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Item 1A. Risk Factors

2023-03-14 compared with 2022-03-15 · 289 added, 252 removed, 186 unchanged (74% of the section changed)

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

Additional risks and uncertainties

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

If any of these known or unknown risks or

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

and/or liquidity could be seriously harmed.

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

all or part of your investment.

Additional risks and uncertainties not

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

If any of these known or unknown risks or uncertainties

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

could be seriously harmed.

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

Risks Related to our Business

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

Our results of operations are highly impacted

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

Our results of operations are highly impacted by

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

and essential ingredients that we sell.

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

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

States and throughout the world.

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

we have no control, such as weather, domestic and global demand, supply shortages, export prices, inflationary conditions, global geopolitical

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

Price volatility of corn, natural gas and other

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in consumer products.

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

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

Over the past several years, for example, the

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

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

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

Over the past several years, for example, the spread

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

Fluctuations are likely to continue to occur.

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

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

A sustained negative

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

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

Revenues from sales of alcohols, particularly fuel-grade

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

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

ethanol, and essential ingredients have in the past and could in the future decline below the marginal cost of production, which may force

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

In addition, some of our fuel-grade ethanol marketing

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

For example, to satisfy

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

Moreover, we procure much of

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

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

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

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

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

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

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

we procure much of our fuel-grade ethanol inventory outside of contracted third-party marketing and distribution arrangements and therefore

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

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

As a result, our margins for

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

We can provide no assurance that corn, natural

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will sell at or near current or any particular prices.

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

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

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

Inflation, including as a result of commodity price

inflation or supply chain constraints due to the war in Ukraine, may adversely impact our results of operations.

inflation or supply chain constraints due to the war in Ukraine, and higher prices in general may adversely impact our results of operations.

We have experienced inflationary impacts on key

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Inflation and its negative impacts could escalate in future periods.

Ukraine is the third largest exporter of grain

in the world.

Russia is one of the largest producers of natural gas and oil.

The commodity price impact of the war in Ukraine has been

a sharp rise in grain and energy prices, including corn and natural gas, two of our primary production input commodities.

the war in Ukraine has and may continue to adversely affect global supply chains resulting in further commodity price inflation for our

production inputs.

Also, given high global grain prices, U.S.

farmers may prefer to lock in prices and export additional volumes, reducing

domestic grain supplies and resulting in further inflationary pressures.

We may not be able to include these additional

costs in the prices of the products we sell.

As a result, inflation may have a material adverse effect on our results of operations and

financial condition.

Ukraine is the third largest exporter of

grain in the world.

Russia is one of the largest producers of natural gas and oil and is the largest exporter of fertilizers.

commodity price impact of the war in Ukraine has been a sharp and sustained rise in grain and energy prices, including for corn and

natural gas, our two most important production input commodities.

In addition, the war in Ukraine has adversely affected and may

continue to adversely affect global supply chains resulting in further commodity price inflation for our production inputs.

fertilizer supplies may also impact future growing seasons, further impacting grain supplies and prices.

Also, given high global

grain prices, U.S.

farmers may prefer to lock in prices and export additional volumes, reducing domestic grain supplies and

resulting in further inflationary pressures on key production inputs.

Even if inflation stabilizes or abates, the prices

of key production inputs, wages and other costs of labor, equipment, services, and other business expenses may remain at elevated levels.

We may not be able to include these additional costs in the prices of the products we sell.

As a result, inflation and higher prices in

general may have a material adverse effect on our results of operations and financial condition.

Increased alcohol or essential ingredient production

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billion gallons in 2018.

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

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

in more abundant fuel-grade ethanol supplies and inventories.

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

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

Moreover, higher industry

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

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

Any of these outcomes could

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

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

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

fuel-grade ethanol supplies and inventories.

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

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

Any of these outcomes could have a material

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

The prices of our products are volatile and subject

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

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

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

Fuel-grade ethanol

prices, as reported by the CBOT, ranged from $1.48 to $3.75 per gallon in 2021, from $0.81 to $1.62 per gallon in 2020 and from $1.25

to $1.70 per gallon in 2019.

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

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

Fluctuations in the prices

of our products may cause our results of operations to fluctuate significantly.

Disruptions in our production or distribution may

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

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

and influenced by a wide variety of geopolitical and global economic conditions, including decisions concerning petroleum output by the

Organization of Petroleum Exporting Countries (OPEC) and their allies, an intergovernmental organization that seeks to manage the price

and supply of oil on the global energy market.

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

fixed-price contracts.

Fuel-grade ethanol prices, as reported by the CBOT, ranged from $2.00 to $2.88 per gallon in 2022, from $1.48 to

$3.75 per gallon in 2021 and from $0.81 to $1.62 per gallon in 2020.

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

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

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

Disruptions in our production or distribution,

including as a result of climate change and other weather effects, may adversely affect our business, results of operations and financial

Our business depends on the continuing availability

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

In particular, due to limited storage capacity at our production facilities

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

The production of

alcohols also requires a significant and uninterrupted supply of other raw materials and energy, primarily water, electricity and natural

Local water, electricity and gas utilities may fail to reliably supply the water, electricity and natural gas that our production

facilities need or may fail to supply those resources on acceptable terms.

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

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

in the Midwest is transported to market.

In addition, in 2020, we experienced closure of the Illinois River for lock repairs which required

greater use of less cost-effective modes of product transport such as via rail and truck, which resulted in higher costs and negatively

affected our results of operations.

Disruptions in production or distribution, whether

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

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

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

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

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

In particular, due to limited storage capacity at some of our production

facilities and other considerations related to production efficiencies, certain facilities depend on just-in-time delivery of corn.

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

and natural gas.

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

production facilities need or may fail to supply those resources on acceptable terms.

In the past, poor weather has caused disruptions

in rail transportation, which slowed the delivery of fuel-grade ethanol by rail, a key method by which fuel-grade ethanol from our Pekin

Campus is transported to market.

For example, in 2022, a lightning strike at the

utility servicing our Pekin Campus disrupted our operations, cutting power to our facilities and materially affecting our production,

resulting in unexpected repair and maintenance costs, lost production and degradation in the quality of work-in-progress inventories.

In addition, in 2020, we experienced closure of the Illinois River for lock repairs which required greater use of less cost-effective

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

Disruptions in production or distribution, whether caused by labor

difficulties, unscheduled downtimes and other operational hazards inherent in the alcohol production industry, including equipment failures,

fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents, climate change and natural disasters such

as earthquakes, floods and storms, or other weather effects, or human error or malfeasance or other reasons, could prevent timely deliveries

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

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

Some of these operational hazards may also cause

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

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

The coronavirus pandemic has resulted in businesses

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

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

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

of these measures remain or have been curtailed only partially.

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

significant price declines and reduced demand.

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

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

our business, results of operations and liquidity.

Climate change, and governmental regulations

aimed at addressing climate-related issues, may affect conditions to which our business is highly sensitive, many of which could materially

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

Our business is highly sensitive to commodity prices,

in particular the prices of corn and grain substitutes, and natural gas.

Inclement weather from climate change, including extreme temperatures

or drought, may adversely affect growing conditions, which may reduce available corn supplies, our primary production input, and other

grain substitutes, driving up prices and thereby increasing our production input costs.

In addition, governmental regulators may disfavor

carbon-based energy sources, such as natural gas, leading to regulations that disincentivize their use or otherwise make their production

more difficult and costly, driving up their prices.

Higher natural gas prices would likewise increase our production input costs.

Other factors that may result from climate change,

or that may result from governmental regulations aimed at addressing climate-related issues, may also adversely affect our business, including

the following:

● Water is one of our key production inputs;

water resource limitations may result from drought and other inclement weather;

water resource

limitations may also result from rationing and other governmental regulations limiting water use;

● Higher water temperatures due to increased global or regional temperatures may negatively affect production efficiencies due to water

temperature production requirements given the poor cooling capacities of our older facilities;

● Flooding and other inclement weather may negatively affect our river access, other transportation logistics and costs, and storage

requirements;

● An overall increase in energy costs will negatively impact our production costs generally and may critically impact certain high energy-intensive

production technologies, such as our wet milling and multiple distillation processes for high-quality alcohol;

● Regulatory and market transition away from combustion fuels and fuel-grade ethanol blending may threaten the viability of our renewable

fuels business;

● Costs and regulatory burdens associated with governmental regulations that limit or tax greenhouse gas emissions, such as carbon dioxide,

from alcohol production and distribution, or from truck transport and packaging associated with Eagle Alcohol’s business and use

of drums and totes, will negatively impact us.

New legislation in the United States to address

climate change issues, including at the federal, state and local levels, likely will continue.

This includes new or expanded cap-and-trade

programs that may layer additional costs on any business that emits greenhouse gases.

New legislation, including new or expanded cap-and-trade

programs, could materially and adversely impact our production cost structure and the market viability of our products.

Any of these factors could materially and adversely

harm our business, results of operations and financial condition.

We may engage in hedging transactions and other risk

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

In an attempt to partially offset the effects

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

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

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

time to time.

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

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

Hedging arrangements

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

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

agreement and the actual prices paid or received by us.

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

calls, negatively impacting our liquidity.

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

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

In an attempt to partially offset the effects of

production input and product price volatility, in particular, corn and natural gas costs and fuel-grade ethanol prices, we may enter into

contracts to purchase a portion of our corn or natural gas requirements on a forward basis or fix the sale price of portions of our alcohol

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

and unleaded gasoline from time to time.

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

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

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

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

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

In addition, our open contract positions may require

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

As a result, our hedging activities and fluctuations in the price

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

Risks Related to our Finances

We have incurred significant losses and negative

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

and impede us from expanding our business.

We have incurred significant losses and negative operating

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

us from expanding our business.

We have incurred significant losses and negative

operating cash flow in the past.

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

$17.3 million and $101.3 million, respectively.

For the year ended December 31, 2019, we incurred negative operating cash flow of approximately

$31.2 million.

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

We expect to rely on cash on hand, cash, if any, generated

from our operations, borrowing availability under our lines of credit and proceeds from our future financing activities, if any, to fund

all of the cash requirements of our business.

Additional losses and negative operating cash flow may hamper our operations and impede

us from expanding our business.

We incur significant expenses to maintain and upgrade

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

For example, for the three months and year ended December 31, 2022 and for the year ended December 31,

2020, we incurred consolidated net losses of approximately $33.1 million, $41.6 million and $17.3 million, respectively.

losses and negative operating cash flow in the future.

We expect to rely on cash on hand, cash, if any, generated from our operations,

borrowing availability under our lines of credit and proceeds from our future financing activities, if any, to fund all of the cash requirements

of our business.

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

We incur significant expenses to maintain and upgrade our production

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

We regularly incur significant expenses to maintain

and upgrade our production facilities and operating equipment.

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

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

We must perform routine equipment maintenance

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

In addition, our production facilities

require periodic shutdowns to perform major maintenance and upgrades.

These scheduled shutdowns result in lower sales and increased costs

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

to equipment and operational and mechanical processes made during shutdown.

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

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

We must perform routine equipment maintenance and must

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

In addition, our production facilities require

periodic shutdowns to perform major maintenance and upgrades.

These scheduled shutdowns result in lower sales and increased costs in the

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

and operational and mechanical processes made during shutdown.

Our indebtedness may expose us to risks that could

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

We have incurred, and anticipate incurring additional,

substantial indebtedness to engage in capital improvement projects.

We expect that these projects, when completed, will generate financial

returns sufficient to service and ultimately repay or refinance our indebtedness.

However, the timing, cost and results of our capital

improvement projects may not meet our projections.

In addition, our indebtedness could:

● make it more difficult to pay or refinance our indebtedness if it becomes due during adverse economic and industry conditions;

● limit our flexibility to pursue strategic opportunities or react to changes in our business and the industries in which we operate

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

● require a substantial portion of our cash flows from operations for debt service payments, thereby reducing the availability of our

cash flows to fund working capital, additional capital expenditures, acquisitions, dividend payments and for other general corporate purposes;

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

Our ability to generate sufficient cash to make

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

control, including the cost of key production inputs, the supply of and demand for specialty alcohols and essential ingredients, and many

other factors related to the industries in which we operate.

We cannot provide any assurance that we will be able to timely service or

satisfy our debt obligations.

Our failure to timely service or satisfy our debt obligations would have a material adverse effect on our

business, business prospects, liquidity, cash flows and results of operations.

Our ability to utilize net operating loss carryforwards

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

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

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

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

substantially limited.

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

on our financial condition and results of operations.

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

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

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

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

condition and results of operations.

Risks Related to Legal and Regulatory Matters

We may be adversely affected by environmental, health

and safety laws, regulations and liabilities .

and safety laws, regulations and liabilities, and which may not be adequately covered by insurance .

We are subject to various federal, state and local

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to the environment.

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

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

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

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

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

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

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

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

We may be liable for the investigation and cleanup

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

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

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

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

hazardous or other materials at or from those properties.

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

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

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

or other materials at or from those properties.

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

cleanup or other costs.

In addition, new laws, new interpretations of

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

expenditures.

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

environmental controls at our production facilities.

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

laws and regulations, applicable to our operations, more vigorous enforcement policies and discovery of currently unknown conditions

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

cleanup or other costs not covered by insurance.

In addition, new laws, new interpretations of existing

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

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

controls at our production facilities.

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

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

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

The hazards and risks associated with producing

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Although many trade groups, academics and governmental

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

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

water resources.

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

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

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

fuel markets.

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

production of corn-based ethanol as a fuel additive could decline, leading to a reduction or repeal of federal ethanol usage mandates,

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

These views could also negatively impact public perception

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

agencies support fuel-grade ethanol as a fuel additive that promotes a cleaner environment, others criticize fuel-grade ethanol production

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

Some studies suggest that corn-based ethanol is less efficient than ethanol produced from other feedstock and that it negatively impacts

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

Additionally, critics

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

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

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

and adversely affect the demand for fuel-grade ethanol.

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

industry and acceptance of ethanol as an alternative fuel.

There are limited markets for fuel-grade ethanol

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ethanol by volume) are important secondary markets.

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

the price of gasoline.

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

to the price of gasoline.

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

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

Demand for transportation fuel is

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

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

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

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

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

Demand for transportation fuel is affected

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

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

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

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

growth in market share relative to other transportation fuels.

The United States fuel-grade ethanol industry is

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of operations, cash flows and financial condition.

The Environmental Protection Agency, or EPA, has

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

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

fuels consumed in the United States.

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

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

Future demand for fuel-grade ethanol

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

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

environmental requirements.

Under the provisions of the Clean Air Act, as

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

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

inadequate domestic renewable fuel supply or implementation of the applicable requirements would severely harm the economy or environment

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

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

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

The EPA has implemented the Renewable Fuel Standard, or RFS, under

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

The RFS program sets annual quotas for the quantity

of renewable fuels (such as fuel-grade ethanol) that must be blended into motor fuels consumed in the United States through 2022.

2022, the EPA is to determine volume requirements in coordination with the Secretary of Energy and the Secretary of Agriculture.

has proposed new post-2022 mandatory volumes of 15.0 billion and 15.25 billion gallons for 2023 and 2024, respectively, in compliance

with a consent decree by the United States District Court for the District of Columbia.

Under the provisions of the Clean Air Act, as amended

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

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

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

region or the United States in general.

In particular, the EPA may issue small refinery waivers, in full or in part, to reduce or eliminate

annual renewable fuel volume requirements for small refineries that process fewer than 75,000 barrels of petroleum daily.

of operations, cash flows and financial condition could be adversely impacted if the EPA reduces the RFS requirements from the statutory

levels specified in the RFS or continues to issue significant small refinery waivers.

The domestic market for fuel-grade ethanol is significantly

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

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

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

blends, the RFS and the EPA’s established volumes from time to time, small refinery waivers, and other applicable environmental

requirements.

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.

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

Some legislative

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Risks Related to Ownership of our Common Stock

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

common stock and our ability to raise capital.

Future sales of substantial

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

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

our common stock and our ability to raise capital.

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

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The market price of our common

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

● fluctuations

in the market prices of our products;

stock may continue to fluctuate in response to one or more of the following factors, or any of the other risks or uncertainties discussed

in this report, many of which are beyond our control:

● fluctuations in the market prices of our products;

● fluctuations

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

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

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

● competitive

pricing pressures;

● anticipated

trends in our financial condition and results of operations;

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

● competitive pricing pressures;

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

in market valuations of companies similar to us;

market price and volume fluctuations generally;

developments or increased enforcement;

● stock market price and volume fluctuations generally;

● regulatory developments or increased enforcement;

● fluctuations

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ability to obtain any necessary financing;

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

● the timing, cost and results of our capital improvement projects;

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

ability to maintain contracts that are critical to our operations.

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

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

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

Because we do not intend to pay any cash dividends

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

they sell them.

We intend to retain a significant

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

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

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

There is no assurance that future

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

board of directors determines to pay dividends, our stockholders will be required to look to appreciation of our common stock to realize

a gain on their investment.

There can be no assurance that this appreciation will occur.

Our bylaws contain an exclusive forum provision,

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

employees or agents.

Our bylaws provide that, unless we consent in

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

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

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

and capital requirements, compliance with any applicable debt covenants, and other factors our board of directors considers relevant.

There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance of the amount of any such

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

in the value of our common stock to realize any gain on their investment.

There can be no assurance that any such appreciation will occur.

Our bylaws contain an exclusive forum provision that

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

Our bylaws provide that, unless we consent in writing

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

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

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

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With respect to the provision making the Delaware

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

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

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

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

have a material adverse effect on us.

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

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

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

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

a material adverse effect on us.

General Risk Factors

Cyberattacks through security vulnerabilities could

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

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

Security vulnerabilities may arise from our hardware,

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

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

and customers.

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

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

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The vulnerability could be caused by inadequate account security practices such

as failure to timely remove employee access when terminated.

as the failure to timely remove employee access when terminated.

To mitigate these security issues, we have implemented measures throughout

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

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

If any of these types of security breaches were to

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

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

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

If any of these types of security breaches were

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

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

Further, if we fail to adequately maintain our

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and interrupt other processes.

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

results, stock price and reputation.

The State of California enacted the California

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

Our and our business partners’ or contractors’ failure

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

In addition, data

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

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

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

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

stock price and reputation.

Our and our business partners’ or contractors’

failure to fully comply with applicable data privacy or similar laws could lead to significant fines and require onerous corrective action.

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

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

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

Unauthorized use or disclosure of, or access to,

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What changed 10-K

Item 1A. Risk Factors