What changed in this filing

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Item 1. Financial Statements

2021-05-17 compared with 2020-11-16 · 936 added, 1427 removed, 177 unchanged (93% of the section changed)

ETHANOL, INC.

FINANCIAL STATEMENTS.

INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable, net (net of allowance for doubtful accounts of $16 and $39, respectively)

Prepaid inventory

Assets held-for-sale

Derivative instruments

Other current assets

Total current assets

and cash equivalents

receivable (net of allowance for doubtful accounts of $351 and $260, respectively)

held-for-sale

current assets

Property and equipment, net

Other Assets:

Right of use operating lease assets, net

Notes receivable

Assets held-for-sale

Intangible assets

Total other assets

derived from the audited consolidated financial statements for the year ended December 31, 2019.

of use operating lease assets, net

derived from the audited financial statements for the year ended December 31, 2020.

accompanying notes to consolidated financial statements.

ETHANOL, INC.

INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except par value)

September 30,

LIABILITIES AND STOCKHOLDERS’

Current Liabilities:

Accounts payable –

Accrued liabilities

Current portion –

AND STOCKHOLDERS’

payable –

portion –

operating leases

Current portion –

portion –

long-term debt

Liabilities held-for-sale

Derivative instruments

Other current liabilities

Total current liabilities

Long-term debt, net of current portion

Operating leases, net of current portion

Other liabilities

Total Liabilities

Commitments and Contingencies (Note 7)

held-for-sale

current liabilities

debt, net of current portion

leases, net of current portion

and Contingencies (Note 6)

Stockholders’

Pacific Ethanol, Inc.

Ingredients, Inc.

Stockholders’

Preferred stock, $0.001 par value;

stock, $0.001 par value;

10,000 shares authorized;

1,684 shares authorized;

no shares issued and outstanding as of September 30, 2020 and December 31, 2019;

no shares issued and outstanding as of

March 31, 2021 and December 31, 2020;

1,581 shares authorized;

927 shares issued and outstanding as of September 30, 2020 and December 31, 2019;

liquidation preference of $19,344 as of September 30, 2020

Common stock, $0.001 par value;

927 shares issued and outstanding as of March 31,

2021 and December 31, 2020;

liquidation preference of $19,975 as of March 31, 2021

stock, $0.001 par value;

300,000 shares authorized;

63,483 and 55,508 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively

Non-voting common stock, $0.001 par value;

73,161 and 72,487 shares issued and outstanding as of March 31, 2021 and December 31,

2020, respectively

common stock, $0.001 par value;

3,553 shares authorized;

1 share issued and outstanding as of September 30, 2020 and December 31, 2019

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Pacific Ethanol, Inc.

1 share issued and outstanding as of March 31, 2021 and December 31,

paid-in capital

other comprehensive loss

Stockholders’

Noncontrolling interests

Total Stockholders’

Total Liabilities and Stockholders’

derived from the audited consolidated financial statements for the year ended December 31, 2019.

Liabilities and Stockholders’

derived from the audited financial statements for the year ended December 31, 2020.

accompanying notes to consolidated financial statements.

ETHANOL, INC.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

in thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

Gross profit (loss)

Selling, general and administrative expenses

Gain on litigation settlement

Selling, general and administrative

Asset impairment

Income (loss) from operations

Interest expense, net

Fair value adjustments

Other income (expense), net

Income (loss) before benefit for income taxes

Interest expense, net

Other income, net

Income (loss) before benefit

for income taxes

Benefit for income taxes

Consolidated net income (loss)

Net loss attributed to noncontrolling interests

Net income (loss) attributed to Pacific Ethanol, Inc.

Net loss attributed to noncontrolling

Net income (loss) attributed

to Alto Ingredients, Inc.

Preferred stock dividends

Net income (loss) available to common stockholders

Net income (loss) per share, basic

Net income (loss) per share, diluted

Weighted-average shares outstanding, basic

Weighted-average shares outstanding, diluted

Net income (loss) available

to common stockholders

Net income (loss) per share,

Weighted-average shares outstanding,

accompanying notes to consolidated financial statements.

ETHANOL, INC.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Nine Months Ended

September 30,

Operating Activities:

Consolidated net income (loss)

Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:

Depreciation and amortization of intangibles

Amortization of deferred financing fees

net income (loss)

to reconcile consolidated net income (loss) to net cash provided by (used in) operating activities:

(losses) on derivative instruments

of deferred financing fees

Fair value adjustments

Interest added to debt

Non-cash compensation

Gain on derivative instruments

Bad debt expense

Changes in operating assets and liabilities:

Accounts receivable

Prepaid inventory

Operating leases

Assets held-for-sale

Liabilities held-for-sale

Accounts payable and accrued expenses

Net cash provided by (used in) operating activities

Investing Activities:

Proceeds from PAL Sale

Additions to property and equipment

Net cash provided by (used in) investing activities

Financing Activities:

Net (payments on) proceeds from Kinergy’s line of credit

Proceeds from warrant exercises

Proceeds from issuance of common stock

Proceeds from CoGen contract amendment

Proceeds from borrowings

Principal payments on borrowings

Preferred stock dividends paid

Net cash provided by (used in) financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental Cash Flow Information:

Interest paid

Accrued preferred stock dividends

added to debt

Changes in operating assets

and liabilities:

expenses and other assets

held-for-sale

payable and accrued liabilities

cash provided by (used in) operating activities

to property and equipment

cash used in investing activities

proceeds (payments) from Kinergy’s line of credit

from stock option exercises

from issuance of common stock

payments on borrowings

cash provided by (used in) financing activities

Net increase (decrease) in

cash and cash equivalents

Cash and cash equivalents

at beginning of period

Cash and cash equivalents

at end of period

preferred stock dividends

accompanying notes to consolidated financial statements.

ETHANOL, INC.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(unaudited, in thousands)

Other Comprehensive

Income (Loss)

Comprehensive

Non-Controlling

January 1, 2021

1 unchanged sentence

restricted stock issued to employees and directors, net of cancellations and tax

of common stock

option exercises

stock dividends

March 31, 2021

compensation expense –

restricted stock issued to employees and directors, net of cancellations and tax

stock dividends

of interests in PAL

income (loss)

June 30, 2020

compensation expense –

restricted stock issued to employees and directors, net of cancellations and tax

of common stock

stock dividends

September 30, 2020

accompanying notes to consolidated financial statements.

PACIFIC ETHANOL, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY (CONTINUED)

(unaudited, in thousands)

Other Comprehensive

Income (Loss)

January 1, 2020

4 unchanged sentences

March 31, 2020

compensation expense –

restricted stock issued to employees and directors, net of cancellations and tax

stock dividends

June 30, 2019

compensation expense –

restricted stock issued to employees and directors, net of cancellations and tax

stock dividends

September 30, 2019

accompanying notes to consolidated financial statements.

ETHANOL, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND BASIS OF PRESENTATION.

and Business –

The consolidated financial statements include, for all periods

presented, the accounts of Pacific Ethanol, Inc., a Delaware corporation (“Pacific Ethanol”), and its direct and indirect

subsidiaries (collectively, the “Company”), including its subsidiaries, Kinergy Marketing LLC, an Oregon limited liability

company (“Kinergy”), Pacific Ag.

Products, LLC, a California limited liability company (“PAP”), PE Op Co.,

a Delaware corporation (“PE Op Co.”) and all nine of the Company’s production distilleries through April 15,

As discussed in Note 2, on April 15, 2020, the Company completed the sale of its ownership interests in Pacific Aurora, LLC

(“Pacific Aurora”), thereby divesting the Company’s two production distilleries located in Nebraska.

Company is a leading producer and marketer of specialty alcohols and essential ingredients in the United States.

Company’s production distilleries in Illinois are located in the heart of the Corn Belt, benefit from low-cost and

abundant feedstock and allow for access to many additional domestic markets.

In addition, the Company’s ability to load

unit trains and barges from these distilleries in the Midwest allows for greater access to international markets.

Company’s four distilleries in California, Oregon and Idaho (together with their respective holding companies, the

“Pacific Ethanol West Plants”) are located in close proximity to both feed and fuel-grade ethanol customers and

thus enjoy unique advantages in efficiency, logistics and product pricing.

Following the Company’s sale of its interest in Pacific

Aurora, the Company has a combined production capacity of 450 million gallons per year.

In 2019, the Company marketed nearly 1.0

billion gallons combined of specialty alcohols and fuel-grade ethanol, and nearly 3.0 million tons of essential ingredients on

a dry matter basis.

The Company focuses on four key markets:

Health, Home &

The consolidated financial statements include, for all periods presented, the accounts of Alto Ingredients,

Inc., a Delaware corporation (“Alto Ingredients”), and its direct and indirect subsidiaries (collectively, the “Company”),

including its wholly-owned subsidiaries, Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Alto Nutrients

LLC, a California limited liability company (“Alto Nutrients”), Alto Op Co., a Delaware corporation (“Alto Op Co.”)

and all seven of the Company’s production facilities as of March 31, 2021.

The Company is a leading producer

and marketer of specialty alcohols and essential ingredients.

The Company also produces and markets fuel-grade ethanol.

The Company’s

production facilities in Pekin, Illinois are located in the heart of the Corn Belt, benefit from low-cost and abundant feedstock and allow

for access to many additional domestic markets.

In addition, the Company’s ability to load unit trains and barges from these facilities

allows for greater access to international markets.

The Company’s four production facilities in California, Oregon and Idaho, located

in close proximity to both feed and fuel-grade ethanol customers, enjoy unique advantages in efficiency, logistics and product pricing.

The Company had a combined production

capacity of 450 million gallons per year, as of March 31, 2021, markets, on an annualized basis, over 500 million gallons of alcohols,

and produces, on an annualized basis, nearly 1.5 million tons of essential ingredients on a dry matter basis, such as dried yeast, corn

gluten meal, corn gluten feed, and distillers grains and liquid feed used in commercial animal feed and pet foods.

Company focuses on four key markets:

Health, Home & Beauty ;

Food & Beverage ;

Essential Ingredients ;

and Renewable Fuels .

Products for the Health, Home & Beauty market

include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners.

for the Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ

used for corn oils.

Products for Essential Ingredients markets include yeast, corn gluten and distillers grains used in commercial

animal feed and pet foods.

Renewable Fuels includes fuel-grade ethanol and distillers corn oil used as a feedstock for renewable

As of September 30, 2020, the Company was operating at approximately

51% of its 450 million gallon annual production capacity.

As market conditions change, the Company may increase, decrease or idle

production at one or more operating distilleries or resume operations at any idled distillery.

Renewable Fuels .

Products for the Health, Home & Beauty market include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals,

hand sanitizers, disinfectants and cleaners.

Products for the Food & Beverage markets include grain neutral spirits used in alcoholic

beverages and vinegar as well as corn germ used for corn oils.

Products for Essential Ingredients markets include yeast, corn gluten

and distillers grains used in commercial animal feed and pet foods.

Renewable Fuels includes fuel-grade ethanol and distillers corn oil

used as a feedstock for renewable diesel fuel.

of March 31, 2021, the Company was operating at approximately 64% of its then-450 million gallon annual production capacity.

market conditions change, the Company may increase, decrease or idle production at one or more operating facilities or resume

operations at any idled facility.

of Presentation –

Interim Financial Statements –

The accompanying unaudited consolidated financial

statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States

for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

Results for interim

periods should not be considered indicative of results for a full year.

These interim consolidated financial statements should

be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2019.

The accounting policies used in preparing these consolidated financial

statements are the same as those described in Note 1 to the consolidated financial statements in the Company’s Annual Report

on Form 10-K for the year ended December 31, 2019.

In the opinion of management, all adjustments (consisting of normal recurring

adjustments) considered necessary for a fair statement of the results for interim periods have been included.

All significant

intercompany accounts and transactions have been eliminated in consolidation.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a

going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of

During the nine months ended September 30, 2020, the Company continued to experience significant adverse conditions

in the fuel-grade ethanol market as demand and pricing were at record lows due to reduced domestic transportation and

resulting lower gasoline demand.

In response, the Company reduced fuel-grade ethanol production at its distilleries by more

than 50% in an effort to conserve capital as a result of the substantial reduction in fuel-grade ethanol demand due to

stay-at-home orders issued in response to the coronavirus pandemic.

The Company, however, has not only continued producing

and selling its specialty alcohols, but also converted a portion of its fuel-grade ethanol production to specialty alcohol

production to respond to increased demand from the sanitizer and disinfectant markets.

These sales of specialty alcohols were

at a mix of fixed and spot prices, both of which resulted in positive net income and cash flows from operations during the

The Company expects current demand for its specialty alcohols to continue for at least the next twelve months as the

Company continues to enter fixed-price contracts and hedge corn input costs, locking in profit margins on sales of specialty

At September 30, 2020, the Company had

$38.7 million in cash and $9.2 million available under Kinergy’s operating line of credit.

During the first nine months of

2020, the Company generated $75.7 million in cash from its operations and realized $19.9 million in net cash proceeds from the

sale of its interest in Pacific Aurora.

These positive cash flows have allowed the Company to make net payments totaling $91.6

million on its debt during the first nine months of 2020.

Further, subsequent to September 30, 2020, the Company made an additional

$25.3 million in payments on its term debt from proceeds of its offerings of common stock and warrants that generated net

proceeds of approximately $70.0 million.

The Company believes that as of the

date of this report, it is in compliance with all debt covenants contained in its credit facilities, except the

Company’s obligation to obtain lender approval of a comprehensive plan to restructure its assets and liabilities with

respect to its Pekin and ICP debt and a dispute over whether a portion of the Company’s principal payments originated

from an approved source of funds.

The Company has appointed a chief restructuring officer to facilitate the development of

such a plan and has presented and continues to negotiate the plan with its lenders.

As a result, the Company is not in

compliance with its obligations to its lenders, which could result in their acceleration of the Company’s debt.

though the Company doesn’t believe acceleration is probable, it has classified its related debt as current on the

Company’s consolidated balance sheets.

In addition to the Company’s

projected cash flows from operations, the Company recently raised net proceeds of $70.0 million in offerings of common stock

and warrants, and has recently announced the sale of certain assets for $10.0 million, which is expected to close by November

In addition, the Company continues to evaluate its Western fuel-grade ethanol distilleries for either repurposing

or sale, which may provide additional proceeds to repay debt.

Given these factors, the Company believes it has

alleviated substantial doubt about its ability to continue as a going concern and has sufficient liquidity to meet its

anticipated working capital, debt service and other liquidity needs for the next twelve months from the date of this

The accompanying unaudited consolidated financial statements

and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial

information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.

Results for interim periods should not be considered

indicative of results for a full year.

These interim consolidated financial statements should be read in conjunction with the consolidated

financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31,

The accounting policies used in preparing these consolidated financial statements are the same as those described in Note 1 to

the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the

results for interim periods have been included.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Receivable and Allowance for Doubtful Accounts –

Trade accounts receivable are presented at face value, net of

the allowance for doubtful accounts.

The Company sells fuel-grade ethanol to gasoline refining and distribution companies,

sells distillers grains and other feed co-products to dairy operators and animal feedlots and sells corn oil to poultry and

biodiesel customers generally without requiring collateral.

Trade accounts receivable are presented at face value, net of the allowance

for doubtful accounts.

The Company sells specialty alcohols to large consumer products companies, sells fuel-grade ethanol to gasoline

refining and distribution companies, sells essential ingredients to animal feed customers, including distillers grains and other feed

co-products to dairy operators and animal feedlots and corn oil to poultry and biodiesel customers generally without requiring collateral.

Company maintains an allowance for doubtful accounts for balances that appear to have specific collection issues.

The collection

process is based on the age of the invoice and requires attempted contacts with the customer at specified intervals.

a specified number of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for

the balance in question.

Delinquent accounts receivable are charged against the allowance for doubtful accounts once uncollectibility

has been determined.

The factors considered in reaching this determination are the apparent financial condition of the customer

and the Company’s success in contacting and negotiating with the customer.

If the financial condition of the Company’s

customers were to deteriorate, resulting in an impairment of ability to make payments, additional allowances may be required.

the accounts receivable balance, approximately $35,872,000 and $63,736,000 at September 30, 2020 and December 31, 2019, respectively,

were used as collateral under Kinergy’s operating line of credit.

The allowance for doubtful accounts was $16,000 and $39,000

as of September 30, 2020 and December 31, 2019, respectively.

The Company recorded no bad debt expense for the three months ended

September 30, 2020 and 2019.

The Company recorded a bad debt expense of $1,000 and $27,000 for the nine months ended September

30, 2020 and 2019, respectively.

The collection process

is based on the age of the invoice and requires attempted contacts with the customer at specified intervals.

If, after a specified number

of days, the Company has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question.

accounts receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined.

The factors considered

in reaching this determination are the apparent financial condition of the customer and the Company’s success in contacting and

negotiating with the customer.

If the financial condition of the Company’s customers were to deteriorate, resulting in an impairment

of ability to make payments, additional allowances may be required.

the accounts receivable balance, approximately $51,301,000 and $35,839,000 at March 31, 2021 and December 31, 2020, respectively, were

used as collateral under Kinergy’s operating line of credit.

The allowance for doubtful accounts was $351,000 and $260,000 as of

March 31, 2021 and December 31, 2020, respectively.

The Company recorded a bad debt expense of $91,000 and $19,000 for the three months

ended March 31, 2021 and 2020, respectively.

The Company does not have any off-balance sheet credit exposure related to its customers.

Instruments –

The carrying values of cash and cash equivalents, accounts receivable, derivative assets, accounts

payable, accrued liabilities and derivative liabilities are reasonable estimates of their fair values because of the short maturity

of these items.

The carrying value of the Company’s senior secured notes were recorded at fair value at December 31, 2019

and are considered Level 2 fair value measurements.

The Company believes their carrying value approximates fair value at September

The Company believes the carrying value of its notes receivable are not considered materially different than fair value

due to their recent issuances, and other long-term debt instruments are not considered materially different than fair value because

the interest rates on these instruments are variable, and are considered Level 2 fair value measurements.

Impairment of Long-Lived Assets

The Company assesses the impairment of long-lived assets, including property and equipment, internally developed software

and purchased intangibles subject to amortization, when events or changes in circumstances indicate that the fair value of assets

could be less than their net book value.

In such event, the Company assesses long-lived assets for impairment by first determining

the forecasted, undiscounted cash flows the asset group is expected to generate plus the net proceeds expected from the sale of

the asset group.

If this amount is less than the carrying value of the asset, the Company will then determine the fair value of

the asset group.

An impairment loss would be recognized when the fair value is less than the related asset group’s net book

value, and an impairment expense would be recorded in the amount of the difference.

An impairment loss may also occur to the extent

that the Company determines long-lived assets as held-for-sale and sales prices are less than carrying value.

of future cash flows are judgments based on the Company’s experience and knowledge of its operations and the industries in

which it operates.

These forecasts could be significantly affected by future changes in market conditions, the economic environment,

including inflation, and purchasing decisions of the Company’s customers.

The Company performed an undiscounted cash flow

analysis for its long-lived assets held-for-use, as of September 30, 2020, resulting in amounts in excess of carrying values.

The carrying values of cash and cash equivalents, accounts receivable, derivative assets, accounts payable,

accrued liabilities and derivative liabilities are reasonable estimates of their fair values because of the short maturity of these items.

The carrying value of the Company’s senior secured notes are recorded at fair value and are considered Level 2 fair value measurements.

The Company believes the carrying value of its notes receivable are not considered materially different than fair value due to their

recent issuances, and other long-term debt instruments’

carrying values are not considered materially different than fair value

because the interest rates on these instruments are variable, and are considered Level 2 fair value measurements.

and Assumptions –

The preparation of the consolidated financial statements in conformity with GAAP requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting

Significant estimates are required as part of determining the allowance for doubtful accounts, net realizable value of

inventory, estimated lives of property and equipment, long-lived asset impairments, valuation allowances on deferred income taxes

and the potential outcome of future tax consequences of events recognized in the Company’s financial statements or tax returns,

and the valuation of assets acquired and liabilities assumed as a result of business combinations.

Actual results and outcomes

may materially differ from management’s estimates and assumptions.

Pacific Aurora

December 19, 2019, Pacific Ethanol Central, LLC (“PE Central”) entered into a term sheet covering the proposed sale

of its 73.93% ownership interest in Pacific Aurora to Aurora Cooperative Elevator Company (“ACEC”) for $52.8 million,

and as a result, the Company determined that as of December 31, 2019, the long-lived assets of Pacific Aurora should be classified

as held-for-sale.

On April 15, 2020, the Company closed the sale of its ownership

interest in Pacific Aurora and preliminarily received total consideration of $52.8 million, subject to working capital adjustments

of approximately $35.3 million, resulting in cash proceeds of $19.9 million and the balance of $16.5 million in long-term ACEC

promissory notes, resulting in a net loss on sale of approximately $1.4 million, recorded as other income (expense) in the Company’s

consolidated statements of operations.

Approximately $14.5 million of the cash proceeds were used to repay a portion of the Company’s

In September 2020, the Company and ACEC agreed to certain post-closing adjustments to the purchase price, resulting

in a decrease of $0.9 million, and a corresponding reduction in the aggregate principal amount owed under the long-term ACEC promissory

The Company received two promissory notes, as adjusted, in the

amounts of $8.6 million and $7.0 million as part consideration for the sale, both maturing on April 15, 2025.

The $8.6 million

note accrues interest at an annual rate of 5.00%.

Interest payments are due quarterly beginning July 1, 2020 and principal payments

of $0.4 million are due quarterly beginning July 1, 2021.

The $7.0 million note accrues interest at an annual rate of 4.50%.

payments are due quarterly beginning July 1, 2020 and principal payments of $0.4 million are due quarterly beginning January 3,

addition, upon the sale, the Company no longer had noncontrolling interests on its balance sheet and no longer records income

(loss) of noncontrolling interests for future periods.

the three months ended September 30, 2019, Pacific Aurora contributed approximately $40.1 million in net sales, $6.7 million in

pre-tax loss and $1.7 million in net loss attributed to noncontrolling interests, respectively.

For the nine months ended September

30, 2020 and 2019, Pacific Aurora contributed $39.6 million and $112.0 million in net sales, $8.4 million and $14.0 million in

pre-tax loss, and $2.2 million and $3.7 million in net loss attributed to noncontrolling interests, respectively.

Pacific Ethanol Magic Valley

On July 28, 2020, the Company entered

into a term sheet with Liberty Basin, LLC (“Liberty”) to sell 134 acres, the rail loop and grain handling assets

at its Magic Valley plant in Burley, Idaho for $10.0 million in cash.

The Company will retain the fuel-grade ethanol

production facility and terminal on the remaining 25 acres and will enter into certain agreements with Liberty for delivery

of grain to the plant, and as a result, the Company determined that as of September 30, 2020, these long-lived assets should

be classified as held-for-sale.

On November 9, 2020, the Company announced a definitive sales agreement with Liberty had been

The sale is expected to close on or before November 30, 2020, subject to customary and other closing conditions.

The Company reports its financial and operating performance

in two segments:

(1) production, which includes the production and sale of alcohols and essential ingredients, with all of the

Company’s production distilleries aggregated, and (2) marketing and distribution, which includes marketing and merchant trading

for Company-produced products as well as third-party fuel-grade ethanol.

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

estimates are required as part of determining the allowance for doubtful accounts, net realizable value of inventory, estimated lives

of property and equipment, long-lived asset impairments, fair value of warrants, valuation allowances on deferred income taxes and the

potential outcome of future tax consequences of events recognized in the Company’s financial statements or tax returns, and the

valuation of assets acquired and liabilities assumed as a result of business combinations.

Actual results and outcomes may materially

differ from management’s estimates and assumptions.

ASSETS AND LIABILITIES HELD-FOR-SALE.

In October 2020, the Company’s Board of

Directors approved a plan to sell the Company’s fuel-grade ethanol production facilities located in Madera and Stockton, California.

As a result, the Company determined the related long-lived asset groups should be classified as held-for-sale at December 31, 2020.

the three months ended March 31, 2021, the Company provided for an additional impairment charge of $1.2 million based on revised fair

value estimates.

On April 23, 2021, the Company entered into an asset purchase agreement to sell its Madera facility for total consideration

of $28.3 million, comprised of $19.5 million in cash and $8.8 million in assumption of liabilities.

On May 14, 2021, the Company closed

Company classified the following assets and liabilities as held-for-sale as of March 31, 2021 (in thousands):

Property and equipment,

Right of use operating lease

Assets held-for-sale

Operating lease

Assessment financing

Liabilities held-for-sale

Company classified the following assets and liabilities as held-for-sale as of December 31, 2020 (in thousands):

Property and equipment,

Right of use operating lease

Assets held-for-sale

Operating lease

Assessment financing

Liabilities held-for-sale

For the three months ended March 31, 2021, net

sales attributed to the results of operations for Stockton and Madera were $0.2 million and less than $0.1 million, respectively.

the three months ended March 31, 2020, net sales attributed to the results of operations for Stockton and Madera were $21.9 million and

$21.5 million, respectively.

For the three months ended March 31, 2021, pre-tax loss attributed to the results of operations for Stockton

and Madera was $0.8 million and $1.6 million, respectively.

For the three months ended March 31, 2020, pre-tax loss attributed to the

results of operations for Stockton and Madera was $2.3 million and $1.8 million, respectively.

The Company reports its financial and operating

performance in three segments:

(1) marketing and distribution, which includes marketing and merchant trading for Company-produced alcohols

and essential ingredients on an aggregated basis, and third-party fuel-grade ethanol (2) Pekin production, which includes the production

and sale of alcohols and essential ingredients produced at the Company’s Pekin, Illinois campus (“Pekin Campus”), and

(3) Other production, which includes the production and sale of fuel-grade ethanol and essential ingredients produced at all of the Company’s

other production facilities on an aggregated basis (“Other production”), none of which are individually so significant as

to be considered a reportable segment.

following tables set forth certain financial data for the Company’s operating segments (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Production, recorded as gross:

Alcohol sales

Other product sales

Intersegment sales

Total production sales

Marketing and distribution:

Alcohol sales, gross

Alcohol sales, net

Intersegment sales

Total marketing and distribution sales

marketing and distribution sales

Pekin Campus production, recorded

ingredient sales

Pekin Campus sales

Other production, recorded

ingredient sales

Other production sales

Intersegment eliminations

Net sales as reported

Cost of goods sold:

Marketing and distribution

Intersegment eliminations

Cost of goods sold as reported

Income (loss) before benefit

for income taxes:

Marketing and distribution

Corporate activities

Depreciation and amortization:

Corporate activities

Interest expense:

Marketing and distribution

Corporate activities

of goods sold:

and distribution

Campus production

of goods sold as reported

(loss) before benefit for income taxes:

and distribution

Campus production

Depreciation:

Campus production

and distribution

Campus production

following table sets forth the Company’s total assets by operating segment (in thousands):

September 30,

Total assets:

Marketing and distribution

Corporate assets

consisted primarily of bulk specialty alcohols, fuel-grade ethanol, corn, co-products, low-carbon and Renewable

Identification Number (“RIN”) credits and unleaded fuel, and are valued at the lower-of-cost-or-net realizable

value, with cost determined on a first-in, first-out basis.

Inventory is net of a $32,000 and $1,290,000 valuation adjustment

as of September 30, 2020 and December 31, 2019, respectively.

Inventory balances consisted of the following (in

September 30,

Finished goods

Work in progress

Marketing and

Pekin Campus production

Other production

consisted primarily of bulk ethanol, specialty alcohols, corn, essential ingredients and unleaded fuel, and are valued at the lower of

cost or net realizable value, with cost determined on a first-in, first-out basis.

Inventory is net of a $1,033,000 valuation adjustment

as of December 31, 2020.

Inventory balances consisted of the following (in thousands):

Raw materials

Low-carbon and RIN credits

business and activities of the Company expose it to a variety of market risks, including risks related to changes in commodity

business and activities of the Company expose it to a variety of market risks, including risks related to changes in commodity prices.

The Company monitors and manages these financial exposures as an integral part of its risk management program.

recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effects that market volatility

could have on operating results.

This program recognizes

the unpredictability of financial markets and seeks to reduce the potentially adverse effects that market volatility could have on operating

Cash Flow Hedges –

The Company uses derivative instruments to protect cash flows

from fluctuations caused by volatility in commodity prices for periods of up to twelve months in order to protect gross profit

margins from potentially adverse effects of market and price volatility on fuel-grade ethanol sale and purchase commitments where

the prices are set at a future date and/or if the contracts specify a floating or index-based price for fuel-grade ethanol.

addition, the Company hedges anticipated sales of fuel-grade ethanol to minimize its exposure to the potentially adverse effects

of price volatility.

These derivatives may be designated and documented as cash flow hedges and effectiveness is evaluated by assessing

the probability of the anticipated transactions and regressing commodity futures prices against the Company’s purchase and

sales prices.

Ineffectiveness, which is defined as the degree to which the derivative does not offset the underlying exposure,

is recognized immediately in cost of goods sold.

For the three and nine months ended September 30, 2020 and 2019, the Company did

not designate any of its derivatives as cash flow hedges.

The Company uses derivative instruments to protect cash flows from fluctuations

caused by volatility in commodity prices for periods of up to twelve months in order to protect gross profit margins from potentially

adverse effects of market and price volatility on alcohol sales and purchase commitments where the prices are set at a future date and/or

if the contracts specify a floating or index-based price.

In addition, the Company hedges anticipated sales of alcohol to minimize its

exposure to the potentially adverse effects of price volatility.

These derivatives may be designated and documented as cash flow hedges

and effectiveness is evaluated by assessing the probability of the anticipated transactions and regressing commodity futures prices against

the Company’s purchase and sales prices.

Ineffectiveness, which is defined as the degree to which the derivative does not offset

the underlying exposure, is recognized immediately in cost of goods sold.

For the three months ended March 31, 2021 and 2020, the Company

did not designate any of its derivatives as cash flow hedges.

Non-Designated Hedges –

The Company uses derivative instruments to lock in prices for certain

amounts of corn and fuel-grade ethanol by entering into exchange-traded forward contracts for those commodities.

derivatives are not designated for hedge accounting treatment.

The changes in fair value of these contracts are recorded on

the balance sheet and recognized immediately in cost of goods sold.

The Company recognized gains of $1,582,000 and losses of

$3,320,000 as the changes in the fair values of these contracts for the three months ended September 30, 2020 and 2019,

respectively.

The Company recognized gains of $1,582,000 and $1,565,000 as the changes in the fair values of these contracts

for the nine months ended September 30, 2020 and 2019, respectively.

The Company uses derivative instruments to lock in prices for certain amounts of corn

and alcohols by entering into exchange-traded forward contracts or options for those commodities.

These derivatives are not designated

for hedge accounting treatment.

The changes in fair value of these contracts are recorded on the balance sheet and recognized immediately

in cost of goods sold.

The Company recognized net gains of $10,543,000 and $0 as the change in the fair value of these contracts for

the three months ended March 31, 2021 and 2020, respectively.

Designated Derivative Instruments –

The classification and amounts of the Company’s derivatives not designated

as hedging instruments, and related cash collateral balances, are as follows (in thousands):

As of September 30, 2020

Balance Sheet

Type of Instrument

Cash collateral balance

Other current assets

Commodity contracts

Derivative instruments

As of December 31,

Balance Sheet

Type of Instrument

Cash collateral balance

Other current assets

Commodity contracts

Derivative instruments

classification and amounts of the Company’s recognized gains (losses) for its derivatives not designated as hedging instruments

are as follows (in thousands):

Realized Gains (Losses)

Three Months Ended

September 30,

Type of Instrument

Statements of Operations Location

Commodity contracts

Cost of goods sold

Unrealized Gains (Losses)

Three Months Ended

September 30,

Type of Instrument

Statements of Operations Location

The classification and amounts of the Company’s derivatives not designated as

hedging instruments, and related cash collateral balances, are as follows (in thousands):

of March 31, 2021

of Instrument

Sheet Location

Commodity contracts

Cost of goods sold

Realized Gains (Losses)

Nine Months Ended

September 30,

Type of Instrument

Statements of Operations Location

Derivative assets

Derivative liabilities

of December 31, 2020

Sheet Location

Cash collateral

Other current

Commodity contracts

Cost of goods sold

Unrealized Gains (Losses)

Nine Months Ended

September 30,

Derivative assets

Derivative liabilities

classification and amounts of the Company’s recognized gains for its derivatives not designated as hedging instruments are as follows

(in thousands):

For the three

Type of Instrument

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Commodity contracts

Cost of goods sold

Cost of goods

For the three

of Operations Location

of goods sold

borrowings are summarized as follows (in thousands):

September 30,

Kinergy line of credit

Pekin term loan

Kinergy line of

Pekin revolving loan

ICP term loan

ICP revolving loan

CARES Act loans

Parent notes payable

Less unamortized debt premium

Less unamortized debt financing costs

Less short-term portion

Long-term debt

Pekin Credit Facilities –

On March 20, 2020, Pacific Ethanol Pekin, LLC (“PE Pekin”) and its lender

agreed to defer $1.0 million in aggregate interest payments due March 20, 2020 and April 20, 2020 until May 20, 2020.

same date, the Company granted to the lender a security interest in all of the Company’s equity interests in PE Op Co.,

which indirectly owns the Company’s distilleries located on the West Coast.

The Company and certain subsidiaries also

entered into intercreditor agreements with the PE Pekin and Illinois Corn Processing, LLC (“ICP”) lenders, and

the agent for the Company’s senior secured noteholders, to address issues of priority and the allocation of proceeds

from asset sales.

In July 2020, the Company reached a confidential settlement of an outstanding dispute resulting in a gain

and cash proceeds of approximately $11.8 million.

The Company used a portion of these funds to make approximately $7.4

million in additional principal payments on PE Pekin’s term debt.

Credit Facilities –

On March 20, 2020, ICP and its lender agreed to defer a $1.5 million principal payment due March

20, 2020 and $0.3 million in aggregate interest payments due March 20, 2020 and April 20, 2020 until May 20, 2020.

date, the Company granted to the lender a security interest in all of the Company’s equity interests in PE Op Co.

and certain of its subsidiaries also entered into intercreditor agreements with the PE Pekin and ICP lenders, and the agent for

the Company’s senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales.

The Company used a portion of the proceeds from the settlement noted above, in July 2020, to make approximately $1.8 million in

additional principal payments on ICP’s term debt.

Less unamortized debt financing

short-term portion

Parent Notes Payable –

On November 10, 2020, the Company repaid an additional $25.3 million in principal on its parent notes payable from the net proceeds

of its recent offerings of common stock and warrants.

Act Loans –

On May 4, 2020, Pacific Ethanol, Inc.

and PE Pekin received loan proceeds from Bank of America, NA under

the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), through the Paycheck Protection

Program administered by the U.S.

Small Business Administration.

Pacific Ethanol, Inc.

received $6.0 million and PE Pekin received

$3.9 million in loan proceeds.

The loans mature in two years and bear interest at a rate of 1.00% per annum.

Under the terms of

the loans, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES Act, but the Company

can provide no assurance that it will be able to obtain forgiveness of all or any portion of the loans.

At September 30, 2020, there were approximately $291.3 million of net assets at the Company’s subsidiaries that

were not available to be transferred to Pacific Ethanol, Inc.

in the form of dividends, loans or advances due to restrictions

contained in the credit facilities of the Company’s subsidiaries.

AND CONTINGENCIES.

May 14, 2021, with proceeds from the Company’s sale of its Madera, California facility, it repaid $19.3 million of principal on

its notes payable, with $0.7 million remaining.

of Long-term Debt –

The Company’s long-term debt matures as follows (in thousands):

At March 31, 2021, there were approximately $231.9 million of net assets at the Company’s subsidiaries that were

not available to be transferred to Alto Ingredients, Inc.

in the form of dividends, loans or advances due to restrictions contained in

the credit facilities of the Company’s subsidiaries.

COMMITMENTS AND CONTINGENCIES.

Commitments –

At September 30, 2020, the Company had entered into sales contracts

with its major customers to sell certain quantities of fuel-grade ethanol and co-products.

The Company had open fuel-grade ethanol

indexed-price contracts for 54,750,000 gallons of fuel-grade ethanol as of September 30, 2020 and open fixed-price fuel-grade ethanol

and specialty alcohol sales contracts totaling $327,244,000 as of September 30, 2020.

The Company had open fixed-price co-product

sales contracts totaling $18,120,000 and open indexed-price co-product sales contracts for 165,000 tons as of September 30, 2020.

These sales contracts are scheduled to be completed throughout 2020 and 2021.

At March 31, 2021, the Company had entered into sales contracts with its major customers to sell certain

quantities of alcohol and essential ingredients.

The Company had open alcohol indexed-price contracts for 102,526,000 gallons as of March

31, 2021 and open fixed-price alcohol sales contracts totaling $207,687,000 as of March 31, 2021.

The Company had open fixed-price sales

contracts for essential ingredients totaling $18,170,000 and open indexed-price sales contracts of essential ingredients for 146,000

tons as of March 31, 2021.

These sales contracts are scheduled to be completed throughout 2021.

Commitments –

At September 30, 2020, the Company had indexed-price purchase contracts to purchase 4,890,000

gallons of fuel-grade ethanol and fixed-price purchase contracts to purchase $3,341,000 of fuel-grade ethanol from its

The Company had fixed-price purchase contracts to purchase $9,525,000 of corn from its suppliers as of September

At March 31, 2021, the Company had indexed-price purchase contracts to purchase 15,626,000 gallons of alcohol

and fixed-price purchase contracts to purchase $1,238,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts

to purchase $33,883,000 of corn from its suppliers as of March 31, 2021.

These purchase commitments are scheduled to be satisfied throughout

General –

The Company is subject to various claims and contingencies in the ordinary course of its business,

including those related to litigation, business transactions, employee-related matters, environmental regulations, and others.

When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure.

If it is probable

that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss.

If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood

of a potential loss is reasonably possible and the amount involved could be material.

While there can be no assurances, the Company

does not expect that any of its pending legal proceedings will have a material impact on the Company’s financial condition

or results of operations.

AND RETIREMENT BENEFIT PLANS.

Company sponsors a defined benefit pension plan (the “Retirement Plan”) and a health care and life insurance plan

(the “Postretirement Plan”).

The Company assumed the Retirement Plan and the Postretirement Plan as part of its acquisition

of PE Central on July 1, 2015.

The Company is subject to various claims and contingencies in the ordinary course of its business, including

those related to litigation, business transactions, employee-related matters, environmental regulations, and others.

When the Company

is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure.

If it is probable that a loss will result

and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss.

If the loss is not probable

or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably

possible and the amount involved could be material.

While there can be no assurances, the Company does not expect that any of its pending

legal proceedings will have a material impact on the Company’s financial condition or results of operations.

PENSION PLANS.

Company sponsors a defined benefit pension plan (the “Retirement Plan”) and a health care and life insurance plan (the “Postretirement

Plan”).

The Company assumed the Retirement Plan and the Postretirement Plan as part of its acquisition of PE Central on July 1,

Retirement Plan is noncontributory, and covers only “grandfathered”

unionized employees at the Company’s Pekin,

Illinois distillery who fulfill minimum age and service requirements.

Benefits are based on a prescribed formula based upon the

employee’s years of service.

The Retirement Plan, which is part of a collective bargaining agreement, covers only union

employees hired prior to November 1, 2010.

unionized employees at the Company’s Pekin, Illinois

facility who fulfill minimum age and service requirements.

Benefits are based on a prescribed formula based upon the employee’s

years of service.

The Retirement Plan, which is part of a collective bargaining agreement, covers only union employees hired prior to

November 1, 2010.

Company uses a December 31 measurement date for its Retirement Plan.

The Company’s funding policy is to make the minimum

annual contribution required by applicable regulations.

As of December 31, 2019, the Retirement Plan’s accumulated projected

benefit obligation was $21.6 million, with a fair value of plan assets of $15.7 million.

The underfunded amount of $5.9 million

is recorded on the Company’s consolidated balance sheet in other liabilities.

The Company’s funding policy is to make the minimum annual

contribution required by applicable regulations.

As of December 31, 2020, the Retirement Plan’s accumulated projected benefit obligation

was $24.6 million, with a fair value of plan assets of $17.6 million.

The underfunded amount of $7.0 million is recorded on the Company’s

consolidated balance sheet in other liabilities.

For the three months ended March 31, 2021, the Retirement Plan’s net periodic

expense was $22,000, comprised of $151,000 in interest cost and $109,000 in service cost, partially offset by $238,000 of expected return

on plan assets.

For the three months ended March 31, 2020, the Retirement Plan’s net periodic expense was $48,000, comprised of

$173,000 in interest cost and $101,000 in service cost, partially offset by $226,000 of expected return on plan assets.

Postretirement Plan provides postretirement medical benefits and life insurance to certain “grandfathered”

unionized employees.

Employees hired after December 31, 2000 are not eligible to participate in the Postretirement Plan.

The Postretirement

Plan is contributory, with contributions required at the same rate as active employees.

Benefit eligibility under the plan reduces

at age 65 from a defined benefit to a defined dollar cap based upon years of service.

As of December 31, 2019, the Postretirement

Plan’s accumulated projected benefit obligation was $5.3 million and is recorded on the Company’s consolidated balance

sheet in other liabilities.

The Company’s funding policy is to make the minimum annual contribution required by applicable

VALUE MEASUREMENTS.

The Postretirement Plan is contributory,

with contributions required at the same rate as active employees.

Benefit eligibility under the plan reduces at age 65 from a defined

benefit to a defined dollar cap based upon years of service.

As of December 31, 2020, the Postretirement Plan’s accumulated projected

benefit obligation was $5.3 million and is recorded on the Company’s consolidated balance sheet in other liabilities.

The Company’s

funding policy is to make the minimum annual contribution required by applicable regulations.

For the three months ended March 31, 2021,

the Postretirement Plan’s net periodic expense was $42,000, comprised of $10,000 of interest cost, $26,000 of service cost and

$6,000 of amortization expense.

For the three months ended March 31, 2020, the Postretirement Plan’s net periodic expense was $59,000,

comprised of $38,000 of interest cost, $14,000 of service cost and $7,000 of amortization expense.

FAIR VALUE MEASUREMENTS.

fair value hierarchy prioritizes the inputs used in valuation techniques into three levels, as follows:

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Unobservable inputs –

includes amounts derived from valuation models

where one or more significant inputs are unobservable.

For fair value measurements using

significant unobservable inputs, a description of the inputs and the information used

to develop the inputs is required along with a reconciliation of Level 3 values from

the prior reporting period.

includes amounts derived from valuation models where

one or more significant inputs are unobservable.

For fair value measurements using significant

unobservable inputs, a description of the inputs and the information used to develop the

inputs is required along with a reconciliation of Level 3 values from the prior reporting

separate accounts –

Pooled separate accounts invest primarily in domestic and international stocks, commercial paper

or single mutual funds.

Pooled separate accounts invest primarily in domestic and international stocks, commercial paper or

single mutual funds.

The net asset value is used as a practical expedient to determine fair value for these accounts.

pooled separate account provides for redemptions by the Retirement Plan at reported net asset values per share, with little to

no advance notice requirement, therefore these funds are classified within Level 2 of the valuation hierarchy.

The Company’s warrants issued December 22, 2019, were valued using the Black-Scholes Valuation Model.

assumptions used and related fair value for the warrants as of August 5, 2020, the day on which they were fully exercised, were

Original Issuance

Exercise Price

Risk Free Interest Rate

Warrants Outstanding

assumptions used and related fair value for the warrants as of December 31, 2019 were as follows:

Original Issuance

Exercise Price

Risk Free Interest Rate

Warrants Outstanding

fair values of the warrants are based on unobservable inputs and are designated as Level 3 inputs.

Each pooled separate

account provides for redemptions by the Retirement Plan at reported net asset values per share, with little to no advance notice requirement,

therefore these funds are classified within Level 2 of the valuation hierarchy.

Assets Held-for-Sale –

The Company recorded its long-lived assets associated with its property and equipment held-for-sale

at fair value at March 31, 2021 and December 31, 2020 of $47,348,000 and $48,548,000, respectively.

The fair values of these assets are

based on observable values for the assets through corroboration with market data and are designated as Level 3 inputs.

Derivative Instruments –

The Company’s other derivative instruments consist of commodity positions.

values of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs.

following table summarizes recurring and nonrecurring fair value measurements by level at September 30, 2020 (in thousands):

Derivative financial instruments

The fair values

of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs.

following table summarizes recurring and nonrecurring fair value measurements by level at March 31, 2021 (in thousands):

financial instruments

assets held-for-sale

financial instruments

following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2020 (in thousands):

Derivative financial instruments

Long-lived assets held-for-sale

Defined benefit plan assets(1)

(pooled separate accounts):

Small/Mid U.S.

International Equity(4)

Fixed Income(5)

Derivative financial instruments

in derivative instruments in the consolidated balance sheets.

financial instruments

assets held-for-sale

benefit plan assets(1)

separate accounts):

International

in other assets in the consolidated balance sheets.

category includes investments in funds comprised of equity securities of large U.S.

The funds are valued using the net asset value method in which an average of the market

prices for the underlying investments is used to value the fund.

The funds are valued using the net asset value method in which an average of the market prices

for the underlying investments is used to value the fund.

category includes investments in funds comprised of equity securities of small- and medium-sized

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including emerging markets.

The funds are valued using the net asset value method in

which an average of the market prices for the underlying investments is used to value

The funds are valued using the net asset value method in which

an average of the market prices for the underlying investments is used to value the fund.

category includes investments in funds comprised of U.S.

and foreign investment-grade

fixed income securities, high-yield fixed income securities that are rated below investment-grade,

and foreign investment-grade fixed

income securities, high-yield fixed income securities that are rated below investment-grade,

treasury securities, mortgage-backed securities, and other asset-backed securities.

The funds are valued using the net asset value method in which an average of the market

prices for the underlying investments is used to value the fund.

The funds are valued using the net asset value method in which an average of the market prices

for the underlying investments is used to value the fund.

EARNINGS PER SHARE.

following tables compute basic and diluted earnings per share (in thousands, except per share data):

Three Months Ended September 30, 2020

Net income attributed to Pacific Ethanol, Inc.

Preferred stock dividends

Basic income per share:

Income available to common stockholders

Dilutive securities

Diluted income per share:

Income available to common stockholders

Three Months Ended September 30, 2019

Net loss attributed to Pacific Ethanol, Inc.

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

Nine Months Ended September 30, 2020

Net income attributed to Pacific Ethanol, Inc.

March 31, 2021

Net income attributed

to Alto Ingredients, Inc.

Preferred stock dividends

Basic income per share:

Income available to common stockholders

income per share:

available to common stockholders

Dilutive securities

Diluted income per share:

Income available to common stockholders

Nine Months Ended September 30, 2019

Net loss attributed to Pacific Ethanol, Inc.

income per share:

available to common stockholders

March 31, 2020

Net loss attributed

to Alto Ingredients, Inc.

Preferred stock dividends

Basic and diluted loss per share:

and diluted loss per share:

loss available to common stockholders

There were an aggregate of 844,000 and 634,000 potentially dilutive

weighted-average shares from convertible securities outstanding for the three and nine months ended September 30, 2020 and 2019,

respectively.

These convertible securities were not considered in calculating diluted net income (loss) per share for the periods

presented, as their effect would have been anti-dilutive.

October 28, 2020, the Company closed an underwritten public offering of 5,075,000 shares of its common stock at a public offering

price of $8.42 per share and 5-year pre-funded warrants to purchase 3,825,493 shares of common stock at a public offering price

of $8.42 per pre-funded warrant.

In addition, in a concurrent private placement, the Company also issued to the investor, for

a nominal price, warrants to purchase an additional 8,900,493 shares of common stock at an exercise price of $9.757 per share.

The warrants will become exercisable after the six-month anniversary of the offering and will expire on the 18-month anniversary

of the offering.

The aggregate gross proceeds from the offerings of common stock, pre-funded warrants and warrants was approximately

$75.0 million.

The net offering proceeds were approximately $70.0 million after deducting underwriting discounts and commissions

and other estimated offering expenses.

COMPANY FINANCIALS.

Net Assets –

At September 30, 2020, the Company had approximately $291,300,000 of net assets at its subsidiaries

that were not available to be transferred to Pacific Ethanol in the form of dividends, distributions, loans or advances due to

restrictions contained in the credit facilities of these subsidiaries.

There were an additional aggregate potentially

dilutive weighted-average shares of 3,265,000 and 964,000 from convertible securities outstanding for the three months ended March 31,

2021 and 2020.

These securities were not considered in calculating diluted net income (loss) per share for the three months ended March

31, 2021 and 2020, as their effect would have been anti-dilutive.

PARENT COMPANY FINANCIALS.

Restricted Net Assets –

March 31, 2021, the Company had approximately $231.9 million of net assets at its subsidiaries that were not available to be transferred

to Alto Ingredients in the form of dividends, distributions, loans or advances due to restrictions contained in the credit facilities

of these subsidiaries.

company financial statements for the periods covered in this report are set forth below (in thousands):

September 30,

Current Assets:

Cash and cash equivalents

Receivables from subsidiaries

Other current assets

Total current assets

Property and equipment, net

and cash equivalents

from subsidiaries

current assets

and equipment, net

Other Assets:

Investments in subsidiaries

Pacific Ethanol West plant receivable

Right of use operating lease assets, net

Total other assets

in subsidiaries

LLC receivable

use operating lease assets, net

payable and accrued liabilities

portion of long-term debt

current liabilities

Accounts payable and accrued liabilities

Accrued PE Op Co.

Current portion of long-term debt

Other current liabilities

Total current liabilities

Long-term debt, net of current portion

Other liabilities

Total Liabilities

current liabilities

debt, net of current portion

Stockholders’

Preferred stock

Common and non-voting common stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Pacific Ethanol, Inc.

and non-voting common stock

paid-in capital

other comprehensive loss

Alto Ingredients, Inc.

stockholders’

Total Liabilities and Stockholders’

Liabilities and Stockholders’

Three Months Ended

Management fees from subsidiaries

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Loss from operations

Interest income from subsidiaries

Interest expense

Fair value adjustments

Other expense

Interest expense, net

Loss before benefit for income taxes

Benefit for income taxes

Loss before benefit for income taxes

Loss before equity in losses of subsidiaries

Equity in income (losses) of subsidiaries

Consolidated net income (loss)

the Nine Months Ended

September 30,

the Three Months Ended

Operating Activities:

net income (loss)

Adjustments to reconcile net income (loss) to cash used in operating activities:

Equity in (income) losses of subsidiaries

to reconcile net income (loss) to cash used in operating activities:

in (income) losses of subsidiaries

Fair value adjustments

Amortization of debt discounts

Changes in operating assets and liabilities:

Accounts receivable

Accounts payable and accrued expenses

Accounts payable with subsidiaries

Net cash used in operating activities

Investing Activities:

Additions to property and equipment

Net cash used in investing activities

Financing Activities:

Proceeds from issuances of common stock

Proceeds from warrant exercises

Proceeds from long-term debt

Proceeds from Pacific Ethanol West

Payments on senior notes

Preferred stock dividend payments

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

(accretion) of debt discount (premium)

in operating assets and liabilities:

from subsidiaries

payable and accrued expenses

payable with subsidiaries

cash used in operating activities

to property and equipment

cash used in investing activities

from issuances of common stock

from plant receivable

on senior notes

stock dividend payments

cash provided by (used in) financing activities

Net increase (decrease) in

cash and cash equivalents

and cash equivalents at beginning of period

and cash equivalents at end of period

SUBSEQUENT EVENT.

Agreement to sell Madera facility –

April 23, 2021, the Company entered into an asset purchase agreement with Seaboard Energy California, LLC, for the purchase and sale of

the Company’s Madera, California production facility for total consideration of $28.3 million, comprised of $19.5 million in cash

and $8.8 million in assumption of liabilities.

The Company closed the sale on May 14, 2021, and using net cash proceeds, repaid $19.3

million on its parent notes payable.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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This report and our consolidated financial statements and notes to consolidated

financial statements contain forward-looking statements, which generally include the plans and objectives of management for future

operations, including plans and objectives relating to our future economic performance and our current beliefs regarding revenues

we might generate and profits we might earn if we are successful in implementing our business and growth strategies.

The forward-looking

statements and associated risks may include, relate to or be qualified by other important factors, including:

fluctuations in the

market prices of our products;

fluctuations in the

costs of key production input commodities such as corn and natural gas;

the projected growth

or contraction in the markets in which we operate;

our strategies for expanding,

maintaining or contracting our presence in these markets;

anticipated trends in

our financial condition and results of operations;

our ability to distinguish

ourselves from our current and future competitors.

are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or

in the case of a document incorporated by reference, as of the date of that document.

We do not undertake to update, revise or

correct any forward-looking statements, except as required by law.

financial statements contain forward-looking statements, which generally include the plans and objectives of management for future operations,

including plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate

and profits we might earn if we are successful in implementing our business and growth strategies.

The forward-looking statements and

associated risks may include, relate to or be qualified by other important factors, including:

● fluctuations

in the market prices of alcohols and essential ingredients;

● fluctuations

in the costs of key production input commodities such as corn and natural gas;

projected growth or contraction in the alcohol and essential ingredients markets in which

strategies for expanding, maintaining or contracting our presence in these markets;

● anticipated

trends in our financial condition and results of operations;

ability to distinguish ourselves from our current and future competitors.

are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the

case of a document incorporated by reference, as of the date of that document.

We do not undertake to update, revise or correct any forward-looking

statements, except as required by law.

of the factors described immediately above, or referenced from time to time in our filings with the Securities and Exchange Commission

or in the “Risk Factors”

section below could cause our financial results, including our net income or loss or growth

in net income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our

common stock to fluctuate substantially.

are a leading United States producer and marketer of specialty alcohols and essential ingredients.

operate seven strategically located production distilleries.

Three of our distilleries are located in the Midwestern state of

Illinois and four of our distilleries are located in the Western states of California, Oregon and Idaho.

Our distilleries have

a combined production capacity of 450 million gallons per year.

We market all of the alcohols produced at our distilleries as

well as fuel-grade ethanol produced by third parties.

In 2019, we marketed nearly 1.0 billion gallons combined of specialty alcohols

and fuel-grade ethanol, and nearly 3.0 million tons of essential ingredients on a dry matter basis.

Our business consists of two

operating segments:

a production segment and a marketing segment.

mission is to be a leading United States producer and marketer of specialty alcohols and essential ingredients.

section below could cause our financial results, including our net income or loss or growth in net

income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock

to fluctuate substantially.

On April 23, 2021, we entered into an asset purchase

agreement with Seaboard Energy California, LLC, for the purchase and sale of our Madera, California production facility for total consideration

of $28.3 million, comprised of $19.5 million in cash and $8.8 million in assumption of liabilities.

We closed the transaction on May 14,

2021, and with the net proceeds, repaid $19.3 million in principal on our senior notes.

are a leading producer and marketer of specialty alcohols and essential ingredients, and the largest producer of specialty alcohols in

the United States based on annualized volumes.

We operate six alcohol production facilities.

of our production facilities are located in the Midwestern state of Illinois and three of our facilities are located in the Western states

of California, Oregon and Idaho.

Our facility in California is held-for-sale as we are in the process of marketing the Stockton facility

We have an annual alcohol production capacity of 410 million gallons.

We market all of the alcohols produced at our facilities

as well as fuel-grade ethanol produced by third parties.

In 2020, we marketed over 500 million gallons combined of our own alcohols as

well as fuel-grade ethanol produced by third parties, and nearly 1.5 million tons of essential ingredients on a dry matter basis.

business consists of three reportable segments:

two production segments and a marketing segment.

We report our financial and operating performance

in three segments:

(1) marketing and distribution, which includes marketing and merchant trading for Company-produced alcohols and essential

ingredients on an aggregated basis, and third party fuel-grade ethanol (2) Pekin production, which includes the production and sale of

alcohols and essential ingredients produced at our Pekin, Illinois campus, and (3) Other production, which includes the production and

sale of fuel-grade ethanol and essential ingredients produced at all of our other production facilities on an aggregate basis, none of

which are individually so significant as to be considered a reportable segment.

mission is to expand our business as a leading producer and marketer of specialty alcohols and essential ingredients.

We intend to accomplish

this goal in part by investing in our specialized and higher value production and distribution infrastructure, expanding production

in high demand essential ingredients, expanding and extending the sale of our products into new regional and international markets,

building efficiencies and economies of scale and by capturing a greater portion of the value stream.

produce specialty alcohols and essential ingredients, focusing on four key markets:

this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding

production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international

markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream.

produce specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on four key markets:

Health, Home & Beauty ;

2 unchanged sentences

and Renewable Fuels .

Products for the Health, Home & Beauty market include specialty alcohols used

in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners.

Products for the Food & Beverage markets

include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils.

Products for Essential

Ingredients markets include yeast, corn gluten and distillers grains used in commercial animal feed and pet foods.

Renewable Fuels

includes fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel fuel.

produce these products at our distilleries described below.

Our distilleries located in the Midwest are in the heart of the Corn

Belt, benefit from low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both

domestic and international markets via truck, rail or barge.

Our distilleries located on the West Coast are near their respective

fuel and feed customers, offering significant timing, transportation cost and logistical advantages.

are currently operating at approximately 51% of production capacity.

As market conditions change, we may increase, decrease or

idle production at one or more operating distilleries or resume operations at any idled distillery.

anticipate restarting our Pekin dry mill, which was idled due to temporary lock repairs

and resultant river closures, during the fourth quarter of 2020.

market all of the alcohols and essential ingredients we produce at our distilleries.

We also market fuel-grade ethanol produced

by third parties.

have extensive and long-standing customer relationships, both domestic and international, for our alcohols and essential ingredients.

These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits

producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global

trading firms.

Products for the Health, Home & Beauty market

include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners.

Products for the

Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn

Products for Essential Ingredients markets include yeast, corn gluten and distillers grains used in commercial animal feed and

Our Renewable Fuels products include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel fuel.

produce our alcohols and essential ingredients at our production facilities described below.

Our production facilities located in the

Midwest are in the heart of the Corn Belt, benefit from low-cost and abundant feedstock and enjoy logistical advantages that enable us

to provide our products to both domestic and international markets via truck, rail or barge.

Our production facilities located on the

West Coast are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages.

We are currently operating at approximately 64%

of our estimated maximum annual production capacity.

Our Magic Valley and Stockton facilities are currently idled.

As market conditions

change, we may increase, decrease or idle production at one or more operating facilities or resume operations at any idled facility.

Annual Production Capacity

(estimated, in gallons)

Production Facility

Fuel-Grade Ethanol

Specialty Alcohol

market all of the alcohols and essential ingredients we produce at our facilities.

We also market fuel-grade ethanol produced by third

have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols and essential ingredients.

These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers,

food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.

fuel-grade ethanol customers are located throughout the Western and Midwestern United States and consist of integrated oil companies

and gasoline marketers who blend fuel-grade ethanol into gasoline.

Our customers depend on us to provide a reliable supply of

fuel-grade ethanol and manage the logistics and timing of delivery with very little effort on their part.

Our customers collectively

require fuel-grade ethanol volumes in excess of the supplies we produce at our production distilleries.

We secure additional fuel-grade

ethanol supplies from third-party fuel-grade ethanol plants in California and other third-party suppliers in the Midwest where

a majority of fuel-grade ethanol producers are located.

We arrange for transportation, storage and delivery of fuel-grade ethanol

purchased by our customers through our agreements with third-party service providers in the Western United States as well as in

the Midwest from a variety of sources.

market our essential ingredient feed products to dairies and feedlots, in many cases located near our distilleries.

Our customers depend on us to provide a reliable supply of fuel-grade

ethanol and manage the logistics and timing of delivery with very little effort on their part.

Our customers collectively require fuel-grade

ethanol volumes in excess of the supplies we produce at our facilities.

We secure additional fuel-grade ethanol supplies from third-party

fuel-grade ethanol plants in California and other third-party suppliers in the Midwest where a majority of fuel-grade ethanol producers

We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements

with third-party service providers in the Western United States as well as in the Midwest from a variety of sources.

market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities.

These customers

use our feed products for livestock as a substitute for corn and other sources of starch and protein.

We sell our corn oil to

poultry and biodiesel customers.

We sell our corn oil to poultry

and biodiesel customers.

We do not market essential ingredients from other producers.

“Note 3 –

See “Note 3 –

Segments”

to our Notes to Consolidated Financial Statements included elsewhere in this report for

financial information about our business segments.

Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our business segments.

Initiatives and Outlook

the third quarter, we continued to experience an excellent margin environment for our specialty alcohols and essential ingredients.

In addition, margins for our fuel-grade ethanol improved, and ethanol spot prices have now largely recovered to pre-pandemic levels.

Our positive results for the quarter were mitigated, however, by significant logistical constraints due to closure of the Illinois

River for lock repairs.

Although we expected this closure, it nevertheless required greater use of less cost-effective modes of

product transport such as via rail and truck, which resulted in higher costs.

The Illinois River lock repairs are now complete

approximately thirty days past the completion date initially anticipated –

and we do not expect similar logistical

constraints going forward.

have strategically realigned our business to focus on specialty alcohols and essential ingredients in the three key markets of

Health, Home & Beauty , Food & Beverage and Essential Ingredients , in addition to our continued focus

on renewable fuel.

These three markets have experienced stable growth and represent strong demand for our specialty alcohols and

essential ingredients that we sell to blue chip customers and well-known household brands.

In the first nine months of 2020, we

generated approximately 45% of our net sales from specialty alcohols as compared to only 15% for all of 2019, excluding sales

of third-party fuel-grade ethanol.

Our focus on specialty alcohols has also reduced our exposure to fuel-grade ethanol markets

that have experienced inventory over-supply challenges and demand destruction.

demand for specialty alcohols used in sanitizers and disinfectants as a result of the coronavirus pandemic has positively impacted

our results thus far in 2020.

As demand vastly exceeded available supplies in the first months of the pandemic, spot prices for

these specialty alcohols significantly exceeded prices for more premium products.

While this market remains highly dynamic, spot

demand has declined and spot prices have fallen from the peaks witnessed in the second quarter.

Specialty alcohol premiums over

fuel-grade ethanol still remain greater than historical averages, contributing to our optimistic outlook for 2021 and beyond.

In fact, the majority of our specialty alcohol production for 2021 is already contracted for at fixed prices and for terms of

up to one year or more.

optimistic outlook is also supported by two key market drivers.

First, we expect an increase in the use of alcohol-based sanitizers

and disinfectants.

Demand has increased for specialty alcohols used in sanitizers and disinfectants such as GermX and Lysol for

use in hospitals, restaurants, offices and schools.

We believe that as the pandemic abates and the population begins to return

to typical social and work environs, demand for sanitizers and disinfectants will remain strong as individuals use these products

to protect themselves and businesses use these products to protect their customers and employees.

Second, we expect continued

growth in distilled spirits consumption.

Demand for distilled spirits has increased every year for the past decade, and we are

working to add 30 million gallons of grain neutral spirits production capacity in the fourth quarter to meet this rising demand.

Once completed, we will have increased our annual production capacity of specialty alcohols to 140 million gallons, the majority

of which will meet or exceed United States Pharmacopeia (USP) specifications, representing an increase of 65% in annual capacity

compared to 85 million gallons in 2019.

are working to broaden our addressable customers and markets by obtaining additional certifications.

In October, we obtained our

ISO9001 certification, the world’s most widely recognized quality management system certification.

We are also pursuing

two additional certifications, specifically, ICH Q7, which sets forth good manufacturing practices for active pharmaceutical ingredients,

and EXCiPACT, which sets standards for excipient safety and quality.

We expect final audits for these additional certifications

by the end of 2020.

continue to evaluate many attractive investment opportunities in our asset portfolio.

These opportunities are now available given

our performance and strengthened balance sheet.

For example, we are expanding annual production capacity of our yeast facility

Our yeast product is a high-value essential ingredient and we anticipate the full return of our investment of $5.5 million

in less than two years.

We expect to complete this capacity expansion by the third quarter of 2021.

also continue to pursue our strategic realignment plans to sell or repurpose our Western distilleries.

We recently announced an

agreement to sell our grain handling assets at our Magic Valley distillery in Burley, Idaho, comprising 134 acres of land, the

rail loop, and related grain handling assets, for $10.0 million.

The sale is expected to close by the end of November and we intend

to use the sale proceeds to repay term debt.

We will retain our alcohol production distillery, terminal and 25 acres of remaining

land in Burley, Idaho.

remain focused on our transformation to a stable, higher-margin business.

We have already successfully transitioned production

to approximately 50% specialty alcohols and we are focusing on established markets that will continue to see long-term demand.

Our initiatives around quality assurance and certifications are directed at expanding our addressable customers and markets.

financial performance and balance sheet have greatly improved year over year, enabling us to pursue investment opportunities in

our asset portfolio.

Overall, we are encouraged that we will be able to deliver greater and more consistent profitability for

our shareholders.

We had a solid first quarter, selling 19 million

gallons of specialty alcohols through a combination of contracted volumes, spot sales and exports.

The first quarter also represented

our fourth consecutive quarter of gross profit, reflecting the benefits of our new business focus on specialty alcohols and essential

Our new business focus is more sustainable and profitable than our prior focus on fuel-grade ethanol.

We are now the largest producer of specialty alcohols

in the United States based on annualized volumes.

We have 410 million gallons of annual production capacity, of which approximately 140

million gallons, or 34%, is specialty alcohols and the balance is fuel-grade ethanol.

We are currently operating production facilities

with 290 million gallons of annual capacity, of which nearly 50% is specialty alcohols.

All of our operating facilities are running at

break-even or better on an earnings before interest, taxes, depreciation and amortization basis.

We remain on track for sales of our specialty alcohols

to contribute a minimum of $60 million in gross profit for the full year based on 70 million gallons of specialty alcohols contracted

in the fall of 2020 at fixed volumes and prices.

Many variables could materially impact our results, including export conditions, the

ability of our customers to take all of their contracted volumes for 2021, market demand for sanitizers and disinfectants, our ability

to timely sell our Stockton, California production facility, and fuel-grade ethanol crush margins.

We are optimistic that we can add additional

contracted specialty alcohol volumes in 2022 and future years, improving utilization over time from our expanded specialty alcohol production

capacity and our ISO 9001, ICH Q7 and EXCiPACT certifications.

As noted above, we have completed the sale of our

idled fuel-grade ethanol production facility in Madera, California for total consideration of $28.3 million.

We expect to save approximately

$0.7 million per quarter in interest expense and approximately $0.4 million per quarter in carrying costs associated with the idled facility.

We have capital improvement projects totaling $18.0

million in process or scheduled for 2021.

We expect these projects to expand revenue and increase efficiencies and plant reliability.

For example, we are increasing our yeast facility’s annual production capacity by approximately 15%.

We will also have the ability

to further expand production of even higher value yeast derivatives with similar payback profiles.

In addition, we are upgrading our feed

dryers at our Pekin Campus that will produce even higher value feed and improve overall plant efficiency and reliability.

These two projects

are scheduled for completion by the third quarter with an expected payback in less than two years, or approximately $5.0 million in additional

annual earnings before interest, taxes, depreciation and amortization.

Our Pekin Campus sits on the Mt.

Simon sandstone

formation, considered one of the most significant potential carbon storage resources in the United States.

As a member of the Carbon Capture

Coalition, we are actively engaged in discussions to develop a carbon capture and sequestration program at our Pekin site, which generates

over 600,000 tons of CO 2 annually, and expect to be an active player in the carbon capture space.

Finally, among many other projects under development

is our plan to expand protein production at our dry-mill production facilities, which collectively represent 250 million gallons of annual

production capacity.

We believe the economics of expanded protein production are compelling and would expect to achieve protein concentrations

in excess of 50% and an improvement in corn oil production by 50%.

Over the past twelve months, we have improved operations

and our production footprint, and reduced controllable expenses and our overall cost of capital, to build a strong foundation for the

future which will enable us to aggressively pursue organic opportunities to reinvest in quality, proven high-value projects, as well as

pursue accretive strategic acquisitions.

Accounting Policies

preparation of our financial statements, which have been prepared in accordance with accounting principles generally accepted

in the United States of America, requires us to make judgments and estimates that may have a significant impact upon the portrayal

of our financial condition and results of operations.

We believe that of our significant accounting policies, the following require

estimates and assumptions that require complex, subjective judgments by management that can materially impact the portrayal of

our financial condition and results of operations:

preparation of our financial statements, which have been prepared in accordance with accounting principles generally accepted in the

United States of America, requires us to make judgments and estimates that may have a significant impact upon the portrayal of our financial

condition and results of operations.

We believe that of our significant accounting policies, the following require estimates and assumptions

that require complex, subjective judgments by management that can materially impact the portrayal of our financial condition and results

of operations:

revenue recognition;

impairment of long-lived assets and held-for-sale classification;

valuation of allowance for deferred taxes and derivative instruments.

These significant accounting principles are more fully described

in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Policies”

in our Annual Report on Form 10-K for the year ended December 31, 2019.

valuation of allowance for deferred

taxes and derivative instruments.

These significant accounting principles are more fully described in “Management’s Discussion

and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies”

in our Annual Report on Form

10-K for the year ended December 31, 2020.

of Operations

following selected financial information should be read in conjunction with our consolidated financial statements and notes to

our consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion

and Analysis of Financial Condition and Results of Operations”

following selected financial information should be read in conjunction with our consolidated financial statements and notes to our consolidated

financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of

Financial Condition and Results of Operations”

contained in this report.

performance metrics that we believe are important indicators of our results of operations include:

gallons sold (in millions)

party gallons sold (in millions)

gallons sold (in millions)

gallons produced (in millions)

capacity utilization

sales price per gallon

cost per bushel –

CBOT equivalent

co-product tons sold (in thousands)

revenues as % of delivered cost of corn (2)

CBOT fuel-grade ethanol price per gallon

CBOT corn price per bushel

basis represents the difference between the immediate cash price of delivered corn and

the future price of corn for Chicago delivery.

(2) Co-product

revenues as a percentage of delivered cost of corn shows our yield based on sales of

co-products, including WDG and corn oil, generated from alcohols we produced.

Three Months Ended

Fuel-grade ethanol production gallons sold (in millions)

Specialty alcohol production gallons sold (in millions)

Third party fuel-grade ethanol gallons sold (in millions)

Total gallons sold (in millions)

Total gallons produced (in millions)

Production capacity utilization

Average sales price per gallon

Corn cost per bushel—CBOT equivalent

Average basis (1)

Delivered cost of corn

Total essential ingredients tons sold (in thousands)

Essential ingredients revenues as % of delivered cost of corn (2)

Average CBOT ethanol price per gallon

Average CBOT corn price per bushel

basis represents the difference between the immediate cash price of delivered corn and the

future price of corn for Chicago delivery.

(2) Essential

ingredients revenues as a percentage of delivered cost of corn shows our yield based on sales

of essential ingredients, including wet distillers grains and corn oil, generated from alcohol

Sales, Cost of Goods Sold and Gross Profit (Loss)

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of net sales (in thousands, except percentages):

Months Ended September 30,

Three Months Ended

Cost of goods sold

Gross profit (loss)

Percentage of

decline in our net sales for the three and nine months ended September 30, 2020 as compared to the same periods in 2019 was primarily

due to a significant decline in our fuel-grade ethanol production gallons sold.

sold fewer fuel-grade ethanol production gallons and co-products for the three and nine months ended September 30, 2020 as

compared to the same periods in 2019.

These declines are primarily due to significantly reduced transportation fuel demand

from the effects of stay-at-home orders as a result of the coronavirus pandemic.

As a result, we reduced our production

capacity utilization to 40% on a consolidated basis in the third quarter.

Demand for our specialty alcohols, however,

increased significantly in the sanitizer and disinfectant markets.

These markets have historically, and even more so in the

second and third quarters, provided a premium price over fuel-grade ethanol markets.

Our third-party gallons sold declined

slightly in the quarter, but significantly less than the decline in overall fuel-grade ethanol demand, as most of our

fuel-grade ethanol commitments for the quarter were met through our third party marketing business.

Months Ended September 30, 2020 and 2019

a consolidated basis, our average sales price per gallon increased 6.2% to $1.71 for the three months ended September 30, 2020

compared to $1.61 for the same period in 2019.

The average Chicago Board of Trade, or CBOT, fuel-grade ethanol price per gallon,

decreased 9.9% to $1.27 for the three months ended September 30, 2020 compared to $1.41 for the same period in 2019.

in our average sales price per gallon, despite lower fuel-grade ethanol prices, is due to a change in our mix of sales, with a

higher percentage of gallons sold of specialty alcohols as compared to fuel-grade ethanol.

sales of alcohols from our production segment declined by $123.1 million, or 58%, to $89.8 million for the three months ended

September 30, 2020 as compared to $212.9 million for the same period in 2019.

Our total volume of production gallons sold declined

by 86.6 million gallons, or 67%, to 43.5 million gallons for the three months ended September 30, 2020 as compared to 130.1 million

gallons for the same period in 2019.

Our production segment’s average sales price per gallon increased 25% to $2.02 for

the three months ended September 30, 2020 compared to our production segment’s average sales price per gallon of $1.62 for

the same period in 2019.

At our production segment’s average sales price per gallon of $2.02 for the three months ended

September 30, 2020, we generated $174.5 million less in net sales from our production segment from the 86.6 million fewer production

gallons sold in the three months ended September 30, 2020 as compared to the same period in 2019.

This decline was partially offset

by the increase of $0.40 in our production segment’s average sales price per gallon for the three months ended September

30, 2020 as compared to the same period in 2019, which increased our net sales of alcohols from our production segment by $51.4

sales of co-products declined $35.1 million, or 53%, to $30.6 million for the three months ended September 30, 2020 as compared

Percentage of net sales

* Not meaningful

decrease in our consolidated net sales for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily

due to a decrease in our total gallons sold, partially offset by an increase in our average sales price per gallon.

Our production gallons sold

and our volume of essential ingredients sold declined for the three months ended March 31, 2021 as compared to the same period in 2020.

Our third-party gallons sold also declined.

Our production gallons and essential ingredients sold declined primarily due to an intentional

reduction in our production of fuel-grade ethanol due to adverse market conditions as well as the sale of our Nebraska facilities in April

Our third-party gallons sold declined as we focused our efforts on selling our own fuel-grade ethanol production.

a consolidated basis, our average sales price per gallon increased 28.5% to $1.94 for the three months ended March 31, 2021 as compared

to $1.51 for the same period in 2020.

The average Chicago Board of Trade, or CBOT, fuel-grade ethanol price per gallon, increased 29.0%

to $1.60 for the three months ended March 31, 2021 as compared to $1.24 for the same period in 2020.

sales of fuel-grade ethanol from our marketing segment, excluding intersegment sales, decreased by $0.5 million, or 1%, to $57.4 million

for the three months ended March 31, 2021 as compared to $57.9 million for the same period in 2020.

volume of third party fuel-grade ethanol gallons sold reported gross by our marketing segment decreased by 7.2 million gallons, or 21%,

to 26.7 million gallons for the three months ended March 31, 2021 as compared to 33.9 million gallons for the same period in 2020.

our marketing segment’s average sales price per gallon of $2.14 for the three months ended March 31, 2021, we generated $15.3 million

less in net sales from our marketing segment from the 7.2 million fewer gallons of third-party fuel-grade ethanol sold gross in the three

months ended March 31, 2021 as compared to the same period in 2020.

Our volume of third party fuel-grade ethanol gallons

sold reported net by our marketing segment decreased by 1.2 million gallons, or 4%, to 27.3 million gallons for the three months ended

March 31, 2021 as compared to 28.5 million gallons for the same period in 2020.

The decrease in third-party fuel-grade ethanol gallons

sold reported net reduced net sales by less than $0.1 million.

$0.44 per gallon, or 26%, increase in our marketing segment’s average sales price per gallon for the three months ended March 31,

2021 as compared to the same period in 2020 resulted in a $14.8 million increase in our net sales from third-party fuel-grade ethanol

sold by our marketing segment.

Campus Production Segment

sales of alcohol from our Pekin Campus production segment increased by $11.0 million, or 13%, to $95.1 million for the three months ended

March 31, 2021 as compared to $84.1 million for the same period in 2020.

Our total volume of production gallons sold decreased by 7.4

million gallons, or 13%, to 50.6 million gallons for the three months ended March 31, 2021 as compared to 58.0 million gallons for the

same period in 2020.

At our Pekin Campus production segment’s average sales price per gallon of $1.88 for the three months ended

March 31, 2021, we generated $13.9 million less in net sales from our Pekin Campus production segment from the 7.4 million fewer gallons

of alcohol sold in the three months ended March 31, 2021 as compared to the same period in 2020.

The increase of $0.43, or 30%, in our

Pekin Campus production segment’s average sales price per gallon in the three months ended March 31, 2021 as compared to the same

period in 2020 improved our net sales from our Pekin Campus production segment by $24.9 million.

sales of essential ingredients increased $5.2 million, or 13%, to $45.1 million for the three months ended March 31, 2021 as compared

to $39.9 million for the same period in 2020.

Our total volume of co-products sold declined by 464.9 thousand tons, or 65%, to

255.5 thousand tons for three months ended September 30, 2020 from 720.4 thousand tons for the same period in 2019, and our average

sales price per ton increased to $119.57 for the three months ended September 30, 2020 from $91.19 for the same period in 2019,

due to a higher mix of more valuable essential ingredients sold from our wet mill.

Our total volume of essential ingredients sold decreased by 27,000 tons, or 11%, to 211,000

tons for the three months ended March 31, 2021 from 238,000 tons for the same period in 2020.

At our average sales price per ton of $213.18

for the three months ended September 30, 2020, we realized $55.5 million less in net sales from the 464.9 thousand ton decline

in co-products sold in the three months ended September 30, 2020 as compared to the same period in 2019.

The increase in our average

sales price per ton of $28.38, or 31%, for the three months ended September 30, 2020 as compared to the same period in 2019 increased

our net sales of co-products by $20.4 million.

sales of alcohols from our marketing segment, excluding intersegment sales, declined by $2.3 million, or 3%, to $84.3 million

for the three months ended September 30, 2020 as compared to $86.6 million for the same period in 2019.

Our total volume of gallons

sold by our marketing segment declined by 90.1 million gallons, or 43%, to 120.2 million gallons for the three months ended September

30, 2020 as compared to 210.3 million gallons for the same period in 2019.

The 90.1 million decline in gallons sold by our marketing

segment is comprised of 86.6 million fewer production gallons sold and 3.5 million fewer third party gallons sold.

The 3.5 million

gallon decline in third party gallons sold is comprised of 0.3 million fewer gallons sold on a gross basis and 3.2 million fewer

gallons sold on a net basis.

marketing segment’s average sales price per gallon declined 2% to $1.65 for the three months ended September 30, 2020 compared

to $1.61 for the same period in 2019.

At our marketing segment’s average sales price per gallon of $1.65 for the three months

ended September 30, 2020, we generated $5.7 million less in net sales from our marketing segment from the 3.5 million fewer gallons

in third party fuel-grade ethanol sold in the three months ended September 30, 2020 as compared to the same period in 2019.

increase of $0.04 in our marketing segment’s average sales price per gallon for the three months ended September 30, 2020

as compared to the same period in 2019 increased our net sales from third party fuel-grade ethanol sold by our marketing segment

by $3.4 million.

Months Ended September 30, 2020 and 2019

a consolidated basis, our average sales price per gallon increased 0.6% to $1.60 for the nine months ended September 30, 2020

compared to $1.59 for the same period in 2019.

The average CBOT fuel-grade ethanol price per gallon declined 13.0% to $1.20 for

the nine months ended September 30, 2020 compared to $1.38 for the same period in 2019.

The increase in our average sales price

per gallon, despite lower fuel-grade ethanol production, is due to a change in our mix of sales, with a higher percentage of gallons

sold of specialty alcohols as compared to fuel-grade ethanol.

sales of alcohols from our production segment declined by $206.9 million, or 35%, to $379.8 million for the nine months ended

September 30, 2020 as compared to $586.7 million for the same period in 2019.

Our total volume of production gallons sold declined

by 142.6 million gallons, or 39%, to 223.0 million gallons for the nine months ended September 30, 2020 as compared to 365.6 million

gallons for the same period in 2019.

Our production segment’s average sales price per gallon increased 6% to $1.68 for the

nine months ended September 30, 2020 compared to $1.59 for the same period in 2019.

At our production segment’s average

sales price per gallon of $1.68 for the nine months ended September 30, 2020, we generated $239.4 million less in net sales from

our production segment from the 142.6 million fewer production gallons sold in the nine months ended September 30, 2020 as compared

to the same period in 2019.

The increase of $0.09 in our production segment’s average sales price per gallon for the nine

months ended September 30, 2020 as compared to the same period in 2019 increased our net sales of alcohols from our production

segment by $32.5 million.

sales of co-products declined $64.5 million, or 32%, to $134.7 million for the nine months ended September 30, 2020 as compared

for the three months ended March 31, 2021, we generated $5.6 million less in net sales from the 27,000 fewer tons of essential ingredients

sold in the three months ended March 31, 2021 as compared to the same period in 2020.

The increase of $45.59, or 27%, in our average

sales price per ton for the three months ended March 31, 2021 as compared to the same period in 2020 increased our net sales from our

Pekin Campus production segment by $10.8 million.

Production Segment

sales of alcohol from our other production segment decreased by $83.3 million, or 84%, to $16.0 million for the three months ended March

31, 2021 as compared to $99.3 million for the same period in 2020.

Our total volume of gallons sold decreased by 57.1 million gallons,

or 89%, to 7.4 million gallons for the three months ended March 31, 2021 as compared to 64.5 million gallons for the same period in 2020.

At our other production segment’s average sales price per gallon of $2.16 for the three months ended March 31, 2021, we generated

$123.2 million less in net sales from our other production segment from the 57.1 million fewer gallons of alcohol sold in the three months

ended March 31, 2021 as compared to the same period in 2020.

The increase of $0.62, or 40%, in our other production segment’s average

sales price per gallon for the three months ended March 31, 2021 as compared to the same period in 2020 improved our net sales from our

other production segment by $39.9 million.

sales of essential ingredients decreased $25.1 million, or 83%, to $5.1 million for the three months ended March 31, 2021 as compared

to $30.2 million for the same period in 2020.

Our total volume of co-products sold decreased by 918.5 thousand tons, or 44%,

to 1,177.5 thousand tons for nine months ended September 30, 2020 from 2,096.0 thousand tons for the same period in 2019.

average sales price per ton increased to $114.38 for the nine months ended September 30, 2020 from $95.03 for the same period

in 2019 due to a higher mix of more valuable essential ingredients.

At our average sales price per ton of $114.38 for the nine

months ended September 30, 2020, we generated $105.0 million less in net sales from the 918.5 thousand tons of fewer co-products

sold in the nine months ended September 30, 2020 as compared to the same period in 2019.

The increase of $19.35, or 20%, in our

average sales price per ton for the nine months ended September 30, 2020 as compared to the same period in 2019 increased net

sales of co-products by $40.5 million.

sales of alcohols from our marketing segment, excluding intersegment sales, declined by $67.7 million, or 24%, to $213.7 million

for the nine months ended September 30, 2020 as compared to $281.4 million for the same period in 2019.

Our total volume of gallons

sold by our marketing segment declined by 188.0 million gallons, or 30%, to 435.9 million gallons for the nine months ended September

30, 2020 as compared to 623.9 million gallons for the same period in 2019.

The 188.0 million decline in gallons sold by our marketing

segment is comprised of 142.6 million fewer production gallons sold and 45.4 million fewer third party gallons sold.

million decline in third party gallons sold is comprised of 32.2 million fewer gallons sold on a gross basis and 13.2 million

fewer gallons sold on a net basis.

marketing segment’s average sales price per gallon increased less than 1% to $1.53 for the nine months ended September 30,

2020 as compared to $1.52 for the same period in 2019.

At our marketing segment’s average sales price per gallon of $1.53

for the nine months ended September 30, 2020, we generated $69.3 million less in net sales from our marketing segment from the

45.4 million fewer gallons in third party fuel-grade ethanol sold in the nine months ended September 30, 2020 as compared to the

same period in 2019.

The increase of $0.01 in our marketing segment’s average sales price per gallon for the nine months

ended September 30, 2020 as compared to the same period in 2019 increased our net sales from third party fuel-grade ethanol sold

by our marketing segment by $1.6 million.

Our total volume of essential ingredients sold decreased by 369,000 tons, or 85%, to 65,000

tons for the three months ended March 31, 2021 from 434,000 tons for the same period in 2020.

At our average sales price per ton of $78.64

for the three months ended March 31, 2021, we generated $29.0 million less in net sales from the 369,000 fewer tons of essential ingredients

sold in the three months ended March 31, 2021 as compared to the same period in 2020.

The increase of $8.97, or 12.9%, in our average

sales price per ton for the three months ended March 31, 2021 as compared to the same period in 2020 increased our net sales from our

other production segment by $3.9 million.

of Goods Sold and Gross Profit (Loss)

consolidated gross profit improved to $20.9 million, representing a gross profit margin of 10.2%, for the three months ended September

30, 2020 compared to a gross loss of $14.8 million, representing a gross profit margin of negative 4.1% for the same period in

Our consolidated gross profit improved to $39.2 million, representing a gross profit margin of 5.4%, for the nine months

ended September 30, 2020 compared to a gross loss of $13.1 million, representing a gross profit margin of negative 1.2%, for the

same period in 2019.

Our gross profit and gross profit margin improved primarily due to significantly higher margins from sales

of our specialty alcohols.

Months Ended September 30, 2020 and 2019

production segment’s gross profit from external sales improved by $36.3 million to $20.4 million for the three months ended

September 30, 2020 as compared to a loss of $15.9 million for the same period in 2019.

Of this improvement, $77.0 million is attributable

to our production segment’s higher production volumes and margins of specialty alcohols for the three months ended September

30, 2020 as compared to the same period in 2019, partially offset by $40.7 million in lower gross profit attributable to lower

production volumes and margins of fuel-grade ethanol for the three months ended September 30, 2020 as compared to the same period

marketing segment’s gross profit declined by $0.6 million to $0.5 million for the three months ended September 30, 2020

as compared to $1.1 million for the same period in 2019.

This decline primarily relates to our marketing segment’s lower

margins per gallon for fuel-grade ethanol for the three months ended September 30, 2020 as compared to the same period in 2019.

Months Ended September 30, 2020 and 2019

production segment’s gross profit from external sales improved by $56.4 million to $32.8 million for the nine months ended

September 30, 2020 as compared to a gross loss of $23.6 million for the same period in 2019.

Of this improvement, $77.4 million

is attributable to our production segment’s higher production volumes and margins of specialty alcohols for the nine months

ended September 30, 2020 as compared to the same period in 2019, partially offset by $21.0 million in lower gross profit attributable

to production volumes and margins of fuel-grade ethanol for the nine months ended September 30, 2020 as compared to the same period

marketing segment’s gross profit declined by $4.1 million to $6.4 million for the nine months ended September 30, 2020 as

compared to $10.5 million for the same period in 2019.

Of this decline, $2.7 million is attributable to our marketing segment’s

lower margins per gallon for fuel-grade ethanol and $1.4 million is attributable to lower third-party marketing volumes for the

nine months ended September 30, 2020 as compared to the same period in 2019.

consolidated gross profit (loss) improved to a gross profit of $13.8 million for the three months ended March 31, 2021 from a gross loss

of $12.9 million for the same period in 2020, representing a gross profit margin of 6.3% for the three months ended March 31, 2021 compared

to negative 4.1% for the same period in 2020.

Our consolidated gross profit (loss) improved due to significantly higher margin sales

of our specialty alcohols and a substantial reduction in negative margin sales of fuel-grade ethanol as we have idled a significant amount

of our fuel-grade ethanol production.

Our marketing segment’s gross profit improved

by $2.0 million to $3.5 million for the three months ended March 31, 2021 as compared to $1.5 million for the same period in 2020.

this improvement, $3.0 million is attributable to higher margins from sales of third-party fuel-grade ethanol, partially offset by a

reduction of $1.0 million attributable to lower marketing volumes of third-party fuel-grade ethanol for the three months ended March 31,

2021 as compared to the same period in 2020.

Campus Production Segment

Our Pekin Campus production segment’s gross

profit improved by $15.2 million to a gross profit of $13.2 million for the three months ended March 31, 2021 as compared to a gross loss

of $2.0 million for the same period in 2020.

Of this improvement, $17.1 million is attributable to increased margins from our specialty

alcohols, partially offset by $1.9 million less in gross profit attributable to decreased sales volumes in the three months ended March

31, 2021 as compared to the same period in 2020.

Production Segment

Our other production segment’s gross profit

improved by $9.5 million to a gross loss of $2.9 million for the three months ended March 31, 2021 as compared to a gross loss of $12.4

million for the same period in 2020.

Of this improvement, $22.6 million is attributable to lower sales volumes at negative margins, partially

offset by $13.1 million in lower gross profit attributable to a negative margin environment for fuel-grade ethanol for the three months

ended March 31, 2021 as compared to the same period in 2020.

General and Administrative Expenses

following table presents our selling, general and administrative, or SG&A, expenses in dollars and as a percentage of net

sales (in thousands, except percentages):

September 30,

Selling, general and

administrative expenses

SG&A expenses decreased for the three months ended September 30, 2020 as compared to the same period in 2019.

in SG&A expenses is primarily due to reduced legal and consulting expenses.

Our SG&A expenses increased for the nine months

ended September 30, 2020 as compared to the same period in 2019.

The increase in SG&A expenses is primarily due to increases

in professional fees associated with the sale of our interest in Pacific Aurora, LLC, or Pacific Aurora, and our other strategic

Income (Loss) Available to Common Stockholders

following table presents our net income (loss) available to common stockholders in dollars and as a percentage of net sales (in

following table presents our selling, general and administrative, or SG&A, expenses in dollars and as a percentage of net sales (in

thousands, except percentages):

September 30,

Three Months Ended

Selling, general and administrative expenses

Percentage of net sales

Our SG&A expenses decreased for the three months

ended March 31, 2021 as compared to the same period in 2021.

The $3.2 million period over period decrease in SG&A expenses is primarily

due to higher professional fees incurred in the three months ended March 31, 2021 in connection with our debt restructuring and asset

sale efforts.

We anticipate SG&A expenses of $20.0 million to $25.0 million for all of 2021.

following table presents our interest expense, net in dollars and as a percentage of net sales (in thousands, except percentages):

Three Months Ended

Interest expense, net

Percentage of net sales

Our interest expense, net decreased for the three

months ended March 31, 2021 as compared to the same period in 2021.

The $3.4 million period over period decrease in interest expense,

net is primarily due to lower average borrowings outstanding as a result of our significant principal payments on outstanding debt over

the past year.

Income (Loss) Available to Common Stockholders

Percentage of

improvement in net income (loss) available to common stockholders is primarily due to significantly higher margins from our specialty

alcohol sales for the three and nine months ended September 30, 2020 as compared to the same periods in 2019 and a gain on settlement

of litigation of $11.8 million, partially offset by higher fair value adjustments resulting from higher market prices of our common

following table presents our net income (loss) available to common stockholders in dollars and as a percentage of net sales (in thousands,

except percentages):

Three Months Ended

Net income (loss) available to Common Stockholders

Percentage of net sales

increase in net income available to common stockholders is primarily due to our higher gross profit and lower SG&A expenses and interest

expense, for the three months ended March 31, 2021 as compared to the same period in 2020.

and Capital Resources

the nine months ended September 30, 2020, we funded our operations primarily from cash generated by our operations and cash on

These funds were used to make payments on our term debt and under our other credit facilities, and for capital expenditures

and to make lease payments.

financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction

of liabilities in the normal course of business.

During the nine months ended September 30, 2020, we continued to experience significant

adverse conditions in the fuel-grade ethanol market as demand and pricing were at record lows due to reduced domestic transportation

and resulting lower gasoline demand.

In response, we reduced production at our distilleries by more than 50% in an effort to conserve

capital as a result of a substantial reduction in demand due to stay-at-home orders issued in response to the coronavirus pandemic.

We have, however, not only continued producing and selling specialty alcohols, but also converted a portion of our fuel-grade

ethanol production to specialty alcohol production to respond to increased demand from the sanitizer and disinfectant markets.

These sales of specialty alcohols were at a mix of fixed and spot pricing, both of which resulted in positive net income and cash

flows from operations during the second and third quarters.

We expect robust demand for our specialty alcohols to continue for

at least the next twelve months as we continue to enter fixed price contracts and hedge corn input costs, locking in profit margins

on sales of specialty alcohols.

September 30, 2020, we had $38.7 million in cash and $9.2 million available under our operating line of credit for our marketing

subsidiary, Kinergy Marketing LLC, or Kinergy.

During the nine months ended September 30, 2020, we generated $75.7 million in

cash from our operations and realized $19.9 million in net cash from the sale of our interest in Pacific Aurora.

These positive

cash flows have allowed us to make net payments totaling $91.6 million on our debt.

Further, subsequent to September 30, 2020,

we made an additional $25.3 million in payments on our term debt using the proceeds of an equity offering described below.

October 28, 2020, we closed an underwritten public offering of 5,075,000 shares of our common stock at a public offering price

of $8.42 per share and 5-year pre-funded warrants to purchase 3,825,493 shares of common stock at a public offering price of $8.42

per pre-funded warrant.

In addition, in a concurrent private placement, we also issued to the investor, for a nominal price, warrants

to purchase an additional 8,900,493 shares of common stock at an exercise price of $9.757 per share.

The warrants will become

exercisable after the six-month anniversary of the offering and will expire on the 18-month anniversary of the offering.

The aggregate

gross proceeds from the offerings of common stock, pre-funded warrants and warrants was approximately $75.0 million.

The net offering

proceeds to us were approximately $70.0 million after deducting underwriting discounts and commissions and other estimated offering

current available capital resources consist of cash on hand and amounts available for borrowing under our credit facilities.

expect that our future available capital resources will consist primarily of any cash generated from our operations, cash balances,

any availability under our lines of credit and net cash proceeds from any sale of our production assets.

believe that as of the date of this report, we are in compliance with all debt covenants contained in our credit facilities,

except our obligation to obtain lender approval of a comprehensive plan to restructure our assets and liabilities with

respect to our Pekin and ICP debt and a dispute over whether a portion of our principal payments originated from an approved

source of funds.

As noted above, we appointed a chief restructuring officer to facilitate the development of such a plan and

we have presented and continue to negotiate the plan with our lenders.

As a result, we are not in compliance with our

obligations to our lenders, which could result in their acceleration of our debt.

Even though we do not believe acceleration

is probable, we have classified our related debt as current on our consolidated balance sheets.

addition to our projected cash flows from operations, we recently raised net proceeds of $70.0 million in offerings of common

stock and warrants, and have recently announced the sale of certain assets for $10.0 million, which is expected to close by

November 30, 2020.

We continue to evaluate our Western fuel-grade ethanol distilleries for either repurposing or sale,

which may provide additional proceeds to repay debt.

Given these factors, we believe we have alleviated substantial doubt

about our ability to continue as a going concern and we will have sufficient liquidity to meet our anticipated working

capital, debt service and other liquidity needs for the next twelve months from the date of this report.

Quarter-End Liquidity Status

the three months ended March 31, 2021, we funded our operations primarily from cash generated by our operations, proceeds from lines

of credit and cash on hand.

These funds were also used to make payments on our term debt and our other credit facilities and for capital

expenditures.

As of March 31, 2021, we had $44.1 million in cash and cash equivalents and $4.7 million available for borrowing under

Kinergy’s operating line of credit.

We believe we have sufficient liquidity to meet our anticipated working capital, debt service

and other liquidity needs for the next twelve months from the date of this report.

Year-End Liquidity Status

believe that the following amounts provide insight into our liquidity and capital resources.

The following selected financial

information should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements

included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition

and Results of Operations”

The following selected financial information

should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere

in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

contained in this report (dollars in thousands).

September 30,

and cash equivalents

and equipment, net

debt, net of current portion

capital ratio

September 30, 2020, we had approximately $291.3 million of net assets at our subsidiaries that were not available to be transferred

to Pacific Ethanol, Inc.

in the form of dividends, loans or advances due to restrictions contained in the credit facilities of

our subsidiaries.

March 31, 2021

December 31, 2020

Cash and cash equivalents

Current assets

Property and equipment, net

Current liabilities

Long-term debt, noncurrent portion

Working capital

Working capital ratio

March 31, 2021, we had approximately $231.9 million of net assets at our subsidiaries that were not available to be transferred to Alto

Ingredients, Inc.

in the form of dividends, distributions, loans or advances due to restrictions contained in the credit facilities of

the subsidiaries.

in Working Capital and Cash Flows

working capital declined to $22.6 million at September 30, 2020 from $71.7 million at December 31, 2019 as a result of a decrease

of $94.3 million in current assets, partially offset by a decrease of $45.3 million in current liabilities.

assets decreased primarily due to a decrease in assets held-for-sale associated with the completed sale of our interest in Pacific

Aurora, and decreases in accounts receivable and inventories, due to the timing of collections, and lower fuel-grade ethanol production

current liabilities decreased primarily due to a decrease in liabilities held-for-sale associated with the completed sale of our

interest in Pacific Aurora, partially offset by an increase in the current portion of our long-term debt primarily due to our

failure to obtain lender approval of a comprehensive plan to restructure our assets and liabilities.

cash and cash equivalents increased by $19.7 million at September 30, 2020 as compared to December 31, 2019 primarily due to $75.7

million in cash provided by our operating activities and $15.0 million in cash provided by our investing activities, partially

offset by $71.0 million in cash used in our financing activities.

provided by our Operating Activities

provided by our operating activities increased by $102.9 million for the nine months ended September 30, 2020, as compared to

the same period in 2019.

We generated $75.7 million in cash from our operating activities during the nine months ended September

Specific factors that contributed to the increase in cash provided by our operating activities include:

increase of $54.4 million in our consolidated net income due to higher margins from our

sales of specialty alcohols;

decrease of $30.2 million related to accounts receivable primarily due to the timing

of collections and reduced volumes;

decrease of $27.6 million related to inventories as we reduced fuel-grade ethanol production

during the period;

increase of $9.4 million related to liabilities held-for-sale in connection with the

sale of our interests in Pacific Aurora.

Working capital improved to $128.8 million at March

31, 2021 from $127.1 million at December 31, 2020 as a result of an increase of $27.5 million in current assets, partially offset by an

increase of $25.8 million in current liabilities.

assets increased primarily due to an increase in accounts receivable and higher inventory values due to increased commodity prices for

both alcohol and corn from the prior period.

current liabilities increased primarily due to an increase in accounts payable due to timing of payments and an increase in current portion

of long-term debt as amounts due within one year increased.

cash and cash equivalents declined by $3.5 million primarily due to $4.1 million in cash used in our operating activities and $4.4 million

in cash used in our investing activities, partially offset by $5.0 million in cash provided by our financing activities.

used in our Operating Activities

used $4.1 million in cash in our operating activities during the three months ended March 31, 2021, as compared to $26.9 million in cash

provided by our operations for the same period in 2020.

Specific factors that contributed to the change in cash from our operating activities

decrease of $35.1 million related to higher accounts receivable balances due to the timing

decrease of $28.1 million related to higher inventories due to increased commodity prices;

decrease of $10.5 million from losses on derivative instruments due to the recent rise in

amounts were partially offset by:

decrease of $18.8 million in accounts payable and accrued expenses, primarily due to increased payments of past due amounts;

decrease of $9.1 million in depreciation expense resulting from the sale of Pacific Aurora;

decrease of $4.5 million related to other assets due to the timing of payments.

provided by our Investing Activities

provided by our investing activities was $15.0 million for the nine months ended September 30, 2020, which included $19.9 million

in net proceeds from the sale of Pacific Aurora, partially offset by $4.9 million of additions to property and equipment.

used in our Financing Activities

used in our financing activities was $71.0 million for the nine months ended September 30, 2020.

The increase in cash used in

our financing activities was primarily due to $39.5 million in net payments under Kinergy’s line of credit and $52.1 million

in principal payments on our other borrowings, partially offset by $9.9 million in proceeds under our CARES Act loans, $5.5 million

in proceeds from warrant exercises and $5.3 million from the issuance of common stock.

increase of $31.8 million in our consolidated net income due to higher margins from our sales

of specialty alcohols;

increase of $21.9 million related to accounts payable due to timing of payments.

used in our Investing Activities

used $4.4 million of cash in our investing activities for the three months ended March 31, 2021 for additions to property and equipment

resulting from our capital expenditure projects.

provided by our Financing Activities

provided by our financing activities was $5.0 million for the three months ended March 31, 2021, which reflected net proceeds of $13.0

million from Kinergy’s operating line of credit and $0.5 million in stock option exercises, partially offset by $8.5 million in

principal payments on our other indebtedness.

Kinergy’s

Operating Line of Credit

3 unchanged sentences

plus (ii) a specified applicable margin ranging from 1.50% to 2.00%.

The credit facility’s monthly unused line fee is 0.25%

to 0.375% of the amount by which the maximum credit under the facility exceeds the average daily principal balance during the

immediately preceding month.

Payments that may be made by Kinergy to Pacific Ethanol as reimbursement for management and other

services provided by Pacific Ethanol to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal

The credit facility also includes the accounts receivable of Pacific Ag.

Products, LLC, or PAP, as additional collateral.

Payments that may be made by PAP to Pacific Ethanol as reimbursement for management and other services provided by Pacific Ethanol

to PAP are limited under the terms of the credit facility to $0.5 million per fiscal quarter.

PAP, one of our indirect wholly-owned

subsidiaries, markets our co-products and also provides raw material procurement services to our subsidiaries.

all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and PAP must collectively maintain

a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization

(EBITDA) divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital

leases and taxes paid during such twelve-month rolling period) of at least 2.0 and are prohibited from incurring certain additional

indebtedness (other than specific intercompany indebtedness).

Kinergy’s and PAP’s obligations under the credit facility

are secured by a first-priority security interest in all of their assets in favor of the lender.

We believe Kinergy and PAP are

in compliance with this covenant.

The following table summarizes Kinergy’s financial covenants and actual results for the

periods presented:

September 30,

Coverage Ratio Requirement

Ethanol has guaranteed all of Kinergy’s obligations under the credit facility.

As of September 30, 2020, Kinergy had an

outstanding balance of $41.4 million with additional borrowing availability under the credit facility of $9.2 million.

Credit Facilities

December 15, 2016, Pacific Ethanol Pekin, LLC, or PE Pekin, entered into term and revolving credit facilities.

PE Pekin borrowed

$64.0 million under a term loan facility that matures on August 20, 2021 and $32.0 million under a revolving credit facility that

matures on February 1, 2022.

The PE Pekin credit facilities are secured by a first-priority security interest in all of PE Pekin’s

Interest initially accrued under the PE Pekin credit facilities at an annual rate equal to the 30-day LIBOR plus 3.75%,

payable monthly.

PE Pekin is required to make quarterly principal payments in the amount of $3.5 million on the term loan beginning

on May 20, 2017, with the remaining principal balance payable at maturity on August 20, 2021.

PE Pekin is required to pay monthly

in arrears a fee on any unused portion of the revolving credit facility at a rate of 0.75% per annum.

Prepayment of these facilities

is subject to a prepayment penalty.

Under the initial terms of the credit facilities, PE Pekin was required to maintain not less

than $20.0 million in working capital and an annual debt service coverage ratio of not less than 1.25 to 1.0.

August 7, 2017, PE Pekin amended its term and revolving credit facilities by agreeing to increase the interest rate under the

facilities by 25 basis points to an annual rate equal to the 30-day LIBOR plus 4.00%.

PE Pekin and its lender also agreed that

PE Pekin is required to maintain working capital of not less than $17.5 million from August 31, 2017 through December 31, 2017

and working capital of not less than $20.0 million from January 1, 2018 and continuing at all times thereafter.

In addition, the

required debt service coverage ratio was reduced to 0.15 to 1.00 for the fiscal year ended December 31, 2017.

PE Pekin’s

actual debt service coverage ratio was 0.17 to 1.00 for the fiscal year ended December 31, 2017, 0.02 in excess of the required

0.15 to 1.00.

For the month ended January 31, 2018, PE Pekin was not in compliance with its working capital requirement due to

larger than anticipated repair and maintenance expenses to replace faulty equipment.

PE Pekin received a waiver from its lender

for this noncompliance.

Further, the lender decreased PE Pekin’s working capital covenant requirement to $13.0 million for

the month ended February 28, 2018, excluding from the calculation a $3.5 million principal payment previously due in May 2018.

March 30, 2018, PE Pekin further amended its term loan facility by reducing the amount of working capital it is required to maintain

to not less than $13.0 million from March 31, 2018 through November 30, 2018 and not less than $16.0 million from December 1,

2018 and continuing at all times thereafter.

In addition, a principal payment in the amount of $3.5 million due for May 2018 was

deferred until the maturity date of the term loan.

December 31, 2018 and January 31, 2019, PE Pekin experienced certain covenant violations under its term and revolving credit facilities.

In February 2019, PE Pekin reached an agreement with its lender to forbear until March 11, 2019 and to defer a $3.5 million principal

payment until that date.

March 21, 2019, PE Pekin amended its term and revolving credit facilities by agreeing to increase the interest rate under the

facilities by 125 basis points to an annual rate equal to the 30-day LIBOR plus 5.00%.

PE Pekin and its lender also agreed that

it is required to maintain working capital of not less than $15.0 million from March 21, 2019 through July 15, 2019 and working

capital of not less than $30.0 million from July 15, 2019 and continuing at all times thereafter.

On July 15, 2019, PE Pekin and

its lender agreed to a further amendment extending the aforementioned July 15, 2019 dates to November 15, 2019.

On August 6, 2019,

PE Pekin paid its $3.5 million principal payment scheduled for August 20, 2019.

these amendments, the lender agreed to temporarily waive financial covenant violations, working capital maintenance violations

and intercompany accounts receivable collections violations that occurred with respect to the credit agreement.

The lenders also

agreed to defer all scheduled principal payments, including further deferral of principal payments in the amount of $3.5 million

each due on February 20, 2019 and May 20, 2019.

waivers and principal deferral expired on November 15, 2019, at which time the waivers were to become permanent if PE Pekin’s

parent, Pacific Ethanol Central, LLC, or PE Central, made a contribution to PE Pekin in an amount equal to $30.0 million, minus

the then-existing amount of PE Pekin’s working capital, plus the amount of any accounts receivable owed by PE Central to

PE Pekin, plus $12.0 million, or the Parent Contribution Amount.

In addition, if the Parent Contribution Amount was timely received,

the lender agreed to waive PE Pekin’s debt service coverage ratio financial covenant for the year ended December 31, 2019.

If the Parent Contribution Amount was not timely made, then the temporary waivers would automatically expire.

Pekin was also required to pay by November 15, 2019 the aggregate amount of $10.5 million representing all deferred and unpaid

scheduled principal payments and all additional scheduled principal payments for the remainder of 2019.

November 15, 2019, PE Pekin amended its term and revolving credit facilities by agreeing to extend the temporary waiver of violations

of financial and other covenants relating to working capital maintenance, intercompany accounts receivable collections, financial

projections, cash flow forecasts, and sales reports.

The lender also agreed to extend the deferral of all scheduled principal

payments payable on February 20, 2019, May 20, 2019 and November 15, 2019 to December 15, 2019.

The amendment also made a payment

default of $250,000 or more under Kinergy’s credit facility or the senior secured notes, or any acceleration of indebtedness,

or any termination of any commitment to lend or termination of any forbearance or other accommodation, an event of default.

waivers and principal deferral expired on December 15, 2019.

On December 15, 2019, the waivers were to become permanent if PE

Central made a contribution to PE Pekin in an amount equal to the Parent Contribution Amount.

In addition, if the Parent Contribution

Amount was timely received, the lender agreed to waive PE Pekin’s debt service coverage ratio financial covenant for the

year ended December 31, 2019.

If the Parent Contribution Amount was not timely made, then the temporary waivers would automatically

December 16, 2019, PE Pekin amended its term and revolving credit facilities by agreeing to extend the deferral of all scheduled

principal payments payable on February 20, 2019, May 20, 2019 and November 20, 2019 to December 20, 2019.

December 20, 2019, PE Pekin’s lender agreed to temporarily waive working capital covenant violations, debt service coverage

ratio covenant violations, reporting covenant violations and certain other covenant violations that occurred under the PE Pekin

credit agreement, and replaced those covenants with new EBITDA and production volume covenants.

PE Pekin’s lender also agreed

to defer all scheduled principal installments payable under the term note on February 20, 2019, May 20, 2019 and November 20,

2019 until August 20, 2021.

In addition, PE Pekin was not required to make its prior scheduled quarterly principal payments of

$3.5 million until September 30, 2020, at which time $3.5 million will be due, with the same amount due quarterly thereafter until

the amendment, PE Pekin, collectively with Illinois Corn Processing, LLC, or ICP, agreed to pay the lenders an aggregate of $40.0

million on or before September 30, 2020 to reduce the outstanding balances of the term loans under the PE Pekin credit agreement

and the ICP credit agreement.

The $40.0 million is an aggregate amount payable to ICP’s lender and PE Pekin’s lender,

and allocated between them.

The $40.0 million is to be funded through asset sales, proceeds of any award, judgment or settlement

of litigation, or, at our election, from funds contributed to PE Pekin by us.

Following receipt by the lenders under the ICP credit

agreement and the PE Pekin credit agreement, collectively, of $40.0 million in full, and once any loans corresponding to the particular

midwestern asset sold are repaid, additional proceeds from the sale of any of our midwestern distillery assets will generally

be allocated 33/34/33% among ICP’s lender and PE Pekin’s lender, collectively, the selling security holders, and us,

respectively.

Proceeds from the sale of any of our western assets will generally be allocated 33/34/33% among PE Pekin’s

lender and ICP’s lender, collectively, the selling security holders, and us, respectively.

Pekin’s lender also imposed cross-default terms such that, until PE Pekin’s lender and ICP’s lender receive

$40.0 million, a default under the ICP credit agreement would constitute a default under the PE Pekin credit agreement.

agreed to provide additional collateral security to support its obligations under the PE Pekin credit agreement, including second

lien positions in our western distilleries, which will terminate and be released upon PE Pekin’s lender’s receipt

of $40.0 million.

December 29, 2019, PE Pekin agreed to amend the secured obligations under its security agreement to include PE Pekin’s unconditional

guarantee of the payment of up to an aggregate $40.0 million to satisfy the obligations of ICP to ICP’s lender under the

ICP credit agreement.

March 20, 2020, PE Pekin and its lender agreed to defer $1.0 million in aggregate interest payments due March 20, 2020 and April

20, 2020 until May 20, 2020.

On that same date, we granted to the lender a security interest in all of our equity interests in

our wholly-owned subsidiary, PE Op Co., which indirectly owns our distilleries located on the West Coast.

We also entered into

intercreditor agreements with our PE Pekin and ICP lenders, and the agent for our senior secured noteholders, to address issues

of priority and the allocation of proceeds from asset sales.

April 15, 2020, upon the closing of the sale of our interests in Pacific Aurora, we repaid approximately $11.6 million in principal

on our PE Pekin term debt.

the end of the second quarter and during the third quarter of 2020, we repaid an aggregate of approximately $19.4 million in additional

principal on our PE Pekin term debt.

of the filing of this report, we believe we are in compliance with all debt covenants under our PE Pekin credit facilities,

except our obligation to obtain lender approval of a comprehensive plan to restructure our assets and liabilities and a

dispute over whether a portion of our principal payments originated from an approved source of funds.

See “Risk

Factors”.

The credit facility’s monthly unused line fee is 0.25% to

0.375% of the amount by which the maximum credit under the facility exceeds the average daily principal balance during the immediately

preceding month.

Payments that may be made by Kinergy to Alto Ingredients, Inc.

as reimbursement for management and other services provided

by Alto Ingredients, Inc.

to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal quarter.

facility also includes the accounts receivable of our wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional

Payments that may be made by Alto Nutrients to Alto Ingredients, Inc.

as reimbursement for management and other services

provided by Alto Ingredients, Inc.

to Alto Nutrients are limited under the terms of the credit facility to $0.5 million per fiscal quarter.

Alto Nutrients, one of our indirect wholly-owned subsidiaries, markets our essential ingredients and also provides raw material procurement

services to our subsidiaries.

all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and Alto Nutrients must collectively

maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization

divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and

taxes paid during such twelve-month rolling period) of at least 2.0 and are prohibited from incurring certain additional indebtedness

(other than specific intercompany indebtedness).

The obligations of Kinergy and Alto Nutrients under the credit facility are secured

by a first-priority security interest in all of their respective assets in favor of the lender.

believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio covenant as of the filing of this report.

following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented:

Three Months Ended

Fixed-Charge Coverage Ratio Requirement

Ingredients, Inc.

has guaranteed all of Kinergy’s obligations under the credit facility.

As of March 31, 2021, Kinergy had an outstanding

balance of $45.5 million and $4.7 million of unused borrowing availability under the credit facility.

Pekin Credit Facilities

December 15, 2016, Alto Pekin, LLC, or Alto Pekin, one of our indirect wholly-owned subsidiaries and the entity that holds two of our

production facilities in Pekin, Illinois, entered into a Credit Agreement, or the Pekin Credit Agreement, with 1 st Farm Credit

Services, PCA and CoBank, ACB, or CoBank.

Under the terms of the Pekin Credit Agreement, Alto Pekin borrowed from 1 st Farm

Credit Services $64.0 million under a term loan facility that matures on August 20, 2021, or the Pekin Term Loan, and up to $32.0 million

under a revolving term loan facility that matures on February 1, 2022, or the Pekin Revolving Loan, and together with the Pekin Term

Loan, the Pekin Credit Facility.

The Pekin Credit Facility is secured by a first-priority security interest in all of Alto Pekin’s

Pekin Credit Facility and related agreements contain a variety of representations, warranties, covenants and events of default.

a series of amendments and waivers among Alto Pekin, its lenders and their agent, certain terms of the agreements are as follows:

accrues under the Pekin Credit Facility at an annual rate equal to the 30-day LIBOR plus

Pekin is required to pay a monthly fee on any unused portion of the Pekin Revolving Loan

at a rate of 0.75% per annum.

Pekin and Alto ICP, LLC, or ICP, one of our indirect wholly-owned subsidiaries and the entity

that holds one of our production facilities in Pekin, Illinois, are collectively required

to maintain working capital of not less than 50% of the combined outstanding revolving lines

of credit, which was $27.0 million at March 31, 2021;

and an annual debt service coverage

ratio of not less than 1.25 to 1.00, in addition to various other affirmative and negative

Net proceeds arising from a

sale of any of our midwestern production facility assets will be allocated 33/34/33% among Alto Pekin’s and ICP’s lenders,

collectively, our senior secured noteholders, and us, respectively.

Net proceeds arising from the sale of any of our western production

facility assets will be allocated first to the senior secured noteholders up to $20.0 million and then allocated 33/34/33% among Alto

Pekin’s and ICP’s lenders, collectively, our senior secured noteholders, and us, respectively.

As of the filing of this report,

we believe we are in compliance with the terms and conditions of the Notes.

Credit Facilities

September 15, 2017, ICP entered into term and revolving credit facilities.

ICP borrowed $24.0 million under a term loan facility

that matures on September 20, 2021 and $18.0 million under a revolving credit facility that matures on September 1, 2022.

ICP credit facilities are secured by a first-priority security interest in all of ICP’s assets.

Interest accrues under the

ICP credit facilities at an annual rate equal to the 30-day LIBOR plus 3.75%, payable monthly.

ICP is required to make quarterly

consecutive principal payments in the amount of $1.5 million.

ICP is required to pay monthly in arrears a fee on any unused portion

of the revolving credit facility at a rate of 0.75% per annum.

Prepayment of these facilities is subject to a prepayment penalty.

Under the terms of the credit facilities, ICP is required to maintain not less than $8.0 million in working capital and an annual

debt service coverage ratio of not less than 1.5 to 1.0, beginning for the year ended December 31, 2018.

As of September 30, 2019,

ICP had no additional borrowing availability under its revolving credit facility.

As of September 30, 2019, ICP did not meet its

minimum working capital requirement, however, ICP’s lender subsequently waived the minimum working capital deficiency.

December 20, 2019, ICP amended its term and revolving credit facilities under which ICP’s lender granted waivers for certain

ICP covenant defaults and replaced those covenants with new EBITDA and production volume covenants.

ICP’s lender also imposed

cross-default terms such that, until ICP’s lender and PE Pekin’s lender receive an aggregate of $40.0 million, a default

under the PE Pekin credit agreement would constitute a default under the ICP credit agreement.

ICP agreed to provide additional

collateral security to support its obligations under the ICP credit agreement, including second lien positions in our western

distilleries, which will terminate and be released upon ICP’s lender’s receipt of an aggregate of $40.0 million.

prior scheduled principal payment of $1.5 million, originally due on December 20, 2019, was deferred to the maturity date of September

Scheduled quarterly principal payments of $1.5 million will resume March 20, 2020.

the amendment, ICP, collectively with PE Pekin, agreed to pay the lenders an aggregate of $40.0 million on or before September

30, 2020 to reduce the outstanding balances of the term loans under the ICP credit agreement and the PE Pekin credit agreement.

The $40.0 million is an aggregate amount payable to ICP’s lender and PE Pekin’s lender, and allocated between them.

The $40.0 million is to be funded through asset sales, proceeds of any award, judgment or settlement of litigation, or, at our

election, from funds contributed to ICP by us.

Following receipt by the lenders under the ICP credit agreement and the PE Pekin

credit agreement, collectively, of $40.0 million in full, and once any loans corresponding to the particular midwestern asset

sold are repaid, any additional proceeds from a sale of our midwestern distillery assets will generally be allocated 33/34/33%

among ICP’s lender and PE Pekin’s lender, collectively, the selling security holders, and us, respectively.

from the sale of any of our western assets will generally be allocated 33/34/33% among PE Pekin’s lender and ICP’s

lender, collectively, the selling security holders, and us, respectively.

December 29, 2019, ICP agreed to amend the secured obligations under its security agreement to include ICP’s unconditional

guarantee of the payment of up to an aggregate $40.0 million to satisfy the obligations of PE Pekin to PE Pekin’s lender

under the PE Pekin credit agreement.

March 20, 2020, ICP and its lender agreed to defer a $1.5 million principal payment due March 20, 2020 and $0.3 million in aggregate

interest payments due March 20, 2020 and April 20, 2020 until May 20, 2020.

On that same date, we granted to the lender a security

interest in all of our equity interests in PE Op Co.

We also entered into intercreditor agreements with our PE Pekin and ICP lenders,

September 15, 2017, ICP, Compeer Financial, PCA, or Compeer, and CoBank as agent, entered into a Credit Agreement, or the ICP Credit

Under the terms of the ICP Credit Agreement, ICP borrowed from Compeer $24.0 million under a term loan facility that matures

on September 20, 2021, or the ICP Term Loan, and up to $18.0 million under a revolving term loan facility that matures on September 1,

2022, or the ICP Revolving Loan, and together with the ICP Term Loan, the ICP Credit Facility.

The ICP Credit Facility is secured by

a first-priority security interest in all of ICP’s assets.

ICP Credit Facility and related agreements contain a variety of representations, warranties, covenants and events of default.

a series of amendments and waivers among ICP, its lenders and their agent, certain terms of the agreements are as follows:

accrues under the ICP Credit Facility at an annual rate equal to the 30-day LIBOR plus 3.75%.

is required to pay an annual nonrefundable commitment fee, calculated as 0.75% multiplied

by the average daily positive difference between (i) the ICP Revolving Loan commitment (which

may be reduced by ICP from time to time in increments of $0.5 million), minus (ii) the aggregate

principal amounts outstanding under the ICP Revolving Loan.

and Alto Pekin are collectively required to maintain working capital of not less than 50%

of the combined outstanding revolving lines of credit, which was $27.0 million at March 31,

and an annual debt service coverage ratio of not less than 1.50 to 1.00, in addition

to various other affirmative and negative covenants.

proceeds arising from the sale of any of our midwestern production facility assets will be allocated 33/34/33% among Alto Pekin’s

and ICP’s lenders, collectively, our senior secured noteholders, and us, respectively.

Net proceeds arising from the sale of any

of our western production facility assets will be allocated first to the senior secured noteholders up to $20.0 million and then allocated

33/34/33% among Alto Pekin’s and ICP’s lenders, collectively, our senior secured noteholders, and us, respectively.

of the filing of this report, we believe we are in compliance with the terms and conditions of our ICP Credit Facility.

Secured Notes

December 12, 2016, we entered into a Note Purchase Agreement with five accredited investors and sold $55.0 million in aggregate principal

amount of senior secured notes to the investors in a private offering for aggregate gross proceeds of 97% of the principal amount of

the notes sold.

On June 26, 2017, we entered into a second Note Purchase Agreement with five accredited investors and sold an additional

$13.9 million in aggregate principal amount of senior secured notes to the investors in a private offering for aggregate gross proceeds

of 97% of the principal amount of the notes sold, and collectively with the notes previously sold, the Notes.

The Notes are secured by

a first-priority security interest in all of our equity interests in Alto Op Co.

Notes and related agreements contain a variety of representations, warranties, covenants and events of default.

Following a series of

amendments and waivers with the holders of our Notes, or the senior secured noteholders, and their agent, certain terms of the agreements

are as follows:

Notes mature on December 15, 2021.

due under the Notes rank senior to all other indebtedness of Alto Ingredients, Inc.

than permitted senior indebtedness.

on the Notes accrues at a rate of 15% per annum.

voluntary prepayments must be made at 102% of the principal amount prepaid.

Notes also contain a variety of limitations, including a prohibition on parent company indebtedness;

restrictions on redemption, repurchase

or payment of any dividend or distribution in respect of our or our subsidiaries’

equity interests;

restrictions on asset sales

and other dispositions;

and restrictions on our or our subsidiaries’

ability to issue equity for purposes other than to pay down

a portion of the outstanding balance of the Notes.

March 2020, ICP granted to the senior secured noteholders a security interest in certain of its personal property.

In addition, Alto

Central granted to the senior secured noteholders a security interest in certain of its personal property.

Alto Central also pledged

its equity interests in Alto Pekin and ICP in favor of the senior secured noteholders as additional collateral securing our obligations

to the senior secured noteholders.

Co also granted to the senior secured noteholders a security interest in certain of its personal

We and certain subsidiaries also entered into intercreditor agreements with the ICP’s and Alto Pekin’s lenders,

and the agent for our senior secured noteholders, to address issues of priority and the allocation of proceeds from asset sales.

April 15, 2020, upon the closing of the sale of our interests in Pacific Aurora, we repaid approximately $2.9 million in principal

on our ICP term debt.

the end of the second quarter and during the third quarter of 2020, we repaid an aggregate of approximately $9.7 million in additional

principal on our ICP revolving debt.

of the filing of this report, we believe we are in compliance with all debt covenants under our ICP credit facilities, except

our obligation to obtain lender approval of a comprehensive plan to restructure our assets and liabilities and a dispute over

whether a portion of our principal payments originated from an approved source of funds.

See “Risk

Factors”.

Ethanol, Inc.

Notes Payable

December 12, 2016, we entered into a Note Purchase Agreement with five accredited investors.

On December 15, 2016, under the terms

of the Note Purchase Agreement, we sold $55.0 million in aggregate principal amount of our senior secured notes to the investors

in a private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold.

On June 26, 2017, we entered

into a second Note Purchase Agreement with five accredited investors.

On June 30, 2017, under the terms of the second Note Purchase

Agreement, we sold an additional $13.9 million in aggregate principal amount of our senior secured notes to the investors in a

private offering for aggregate gross proceeds of 97% of the principal amount of the notes sold, for a total of $68.9 million in

aggregate principal amount of senior secured notes.

notes had an original maturity date of December 15, 2019.

Interest on the notes accrued at an annual rate equal to (i) the greater

of 1% and the three-month LIBOR, plus 7.0% from the closing through December 14, 2017, (ii) the greater of 1% and three-month

LIBOR, plus 9% between December 15, 2017 and December 14, 2018, and (iii) the greater of 1% and three-month LIBOR plus 11% between

December 15, 2018 and the maturity date.

The interest rate would increase by an additional 2% per annum above the interest rate

otherwise applicable upon the occurrence and during the continuance of an event of default until cured.

Interest was payable in

cash in arrears on the 15th calendar day of each March, June, September and December.

We are required to pay all outstanding principal

and any accrued and unpaid interest on the notes on the maturity date.

We may, at our option, prepay the outstanding principal

amount of the notes at any time without premium or penalty.

Pacific Ethanol, Inc.

issued the notes, which are secured by a first-priority

security interest in the equity interest held by Pacific Ethanol, Inc.

December 16, 2019, we amended the notes to extend the maturity date from December 15, 2019 to December 23, 2019 and amended the

interest rate from the greater of 1% and the three-month LIBOR, plus 11% between December 15, 2018 through December 14, 2019 to

15% commencing on September 15, 2019.

Under the amendment, we also agreed to pay the December 15, 2019 interest payment 50% in

cash and 50% in-kind through the issuance of an additional note in the principal amount equal thereto.

December 22, 2019, we amended and restated the notes which extended the maturity date from December 23, 2019 to December 15, 2021.

Interest on the Notes accrues at a rate of 15% per annum, payable quarterly.

March 20, 2020, we and the noteholders agreed to defer a $2.5 million aggregate interest payment due March 15, 2020 until May

On that same date, ICP granted a junior lien in certain of its personal property to the noteholders, and PE Central

granted a junior lien in certain of its personal property to the noteholders.

PE Central also pledged its equity interests in

Pacific Aurora, PE Pekin and ICP in favor of the noteholders.

In addition, PE Op Co.

and Pacific Ethanol West, LLC, which directly

owns our distilleries located on the West Coast, granted a security interest in certain of their personal property to the noteholders.

We also entered into intercreditor agreements with our PE Pekin and ICP lenders, and the agent for our senior secured noteholders,

to address issues of priority and the allocation of proceeds from asset sales.

September 2020, we repaid approximately $5.5 million in additional principal on the notes.

November 10, 2020, we repaid approximately $25.3 million in additional principal on the notes.

of the filing of this report, we believe we are in compliance with all debt covenants under our senior secured notes.

May 4, 2020, Pacific Ethanol, Inc.

and PE Pekin received loan proceeds from Bank of America, NA under the recently enacted Coronavirus

Aid, Relief, and Economic Security Act, or CARES Act, through the Paycheck Protection Program administered by the U.S.

Small Business

Administration.

Pacific Ethanol, Inc.

received $6.0 million and PE Pekin received $3.9 million in loan proceeds.

The loans mature

in two years and bear interest at a rate of 1.00% per annum.

Under the terms of the loans, certain amounts may be forgiven if

they are used for qualifying expenses as described in the CARES Act, but we can provide no assurance that we will be able to obtain

forgiveness of all or any portion of the loans.

At-the-Market

previously established an “at-the-market”

equity distribution program under which we could offer and sell shares of

common stock to, or through, sales agents by means of ordinary brokers’

transactions on The NASDAQ Capital Market, in block

transactions, or as otherwise agreed to between us and the sales agent at prices we deem appropriate.

We were under no obligation

to offer and sell shares of common stock under the program.

For the three months ended September 30, 2020, we sold 1,000,000 shares

of common stock through our “at-the-market”

equity program that resulted in net proceeds of $5,013,741 and fees paid

to our sales agent of $159,048.

We terminated our “at-the-market”

equity program on October 22, 2020.

impact of inflation was not significant to our financial condition or results of operations for the three and nine months ended

September 30, 2020 and 2019.

On May 14, 2021, in connection with the sale of

our Madera, California fuel-grade ethanol production facility, we repaid $19.3 million in principal on these Notes.

of the filing of this report, we believe we are in compliance with the terms and conditions of the Notes.

May 4, 2020, Alto Ingredients, Inc.

and Alto Pekin received loan proceeds from Bank of America, NA under the Coronavirus Aid, Relief,

and Economic Security Act, or the CARES Act, through the Paycheck Protection Program administered by the U.S.

Small Business Administration.

Alto Ingredients, Inc.

received $6.0 million and Alto Pekin received $3.9 million in loan proceeds.

The loans mature in two years and

bear interest at a rate of 1.00% per annum.

Under the terms of the loans, certain amounts may be forgiven if they are used for qualifying

expenses as described in the CARES Act, but we can provide no assurance that we will be able to obtain forgiveness of all or any portion

of the loans.

We have applied for loan forgiveness.

impact of inflation was not significant to our financial condition or results of operations for the three months ended March 31, 2021

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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-Q

Item 1. Financial Statements