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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-14 · 728 added, 733 removed, 106 unchanged (93% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated

financial statements and notes to consolidated financial statements included elsewhere in this report.

This discussion contains forward-looking

statements, reflecting our plans and objectives that involve risks and uncertainties.

Actual results and the timing of events may differ

materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section

entitled “Risk Factors” and elsewhere in this report.

We produce and distribute renewable fuel and essential ingredients.

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

The following discussion and analysis of our

financial condition and results of operations should be read in conjunction with our consolidated financial statements and notes to consolidated

financial statements included elsewhere in this report.

This discussion contains forward-looking statements, reflecting our plans and

objectives that involve risks and uncertainties.

Actual results and the timing of events may differ materially from those contained in

these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors”

and elsewhere in this report.

We are a leading producer and distributor of specialty

alcohols, renewable fuels and essential ingredients 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 fuel-grade ethanol 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 high-quality beverage-grade alcohol and alcohols of other quality specifications.

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.

We purchase bulk alcohol from suppliers and then store, denature, package, and resell alcohol products

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

We deliver products to

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

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 350 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-,

and high-quality food- and beverage-grade alcohols.

Of this amount, we can produce up to 110 million gallons annually of specialty alcohols,

depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols.

We market and distribute

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

In 2024, we marketed and distributed approximately

386 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.4 million

tons of essential ingredients on a dry matter basis.

We also own and operate a liquid CO 2

production facility adjacent to our plant in Oregon for the offtake of CO 2 gas from the plant for conversion to liquid CO 2

and subsequent sale.

In addition, we break bulk distribute specialty

alcohols, produced by us and third parties, through our Eagle Alcohol business.

We report our financial and operating performance

in three segments:

(1) Pekin 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.

We produce specialty alcohols, fuel-grade ethanol

in three distinct segments:

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;

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;

production , which includes the production and sale of renewable fuels and essential

ingredients and, beginning in 2025, liquid CO 2 produced at our western production

facilities, including our liquid CO 2 plant, 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 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 fuels

and essential ingredients, focusing on five key markets:

1 unchanged sentence

Food & Beverage ;

Agriculture ;

Essential Ingredients ;

and Renewable Fuels .

Products for the Health, Home & Beauty markets include

Products for 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.

All of our production facilities are currently operating except our

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

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

high protein system.

We intend to restart Magic Valley production in the second quarter once the upgrades are complete and crush margins

have improved.

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

We market and distribute all of the alcohols and essential ingredients

we produce at our facilities.

Products for Food &

Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar and corn germ used for corn oils.

for Industry & Agriculture markets include alcohols and other products for paint applications and fertilizers.

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

CO 2 and liquid feed used in commercial animal feed and pet foods.

We also sell yeast and liquid CO 2 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.

Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home

& Beauty markets represented approximately 12%, 7% and 3%, respectively, of our sales in 2024 from these three markets.

We produce our alcohols and essential ingredients

at our facilities described below.

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, product transportation cost and logistical advantages.

All of our production facilities, other than our

Magic Valley plant, were operating for all of 2024, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.

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 to achieve

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

We restarted our Magic

Valley facility in July 2024 and by October 2024, the 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.

Increases in regional

corn basis and declining market prices for protein and corn oil resulted in overall margin compression, outweighing the economic benefits

of our plant improvements.

As a consequence, we cold-idled our Magic Valley facility on December 31, 2024 to minimize financial losses.

We continue to provide terminal services at the plant and intend to resume operations at the facility when the economic environment in

the region sustainably improves.

We believe that the cold-idling of our Magic Valley facility will have a positive impact on our overall

financial results in 2025 compared to 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.

Marketing and Distribution Segment

We market and distribute all 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 our essential ingredient 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

and biodiesel customers.

We do not market essential ingredients from other producers.

“Note 5 – Segments” to our Notes to Consolidated Financial Statements included elsewhere in this report for financial

information about our business segments.

Review, Current Initiatives and Outlook

In 2023, we continued

our transformation to produce a variety of essential ingredients and the highest-grade beverage alcohol in the industry.

We invested significant

capital in our facilities to improve efficiency and capacity utilization rates and to expand margins long term.

These strategies have

begun to mitigate the impact of negative commodity price fluctuations.

Although ethanol crush margins exhibited greater volatility in

the second half of 2023, both our fourth quarter and full year 2023 results significantly outperformed those same periods in 2022 despite

lower overall plant utilization rates.

Gross loss declined by $18.8 million in the fourth

quarter of 2023 compared to the same period in 2022.

We generated $16 million in gross profit for the full year 2023, an improvement of

$43 million over 2022.

We reported positive Adjusted EBITDA of $3 million

for the fourth quarter of 2023, an improvement of $19 million compared the same period in 2022.

We also reported positive Adjusted EBITDA

of approximately $21 million for all of 2023, an increase of $27 million over the prior year, representing a significant year-over-year

improvement, particularly in light of $20 million less in USDA cash grants in 2023 as compared to 2022.

We define EBITDA as unaudited consolidated net

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

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.

Renewable fuel margins were strong for the second

and third quarters of 2023.

As a result, we shifted part of our production to renewable fuel to take advantage of the higher margin environment.

Ethanol crush margins exhibited extreme volatility in the second half of 2023, peaking in the mid-60 cents per gallon in September and

declining thereafter to slightly negative in December.

Margin volatility impacted the production volumes we were willing to sell, the

prices at which we sold and the volume of third-party production we contracted for sale.

Overall sales volume declined for 2023 due to

these factors as well as the hot-idling of our Magic Valley facility in the first quarter of the year, ongoing challenges with the corn

oil and high protein system at the facility, and longer than expected unscheduled downtime in the third quarter at our Pekin Campus.

Thus far in 2024, although crush margins have been

break-even or slightly negative, they have begun to improve compared to the end of 2023.

In addition, margins were approximately 20 cents

per gallon higher for January and February 2024 compared to the same period in 2023.

In January 2024, however, a polar vortex in the Midwest

negatively impacted both operations and logistics at our Pekin Campus.

Despite significant preparations ahead of the freeze and timely

recovery response efforts, we experienced a shift to lower margin feed products and reduced alcohol production by approximately one million

gallons due to frozen river conditions.

In addition, the hot-idle of our Magic Valley facility in January 2024 will lower renewable fuel

production, shifting sales volumes to higher third-party production compared to the fourth quarter of 2023.

We have contracted approximately 93 million gallons

of fixed-price, high-quality alcohol at an average premium to renewable fuel of 31 cents per gallon, with additional capacity to take

advantage of spot sales.

Our overall outlook for 2024 is favorable in light

of good corn inventories, low corn and natural gas prices, higher sugar prices, domestic regulatory support for summer blending and expected

global demand growth for U.S.-sourced ethanol.

These factors should result in an improved crush margin environment in the coming months

and yield positive crush spreads through most of 2024.

Markets are dynamic but we remain agile and financially prudent while we seek to

capitalize on the best opportunities.

We remain enthusiastic about our prospects and confident in our long-term growth strategy.

During the fourth quarter, repairs and maintenance

expense across our plants was $7.7 million compared to $7.1 million for the same period in 2022, bringing total repairs and maintenance

expense to $29.5 million for 2023 as compared to $30.0 million for 2022.

Our wet mill, yeast facility and distillery capabilities

at our Pekin Campus provide significant differentiation and greater production capabilities than the typical dry mill.

However, given

the nature and age of these facilities, they require consistent, ongoing repairs and maintenance, and capital upgrades integral to the

longevity, sustainable performance and modernization of these assets.

To maintain reliable and efficient operations, we normally address

smaller concerns as needed and conduct larger scheduled outages approximately every two years.

We originally scheduled our biennial Pekin Campus

wet mill repair and maintenance outage for August 2023 but due to favorable crush margins and sufficient corn supply at the time, we postponed

the outage to this coming April.

We expect the repairs and maintenance activities will take approximately ten days, lowering production

in the second quarter.

The repairs and maintenance are projected to cost approximately $4.0 million.

For the full year 2024, we expect

to track to our typical repairs and maintenance run rate of around $30.0 million, bringing the total, including the upcoming outage expense,

to $34.0 million for 2024.

We invested $5.0 million in capital expenditures

in the fourth quarter of 2023, bringing our year-end total to $30.0 million for all of 2023, compared to $13.0 million in the fourth quarter

of 2022 and $38.0 million for all of 2022.

We plan for capital expenditures of approximately $25.0 million in 2024 for equipment upgrades,

process improvements and projects with short-term paybacks.

We believe that these ongoing repairs and maintenance efforts and our capital

improvement projects position us for a much stronger future.

Our biennial outages have historically increased reliability and production

We expect these positive effects will benefit 2024, in particular as we head into the typically more favorable summer months.

We continue to pursue a number of strategic capital

investment initiatives.

In the fourth quarter of 2023 and into 2024, we continued our ongoing evaluation of these initiatives.

current market dynamics, recent findings from our updated front-end engineering and design (FEED) studies, interest from potential strategic

partners and expected project return profiles, we decided to designate our carbon capture and storage, or CCS, project as our top priority.

Under the Inflation Reduction Act, we have a compelling

opportunity to capture and store biogenic CO 2 we generate at our Pekin Campus.

Together with associated energy upgrades, we

believe that our CCS project provides excellent economics.

Given the significant time, personnel and financial resources necessary to

complete our CCS project, we decided to pause further development of our primary yeast and biogas conversion projects.

These projects

continue as opportunities for potential future development as resources permit.

We are encouraged by recent progress on many aspects

This progress includes overall system design, community outreach, financing, vendor negotiations, EPA application preparation

and schedule alignment to procure equipment and install power and compression.

We have also signed an exclusive non-binding letter of

intent with Vault 44.01 and we are nearing the execution of definitive agreements to develop our CCS project.

The project, as currently

planned, involves our installation of equipment to capture CO 2 generated at our Pekin Campus and our project partner safely

transporting and permanently storing those emissions deep underground in a secure geologic reservoir located in close proximity to the

Our intent is to substantially reduce CO 2 emissions from the alcohol production process while providing direct value

to the surrounding communities.

Unfortunately, the EPA has extended its CCS application approval process from 18 to 24 months, and equipment

manufacturing and installation times have grown longer than originally anticipated.

We intend to make positive use of this additional

time to better align our various project schedules and reduce our overall financial risk.

Overall, we believe we can generate over $30.0

million in EBITDA annually from our CCS project, after accounting for operating and storage costs, and excluding any of the substantial

additional economic benefits of the environmental attributes associated with low carbon ethanol.

In addition to CCS, we are pursuing two attractive

alternatives to increase energy capacity at our Pekin Campus with either our current utility provider or a highly regarded, independent

energy company that would build, own and operate onsite energy facilities.

Both alternatives would greatly reduce our capital requirements

and long-term energy costs while lowering our carbon footprint.

These capital-light energy alternatives may result in better earnings

accretion from our CCS project than originally estimated.

We continue to assess our current portfolio of

assets, especially our Western production facilities, as we evaluate our path to higher margins, improved profitability and the highest

return to our shareholders.

Our intent is to leverage the distinct strengths and opportunities of these facilities by investing in new

equipment and applications.

While we work on these projects, we may also consider disposing of one or both of our Western production facilities.

As demonstrated with the sale of our California and Nebraska facilities, we remain steadfast in our commitment to appropriate decisions

to optimize long-term value.

Over the past two years we have completed numerous

Some of our larger in-progress or completed initiatives over the prior twelve months include the completion in February 2024

of a new, high efficiency boiler at our Pekin Campus that replaced two inefficient, high-pressure boilers.

We expect full boiler utilization

by the end of the first quarter, reducing our energy needs and operating costs, and increasing annualized incremental EBITDA by $2.0 million.

In addition, in the second quarter of 2023, our new grain silo at our Pekin Campus became fully operational, doubling our days of corn

storage capacity.

This achieved our goal to increase flexibility around the timing of corn deliveries while lowering costs related to

quick or last-minute shipments and to reduce corn premiums during extended weekends and harsh weather conditions.

This project has already

exceeded our target of contributing annualized incremental EBITDA of $2.0 million.

We continue to expand into higher quality alcohol

and our ability to differentiate our product offerings has been very important considering market trends.

For example, in 2021 and for

part of 2022, the higher margin for specialty alcohol attracted many new producers, increasing product availability and supply.

factors, combined with ebbing consumer demand growth and supply chain dynamics, resulted in margin compression over the past 18 months.

Starting in 2022, in anticipation these changing market conditions, we began strategic investments to produce a higher volume of beverage

grade alcohols that leverage the capabilities of our Pekin Campus.

We developed our highly differentiated 192 proof and low-moisture 200

proof grain neutral spirits, or GNS, which became available in early 2023.

These new products were well received by our customers and

actively sold in the spot market, generating significant sales and bolstering our gross margins for the year.

In our pursuit to expand higher margin corn oil

and high-protein products at our Magic Valley facility, working with our corn oil and high protein system vendor, Harvesting Technology,

we engaged equipment manufacturers and independent third-party engineers in the fourth quarter of 2023 to conduct an in-depth analysis

of our challenges.

The team formulated a plan, including extensive design modifications, to achieve the intended production rate, quality

and consistency.

We decided in January 2024 to temporarily hot-idle the facility to minimize losses from negative regional crush margins

and expedite the installation of additional equipment at the plant.

Harvesting Technology has borne the direct costs associated with their

design and equipment.

We are confident in the extensive design modifications under way and in achieving our corn oil and high-protein

targets in 2024.

We intend to restart production in the second quarter once the upgrades are complete and crush margins have improved.

The operation of the upgraded high-protein system at our Magic Valley facility will influence our decision and timing to roll out the

system at our other dry mills.

In the interim, we are operating the Magic Valley facility as a terminal to service our renewable fuel

We are also working with the local feed distributor and our feed customers to meet their supply requirements.

Going forward, we intend to discuss our various

capital projects individually and not in the aggregate, using three categories:

In Operation , which includes completed projects,

such as our corn storage and boiler upgrades, our beverage grade GNS alcohols and Eagle Alcohol distribution infrastructure;

Development , which includes high priority strategic opportunities that have the greatest expected returns as well as initiatives that

support our near-term operational goals, such as CCS and potential partnerships for cogeneration and a natural gas pipeline;

Future Evaluation , which includes potential opportunities with attractive expected returns to be assessed as resources permit, such

as primary yeast, biogas conversion, the installation of higher margin corn oil and high protein systems at our three other dry mills,

sustainable aviation fuel, blue ethanol, ethanol-to-jet fuel and synthetic natural gas.

As a renewables company, we remain dedicated to

implementing sustainable best practices that are good for our business, our stakeholders and our planet.

In December, we published our

first Sustainability Summary.

Our Sustainability Summary provides a review of our strategy and vision for advancements in sustainability,

responsible sourcing and risk management.

We are focused on continuous improvement in environmental, health and safety, product quality,

and diversification by integrating innovative practices at our facilities to ensure optimal efficiency, contributing to a lower carbon

Our efforts improved our sustainability scores across the board with all three rating agencies, which is important to our customers.

Looking ahead, we are working to obtain third-party greenhouse gas verifications, improve transportation safety and earn additional EcoVadis

We have extensive and long-standing customer relationships,

both domestic and international, for our specialty alcohols, renewable fuels 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 fuels 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.

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

See “Note 4 – Segments” to our

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

Financial Review, Current Initiatives and Outlook

Our fourth quarter and full-year financial results

reflect challenging market conditions, including lower crush margins, compared to the fourth quarter of 2023 and the prior full year.

As discussed below, we took decisive action to rationalize our business which, together with over $30 million in associated asset impairments,

resulted in a material portion of the substantial non-cash, one-time expenses for the fourth quarter and full year 2024, resetting our

We also reduced our annual expense run rate by nearly $8 million.

Together with improved performance at our Pekin Campus wet mill,

our synergistic acquisition of premium liquid CO 2 processing and our entry into the European market through International

Sustainability and Carbon Certification, or ISCC, product sales, we are optimistic about 2025.

As part of our ongoing efforts to maximize shareholder

value, we have engaged an investment banking firm to explore the sale of our production facilities located in Oregon and Idaho.

with the assistance of our financial and legal advisors, we are considering a broad range of other options, including asset sales, a merger

or other strategic transactions to better align our long-term value potential.

In January, we acquired Kodiak Carbonic, a beverage-grade

liquid CO 2 processor, for $7.6 million.

This processing facility, renamed Alto Carbonic, is located adjacent to our Columbia

plant in Boardman, Oregon and has been operating profitably since 2015.

Alto Carbonic processes biogenic CO 2

gas produced as a byproduct of the fermentation process at our Columbia plant and converts it into premium liquid CO 2 .

finished product is sold into the Northwestern region of the United States for use in food and beverage processing, industrial cooling,

and other applications.

The facility produces an average of approximately 56,000 tons annually of liquid CO 2 with the capacity

to produce over 70,000 tons annually and the potential for further expansion.

Alto Carbonic currently uses only 50% of our Columbia plant’s

biogenic CO 2 gas.

Simultaneous with this acquisition, we entered

into an amended long-term sales offtake agreement with a leading North American industrial gas supplier.

The acquisition is immediately

accretive and has a compelling payback of approximately two years.

We are in the process of integrating the liquid CO 2 plant

with our Columbia facility, improving coordination between operations.

We expect to realize additional cost savings through synergies

in production and overhead.

We are also evaluating an opportunity to increase storage capacity at the site to improve logistics and take

advantage of spot market demand for premium liquid CO 2 .

The acquisition immediately stems the recent lack

of profitability at our Columbia plant, provides a stronger financial foundation to overcome competitive challenges for destination plants

and significantly increases the value of these combined assets.

We integrated Eagle Alcohol’s high quality

alcohol bulk operations and customers into our Pekin Campus and Kinergy businesses and have now turned our focus to converting Eagle Alcohol’s

break-bulk warehousing and trucking operations into a profitable service center.

We also decreased staff at other operations, reducing

overhead run-rates of both costs of goods sold and selling, general and administrative expenses.

In total, we reduced headcount by 16%

and expect to save nearly $8 million annually from these efficiencies, improving our bottom-line run rate and helping us manage our liquidity.

We expect to realize the full annualized financial benefit from these cost saving initiatives beginning in the second quarter.

As an additional cost saving initiative, we cold-idled

our Magic Valley facility at the end of 2024.

For context, starting in 2022, we saw an opportunity to take advantage of premium prices

for high quality protein and corn oil.

Consistent with our business strategy to improve yields of high margin products, we undertook

the installation and ultimate commissioning of high-quality protein and corn oil technology at our Magic Valley plant.

The installation

took much longer and cost significantly more than expected.

In addition, we underestimated the negative impact that the buildout of renewable

diesel and soy crush capacity would have on market prices for protein and corn oil in the region.

Compounded by the dramatic swing in

delivered corn prices for Western operations compared to our Midwestern facilities, it became impossible to operate our Magic Valley

facility profitably.

By cold idling the plant and reducing our variable and fixed costs as much as possible, we have stopped this drag

on the profitable areas of our business.

In the fourth quarter, we took a significant impairment charge related to the Magic Valley plant.

To partially offset remaining carry expenses, and to serve our customers in the area, we are opportunistically using the facility as

a renewable fuel terminal.

At our Pekin Campus, we continue to pursue opportunities

to optimize carbon, which historically was considered a waste stream with only marginal value.

In November, we achieved an important

milestone by finalizing our CO 2 transportation and sequestration agreement with Vault 44.01, or Vault.

This partnership is

critical to our carbon capture and storage, or CCS, project.

In December, Vault submitted the formal application to the EPA for our CCS

project to obtain the Class VI permit required to begin construction of the CCS pipeline and for long-term CO 2 storage in

deep geological formations.

CCS operations require significant development

and planning.

The EPA requires extensive site analysis, monitoring and safety measures to safeguard underground water supplies.

process is currently estimated to take at least two years.

We expect that this approval timeline will also allow the time necessary to

address Illinois’s current moratorium on new CO 2 pipelines imposed as part of its SAFE CCS Act.

The moratorium is in

effect until the earlier of July 2026 or revised federal safety standards are established.

Although progress on our CCS project has been

slow, significant changes have occurred in the political and regulatory environment, as well as the carbon market, during that time.

Our deliberate pace has been advantageous as we navigate these changes and discover effective paths forward.

The extended period required

for regulatory approvals affords us additional time to develop the necessary infrastructure plans, including compression and energy solutions.

We also intend to use the additional time to secure necessary financing.

Finally, working with Vault, we are focused on meeting with

local groups and authorities to educate the community about our CCS project, strengthen support and address concerns.

At our Pekin Campus, we are proactively modifying

our operations to deliver higher value products.

Following our biennial wet mill outage in spring 2024, we improved plant utilization,

operating the wet mill at nameplate capacity of 100 million gallons.

Pekin Campus production volume in the fourth quarter increased 3.8

million gallons over the prior year period.

This 7% increase demonstrates the effectiveness of our maintenance program.

Carrying these

improvements into 2025, we expect to produce an additional 8 million gallons for the full year, lowering our per gallon cost of production

and enabling us to produce a greater volume of specialty alcohols.

We applied for, and in late summer obtained for

our Pekin Campus, ISCC certification for our renewable fuels business to allow us to ship qualified renewable fuel to the European Union

where we typically are able to garner premium prices compared to domestic markets.

We began exporting certified renewable fuel to European

markets in the fourth quarter and anticipate expanding exports in 2025.

In our premium specialty alcohol business, we

continue to materially differentiate our products through our certifications and customer relationships.

For 2024, we sold nearly 92

million gallons of specialty alcohols.

In 2025, our goal is to balance production levels between specialty alcohols and ISCC renewable

fuels to maximize margins while addressing customer needs.

We also completed another ISO 9001 audit with no adverse findings, a testament

to our culture of quality.

For the fourth quarter, we sold 95.1 million gallons,

up from 92.5 million gallons for the same period in 2023, largely reflecting production improvements at our Pekin Campus from our planned

repairs and maintenance program.

However, our sales price per gallon averaged $1.88 in the fourth quarter compared to $2.24 for the same

period in 2023, reducing net sales by $38 million for the year over year period.

Market crush margins declined nearly 18 cents per gallon

in the fourth quarter resulting in an $8.7 million adverse impact to gross profit for the period.

In addition, returns from protein sales

were negatively impacted by expanded soy crush intended to meet renewable diesel demand, higher wet feed product mix and the inability

of a key customer to take product deliveries following Hurricane Helene.

Low carbon fuel credit prices also declined in the fourth quarter

compared to the prior year period but improved sequentially from the third quarter of 2024 and continue to recover from market lows.

Our realized derivative losses, which are included

in Adjusted EBITDA (defined below), were $3.5 million for the fourth quarter compared to $2.3 million for the prior year period.

derivative gains, which are excluded from Adjusted EBITDA, were $5.5 million for the fourth quarter compared to a loss of $8.2 million

for the prior year period, resulting in a positive $13.7 million year-over-year net difference.

Our non-cash, lower of cost or market

adjustment on physical inventories and mark-to-market on corn commitments resulted in a $3.5 million reserve in the fourth quarter compared

to $2.2 million in the prior year period.

In the fourth quarter, we recognized final acquisition-related expenses for Eagle Alcohol of

$5.7 million, of which $5.0 million was non-cash, compared to $0.7 million in the prior year period.

Asset impairments for the fourth quarter totaled

$24.8 million, consisting of $21.4 million related to the cold idling of our Magic Valley plant and $3.4 million related to the impairment

of intangibles from the integration of certain Eagle Alcohol activities, compared to a $6.0 million impairment in the prior year period

related to Eagle Alcohol’s goodwill.

Use of Non-GAAP Financial Measures

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

To increase transparency

to our operating physical margins and conform our reporting to management’s evaluation of our financial performance, we now exclude

the impact of unrealized non-cash derivative gains and losses when calculating Adjusted EBITDA.

Unrealized derivative gains and losses

are non-cash, mark-to-market adjustments of derivative instruments on open positions related to future period purchases and sales that

are recorded as part of cost of goods sold.

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, provision for income taxes, asset impairments, and depreciation and amortization expense.

A table is provided below

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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

Reconciliation of

Adjusted EBITDA to Consolidated Net Loss

Three Months Ended

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Interest income

Unrealized derivative losses

Unrealized derivative (gains) losses

Acquisition-related expense

5 unchanged sentences

2024 Financial Performance Summary

consolidated net sales declined by $0.1 billion to $1.2 billion for 2023 from $1.3 billion for 2022.

Our net loss available to common

stockholders improved by $13.6 million to a net loss of $29.3 million for 2023 from a net loss of $42.9 million for 2022.

that contributed to these results of operations for 2023 include:

Our net sales declined by $0.1 billion to $1.2 billion for 2023 from $1.3 billion for 2022 due to a decrease in total alcohol

gallons sold, a decline in our average sales price per gallon and fewer tons of essential ingredients sold.

total gallons sold declined by 36.4 million gallons, or 9%, to 382.5 million gallons for 2023 from 418.9 million gallons for 2022.

● Our renewable fuel production sales volume declined by 5.3 million

gallons, or 3%, to 203.2 million gallons for 2023 from 208.5 million gallons for 2022, primarily from reduced production in 2023 as our

Magic Valley facility was hot-idled in the first quarter of 2023 coupled with unusually high unscheduled production downtime later in

the year at our Pekin Campus for repairs and maintenance.

● Our specialty alcohol production sales volume declined by 15.8 million

gallons, or 17%, to 76.7 million gallons for 2023 from 92.5 million gallons for 2022 primarily due to reduced customer demand for specialty

alcohols during the year, a portion of which was shifted to 2024.

● Our third-party sales volume declined by 15.3 million gallons, or 13%,

to 102.6 million gallons for 2023 from 117.9 million gallons for 2022.

Consistent with our efforts over the past two years, we continued

to intentionally reduce sales of third-party fuel-grade ethanol in geographic areas less important to our business to focus on sales of

inventory from our own production in 2023.

average sales price per gallon declined by $0.17, or 6%, to $2.47 for 2023 from $2.64 for

The decline was primarily driven by lower renewable fuel prices in 2023 largely due

to lower oil and gasoline prices.

volume of essential ingredients sold declined by 0.1 million tons, or 7%, to 1.5 million

tons for 2023 from 1.6 million tons for 2022 primarily due to lower alcohol production volumes

Our average sales price for our essential ingredients also declined primarily

due to lower corn prices.

Profit (Loss) .

Our gross profit improved by $43.2 million to a gross profit of $15.7

million for 2023 from a gross loss of $27.5 million for 2022 due to improved commodity crush

margins from lower corn prices and successful efficiency initiatives.

Our gross profit and

margins were tempered, however, due to production challenges at our Magic Valley plant as

we continued to implement our high-protein system at the facility coupled with unusually

high unscheduled downtime at our Pekin Campus that reduced sales volumes, shifted our overall

product mix toward lower margin products, and resulted in significant increases in repair

and maintenance costs.

generate sales by marketing all of the alcohols produced by our three production facilities in Illinois, all of the fuel-grade ethanol

produced by our production facilities in Oregon and Idaho, and fuel-grade ethanol purchased from third-party suppliers throughout the

United States.

We also market essential ingredients produced by our production facilities, including dried yeast, corn gluten meal, corn

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

We also sell yeast for human

profitability is highly dependent on various commodity prices, including the market prices of corn, natural gas and fuel-grade ethanol.

Our consolidated average alcohol sales price declined by 6% to $2.47

per gallon for 2023 compared to $2.64 per gallon for 2022.

The average price of fuel-grade ethanol as reported by the Chicago Mercantile

Exchange, or CME, declined by 10% to $2.22 per gallon for 2023 compared to $2.47 per gallon for 2022.

Our average cost of corn declined

by 15% to $6.58 per bushel for 2023 from $7.77 per bushel for 2022.

The average price of corn as reported by the CME declined by 19% to

$5.64 per bushel for 2023 from $6.94 per bushel for 2022.

believe that our gross profit margins depend primarily on six key factors:

Our consolidated net sales declined by $0.3 billion

to $1.0 billion for 2024 from $1.2 billion for 2023.

Our net loss attributable to common stockholders increased by $31.0 million to a

net loss of $60.3 million for 2024 from a net loss of $29.3 million for 2023.

Factors that contributed to these results of operations

for 2024 include:

Our net sales decline of $0.3 billion was due to a decline in our average sales

price per gallon and fewer tons of essential ingredients sold, partially offset by an increase

in total alcohol gallons sold.

o Our average

sales price per gallon declined by $0.52, or 21%, to $1.95 for 2024 from $2.47 for 2023.

The decline was primarily driven by lower renewable fuel prices in 2024 largely due to lower

oil and gasoline prices.

of essential ingredients sold declined by 0.1 million tons, or 7%, to 1.4 million tons for

2024 from 1.5 million tons for 2023 primarily due to lower alcohol production volumes during

Our average sales price for our essential ingredients also declined primarily due to

lower corn prices.

gallons sold increased by 3.5 million gallons, or 1%, to 386.0 million gallons for 2024 from

382.5 million gallons for 2023.

◾ Our specialty alcohol

production sales volume increased by 14.8 million gallons, or 19%, to 91.5 million gallons

for 2024 from 76.7 million gallons for 2023 primarily due to increased customer demand for

specialty alcohols during the year.

◾ Our third-party sales

volume increased by 5.7 million gallons, or 6%, to 108.3 million gallons for 2024 from 102.6

million gallons for 2023.

This increase resulted from our fulfillment of customer contracts

for renewable fuels using third party volumes while our Magic Valley and Pekin Campus plants

were offline in 2024.

◾ Our renewable fuel

production sales volume declined by 17.0 million gallons, or 8%, to 186.2 million gallons

for 2024 from 203.2 million gallons for 2023, primarily due to reduced production in 2024

as our Magic Valley facility was hot-idled for most of the first half of 2024 coupled with

scheduled production downtime at our Pekin Campus for repairs and maintenance.

Our gross profit declined by $5.9 million to a gross profit of $9.7 million for

2024 from $15.7 million for 2023 partially due to weakened commodity crush margins from lower

ethanol sales prices as well as lower corn prices which reduced profits from our essential

Our gross profit and margins were further impacted by production challenges

at our Magic Valley plant as we continued to incur costs to implement our high-protein and

corn oil system at the facility coupled with higher repairs and maintenance costs due to

our scheduled downtime at our Pekin Campus.

Sales and Margins

We generate sales by marketing all of the

alcohols produced by our three production facilities in Illinois, all of the fuel-grade ethanol produced by our production

facilities in Oregon and Idaho, and fuel-grade ethanol purchased from third-party suppliers throughout the United States.

market essential ingredients produced by our production facilities, including 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 and liquid

CO 2 for human consumption.

Our profitability is highly dependent on various

commodity prices, including the market prices of corn, natural gas and fuel-grade ethanol.

Our consolidated average alcohol sales price declined

by 21% to $1.95 per gallon for 2024 compared to $2.47 per gallon for 2023.

The average price of fuel-grade ethanol as reported by the

Chicago Mercantile Exchange, or CME, declined by 24% to $1.69 per gallon for 2024 compared to $2.22 per gallon for 2023.

cost of corn declined by 28% to $4.72 per bushel for 2024 from $6.58 per bushel for 2023.

The average price of corn as reported by the

CME declined by 25% to $4.24 per bushel for 2024 from $5.64 per bushel for 2023.

We believe that our gross profit margins depend

primarily on the following key factors:

prices of our specialty alcohols and the market price of fuel-grade ethanol, the latter of

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market prices of our essential ingredients;

variable costs (other than production input commodities), such as production and other personnel

ability to anticipate trends in the market and contracted prices of our alcohols, essential

ingredients, and costs of key input commodities, and our ability to implement appropriate

risk management through hedging and other means, and opportunistic pricing strategies;

risk management through hedging and other means, and opportunistic pricing strategies, as

well as the financial results of those hedging activities;

proportion of our sales of specialty alcohols to our sales of fuel-grade ethanol produced

3 unchanged sentences

ethanol and marketing and distribution fees payable for third-party sales.

We seek to optimize our gross profit margins by anticipating the factors

above and, when resources are available, implementing hedging transactions and taking other actions designed to lock in margins, limit

risk and otherwise address these factors.

For example, we may seek to reduce inventory levels in anticipation of declining alcohol or

essential ingredient prices and increase production and inventory levels in anticipation of rising alcohol or essential ingredient prices.

We seek to optimize our gross profit margins by

anticipating the factors above and, when resources are available, implementing hedging transactions and taking other actions designed

to lock in margins, limit risk and otherwise address these factors.

For example, we may seek to reduce inventory levels in anticipation

of declining alcohol or essential ingredient prices and increase production and inventory levels in anticipation of rising alcohol or

essential ingredient prices.

We may also seek to alter our proportion or timing, or both, of purchase and sales commitments.

inability to anticipate the factors described above or their relative importance, and adverse movements in the factors themselves, could

result in declining or even negative gross profit margins over certain periods of time.

Our ability to anticipate these factors or favorable

movements in these factors may enable us to generate above-average gross profit margins.

However, given the difficulty associated with

successfully forecasting any of these factors, we are unable to estimate our future sales or gross profit margins.

Our inability to anticipate the factors described

above or their relative importance, and adverse movements in the factors themselves, could result in declining or even negative gross

profit margins over certain periods of time.

Our ability to anticipate these factors or favorable movements in these factors may enable

us to generate above-average gross profit margins.

However, given the difficulty associated with successfully forecasting any of these

factors, we are unable to estimate our future sales or gross profit margins.

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:

Sales and Operating Metrics (unaudited)

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:

Certain performance

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

Percentage Change

Years Ended December 31,

Alcohol Sales (gallons in millions)

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Board corn crush per gallon (1)

Essential Ingredients Sold (thousand tons)

Pekin Campus:

Essential Ingredients Sold (in thousands of tons)

Distillers grains

3 unchanged sentences

Syrup and other

Total Pekin Campus essential ingredients sold

Total Pekin Campus

Western production

1 unchanged sentence

Syrup and other

Total Western production essential ingredients sold

Total Western Production

Total Essential Ingredients Sold

Ingredients Return % (2)

Essential Ingredients return % (2)

Pekin Campus Return

1 unchanged sentence

Consolidated Total Return

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

(2) Essential

ingredient revenues as a percentage of total corn costs consumed.

Ended December 31, 2023 Compared to the Year Ended December 31, 2022

(Unfavorable)

of goods sold

profit (loss)

general and administrative expenses

on disposal of assets

from operations

from cash grant

before income taxes

for income taxes

stock dividends

available to common stockholders

decline in our consolidated net sales for 2023 as compared to 2022 was due to a decrease in the average sales price per gallon for our

alcohols, fewer total gallons sold and lower volumes of essential ingredients sold at lower prices.

Our average sales price per gallon

decreased primarily due to lower fuel-grade ethanol prices largely driven by lower oil and gasoline prices.

Fewer total gallons sold

for 2023 as compared to 2022 resulted primarily from the hot-idling of our Magic Valley facility in the first quarter of 2023 coupled

with unusually high unscheduled production downtime later in the year at our Pekin Campus for repairs and maintenance.

In addition, we

produced and sold fewer tons of essential ingredients primarily due to lower alcohol production in 2023 compared to 2022.

sales price for our essential ingredients declined primarily due to lower corn prices.

As we did in 2021 and 2022, we continued to intentionally

reduce sales of third-party fuel-grade ethanol in geographical areas less important to our business and to instead focus on sales of

inventory from our own production in 2023.

Campus Production Segment

Net sales of alcohol from our Pekin Campus production segment declined

by $19.1 million, or 4%, to $502.2 million for 2023 as compared to $521.3 million for 2022.

Our total volume of production gallons sold,

however, increased by 4.3 million gallons, or 2%, to 208.9 million gallons for 2023 as compared to 204.6 million gallons for 2022, due

to an extended shut down for maintenance during the summer of 2022.

At the segment’s average sales price per gallon of $2.49 for

2023, we generated $10.3 million in additional net sales from the 4.3 million additional gallons of alcohol sold in 2023 as compared to

However, a decrease of $0.14, or 6%, in the segment’s average sales price per gallon in 2023 as compared to 2022 resulted

in a $29.4 million decline in net sales as compared to 2022.

Net sales of essential ingredients declined by $8.2 million, or 4%,

to $217.7 million for 2023 as compared to $225.9 million for 2022.

Our total volume of essential ingredients sold increased by 28,100

tons, or 3%, to 878,400 tons for 2023 from 850,300 tons for 2022.

Sales volumes of essential ingredients were higher in 2023 due to an

extended shut down for maintenance during the summer of 2022.

At our average sales price per ton of $247.84 for 2023, we generated $6.9

million in additional net sales from the 28,100 additional tons of essential ingredients sold in 2023 as compared to 2022.

of $17.80, or 7%, in our average sales price per ton in 2023 as compared to 2022 resulted in a $15.1 million decline in net sales as compared

and Distribution Segment

sales of renewable fuel from our marketing and distribution segment, excluding intersegment sales, increased by $34.1 million, or 15%,

to $263.0 million for 2023 as compared to $228.9 million for 2022.

Our volume of third-party renewable fuel sold reported gross by the

segment increased by 22.1 million gallons, or 28%, to 102.6 million gallons for 2023 as compared to 80.5 million gallons for 2022.

increase resulted from a shift in the source of renewable fuel from our Magic Valley facility, as we hot-idled the facility in early 2023,

to third-party suppliers.

At the segment’s average sales price per gallon of $2.56 for 2023, net sales were $56.6 million higher

as a result of the 22.1 million additional gallons sold in 2023 as compared to 2022.

This increase was partially offset by the $0.27 decrease

in our average sales price per gallon for 2023.

The decrease of $0.27, or 10%, in our average sales price per gallon in 2023 as compared

to 2022 resulted in a $21.6 million decline in net sales from our third-party renewable fuel sold by the segment compared to 2022.

volume of third-party fuel-grade ethanol sold reported net by the segment declined by 37.4 million gallons, or 100%, to no gallons sold

net for 2023 as compared to 37.4 million gallons for 2022.

The decline in sales reported net resulted in a decrease of $0.9 million in

Production Segment

Net sales of alcohol from our Western production segment declined by

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

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

costs consumed.

Year Ended December 31, 2024 Compared to the Year Ended

December 31, 2023

Results as a Percentage

of Net Sales for the

(dollars in thousands)

Cost of goods sold

Selling, general and administrative expenses

Acquisition-related expenses

Gain (loss) on sale (disposal) of assets

Asset impairments

Loss from operations

Income from cash grant

Interest expense, net

Other income, net

Loss before provision for income taxes

Provision for income taxes

Consolidated net loss

Preferred stock dividends

Loss attributable to common stockholders

* Not meaningful.

The decline in our consolidated net sales for

2024 as compared to 2023 was due to a decrease in our average sales price per gallon for our alcohols and lower volumes of essential

ingredients sold at lower prices, partially offset by a higher volume of alcohol sold.

Our average sales price per gallon declined primarily

due to lower fuel-grade ethanol prices largely driven by lower oil and gasoline prices in 2024 compared to the prior year.

We also produced and sold fewer tons of essential

ingredients primarily due to lower alcohol production in 2024 compared to 2023.

Our average sales price for our essential ingredients

declined primarily due to lower corn prices.

Partially offsetting these declines, we sold more

total gallons for 2024 as compared to 2023 resulting primarily from an increase in our specialty alcohol gallons sold and third-party

gallons sold, partially offset by lower renewable fuel production gallons sold due to downtime at both our Magic Valley facility and

our Pekin Campus, as discussed above.

We were able to produce and sell more specialty alcohol due in part to higher production from our

Pekin Campus wet mill after our biennial maintenance outage during the year.

Pekin Campus Production Segment

Net sales of alcohol from our Pekin Campus production

segment declined by $86.5 million, or 17%, to $415.7 million for 2024 as compared to $502.2 million for 2023.

Our total volume of production

gallons sold, however, increased by 4.7 million gallons, or 2%, to 213.6 million gallons for 2024 as compared to 208.9 million gallons

for 2023, due to production benefits realized in second half of the year from our biennial maintenance performed in Spring 2024 resulting

in higher production rates.

At the segment’s average sales price per

gallon of $1.95 for 2024, we generated $9.1 million in additional net sales from the 4.7 million additional gallons of alcohol sold in

2024 as compared to 2023.

However, a decrease of $0.45, or 19%, in the segment’s average sales price per gallon in 2024 as compared

to 2023 resulted in a $95.6 million decline in net sales as compared to 2023.

Net sales of essential ingredients declined by

$48.4 million, or 22%, to $169.3 million for 2024 as compared to $217.7 million for 2023.

Our total volume of gallons sold declined by

25.4 million gallons, or 27%, to 67.0 million gallons for 2023 as compared to 92.4 million gallons for 2022.

This decline in sales volume

primarily resulted from lower production from our Magic Valley facility as we hot-idled the facility in the first quarter of 2023.

the segment’s average sales price of $2.49 per gallon for 2023, net sales were $63.2 million lower as a result of the 25.4 million

fewer gallons sold in 2023 as compared to 2022.

A decline of $0.26, or 9%, in our average sales price per gallon in 2023 as compared to

2022 resulted in a $23.4 million decrease in net sales of alcohol from the segment compared to 2022.

Net sales of essential ingredients declined by $32.9 million, or 36%,

to $57.3 million for 2023 as compared to $90.2 million for 2022.

Our total volume of essential ingredients sold declined by 144,800 tons,

or 18%, to 642,300 tons for 2023 from 787,100 tons for 2022.

At our average sales price of $89.15 per ton for 2023, net sales were $12.9

million lower as a result of the 144,800 fewer tons sold in 2023 as compared to 2022.

In addition, our sales price declined by $25.45

per ton for 2023.

The decline of $25.45, or 22%, in our average sales price per ton in 2023 as compared to 2022 resulted in a decrease

of $20.0 million in net sales of essential ingredients from the segment compared to 2022.

and Other Segment

sales from our Corporate and other segment were flat at $15.8 million for each of 2023 and 2022.

These sales are from Eagle Alcohol’s

of Goods Sold and Gross Profit (Loss)

Our consolidated gross profit (loss) improved to

a gross profit of $15.7 million, representing a gross margin of 1.3% for 2023, from a gross loss of $27.6 million, representing a gross

margin of negative 2.1%, for 2022.

Our consolidated gross profit improved due to improved commodity crush margins, particularly for renewable

fuel, primarily due to lower corn costs, but was partially offset by $9.7 million in unrealized non-cash derivative losses from mark-to-market

adjustments on open positions related to future period sales and $2.2 million in lower-of-cost-or-market charges in the fourth quarter

of 2023 on our ending renewable fuel inventories and related fixed corn purchase commitments due to negative crush margins heading into

year-end 2023 and the first quarter of 2024.

Campus Production Segment

Our total volume of essential ingredients sold

increased by 27,900 tons, or 3%, to 906,300 tons for 2024 from 878,400 tons for 2023.

Sales volumes of essential ingredients from our

Pekin Campus were higher in 2024 due to higher production rates for the year.

At our average sales price per ton of $186.81 for 2024,

we generated $5.2 million in additional net sales from the 27,900 additional tons of essential ingredients sold in 2024 as compared to

A decrease of $61.03, or 25%, in our average sales price per ton in 2024 as compared to 2023 resulted in a $53.6 million decline

in net sales as compared to 2023.

Marketing and Distribution Segment

Net sales of renewable fuel from our marketing

and distribution segment, excluding intersegment sales, decreased by $46.5 million, or 18%, to $216.5 million for 2024 as compared to

$263.0 million for 2023.

Our volume of third-party renewable fuel sold

reported gross by the segment increased by 5.7 million gallons, or 6%, to 108.3 million gallons for 2024 as compared to 102.6 million

gallons for 2023.

This increase resulted from a shift in the source of renewable fuel from our Magic Valley facility to third-party suppliers.

At the segment’s average sales price per gallon of $2.00 for 2024, net sales were $11.4 million higher as a result of the 5.7 million

additional gallons sold in 2024 as compared to 2023.

This increase was partially offset by the $0.56 decrease in our average sales price

per gallon for 2024.

The decrease of $0.56, or 22%, in our average sales price per gallon in 2024 as compared to 2023 resulted in a $57.9

million decline in net sales from our third-party renewable fuel sold by the segment compared to 2023.

Western Production Segment

Net sales of alcohol from our Western production

segment declined by $51.6 million, or 31%, to $115.4 million for 2024 as compared to $167.0 million for 2023.

Our total volume of gallons

sold declined by 6.5 million gallons, or 10%, to 60.5 million gallons for 2024 as compared to 67.0 million gallons for 2023.

in sales volume primarily resulted from lower production from our Magic Valley facility.

At the segment’s average sales price of

$1.91 per gallon for 2024, net sales were $12.4 million lower as a result of the 6.5 million fewer gallons sold in 2024 as compared to

A decline of $0.58, or 23%, in our average sales price per gallon in 2024 as compared to 2023 resulted in a $39.2 million decrease

in net sales of alcohol from the segment compared to 2023.

Net sales of essential ingredients declined by

$20.3 million, or 35%, to $37.0 million for 2024 as compared to $57.3 million for 2023.

Our total volume of essential ingredients sold

declined by 127,700 tons, or 20%, to 514,600 tons for 2024 from 642,300 tons for 2023.

At our average sales price of $71.81 per ton for

2024, net sales were $9.2 million lower as a result of the 127,700 fewer tons sold in 2024 as compared to 2023.

In addition, our sales

price declined by $17.35 per ton for 2024.

The decline of $17.35, or 19%, in our average sales price per ton in 2024 as compared to 2023

resulted in a decrease of $11.1 million in net sales of essential ingredients from the segment compared to 2023.

Corporate and Other Segment

Net sales from our Corporate and other segment

declined by $4.4 million or 28% to $11.4 million for 2024 as compared to $15.8 million for 2023.

These results are from Eagle Alcohol’s

Cost of Goods Sold and Gross Profit

Our consolidated gross profit declined to a gross

profit of $9.7 million, representing a gross margin of 1.0% for 2024, from $15.7 million, representing a gross margin of 1.3%, for 2023.

Our consolidated gross profit declined due to lower overall commodity crush margins, particularly for renewable fuel, primarily due to

lower sales prices as well as lower margins on essential ingredients sold due to lower corn prices.

We spent a total of $34.6 million

for repairs and maintenance, in-line with our 2024 estimate.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit improved by $35.5 million to a gross profit of $13.7 million from a gross loss of $21.8 million.

Of this increase, $35.2 million

is attributable to higher commodity crush margins and $0.3 million is attributable to increased sales volumes in 2023 as compared to 2022.

and Distribution Segment

marketing and distribution segment’s gross profit improved by $4.1 million to a gross profit of $3.7 million for 2023 from a gross

loss of $0.4 million for 2022.

Of this increase, $3.3 million is attributable to higher margins from sales of third-party renewable fuel,

and $0.8 million attributable to higher marketing volumes of third-party renewable fuel sold reported gross in 2023 as compared to 2022.

Production Segment

profit improved by $12.7 million to a gross profit of $25.9 million from $13.3 million.

Of this increase, $12.1 million is attributable

to higher commodity crush margins and $0.6 million is attributable to increased sales volumes in 2024 as compared to 2023.

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit declined by $0.2 million to a gross profit of $4.0 million for 2024 from $4.2 million for 2023.

Of this decrease, $0.4 million

is attributable to lower margins from sales of third-party renewable fuel, partially offset by an increase of $0.2 million attributable

to higher marketing volumes of third-party renewable fuel sold reported gross in 2024 as compared to 2023.

Western Production Segment

Our Western production segment’s gross loss

improved by $3.5 million to a gross loss of $5.5 million for 2023 as compared to a gross loss of $9.0 million for 2022, despite lower

production from our Magic Valley facility during the year.

Of this improvement, $1.4 million is attributable to higher margins for renewable

fuel and $2.1 million is attributable to lower sales volumes at negative margins in 2023 as compared to 2022.

and Other Segment

profit from our Corporate and other segment was flat at $3.7 million for each of 2023 and 2022.

This gross profit was from Eagle Alcohol’s

General and Administrative Expenses

selling, general and administrative, or SG&A, expenses increased by $1.1 million to $32.7 million for 2023 as compared to $31.6 million

SG&A expenses increased primarily due to higher compensation-related expenses and litigation accruals, partially offset

by lower accruals for deferred cash payments attributable to our acquisition of Eagle Alcohol.

worsened by $13.8 million to a gross loss of $19.3 million for 2024 as compared to a gross loss of $5.5 million for 2023.

Of this decline,

$15.8 million is attributable to significantly lower margins for renewable fuel, partially offset by $2.0 million attributable to lower

sales volumes at negative margins in 2024 as compared to 2023.

Corporate and Other Segment

Gross profit and loss from our Corporate and other

segment was a gross loss of $0.9 million for 2024 and a gross profit of $3.7 million for 2023, primarily from Eagle Alcohol’s business.

Selling, General and Administrative Expenses

Our selling, general and administrative, or SG&A,

expenses decreased by $0.1 million to $29.7 million for 2024 as compared to $29.8 million for 2023.

SG&A expenses decreased primarily

due to lower professional fees.

Acquisition-related Expenses

Our acquisition-related expenses increased by

$4.9 million to $7.7 million for 2024 as compared to $2.8 million for 2023.

These expenses relate to the acceleration of stock

payments to the former owners of Eagle Alcohol.

Asset Impairments

We recorded an asset impairment charge of $6.5

million for 2023 as compared to none for 2022, of which $6.0 million is attributable to an impairment to the goodwill associated with

our acquisition of Eagle Alcohol in 2022.

This charge primarily reflects revisions to current market premiums and adjustments to projections

in our required annual goodwill valuation.

from Cash Grant

received cash grants under the USDA’s Biofuel Producer Program in the amount of $2.8 million and $22.7 million for 2023 and 2022,

respectively.

The program was created as part of the CARES Act of 2020, which allocated $700 million to support biofuel producers that

experienced market losses due to the pandemic.

We are neither required to repay the grants nor will they recur in the future.

expense, net, increased by $5.6 million to $7.4 million for 2023 from $1.8 million for 2022.

The increase in interest expense, net, is

primarily due to higher debt balances under our term loan to fund our capital improvement projects, as well as higher interest rates

under Kinergy’s line of credit consistent with an overall higher interest rate environment.

Ended December 31, 2022, Compared to the Year Ended December 31, 2021

analysis of our financial results comparing 2022 to 2021 can be found under “Management’s Discussion and Analysis of Financial

Condition and Results of Operations” in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31,

2022, filed with the Securities and Exchange Commission on March 14, 2023, which is available free of charge on the Securities and Exchange

Commission’s website at www.sec.gov.

and Capital Resources

the year ended December 31, 2023, we funded our operations primarily from cash on hand, cash flow from operations and proceeds from Kinergy’s

operating line of credit.

In addition to funding our operations, we used our capital resources to continue our capital improvement projects,

make an annual payment related to our acquisition of Eagle Alcohol, repurchase shares of our common stock and pay preferred stock dividends.

As of December 31, 2023, we had $30.0 million in

cash and cash equivalents and $33.3 million available for borrowing under Kinergy’s operating line of credit.

In addition, we have

up to an additional $65.0 million that may be available for capital improvement projects under our Orion term loan, subject to certain

We believe we have sufficient sources of liquidity to meet our anticipated working capital, debt service, capital expenditure

and other liquidity needs for at least the next twelve months from the date of this report.

Year-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).

equivalents and restricted cash

We recorded asset impairment charges of $24.8

million for 2024 as compared $6.5 million for 2023.

The 2024 impairments reflect $21.4 million for our Magic Valley asset group, as we

cold-idled the plant at the end of the year, and $3.4 million for intangible assets of Eagle Alcohol.

The 2023 impairments relate to

the goodwill associated with our acquisition of Eagle Alcohol.

Interest Expense, net

Interest expense, net, increased by $0.2 million

to $7.6 million for 2024 from $7.4 million for 2023.

The increase in interest expense, net, is primarily due to higher debt balances,

as well as higher interest rates under Kinergy’s line of credit.

Year Ended December 31, 2023, Compared

to the Year Ended December 31, 2022

An analysis of our financial results comparing

2023 to 2022 can be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange

Commission on March 14, 2024, which is available free of charge on the Securities and Exchange Commission’s website at www.sec.gov.

Liquidity and Capital Resources

During the year ended December 31, 2024, we funded

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

In addition to funding our operations,

we used our capital resources to continue our capital improvement projects, make an annual cash payment related to our acquisition of

Eagle Alcohol and pay preferred stock dividends.

As of December 31, 2024, we had $35.5 million

in cash and cash equivalents and $23.1 million available for borrowing under Kinergy’s operating line of credit.

In addition, we

have up to an additional $65.0 million that may be available for capital improvement projects under our Orion term loan discussed below,

subject to certain conditions.

We believe we have sufficient sources of liquidity to meet our anticipated working capital, debt service,

capital expenditure and other liquidity needs for at least the next twelve months from the date of this report.

Quantitative Year-End Liquidity Status

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).

Cash, cash equivalents and restricted cash

Current assets

Property and equipment,

Property and equipment, net

Current liabilities

Long-term debt, noncurrent

Long-term debt, noncurrent portion

Working capital

Working capital ratio

December 31, 2023, we had approximately $64.6 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 declined to $103.5 million at December 31, 2023 from $121.1 million at December 31, 2022 as a result of a $30.3 million decrease

in current assets, partially offset by a $12.7 million decrease in current liabilities.

assets declined primarily due to decreases in cash and cash equivalents, accounts receivable, inventories and derivative instruments,

partially offset by an increase in restricted cash.

current liabilities declined primarily due to decreases in accounts payable, accrued liabilities and other current liabilities, partially

offset by increases in derivative instruments and the current portion of our operating lease payment obligations.

cash, cash equivalents and restricted cash declined by $4.0 million due to $33.0 million used in our investing activities primarily for

our capital improvement projects, partially offset by $22.0 million in cash provided by our operating activities and $7.0 million in

cash provided by our financing activities.

provided by our Operating Activities

generated $22.0 million in cash from our operating activities during 2023, as compared to $6.0 million in 2022.

Specific factors that

contributed significantly to the change in cash generated by our operating activities include:

● a decline of $13.6 million in net loss

primarily due to improved commodity crush margins resulting from lower corn costs;

increase related to inventories of $27.3 million due to the timing of production and sales

where an increase in production did not result in a commensurate increase in sales by the

end of the period;

increase of $27.3 million related to changes in the fair value of our derivative instruments

Restricted Net Assets

At December 31, 2024, we had approximately $54.1

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 to $95.3 million at December

31, 2024 from $103.5 million at December 31, 2023 as a result of a $15.7 million decrease in current assets, partially offset by a $7.5

million decrease in current liabilities.

Current assets declined primarily due to decreases

in restricted cash, inventories and other current assets.

Our current liabilities declined primarily due to decreases in derivative instruments

and accrued liabilities.

Our cash, cash equivalents and restricted cash

declined by $9.3 million due to $3.5 million of cash used in our operating activities and $13.5 million of cash used in our investing

activities primarily for our capital improvement projects, partially offset by $7.7 million in cash provided by our financing activities,

primarily due to proceeds from our operating line of credit.

Cash used in our Operating Activities

We used $3.5 million in cash in our operating

activities during 2024, as compared to $22.0 million in cash generated from our operating activities in 2023.

Specific factors that contributed

significantly to the change in cash generated by our operating activities include:

increase of $31.0 million in net loss primarily due to lower commodity crush margins and

increased asset impairments;

decrease of $19.1 million related to changes in the fair value of our derivative instruments

due to changes in commodity prices at period-end 2024 as compared to 2023;

amounts were partially offset by:

decrease of $33.1 million related to accounts payable and accrued expenses due to lower corn

costs and the timing of payments;

decrease $14.5 million related to accounts receivable balances primarily due to the timing

decrease of $8.9 million related to accounts receivable balances primarily due to the timing

of sales and collections;

used in our Investing Activities

used $33.0 million of cash in our investing activities for 2023, of which $29.5 million is attributable to additions to property and

equipment resulting from our capital improvement projects and $3.5 million is attributable to cash paid for our acquisition of Eagle

provided by our Financing Activities

provided by our financing activities was $7.0 million for 2023, of which $12.6 million is attributable to net proceeds from Kinergy’s

line of credit, partially offset by $3.7 million in repurchases of our common stock, $1.3 million of preferred stock dividends and $0.7

million of debt issuance costs.

Operating Line of Credit

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

decrease of $7.3 million in inventories due to lower period-end commodity prices.

These amounts were partially offset by:

● an increase of $22.5 million related to accounts payable and

accrued expenses due to the timing of payments;

● an increase of $18.2 million in asset impairments primarily

related to the cold-idling of our Magic Valley facility.

Cash used in our Investing Activities

We used $13.5 million of cash in our investing

activities for 2024, of which $11.1 million was for additions to property and equipment resulting from our capital improvement projects

and $2.8 million is attributable to cash paid for our acquisition of Eagle Alcohol.

Cash provided by our Financing Activities

Cash provided by our financing activities was $7.7

million for 2024, of which $9.0 million is attributable to net proceeds from Kinergy’s line of credit, partially offset by $1.3

million of preferred stock dividends.

Kinergy’s Operating Line of Credit

Kinergy maintains an operating line of credit 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

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,

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,

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:

Fixed-Charge Coverage Ratio Requirement

Ingredients, Inc.

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

As of December 31, 2023, Kinergy had an

outstanding balance of $30.7 million and $33.3 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.

The Lenders agreed to advance to us up to $125.0

million upon the satisfaction of certain conditions.

We committed to issue to the Lenders pro rata an aggregate of 1,282,051 shares of

our common stock at the initial funding and up to an additional 320,513 shares of our common stock based upon certain further fundings

under the credit facility.

On November 23, 2022, we received our initial funding of $60.0 million under the credit facility and issued

an aggregate of 1,282,051 shares of our common stock to the Lenders.

We received no separate consideration for the shares of common stock

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 beginning with the six-month period ending December 31, 2023

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 December 31, 2023 and 2022, the principal amount outstanding under the Term Loan was $60.0 million.

Repurchase Program

the three months ended December 31, 2023, we repurchased 436,000 shares of our common stock as part of our publicly announced share repurchase

program at an average price per share of $2.27 for an aggregate expenditure of approximately $1.0 million during the period.

5 – Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities –

Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”

the year ended December 31, 2023, we repurchased 1,685,000 shares of our common stock as part of our publicly announced share repurchase

program at an average price per share of $2.18 for an aggregate expenditure of $3.7 million during the period.

Cash Obligations

of December 31, 2023, we had future commitments for certain capital projects totaling $15.6 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 $5.5 million in cash over the next two

years if certain financial targets and other conditions are met.

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 amount of net sales and expenses for each

The following represents a summary of our critical accounting policies and related estimates, defined as 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.

for Business Combinations

the fair value of assets acquired and liabilities assumed in a business combination is considered a critical accounting estimate because

the allocation of the purchase price to assets acquired and liabilities assumed based upon fair values requires significant management

judgment and the use of subjective measurements.

Variability in industry conditions and changes in assumptions or subjective measurements

used to allocate fair value are reasonably possible and may have a material impact on our financial position, liquidity or results of

recognize revenue primarily from sales of alcohols and essential ingredients.

have five alcohol production facilities from which we produce and sell alcohols to our customers through our subsidiary, Kinergy.

enters into sales contracts with customers under exclusive intercompany sales agreements with each of our five production facilities.

Kinergy also acts as a principal when it purchases third party fuel-grade ethanol which it resells to its customers.

Finally, in 2022

and 2021, Kinergy had exclusive sales agreements with two third-party owned fuel-grade ethanol plants under which it sold the plants’

fuel-grade ethanol production for a fee plus the costs to deliver the ethanol to Kinergy’s customers.

Kinergy has since terminated

these contracts.

These sales are referred to as third-party agent sales.

Revenue from these third-party agent sales is recorded on a

net basis, with Kinergy recognizing its predetermined fees and any associated delivery costs.

have five production facilities from which we produce and sell essential ingredients to our customers through our subsidiary, Alto Nutrients.

Alto Nutrients enters into sales contracts with essential ingredient customers under exclusive intercompany sales agreements with each

of our five production facilities.

recognize revenue from sales of alcohols and essential ingredients at the point in time when the customer obtains control of the products,

which typically occurs upon delivery depending on the terms of the underlying contracts.

In some instances, we enter into contracts with

customers that contain multiple performance obligations to deliver volumes of alcohols or essential ingredients over a contractual period

of less than 12 months.

We allocate the transaction price to each performance obligation identified in the contract based on relative

standalone selling prices and recognize the related revenue as control of each individual product is transferred to the customer in satisfaction

of the corresponding performance obligations.

we are the agent, the supplier controls the products before they are transferred to the customer because the supplier is primarily responsible

for fulfilling the promise to provide the product, has inventory risk before the product has been transferred to a customer and has discretion

in establishing the price for the product.

When we are the principal, we control the products before they are transferred to the customer

because we are primarily responsible for fulfilling the promise to provide the products, we have inventory risk before the product has

been transferred to a customer and we have discretion in establishing the price for the product.

“Note 5 – Segments” of the Notes to Consolidated Financial Statements for our revenue-breakdown by type of contract.

of Long-Lived Assets and Held-for-Sale Classification

long-lived assets have been primarily associated with our production facilities, reflecting their original cost, adjusted for depreciation

and amortization and any subsequent impairment.

assess the impairment of long-lived assets, including property and equipment, when events or changes in circumstances indicate that the

fair value of an asset group could be less than the net book value of the asset group.

Generally, we assess long-lived assets for impairment

by first determining the forecasted, undiscounted cash flows each asset is expected to generate plus the net proceeds expected from the

sale of the asset group.

If the total amount of the undiscounted cash flows is less than the carrying value of the asset group, we then

determine the fair value of the asset group.

An impairment loss would be recognized when the fair value is less than the related net

book value, and an impairment expense would be recorded in the amount of the difference.

Forecasts of future cash flows are estimates

based on our experience and knowledge of our operations and the industry in which we operate.

These estimates could be significantly

affected by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of our customers.

As a result, we recorded an asset impairment of $0.6 million with respect to our right of use assets associated with our operating leases.

We did not record any impairment on our right of use assets for the years ended December 31, 2022 and 2021.

Alto Ingredients, Inc.

has guaranteed all of Kinergy’s

obligations under the credit facility.

As of December 31, 2024, Kinergy had an outstanding balance of $39.7 million and $23.1 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.

Interest accrues on the unpaid principal amount of the Term Loan

at a fixed rate of 10% per annum.

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

We must prepay amounts outstanding under the Term

Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023 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.

As of December 31, 2024 and 2023, the principal

amount outstanding under the Term Loan was $60.0 million.

Other Cash Obligations

As of December 31, 2024, we had future commitments

for certain capital projects totaling $9.1 million.

These commitments are scheduled to be satisfied through 2025.

In connection with our acquisition of Eagle Alcohol,

we are committed to pay contingent payments of up to $2.7 million in the first half of 2025.

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 amount of net sales and expenses for each period.

The following represents a summary of our critical accounting

policies and related estimates, defined as 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

Determining the fair value of assets acquired and

liabilities assumed in a business combination is considered a critical accounting estimate because the allocation of the purchase price

to assets acquired and liabilities assumed based upon fair values requires significant management judgment and the use of subjective measurements.

Variability in industry conditions and changes in assumptions or subjective measurements used to allocate fair value are reasonably possible

and may have a material impact on our financial position, liquidity or results of operations.

Revenue Recognition

We recognize revenue primarily from sales of alcohols

and essential ingredients.

We have five alcohol production facilities from

which we produce and sell alcohols to our customers through our subsidiary, Kinergy.

Kinergy enters into sales contracts with customers

under exclusive intercompany sales agreements with each of our five production facilities.

Kinergy also acts as a principal when it purchases

third party fuel-grade ethanol which it resells to its customers.

Finally, in 2022, Kinergy had exclusive sales agreements with two third-party

owned fuel-grade ethanol plants under which it sold the plants’ fuel-grade ethanol production for a fee plus the costs to deliver

the ethanol to Kinergy’s customers.

Kinergy has since terminated these contracts.

These sales are referred to as third-party agent

Revenue from these third-party agent sales is recorded on a net basis, with Kinergy recognizing its predetermined fees and any

associated delivery costs.

We have five production facilities from which we

produce and sell essential ingredients to our customers through our subsidiary, Alto Nutrients.

Alto Nutrients enters into sales contracts

with essential ingredient customers under exclusive intercompany sales agreements with each of our five production facilities.

We recognize revenue from sales of alcohols and

essential ingredients at the point in time when the customer obtains control of the products, which typically occurs upon delivery depending

on the terms of the underlying contracts.

In some instances, we enter into contracts with customers that contain multiple performance

obligations to deliver volumes of alcohols or essential ingredients over a contractual period of less than 12 months.

We allocate the

transaction price to each performance obligation identified in the contract based on relative standalone selling prices and recognize

the related revenue as control of each individual product is transferred to the customer in satisfaction of the corresponding performance

When we are the agent, the supplier controls the

products before they are transferred to the customer because the supplier is primarily responsible for fulfilling the promise to provide

the product, has inventory risk before the product has been transferred to a customer and has discretion in establishing the price for

When we are the principal, we control the products before they are transferred to the customer because we are primarily responsible

for fulfilling the promise to provide the products, we have inventory risk before the product has been transferred to a customer and we

have discretion in establishing the price for the product.

See “Note 4 – Segments” of the

Notes to Consolidated Financial Statements for our revenue breakdown by type of contract.

Impairment of Long-Lived Assets

Our long-lived assets have been primarily associated

with our production facilities, reflecting their original cost, adjusted for depreciation and amortization and any subsequent impairment.

We assess the impairment of long-lived assets,

including property and equipment, when events or changes in circumstances indicate that the fair value of an asset group could be less

than the net book value of the asset group.

Generally, we assess long-lived assets for impairment by first determining the forecasted,

undiscounted cash flows each asset is expected to generate plus the net proceeds expected from the sale of the asset group.

amount of the undiscounted cash flows is less than the carrying value of the asset group, we then determine the fair value of the asset

When the estimated fair value of the asset group is less than its carrying value, we recognize an impairment expense equal to the

difference between the asset group’s carrying value and estimated fair value.

Forecasts of future cash flows are estimates based

on our experience and knowledge of our operations and the industry in which we operate.

These estimates could be significantly affected

by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of our customers.

As a result, we recorded asset impairments of $21.4 million and $0.6 million with respect to our Magic Valley facility and right of use

assets associated with our operating leases for the years ended December 31, 2024 and 2023, respectively.

We review our intangible assets, including goodwill,

4 unchanged sentences

We performed our annual

review of impairment and recognized an asset impairment loss of $6.0 million against our goodwill for the year ended December 31, 2023.

We recognized no asset impairments against intangible assets for the years ended December 31, 2022 and 2021.

held-for-sale are assessed for impairment by comparing the carrying values to their expected net sales proceeds.

In 2020, our Board of

Directors approved a plan to sell our fuel-grade ethanol production facilities in Madera and Stockton, California, which were ultimately

sold in 2021.

We reviewed the criteria for held-for-sale classification of the long-lived assets associated with these asset groups.

Our analysis concluded that these assets should be classified as held-for-sale as of December 31, 2020, and as such, we estimated an

aggregate corresponding asset impairment of $22.3 million for 2020.

We further evaluated the original estimate and recorded an additional

asset impairment on these assets held-for-sale of $1.2 million for 2021.

In 2021, we decided to sell our property and equipment located

in Canton, Illinois.

We reviewed the criteria for held-for-sale classification of the long-lived assets for this asset group.

that these assets should be classified as held-for-sale as of December 31, 2021, and as such, we estimated a corresponding asset impairment

of $1.9 million for 2021.

We did not record any impairments for assets held-for-sale for December 31, 2023 or 2022.

Allowance for Deferred Taxes

account for income taxes under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences

between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected

to be in effect when the differences reverse.

Valuation allowances are established when necessary to reduce deferred tax assets to the

amounts expected to be realized.

evaluate our deferred tax asset balance for realizability.

To the extent we believe it is more likely than not that some portion or all

of our deferred tax assets will not be realized, we will establish a valuation allowance against the deferred tax assets.

of our deferred tax assets is dependent upon future taxable income during the periods in which the associated temporary differences become

We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies

in making this assessment.

These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in

a reduction in net income or an increase in net loss in the period when such determinations are made.

review of impairment and recognized asset impairments of $3.4 million and $6.0 million against our intangible assets and goodwill for

the years ended December 31, 2024 and 2023, respectively.

We did not recognize any asset impairments for the year ended December 31, 2022.

Valuation Allowance for Deferred Taxes

We account for income taxes under the asset and

liability approach, where deferred tax assets and liabilities are determined based on differences between financial reporting and tax

bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected to be in effect when the differences

Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

We evaluate our deferred tax asset balance for

realizability.

To the extent we believe it is more likely than not that some portion or all of our deferred tax assets will not be realized,

we will establish a valuation allowance against the deferred tax assets.

Realization of our deferred tax assets is dependent upon future

taxable income during the periods in which the associated temporary differences become deductible.

We consider the scheduled reversal

of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

These changes, if

any, may require possible material adjustments to these deferred tax assets, resulting in a reduction in net income or an increase in

net loss in the period when such determinations are made.

We had pre-tax consolidated net losses of $58.8

million and $39.7 million for the years ended December 31, 2023 and 2022, respectively.

We had pre-tax consolidated net income of $47.6

million for the year ended December 31, 2021.

Based on our current and prior results, we do not have significant evidence to support a

conclusion that we will more likely than not be able to benefit from our remaining deferred tax assets.

As such, we have recorded

a valuation allowance against our net deferred tax assets.

evaluate our contracts to determine whether the contracts are derivative instruments.

Management may elect to exempt certain forward

contracts that meet the definition of a derivative from derivative accounting as normal purchases or normal sales.

Normal purchases and

normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument

that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business.

that meet the requirements of normal purchases or sales are documented as normal and exempted from the fair value accounting and reporting

requirements of derivative accounting.

enter into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of fuel-grade

ethanol and managing exposure to changes in commodity prices.

All of our exchange-traded derivatives are designated as non-hedge derivatives

for accounting purposes, with changes in fair value recognized in net income.

Although the contracts are economic hedges of specified

risks, they are not designated or accounted for as hedging instruments.

and unrealized gains and losses related to exchange-traded derivative contracts are included as a component of cost of goods sold in

the accompanying financial statements.

The fair values of contracts entered through commodity exchanges are presented on the accompanying

balance sheet as derivative assets or liabilities.

The selection of normal purchase or sales contracts, and use of hedge accounting,

are accounting policies that can change the timing of recognition of gains and losses in the statement of operations.

million, $27.9 million and $39.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Based on our current and

prior results, we do not have sufficient evidence to support a conclusion that we will more likely than not be able to benefit from our

remaining deferred tax assets.

As such, we have recorded a valuation allowance against our net deferred tax assets.

Derivative Instruments

We evaluate our contracts to determine whether

the contracts are derivative instruments.

Management may elect to exempt certain forward contracts that meet the definition of a derivative

from derivative accounting as normal purchases or normal sales.

Normal purchases and normal sales are contracts that provide for the purchase

or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used

or sold over a reasonable period in the normal course of business.

Contracts that meet the requirements of normal purchases or sales are

documented as normal and exempted from the fair value accounting and reporting requirements of derivative accounting.

We enter into short-term cash, option and futures

contracts as a means of securing purchases of corn, natural gas and sales of fuel-grade ethanol and managing exposure to changes in commodity

All of our exchange-traded derivatives are designated as non-hedge derivatives for accounting purposes, with changes in fair value

recognized in net income.

Although the contracts are economic hedges of specified risks, they are not designated or accounted for as hedging

Realized and unrealized gains and losses related

to exchange-traded derivative contracts are included as a component of cost of goods sold in the accompanying financial statements.

fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative assets or liabilities.

The selection of normal purchase or sales contracts, and use of hedge accounting, are accounting policies that can change the timing of

recognition of gains and losses in the statement of operations.

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-K

Item 7. Management’s Discussion and Analysis