What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-10 · 455 added, 376 removed, 332 unchanged (71% of the section changed)

3 unchanged sentences

(in thousands)

and cash equivalents

September 30,

Current Assets:

Cash and cash equivalents

Accounts receivable, net (net of allowance for doubtful accounts of $ 360 and $ 260 , respectively)

Prepaid inventory

Derivative instruments

Assets held-for-sale

current assets

and equipment, net

use operating lease assets, net

Other current assets

Total current assets

Property and equipment, net

Other Assets:

Right of use operating lease assets, net

Notes receivable

Intangible assets

Total other assets

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

See accompanying notes

to consolidated financial statements.

ALTO INGREDIENTS,

See accompanying notes to consolidated financial

INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except par value)

September 30,

LIABILITIES AND STOCKHOLDERS’ EQUITY

payable – trade

portion – operating leases

portion – long-term debt

held-for-sale

Current Liabilities:

Total current

debt, net of current portion

leases, net of current portion

and Contingencies (Note 7)

Stockholders’

Alto Ingredients,

Accounts payable – trade

Accrued liabilities

Current portion – operating leases

Current portion – long-term debt

Derivative instruments

Liabilities held-for-sale

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)

Stockholders’ Equity:

Alto Ingredients, Inc.

Stockholders’ Equity:

Preferred stock, $ 0.001 par value;

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1,684 shares authorized;

no shares issued and outstanding as of June 30, 2021 and December 31, 2020;

no shares issued and outstanding as of September 30, 2021 and December 31, 2020;

1,581 shares authorized;

927 shares issued and outstanding as of June 30, 2021 and December 31, 2020;

liquidation preference of $ 20,290 as of June 30, 2021

927 shares issued and outstanding as of September 30, 2021 and December 31, 2020;

liquidation preference of $ 20,609 as of September 30, 2021

Common stock, $ 0.001 par value;

300,000 shares authorized;

72,811 and 72,487 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

72,800 and 72,487 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Non-voting common stock, $ 0.001 par value;

3,553 shares authorized;

1 share issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

paid-in capital

other comprehensive loss

Stockholders’ Equity

Liabilities and Stockholders’ Equity

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

See accompanying notes

to consolidated financial statements.

ALTO INGREDIENTS,

1 share issued and outstanding as of September 30, 2021 and December 31, 2020

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

* Amounts derived from the audited

consolidated financial statements for the year ended December 31, 2020.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in

thousands, except per share data)

of goods sold

general and administrative expenses

Income (loss)

from operations

loan forgiveness

income (expense), net

Income (loss) before

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

Asset impairments

Gain on litigation settlement

Income (loss) from operations

Interest expense, net

Income from loan forgiveness

Fair value adjustments

Other income (expense), net

Income (loss) before benefit for income taxes

Benefit for income taxes

for income taxes

Consolidated net

income (loss)

loss attributed to noncontrolling interests

income (loss) attributed to Alto Ingredients, Inc.

stock dividends

income (loss) available to common stockholders

income (loss) per share, basic

income (loss) per share, diluted

Weighted-average

shares outstanding, basic

Weighted-average

shares outstanding, diluted

accompanying notes to consolidated financial statements.

ALTO INGREDIENTS, INC.

Consolidated net income (loss)

Net loss attributed to noncontrolling interests

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

See accompanying notes to consolidated financial

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities:

Consolidated net income (loss)

Adjustments to reconcile consolidated net income (loss)

to net cash provided by operating activities:

Consolidated net income

Adjustments to reconcile consolidated net income to net

cash (used in) provided by operating activities:

Depreciation and amortization of intangibles

Asset impairments

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Accounts payable and accrued expenses

Net cash provided by operating activities

Net cash (used in) provided by operating activities

Investing Activities:

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Financing Activities:

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

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

Proceeds from stock option exercises

Principal payments on borrowings

Proceeds from warrant exercises

Proceeds from issuance of common stock

Proceeds from borrowings

Net cash used in financing activities

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

Cash and cash equivalents at end

Supplemental Information:

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

See accompanying notes to consolidated financial statements.

ALTO INGREDIENTS, INC.

See accompanying notes to consolidated financial

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)

Preferred Stock

Comprehensive

Non-Controlling

Income (Loss)

Balances, January 1, 2021

January 1, 2021

$ ( 736,598 )

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

Stock-based compensation

Stock option exercises

Preferred stock dividends

Balances, March 31, 2021

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

option exercises

stock dividends

March 31, 2021

$ ( 732,232 )

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

Stock-based compensation

Preferred stock dividends

Balances, June 30, 2021

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

stock dividends

June 30, 2021

$ ( 724,157 )

Preferred Stock

Comprehensive

Non-Controlling

Income (Loss)

Balances, January 1, 2020

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

stock dividends

September 30, 2021

$ ( 727,608 )

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

January 1, 2020

$ ( 720,214 )

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

of common stock

stock dividends

March 31, 2020

$ ( 745,629 )

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

Stock-based compensation

Issuances of common stock

Sale of interests in PAL

Preferred stock dividends

Balances, March 31, 2020

Net income (loss)

Balances, June 30, 2020

$ ( 730,980 )

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Stock-based compensation

Issuances of common stock

Warrant exercise

Preferred stock dividends

Sale of interests in PAL

Net income (loss)

Balances, June 30, 2020

Balances, September 30, 2020

$ ( 716,084 )

See accompanying notes to

consolidated financial statements.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See accompanying notes to consolidated financial

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

ORGANIZATION AND BASIS OF PRESENTATION.

Organization and Business

– 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 Op Co., a Delaware corporation, and

all seven of the Company’s production facilities through May 14, 2021.

As discussed in Note 2, on May 14, 2021, the Company completed

the sale of its production facility located in Madera, California.

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 three 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 has a combined production

capacity of 410 million gallons per year, 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.

The Company focuses on four

and Business – 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 Op Co., a Delaware corporation, and all seven of the Company’s production facilities

through May 14, 2021.

As discussed in Note 2, on May 14, 2021, the Company completed the sale of its production facility located in Madera,

Company is a leading producer and marketer of specialty alcohols and essential ingredients.

The Company also produces and markets fuel-grade

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 three 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, as of September

30, 2021, a combined alcohol production capacity of 410 million gallons per year and produces, on an annualized basis, nearly

1.2 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.

In addition, the Company markets, on an annualized basis, over 250

million gallons combined of its own alcohol production and third-party production.

On November 5, 2021, the Company closed the sale of

its Stockton facility, reducing its alcohol production capacity by 60 million gallons of fuel-grade ethanol per year.

Company focuses on four key markets:

Health, Home & Beauty ;

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Essential Ingredients ;

and Renewable Fuels .

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

As of June 30, 2021, the Company

was operating at approximately 71% of its 410 million gallon annual production capacity.

As market conditions change, the Company may

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

Basis 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

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, 2020.

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.

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.

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 September 30, 2021, the Company was operating at approximately 71% of its 410 million gallon annual production capacity.

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,

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.

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allowances may be required.

Of the accounts receivable balance, approximately

$ 61,501,000 and $ 35,839,000 at June 30, 2021 and December 31, 2020, respectively, were used as collateral under Kinergy’s operating

line of credit.

The allowance for doubtful accounts was $ 363,000 and $ 260,000 as of June 30, 2021 and December 31, 2020, respectively.

The Company recorded a bad debt expense of $ 52,000 and a bad debt recovery of $ 18,000 for the three months ended June 30, 2021 and 2020,

respectively.

The Company recorded a bad debt expense of $ 143,000 and $ 1,000 for the six months ended June 30, 2021 and 2020, respectively.

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

Of the accounts receivable balance,

approximately $ 59,997,000 and $ 35,839,000 at September 30, 2021 and December 31, 2020, respectively, were used as collateral under

Kinergy’s operating line of credit.

The allowance for doubtful accounts was $ 360,000 and $ 260,000 as of September 30, 2021 and

December 31, 2020, respectively.

The Company recorded a bad debt recovery of $ 3,000 and no bad debt expense for the three months

ended September 30, 2021 and 2020, respectively.

The Company recorded bad debt expense of $ 140,000 and $ 1,000 for the nine months

ended September 30, 2021 and 2020, respectively.

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

Financial Instruments – The

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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

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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 six months ended June 30, 2021, the Company provided for an additional impairment charge of $ 1.2 million based on revised fair value

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

During the nine months

ended September 30, 2021, the Company provided for an additional impairment charge of $ 1.2 million based on revised fair value estimates.

On May 14, 2021, the Company closed the sale of

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All of the cash proceeds were used to repay a significant portion of the Company’s term debt and accrued

The Company continues to market its Stockton

facility for sale.

In June 2021, the Company agreed to a plan to

sell certain assets of the Company’s idled facility in Canton, Illinois.

As a result, the Company determined the related long-lived

asset groups should be classified as held-for-sale at June 30, 2021.

During the three months ended June 30, 2021, the Company recorded

an estimated impairment charge of $ 1.9 million based on fair value estimates.

On November 5, 2021, the Company closed the

sale of its Stockton facility for gross proceeds of $ 24.0 million in cash.

With the net cash proceeds, the Company repaid its

parent notes payable and the Pekin and ICP loans in full.

During 2021, the Company has agreed to sell certain

assets of the Company’s idled facility in Canton, Illinois.

As a result, the Company determined the related long-lived asset groups

should be classified as held-for-sale at September 30, 2021.

During the nine months ended September 30, 2021, the Company recorded an

estimated impairment charge of $ 1.9 million based on fair value estimates.

The Company classified the following assets and

liabilities as held-for-sale as of June 30, 2021 (in thousands):

liabilities as held-for-sale as of September 30, 2021 (in thousands):

Property and equipment, net

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Liabilities held-for-sale

For the three months ended June 30, 2021, net

sales attributed to the results of operations for Stockton and Madera were $ 0.4 million and less than $ 0.1 million, respectively.

the three months ended June 30, 2020, net sales attributed to the results of operations for Stockton and Madera were $ 0.5 million and

For the three months ended September 30, 2021,

net sales attributed to the results of operations for Stockton and Madera were $ 1.5 million and $ 0 , respectively.

For the three months

ended September 30, 2020, net sales attributed to the results of operations for Stockton and Madera were $ 0.2 million and less than $ 0.1

million, respectively.

For the three months ended June 30, 2021, pre-tax loss attributed to the results of operations for Stockton

and Madera was $ 1.4 million and $ 0.2 million, respectively.

For the three months ended June 30, 2020, pre-tax loss attributed to the results

of operations for Stockton and Madera was $ 1.2 million and $ 1.8 million, respectively.

For the six months ended June 30, 2021, net sales

attributed to the results of operations for Stockton and Madera were $ 0.6 million and less than $ 0.1 million, respectively.

months ended June 30, 2020, net sales attributed to the results of operations for Stockton and Madera were $ 22.4 million and $ 22.5 million,

For the three months ended September 30, 2021, pre-tax income (loss) attributed to the results of operations for

Stockton and Madera was income of $ 0.3 million and loss of $ 0.2 million, respectively.

For the three months ended September 30, 2020,

pre-tax loss attributed to the results of operations for Stockton and Madera was $ 1.8 million and $ 1.8 million, respectively.

For the nine months ended September 30, 2021,

net sales attributed to the results of operations for Stockton and Madera were $ 2.0 million and $ 0 , respectively.

For the nine months

ended September 30, 2020, net sales attributed to the results of operations for Stockton and Madera were $ 22.6 million and $ 22.5 million,

respectively.

For the six months ended June 30, 2021, pre-tax loss attributed to the results of operations for Stockton and Madera was

$ 2.2 million and $ 1.8 million, respectively.

For the six months ended June 30, 2020, pre-tax loss attributed to the results of operations

for Stockton and Madera was $ 3.5 million and $ 3.6 million, respectively.

For the nine months ended September 30, 2021, pre-tax loss attributed to the results of operations for Stockton and Madera

was $ 1.9 million and $ 0.8 million, respectively.

For the nine months ended September 30, 2020, pre-tax loss attributed to the results

of operations for Stockton and Madera was $ 5.4 million and $ 5.4 million, respectively.

The Company reports its financial and operating

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Marketing and distribution:

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Corporate activities

Interest expense:

Interest expense (income):

Marketing and distribution

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total assets by operating segment (in thousands):

September 30,

Total assets:

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determined on a first-in, first-out basis.

Inventory is net of valuation adjustments of $ 1,800,000 and $ 1,033,000 as of June 30, 2021

and December 31, 2020, respectively.

Inventory is net of valuation adjustments of $ 0 and $ 1,033,000 as of September 30, 2021 and

December 31, 2020, respectively.

Inventory balances consisted of the following (in thousands):

September 30,

Finished goods

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recognized immediately in cost of goods sold.

For the three and six months ended June 30, 2021 and 2020, the Company did not designate

For the three and nine months ended September 30, 2021 and 2020, the Company did not designate

any of its derivatives as cash flow hedges.

Commodity Risk – Non-Designated Hedges

– 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 $ 8,868,000 and $ 0 as the change in the fair value of these contracts for the three months ended June 30, 2021 and 2020, respectively.

The Company recognized net gains of $ 19,411,000 and $ 0 as the change in the fair value of these contracts for the six months ended June

30, 2021 and 2020, respectively.

Commodity Risk – Non-Designated

Hedges – 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 losses of $ 976,000 and gains of $ 1,582,000 as the change in the fair value of these

contracts for the three months ended September 30, 2021 and 2020, respectively.

The Company recognized net gains of $ 18,435,000 and

$ 1,582,000 as the change in the fair value of these contracts for the nine months ended September 30, 2021 and 2020,

respectively.

Non Designated Derivative Instruments

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balances, are as follows (in thousands):

As of June 30, 2021

As of September 30, 2021

Type of Instrument

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recognized gains for its derivatives not designated as hedging instruments are as follows (in thousands):

Realized Gains

For the Three Months Ended

Realized Losses

Three Months Ended

September 30,

Type of Instrument

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Cost of goods sold

Realized Gains

For the Six Months Ended

Unrealized Gains

Three Months Ended

September 30,

Type of Instrument

2 unchanged sentences

Cost of goods sold

Unrealized Losses

For the Three Months Ended

Realized Gains

Nine Months Ended

September 30,

Type of Instrument

2 unchanged sentences

Cost of goods sold

Unrealized Losses

For the Six Months Ended

Unrealized Gains (Losses)

Nine Months Ended

September 30,

Type of Instrument

2 unchanged sentences

Cost of goods sold

borrowings are summarized as follows (in thousands):

Long-term borrowings are summarized as follows

(in thousands):

September 30,

Kinergy line of credit

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Long-term debt

Notes Payable – On May 14, 2021, with proceeds from the Company’s sale of its

Madera, California facility, the Company repaid $ 19.3 million of principal on its notes payable, resulting in an aggregate balance of

$ 0.7 million.

Act Loans – On May 4, 2020, Alto Ingredients, Inc.

and Alto Pekin, LLC, or Alto

Pekin, received loan proceeds from Bank of America, NA under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”),

through the Paycheck Protection Program administered by the U.S.

Small Business Administration (“SBA”).

Alto Ingredients,

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

Under the terms of the loans, certain amounts may be

forgiven if they are used for qualifying expenses as described in the CARES Act.

In June 2021, the SBA approved Alto Pekin’s forgiveness

application for the full amount of $ 3.9 million, and accordingly, the Company recognized income from loan forgiveness for the three months

ended June 30, 2021.

The Company has applied to the SBA for forgiveness of the Company’s

remaining loan.

The SBA may audit the loan forgiveness applications and further examine eligibility for forgiveness, including the facts

and circumstances existing at the time the loans were made.

The Company can provide no assurances that any loan forgiven will not require

repayment following an audit by the SBA.

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

– At June 30, 2021, there were approximately $ 245.7 million of net assets

at the Company’s subsidiaries that were not available for transfer 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.

AND CONTINGENCIES.

Commitments – At June 30, 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 96,399,000 gallons as of June 30, 2021 and open fixed-price alcohol sales contracts totaling $ 223,575,000 as of June 30, 2021.

Company had open fixed-price sales contracts for essential ingredients totaling $ 11,061,000 and open indexed-price sales contracts of

essential ingredients for 117,000 tons as of June 30, 2021.

These sales contracts are scheduled for completion over the next twelve months.

Commitments – At June 30, 2021, the Company had indexed-price purchase contracts to purchase 17,706,000 gallons of alcohol

and fixed-price purchase contracts to purchase $ 39,086,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts

to purchase $ 77,375,000 of corn from its suppliers as of June 30, 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.

The 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 Aventine Renewable Energy Holdings, Inc.

Parent Notes Payable – On

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

on its notes payable, resulting in an aggregate remaining balance of $ 0.7 million.

On November 5, 2021, with proceeds from the Company’s

sale of its Stockton, California facility, the Company repaid the remaining outstanding balance on these notes.

Pekin and ICP Revolving Loans

– On November 5, 2021, with proceeds from the Company’s sale of its Stockton, California facility, the Company repaid in

full the outstanding balances on these loans.

CARES Act Loans – On May 4,

2020, Alto Ingredients, Inc.

and Alto Pekin, LLC, or Alto Pekin, received loan proceeds from Bank of America, NA under the Coronavirus

Aid, Relief, and Economic Security Act (“CARES Act”), through the Paycheck Protection Program administered by the U.S.

Business Administration (“SBA”).

Alto Ingredients, Inc.

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

Under the terms of the loans, certain amounts may be forgiven if they are used for qualifying expenses as described in the CARES

In June 2021, the SBA approved Alto Pekin’s forgiveness application for the full amount of $ 3.9 million, and accordingly, the

Company recognized income from loan forgiveness for the three months ended June 30, 2021.

In September 2021, the SBA approved Alto Ingredients,

Inc.’s forgiveness application for the full amount of $ 6.0 million, and accordingly, the Company recognized income from loan forgiveness

for the three months ended September 30, 2021.

The SBA may audit the loan forgiveness applications and further examine eligibility for

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

The Company can provide no assurances that

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

Maturities of Long-term Debt –

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

Restrictions – At September

30, 2021, there were approximately $ 250.3 million of net assets at the Company’s subsidiaries that were not available for transfer

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.

Sales Commitments – At September

30, 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 93,403,000 gallons as of September 30, 2021 and open fixed-price alcohol sales

contracts totaling $ 242,181,000 as of September 30, 2021.

The Company had open fixed-price sales contracts for essential ingredients

totaling $ 18,448,000 and open indexed-price sales contracts of essential ingredients for 5,044,000 tons as of September 30, 2021.

sales contracts are scheduled for completion over the next twelve months.

Purchase Commitments – At

September 30, 2021, the Company had indexed-price purchase contracts to purchase 33,233,000 gallons of alcohol and fixed-price

purchase contracts to purchase $ 54,988,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts to purchase

$ 29,916,000 of corn from its suppliers as of September 30, 2021.

The Company had fixed-price purchase contracts for natural gas

totaling $ 4,464,000 .

The Company also had future commitments for certain capital projects totalling $ 19,100,000 .

These purchase

commitments are scheduled to be satisfied through mid-2022.

Litigation – 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.

PENSION AND RETIREMENT BENEFIT PLANS.

The 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 Aventine Renewable Energy Holdings,

on July 1, 2015.

Retirement Plan is noncontributory, and covers only “grandfathered” 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, 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.

the three months ended June 30, 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 June 30,

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.

For the six months ended June 30, 2021, the Retirement Plan’s net

periodic expense was $ 44,000 , comprised of $ 302,000 in interest cost and $ 218,000 in service cost, partially offset by $ 476,000 of expected

return on plan assets.

For the six months ended June 30, 2020, the Retirement Plan’s net periodic expense was $ 96,000 , comprised

of $ 346,000 in interest cost and $ 202,000 in service cost, partially offset by $ 452,000 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 declines 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.

the three months ended June 30, 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 June 30, 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.

the six months ended June 30, 2021, the Postretirement Plan’s net periodic expense was $ 84,000 , comprised of $ 20,000 of interest

cost, $ 52,000 of service cost and $ 12,000 of amortization expense.

For the six months ended June 30, 2020, the Postretirement Plan’s

net periodic expense was $ 118,000 , comprised of $ 76,000 of interest cost, $ 28,000 of service cost and $ 14,000 of amortization expense.

VALUE MEASUREMENTS.

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

1 – Observable inputs – unadjusted quoted prices in active markets for identical

assets and liabilities;

2 – Observable inputs other than quoted prices included in Level 1 that are observable

for the asset or liability through corroboration with market data;

3 – 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

separate accounts – 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.

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 June 30, 2021 and December 31, 2020 of $ 20,535,000 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.

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 June 30, 2021 (in thousands):

The Retirement Plan is noncontributory,

and covers only “grandfathered” 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.

The 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, 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 September

30, 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 September 30, 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.

For the nine months ended September

30, 2021, the Retirement Plan’s net periodic expense was $ 66,000 , comprised of $ 453,000 in interest cost and $ 327,000 in service

cost, partially offset by $ 714,000 of expected return on plan assets.

For the nine months ended September 30, 2020, the Retirement Plan’s

net periodic expense was $ 144,000 , comprised of $ 519,000 in interest cost and $ 303,000 in service cost, partially offset by $ 678,000 of

expected return on plan assets.

The 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 declines 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 September

30, 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 September 30, 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.

For the nine months ended September

30, 2021, the Postretirement Plan’s net periodic expense was $ 126,000 , comprised of $ 30,000 of interest cost, $ 78,000 of service

cost and $ 18,000 of amortization expense.

For the nine months ended September 30, 2020, the Postretirement Plan’s net periodic expense

was $ 177,000 , comprised of $ 114,000 of interest cost, $ 42,000 of service cost and $ 21,000 of amortization expense.

FAIR VALUE MEASUREMENTS.

The fair value hierarchy prioritizes the inputs

used in valuation techniques into three levels, as follows:

● Level 1 – Observable inputs – unadjusted quoted

prices in active markets for identical assets and liabilities;

● Level 2 – Observable inputs other than quoted prices

included in Level 1 that are observable for the asset or liability through corroboration with market data;

● Level 3 – 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.

Pooled separate accounts –

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.

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.

Long-Lived Assets Held-for-Sale

– The Company recorded its long-lived assets associated with its property and equipment held-for-sale at fair value at September

30, 2021 and December 31, 2020 of $ 20,535,000 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.

Other Derivative Instruments –

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

The fair values of the commodity positions are based

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

The following table summarizes recurring and nonrecurring

fair value measurements by level at September 30, 2021 (in thousands):

Derivative financial instruments

1 unchanged sentence

Derivative financial instruments

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

The 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):

Defined benefit plan assets(1)

(pooled separate accounts):

Small/Mid U.S.

1 unchanged sentence

Fixed Income(5)

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.

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

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 foreign companies

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 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,

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.

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

Three Months Ended June 30, 2021

Net income attributed to Alto Ingredients, Inc.

(1) Included in other assets in the consolidated balance sheets.

(2) This category includes investments in funds comprised of equity securities of large U.S.

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

(3) This category includes investments in funds comprised of equity securities of small- and medium-sized

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.

(4) This category includes investments in funds comprised of equity securities of foreign companies 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 fund.

(5) This 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, U.S.

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.

EARNINGS PER SHARE.

The following tables compute basic and diluted

earnings per share (in thousands, except per share data):

Three Months Ended September 30, 2021

Loss Numerator

Shares Denominator

Per-Share Amount

Net loss attributed to Alto Ingredients, Inc.

Preferred stock dividends

Basic income per share:

Income available to common stockholders

Dilutive instruments

Diluted income per share:

Income available to common stockholders

Three Months Ended June 30, 2020

Net income attributed to Alto Ingredients, Inc.

Basic and Diluted loss per share:

Loss available to common stockholders

Months Ended September 30, 2020

income attributed to Alto Ingredients, Inc.

Preferred stock dividends

Basic and diluted income per share:

Income available to common stockholders

Six Months Ended June 30, 2021

income per share:

available to common stockholders

Dilutive securities

income per share:

available to common stockholders

Nine Months Ended September 30, 2021

Net income attributed to Alto Ingredients, Inc.

2 unchanged sentences

Income available to common stockholders

Dilutive instruments

Dilutive securities

Diluted income per share:

Income available to common stockholders

Six Months Ended June 30, 2020

Net loss attributed to Alto Ingredients, Inc.

Months Ended September 30, 2020

income attributed to Alto Ingredients, Inc.

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

income per share:

available to common stockholders

Dilutive securities

income per share:

available to common stockholders

were an additional aggregate potentially dilutive weighted-average shares of 964,000 from convertible securities outstanding for the

three and six months ended June 30, 2021 and 2020.

These securities were not considered in calculating diluted net income (loss) per

share for the three and six months ended June 30, 2021 and 2020, as their effect would have been anti-dilutive.

COMPANY FINANCIALS.

Net Assets – At June 30, 2021, the Company had approximately $ 245.7 million of net

assets at its subsidiaries that were not available for transfer to Alto Ingredients in the form of dividends, distributions, loans or

advances due to restrictions contained in the credit facilities of these subsidiaries.

three and nine months ended September 30, 2021 and 2020.

These securities were not considered in calculating diluted net income per share

for the three and nine months ended September 30, 2021 and 2020, as their effect would have been anti-dilutive.

PARENT COMPANY FINANCIALS.

Net Assets – At September 30, 2021, the Company had approximately $ 250.3 million of net assets at its subsidiaries that

were not available for transfer 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:

27 unchanged sentences

Total Liabilities and Stockholders’ Equity

Three Months Ended

September 30,

Nine Months Ended

September 30,

Management fees from subsidiaries

Selling, general and administrative expenses

Income (loss) from operations

Loss from operations

Income from loan forgiveness

Interest income (expense), net

Fair value adjustments

Interest expense, net

Other income (expense)

Loss before benefit for income taxes

Income (loss) before benefit for income taxes

Benefit for income taxes

Income (loss) before benefit for income taxes

Equity in income (losses) of subsidiaries

Net income (loss) attributed to Alto Ingredients, Inc.

the Six Months Ended

Operating Activities:

Net income (loss)

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

For the Nine Months Ended

September 30,

Operating Activities:

Adjustments to reconcile net income to cash used in operating activities:

Equity in (income) losses of subsidiaries

Income from loan forgiveness

Fair value adjustments

Amortization of debt (premiums) discounts

Amortization of debt discounts

Changes in operating assets and liabilities:

9 unchanged sentences

Proceeds from plant receivables

Proceeds from warrant exercises

Proceeds from long-term debt

1 unchanged sentence

Dividend from subsidiary

Net cash provided by (used in) financing activities

Preferred stock dividend payments

Net cash (used in) provided by financing activities

Net change in cash and cash equivalents

2 unchanged sentences

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