• Filing Date: 2018-05-15
  • Form Type: 10-Q
  • Description: Quarterly report
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 14, 2018
Document And Entity Information    
Entity Registrant Name Vertex Energy Inc.  
Entity Central Index Key 0000890447  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   33,357,297
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Current assets    
Cash and cash equivalents $ 52,876 $ 1,105,787
Accounts receivable, net 11,237,297 11,288,991
Federal income tax receivable 274,423 0
Inventory 8,112,625 6,304,842
Prepaid expenses 2,635,727 1,771,832
Total current assets 22,312,948 20,471,452
Noncurrent assets    
Fixed assets, at cost 65,541,421 65,237,652
Less accumulated depreciation (17,673,342) (16,617,824)
Fixed assets, net 47,868,079 48,619,828
Goodwill and other intangible assets, net 14,047,119 14,499,354
Federal income tax receivable 0 274,423
Other assets 492,417 440,417
TOTAL ASSETS 84,720,563 84,305,474
Current liabilities    
Accounts payable and accrued expenses 11,465,453 10,318,738
Dividends payable 554,917 420,713
Capital leases-current 9,698 0
Current portion of long-term debt, net of unamortized finance costs 1,158,196 1,616,926
Derivative commodity liability 466,828 0
Revolving note 4,239,388 4,591,527
Total current liabilities 17,894,480 16,947,904
Long-term liabilities    
Long-term debt, net of unamortized finance costs 14,744,333 13,531,179
Capital leases-long-term 19,923  
Contingent consideration 236,680 236,680
Derivative warrant liability 2,677,159 2,245,408
Total liabilities 35,572,575 32,961,171
COMMITMENTS AND CONTINGENCIES (Note 3) 0 0
TEMPORARY EQUITY    
Total Temporary Equity 23,242,948 22,959,945
EQUITY    
Common stock, $0.001 par value per share; 750,000,000 shares authorized; 33,158,176 and 32,658,176 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively. 33,158 32,658
Additional paid-in capital 68,693,980 67,768,509
Accumulated deficit (43,272,128) (39,816,300)
Total Vertex Energy, Inc. stockholders' equity 25,455,496 27,985,353
Non-controlling interest 449,544 399,005
Total Equity 25,905,040 28,384,358
TOTAL LIABILITIES, TEMPORARY EQUITY, AND EQUITY 84,720,563 84,305,474
Series B Preferred Stock    
TEMPORARY EQUITY    
Series B and B-1 preferred shares 7,583,722 7,190,467
Series B1 Preferred Stock    
TEMPORARY EQUITY    
Series B and B-1 preferred shares 15,659,226 15,769,478
Series A Preferred Stock    
EQUITY    
Preferred stock 454 454
Series C Preferred Stock    
EQUITY    
Preferred stock $ 32 $ 32
v3.8.0.1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Preferred stock, par value (in dollars per share) $ 0.001  
Preferred stock, shares designated 50,000,000 50,000,000
Common stock, par value (in USD per share) $ 0.001 $ 0.001
Common stock, shares authorized 750,000,000 750,000,000
Common stock, shares issued 33,158,176 32,658,176
Common stock, shares outstanding 33,158,176 32,658,176
Series A Preferred Stock    
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares designated 5,000,000 5,000,000
Preferred stock, shares issued 453,567 453,567
Preferred stock, shares outstanding 453,567 453,567
Preferred stock, liquidation preference $ 675,815 $ 675,815
Series B Preferred Stock    
Temporary equity, par value (in USD per share) $ 0.001 $ 0.001
Temporary equity, shares designated 10,000,000 10,000,000
Temporary equity, shares issued 3,479,016 3,427,597
Temporary equity, shares outstanding 3,479,016 3,427,597
Temporary equity, liquidation preference $ 10,784,950 $ 10,625,551
Series B1 Preferred Stock    
Temporary equity, par value (in USD per share) $ 0.001 $ 0.001
Temporary equity, shares designated 17,000,000 17,000,000
Temporary equity, shares issued 12,947,916 13,151,989
Temporary equity, shares outstanding 12,947,916 13,151,989
Temporary equity, liquidation preference $ 20,198,749 $ 20,517,103
Series C Preferred Stock    
Preferred stock, par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares designated 44,000 44,000
Preferred stock, shares issued 31,568 31,568
Preferred stock, shares outstanding 31,568 31,568
Preferred stock, liquidation preference $ 3,156,800 $ 3,156,800
v3.8.0.1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Revenues $ 41,368,195 $ 34,770,614
Cost of revenues (exclusive of depreciation and amortization shown separately below) 34,588,749 30,701,554
Gross profit 6,779,446 4,069,060
Operating expenses:    
Selling, general and administrative expenses 5,645,442 5,229,837
Depreciation and amortization 1,694,099 1,600,060
Total operating expenses 7,339,541 6,829,897
Loss from operations (560,095) (2,760,837)
Other income (expense):    
Interest income 0 1,952
Gain (loss) on sale of assets 42,680 (13,100)
Gain (loss) on change in value of derivative liability (431,751) 920,672
Gain (loss) on futures contracts (456,402) 0
Interest expense (802,515) (1,336,487)
Total other income (expense) (1,647,988) (426,963)
Loss before income tax (2,208,083) (3,187,800)
Income tax benefit (expense) 0 0
Net loss (2,208,083) (3,187,800)
Net income attributable to non-controlling interest 50,539 8,607
Net loss attributable to Vertex Energy, Inc. (2,258,622) (3,196,407)
Accretion of discount on Series B and B-1 Preferred Stock (457,853) (433,201)
Accrual of dividends on Series B and B-1 Preferred Stock (739,354) (417,636)
Net loss available to common shareholders $ (3,455,829) $ (4,047,244)
Loss per common share    
Basic and diluted (in dollars per share) $ (0.10) $ (0.12)
Shares used in computing earnings per share    
Basic and diluted (in shares) 33,063,732 32,953,812
v3.8.0.1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash flows from operating activities    
Net loss $ (2,208,083) $ (3,187,800)
Adjustments to reconcile net loss to cash provided by (used in) operating activities    
Stock based compensation expense 145,971 148,736
Depreciation and amortization 1,694,099 1,600,060
(Gain) loss on sale of assets (42,680) 13,100
(Increase) decrease in fair value of derivative liability 431,751 (920,672)
(Increase) decrease in future contracts 456,402 0
Net cash settlements on commodity derivatives (763,997) 0
Amortization of debt discount and deferred costs 143,477 318,512
Changes in operating assets and liabilities    
Accounts receivable 51,694 3,934,346
Inventory (1,807,783) (381,981)
Prepaid expenses (89,472) 1,273,772
Accounts payable and accrued expenses 1,146,716 (1,322,370)
Other assets (52,000) (253,000)
Net cash provided by (used in) operating activities (893,905) 1,222,703
Cash flows from investing activities    
Acquisition of Acadiana 0 (320,700)
Purchase of fixed assets (490,361) (1,100,962)
Proceeds from sale of fixed assets 75,230 62,594
Net cash provided by (used in) investing activities (415,131) (1,359,068)
Cash flows from financing activities    
Payment of debt issuance costs 0 (1,656,350)
Line of credit (payments) proceeds, net (352,139) (1,818,744)
Proceeds from note payable 1,667,426 12,160,194
Payments on note payable (1,059,162) (10,241,622)
Net cash provided by (used in) financing activities 256,125 (1,556,522)
Net change in cash, cash equivalents and restricted cash (1,052,911) (1,692,887)
Cash, cash equivalents, and restricted cash at beginning of the period 1,105,787 3,206,158
Cash, cash equivalents, and restricted cash at end of period 52,876 1,513,271
SUPPLEMENTAL INFORMATION    
Cash paid for interest 477,583 260,352
Cash received for income tax benefit 0 0
NON-CASH INVESTING AND FINANCING TRANSACTIONS    
Accretion of discount on Series B and B-1 Preferred Stock 457,853 433,201
Dividends-in-kind accrued on Series B and B-1 Preferred Stock 739,354  
Return of common shares for sale escrow 0 1,109
Series A Preferred Stock    
NON-CASH INVESTING AND FINANCING TRANSACTIONS    
Conversion of preferred stock into common stock 0 30
Series B1 Preferred Stock    
NON-CASH INVESTING AND FINANCING TRANSACTIONS    
Conversion of preferred stock into common stock 779,500 $ 119,440
Dividends-in-kind accrued on Series B and B-1 Preferred Stock $ 415,731  
v3.8.0.1
BASIS OF PRESENTATION AND NATURE OF OPERATIONS
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BASIS OF PRESENTATION AND NATURE OF OPERATIONS
BASIS OF PRESENTATION AND NATURE OF OPERATIONS

The accompanying unaudited consolidated interim financial statements of Vertex Energy, Inc. (the "Company" or "Vertex Energy") 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 contained in the Company's annual consolidated financial statements for the year ended December 31, 2017, as filed with the SEC on Form 10-K on March 7, 2018 (the "Form 10-K"). The December 31, 2017 balance sheet was derived from the audited financial statements of our 2017 Form 10-K. In the opinion of management all adjustments, consisting of normal recurring adjustments necessary for a fair presentation of financial position and the results of operations for the interim periods presented, have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the most recent fiscal year 2017 as reported in Form 10-K have been omitted.
v3.8.0.1
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Cash, 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.

The Company early adopted the guidance in Accounting Standards Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), in the third quarter of 2017, which requires restricted cash to be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statements of cash flows.

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

 
March 31, 2018
 
March 31, 2017
Cash
$
52,876

 
$
6,596

Restricted cash

 
1,506,675

Cash, cash equivalents and restricted cash as shown in the consolidated statements of cash flows
$
52,876

 
$
1,513,271



Inventory

Inventories of products consist of feedstocks, refined petroleum products and recovered ferrous and non-ferrous metals and are reported at the lower of cost or market.   Cost is determined using the first-in, first-out (“FIFO”) method. The Company reviews its inventory commodities whenever events or circumstances indicate that the value may not be recoverable.

Impairment of long-lived assets
The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of the Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") regarding long-lived assets. It requires that long-lived assets be 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 at March 31, 2018.



Fair value of financial instruments
Under the FASB ASC, we are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Consistent with the Fair Value Measurement Topic of the FASB ASC, we implemented guidelines relating to the disclosure of our methodology for periodic measurement of our assets and liabilities recorded at fair market value.
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:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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
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 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 contracts. In addition, the Company routinely monitors the creditworthiness of its counterparty.

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 at fair value.


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.
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 sheets. 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. 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. Furthermore, the Company’s interpretation of complex tax laws may impact its recognition and measurement of current and deferred income taxes.
Derivative Transactions
All derivative instruments are recorded on the accompanying balance sheets at fair value. These derivative transactions are not designated as cash flow hedges under FASB ASC 815, Derivatives and Hedges. Accordingly, these derivative contracts are marked-to-market and any changes in the estimated value of derivative contracts held at the balance sheet date are recognized in the accompanying statements of operations as net gain or loss on derivative contracts. 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.
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.
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.
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 results of operations. 
Recently Issued Accounting Pronouncements

The Company adopted early the guidance in ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), in the third quarter of 2017 which requires restricted cash to be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statements of cash flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). The Company adopted ASU 2014-09 in the first quarter of fiscal 2018 using the modified retrospective method. The adoption of the standard did not have a material impact on our revenue recognition policies, and the Company has concluded that the most significant impact of the standard relates to the incremental disclosures required.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases expiring before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently reviewing our various leases to identify those affected by ASU No. 2016-02.
v3.8.0.1
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2018
Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract]  
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES
 
At March 31, 2018 and 2017 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:
 
Three Months Ended March 31, 2018
 
Three Months Ended
March 31, 2017
 
% of
Revenues
 
% of
Receivables
 
% of
Revenues
 
% of
Receivables
Customer 1
42%
 
13%
 
8%
 
—%
Customer 2
9%
 
6%
 
11%
 
8%
Customer 3
7%
 
3%
 
15%
 
17%
Customer 4
4%
 
1%
 
5%
 
11%
Customer 5
—%
 
—%
 
22%
 
—%
Customer 6
—%
 
—%
 
—%
 
12%
 
At March 31, 2018 and 2017 and for each of the three months then ended, the Company's segment revenues were comprised of the following customer concentrations:

 
% of Revenue by Segment
 
% Revenue by Segment
 
Three Months Ended March 31, 2018
 
Three Months Ended March 31, 2017
 
Black Oil
 
Refining
 
Recovery
 
Black Oil
 
Refining
 
Recovery
Customer 1
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 2
—%
 
100%
 
—%
 
—%
 
100%
 
—%
Customer 3
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 4
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 5
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 6
—%
 
—%
 
100%
 
—%
 
—%
 
100%


The Company had one vendor that represented 10% of total purchases for the three months ended March 31, 2017 and zero vendors that represented 10% of total purchases for the three months ended March 31, 2018.

In February 2013, Bank of America agreed to lease the Company equipment to enhance the Thermal Chemical Extraction Process (“TCEP”) operation, which went into effect in April 2013.  Under the current terms of the lease agreement, 7 monthly payments remain of approximately $13,328 each.

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, access to capital, and the quantities of petroleum-based products that the Company can economically produce.
Business commitment:

On June 5, 2016, Vertex Energy and Penthol C.V. (“Penthol”)  of the Netherlands aka Penthol LLC (a Penthol subsidiary in the United States) reached an agreement for Vertex Energy to act as Penthol’s exclusive agent to provide marketing, sales, and logistical duties of Group III base oil from the United Arab Emirates to the United States.  The start-up date was July 25, 2016, with a 5 year term through 2021 and the product will ship via truck, rail and barge.

Litigation:
The Company, in its normal course of business, is involved in various other 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 ("Vertex Refining LA"), the wholly-owned subsidiary of Vertex Operating, LLC, our wholly-owned subsidiary ("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.

E-Source Holdings, LLC ("E-Source"), the wholly-owned subsidiary of Vertex Operating, was named as a defendant (along with Motiva Enterprises, LLC, ("Motiva")) in a lawsuit filed in the Sixtieth (60th) Judicial District, Jefferson County, Texas, on April 22, 2015. Pursuant to the lawsuit, Whole Environmental, Inc. ("Whole"), made certain allegations against E-Source and Motiva. The claims include Breach of Contract and Quantum Meruit actions relating to asbestos abatement and remediation operations performed for defendants at Motiva's facility in Port Arthur, Jefferson County, Texas. The plaintiff alleges it is due monies earned. Defendants have denied any amounts due to plaintiff. The suit seeks damages of approximately $864,000, along with pre-judgment and post-judgment interest, the fair value of certain property alleged to be converted by defendants and reimbursement of legal fees. E-Source has asserted a counterclaim against Whole for the filing of a mechanic's lien in excess of any amount(s) actually due, as well as a cross-claim against Motiva. Under the terms of E-Source's contract with Motiva, Motiva was to pay all sums due to any sub-contractors of E-Source. In management's opinion, any monies due to Whole, should be paid by Motiva. E-Source seeks to recover the balance due under its contract with Motiva of approximately $1,000,000. The case is set for trial in the summer of 2018. We intend to vigorously defend ourselves against the allegations made in the complaint. The Company has no basis of determining whether there is any likelihood of material loss associated with the claims and/or the potential and/or the outcome of the litigation.
v3.8.0.1
REVENUES
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
REVENUE
REVENUES


Revenue Recognition

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. Revenue is recognized when our performance obligations under the terms of a contract with our customers are satisfied. Recognition occurs when the Company transfers control by completing the specified services at the point in time the customer benefits from the services performed or once our products are delivered. Revenue is measured as the amount of consideration we expect to receive in exchange for completing our performance obligations. Sales tax and other taxes we collect with revenue-producing activities are excluded from revenue. In the case of contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation based on the relative stand-alone selling prices of the various goods and/or services encompassed by the contract. We do not have any material significant payment terms as payment is generally due within 30 days after the performance obligation has been satisfactorily completed. The Company has elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that we otherwise would have recognized is one year or less. In applying the guidance in Topic 606, there were no judgments or estimates made that the Company deems significant.

Disaggregation of Revenue

The following table presents our revenues disaggregated by revenue source:
 
Three Months Ended 31, 2018
 
Black Oil
 
Refining & Marketing
 
Recovery
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
Northern United States
$
8,837,230

 
$

 
$

 
$
8,837,230

Southern United States
23,400,016

 
5,675,241

 
3,455,708

 
32,530,965

 
$
32,237,246

 
$
5,675,241

 
$
3,455,708

 
$
41,368,195

Sources of Revenue
 
 
 
 
 
 
 
Petroleum products
$
32,237,246

 
$
5,675,241

 
$
377,142

 
$
38,289,629

Metals

 

 
3,078,566

 
3,078,566

Total revenues
$
32,237,246

 
$
5,675,241

 
$
3,455,708

 
$
41,368,195



 
Three Months Ended 31, 2017
 
Black Oil
 
Refining & Marketing
 
Recovery
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
Northern United States
$
5,753,012

 
$

 
$

 
$
5,753,012

Southern United States
19,051,071

 
5,394,041

 
4,572,490

 
29,017,602

 
$
24,804,083

 
$
5,394,041

 
$
4,572,490

 
$
34,770,614

Sources of Revenue
 
 
 
 
 
 
 
Petroleum products
$
24,804,083

 
$
5,394,041

 
$
3,667,168

 
$
33,865,292

Metals

 

 
905,322

 
905,322

Total revenues
$
24,804,083

 
$
5,394,041

 
$
4,572,490

 
$
34,770,614



Petroleum products- We derive a majority of our revenues from the sale of recovered/re-refined petroleum products, which include Base Oil, VGO (Vacuum Gas Oil), Pygas, Gasoline, Cutterstock and Fuel Oils.

Metals- Consists 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.
v3.8.0.1
ACCOUNTS RECEIVABLE
3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE

Accounts receivable, net, consists of the following at March 31, 2018 and December 31, 2017:

 
March 31, 2018 (Unaudited)
 
December 31, 2017
Accounts receivable trade
$
12,867,367

 
$
12,925,059

Allowance for doubtful accounts
(1,630,070
)
 
(1,636,068
)
Accounts receivable trade, net
$
11,237,297

 
$
11,288,991



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 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 30 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. The Company does not have any significant off balance sheet credit exposure related to its customers.
v3.8.0.1
LINE OF CREDIT AND LONG-TERM DEBT
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
LINE OF CREDIT AND LONG-TERM DEBT
LINE OF CREDIT AND LONG-TERM DEBT

Credit and Guaranty Agreement and Revolving Credit Facility with Encina Business Credit, LLC
Effective February 1, 2017, we, Vertex Operating, and substantially all of our other operating subsidiaries, other than E-Source Holdings, LLC ("E-Source"), entered into a Credit Agreement (the “EBC Credit Agreement”) with Encina Business Credit, LLC as agent (the “Agent” or “EBC”) and Encina Business Credit SPV, LLC and CrowdOut Capital LLC as lenders thereunder (the “EBC Lenders”). Pursuant to the EBC Credit Agreement, and the terms thereof, the EBC Lenders agreed to loan us up to $20 million, provided that the amount outstanding under the EBC Credit Agreement at any time cannot exceed 50% of the value of the operating plant facilities and related machinery and equipment owned by us (not including E-Source).

Amounts borrowed under the EBC Credit Agreement bear interest at 12%, 13% or 14% per annum, based on the ratio of (a) (i) consolidated EBITDA for such applicable period minus (ii) capital expenditures made during such period, minus (iii) the aggregate amount of income taxes paid in cash during such period (but not less than zero) to (b) the sum of (i) debt service charges plus (ii) the aggregate amount of all dividend or other distributions paid on capital stock in cash for the most recently completed 12 month period (which ratio falls into one of the three following tiers: less than 1 to 1; from 1 to 1 to less than 1.45 to 1; or equal to or greater than 1.45 to 1, which together with the value below, determines which interest rate is applicable) and average availability under the Revolving Credit Agreement (defined below) (which falls into two tiers: less than $2.5 million and greater than or equal to $2.5 million, which together with the calculation above, determines which interest rate is applicable), as described in greater detail in the EBC Credit Agreement (increasing by 2% per annum upon the occurrence of an event of default). Interest on amounts borrowed under the EBC Credit Agreement is payable by us in arrears, on the first business day of each month, beginning on the first business day of the first full month following the closing, together with required $75,000 monthly principal repayments. We also have the right to make voluntary repayments of the amount owed under the EBC Credit Agreement in amounts equal to or greater than $100,000, from time to time. The interest rate is based on the LIBOR rate (1.66% at March 31, 2018) plus 6.50% per year.
    
The EBC Credit Agreement terminates on February 1, 2020, on which date we are required to repay the outstanding balance owed thereunder and any accrued and unpaid interest thereon.
        
The amounts borrowed under the EBC Credit Agreement are guaranteed by us and our subsidiaries, other than E-Source, pursuant to a Guaranty and Security Agreement (the “Guaranty and Security Agreement”), whereby we also pledged substantially all of our assets and all of the securities of our subsidiaries (other than E-Source) as collateral securing the amount due under the terms of the EBC Credit Agreement. We also provided EBC mortgages on our Marrero, Louisiana, and Columbus, Ohio facilities to secure the repayment of outstanding amounts and agreed to provide mortgages on certain other real property to be delivered post-closing. The post-closing mortgage properties provided were in Baytown, Pflugerville and Corpus Christi, Texas.
        
The EBC Credit Agreement contains customary representations, warranties and requirements for the Company to indemnify the EBC Lenders and their affiliates. The EBC Credit Agreement also includes various covenants (positive and negative) binding upon the Company, including, prohibiting us from undertaking acquisitions or dispositions unless they meet the criteria set forth in the EBC Credit Agreement, not incurring any capital expenditures in amount exceeding $3 million in any fiscal year that the EBC Credit Agreement is in place, and requiring us to maintain at least $2.5 million of borrowing availability under the Revolving Credit Agreement (defined below) in any 30 day period.
    
The EBC Credit Agreement includes customary events of default for facilities of a similar nature and size as the EBC Credit Agreement, including if an event of default occurs under any agreement evidencing $500,000 or more of indebtedness of the Company; we fail to make any payment when due under any material agreement; subject to certain exceptions, any judgment is entered against the Company in an amount exceeding $500,000; and also provides that an event of default occurs if a change in control of the Company occurs, which includes if (a) Benjamin P. Cowart, the Company’s Chief Executive Officer, Chairman of the Board and largest shareholder and Chris Carlson, the Chief Financial Officer of the Company, cease to own and control legally and beneficially, collectively, either directly or indirectly, equity securities in Vertex Energy, Inc., representing more than 15% of the combined voting power of all securities entitled to vote for members of the board of directors or equivalent on a fully-diluted basis, (b) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group of securities representing more than 30% of the aggregate ordinary voting power represented by the issued and outstanding securities of Vertex Energy, Inc., or (c) during any period of 12 consecutive months, a majority of the members of the board of directors of the Company cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body (collectively “Events of Default”). An event of default under the Revolving Credit Agreement (defined below), is also an event of default under the EBC Credit Agreement.
    
Effective February 1, 2017, we, Vertex Operating and substantially all of our operating subsidiaries, other than E-Source, entered into a Revolving Credit Agreement (the “Revolving Credit Agreement” and together with the EBC Credit Agreement, the "Credit Agreements") with Encina Business Credit SPV, LLC as lender (“Encina”) and EBC as the administrative agent. Pursuant to the Revolving Credit Agreement, and the terms thereof, Encina agreed to loan us, on a revolving basis, up to $10 million, subject to the terms of the Revolving Credit Agreement and certain lending ratios set forth therein, which provide that the amount outstanding thereunder cannot exceed an amount equal to the total of (a) the lesser of (A) the value (as calculated in the Revolving Credit Agreement) of our inventory which are raw materials or finished goods that are merchantable and readily saleable to the public in the ordinary course of our business (“EBC Eligible Inventory”), net of certain inventory reserves, multiplied by 85% of the appraised value of EBC Eligible Inventory, or (B) the value (as calculated in the Revolving Credit Agreement) of EBC Eligible Inventory, net of certain inventory reserves, multiplied by 65%, subject to a ceiling of $4 million, plus (b) the face amount of certain accounts receivables (net of certain reserves applicable thereto) multiplied by 85% (subject to adjustment as provided in the Revolving Credit Agreement); minus (c) the then-current amount of certain reserves that the agent may determine necessary for the Company to maintain. At March 31, 2018, the maximum amount available to be borrowed was $5,760,612, based on the above borrowing base calculation.
Amounts borrowed under the Revolving Credit Agreement bear interest, subject to the terms of the Revolving Credit Agreement, at the one month LIBOR interest rate then in effect, subject to a floor of 0.25% (which interest rate is currently approximately 1.66% per annum), plus an additional 6.50% per annum (increasing by 2% per annum upon the occurrence of an event of default), provided that under certain circumstances amounts borrowed bear interest at the higher of (a) the “prime rate”; (b) the Federal Funds Rate, plus 0.50%; and (c) the LIBOR Rate for a one month interest period, plus 1.00%. Interest on amounts borrowed under the Revolving Credit Agreement is payable by us in arrears, on the first business day of each month, beginning on the first business day of the first full month following the closing.
The Revolving Credit Agreement terminates on February 1, 2020, on which date we are required to repay the outstanding balance owed thereunder and any accrued and unpaid interest thereon. Borrowings under a revolving credit agreement that contain a subjective acceleration clause and also require a borrower to maintain a lockbox with the lender (whereby lockbox receipts may be applied to reduce the amount outstanding under the revolving credit agreement) are considered short-term obligations. As a result, the debt is classified as a current liability at March 31, 2018.
The amounts borrowed under the Revolving Credit Agreement are guaranteed by us and our subsidiaries, other than E-Source, pursuant to a separate Guaranty and Security Agreement, similar to the EBC Credit Agreement, described in greater detail above. We also provided Encina mortgages on our Marrero, Louisiana, and Columbus, Ohio facilities to secure the repayment of outstanding amounts.
The Revolving Credit Agreement contains customary representations, warranties and requirements for the Company to indemnify Encina and its affiliates. The Revolving Credit Agreement also includes various covenants (positive and negative) binding upon the Company, including, prohibiting us from undertaking acquisitions or dispositions unless they meet the criteria set forth in the Revolving Credit Agreement, not incurring any capital expenditures in amount exceeding $3 million in any fiscal year that the Revolving Credit Agreement is in place, and requiring us to maintain at least $2.5 million of borrowing availability under the Revolving Credit Agreement in any 30 day period.
The Revolving Credit Agreement includes customary events of default for facilities of a similar nature and size as the Revolving Credit Agreement, including the same Events of Default as are described above under the description of the EBC Credit Agreement.
A total of $11,282,537 of the amount initially borrowed under the EBC Credit Agreement and Revolving Credit Agreement was used to repay amounts owed under our previous financing agreements.
The principal balances of the EBC Credit Agreement and the Revolving Credit Agreement as of March 31, 2018 are $16,025,000 and $4,239,388, respectively.
Amendments to Credit Agreement
On December 15, 2017, we and Vertex Operating, entered into (a) a First Amendment to Credit Agreement, with the Agent, and lender thereunder; and (b) a Second Amendment to the Revolving Credit Agreement, with the Agent, and the lenders thereunder (collectively, the “Credit Agreement Amendments”).
 
The Credit Agreement Amendments amended the Credit Agreements to decrease the required minimum availability under the Credit Agreements to $1.5 million for periods prior to December 31, 2017 (effective as of November 5, 2017) and $2.5 million thereafter. Previously the Company was required to maintain minimum availability of at least $2.5 million at all times.

Texas Citizens Bank Loan Agreement

The Company has notes payable to Texas Citizens Bank bearing interest at 5.50% per annum, maturing on January 7, 2020.  The balances of the notes payable are $633,894 and $834,283 at March 31, 2018 and December 31, 2017, respectively.
Insurance Premiums

The Company financed insurance premiums through various financial institutions bearing interest rates from 4.00% to 4.52%. All such premium finance agreements have maturities of less than one year and have a balance of $337,833 at March 31, 2018 and $803,392 at December 31, 2017.

Capital Leases

On March 1, 2018, the Company obtained one capital lease. Payments are $908 per month for the three years and have reduced the capital lease obligation to $29,621 at March 31, 2018.

The Company's outstanding debt facilities as of March 31, 2018 and December 31, 2017 are summarized as follows:
Creditor
Loan Type
 
Origination Date
 
Maturity Date
 
Loan Amount
 
Balance on March 31, 2018
Balance on December 31, 2017
Encina Business Credit, LLC
Term Loan
 
February 1, 2017
 
February 1, 2020
 
$
20,000,000

 
$
16,025,000

$
14,750,000

Encina Business Credit SPV, LLC
Revolving Note
 
February 1, 2017
 
February 1, 2020
 
$
10,000,000

 
4,239,388

4,591,527

Well Fargo Equipment Lease
Capital Lease
 
March, 2018
 
March, 2021
 
$
30,408

 
29,621


Texas Citizens Bank
Term Note
 
January, 2015
 
January, 2020
 
$
2,045,500

 
633,894

834,283

Various institutions
Insurance premiums financed
 
Various
 
< 1 year
 
$
2,902,428

 
337,833

803,392

Total
 
 
 
 
 
 
 
 
$
21,265,736

$
20,979,202

Deferred finance cost, net
 
 
 
 
 
 
 
 
(1,094,198
)
(1,239,570
)
Total, net of deferred finance costs
 
 
 
 
 
 
 
 
$
20,171,538

$
19,739,632




Future contractual maturities of notes payable as of March 31, 2018 are summarized as follows:
Creditor
Year 1
 
Year 2
 
Year 3
 
Year 4
 
Year 5
 
Thereafter
Encina Business Credit, LLC
$
900,000

 
$
15,125,000

 
$

 
$

 
$

 
$

Encina Business Credit SPV, LLC
4,239,388

 

 

 

 

 

Well Fargo Equipment Lease
9,698

 
10,169

 
9,754

 

 

 

Texas Citizens Bank
501,851

 
132,043

 

 

 

 

Various institutions
337,833

 

 

 

 

 

Totals
5,988,770

 
15,267,212

 
9,754

 

 

 

Deferred finance costs, net
(581,488
)
 
(512,710
)
 

 

 

 

Totals, net of deferred finance costs
$
5,407,282

 
$
14,754,502

 
$
9,754

 
$

 
$

 
$

v3.8.0.1
EARNINGS PER SHARE
3 Months Ended
Mar. 31, 2018
Earnings Per Share [Abstract]  
EARNINGS PER SHARE
EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. Diluted earnings per share reflects 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 three months ended March 31, 2018 and 2017 excludes: 1) options to purchase 2,962,933 and 3,032,345 shares, respectively, of common stock, 2) warrants to purchase 7,353,061 and 7,353,061 shares, respectively, of common stock, 3) Series B Preferred Stock which is convertible into 3,479,016 and 3,327,028 shares, respectively, of common stock, 4) Series B1 Preferred Stock which is convertible into 12,947,916 and 12,579,522 shares, respectively, of common stock, 5) Series A Preferred Stock which is convertible into 453,567 and 462,644 shares, respectively, of common stock, and 6) Series C Preferred Stock, which is convertible into 3,156,800 and 3,156,800 shares of common stock, respectively.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the three months ended March 31, 2018 and 2017
 
Three Months Ended March 31,
 
2018
 
2017
Basic Earnings per Share
 
 
 
Numerator:
 
 
 
Net loss available to common shareholders
$
(3,455,829
)
 
$
(4,047,244
)
Denominator:
 
 
 
Weighted-average shares outstanding
33,063,732

 
32,953,812

Basic earnings per share
$
(0.10
)
 
$
(0.12
)
 
 
 
 
Diluted Earnings per Share
 
 
 
Numerator:
 
 
 
Net loss available to common shareholders
$
(3,455,829
)
 
$
(4,047,244
)
Denominator:
 
 
 
Weighted-average shares outstanding
33,063,732

 
32,953,812

Effect of dilutive securities
 
 
 
Stock options and warrants

 

Preferred Stock

 

Diluted weighted-average shares outstanding
33,063,732

 
32,953,812

Diluted earnings (loss) per share
$
(0.10
)
 
$
(0.12
)
v3.8.0.1
COMMON STOCK
3 Months Ended
Mar. 31, 2018
Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]  
COMMON STOCK
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 March 31, 2018, there were 33,158,176 common shares issued and outstanding.

Common stock activity during the three months ended March 31, 2018 was as follows:

On January 18, 2018, the Company issued 500,000 shares of common stock in connection with the conversion of 500,000 shares of Series B1 Convertible Preferred Stock, pursuant to the terms of such security.
v3.8.0.1
PREFERRED STOCK AND DETACHABLE WARRANTS
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
PREFERRED STOCK AND DETACHABLE WARRANTS
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. The number of designated shares of the Company's Series C Convertible Preferred Stock is 44,000. As of March 31, 2018 and December 31, 2017, there were 453,567 shares and 453,567 shares of Series A Preferred Stock issued and outstanding, respectively. As of March 31, 2018 and December 31, 2017, there were 3,479,016 and 3,427,597 shares of Series B Preferred Stock issued and outstanding, respectively. As of March 31, 2018 and December 31, 2017, there were 12,947,916 and 13,151,989 shares of Series B1 Preferred Stock issued and outstanding, respectively. As of both March 31, 2018 and December 31, 2017, there were 31,568 shares of Series C Preferred Stock issued and outstanding.
Series B Preferred Stock and Temporary Equity
Dividends on our Series B Preferred Stock accrue at an annual rate of 6% of the original issue price of the preferred stock ($3.10 per share), subject to increase under certain circumstances, and are payable on a quarterly basis. The dividends are payable by the Company, at the Company’s election, in registered common stock of the Company (if available), cash or in-kind in Series B Preferred Stock at $3.10 per share.

The Company has the option to redeem the outstanding shares of Series B Preferred Stock at $3.10 per share, plus any accrued and unpaid dividends on such Series B Preferred Stock redeemed, at any time beginning on June 24, 2017, and the Company is required to redeem the Series B Preferred Stock at $3.10 per share, plus any accrued and unpaid dividends, on June 24, 2020. Notwithstanding either of the foregoing, the Series B Preferred Stock may not be redeemed unless and until amounts outstanding under the Company’s senior credit facility have been paid in full.

The Warrants issued in connection with the Series B Preferred Stock (Series B Warrants) were valued using the Dynamic Black Scholes Merton formula pricing model that computes the impact of share dilution upon the exercise of the warrant shares at $7,028,067. In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing Liabilities from Equity, the convertible preferred shares are accounted for net outside of stockholders’ equity with the Warrants accounted for as liabilities at their fair value. The initial value assigned to the derivative warrant liability was recognized through a corresponding discount to the Series B Preferred Stock. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded in earnings. The initial valuation of the warrants resulted in a beneficial conversion feature on the convertible preferred stock of $5,737,796. The amounts related to the warrant discount and beneficial conversion feature will be accreted over the term as a deemed dividend. Fees in the amount of $1.4 million relating to the stock placement were netted against proceeds.
The following table represents the activity related to the Series B Preferred Stock, classified as Temporary Equity on the accompanying Consolidated Balance Sheet, during the three months ended March 31, 2018 and 2017:
 
2018
 
2017
Balance at beginning of period
$
7,190,467

 
$
5,676,467

Plus: discount accretion
254,069

 
206,916

Plus: dividends in kind
139,186

 
214,227

Balance at end of period
$
7,583,722

 
$
6,097,610



The Series B Warrants and Series B1 Warrants were revalued at March 31, 2018 and December 31, 2017 using the Dynamic Black Scholes model that computes the impact of a possible change in control transaction upon the exercise of the warrant shares at approximately $2,677,159 and $2,245,408, respectively. At March 31, 2018, the Series B Warrants and Series B1 Warrants were valued at approximately $905,484 and $1,771,675, respectively. The Dynamic Black Scholes Merton inputs used were: expected dividend rate of 0%, expected volatility of 76%-100%, risk free interest rate of 2.33% (Series B Warrants) and 2.54% (Series B1 Warrants), and expected term of 2.22 years (Series B Warrants) and 3.61 years (Series B1 Warrants).
At both March 31, 2018 and December 31, 2017, a total of $139,186 and $139,186 of dividends were accrued on our outstanding Series B Preferred Stock. During the three months ended March 31, 2018 and 2017, we paid dividends in-kind in additional shares of Series B Preferred Stock of $139,186 and $214,227, respectively.
Series B1 Preferred Stock and Temporary Equity

Dividends on our Series B1 Preferred Stock accrue at an annual rate of 6% of the original issue price of the preferred stock ($1.56 per share), subject to increases if certain EBITDA thresholds are not met, and are payable on a quarterly basis. The dividends are payable by the Company, at the Company’s election, in registered common stock of the Company (if available), cash, or in-kind in Series B Preferred Stock at $1.56 per share. At March 31, 2018, the EBITDA thresholds were not met resulting in a 9% dividend rate.

The Company has the option to redeem the outstanding shares of Series B1 Preferred Stock at $1.72 per share, plus any accrued and unpaid dividends on such Series B1 Preferred Stock redeemed, at any time beginning on June 24, 2017, and the Company is required to redeem the Series B1 Preferred Stock at $1.56 per share, plus any accrued and unpaid dividends, on June 24, 2020. Notwithstanding either of the foregoing, the Series B1 Preferred Stock may not be redeemed unless and until amounts outstanding under the Company’s senior credit facility have been paid in full.

The Warrants issued in connection with Series B1 Preferred Stock offering (Series B1 Warrants) were initially valued using the Dynamic Black Scholes Merton formula pricing model that computes the impact of share dilution upon the exercise of the May 2016 Warrant shares at $2,867,264. In accordance with ASC 815-40-25 and ASC 815-10-15 Derivatives and Hedging and ASC 480-10-25 Liabilities-Distinguishing Liabilities from Equity, the convertible Series B1 Preferred Stock shares are accounted for net outside of stockholders’ equity at $15,659,226 with the May 2016 Warrants accounted for as liabilities at their fair value. The initial value assigned to the derivative warrant liability was recognized through a corresponding discount to the Series B1 Preferred Stock. The value of the derivative warrant liability will be re-measured at each reporting period with changes in fair value recorded in earnings. This initial valuation of the warrants resulted in a beneficial conversion feature on the convertible preferred stock of $2,371,106. The amounts related to the warrant discount and beneficial conversion feature will be accreted over the term as a deemed dividend. Fees in the amount of $0.6 million relating to the stock placement were netted against proceeds.

The following table represents the activity related to the Series B1 Preferred Stock, classified as Temporary Equity on the accompanying Consolidated Balance Sheet, for the three months ended March 31, 2018, and 2017:

 
2018
 
2017
Balance at beginning of period
$
15,769,478

 
$
13,927,788

Less: conversions of shares to common
(595,563
)
 
(86,468
)
Plus: dividends-in-kind
281,527

 
292,553

Plus: discount accretion
203,784

 
193,313

Balance at end of period
$
15,659,226

 
$
14,327,186



As of March 31, 2018 and December 31, 2017, respectively, a total of $415,731 and $276,144 of dividends were accrued on our outstanding Series B1 Preferred Stock. During the three months ended March 31, 2018 and 2017, we paid dividends in-kind in additional shares of Series B Preferred Stock of $281,527 and $292,553, respectively.

The following is an analysis of changes in the derivative liability for the three months ended:

Level Three Roll-Forward
 
 
 
 
 
2018
2017
Balance at beginning of period
 
$
2,245,408

$
4,365,992

Change in valuation of warrants
 
431,751

(920,672
)
Balance at end of period
 
$
2,677,159

$
3,445,320

v3.8.0.1
SEGMENT REPORTING
3 Months Ended
Mar. 31, 2018
Segment Reporting [Abstract]  
SEGMENT REPORTING
SEGMENT REPORTING
 
The Company’s reportable segments include the Black Oil, Refining & Marketing and Recovery divisions. Segment information for the three months ended March 31, 2018 and 2017 is as follows:


THREE MONTHS ENDED MARCH 31, 2018
 
 
Black Oil
 
Refining &
Marketing
 
Recovery
 
Total
Revenues
 
$
32,237,246

 
$
5,675,241

 
$
3,455,708

 
$
41,368,195

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
(302,950
)
 
$
(343,385
)
 
$
86,240

 
$
(560,095
)


THREE MONTHS ENDED MARCH 31, 2017
 
 
Black Oil
 
Refining &
Marketing
 
Recovery
 
Total
Revenues
 
$
24,804,083

 
$
5,394,041

 
$
4,572,490

 
$
34,770,614

 
 
 
 
 
 
 
 
 
Income (loss) from operations
 
$
(2,670,103
)
 
$
15,706

 
$
(106,440
)
 
$
(2,760,837
)
v3.8.0.1
INCOME TAXES
3 Months Ended
Mar. 31, 2018
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Our effective tax rate of 0% on pretax income differs from the U.S. federal income tax of 21% because of the change in our valuation allowance.
The year to date loss at March 31, 2018 put the Company in an accumulated loss position for the cumulative 12 quarters then ended. For tax reporting purposes, we have net operating losses ("NOLs") of approximately $57.9 million as of March 31, 2018 that are available to reduce future taxable income. In determining the carrying value of our net deferred tax asset, the Company considered all negative and positive evidence. The Company has incurred a pre-tax loss of approximately $2.2 million from January 1, 2018 through March 31, 2018. As a result, the Company created a full valuation allowance of 100% to offset the entire balances of deferred tax assets and deferred tax liabilities.
v3.8.0.1
DERIVATIVE INSTRUMENTS
3 Months Ended
Mar. 31, 2018
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE INSTRUMENTS
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 swap and futures arrangements for oil. In a commodity swap agreement, if the agreed-upon published third-party index price (“index price”) is lower than the swap fixed price, the Company receives the difference between the index price and the swap fixed price. If the index price is higher than the swap fixed price, the Company pays the difference. For 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 March 31, 2018, are summarized in the following table. The Company held no open contracts at December 31, 2017. The notional amount is equal to the total net volumetric derivative position during the period indicated. The fair value of the crude oil swap agreements is based on the difference between the strike price and the New York Mercantile Exchange futures price for the applicable trading months.

Contract Type
Contract Period
Weighted Average Strike Price (Barrels)
Remaining Volume (Barrels)
Fair Value
 
 
 
 
 
Swap
Jan. 2018- June 2018
$
55.37

80,000

$
(23,200
)
Swap
Jan. 2018- June 2018
$
81.59

80,000

$
(35,448
)
Futures
Jan. 2018- June 2018
$
81.10

110,000

$
(408,180
)


The carrying values of the Company's derivatives positions and their locations on the consolidated balance sheets as of March 31, 2018 are presented in the table below.

Balance Sheet Classification
Contract Type
2018
 
 
 
Current liabilities
Crude oil swaps
$
(58,648
)
 
Crude oil futures
(408,180
)
 
 
 
Total derivatives
 
$
(466,828
)
v3.8.0.1
SUBSEQUENT EVENTS
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

Issuance of Series B and B1 Preferred Stock Shares In-Kind

We paid the accrued dividends on our Series B Preferred Stock and Series B1 Preferred Stock, which were accrued as of March 31, 2018, in-kind by way of the issuance of 52,192 restricted shares of Series B Preferred Stock pro rata to each of the then holders of our Series B Preferred Stock in April 2018 and the issuance of 291,337 restricted shares of Series B1 Preferred Stock pro rata to each of the then holders of our Series B1 Preferred Stock in April 2018. If converted in full, the 52,192 shares of Series B Preferred Stock would convert into 52,192 shares of common stock and the 291,337 shares of Series B1 Preferred Stock would convert into 291,337 shares of common stock.

Options Granted

Effective April 12, 2018, the Board of Directors granted options to purchase a total of 687,000 shares of our common stock to several employees of the Company, vesting at 25% per year over four years.

Conversion of Series B Preferred Stock

On April 25, 2018, the Company issued 32,149 shares of common stock in connection with the conversion by a holder of 32,149 shares of our Series B Preferred Stock.

Conversion of Series B1 Preferred Stock

On April 25, 2018, the Company issued 133,264 shares of common stock in connection with the conversion by a holder of 133,264 shares of our Series B1 Preferred Stock.

Specialty Environmental Services

On April 30, 2018, the Company entered into and closed an Asset Purchase Agreement (the "APA") with Specialty Environmental Services ("SES") pursuant to which the Company agreed to buy substantially all of SES's customer relations, vehicles, equipment, supplies and tools in Texas for an aggregate purchase price of $269,826. We recognized all the consideration in tangible and intangible assets as of the purchase date.

Conversion of Series A Preferred Stock

On May 7, 2018, the Company issued 33,708 shares of common stock in connection with the conversion by a holder of 33,708 shares of our Series A Preferred Stock.
v3.8.0.1
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Policies)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Cash, Cash Equivalents and Restricted Cash
Cash, 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.

The Company early adopted the guidance in Accounting Standards Update (ASU) No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), in the third quarter of 2017, which requires restricted cash to be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statements of cash flows.
Inventory
Inventory

Inventories of products consist of feedstocks, refined petroleum products and recovered ferrous and non-ferrous metals and are reported at the lower of cost or market.   Cost is determined using the first-in, first-out (“FIFO”) method. The Company reviews its inventory commodities whenever events or circumstances indicate that the value may not be recoverable.
Impairment of long-lived assets
Impairment of long-lived assets
The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of the Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") regarding long-lived assets. It requires that long-lived assets be 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.
Fair value of financial instruments
Fair value of financial instruments
Under the FASB ASC, we are permitted to elect to measure financial instruments and certain other items at fair value, with the change in fair value recorded in earnings. We elected not to measure any eligible items using the fair value option. Consistent with the Fair Value Measurement Topic of the FASB ASC, we implemented guidelines relating to the disclosure of our methodology for periodic measurement of our assets and liabilities recorded at fair market value.
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:
Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;
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
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 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 contracts. In addition, the Company routinely monitors the creditworthiness of its counterparty.

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 at fair value.
Income Taxes
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.
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 sheets. 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. 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. Furthermore, the Company’s interpretation of complex tax laws may impact its recognition and measurement of current and deferred income taxes.
Derivative Transactions
Derivative Transactions
All derivative instruments are recorded on the accompanying balance sheets at fair value. These derivative transactions are not designated as cash flow hedges under FASB ASC 815, Derivatives and Hedges. Accordingly, these derivative contracts are marked-to-market and any changes in the estimated value of derivative contracts held at the balance sheet date are recognized in the accompanying statements of operations as net gain or loss on derivative contracts. 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.
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.
Debt Issuance Costs
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.
Reclassification of Prior Year Presentation
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 results of operations. 
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

The Company adopted early the guidance in ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (ASU 2016-18), in the third quarter of 2017 which requires restricted cash to be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statements of cash flows.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU No. 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU No. 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU No. 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB issued ASU No. 2015-14 which delayed the effective date of ASU No. 2014-09 by one year (effective for annual periods beginning after December 15, 2017). The Company adopted ASU 2014-09 in the first quarter of fiscal 2018 using the modified retrospective method. The adoption of the standard did not have a material impact on our revenue recognition policies, and the Company has concluded that the most significant impact of the standard relates to the incremental disclosures required.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which requires lessees to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU No. 2016-02, lessor accounting is largely unchanged. ASU No. 2016-02 is effective for fiscal years beginning after December 15, 2018 with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases expiring before the earliest comparative period presented. Lessees and lessors may not apply a full retrospective transition approach. Management is currently reviewing our various leases to identify those affected by ASU No. 2016-02.
v3.8.0.1
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Schedule of Cash, Cash Equivalents, and Restricted Cash
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets to the same such amounts shown in the consolidated statements of cash flows.

 
March 31, 2018
 
March 31, 2017
Cash
$
52,876

 
$
6,596

Restricted cash

 
1,506,675

Cash, cash equivalents and restricted cash as shown in the consolidated statements of cash flows
$
52,876

 
$
1,513,271

v3.8.0.1
CONCENTRATIONS, SIGNIFICANT CUSTOMERS, COMMITMENTS AND CONTINGENCIES (Tables)
3 Months Ended
Mar. 31, 2018
Concentrations, Significant Customers, Commitments And Contingencies Disclosure [Abstract]  
Schedule of Concentrations
At March 31, 2018 and 2017 and for each of the three months then ended, the Company’s revenues and receivables were comprised of the following customer concentrations:
 
Three Months Ended March 31, 2018
 
Three Months Ended
March 31, 2017
 
% of
Revenues
 
% of
Receivables
 
% of
Revenues
 
% of
Receivables
Customer 1
42%
 
13%
 
8%
 
—%
Customer 2
9%
 
6%
 
11%
 
8%
Customer 3
7%
 
3%
 
15%
 
17%
Customer 4
4%
 
1%
 
5%
 
11%
Customer 5
—%
 
—%
 
22%
 
—%
Customer 6
—%
 
—%
 
—%
 
12%
 
At March 31, 2018 and 2017 and for each of the three months then ended, the Company's segment revenues were comprised of the following customer concentrations:

 
% of Revenue by Segment
 
% Revenue by Segment
 
Three Months Ended March 31, 2018
 
Three Months Ended March 31, 2017
 
Black Oil
 
Refining
 
Recovery
 
Black Oil
 
Refining
 
Recovery
Customer 1
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 2
—%
 
100%
 
—%
 
—%
 
100%
 
—%
Customer 3
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 4
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 5
100%
 
—%
 
—%
 
100%
 
—%
 
—%
Customer 6
—%
 
—%
 
100%
 
—%
 
—%
 
100%
v3.8.0.1
REVENUES (Tables)
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue
The following table presents our revenues disaggregated by revenue source:
 
Three Months Ended 31, 2018
 
Black Oil
 
Refining & Marketing
 
Recovery
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
Northern United States
$
8,837,230

 
$

 
$

 
$
8,837,230

Southern United States
23,400,016

 
5,675,241

 
3,455,708

 
32,530,965

 
$
32,237,246

 
$
5,675,241

 
$
3,455,708

 
$
41,368,195

Sources of Revenue
 
 
 
 
 
 
 
Petroleum products
$
32,237,246

 
$
5,675,241

 
$
377,142

 
$
38,289,629

Metals

 

 
3,078,566

 
3,078,566

Total revenues
$
32,237,246

 
$
5,675,241

 
$
3,455,708

 
$
41,368,195



 
Three Months Ended 31, 2017
 
Black Oil
 
Refining & Marketing
 
Recovery
 
Total
Primary Geographical Markets
 
 
 
 
 
 
 
Northern United States
$
5,753,012

 
$

 
$

 
$
5,753,012

Southern United States
19,051,071

 
5,394,041

 
4,572,490

 
29,017,602

 
$
24,804,083

 
$
5,394,041

 
$
4,572,490

 
$
34,770,614

Sources of Revenue
 
 
 
 
 
 
 
Petroleum products
$
24,804,083

 
$
5,394,041

 
$
3,667,168

 
$
33,865,292

Metals

 

 
905,322

 
905,322

Total revenues
$
24,804,083

 
$
5,394,041

 
$
4,572,490

 
$
34,770,614

v3.8.0.1
ACCOUNTS RECEIVABLE (Tables)
3 Months Ended
Mar. 31, 2018
Receivables [Abstract]  
Schedule of Accounts Receivable
Accounts receivable, net, consists of the following at March 31, 2018 and December 31, 2017:

 
March 31, 2018 (Unaudited)
 
December 31, 2017
Accounts receivable trade
$
12,867,367

 
$
12,925,059

Allowance for doubtful accounts
(1,630,070
)
 
(1,636,068
)
Accounts receivable trade, net
$
11,237,297

 
$
11,288,991

v3.8.0.1
LINE OF CREDIT AND LONG-TERM DEBT (Tables)
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Schedule of Outstanding Debt Facilities
The Company's outstanding debt facilities as of March 31, 2018 and December 31, 2017 are summarized as follows:
Creditor
Loan Type
 
Origination Date
 
Maturity Date
 
Loan Amount
 
Balance on March 31, 2018
Balance on December 31, 2017
Encina Business Credit, LLC
Term Loan
 
February 1, 2017
 
February 1, 2020
 
$
20,000,000

 
$
16,025,000

$
14,750,000

Encina Business Credit SPV, LLC
Revolving Note
 
February 1, 2017
 
February 1, 2020
 
$
10,000,000

 
4,239,388

4,591,527

Well Fargo Equipment Lease
Capital Lease
 
March, 2018
 
March, 2021
 
$
30,408

 
29,621


Texas Citizens Bank
Term Note
 
January, 2015
 
January, 2020
 
$
2,045,500

 
633,894

834,283

Various institutions
Insurance premiums financed
 
Various
 
< 1 year
 
$
2,902,428

 
337,833

803,392

Total
 
 
 
 
 
 
 
 
$
21,265,736

$
20,979,202

Deferred finance cost, net
 
 
 
 
 
 
 
 
(1,094,198
)
(1,239,570
)
Total, net of deferred finance costs
 
 
 
 
 
 
 
 
$
20,171,538

$
19,739,632



Schedule of Future Maturities of Notes Payable
Future contractual maturities of notes payable as of March 31, 2018 are summarized as follows:
Creditor
Year 1
 
Year 2
 
Year 3
 
Year 4
 
Year 5
 
Thereafter
Encina Business Credit, LLC
$
900,000

 
$
15,125,000

 
$

 
$

 
$

 
$

Encina Business Credit SPV, LLC
4,239,388

 

 

 

 

 

Well Fargo Equipment Lease
9,698

 
10,169

 
9,754

 

 

 

Texas Citizens Bank
501,851

 
132,043

 

 

 

 

Various institutions
337,833