What changed in this filing

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Item 1A. Risk Factors

2024-08-08 compared with 2024-05-08 · 114 added, 81 removed, 490 unchanged (28% of the section changed)

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hedging arrangements.

For example, for the year ended December 31, 2023, we recognized net losses of $8.0 million related to the change

in the fair values of hedging contracts.

For example, for the year ended December 31, 2023 and the six months ended June 30, 2024, we recognized net losses

of $8.0 million and net gains of $11.6 million, respectively, related to the change in the fair values of hedging contracts.

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

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which fuel-grade ethanol from our Pekin Campus is transported to market.

For example, in the first quarter of 2024, 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.

third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance which reduced sales volumes

In 2022, a lightning strike at the utility servicing our Pekin Campus disrupted our operations, cutting power to our facilities

and materially affecting our production, resulting in unexpected repair and maintenance costs, lost production and degradation in the

quality of work-in-progress inventories.

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

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

affected our results of operations.

example, in the first quarter of 2024, 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.

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.

In the third quarter of 2023 we experienced unusually high unscheduled production

downtime for repairs and maintenance which reduced sales volumes and profits.

In 2022, a lightning strike at the utility servicing our

Pekin Campus disrupted our operations, cutting power to our facilities and materially affecting our production, resulting in unexpected

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

In addition, in 2020, we

experienced closure of the Illinois River for lock repairs which required greater use of less cost-effective modes of product transport

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

in production or distribution, whether caused by labor difficulties, unscheduled downtimes and other operational hazards inherent in

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logistics and costs, and storage requirements;

● an overall increase in energy costs will negatively impact our production

costs generally and may critically impact certain high energy-intensive production technologies, such as our wet milling and multiple

distillation processes for the highest quality specialty alcohols;

overall increase in energy costs will negatively impact our production costs generally and

may critically impact certain high energy-intensive production technologies, such as our

wet milling and multiple distillation processes for the highest quality specialty alcohols;

and market transition away from combustion fuels and fuel-grade ethanol blending may threaten

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and totes, will negatively impact us.

legislation in the United States to address climate change issues, including at the federal, state and local levels, likely will continue.

This includes new or expanded cap-and-trade programs that may layer additional costs on any business that emits greenhouse gases.

legislation, including new or expanded cap-and-trade programs, could materially and adversely impact our production cost structure and

the market viability of our products.

legislation in the United States to address climate change issues, including at the federal, state and local levels, likely will

This may include new or expanded cap-and-trade programs that may layer additional costs on any business that emits

greenhouse gases.

New legislation, including new or expanded cap-and-trade programs, could materially and adversely impact our

production cost structure and the market viability of our products.

of these factors could materially and adversely harm our business, results of operations and financial condition.

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have incurred significant losses and negative operating cash flow in the past.

For example, for the three months ended March 31, 2024

and December 31, 2023, and the years ended December 31, 2023 and 2022, we incurred consolidated net losses of approximately $11.7 million,

$19.0 million, $28.0 million and $41.6 million, respectively.

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

expect to rely on cash on hand, cash, if any, generated from our operations, borrowing availability under our lines of credit and proceeds

from our future financing activities, if any, to fund all of the cash requirements of our business.

Additional losses and negative operating

cash flow may hamper our operations and impede us from expanding our business.

For example, for the three months ended June 30, 2024

and December 31, 2023, six months ended June 30, 2024 and the years ended December 31, 2023 and 2022, we incurred consolidated net losses

of approximately $3.1 million, $19.0 million, $14.8 million, $28.0 million and $41.6 million, respectively.

We may incur losses and negative

operating cash flow in the future.

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

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

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

are engaged in multiple capital improvement projects.

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the results we expect, including as to projected additional EBITDA and Adjusted EBITDA.

We are engaged in multiple capital

improvement projects to diversify and enhance our revenue streams and to expand margins and profitability by reducing costs.

These projects

have different timelines, returns on investment and risk profiles.

In addition, we must raise significant additional capital to complete

some of our projects, including our CCS project.

Our expected financial and other results from these projects are based on assumptions

around many factors, including their costs, timing, operation and market prices prevailing at project completion and thereafter, as well

as tax and other favorable environmental attributes associated with low carbon alcohol that may accrue to our benefit.

For example, our

assumptions around the anticipated results of our CCS project rely heavily on the tax benefits that may accrue to us under the Inflation

Reduction Act of 2022 as well as other favorable environmental attributes associated with carbon capture and storage and low carbon alcohol

These tax and other benefits may change, including as a result of new or repealed laws, new administrations and the implementation

or interpretation of existing laws, or the exhaustion of funds or benefits available under a particular program.

We can provide no assurances

that any particular benefit will be available to us upon completion of our CCS project, or thereafter, or any other capital improvement

Capital improvement projects

require significant outlays of capital and are often subject to material execution risks and delays.

Our CCS project in particular requires

Environmental Protection Agency, or EPA, approval but the EPA’s own projected timeline

for approval has lengthened and may lengthen further.

We may have insufficient financial resources, and we may be unable to raise sufficient

capital, to complete our projects timely or at all.

Although we intend to use reputable third-party contractors with expertise in their

fields to implement our projects, adverse conditions and events as well as delays in capital projects are not uncommon.

Moreover, the

projects’ interaction with existing processes may result in the degradation of other plant operations.

For example, operation of

our corn oil and high protein system at our Magic Valley facility has resulted in inconsistent product quality and degraded other operations

at the plant, including production rates.

We continue to work to resolve the system’s issues but can provide no assurance that the

system will perform as anticipated or perform sufficiently well to justify continued operation or expansion to our three other dry mills.

In the past, we have extended our expected completion dates for various projects and, as circumstances require, may have to do so again.

are engaged in multiple capital improvement projects to diversify and enhance our revenue streams and to expand margins and profitability

by reducing costs.

These projects have different timelines, returns on investment and risk profiles.

In addition, we must raise significant

additional capital to complete some of our projects, including our CCS project.

Our expected financial and other results from these projects

are based on assumptions around many factors, including their costs, timing, operation and market prices prevailing at project completion

and thereafter, as well as tax and other favorable environmental attributes associated with low carbon alcohol that may accrue to our

For example, our assumptions around the anticipated results of our CCS project rely heavily on the tax benefits that may accrue

to us under the Inflation Reduction Act of 2022 as well as other favorable environmental attributes associated with carbon capture and

storage and low carbon alcohol production.

These tax and other benefits may change, including as a result of new or repealed laws, new

administrations and the implementation or interpretation of existing laws, or the exhaustion of funds or benefits available under a particular

We can provide no assurances that any particular benefit will be available to us upon completion of our CCS project, or thereafter,

or any other capital improvement project.

improvement projects require significant outlays of capital and are often subject to material execution risks and delays.

Our CCS project

in particular requires Environmental Protection Agency, or EPA, approval

but the EPA’s own projected timeline for approval has lengthened and may lengthen further.

We may have insufficient financial resources,

and we may be unable to raise sufficient capital, to complete our projects timely or at all.

Although we intend to use reputable third-party

contractors with expertise in their fields to implement our projects, adverse conditions and events as well as delays in capital projects

are not uncommon.

Moreover, the projects’ interaction with existing processes may result in the degradation of other plant operations.

For example, operation of our corn oil and high protein system at our Magic Valley facility has resulted in inconsistent product quality

and degraded other operations at the plant, including production rates.

We continue to work to resolve the system’s issues but

can provide no assurance that the system will perform as anticipated or perform sufficiently well to justify continued operation or expansion

to our three other dry mills.

In the past, we have extended our expected completion dates for various projects and, as circumstances

require, may have to do so again.

addition, our CCS project may be adversely affected by the SAFE CCS Act or the United States Supreme Court’s decision in the case

of Chevron U.S.A., Inc.

Natural Resources Defense Council, Inc., or both, as discussed below.

can provide no assurances that our projects will be completed, or if completed, will be completed timely.

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in our operations would harm our operating performance.

We regularly incur significant expenses to repair, maintain and upgrade

our production facilities and operating equipment, estimated at an average of $30.0 million per year and $34.0 million for 2024.

and equipment we use to produce our alcohols and essential ingredients are complex, have many parts, and some operate on a continuous

We must perform routine equipment maintenance and must periodically replace a variety of parts such as motors, pumps, pipes and

electrical parts, and engage in other repairs.

In addition, our production facilities require periodic shutdowns to perform major maintenance

and upgrades.

regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, estimated at

an average of $30.0 million per year;

however, we expect these expenses will be approximately $34.0 million for 2024.

The machines and

equipment we use to produce our alcohols and essential ingredients are complex, have many parts, and some operate on a continuous basis.

We must perform routine equipment maintenance and must periodically replace a variety of parts such as motors, pumps, pipes and electrical

parts, and engage in other repairs.

In addition, our production facilities require periodic shutdowns to perform major maintenance and

Our production facilities also occasionally require unscheduled shutdowns to perform repairs.

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our biennial wet mill outage at our Pekin Campus.

The wet mill was offline for ten days, which will negatively impact sales and margins

The wet mill was offline for ten days, which negatively impacted sales and margins

for the second quarter.

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results of operations and financial condition.

CCS project may be adversely affected by the SAFE CCS Act.

The SAFE CCS Act was signed into law in Illinois in July 2024.

evaluating at our Pekin Campus, located in Illinois, a CCS project that will require significant financial and personnel resources.

CCS project is our most important ongoing capital improvement initiative.

The SAFE CCS Act establishes stringent safety, financial and

insurance requirements on CO 2 pipelines and imposes a moratorium on the construction of new CO 2 pipelines until

the federal Pipeline and Hazardous Materials Safety Administration finalizes its new safety rules or July 1, 2026, whichever occur sooner.

The SAFE CCS Act will result in increased compliance and other requirements likely adding costs and potentially adding time to complete

our CCS project.

We can provide no assurance that our CCS project will not be adversely affected by the SAFE CCS Act or that it will be

financially viable in light of any new requirements and potential delays.

may be adversely affected by food and drug laws and regulations, as well as related liabilities that may not be adequately covered by

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United States fuel-grade ethanol industry is highly dependent upon various federal and state laws and regulations and any changes in

those laws or regulations could have a material adverse effect on our results of operations, cash flows and financial condition.

The domestic market for fuel-grade ethanol is significantly impacted

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

Future demand for fuel-grade

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

the relative octane value of ethanol, constraints on the ability of vehicles to use higher ethanol blends, and the EPA’s, established

volumes from time to time, small refinery waivers, and other applicable environmental requirements.

or reinterpretations of those laws or regulations could have a material adverse effect on our results of operations, cash flows and financial

domestic market for fuel-grade ethanol is significantly impacted by federal mandates for volumes of renewable fuels (such as ethanol)

required to be blended with gasoline.

Future demand for fuel-grade ethanol will largely depend on incentives to blend ethanol into motor

fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of ethanol, constraints on the ability

of vehicles to use higher ethanol blends, and the EPA’s, established volumes from time to time, small refinery waivers, and other

applicable environmental requirements.

EPA has implemented the Renewable Fuel Standard under the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007.

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results of operations, cash flows and financial condition could be adversely impacted if the EPA reduces mandatory volumes or issues

significant small refinery waivers, or if any legislation is enacted that reduces volume requirements.

significant small refinery waivers, or if any legislation is enacted that reduces volume requirements or if existing legislation is reinterpreted

to have the same effect.

demand for fuel-grade ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance

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fuels is necessary before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation fuels.

United States Supreme Court’s decision in the case of Chevron U.S.A., Inc.

Natural Resources Defense Council, Inc.

in less industry-favorable rulemaking and agency interpretations of laws and regulations, which could materially and adversely affect

our results of operations, cash flows and financial condition as well as the business and financial prospects of certain capital improvement

projects, such as CCS.

United States Supreme Court, in the landmark case of Chevron U.S.A., Inc.

Natural Resources Defense Council, Inc., recently overturned

its prior doctrine of judicial deference to administrative interpretations of laws and regulations.

This outcome could materially and

adversely affect rulemaking and agencies’ interpretations favorable to the renewable fuels industry, such as the EPA’s administration

of the Renewable Fuel Standard.

This outcome could also materially and adversely affect the Treasury Department’s ability to promulgate

favorable regulations under the Inflation Reduction Act of 2022, including tax credits such as the 45Q carbon capture and storage tax

credits, and other industry-favorable tax credits.

Less industry-favorable rulemaking and agency interpretations of laws and regulations

could materially and adversely affect our results of operations, cash flows and financial condition as well as the financial prospects

of certain capital improvement projects, such as CCS.

Related to Ownership of our Common Stock

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

● the timing, cost and effects of, and our ability to fund, our capital

improvement projects, including with respect to our CCS project and our corn oil and high protein system at our Magic Valley facility;

timing, cost and effects of, and our ability to fund, our capital improvement projects, including

with respect to our CCS project and our corn oil and high protein system at our Magic Valley

● anticipated

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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 1A. Risk Factors