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Item 1. Business

2022-03-15 compared with 2021-03-26 · 463 added, 471 removed, 95 unchanged (91% of the section changed)

Business Overview

We are a leading producer and marketer

of specialty alcohols and essential ingredients, and the largest producer of specialty alcohols in the United States based on

annualized volumes.

We operate seven alcohol production facilities.

Three of our production facilities are located in the Midwestern state of Illinois and four of our facilities are located in the

Western states of California, Oregon and Idaho.

We are a leading producer and marketer of specialty

alcohols and essential ingredients, and the largest producer of specialty alcohols in the United States.

We operate five alcohol production facilities.

Three of our production facilities are located in the Midwestern state of Illinois and two of our facilities are located in the Western

states of Oregon and Idaho.

We have an annual alcohol production capacity of 350 million gallons.

all of the alcohols produced at our facilities as well as fuel-grade ethanol produced by third parties.

In 2020, we marketed over

500 million gallons combined of our own alcohols as well as fuel-grade ethanol produced by third parties, and nearly 1.5 million

tons of essential ingredients on a dry matter basis.

Our business consists of three reportable segments:

two production segments

and a marketing segment.

Our mission is to expand our business as

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

We intend to accomplish this goal in part by

investing in our specialized and higher value specialty alcohol production and distribution infrastructure, expanding production

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

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

We market all of the alcohols produced

at our facilities as well as fuel-grade ethanol produced by third parties.

In 2021, we marketed approximately 480 million gallons combined

of our own alcohols as well as fuel-grade ethanol produced by third parties, and over 1.2 million tons of essential ingredients on a

dry matter basis.

Through our recent acquisition of Eagle Alcohol Company LLC, or Eagle Alcohol, we now specialize in break bulk distribution

of specialty alcohols.

We report our financial and operating performance in three segments:

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

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

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

and sale of renewable fuel and essential ingredients produced at all of our other production facilities on an aggregated basis, none of

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

Our mission is to expand our business as a leading

producer and marketer of specialty alcohols and essential ingredients.

We intend to accomplish this goal in part by investing in our

specialized and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential

ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and

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

Production Segments

We produce specialty alcohols, fuel-grade

ethanol and essential ingredients, focusing on four key markets:

We produce specialty alcohols, renewable fuel and essential ingredients,

focusing on four key markets:

Health, Home & Beauty ;

1 unchanged sentence

Essential Ingredients ;

and Renewable Fuels .

Products for the Health, Home & Beauty market include specialty

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

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

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

and Renewable

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.

Our Renewable Fuels products include fuel-grade ethanol and distillers

corn oil used as a feedstock for renewable diesel fuel.

We produce our alcohols and essential ingredients

at our production facilities described below.

Our production facilities located in the Midwest are in the heart of the Corn Belt,

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

and international markets via truck, rail or barge.

Our production facilities located on the West Coast are near their respective

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

We are currently operating at approximately

64% of our estimated maximum annual production capacity.

Our Magic Valley, Stockton and Madera facilities are currently idled.

As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume operations

at any idled facility.

Our production facilities located in the Midwest are in the heart of the Corn Belt, benefit

from low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic and international

markets via truck, rail or barge.

Our production facilities located on the West Coast are near their respective fuel and feed customers,

offering significant timing, transportation cost and logistical advantages.

We restarted our Magic Valley facility in November 2021 and we are

now operating all of our production facilities.

As market conditions change, we may increase, decrease or idle production at one or more

operating facilities or resume operations at any idled facility.

Annual Production Capacity

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Specialty Alcohol

Marketing Segment

We market all of the alcohols and essential

ingredients we produce at our facilities.

Marketing and Distribution Segment

We market all of the alcohols and essential ingredients

we produce at our facilities.

We also market fuel-grade ethanol produced by third parties.

We have extensive and long-standing customer

relationships, both domestic and international, for our specialty alcohols and essential ingredients.

These customers include

producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products

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

Our fuel-grade ethanol customers are located

throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade

ethanol into gasoline.

Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics

and timing of delivery with very little effort on their part.

Our customers collectively require fuel-grade ethanol volumes in

excess of the supplies we produce at our facilities.

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

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

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

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

We market our essential ingredient feed

products to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products

for livestock as a substitute for corn and other sources of starch and protein.

We sell our corn oil to poultry and biodiesel

We do not market essential ingredients from other producers.

See “Note 4 –

Segments”

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

Beginning in January 2022, we now break bulk

and distribute specialty alcohols from our own production as well as from third-party producers.

We have extensive and long-standing customer relationships,

both domestic and international, for our specialty alcohols and essential ingredients.

These customers include producers and distributors

of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of

personal health/consumer health and personal care hygiene products, and global trading firms.

Our renewable fuel customers are located throughout the Western and

Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade ethanol into gasoline.

customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics and timing of delivery with very little

effort on their part.

Our customers collectively require fuel-grade ethanol volumes in excess of the supplies we produce at our facilities.

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

We arrange for transportation, storage

and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western

United States as well as in the Midwest from a variety of sources.

We market our essential ingredient feed products

to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock as

a substitute for corn and other sources of starch and protein.

We sell our corn oil to poultry and biodiesel customers.

We do not market

essential ingredients from other producers.

See “Note 4 – Segments” to our

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

Company History

We are a Delaware corporation formed in

February 2005.

Our common stock trades on The Nasdaq Capital Market under the symbol “ALTO”.

Our Internet website

address is http://www.altoingredients.com .

Information contained on our website is not part of this Annual Report on Form

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such

reports filed with or furnished to the Securities and Exchange Commission and other Securities and Exchange Commission filings

are available free of charge through our website as soon as reasonably practicable after the reports are electronically filed

with, or furnished to, the Securities and Exchange Commission.

We are a Delaware corporation formed in February

Our common stock trades on The Nasdaq Capital Market under the symbol “ALTO”.

Our Internet website address is http://www.altoingredients.com.

Information contained on our website is not part of this Annual Report on Form 10-K.

Our Annual Reports on Form 10-K, Quarterly Reports

on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed with or furnished to the Securities and Exchange Commission

and other Securities and Exchange Commission filings are available free of charge through our website as soon as reasonably practicable

after the reports are electronically filed with, or furnished to, the Securities and Exchange Commission.

Business Strategy

Our goal is to expand our business as a

leading producer and marketer of specialty alcohols and essential ingredients.

The key elements of our business and growth strategy

to achieve this objective include:

● Focus on our customer relationships.

We have repositioned

our business to focus on specialty alcohols and essential ingredients.

As a result, our

business is service-oriented and focused on specialty products compared to a price-oriented

business focused on commodity products.

We strive to make our business ever more customer-centric

to enable our premium services to support premium prices and new differentiated and higher-margin

● Expand product offerings.

We are pursuing initiatives

to broaden our product offerings to appeal to a wider range of customers and uses in

our key markets.

For example, we have secured ISO 9001, ICH Q7 and EXCiPACT certifications.

These certifications appeal to customers with stringent quality demands and enable us

to offer alcohol certified for use as an active pharmaceutical ingredient, or API, and

as an excipient—an inactive component of a drug or medication, such as solvents,

carriers or tinctures—in the pharmaceutical industry.

We are reviewing additional

certifications and product positioning within our key markets to expand the range of

customers we serve and the uses our products support.

Our goal is to expand our business as a leading

producer and marketer of specialty alcohols and essential ingredients.

The key elements of our business and growth strategy to achieve

this objective include:

● Focus on our customer

relationships.

We have repositioned our business to focus on specialty alcohols and essential

As a result, our business is service-oriented and focused on specialty products

compared to a price-oriented business focused on commodity products.

We strive to make our

business ever more customer-centric to enable our premium services to support premium prices

and new differentiated and higher-margin products.

our break bulk capabilities.

Through our acquisition of Eagle Alcohol, we plan

to further diversify our business to focus on break bulk distribution of specialty alcohols.

With the specialty alcohols we produce and purchase from other suppliers, we now can store,

denature, package and resell alcohol in smaller sizes, including tank trucks, totes and drums,

that garner a premium price to bulk specialty alcohols.

We deliver to customers in the beverage,

food, pharmaceutical and related-process industries using our own trucking fleet and common

product offerings.

We are pursuing initiatives to broaden our product offerings to appeal

to a wider range of customers and uses in our key markets.

For example, we have secured ISO

9001, ICH Q7 and EXCiPACT certifications at all of our Pekin Campus production facilities.

These certifications appeal to customers with stringent

quality demands and enable us to offer alcohol certified for use as an active pharmaceutical

ingredient, or API, and as an excipient—an inactive component of a drug or medication,

such as solvents, carriers or tinctures—in the pharmaceutical industry.

We are reviewing

additional certifications and product positioning within our key markets to expand the range

of customers we serve and the uses our products support.

● Implement new equipment and technologies.

evaluating and plan to implement new equipment and technologies to increase our production

yields, improve our operating efficiencies and reliability, reduce our overall carbon

footprint, diversify our products and revenues, and increase our profitability as financial

resources and market conditions justify these investments.

● Sell or repurpose underperforming production assets.

We are pursuing the sale of our production facilities located in Stockton and Madera,

We are also evaluating the sale or repurposing of other underperforming fuel-grade

ethanol production assets.

We have idled certain underperforming production facilities

and intend to restart production at those facilities only when economic prospects indicate

a level of production margins sufficient to justify resuming production.

We may repurpose

one or more underperforming production facilities to shift production to specialty alcohols

if market demand justifies the expense.

We are also exploring other potential repositioning

activities, including an expansion into new markets such as essential oils and CBD oils,

high protein development and protein pelletizing.

● Evaluate and pursue strategic opportunities .

are examining opportunities to expand our business such as joint ventures, strategic

partnerships, synergistic acquisitions and other opportunities.

We intend to pursue these

opportunities as financial resources and business prospects make these opportunities

We are evaluating and plan to implement new equipment and technologies to increase

our production yields, improve our operating efficiencies and reliability, reduce our overall carbon footprint, diversify our products

and revenues, and increase our profitability as financial resources and market conditions justify these investments.

and pursue strategic opportunities .

We are examining opportunities to expand our business

such as joint ventures, strategic partnerships, synergistic acquisitions and other opportunities.

We intend to pursue these opportunities as financial resources and business prospects make

these opportunities desirable.

Competitive Strengths

We are the largest producer of specialty

alcohols in the United States based on annualized volumes.

We are the largest producer of specialty alcohols

in the United States.

We believe that our competitive strengths include:

● Our customer and supplier

relationships .

We have extensive and long-standing close customer and supplier

relationships, both domestic and international, for our specialty alcohols and essential

We have an excellent reputation for developing specialty alcohols under

stringent quality control standards, particularly at our Pekin, Illinois campus, or Pekin

Our quality management systems are supported by ISO 9001, ICH Q7 and EXCiPACT

certifications which are viewed by our customers as important attestations of our quality

control standards.

● Barriers to entry .

Our production facilities use

specialized equipment, technologies and processes to achieve stringent quality controls,

lower operating costs, higher yields, and efficient production of alcohols and essential

Our specialized equipment, technologies and processes, together with our

quality management certifications, strict regulatory requirements, and close customer

and supplier relationships create significant barriers to entry to new market participants.

● Our experienced management .

Our senior management

team has a proven track record with significant operational and financial expertise and

many years of experience in the alcohol production industry.

Our senior executives have

successfully navigated a wide variety of business and industry-specific challenges and

deeply understand the business of successfully producing and marketing specialty alcohols

and essential ingredients.

● The strategic location of our Midwest production facilities .

We operate three distinct but integrated production facilities at our Pekin Campus in

We are able to participate from that location in the largest regional specialty

alcohol market in the United States as well as international markets.

● Our Midwest location enhances our overall hedging opportunities

with a greater correlation to the highly-liquid physical and paper markets in Chicago.

● Our Midwest location provides excellent logistical access

via rail, truck and barge.

In particular, barge access via the Illinois River to the

Mississippi River enables us to efficiently bring our products to international markets.

● The relatively unique wet milling process at one of our production facilities at our Pekin Campus allows us to extract

the highest use and value from each component of the corn kernel.

As a result, the wet milling process generates a higher

level of cost recovery from corn than that produced at a dry mill.

● Our Midwest location allows us deep market insight and engagement

in major fuel-grade ethanol and feed markets, thereby improving pricing opportunities.

We believe that these competitive strengths

will help us attain our goal of expanding our business as a leading producer and marketer of specialty alcohols and essential

customer and supplier relationships .

We have extensive and long-standing close customer

and supplier relationships, both domestic and international, for our specialty alcohols and

essential ingredients.

We have an excellent reputation for developing specialty alcohols

under stringent quality control standards, particularly at our Pekin Campus.

management systems are supported by ISO 9001, ICH Q7 and EXCiPACT certifications which are

viewed by our customers as important attestations of our quality control standards.

Our production facilities use specialized equipment, technologies and processes

to achieve stringent quality controls, higher yields and efficient

production of alcohols and essential ingredients.

Our specialized equipment, technologies

and processes, together with our quality management certifications, strict regulatory requirements,

and close customer and supplier relationships create significant barriers to entry to new

market participants.

experienced management .

Our senior management team has a proven track record with significant

operational and financial expertise and many years of experience in the alcohol production

Our senior executives have successfully navigated a wide variety of business and

industry-specific challenges and deeply understand the business of successfully producing

and marketing specialty alcohols and essential ingredients.

strategic location of our Midwest production facilities .

We operate three distinct but

integrated production facilities at our Pekin Campus in the Midwest.

We are able to participate

from that location in the largest regional specialty alcohol market in the United States

as well as international markets.

Midwest location enhances our overall hedging opportunities with a greater correlation to

the highly-liquid physical and paper markets in Chicago.

Midwest location provides excellent logistical access via rail, truck and barge.

In particular,

barge access via the Illinois River to the Mississippi River enables us to efficiently bring

our products to international markets.

relatively unique wet milling process at one of our production facilities at our Pekin Campus

allows us to extract the highest use and value from each component of the corn kernel.

a result, the wet milling process generates a higher level of cost recovery from corn than

that produced at a dry mill.

Midwest location allows us deep market insight and engagement in major fuel-grade ethanol

and feed markets, thereby improving pricing opportunities.

We believe that these competitive strengths will

help us attain our goal of expanding our business as a leading producer and marketer of specialty alcohols and essential ingredients.

Overview of Our Key Markets and Market Opportunity

We produce specialty alcohols, fuel-grade

ethanol and essential ingredients, focusing on four key markets:

We produce specialty alcohols, fuel-grade ethanol

and essential ingredients, focusing on four key markets:

Health, Home & Beauty ;

3 unchanged sentences

Health, Home & Beauty

Our products for the health, home and beauty markets include

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

Our products for the health, home and beauty markets

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

We offer a variety

of specialty alcohols for the health, home and beauty markets, depending on usage and regulatory requirements, including API-grade,

United States Pharmacopeia, or USP, -grade ethyl alcohols, and industrial-grade ethyl alcohol.

In 2020 we expanded our range of available

product offerings within the health, home and beauty markets through quality management systems certifications.

We have ISO 9001,

ICH Q7 and EXCiPACT certifications at a key production facility at our Pekin Campus, all of which are viewed as important attestations

of quality control standards.

In particular, our ICH Q7 certification qualifies our specialty alcohols for use as an API, and our EXCiPACT certification qualifies our specialty alcohols for use as an excipient in the pharmaceutical industry.

These certifications enable us to offer products to a wider group of customers and generally at more profitable margins.

of specialty alcohols for the health, home and beauty markets, depending on usage and regulatory requirements, including API-grade, United

States Pharmacopeia, or USP, -grade ethyl alcohols, and industrial-grade ethyl alcohol.

In 2020, we expanded our range of available product

offerings within the health, home and beauty markets through quality management systems certifications.

We have ISO 9001, ICH Q7 and EXCiPACT certifications at each of our

Pekin Campus production facilities, all of which are viewed as important attestations of quality control standards.

In particular, our ICH Q7 certification qualifies our specialty alcohols for use as an API, and our EXCiPACT certification

qualifies our specialty alcohols for use as an excipient in the pharmaceutical industry.

These certifications enable us to offer products

to a wider group of customers and generally at more profitable margins.

Food & Beverage

Our products for the food and beverage

market include specialty alcohols used in alcoholic beverages, flavor extracts and vinegar as well as corn germ used for corn

oils and carbon dioxide, or CO 2 , used for beverage carbonation and dry ice.

The principal specialty alcohol we offer

for alcoholic beverages and vinegar is our grain neutral spirits, or GNS, alcohol.

We believe the key drivers in the food

and beverage market include consumer preferences for the social currency of brand authenticity and heritage;

consumers seeking

unique and personalized experiences;

younger adults drawn to the caché

of luxury brands, including super-premium spirits;

improved consumer access to spirits products;

Our products for the food and beverage market

include specialty alcohols used in alcoholic beverages, flavor extracts and vinegar as well as corn germ used for corn oils and carbon

dioxide, or CO 2 , used for beverage carbonation and dry ice.

The principal specialty alcohol we offer for alcoholic beverages

and vinegar is our grain neutral spirits, or GNS, alcohol.

We believe the key drivers in the food and beverage

market include consumer preferences for the social currency of brand authenticity and heritage;

consumers seeking unique and personalized

younger adults drawn to the caché of luxury brands, including super-premium spirits;

improved consumer access to

spirits products;

the growth of craft distillers;

and the ability to meet wide-ranging consumer preferences

through a broad diversity of spirits categories and cocktails.

and the ability to meet wide-ranging consumer preferences through a broad diversity

of spirits categories and cocktails.

Essential Ingredients

Our essential ingredients products include

dried yeast, corn gluten meal, corn gluten feed, and distillers grains and liquid feed used in commercial animal feed and pet

The raw materials for our essential ingredients products are generated as co-products from our production of alcohols.

These co-products are further manufactured, altered and refined into our essential ingredients products, including for special

customer applications.

Many of our essential ingredients are used

in a variety of food products to affect their nutrition, including protein and fat content, as well as other product attributes

such as taste, texture, palatability and stability.

Our high quality and high purity manufacturing enable our customers to use

some of our essential ingredients in human foods while others are used in pet foods and animal feed.

See “—Overview

of Distillers Grains Market”.

We expect the essential ingredients market

to grow significantly due to global demand for higher-grade protein feed, such as feed used in fisheries and other applications.

Our essential ingredients products include dried

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

materials for our essential ingredients products are generated as co-products from our production of alcohols.

These co-products are

further manufactured, altered and refined into our essential ingredients products, including for special customer applications.

Many of our essential ingredients are used in

a variety of food products to affect their nutrition, including protein and fat content, as well as other product attributes such as

taste, texture, palatability and stability.

Our high quality and high purity manufacturing enable our customers to use some of our essential

ingredients in human foods while others are used in pet foods and animal feed.

See “—Overview of Distillers Grains Market”.

We expect the essential ingredients market to

grow significantly due to global demand for higher-grade protein feed, such as feed used in fisheries and other applications.

Renewable Fuels

4 unchanged sentences

Renewable fuels, primarily fuel-grade ethanol,

are used for a variety of purposes, including as octane enhancers for premium gasoline and to enable refiners to produce greater

quantities of lower octane blend stock;

for fuel blending to extend fuel supplies and reduce reliance on crude oil and refined

and to comply with a variety of governmental programs, in particular, the national Renewable Fuel Standard, or RFS,

which was enacted to promote alternatives to fossil fuels.

Under the RFS, the mandated use of all renewable fuels rises incrementally

and peaks at 36.0 billion gallons by 2022, of which 15.0 billion gallons are required from conventional, or corn-based, ethanol.

The RFS allows the Environmental Protection Agency, or EPA, to adjust the annual requirement based on certain facts and circumstances.

See “—Governmental Regulation”.

According to the Renewable Fuels Association,

the domestic fuel-grade ethanol industry produced 13.8 billion gallons of ethanol in 2020.

According to the United States Department

of Energy, total annual gasoline consumption in the United States is approximately 123.5 billion gallons and total annual fuel-grade

are used for a variety of purposes, including as octane enhancers for premium gasoline and to enable refiners to produce greater quantities

of lower octane blend stock;

for fuel blending to extend fuel supplies and reduce reliance on crude oil and refined products;

comply with a variety of governmental programs, in particular, the national Renewable Fuel Standard, or RFS, which was enacted to promote

alternatives to fossil fuels.

Under the RFS, the mandated use of all renewable fuels rises incrementally and peaks at 36.0 billion gallons

by 2022, of which 15.0 billion gallons are required from conventional, or corn-based, ethanol.

The RFS allows the Environmental Protection

Agency, or EPA, to adjust the annual requirement based on certain facts and circumstances.

See “—Governmental Regulation”.

According to the Renewable Fuels Association, the domestic fuel-grade

ethanol industry produced 15.0 billion gallons of ethanol in 2021, up from 13.8 billion gallons in 2020.

According to the United States

Department of Energy, total annual gasoline consumption in the United States is approximately 123.5 billion gallons and total annual fuel-grade

ethanol consumption represented approximately 11% of this amount in 2020.

We anticipate that increased transportation and economic

activity as the coronavirus pandemic subsides together with continued limited opportunities for gasoline refinery expansions and

the growing importance of reducing CO 2 emissions through the use of renewable fuels will generate additional growth

in the demand for fuel-grade ethanol.

We anticipate that increased transportation and economic activity

as the coronavirus pandemic subsides together with continued limited opportunities for gasoline refinery expansions and the growing importance

of reducing CO 2 emissions through the use of renewable fuels will generate additional growth in the demand for fuel-grade ethanol.

Overview of Alcohol Production Process

1 unchanged sentence

feedstock is a highly-efficient process.

Modern alcohol production requires large amounts of corn, or other high-starch grains,

and water as well as chemicals, enzymes and yeast, and denaturants including unleaded gasoline or liquid natural gas, in addition

to natural gas and electricity.

Modern alcohol production requires large amounts of corn, or other high-starch grains, and water

as well as chemicals, enzymes and yeast, and denaturants including unleaded gasoline or liquid natural gas, in addition to natural gas

and electricity.

Dry Milling Process

In the dry milling process, corn or other

high-starch grain is first ground into meal, then slurried with water to form a mash.

Enzymes are added to the mash to convert

the starch into dextrose, a simple sugar.

In the dry milling process, corn or other high-starch

grain is first ground into meal, then slurried with water to form a mash.

Enzymes are added to the mash to convert the starch into dextrose,

a simple sugar.

Ammonia is added for acidic (pH) control and as a nutrient for the yeast.

processed through a high temperature cooking procedure, which reduces bacteria levels prior to fermentation.

The mash is then

cooled and transferred to fermenters, where yeast is added and the conversion of sugar to alcohol and CO 2 begins.

After fermentation, the resulting “beer”

is transferred to distillation, where the alcohol is separated from the residual “stillage”.

The resulting alcohol

is concentrated to 190 proof using conventional distillation methods and then is dehydrated to approximately 200 proof, representing

100% alcohol levels, in a molecular sieve system.

For fuel-grade ethanol, the resulting anhydrous alcohol is then blended with

approximately 2.5% denaturant, which is usually gasoline, and is then ready for shipment to renewable fuels markets.

The residual stillage is separated into

a coarse grain portion and a liquid portion through a centrifugation process.

The soluble liquid portion is concentrated to about

40% dissolved solids by an evaporation process.

The mash is processed through a high temperature

cooking procedure, which reduces bacteria levels prior to fermentation.

The mash is then cooled and transferred to fermenters, where

yeast is added and the conversion of sugar to alcohol and CO 2 begins.

After fermentation, the resulting “beer”

is transferred to distillation, where the alcohol is separated from the residual “stillage”.

The resulting alcohol is concentrated

to 190 proof using conventional distillation methods and then is dehydrated to approximately 200 proof, representing 100% alcohol levels,

in a molecular sieve system.

For fuel-grade ethanol, the resulting anhydrous alcohol is then blended with approximately 2.5% denaturant,

which is usually gasoline, and is then ready for shipment to renewable fuels markets.

The residual stillage is separated into a coarse

grain portion and a liquid portion through a centrifugation process.

The soluble liquid portion is concentrated to about 40% dissolved

solids by an evaporation process.

This intermediate state is called condensed distillers solubles, or syrup.

coarse grain and syrup portions are then mixed to produce wet distillers grains, or WDG, or can be mixed and dried to produce

dried distillers grains with solubles, or DDGS.

The coarse grain and syrup

portions are then mixed to produce wet distillers grains, or WDG, or can be mixed and dried to produce dried distillers grains with solubles,

Both WDG and DDGS are high-protein animal feed products.

Wet Milling Process

In the wet milling process, corn or other

high-starch grain is first soaked or “steeped”

in water for 24 –

48 hours to separate the grain into its many

After steeping, the grain slurry is processed first to separate the grain germ, from which the grain oil can be further

The remaining fiber, gluten and starch components are further separated and sold.

The steeping liquor is concentrated in

an evaporator.

The concentrated product, called heavy steep water, is co-dried with the fiber component and is then sold as gluten

The gluten component is filtered and dried to produce gluten meal.

The starch and any remaining water from

the mash is then processed into alcohol or dried and processed into corn syrup.

The fermentation process for alcohol at this stage

is similar to the dry milling process.

In the wet milling process, corn or other high-starch

grain is first soaked or “steeped” in water for 24 – 48 hours to separate the grain into its many components.

steeping, the grain slurry is processed first to separate the grain germ, from which the grain oil can be further separated.

The remaining

fiber, gluten and starch components are further separated and sold.

The steeping liquor is concentrated in an evaporator.

The concentrated product, called heavy steep water, is co-dried with the fiber component and is then sold as gluten feed.

component is filtered and dried to produce gluten meal.

The starch and any remaining water from the mash

is then processed into alcohol or dried and processed into corn syrup.

The fermentation process for alcohol at this stage is similar

to the dry milling process.

Overview of Distillers Grains Market

Distillers grains are produced as a co-product

of alcohol production and are valuable components of feed rations primarily to dairies and beef cattle markets, both nationally

and internationally.

of alcohol production and are valuable components of feed rations primarily to dairies and beef cattle markets, both nationally and internationally.

Our plants produce both WDG and DDGS.

WDG is sold to customers proximate to the plants and DDGS is delivered

by truck, rail and barge to customers in domestic and international markets.

Producing WDG also allows us to use up to one-third

less process energy, thus reducing production costs and lowering the carbon footprint of our production facilities.

WDG is sold to customers proximate to the plants and DDGS is delivered by truck, rail and barge

to customers in domestic and international markets.

Producing WDG also allows us to use up to one-third less process energy, thus reducing

production costs and lowering the carbon footprint of our production facilities.

Historically, the market price for distillers

grains has generally tracked the value of corn.

We believe that the market price of WDG and DDGS is determined by a number of

factors, including the market value of corn, soybean meal and other competitive ingredients, the performance or value of WDG and

DDGS in a particular feed formulation and general market forces of supply and demand, including export markets for these co-products.

The market price of distillers grains is also often influenced by nutritional models that calculate the feed value of distillers

grains by nutritional content, as well as reliability of consistent supply.

We market and sell through our wholly-owned

subsidiary, Kinergy Marketing LLC, or Kinergy, all of the alcohols we produce.

Kinergy also markets fuel-grade ethanol produced

by third parties.

We market and sell through our wholly-owned subsidiary, Alto Nutrients, LLC, all of the essential ingredients

We have extensive and long-standing customer

relationships, both domestic and international, for our specialty alcohols and essential ingredients.

These customers include

producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products

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

Our fuel-grade ethanol customers are located

throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade

ethanol into gasoline.

Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the logistics

and timing of delivery with very little effort on their part.

Our customers collectively require fuel-grade ethanol volumes in

excess of the supplies we produce at our facilities.

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

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

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

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

We market our essential ingredient feed

products to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products

for livestock as a substitute for corn and other sources of starch and protein.

We sell our corn oil to poultry and biodiesel

We do not market essential ingredients from other producers.

We believe that the market price of WDG and DDGS is determined by a number of factors,

including the market value of corn, soybean meal and other competitive ingredients, the performance or value of WDG and DDGS in a particular

feed formulation and general market forces of supply and demand, including export markets for these co-products.

The market price of

distillers grains is also often influenced by nutritional models that calculate the feed value of distillers grains by nutritional content,

as well as reliability of consistent supply.

We market and sell through our wholly-owned subsidiary, Kinergy Marketing

LLC, or Kinergy, all of the alcohols we produce.

Kinergy also markets fuel-grade ethanol produced by third parties.

We market and sell

through our wholly-owned subsidiary, Alto Nutrients, LLC, all of the essential ingredients we produce.

We also now sell break bulk quantities

through Eagle Alcohol to customers in the beverage, food, pharma and related-process industries.

We have extensive and long-standing customer relationships,

both domestic and international, for our specialty alcohols and essential ingredients.

These customers include producers and distributors

of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of

personal health/consumer health and personal care hygiene products, and global trading firms.

Our renewable fuel customers

are located throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who

blend fuel-grade ethanol into gasoline.

Our customers depend on us to provide a reliable supply of fuel-grade ethanol and manage the

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

Our customers collectively require fuel-grade ethanol

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

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

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

producers are located.

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

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

We market our essential ingredient feed products

to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock as

a substitute for corn and other sources of starch and protein.

We sell our corn oil to poultry and biodiesel customers.

We do not market

essential ingredients from other producers.

Our Pekin Campus production segment generated

$330.4 million and $343.6 million in net sales for the years ended December 31, 2020 and 2019, respectively, from the sale of

Our Pekin Campus production segment generated $130.3 million and $139.0 million in net sales for the years ended December

31, 2020 and 2019, respectively, from the sale of essential ingredients.

During 2020 and 2019, our Pekin Campus

production segment sold an aggregate of approximately 193.9 million and 218.5 million gallons of alcohols and 829,000 and 913,000

$498.2 million, $330.4 million and $343.6 million in net sales for the years ended December 31, 2021, 2020 and 2019, respectively, from

the sale of alcohols.

Our Pekin Campus production segment generated $189.5 million, $130.3 million and $139.0 million in net sales for

the years ended December 31, 2021, 2020 and 2019, respectively, from the sale of essential ingredients.

During 2021, 2020 and 2019, our Pekin Campus production

segment sold an aggregate of approximately 213.0 million, 193.9 million and 218.5 million gallons of alcohols and 875,000, 829,000 and

913,000 tons of essential ingredients, respectively, on a dry matter basis.

Our other production segment generated $107.9

$137.7 million and $455.3 million in net sales for the years ended December 31, 2020 and 2019, respectively, from the sale of

Our other production segment generated $40.9 million and $130.0 million in net sales for the years ended December 31,

2020 and 2019, respectively, from the sale of essential ingredients.

million, $137.7 million and $455.3 million in net sales for the years ended December 31, 2021, 2020 and 2019, respectively, from the

sale of alcohols.

Our other production segment generated $31.1 million, $40.9 million and $130.0 million in net sales for the years ended

December 31, 2021, 2020 and 2019, respectively, from the sale of essential ingredients.

During 2021, 2020 and 2019, our other production

segment sold an aggregate of approximately 78.0 million and 272.5 million gallons of alcohols and 619,000 and 1,908,000 tons of

essential ingredients, respectively, on a dry matter basis.

Our marketing segment generated $257.7

million and $356.9 million in net sales for the years ended December 31, 2020 and 2019, respectively, from the sale of alcohols.

segment sold an aggregate of approximately 37.6 million, 78.0 million and 272.5 million gallons of alcohols and 361,000, 619,000 and

1,908,000 tons of essential ingredients, respectively, on a dry matter basis.

Our marketing segment generated $381.2 million,

$257.7 million and $356.9 million in net sales for the years ended December 31, 2021, 2020 and 2019, respectively, from the sale of all

During 2021, 2020 and 2019, we produced or purchased

from third parties and resold an aggregate of 536.3 million and 819.4 million gallons of alcohols to approximately 65 and 109

customers, respectively.

For 2020 and 2019, sales to our two largest customers, Chevron Products USA and Valero Energy Corporation

represented an aggregate of approximately 14% and 24%, of our net sales, respectively.

For 2020 and 2019, sales to each of our

other customers represented less than 10% of our net sales.

from third parties and resold an aggregate of 479.6 million, 536.3 million and 819.4 million gallons of alcohols to approximately 99,

65 and 109 customers, respectively.

For 2021, 2020 and 2019, sales to our three largest customers, Shell Trading US Company, Chevron

Products USA and Valero Energy Corporation represented an aggregate of approximately 23%, 17% and 33%, of our net sales, respectively.

For 2021, 2020 and 2019, sales to each of our other customers represented less than 10% of our net sales.

Production Segments

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raw materials suppliers, including suppliers of corn, natural gas, electricity and water.

The cost of corn is the most important

variable cost associated with our alcohol production.

We source corn for our plants using standard contracts, including spot purchase,

forward purchase and basis contracts.

When resources are available, we seek to limit the exposure of our production operations

to raw material price fluctuations by purchasing forward a portion of our corn requirements on a fixed price basis and by purchasing

corn and other raw materials futures contracts.

The cost of corn is the most important variable

cost associated with our alcohol production.

We source corn for our plants using standard contracts, including spot purchase, forward

purchase and basis contracts.

When resources are available, we seek to limit the exposure of our production operations to raw material

price fluctuations by purchasing forward a portion of our corn requirements on a fixed price basis and by purchasing corn and other raw

materials futures contracts and options.

During 2021, 2020 and 2019, purchases of corn

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Marketing Segment

Our marketing operations cover alcohols

and essential ingredients we produce but also depend upon various third-party producers of fuel-grade ethanol.

In addition, we

provide transportation, storage and delivery services through third-party service providers with whom we have contracted to receive

fuel-grade ethanol at agreed upon locations from our third-party suppliers and to store and/or deliver the ethanol to agreed-upon

locations on behalf of our customers.

These contracts generally run from year-to-year, subject to termination by either party

upon advance written notice before the end of the then current annual term.

During 2020 and 2019, we purchased and

resold from third parties an aggregate of approximately 163 million and 213 million gallons, respectively, of fuel-grade ethanol.

Our marketing operations cover alcohols and essential

ingredients we produce but also depend upon various third-party producers of fuel-grade ethanol.

In addition, we provide transportation,

storage and delivery services through third-party service providers with whom we have contracted to receive fuel-grade ethanol at agreed

upon locations from our third-party suppliers and to store and/or deliver the ethanol to agreed-upon locations on behalf of our customers.

These contracts generally run from year-to-year, subject to termination by either party upon advance written notice before the end of

the then-current annual term.

During 2021, 2020 and 2019, we purchased and resold

from third parties an aggregate of approximately 204 million, 163 million and 213 million gallons, respectively, of fuel-grade ethanol.

During 2021, 2020 and 2019, purchases of fuel-grade

ethanol from our two largest third-party suppliers represented 54% and 35%, respectively, of our total third-party ethanol purchases

ethanol from our three largest third-party suppliers represented 76%, 62% and 53%, respectively, of our total third-party ethanol purchases

for each of those periods.

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Production Facilities

We operate seven production facilities.

Three of our production facilities are located in the Midwestern state of Illinois and four of our facilities are located in the

Western states of California, Oregon and Idaho.

We operate five production facilities.

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

of Oregon and Idaho.

We have a combined annual alcohol production capacity of 350 million gallons.

Our Magic Valley, Stockton and Madera facilities are currently idled.

As market conditions change, we may increase, decrease or

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

The tables below provide an overview

of our seven production facilities.

As market conditions change, we may

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

The tables below

provide an overview of our five production facilities.

Pekin Campus Production Facilities

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Primary energy source

* Included in approximate maximum annual

alcohol production capacity.

Western Production Facilities

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Primary energy source

* Restarted operations in November 2021.

Commodity Risk Management

We employ various risk mitigation techniques.

For example, we may seek to mitigate our exposure to commodity price fluctuations by purchasing forward a portion of our corn

and natural gas requirements through fixed-price or variable-price contracts with our suppliers, as well as entering into derivative

contracts for fuel-grade ethanol, corn and natural gas.

To mitigate fuel-grade ethanol inventory price risks, we may sell a portion

of our production forward under fixed- or index-price contracts, or both.

We may hedge a portion of the price risks by selling

exchange-traded futures contracts.

Proper execution of these risk mitigation strategies can reduce the volatility of our gross

profit margins.

Specialty alcohols have relatively low

price volatility and are usually priced at significant premiums to fuel-grade ethanol.

The market price of fuel-grade ethanol

is volatile, however, and subject to large fluctuations.

Given the nature of our business, we cannot effectively hedge against

extreme volatility or certain market conditions.

For example, fuel-grade ethanol prices, as reported by the Chicago Board of Trade,

or CBOT, ranged from $0.81 to $1.62 per gallon during 2020 and from $1.25 to $1.70 per gallon during 2019;

and corn prices, as

reported by the CBOT, ranged from $3.03 to $4.84 per bushel during 2020 and from $3.41 to $4.55 per bushel during 2019.

For example, we may seek to mitigate our exposure to commodity price fluctuations by purchasing forward a portion of our corn and natural

gas requirements through fixed-price or variable-price contracts with our suppliers, as well as entering into derivative contracts for

fuel-grade ethanol, corn and natural gas.

To mitigate fuel-grade ethanol inventory price risks, we may sell a portion of our production

forward under fixed- or index-price contracts, or both.

We may hedge a portion of the price risks by entering into exchange-traded futures

contracts and options.

Proper execution of these risk mitigation strategies can reduce the volatility of our gross profit margins.

Specialty alcohols have relatively low price volatility

and are usually priced at significant premiums to fuel-grade ethanol.

The market price of fuel-grade ethanol is volatile, however, and

subject to large fluctuations.

Given the nature of our business, we cannot effectively hedge against extreme volatility or certain market

For example, fuel-grade ethanol prices, as reported by the Chicago Board of Trade, or CBOT, ranged from $1.48 to $3.75 per

gallon during 2021, from $0.81 to $1.62 per gallon during 2020 and from $1.25 to $1.70 per gallon during 2019;

and corn prices, as reported

by the CBOT, ranged from $4.84 to $7.73 per bushel during 2021, from $3.03 to $4.84 per bushel during 2020 and from $3.41 to $4.55 per

bushel during 2019.

Marketing Arrangements

We market all the alcohols and essential

ingredients produced at our facilities.

In addition, we have exclusive fuel-grade ethanol marketing arrangements with two third-party

ethanol producers, Calgren Renewable Fuels, LLC and Aemetis Advanced Fuels Keyes, Inc., to market and sell their entire fuel-grade

ethanol production volumes.

Calgren Renewable Fuels, LLC owns and operates a fuel-grade ethanol production facility in Pixley,

California with annual production capacity of 55 million gallons.

Aemetis Advanced Fuels Keyes, Inc.

owns and operates a fuel-grade

ethanol production facility in Keyes, California with annual production capacity of 60 million gallons.

We are the largest producer of specialty

alcohols in the United States based on annualized volumes.

Other significant producers of specialty

alcohols in the United States are Archer-Daniels-Midland Company, MGP Ingredients, Inc., Grain Processing Corporation, CIE and

Greenfield Global Inc., which collectively make up a significant majority of the total installed specialty alcohol production

capacity in the United States along with many smaller producers.

The largest producers of fuel-grade ethanol

in the United States are POET, LLC, Valero Renewable Fuels Company, LLC, Archer-Daniels-Midland Company, Green Plains Inc.

Flint Hills Resources, collectively with approximately 41% of the total installed fuel-grade ethanol production capacity in the

United States.

In addition, there are many mid-sized fuel-grade ethanol producers with several plants under ownership, smaller

producers with one or two plants, and several fuel-grade ethanol marketers that create significant competition.

Overall, we believe

there are over 200 fuel-grade ethanol production facilities in the United States with a total installed production capacity of

approximately 17.4 billion gallons and many brokers and marketers with whom we compete for sales of fuel-grade ethanol and its

Our fuel-grade ethanol also competes on

a global market against production from other countries, such as Brazil, which may have lower production costs than United States

Lower feedstock input costs such as sugarcane used in Brazil as compared to corn used in the Unites States may give

foreign producers a competitive advantage.

In addition, fuel-grade ethanol from sugarcane feedstock qualifies as an advanced biofuel,

unlike corn ethanol, allowing required parties to economically satisfy an advanced biofuel standard.

Moreover, new products and

production technologies are under continuous development, many of which, if adopted by competitors, could harm ability to compete.

We believe that our competitive strengths include our customer and supplier relationships, the barriers to entry to our most profitable

lines of business—including our modern technologies at our production facilities—our experienced management, and the

strategic location of our Midwest production facilities.

We believe that these advantages will help us to attain our goal to expand

our business as a leading producer and marketer of specialty alcohols and essential ingredients.

See “—Competitive

Strengths”.

We market all the alcohols and essential ingredients

produced at our facilities.

In addition, we have exclusive fuel-grade ethanol marketing arrangements with two third-party ethanol producers,

Calgren Renewable Fuels, LLC and Pelican Renewables, LLC, to market and sell their entire fuel-grade ethanol production volumes.

Renewable Fuels, LLC owns and operates a fuel-grade ethanol production facility in Pixley, California with annual production capacity

of 55 million gallons.

Pelican Renewables, LLC, owns and operates a fuel-grade ethanol production facility in Stockton, California with

annual production capacity of 60 million gallons.

We are the largest producer of specialty alcohols

in the United States.

Other significant producers of specialty alcohols

in the United States are Archer-Daniels-Midland Company, MGP Ingredients, Inc., Grain Processing Corporation, CIE and Greenfield Global

Inc., which collectively make up a significant majority of the total installed specialty alcohol production capacity in the United States

along with many smaller producers.

The largest producers of fuel-grade ethanol in

the United States are POET, LLC, Valero Renewable Fuels Company, LLC, Archer-Daniels-Midland Company and Green Plains Inc., collectively

with approximately 36% of the total installed fuel-grade ethanol production capacity in the United States.

In addition, there are many

mid-sized fuel-grade ethanol producers with several plants under ownership, smaller producers with one or two plants, and several fuel-grade

ethanol marketers that create significant competition.

Overall, we believe there are over 200 fuel-grade ethanol production facilities

in the United States with a total installed production capacity of approximately 17.5 billion gallons and many brokers and marketers

with whom we compete for sales of fuel-grade ethanol and its co-products.

Our fuel-grade ethanol also competes on a global

market against production from other countries, such as Brazil, which may have lower production costs than United States producers.

feedstock input costs such as sugarcane used in Brazil as compared to corn used in the Unites States may give foreign producers a competitive

In addition, fuel-grade ethanol from sugarcane feedstock qualifies as an advanced biofuel, unlike corn ethanol, allowing required

parties to economically satisfy an advanced biofuel standard.

Moreover, new products and production technologies are under continuous

development, many of which, if adopted by competitors, could harm our ability to compete.

We believe that our competitive strengths include

our customer and supplier relationships, the barriers to entry to our most profitable lines of business—including our modern technologies

at our production facilities—our experienced management, and the strategic location of our Midwest production facilities.

that these advantages will help us to attain our goal to expand our business as a leading producer and marketer of specialty alcohols

and essential ingredients.

See “—Competitive Strengths”.

Governmental Regulation

Our business is subject to a wide range

of federal, state and local laws and regulations directed at protecting public health and the environment, including those promulgated

Our business is subject to a wide range of

federal, state and local laws and regulations directed at protecting public health and the environment, including those promulgated

by the Occupational Safety and Health Administration, or OSHA, the U.S.

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state and local authorities.

These laws, their underlying regulatory requirements and their potential enforcement, some of which

are described below, impact, or may impact, nearly every aspect of our operations, including our production of alcohols (including

distillation), our production of essential ingredients, our storage facilities, and our water usage, waste water discharge, disposal

of hazardous wastes and emissions, and other matters pertaining to our existing and proposed business by imposing:

● restrictions on our existing and proposed operations and/or

the need to install enhanced or additional controls;

● special requirements applicable to food and drug additives;

● the need to obtain and comply with permits and authorizations;

● liability for exceeding applicable permit limits or legal

requirements, in some cases for the remediation of contaminated soil and groundwater

at our production facilities, contiguous and adjacent properties and other properties

owned and/or operated by third parties;

● other specifications for the specialty alcohols and essential

ingredients we produce and market.

In addition, some governmental regulations

are helpful to our production and marketing business.

The fuel-grade ethanol industry in particular is supported by federal and

state mandates and environmental regulations that favor the use of fuel-grade ethanol in motor fuel blends in North America.

of the governmental regulations applicable to our production and marketing business are briefly described below.

These laws, their underlying regulatory requirements and their potential enforcement, some of which are

described below, impact, or may impact, nearly every aspect of our operations, including our production of alcohols (including

distillation), our production of essential ingredients, our storage facilities, and our water usage, wastewater discharge, disposal of hazardous wastes and emissions, and other matters pertaining to our existing and proposed business by

● restrictions

on our existing and proposed operations and/or the need to install enhanced or additional

requirements applicable to food and drug additives;

need to obtain and comply with permits and authorizations;

for exceeding applicable permit limits or legal requirements, in some cases for the remediation

of contaminated soil and groundwater at our production facilities, contiguous and adjacent

properties and other properties owned and/or operated by third parties;

specifications for the specialty alcohols and essential ingredients we produce and market.

In addition, some governmental regulations are

helpful to our production and marketing business.

The fuel-grade ethanol industry in particular is supported by federal and state mandates

and environmental regulations that favor the use of fuel-grade ethanol in motor fuel blends in North America.

Some of the governmental

regulations applicable to our production and marketing business are briefly described below.

Food and Drug Regulation

Our products for the Health, Home &

Beauty, Food & Beverage and some Essential Ingredients markets are subject to regulation by the FDA as well as similar state

Under the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA regulates the processing, formulation, safety, manufacture,

packaging, labeling and distribution of food ingredients, vitamins and cosmetics.

Many of the FDA’s and FDCA’s rules

and regulations apply directly to us as well as indirectly through their application in our

customers’

To be properly marketed and sold in the United States, a relevant product must be generally recognized

as safe, approved and not adulterated or misbranded under the FDCA and relevant regulations issued under the FDCA.

broad authority to enforce the provisions of the FDCA.

Failure to comply with the laws and regulations of the FDA or similar state

agencies could prevent us from selling certain of our products or subject us to liability.

Our products for the Health, Home & Beauty,

Food & Beverage and some Essential Ingredients markets are subject to regulation by the FDA as well as similar state agencies.

the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA regulates the processing, formulation, safety, manufacture, packaging, labeling

and distribution of food ingredients, vitamins and cosmetics.

Many of the FDA’s and FDCA’s rules and regulations apply directly

to us as well as indirectly through their application in our customers’ products.

To be properly marketed and sold in the United

States, a relevant product must be generally recognized as safe, approved and not adulterated or misbranded under the FDCA and relevant

regulations issued under the FDCA.

The FDA has broad authority to enforce the provisions of the FDCA.

Failure to comply with the laws

and regulations of the FDA or similar state agencies could prevent us from selling certain of our products or subject us to liability.

Renewable Fuels Energy Legislation

Under the RFS, the mandated use of all

renewable fuels, including fuel-grade ethanol, rises incrementally and peaks at 36.0 billion gallons by 2022, of which 15.0 billion

gallons are required from conventional, or corn-based, ethanol.

Under the provisions of the Energy Independence and Security Act

of 2007, the EPA has the authority to waive the mandated RFS requirements in whole or in part.

To grant a waiver, the EPA administrator

must determine, in consultation with the Secretaries of Agriculture and Energy, that there is inadequate domestic renewable fuel

supply or implementation of the requirement would severely harm the economy or environment of a state, region or the United States

Various bills in Congress introduced from

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

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

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

The EPA has allowed fuel and fuel-additive

manufacturers to introduce into commercial gasoline that contains greater than 10% fuel-grade ethanol by volume, up to 15% fuel-grade

ethanol by volume, or E15, for vehicles from model year 2001 and beyond.

Commercial sale of E15 has begun in a majority of states,

and the EPA has enacted a rule allowing for year-round use of E15.

Various states including California, Oregon

and Washington, and other regions such as the Canadian province of British Columbia, have implemented low-carbon fuel standards

focused on reducing the carbon intensity of transportation fuels.

Blending fuel-grade ethanol into gasoline is one of the primary

means of attaining these goals.

Under the RFS, the mandated use of all renewable

fuels, including fuel-grade ethanol, rises incrementally and peaks at 36.0 billion gallons by 2022, of which 15.0 billion gallons are

required from conventional, or corn-based, ethanol.

Under the provisions of the Energy Independence and Security Act of 2007, the EPA

has the authority to waive the mandated RFS requirements in whole or in part.

To grant a waiver, the EPA administrator must determine,

in consultation with the Secretaries of Agriculture and Energy, that there is inadequate domestic renewable fuel supply or implementation

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

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.

The EPA has allowed fuel and fuel-additive manufacturers

to introduce into commercial gasoline that contains greater than 10% fuel-grade ethanol by volume, up to 15% fuel-grade ethanol by volume,

or E15, for vehicles from model year 2001 and beyond.

Commercial sale of E15 has begun in a majority of states, and the EPA has enacted

a rule allowing for year-round use of E15.

Various states including California, Oregon and

Washington, and other regions such as the Canadian province of British Columbia, have implemented low-carbon fuel standards focused on

reducing the carbon intensity of transportation fuels.

Blending fuel-grade ethanol into gasoline is one of the primary means of attaining

Additional Environmental Regulations

In addition to the governmental regulations

applicable to the alcohol production and marketing industry described above, our business is subject to additional federal, state

and local environmental regulations, including regulations established by the EPA and state regulatory agencies related to water

quality and air pollution control.

We cannot predict the manner or extent to which these regulations will harm or help our business

or the alcohol production and marketing industry in general.

In addition to the governmental regulations applicable

to the alcohol production and marketing industry described above, our business is subject to additional federal, state and local environmental

regulations, including regulations established by the EPA and state regulatory agencies related to water quality and air pollution control.

We cannot predict the manner by which, or extent to which, these regulations will harm or help our business or the alcohol production

and marketing industry in general.

Human Capital Resources

As of March 11, 2022, we had approximately

417 employees, including 415 full-time employees.

We believe that our employees are highly-skilled, and our success will depend

in part upon our ability to retain our employees and attract new qualified employees, many of whom are in great demand.

Approximately

51% of our employees are presently represented by a labor union and covered by a collective bargaining agreement.

We have never

had a work stoppage or strike and we consider our relations with our employees to be good.

Our human capital resources objectives include attracting and retaining

well-qualified and highly skilled and motivated employees and executives.

Our compensation program is designed to attract, retain

and motivate these personnel.

We use a mix of competitive salaries and other benefits to attract and retain employees and

As of March 11, 2022, approximately 45% of our employees were represented by a labor union and covered by a collective

bargaining agreement.

We have never had a work stoppage or strike and we consider our relations with our employees to be good.

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

What changed 10-K

Item 1. Business