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Item 2. Management’s Discussion and Analysis

2024-11-08 compared with 2024-08-08 · 667 added, 552 removed, 78 unchanged (94% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

following discussion and analysis should be read in conjunction with our consolidated financial statements and notes to consolidated

financial statements included elsewhere in this report.

This report and our consolidated financial statements and notes to consolidated

financial statements contain forward-looking statements, which generally include the plans and objectives of management for future operations,

including plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate

and profits we might earn if we are successful in implementing our business and growth strategies.

The forward-looking statements and

associated risks may include, relate to or be qualified by other important factors, including:

● fluctuations

in the market prices of alcohols and essential ingredients;

● fluctuations

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

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;

strategies for expanding, maintaining or contracting our presence in these markets;

● anticipated

trends in our financial condition and results of operations;

ability to distinguish ourselves from our current and future competitors.

are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the

case of a document incorporated by reference, as of the date of that document.

We do not undertake to update, revise or correct any forward-looking

statements, except as required by law.

of the factors described immediately above or referenced from time to time in our filings with the Securities and Exchange Commission

or in the “Risk Factors” section below could cause our financial results, including our net income or loss or growth in net

income or loss to differ materially from prior results, which in turn could, among other things, cause the price of our common stock

to fluctuate substantially.

produce and distribute renewable fuel and essential ingredients.

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

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:

(1) Pekin campus production, which includes the production and sale

of alcohols and essential ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our

Pekin Campus, (2) 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, and (3) Western production, which includes

the production and sale of renewable fuel and essential ingredients produced at our two western production facilities on an aggregated

basis, none of which are individually so significant as to be considered a separately reportable segment.

mission is to produce the highest quality, sustainable ingredients from renewable resources that make everyday products better.

to accomplish this goal in part by investing in our specialized and higher value specialty alcohol production and distribution infrastructure,

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

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

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

The following discussion and

analysis should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included

elsewhere in this report.

This report and our consolidated financial statements and notes to consolidated financial statements contain

forward-looking statements, which generally include the plans and objectives of management for future operations, including plans and

objectives relating to our future economic performance and our current beliefs regarding revenues we might generate and profits we might

earn if we are successful in implementing our business and growth strategies.

The forward-looking statements and associated risks may

include, relate to or be qualified by other important factors, including:

● fluctuations in the market prices of alcohols and essential

● fluctuations 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, or CCS, project;

● key regulatory developments relating to these projects or

to our business;

● the projected growth or contraction in the alcohol and essential

ingredients markets in which we operate;

● our strategies for expanding, maintaining or contracting our

presence in these markets;

● anticipated trends in our financial condition and results

of operations;

● our ability to distinguish ourselves from our current and

future competitors.

You are cautioned not to place

undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the case of a document incorporated

by reference, as of the date of that document.

We do not undertake to update, revise or correct any forward-looking statements, except

as required by law.

Any of the factors described

immediately above or referenced from time to time in our filings with the Securities and Exchange Commission or in the “Risk Factors”

section below could cause our financial results, including our net income or loss or growth in net income or loss to differ materially

from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

We produce and distribute renewable fuel and essential

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

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.

We 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.

We report our financial and

operating performance in three segments:

(1) Pekin campus production, which includes the production and sale of alcohols and essential

ingredients produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus, (2) 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, and (3) Western production, which includes the production and sale

of renewable fuel and essential ingredients produced at our two western production facilities on an aggregated basis, none of which are

individually so significant as to be considered a separately reportable segment.

Our mission is to produce the highest quality,

sustainable ingredients from renewable resources that make everyday products better.

We intend to accomplish this goal in part by investing

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

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

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

Production Segments

We produce specialty alcohols, renewable fuel and

essential ingredients, focusing on five key markets:

Health, Home & Beauty ;

3 unchanged sentences

and Renewable Fuels .

Products for the Health,

Home & Beauty markets 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 Industry & Agriculture markets include alcohols and other products for

paint applications and fertilizer s.

Products for Essential Ingredients markets include dried yeast, corn protein meal,

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

We also sell yeast

for human consumption.

Our products for the Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as

a feedstock for renewable diesel and biodiesel fuels.

produce our alcohols and essential ingredients at our production facilities.

Our production facilities located in Illinois are in the

heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide

our products to both domestic and international markets via truck, rail or barge.

Our production facilities located in Oregon and Idaho

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

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.

Products for the Health, Home & Beauty markets 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 Industry

& Agriculture markets include alcohols and other products for paint applications and fertilizer s.

Products for Essential

Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and liquid feed used

in commercial animal feed and pet foods.

We also sell yeast for human consumption.

Our products for the Renewable Fuels markets

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

We produce our alcohols and essential ingredients

at our production facilities.

Our production facilities located in Illinois are in the heart of the Corn Belt, benefit from relatively

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

markets via truck, rail or barge.

Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers,

offering significant timing, transportation cost and logistical advantages.

All of our production

facilities are currently operating.

However, unless there are meaningful improvements in overall economics at our Magic Valley

facility, we plan to idle the plant before the end of 2024, which we believe will have a positive impact on our financial results.

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 the intended production rate, quality and consistency from the

corn oil and high protein system at the facility.

We restarted our Magic Valley facility in July 2024.

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

market and distribute all of the alcohols and essential ingredients we produce at our facilities.

We also market and distribute alcohols

produced by third parties.

have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols and essential ingredients.

These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers,

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

renewable fuel customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and

gasoline marketers who blend fuel-grade ethanol into gasoline.

Our customers depend on us to provide a reliable supply of fuel-grade

ethanol and manage the logistics and timing of delivery.

Our customers collectively require fuel-grade ethanol volumes in excess of the

supplies we produce at our facilities.

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

for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service

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

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.

As market conditions change,

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

Marketing and Distribution Segment

We market and distribute all of the alcohols and

essential ingredients we produce at our facilities.

We also market and distribute alcohols produced by third parties.

We have extensive and long-standing customer relationships,

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

These customers include producers and distributors

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

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

Our renewable fuel customers are located throughout

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

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

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

We secure additional

fuel-grade ethanol supplies from third-party ethanol producers.

We arrange for transportation, storage and delivery of fuel-grade ethanol

purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest

from a variety of sources.

We market 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

information about our business segments.

Initiatives and Outlook

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

Management believes that

certain financial measures not in accordance with generally accepted accounting principles, or GAAP, are useful measures of operations.

Management provides EBITDA and Adjusted EBITDA as non-GAAP financial measures so that investors will have the same financial information

that management uses, which may assist investors in properly assessing our performance on a period-over-period basis.

We define EBITDA as unaudited

consolidated net income (loss) before interest expense, interest income, provision for income taxes and depreciation and amortization

We define Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, unrealized derivative

gains and losses, acquisition-related expense, asset impairments, provision for income taxes and depreciation and amortization expense.

A table is provided below

to reconcile Adjusted EBITDA to its most directly comparable GAAP measure, consolidated net income (loss).

EBITDA and Adjusted EBITDA

are not measures of financial performance under GAAP and should not be considered as alternatives to consolidated net income (loss) or

any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash

flows or as a measure of liquidity.

EBITDA and Adjusted EBITDA have limitations as analytical tools and you should not consider these

measures in isolation or as a substitute for analysis of our results as reported under GAAP.

Information reconciling

forward-looking EBITDA or Adjusted EBITDA to forward-looking consolidated net income (loss) would require a forward-looking statement

of consolidated net income (loss) prepared in accordance with GAAP, which is unavailable to us without unreasonable effort.

able to provide a quantitative reconciliation of forward-looking EBITDA or Adjusted EBITDA to forward-looking consolidated net income

(loss) because certain items required for reconciliation are uncertain, outside of our control and/or cannot reasonably be predicted,

such as net sales, cost of goods sold, unrealized derivative gains and losses, asset impairments and provision (benefit) for income taxes,

which we view as the most material components of consolidated net income (loss) that are not presently estimable.

Reconciliation of Adjusted

EBITDA to Consolidated Net Income (Loss)

See “Note 2 – Segments” to our

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

Current Initiatives and Outlook

In early November, we took

a significant step forward in our commitment to sustainability by finalizing a definitive CO 2 Transportation and Sequestration

Agreement with Vault 44.01 for our carbon capture and storage project, or CCS.

Under the terms of the agreement, Vault will handle the

transportation, injection and sequestration of CO 2 from our Pekin Campus to the Mt.

Simon sandstone formation in Illinois.

This partnership marks a critical milestone on our journey toward a more sustainable and prosperous future.

While we await EPA submission

and approval, address financing and source equipment, this agreement brings us closer to achieving our goals of lowering our carbon footprint

and monetizing the value of the biogenic CO 2 we produce at our Pekin Campus.

the third quarter of 2024, we improved our consolidated gross profit to $6.0 million and improved our Adjusted EBITDA to $12.2 million,

including $3.6 million in realized gains on derivatives for the quarter.

These results were primarily driven by an increase in our production

capabilities and uptime at our Pekin Campus, increasing its profitability despite fluctuating market conditions, compared to the third

quarter of 2023.

These results compare to $13.6 million of Adjusted EBITDA for the same period in 2023, including $6.2 million in realized

gains on derivatives and a cash grant of $2.8 million from the USDA’s Biofuel Producer Program.

third quarter began with solid ethanol crush margins supported by strong exports.

Domestic demand began to weaken as weather-related

events reduced miles driven.

Ethanol production remained relatively high, outpacing demand and resulting in higher ethanol inventory

levels and lower market prices.

In addition, in the third quarter, carbon prices were approximately 80% lower in Oregon and Washington

and 20% lower in California compared to the third quarter of 2023.

Although carbon prices remained low in October, we have begun to see

some price recovery.

increased productivity at our Pekin Campus wet mill to its highest level since 2020, reflecting in part the results of our successful

biennial repairs and maintenance outage in April 2024.

This translated into higher specialty alcohol production in the third quarter

of 2024, reaching 42% of total sales volume at our Pekin Campus, seven percentage points higher than for the same period last year.

remain on track to sell 90 million gallons of specialty alcohols in 2024 and expect to match this volume in 2025.

the fourth quarter, we expect corn prices to remain low, reflecting a good 2024 harvest, which we anticipate will result in a strong

supply carryout and attractive prices into 2025.

However, with domestic corn prices lower than international prices, demand for United

States corn exports will likely increase, straining logistics and driving up transportation costs.

Moreover, when domestic corn prices

are low, suppliers typically require that prices cover at least their costs, driving up corn basis.

This dynamic is one reason we expanded

our corn storage capacity at our Pekin Campus and are considering a further increase in storage capacity at the site.

higher corn transportation costs impact all ethanol producers, they have a more substantial impact on our Western operations, for which

we source corn supplies from the Midwest, compared to Midwest ethanol producers that have access to local corn supplies and cheaper corn

our Magic Valley plant, we completed upgrades to Harvesting Technology’s system to capture high protein and corn oil products and

restarted the plant in July to prove out the system and benefit from the positive crush margins at the time.

In October, the Magic Valley

facility consistently achieved average ethanol production rates at full capacity, the protein content yield from the plant reached 50%

or greater, and we were able to expand our corn oil yields.

This successful restart and operation has informed us of the technology system’s

capabilities as we consider system deployment at our other dry mills.

Unfortunately, recent increases in regional corn basis and declining

market prices for protein and corn oil have resulted in overall margin compression, outweighing the economic benefits of our plant improvements.

We will continue to explore operational opportunities and assess market trends, but unless there are meaningful improvements in overall

economics at the facility, we plan to idle the plant before the end of 2024, which we believe will have a positive impact on our financial

address these challenges, we continue to pursue opportunities to maximize the Western plants’ strengths and advantages.

engaged Guggenheim Securities to actively explore our alternatives to monetize or optimize these assets, including through potential

partnerships.

while our Columbia facility is also experiencing margin compression, the combination of lower transportation costs, premiums earned on

low-carbon ethanol and revenues generated from the sale of CO 2 make the plant more economically resilient than our Magic Valley

continue to modernize our equipment and facilities to improve reliability, lower our operating costs and reduce our carbon footprint.

For example, we are currently building a second alcohol loading dock at our Pekin Campus.

Our goal for the project is to improve our

river logistics by expediting the shipping process, adding redundancy and expanding our capabilities to accommodate a wider array of

We expect this project will yield a synergistic effect with our existing facilities and increase overall loading efficiencies.

Our anticipated project cost is $3.0 million.

The project is scheduled for completion in 2025.

Sustainability

recently completed our sustainability report for 2023 and increased our disclosures on topics such as environmental, health, safety,

quality and social metrics.

Our core values of responsibility, integrity and quality drive our mission to produce the highest quality,

sustainable ingredients that make everyday products better.

We proudly offer 100% bio-based renewable products from our specialty alcohols

and essential ingredients to renewable fuels and plant-based proteins.

At our highly efficient dry grind facilities, we are striving

for carbon intensity scores below 50 by optimizing efficiency, upgrading energy infrastructure and selecting sustainable feedstocks.

Our dedication to sustainability and social responsibility extends to our customers, employees, investors, partners, suppliers and consumers,

as well as our focus on product quality and safety.

conducted materiality assessments with internal and external stakeholders and identified multiple long-term market opportunities to viably

expand our bio-based renewable offerings.

The third-party certifications we earned include such areas as oversight on risk management;

chemical storage, handling, transportation and disposal;

multiple food safety initiatives;

quality management;

good manufacturing practices

and requirements for all active pharmaceutical ingredients and excipient products;

and supply chains for waste streams.

employ a variety of risk management strategies to mitigate the price volatility of different commodities throughout the year as a normal

course of business.

These strategies may include managing the spread between corn and ethanol prices, otherwise known as the crush margin.

We may also take positions on corn and natural gas.

Currently, our core strategy is to hedge the premium over fuel grade ethanol of our

specialty alcohol contracts that have fixed sales prices of up to one year or longer.

Using derivatives, we lock-in certain premiums

for the duration of the specialty alcohol contract over production that otherwise would be sold as ethanol.

For positions that settle,

we record the cumulative unrealized gains or losses on those positions since inception to realized.

On the remaining unsettled positions,

the change in market values measured at the end of the reporting period is reflected as unrealized.

Unrealized amounts are not determinate

of amounts that will be realized in future periods.

However, we believe that the most accurate method to assess the value or obligation

to be realized in the future, measured as of a specific date, is to note the amounts on our balance sheet.

The net derivative asset or

liability amount on the balance sheet denotes the amount that we would realize if we liquidated all of our positions as of that

specific period-end date.

Use of Non-GAAP Financial

believes that certain financial measures not in accordance with generally accepted accounting principles, or GAAP, are useful measures

of operations.

Management provides EBITDA and Adjusted EBITDA as non-GAAP financial measures so that investors will have the same financial

information that management uses, which may assist investors in properly assessing our performance on a period-over-period basis.

define EBITDA as unaudited consolidated net income (loss) before interest expense, interest income, provision for income taxes and depreciation

and amortization expense.

We define Adjusted EBITDA as unaudited consolidated net income (loss) before interest expense, interest income,

unrealized derivative gains and losses, acquisition-related expense, asset impairments, provision for income taxes and depreciation and

amortization expense.

table is provided below to reconcile Adjusted EBITDA to its most directly comparable GAAP measure, consolidated net income (loss).

and Adjusted EBITDA are not measures of financial performance under GAAP and should not be considered as alternatives to consolidated

net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities

as an indicator of cash flows or as a measure of liquidity.

EBITDA and Adjusted EBITDA have limitations as analytical tools and you should

not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.

reconciling forward-looking EBITDA or Adjusted EBITDA to forward-looking consolidated net income (loss) would require a forward-looking

statement of consolidated net income (loss) prepared in accordance with GAAP, which is unavailable to us without unreasonable effort.

We are not able to provide a quantitative reconciliation of forward-looking EBITDA or Adjusted EBITDA to forward-looking consolidated

net income (loss) because certain items required for reconciliation are uncertain, outside of our control and/or cannot reasonably be

predicted, such as net sales, cost of goods sold, unrealized derivative gains and losses, asset impairments and provision (benefit) for

income taxes, which we view as the most material components of consolidated net income (loss) that are not presently estimable.

Reconciliation

of Adjusted EBITDA to Consolidated Net Loss

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands) (unaudited)

Consolidated net income (loss)

Consolidated net loss

Interest expense, net

7 unchanged sentences

Adjusted EBITDA

Accounting Policies and Estimates

discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these

financial statements requires us to make estimates and judgments 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 net sales and expenses for each

We believe that of our significant accounting policies, the following critical accounting policies and estimates are those policies

that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s

most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are

inherently uncertain:

Critical Accounting Policies and Estimates

Our discussion and analysis

of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America.

The preparation of these financial statements requires

us to make estimates and judgments 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 net sales and expenses for each period.

We believe that

of our significant accounting policies, the following critical accounting policies and estimates are those policies that we believe are

the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult,

subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain:

accounting for business combinations;

1 unchanged sentence

impairment of long-lived assets and held-for-sale classification;

valuation allowance for deferred taxes and derivative instruments.

Except as noted below, these significant accounting principles are

more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical

Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.

of Operations

Financial Information

following selected financial information should be read in conjunction with our consolidated financial statements and notes to our consolidated

financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of

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

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

allowance for deferred taxes and derivative instruments.

Except as noted below, these significant accounting principles are more fully

described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Results of Operations

Selected Financial Information

The following selected financial

information should be read in conjunction with our consolidated financial statements and notes to our consolidated financial statements

included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition

and Results of Operations” contained in this report.

Certain performance metrics

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

Three Months Ended

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

September 30,

Nine Months Ended

September 30,

Sales (gallons in millions)

renewable fuel gallons sold

Western production renewable

fuel gallons sold

renewable fuel gallons sold

Total renewable fuel gallons

alcohol gallons sold

Total gallons sold

2 unchanged sentences

Marketing and distribution

Alcohol Production (gallons in millions)

Western production

Production (gallons in millions)

Corn Cost per Bushel

1 unchanged sentence

Average Market Metrics

PLATTS Ethanol price per gallon

PLATTS Ethanol price per

CME Corn cost per bushel

Board corn crush per gallon

Essential Ingredients Sold (in thousands of tons)

Ingredients Sold (in thousands of tons)

Distillers grains

4 unchanged sentences

Total Pekin Campus

Western production

Distillers grains

1 unchanged sentence

Total Western Production

Total Essential Ingredients Sold

Essential Ingredients return % (2)

Total Essential Ingredients

Essential Ingredients

Pekin Campus Return

1 unchanged sentence

Consolidated Total Return

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

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

(2) Essential ingredients revenues as a percentage of total corn costs consumed.

Net Sales, Cost of

Goods Sold and Gross Profit

The 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

September 30,

Nine Months Ended

September 30,

Cost of goods sold

Percentage of net sales

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

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 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

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

* Not meaningful

Three Months ended September 30, 2024 as compared to the Three Months

ended September 30, 2023

The decline in our consolidated

net sales for the three months ended September 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, which we restarted in July 2024, but which did not reach average

full capacity until October 2024.

Pekin Campus Production Segment

Net sales of alcohol from our

Pekin Campus production segment declined by $22.1 million, or 17%, to $106.5 million for the three months ended September 30, 2024 as

compared to $128.6 million for the same period in 2023.

Our total volume of production gallons sold increased by 0.8 million gallons,

or 2%, to 52.8 million gallons for the three months ended September 30, 2024 as compared to 52.0 million gallons for the same period in

The decrease of $0.46, or 19%, in the segment’s average sales price per gallon for the three months ended September 30, 2024

as compared to the same period in 2023 reduced our net sales from the segment by $23.7 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

With the segment’s average sales

price per gallon of $2.02 for the three months ended September 30, 2024, we generated $1.6 million more in net sales from the 0.8 million

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

Net sales of essential ingredients

from our Pekin Campus production segment declined by $10.4 million, or 20%, to $41.2 million for the three months ended September 30,

2024 as compared to $51.6 million for the same period in 2023.

Our total volume of essential ingredients sold increased by 10,400 tons,

or 5%, to 236,600 tons for the three months ended September 30, 2024 from 226,200 tons for the same period in 2023.

The decrease of $54.06,

or 24%, in the segment’s average sales price per ton for the three months ended September 30, 2024 as compared to the same period

in 2023 reduced our net sales from the segment by $12.2 million.

With the segment’s average sales price per ton of $174.21 for the

three months ended September 30, 2024, we generated $1.8 million in additional net sales from the 10,400 additional tons of essential

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

Marketing and Distribution

Net sales of alcohol from our marketing and distribution

segment, excluding intersegment sales, declined by $4.3 million, or 7%, to $54.6 million for the three months ended September 30, 2024

as compared to $58.9 million for the same period in 2023.

The $0.52 per gallon, or 19%, decrease in the segment’s

average sales price per gallon for the three months ended September 30, 2024 as compared to the same period in 2023 resulted in a $11.4

million decline in our net sales from third-party fuel-grade ethanol sold by the segment.

Our volume of third-party alcohol sold reported

gross by the segment increased by 3.3 million gallons, or 15%, to 25.2 million gallons for the three months ended September 30, 2024 as

compared to 21.9 million gallons for the same period in 2023.

With the segment’s average sales price per gallon of $2.17 for the

three months ended September 30, 2024, we realized $7.1 million in additional net sales from the 3.3 million additional gallons of third-party

alcohol sold gross in the three months ended September 30, 2024 as compared to the same period in 2023.

Western Production Segment

Net sales of alcohol from our

Western production segment declined by $20.8 million, or 36%, to $36.4 million for the three months ended September 30, 2024 as compared

to $57.2 million for the same period in 2023.

Our total volume of alcohol sold decreased by 4.2 million gallons, or 19%, to 18.0 million

gallons for the three months ended September 30, 2024 as compared to 22.2 million gallons for the same period in 2023.

The decrease of

$0.55, or 21%, in the segment’s average sales price per gallon for the three months ended September 30, 2024 as compared to the

same period in 2023 reduced our net sales from the segment by $12.3 million.

With the segment’s average sales price per gallon of

$2.02 for the three months ended September 30, 2024, we generated $8.5 million less in net sales from the 4.2 million fewer gallons of

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

Net sales of essential ingredients

from our Western production segment declined by $7.4 million, or 42%, to $10.4 million for the three months ended September 30, 2024 as

compared to $17.8 million for the same period in 2023.

Our total volume of essential ingredients sold decreased 42,200 tons, or 21%, to

154,800 tons for the three months ended September 30, 2024 from 197,000 tons for the same period in 2023.

The decrease of $23.33, or 26%,

in our average sales price per ton for the three months ended September 30, 2024 as compared to the same period in 2023 reduced our net

sales of essential ingredients from the segment by $4.6 million.

With the segment’s average sales price per ton of $67.24 for the

three months ended September 30, 2024, we generated $2.8 million less in net sales from the 42,200 fewer tons of essential ingredients

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

Corporate and other

Net sales of alcohol from corporate

and other declined by $1.4 million, or 34%, to $2.7 million for the three months ended September 30, 2024 as compared to $4.1 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 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, 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

$0.8 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 June 30, 2024 as compared to a gross profit of $1.1 million for the same period in 2023.

Of this decline,

$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

Cost of Goods Sold and Gross Profit

Our consolidated gross profit improved to $6.0

million for the three months ended September 30, 2024 from $4.2 million for the same period in 2023, representing a gross margin of 2.4%

and 1.3% for the three months ended September 30, 2024 and 2023, respectively.

With total alcohol sales volumes essentially flat, our

consolidated gross profit increased due to lower overall corn costs, primarily from lower corn basis costs, which declined $0.63 per bushel

compared to the same period in 2023.

Our lower corn costs were, however, partially offset by a $0.10 decline in market crush margins to

$0.41 per gallon compared to the same period in 2023.

Our Pekin Campus contributed $6.2 million to gross

profit, improving tenfold year-over-year, in part due to productivity and other improvements resulting from our scheduled repairs and

maintenance in April 2024 as well as a positive shift in sales mix to higher margin products.

In particular, we sold 4.0 million gallons

more of specialty alcohols for the three months ended September 30, 2024 compared to the same period in 2023.

These improvements were

partially offset by a 24% decline in our average sales price for essential ingredients compared to the same period in 2023.

Our Western facilities generated a gross loss of

$2.3 million for the three months ended September 30, 2024 compared to a gross profit of $1.5 million for the same period in 2023.

$3.8 million year-over-year decline in gross profit is largely attributable to production downtime at our Magic Valley facility and higher

costs associated with upgrading equipment at the plant and restarting the facility at the beginning of the third quarter of 2024.

Production at our Magic Valley plant did not reach average full capacity

until October 2024.

our Columbia facility generated $1.6 million less in high margin revenue due to an 80% drop in carbon prices in the region.

realized consolidated derivative gains of $3.6 million for the three months ended September 30, 2024 compared to $6.2 million 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

During the third quarter of 2024, on a consolidated basis, we recorded $8.1 million dollars in repairs and maintenance

expense, in line with the prior-year quarter, and we are on track to meet our 2024 full-year estimate of $34.0 million dollars of repairs

and maintenance expense.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit, net of intercompany activity, increased by $5.9 million to $7.0 million for the three months ended September 30, 2024 as compared

to $1.1 million for the same period in 2023.

Of this increase, $5.8 million is attributable to higher margins and $0.1 million is attributable

to higher sales volumes.

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit, net of intercompany activity, increased by $0.4 million to $1.3 million for the three months ended September 30, 2024 as

compared to a gross profit of $0.9 million for the same period in 2023.

Of this improvement, $0.3 million is attributable to higher margins

from sales of third-party fuel-grade ethanol and $0.1 million attributable to higher sales volumes.

Western Production Segment

Our Western production segment’s gross profit,

net of intercompany activity, declined by $3.8 million to a gross loss of $2.1 million for the three months ended September 30, 2024 as

compared to a gross profit of $1.7 million for the same period in 2023.

Of this decline, $4.2 million is attributable to lower renewable

fuel margins, partially offset by $0.4 million attributable to lower sales volumes at negative margins.

Corporate and other

Gross profit from corporate

and other declined by $0.7 million to a gross loss of $0.2 million for the three months ended September 30, 2024 as compared to a gross

profit of $0.5 million for the same period in 2023, all of which were from Eagle Alcohol’s business.

Nine Months ended September 30, 2024 as compared to the Nine Months

ended September 30, 2023

The decrease in our consolidated

net sales for the nine months ended September 30, 2024 as compared to the same period in 2023 is primarily attributable to lower average

sales prices per gallon for both specialty alcohols 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.

Pekin Campus Production Segment

Net sales of alcohol from our

Pekin Campus production segment declined by $73.1 million, or 19%, to $315.5 million for the nine months ended September 30, 2024 as compared

to $388.6 million for the same period in 2023.

Our total volume of production gallons sold increased by 2.8 million gallons, or 2%, to

160.7 million gallons for the nine months ended September 30, 2024 as compared to 157.9 million gallons for the same period in 2023.

decrease of $0.50, or 20%, in the segment’s average sales price per gallon for the nine months ended September 30, 2024 as compared

to the same period in 2023 reduced our net sales from the segment by $78.6 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

With the segment’s average sales price per gallon

of $1.96 for the nine months ended September 30, 2024, we generated $5.5 million more in net sales from the 2.8 million additional gallons

of alcohol sold in the nine months ended September 30, 2024 as compared to the same period in 2023.

Net sales of essential ingredients

from our Pekin Campus production segment declined by $41.9 million, or 25%, to $127.3 million for the nine months ended September 30,

2024 as compared to $169.2 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.

Our total volume of essential ingredients sold decreased by 1,200 tons,

or less than 1%, to 659,200 tons for the nine months ended September 30, 2024 from 660,400 tons for the same period in 2023.

of $63.13, or 25%, in the segment’s average sales price per ton for the nine months ended September 30, 2024 as compared to the

same period in 2023 reduced our net sales from the segment by $41.7 million.

With the segment’s average sales price per ton of $193.11

for the nine months ended September 30, 2024, we generated $0.2 million less in net sales from the 1,200 fewer tons of essential ingredients

sold in the nine months ended September 30, 2024 as compared to the same period in 2023.

Marketing and Distribution

Net sales of alcohol from our marketing and distribution

segment, excluding intersegment sales, declined by $36.7 million, or 17%, to $179.3 million for the nine months ended September 30, 2024

as compared to $216.0 million for the same period in 2023.

Our volume of third-party alcohol sold reported

gross by the segment increased by 6.9 million gallons, or 8%, to 89.3 million gallons for the nine months ended September 30, 2024 as

compared to 82.4 million gallons for the same period in 2023.

The $0.61 per gallon, or 23%, decrease in the segment’s average sales

price per gallon for the nine months ended September 30, 2024 as compared to the same period in 2023 resulted in a $50.6 million decline

in our net sales from third-party fuel-grade ethanol sold by the segment.

With the segment’s average sales price per gallon of $2.01

for the nine months ended September 30, 2024, we realized $13.9 million in additional net sales from the 6.9 million additional gallons

of third-party alcohol sold gross in the nine months ended September 30, 2024 as compared to the same period in 2023.

Western Production Segment

Net sales of alcohol from our

Western production segment declined by $48.4 million, or 40%, to $74.1 million for the nine months ended September 30, 2024 as compared

to $122.5 million for the same period in 2023.

Our total volume of alcohol sold decreased by 8.4 million gallons, or 18%, to 38.2 million

gallons for the nine months ended September 30, 2024 as compared to 46.6 million gallons for 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

$0.69, or 26%, in the segment’s average sales price per gallon for the nine months ended September 30, 2024 as compared to the same

period in 2023 reduced our net sales from the segment by $32.1 million.

With the segment’s average sales price per gallon of $1.94

for the nine months ended September 30, 2024, we generated $16.3 million less in net sales from the 8.4 million fewer gallons of alcohol

sold in the nine months ended September 30, 2024 as compared to the same period in 2023.

Net sales of essential ingredients

from our Western production segment declined by $16.4 million, or 40%, to $24.2 million for the nine months ended September 30, 2024 as

compared to $40.6 million for the same period in 2023.

Our total volume of essential ingredients sold decreased 90,800 tons, or 21%, to

335,400 tons for the nine months ended September 30, 2024 from 426,200 tons for the same period in 2023.

The decrease of $23.19, or 24%,

in our average sales price per ton for the nine months ended September 30, 2024 as compared to the same period in 2023 reduced our net

sales of essential ingredients from the segment by $9.9 million.

With the segment’s average sales price per ton of $72.10 for the

nine months ended September 30, 2024, we generated $6.5 million less in net sales from the 90,800 fewer tons of essential ingredients

sold in the nine months ended September 30, 2024 as compared to the same period in 2023.

Corporate and other

Net sales of alcohol from corporate

and other declined by $3.7 million, or 30%, to $8.6 million for the nine months ended September 30, 2024 as compared to $12.3 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

following table presents our selling, general and administrative, or SG&A, expenses in dollars and as a percentage of net sales (in

thousands, except percentages):

Cost of Goods Sold and Gross Profit

consolidated gross profit declined to $11.1 million for the nine months ended September 30, 2024 from $18.2 million for the same

period in 2023, representing a gross margin of 1.5% and 1.9% for the nine months ended September 30, 2024 and 2023, respectively.

Our consolidated gross profit declined primarily due to higher repairs and maintenance expense and lower average sales prices for

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

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

Another contributing factor to the

year-over-year decline in gross profit is production downtime at our Magic Valley facility and higher operating costs associated

with upgrading equipment at the plant.

We restarted our Magic Valley facility in July 2024, but production did not reach average full capacity until October

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit, net of intercompany activity, increased by $8.6 million to a gross profit of $22.4 million for the nine months ended September

30, 2024 as compared to $13.8 million for the same period in 2023.

Of this improvement, $8.3 million is attributable to higher alcohol

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

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit, net of intercompany activity, declined by $0.3 million to a gross profit of $2.9 million for the nine months ended September

30, 2024 as compared to a gross profit of $3.2 million for the same period in 2023.

Of this decline, $0.5 million is attributable to lower

margins from sales of third-party fuel-grade ethanol, partially offset by $0.2 million attributable to higher sales volumes.

Western Production Segment

Our Western production segment’s gross profit,

net of intercompany activity, declined by $12.3 million to a gross loss of $14.1 million for the nine months ended September 30, 2024

as compared to a gross loss of $1.8 million for the same period in 2023.

Of this decline, $15.4 million is attributable to lower renewable

fuel margins and hot-idling costs at our Magic Valley facility, partially offset by $3.1 million attributable to lower sales volumes at

negative margins.

Corporate and other

Gross profit from corporate

and other declined by $3.1 million to a gross loss of $0.1 million for the nine months ended September 30, 2024 as compared to a gross

profit of $3.0 million for the same period in 2023, all of which were from Eagle Alcohol’s business.

Selling, General and

Administrative Expenses

The following table presents

our selling, general and administrative, or SG&A, expenses in dollars and as a percentage of net sales (in thousands, except percentages):

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

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):

Our SG&A expenses decreased for the three months

ended September 30, 2024 as compared to the same period in 2023.

The period over period decrease in SG&A expenses is primarily due

to lower 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.

SG&A expenses remained

essentially flat for the nine months ended September 30, 2024 and 2023.

Net Loss Available

to Common Stockholders

The following table presents

our net 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

September 30,

Nine Months Ended

September 30,

Net 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

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

Our net loss available to common stockholders for

the three and nine months ended September 30, 2024 and 2023 is primarily due to lower margins resulting from increased repairs and maintenance

expense, higher up-front project costs as we worked to advance our CCS project, and other factors affecting gross profit as discussed

above, partially offset by $0.8 million in gains for the three months ended September 30, 2024 from the sale of noncore assets from a past

business acquisition.

In addition, for the three months ended September 30, 2023, we received a USDA cash grant of $2.8 million related

to the Biofuel Producer Program.

This grant did not recur in 2024.

Liquidity and Capital Resources

During the nine months ended September 30, 2024,

we funded our operations primarily from cash on hand, cash provided by our operations and Kinergy’s operating line of credit.

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

relating to our acquisition of Eagle Alcohol.

As of September 30, 2024, we had $38.5 million in cash, cash equivalents and restricted

cash, $27.2 million available for borrowing under Kinergy’s operating line of credit and $65.0 million that may be available for

5 unchanged sentences

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.

The following selected financial information

should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere

in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

contained in this report (dollars in thousands).

Quantitative Period-End Liquidity

We believe that the following

amounts provide insight into our liquidity and capital resources.

The following selected financial information should be read in conjunction

with our consolidated financial statements and notes to consolidated financial statements included elsewhere in this report, and the other

sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this

report (dollars in thousands).

September 30,

Cash, cash equivalents and restricted cash

5 unchanged sentences

Working capital ratio

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.

in the form of dividends, distributions, loans or advances due to restrictions contained in our subsidiaries’

credit facilities.

in Working Capital and Cash Flows

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:

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

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

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

maintains an operating line of credit for an aggregate amount of up to $100.0 million.

Restricted Net Assets

At September 30, 2024, we had approximately $56.3

million of net assets at our subsidiaries that were not available to be transferred to Alto Ingredients, Inc.

in the form of dividends,

distributions, loans or advances due to restrictions contained in our subsidiaries’ credit facilities.

Changes in Working Capital and Cash Flows

Working capital declined by $3.5 million to $100.0

million at September 30, 2024 compared to $103.5 million at December 31, 2023 due to a decrease of $23.7 million in current assets, partially

offset by a decrease of $20.2 million in current liabilities.

Current assets declined due to decreases in cash,

cash equivalents and restricted cash, accounts receivable, inventories, derivative assets and other assets for the nine months ended September

30, 2024 as compared to the same period in 2023.

Our current liabilities decreased primarily due

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

Our cash, cash equivalents and restricted cash

declined by $7.0 million primarily due to $12.0 million in cash used in our investing activities and $1.0 million in cash used in our

financing activities, partially offset by $6.0 million of cash provided by our operating activities.

Cash provided by our Operating Activities

We generated $6.3 million in cash from our operating

activities during the nine months ended September 30, 2024 as compared to $10.2 million for the same period in 2023.

Specific factors

that contributed to the change in cash from our operating activities include:

● an increase of $8.2 million in our net loss primarily due to lower commodity margins;

● a decrease of $6.5 million related to derivative instruments due to changes in commodity prices.

These amounts were partially offset by:

● an increase of $6.8 million related to accounts payable and accrued liabilities due to the timing of payments;

● an increase of $4.1 million related to changes in accounts receivable balances due to the timing of our collections.

Cash used in our Investing Activities

We used $12.2 million in cash during the nine months

ended September 30, 2024 to fund $9.8 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, partially offset by $0.4 million

in proceeds from the sale of assets.

Our capital expenditures for the third quarter of 2024 totaled $0.5

million, net of various energy rebates.

Cash used in our Financing Activities

We used $1.0 million in cash during the nine months

ended September 30, 2024 to fund $0.9 million in preferred stock dividends and $0.1 million in net payments on Kinergy’s operating

line of credit.

Kinergy’s Operating Line of Credit

Kinergy maintains an operating line of credit with

Wells Fargo Bank for an aggregate amount of up to $100.0 million.

The credit facility matures on November 7, 2027.

Interest accrues under the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified

applicable margin ranging from 1.25% to 1.75%.

The credit facility’s monthly unused line fee is 0.25% to 0.375% of the amount by

which the maximum credit under the facility exceeds the average daily principal balance during the immediately preceding month.

that may be made by Kinergy to Alto Ingredients, Inc.

as reimbursement for management and other services provided by Alto Ingredients,

to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal quarter.

The credit facility also includes

the accounts receivable of our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral.

that may be made by Alto Nutrients to Alto Ingredients, Inc.

as reimbursement for management and other services provided by Alto Ingredients,

to Alto Nutrients are limited under the terms of the credit facility to $0.5 million per fiscal quarter.

Alto Nutrients markets

our essential ingredients and also provides raw material procurement services to our subsidiaries.

In addition, the amount of cash distributions

that Kinergy or Alto Nutrients may make to us is also limited to up to 75% of excess cash flow.

all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and Alto Nutrients must collectively

maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization

divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and

taxes paid during such twelve-month rolling period) of at least 1.1 and are prohibited from incurring certain additional indebtedness

(other than specific intercompany indebtedness).

The obligations of Kinergy and Alto Nutrients under the credit facility are secured

by all of our tangible and intangible assets.

believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio covenant as of the filing of this report.

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

Interest accrues under

the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging

from 1.25% to 1.75%.

The credit facility’s monthly unused line fee is 0.25% to 0.375% of the amount by which the maximum credit

under the facility exceeds the average daily principal balance during the immediately preceding month.

Payments that may be made by Kinergy

to Alto Ingredients, Inc.

as reimbursement for management and other services provided by Alto Ingredients, Inc.

to Kinergy are limited

under the terms of the credit facility to $1.5 million per fiscal quarter.

The credit facility also includes the accounts receivable of

our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral.

Payments that may be made by Alto

Nutrients to Alto Ingredients, Inc.

as reimbursement for management and other services provided by Alto Ingredients, Inc.

to Alto Nutrients

are limited under the terms of the credit facility to $0.5 million per fiscal quarter.

Alto Nutrients markets our essential ingredients

and also provides raw material procurement services to our subsidiaries.

In addition, the amount of cash distributions that Kinergy or

Alto Nutrients may make to us is also limited to up to 75% of excess cash flow.

For all monthly periods in which excess borrowing

availability falls below a specified level, Kinergy and Alto Nutrients must collectively maintain a fixed-charge coverage ratio (calculated

as a twelve-month rolling earnings before interest, taxes, depreciation and amortization divided by the sum of interest expense, capital

expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period)

of at least 1.1 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness).

obligations of Kinergy and Alto Nutrients under the credit facility are secured by all of our tangible and intangible assets.

We believe Kinergy and Alto Nutrients are in compliance

with the fixed-charge coverage ratio covenant as of the filing of this report.

The following table sets forth the fixed-charge coverage

ratio financial covenant and the actual results for the periods presented:

Three Months Ended

September 30,

Fixed-Charge Coverage Ratio Requirement

Ingredients, Inc.

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

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.

November 7, 2022, we entered into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which

the Lenders extended a senior secured credit facility in the amount of up to $125.0 million, or Term Loan.

The Term Loan is secured by

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

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.

Alto Ingredients, Inc.

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

As of September 30, 2024, Kinergy had an outstanding balance

of $30.6 million and $27.2 million of unused borrowing availability under the credit facility.

Orion Term Loan

On November 7, 2022, we entered

into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which the Lenders extended a senior

secured credit facility in the amount of up to $125.0 million, or Term Loan.

The Term Loan is secured by a first priority lien on certain

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

The 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.

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 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.

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,

(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.

As of September 30, 2024, the principal amount

outstanding under the Term Loan was $60,000,000.

Other Cash Obligations

As of September 30, 2024, we

had future commitments for certain capital projects totaling $8.6 million.

These commitments are scheduled to be satisfied through 2024

In 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