VERTEX ENERGY: Administration report and evaluation of the monetary scenario and working outcomes (kind 10-Q)

introduction

  This info ought to be learn together with the interim unaudited
monetary statements and the notes thereto included on this Quarterly Report on
Kind 10-Q, and the audited monetary statements and notes thereto and "  Half
II", "Merchandise 7, Administration's Dialogue and Evaluation of Monetary Situation and
Outcomes of Operations  " contained in our Annual Report on Kind 10-Okay for the
12 months ended December 31, 2020, filed with the Securities and Alternate Fee
on March 9, 2021 (the "Annual Report").

  Sure capitalized phrases used beneath and in any other case outlined beneath, have the
meanings given to such phrases within the footnotes to our unaudited consolidated
monetary statements included above below "  Half I - Monetary Data" -
"Merchandise 1. Monetary Statements  ".

  On this Quarterly Report on Kind 10-Q, we might depend on and check with info
concerning the refining, re-refining, used oil and oil and fuel industries in
common from market analysis experiences, analyst experiences and different publicly
out there info. Though we consider that this info is dependable, we
can not assure the accuracy and completeness of this info, and we've got
not independently verified any of it.

Our fiscal 12 months ends on December thirty first. Interim outcomes are introduced on a
quarterly foundation for the quarters ended March 31, June 30, and September thirtieth,
the primary quarter, second quarter and third quarter, respectively, with the
quarter ending December thirty first being referenced herein as our fourth quarter.
Fiscal 2020 means the 12 months ended December 31, 2020, whereas fiscal 2019 means
the 12 months ended December 31, 2019.

Please see the “Glossary of Sure Phrases” included by reference herein as Exhibit 99.1, for an inventory of abbreviations and definitions used all through this report.

Except the context requires in any other case, references to the "Firm," "we," "us,"
"our," "Vertex", "Vertex Vitality" and "Vertex Vitality, Inc." refer particularly to
Vertex Vitality, Inc. and its consolidated subsidiaries.

As well as, until the context signifies in any other case and for the needs of this report solely:

"Base Oil" means the lubrication grade oils initially produced from refining
crude oil (mineral base oil) or via chemical synthesis (artificial base oil).
Usually, only one% to 2% of a barrel of crude oil is appropriate for refining into
base oil. The vast majority of the barrel is used to provide gasoline and different
hydrocarbons;

“Cutterstock” means gasoline oil used as a mixing agent added to different fuels. For instance, to cut back viscosity;

"Crack" means breaking up crude oil into its element merchandise, together with
gases like propane, heating gasoline, gasoline, gentle distillates like jet gasoline,
intermediate distillates like diesel gasoline and heavy distillates like grease;

“Alternate Act” refers back to the Securities Alternate Act of 1934, as amended;

"Feedstock" means a product or a mix of merchandise derived from crude oil
and destined for additional processing within the refining or re-refining industries.
It's remodeled into a number of parts and/or completed merchandise;

“Gasoline Mix” means naphtha and varied distillates used to mix or mix with completed motor gasoline. These parts might embody a gasoline combination reformulated for oxygen combination (RBOB) however exclude oxygenates (alcohols and ethers), butane and pentanes (an natural compound with properties much like these of a butane);

“Hydrotreatment” means the method of reacting oil fractions with hydrogen within the presence of a catalyst to provide clear, high-value merchandise;

“IMO 2020” efficient January 1, 2020, the Worldwide Maritime Group
(IMO) has imposed a most sulfur content material of 0.5% in marine fuels globally;

"MDO" means marine diesel oil, which is a sort of gasoline oil and is a mix of
gasoil and heavy gasoline oil, with much less gasoil than intermediate gasoline oil utilized in
the maritime area;
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“Naphtas” means any of assorted mixtures of risky and extremely flammable liquid hydrocarbons used primarily as solvents and diluents and as uncooked supplies for conversion to gasoline;

"Pygas" means pyrolysis gasoline, an aromatics-rich gasoline stream produced in
sizeable portions by an ethylene plant. These vegetation are designed to crack a
variety of feedstocks, together with ethane, propane, naphtha, and gasoil. Pygas can
function a high-octane blendstock for motor gasoline or as a feedstock for an
aromatics extraction unit;

“SEC” or “Fee” means the United States Securities and Alternate Fee;

“Securities Act” refers back to the Securities Act of 1933, as amended; and

“VGO” refers to hoover fuel oil (often known as catalytic feed) – a feedstock for a fluid catalytic cracker sometimes present in a crude oil refinery and used to make gasoline. ° 2 and different by-products.

The place to seek out additional info

We file annual, quarterly, and present experiences, proxy statements and different
info with the Securities and Alternate Fee ("SEC"). Our SEC filings
(experiences, proxy and knowledge statements, and different info) can be found
to the general public over the Web on the SEC's web site at www.sec.gov and are
out there for obtain, freed from cost, quickly after such experiences are filed with
or furnished to the SEC, on the "Investor Relations," "SEC Filings" web page of our
web site at www.vertexenergy.com. Data on our web site isn't a part of this
Report, and we don't want to include by reference such info
herein. Copies of paperwork filed by us with the SEC are additionally out there from us
with out cost, upon oral or written request to our Secretary, who will be
contacted on the handle and phone quantity set forth on the duvet web page of
this Report.

Novel Coronavirus (COVID-19)

In December 2019, a novel pressure of coronavirus, which causes the infectious
illness often known as COVID-19, was reported in Wuhan, China. The World Well being
Group declared COVID-19 a "Public Well being Emergency of Worldwide
Concern" on January 30, 2020 and a world pandemic on March 11, 2020. In March
and April, many U.S. states and native jurisdictions started issuing 'stay-at-home'
orders, which proceed in varied types as of the date of this report.
However such 'stay-at-home' orders, up to now, our operations have for the
most half been deemed a vital enterprise below relevant governmental orders
based mostly on the vital nature of the merchandise we provide.

We promote services and products primarily within the U.S. home oil and fuel
commodity markets. All through the primary quarter of 2020, the {industry}
skilled a number of elements which lowered each the demand for, and costs of,
oil and fuel. First, the COVID-19 pandemic lowered world demand for
hydrocarbons, as social distancing and journey restrictions had been applied
internationally. Second, the lifting of Group of the Petroleum Exporting
Nations (OPEC)+ provide curtailments, and the related enhance in manufacturing
of oil, drove the worldwide provide of hydrocarbons increased via the primary quarter
of 2020. Because of each dynamics, costs for hydrocarbons declined 67% from
peak costs throughout the quarter. As well as, whereas world gross home product
(GDP) progress was impacted by COVID-19 throughout 2020 and the primary quarter of 2021,
we anticipate GDP to proceed to be impacted globally for at the least the early a part of
2021, on account of the COVID-19 pandemic. In consequence, we anticipate oil and fuel
associated markets will proceed to expertise important volatility in 2021. Our
objective via this downturn has been to stay disciplined in allocating capital
and to concentrate on liquidity and money preservation. We're taking the required
actions to right-size the enterprise for anticipated exercise ranges.

Because of the affect of the COVID-19 outbreak, a few of our feedstock
suppliers have completely or quickly closed their companies, restricted our
entry to their companies, or have skilled a decreased demand for companies.
Because of the above, and because of 'stay-at-home' and different social distancing
orders, in addition to the decline in U.S. journey attributable to COVID-19, we've got seen a
important decline within the quantity of feedstocks (particularly used oil) that we
have been capable of acquire, and due to this fact course of via our amenities. A
extended financial slowdown, interval of social quarantine (imposed by the
authorities or in any other case), or a continued interval of decreased journey because of
COVID-19 or the responses thereto, will seemingly have a cloth unfavourable adversarial
affect on our skill to provide merchandise, and consequently our revenues and
outcomes of operations.

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The complete extent of the affect of COVID-19 on our enterprise and operations
at the moment can't be estimated and can rely upon numerous elements together with
the scope and period of the worldwide pandemic, the efficacy of, skill to
manufacture a adequate quantity of, and the willingness of most people to
acquire, vaccines.

At present we consider that we've got adequate money readily available and can generate
adequate money via operations to assist our operations for the foreseeable
future; nonetheless, we are going to proceed to guage our enterprise operations based mostly on
new info because it turns into out there and can make adjustments that we take into account
vital in gentle of any new developments concerning the pandemic.

The pandemic is growing quickly and the total extent to which COVID-19 will
in the end affect us is dependent upon future developments, together with the period and
unfold of the virus, in addition to the affect of vaccines and virus mutations and
the potential seasonality of latest outbreaks.

Description of Enterprise Actions:
We're an environmental companies firm that recycles industrial waste streams
and off-specification business chemical merchandise. Our main focus is
recycling used motor oil and different petroleum by-products. We're engaged in
operations throughout your entire petroleum recycling worth chain together with
assortment, aggregation, transportation, storage, re-refinement, and gross sales of
aggregated feedstock and re-refined merchandise to finish customers. We function in three
segments:
(1) Black Oil,
(2) Refining and Advertising and marketing, and
(3) Restoration.
We at the moment present our companies in 15 states, primarily within the Gulf Coast,
Midwest and Mid-Atlantic areas of america. For the rolling
twelve-month interval ending March 31, 2021, we aggregated roughly 65.1
million gallons of used motor oil and different petroleum by-product feedstocks and
managed the re-refining of roughly 74.0 million gallons of used motor oil
with our proprietary vacuum fuel oil ("VGO") and Base Oil processes.
Our Black Oil phase collects and purchases used motor oil immediately from
third-party turbines, aggregates used motor oil from a longtime community of
native and regional collectors, and sells used motor oil to our clients to be used
as a feedstock or substitute gasoline for industrial burners. We function a refining
facility that makes use of our proprietary Thermal Chemical Extraction Course of ("TCEP")
and we additionally make the most of third-party processing amenities. TCEP's authentic function
was to re-fine used oil into marine cutterstock; nonetheless, between the third
quarter of 2015 and the third quarter of 2019, and for the reason that first quarter of
2020, the unique function of TCEP has not been economically viable and we've got
as an alternative been utilizing TCEP to re-fine used oil into marine cutterstock; previous to
transport to our facility in Marrero, Louisiana.
We additionally acquired our Marrero, Louisiana facility, which facility re-refines used
motor oil and in addition produces VGO and the Myrtle Grove re-refining complicated in
Belle Chasse, Louisiana (which is now owned by a particular function entity which we
personal an approximate 85% curiosity of) in Might 2014.
Our Refining and Advertising and marketing phase aggregates and manages the re-refinement of
used motor oil and different petroleum by-products and sells the re-refined merchandise
to finish clients.
Our Restoration phase features a generator options firm for the correct
restoration and administration of hydrocarbon streams in addition to metals which incorporates
transportation and marine salvage companies all through the Gulf Coast.
Black Oil Phase
Our Black Oil phase is engaged in operations throughout your entire used motor oil
recycling worth chain together with assortment, aggregation, transportation,
storage, refinement, and gross sales of aggregated feedstock and re-refined merchandise
to finish customers. We acquire and buy used oil immediately from turbines reminiscent of
oil change service stations, automotive restore retailers, manufacturing amenities,
petroleum refineries, and petrochemical manufacturing operations. We personal a fleet
of 41 assortment automobiles, which routinely go to turbines to gather and
buy used motor oil. We additionally mixture used oil from a various community of
roughly 50 suppliers who function comparable assortment companies to ours.
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We handle the logistics of transport, storage and supply of used oil to our
clients. We personal a fleet of 30 transportation vehicles and greater than 80
aboveground storage tanks with over 8.6 million gallons of storage capability.
These belongings are utilized by each the Black Oil phase and the Refining and
Advertising and marketing phase. As well as, we additionally make the most of third events for the
transportation and storage of used oil feedstocks. Sometimes, we promote used oil
to our clients in bulk to make sure environment friendly supply by truck, rail, or barge.
In lots of instances, we've got contractual buy and sale agreements with our
suppliers and clients, respectively. We consider these contracts are useful
to all events concerned as a result of it ensures {that a} minimal quantity is bought
from collectors and turbines, a minimal quantity is bought to our clients, and
we're capable of decrease our stock danger by a selection between the prices to
purchase used oil and the revenues acquired from the sale and supply of used
oil. Additionally, as mentioned above below "Description of Enterprise Actions", from
time to time, when market circumstances warrant (i.e., when oil costs are
sufficiently excessive), we've got used our proprietary TCEP expertise to re-refine
used oil into marine gasoline cutterstock, offered that we're at the moment utilizing such
expertise solely to pre-treat our used motor oil feedstock previous to transport to
our facility in Marrero, Louisiana. As well as, at our Marrero, Louisiana
facility, we produce a Vacuum Gasoline Oil (VGO) product that's bought to refineries
in addition to to the marine fuels market. At our Columbus, Ohio facility (Heartland
Petroleum), we produce a base oil product that's bought to lubricant packagers
and distributors.
Refining and Advertising and marketing Phase
Our Refining and Advertising and marketing phase is engaged within the aggregation of feedstock,
re-refining it into increased value-end merchandise, and promoting these merchandise to our
clients, in addition to associated transportation and storage actions. We
mixture a various mixture of feedstocks together with used motor oil, petroleum
distillates, transmix and different off-specification chemical merchandise. These
feedstock streams are bought from pipeline operators, refineries, chemical
processing amenities and third-party suppliers, and are additionally transferred from
our Black Oil phase. We've got a toll-based processing settlement in place with
KMTEX to re-refine feedstock streams, below our course, into varied finish
merchandise that we specify. KMTEX makes use of {industry} customary processing applied sciences
to re-refine our feedstocks into pygas, gasoline blendstock and marine gasoline
cutterstock. We promote all of our re-refined merchandise on to end-customers or
to processing amenities for additional refinement. As well as, we're
distributing refined motor fuels reminiscent of gasoline, blended gasoline merchandise and
diesel used as engine fuels, to 3rd occasion clients who sometimes resell these
merchandise to retailers and finish customers.
Restoration Phase
  The Firm's Restoration Phase features a generator options firm for the
correct restoration and administration of hydrocarbon streams, the gross sales and advertising
of Group III base oils and different petroleum-based merchandise, along with the
restoration and processing of metals.

Thermal chemical extraction course of

We personal the mental property for our patented TCEP. TCEP is a expertise
which makes use of thermal and chemical dynamics to extract impurities from used oil
which will increase the worth of the feedstock. We intend to proceed to develop our
TCEP expertise and design with the objective of manufacturing extra re-refined
merchandise, together with lubricating base oil.
TCEP differs from standard re-refining applied sciences, reminiscent of vacuum
distillation and hydrotreatment, by relying extra closely on chemical processes
to take away impurities somewhat than temperature and stress. Subsequently, the
capital necessities to construct a TCEP plant are sometimes a lot lower than a
conventional re-refinery as a result of massive feed heaters, vacuum distillation columns,
and a hydrotreating unit are usually not required. The tip product at the moment produced by
TCEP is used as gasoline oil cutterstock. Typical re-refineries produce
lubricating base oils or product grades barely decrease than base oil that may be
used as industrial fuels or transportation gasoline blendstocks.
  We at the moment estimate the fee to assemble a brand new, fully-functional,
business facility utilizing our TCEP expertise, with annual processing capability
of between 25 and 50 million gallons at one other location can be roughly
$10 - $15 million, which may fluctuate based mostly on throughput capability. The
facility infrastructure would require extra capitalized expenditures which
would rely upon the situation and website specifics of the ability. Our TCEP
expertise converts feedstock right into a low sulfur marine gasoline that may be bought
into the brand new 0.5% low sulfur marine gasoline specification mandated below
Worldwide Maritime Group (IMO) guidelines which went into impact on
January 1, 2020. As described above, as a result of decline in oil costs and
challenges in acquiring feedstock within the early a part of 2020, we've got been utilizing
TCEP for the needs of pre-treating our used motor oil feedstock previous to
transport to our facility in Marrero, Louisiana for the reason that first quarter of 2020.
We've got no present plans to assemble some other TCEP amenities at the moment.
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Services and products

We generate virtually all of our revenue from the sale of eight product classes. All of those merchandise are merchandise topic to various levels of product high quality and efficiency specs.

Base oil

Base oil is an oil to which different oils or substances are added to provide a lubricant. Often, the principle substance in lubricants, base oils, is refined from crude oil.

Pygas

Pygas, or pyrolysis gasoline, is a product that may be blended with gasoline as
an octane booster or that may be distilled and separated into its parts,
together with benzene and different hydrocarbons.

Industrial gasoline

Industrial gasoline is a distillate gasoline oil which is often a mix of decrease
high quality gasoline oils. It could possibly embody diesel fuels and gasoline oils reminiscent of No. 1, No.
2 and No. 4 diesel fuels which can be traditionally used for house heating and energy
era. Industrial gasoline is often a gasoline with low viscosity, in addition to
low sulfur, ash, and heavy metallic content material, making it a perfect mixing agent.

Distillates

Distillates are completed petroleum merchandise reminiscent of gasoline and diesel fuels.

Oil assortment companies

Oil assortment companies embody the gathering, dealing with, therapy and gross sales of
used motor oil and merchandise which embody used motor oil (reminiscent of oil filters)
that are collected from our clients.

Metals

Metals encompass recoverable ferrous and non-ferrous recyclable metals from
manufacturing and consumption. Scrap metallic will be recovered from pipes, barges,
boats, constructing provides, surplus tools, tanks, and different objects consisting
of metallic composition. These supplies are segregated, processed, cut-up and despatched
again to a metal mill for re-purposing.

Different re-refinery merchandise

Different refinery merchandise embody gross sales of asphalt, condensate, recovered merchandise and different petroleum merchandise.

VGO / Marine gasoline gross sales

VGO / Marine fuels gross sales relate to the sale of low sulfur fuels that meet IMO 2020 compliant marine fuels standards.

How the above product classes match into our three working segments (1) Black Oil; (2) Refining and advertising; and (3) Restoration, are proven beneath:

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                               Black Oil(1)    Refining and Advertising and marketing(2)    Restoration(3)
 Base oil                           X                                            X
 Pygas                                                     X
 Industrial gasoline                    X                      X
 Distillates                                               X
 Oil assortment companies            X
 Metals                                                                          X
 Different re-refinery merchandise         X                                            X
 VGO/Marine gasoline gross sales              X




(1) As mentioned in larger element above below "Black Oil Phase", the Black
Oil phase consists main of the sale of (a) petroleum merchandise which embody
base oil and industrial fuels-which encompass used motor oils, cutterstock and
gasoline oil generated by our amenities; (b) oil assortment services-which consist
of used oil gross sales, burner gasoline gross sales, antifreeze gross sales and repair fees; (c)
the sale of different re-refinery merchandise together with asphalt, condensate, recovered
merchandise, and used motor oil; (d) transportation revenues; and (e) the sale of
VGO (vacuum fuel oil)/marine gasoline.

(2) As mentioned in additional element above below “Refining and Advertising and marketing Phase”, the Refining and Advertising and marketing phase consists primarily of the sale of pygas; industrial fuels, that are produced in a third-party facility (KMTEX); and distillates.

(3) As mentioned in larger element above below "Restoration Phase", the Restoration
phase consists primarily of revenues generated from the sale of ferrous and
non-ferrous recyclable Metallic(s) merchandise which can be recovered from manufacturing
and consumption. It additionally contains revenues generated from buying and selling/advertising of
Group III Base Oils.


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RESULTS OF OPERATIONS
Description of Materials Monetary Line Objects:
Revenues
We generate revenues from three present working segments as follows:
BLACK OIL - Revenues from our Black Oil phase are comprised primarily of
product gross sales from our re-refineries and feedstock gross sales (used motor oil) which
are bought from turbines of used motor oil reminiscent of oil change retailers and
garages, in addition to a community of native and regional suppliers. Volumes are
consolidated for environment friendly supply after which bought to third-party re-refiners and
gasoline oil blenders for the export market. As well as, via used oil
re-refining, we re-refine used oil into totally different commodity merchandise. By way of
the operations at our Marrero, Louisiana facility, we produce a Vacuum Gasoline Oil
(VGO) product from used oil re-refining which is then bought by way of barge to crude
refineries to be utilized as an intermediate feedstock within the refining course of.
By way of the operations at our Columbus, Ohio facility, we produce a base oil
completed product which is then bought by way of truck or rail automotive to finish customers for
mixing, packaging and advertising of lubricants.
REFINING AND MARKETING - The Refining and Advertising and marketing phase generates revenues
referring to the gross sales of completed merchandise. The Refining and Advertising and marketing phase
gathers hydrocarbon streams within the type of petroleum distillates, transmix and
different chemical merchandise which have change into off-specification through the
transportation or refining course of. These feedstock streams are bought from
pipeline operators, refineries, chemical processing amenities and third-party
suppliers, after which processed at a third-party facility below our course. The
finish merchandise are sometimes three distillate petroleum streams (gasoline
blendstock, pygas and gasoline oil cutterstock), that are bought to main oil
firms or to massive petroleum buying and selling and mixing firms. The tip merchandise
are delivered by barge and truck to clients.
RECOVERY - The Restoration phase is a generator options firm for the correct
restoration and administration of hydrocarbon streams. We personal and function a fleet of
vehicles and different automobiles used for transport and dealing with tools and scrap
supplies.
Our revenues are affected by adjustments in varied commodity costs together with crude
oil, pure fuel, #6 oil and metals.
Price of Revenues
BLACK OIL - Price of revenues for our Black Oil phase are comprised primarily
of feedstock purchases from a community of suppliers. Different price of revenues
embody processing prices, transportation prices, buying and receiving prices,
analytical assessments, brokerage charges and commissions, and surveying and
storage prices.
REFINING AND MARKETING - The Refining and Advertising and marketing phase incurs price of
revenues referring to the acquisition of feedstock, buying and receiving prices,
and inspection and processing of the feedstock into gasoline blendstock, pygas
and gasoline oil cutter by a 3rd occasion. Price of revenues additionally contains dealer's
charges, inspection and transportation prices.
RECOVERY - The Restoration phase incurs price of revenues referring to the acquisition
of hydrocarbon merchandise, buying and receiving prices, inspection, and
transporting of metals and different salvage and supplies. Price of revenues additionally
contains dealer's charges, inspection and transportation prices.
Our price of revenues is affected by adjustments in varied commodity indices,
together with crude oil, pure fuel, #6 oil and metals. For instance, if the value
for crude oil will increase, the price of solvent components used within the manufacturing of
blended oil merchandise, and gasoline price for transportation price from third occasion
suppliers will usually enhance. Equally, if the value of crude oil falls,
these prices might also decline.
Common and Administrative Bills
Our common and administrative bills consist primarily of salaries and different
employee-related advantages for government, administrative, authorized, monetary, and
info expertise personnel, in addition to outsourced {and professional}
companies, hire, utilities, and associated bills at our headquarters, in addition to
sure taxes.
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Depreciation and Amortization Bills
Our depreciation and amortization bills are primarily associated to the
property, plant and tools and intangible belongings acquired in reference to
our Vertex Holdings, L.P. (previously Vertex Vitality, L.P.), a Texas restricted
partnership ("Holdings"), Omega Refining, LLC ("Omega Refining"), Warren Ohio
Holdings Co., LLC, f/okay/a Heartland Group Holdings, LLC ("Heartland"), Acadiana
Restoration, LLC, Nickco Recycling, Inc., Ygriega Environmental Companies, LLC,
Specialty Environmental Companies and Crystal Vitality, LLC acquisitions, described
in larger element in our 2020 Annual Report on Kind 10-Okay for the 12 months ended
December 31, 2020.
Depreciation and amortization expense attributable to price of revenues displays
the depreciation and amortization of the fastened belongings at our refineries alongside
with rolling inventory at our assortment branches.

Amortization expense attributable to working bills displays depreciation and amortization associated to our company and administrative places of work in addition to objects associated to Web expertise (IT) and intangible belongings.





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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2021 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2020

Beneath are our working outcomes for the three months ended.
March 31, 2021 in comparison with the identical interval in 2020.

                                                       Three Months Ended March 31,                  $ Change -
                                                                                                      Favorable            % Change - Favorable
                                                        2021                     2020               (Unfavorable)              (Unfavorable)
Revenues                                        $    58,083,993$ 36,203,429$   21,880,564                            60  %
Price of revenues (unique of depreciation and
amortization proven individually beneath)                 43,346,274               26,836,854             (16,509,420)                          (62) %
Depreciation and amortization attributable to
prices of revenues                                     1,347,820                1,178,594                (169,226)                          (14) %
Gross revenue*                                        13,389,899                8,187,981               5,201,918                            64  %

Working bills:
Promoting, common and administrative bills          7,926,580                6,700,518              (1,226,062)                          (18) %
Depreciation and amortization attributable to
working bills                                      482,869                  455,953                 (26,916)                           (6) %

Whole working bills                              8,409,449                7,156,471              (1,252,978)                          (18) %

Earnings from operations                                4,980,450                1,031,510               3,948,940                           383  %

Different revenue (expense):

Different revenue                                                  -                       80                     (80)                         (100) %
Acquire (loss) on asset gross sales                                1,424                        -                   1,424                           100  %
Acquire (loss) on change in worth of spinoff
legal responsibility                                            (1,780,203)               1,698,747              (3,478,950)                         (205) %

Curiosity expense                                       (236,333)                (340,086)                103,753                            31  %
Whole different revenue (expense)                         (2,015,112)               1,358,741              (3,373,853)                         (248) %

Earnings earlier than revenue tax                              2,965,338                2,390,251                 575,087                            24  %

Earnings tax profit (expense)                                  -                        -                       -                             -  %

Web revenue                                            2,965,338                2,390,251                 575,087                            24  %
Web revenue (loss) attributable to
non-controlling curiosity and redeemable
non-controlling curiosity                              1,990,969                 (398,609)              2,389,578                           599  %
Web revenue attributable to Vertex Vitality, Inc.  $       974,369$  2,788,860$   (1,814,491)                          (65) %



* The Firm modified its presentation of gross revenue, starting in its
Quarterly Report on Kind 10-Q for the quarter ended September 30, 2020, to
embody depreciation and amortization of our refineries. This alteration in
presentation had no impact on the beforehand reported outcomes of operations. The
disclosures above have been retroactively adjusted from the prior shows
to incorporate depreciation and amortization of our refineries.

Our revenues and price of revenues are considerably impacted by fluctuations in
commodity costs; will increase in commodity costs sometimes end in will increase in
income and price of revenues (i.e., feedstock acquisition prices). Our gross
revenue is to a big extent a perform of the market low cost we're capable of
acquire in buying feedstock, in addition to how effectively administration conducts
operations. Moreover, we use hedging devices to handle our publicity to
underlying commodity costs. In the course of the three months ended March 31, 2021, we
had a lack of $720,000 in our hedging devices as in comparison with a acquire of $4.4
million for the three months ended March 31, 2020. We acknowledge our hedging
actions from commodity derivatives in our price of products bought. In the course of the
three months ended March 31, 2021, in comparison with the identical interval in 2020, we noticed a
20% lower within the low cost we had been paying for feedstock into our refineries.
As well as, we noticed a 9% lower in working prices (inclusive of depreciation
and amortization) on a per barrel foundation for the primary quarter of 2021 as
in comparison with the identical interval in 2020.

  Whole revenues elevated by 60% for the three months ended March 31, 2021,
in comparison with the identical interval in 2020, due primarily to increased commodity costs
(commodity costs reached had been close to historic lows on the finish of the quarter
ended March 31,
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2020, on account of the COVID-19 pandemic) and elevated volumes at our
refineries; together with $16 million of income generated from our wholesale
distribution of gasoline, blended gasoline, and diesel to be used as engine gasoline to
function cars, vehicles, locomotives, and development tools, which
operations had been acquired in June 2020, in reference to our acquisition of
Crystal Vitality, LLC ("Crystal"), for the three months ended March 31, 2021,
in comparison with the identical interval in 2020. Whole quantity elevated 18% through the three
months ended March 31, 2021 in comparison with the identical interval in 2020. Volumes had been
impacted on account of feedstock availability particularly used motor oil, in
the general market. This quantity affect was largely because of lingering impacts
of the shelter in place orders within the areas during which we acquire used motor
oil and different merchandise on account of the COVID-19 pandemic, which immediately
impacted the era of used oil and petroleum merchandise.

In the course of the three months ended March 31, 2021, complete price of revenues (unique
of depreciation and amortization) was $43,346,274 in comparison with $26,836,854 for
the three months ended March 31, 2020, a rise of $16,509,420 or 62% from
the prior interval. The primary cause for the rise was the results of the
enhance in commodity costs, which impacted our feedstock pricing and the
extra price of gross sales associated to our Crystal operations. Our price of revenues
are a perform of the last word value we're required to pay to accumulate
feedstocks, how environment friendly we're in buying such feedstocks (which pertains to
every little thing from how environment friendly our assortment vehicles are of their assortment
routes to how effectively we function our amenities), and the price of
turn-arounds and different upkeep at our amenities.

We had promoting, common and administrative bills of $7,926,580 for the three
months ended March 31, 2021, in comparison with $6,700,518 from the prior 12 months's
interval, a rise of $1,226,062 or 18% from the prior 12 months's interval. This
enhance is primarily as a result of extra promoting, common and administrative
bills incurred through the interval on account of elevated personnel prices,
authorized bills, and insurance coverage bills associated to our enlargement of vehicles and
amenities via acquisitions and natural progress.

For the three months ended March 31, 2021, complete depreciation and amortization
expense attributable to price of revenues was $1,347,820, in comparison with $1,178,594
for the three months ended March 31, 2020, a rise of $169,226 primarily because of
extra investments in rolling inventory and facility belongings through the fourth
quarter of 2020, which elevated depreciation and amortization within the first
quarter of 2021.

We had gross revenue as a share of income of 23.1% for the three months
ended March 31, 2021, in comparison with gross revenue as a share of revenues of
22.6% for the three months ended March 31, 2020. The primary cause for the
enchancment was the slight enhance in volumes at our refineries, together with
will increase in commodity costs through the interval.

  Moreover, our per barrel margin elevated 38% for the three months ended
March 31, 2021, relative to the three months ended March 31, 2020. Our per
barrel margin is calculated by dividing the overall quantity of product bought (in
bbls) by complete gross revenue for the relevant interval ($13,389,899 for the 2021
interval versus $8,187,981 for the 2020 interval). This enhance was a results of the
enhancements in our product spreads associated to will increase in feedstock product
costs and reduces in working prices at our refining amenities, through the
three months ended March 31, 2021, in comparison with the identical interval throughout 2020.
Total, commodity costs had been up for the three months ended March 31, 2021,
in comparison with the identical interval in 2020. For instance, the typical posting (U.S.
Gulfcoast Residual Gas No. 6 3%) for the three months ended March 31, 2021,
elevated $14.91 per barrel from a three-month common of $37.64 for the three
months ended March 31, 2020 to $52.55 per barrel for the three months ended
March 31, 2021. The common posting (U.S. Gulfcoast Unleaded 87 Waterborne) for
the three months ended March 31, 2021 elevated $6.39 per barrel from a
three-month common of $59.61 for the three months ended March 31, 2020 to
$66.00 per barrel for the three months ended March 31, 2021.

We had revenue from operations of $4,980,450 for the three months ended March 31,
2021, in comparison with revenue from operations of $1,031,510 for the three months
ended March 31, 2020, a rise of $3,948,940 or 383% from the prior 12 months's
three-month interval. The rise in revenue from operations was largely as a result of
enhancements seen in commodity costs and general margin enchancment in our
completed merchandise together with general reductions in working bills at our
amenities together with will increase in fees all through our assortment operations.
As market circumstances change, the costs for our oil assortment companies will
fluctuate.
  We had curiosity expense of $236,333 for the three months ended March 31, 2021,
in comparison with curiosity expense of $340,086 for the three months ended March 31,
2020, a lower in curiosity expense of $103,753 or 31% from the prior interval,
because of having a decrease steadiness owed below our line of credit score and time period mortgage alongside
with a decrease rate of interest on the time period debt excellent through the three months
ended March 31, 2021, in comparison with the prior 12 months's interval. The Firm acquired
a complete of $21.0 million from the June 2019 and January 2020, Tensile
transactions, described in larger element above below   "    Half I    " -
"    Merchandise 1. Monetary Statements    " - "    Observe 14. Share Buy and
Subscription Agreements    "  , of which roughly $9.0 million was used to
pay down our debt obligations.
                                       10
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  We had a $1,780,203 loss on change in worth of spinoff legal responsibility for the
three months ended March 31, 2021, in reference to sure warrants granted
in Might 2016, as described in larger element in "  Observe 9. Most popular Inventory and
Removable Warrants  " to the unaudited consolidated monetary statements
included herein below "Half I"-"Merchandise 1 Monetary Statements", in comparison with a acquire
on change within the worth of our spinoff legal responsibility of $1,698,747 within the prior
12 months's interval (which additionally included warrants granted in June 2015, which had
expired as of December 31, 2020). This alteration was primarily as a result of fluctuation
available in the market value of our frequent inventory, warrant workout routines, and non-cash
accounting changes in connection therewith. This resulted in a big
change in non-cash expense for the interval, in comparison with the prior 12 months's interval.

We realized a acquire on asset gross sales of $ 1,424 for the three months ended March 31, 2021, in reference to the sale of apparatus in comparison with no acquire or loss on the sale of belongings through the interval of the earlier 12 months.

  We had internet revenue of $2,965,338 for the three months ended March 31, 2021,
in comparison with internet revenue of $2,390,251 for the three months ended March 31, 2020,
a rise in internet revenue of $575,087 or 24% from the prior interval. The primary
cause for the rise in internet revenue for the three months ended March 31, 2021,
in comparison with the three months ended March 31, 2020, was attributable to the
enhance in gross revenue as mentioned above, offset by the lower in acquire in
spinoff legal responsibility for the three months ended March 31, 2021 described above,
which is a non-cash adjustment.

The working revenue (loss) of every of our segments through the three months ended March 31, 2021 and 2020 was as follows:

                                       11
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                                                    Three Months Ended                    $ Change -
                                                         March 31,                         Favorable            % Change - Favorable
Black Oil Phase                               2021                  2020               (Unfavorable)              (Unfavorable)
Revenues                                   $ 32,158,248$ 29,531,370$    2,626,878                             9  %
Price of revenues (unique of
depreciation and amortization proven
individually beneath)                            19,836,446            20,066,240                 229,794                             1  %
Depreciation and amortization attributable
to prices of revenues                          1,074,260               936,895                (137,365)                          (15) %

Gross revenue*                                11,247,542             8,528,235               2,719,307                            32  %
Promoting common and administrative expense    6,421,696             5,411,222              (1,010,474)                          (19) %
Depreciation and amortization attributable
to working bills                           353,948               335,105                 (18,843)                           (6) %

Earnings from operations                     $  4,471,898$  2,781,908$    1,689,990                            61  %

Refining and Advertising and marketing Phase
Revenues                                   $ 19,273,952$  2,510,593$   16,763,359                           668  %
Price of revenues (unique of
depreciation and amortization proven
individually beneath)                            18,150,770             2,596,052             (15,554,718)                         (599) %
Depreciation and amortization attributable
to prices of revenues                            125,634               105,768                 (19,866)                          (19) %
Gross revenue*                                   997,548              (191,227)              1,188,775                           622  %
Promoting common and administrative expense      759,410               592,389                (167,021)                          (28) %
Depreciation and amortization attributable
to working bills                           108,471               100,398                  (8,073)                           (8) %
Earnings (loss) from operations              $    129,667$   (884,014)$    1,013,681                           115  %

Restoration Phase
Revenues                                   $  6,651,793$  4,161,466$    2,490,327                            60  %
Price of revenues (unique of
depreciation and amortization proven
individually beneath)                             5,359,058             4,174,562              (1,184,496)                          (28) %
Depreciation and amortization attributable
to prices of revenues                            147,926               135,931                 (11,995)                           (9) %
Gross revenue*                                 1,144,809              (149,027)              1,293,836                           868  %
Promoting common and administrative expense      745,474               696,907                 (48,567)                           (7) %
Depreciation and amortization attributable
to working bills                            20,450                20,450                       -                             -  %
Earnings (loss) from operations              $    378,885$   (866,384)$    1,245,269                           144  %



  * The Firm modified its presentation of gross revenue, starting in its
Quarterly Report on Kind 10-Q for the quarter ended September 30, 2020, to
embody depreciation and amortization of our refineries. This alteration in
presentation had no impact on the beforehand reported outcomes of operations. The
disclosures above have been retroactively adjusted from the prior shows
to incorporate depreciation and amortization of our refineries.

Our Black Oil phase generated revenues of $32,158,248 for the three months
ended March 31, 2021, with price of revenues (unique of depreciation and
amortization) of $19,836,446, and depreciation and amortization attributable to
price of revenues of $1,074,260. In the course of the three months ended March 31, 2020,
these revenues had been $29,531,370 with price of revenues (unique of depreciation
and amortization) of $20,066,240 and depreciation and amortization attributable
to price of revenues of $936,895. Earnings from operations improved for the three
months ended March 31, 2021, in comparison with 2020, on account of enhancements in
commodity costs which resulted in improved margins in addition to reductions in
working bills via our varied amenities in addition to by diligent
administration of our road collections and pricing.

Our Black Oil phase's quantity decreased roughly 7% through the three
months ended March 31, 2021, in comparison with the identical interval in 2020. This lower
was largely because of continued impacts of the shelter in place orders within the
areas during which we acquire used motor oil on account of the COVID-19
pandemic, which immediately impacted the era of used oil, which induced a
discount in volumes. The Heartland facility skilled decrease calls for for
completed merchandise through the three months ended March
                                       12
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31, 2021 in comparison with the identical interval in 2020. Volumes collected via our H&H
Oil, L.P. ("H&H Oil") (based mostly in Houston, Austin and Corpus Christi, Texas) and
Heartland (based mostly in Ohio and West Virginia) assortment amenities elevated 17%
through the three months ended March 31, 2021, in comparison with the identical interval in
2020. One in all our key initiatives continues to be a concentrate on rising our personal
volumes of collected materials and displacing the third-party oil processed in
our amenities. We began to see enhancements in our assortment volumes on the
finish of the interval.

  In the course of the three months ended March 31, 2021, our Refining and Advertising and marketing price
of revenues (unique of depreciation and amortization) had been $18,150,770, of
which the processing prices for our Refining and Advertising and marketing enterprise positioned at
KMTEX had been $420,420, and depreciation and amortization attributable to price of
revenues was $125,634. Revenues for a similar interval had been $19,273,952. In the course of the
three months ended March 31, 2020, our Refining and Advertising and marketing price of revenues
(unique of depreciation and amortization) had been $2,596,052, which included the
processing prices at KMTEX of $454,007, and depreciation and amortization
attributable to price of revenues was $105,768. Revenues for a similar interval had been
$2,510,593.

Our Refining phase contains the enterprise operations of our Refining and
Advertising and marketing operations, in addition to our belongings from Crystal in June 2020. With the
acquisition of the Crystal belongings, we now function as a wholesale distributer of
motor fuels which embody gasoline, blended gasoline and diesel. Revenues within the
Refining phase had been up 668% through the three months ended March 31, 2021, as
in comparison with the identical interval in 2020 largely on account of the added enterprise
line. Total quantity for the Refining and Advertising and marketing phase elevated 267%
through the three months ended March 31, 2021, as in comparison with the identical interval in
2020. This can be a results of a concentrate on the manufacturing of upper high quality completed
merchandise, which in flip has decreased the quantity of quantity being produced. In
addition, volumes had been barely impacted on account of 'stay-at-home' orders
through the interval. Our pygas volumes elevated 1% for the three months ended
March 31, 2021, as in comparison with the identical interval in 2020. Our gasoline oil cutter
volumes decreased 19% for the three months ended March 31, 2021, as in comparison with
the identical interval in 2020, because of decrease volumes of feedstock out there from third
occasion amenities within the Gulf coast area on account of climate delays. We've got
additionally needed to assess the amount of gasoline oil cutterstocks that we handle because of
enhanced high quality of merchandise being demanded within the market.

  Our Restoration phase generated revenues of $6,651,793 for the three months
ended March 31, 2021, with price of revenues (unique of depreciation and
amortization) of $5,359,058, and depreciation and amortization attributable to
price of revenues of $147,926. In the course of the three months ended March 31, 2020,
these revenues had been $4,161,466 with price of revenues (unique of depreciation
and amortization) of $4,174,562, and depreciation and amortization attributable
to price of revenues of $135,931. Earnings from operations elevated for the three
months ended March 31, 2021, in comparison with 2020, on account of elevated volumes
attributable to our Restoration phase and margins associated thereto, via our
varied amenities.

Our Restoration phase contains the enterprise operations of Vertex Restoration
Administration in addition to our Group III base oil enterprise. Vertex beforehand acted
as Penthol C.V. of the Netherlands aka Penthol LLC's (a Penthol subsidiary in
america) ("Penthol's") unique agent to supply advertising, gross sales,
and logistical duties of Group III base oil from the United Arab Emirates to the
United States from June 2016 to January 2021. Revenues for this phase
elevated 60% on account of a rise in volumes through the three months
ended March 31, 2021, in comparison with the identical interval in 2020. Volumes had been up in
our metals phase through the three months ended March 31, 2021, in comparison with the
similar interval throughout 2020, because of sure one-time tasks. This phase
periodically participates in mission work that's not ongoing thus we anticipate to
see fluctuations in income and gross revenue from this phase from interval to
interval.

The Firm purchases product/feedstock from third-party collectors in addition to
internally collected product utilizing its fleet of vehicles. Our long-term objective is to
acquire as a lot of our product/feedstock as doable as this helps to enhance
margins and in the end internet revenue of the Firm. The extra product/feedstock we
can acquire with our personal fleet and displace third-party purchases improves the
general profitability of the Firm via price reductions, as our internally
collected product/feedstock is usually cheaper than product/feedstock we've got
to buy from third-parties. Usually, the extra product/feedstock we're
required to accumulate from third-parties, the decrease our margins. Whereas the
breakdown between internally sourced and third-party sourced product/feedstock
has no impact on income (which is a perform of fluctuating product spreads),
it does affect price of revenues, and due to this fact our revenue earlier than
company promoting, common and administrative bills. Particularly, the next
variety of third-party sourced product/feedstock usually leads to will increase
to prices of revenues. Inventories are additionally affected to a restricted extent by
assortment and manufacturing values - the extra product we acquire, the larger our
inventories of product/feedstock, at the least till such product/feedstock is
processed into end-products. The stock ranges of our end-products are
decided based mostly on provide and demand, and the way shortly such merchandise will be
transported, and never sometimes depending on the quantity of merchandise/feedstock we
supply internally or externally.
                                       13
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The next desk units forth the excessive and low spot costs through the three
months ended March 31, 2021, for our key benchmarks.
2021
Benchmark                                      Excessive                 Date                  Low                   Date
U.S. Gulfcoast No. 2 Waterborne
({dollars} per gallon)                        $  1.79                     March 12       $  1.32                     January 4
U.S. Gulfcoast Unleaded 87 Waterborne
({dollars} per gallon)                        $  2.13                     March 11       $  1.36                     January 4
U.S. Gulfcoast Residual Gas No. 6 3%
({dollars} per barrel)                        $ 59.54                      March 5       $ 45.08                     January 4
NYMEX Crude oil ({dollars} per barrel)        $ 66.09                      March 5       $ 47.62                     January 4

Reported in Platt’s US Marketscan (Gulf Coast)



  The next desk units forth the excessive and low spot costs through the three
months ended March 31, 2020, for our key benchmarks.
2020
Benchmark                                      Excessive                  Date                  Low                  Date
U.S. Gulfcoast No. 2 Waterborne
({dollars} per gallon)                        $  1.95                     January 3       $  0.74                     March 18
U.S. Gulfcoast Unleaded 87 Waterborne
({dollars} per gallon)                        $  1.75                     January 3       $  0.40                     March 23
U.S. Gulfcoast Residual Gas No. 6 3%
({dollars} per barrel)                        $ 47.34                    January 29       $ 15.64                     March 31
NYMEX Crude oil ({dollars} per barrel)        $ 63.27                     January 6       $ 20.09                     March 30

Reported in Platt’s US Marketscan (Gulf Coast)



We noticed a rise in February and March of 2021, in every of the benchmark
commodities we monitor in comparison with the identical interval in 2020. The rise in market
costs was a results of the gradual opening up of states and marketplaces which
had been shut-down a 12 months in the past on account of COVID-19, which led to worldwide
shutdowns and halting of business and interpersonal exercise, as governments
world wide imposed rules in response to efforts to manage the
unfold of COVID-19, reminiscent of 'shelter-in-place' orders, quarantines, government
orders and comparable restrictions. In consequence, the worldwide financial system has been marked
by important slowdown and uncertainty, which has led to a precipitous decline
in oil costs in response to demand considerations, additional exacerbated by the value
battle amongst members of the Group of Petroleum Exporting Nations ("OPEC")
and different non-OPEC producer nations (collectively with OPEC members, "OPEC+")
through the first quarter of 2020 and world storage concerns. Shifting into
the second, third and fourth quarters of 2021, we anticipate that our outcomes of
operations will proceed to be considerably impacted by the value of, and
demand for oil, COVID-19 and the worldwide response thereto.

Our margins are a perform of the distinction between what we're capable of pay for
uncooked supplies and the market costs for the vary of merchandise produced. The
varied petroleum merchandise produced are sometimes a perform of crude oil
indices and are quoted on a number of exchanges such because the New York Mercantile
Alternate ("NYMEX"). These costs are decided by a world market and will be
influenced by many elements, together with however not restricted to produce/demand, climate,
politics, and world/regional stock ranges. As such, we can not present any
assurances concerning outcomes of operations for any future durations, as quite a few
elements exterior of our management have an effect on the costs paid for uncooked supplies and the
costs (for essentially the most half keyed to the NYMEX) that may be charged for such
merchandise. Moreover, for the close to time period, outcomes of operations shall be topic
to additional uncertainty, as the worldwide markets and exchanges, together with the
NYMEX, proceed to expertise volatility.

  As our rivals carry new applied sciences to {the marketplace}, which can
seemingly allow them to acquire increased values for the completed merchandise created
via their applied sciences from bought black oil feedstock, we anticipate
that they must pay extra for feedstock as a result of extra worth
acquired from their completed product (i.e., as their margins enhance, they're
capable of enhance the costs they're prepared to pay for feedstock). If we're
not capable of proceed to refine and enhance our applied sciences and acquire
efficiencies in our applied sciences, we may very well be negatively impacted by the power
of our rivals to carry new processes to market which compete with our
processes, in addition to their skill to outbid us for feedstock provides.
Moreover, if we're pressured to pay extra for feedstock, our money flows shall be
negatively impacted and our margins will lower.
                                       14
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Liquidity and capital assets

  The success of our present enterprise operations has change into depending on repairs
and upkeep to our amenities and our skill to make routine capital
expenditures, in addition to our skill to handle our margins that are a perform
of the distinction between what we're capable of pay or cost for uncooked supplies
and the market costs for the vary of merchandise produced. We additionally should keep
relationships with feedstock suppliers and end-product clients, and function
with environment friendly administration of overhead prices. By way of these relationships, we
have traditionally been capable of obtain quantity reductions within the procurement of
our feedstock, thereby growing the margins of our segments' operations. The
ensuing working money movement is essential to the viability and progress of our
present enterprise strains.

  We had complete belongings of $126,646,553 as of March 31, 2021, in comparison with
$122,099,958 at December 31, 2020. The rise was primarily because of workout routines of
warrants that offered money, together with will increase in accounts receivable and
stock ranges, through the three months ended March 31, 2021, in comparison with the
prior 12 months's interval.

  We had complete present liabilities of $27,459,290 as of March 31, 2021, in contrast
to $23,850,412 at December 31, 2020. We had complete liabilities of $59,247,427 as
of March 31, 2021, in comparison with complete liabilities of $60,809,023 as of December
31, 2020. The lower in present liabilities and complete liabilities was primarily
as a result of lower in excellent debt through the three months ended March 31,
2021, in comparison with the prior 12 months's interval.
  We had working capital of $7,944,465 as of March 31, 2021, in comparison with working
capital of $5,934,977 as of December 31, 2020. The rise in working capital
from December 31, 2020 to March 31, 2021 is principally as a result of era of
extra liquidity on account of warrant workout routines and the discount in debt
through the three months ended March 31, 2021 as described above.

  Our future working money flows will range based mostly on numerous elements, many
of that are past our management, together with commodity costs, the price of
recovered oil, and the power to show our stock. Different elements which have
affected and are anticipated to proceed to have an effect on earnings and money movement are
transportation, processing, and storage prices. Over the long run, our working
money flows may even be impacted by our skill to successfully handle our
administrative and working prices. Moreover, we might incur capital
expenditures associated to new TCEP amenities sooner or later (offered that none
are at the moment deliberate).

  Given the continuing COVID-19 pandemic, difficult market circumstances and up to date
market occasions leading to industry-wide spending cuts, we proceed to stay
targeted on sustaining a powerful steadiness sheet and satisfactory liquidity. Over the
close to time period, we plan to cut back, defer or cancel sure deliberate capital
expenditures and cut back our general price buildings commensurate with our
anticipated degree of actions. We consider that our money readily available, internally
generated money flows and availability below the Revolving Credit score Settlement will
be adequate to fund our operations and repair our debt within the close to time period. A
extended interval of weak, or a big lower in, {industry} exercise and
general markets, because of COVID-19 or in any other case, might make it tough to conform
with our covenants and the opposite restrictions within the agreements governing our
debt. Present world and market circumstances have elevated the potential for that
problem.

The Firm’s excellent credit score amenities at March 31, 2021 and December 31, 2020 are summarized as follows:

                                       15
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                                                                                                                                  Stability on March     Stability on
       Creditor              Mortgage Kind                Origination Date              Maturity Date             Mortgage Quantity             31, 2021      December 31, 2020
Encina Enterprise
Credit score, LLC            Time period Mortgage                   February 1, 2017             February 1, 2022            $ 20,000,000$    5,208,000    $  

5,433,000

Encina Enterprise Credit score
SPV, LLC               Revolving Observe              February 1, 2017             February 1, 2022            $ 10,000,000                       -       

133,446

Encina Enterprise
Credit score, LLC            Capex Mortgage                  August 7, 2020               February 1, 2022            $  2,000,000               1,286,603       

1,378,819

Wells Fargo Gear
Lease-Ohio             Finance Lease               April-Might, 2019              April-Might, 2024             $    621,000                 406,765           436,411
AVT Gear
Lease-Ohio             Finance Lease               April 2, 2020                April 2, 2023               $    466,030                 350,086           380,829
AVT Gear Lease-HH Finance Lease               Might 22, 2020                 Might 22, 2023                $    551,609                 414,632           450,564
John Deere Observe        Observe                        Might 27, 2020                 June 24, 2024               $    152,643                 122,063           131,303
Tetra Capital Lease    Finance Lease               Might, 2018                    Might, 2022                   $    419,690                 148,309       

172,235

Nicely Fargo Gear
Lease-VRM LA           Finance Lease               March, 2018                  March, 2021                 $     30,408                       -       

1,804

Texas Residents Financial institution    PPP Mortgage                    Might 5, 2020                  April 28, 2022              $  4,222,000               4,222,000       

4,222,000

                       Insurance coverage premiums
Numerous establishments   financed                    Numerous                      < 1 12 months                    $  2,902,428                 473,417         1,183,543
Whole                                                                                                                             $   12,631,875$   13,923,954

The longer term contractual maturities of notes payable are summarized as follows:

          Creditor               12 months 1               12 months 2              12 months 3            12 months 4            12 months 5            Thereafter
Encina Enterprise Credit score, LLC  $ 5,208,000          $         -          $       -          $      -          $      -          $         -

Encina Enterprise Credit score, LLC    1,286,603                    -                  -                 -                 -                    -
John Deere Observe                   37,528               38,459             39,413             6,663                 -                    -
Nicely Fargo Gear Lease-
Ohio                             122,458              128,908            135,698            19,701                 -                    -
AVT Gear Lease-Ohio         129,676              141,111             79,299                 -                 -                    -
AVT Gear Lease-HH           151,568              164,934             98,130                 -                 -                    -
Tetra Capital Lease               99,832               48,477                  -                 -                 -                    -

Texas Residents Financial institution            1,877,461            2,344,539                  -                 -                 -                    -
Numerous establishments             473,417                    -                  -                 -                 -                    -
Totals                       $ 9,386,543$ 2,866,428$ 352,540$ 26,364          $      -          $         -




Want for added funding

  Our re-refining enterprise would require important capital to design and
assemble any new amenities. The ability infrastructure can be a further
capitalized expenditure to those course of prices and would rely upon the situation
and website specifics of the ability.

  Moreover, as a part of our ongoing efforts to take care of a capital construction
that's carefully aligned with what we consider to be the potential of our enterprise
and targets for future progress, which is topic to cyclical adjustments in commodity
costs, we shall be exploring extra sources of exterior liquidity. The
receptiveness of the capital markets to an providing of debt or equities can not
be assured and could also be negatively impacted by, amongst different issues, debt
maturities, present market circumstances, and potential
                                       16
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stockholder dilution. The sale of extra securities, if undertaken by us and
if completed, might end in dilution to our shareholders. Nonetheless, such
future financing is probably not out there in quantities or on phrases acceptable to us,
or in any respect.

Along with the above, we might also search to accumulate extra companies,
amenities, operations or belongings and/or may take into account promoting belongings if a extra
strategic acquisition presents itself. Lastly, within the occasion we deem such
transaction in our greatest curiosity, we might enter right into a enterprise mixture or
comparable transaction sooner or later.

We may even want extra capital sooner or later to redeem our Collection B
Most popular Inventory and Collection B1 Most popular Inventory, which had a required redemption
date of June 24, 2020, offered that, as mentioned beneath below "  Threat
Elements  " - "We don't anticipate redeeming our Collection B and B1 Most popular Inventory
within the close to future.", we aren't contractually, or legally, capable of redeem such
inventory and don't anticipate having adequate money readily available to finish such
redemption within the close to time period. As a result of such most popular inventory was not redeemed on
June 24, 2020, the popular inventory accrues a ten% each year dividend (payable
in-kind on the possibility of the Firm), till such most popular inventory is redeemed or
transformed into frequent inventory.

In line with our dedication to maximise worth for all buyers, we've got
beforehand launched an inner assessment of strategic options for our
enterprise. These options might embody persevering with as a public standalone
group, going non-public or promoting sure belongings to a strategic accomplice,
topic to the assessment and approval of our Board of Administrators. There is no such thing as a formal
timeline for this course of, nor have we chosen anybody particular different at
this time. We'll present additional updates on the matter at such time that our
Board determines applicable.

  There's at the moment solely a restricted marketplace for our frequent inventory, and as such, we
anticipate that such market shall be illiquid, sporadic and topic to broad
fluctuations in response to a number of elements shifting ahead, together with, however not
restricted to:

(1) precise or anticipated adjustments in our working outcomes;

(2) the market and the volatility of the oil and fuel market;

(3) our skill or incapacity to generate new revenue; and

(4) the variety of shares in our public float.

  Moreover, as a result of our frequent inventory is traded on The NASDAQ Capital Market,
our inventory value could also be impacted by elements which can be unrelated or
disproportionate to our working efficiency. These market fluctuations, as
effectively as common financial, political and market circumstances, reminiscent of recessions,
rates of interest or worldwide foreign money fluctuations might adversely have an effect on the
market value of our frequent inventory. Moreover, at current, we've got a restricted
variety of shares in our public float, and in consequence, there may very well be excessive
fluctuations within the value of our frequent inventory.

  We consider that our inventory costs (bid, ask and shutting costs) might not relate
to the precise worth of our firm, and should not replicate the precise worth of our
frequent inventory. Shareholders and potential buyers in our frequent inventory ought to
train warning earlier than investing in our frequent inventory, and shouldn't
depend on the publicly quoted or traded inventory costs in figuring out our frequent
inventory worth, however ought to as an alternative decide the worth of our frequent inventory based mostly on
the data contained in our public experiences, {industry} info, and people
enterprise valuation strategies generally used to worth non-public firms.

  Money flows for the three months ended March 31, 2021 in comparison with the three
months ended March 31, 2020:
                                                                          Three Months Ended March 31,
                                                                           2021                     2020
Starting money, money equivalents and restricted money               $    10,995,169$  4,199,825
Web money offered by (utilized in):
Working actions                                                     2,189,096                3,115,008
Investing actions                                                    (1,017,379)                (491,409)
Financing actions                                                       359,943                9,571,772

Web enhance (lower) in money, money equivalents and restricted money

                                                          1,531,660               12,195,371
Ending money, money equivalents and restricted money                  $    12,526,829$ 16,395,196



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Web money offered by working actions was $2,189,096 for the three months
ended March 31, 2021, as in comparison with internet money utilized in working actions of
$3,115,008 through the corresponding interval in 2020. Our main sources of
liquidity are money flows from our operations and the supply to borrow
funds below our credit score and mortgage amenities. The first cause for the lower
in money offered by working actions for the three month interval ended
March 31, 2021, in comparison with the identical interval in 2020, was the fluctuation in
market and commodity costs through the three months ended March 31, 2021, an
enhance of $1,873,520 in accounts receivable and $2,540,005 in stock, and
$1,306,344 of internet money settlements on commodity derivatives.

Investing actions used money of $1,017,379 for the three months ended March
31, 2021, as in comparison with having used $491,409 of money through the corresponding
interval in 2020, due primarily to the acquisition of fastened belongings.

  Financing actions offered money of $359,943 for the three months ended
March 31, 2021, as in comparison with offering money of $9,571,772 through the
corresponding interval in 2020. Financing actions for the three months ended
March 31, 2021 had been comprised of proceeds from the train of warrants of
$1,652,022, offset by roughly $1.0 million used to pay down our long-term
debt, and funds on our line of credit score. Financing actions for the three
months ended March 31, 2020 had been comprised of contributions from the Tensile
transactions of $21.0 million, offset by roughly $8.1 million used to pay
down our long-term debt, and $3.3 million of funds on our line of credit score.

Additional info on our line of credit score, promissory notes and excellent long-term debt will be discovered below “Observe 6. Line of credit score and long-term debt” of the unaudited monetary statements included herein.

Crucial accounting insurance policies and use of estimates

Our monetary statements are ready in accordance with U.S. GAAP. The
preparation of those monetary statements requires administration to make estimates
and judgments that have an effect on the reported quantities of belongings, liabilities, revenues
and bills. Administration repeatedly evaluates its estimates and judgments,
together with these associated to income recognition, goodwill, intangible belongings,
long-lived belongings valuation, and authorized issues. Precise outcomes might differ from
these estimates. (See "Half I" - "Merchandise 1. Monetary Statements" - "  Observe 1.
Foundation of Presentation and Nature of Operations  " to the monetary statements
included herein).
  Impairment of long-lived belongings
The Firm evaluates the carrying worth and recoverability of its long-lived
belongings when circumstances warrant such analysis by making use of the provisions of
the FASB ASC concerning long-lived belongings. It requires that long-lived belongings be
reviewed for impairment at any time when occasions or adjustments in circumstances point out
that the carrying quantity of an asset is probably not recoverable via the
estimated undiscounted money flows anticipated to outcome from the use and eventual
disposition of the belongings. Every time any such impairment exists, an impairment
loss shall be acknowledged for the quantity by which the carrying worth exceeds the
honest worth. The Firm decided that no long-lived asset impairment existed
at March 31, 2021.
Leases
  In February 2016, the FASB issued Accounting Requirements Replace No. 2016-02 (ASU
2016-02), Leases (Matter 842). ASU 2016-02 requires firms to acknowledge lease
belongings and lease liabilities on the steadiness sheet and disclose key info
about leasing preparations.  We adopted ASU No. 2016-02, Leases (Matter 842)
efficient January 1, 2019 and elected sure sensible expedients which allow
us to not reassess whether or not present contracts are or comprise leases, to not
reassess the lease classification of any present leases, to not reassess
preliminary direct prices for any present leases, and to not separate lease and
nonlease parts for all courses of underlying belongings. We additionally made an
accounting coverage election to maintain leases with an preliminary time period of 12 months or
much less off of the steadiness sheet for all courses of underlying belongings. Extra
info and disclosures required by this new customary are contained in "Half
I" - "Merchandise 1. Monetary Statements" - "  Observe 13. Leases  ".

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Most popular Inventory Classification
A mandatorily redeemable monetary instrument shall be categorised as a legal responsibility
until the redemption is required to happen solely upon the liquidation or
termination of the reporting entity. A monetary instrument issued within the kind
of shares is mandatorily redeemable if it embodies an unconditional obligation
requiring the issuer to redeem the instrument by transferring its belongings at a
specified or determinable date (or dates) or upon an occasion sure to happen. A
monetary instrument that embodies a conditional obligation to redeem the
instrument by transferring belongings upon an occasion not sure to happen turns into
mandatorily redeemable-and, due to this fact, turns into a liability-if that occasion happens,
the situation is resolved, or the occasion turns into sure to happen. The Collection B
Most popular Inventory requires the Firm to redeem such most popular inventory on the fifth
anniversary of the issuance of the Collection B Most popular Inventory and the Collection B1
Most popular Inventory requires the Firm to redeem such most popular inventory on the identical
date because the Collection B Most popular Inventory, within the occasion such redemptions are allowed
pursuant to the Firm's senior credit score amenities and relevant legislation. SEC
reporting necessities present that any doable redemption exterior of the
management of the Firm requires the popular inventory to be categorised exterior of
everlasting fairness.
Redeemable Noncontrolling Curiosity
  As extra totally described in "  Observe 14. Share Buy and Subscription
Agreements  ", the Firm is occasion to place/name possibility agreements with the
holder of MG SPV's and Heartland SPV's non-controlling pursuits. The put
choices allow MG SPV's and Heartland SPV's non-controlling curiosity holders, at
any time on or after the sooner of (a) the fifth anniversary of the relevant
cut-off date of such issuances and (ii) the prevalence of sure triggering
occasions (an "MG Redemption" and "Heartland Redemption", as relevant) to require
MG SPV and Heartland SPV to redeem the non-controlling curiosity from the holder
of such curiosity. Per the agreements, the money buy value for such redeemed
Class B Items (MG SPV) and Class A Items (Heartland SPV) is the larger of
(y) the honest market worth of such items (with out low cost for illiquidity,
minority standing or in any other case) as decided by a certified third occasion agreed to
in writing by a majority of the holders searching for an MG SPV Redemption and
Heartland SPV Redemption and Vertex Working (offered that Vertex Working
nonetheless owns Class A Items (as to MG SPV) or Class B Items (as to Heartland SPV)
on such date, as relevant) and (z) the unique per-unit value for such Class
B Items/Class A Items plus any unpaid Class A/Class B desire. The desire
is outlined because the larger of (A) the mixture unpaid "Class B/Class A Yield"
(equal to an annual return of twenty-two.5% each year) and (B) an quantity equal to fifty
% (50%) of the mixture capital invested by the Class B/Class A Unit
holders. The agreements additionally allow the Firm to accumulate the non-controlling
curiosity from the holders thereof upon sure occasions. Relevant accounting
steering requires an fairness instrument that's redeemable for money or different
belongings to be categorised exterior of everlasting fairness whether it is redeemable (a) at a
fastened or determinable value on a hard and fast or determinable date, (b) on the possibility
of the holder, or (c) upon the prevalence of an occasion that's not solely inside
the management of the issuer. Primarily based on this steering, the Firm has categorised
the MG SPV and Heartland SPV non-controlling pursuits between the liabilities
and fairness sections of the accompanying consolidated steadiness sheets. If an
fairness instrument topic to the steering is at the moment redeemable, the
instrument is adjusted to its most redemption quantity on the steadiness sheet
date. If the fairness instrument topic to the steering isn't at the moment
redeemable however it's possible that the fairness instrument will change into redeemable
(for instance, when the redemption relies upon solely on the passage of time), the
steering permits both of the next measurement strategies: (a) accrete
adjustments within the redemption worth over the interval from the date of issuance (or
from the date that it turns into possible that the instrument will change into
redeemable, if later) to the earliest redemption date of the instrument utilizing
an applicable methodology, or (b) acknowledge adjustments within the redemption worth
instantly as they happen and modify the carrying quantity of the instrument to
equal the redemption worth on the finish of every reporting interval. The quantity
introduced in non permanent fairness ought to be a minimum of the preliminary quantity reported
in non permanent fairness for the instrument. As a result of the MG SPV and Heartland SPV
fairness devices will change into redeemable solely based mostly on the passage of time,
the Firm decided that it's possible that the MG SPV and Heartland SPV
fairness devices will change into redeemable. The Firm has elected to use the
second of the 2 measurement choices described above. An adjustment to the
carrying quantity of a non-controlling curiosity from the appliance of the above
steering doesn't affect internet revenue or loss within the consolidated monetary
statements. Slightly, such changes are handled as fairness transactions.

Variable Curiosity Entities

  The Firm has investments in sure authorized entities during which fairness
buyers wouldn't have (1) adequate fairness in danger for the authorized entity to
finance its actions with out extra subordinated monetary assist, (2) as
a gaggle, (the holders of the fairness funding in danger), wouldn't have both the
energy, via voting or comparable rights, to direct the actions of the authorized
entity that the majority considerably affect the entity's financial efficiency, or (3)
the duty to soak up the anticipated losses of the authorized entity or the precise to
obtain anticipated residual returns of the authorized entity. These sure authorized
entities are known as "variable curiosity entities" or "VIEs."
  The Firm consolidates the outcomes of any such entity during which it determines
that it has a controlling monetary curiosity. The Firm has a "controlling
monetary curiosity" in such an entity if the Firm has each the ability to
direct the actions that
                                       19
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most importantly have an effect on the VIE's financial efficiency and the duty to
take up the losses of, or proper to obtain advantages from, the VIE that may very well be
doubtlessly important to the VIE. On a quarterly foundation, the Firm reassesses
whether or not it has a controlling monetary curiosity in any investments it has in
these sure authorized entities.

Market danger

  Our revenues and price of revenues are affected by fluctuations within the worth of
vitality associated merchandise.  We try to mitigate a lot of the chance related
with the volatility of related commodity costs by utilizing our data of the
market to acquire feedstock at engaging prices, by effectively managing the
logistics related to our merchandise, by turning our stock over shortly
and by promoting our merchandise into markets the place we consider we will obtain the
best worth.

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