors, who were only named in the Texas case, dismissing them from the lawsuit without prejudice, and on August 28, 2023, the Court granted the parties’ joint motion to stay the derivative lawsuit pending the outcome of an anticipated motion to dismiss in the putative securities class action. Similarly, on October 5, 2023, the Nevada court granted the parties’ joint stipulation to stay the case pending the outcome of the anticipated motion to dismiss in the putative securities class action.
The Company has also been informed that a third shareholder derivative lawsuit was filed in the United States District Court for the Southern District of Texas on February 26, 2024, against certain Directors and Officers of the Company. The factual allegations in the third derivative lawsuit are substantially similar to the derivative lawsuits that are stayed in Texas and Nevada. This third derivative lawsuit, however, contains five claims in total, including claims for breach of fiduciary duty, aiding and abetting breach of fiduciary duty, unjust enrichment, violations of Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and waste of corporate assets. The Company plans to seek a stay of the third derivative lawsuit that is similar to the stay entered in the other derivative lawsuits, as well as dismissal of the two Directors who were dismissed from the first derivative lawsuit in Texas state court.
The Company has retained counsel to respond to the putative class action and the shareholder derivative lawsuits, and its assessment of the respective allegations is ongoing. All defendants intend to vigorously defend against the allegations.
At this stage of the lawsuits described above, we are unable to anticipate the ultimate impact, if any, that the legal proceedings may have on the consolidated financial position, liquidity, results of operations, or cash flows of the Company. As a result, we have not estimated a range of potential exposure for amounts, if any, that might become payable in connection with these matters and reserves have not been established. If an unfavorable ruling or development were to occur in these or other possible legal proceedings and claims, there exists the possibility of a material adverse impact on our business, results of operations, prospects, cash flows, or financial position and it is possible that an adverse outcome in any of such matters may have a material adverse impact on the Company.
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. As of March 31, 2024 and December 31, 2023, we reserved $1.4 million for anticipated environment clean-up costs.
NOTE 4. NON-CONTROLLING INTERESTS

Vertex Recovery Management LA, LLC
On May 25, 2016, Vertex Recovery Management, LLC, our wholly-owned subsidiary ("VRM") and Industrial Pipe, Inc. ("Industrial Pipe"), formed a joint venture through a Louisiana limited liability company, Vertex Recovery Management LA, LLC ("VRMLA"). 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 loss for the period ended March 31, 2024 and 2023, respectively, and then added the loss attributable to the non-controlling interest back to the Company's "Net income attributable to Vertex Energy, Inc." in the Consolidated Statement of Operations. The below table represents the net loss of VRMLA for the periods ended March 31, 2024 and 2023 (in thousands).

17


Three Months Ended March 31,
20242023
Net loss consolidated$(245)$(102)
Loss attributed to Non-controlling entity$(120)$(50)
18


NOTE 5. REVENUES

The following tables present our revenues disaggregated by geographical market and revenue source (in thousands):
Three Months Ended March 31, 2024
Refining &
Marketing
Black Oil & RecoveryCorporate and EliminationsConsolidated
Primary Geographical Markets
Gulf Coast$657,707 $38,641 $(1,022)$695,326 
Sources of Revenue
Refined products:
Gasolines$133,151 $ $ $133,151 
Jet Fuels136,137   136,137 
Diesel124,701   124,701 
Renewable diesel75,803   75,803 
Other refinery products (1)
180,967 31,724 (1,022)211,669 
Re-refined products:
Pygas3,867   3,867 
Metals (2)
 3,442  3,442 
Other re-refined products (3)
 1,773  1,773 
Services:
Terminalling3,081   3,081 
Oil collection services 1,702  1,702 
Total revenues$657,707 $38,641 $(1,022)$695,326 

Three Months Ended March 31, 2023
Refining &
Marketing
Black Oil & RecoveryCorporate and EliminationsConsolidated
Primary Geographical Markets
Gulf Coast$659,328 $34,547 $(2,733)$691,142 
Sources of Revenue
Refined products:
Gasolines$147,721 $ $ $147,721 
Jet Fuels142,375   142,375 
Diesel182,456   182,456 
Other refinery products (1)
180,490 29,423 (2,733)207,180 
Re-refined products:
Pygas3,835   3,835 
Metals (2)
 3,413  3,413 
Other re-refined products (3)
518 998  1,516 
Services:
Terminalling1,933   1,933 
Oil collection services 713  713 
Total revenues$659,328 $34,547 $(2,733)$691,142 

(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.
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(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. During the second quarter of 2023, the Mobile Refinery began processing soybean oil into renewable diesel.
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 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 excludes 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 “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.
Segment information for the three months ended March 31, 2024 and 2023 is as follows (in thousands):
THREE MONTHS ENDED MARCH 31, 2024
Refining &
Marketing
Black Oil & RecoveryCorporate and EliminationsTotal
Revenues:
Refined products
$650,759 $31,724 $(1,022)$681,461 
Re-refined products
3,867 5,215  9,082 
Services3,081 1,702  4,783 
Total revenues657,707 38,641 (1,022)695,326 
Cost of revenues (exclusive of depreciation and amortization shown separately below)622,974 30,082 (1,022)652,034 
Depreciation and amortization attributable to costs of revenues6,541 1,645  8,186 
Gross profit28,192 6,914  35,106 
Selling, general and administrative expenses26,147 5,397 8,238 39,782 
Depreciation and amortization attributable to operating expenses793 72 239 1,104 
Income (loss) from operations1,252 1,445 (8,477)(5,780)
Other income (expenses)
Other expense(685)(359)(5)(1,049)
Gain on change in derivative liability  6,658 6,658 
Interest expense(4,747)(96)(12,840)(17,683)
Total other expense(5,432)(455)(6,187)(12,074)
Income (loss) from continuing operations before income tax$(4,180)$990 $(14,664)$(17,854)
Capital expenditures$11,299 $3,427 $ $14,726 

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THREE MONTHS ENDED MARCH 31, 2023
Refining &
Marketing
Black Oil & Recovery Corporate and EliminationsTotal
Revenues:
Refined products
$653,042 $29,423 $(2,733)$679,732 
Re-refined products
4,353 4,411  8,764 
Services1,933 713  2,646 
Total revenues659,328 34,547 (2,733)691,142 
Cost of revenues (exclusive of depreciation and amortization shown separately below)589,812 30,418 (878)619,352 
Depreciation and amortization attributable to costs of revenues3,294 1,043  4,337 
Gross profit66,222 3,086 (1,855)67,453 
Selling, general and administrative expenses26,486 4,799 10,657 41,942 
Depreciation and amortization attributable to operating expenses808 38 170 1,016 
Income (loss) from operations38,928 (1,751)(12,682)24,495 
Other income (expenses)
Other income (expense) 1,655 (2)1,653 
Loss on change in derivative liability  (9,185)(9,185)
Interest expense(3,876)(57)(8,544)(12,477)
Total other income (expense)(3,876)1,598 (17,731)(20,009)
Income (loss) from continuing operations before income tax$35,052 $(153)$(30,413)$4,486 
Capital expenditures$69,908 $4,028 $ $73,936 

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

As of March 31, 2024
Refining &
Marketing
Black Oil & RecoveryCorporate and EliminationsConsolidated
Total assets$655,271 $110,131 $69,651 $835,053 
As of December 31, 2023
Refining &
Marketing
Black Oil & RecoveryCorporate and EliminationsConsolidated
Total assets$661,101 $106,524 $86,999 $854,624 

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, derivative commodity assets and cash.

NOTE 7. ACCOUNTS RECEIVABLE

Accounts receivable, net, consists of the following at March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024December 31, 2023
Accounts receivable trade$42,886 $37,473 
Allowance for credit losses(1,327)(1,309)
Accounts receivable, net$41,559 $36,164 

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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. 

The provision for credit losses was $19.0 thousand and $881.7 thousand for continued operations for the three months ended March 31, 2024 and 2023, respectively.

NOTE 8. CONCENTRATIONS OF 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 quarter ended March 31, 2024 and year ended December 31, 2023, the Company’s cash balances exceeded the federally insured limits. No losses have been incurred relating to this concentration. 
At March 31, 2024 and 2023 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:
As of and for the Three Months Ended
 March 31, 2024March 31, 2023
% of
Revenues
% of
Receivables
% of
Revenues
% of
Receivables
Customer 135%2%38%23%
Customer 230%4%37%1%
Customer 310%22%%%

For each of the three months ended March 31, 2024 and 2023, the Company’s segment revenues were comprised of the following customer concentrations:
% of Revenue by Segment% Revenue by Segment
March 31, 2024March 31, 2023
RefiningBlack Oil and RecoveryRefiningBlack Oil and Recovery
Customer 137%%39%%
Customer 231%%39%%
Customer 311%%%%

For each of the three months ended March 31, 2024 and 2023, substantially all of the Company's crude oil, which is used in our Refining and Marketing segment, is purchased from a single vendor.

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 (in thousands):
As of March 31, 2024As of December 31, 2023
Crude oil$72,966 $60,702 
Renewable feedstocks24,920 27,450 
Refined products98,699 91,911 
Re-refined products2,394 2,057 
Total hydrocarbon inventories$198,979 $182,120 
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NOTE 10. INVENTORY FINANCING AGREEMENTS

The following table summarizes our outstanding obligations under our inventory financing agreements (in thousands):

March 31, 2024
December 31, 2023
Obligations under inventory financing agreements$169,656 $141,343 
Unamortized financing cost (250)
Obligations under inventory financing agreements, net$169,656 $141,093 

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 “Commencement Date”), Vertex Refining Alabama, LLC (“Vertex Refining”), and the Company, entered into a Supply and Offtake Agreement (the “Supply and Offtake Agreement”) with Macquarie Energy North American Trading Inc (“Macquarie”), pertaining to crude oil supply and offtake of finished products located at the Mobile Refinery acquired on April 1, 2022.
Under the Supply and Offtake Agreement, Macquarie purchases the majority of the crude oil utilized at the Mobile Refinery and holds legal title prior to its sale to Vertex Refining for consumption within the Mobile Refinery processing units. Also pursuant to the Supply and Offtake Agreement, Macquarie purchases from Vertex Refining substantially all of the Mobile Refinery’s output of certain refined products and owns 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 any unsold inventory.
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 Supply and Offtake Agreement expires March 31, 2024, subject to the performance of customary covenants, and certain events of default and termination events provided therein, for a facility of that size and type. The agreement automatically extends for another 12 months after the end of the initial term, unless terminated prior to such date by either party with 180 days prior written notice. Neither party exercised the termination clause.

Amendment No. 1 to Supply and Offtake Agreement
On May 26. 2023, in connection with the entry into the RD Supply and Offtake Agreement, discussed below, Macquarie, Vertex Refining and the Company, entered into Amendment Agreement No. 1 to the Supply and Offtake Agreement (“Amendment 1”). Pursuant to Amendment 1, the Supply and Offtake Agreement was amended to include certain additional documents relating to the RD Supply and Offtake Agreement as transaction documents, and to update such Supply and Offtake Agreement in connection therewith, to amend the unwind procedures associated with the Supply and Offtake Agreement, and to update or revise certain other covenants set forth in the Supply and Offtake Agreement relating to cross defaults, finance agreements, minimum liquidity, and guarantor requirements, to be conformed with changes made to analogous provisions in, or to otherwise account for, the RD Supply and Offtake Agreement terms. Amendment 1 also made conforming amendments to certain other agreements relating to the Supply and Offtake Agreement.
Renewables RD Supply and Offtake Agreement
On May 26, 2023 (the “Commencement Date”), Vertex Renewables Alabama, LLC, an affiliate indirectly wholly-owned by the Company (“Vertex Renewables”), entered into a Supply and Offtake Agreement (the “RD Supply and Offtake Agreement”, and
23


together with the Supply and Offtake Agreement, the “Supply and Offtake Agreements”) with Macquarie, pertaining to the supply and financing of renewable biomass feedstocks used for the production of renewable fuels, the offtake and financing of renewable diesel, and the provision of certain financing accommodations with respect to certain agreed environmental attributes associated with the operation of such renewable diesel unit (including Renewable Identification Numbers (RINs), tax credits, and low carbon fuel credits) at the Mobile Refinery.
The RD Supply and Offtake Agreement has a 24 month term following the Effective Date, which was May 26, 2023, subject to the performance of customary covenants, and may be terminated earlier following the occurrence of certain events of default and termination events provided therein that are customary for a facility of this size and type and subject to applicable cure periods in certain events. Additionally, either party may terminate the agreement at any time, for any reason, with not less than 180 days prior notice to the other. In the event Vertex Renewables is the terminating party, Vertex Refining must also at the same time, terminate that certain Supply and Offtake Agreement entered into with Macquarie dated April 1, 2022.
Pursuant to the Supply and Offtake Agreement, we pay or receive certain fees from Macquarie based on changes in market prices over time. The following table summarizes the inventory intermediation fees, interest expenses and financing costs (in thousands):
Three Months Ended March 31,
20242023
Intermediation fees (include over/under)$(41)$2,064 
Inventory financing fees$2,063 $2,295 
Interest expense and financing costs, net$2,959 $2,520 

The intermediation fees are included in the cost of revenues on the consolidated statement of operations for three months ended March 31, 2024 and 2023.

NOTE 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 March 31, 2024As of December 31, 2023
Prepaid insurance$1,950 $8,076 
Commodity derivative advance1,724 1,502 
Sulfur credits603 3,462 
Prepaid feedstock1,831 9,845 
Prepaid freight3,243 3,260 
Prepaid operating expenses3,429 4,756 
Inventory financing deposit18,618 15,259 
Derivative commodity assets 11 
Other current assets7,275 7,003 
Total prepaid expenses & other current assets$38,673 $53,174 

NOTE 12. FIXED ASSETS, NET
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Fixed assets consist of the following (in thousands):
Useful Life
(in years)
March 31, 2024December 31, 2023
Equipment
7 - 20
$287,067 $276,331 
Leasehold improvements152,877 2,852 
Office equipment & furniture
5 - 7
1,446 1,446 
Vehicles515,796 15,087 
Building203,912 3,663 
Turnarounds419,388 21,100 
Construction in progress55,043 53,467 
Land9,120 9,439 
Land improvement15972 354 
Total fixed assets395,621 383,739 
Less accumulated depreciation(62,672)(57,628)
Net fixed assets$332,949 $326,111 
The increase in fixed assets is due to the investment in the conventional refinery project at the Mobile Refinery, which began April 1, 2022, and which includes construction in progress. Depreciation expense was $7.2 million and $3.6 million for the three months ended March 31, 2024 and 2023, respectively, for the continued operations. In addition, we sold a portion of land at the Mobile Refinery for $2.6 million for purposes of building a rail road spur at the facility site.
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.
NOTE 13. INTANGIBLE ASSETS, NET

Components of intangible assets (subject to amortization) consist of the following items (in thousands):
March 31, 2024December 31, 2023
Useful Life (in years)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Customer relations5$1,658 $1,023 $635 $1,658 $989 $669 
Vendor relations104,778 4,657 121 4,778 4,639 139 
Trademark/Trade name15887 669 218 887 657 230 
Technology/Patent
15 - 30
15,787 10,021 5,766 15,787 9,780 6,007 
Software and cloud310,419 6,370 4,049 10,067 5,571 4,496 
$33,529 $22,740 $10,789 $33,177 $21,636 $11,541 
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 $1.1 million and $1.0 million for the three months ended March 31, 2024 and 2023, respectively.
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Estimated future amortization expense is as follows (in thousands):
March 31,Balance
2025$4,458 
20261,412 
20271,383 
20281,006 
2029510 
Thereafter2,020 
 $10,789 

NOTE 14. ACCRUED LIABILITIES

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

March 31, 2024December 31, 2023
Accrued purchases$10,020 17,685 
Accrued interest321 460 
Accrued compensation and benefits6,206 7,605 
Accrued taxes other than payroll taxes2,223 826 
RINS obligations44,395 46,153 
Benzene credits obligations311 531 
Unearned revenue5,278 325 
Environmental liabilities - current51 51 
Derivative commodity liability435  
$69,240 $73,636 


NOTE 15. FINANCING AGREEMENTS

The Company's long-term debt consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):

CreditorLoan TypeBalance at March 31, 2024Balance at December 31, 2023
Senior Convertible NoteConvertible note$15,230