What changed in this filing

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Item 1A. Risk Factors

2021-08-10 compared with 2021-05-17 · 457 added, 409 removed, 30 unchanged (97% of the section changed)

RISK FACTORS.

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

information contained in this Report and in our other filings with the Securities and Exchange Commission, including subsequent reports

on Forms 10-Q and 8-K.

Before deciding

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

contained in this report and in our other filings with the Securities and Exchange Commission, including subsequent reports on Forms 10-Q

The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties

not presently known to us or that we currently deem immaterial may also affect our business.

If any of these known or unknown risks or

uncertainties actually occurs with material adverse effects on Alto Ingredients, our business, financial condition, results of operations

and/or liquidity could be seriously harmed.

In that event, the market price for our common stock will likely decline, and you may lose

all or part of your investment.

Related to our Business

effects of the coronavirus pandemic, or its abatement, may materially and adversely affect our business, results of operations and liquidity.

coronavirus pandemic has resulted in businesses suspending or substantially curtailing operations and travel, quarantines, and an overall

substantial slowdown of economic activity.

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

social distancing requirements, travel restrictions, border closures, limitations on public gatherings, work-from-home orders, and closure

of non-essential businesses.

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

Transportation fuels in particular,

including fuel-grade ethanol, experienced significant price declines and reduced demand.

A further or extended ongoing downturn in global

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

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

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

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

the foreseeable future.

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

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

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

addition, if one or more of our employees or customers becomes ill from coronavirus and attributes their infection to us, including through

exposure at one of our offices or production facilities, we could be subject to allegations of failure to adequately mitigate the risk

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

specialty alcohols business has benefitted significantly from the coronavirus pandemic due to a substantial increase in demand for alcohol-based

sanitizers and disinfectants.

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

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

In addition, higher industry production

levels in response to the coronavirus pandemic and any resulting oversupply of specialty alcohols for sanitizers and disinfectants would

also exert downward pressure on prices.

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

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

results of operations and our ability to operate at a profit are largely dependent on our ability to manage the costs of corn, natural

gas and other production inputs, with the prices of our alcohols and essential ingredients, all of which are subject to volatility and

results of operations are highly impacted by commodity prices, including the cost of corn, natural gas and other production inputs that

we must purchase, and the prices of alcohols and essential ingredients that we sell.

Prices and supplies are subject to and determined

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

and various governmental policies in the United States and throughout the world.

volatility of corn, natural gas and other production inputs, and alcohols and essential ingredients, may cause our results of operations

to fluctuate substantially.

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

for the sale of specialty alcohols used in consumer products.

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

fixed-price contracts for our specialty alcohols, and may seek to renegotiate prices under those contracts during periods of falling

prices or high price volatility.

the past several years, for example, the spread between corn and fuel-grade ethanol prices has fluctuated significantly.

are likely to continue to occur.

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

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

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

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

addition, some of our fuel-grade ethanol marketing activities will likely be unprofitable in a market of generally declining prices due

to the nature of our business.

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

for subsequent resale.

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

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

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

As a result, our margins

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

can provide no assurance that corn, natural gas or other production inputs can be purchased at or near current or any particular prices,

or that our alcohols or essential ingredients will sell at or near current or any particular prices.

Consequently, our results of operations

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

in the prices of our alcohols and essential ingredients.

alcohol or essential ingredient production or higher inventory levels may cause a decline in prices for those products, and may have

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

prices of our alcohols and essential ingredients are impacted by competing third-party supplies of those products.

For example, we believe

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

to the Renewable Fuels Association, domestic fuel-grade ethanol production capacity increased from an annualized rate of 1.5 billion

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

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

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

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

Increases in the supply of alcohols

and essential ingredients may not be commensurate with increases in demand for alcohols and essential ingredients, thus leading to lower

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

for sanitizers and disinfectants, and corresponding oversupply of essential ingredient co-products, may also exert downward pressure

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

prices of our products are volatile and subject to large fluctuations, which may cause our results of operations to fluctuate significantly.

prices of our products are volatile and subject to large fluctuations.

For example, the market price of fuel-grade ethanol is dependent

upon many factors, including the supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum

which itself is highly volatile and difficult to forecast.

Our fuel-grade ethanol sales are tied to prevailing spot market prices rather

than long-term, fixed-price contracts.

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

and from $1.25 to $1.70 per gallon in 2019.

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

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

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

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

Additional risks and uncertainties not presently known

to us or that we currently deem immaterial may also affect our business.

If any of these known or unknown risks or uncertainties actually

occurs with material adverse effects on Alto Ingredients, our business, financial condition, results of operations and/or liquidity could

be seriously harmed.

In that event, the market price for our common stock will likely decline, and you may lose all or part of your investment.

Risks Related to our Business

The effects of the coronavirus pandemic, or its abatement,

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

The coronavirus pandemic has resulted in businesses

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

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

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

Many of these measures

remain or have been curtailed only partially.

Transportation fuels in particular, including fuel-grade ethanol, experienced significant

price declines and reduced demand.

A further or extended ongoing downturn in global economic activity, or recessionary conditions in general,

would likely lead to poor demand for, and negatively affect the prices of, fuel-grade ethanol, materially and adversely affecting our

business, results of operations and liquidity.

Furthermore, to protect the health and well-being

of our employees and customers, we have implemented work-from-home requirements, made substantial modifications to employee travel policies,

and cancelled or shifted marketing and other corporate events to virtual-only formats for the foreseeable future.

While we continue to

monitor our circumstances and may adjust our current policies as more information and public health guidance become available, these precautionary

measures could negatively affect our sales and marketing efforts, delay and lengthen our sales cycles, or create operational or other

challenges, any of which could harm our business and results of operations.

In addition, if one or more of our employees or

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

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

Such allegations could harm our

reputation and expose us to the risks of litigation and liability.

Our specialty alcohols business has benefitted

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

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

on prices for our specialty alcohols used in those products.

In addition, higher industry production levels in response to the coronavirus

pandemic and any resulting oversupply of specialty alcohols for sanitizers and disinfectants would also exert downward pressure on prices.

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

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

Our results of operations and our ability to operate

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

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

Our results of operations are highly impacted by

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

and essential ingredients that we sell.

Prices and supplies are subject to and determined by market and other forces over which we have

no control, such as weather, domestic and global demand, supply shortages, export prices and various governmental policies in the United

States and throughout the world.

Price volatility of corn, natural gas and other

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

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

in consumer products.

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

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

Over the past several years, for example, the spread

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

Fluctuations are likely to continue to occur.

A sustained narrow

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

would adversely affect our results of operations and financial position.

Revenues from sales of alcohols, particularly fuel-grade ethanol,

and essential ingredients could decline below the marginal cost of production, which may force us to further suspend production, particularly

fuel-grade ethanol production, at some or all of our facilities.

In addition, some of our fuel-grade ethanol marketing

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

For example, to satisfy

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

Moreover, we procure much of our

fuel-grade ethanol inventory outside of third-party marketing arrangements and therefore must buy fuel-grade ethanol at a price established

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

of movements in the market price of fuel-grade ethanol.

As a result, our margins for fuel-grade ethanol sold in these transactions generally

decline and may turn negative as the market price of fuel-grade ethanol declines.

We can provide no assurance that corn, natural

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

will sell at or near current or any particular prices.

Consequently, our results of operations and financial position may be adversely

affected by increases in the prices of corn, natural gas and other production inputs or decreases in the prices of our alcohols and essential

Increased alcohol or essential ingredient production

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

our results of operations, cash flows and financial condition.

The prices of our alcohols and essential ingredients

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

For example, we believe that the most significant factor influencing

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

According to the Renewable Fuels Association, domestic

fuel-grade ethanol production capacity increased from an annualized rate of 1.5 billion gallons per year in January 1999 to a record 16.1

billion gallons in 2018.

In addition, if fuel-grade ethanol production margins improve, we anticipate that owners of production facilities

operating at below capacity, or owners of idled production facilities, will increase production levels, thereby resulting in more abundant

fuel-grade ethanol supplies and inventories.

Increases in the supply of alcohols and essential ingredients may not be commensurate with

increases in demand for alcohols and essential ingredients, thus leading to lower prices.

Moreover, higher industry production levels

in response to the coronavirus pandemic and any resulting oversupply of alcohols for sanitizers and disinfectants, and corresponding oversupply

of essential ingredient co-products, may also exert downward pressure on prices.

Any of these outcomes could have a material adverse effect

on our results of operations, cash flows and financial condition.

The prices of our products are volatile and subject

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

The prices of our products are volatile and subject

to large fluctuations.

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

and the price of gasoline, which is in turn dependent upon the price of petroleum which itself is highly volatile and difficult to forecast.

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

Fuel-grade ethanol

prices, as reported by the CBOT, ranged from $0.81 to $1.62 per gallon in 2020 and from $1.25 to $1.70 per gallon in 2019.

even under longer-term, fixed-price contracts for our specialty alcohols, our customers may seek to renegotiate prices under those contracts

during periods of falling prices or high price volatility.

Fluctuations in the prices of our products may cause our results of operations

to fluctuate significantly.

Disruptions in our production or distribution may

adversely affect our business, results of operations and financial condition.

Our business depends on the continuing availability

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In the past, poor weather has caused disruptions in rail transportation,

which slowed the delivery of fuel-grade ethanol by rail, the principle manner by which fuel-grade ethanol from our facilities located

which slowed the delivery of fuel-grade ethanol by rail, the principal manner by which fuel-grade ethanol from our facilities located

in the Midwest is transported to market.

2 unchanged sentences

affected our results of operations.

in production or distribution, whether caused by labor difficulties, unscheduled downtimes and other operational hazards inherent in

the alcohol production industry, including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation

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

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

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

operations and financial condition.

of these operational hazards may also cause personal injury or loss of life, severe damage to or destruction of property and equipment

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

Our insurance

may not fully cover the potential hazards described above or we may be unable to renew our insurance on commercially reasonable terms

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

an attempt to partially offset the effects of volatility of our product prices, in particular fuel-grade ethanol, corn and natural gas

costs, we may enter into contracts to fix the price of a portion of our production or purchase a portion of our corn or natural gas requirements

on a forward basis.

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

gas and unleaded gasoline from time to time.

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

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

have been made.

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

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

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

In addition, our open contract positions

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

As a result, our hedging activities and fluctuations

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

condition and liquidity.

industries in which we operate are extremely competitive.

Many of our significant competitors have greater production and financial resources

and could use their greater resources to gain market share at our expense.

industries in which we operate are extremely competitive.

Many of our significant competitors have substantially greater production and

financial resources than we do.

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

a longer period of time.

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

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

to many significant competitors.

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

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

also face competition from international suppliers, particularly of fuel-grade ethanol, many of whom have cost structures substantially

lower than ours.

An increase in domestic or foreign competition could force us to reduce our prices and take other steps to compete effectively,

which could adversely affect our business, financial condition and results of operations.

incur significant expenses to maintain and upgrade our production facilities and operating equipment, and any interruption in our operations

would harm our operating performance.

regularly incur significant expenses to maintain and upgrade our production facilities and operating equipment.

The machines and equipment

we use to produce our alcohols and manufacture our essential ingredients are complex, have many parts, and some operate on a continuous

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

electrical parts.

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

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

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

Related to our Finances

have incurred significant losses and negative operating cash flow in the past and we may incur losses and negative operating cash flow

in the future, which may hamper our operations and impede us from expanding our business.

Disruptions in production or distribution, whether

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

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

such as earthquakes, floods and storms, or human error or malfeasance or other reasons, could prevent timely deliveries of corn or other

raw materials and energy, and could delay transport of our products to market, and may require us to halt production at one or more production

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

Some of these operational hazards may also cause

personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in

suspension of operations and the imposition of civil or criminal penalties.

Our insurance may not fully cover the potential hazards described

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

We may engage in hedging transactions and other risk

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

In an attempt to partially offset the effects of

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

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

In addition, we

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

time to time.

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

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

Hedging arrangements

also expose us to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or,

in the case of exchange-traded contracts, where there is a change in the expected differential between the underlying price in the hedging

agreement and the actual prices paid or received by us.

In addition, our open contract positions may require cash deposits to cover margin

calls, negatively impacting our liquidity.

As a result, our hedging activities and fluctuations in the price of corn, natural gas, fuel-grade

ethanol and unleaded gasoline may adversely affect our results of operations, financial condition and liquidity.

The industries in which we operate are extremely competitive.

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

share at our expense.

The industries in which we operate are extremely

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

our competitors may be able to compete more aggressively and sustain that competition over a longer period of time.

Successful competition

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

We may fail to anticipate or respond adequately to new industry

developments and other competitive pressures due to our limited resources relative to many significant competitors.

This failure could

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

Even if sufficient funds are available, we may

not be able to make the modifications and improvements necessary to compete successfully.

We also face competition from international suppliers,

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

An increase in domestic or foreign

competition could force us to reduce our prices and take other steps to compete effectively, which could adversely affect our business,

financial condition and results of operations.

We incur significant expenses to maintain and upgrade

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

We regularly incur significant expenses to maintain

and upgrade our production facilities and operating equipment.

The machines and equipment we use to produce our alcohols and manufacture

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

We must perform routine equipment maintenance

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

In addition, our production facilities

require periodic shutdowns to perform major maintenance and upgrades.

These scheduled shutdowns result in lower sales and increased costs

in the periods during which a shutdown occurs and could result in unexpected operational issues in future periods as a result of changes

to equipment and operational and mechanical processes made during shutdown.

Risks Related to our Finances

We have incurred significant losses and negative operating

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

us from expanding our business.

We have incurred significant losses and negative

9 unchanged sentences

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

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

and results of operations.

production facilities located in the Midwest have significant indebtedness.

In addition, we have significant indebtedness under our senior

secured notes issued at the parent-company level.

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

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

dates of those facilities.

Our indebtedness exposes us to many risks that could

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

Our Pekin Campus facilities have significant indebtedness.

The terms of our loans associated with Pekin Campus facilities require amortizing payments of principal over the lives of the loans and

our borrowing availability under our revolving credit facilities associated with those facilities periodically and automatically declines

through the maturity dates of those facilities.

Our indebtedness could:

it more difficult to pay or refinance our debts as they become due during adverse economic and industry conditions because those conditions

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

our flexibility to pursue strategic opportunities or react to changes in our business and the industry in which we operate and, consequently,

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

a substantial portion of our cash flow from operations, if any, to be used for debt service payments, thereby reducing our ability to

fund working capital, capital expenditures, new business ventures, dividend payments and other general corporate purposes;

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

term loans and credit facilities also require compliance with numerous financial and other covenants, the violation of which could result

in an acceleration of our indebtedness.

of our indebtedness bears interest at variable rates.

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

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

ability to generate sufficient cash to make all principal and interest payments when due depends on our business performance, which is

subject to a variety of factors beyond our control, including the supply of and demand for our alcohols and other products, product prices,

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

We cannot provide

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

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

and state income tax laws impose restrictions on our use of net operating loss, or NOL, and tax credit carryforwards in the event that

an “ownership change”

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

an ownership change occurs when stockholders owning 5% or more of a corporation entitled to use NOL or other loss carryforwards have

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

The annual base limitation under Section 382

of the Code is calculated by multiplying the corporation’s value at the time of the ownership change by the greater of the long-term

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

to utilize our NOL and other loss carryforwards may be substantially limited.

These limitations could result in increased future tax

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

Related to Legal and Regulatory Matters

demand for fuel-grade ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance

and overall consumer demand for transportation fuel, any of which could negatively affect demand for fuel-grade ethanol and our results

of operations.

many trade groups, academics and governmental agencies have supported fuel-grade ethanol as a fuel additive that promotes a cleaner environment,

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

biofuels and potentially depleting water resources.

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

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

from livestock that consume corn.

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

food markets to domestic fuel markets.

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

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

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

These views could also negatively

impact public perception of the fuel-grade ethanol industry and acceptance of ethanol as an alternative fuel.

are limited markets for fuel-grade ethanol beyond those established by federal mandates.

Discretionary blending and E85 blending (i.e.,

gasoline blended with up to 85% fuel-grade ethanol by volume) are important secondary markets.

Discretionary blending is often determined

by the price of fuel-grade ethanol versus the price of gasoline.

In periods when discretionary blending is financially unattractive,

the demand for fuel-grade ethanol may decline.

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

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

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

our ability to generate revenue or to operate profitably.

In addition, we believe that consumer acceptance of E15 and E85 fuels is necessary

before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation fuels.

United States fuel-grade ethanol industry is highly dependent upon various federal and state laws and any changes in those laws could

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

Environmental Protection Agency, or EPA, has implemented the Renewable Fuel Standard, or RFS, under the Energy Policy Act of 2005 and

the Energy Independence and Security Act of 2007.

The RFS program sets annual quotas for the quantity of renewable fuels (such as fuel-grade

ethanol) that must be blended into motor fuels consumed in the United States.

The domestic market for fuel-grade ethanol is significantly

impacted by federal mandates under the RFS program for volumes of renewable fuels (such as ethanol) required to be blended with gasoline.

Future demand for fuel-grade ethanol will largely depend on incentives to blend ethanol into motor fuels, including the price of ethanol

relative to the price of gasoline, the relative octane value of ethanol, constraints in the ability of vehicles to use higher ethanol

blends, the RFS, and other applicable environmental requirements.

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

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

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

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

Our results of operations, cash flows

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

bills in Congress introduced from time to time are also directed at altering existing renewable fuels energy legislation, but none has

passed in recent years.

Some legislative bills are directed at halting or reversing expansion of, or even eliminating, the renewable

fuel program, while other bills are directed at bolstering the program or enacting further mandates or grants that would support the

renewable fuels industry.

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

is enacted that reduces the RFS volume requirements.

may be adversely affected by environmental, health and safety laws, regulations and liabilities .

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

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

and the health and safety of our employees.

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

are subject to renewal or modification.

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

changes to limit actual or potential impacts to the environment.

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

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

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

laws, regulations and permits.

may be liable for the investigation and cleanup of environmental contamination at each of our production facilities and at off-site locations

where we arrange for the disposal of hazardous substances or wastes.

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

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

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

and for damages to natural resources.

We may also be subject to related claims by private parties alleging property damage and personal

injury due to exposure to hazardous or other materials at or from those properties.

Some of these matters may require us to expend significant

amounts for investigation, cleanup or other costs.

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

could require us to make significant additional expenditures.

Continued government and public emphasis on environmental issues will likely

result in increased future investments for environmental controls at our production facilities.

Present and future environmental laws

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

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

of operations and financial condition.

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

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

As protection against operating

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

However, we could sustain losses for uninsurable

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

Events that result in significant personal injury or damage

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

results of operations and financial condition.

Related to Ownership of our Common Stock

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

of our common stock and our ability to raise capital.

sales of substantial amounts of our common stock into the public market, including up to 8.9 million shares of our common stock that

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

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

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

market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future.

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

beyond our control:

● fluctuations

in the market prices of our products;

● fluctuations

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

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

coronavirus pandemic, including governmental and public response to the pandemic;

● competitive

pricing pressures;

● anticipated

trends in our financial condition and results of operations;

in market valuations of companies similar to us;

market price and volume fluctuations generally;

developments or increased enforcement;

● fluctuations

in our quarterly or annual operating results;

or departures of key personnel;

ability to obtain any necessary financing;

financing activities and future sales of our common stock or other securities;

ability to maintain contracts that are critical to our operations.

price at which you purchase shares of our common stock may not be indicative of the price that will prevail in the trading market.

may be unable to sell your shares of common stock at or above your purchase price, which may result in substantial losses to you and

which may include the complete loss of your investment.

In the past, securities class action litigation has often been brought against

a company following periods of high stock price volatility.

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

become due during adverse economic and industry conditions because those conditions could result in insufficient cash flows from operations

to make our scheduled debt payments;

● limit our flexibility to pursue strategic opportunities or

react to changes in our business and the industry in which we operate and, consequently, place us at a competitive disadvantage to our

competitors who have less debt;

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

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

ventures, dividend payments and other general corporate purposes;

● limit our ability to procure additional financing for working

capital or other purposes.

Our term loans and credit facilities also require

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

Much of our indebtedness bears interest at variable

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

affect our cash flows and results of operations.

Our ability to generate sufficient cash to make

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

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

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

We cannot provide any assurance that we will be able to

timely satisfy such obligations.

We can provide no assurances that our remaining PPP

loan will be forgiven, in whole or in part, or that any loan forgiven will not require repayment following an audit by the SBA.

On May 4, 2020, Alto Ingredients, Inc.

Pekin received loan proceeds from Bank of America, NA under the CARES Act through the Paycheck Protection Program administered by the

Alto Ingredients, Inc.

received $6.0 million and Alto Pekin received $3.9 million in loan proceeds.

As of the filing of this report,

the $6.0 million loan to Alto Ingredients, Inc.

remains outstanding.

We can provide no assurances that we will be able to obtain forgiveness

of all or any portion of the remaining loan.

In addition, the SBA may audit our loan forgiveness applications and further examine our

eligibility for forgiveness, including the facts and circumstances existing at the time the loans were made.

We can provide no assurances

that any loan forgiven will not require repayment following an audit by the SBA.

Our ability to utilize net operating loss carryforwards

and certain other tax attributes may be limited.

Federal and state income tax laws impose restrictions

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

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

In general, an ownership change occurs when stockholders

owning 5% or more of a corporation entitled to use NOL or other loss carryforwards have increased their ownership by more than 50 percentage

points during any three-year period.

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

value at the time of the ownership change by the greater of the long-term tax-exempt rate determined by the Internal Revenue Service in

the month of the ownership change or the two preceding months.

Our ability to utilize our NOL and other loss carryforwards may be substantially

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

condition and results of operations.

Risks Related to Legal and Regulatory Matters

Future demand for fuel-grade ethanol is uncertain

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

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

Although many trade groups, academics and governmental

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

production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and potentially depleting water

Some studies have suggested that corn-based ethanol is less efficient than ethanol produced from other feedstock and that it

negatively impacts consumers by causing increased prices for dairy, meat and other food generated from livestock that consume corn.

Additionally,

critics of fuel-grade ethanol contend that corn supplies are redirected from international food markets to domestic fuel markets.

views of corn-based ethanol production gain acceptance, support for existing measures promoting use and domestic production of corn-based

ethanol as a fuel additive could decline, leading to a reduction or repeal of federal ethanol usage mandates, which would materially and

adversely affect the demand for fuel-grade ethanol.

These views could also negatively impact public perception of the fuel-grade ethanol

industry and acceptance of ethanol as an alternative fuel.

There are limited markets for fuel-grade ethanol

beyond those established by federal mandates.

Discretionary blending and E85 blending (i.e., gasoline blended with up to 85% fuel-grade

ethanol by volume) are important secondary markets.

Discretionary blending is often determined by the price of fuel-grade ethanol versus

the price of gasoline.

In periods when discretionary blending is financially unattractive, the demand for fuel-grade ethanol may decline.

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

Demand for transportation fuel is affected

by the number of miles traveled by consumers and vehicle fuel economy.

Lower demand for fuel-grade ethanol and co-products would reduce

the value of our ethanol and related products, erode our overall margins and diminish our ability to generate revenue or to operate profitably.

In addition, we believe that consumer acceptance of E15 and E85 fuels is necessary before fuel-grade ethanol can achieve any significant

growth in market share relative to other transportation fuels.

The United States fuel-grade ethanol industry is highly

dependent upon various federal and state laws and any changes in those laws could have a material adverse effect on our results of operations,

cash flows and financial condition.

The Environmental Protection Agency, or EPA, has

implemented the Renewable Fuel Standard, or RFS, under the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.

The RFS program sets annual quotas for the quantity of renewable fuels (such as fuel-grade ethanol) that must be blended into motor fuels

consumed in the United States.

The domestic market for fuel-grade ethanol is significantly impacted by federal mandates under the RFS

program for volumes of renewable fuels (such as ethanol) required to be blended with gasoline.

Future demand for fuel-grade ethanol will

largely depend on incentives to blend ethanol into motor fuels, including the price of ethanol relative to the price of gasoline, the

relative octane value of ethanol, constraints in the ability of vehicles to use higher ethanol blends, the RFS, and other applicable environmental

requirements.

Under the provisions of the Clean Air Act, as amended

by the Energy Independence and Security Act of 2007, the EPA has limited authority to waive or reduce the mandated RFS requirements, which

authority is subject to consultation with the Secretaries of Agriculture and Energy, and based on a determination that there is inadequate

domestic renewable fuel supply or implementation of the applicable requirements would severely harm the economy or environment of a state,

region or the United States in general.

Our results of operations, cash flows and financial condition could be adversely impacted if the

EPA reduces the RFS requirements from the statutory levels specified in the RFS.

Various bills in Congress introduced from time

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

Some legislative

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

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

Our results of operations,

cash flows and financial condition could be adversely impacted if any legislation is enacted that reduces the RFS volume requirements.

We may be adversely affected by environmental, health

and safety laws, regulations and liabilities .

We are subject to various federal, state and local

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

storage, handling, use, transportation and disposal of hazardous materials and wastes, and the health and safety of our employees.

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

regulations and permits often require expensive pollution control equipment or operational changes to limit actual or potential impacts

to the environment.

A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages,

criminal sanctions, permit revocations and/or production facility shutdowns.

In addition, we have made, and expect to make, significant

capital expenditures on an ongoing basis to comply with increasingly stringent environmental laws, regulations and permits.

We may be liable for the investigation and cleanup

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

substances or wastes.

If these substances or wastes have been or are disposed of or released at sites that undergo investigation and/or

remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental Response, Compensation and Liability Act

of 1980, or other environmental laws for all or part of the costs of investigation and/or remediation, and for damages to natural resources.

We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous

or other materials at or from those properties.

Some of these matters may require us to expend significant amounts for investigation,

cleanup or other costs.

In addition, new laws, new interpretations of existing

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

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

controls at our production facilities.

Present and future environmental laws and regulations, and interpretations of those laws and regulations,

applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions may require substantial

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

The hazards and risks associated with producing

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

personal injury claims or damage to property and third parties.

As protection against operating hazards, we maintain insurance coverage

against some, but not all, potential losses.

However, we could sustain losses for uninsurable or uninsured risks, or in amounts in excess

of existing insurance coverages.

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

losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition.

Risks Related to Ownership of our Common Stock

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

common stock and our ability to raise capital.

Future sales of substantial

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

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

common stock and our ability to raise capital.

Our stock price

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

The market price of our common

stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future.

The market price of our common

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

● fluctuations in the market prices of our products;

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

● the volume and timing of the receipt of orders for our products from major customers;

● the coronavirus pandemic, including governmental and public responses to the pandemic;

● competitive pricing pressures;

● anticipated trends in our financial condition and results of operations;

● changes in market valuations of companies similar to us;

● stock market price and volume fluctuations generally;

● regulatory developments or increased enforcement;

● fluctuations in our quarterly or annual operating results;

● additions or departures of key personnel;

● our ability to obtain any necessary financing;

● our financing activities and future sales of our common stock or other securities;

● our ability to maintain contracts that are critical to our operations.

The price at which you purchase

shares of our common stock may not be indicative of the price that will prevail in the trading market.

You may be unable to sell your

shares of common stock at or above your purchase price, which may result in substantial losses to you and which may include the complete

loss of your investment.

In the past, securities class action litigation has often been brought against a company following periods of

high stock price volatility.

We may be the target of similar litigation in the future.

Securities litigation

could result in substantial costs and divert management’s attention and our resources away from our business.

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

we do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive

Securities litigation could result in substantial

costs and divert management’s attention and our resources away from our business.

Any of the risks described

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

do not intend to pay any cash dividends on our shares of common stock in the near future, our stockholders will not be able to receive

a return on their shares unless and until they sell them.

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

do not anticipate paying any cash dividends on our common stock in the near future.

The declaration, payment, and amount of any future

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

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

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

of any such dividend.

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

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

We intend to retain a significant

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

We do not anticipate paying any cash

dividends on our common stock in the near future.

The declaration, payment, and amount of any future dividends will be made at the discretion

of our board of directors, and will depend upon, among other things, our results of operations, cash flows, and financial condition, operating

and capital requirements, and other factors as our board of directors considers relevant.

There is no assurance that future dividends

will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

Unless our board of directors

determines to pay dividends, our stockholders will be required to look to appreciation of our common stock to realize a gain on their

There can be no assurance that this appreciation will occur.

bylaws contain an exclusive forum provision, which could limit our stockholders’

ability to obtain a favorable judicial forum for

disputes with us or our directors, officers, employees or agents.

bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery shall be the

sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach

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

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

affairs doctrine.

the avoidance of doubt, the exclusive forum provision described above does not apply to any claims arising under the Securities Act of

1933, as amended, or the Securities Act, or the Securities Exchange Act of 1934, as amended, or the Exchange Act.

Section 27 of the Exchange

Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the

rules and regulations thereunder, and Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over

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

choice of forum provision in our bylaws may limit our stockholders’

ability to bring a claim in a judicial forum that they find

favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our

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

The applicable courts

may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may

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

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

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

if they do not reside in or near Delaware.

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

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

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

through security vulnerabilities could lead to disruption of business, reduced revenue, increased costs, liability claims, or harm to

our reputation or competitive position.

vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external

parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to

accounts we have at our suppliers, vendors, and customers.

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

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

The vulnerability could be caused

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

To mitigate these security

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

policies and user account policies.

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

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

and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation

and possible significant liability.

if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss.

Excessive outages may

affect our ability to timely and efficiently deliver products to customers or develop new products.

Such disruptions and data loss may

adversely impact our ability to fulfill orders and interrupt other processes.

Delayed sales or lost customers resulting from these disruptions

could adversely affect our financial results, stock price and reputation.

State of California enacted the California Consumer Privacy Act of 2018, or CCPA, effective on January 1, 2020.

Our and our business

partners’

or contractors’

failure to fully comply with the CCPA and other laws could lead to significant fines and require

onerous corrective action.

In addition, data security breaches experienced by us or our business partners or contractors could result

in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data, and the exposure of personally

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

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

breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse,

or otherwise, could harm our business.

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

occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and

investigations, related actions, and penalties by regulatory authorities.

In addition, we could incur significant costs in notifying

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

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

Finally, any perceived or actual unauthorized access to,

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

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

Our bylaws contain an exclusive forum provision, which

could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees

Our bylaws provide that, unless we consent in writing

to the selection of an alternative forum, the Delaware Court of Chancery shall be the sole and exclusive forum for (a) any derivative

action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer

or other employee of us to us or our stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware

General Corporation Law, or (d) any action asserting a claim governed by the internal affairs doctrine.

For the avoidance of doubt, the exclusive forum

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

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

Section 27 of the Exchange Act creates exclusive federal jurisdiction

over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section

22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability

created by the Securities Act or the rules and regulations thereunder.

The choice of forum provision in our bylaws may

limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors,

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

an action, if successful, might benefit our stockholders.

The applicable courts may also reach different judgments or results than would

other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action,

and such judgments or results may be more favorable to us than to our stockholders.

With respect to the provision making the Delaware

Court of Chancery the sole and exclusive forum for certain types of actions, stockholders who do bring a claim in the Delaware Court of

Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware.

if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types

of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have

a material adverse effect on us.

General Risk Factors

Cyberattacks through security vulnerabilities could

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

Security vulnerabilities may arise from our hardware,

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

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

and customers.

External parties may gain access to our data or our customers’ data, or attack the networks causing denial of service

or attempt to hold our data or systems in ransom.

The vulnerability could be caused by inadequate account security practices such

as failure to timely remove employee access when terminated.

To mitigate these security issues, we have implemented measures throughout

our organization, including firewalls, backups, encryption, employee information technology policies and user account policies.

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

If any of these types of security breaches were to

occur and we were unable to protect sensitive data, our relationships with our business partners and customers could be materially damaged,

our reputation could be materially harmed, and we could be exposed to a risk of litigation and possible significant liability.

Further, if we fail to adequately maintain our

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

Excessive outages may affect our ability to timely and efficiently

deliver products to customers or develop new products.

Such disruptions and data loss may adversely impact our ability to fulfill orders

and interrupt other processes.

Delayed sales or lost customers resulting from these disruptions could adversely affect our financial results,

stock price and reputation.

The State of California enacted the California

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

Our and our business partners’ or contractors’ failure

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

In addition, data

security breaches experienced by us or our business partners or contractors could result in the loss of trade secrets or other intellectual

property, public disclosure of sensitive commercial data, and the exposure of personally identifiable information (including sensitive

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

Unauthorized use or disclosure of, or access to,

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

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

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

disrupted, and we could be subject to demands, claims and litigation by private parties, and investigations, related actions, and penalties

by regulatory authorities.

In addition, we could incur significant costs in notifying affected persons and entities and otherwise complying

with the multitude of foreign, federal, state and local laws and regulations relating to the unauthorized access to, or use or disclosure

of, personal information.

Finally, any perceived or actual unauthorized access to, or use or disclosure of, such information could harm

our reputation, substantially impair our ability to attract and retain customers and have an adverse impact on our business, financial

condition and results of operations.

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 1A. Risk Factors