Acquisition of Eagle Alcohol – On January 14, 2022, Alto Ingredients, Inc. purchased 100% of the membership interests of Eagle Alcohol. The purchase price was $14.0 million in cash plus an estimated net working capital adjustment of $1.3 million in cash. The selling members of Eagle Alcohol are eligible to receive up to an additional $14.0 million of contingent consideration, payable through a combination of $9.0 million in cash over the next three years and an aggregate of $5.0 million in the Company’s common stock on the fourth and fifth year anniversaries of the closing date, subject to the satisfaction of certain conditions, including continued employment with the Company.

Eagle Alcohol specializes in break bulk distribution of specialty alcohols. Eagle Alcohol purchases bulk alcohol from suppliers, including the Company. Then it stores, denatures, packages, and resells alcohol products in smaller sizes, including tank trucks, totes, and drums, that garner a premium to bulk alcohols. Eagle Alcohol delivers products to customers in the beverage, food, pharma, and related-process industries via its own dedicated trucking fleet and common carrier. The acquisition will provide the Company further vertical integration and reach new markets in the specialty alcohol industry.

Eagle Alcohol’s unaudited results for 2021 generated $35.7 million in net sales and $3.6 million in pre-tax income. Assuming the acquisition had closed on January 1, 2021, the combined consolidated financials of the Company, on a pro forma unaudited basis, excluding any intangible amortization, would have resulted in net sales of $1,243.6 million, pre-tax income of $51.2 million, and diluted earnings per share of $0.66.

The allocation of the estimated purchase price has not been completed. Preliminarily, the Company estimates acquired tangible assets of approximately $8.6 million, acquired intangible assets, including any goodwill, of approximately $12.8 million and liabilities of approximately $6.1 million.

The Company expects to recognize certain identifiable intangible assets with respect to customers and tradename, which is ongoing and an estimate cannot be provided. In addition, a final valuation may include either an asset or liability associated with any material out-of-market contract positions.

The actual determination of the purchase price allocation on the closing date will be based on the final net tangible and intangible assets of Eagle Alcohol as of January 14, 2022, based on completion of the valuation of the fair value of such net assets. The Company anticipates that the ultimate purchase price allocation of balance sheet amounts such as current assets and liabilities, property and equipment, intangible assets and long-term assets and liabilities will differ from the preliminary assessment noted above, including any income tax impact. Any changes to the initial estimates of the fair value of the acquired assets and assumed liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill if net assets acquired are less than the purchase price. If net assets acquired exceed the purchase price, the residual amount will result in a bargain purchase gain.

Amendments to Notes Receivable – On February 23, 2022, the Company settled certain post-closing indemnification claims with ACEC, amending the Company’s notes receivable with ACEC. These amendments reduced the overall principal balance by $1.6 million and accelerated the maturity dates of the notes to June 30, 2022.