NOTE 3. ACQUISITIONS

MGI

On April 4, 2019, we acquired substantially all of the assets comprising the business of MGI Grain Processing, LLC, a Minnesota limited liability company, now conducting business as MGI Grain Incorporated (MGI) for an aggregate purchase price of $3.8 million. The purchase price included $0.3 million deposited in an escrow account at closing which was subsequently released to the sellers in June 2019. MGI owns and operates a grain mill and processing facility in East Grand Forks, Minnesota. We acquired MGI as part of our strategy to expand our product portfolio. The acquisition has been accounted for as a business combination. The results of MGI’s operations are included in our consolidated financial statements beginning April 4, 2019. In 2019, we incurred $0.1 million of MGI acquisition-related costs which are included in selling, general and administrative expenses.

The purchase price for MGI was subject to adjustment if the estimated closing working capital with respect to the assets purchased and the liabilities assumed was different than the actual closing working capital, as defined in the purchase agreement. The seller of MGI paid a working capital adjustment of $18 thousand in 2019.The following table summarizes the purchase price allocation, the consideration transferred to acquire MGI and the amounts of identified assets acquired and liabilities assumed (in thousands).

	Estimated at June 30, 2019			Adjustments		Final as of December 31, 2019
Cash	$	3,795		$	-	$	3,795
Working capital adjustment to purchase price		(38	)		20		(18	)
Total fair value of consideration transferred		3,757			20		3,777
Accounts receivable		591			-		591
Inventories		149			-		149
Deposits and other current assets		4			8		12
Property and equipment		1,560			-		1,560
Customer relationship		930			-		930
Other finite-lived intangible assets		35			-		35
Accounts payable		(219	)		-		(219	)
Finance lease liabilities		(18	)		-		(18	)
Net recognized amounts of identifiable assets acquired and liabilities assumed		3,032			8		3,040
Goodwill	$	725		$	12	$	737

In the fourth quarter of 2019, our appraiser finalized certain fair value calculations and we completed our review of the calculations. The fair value of MGI’s trade receivables at acquisition, equaled the gross amount of trade receivables. The fair value of the customer relationship intangible at acquisition was estimated using an income approach based on expected future cash flows. As discussed in Note 9, we are amortizing the customer relationship intangible to expense over the 15-year period of expected future economic benefit, in proportion to the discounted expected future cash flows used to estimate the value of the intangible at acquisition. Goodwill primarily was attributed to intangible assets that do not qualify for separate recognition and synergies generated by MGI when combined with our existing operations. The $0.7 million allocated to goodwill is deductible for tax purposes over the next fifteen years.

Our revenues for 2019 include $1.9 million related to the acquired MGI business. Our net loss for 2019 includes $0.3 million of net loss from the acquired MGI business. The following table provides unaudited pro forma information for the periods presented as if the MGI acquisition had occurred January 1, 2018.

	Year Ended December 31
	2019			2018
Revenues (in thousands)	$	224,913		$	17,542
Loss from continuing operations (in thousands)	$	(13,432	)	$	(7,792	)
Loss per share - continuing operations	$	(0.42	)	$	(0.35	)
Weighted average number of common shares outstanding - basic and diluted		32,359,316			22,099,149

No adjustments have been made in the pro forma information for synergies that are resulting or planned from the MGI acquisition. The unaudited proforma information is not indicative of the results that may have been achieved had the companies been combined as of January 1, 2018, or of our future operating results.

Golden Ridge

In November 2018, we acquired substantially all of the assets comprising the business of Golden Ridge Rice Mills, LLC, now conducting business as Golden Ridge Rice Mills, Inc. (Golden Ridge). The primary activity of the business is the operation of a rice mill in Wynne, Arkansas. We acquired the business as part of our strategy to vertically integrate in order to leverage our proprietary technologies for producing SRB and derivative products. The acquisition has been accounted for as a business combination. The results of Golden Ridge’s operations are included in our consolidated financial statements beginning November 28, 2018. In 2018, we incurred $0.1 million of Golden Ridge acquisition-related costs which are included in selling, general and administrative expenses.

The purchase price for Golden Ridge was subject to adjustment if the estimated working capital with respect to the assets purchased and the liabilities assumed at the time of closing was different than the actual closing working capital, as defined in the purchase agreement. We revised our preliminary estimate of the working capital adjustment as indicated in the table below.The following table summarizes the purchase price allocation as of closing and as revised (in thousands, except share and per share amounts).

	Estimated at Acquisition and as of December 31, 2018			Adjustments			Final as of December 31, 2019
1,666,667 shares of common stock, at fair value of $3.00 per share at closing	$	5,000		$	-		$	5,000
Golden Ridge financial liabilities paid for the seller		2,661			-			2,661
Cash		250			-			250
Note payable to seller		609			-			609
Working capital adjustment to purchase price		(1,147	)		584			(563	)
Total fair value of consideration transferred		7,373			584			7,957

Cash		409			(63	)		346
Accounts receivable		1,587			87			1,674
Inventories		103			-			103
Property and equipment		5,092			-			5,092
Accounts payable		(222	)		110			(112	)
Commodities payable		(2,559	)		432			(2,127	)
Accrued liabilities		(12	)		12			-
Lease liabilities		(104	)		-			(104	)
Equipment notes payable		(99	)		6			(93	)
Net recognized amounts of identifiable assets acquired and liabilities assumed		4,195			584			4,779
Goodwill	$	3,178		$	-		$	3,178

The 1,666,667 shares issued at closing of our purchase of Golden Ridge included 380,952 shares that were deposited in an escrow account to be used to satisfy any indemnification obligations of the seller that may arise. As of December 31, 2018, the 380,952 shares remained in escrow. In July 2019, we reached an agreement to settle the $0.6 million working capital adjustment receivable and other claims with the sellers of Golden Ridge. As a result, (i) 340,000 shares of common stock held in the escrow account ($1.0 million fair value as of both the settlement date and the November 28, 2018, acquisition date) were returned to us and retired, (ii) the remaining $0.4 million note payable we owed to a seller was cancelled and (iii) certain open grain purchase contracts with entities related to a seller were terminated. We recorded a gain on the noncash settlement of $0.8 million in the third quarter of 2019, which is included in other income. In connection with the foregoing, a settlement agreement was entered into among the parties, all shares of common stock were distributed, and the escrow agreement was terminated.

The fair value of trade receivables for Golden Ridge at acquisition was $1.6 million, which was $0.1 million less than the value of gross trade receivables. Goodwill was primarily attributed to intangible assets that do not qualify for separate recognition and synergies generated by Golden Ridge’s integration with our other operations. Between December 31, 2018, and June 30, 2019, information was discovered requiring adjustments to the opening balance sheet of Golden Ridge. The adjustments resulted primarily from an overstatement of the opening balances of commodities payable and accounts payable at December 31, 2018. These balances were adjusted in the June 30, 2019, financial statements. The impact of the adjustments to our prior period financial statements is not considered significant. No additional adjustments have been made to the opening balances after June 30, 2019.

Our revenues for 2019 and 2018 includes $7.6 million and $0.9 million related to the acquired Golden Ridge business. Our net loss for 2019 and 2018 includes $2.8 million and $0.2 million, respectively, related to the acquired Golden Ridge business. The following table provides unaudited pro forma information for 2018 as if the acquisition had occurred January 1, 2017.

Revenues (in thousands)	$	30,289
Loss from continuing operations (in thousands)	$	(10,601	)
Loss per share - continuing operations	$	(0.45	)
Weighted average number of common shares outstanding - basic and diluted		23,615,131

No adjustments have been made in the pro forma information for synergies that are resulting or planned from the Golden Ridge acquisition. The unaudited proforma information is not indicative of the results that may have been achieved had the companies been combined as of January 1, 2017, or of our future operating results.