What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-08 · 402 added, 317 removed, 228 unchanged (76% of the section changed)

12 unchanged sentences

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

● our ability to fund, and the costs, timing and effects of, our plant

improvement initiatives and other capital projects, including our carbon capture and storage project;

ability to fund, and the costs, timing and effects of, our plant improvement initiatives and other capital projects, including our carbon

capture and storage, or CCS, project;

regulatory developments relating to these projects or to our business;

projected growth or contraction in the alcohol and essential ingredients markets in which we operate;

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We are also the largest producer of specialty alcohols in the United

We operate five alcohol production facilities.

Three of our production

facilities are located in Illinois, one is located in Oregon and another is located in Idaho.

We have an annual alcohol production capacity

of up to 350 million gallons, including both renewable fuel and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality

food- and beverage-grade alcohols.

Of this amount, we are able to produce up to 110 million gallons annually of specialty alcohols, depending

on our product mix among the highest quality beverage-grade alcohol and alcohols of other quality specifications.

We market and distribute

all of the alcohols produced at our facilities as well as alcohols produced by third parties.

In 2023, we marketed and distributed approximately

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

essential ingredients on a dry matter basis.

also specialize in break bulk distribution of specialty alcohols through our Eagle Alcohol subsidiary.

We purchase bulk alcohol from

suppliers and then store, denature, package, and resell alcohol products in smaller sizes, including tank trucks, totes and drums that

typically garner a premium price to bulk alcohols.

We deliver products to customers in the beverage, food, industrial and related-process

industries via our own dedicated trucking fleet and common carrier.

operate five alcohol production facilities.

Three of our production facilities are located in Illinois, one is located in Oregon and

another is located in Idaho.

We have an annual alcohol production capacity of up to 350 million gallons, including both renewable fuel

and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols.

Of this amount,

we are able to produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among the highest quality

beverage-grade alcohol and alcohols of other quality specifications.

We market and distribute all of the alcohols produced at our facilities

as well as alcohols produced by third parties.

In 2023, we marketed and distributed approximately 383 million gallons combined of our

own alcohols as well as fuel-grade ethanol produced by third parties, and over 1.5 million tons of essential ingredients on a dry matter

also specialize in break bulk distribution of specialty alcohols, through our Eagle Alcohol subsidiary, produced by us and

third-parties.

We then store, denature, package, and resell alcohol products in smaller sizes, including tank trucks, totes and drums

that typically garner a premium price to bulk alcohols.

We deliver products to customers in the beverage, food, industrial and

related-process industries via our own dedicated trucking fleet and common carrier.

report our financial and operating performance in three segments:

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

produce specialty alcohols, fuel-grade ethanol and essential ingredients, focusing on five key markets:

produce specialty alcohols, renewable fuel and essential ingredients, focusing on five key markets:

Health, Home & Beauty ;

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are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages.

All of our production facilities are currently operating except our

Magic Valley plant, which we temporarily hot-idled in January 2024 to minimize losses from negative regional crush margins and to expedite

the installation of additional equipment needed to achieve our intended production rate, quality and consistency from our corn oil and

high protein system.

We intend to restart Magic Valley production in late June or early July once the modifications are complete.

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

of our production facilities are currently operating.

In January 2024, we temporarily hot-idled our Magic Valley facility to minimize

losses from negative regional crush margins and to expedite the installation of additional equipment needed to achieve our intended production

rate, quality and consistency from our corn oil and high protein system at the facility.

We restarted our Magic Valley facility in July

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

at any idled facility.

and Distribution Segment

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

We market food-grade essential ingredients to human and pet food markets,

our feed products such as distillers grains primarily to export markets from our Pekin Campus, and other feed products to dairies and

feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock as a substitute for

corn and other sources of starch and protein.

We sell our corn oil to poultry, renewable diesel and biodiesel customers.

We do not market

essential ingredients from other producers.

market food-grade essential ingredients to human and pet food markets, our feed products such as distillers grains primarily to export

markets from our Pekin Campus, and other feed products to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein.

We sell our corn

oil to poultry, renewable diesel and biodiesel customers.

We do not market essential ingredients from other producers.

“Note 2 – Segments” to our Notes to Consolidated Financial Statements included elsewhere in this report for financial

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Initiatives and Outlook

We began the year with

a refined vision to produce a variety of essential ingredients and the highest-grade beverage alcohol in the industry while prioritizing

our carbon capture and storage, or CCS, initiative.

Although encouraged by our strategic and operational progress thus far in 2024, relatively

low but now improving crush margins and various weather factors impacted our first quarter financial results.

Despite these challenges,

specialty alcohol sales from our Pekin Campus increased year-over-year contributing toward an overall improved gross profit and higher

Adjusted EBITDA.

Our results also reflect our ability to leverage the unique capabilities of our Pekin Campus and our other production

assets to moderate the impact of crush margin fluctuations.

During the first quarter, we also completed our annual Scope I and II greenhouse

gas verifications as part of our sustainability efforts.

Our outlook for the remainder

of 2024 is positive.

Crush margins have continued to improve in the second quarter compared to the first quarter, and we expect further

improvement, particularly during the summer driving season.

While we forecast lower feed prices for the balance of the year, we have solid

corn inventories and see improved export demand for ethanol.

In addition, the EPA’s summer waiver for 15% blends will facilitate

sustained use of higher-blend renewable transportation fuel and support ethanol prices in the coming months.

We expect our recent repair

and maintenance work will result in more consistent and higher production rates, enhancing reliability and profitability.

to evaluate our path to increase margins, improve profitability and deliver the highest return to our shareholders by evaluating our current

portfolio of assets.

Our goal for our CCS project

is to create value for us, our customers and the communities surrounding our Pekin Campus by substantially reducing our carbon footprint.

Our Pekin Campus facilities, given their CO 2 production and their location, provide us with a unique CCS opportunity.

to negotiate the terms of our proposed CCS agreements with potential financial partners and with Vault 44.01, a leading CCS company focused

on the development, capitalization and operation of carbon storage assets.

Our plan is to work with Vault to safely transport CO 2

to a geological reservoir nearby and permanently and securely store the CO 2 deep underground.

As noted in our March update,

together with Vault, we are driving forward with our respective activities for system design, community outreach, vendor negotiations

and schedule alignment requirements to procure equipment for compression and to support the installation of additional power.

completed a 2-dimensional seismic geological survey and has begun data analysis.

Vault has also advanced the work required to submit the

EPA Class VI permit application.

Our goal is for Vault to submit its application by the end of the third quarter, which will impact the

timing of when we order CCS equipment and when our energy needs for the project must be resolved.

We expect the most significant outlays

of capital for our CCS project will begin in the first half of 2025.

Our CCS project provides

compelling economics that we believe we can enhance with more efficient, lower-cost energy production.

To this end, we are evaluating

multiple capital-light options.

We are in discussions with a highly regarded, independent energy company.

We engaged this potential partner

to complete a front-end engineering and design (FEED) study for an energy cogeneration facility that the partner would build, own, operate

and maintain onsite at our Pekin Campus.

The cogeneration facility would lower our capital expenditures, improve operating efficiencies

and reduce our forecasted long-term energy costs.

We also continue to explore an opportunity with our current utility provider to expand

energy supply capabilities as an alternative to cogeneration.

Longer term, the updated

guidelines around tax credits for including ethanol in the production of sustainable aviation fuel further validates our CCS efforts.

Overall, we are pleased with the progress we have made with our CCS initiative and the value we expect to deliver to stakeholders.

In the first quarter,

we sold 26 million gallons of specialty alcohol, up from 21 million gallons in the same period for 2023.

As discussed in our March update,

we have contracted to sell approximately 93 million gallons of fixed-price specialty alcohol for 2024 at an average premium to renewable

fuel of 31 cents per gallon.

Our specialty alcohols include highly differentiated 192 proof and low-moisture 200 proof grain neutral spirits

that create customer opportunities higher up the value chain.

We completed our biennial

wet mill outage at our Pekin Campus in April.

The wet mill was offline for ten days while we executed a scope of work with over 450 discrete

tasks focused on corrective and preventative maintenance as well as upgrades to plant infrastructure.

The plant has returned safely to

operation and is ramping up to target production rates.

Although these efforts will negatively impact sales and margins for the second

quarter, they will result in more consistent and higher production rates, improving reliability as we approach the summer driving season.

At our Magic Valley facility,

we are diligently working on our corn oil and high protein system to return the plant to more sustainable profitability by reducing the

impact of periodic low crush margins and higher destination corn basis costs.

As outlined in our March update, we are working with the

system vendor, Harvesting Technology, to achieve the intended production rate, quality and consistency of corn oil and high protein output

at the facility.

We will evaluate a roll-out of the system to our other plants based on the system’s performance at our Magic Valley

The equipment for the system modifications has been ordered and based on current delivery and installation schedules, we expect

to resume production in late June or early July.

Harvesting Technology continues to pay for the direct costs of equipment and design changes

associated with the system.

During this downtime we are accelerating routine maintenance activities to optimize plant efficiency upon

Over the last few years,

we have used cash flow from operations and excess liquidity to fund capital upgrades and repairs and maintenance to strengthen our facilities

and improve our long-term profitability.

While these additional expenses can impact short-term results, our recent efforts have begun

to yield operational improvements and we are confident of their long-term benefits.

the second quarter, we increased production at our Pekin Campus as a result of these initiatives, positioning us to benefit from

improving ethanol margins.

Our efforts further demonstrate our Pekin facilities’ advantages, including our ability to

consistently operate them profitably.

For example, despite over $5 million in expenses related to our biennial wet mill outage,

which was completed on time and within budget, our Pekin Campus generated over $10 million of gross profit in the second quarter, up

from over $4 million in the first quarter, reflecting the successful outcome of our capital upgrade and repairs and

maintenance programs as well as higher crush margins starting in June.

For the second quarter, the average Chicago crush margin

increased to 21 cents per gallon compared to slightly above breakeven in the first quarter.

In July, the average Chicago crush

margin rose further to 48 cents per gallon.

These improvements align with the optimism we expressed on our first quarter earnings

call concerning stronger crush margins, solid corn supplies and growing export demand.

Our Pekin Campus is fully

operational and is taking advantage of the favorable summer driving season economics.

We remain on track to achieve 90 million gallons

or more of specialty alcohol sales in 2024 and we are encouraged by the demand from existing and new customers.

Assuming crush margins

hold at or near present levels, we expect to deliver strong third quarter financial results.

Despite the strong performance

from our Pekin Campus, our consolidated second quarter results and Adjusted EBITDA were negatively impacted by the cost of our biennial

wet mill outage, preventative repairs and maintenance expenses at all our facilities, lower feed and carbon prices, particularly with

respect to our Columbia facility, and losses on our hedging activities.

We recorded $11.3 million in repairs and maintenance expense for

the second quarter and remain on track for $34 million in total repairs and maintenance expense for all plants in 2024.

We are capitalizing on

our Pekin Campus’s proximity to the Illinois River, which provides us with access to the Gulf of Mexico and an ability to export

We are building a second loading dock at our Pekin Campus that will increase barge volume, reduce our overall transportation

costs and provide critical redundancy.

We expect the cost of the second dock will be less than $3 million.

To generate long-term

sustainable profitability, we have been actively expanding our revenue streams, such as with initiatives to produce higher quality specialty

alcohols, a diversity of essential ingredients, including corn oil and high protein feed, and carbon capture and storage, or CCS.

that regulatory developments and carbon market fluctuations will affect our CCS initiative on an ongoing basis.

Most recently, Illinois

passed the SAFE CCS Act in July, establishing stringent safety, financial and insurance requirements for carbon dioxide pipelines.

Act also imposes a moratorium on the construction of new carbon pipelines until the federal Pipeline and Hazardous Materials Safety Administration

finalizes its new safety rules, or July 1, 2026, whichever occurs sooner.

This timing aligns with our current proposed CCS project permitting

and construction schedules.

We believe the Act will add clarity for the industry on CCS projects, although we do anticipate increased

compliance and other requirements.

The CCS market remains

For example, on the economic front, current prices in Low Carbon Fuel Standard markets are at historic lows and voluntary carbon

markets are nascent.

As a result, we cannot project with certainty, beyond the value of 45Q tax credits that begin at $85 per metric ton,

what the dollar values of the associated environmental attributes will be over the life of our proposed CCS project.

Given our plans to

take a capital-light approach to this project, we must align with our various partners so that each party bears appropriate risks while

retaining appropriate financial benefits.

Given these evolving dynamics, it is important that we pursue our CCS project with the right

We believe we are doing so effectively as we continue to work collaboratively with Vault and other parties.

We continue to invest

in our Western plants, which were built at a time when destination plants delivered a solid and differentiated value proposition.

As competition

and corn basis increased and carbon values declined, we began further investing in these plants to broaden our revenue streams and improve

profitability.

Our ultimate goal is to optimize their value, which could include operating them long-term as part of our portfolio of

production assets or evaluating the sale of one or both plants.

At our Magic Valley plant,

we continue to work with our high-protein system vendor, Harvesting Technology, to produce increased levels of corn oil and higher protein

feed products that garner higher prices.

In January, we hot-idled our Magic Valley plant due to negative regional crush margins and to

address the excess water and mass balance challenges that inhibited our ability to operate the plant at capacity and to achieve the target

results from our corn oil and high protein system.

We have implemented significant modifications that include installing additional equipment

and adjusting designed process flows.

In the second quarter, to optimize plant efficiency upon restart, we accelerated routine maintenance

activities, including tuning other major plant equipment and operating systems, performing routine cleanings and flushing prior process

We resumed operations at our Magic Valley facility in early July and we are encouraged by the initial results.

We are currently

running the plant at approximately 70% of capacity and expect to increase production rates in the coming weeks as we complete system upgrades.

We intend to do so carefully to ensure the process remains balanced and our products meet quality expectations.

We anticipate having a

clearer picture in late summer, and in time for our third quarter earnings call, of the effectiveness of these system modifications and

the general performance of the plant.

The system’s effectiveness will be measured against project goals and system production targets

to determine the advisability of rolling the system out to other plants.

In the second quarter,

we significantly improved production rates at our Columbia plant by addressing centrifuge limitations we experienced in the first quarter.

As a result, we increased capacity utilization rates in the second quarter and anticipate further improvements as the summer driving season

We are currently working on other ways to improve the facility’s profitability and expect to share additional information

in due course.

At our Pekin Campus, we

are seeing improvements of up to 10% of total ethanol production capacity utilization and up to 15% of total essential ingredients production.

Total capital expenditures through the second quarter were $9.3 million and we continue to expect $25 million in total capital expenditures

for the full year.

We continue to make progress

on the sustainability front and our customers have indicated their support of our efforts to continue to improve sustainability and lower

our carbon footprint.

In furtherance of those efforts, in July, our ICP and Pekin plants received the 2024 Bronze Medal Sustainability

rating from EcoVadis, which honors the top 35% of companies assessed.

EcoVadis is a globally recognized business sustainability rating

service that sets corporate sustainability standards.

Use of Non-GAAP Financial Measures

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Reconciliation of Adjusted

EBITDA to Consolidated Net Loss

EBITDA to Consolidated Net Income (Loss)

Three Months Ended

Six Months Ended

(in thousands) (unaudited)

Consolidated net loss

Consolidated net income (loss)

Interest expense, net

Interest income

Unrealized derivative gains

Unrealized derivative (gains) losses

Acquisition-related expense

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Financial Condition and Results of Operations” contained in this report.

performance metrics that we believe are important indicators of our results of operations include:

Alcohol Sales

(gallons in millions)

Campus renewable fuel gallons sold

production renewable fuel gallons sold

party renewable fuel gallons sold

renewable fuel gallons sold

alcohol gallons sold

and distribution

Production (gallons in millions)

Cost per Bushel

Average Market

PLATTS Ethanol

price per gallon

Corn cost per bushel

corn crush per gallon (1)

performance metrics that we believe are important indicators of our results of operations include the following:

Three Months Ended

Essential Ingredients Sold (thousand tons)

Pekin Campus:

Six Months Ended

Alcohol Sales (gallons in millions)

Pekin Campus renewable fuel gallons sold

Western production renewable fuel gallons sold

Third-party renewable fuel gallons sold

Total renewable fuel gallons sold

Specialty alcohol gallons sold

Total gallons sold

Sales Price per Gallon

Western production

Marketing and distribution

Alcohol Production (gallons in millions)

Western production

Corn Cost per Bushel

Western production

Average Market Metrics

PLATTS Ethanol price per gallon

CME Corn cost per bushel

Board corn crush per gallon (1)

Essential Ingredients Sold (in thousands of tons)

Distillers grains

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Syrup and other

Total Pekin Campus essential ingredients sold

Total Pekin Campus

Western production

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Syrup and other

Total Western production essential ingredients sold

Total Western Production

Total Essential Ingredients Sold

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Consolidated Total Return

(1) Assumes corn conversion of 2.80 gallons of alcohol per bushel

(2) Essential ingredient revenues as a percentage of total corn

costs consumed.

* Not meaningful

Sales, Cost of Goods Sold and Gross Loss

following table presents our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage

of net sales (in thousands, except percentages):

corn conversion of 2.80 gallons of alcohol per bushel of corn.

(2) Essential

ingredients revenues as a percentage of total corn costs consumed.

Sales, Cost of Goods Sold and Gross Profit

following table presents our net sales, cost of goods sold and gross profit in dollars and gross profit as a percentage of net sales

(in thousands, except percentages):

Three Months Ended June 30,

Six Months Ended

Cost of goods sold

Percentage of net sales

The decrease in our consolidated net sales for the three months ended

March 31, 2024 as compared to the same period in 2023 is attributable to lower average sales prices per gallon for both specialty alcohol

and renewable fuel as well as lower average sales prices of essential ingredients due to a lower commodity price environment.

Months ended June 30, 2024 as compared to the Three Months ended June 30, 2023

decrease in our consolidated net sales for the three months ended June 30, 2024 as compared to the same period in 2023 is primarily

attributable to lower average sales prices per gallon for both specialty alcohol and renewable fuel as well as lower average sales

prices of essential ingredients due to a lower commodity price environment.

In addition, we had lower sales of renewable fuel and

essential ingredients due to the hot-idling of our Magic Valley plant in January 2024 and the biennial wet mill outage at our Pekin

Campus for repairs and maintenance in April 2024.

Campus Production Segment

Net sales of alcohol from our Pekin Campus production segment declined

by $24.0 million, or 18%, to $108.4 million for the three months ended March 31, 2024 as compared to $132.4 million for the same period

Our total volume of production gallons sold increased by 1.3 million gallons, or 2%, to 57.1 million gallons for the three months

ended March 31, 2024 as compared to 55.8 million gallons for the same period in 2023.

The decrease of $0.48, or 20%, in the segment’s

average sales price per gallon for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales

from the segment by $26.5 million.

With the segment’s average sales price per gallon of $1.90 for the three months ended March 31,

2024, we generated $2.5 million more in net sales from the 1.3 million additional gallons of alcohol sold in the three months ended March

31, 2024 as compared to the same period in 2023.

Net sales of essential ingredients from our Pekin Campus production

segment declined by $16.9 million, or 27%, to $46.7 million for the three months ended March 31, 2024 as compared to $63.6 million for

the same period in 2023.

Our total volume of essential ingredients sold declined by 14,300 tons, or 6%, to 212,600 tons for the three

months ended March 31, 2024 from 226,900 tons for the same period in 2023.

The decrease of $60.73, or 22%, in the segment’s average

sales price per ton for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales from the segment

by $13.8 million.

With the segment’s average sales price per ton of $219.70 for the three months ended March 31, 2024, we generated

$3.1 million less in net sales from the 14,300 fewer tons of essential ingredients sold in the three months ended March 31, 2024 as compared

to the same period in 2023.

sales of alcohol from our Pekin Campus production segment declined by $27.0 million, or 21%, to $100.7 million for the three months ended

June 30, 2024 as compared to $127.7 million for the same period in 2023.

Our total volume of production gallons sold increased by 0.6

million gallons, or 1%, to 50.8 million gallons for the three months ended June 30, 2024 as compared to 50.2 million gallons for the

same period in 2023.

The decrease of $0.56, or 22%, in the segment’s average sales price per gallon for the three months ended

June 30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $28.1 million.

With the segment’s

average sales price per gallon of $1.98 for the three months ended June 30, 2024, we generated $1.1 million more in net sales from the

0.6 million additional gallons of alcohol sold in the three months ended June 30, 2024 as compared to the same period in 2023.

sales of essential ingredients from our Pekin Campus production segment declined by $14.6 million, or 27%, to $39.4 million for the three

months ended June 30, 2024 as compared to $54.0 million for the same period in 2023.

Our total volume of essential ingredients sold increased

by 2,700 tons, or 1%, to 210,000 tons for the three months ended June 30, 2024 from 207,300 tons for the same period in 2023.

of $72.80, or 28%, in the segment’s average sales price per ton for the three months ended June 30, 2024 as compared to the same

period in 2023 reduced our net sales from the segment by $15.0 million.

With the segment’s average sales price per ton of $187.48

for the three months ended June 30, 2024, we generated $0.4 million in additional net sales from the 2,700 additional tons of essential

ingredients sold in the three months ended June 30, 2024 as compared to the same period in 2023.

and Distribution Segment

sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $2.5 million, or 3%, to $70.2

million for the three months ended March 31, 2024 as compared to $84.5 million for the same period in 2023.

Our volume of third-party alcohol sold reported gross by the segment

declined by 4.2 million gallons, or 12%, to 29.7 million gallons for the three months ended March 31, 2024 as compared to 33.9 million

gallons for the same period in 2023.

With the segment’s average sales price per gallon of $1.83 for the three months ended March

31, 2024, we realized $7.7 million less in net sales from the 4.2 million fewer gallons of third-party alcohol sold gross in the three

months ended March 31, 2024 as compared to the same period in 2023.

$0.66 per gallon, or 27%, decrease in the segment’s average sales price per gallon for the three months ended March 31, 2024 as

million for the three months ended June 30, 2024 as compared to $72.7 million for the same period in 2023.

volume of third-party alcohol sold reported gross by the segment increased by 7.8 million gallons, or 29%, to 34.4 million gallons for

the three months ended June 30, 2024 as compared to 26.6 million gallons for the same period in 2023.

With the segment’s average

sales price per gallon of $2.04 for the three months ended June 30, 2024, we realized $15.9 million in additional net sales from the

7.8 million additional gallons of third-party alcohol sold gross in the three months ended June 30, 2024 as compared to the same period

$0.69 per gallon, or 25%, decrease in the segment’s average sales price per gallon for the three months ended June 30, 2024 as

compared to the same period in 2023 resulted in a $18.4 million decline in our net sales from third-party fuel-grade ethanol sold by

Production Segment

Net sales of alcohol from our Western production segment declined by

$0.7 million, or 3%, to $20.2 million for the three months ended March 31, 2024 as compared to $20.9 million for the same period in 2023.

Our total volume of alcohol sold increased by 3.3 million gallons, or 42%, to 11.2 million gallons for the three months ended March 31,

2024 as compared to 7.9 million gallons for the same period in 2023.

With the segment’s average sales price per gallon of $1.80

for the three months ended March 31, 2024, we generated $6.0 million more in net sales from the 3.3 million additional gallons of alcohol

sold in the three months ended March 31, 2024 as compared to the same period in 2023.

However, the decrease of $0.84, or 32%, in the segment’s

average sales price per gallon for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales

from the segment by $6.7 million.

Net sales of essential ingredients from our Western production segment

declined by $0.6 million, or 7%, to $7.8 million for the three months ended March 31, 2024 as compared to $8.4 million for the same period

Our total volume of essential ingredients sold increased by 28,400 tons, or 39%, to 100,800 tons for the three months ended March

31, 2024 from 72,400 tons for the same period in 2023.

With the segment’s average sales price per ton of $77.64 for the three months

ended March 31, 2024, we generated $2.2 million more in net sales from the 28,400 additional tons of essential ingredients sold in the

three months ended March 31, 2024 as compared to the same period in 2023.

The decrease of $37.73, or 33%, in our average sales price per

ton for the three months ended March 31, 2024 as compared to the same period in 2023 reduced our net sales of essential ingredients from

the segment by $2.8 million.

sales of alcohol from corporate and other declined by $1.1 million, or 27%, to $3.0 million for the three months ended March 31, 2024

sales of alcohol from our Western production segment declined by $26.9 million, or 61%, to $17.5 million for the three months ended June

30, 2024 as compared to $44.4 million for the same period in 2023.

Our total volume of alcohol sold decreased by 7.5 million gallons,

or 46%, to 9.0 million gallons for the three months ended June 30, 2024 as compared to 16.5 million gallons for the same period in 2023.

With the segment’s average sales price per gallon of $1.94 for the three months ended June 30, 2024, we generated $14.6 million

less in net sales from the 7.5 million fewer gallons of alcohol sold in the three months ended June 30, 2024 as compared to the same

period in 2023.

The decrease of $0.75, or 28%, in the segment’s average sales price per gallon for the three months ended June

30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $12.3 million.

sales of essential ingredients from our Western production segment declined by $8.5 million, or 59%, to $5.9 million for the three months

ended June 30, 2024 as compared to $14.4 million for the same period in 2023.

Our total volume of essential ingredients sold decreased

77,000 tons, or 49%, to 79,800 tons for the three months ended June 30, 2024 from 156,800 tons for the same period in 2023.

segment’s average sales price per ton of $74.56 for the three months ended June 30, 2024, we generated $5.7 million less in net

sales from the 77,000 fewer tons of essential ingredients sold in the three months ended June 30, 2024 as compared to the same period

The decrease of $17.41, or 19%, in our average sales price per ton for the three months ended June 30, 2024 as compared to the

same period in 2023 reduced our net sales of essential ingredients from the segment by $2.8 million.

sales of alcohol from corporate and other declined by $1.4 million, or 33%, to $2.8 million for the three months ended June 30, 2024

as compared to $4.2 million for the same period in 2023.

These sales are from Eagle Alcohol’s business.

of Goods Sold and Gross Profit (Loss)

Our consolidated gross loss declined to a gross

loss of $2.4 million for the three months ended March 31, 2024 from a gross loss of $3.2 million for the same period in 2023, representing

a gross margin of negative 1.0% for the three months ended March 31, 2024 and 2023.

With sales volumes relatively flat, our consolidated

gross loss declined due to slightly higher average commodity margins from proportionally lower production input costs despite lower sales

prices, and increased sales of higher-margin specialty alcohol as well as the positive impact of our efforts to increase returns on our

essential ingredients, reduce costs and expand our operating efficiencies.

Three significant additional factors impacted our

gross profit in the first quarter.

First, we recognized $4.9 million in incremental costs, compared to $8.6 million for the

same period in 2023, from our natural gas hedging activities, which benefitted us during the cold spike in January but resulted in losses

for the remainder of the quarter due to unseasonably moderate weather conditions and ensuing historically low natural gas prices resulting

from higher natural gas production and supply coupled with lower consumer demand.

Second, extreme cold weather conditions in January at

our Pekin Campus restricted barge deliveries and increased standby fees.

To manage inventory levels, we transported more product by rail,

a higher cost mode of transportation.

Cold weather conditions also required us to shift to lower margin feed products and reduced our

production rates across our Pekin Campus, hindering our ability to produce specialty alcohol at full capacity.

Finally, first quarter

production at our Colombia facility was hampered by equipment issues which we addressed by extending the facility’s regularly scheduled

outage in mid-March to install equipment upgrades that will increase reliability and reduce ongoing maintenance costs.

Our repairs and maintenance expense for the first

quarter was $7.5 million, an increase of $1.0 million compared to the same period in 2023.

This increase reflects accelerated

repairs and maintenance costs, and we remain on track to achieve our overall estimate of $34 million in repairs and maintenance expenses

Our consolidated gross profit declined to $7.6

million for the three months ended June 30, 2024 from $17.2 million for the same period in 2023, representing a gross margin of 3.2% and

5.4% for the three months ended June 30, 2024 and 2023, respectively.

With sales volumes of alcohols being relatively flat, our consolidated

gross profit declined due to higher repairs and maintenance expense, totaling $11.3 million across all plants, and lower average sales

prices for our essential ingredients, in particular, a compression on protein prices due to an increase in soybean meal supply, a consequence

of production growth in soy crush driven by the demand for renewable diesel.

Gross profit was also negatively impacted by historic low

carbon market pricing at our Columbia plant and significantly higher realized derivative losses of $2.9 million compared to $5.5 million

in derivative gains for the prior year period.

Campus Production Segment

Pekin Campus production segment’s gross profit, net of intercompany activity, improved by $6.5 million to a gross profit of $4.9

million for the three months ended March 31, 2024 as compared to a gross loss of $1.6 million for the same period in 2023.

Of this improvement,

$6.4 million is attributable to higher fuel-grade ethanol margins and $0.1 million is attributable to higher sales volumes.

Pekin Campus production segment’s gross profit, net of intercompany activity, declined by $3.7 million to a gross profit of $10.6

million for the three months ended June 30, 2024 as compared to $14.3 million for the same period in 2023.

Of this decline, $3.8 million

is attributable to lower alcohol sales margins, partially offset by $0.1 million attributable to higher sales volumes.

and Distribution Segment

marketing and distribution segment’s gross profit, net of intercompany activity, declined by $0.2 million to a gross profit of

$0.7 million for the three months ended March 31, 2024 as compared to a gross profit of $1.3 million for the same period in 2023.

this decline, $0.5 million is attributable to lower margins from sales of third-party fuel-grade ethanol and $0.1 million is attributable

to lower sales volumes for the three months ended March 31, 2024 as compared to the same period in 2023.

$0.8 million for the three months ended June 30, 2024 as compared to a gross profit of $1.0 million for the same period in 2023.

decline, $0.3 million is attributable to lower margins from sales of third-party fuel-grade ethanol, partially offset by $0.1 million

attributable to higher sales volumes.

Production Segment

Western production segment’s gross profit, net of intercompany activity, declined by $4.8 million to a gross loss of $3.7 million

for the three months ended March 31, 2024 as compared to a gross loss of $4.6 million for the same period in 2023.

for the three months ended June 30, 2024 as compared to a gross profit of $1.1 million for the same period in 2023.

Of this decline,

million is attributable to lower renewable fuel margins and $2.4 million is attributable to higher sales volumes of both renewable fuel

and essential ingredients at lower margins.

profit from corporate and other declined by $1.4 million to a gross profit of $0.3 million for the three months ended March 31, 2024

as compared to $1.7 million for the same period in 2023, all of which were from Eagle Alcohol’s business.

$7.8 million is attributable to lower renewable fuel margins, partially offset by $3.0 million attributable to lower sales volumes at

negative margins.

profit from corporate and other declined by $0.9 million to a gross loss of $0.1 million for the three months ended June 30, 2024 as

compared to a gross profit of $0.8 million for the same period in 2023, all of which were from Eagle Alcohol’s business.

Months ended June 30, 2024 as compared to the Six Months ended June 30, 2023

decrease in our consolidated net sales for the six months ended June 30, 2024 as compared to the same period in 2023 is primarily attributable

to lower average sales prices per gallon for both specialty alcohol and renewable fuel as well as lower average sales prices of essential

ingredients due to lower corn prices.

In addition, we had lower sales of renewable fuel and essential ingredients due to the hot-idling

of our Magic Valley plant in January 2024 and the biennial wet mill outage at our Pekin Campus for repairs and maintenance in April 2024.

Campus Production Segment

sales of alcohol from our Pekin Campus production segment declined by $51.1 million, or 20%, to $209.0 million for the six months ended

June 30, 2024 as compared to $260.1 million for the same period in 2023.

Our total volume of production gallons sold increased by 2.0

million gallons, or 2%, to 107.9 million gallons for the six months ended June 30, 2024 as compared to 105.9 million gallons for the

same period in 2023.

The decrease of $0.52, or 21%, in the segment’s average sales price per gallon for the six months ended June

30, 2024 as compared to the same period in 2023 reduced our net sales from the segment by $55.0 million.

With the segment’s average

sales price per gallon of $1.94 for the six months ended June 30, 2024, we generated $3.9 million more in net sales from the 2.0 million

additional gallons of alcohol sold in the six months ended June 30, 2024 as compared to the same period in 2023.

sales of essential ingredients from our Pekin Campus production segment declined by $31.5 million, or 27%, to $86.1 million for the six

months ended June 30, 2024 as compared to $117.6 million for the same period in 2023.

Our total volume of essential ingredients sold

declined by 11,600 tons, or 3%, to 422,600 tons for the six months ended June 30, 2024 from 434,200 tons for the same period in 2023.

The decrease of $67.12, or 25%, in the segment’s average sales price per ton for the six months ended June 30, 2024 as compared

to the same period in 2023 reduced our net sales from the segment by $29.1 million.

With the segment’s average sales price per

ton of $203.69 for the six months ended June 30, 2024, we generated $2.4 million less in net sales from the 11,600 fewer tons of essential

ingredients sold in the six months ended June 30, 2024 as compared to the same period in 2023.

and Distribution Segment

sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $32.4 million, or 21%, to $124.7

million for the six months ended June 30, 2024 as compared to $157.1 million for the same period in 2023.

volume of third-party alcohol sold reported gross by the segment increased by 3.6 million gallons, or 6%, to 64.1 million gallons for

the six months ended June 30, 2024 as compared to 60.5 million gallons for the same period in 2023.

With the segment’s average

sales price per gallon of $1.94 for the six months ended June 30, 2024, we realized $7.0 million in additional net sales from the 3.6

million additional gallons of third-party alcohol sold gross in the six months ended June 30, 2024 as compared to the same period in

$0.66 per gallon, or 25%, decrease in the segment’s average sales price per gallon for the six months ended June 30, 2024 as compared

to the same period in 2023 resulted in a $39.4 million decline in our net sales from third-party fuel-grade ethanol sold by the segment.

Production Segment

sales of alcohol from our Western production segment declined by $27.6 million, or 42%, to $37.7 million for the six months ended June

30, 2024 as compared to $65.3 million for the same period in 2023.

Our total volume of alcohol sold decreased by 4.2 million gallons,

or 17%, to 20.2 million gallons for the six months ended June 30, 2024 as compared to 24.4 million gallons for the same period in 2023.

With the segment’s average sales price per gallon of $1.86 for the six months ended June 30, 2024, we generated $7.8 million less

in net sales from the 4.2 million fewer gallons of alcohol sold in the six months ended June 30, 2024 as compared to the same period

The decrease of $0.81, or 30%, in the segment’s average sales price per gallon for the six months ended June 30, 2024

as compared to the same period in 2023 reduced our net sales from the segment by $19.8 million.

sales of essential ingredients from our Western production segment declined by $9.0 million, or 39%, to $13.8 million for the six months

ended June 30, 2024 as compared to $22.8 million for the same period in 2023.

Our total volume of essential ingredients sold decreased

48,600 tons, or 21%, to 180,600 tons for the six months ended June 30, 2024 from 229,200 tons for the same period in 2023.

With the segment’s

average sales price per ton of $76.28 for the six months ended June 30, 2024, we generated $3.7 million less in net sales from the 48,600

fewer tons of essential ingredients sold in the six months ended June 30, 2024 as compared to the same period in 2023.

The decrease of

$23.08, or 23%, in our average sales price per ton for the six months ended June 30, 2024 as compared to the same period in 2023 reduced

our net sales of essential ingredients from the segment by $5.3 million.

sales of alcohol from corporate and other declined by $2.5 million, or 30%, to $5.8 million for the six months ended June 30, 2024 as

compared to $8.3 million for the same period in 2023.

These sales are from Eagle Alcohol’s business.

of Goods Sold and Gross Profit (Loss)

consolidated gross profit declined to $5.2 million for the six months ended June 30, 2024 from $14.0 million for the same period in 2023,

representing a gross margin of 1.1% and 2.2% for the six months ended June 30, 2024 and 2023, respectively.

Our consolidated gross profit declined due to higher repairs and maintenance

expense and lower average sales prices for our essential ingredients, in particular, a compression on protein prices due to an increase

in soybean meal supply, a consequence of production growth in soy crush driven by the demand for renewable diesel.

Gross profit was also

negatively impacted by historic low carbon market pricing at our Columbia plant and significantly higher realized derivative losses compared

to the prior year period.

Campus Production Segment

Pekin Campus production segment’s gross profit, net of intercompany activity, increased by $2.9 million to a gross profit of $15.5

million for the six months ended June 30, 2024 as compared to $12.6 million for the same period in 2023.

Of this improvement, $2.6 million

is attributable to higher alcohol sales margins and $0.3 million attributable to higher sales volumes.

and Distribution Segment

marketing and distribution segment’s gross profit, net of intercompany activity, declined by $0.8 million to a gross profit of

$1.6 million for the six months ended June 30, 2024 as compared to a gross profit of $2.4 million for the same period in 2023.

is attributable primarily to lower margins from sales of third-party fuel-grade ethanol for the six months ended June 30, 2024 as compared

to the same period in 2023.

Production Segment

Our Western production segment’s gross profit, net of intercompany

activity, declined by $8.5 million to a gross loss of $12.0 million for the six months ended June 30, 2024 as compared to a gross loss

of $3.5 million for the same period in 2023.

Of this decline, $11.1 million is attributable to lower renewable fuel margins and hot-idling

costs attributable to our Magic Valley facility, partially offset by $2.6 million attributable to lower sales volumes at negative margins.

profit from corporate and other declined by $2.4 million to a gross profit of $0.1 million for the six months ended June 30, 2024 as

compared to $2.5 million for the same period in 2023, all of which were from Eagle Alcohol’s business.

General and Administrative Expenses

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thousands, except percentages):

general and administrative expenses

Our SG&A expenses were essentially flat for the three months ended

March 31, 2024 as compared to the same period in 2023.

However, as a percentage of net sales, our SG&A expenses increased primarily

due to additional legal and other costs associated with progress on our strategic capital improvement projects.

following table presents our interest expense, net, in dollars and as a percentage of net sales (in thousands, except percentages):

interest expense, net, increased for the three months ended March 31, 2024 as compared to the same period in 2023.

The less than $0.1

million period over period increase in interest expense, net, is primarily due to higher debt balances compared to the prior year period.

Loss Available to Common Stockholders

following table presents our net loss available to common stockholders in dollars and as a percentage of net sales (in thousands, except

percentages):

loss available to Common Stockholders

decrease in net loss available to common stockholders is primarily due to lower net sales at negative margins and a decline of $0.6 million

in asset impairments for the three months ended March 31, 2024 as compared to the same period in 2023.

Three Months Ended

Six Months Ended

Selling, general and administrative expenses

Percentage of net sales

Our SG&A expenses increased for the three and six months ended

June 30, 2024 as compared to the same periods in 2023.

The period over period increases in SG&A expenses are primarily due to increased

non-cash compensation and higher professional services fees from diligence work on strategic capital projects and other related up-front

project costs, such as with respect to our CCS project, which are expensed until the project is at a stage where costs are capitalized.

Income (Loss) Available to Common Stockholders

following table presents our net income (loss) available to common stockholders in dollars and as a percentage of net sales (in thousands,

except percentages):

Three Months Ended

Six Months Ended

Net income (loss) available to common stockholders

Percentage of net sales

The decrease in our net income available to common stockholders for

the three and six months ended June 30, 2024 as compared to the same periods in 2023 is primarily due to lower margins caused by increased

repairs and maintenance expense, realized derivative losses from hedging activities, higher up-front project costs, and other factors

affecting gross profit (loss) as discussed above.

and Capital Resources

During the three months ended March 31, 2024, we funded our operations

primarily from proceeds from cash on hand, cash flow from our operations, and Kinergy’s operating line of credit.

In addition to

funding our operations, our capital resources were used to advance our capital improvement projects and make an annual payment for our

acquisition of Eagle Alcohol.

As of March 31, 2024, we had $42.1 million in cash, cash equivalents and restricted cash, $25.9 million

available for borrowing under Kinergy’s operating line of credit and $65.0 million that may be available for capital improvement

projects under our Orion term loan, subject to certain conditions.

We believe we have sufficient liquidity to meet our anticipated working

capital, debt service and other liquidity needs for the next twelve months from the date of this report.

Year-End Liquidity Status

the six months ended June 30, 2024, we funded our operations primarily from cash on hand and Kinergy’s operating line of credit.

In addition to funding our operations, our capital resources were used to advance our capital improvement projects and make an annual

payment relating to our acquisition of Eagle Alcohol.

As of June 30, 2024, we had $28.4 million in cash, cash equivalents and restricted

cash, $30.3 million available for borrowing under Kinergy’s operating line of credit and $65.0 million that may be available for

capital improvement projects under our term loan with Orion Infrastructure Capital, subject to certain conditions.

We believe we have

sufficient liquidity to meet our anticipated working capital, debt service and other liquidity needs to fund our operations for at least

the next twelve months from the date of this report.

We must, however, raise significant additional capital to advance and complete some

of our capital improvement projects, including our CCS project.

Period-End Liquidity Status

believe that the following amounts provide insight into our liquidity and capital resources.

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Working capital ratio

March 31, 2024, we had approximately $53.0 million of net assets at our subsidiaries that were not available to be transferred to Alto

June 30, 2024, we had approximately $57.4 million of net assets at our subsidiaries that were not available to be transferred to Alto

Ingredients, Inc.

2 unchanged sentences

in Working Capital and Cash Flows

capital declined to $95.8 million at March 31, 2024 from $103.5 million at December 31, 2023 as a result of a decrease of $17.9 million

in current assets, partially offset by a decrease of $10.2 million in current liabilities.

Current assets declined primarily due to a decrease in inventories

from reduced production volumes.

Our current liabilities decreased primarily due to lower accounts payable

and accrued liabilities as a result of timing of payments, and a decrease in derivative liabilities from changes in commodity prices for

open contracts.

cash, cash equivalents and restricted cash declined by $3.4 million due to $6.0 million in cash used in our investing activities,

partially offset by $1.4 million in cash provided by our operating activities and $1.2 million in cash provided by our financing activities.

provided by our Operating Activities

cash flow provided by our operations was $1.4 million for the three months ended March 31, 2024 as compared to $23.3 million of cash

used in our operating activities for the same period in 2023.

Specific factors that contributed to the change in cash provided by our

operating activities include:

increase of $22.0 million related to payments of accounts payable and accrued liabilities

due to their timing;

increase of $9.9 million related to lower inventories due to reduced production volumes.

capital remained relatively flat at $103.9 million at June 30, 2024 compared to $103.5 million at December 31, 2023 due to a decrease

of $15.5 million in current liabilities and a decrease of $15.1 million in current assets.

assets declined primarily due to a decrease in cash, cash equivalents and restricted cash and a decrease in inventories, partially offset

by an increase in accounts receivable and derivative assets for the six months ended June 30, 2024 as compared to the same period in

current liabilities decreased primarily due to a decrease in accrued liabilities, derivative instruments and other current liabilities.

cash, cash equivalents and restricted cash declined by $17.1 million primarily due to $12.3 million in cash used in our operating activities

and $12.1 million in cash used in our investing activities, partially offset by $7.3 million in cash provided by our financing activities,

as further detailed below.

used in our Operating Activities

used $12.3 million in cash for our operating activities during the six months ended June 30, 2024 as compared to $12.9 million in cash

used in our operations for the same period in 2023.

Specific factors that contributed to the change in cash from our operating activities

increase of $11.5 million related to changes in inventories due to changes in commodity prices;

decrease of $15.0 million related to accounts payable and accrued liabilities due to the timing

amounts were partially offset by:

decrease of $5.1 million related to higher period-end commodity prices applicable to our

derivative instruments;

decrease of $1.5 million related to lower accounts receivable balances due to the timing

of collections;

● a decrease of $1.4 million in net loss due to lower sales volumes at

negative margins.

increase of $10.6 million related to changes in accounts receivable balances due to the timing

of our collections;

increase of $9.3 million in our net loss primarily due to lower commodity margins;

decrease of $6.4 million related to derivative instruments due to changes in commodity prices.

used in our Investing Activities

We used $4.6 million in cash during the quarter for capital expenditures

to fund additions to property and equipment and $1.4 million in cash to make contingent purchase price payments for our acquisition of

Eagle Alcohol.

Our capital expenditures for the first quarter are in line with our overall $25 million capital expenditure budget for

used $12.1 million in cash during the six months ended June 30, 2024 to fund $9.3 million of additions to property and equipment, including

for our capital improvement projects, and to fund $2.8 million of contingent purchase price payments for our acquisition of Eagle Alcohol.

provided by our Financing Activities

Cash provided by our financing activities was $1.2 million for the

three months ended March 31, 2024, which reflects net proceeds of $1.5 million from Kinergy’s operating line of credit, partially

offset by $0.3 million paid in preferred dividends.

provided by our financing activities was $7.3 million for the six months ended June 30, 2024, which reflects net proceeds of $8.0 million

from Kinergy’s operating line of credit, partially offset by $0.6 million paid in preferred stock dividends.

Operating Line of Credit

26 unchanged sentences

following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented:

Fixed-Charge Coverage

Ratio Requirement

Three Months Ended

Fixed-Charge Coverage Ratio Requirement

Ingredients, Inc.

has guaranteed all of Kinergy’s obligations under the credit facility.

As of March 31, 2024, Kinergy had an outstanding

As of June 30, 2024, Kinergy had an outstanding

balance of $38.6 million and $30.3 million of unused borrowing availability under the credit facility.

3 unchanged sentences

a first priority lien on certain of our assets and a second priority lien on certain assets of Kinergy and Alto Nutrients.

Lenders agreed to advance to us up to $125.0 million upon the satisfaction of certain conditions.

Interest accrues on the

unpaid principal amount of the Term Loan at a fixed rate of 10% per annum.

The Term Loan matures on November 7, 2028, or earlier

upon acceleration.

We must prepay amounts outstanding under the Term Loan on a semi-annual

basis in an amount equal to a percentage of our excess cash flow based on a specified leverage ratio, as follows:

(i) if our leverage

ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of our excess cash flow, (ii) if our leverage

ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50% of our excess cash flow,

and (iii) if our leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.

of March 31, 2024, the principal amount outstanding under the Term Loan was $60,000,000.

agreed to advance to us up to $125.0 million upon the satisfaction of certain conditions.

Interest accrues on the unpaid principal amount

of the Term Loan at a fixed rate of 10% per annum.

The Term Loan matures on November 7, 2028, or earlier upon acceleration.

must prepay amounts outstanding under the Term Loan on a semi-annual basis in an amount equal to a percentage of our excess cash flow

based on a specified leverage ratio, as follows:

(i) if our leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment

amount will equal 100% of our excess cash flow, (ii) if our leverage ratio is less than 3.0x and greater than or equal to 1.5x, then

the mandatory prepayment amount will equal 50% of our excess cash flow, and (iii) if our leverage ratio is less than 1.5x, then the mandatory

prepayment amount will equal 25% of our excess cash flow.

of June 30, 2024, the principal amount outstanding under the Term Loan was $60,000,000.

Cash Obligations

of March 31, 2024, we had future commitments for certain capital projects totaling $10.8 million.

These commitments are scheduled to

be satisfied through 2024.

connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $4.1 million in cash over the next two

years if certain targets are met.

of June 30, 2024, we had future commitments for certain capital projects totaling $7.8 million.

These commitments are scheduled to be

satisfied through 2024.

connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $2.7 million in cash in early 2025 if

certain targets are met.

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 2. Management’s Discussion and Analysis