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Item 1A. Risk Factors

2021-03-26 compared with 2020-03-30 · 465 added, 577 removed, 37 unchanged (97% of the section changed)

Risk Factors.

deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the

5 unchanged sentences

If any of these known

or unknown risks or uncertainties actually occurs with material adverse effects on Pacific Ethanol, our business, financial condition,

or unknown risks or uncertainties actually occurs with material adverse effects on Alto Ingredients, our business, financial condition,

results of operations and/or liquidity could be seriously harmed.

2 unchanged sentences

Risks Related to our Business

There is substantial doubt as to our ability

to continue as a going concern.

As a result of

ethanol industry conditions that have negatively affected our business, we do not expect to have sufficient liquidity to meet

our anticipated working capital, debt service and other liquidity needs unless we successfully restructure

our debt, sell assets, experience a significant improvement in margins and/or obtain other sources of liquidity.

our 2019 financial statements include an explanatory paragraph by our independent registered public accounting firm

describing the substantial doubt as to our ability to continue as a going concern.

Although we are actively

pursuing a number of initiatives, including seeking to sell assets, there can be no assurance that we will be successful.

cannot sell assets and obtain sufficient liquidity in the near term, we may need to seek to protection under the U.S.

If we are unable

to timely implement our strategic initiatives and raise sufficient capital on suitable terms, we will likely have insufficient

liquidity to operate our business through the next twelve months, or earlier, resulting in a material adverse effect on our business,

prospects, financial condition and results of operations, which could result in a need to seek protection under the U.S.

We are engaged in

strategic initiatives to reduce our debt levels and provide additional liquidity to operate our business.

These initiatives will

likely require the prompt sale of certain production assets as well as other capital raising activities.

Financing, whether through

a sale of production assets or other capital raising activities, may not be available on a timely basis, in sufficient amounts,

on terms acceptable to us, or at all.

In addition, any equity financing may cause significant dilution to existing stockholders

and any debt financing or other financing of securities senior to our common stock will likely include financial and other covenants

that will restrict our flexibility, including our ability to pay dividends on our common stock.

We have entered into

a membership interest purchase agreement to sell our 73.93% ownership interest in Pacific Aurora, LLC to Aurora Cooperative Elevator

Pacific Aurora, LLC owns two ethanol production facilities and related assets located in Aurora, Nebraska.

unable to successfully close this transaction, which is subject to a financing condition in favor of ACEC and numerous customary

and other conditions to closing.

In addition, after working capital adjustments, our cash consideration at closing may be less

than expected.

If we are unable to

timely sell production assets or raise additional capital, or both, in sufficient amounts and on suitable terms, or if we do not

experience a sustained margin improvement, we will likely have insufficient liquidity to operate our business.

A failure to timely implement our

strategic initiatives to reduce our debt levels on suitable terms or our inability to satisfy our payment obligations under our

various credit facilities will have a material adverse effect on our business, prospects, financial condition and results of operations

and could result in a need to idle production at one or more operating facilities and/or seek protection under the U.S.

Code for all or some portion of our production assets and other subsidiaries, at the parent company level, or both.

The effects of the novel

coronavirus may further materially and adversely affect our business, results of operations and liquidity.

Last year’s

novel strain of coronavirus (COVID-19), has resulted in businesses suspending or substantially curtailing global operations and

travel, quarantines, and an overall substantial slowdown of economic activity.

Transportation fuels in particular, including ethanol,

have experienced significant price declines and reduced demand.

A further downturn in global economic growth, or recessionary

conditions in major geographic regions, will lead to reduced demand for ethanol and negatively affect the market prices of our

products, further materially and adversely affecting our business, results of operations and liquidity.

Our plant indebtedness

exposes us to many risks that could negatively impact our business, our business prospects, our liquidity and our cash flows and

results of operations.

Our plants located

in the Midwest have significant indebtedness.

The terms of our plant loans require amortizing payments of principal over the lives

of the loans and our borrowing availability under our plant credit facilities periodically and automatically declines through

the maturity dates of those facilities.

Our plant indebtedness could:

it more difficult to pay or refinance our debts as they become due during adverse economic

and industry conditions because any decrease in revenues could cause us to not have sufficient

cash flows from operations to make our scheduled debt payments;

our flexibility to pursue strategic opportunities or react to changes in our business

and the industry in which we operate and, consequently, place us at a competitive disadvantage

to our competitors who have less debt;

a substantial portion of our cash flows from operations to be used for debt service payments,

thereby reducing the availability of our cash flows to fund working capital, capital

expenditures, acquisitions, dividend payments and other general corporate purposes;

our ability to procure additional financing for working capital or other purposes.

Our term loans and

credit facilities also require compliance with numerous financial and other covenants.

In addition, our plant indebtedness bears

interest at variable rates.

An increase in prevailing interest rates would likewise increase our debt service obligations and

could materially and adversely affect our cash flows and results of operations.

Our ability to generate

sufficient cash to make all principal and interest payments when due, including an aggregate $40.0 million payment due on September

30, 2020 under our PE Pekin and ICP credit facilities, depends on our business performance, which is subject to a variety of factors

beyond our control, including the supply of and demand for ethanol and co-products, ethanol and co-product prices, the cost of

key production inputs, and many other factors incident to the ethanol production and marketing industry.

We cannot provide any

assurance that we will be able to timely satisfy such obligations.

Our failure to timely satisfy our debt obligations could have

a material adverse effect on our business, business prospects, liquidity, cash flows and results of operations.

We have incurred significant

losses and negative operating cash flow in the past and we may incur losses and negative operating cash flow in the future, which

may hamper our operations and impede us from expanding our business.

We have incurred significant

losses and negative operating cash flow in the past.

For the years ended December 31, 2019 and 2018, we incurred consolidated

net losses of approximately $101.3 million and $68.0 million, respectively.

For the year ended December 31, 2019, we incurred

negative operating cash flow of approximately $23.4 million.

We may incur losses and negative operating cash flow in the future.

We expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under our lines of credit

and proceeds from future financing activities, if any, to fund all of the cash requirements of our business.

Continued losses

and negative operating cash flow may hamper our operations and impede us from expanding our business.

Our results of operations

and our ability to operate at a profit is largely dependent on managing the costs of corn and natural gas and the prices of ethanol,

distillers grains and other ethanol co-products, all of which are subject to significant volatility and uncertainty.

Our results of operations

are highly impacted by commodity prices, including the cost of corn and natural gas that we must purchase, and the prices of ethanol,

distillers grains and other ethanol co-products that we sell.

Prices and supplies are subject to and determined by market and

other forces over which we have no control, such as weather, domestic and global demand, supply shortages, export prices and various

governmental policies in the United States and around the world.

As a result of price

volatility of corn, natural gas, ethanol, distillers grains and other ethanol co-products, our results of operations may fluctuate

substantially.

In addition, increases in corn or natural gas prices or decreases in ethanol, distillers grains or other ethanol

co-product prices may make it unprofitable to operate.

In fact, some of our marketing activities will likely be unprofitable in

a market of generally declining ethanol prices due to the nature of our business.

For example, to satisfy customer demands, we

maintain certain quantities of ethanol inventory for subsequent resale.

Moreover, we procure much of our inventory outside the

context of a marketing arrangement and therefore must buy ethanol at a price established at the time of purchase and sell ethanol

at an index price established later at the time of sale that is generally reflective of movements in the market price of ethanol.

As a result, our margins for ethanol sold in these transactions generally decline and may turn negative as the market price of

ethanol declines.

No assurance can be

given that corn or natural gas can be purchased at, or near, current or any particular prices or that ethanol, distillers grains

or other ethanol co-products will sell at, or near, current or any particular prices.

Consequently, our results of operations

and financial position may be adversely affected by increases in the price of corn or natural gas or decreases in the price of

ethanol, distillers grains or other ethanol co-products.

Over the past several

years, the spread between ethanol and corn prices has fluctuated significantly.

The effects of the coronavirus pandemic, or its abatement,

may materially and adversely affect our business, results of operations and liquidity.

The coronavirus pandemic has resulted in

businesses suspending or substantially curtailing operations and travel, quarantines, and an overall substantial slowdown of economic

Federal, state and foreign governments have implemented measures to contain the virus, including social distancing requirements,

travel restrictions, border closures, limitations on public gatherings, work-from-home orders, and closure of non-essential businesses.

Many of these measures remain or have been curtailed only partially.

Transportation fuels in particular, including fuel-grade

ethanol, experienced significant price declines and reduced demand.

A further or extended ongoing downturn in global economic

activity, or recessionary conditions in general, would likely lead to poor demand for, and negatively affect the prices of, fuel-grade

ethanol, materially and adversely affecting our business, results of operations and liquidity.

Furthermore, to protect the health and

well-being of our employees and customers, we have implemented work-from-home requirements, made substantial modifications to

employee travel policies, and cancelled or shifted marketing and other corporate events to virtual-only formats for the foreseeable

While we continue to monitor our circumstances and may adjust our current policies as more information and public health

guidance become available, these precautionary measures could negatively affect our sales and marketing efforts, delay and lengthen

our sales cycles, or create operational or other challenges, any of which could harm our business and results of operations.

In addition, if one or more of our employees

or customers becomes ill from coronavirus and attributes their infection to us, including through exposure at one of our offices

or production facilities, we could be subject to allegations of failure to adequately mitigate the risk of exposure.

Such allegations

could harm our reputation and expose us to the risks of litigation and liability.

Our specialty alcohols business has benefitted

significantly from the coronavirus pandemic due to a substantial increase in demand for alcohol-based sanitizers and disinfectants.

As the coronavirus pandemic abates, demand for alcohol-based sanitizers and disinfectants may decline, ultimately exerting downward

pressure on prices for our specialty alcohols used in those products.

In addition, higher industry production levels in response

to the coronavirus pandemic and any resulting oversupply of specialty alcohols for sanitizers and disinfectants would also exert

downward pressure on prices.

Reduced demand and prices for our specialty alcohols used in sanitizers and disinfectants, or industry

oversupply of those specialty alcohols, may materially and adversely affect our business, results of operations and liquidity.

Our results of operations and our ability to operate

at a profit are largely dependent on our ability to manage the costs of corn, natural gas and other production inputs, with the

prices of our alcohols and essential ingredients, all of which are subject to volatility and uncertainty.

Our results of operations are highly impacted

by commodity prices, including the cost of corn, natural gas and other production inputs that we must purchase, and the prices

of alcohols and essential ingredients that we sell.

Prices and supplies are subject to and determined by market and other forces

over which we have no control, such as weather, domestic and global demand, supply shortages, export prices and various governmental

policies in the United States and throughout the world.

Price volatility of corn, natural gas and

other production inputs, and alcohols and essential ingredients, may cause our results of operations to fluctuate substantially.

We may fail to generate expected levels of net sales and profits even under fixed-price and other contracts for the sale of specialty

alcohols used in consumer products.

Our customers may not pay us timely or at all, even under longer-term, fixed-price contracts

for our specialty alcohols, and may seek to renegotiate prices under those contracts during periods of falling prices or high

price volatility.

Over the past several years, for example,

the spread between corn and fuel-grade ethanol prices has fluctuated significantly.

Fluctuations are likely to continue to occur.

A sustained narrow spread, whether as a result of sustained high or increased corn prices or sustained low or decreased ethanol

prices, would adversely affect our results of operations and financial position.

Further, combined revenues from sales of ethanol,

distillers grains and other ethanol co-products could decline below the marginal cost of production, which may force us to suspend

production of ethanol, distillers grains and other ethanol co-products at some or all of our plants.

Increased ethanol production

or higher inventory levels may cause a decline in ethanol prices or prevent ethanol prices from rising, and may have other negative

effects, adversely impacting our results of operations, cash flows and financial condition.

We believe that the

most significant factor influencing the price of ethanol has been the substantial increase in ethanol production.

the Renewable Fuels Association, domestic ethanol production capacity increased from an annualized rate of 1.5 billion gallons

per year in January 1999 to a record 16.1 billion gallons in 2018.

In addition, if ethanol production margins improve, we anticipate

that owners of ethanol production facilities will increase production levels, thereby resulting in more abundant ethanol supplies

and inventories.

Any increase in the supply of ethanol may not be commensurate with increases in the demand for ethanol, thus

leading to lower ethanol prices.

Also, demand for ethanol could be impaired due to a number of factors, including regulatory developments

and reduced United States gasoline consumption.

Reduced gasoline consumption has occurred in the past and could occur in the future

as a result of increased gasoline or oil prices or other factors such as increased automobile fuel efficiency.

Any of these outcomes

could have a material adverse effect on our results of operations, cash flows and financial condition.

The market price

of ethanol is volatile and subject to large fluctuations, which may cause our profitability or losses to fluctuate significantly.

The market price of

ethanol is volatile and subject to large fluctuations.

The market price of ethanol is dependent upon many factors, including the

supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum which is highly volatile and

difficult to forecast.

For example, ethanol prices, as reported by the CBOT, ranged from $1.25 to $1.70 per gallon in 2019 and

from $1.20 to $1.53 per gallon during 2018.

Fluctuations in the market price of ethanol may cause our profitability or losses

to fluctuate significantly.

Some of our marketing

activities will likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business.

Some of our marketing

activities will likely be unprofitable in a market of generally declining ethanol prices due to the nature of our business.

example, to satisfy customer demands, we maintain certain quantities of ethanol inventory for subsequent resale.

procure much of our inventory outside the context of a marketing arrangement and therefore must buy ethanol at a price established

at the time of purchase and sell ethanol at an index price established later at the time of sale that is generally reflective

of movements in the market price of ethanol.

As a result, our margins for ethanol sold in these transactions generally decline

and may turn negative as the market price of ethanol declines.

Disruptions in production

or distribution infrastructure may adversely affect our business, results of operations and financial condition.

Our business depends

on the continuing availability of rail, road, port, storage and distribution infrastructure.

In particular, due to limited storage

capacity at our plants and other considerations related to production efficiencies, our plants depend on just-in-time delivery

The production of ethanol and specialty alcohols also requires a significant and uninterrupted supply of other raw materials

and energy, primarily water, electricity and natural gas.

Local water, electricity and gas utilities may not be able to reliably

supply the water, electricity and natural gas that our plants need or may not be able to supply those resources on acceptable

In the past, poor weather has caused disruptions in rail transportation, which slowed the delivery of ethanol by rail,

the principle manner by which ethanol from our plants located in the Midwest is transported to market.

Disruptions in production

or distribution infrastructure, whether caused by labor difficulties, earthquakes, storms, other natural disasters or human error

or malfeasance or other reasons, could prevent timely deliveries of corn or other raw materials and energy, and could delay transport

of our products to market, and may require us to halt production at one or more plants, any of which could have a material adverse

effect on our business, results of operations and financial condition.

We may engage in hedging

transactions and other risk mitigation strategies that could harm our results of operations and financial condition.

In an attempt to partially

offset the effects of volatility of ethanol prices and corn and natural gas costs, we may enter into contracts to fix the price

of a portion of our ethanol production or purchase a portion of our corn or natural gas requirements on a forward basis.

we may engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas and unleaded gasoline

from time to time.

The financial statement impact of these activities is dependent upon, among other things, the prices involved

and our ability to sell sufficient products to use all of the corn and natural gas for which forward commitments have been made.

Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging contract

defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential between

the underlying price in the hedging agreement and the actual prices paid or received by us.

In addition, our open contract positions

may require cash deposits to cover margin calls, negatively impacting our liquidity.

As a result, our results of operations and

financial condition may be adversely affected by our hedging activities and fluctuations in the price of corn, natural gas, ethanol

and unleaded gasoline.

Operational difficulties

at our plants could negatively impact sales volumes and could cause us to incur substantial losses.

Operations at our

plants are subject to labor disruptions, unscheduled downtimes and other operational hazards inherent in the ethanol production

industry, including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents

and natural disasters.

Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction

of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal

Our insurance may not be adequate to fully cover the potential operational hazards described above or we may not be

able to renew this insurance on commercially reasonable terms or at all.

Moreover, our plants

may not operate as planned or expected.

All of these facilities are designed to operate at or above a specified production capacity.

The operation of these facilities is and will be, however, subject to various uncertainties.

As a result, these facilities may

not produce ethanol, specialty alcohols and co-products at expected levels.

In the event any of these facilities do not run at

their expected capacity levels, our business, results of operations and financial condition may be materially and adversely affected.

Future demand for ethanol

is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance and overall consumer demand

for transportation fuel, any of which could negatively affect demand for ethanol and our results of operations.

Although many trade

groups, academics and governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others

have criticized ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels

and potentially depleting water resources.

Some studies have suggested that corn-based ethanol is less efficient than ethanol

produced from other feedstock and that it negatively impacts consumers by causing increased prices for dairy, meat and other food

generated from livestock that consume corn.

Additionally, ethanol critics contend that corn supplies are redirected from international

A sustained narrow spread, whether as a result of sustained high or increased corn prices or sustained low or decreased alcohol

or essential ingredient prices, would adversely affect our results of operations and financial position.

Revenues from sales of

alcohols, particularly fuel-grade ethanol, and essential ingredients could decline below the marginal cost of production, which

may force us to further suspend production, particularly fuel-grade ethanol production, at some or all of our facilities.

In addition, some of our fuel-grade ethanol

marketing activities will likely be unprofitable in a market of generally declining prices due to the nature of our business.

For example, to satisfy customer demands, we maintain certain quantities of fuel-grade ethanol inventory for subsequent resale.

Moreover, we procure much of our fuel-grade ethanol inventory outside of third-party marketing arrangements and therefore must

buy fuel-grade ethanol at a price established at the time of purchase and sell fuel-grade ethanol at an index price established

later at the time of sale that is generally reflective of movements in the market price of fuel-grade ethanol.

As a result, our

margins for fuel-grade ethanol sold in these transactions generally decline and may turn negative as the market price of fuel-grade

ethanol declines.

We can provide no assurance that corn,

natural gas or other production inputs can be purchased at or near current or any particular prices, or that our alcohols or essential

ingredients will sell at or near current or any particular prices.

Consequently, our results of operations and financial position

may be adversely affected by increases in the prices of corn, natural gas and other production inputs or decreases in the prices

of our alcohols and essential ingredients.

Increased alcohol or essential ingredient production

or higher inventory levels may cause a decline in prices for those products, and may have other negative effects, adversely impacting

our results of operations, cash flows and financial condition.

The prices of our alcohols and essential

ingredients are impacted by competing third-party supplies of those products.

For example, we believe that the most significant

factor influencing the price of fuel-grade ethanol has been the substantial increase in production.

According to the Renewable

Fuels Association, domestic fuel-grade ethanol production capacity increased from an annualized rate of 1.5 billion gallons per

year in January 1999 to a record 16.1 billion gallons in 2018.

In addition, if fuel-grade ethanol production margins improve,

we anticipate that owners of production facilities operating at below capacity, or owners of idled production facilities, will

increase production levels, thereby resulting in more abundant fuel-grade ethanol supplies and inventories.

Increases in the supply

of alcohols and essential ingredients may not be commensurate with increases in demand for alcohols and essential ingredients,

thus leading to lower prices.

Moreover, higher industry production levels in response to the coronavirus pandemic and any resulting

oversupply of alcohols for sanitizers and disinfectants, and corresponding oversupply of essential ingredient co-products, may

also exert downward pressure on prices.

Any of these outcomes could have a material adverse effect on our results of operations,

cash flows and financial condition.

The prices of our products are volatile and subject to

large fluctuations, which may cause our results of operations to fluctuate significantly.

The prices of our products are volatile

and subject to large fluctuations.

For example, the market price of fuel-grade ethanol is dependent upon many factors, including

the supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum which itself is highly

volatile and difficult to forecast.

Our fuel-grade ethanol sales are tied to prevailing spot market prices rather than long-term,

fixed-price contracts.

Fuel-grade ethanol prices, as reported by the CBOT, ranged from $0.81 to $1.62 per gallon in 2020 and from

$1.25 to $1.70 per gallon in 2019.

In addition, even under longer-term, fixed-price contracts for our specialty alcohols, our

customers may seek to renegotiate prices under those contracts during periods of falling prices or high price volatility.

in the prices of our products may cause our results of operations to fluctuate significantly.

Disruptions in our production or distribution may adversely

affect our business, results of operations and financial condition.

Our business depends on the continuing

availability of rail, road, port, storage and distribution infrastructure.

In particular, due to limited storage capacity at our

production facilities and other considerations related to production efficiencies, our facilities depend on just-in-time delivery

The production of alcohols also requires a significant and uninterrupted supply of other raw materials and energy, primarily

water, electricity and natural gas.

Local water, electricity and gas utilities may fail to reliably supply the water, electricity

and natural gas that our production facilities need or may fail to supply those resources on acceptable terms.

In the past, poor

weather has caused disruptions in rail transportation, which slowed the delivery of fuel-grade ethanol by rail, the principle

manner by which fuel-grade ethanol from our facilities located in the Midwest is transported to market.

In addition, we recently

experienced closure of the Illinois River for lock repairs which required greater use of less cost-effective modes of product

transport such as via rail and truck, which resulted in higher costs and negatively affected our results of operations.

Disruptions in production or distribution,

whether caused by labor difficulties, unscheduled downtimes and other operational hazards inherent in the alcohol production industry,

including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and

natural disasters such as earthquakes, floods and storms, or human error or malfeasance or other reasons, could prevent timely

deliveries of corn or other raw materials and energy, and could delay transport of our products to market, and may require us

to halt production at one or more production facilities, any of which could have a material adverse effect on our business, results

of operations and financial condition.

Some of these operational hazards may also

cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and

may result in suspension of operations and the imposition of civil or criminal penalties.

Our insurance may not fully cover the

potential hazards described above or we may be unable to renew our insurance on commercially reasonable terms or at all.

We may engage in hedging transactions and other risk

mitigation strategies that could harm our results of operations and financial condition.

In an attempt to partially offset the effects

of volatility of our product prices, in particular fuel-grade ethanol, corn and natural gas costs, we may enter into contracts

to fix the price of a portion of our production or purchase a portion of our corn or natural gas requirements on a forward basis.

In addition, we may engage in other hedging transactions involving exchange-traded futures contracts for corn, natural gas and

unleaded gasoline from time to time.

The financial statement impact of these activities is dependent upon, among other things,

the prices involved and our ability to sell sufficient products to use all of the corn and natural gas for which forward commitments

have been made.

Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging

contract defaults on its contract or, in the case of exchange-traded contracts, where there is a change in the expected differential

between the underlying price in the hedging agreement and the actual prices paid or received by us.

In addition, our open contract

positions may require cash deposits to cover margin calls, negatively impacting our liquidity.

As a result, our hedging activities

and fluctuations in the price of corn, natural gas, fuel-grade ethanol and unleaded gasoline may adversely affect our results

of operations, financial condition and liquidity.

The industries in which we operate are extremely competitive.

Many of our significant competitors have greater production and financial resources and could use their greater resources to gain

market share at our expense.

The industries in which we operate are

extremely competitive.

Many of our significant competitors have substantially greater production and financial resources than

As a result, our competitors may be able to compete more aggressively and sustain that competition over a longer period

Successful competition will require a continued high level of investment in facility maintenance.

We may fail to anticipate

or respond adequately to new industry developments and other competitive pressures due to our limited resources relative to many

significant competitors.

This failure could reduce our competitiveness and cause a decline in market share, sales and profitability.

Even if sufficient funds are available, we may not be able to make the modifications and improvements necessary to compete successfully.

We also face competition from international

suppliers, particularly of fuel-grade ethanol, many of whom have cost structures substantially lower than ours.

An increase in

domestic or foreign competition could force us to reduce our prices and take other steps to compete effectively, which could adversely

affect our business, financial condition and results of operations.

We incur significant expenses to maintain and upgrade

our production facilities and operating equipment, and any interruption in our operations would harm our operating performance.

We regularly incur significant expenses

to maintain and upgrade our production facilities and operating equipment.

The machines and equipment we use to produce our alcohols

and manufacture our essential ingredients are complex, have many parts, and some operate on a continuous basis.

We must perform

routine equipment maintenance and must periodically replace a variety of parts such as motors, pumps, pipes and electrical parts.

In addition, our production facilities require periodic shutdowns to perform major maintenance and upgrades.

These scheduled shutdowns

result in lower sales and increased costs in the periods during which a shutdown occurs and could result in unexpected operational

issues in future periods as a result of changes to equipment and operational and mechanical processes made during shutdown.

Risks Related to our Finances

We have incurred significant losses and negative operating

cash flow in the past and we may incur losses and negative operating cash flow in the future, which may hamper our operations

and impede us from expanding our business.

We have incurred significant losses and

negative operating cash flow in the past.

For the years ended December 31, 2020 and 2019, we incurred consolidated net losses

of approximately $17.3 million and $101.3 million, respectively.

For the year ended December 31, 2019, we incurred negative operating

cash flow of approximately $23.4 million.

We may incur losses and negative operating cash flow in the future.

We expect to rely

on cash on hand, cash, if any, generated from our operations, borrowing availability under our lines of credit and proceeds from

our future financing activities, if any, to fund all of the cash requirements of our business.

Additional losses and negative

operating cash flow may hamper our operations and impede us from expanding our business.

Our indebtedness exposes us to many risks that could

negatively impact our business, our business prospects, our liquidity and our cash flows and results of operations.

Our production facilities located in the

Midwest have significant indebtedness.

In addition, we have significant indebtedness under our senior secured notes issued at

the parent-company level.

The terms of our loans require amortizing payments of principal over the lives of the loans and our

borrowing availability under our revolving credit facilities periodically and automatically declines through the maturity dates

of those facilities.

Our indebtedness could:

● make it more difficult to pay or refinance our debts as

they become due during adverse economic and industry conditions because those conditions

could result in insufficient cash flows from operations to make our scheduled debt payments;

● limit our flexibility to pursue strategic opportunities

or react to changes in our business and the industry in which we operate and, consequently,

place us at a competitive disadvantage to our competitors who have less debt;

● require a substantial portion of our cash flow from operations,

if any, to be used for debt service payments, thereby reducing our ability to fund working

capital, capital expenditures, new business ventures, dividend payments and other general

corporate purposes;

● limit our ability to procure additional financing for

working capital or other purposes.

Our term loans and credit facilities also

require compliance with numerous financial and other covenants, the violation of which could result in an acceleration of our

indebtedness.

Much of our indebtedness bears interest

at variable rates.

An increase in prevailing interest rates would likewise increase our debt service obligations and could materially

and adversely affect our cash flows and results of operations.

Our ability to generate sufficient cash

to make all principal and interest payments when due depends on our business performance, which is subject to a variety of factors

beyond our control, including the supply of and demand for our alcohols and other products, product prices, the cost of key production

inputs, and many other factors incident to the alcohol production and marketing industry.

We cannot provide any assurance that

we will be able to timely satisfy such obligations.

Our ability to utilize net operating loss carryforwards

and certain other tax attributes may be limited.

Federal and state income tax laws impose

restrictions on our use of net operating loss, or NOL, and tax credit carryforwards in the event that an “ownership change”

occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code, or Code.

In general, an ownership change occurs

when stockholders owning 5% or more of a corporation entitled to use NOL or other loss carryforwards have increased their ownership

by more than 50 percentage points during any three-year period.

The annual base limitation under Section 382 of the Code is calculated

by multiplying the corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate

determined by the Internal Revenue Service in the month of the ownership change or the two preceding months.

Our ability to utilize

our NOL and other loss carryforwards may be substantially limited.

These limitations could result in increased future tax obligations,

which could have a material adverse effect on our financial condition and results of operations.

Risks Related to Legal and Regulatory

Future demand for fuel-grade ethanol is uncertain

and may be affected by changes to federal mandates, public perception, consumer acceptance and overall consumer demand for transportation

fuel, any of which could negatively affect demand for fuel-grade ethanol and our results of operations.

Although many trade groups, academics and

governmental agencies have supported fuel-grade ethanol as a fuel additive that promotes a cleaner environment, others have criticized

fuel-grade ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and

potentially depleting water resources.

Some studies have suggested that corn-based ethanol is less efficient than ethanol produced

from other feedstock and that it negatively impacts consumers by causing increased prices for dairy, meat and other food generated

from livestock that consume corn.

Additionally, critics of fuel-grade ethanol contend that corn supplies are redirected from international

food markets to domestic fuel markets.

If negative views of corn-based ethanol production gain acceptance, support for existing

measures promoting use and domestic production of corn-based ethanol could decline, leading to reduction or repeal of federal

mandates, which could adversely affect the demand for ethanol.

These views could also negatively impact public perception of the

ethanol industry and acceptance of ethanol as an alternative fuel.

There are limited

markets for ethanol beyond those established by federal mandates.

Discretionary blending and E85 blending are important secondary

Discretionary blending is often determined by the price of ethanol versus the price of gasoline.

In periods when discretionary

blending is financially unattractive, the demand for ethanol may be reduced.

Also, the demand for ethanol is affected by the overall

demand for transportation fuel.

Demand for transportation fuel is affected by the number of miles traveled by consumers and the

fuel economy of vehicles.

Market acceptance of E15 may partially offset the effects of decreases in transportation fuel demand.

A reduction in the demand for ethanol and ethanol co-products may depress the value of our products, erode our margins and reduce

our ability to generate revenue or to operate profitably.

Consumer acceptance of E15 and E85 fuels is needed before ethanol can

achieve any significant growth in market share relative to other transportation fuels.

The United States ethanol

industry is highly dependent upon certain federal and state legislation and regulation and any changes in legislation or regulation

could have a material adverse effect on our results of operations, cash flows and financial condition.

The EPA has implemented

the RFS pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.

The RFS program sets annual

quotas for the quantity of renewable fuels (such as ethanol) that must be blended into motor fuels consumed in the United States.

The domestic market for ethanol is significantly impacted by federal mandates under the RFS program for volumes of renewable fuels

measures promoting use and domestic production of corn-based ethanol as a fuel additive could decline, leading to reduction or

repeal of federal ethanol usage mandates, which would materially and adversely affect the demand for fuel-grade ethanol.

views could also negatively impact public perception of the fuel-grade ethanol industry and acceptance of ethanol as an alternative

There are limited markets for fuel-grade

ethanol beyond those established by federal mandates.

Discretionary blending and E85 blending (i.e., gasoline blended with up

to 85% fuel-grade ethanol by volume) are important secondary markets.

Discretionary blending is often determined by the price

of fuel-grade ethanol versus the price of gasoline.

In periods when discretionary blending is financially unattractive, the demand

for fuel-grade ethanol may decline.

Also, the demand for fuel-grade ethanol is affected by the overall demand for transportation

Demand for transportation fuel is affected by the number of miles traveled by consumers and vehicle fuel economy.

demand for fuel-grade ethanol and co-products would reduce the value of our ethanol and related products, erode our overall margins

and diminish our ability to generate revenue or to operate profitably.

In addition, we believe that consumer acceptance of E15

and E85 fuels is necessary before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation

The United States fuel-grade ethanol industry

is highly dependent upon various federal and state laws and any changes in those laws could have a material adverse effect on

our results of operations, cash flows and financial condition.

The EPA has implemented the RFS under the

Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.

The RFS program sets annual quotas for the quantity

of renewable fuels (such as fuel-grade ethanol) that must be blended into motor fuels consumed in the United States.

market for fuel-grade ethanol is significantly impacted by federal mandates under the RFS program for volumes of renewable fuels

(such as ethanol) required to be blended with gasoline.

Future demand for ethanol will be largely dependent upon incentives to

blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of

ethanol, constraints in the ability of vehicles to use higher ethanol blends, the RFS, and other applicable environmental requirements.

Any significant increase in production capacity above the RFS minimum requirements may have an adverse impact on ethanol prices.

Legislation aimed

at reducing or limiting the renewable fuel use required by the RFS has been introduced in the United States Congress.

3, 2019, a bill (H.R.

104) was introduced into the House of Representatives aiming to repeal certain amendments to the Clean Air

Act relating to the expansion of the renewable fuel program, and for other purposes.

This bill revises the renewable fuel program,

including the RFS.

Under current law, the RFS specifies the minimum volume of renewable fuel, such as ethanol, that must be contained

in gasoline sold in the United States, except in noncontiguous states or territories.

The RFS annually increases until 2022 when

a minimum of 36 billion gallons of renewable fuel must be blended into gasoline.

This bill decreases the volume of renewable fuel

that must be contained in gasoline to 7.5 billion gallons each year.

The bill also revises the RFS to eliminate separate volume

requirements for the following renewable fuel categories:

advanced biofuels, cellulosic biofuel, and biomass-based diesel.

bill was referred to a congressional subcommittee where it awaits further consideration.

On May 7, 2019, the Food and Fuel Consumer

Protection Act of 2019 (H.R.

2540), was introduced in the House of Representatives.

The bill aims to prevent RFS blending obligations

from requiring ethanol to make up more than 9.7 percent of the total volume of gasoline projected to be sold or introduced into

commerce in the United States for a given calendar year.

The bill was referred to a congressional committee, which will consider

it before possibly sending the bill to the House of Representatives as a whole.

On June 21, 2019, a bill (H.R.

3427) was introduced

in the House of Representatives aiming to repeal the EPA’s Renewable Fuel Standard program, which requires transportation

fuel to contain a minimum volume of renewable fuel.

The bill was referred to a congressional committee, which will consider it

before possibly sending the bill to the House of Representatives as a whole.

On July 25, 2019, a bill (S.2298) was introduced

in the United States Senate, to amend the Clean Air Act to eliminate the corn ethanol mandate for renewable fuel.

read twice and referred to the Committee on Environment and Public Works.

Future demand for fuel-grade ethanol will largely depend on incentives

to blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the relative octane value

of ethanol, constraints in the ability of vehicles to use higher ethanol blends, the RFS, and other applicable environmental requirements.

Under the provisions of the Clean Air Act,

as amended by the Energy Independence and Security Act of 2007, the EPA has limited authority to waive or reduce the mandated

RFS requirements, which authority is subject to consultation with the Secretaries of Agriculture and Energy, and based on a determination

that there is inadequate domestic renewable fuel supply or implementation of the applicable requirements would severely harm the

economy or environment of a state, region or the United States in general.

Our results of operations, cash flows and financial

condition could be adversely impacted if any legislation is enacted that reduces or limits the RFS volume requirements.

Under the provisions

of the Clean Air Act, as amended by the Energy Independence and Security Act of 2007, the EPA has limited authority to waive or

reduce the mandated RFS requirements, which authority is subject to consultation with the Secretaries of Agriculture and Energy,

and based on a determination that there is inadequate domestic renewable fuel supply or implementation of the applicable requirements

would severely harm the economy or environment of a state, region or the United States.

Our results of operations, cash flows

and financial condition could be adversely impacted if the EPA reduces the RFS requirements from the statutory levels specified

The ethanol production

and marketing industry is extremely competitive.

Many of our significant competitors have greater production and financial resources

and one or more of these competitors could use their greater resources to gain market share at our expense.

The ethanol production

and marketing industry is extremely competitive.

Many of our significant competitors in the ethanol production and marketing industry,

including Archer-Daniels-Midland Company, POET, LLC, Green Plains, Inc.

and Valero Renewable Fuels Company, LLC, have substantially

greater production and/or financial resources.

As a result, our competitors may be able to compete more aggressively and sustain

that competition over a longer period of time.

Successful competition will require a continued high level of investment in marketing

and customer service and support.

Our limited resources relative to many significant competitors may cause us to fail to anticipate

or respond adequately to new developments and other competitive pressures.

This failure could reduce our competitiveness and cause

a decline in market share, sales and profitability.

Even if sufficient funds are available, we may not be able to make the modifications

and improvements necessary to compete successfully.

We also face competition

from international suppliers.

Currently, international suppliers produce ethanol primarily from sugar cane and have cost structures

that are generally substantially lower than our cost structures.

Any increase in domestic or foreign competition could cause us

to reduce our prices and take other steps to compete effectively, which could adversely affect our business, financial condition

and results of operations.

Our ability to utilize

net operating loss carryforwards and certain other tax attributes may be limited.

Federal and state

income tax laws impose restrictions on the utilization of net operating loss, or NOL, and tax credit carryforwards in the event

that an “ownership change”

occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code, or Code.

In general, an ownership change occurs when stockholders owning 5% or more of a “loss corporation”

(a corporation

entitled to use NOL or other loss carryovers) have increased their ownership of stock in such corporation by more than 50 percentage

points during any three-year period.

The annual base limitation under Section 382 of the Code is calculated by multiplying the

loss corporation’s value at the time of the ownership change by the greater of the long-term tax-exempt rate determined

by the Internal Revenue Service in the month of the ownership change or the two preceding months.

As of December 31,

2019, of our $228.8 million of federal NOLs, we had $82.1 million of federal NOLs that are limited in their annual use under Section

382 of the Code beyond 2019.

Accordingly, our ability to utilize these NOL carryforwards may be substantially limited.

These limitations

could in turn result in increased future tax obligations, which could have a material adverse effect on our business, financial

condition and results of operations.

Our business is not diversified.

The high concentration of our sales within the ethanol production and marketing industry could result in a significant reduction

in sales and negatively affect our profitability if demand for ethanol declines .

Our business is not

Our sales are highly concentrated within the ethanol production and marketing industry.

We expect to be substantially

focused on the production and marketing of ethanol and its co-products for the foreseeable future.

An industry shift away from

ethanol, or the emergence of new competing products, may significantly reduce the demand for ethanol.

However, we may be unable

to timely alter our business focus away from the production and marketing of ethanol to other renewable fuels or competing products.

A downturn in the demand for ethanol would likely materially and adversely affect our sales and profitability.

We may be adversely affected

by environmental, health and safety laws, regulations and liabilities .

We are subject to

various federal, state and local environmental laws and regulations, including those relating to the discharge of materials into

the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes,

and the health and safety of our employees.

In addition, some of these laws and regulations require us to operate under permits

that are subject to renewal or modification.

These laws, regulations and permits can often require expensive pollution control

equipment or operational changes to limit actual or potential impacts to the environment.

A violation of these laws and regulations

or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or

facility shutdowns.

In addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply

with increasingly stringent environmental laws, regulations and permits.

We may be liable for

the investigation and cleanup of environmental contamination at each of our plants and at off-site locations where we arrange

for the disposal of hazardous substances or wastes.

If these substances or wastes have been or are disposed of or released at

sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental

condition could be adversely impacted if the EPA reduces the RFS requirements from the statutory levels specified in the RFS.

Various bills in Congress introduced from

time to time are also directed at altering existing renewable fuels energy legislation, but none has passed in recent years.

legislative bills are directed at halting or reversing expansion of, or even eliminating, the renewable fuel program, while other

bills are directed at bolstering the program or enacting further mandates or grants that would support the renewable fuels industry.

Our results of operations, cash flows and financial condition could be adversely impacted if any legislation is enacted that reduces

the RFS volume requirements.

We may be adversely affected by environmental,

health and safety laws, regulations and liabilities .

We are subject to various federal, state

and local environmental laws and regulations, including those relating to the discharge of materials into the air, water and ground,

the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes, and the health and safety

of our employees.

In addition, some of these laws and regulations require us to operate under permits that are subject to renewal

or modification.

These laws, regulations and permits often require expensive pollution control equipment or operational changes

to limit actual or potential impacts to the environment.

A violation of these laws and regulations or permit conditions can result

in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or production facility shutdowns.

addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent

environmental laws, regulations and permits.

We may be liable for the investigation

and cleanup of environmental contamination at each of our production facilities and at off-site locations where we arrange for

the disposal of hazardous substances or wastes.

If these substances or wastes have been or are disposed of or released at sites

that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental

Response, Compensation and Liability Act of 1980, or other environmental laws for all or part of the costs of investigation and/or

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may require us to expend significant amounts for investigation, cleanup or other costs.

In addition, new laws,

new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could require

us to make significant additional expenditures.

Continued government and public emphasis on environmental issues can be expected

to result in increased future investments for environmental controls at our plants.

Present and future environmental laws and

regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies

and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on

our results of operations and financial condition.

The hazards and risks

associated with producing and transporting our products (including fires, natural disasters, explosions and abnormal pressures

and blowouts) may also result in personal injury claims or damage to property and third parties.

As protection against operating

hazards, we maintain insurance coverage against some, but not all, potential losses.

However, we could sustain losses for uninsurable

or uninsured risks, or in amounts in excess of existing insurance coverage.

Events that result in significant personal injury

or damage to our property or third parties or other losses that are not fully covered by insurance could have a material adverse

effect on our results of operations and financial condition.

If we are unable to attract

or retain key personnel, our ability to operate effectively may be impaired, which could have a material adverse effect on our

business, financial condition and results of operations.

Our ability to operate

our business and implement strategies depends, in part, on the efforts of our executive officers and other key personnel.

future success will depend on, among other factors, our ability to retain our current key personnel and attract and retain qualified

future key personnel, particularly executive management.

If we are unable to attract or retain key personnel, our ability to operate

effectively may be impaired, which could have a material adverse effect on our business, financial condition and results of operations.

We depend on a small

number of customers for the majority of our sales.

A reduction in business from any of these customers could cause a significant

decline in our overall sales and profitability.

The majority of our

sales are generated from a small number of customers.

During 2019 and 2018, two customers accounted for an aggregate of approximately

$336 million and $367 million in net sales, representing 24% and 25% of our net sales, respectively, for those periods.

that we will continue to depend for the foreseeable future upon a small number of customers for a significant portion of our sales.

Our agreements with these customers generally do not require them to purchase any specified volume or dollar value of ethanol

or co-products, or to make any purchases whatsoever.

Therefore, in any future period, our sales generated from these customers,

individually or in the aggregate, may not equal or exceed historical levels.

If sales to any of these customers cease or decline,

we may be unable to replace these sales with sales to either existing or new customers in a timely manner, or at all.

or reduction of sales to one or more of these customers could cause a significant decline in our overall sales and profitability.

We incur significant

expenses to maintain and upgrade our operating equipment and plants, and any interruption in the operation of our facilities may

harm our operating performance.

We regularly incur

significant expenses to maintain and upgrade our equipment and facilities.

The machines and equipment we use to produce our products

are complex, have many parts and some are run on a continuous basis.

We must perform routine maintenance on our equipment and

will have to periodically replace a variety of parts such as motors, pumps, pipes and electrical parts.

In addition, our facilities

require periodic shutdowns to perform major maintenance and upgrades.

These scheduled facility shutdowns result in decreased sales

and increased costs in the periods in which a shutdown occurs and could result in unexpected operational issues in future periods

as a result of changes to equipment and operational and mechanical processes made during the shutdown period.

Our lack of long-term

ethanol orders and commitments by our customers could lead to a rapid decline in our sales and profitability.

We cannot rely on

long-term ethanol orders or commitments by our customers for protection from the negative financial effects of a decline in the

demand for ethanol or a decline in the demand for our marketing services.

The limited certainty of ethanol orders can make it

difficult for us to forecast our sales and allocate our resources in a manner consistent with our actual sales.

Moreover, our

expense levels are based in part on our expectations of future sales and, if our expectations regarding future sales are inaccurate,

we may be unable to reduce costs in a timely manner to adjust for sales shortfalls.

Furthermore, because we depend on a small

number of customers for a significant portion of our sales, the ramifications of these risks are greater in magnitude than if

our sales were less concentrated.

As a result of our lack of long-term ethanol orders and commitments, we may experience a rapid

decline in our sales and profitability.

There are limitations

on our ability to receive distributions from our subsidiaries.

We conduct most of

our operations through subsidiaries and are dependent upon dividends or other intercompany transfers of funds from our subsidiaries

to generate free cash flow.

Moreover, some of our subsidiaries are limited in their ability to pay dividends or make distributions,

loans or advances to us by the terms of their financing arrangements.

At December 31, 2019, we had approximately $180.9 million

of net assets at our subsidiaries that were not available to be distributed in the form of dividends, distributions, loans or

advances due to restrictions contained in their financing arrangements.

ability to raise capital may be limited by applicable laws and regulations.

Our capital raising

activities have benefited from using a “shelf”

registration on Form S-3, which typically enables an issuer to raise

additional capital on a more timely and cost effective basis than through other means, such as registration of a securities offering

under a Form S-1 registration statement.

Our current and future ability to raise additional capital through the sale and issuance

of our equity securities may be limited by, among other things, current Securities and Exchange Commission, or the SEC, rules

and regulations.

Under current SEC rules and regulations, to be eligible to use a Form S-3 registration statement for primary

offerings without restriction as to the amount of securities to be sold and issued, the aggregate market value of our common equity

held by non-affiliates (i.e., our “public float”) must be at least $75.0 million at the time we file the Form S-3

(calculated pursuant to the General Instructions to Form S-3).

Furthermore, with respect to our effective Form S-3 registration

statement, the SEC’s rules and regulations require that we periodically re-evaluate the value of our public float (typically

when we file our Annual Report on Form 10-K) to determine whether we continue to satisfy the foregoing public float requirement.

As of the date of this report, we do not satisfy the $75.0 million public float requirement.

As a result, the amount we can raise

through primary offerings of our securities in any 12-month period using a Form S-3 registration statement is limited to an aggregate

of one-third of our public float.

Moreover, the market value of all securities sold by us under our Form S-3 registration statements

during the 12-month period prior to any intended sale will be subtracted from that amount to determine the amount we can then

raise under our Form S-3 registration statements.

If our public float increases to $75.0 million or more, this limitation would

cease to apply until we conduct our next re-evaluation.

In addition, new laws, new interpretations

of existing laws, increased governmental enforcement of environmental laws or other developments could require us to make significant

additional expenditures.

Continued government and public emphasis on environmental issues will likely result in increased future

investments for environmental controls at our production facilities.

Present and future environmental laws and regulations, and

interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery

of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results

of operations and financial condition.

The hazards and risks associated with producing

and transporting our products (including fires, natural disasters, explosions and abnormal pressures and blowouts) may also result

in personal injury claims or damage to property and third parties.

As protection against operating hazards, we maintain insurance

coverage against some, but not all, potential losses.

However, we could sustain losses for uninsurable or uninsured risks, or

in amounts in excess of existing insurance coverages.

Events that result in significant personal injury or damage to our property

or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our results of

operations and financial condition.

Risks Related to Ownership of our Common

We have received a delisting notice from The

NASDAQ Stock Market.

Our common stock may be involuntarily delisted from trading on The NASDAQ Capital Market if we fail to regain

compliance with the minimum closing bid price requirement of $1.00 per share.

A delisting of our common stock is likely to reduce

the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing and may also materially

and adversely impact our credit terms with our vendors.

The quantitative listing standards of The

NASDAQ Stock Market, or NASDAQ, require, among other things, that listed companies maintain a minimum closing bid price of $1.00

We failed to satisfy this threshold for 30 consecutive trading days and on July 17, 2019, we received a letter from

NASDAQ indicating that we had an initial period of 180 calendar days, or until January 13, 2020, in which to regain compliance.

On January 15, 2020, we received a letter from NASDAQ granting us a 180-day extension period, or until July 13, 2020, in which

to regain compliance by meeting the minimum closing bid price of $1.00 per share for ten consecutive business days.

regain compliance by July 13, 2020, the NASDAQ staff will provide written notice that our common stock is subject to delisting.

Given the increased market volatility and the effects of the Coronavirus, including an acute negative margin environment in the

biofuels industry, and our lack of liquidity, we may be unable to regain compliance with the closing bid price requirement by July

A delisting of our common stock is likely to reduce the liquidity of our common stock and may inhibit or preclude our

ability to raise additional financing and may also materially and adversely impact our credit terms with our vendors.

The conversion

of convertible securities and the exercise of outstanding options and warrants to purchase our common stock could substantially

dilute your investment, impede our ability to obtain additional financing and cause us to incur additional expenses.

Our Series B Preferred

Stock, which are convertible into our common stock, and outstanding options to acquire our common stock issued to employees, directors

and others, and the Warrants to purchase our common stock, allow the holders of these securities an opportunity to profit from

a rise in the market price of our common stock such that conversion or exercise of the securities will result in dilution of the

equity interests of our common stockholders.

The terms on which we may obtain additional financing may be adversely affected by

the existence and potentially dilutive impact of our Series B Preferred Stock, options and Warrants.

In addition, holders of our

Series B Preferred Stock and Warrants have registration rights with respect to the common stock underlying those Series B Preferred

Stock and Warrants, the registration of which involves substantial expense.

The market price

of our common stock and the value of your investment could substantially decline if shares of our Series B Preferred Stock are

converted into shares of our common stock and if our options and Warrants are exercised for shares of our common stock and all

of these shares of common stock are resold into the market, or if a perception exists that a substantial number of shares of common

stock will be issued upon conversion of our Series B Preferred Stock or upon exercise of our Warrants or options and then resold

into the market.

Sales of a substantial

number of shares of common stock issued upon conversion of our Series B Preferred Stock and upon exercise of our Warrants and

options, or even the perception that these sales could occur, could adversely affect the market price of our common stock.

a result, you could experience a substantial decline in the value of your investment as a result of both the actual and potential

conversion of our outstanding shares of Series B Preferred Stock and exercise of our outstanding Warrants or options.

Our stock price

is highly volatile, which could result in substantial losses for investors purchasing shares of our common stock and in litigation

Future sales of substantial amounts of our common

stock, or perceptions that those sales could occur, could adversely affect the market price of our common stock and our ability

to raise capital.

Future sales of substantial

amounts of our common stock into the public market, including up to 8.9 million shares of our common stock that may be issued

upon the exercise of outstanding warrants, or perceptions that those sales could occur, could adversely affect the prevailing

market price of our common stock and our ability to raise capital.

Our stock price is highly volatile, which could

result in substantial losses for investors purchasing shares of our common stock and in litigation against us.

The market price of

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price of our common stock may continue to fluctuate in response to one or more of the following factors, many of which are beyond

● our ability to continue as

a going concern;

● fluctuations

in the market prices of ethanol and its co-products;

cost of key inputs to the production of ethanol, including corn and natural gas;

volume and timing of the receipt of orders for ethanol from major customers;

● competitive

pricing pressures;

ability to timely and cost-effectively produce, sell and deliver ethanol;

announcement, introduction and market acceptance of one or more alternatives to ethanol;

in market valuations of companies similar to us;

market price and volume fluctuations generally;

developments or increased enforcement;

● fluctuations

in our quarterly or annual operating results;

or departures of key personnel;

timing and results of our strategic initiatives;

inability to obtain financing;

financing activities and future sales of our common stock or other securities, as well

as stockholder dilution;

ability to maintain contracts that are critical to our operations.

Demand for ethanol

could also be adversely affected by a slow-down in overall demand for oxygenate and gasoline additive products.

The levels of

our ethanol production and purchases for resale will be based upon forecasted demand.

Accordingly, any inaccuracy in forecasting

anticipated revenues and expenses could adversely affect our business.

The failure to receive anticipated orders or to complete

delivery in any quarterly period could adversely affect our results of operations for that period.

Quarterly and annual results

are not necessarily indicative of future performance for any particular period, and we may not experience revenue growth or profitability

on a quarterly or an annual basis.

● fluctuations in the market prices of our products;

● fluctuations in the costs of key production input commodities

such as corn and natural gas;

● the volume and timing of the receipt of orders for our

products from major customers;

● the coronavirus pandemic, including governmental and public

response to the pandemic;

● competitive pricing pressures;

● anticipated trends in our financial condition and results

of operations;

● changes in market valuations of companies similar to us;

● stock market price and volume fluctuations generally;

● regulatory developments or increased enforcement;

● fluctuations in our quarterly or annual operating results;

● additions or departures of key personnel;

● our ability to obtain any necessary financing;

● our financing activities and future sales of our common

stock or other securities;

● our ability to maintain contracts that are critical to

our operations.

The price at which

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above could have a material adverse effect on our results of operations, the price of our common stock, or both.

Staff Comments.

We have received no

written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were

Because we do not intend to pay any cash dividends

on our shares of common stock in the near future, our stockholders will not be able to receive a return on their shares unless

and until they sell them.

We intend to retain

a significant portion of any future earnings to finance the development, operation and expansion of our business.

We do not anticipate

paying any cash dividends on our common stock in the near future.

The declaration, payment, and amount of any future dividends

will be made at the discretion of our board of directors, and will depend upon, among other things, our results of operations,

cash flows, and financial condition, operating and capital requirements, and other factors as our board of directors considers

There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect

to the amount of any such dividend.

Unless our board of directors determines to pay dividends, our stockholders will be required

to look to appreciation of our common stock to realize a gain on their investment.

There can be no assurance that this appreciation

See “Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities—Dividend Policy”.

Our bylaws contain an exclusive forum provision,

which could limit our stockholders’

ability to obtain a favorable judicial forum for disputes with us or our directors,

officers, employees or agents.

Our bylaws provide that, unless we consent

in writing to the selection of an alternative forum, the Delaware Court of Chancery shall be the sole and exclusive forum for

(a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty

owed by any director, officer or other employee of us to us or our stockholders, (c) any action asserting a claim arising pursuant

to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal affairs

For the avoidance of doubt, the exclusive

forum provision described above does not apply to any claims arising under the Securities Act of 1933, as amended, or the Securities

Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Section 27 of the Exchange Act creates exclusive

federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations

thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought

to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

The choice of forum provision in our bylaws

may limit our stockholders’

ability to bring a claim in a judicial forum that they find favorable for disputes with us or

our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees

and agents even though an action, if successful, might benefit our stockholders.

The applicable courts may also reach different

judgments or results than would other courts, including courts where a stockholder considering an action may be located or would

otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders.

respect to the provision making the Delaware Court of Chancery the sole and exclusive forum for certain types of actions, stockholders

who do bring a claim in the Delaware Court of Chancery could face additional litigation costs in pursuing any such claim, particularly

if they do not reside in or near Delaware.

Finally, if a court were to find this provision of our bylaws inapplicable to, or unenforceable

in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving

such matters in other jurisdictions, which could have a material adverse effect on us.

General Risk Factors

Cyberattacks through security vulnerabilities

could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to our reputation or competitive

Security vulnerabilities may arise from

our hardware, software, employees, contractors or policies we have deployed, which may result in external parties gaining access

to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to accounts we have

at our suppliers, vendors, and customers.

External parties may gain access to our data or our customers’

data, or attack

the networks causing denial of service or attempt to hold our data or systems in ransom.

The vulnerability could be caused

by inadequate account security practices such as failure to timely remove employee access when terminated.

To mitigate these security

issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information

technology policies and user account policies.

However, there can be no assurance these measures will be sufficient to avoid cyberattacks.

If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with

our business partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed

to a risk of litigation and possible significant liability.

Further, if we fail to adequately maintain

our information technology infrastructure, we may have outages and data loss.

Excessive outages may affect our ability to timely

and efficiently deliver products to customers or develop new products.

Such disruptions and data loss may adversely impact our

ability to fulfill orders and interrupt other processes.

Delayed sales or lost customers resulting from these disruptions could

adversely affect our financial results, stock price and reputation.

The State of California enacted the California

Consumer Privacy Act of 2018, or CCPA, effective on January 1, 2020.

Our and our business partners’

or contractors’

failure to fully comply with the CCPA and other laws could lead to significant fines and require onerous corrective action.

addition, data security breaches experienced by us or our business partners or contractors could result in the loss of trade secrets

or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information

(including sensitive personal information) of our employees, customers, suppliers, contractors and others.

Unauthorized use or disclosure of, or access

to, any personal information maintained by us or on our behalf, whether through breach of our systems, breach of the systems of

our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse, or otherwise, could

harm our business.

If any such unauthorized use or disclosure of, or access to, such personal information was to occur, our operations

could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations,

related actions, and penalties by regulatory authorities.

In addition, we could incur significant costs in notifying affected

persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating

to the unauthorized access to, or use or disclosure of, personal information.

Finally, any perceived or actual unauthorized access

to, or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain

customers and have an adverse impact on our business, financial condition and results of operations.

Unresolved Staff Comments.

We have received

no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were

issued 180 days or more preceding the end of our 2020 fiscal year and that remain unresolved.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors