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Item 1. Financial Statements

2023-05-09 compared with 2022-11-09 · 338 added, 582 removed, 154 unchanged (86% of the section changed)

FINANCIAL STATEMENTS.

ALTO INGREDIENTS, INC.

INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

and cash equivalents

Accounts receivable (net of allowance for credit losses of $ 66 and $ 105 , respectively)

current assets

Cash and cash equivalents

Restricted cash

Accounts receivable, net (net of allowance for doubtful accounts of $ 135 and $ 378 , respectively)

Derivative instruments

Notes receivable, current

Other current assets

Total current assets

Property and equipment, net

Other Assets:

Right of use operating lease assets, net

Notes receivable, noncurrent

Intangible assets, net

Total other assets

* Amounts derived from the

audited consolidated financial statements for the year ended December 31, 2021.

See accompanying notes to consolidated financial

ALTO INGREDIENTS, INC.

current assets

and equipment, net

of use operating lease assets, net

derived from the audited financial statements for the year ended December 31, 2022.

accompanying notes to consolidated financial statements.

INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except par value)

September 30,

LIABILITIES AND STOCKHOLDERS’ EQUITY

AND STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable – trade

Accrued liabilities

Current portion – operating leases

Derivative instruments

Other current liabilities

Total current liabilities

Long-term debt, net of current portion

Operating leases, net of current portion

Other liabilities

Total Liabilities

Commitments and Contingencies (Note 7)

Stockholders’ Equity:

Alto Ingredients, Inc.

Stockholders’ Equity:

portion – operating leases

current liabilities

leases, net of current portion

and Contingencies (Note 6)

Stockholders’

Preferred stock, $ 0.001 par value;

1 unchanged sentence

1,684 shares authorized;

no shares issued and outstanding as of September 30, 2022 and December 31, 2021;

no shares issued and outstanding as of March 31, 2023 and December 31, 2022;

1,581 shares authorized;

927 shares issued and outstanding as of September 30, 2022 and December 31, 2021;

liquidation preference of $ 18,075 as of September 30, 2022

927 shares issued and outstanding as of March 31, 2023 and December 31, 2022;

liquidation preference of $ 18,075 as of March 31, 2023

Common stock, $ 0.001 par value;

300,000 shares authorized;

73,956 and 72,778 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

76,187 and 75,154 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Non-voting common stock, $ 0.001 par value;

3,553 shares authorized;

1 share issued and outstanding as of September 30, 2022 and December 31, 2021

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

* Amounts derived from the

audited consolidated financial statements for the year ended December 31, 2021.

See accompanying notes to consolidated financial

ALTO INGREDIENTS, INC.

1 share issued and outstanding as of March 31, 2023 and December 31, 2022

paid-in capital

other comprehensive income

Stockholders’ Equity

Liabilities and Stockholders’ Equity

* Amounts derived from the audited

financial statements for the year ended December 31, 2022.

accompanying notes to consolidated financial statements.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

Gross profit (loss)

Selling, general and administrative expenses

Asset impairments

Income (loss) from operations

Interest expense, net

Income from cash grant

Income from loan forgiveness

Other income (expense), net

Income (loss) before provision for income taxes

Provision for income taxes

Net income (loss)

Preferred stock dividends

Income allocated to participating securities

Net income (loss) available to common stockholders

Net income (loss) per share, basic

Net income (loss) per share, diluted

Weighted-average shares outstanding, basic

Weighted-average shares outstanding, diluted

See accompanying notes to consolidated financial

ALTO INGREDIENTS, INC.

in thousands, except per share data)

of goods sold

profit (loss)

general and administrative expenses

from operations

before provision for income taxes

for income taxes

stock dividends

loss available to common stockholders

Net loss per share, basic and diluted

Weighted-average

shares outstanding, basic

Weighted-average

shares outstanding, diluted

accompanying notes to consolidated financial statements.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash

provided by (used in) operating activities:

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

Depreciation and amortization of intangibles

Inventory valuation

Asset impairments

Income from loan forgiveness

Losses (gains) on derivative instruments

Non-cash compensation

Asset impairments

Amortization of deferred financing fees

Bad debt expense (benefit)

Amortization of debt discount

Bad debt expense (recovery)

Changes in operating assets and liabilities, net of business acquisition:

1 unchanged sentence

Operating leases

Assets held-for-sale

Liabilities held-for-sale

Accounts payable and accrued expenses

Accounts payable and accrued liabilities

Net cash provided by (used in) operating activities

Investing Activities:

Proceeds from principal payments on notes receivable

Proceeds from asset sales

Additions to property and equipment

Deferred purchase price payments for Eagle Alcohol

Purchase of Eagle Alcohol, net of cash acquired

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing Activities:

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

Net proceeds from Kinergy’s line of credit

Stock repurchases

Proceeds from stock option exercises

Principal payments on borrowings

Proceeds from principal payments on notes receivable

Preferred stock dividends paid

Net cash provided by (used in) financing activities

Net change in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

6 unchanged sentences

Interest paid

Accrued preferred stock dividends

Interest expense capitalized

accompanying notes to consolidated financial statements.

ALTO INGREDIENTS, INC.

INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

3 unchanged sentences

$ ( 734,643 )

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

issued for Eagle Alcohol acquisition

stock dividends

Stock-based compensation

Restricted stock issued to

employees and directors, net of cancellations and tax

Stock repurchases

Preferred stock dividends

March 31, 2023

$ ( 748,121 )

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

stock dividends

June 30, 2022

$ ( 672,895 )

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

stock dividends

September 30, 2022

$ ( 701,252 )

January 1, 2022

$ ( 691,781 )

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

of common stock

stock dividends

Stock-based compensation

Restricted stock issued to

employees and directors, net of cancellations and tax

Shares issued for Eagle Alcohol

Preferred stock dividends

March 31, 2022

$ ( 694,695 )

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

stock dividends

June 30, 2021

$ ( 724,157 )

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

stock dividends

September 30, 2021

$ ( 727,608 )

See accompanying notes to consolidated financial

accompanying notes to consolidated financial statements.

ALTO INGREDIENTS, INC.

1 unchanged sentence

ORGANIZATION AND BASIS OF PRESENTATION.

Organization and Business

– The consolidated financial statements include, for all periods presented, the accounts of Alto Ingredients, Inc., a Delaware corporation

(“Alto Ingredients”), and its direct and indirect wholly-owned subsidiaries (collectively, the “Company”), including

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

Inc., a Delaware corporation, and its direct and indirect wholly-owned subsidiaries (collectively, the “Company”), including

Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Alto Nutrients, LLC, a California limited liability

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

liability company (“Alto Pekin”) and Alto ICP, LLC, a Delaware limited liability company (“ICP”), and the Company’s

company, Eagle Alcohol Company, LLC, a Delaware limited liability company, Alto Op Co., a Delaware corporation,

Alto Pekin, LLC, a Delaware limited liability company, and Alto ICP, LLC, a Delaware limited liability company, and the Company’s

production facilities in Oregon and Idaho.

On May 14, 2021 and November

4, 2021, the Company completed the sale of its production facilities located in Madera and Stockton, California, respectively.

of these facilities are included in the Company’s results reported for the three and nine months ended September 30, 2021.

in Note 2, on January 14, 2022, the Company acquired 100 % ownership of Eagle Alcohol Company LLC, a Missouri limited liability company

(“Eagle Alcohol”), which is now a wholly-owned subsidiary of Alto Ingredients, Inc.

The results of Eagle Alcohol since the

date of the acquisition are included in the Company’s results reported for the three and nine months ended September 30, 2022.

The Company is a leading producer

and distributor of specialty alcohols and essential ingredients.

The Company also produces, markets and distributes renewable fuel.

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

feedstock and allow for access to many additional domestic markets.

In addition, the Company’s ability to load barges, rail and

trucks from these facilities allows for greater access to international markets.

The Company’s two production facilities in Oregon

and Idaho are located in close proximity to both feed and renewable fuel customers and thus enjoy unique advantages in efficiency, logistics

and product pricing.

The Company has a combined alcohol

production capacity of 350 million gallons per year and produces, on an annualized basis, over 1.5 million tons of essential ingredients,

such as dried yeast, corn gluten meal, corn gluten feed, corn germ, and distillers grains and liquid feed used in commercial animal feed

and pet foods.

In addition, the Company sells alcohols acquired from other producers, and markets and distributes fuel-grade ethanol produced

by third parties.

The Company focuses on four

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

The Company also produces and markets

fuel-grade ethanol.

The Company’s production facilities in Pekin, Illinois are located in the heart of the Corn Belt.

The Company’s

two production facilities in Oregon and Idaho are located in close proximity to both feed and fuel-grade ethanol customers.

Company has a combined alcohol production capacity of 350 million gallons per year and produced in 2022 over 1.6 million tons of essential

ingredients, such as dried yeast, corn gluten meal, corn gluten feed, corn germ, and distillers grains and liquid feed used in commercial

animal feed and pet foods.

In addition, the Company markets and distributes fuel-grade ethanol produced by third parties.

Company focuses on four key markets:

Health, Home & Beauty ;

1 unchanged sentence

Essential Ingredients ;

and Renewable Fuels .

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

and cleaners.

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

as corn germ used for corn oils.

Products for Essential Ingredients markets include dried yeast, corn gluten meal, corn gluten feed, corn

germ, and distillers grains and liquid feed used in commercial animal feed and pet foods.

Renewable Fuels includes fuel-grade ethanol

and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.

As of September 30, 2022, all

of the Company’s production facilities were operating.

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

at one or more operating facilities or resume operations at any then-idled facility.

Presentation – Interim Financial Statements – The accompanying unaudited consolidated financial

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

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

Results for interim

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

These interim consolidated financial statements should be

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

Form 10-K for the year ended December 31, 2021.

The accounting policies used in preparing these consolidated financial

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

on Form 10-K for the year ended December 31, 2021.

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

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

All significant

intercompany accounts and transactions have been eliminated in consolidation.

Accounts Receivable and Allowance for Doubtful

Accounts – Trade accounts receivable are presented at face value, net of the allowance for doubtful accounts.

sells specialty alcohols to large consumer products companies, sells fuel-grade ethanol to gasoline refining and distribution companies,

sells essential ingredients to animal feed customers, including distillers grains and other feed co-products to dairy operators and animal

feedlots and corn oil to poultry and biodiesel customers generally without requiring collateral.

The Company maintains an allowance for doubtful

accounts for balances that appear to have specific collection issues.

The collection process is based on the age of the invoice and requires

attempted contacts with the customer at specified intervals.

If, after a specified number of days, the Company has been unsuccessful in

its collection efforts, a bad debt allowance is recorded for the balance in question.

Delinquent accounts receivable are charged against

the allowance for doubtful accounts once uncollectibility has been determined.

The factors considered in reaching this determination are

the apparent financial condition of the customer and the Company’s success in contacting and negotiating with the customer.

financial condition of the Company’s customers were to deteriorate, resulting in an impairment of ability to make payments, additional

allowances may be required.

Of the accounts receivable balance, approximately

$ 54,972,000 and $ 63,929,000 at September 30, 2022 and December 31, 2021, respectively, were used as collateral under Kinergy’s operating

line of credit.

The allowance for doubtful accounts was $ 135,000 and $ 378,000 as of September 30, 2022 and December 31, 2021, respectively.

The Company recorded a bad debt recovery of $ 253,000 and $ 3,000 for the three months ended September 30, 2022 and 2021, respectively.

The Company recorded a bad debt recovery of $ 187,000 and bad debt expense of $ 140,000 for the nine months ended September 30, 2022 and

2021, respectively.

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

Financial Instruments – The

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

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

The Company believes the carrying value of its long-term debt instruments are not considered materially different than fair value because

the interest rates on these instruments are variable.

Business Combinations –

Business acquisitions are accounted for in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 805 “Business Combinations”.

FASB ASC 805 requires the reporting entity to identify the acquirer,

determine the acquisition date, recognize and measure the identifiable tangible and intangible assets acquired and liabilities assumed

and recognize and measure goodwill or a gain from the purchase.

Assets acquired and liabilities assumed are recorded at their fair values

and the excess of the purchase price over the amounts assigned is recorded as goodwill.

Adjustments to fair value assessments are recorded

to goodwill over the measurement period (not longer than twelve months).

Income from Cash

Grant – The Company applied for and received $ 22,652,000 in cash from the USDA’s Biofuel Producer Program.

The program was created as part of the CARES Act in 2020, which allocated $ 700,000,000 to support biofuel producers who experienced

market losses due to the pandemic.

The cash grant is not required to be repaid.

Since these funds are provided to subsidize

historical losses of the Company, and are not required to be repaid, the Company accounted for the proceeds by analogy to

International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance , and reported

the amount as income from cash grant in the accompanying consolidated statements of operations.

Share Repurchase Program –

On September 12, 2022, the Company announced a share repurchase program under which it may repurchase up to $ 50 million of its common

stock with an initial purchase authorization of $ 10 million.

Amounts in excess of the initial purchase authorization of $ 10 million will

require additional board and preferred stockholder authorization.

The share repurchase program does not have an expiration date, does

not require the repurchase of any particular amount of shares, and may be implemented, modified, suspended or discontinued in whole or

in part at any time and without further notice.

As repurchases are made, the Company will retire the shares, resulting in a reduction

of issued and outstanding shares.

For the three and nine months ended September 30, 2022, the Company repurchased an aggregate of 259,000

shares for $ 1,002,000 in cash.

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 dried yeast, corn gluten

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

Renewable Fuels

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

As of March 31, 2023, all of the Company’s production facilities

were operating, except its Magic Valley facility in Idaho.

On January 1, 2023, the Company temporarily hot-idled its Magic Valley production

facility due to extreme natural gas prices, other unfavorable market conditions and to facilitate the installation of its new high protein

The Company restarted the facility in April 2023.

All production facilities are currently operating.

As market conditions change,

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

of Presentation – Interim Financial Statements – The accompanying unaudited consolidated financial statements

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

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

Results for interim periods should not be considered

indicative of results for a full year.

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

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

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

the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

results for interim periods have been included.

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

Receivable and Allowance for Credit Losses – Trade accounts receivable are presented at original invoice amount, net of

the allowance for credit losses.

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

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

feed co-products to dairy operators and animal feedlots and corn oil to poultry and biodiesel customers, in each case generally without

requiring collateral.

carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts

that will not be collected.

The Company regularly reviews accounts receivable and based on assessments of current customer creditworthiness,

estimates the portion, if any, of the customer balance that will not be collected.

the accounts receivable balance, approximately $ 53,655,000 and $ 55,667,000 at March 31, 2023 and December 31, 2022, respectively, were

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

The allowance for credit losses was $ 66,000 and $ 105,000 as of March

31, 2023 and December 31, 2022, respectively.

The Company recorded a bad debt recovery of $ 39,000 and bad debt expense of $ 31,000 for

the three months ended March 31, 2023 and 2022, respectively.

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

to its customers.

Repurchase Program – On September 12, 2022, the Company announced a share repurchase program under which it may repurchase

up to $ 50 million of its common stock with an initial purchase authorization of $ 10 million.

The Company’s lender has further limited

the Company’s purchase authorization to $ 5 million.

Amounts in excess of the purchase authorization of $ 5 million will require

additional lender consent and amounts in excess of the initial purchase authorization of $ 10 million will require additional board and

preferred stockholder authorization.

The share repurchase program does not have an expiration date, does not require the repurchase of

any particular amount of shares, and may be implemented, modified, suspended or discontinued in whole or in part at any time and without

further notice.

As repurchases are made, the Company will retire the shares, resulting in a reduction of issued and outstanding shares.

For the three months ended March 31, 2023, the Company repurchased an aggregate of 860,000 shares for $ 1,682,000 in cash.

31, 2023, total repurchases under the program since its inception were $ 3,007,000 .

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

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

of these items.

The Company believes the carrying value of its long-term debt instruments are not considered materially different than

fair value because they were just recently issued.

and Assumptions – The preparation of the consolidated financial statements in conformity with accounting principles generally

accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

Significant estimates are required as part of determining the allowance for credit losses, net

realizable value of inventory, long-lived asset impairments, valuation allowances on deferred income taxes, the potential outcome of

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

acquired and liabilities assumed as a result of business combinations.

Actual results and outcomes may materially differ from management’s

estimates and assumptions.

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States

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

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

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

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

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

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

Actual results and outcomes may materially

differ from management’s estimates and assumptions.

ACQUISITION OF EAGLE ALCOHOL.

On January 14, 2022, the Company purchased 100 %

of the membership interests of Eagle Alcohol.

The purchase price was $ 14.0 million in cash plus an estimated net working capital adjustment

of $ 1.3 million in cash.

The selling members of Eagle Alcohol are eligible to receive up to an additional $ 14.0 million of contingent

consideration, payable through a combination of $ 9.0 million in cash over the next three years and an aggregate of $ 5.0 million in the

Company’s common stock on the fourth and fifth year anniversaries of the closing date, subject to the satisfaction of certain conditions,

including continued employment with the Company.

With respect to these payments, the Company has recognized an estimated $ 0.9 million

and $ 2.6 million for the three and nine months ended September 30, 2022, respectively, in selling, general and administrative expenses

in the accompanying consolidated statements of operations.

Eagle Alcohol specializes in break bulk distribution

of specialty alcohols.

Eagle Alcohol purchases bulk alcohol from suppliers and then stores, denatures, packages, and resells alcohol products

in smaller sizes, including tank trucks, totes, and drums, that garner a premium to bulk alcohols.

Eagle Alcohol delivers products to

customers in the beverage, food, and related-process industries via its own dedicated trucking fleet and common carrier.

The acquisition

has provided the Company further vertical integration and access to new markets in the specialty alcohol industry.

Eagle Alcohol’s unaudited results for the

three months ended September 30, 2022 and 2021 generated $ 4.2 million and $ 9.9 million in net sales and $ 0.0 million and $ 1.0 million

in net income, respectively.

Eagle Alcohol’s unaudited results for the nine months ended September 30, 2022 and 2021 generated

$ 12.1 million and $ 27.5 million in net sales and $ 0.1 million and $ 3.0 million in net income, respectively.

The following table presents

unaudited pro forma combined financial information assuming the acquisition occurred on January 1, 2021 (dollars in thousands except

per share amounts):

Three Months Ended

September 30,

Revenues – pro forma

Net loss available to common stockholders – pro forma

Diluted net loss per share – pro forma

Diluted shares

Nine Months Ended

September 30,

Revenues – pro forma

Net income (loss) available to common stockholders – pro forma

Diluted net income (loss) per share – pro forma

Diluted shares

The following preliminary allocation of the estimated

purchase price assumes, with the exception of property and equipment and intangibles, carrying values approximate fair value.

of uncollectible accounts receivable are not considered material due to the short-term nature and customer collection history.

The preliminary

estimate of working capital is under review by management and is subject to change.

Based upon these assumptions, the preliminary purchase

price allocation is as follows (in thousands):

Cash and equivalents

Accounts receivable

Total current assets

Property and equipment

Right of use assets

Total tangible assets

Current liabilities

Right of use liability

Total liabilities

Net tangible assets acquired

Customer relationships

Total Purchase Price

Goodwill represents the value of the downstream

integration that the operations of Eagle Alcohol will add to the Company.

The Company expects the amortization of goodwill to be deductible

for tax purposes.

For the identifiable intangible assets, the Company has estimated 12 years for useful lives for customer relationships

and 10 years for tradename.

For the three months ended September 30, 2022, the Company recorded amortization expense of $ 137,000 and $ 10,000

for customer relationships and tradename, respectively.

For the nine months ended September 30, 2022, the Company recorded amortization

expense of $ 390,000 and $ 30,000 for customer relationships and tradename, respectively.

Any changes to the initial estimates of the fair

value of the acquired assets and assumed liabilities will be recorded as adjustments to those assets and liabilities and residual amounts

will be allocated to goodwill if net assets acquired are less than the purchase price.

The Company did not incur any material acquisition

The Company reports its financial and operating

performance in three segments:

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

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

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

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

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

to be considered a reportable segment.

The following tables set forth certain financial

data for the Company’s operating segments (in thousands):

Company reports its financial and operating performance in three segments:

(1) marketing and distribution, which includes marketing and

merchant trading for Company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced

from third parties (2) Pekin production, which includes the production and sale of alcohols and essential ingredients produced at the

Company’s Pekin, Illinois campus (“Pekin Campus”), and (3) Other production, which includes the production and sale

of fuel-grade ethanol and essential ingredients produced at all of the Company’s other production facilities on an aggregated basis

(“Other production”), none of which are individually so significant to be considered a separately reportable segment.

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Pekin Campus, recorded as gross:

Pekin Campus production, recorded as gross:

Alcohol sales

16 unchanged sentences

Cost of goods sold:

Pekin Campus production

Marketing and distribution

4 unchanged sentences

Gross profit (loss):

Pekin Campus production

Marketing and distribution

3 unchanged sentences

Gross profit (loss) as reported

Income (loss) before provision for income taxes:

Loss before provision for income taxes:

Pekin Campus production

Marketing and distribution

1 unchanged sentence

Corporate and other

Depreciation and amortization of intangibles:

Depreciation and amortization expense:

Pekin Campus production

Other production

Corporate and other

Interest expense, net of capitalized interest:

Interest expense, net of capitalized

Pekin Campus production

Marketing and distribution

1 unchanged sentence

Corporate and other

The following table sets forth the Company’s

total assets by operating segment (in thousands):

September 30,

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

Total assets:

Pekin Campus production

Marketing and distribution

1 unchanged sentence

Corporate and other

Inventories consisted primarily of bulk ethanol,

specialty alcohols, corn, essential ingredients and unleaded fuel, and are valued at the lower of cost or net realizable value, with cost

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

Inventory is net of a valuation adjustment of $ 7,963,000 and $ 0 as of September 30, 2022 and

December 31, 2021, respectively.

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

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

Inventory is net of a valuation adjustment of $ 0 and

$ 4,612,000 as of March 31, 2023 and December 31, 2022, respectively.

Inventory balances consisted of the following (in thousands):

September 30,

Finished goods

1 unchanged sentence

Raw materials

The business and activities of the Company expose

it to a variety of market risks, including risks related to changes in commodity prices.

The Company monitors and manages these financial

exposures as an integral part of its risk management program.

This program recognizes the unpredictability of financial markets and seeks

to reduce the potentially adverse effects that market volatility could have on operating results.

Commodity Risk – Cash

Flow Hedges – The Company uses derivative instruments to protect cash flows from fluctuations caused by volatility in

commodity prices for periods of up to twelve months in order to protect gross profit margins from potentially adverse effects of

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

contracts specify a floating or index-based price.

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

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

This program recognizes

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

Risk – Cash Flow Hedges – The Company uses derivative instruments to protect cash flows from fluctuations

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

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

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

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

exposure to the potentially adverse effects of price volatility.

These derivatives may be designated and documented as cash flow

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

prices against the Company’s purchase and sales prices.

Ineffectiveness, which is defined as the degree to which the

derivative does not offset the underlying exposure, is recognized immediately in cost of goods sold.

For the three and nine months

ended September 30, 2022 and 2021, the Company did not designate any of its derivatives as cash flow hedges.

Commodity Risk – Non-Designated Hedges

– The Company uses derivative instruments to lock in prices for certain amounts of corn and alcohols by entering into exchange-traded

forward contracts or options for those commodities.

These derivatives are not designated for hedge accounting treatment.

The changes in

fair value of these contracts are recorded on the balance sheet and recognized immediately in cost of goods sold.

The Company recognized

net losses of $ 1,772,000 and $ 976,000 as the change in the fair value of these contracts for the three months ended September 30, 2022

and 2021, respectively.

The Company recognized net gains of $ 20,164,000 and $ 18,435,000 as the change in the fair value of these contracts

for the nine months ended September 30, 2022 and 2021, respectively.

Non Designated Derivative Instruments

– The classification and amounts of the Company’s derivatives not designated as hedging instruments, and related cash collateral

balances, are as follows (in thousands):

As of September 30, 2022

Type of Instrument

Balance Sheet Location

These derivatives may be designated and documented as cash flow hedges

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

the Company’s purchase and sales prices.

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

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

For the three months ended March 31, 2023 and 2022, the Company

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

Risk – Non-Designated Hedges – The Company uses derivative instruments to lock in prices for certain amounts of corn

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

These derivatives are not designated

for hedge accounting treatment.

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

in cost of goods sold.

The Company recognized net losses of $ 1,777,000 and net gains of $ 5,316,000 as the change in the fair value of

these contracts for the three months ended March 31, 2023 and 2022, respectively.

Designated Derivative Instruments – The classification and amounts of the Company’s derivatives not designated as

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

of March 31, 2023

of Instrument

Sheet Location

Cash collateral balance

1 unchanged sentence

Commodity contracts

Derivative assets

Derivative liabilities

As of December 31, 2021

Type of Instrument

Balance Sheet Location

Derivative instruments

of December 31, 2022

of Instrument

Sheet Location

Cash collateral balance

1 unchanged sentence

Commodity contracts

Derivative assets

Derivative liabilities

The above amounts represent the gross balances

of the contracts;

however, the Company does have a right of offset with each of its derivative brokers, but its intent is to close out

positions individually, therefore, they are reported at gross.

The classification and amounts of the Company’s

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

Realized Losses

For the Three Months

Ended September 30,

Type of Instrument

Statements of Operations Location

Commodity contracts

Cost of goods sold

Realized Gains

Type of Instrument

Statements of Operations Location

For the Nine Months Ended September 30,

Commodity contracts

Cost of goods sold

Unrealized Gains

For the Three Months

Ended September 30,

Type of Instrument

Statements of Operations Location

Derivative instruments

above amounts represent the gross balances of the contracts;

however, the Company does have a right of offset with each of its derivative

brokers, but the Company’s intent is to close out positions individually, therefore the positions are reported at gross.

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

are as follows (in thousands):

Gains (Losses)

the three months Ended

of Instrument

of Operations Location

Commodity contracts

Cost of goods sold

Unrealized Gains (Losses)

For the Nine Months

Ended September 30,

Type of Instrument

Statements of Operations Location

Gains (Losses)

the three months Ended March 31,

of Instrument

of Operations Location

Commodity contracts

Cost of goods sold

Long-term borrowings are summarized as follows

(in thousands):

September 30,

borrowings are summarized as follows (in thousands):

Kinergy line of credit

Orion term loan

Less unamortized debt discount

Less unamortized debt financing costs

Less short-term portion

Less current portion

Long-term debt

As of September 30, 2022, Kinergy had $ 30.7 million

in unused borrowing availability under its line of credit.

The Company believes it was in compliance with its covenants under the line

of credit as of September 30, 2022.

Availability – As of March 31, 2023, Kinergy had $ 41.6 million in unused borrowing availability under its line of credit.

COMMITMENTS AND CONTINGENCIES.

Sales Commitments – At September

30, 2022, the Company had entered into sales contracts with its major customers to sell certain quantities of alcohol and essential ingredients.

The Company had open alcohol indexed-price contracts for 92,771,000 gallons as of September 30, 2022 and open fixed-price alcohol sales

contracts totaling $ 101,427,000 as of September 30, 2022.

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

$ 17,274,000 as of September 30, 2022.

These sales contracts are scheduled to be completed throughout 2022 and 2023.

Purchase Commitments – At

September 30, 2022, the Company had indexed-price purchase contracts to purchase 13,988,000 gallons of alcohol and fixed-price purchase

contracts to purchase $ 45,599,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts to purchase $ 38,769,000

of corn from its suppliers as of September 30, 2022.

The Company had fixed-price purchase contracts for natural gas totaling $ 1,947,000

and indexed-price purchase contracts for natural gas totaling 4,463,000 MMBTU.

The Company also had future commitments for certain capital

projects totaling $ 46,796,000 .

These purchase commitments are scheduled to be satisfied throughout 2022 and 2023.

Litigation – General –

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

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

When the Company is aware of a claim or potential

claim, it assesses the likelihood of any loss or exposure.

If it is probable that a loss will result and the amount of the loss can be

reasonably estimated, the Company will record a liability for the loss.

If the loss is not probable or the amount of the loss cannot be

reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved

could be material.

While there can be no assurances, the Company does not expect that any of its pending legal proceedings will have a

material impact on the Company’s financial condition or results of operations.

PENSION AND RETIREMENT BENEFIT PLANS.

The Company sponsors a defined

benefit pension plan (the “Retirement Plan”) and a healthcare and life insurance plan (the “Postretirement Plan”).

The Retirement Plan is noncontributory,

and covers only “grandfathered” unionized employees at the Company’s Pekin, Illinois facility who fulfill minimum age

and service requirements.

Benefits are based on a prescribed formula based upon the employee’s years of service.

The Retirement

Plan, which is part of a collective bargaining agreement, covers only union employees hired prior to November 1, 2010.

The Company uses a December

31 measurement date for its Retirement Plan.

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

applicable regulations.

As of December 31, 2021, the Retirement Plan’s accumulated projected benefit obligation was $ 23.8 million,

with a fair value of plan assets of $ 20.0 million.

The underfunded amount of $ 3.8 million is recorded on the Company’s consolidated

Commitments – At March 31, 2023, the Company had entered into sales contracts with its major customers to sell certain

quantities of alcohol and essential ingredients.

The Company had open alcohol indexed-price contracts for 89,084,000 gallons as of March

31, 2023 and open fixed-price alcohol sales contracts totaling $ 110,251,000 as of March 31, 2023.

The Company had open fixed-price sales

contracts for essential ingredients totaling $ 13,652,000 and open indexed-price sales contracts of essential ingredients for 128,000

tons as of March 31, 2023.

These sales contracts are scheduled to be completed throughout 2023.

Commitments – At March 31, 2023, the Company had indexed-price purchase contracts to purchase 21,049,000 gallons of alcohol

and fixed-price purchase contracts to purchase $ 612,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts

to purchase $ 73,170,000 of corn from its suppliers as of March 31, 2023.

The Company had fixed-price purchase contracts for natural gas

totaling $ 487,000 as of March 31, 2023.

The Company also had future commitments for certain capital projects totaling $ 21,730,000 .

purchase commitments are scheduled to be satisfied throughout 2023 and 2024.

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

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

When the Company

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

If it is probable that a loss will result

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

If the loss is not probable

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

possible and the amount involved could be material.

While the Company can provide no assurances, the Company does not expect that any

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

PENSION PLANS.

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

Retirement Plan is noncontributory and covers only “grandfathered” unionized employees at the Company’s Pekin, Illinois

facility who fulfill minimum age and service requirements.

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

years of service.

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

November 1, 2010.

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

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

contribution required by applicable regulations.

As of December 31, 2022, the Retirement Plan’s accumulated projected benefit obligation

was $ 18.0 million, with a fair value of plan assets of $ 16.7 million.

The underfunded amount of $ 1.3 million is recorded on the Company’s

consolidated balance sheet in other liabilities.

For the three months ended March 31, 2023, the Retirement Plan’s net periodic

expense was $ 39,000 , comprised of $ 225,000 in interest cost and $ 62,000 in service cost, partially offset by $ 248,000 of expected return

on plan assets.

For the three months ended March 31, 2022, the Retirement Plan’s net periodic expense (income) was ($ 8,000 ), comprised

of $ 164,000 in interest cost and $ 101,000 in service cost, more than offset by $ 273,000 of expected return on plan assets.

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

at the Company’s Pekin, Illinois facility.

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

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

Benefit eligibility

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

As of December 31, 2022,

the Postretirement Plan’s accumulated projected benefit obligation was $ 3.9 million and is recorded on the Company’s consolidated

balance sheet in other liabilities.

For the three months ended September

30, 2022, the Retirement Plan’s net periodic benefit was $ 8,000 , comprised of $ 273,000 of expected return on plan assets, partially

offset by $ 164,000 in interest cost and $ 101,000 in service cost.

For the three months ended September 30, 2021, the Retirement Plan’s

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

expected return on plan assets.

For the nine months ended September 30, 2022, the Retirement Plan’s net periodic benefit was $ 24,000 ,

comprised of $ 819,000 of expected return on plan assets, partially offset by $ 492,000 in interest cost and $ 303,000 in service cost.

the nine months ended September 30, 2021, the Retirement Plan’s net periodic expense was $ 66,000 , comprised of $ 453,000 in interest

cost and $ 327,000 in service cost, partially offset by $ 714,000 of expected return on plan assets.

The Postretirement Plan provides

postretirement medical benefits and life insurance to certain “grandfathered” unionized employees.

Employees hired after December

31, 2000 are not eligible to participate in the Postretirement Plan.

The Postretirement Plan is contributory, with contributions required

at the same rate as active employees.

Benefit eligibility under the plan declines at age 65 from a defined benefit to a defined dollar

cap based upon years of service.

As of December 31, 2021, the Postretirement Plan’s accumulated projected benefit obligation was

$ 4.3 million and is recorded on the Company’s consolidated balance sheet in other liabilities.

The Company’s funding policy

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

For the three months ended September

30, 2022, the Postretirement Plan’s net periodic expense was $ 32,000 , comprised of $ 6,000 of interest cost and $ 26,000 of service

For the three months ended September 30, 2021, the Postretirement Plan’s net periodic expense was $ 42,000 , comprised of $ 10,000

of interest cost, $ 26,000 of service cost and $ 6,000 of amortization expense.

For the nine months ended September

30, 2022, the Postretirement Plan’s net periodic expense was $ 96,000 , comprised of $ 18,000 of interest cost and $ 78,000 of service

For the nine months ended September 30, 2021, the Postretirement Plan’s net periodic expense was $ 126,000 , comprised of $ 30,000

of interest cost, $ 78,000 of service cost and $ 18,000 of amortization expense.

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

For the three months ended March 31, 2023, the Postretirement Plan’s net periodic expense was $ 36,000 , comprised of

$ 46,000 of interest cost and $ 3,000 of service cost, partially offset by $ 13,000 in amortization of gains.

For the three months ended

March 31, 2022, the Postretirement Plan’s net periodic expense was $ 32,000 , comprised of $ 26,000 of interest cost and $ 6,000 of

service cost.

FAIR VALUE MEASUREMENTS.

The fair va lue

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

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

assets and liabilities;

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

for the asset or liability through corroboration with market data;

3 – Unobservable inputs – includes amounts derived from valuation models where

one or more significant inputs are unobservable.

For fair value measurements using significant

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

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

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

single mu tual funds.

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

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

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

Long-Lived Assets Held-for-Sale

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

31, 2021 of $ 1,000,000 .

These assets were sold during the three months ended September 30, 2022.

The fair values of these assets are based

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

The fair value hierarchy prioritizes the inputs

used in valuation techniques into three levels, as follows:

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

and liabilities;

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

the asset or liability through corroboration with market data;

● Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or

more significant inputs are unobservable.

For fair value measurements using significant unobservable inputs, a description of the inputs

and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period.

Pooled separate accounts –

Pooled separate accounts invest primarily in domestic and international stocks, commercial paper or single mutual funds.

The net asset

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

Each pooled separate account provides for redemptions

by the Retirement Plan at reported net asset values per share, with little to no advance notice requirement, therefore these funds are

classified within Level 2 of the valuation hierarchy.

Other Derivative Instruments –

2 unchanged sentences

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

The following table summarizes recurring and

nonrecurring fair value measurements by level at September 30, 2022 (in thousands):

The following table summarizes recurring and nonrecurring

fair value measurements by level at March 31, 2023 (in thousands):

Derivative financial instruments

3 unchanged sentences

Derivative financial instruments

Long-lived assets held-for-sale

Defined benefit plan assets(1) (pooled separate accounts):

4 unchanged sentences

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

(2) This category includes investments in funds comprised of

equity securities of large U.S.

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

for the underlying investments is used to value the fund.

(3) This category includes investments in funds comprised of

equity securities of small- and medium-sized U.S.

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

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

(4) This category includes investments in funds comprised of

equity securities of foreign companies including emerging markets.

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

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

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

funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value

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

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

is used to value the fund.

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

emerging markets.

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

is used to value the fund.

(5) This category includes investments in funds comprised of U.S.

5 unchanged sentences

the underlying investments is used to value the fund.

EARNINGS (LOSS) PER SHARE.

EARNINGS PER SHARE.

The following tables compute basic and diluted

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

Three Months Ended September 30, 2022

Preferred stock dividends

Basic and Diluted loss per share:

Loss available to common stockholders

Three Months Ended September 30, 2021

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

Three Months Ended

March 31, 2023

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

Nine Months Ended September 30, 2022

Net loss available to common stockholders

Three Months Ended

March 31, 2022

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

Nine Months Ended September 30, 2021

Preferred stock dividends

Income allocated to participating securities

Basic income per share:

Income available to common stockholders

Dilutive instruments

Diluted income per share:

Income available to common stockholders

Net loss available to common stockholders

There were an additional aggregate potentially

dilutive weighted-average shares of 964,000 from convertible securities outstanding for the three and nine months ended September 30,

dilutive weighted-average shares of 964,000 and 1,339,000 from convertible securities outstanding for the three months ended March 31,

2023 and 2022.

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

September 30, 2022 and 2021, as their effect would have been anti-dilutive.

At December 31, 2021, the Company had outstanding unexercised

warrants to purchase 8.9 million shares of its common stock at an exercise price of $ 9.76 per share.

These warrants expired unexercised

on April 28, 2022 .

SUBSEQUENT EVENTS.

Loan Facility – On November 7, 2022, the Company closed on a senior secured term loan credit facility with certain

funds managed by Orion Infrastructure Capital for up to $125 million.

The term loan allows for periodic draws in an aggregate amount

of up to $100 million, with an additional $25 million available upon the attainment of certain performance conditions.

November 7, 2022, no amounts had been drawn.

The six-year term loan has a fixed annual interest rate of 10% and will be issued at

an original issue discount of 1.5%.

The term loan does not require scheduled principal amortization payments but includes customary

prepayment obligations as well as semi-annual sweeps of a portion of excess cash flow commencing for the six-month period ending

December 31, 2023.

The Company’s obligations under the term loan are secured by all of the Company’s tangible and

intangible assets.

In connection

with the term loan facility, the Company will issue to the lenders an aggregate of up to 1,602,564 shares of the

Company’s common stock.

Operating Line of Credit Extension – On November 7, 2022, the Company amended Kinergy’s operating line of credit

to extend the maturity to 2027.

These securities were not considered in calculating diluted net loss per share for the three months ended March 31, 2023

and 2022, as their effect would have been anti-dilutive.

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

What changed 10-Q

Item 1. Financial Statements