What changed in this filing

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Item 9A. Controls and Procedures

2025-03-13 compared with 2024-03-14 · 1649 added, 1431 removed, 255 unchanged (92% of the section changed)

14 unchanged sentences

Financial Officer concluded as of December 31, 2024 that our disclosure controls and procedures were effective at a reasonable assurance

Report on Internal Control over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)

and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is designed to provide reasonable assurance regarding

the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally

accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that:

to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally

accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management

and directors;

(iii) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could

have a material effect on our financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of

any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,

or that the degree of compliance with the policies or procedures may deteriorate.

material weakness is defined by the Public Company Accounting Oversight Board’s Audit Standards AS 2201 as being a deficiency,

or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material

misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis by the

company’s internal controls.

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in

Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework set forth in Internal Control — Integrated Framework (2013), our management

concluded that our internal control over financial reporting was effective as of December 31, 2023.

US LLP , an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting

as of December 31, 2023.

That report is included in Part IV of this report.

Limitations on the Effectiveness of Controls

does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all

errors and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance

that the objectives of the control systems are met.

Further, the design of a control system must reflect the fact that there are resource

constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in a cost-effective

control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error

or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a

simple error or mistake.

Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people,

or by management override of the controls.

The design of any system of controls is based in part on certain assumptions about the likelihood

of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future

Projections of any evaluation of controls effectiveness to future periods are subject to risks.

Over time, controls may become

inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

in Internal Control over Financial Reporting

has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)

during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal

control over financial reporting.

Management’s Report on Internal Control

over Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting

and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable

detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our

receipts and expenditures are being made only in accordance with authorizations of our management and directors;

(iii) provide reasonable assurance regarding prevention or timely

detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control

over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods

are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the

policies or procedures may deteriorate.

A material weakness is defined by the Public Company

Accounting Oversight Board’s Audit Standards AS 2201 as being a deficiency, or combination of deficiencies, in internal control

over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim

financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

Under the supervision and with the participation

of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness

of our internal control over financial reporting based on the framework set forth in Internal Control — Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under the framework

set forth in Internal Control — Integrated Framework (2013), our management concluded that our internal control over financial

reporting was effective as of December 31, 2024.

RSM US LLP, an independent registered public accounting

firm, has issued an attestation report on our internal control over financial reporting as of December 31, 2024.

That report is included

in Part IV of this report.

Inherent Limitations on the Effectiveness

Management does not expect that our disclosure

controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud.

A control system,

no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls

must be considered relative to their costs.

Because of the inherent limitations in a cost-effective control system, no evaluation of internal

control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control

issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities

that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake.

Controls can also

be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no

assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation

of controls effectiveness to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions

or deterioration in the degree of compliance with policies or procedures.

Changes in Internal Control

over Financial Reporting

There has been no change in our internal control

over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recently completed fiscal

quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act

of 1934, as amended) informed us of the adoption or termination of a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement

(as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

During the three months ended December 31, 2024,

none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) informed us of the

adoption , modification or termination of a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined

in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Directors, Executive Officers and Corporate Governance.

information under the captions “Information about our Board of Directors, Board Committees and Related Matters” appearing

in the Proxy Statement, is hereby incorporated by reference.

The information under the captions “Information

about our Board of Directors, Board Committees and Related Matters” appearing in the Proxy Statement, is hereby incorporated by

Executive Compensation.

information under the caption “Executive Compensation and Related Information,” appearing in the Proxy Statement, is hereby

incorporated by reference.

The information under the caption “Executive

Compensation and Related Information,” appearing in the Proxy Statement, is hereby incorporated by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

information under the captions “Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation

Plan Information,” appearing in the Proxy Statement, is hereby incorporated by reference.

The information under the captions “Security

Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” appearing in the

Proxy Statement, is hereby incorporated by reference.

Certain Relationships and Related Transactions, and Director Independence.

information under the captions “Certain Relationships and Related Transactions” and “Information about our Board of

Directors, Board Committees and Related Matters—Director Independence” appearing in the Proxy Statement, is hereby incorporated

by reference.

The information under the captions “Certain

Relationships and Related Transactions” and “Information about our Board of Directors, Board Committees and Related Matters—Director

Independence” appearing in the Proxy Statement, is hereby incorporated by reference.

Principal Accountant Fees and Services.

information under the caption “Audit Matters—Principal Accountant Fees and Services,” appearing in the Proxy Statement,

is hereby incorporated by reference.

The information under the caption “Audit

Matters—Principal Accountant Fees and Services,” appearing in the Proxy Statement, is hereby incorporated by reference.

Exhibits and Financial Statement Schedules.

Financial Statements

is made to the financial statements listed on and attached following the Index to Consolidated Financial Statements contained on page

F-1 of this report.

Financial Statement Schedules

is made to the exhibits listed on the Index to Exhibits.

(a)(1) Financial Statements

Reference is made to the financial statements listed

on and attached following the Index to Consolidated Financial Statements contained on page F-1 of this report.

(a)(2) Financial Statement Schedules

(a)(3) Exhibits

Reference is made to the exhibits listed on the

Index to Exhibits.

Form 10-K Summary.

7 unchanged sentences

Notes to Consolidated Financial Statements F-11

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors of Alto Ingredients, Inc.

on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Alto Ingredients, Inc.

and its subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated

statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period

ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements).

opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023

and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity

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

We have also audited, in accordance

with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s

internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated

Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 13,

2024, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent

with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a

reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

of indicators of long-lived asset impairment

in Note 1 to the financial statements, the Company assesses the impairment of long-lived assets, including property and equipment, when

events or changes in circumstances indicate that the fair value of assets could be less than their net book value.

The Company’s

assessment did not result in an impairment for the year ended December 31, 2023.

We identified

the evaluation of impairment indicators for long-lived assets as a critical audit matter because of the significant assumptions management

makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of property and

equipment may not be recoverable.

This required a high degree of auditor judgment when performing audit procedures to evaluate whether

management appropriately identified and evaluated impairment indicators.

audit procedures related to the assessment of long-lived assets for possible indications of impairment included the following, among

● We obtained an understanding of management’s process and internal

controls over management’s evaluation of potential indicators of impairment and tested the operating effectiveness of the controls

● We obtained management’s analysis of potential indicators of

impairment and evaluated management’s analysis by:

- Agreeing current period operating profits or losses for all identifiable

asset groups to respective trial balances

asset groups in a current period loss, compared the current period operating loss to historical operating profits or losses

an independent expectation of the underlying fair value for one identified asset group that had both current period and historical operating

publicly available information related to sales of comparable production facilities

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

of Alto Ingredients, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Alto

Ingredients, Inc.

and its subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations,

comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2024,

and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results

of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting

principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company

Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December

31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring

Organizations of the Treadway Commission in 2013, and our report dated March 13, 2025, expressed an unqualified opinion on the effectiveness

of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public

accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free

of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement

of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included

examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating

the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from

the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective

or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken

as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter

or on the accounts or disclosures to which it relates.

Long-lived asset impairment

As described in Note 1 to the financial statements, the Company assesses

the impairment of long-lived assets when events or changes in circumstances indicate that the fair value of assets could be less than

their carrying value.

In such event, the Company assesses long-lived assets for impairment by first determining the forecasted, undiscounted

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

If this amount is

less than the carrying value of the asset group, the Company will then determine the fair value of the asset group.

When the estimated

fair value of the asset group is less than its carrying value, the Company recognizes an impairment expense equal to the difference between

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

The Company’s assessment resulted in an asset impairment of $24,790,000

for the year ended December 31, 2024.

We identified the evaluation of the fair value of asset groups, where

fair value was required to be determined as part of the impairment analysis, as a critical audit matter because of the significant estimates

management makes when determining fair value.

This required a high degree of auditor judgment when performing audit procedures to evaluate

whether management appropriately determined fair value.

Our audit procedures related to the evaluation of fair value, where

fair value was required to be determined as part of the impairment analysis, included the following, among others:

● We obtained an understanding of management’s process

and the internal controls over management’s determination of fair value and tested the operating effectiveness of the controls

obtained management’s determination of fair value and evaluated management’s

determination by:

it to publicly available information related to sales of comparable asset groups sold by

the Company and others in the industry

the sales price per nameplate production gallons to the carrying value of the asset group

board of directors meeting minutes, press releases, and publicly available information for indications of significant changes in the

manner of or the use of the asset group

/s/ RSM US LLP

We have served as the Company’s

auditor since 2015.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and the Board of Directors of Alto Ingredients, Inc.

on the Internal Control Over Financial Reporting

We have audited Alto Ingredients, Inc.’s

(the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control

— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion,

the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on

criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations

of the Treadway Commission in 2013.

have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated

balance sheets as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders’

equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial

statements of the Company and our report dated March 13, 2024 expressed an unqualified opinion.

Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment

of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control over

Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based

on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company

in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,

and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included

performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis

for our opinion.

and Limitations of Internal Control Over Financial Reporting

A company’s internal control over

financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal

control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable

detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance

that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting

principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and

directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use

or disposition of the company’s assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of

any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,

or that the degree of compliance with the policies or procedures may deteriorate.

We have served as the Company’s auditor since 2015.

Rochester, Minnesota

March 13, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Stockholders and the Board of Directors

of Alto Ingredients, Inc.

Opinion on the Internal Control Over Financial Reporting

We have audited Alto Ingredients, Inc.’s (the Company) internal

control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in

all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in

Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in

We have also audited, in accordance with the standards of the Public

Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets as of December 31, 2024 and 2023, the related

consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three

years in the period ended December 31, 2024, and the related notes to the consolidated financial statements of the Company and our report

dated March 13, 2025, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective

internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in

the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion

on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with

the PCAOB and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over

financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial

reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal

control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial

A company’s internal control over financial reporting is a process

designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting

includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly

reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded

as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts

and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s

assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial

reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject

to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies

or procedures may deteriorate.

/s/ RSM US LLP

INGREDIENTS, INC.

Rochester, Minnesota

March 13, 2025

ALTO INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and par value)

and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 85 and $ 105 , respectively

Current Assets:

current assets

and equipment, net

of use operating lease assets, net

accompanying notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

Cash and cash equivalents

Restricted cash

Accounts receivable, net of allowance for credit losses of $ 23 and $ 85 , respectively

Derivative instruments

Other current assets

Total current assets

Property and equipment, net

Other Assets:

Right of use operating lease assets, net

Intangible assets, net

Total other assets

The accompanying notes are an integral part of

these consolidated financial statements.

ALTO INGREDIENTS, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except shares and par value)

AND STOCKHOLDERS’ EQUITY

Current Liabilities:

portion – operating leases

current liabilities

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

leases, net of current portion

and contingencies (Notes 1, 9, 10, 11 and 15)

Stockholders’

Accounts payable

Accrued liabilities

Current portion – operating leases

Derivative instruments

Other current liabilities

Total current liabilities

Long-term debt, net

Operating leases, net of current portion

Other liabilities

Total Liabilities

Commitments and contingencies (Notes 1, 8, 9, 10 and 14)

Stockholders’ Equity:

Preferred stock, $ 0.001 par value;

11 unchanged sentences

896 shares issued and outstanding as of December 31, 2024 and 2023

paid-in capital

other comprehensive income

stockholders’ equity

Liabilities and Stockholders’ Equity

accompanying notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’ equity

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of

these consolidated financial statements.

ALTO INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

4 unchanged sentences

Selling, general and administrative expenses

Gain (loss) on sale (disposal) of assets

Acquisition-related expenses

Gain (loss) on sale or disposal of assets

Asset impairments

Income (loss) from operations

Loss from operations

Income from cash grant

Income from loan forgiveness

Interest expense, net

Other income, net

Income (loss) before provision for income taxes

Loss before provision for income taxes

Provision for income taxes

Consolidated net income (loss)

Consolidated net loss

Preferred stock dividends

Income allocated to participating securities

Income (loss) available to common stockholders

Income (loss) per share, basic

Income (loss) per share, diluted

Weighted-average shares outstanding, basic

Weighted-average shares outstanding, diluted

accompanying notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

Loss attributable to common stockholders

Loss per share, basic and diluted

Weighted-average shares outstanding, basic and diluted

The accompanying notes are an integral part of

these consolidated financial statements.

ALTO INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

Ended December 31,

net income (loss)

comprehensive income – net gain arising during the period on defined

benefit pension plans

comprehensive income (loss)

accompanying notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

Years Ended December 31,

Consolidated net loss

Other comprehensive income– net gain arising during the period on defined benefit pension plans

Total comprehensive loss

The accompanying notes are an integral part of

these consolidated financial statements.

ALTO INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Common Stock and

Preferred Stock

Non-Voting Common

Comprehensive

December 31, 2020

Income (Loss)

Balances, December 31, 2021

$ ( 691,781 )

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

stock issuances

plan adjustment

stock dividends

December 31, 2021

Stock-based compensation

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

Shares issued for Eagle

Shares issued to Orion

Stock repurchases

Pension plan adjustment

Preferred stock dividends

Balances, December 31, 2022

$ ( 734,643 )

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

issued for Eagle

issued to Orion

plan adjustment

stock dividends

December 31, 2022

Stock-based compensation

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

Stock repurchases

Pension plan adjustment

Preferred stock dividends

Balances, December 31, 2023

$ ( 763,913 )

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

plan adjustment

stock dividends

December 31, 2023

Stock-based compensation

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

Pension plan adjustment

Preferred stock dividends

Balances, December 31, 2024

$ ( 824,166 )

accompanying notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

The accompanying notes are an integral part of

these consolidated financial statements.

ALTO INGREDIENTS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

the Years Ended December 31,

Years Ended December 31,

Operating Activities:

net income (loss)

to reconcile consolidated net income (loss) to cash provided by operating activities:

Depreciation and amortization

of intangibles

Consolidated net loss

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

Depreciation and amortization of intangibles

Asset impairments

Income from loan forgiveness

(Gain) loss on (sale)

disposal of assets

(Gain) loss on sale or disposal of assets

Inventory valuation

Losses (gains) on derivative

Amortization of deferred

financing costs

Amortization of debt

discounts (premiums)

Noncash compensation

Bad debt expense (recovery)

in operating assets and liabilities:

Losses (gains) on derivative instruments

Amortization of deferred financing costs

Amortization of debt discounts

Stock-based compensation

Bad debt (recovery) expense

Changes in operating assets and liabilities:

Accounts receivable

1 unchanged sentence

Operating leases

Assets held-for-sale

Liabilities held-for-sale

payable and accrued expenses

cash provided by operating activities

Additions to property

and equipment

Deferred purchase price

payments for Eagle Alcohol

Purchase of Eagle Alcohol,

net of cash acquired

Proceeds from principal

payments on notes receivable

Proceeds from sale of Stockton

from sale of Madera

cash (used in) provided by investing activities

Net proceeds from (payments

on) Kinergy’s line of credit

Accounts payable and accrued expenses

Net cash (used in) provided by operating activities

Investing Activities:

Additions to property and equipment

Deferred purchase price payments for Eagle Alcohol

Proceeds from sale of assets

Purchase of Eagle Alcohol, net of cash acquired

Proceeds from principal payments on notes receivable

Net cash used in investing activities

Financing Activities:

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

Net proceeds from term loan

Stock repurchases

Preferred stock dividend

Debt issuance costs

Proceeds from issuances

of common stock and warrants

Payments on plant borrowings

on senior notes

cash provided by (used in) financing activities

Net increase (decrease)

in cash, cash equivalents and restricted cash

cash equivalents and restricted cash at beginning of period

cash equivalents and restricted cash at end of period

Reconciliation of total cash, cash equivalents

and restricted cash:

and cash equivalents

Preferred stock dividend payments

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Reconciliation of total cash, cash

equivalents and restricted cash:

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents

and restricted cash

Total cash, cash equivalents and restricted cash

Supplemental Information:

paid (net of capitalized interest)

The accompanying

notes are an integral part of these consolidated financial statements.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

AND SIGNIFICANT ACCOUNTING POLICIES.

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

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

“Company”), including Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Alto Nutrients,

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

limited liability company (“Alto Pekin”) and Alto ICP, LLC, a Delaware limited liability company (“ICP”), and

the Company’s production facilities in Oregon and Idaho.

As discussed in Note 3, on May 14, 2021 and November 4, 2021, the Company

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

As discussed in Note 2, on January

14, 2022, the Company acquired Eagle Alcohol Company LLC, a Missouri limited liability company (“Eagle Alcohol”).

date, Eagle Alcohol became a wholly-owned subsidiary of the Company.

Eagle Alcohol specializes in break bulk distribution of specialty

Eagle Alcohol purchases bulk alcohol from suppliers, including the Company.

Then it stores, denatures, packages, and resells

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

Alcohol delivers products to customers in the beverage, food, industrial and related-process industries via its own dedicated trucking

fleet and common carrier.

The acquisition has provided the Company further vertical integration and access to new markets in the specialty

alcohol industry.

The Company produces and distributes renewable fuel, essential ingredients and specialty alcohols.

The Company also

produces and markets fuel-grade ethanol.

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

The Company’s two production facilities in Oregon and Idaho are located in close proximity to both feed and fuel-grade

ethanol customers.

Company has a combined alcohol production capacity of 350 million gallons per year and produces, on an annualized basis, over 1.6 million

tons of essential ingredients, such as dried yeast, corn gluten meal, corn gluten feed, corn germ, and distillers grains and liquid feed

used in commercial animal feed and pet foods.

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

The Company focuses on five

Health, Home & Beauty ;

Interest paid (net of capitalized interest)

Capitalized interest

Income tax refunds (payments)

accompanying notes are an integral part of these consolidated financial statements.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES .

Organization and Business – The

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

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

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

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

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

in Oregon and Idaho.

As discussed in Note 2, on January 14, 2022, the Company acquired Eagle

Alcohol Company LLC, a Missouri limited liability company (“Eagle Alcohol”).

On that date, Eagle Alcohol became a wholly-owned

subsidiary of the Company.

Eagle Alcohol specializes in break bulk distribution of specialty alcohols.

As discussed in Note 16, On January 1, 2025, the Company’s wholly-owned

subsidiary, Alto Carbonic, LLC (“Alto Carbonic”), acquired Kodiak Carbonic, LLC, a beverage-grade liquid CO 2 processor

for $ 7.6 million.

Alto Carbonic is co-located at the Company’s Columbia ethanol facility.

The Company plans to report the results

of Alto Carbonic in the Company’s Western Production segment beginning January 1, 2025.

The Company produces and distributes renewable fuels,

essential ingredients and specialty alcohols.

The Company also markets fuel-grade ethanol produced by third parties.

The Company’s

production facilities in Pekin, Illinois are located in the heart of the Corn Belt.

The Company’s two production facilities in Oregon

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

The Company has a combined alcohol production capacity

of 350 million gallons per year and produces, on an annualized basis, over 1.4 million tons of essential ingredients, such as dried yeast,

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

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

The Company focuses on Health, Home & Beauty ;

Food & Beverage ;

1 unchanged sentence

Essential Ingredients ;

Renewable Fuels .

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

hand sanitizers, disinfectants and cleaners.

Products for the Food & Beverage markets include grain neutral spirits used in alcoholic

beverages and vinegar as well as corn germ used for corn oils.

Products for Industry & Agriculture markets include alcohols and other

products for paint applications and fertilizers.

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

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

Products for Renewable Fuels

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

The Company’s production

facilities were operating for all of 2022, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.

On January 1, 2023, the Company temporarily hot-idled its Magic Valley production facility due to extreme natural gas prices, other unfavorable

market conditions and to facilitate the installation of its new corn oil and high protein system, bringing the facility back online in

In January 2024, the Company again temporarily hot-idled the facility to minimize losses from negative regional crush margins

and to expedite the installation of additional equipment needed to achieve the Company’s intended production rate, quality and consistency

from the corn oil and high protein system.

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

more operating facilities or resume operations at any idled facility.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of Presentation – The consolidated financial statements and related notes have been prepared in accordance with accounting

principles generally accepted in the United States (“GAAP”) and include the accounts of the Company.

All significant intercompany

accounts and transactions have been eliminated in consolidation.

Segments – A segment is a

component of an enterprise whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to

make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information

is available.

The Company determines and discloses its segments in accordance with the Financial Accounting Standards Board’s (“FASB”)

Accounting Standards Codification (“ASC”) Section 280, Segment Reporting , which defines how to determine segments.

The Company reports financial and operating performance in three reportable segments (1) Pekin production, which includes the entire campus

in Pekin, Illinois (“Pekin Campus”), (2) marketing and distribution, which includes marketing and merchant trading for Company-produced

specialty alcohols, fuel-grade ethanol and essential ingredients, and sales of fuel-grade ethanol sourced from third parties, and (3)

Western production, which includes the Company’s two western production facilities on an aggregated basis (“Western production”).

and Cash Equivalents – The Company considers all highly-liquid investments with an original maturity of three months or less

to be cash equivalents.

The Company maintains its accounts at several financial institutions.

These cash balances regularly exceed amounts

insured by the Federal Deposit Insurance Corporation;

however, the Company does not believe it is exposed to any significant credit risk

on these balances.

Cash – The Company’s restricted cash comprises cash collateral balances held in derivative brokerage accounts.

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

allowance for credit losses.

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

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

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

Due to a limited number of customers, the Company had significant concentrations of credit risk from sales as of December

31, 2023 and 2022, as described below.

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

that will not be collected.

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

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

the accounts receivable balance, approximately $ 51,315,000 and $ 55,667,000 at December 31, 2023 and 2022, respectively, were used as

collateral under Kinergy’s operating line of credit.

The allowance for credit losses was $ 85,000 and $ 105,000 as of December 31,

2023 and 2022, respectively.

The Company recorded a bad debt expense of $ 427 ,000, a bad debt recovery of $ 217 ,000 and a bad debt expense

of $ 158,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company does not have any off-balance sheet credit

exposure related to its customers.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration

Risks – Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed

completely to perform as contracted.

Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments

exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet

contractual obligations to be similarly affected by changes in economic or other conditions described below.

Financial instruments that

subject the Company to credit risk consist of cash balances maintained in excess of federal depository insurance limits and accounts

receivable which have no collateral or security.

The Company has not experienced any significant losses in such accounts.

Company sells specialty alcohols to consumer product companies and fuel-grade ethanol to gasoline refining and distribution companies.

The Company sold to customers representing 10% or more of the Company’s total net sales, as follows.

Ended December 31,

Company had accounts receivable due from these customers totaling $ 4,302,000 and $ 10,469,000 , representing 7 % and 15 % of total accounts

receivable, as of December 31, 2023 and 2022, respectively.

Company purchases corn, its largest cost component in producing alcohols, from its suppliers.

The Company purchased corn from suppliers

representing 10% or more of the Company’s total corn purchases, as follows:

and Renewable Fuels markets.

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

and cleaners.

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

as corn germ used for corn oils.

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

and fertilizers.

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.

Products for Renewable Fuels markets include fuel-grade

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

The Company’s production facilities, other than its Magic Valley

plant, were operating for all periods presented subject to scheduled and unscheduled downtimes to address facility repair and maintenance.

In January 2024, the Company temporarily hot-idled its 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 the Company’s

corn oil and high protein system at the facility.

The Company restarted its 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 the Company was able to expand its 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 these plant improvements.

As a consequence,

the Company cold-idled its Magic Valley facility on December 31, 2024 to minimize financial losses.

The Company continues to provide terminal

services at the plant and intends to resume operations at the facility when the economic environment in the region sustainably improves.

Basis of Presentation – The consolidated financial

statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”)

and include the accounts of the Company.

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

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Segments – A segment is a component of an enterprise whose operating

results are regularly reviewed by the enterprise’s chief operating decision maker (“CODM”) to make decisions about resources

to be allocated to the segment and assess its performance, and for which discrete financial information is available.

The Company determines

and discloses its segments in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards

Codification (“ASC”) Section 280, Segment Reporting , which defines how to determine segments.

The Company has adopted

the guidance issued under ASU 2023-07, Segment Reporting (Topic 280) , which enhances disclosures about the Company’s segments.

The Company’s CODM is the Company’s executive committee, which is led by the Company’s Chief Executive Officer (“CEO”)

and includes its Chief Financial Officer, Chief Operating Officer, Chief Commercial Officer and Chief Legal Officer (“Executive

The Company manages and assesses the performance of its reportable segments by its gross profit (loss).

As part of the

Executive Committee’s review of segment-level performance, each member of the Executive Committee reviews the gross profit of the

Company’s reportable segments and provides expertise and analysis from their respective areas which drive the evaluation of the

performance of the Company’s reportable segments and allocation of resources to those segments.

Even though the CEO has the authority

to override the other members for strategic or other reasons, key decisions are made jointly by the Executive Committee.

The Company reports financial and operating performance in three reportable

segments (1) Pekin production, which includes the entire campus in Pekin, Illinois (“Pekin Campus”), (2) marketing and distribution,

which includes marketing and merchant trading for Company-produced specialty alcohols, fuel-grade ethanol and essential ingredients, and

sales of fuel-grade ethanol sourced from third parties, and (3) Western production, which includes the Company’s two western production

facilities and, beginning in 2025, its liquid CO 2 plant on an aggregated basis (“Western production”).

Cash and Cash Equivalents – The Company considers

all highly-liquid investments with an original maturity of three months or less to be cash equivalents.

The Company maintains its accounts

at several financial institutions.

These cash balances regularly exceed amounts insured by the Federal Deposit Insurance Corporation;

however, the Company does not believe it is exposed to any significant credit risk on these balances.

Restricted Cash – The Company’s restricted

cash comprises cash collateral balances held in derivative brokerage accounts.

Accounts Receivable and Allowance for Credit Losses –

Trade accounts receivable are presented at original invoice amount, net of the allowance for credit losses.

The Company sells specialty

alcohols to large consumer product companies, sells fuel-grade ethanol to gasoline refining and distribution companies, sells essential

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

corn oil to poultry and renewable diesel and biodiesel customers, in each case generally without requiring collateral.

Due to a limited

number of customers, the Company had significant concentrations of credit risk from sales as of December 31, 2024 and 2023, as described

The carrying amount of accounts receivable is reduced by a valuation

allowance that reflects the Company’s best estimate of the amounts that will not be collected.

The Company regularly reviews accounts

receivable and based on assessments of current customer creditworthiness, estimates the portion, if any, of the customer balance that

will not be collected.

Of the accounts receivable balance, approximately $ 44,750 ,000 and $ 51,315 ,000

at December 31, 2024 and 2023, respectively, were used as collateral under Kinergy’s operating line of credit.

The allowance for

credit losses was $ 23 ,000 and $ 85 ,000 as of December 31, 2024 and 2023, respectively.

The Company recorded a bad debt recovery of $ 50 ,000,

bad debt expense of $ 427 ,000 and a bad debt recovery of $ 217 ,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

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

Concentration Risks – Credit risk represents the

accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted.

Concentrations

of credit risk, whether on- or off-balance sheet, that arise from financial instruments exist for groups of customers or counterparties

when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected

by changes in economic or other conditions described below.

Financial instruments that subject the Company to credit risk consist of cash

balances maintained in excess of federal depository insurance limits and accounts receivable which have no collateral or security.

Company has not experienced any significant losses in such accounts.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

The Company sells specialty alcohols to consumer product companies

and fuel-grade ethanol to gasoline refining and distribution companies.

The Company sold to customers representing 10% or more of the

Company’s total net sales, as follows.

Years Ended December 31,

The Company had accounts receivable due from these customers totaling

$ 5,187 ,000 and $ 4,302 ,000, representing 9 % and 7 % of total accounts receivable, as of December 31, 2024 and 2023, respectively.

The Company purchases corn, its largest cost component in producing

alcohols, from its suppliers.

The Company purchased corn from suppliers representing 10% or more of the Company’s total corn purchases,

Ended December 31,

of December 31, 2023, approximately 44 % of the Company’s employees were covered by a collective bargaining agreement.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

– Inventories consisted primarily of bulk ethanol, specialty alcohols, corn, essential ingredients and unleaded fuel, and are

valued at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

Inventory is net of valuation

adjustments of $ 2,201,000 and $ 4,612,000 as of December 31, 2023 and 2022, respectively.

Of the inventory balance, approximately $ 41,041,000

and $ 43,484,000 at December 31, 2023 and 2022, respectively, were used as collateral under Kinergy’s operating line of credit.

Inventory balances consisted of the following (in thousands):

As of December 31, 2024, approximately 44 % of the Company’s employees

were covered by a collective bargaining agreement.

Inventories – Inventories consisted primarily of

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

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

Inventory is net of valuation adjustments of $ 2,050,000 and $ 2,201,000 as

of December 31, 2024 and 2023, respectively.

Of the inventory balance, approximately $ 35,495 ,000 and $ 41,041 ,000 at December 31, 2024

and 2023, respectively, were used as collateral under Kinergy’s operating line of credit.

Inventory balances consisted of the following

(in thousands):

Finished goods

1 unchanged sentence

Raw materials

and Equipment – Property and equipment are stated at cost.

Depreciation is computed using the straight-line method over the

following estimated useful lives:

Property and Equipment – Property and equipment

are stated at cost.

Depreciation is computed using the straight-line method over the following estimated useful lives:

Facilities and plant equipment

1 unchanged sentence

Other equipment, vehicles and furniture

cost of normal maintenance and repairs is charged to operations as incurred.

Significant capital expenditures that increase the life

of an asset are capitalized and depreciated over the estimated remaining useful life of the asset.

The cost of property and equipment

sold, or otherwise disposed of, and the related accumulated depreciation or amortization are removed from the accounts, and any resulting

gains or losses are reflected in current operations.

Assets – The Company amortizes intangible assets with definite lives using the straight-line method over their estimated lives

of 10 - 12 years.

Additionally, the Company assesses indefinite-lived intangible assets for impairment annually, or more frequently if

circumstances indicate impairment may have occurred.

If the carrying value of an indefinite-lived intangible asset exceeds its fair value,

an impairment loss is recognized in an amount equal to that excess.

If the Company determines that an impairment charge is needed, the

charge will be recorded as an asset impairment in the consolidated statements of operations.

– The Company accounts for leases under ASC Section 842, Leases (“ASC 842), whereby lessees are required to recognize

the following for all leases (with the exception of short-term leases) at the commencement date:

(1) a lease liability, which is a lessee’s

obligation to make lease payments arising from a lease, measured on a discounted cash flow basis;

and (2) a “right of use”

asset, which is an asset that represents the lessee’s right to use the specified asset for the lease term.

See Note 10 for further

Instruments and Hedging Activities – Derivative transactions, which can include exchange-traded futures contracts, options

and futures positions on the New York Mercantile Exchange or the Chicago Mercantile Exchange, are recorded on the balance sheet as assets

and liabilities based on the derivative’s fair value.

Changes in the fair value of derivative contracts are recognized currently

in income unless specific hedge accounting criteria are met.

If derivatives meet those criteria, and hedge accounting is elected, effective

gains and losses are deferred in accumulated other comprehensive income (loss) and later recorded together with the hedged item in consolidated

income (loss).

For derivatives designated as a cash flow hedge, the Company formally documents the hedge and assesses the effectiveness

with associated transactions.

The Company has designated and documented contracts for the physical delivery of commodity products to

and from counterparties as normal purchases and normal sales.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Recognition – The Company recognizes revenue under ASC Section 606, Revenue from Contracts with Customers (“ASC

The provisions of ASC 606 include a five-step process by which an entity will determine revenue recognition, depicting the

transfer of goods or services to customers in amounts reflecting the payment to which an entity expects to be entitled in exchange for

those goods or services.

ASC 606 requires the Company to apply the following steps:

The cost of normal maintenance and repairs is charged to operations

Significant capital expenditures that increase the life of an asset are capitalized and depreciated over the estimated remaining

useful life of the asset.

The cost of property and equipment sold, or otherwise disposed of, and the related accumulated depreciation

or amortization are removed from the accounts, and any resulting gains or losses are reflected in current operations.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Intangible Assets – The Company amortizes intangible

assets with definite lives using the straight-line method over their estimated lives of 10 - 12 years.

Additionally, the Company assesses

indefinite-lived intangible assets for impairment annually, or more frequently if circumstances indicate impairment may have occurred.

If the carrying value of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal

to that excess.

If the Company determines that an impairment charge is needed, the charge will be recorded as an asset impairment in the

consolidated statements of operations.

Leases – The Company accounts for leases under

ASC Section 842, Leases (“ASC 842), whereby lessees are required to recognize the following for all leases (with the exception

of short-term leases) at the commencement date:

(1) a lease liability, which is a lessee’s obligation to make lease payments arising

from a lease, measured on a discounted cash flow basis;

and (2) a “right of use” asset, which is an asset that represents

the lessee’s right to use the specified asset for the lease term.

See Note 9 for further information.

Derivative Instruments and Hedging Activities –

Derivative transactions, which can include exchange-traded futures contracts, options and futures positions on the New York Mercantile

Exchange or the Chicago Mercantile Exchange, are recorded on the balance sheet as assets and liabilities based on the derivative’s

Changes in the fair value of derivative contracts are recognized currently in income unless specific hedge accounting criteria

If derivatives meet those criteria, and hedge accounting is elected, effective gains and losses are deferred in accumulated other

comprehensive income (loss) and later recorded together with the hedged item in consolidated income (loss).

For derivatives designated

as a cash flow hedge, the Company formally documents the hedge and assesses the effectiveness with associated transactions.

has designated and documented contracts for the physical delivery of commodity products to and from counterparties as normal purchases

and normal sales.

Revenue Recognition – The Company recognizes revenue

under ASC Section 606, Revenue from Contracts with Customers (“ASC 606”).

The provisions of ASC 606 include a five-step

process by which an entity will determine revenue recognition, depicting the transfer of goods or services to customers in amounts reflecting

the payment to which an entity expects to be entitled in exchange for those goods or services.

ASC 606 requires the Company to apply the

following steps:

(1) identify the contract with the customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to the

performance obligations in the contract;

and (5) recognize revenue when, or as, the Company satisfies the performance obligation.

Company recognizes revenue primarily from sales of alcohols and essential ingredients.

Company has five production facilities from which it produces and sells alcohols to its customers through Kinergy.

Kinergy enters into

back-to-back sales contracts with its customers under exclusive intercompany sales agreements with each of the Company’s five production

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

for the years ended December 31, 2022 and 2021, Kinergy had exclusive sales agreements with certain third-party owned fuel-grade ethanol

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

Kinergy’s customers.

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

Revenue from these third-party agent sales was recorded

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

Kinergy has terminated these contracts,

and as a result, did not have any related sales for the year ended December 31, 2023.

Company has five production facilities from which it produces and sells essential ingredients to its customers through Alto Nutrients.

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

of the Company’s five production facilities.

Company recognizes 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, the Company

enters 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.

The Company allocates the transaction price to each performance obligation identified

in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product

is transferred to the customer in satisfaction of the corresponding performance obligations.

the Company is 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 the Company is the principal, the Company controls the products before

they are transferred to the customer because the Company is primarily responsible for fulfilling the promise to provide the products,

(3) determine

the transaction price;

(4) allocate the transaction price to the performance obligations in the contract;

and (5) recognize revenue when,

or as, the Company satisfies the performance obligation.

The Company recognizes revenue primarily from sales of alcohols and

essential ingredients.

The Company has five production facilities from which it produces and

sells alcohols to its customers through Kinergy.

Kinergy enters into back-to-back sales contracts with its customers under exclusive intercompany

sales agreements with each of the Company’s five production facilities.

Kinergy also acts as a principal when it purchases third

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

Finally, for the year ended December 31, 2022, Kinergy had exclusive sales

agreements with certain third-party owned fuel-grade ethanol production facilities under which it sold the facilities’ fuel-grade

ethanol for a fee plus the costs to deliver the ethanol to Kinergy’s customers.

These sales were referred to as third-party agent

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

associated delivery costs.

Kinergy has terminated these contracts, and as a result, did not have any related sales for the year ended

December 31, 2024 and 2023.

The Company’s balances of accounts receivable, net of allowance for credit losses, were $ 58,217 ,000,

$ 58,729 ,000 and $ 68,655 ,000, as of December 31, 2024, 2023 and 2022, respectively.

The Company has five production facilities from which it produces and

sells essential ingredients to its customers through Alto Nutrients.

Alto Nutrients enters into sales contracts with essential ingredient

customers under exclusive intercompany sales agreements with each of the Company’s five production facilities.

The Company recognizes 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, the Company enters 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.

The Company allocates

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

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

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

When the Company is 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.

the tables in Note 5 for the Company’s revenue by type of contracts.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

and Handling Costs – The Company accounts for shipping and handling costs relating to contracts with customers as costs to

fulfill its promise to transfer its products.

Accordingly, the costs are classified as a component of cost of goods sold in the accompanying

consolidated statements of operations.

Costs – Selling costs associated with the Company’s product sales are classified as a component of selling, general and

administrative expenses in the accompanying consolidated statements of operations.

Compensation – The Company accounts for the cost of employee services received in exchange for the award of equity instruments

based on the fair value of the award, determined on the date of grant.

The expense is recognized over the period during which an employee

is required to provide services in exchange for the award.

The Company accounts for forfeitures as they occur.

The Company recognizes

stock-based compensation expense as a component of either cost of goods sold or selling, general and administrative expenses in the consolidated

statements of operations.

– Goodwill represents the excess of cost of an acquired entity over the net of the amounts assigned to net assets acquired

and liabilities assumed.

Annually, or more frequently, if indications of impairment arise, the Company performs a review for impairment.

This review includes the determination of each reporting unit’s fair value using market multiples and discounted cash flow modeling.

The estimates of future cash flows are judgments based on management’s experience and knowledge of the Company’s operations

and the industries in which the Company operates.

These estimates can be significantly affected by future changes in market conditions,

the economic environment, including inflation, and capital spending decisions of the Company’s customers.

Any assessed impairments

will be permanent and expensed in the period in which the impairment is determined.

If the Company determines through its assessment

process that any of its goodwill requires impairment charges, the charges will be recorded in asset impairment expenses in the consolidated

When the Company is the principal, the Company controls the products before they are transferred to the customer because the Company is

primarily responsible for fulfilling the promise to provide the products, has inventory risk before the product has been transferred to

a customer and has discretion in establishing the price for the product.

See the tables in Note 4 for the Company’s revenue by type of

Shipping and Handling Costs – The Company accounts

for shipping and handling costs relating to contracts with customers as costs to fulfill its promise to transfer its products.

the costs are classified as a component of cost of goods sold in the accompanying consolidated statements of operations.

Selling Costs – Selling costs associated with the

Company’s product sales are classified as a component of selling, general and administrative expenses in the accompanying consolidated

statements of operations.

The Company performed its annual review of impairment

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

No impairment losses for

goodwill were recognized for the years ended December 31, 2022 and 2021.

of Long-Lived Assets – The Company assesses the impairment of long-lived assets, including property and equipment, internally

developed software and purchased intangibles subject to amortization, when events or changes in circumstances indicate that the fair

value of assets could be less than their net book value.

In such event, the Company assesses long-lived assets for impairment by first

determining the forecasted, undiscounted cash flows the asset group is expected to generate plus the net proceeds expected from the sale

of the asset group.

If this amount is less than the carrying value of the asset, the Company will then determine the fair value of the

An impairment loss would be recognized when the fair value is less than the related asset group’s net book value,

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

Forecasts of future cash flows are judgments based on the

Company’s experience and knowledge of its operations and the industries in which it operates.

These forecasts could be significantly

affected by future changes in market conditions, the economic environment, including inflation, and purchasing decisions of the Company’s

The Company’s assessment resulted in an asset impairment of $ 574,000 , $ 0 and $ 3,100,000 for the years ended December

31, 2023, 2022 and 2021, respectively.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Financing Costs – Deferred financing costs are costs incurred to obtain debt financing, including all related fees, and are

amortized as interest expense over the term of the related financing using the straight-line method, which approximates the effective

interest rate method.

Amortization of deferred financing costs, included in interest expense, net, in the accompanying consolidated statements

of operations, was approximately $ 1,048,000 , $ 177,000 and $ 778,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Unamortized deferred financing costs were approximately $ 4,700,000 and $ 5,034,000 as of December 31, 2023 and 2022, respectively, and

are recorded as a reduction of long-term debt in the consolidated balance sheets.

for Income Taxes – Income taxes are accounted for under the asset and liability approach, where deferred tax assets and liabilities

are determined based on differences between financial reporting and tax basis 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.

Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions.

first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be

sustained on audit, including resolution of related appeals or litigation processes, if any.

The second step is to measure the tax benefit

as the largest amount which is more than 50 % likely of being realized upon ultimate settlement.

An uncertain tax position is considered

effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied.

Should the Company

incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net,

and other income (expense), net, respectively.

Deferred tax assets and liabilities are classified as noncurrent in the Company’s

consolidated balance sheets.

Company files a consolidated federal income tax return.

This return includes all wholly owned subsidiaries as well as the Company’s

pro-rata share of taxable income from pass-through entities in which the Company owns less than 100 %.

State tax returns are filed on

a consolidated, combined or separate basis depending on the applicable laws relating to the Company and its subsidiaries.

does not have any foreign operations.

(Loss) Per Share – Basic income (loss) per share is computed on the basis of the weighted-average number of shares of common

stock outstanding during the period.

Preferred dividends are deducted from net income (loss) attributed to Alto Ingredients, Inc.

are considered in the calculation of income (loss) available to common stockholders in computing basic income (loss) per share.

stock equivalents to preferred stock are considered participating securities and are also included in this calculation when dilutive.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

following tables compute basic and diluted income (loss) per share (in thousands, except per share data):

Ended December 31, 2023

Stock-Based Compensation – The Company accounts

for the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award, determined

on the date of grant.

The expense is recognized over the period during which an employee is required to provide services in exchange for

The Company accounts for forfeitures as they occur.

The Company recognizes stock-based compensation expense as a component

of either cost of goods sold or selling, general and administrative expenses in the consolidated statements of operations.

Goodwill – Goodwill represents the excess of cost

of an acquired entity over the net of the amounts assigned to net assets acquired and liabilities assumed.

Annually, or more frequently,

if indications of impairment arise, the Company performs a review for impairment.

This review includes the determination of each reporting

unit’s fair value using market multiples and discounted cash flow modeling.

The estimates of future cash flows are judgments based

on management’s experience and knowledge of the Company’s operations and the industries in which the Company operates.

estimates can be significantly affected by future changes in market conditions, the economic environment, including inflation, and capital

spending decisions of the Company’s customers.

Any assessed impairments will be permanent and expensed in the period in which the

impairment is determined.

If the Company determines through its assessment process that any of its goodwill requires impairment charges,

the charges will be recorded in asset impairment expenses in the consolidated statements of operations.

The Company performed its annual review of impairment of goodwill and

recognized an asset impairment loss of $ 6.0 million for the year ended December 31, 2023.

No impairment losses for goodwill were

recognized for the year ended December 31, 2024 and 2022.

Impairment of Long-Lived Assets

– The Company assesses the impairment of long-lived assets, including property and equipment, internally developed software and

purchased intangibles subject to amortization, when events or changes in circumstances indicate that the fair value of assets could be

less than their net book value.

In such event, the Company assesses long-lived assets for impairment by first determining the forecasted,

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

amount is less than the carrying value of the asset, the Company will then determine the fair value of the asset group.

When the estimated

fair value of the asset group is less than its carrying value, the Company recognizes an impairment expense equal to the difference between

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

Forecasts of future cash flows are judgments based on the Company’s

experience and knowledge of its operations and the industries in which it operates.

These forecasts could be significantly affected by

future changes in market conditions, the economic environment, including inflation, and purchasing decisions of the Company’s customers.

The Company’s assessment resulted in an asset impairment of $ 24,790,000 primarily from the cold-idling of the Company’s Magic

Valley facility due to increased regional corn basis and overall margin compression and the Company’s changes to its Eagle Alcohol

business, for the year ended December 31, 2024.

The Company’s assessment resulted in an asset impairment of $ 574,000 related to

amendments to certain of the Company’s lease agreements, for the year ended December 31, 2023.

The Company’s impairment analysis

performed during the year ended December 31, 2022 did not result in an impairment charge.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Deferred Financing Costs – Deferred financing costs

are costs incurred to obtain debt financing, including all related fees, and are amortized as interest expense over the term of the related

financing using the straight-line method, which approximates the effective interest rate method.

Amortization of deferred financing costs,

included in interest expense, net, in the accompanying consolidated statements of operations, was approximately $ 1,016 ,000, $ 1,048 ,000

and $ 177 ,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

Unamortized deferred financing costs were approximately

$ 3,684,000 and $ 4,700,000 as of December 31, 2024 and 2023, respectively, and are recorded as a reduction of long-term debt in the consolidated

balance sheets.

Provision for Income Taxes – Income taxes are accounted

for under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences between financial

reporting and tax basis 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.

The Company accounts for uncertainty in income taxes using a two-step

approach to recognizing and measuring uncertain tax positions.

The first step is to evaluate the tax position for recognition by determining

whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation

processes, if any.

The second step is to measure the tax benefit as the largest amount which is more than 50 % likely of being realized

upon ultimate settlement.

An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority

if certain other conditions are satisfied.

Should the Company incur interest and penalties relating to tax uncertainties, such amounts

would be classified as a component of interest expense, net, and other income (expense), net, respectively.

Deferred tax assets and liabilities

are classified as noncurrent in the Company’s consolidated balance sheets.

The Company files a consolidated federal income tax return.

includes all wholly owned subsidiaries as well as the Company’s pro-rata share of taxable income from pass-through entities in which

the Company owns less than 100 %.

State tax returns are filed on a consolidated, combined or separate basis depending on the applicable

laws relating to the Company and its subsidiaries.

The Company does not have any foreign operations.

Loss Per Share – Basic loss per share is computed

on the basis of the weighted-average number of shares of common stock outstanding during the period.

Preferred dividends are deducted

from net loss attributed to Alto Ingredients, Inc.

and are considered in the calculation of loss attributable to common stockholders in

computing basic loss per share.

Common stock equivalents to preferred stock are considered participating securities and are also included

in this calculation when dilutive.

The following tables compute basic and diluted loss per share (in thousands,

except per share data):

Year Ended December 31, 2024

Shares Denominator

Per-Share Amount

Consolidated net loss

Preferred stock

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

Ended December 31, 2022

Loss attributable to common stockholders

Year Ended December 31, 2023

Shares Denominator

Per-Share Amount

Consolidated net loss

Preferred stock

Preferred stock dividends

Basic and diluted loss per share:

Loss available to common stockholders

Ended December 31, 2021

Loss attributable to common stockholders

Year Ended December 31, 2022

Shares Denominator

Per-Share Amount

Consolidated net loss

Preferred stock dividends

Income allocated to participating securities

income per share:

available to common stockholders

Dilutive securities

income per share:

available to common stockholders

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

were an aggregate of 981,000 , 964,000 and 964,000 potentially dilutive shares from convertible securities outstanding for the years ended

December 31, 2023, 2022 and 2021, respectively.

These convertible securities were not considered in calculating diluted loss per common

share for the years ended December 31, 2023, 2022 and 2021 as their effect would be anti-dilutive.

In addition, there were an aggregate

of 3,188,000 and 8,900,500 weighted-average anti-dilutive shares from outstanding out-of-the-money warrants for the years ended December

31, 2022 and 2021, respectively.

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

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

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

they were recently issued.

Combinations – Business acquisitions are accounted for in accordance with ASC Section 805, Business Combinations .

ASC 805 requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable

tangible and intangible assets acquired and liabilities assumed and recognize and measure goodwill or a gain from the purchase.

acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is

recorded as goodwill.

Adjustments to fair value assessments are recorded to goodwill over the measurement period (not longer than twelve

from Cash Grant – For the years ended December 31, 2023 and 2022, the Company received $ 2,812,000 and $ 22,652,000 , respectively,

in cash from the USDA’s Biofuel Producer Program.

The program was created as part of the CARES Act of 2020, which allocated $ 700,000,000

to support biofuel producers who experienced market losses due to the pandemic.

Basic and diluted loss per share:

Loss attributable to common stockholders

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

There were an aggregate of 981,000 , 981,000 and 964,000 potentially

dilutive shares from convertible securities outstanding for the years ended December 31, 2024, 2023 and 2022, respectively.

These convertible

securities were not considered in calculating diluted loss per common share for the years ended December 31, 2024, 2023 and 2022 as their

effect would be anti-dilutive.

In addition, there were an aggregate of 3,188,000 weighted-average anti-dilutive shares from outstanding

out-of-the-money warrants for the year ended December 31, 2022.

Financial Instruments – The carrying values of

cash and cash equivalents, restricted cash, accounts receivable, derivative instruments, accounts payable and accrued liabilities are

reasonable estimates of their fair values because of the short maturity of these items.

The Company believes the carrying value of its

long-term debt instruments are not considered materially different than fair value.

Business Combinations – Business acquisitions

are accounted for in accordance with ASC Section 805, Business Combinations .

ASC 805 requires the reporting entity to identify

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

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

Assets acquired and liabilities assumed are recorded at their

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

Adjustments to fair value assessments

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

Income from Cash Grant – For the years ended

December 31, 2023 and 2022, the Company received $ 2,812 ,000 and $ 22,652 ,000, respectively, in cash from the USDA’s Biofuel Producer

The Company did not receive any cash from this program for the year ended December 31, 2024.

The program was created as part

of the CARES Act of 2020, which allocated $ 700,000,000 to support biofuel producers who experienced market losses due to the pandemic.

The Company is not required to repay the grants.

these funds are provided to subsidize historical losses of the Company, and are not required to be repaid, the Company accounted for

the proceeds by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance ,

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

Employment-related

Benefits – Employment-related benefits associated with pensions and postretirement health care are expensed based on actuarial

The recognition of expense is affected by estimates made by management, such as discount rates used to value certain liabilities,

investment rates of return on plan assets, increases in future wage amounts and future health care costs.

Discount rates are determined

based on a spot yield curve that includes bonds with maturities that match the expected timing of benefit payments under the plan.

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

up to $ 50,000,000 of its common stock with an initial purchase authorization of $ 10,000,000 .

The Company’s lender has further limited

the Company’s purchase authorization to $ 5,000,000 .

Amounts in excess of the purchase authorization of $ 5,000,000 will require

additional lender consent and amounts in excess of the initial purchase authorization of $ 10,000,000 will require additional board and

preferred stockholder authorization.

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

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

further notice.

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

For the years ended December 31, 2023 and 2022, the Company repurchased an aggregate of 1,685,000 shares and 351,000 shares for $ 3,674,000

and $ 1,325,000 in cash, respectively.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Common Stock – In 2015, the Company issued nonvoting common stock convertible at a holder’s election into voting common

As of December 31, 2023, an aggregate of 3,539,236 shares of nonvoting common stock had been converted into an equal number of

shares of the Company’s voting common stock.

As of December 31, 2023, there were 896 shares of nonvoting common stock outstanding.

and Assumptions – The preparation of the consolidated financial statements in conformity with GAAP requires management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities

at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates

are required as part of determining the allowance for credit losses, net realizable value of inventory, long-lived asset impairments,

goodwill impairment, valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized

in the Company’s financial statements or tax returns, and the valuation of assets acquired and liabilities assumed as a result

of business combinations.

Actual results and outcomes may materially differ from management’s estimates and assumptions.

Events – Management evaluates, as of each reporting period, events or transactions that occur after the balance sheet date

through the date that the financial statements are issued for either disclosure or adjustment to the consolidated financial results.

OF EAGLE ALCOHOL.

January 14, 2022, the Company purchased 100 % of the membership interests of Eagle Alcohol.

The purchase price was $ 14.0 million in cash

plus an estimated net working capital adjustment of $ 1.3 million in cash.

The selling members of Eagle Alcohol were eligible to receive

up to an additional $ 14.0 million of contingent consideration, payable through a combination of $ 9.0 million in cash over the succeeding

three years and an aggregate of $ 5.0 million in the Company’s common stock on the fourth- and fifth-year anniversaries of the closing

date, subject to the satisfaction of certain conditions, including continued employment with the Company.

With respect to these payments,

the Company accrued $ 2.8 million and $ 3.5 million in other current liabilities in the accompanying consolidated balance sheets as of

December 31, 2023 and 2022, respectively, with the expense included in selling, general and administrative expenses in the accompanying

consolidated statements of operations for the years then ended.

Eagle Alcohol specializes in break bulk distribution

of specialty alcohols.

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

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

Eagle Alcohol delivers

products to customers in the beverage, food, industrial and related-process industries via its own dedicated trucking fleet and common

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

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

part of the Company’s allocation of purchase price for its acquisition of Eagle Alcohol, the Company recorded a customer relationships

intangible asset of $ 6.5 million, a trade name intangible asset of $ 0.4 million and goodwill of $ 6.0 million.

October 2020, the Company’s Board of Directors approved a plan to sell the Company’s fuel-grade ethanol production facilities

located in Madera and Stockton, California.

The analysis of these potential sales resulted in an aggregate asset impairment of $ 1.2 million

in the Company’s Western production segment for the year ended December 31, 2021.

May 14, 2021, the Company closed the sale of its Madera facility for total consideration of $ 28.3 million, comprised of $ 19.5 million

in cash and $ 8.8 million in assumption of liabilities, resulting in a net loss on sale of less than $ 0.1 million, included in gain (loss)

on sale (disposal) of assets in the Company’s consolidated statements of operations.

All of the cash proceeds were used to repay

a significant portion of the Company’s term debt and accrued interest.

November 5, 2021, the Company closed the sale of its Stockton facility for gross proceeds of $ 24.0 million in cash, resulting in a net

gain on sale of $ 4.6 million, recorded in gain (loss) on sale (disposal) of assets in the Company’s consolidated statements of

With the net cash proceeds, the Company repaid in full its senior secured notes and loans made to Alto Pekin and ICP.

the year ended December 31, 2021, net sales attributed to the results of operations for Stockton and Madera were $ 2.6 million and $ 0 ,

respectively.

For the year ended December 31, 2021, pre-tax loss attributed to the results of operations for Stockton and Madera was

$ 2.8 million and $ 2.0 million, respectively.

The above pre-tax results include asset impairments associated with Stockton and Madera

recorded for the year ended December 31, 2021 of $ 0 and $ 1.2 million, respectively.

2021, the Company agreed to sell certain assets of the Company’s property and equipment in Canton, Illinois.

The analysis of the

potential sale resulted in an asset impairment of $ 1.9 million in the Company’s Western production segment for the year ended December

The Company sold these assets in 2022.

For the years ended December 31, 2022 and 2021, there were no sales from Canton.

the years ended December 31, 2022 and 2021, pre-tax losses attributed to Canton were less than $ 1.0 million for each year.

Company, directly or through one of its subsidiaries, has entered into the following management and marketing agreements:

Management Agreement – Alto Ingredients entered into an Affiliate Management Agreement (“AMA”) with its operating

subsidiaries under which Alto Ingredients agreed to provide operational, administrative and staff support services.

These services generally

include, but are not limited to, administering the subsidiaries’ compliance with their credit agreements and performing billing,

collection, record keeping and other administrative and ministerial tasks.

Alto Ingredients agreed to supply all labor and personnel

required to perform its services under the AMA, including the labor and personnel required to operate and maintain the production facilities

and marketing activities.

These services are billed at a predetermined amount per subsidiary each month plus out of pocket costs such

as employee wages and benefits.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

AMAs had an initial term of one year and have automatic successive one year renewal periods.

Alto Ingredients may terminate the AMA,

and any subsidiary may terminate the AMA, at any time by providing at least 90 days prior notice of termination.

Ingredients recorded revenues of approximately $ 13,200,000 $ 12,403,000 and $ 9,774,000 related to the AMAs in place for the years ended

December 31, 2023, 2022 and 2021, respectively.

These amounts have been eliminated upon consolidation.

Marketing Agreements – Kinergy entered into separate marketing agreements with each of the Company’s production facilities

which granted Kinergy the exclusive right to purchase, market and sell the alcohols produced at those facilities.

Under the terms of

the marketing agreements, within ten days after delivering alcohol to Kinergy, an amount is paid to Kinergy equal to (i) the estimated

purchase price payable by the third-party purchaser of the alcohol, minus (ii) the estimated amount of transportation costs to be incurred,

minus (iii) the estimated incentive fee payable to Kinergy, which equals 1% of the aggregate third-party purchase price, provided that

the marketing fee shall not be less than $0.015 per gallon and not more than $0.0225 per gallon.

Each of the marketing agreements had

an initial term of one year and has successive one year renewal periods at the option of the production facility.

recorded revenues of approximately $ 5,431,000 , $ 5,746,000 and $ 4,496,000 related to the marketing agreements for the years ended December

31, 2023, 2022 and 2021, respectively.

Since these funds are provided to subsidize historical losses of the Company, and are

not required to be repaid, the Company accounted for the proceeds by analogy to International Accounting Standards 20, Accounting for

Government Grants and Disclosure of Government Assistance , and reported the amount as income from cash grant in the accompanying consolidated

statements of operations.

Employment-related Benefits – Employment-related

benefits associated with pensions and postretirement health care are expensed based on actuarial analysis.

The recognition of expense

is affected by estimates made by management, such as discount rates used to value certain liabilities, investment rates of return on plan

assets, increases in future wage amounts and future health care costs.

Discount rates are determined based on a spot yield curve that

includes bonds with maturities that match the expected timing of benefit payments under the plan.

Share Repurchase Program – On September 12,

2022, the Company announced a share repurchase program under which it may repurchase up to $ 50,000,000 of its common stock with an initial

purchase authorization of $ 10,000,000 .

The Company’s lender has further limited the Company’s purchase authorization to $ 5,000,000 .

Amounts in excess of the purchase authorization of $ 5,000,000 will require additional lender consent and amounts in excess of the initial

purchase authorization of $ 10,000,000 will require additional board and preferred stockholder authorization.

The share repurchase program

does not have an expiration date, does not require the repurchase of any particular amount of shares, and may be implemented, modified,

suspended or discontinued in whole or in part at any time and without further notice.

As repurchases are made, the Company will retire

the shares, resulting in a reduction of issued and outstanding shares.

For the years ended December 31, 2023 and 2022, the Company repurchased

an aggregate of 1,685,000 shares and 351,000 shares for $ 3,674,000 and $ 1,325,000 in cash, respectively.

No shares were repurchased during

the year ended December 31, 2024.

Nonvoting Common Stock – In 2015, the Company issued

nonvoting common stock convertible at a holder’s election into voting common stock.

As of December 31, 2024, an aggregate of 3,539,236

shares of nonvoting common stock had been converted into an equal number of shares of the Company’s voting common stock.

As of December

31, 2024, there were 896 shares of nonvoting common stock outstanding.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Estimates and Assumptions – The preparation of

the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported

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

reported amounts of revenues and expenses during the reporting period.

Significant estimates are required as part of determining net realizable

value of inventory, long-lived asset impairments, goodwill impairment, valuation allowances on deferred income taxes and the potential

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

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

Actual results and outcomes may materially differ from

management’s estimates and assumptions.

Recent Accounting Pronouncements – In November

2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures

(Subtopic 220-40) , which provides for more detailed information about the types of expenses aggregated in common expense captions

in the statement of operations.

ASU 2024-03 is effective for the Company for the year ended December 31, 2027, with early adoption permitted.

The Company is currently evaluating the impact of this ASU.

Subsequent Events – Management evaluates, as of

each reporting period, events or transactions that occur after the balance sheet date through the date that the financial statements are

issued for either disclosure or adjustment to the consolidated financial results.

ACQUISITION OF EAGLE ALCOHOL.

On January 14, 2022, the Company purchased 100 %

of the membership interests of Eagle Alcohol.

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

of $1.3 million in cash.

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

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

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

Subsequently, the Company made organizational changes at Eagle Alcohol, and accelerated the vesting of the Company’s

common stock under the terms of the purchase agreement.

With respect to these payments, the Company accrued $ 7.7 million and $ 2.8 million

in other current liabilities in the accompanying consolidated balance sheets as of December 31, 2024 and 2023, respectively, with the

expense included in acquisition-related expenses in the accompanying consolidated statements of operations for the years then ended.

Eagle Alcohol specializes in break bulk distribution of specialty alcohols.

Eagle Alcohol delivers products to customers

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

As part of the Company’s original allocation of purchase price

for its acquisition of Eagle Alcohol, the Company recorded a customer relationships intangible asset of $ 6.5 million, a trade name intangible

asset of $ 0.4 million and goodwill of $ 6.0 million.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

INTERCOMPANY AGREEMENTS.

The Company, directly or through one of its subsidiaries, has entered

into the following management and marketing agreements:

Affiliate Management Agreement – Alto Ingredients

entered into an Affiliate Management Agreement (“AMA”) with its operating subsidiaries under which Alto Ingredients agreed

to provide operational, administrative and staff support services.

These services generally include, but are not limited to, administering

the subsidiaries’ compliance with their credit agreements and performing billing, collection, record keeping and other administrative

and ministerial tasks.

Alto Ingredients agreed to supply all labor and personnel required to perform its services under the AMA, including

the labor and personnel required to operate and maintain the production facilities and marketing activities.

These services are billed

at a predetermined amount per subsidiary each month plus out of pocket costs such as employee wages and benefits.

The AMAs had an initial term of one year and have automatic successive

one year renewal periods.

Alto Ingredients may terminate the AMA, and any subsidiary may terminate the AMA, at any time by providing at

least 90 days prior notice of termination.

Alto Ingredients recorded revenues of approximately

$ 18,000,000 , $ 13,200,000 and $ 12,403,000 related to the AMAs in place for the years ended December 31, 2024, 2023 and 2022, respectively.

These amounts have been eliminated upon consolidation.

Corn Procurement and Handling Agreements

– Alto Nutrients entered into separate corn procurement and handling agreements with each of the Company’s production facilities.

Under the terms of the corn procurement and handling agreements, each facility appointed Alto Nutrients as its exclusive agent to solicit,

negotiate, enter into and administer, on its behalf, corn supply arrangements to procure the corn necessary to operate the facility.

Nutrients also provides grain handling services including, but not limited to, receiving, unloading and conveying corn into the facility’s

Ethanol Marketing Agreements –

Kinergy entered into separate marketing agreements with each of the Company’s production facilities which granted Kinergy the exclusive

right to purchase, market and sell the alcohols produced at those facilities.

Under the terms of the marketing agreements, within ten

days after delivering alcohol to Kinergy, an amount is paid to Kinergy equal to (i) the estimated purchase price payable by the third-party

purchaser of the alcohol, minus (ii) the estimated amount of transportation costs to be incurred, minus (iii) the estimated incentive

fee payable to Kinergy, which equals 1% of the aggregate third-party purchase price, provided that the marketing fee shall not be less

than $0.015 per gallon and not more than $0.0225 per gallon.

Each of the marketing agreements had an initial term of one year and has

successive one year renewal periods at the option of the production facility.

Kinergy recorded revenues of approximately $ 5,407,000 ,

$ 5,431,000 and $ 5,746,000 related to the marketing agreements for the years ended December 31, 2024, 2023 and 2022, respectively.

amounts have been eliminated upon consolidation.

Corn Procurement and Handling Agreements – Alto

Nutrients entered into separate corn procurement and handling agreements with each of the Company’s production facilities.

the terms of the corn procurement and handling agreements, each facility appointed Alto Nutrients as its exclusive agent to solicit, negotiate,

enter into and administer, on its behalf, corn supply arrangements to procure the corn necessary to operate the facility.

Alto Nutrients

also provides grain handling services including, but not limited to, receiving, unloading and conveying corn into the facility’s

storage and, in the case of whole corn delivered, processing and hammering the whole corn.

these agreements, Alto Nutrients receives a fee of $ 0.03 per bushel of corn delivered to each production facility as consideration for

its procurement and handling services, payable monthly.

Each corn procurement and handling agreement had an initial term of one year

and successive one year renewal periods at the option of the individual facility.

Under these agreements, Alto Nutrients receives a

fee of $ 0.03 per bushel of corn delivered to each production facility as consideration for its procurement and handling services, payable

Each corn procurement and handling agreement had an initial term of one year and successive one year renewal periods at the option

of the individual facility.

Alto Nutrients recorded revenues of approximately $ 2,910,000 , $ 3,007,000 and $ 3,207,000 related to the corn

procurement and handling agreements for the years ended December 31, 2024, 2023 and 2022, respectively.

These amounts have been eliminated

upon consolidation.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

Essential Ingredients Marketing Agreements

– Alto Nutrients entered into separate marketing agreements with each of the Company’s production facilities (except for the

Company’s Magic Valley facility), which grant Alto Nutrients the exclusive right to market, purchase and sell the various essential

ingredients produced at each facility.

Under the terms of the marketing agreements, within ten days after a facility delivers essential

ingredients to Alto Nutrients, the production facility is paid an amount equal to (i) the estimated purchase price payable by the third-party

purchaser of the essential ingredients, minus (ii) the estimated amount of transportation costs to be incurred, minus (iii) the estimated

amount of fees and taxes payable to governmental authorities in connection with the tonnage of the essential ingredients produced or marketed,

minus (iv) the estimated incentive fee payable to the Company, which equals (a) 5% of the aggregate third-party purchase price for wet

corn protein feed, wet distillers grains, corn condensed distillers solubles and distillers grains with solubles, or (b) 1% of the aggregate

third-party purchase price for corn protein meal, dry corn protein feed, dry distillers grains, corn germ and corn oil.

Each marketing

agreement had an initial term of one year and has successive one year renewal periods at the option of the production facility.

Alto Nutrients recorded revenues of approximately

$ 3,207,000 and $ 2,694,000 related to the corn procurement and handling agreements for the years ended December 31, 2023, 2022 and 2021,

respectively.

These amounts have been eliminated upon consolidation.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Ingredients Marketing Agreements – Alto Nutrients entered into separate marketing agreements with each of the Company’s

production facilities (except for the Company’s Magic Valley facility), which grant Alto Nutrients the exclusive right to market,

purchase and sell the various essential ingredients produced at each facility.

Under the terms of the marketing agreements, within ten

days after a facility delivers essential ingredients to Alto Nutrients, the production facility is paid an amount equal to (i) the estimated

purchase price payable by the third-party purchaser of the essential ingredients, minus (ii) the estimated amount of transportation costs

to be incurred, minus (iii) the estimated amount of fees and taxes payable to governmental authorities in connection with the tonnage

of the essential ingredients produced or marketed, minus (iv) the estimated incentive fee payable to the Company, which equals (a) 5%

of the aggregate third-party purchase price for wet corn gluten feed, wet distillers grains, corn condensed distillers solubles and distillers

grains with solubles, or (b) 1% of the aggregate third-party purchase price for corn gluten meal, dry corn gluten feed, dry distillers

grains, corn germ and corn oil.

Each marketing agreement had an initial term of one year and has successive one year renewal periods

at the option of the production facility.

Nutrients recorded revenues of approximately $ 3,216,500 , $ 3,505,000 and $ 2,871,000 related to the marketing agreements for the years

ended December 31, 2023, 2022 and 2021, respectively.

$ 2,516,000 , $ 3,216,500 and $ 3,505,000 related to the marketing agreements for the years ended December 31, 2024, 2023 and 2022, respectively.

These amounts have been eliminated upon consolidation.

4 unchanged sentences

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 fuel-grade ethanol and essential ingredients produced the Company’s

two western production facilities on an aggregated basis, none of which are individually so significant to be considered a separately

reportable segment.

before provision for income taxes includes management fees charged by Alto Ingredients to the segments.

The Pekin Campus production segment

incurred $ 5,280,000 , $ 5,046,000 and $ 4,344,000 in management fees for the years ended December 31, 2023, 2022 and 2021, respectively.

The marketing and distribution segment incurred $ 3,960,000 , $ 3,840,000 and $ 3,480,000 in management fees for the years ended December

31, 2023, 2022 and 2021, respectively.

The Western production segment incurred $ 2,640,000 , $ 2,400,000 and $ 1,950,000 in management fees

for the years ended December 31, 2023, 2022 and 2021, respectively.

Corporate and other includes the results of Eagle Alcohol and selling,

general and administrative expenses, consisting primarily of corporate employee compensation, professional fees and overhead costs not

directly related to a specific operating segment.

the normal course of business, the segments do business with each other.

The preponderance of this activity occurs when the Company’s

marketing and distribution segment markets alcohol produced by the production segments for a marketing fee, as discussed in Note 4.

intersegment activities are considered arms’-length transactions.

Consequently, although these transactions impact segment performance,

they do not impact the Company’s consolidated results since all revenues and corresponding costs are eliminated upon consolidation.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

the years ended December 31, 2023, 2022 and 2021, capital expenditures incurred by the Pekin Campus segment were approximately $ 17.7

million, $ 25.7 million and $ 14.3 million, and capital expenditures incurred by the Western production segment were approximately $ 11.8

million, $ 12.3 million $ 2.1 million, respectively.

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

and (3) Western production, which includes the production and sale of fuel-grade ethanol and essential ingredients, including liquid CO 2 ,

produced at the Company’s two western production facilities and its liquid CO 2 plant on an aggregated basis, none of

which are individually so significant to be considered a separately reportable segment.

The Company manages and assesses the performance

of its reportable segments by its gross profit (loss).

As part of the Executive Committee’s review of segment-level performance,

each member of the Executive Committee reviews the gross profit of the Company’s reportable segments and provides expertise and

analysis from their respective areas which drive the evaluation of the performance of the Company’s reportable segments and allocation

of resources to those segments.

Even though the CEO has the authority to override the other members for strategic or other reasons, key

decisions are made jointly by the Executive Committee.

Included in income (loss) before provision for income taxes are management

fees charged by Alto Ingredients to each of the segments.

The Pekin Campus production segment incurred $ 7,200,000 , $ 5,280,000 and $ 5,046,000

in management fees for the years ended December 31, 2024, 2023 and 2022, respectively.

The marketing and distribution segment incurred

$ 5,400,000 , $ 3,960,000 and $ 3,840,000 in management fees for the years ended December 31, 2024, 2023 and 2022, respectively.

production segment incurred $ 3,600,000 , $ 2,640,000 and $ 2,400,000 in management fees for the years ended December 31, 2024, 2023 and 2022,

respectively.

Corporate and other includes the results of Eagle Alcohol and selling, general and administrative expenses, consisting primarily

of corporate employee compensation, professional fees and overhead costs not directly related to a specific operating segment.

During the normal course of business, the segments do business with

The preponderance of this activity occurs when the Company’s marketing and distribution segment markets alcohol produced

by the production segments for a marketing fee, as discussed in Note 3.

These intersegment activities are considered arms’-length

transactions.

Consequently, although these transactions impact segment performance, they do not impact the Company’s consolidated

results since all revenues and corresponding costs are eliminated upon consolidation.

For the years ended December 31, 2024, 2023 and 2022, capital expenditures

incurred by the Pekin Campus segment were approximately $ 6.8 million, $ 17.7 million and $ 25.7 million, and capital expenditures incurred

by the Western production segment were approximately $ 4.3 million, $ 11.8 million and $ 12.3 million, respectively.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

The following tables set forth certain financial data for the Company’s

operating segments (in thousands):

Years Ended December 31,

Pekin Campus production, recorded as gross:

ingredient sales

Pekin Campus sales

Alcohol sales

Essential ingredient sales

Intersegment sales

Total Pekin Campus sales

Marketing and distribution:

marketing and distribution sales

Alcohol sales, gross

Alcohol sales, net

Intersegment sales

Total marketing and distribution sales

Western Production, recorded as gross:

ingredient sales

Western production sales

Alcohol sales

Essential ingredient sales

Intersegment sales

Total Western production sales

Corporate and other

Intersegment eliminations

sales as reported

of goods sold:

Net sales as reported

Cost of goods sold:

Pekin Campus production

4 unchanged sentences

Cost of goods sold as reported

(loss) before provision for income taxes:

Campus production

and distribution

and amortization expense:

Campus production

expense, net of capitalized interest:

Campus production

and distribution

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

Gross profit (loss):

Pekin Campus production

2 unchanged sentences

Corporate and other

AND EQUIPMENT.

and equipment consisted of the following (in thousands):

Intersegment eliminations

Income (loss) before provision for income taxes:

Pekin Campus production

Marketing and distribution

Western production

Corporate and other

Asset impairments:

Western production

Corporate and other

Depreciation and amortization expense:

Pekin Campus production

Western production

Corporate and other

Interest expense, net of capitalized interest:

Pekin Campus production

Marketing and distribution

Western production

Corporate and other

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth the Company’s total assets by

operating segment (in thousands):

Total assets:

Pekin Campus production

Marketing and distribution

Western production

Corporate and other

PROPERTY AND EQUIPMENT.

Property and equipment consisted of the following (in thousands):

Facilities and plant equipment

2 unchanged sentences

Accumulated depreciation

expense was $ 22,492,000 , $ 24,528,000 and $ 23,292,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Company capitalized interest of $ 2,454,000 , $ 720,000 and $ 628,000 for the years ended December 31, 2023, 2022 and 2021, respectively,

related to its capital investment activities.

Company’s property and equipment are substantially collateralized under the Company’s Term Loan.

assets, including goodwill, consisted of the following (in thousands):

Depreciation expense was $ 23,820,000 , $ 22,492,000

and $ 24,528,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

The Company capitalized interest of $ 2,517,000 , $ 2,454,000

and $ 720,000 for the years ended December 31, 2024, 2023 and 2022, respectively, related to its capital investment activities.

recorded an asset impairment of $ 19,000,000 for the year ended December 31, 2024.

The Company did not record any impairment on its property

and equipment for the years ended December 31, 2023 and 2022.

The Company’s property and equipment are substantially

pledged as collateral under the Company’s Term Loan.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED

FINANCIAL STATEMENTS

INTANGIBLE ASSETS.

Intangible assets, including goodwill, consisted of the following (in

December 31, 2024 December 31, 2023

(Years) Gross Accumulated

Amortization/

Impairment Net Book

Value Gross Accumulated

Amortization/

Impairment Net Book

Non-Amortizing:

Goodwill $ 5,970 $ ( 5,970 ) $ —

$ 5,970 $ ( 5,970 ) $ —

Kinergy tradename 2,678 —

2,678 2,678 —

Customer relationships 12 6,556 ( 5,021 ) 1,535 6,556 ( 1,074 ) 5,482

Alcohol tradename

goodwill and intangible assets

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

– As discussed in Note 2, the Company’s recorded goodwill of $ 5,970,000 in its Corporate and other segment resulted from

the Company’s acquisition of Eagle Alcohol.

As part of the Company’s annual goodwill testing, it impaired the full amount

of goodwill of $ 5,970,000 and recognized the amount in asset impairments in the consolidated statements of operations for the year ended

December 31, 2023.

The Company did not record any goodwill impairment for the years ended December 31, 2022 and 2021.

Tradename – The Company recorded tradename of $ 2,678,000 as part of the Company’s merger with Kinergy in 2006.

determined that the tradename has an indefinite life and therefore, rather than being amortized, will be tested annually for impairment.

The Company did not record any impairment on its tradename for the years ended December 31, 2023, 2022 and 2021.

Relationships – The Company recorded customer relationships of $ 6,556,000 from the Company’s acquisition of Eagle Alcohol.

The Company has established a useful life of twelve years for these customer relationships.

Alcohol Tradename – The Company recorded tradename of $ 420,000 from the Company’s acquisition of Eagle Alcohol.

The Company has established a useful life of ten years for the tradename.

expense associated with intangible assets totaled $ 588,000 and $ 567,000 for the years ended December 31, 2023 and 2022.

The weighted-average

unamortized life of the customer relationships and tradename is 9.9 years.

expected amortization expense relating to amortizable intangible assets in each of the five years after December 31, 2023 are (in thousands):

Ended December 31,

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

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

This program recognizes

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

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

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

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

the contracts specify a floating or index-based price.

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

to the potentially adverse effects of price volatility.

These derivatives may be designated and documented as cash flow hedges and effectiveness

is evaluated by assessing the probability of the anticipated transactions and regressing commodity futures prices against the Company’s

purchase and sales prices.

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

is recognized immediately in cost of goods sold.

For the years ended December 31, 2023, 2022 and 2021, the Company did not designate

any of its derivatives as cash flow hedges.

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

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

These derivatives are not designated

for hedge accounting treatment.

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

in cost of goods sold.

The Company recognized net losses of $ 8,031,000 and net gains of $ 19,263,000 and $ 21,619,000 as the change in

the fair value of these contracts for the years ended December 31, 2023, 2022 and 2021, respectively.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Non-Designated

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

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

of December 31, 2023

of Instrument

Sheet Location

Cash collateral

Eagle Alcohol tradename 10 420 ( 124 ) 296 420 ( 82 ) 338

Total goodwill and intangible assets $ 15,624 $ ( 11,115 ) $ 4,509 $ 15,624 $ ( 7,126 ) $ 8,498

Goodwill – The Company recorded goodwill of $ 5,970,000

in its Corporate and other segment resulted from the Company’s acquisition of Eagle Alcohol.

As part of the Company’s annual

goodwill testing, it impaired the full amount of goodwill of $ 5,970,000 and recognized the amount in asset impairments in the consolidated

statements of operations for the year ended December 31, 2023.

The Company did not record any goodwill impairment for the years ended

December 31, 2024 and 2022.

Kinergy Tradename – The Company recorded tradename

of $ 2,678,000 as part of the Company’s merger with Kinergy in 2006.

The Company determined that the tradename has an indefinite

life and therefore, rather than being amortized, will be tested annually for impairment.

The Company did not record any impairment on

its tradename for the years ended December 31, 2024, 2023 and 2022.

Customer Relationships – The Company recorded customer

relationships of $ 6,556,000 from the Company’s acquisition of Eagle Alcohol.

As part of the Company’s impairment testing,

it impaired this intangible asset by $ 3,401,000 and recognized the amount in asset impairments in the consolidated statement of operations

for the year ended December 31, 2024.

The Company did not record any asset impairment on its customer relationships for the years ended

December 31, 2023 and 2022.

Eagle Alcohol Tradename – The Company recorded

tradename of $ 420,000 from the Company’s acquisition of Eagle Alcohol.

The Company did not record any tradename impairment for the

years ended December 31, 2024, 2023 and 2022.

Amortization expense associated with intangible assets totaled $ 588,000 ,

$ 588,000 and $ 567,000 for the years ended December 31, 2024, 2023 and 2022.

The weighted-average unamortized life of the customer

relationships and tradename is 8.7 years.

The expected amortization expense relating to amortizable intangible

assets in each of the five years after December 31, 2024 are (in thousands):

Years Ended December 31,

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The business and activities of the Company expose it to a variety of

market risks, including risks related to changes in commodity prices.

The Company monitors and manages these financial exposures as an

integral part of its risk management program.

This program recognizes the unpredictability of financial markets and seeks to reduce the

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

Commodity Risk – Cash Flow Hedges

– The Company uses derivative instruments to protect cash flows from fluctuations caused by volatility in commodity prices for periods

of up to twelve months in order to protect gross profit margins from potentially adverse effects of market and price volatility on alcohol

sales and purchase commitments where the prices are set at a future date and/or if the contracts specify a floating or index-based price.

In addition, the Company hedges anticipated sales of alcohol to minimize its exposure to the potentially adverse effects of price volatility.

These derivatives may be designated and documented as cash flow hedges and effectiveness is evaluated by assessing the probability of

the anticipated transactions and regressing commodity futures prices against the Company’s purchase and sales prices.

Ineffectiveness,

which is defined as the degree to which the derivative does not offset the underlying exposure, is recognized immediately in cost of goods

For the years ended December 31, 2024, 2023 and 2022, the Company did not designate any of its derivatives as cash flow hedges.

Commodity Risk – Non-Designated Hedges –

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

contracts or options for those commodities.

These derivatives are not designated for hedge accounting treatment.

The changes in fair value

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

The Company recognized net gains

of $ 11,045,000 , net losses of $ 8,031,000 and net gains of $ 19,263,000 as the change in the fair value of these contracts for the years

ended December 31, 2024, 2023 and 2022, respectively.

Non-Designated Derivative Instruments – The classification

and amounts of the Company’s derivatives not designated as hedging instruments, and related cash collateral balances, are as follows

(in thousands):

As of December 31, 2024

Type of Instrument

Balance Sheet Location

Cash collateral balance

Restricted cash

2 unchanged sentences

Derivative instruments

of December 31, 2022

of Instrument

Sheet Location

Cash collateral

As of December 31, 2024

Type of Instrument

Balance Sheet Location

Cash collateral balance

Restricted cash

Commodity contracts

1 unchanged sentence

Derivative instruments

above amounts represent the gross balances of the contracts;

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

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

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

are as follows (in thousands):

the Years Ended December 31,

of Instrument

of Operations Location

of goods sold

the Years Ended December 31,

of Instrument

of Operations Location

of goods sold

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

borrowings are summarized as follows (in thousands):

The above amounts represent the gross balances of the contracts;

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

individually, therefore the positions are reported at gross.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The classification and amounts of the Company’s recognized gains

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

Realized Gains (Losses)

For the Years Ended December 31,

Type of Instrument

Statements of Operations Location

Commodity contracts

Cost of goods sold

Unrealized Gains (Losses)

For the Years Ended December 31,

Type of Instrument

Statements of Operations Location

Commodity contracts

Cost of goods sold

Long-term borrowings are summarized as follows (in thousands):

Kinergy line of credit

4 unchanged sentences

Long-term debt

Line of Credit – Kinergy has an operating line of credit for an aggregate amount of up to $ 100,000,000 .

The line of credit

matures on November 7, 2027 .

The credit facility is based on Kinergy’s eligible accounts receivable and inventory levels, subject

to certain concentration reserves.

The credit facility is subject to certain other sublimits, including inventory loan limits.

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

margin ranging between 1.25 % and 1.75 %.

Kinergy Line of Credit – Kinergy

has an operating line of credit for an aggregate amount of up to $ 100,000,000 .

The line of credit matures on November 7, 2027.

facility is based on Kinergy’s eligible accounts receivable and inventory levels, subject to certain concentration reserves.

credit facility is subject to certain other sublimits, including inventory loan limits.

Interest accrues under the line of credit at a

rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging between 1.25 % and 1.75 %.

The applicable margin was 1.50 %, for a total rate of 6.06 %, at December 31, 2024.

facility’s monthly unused line fee is an annual rate equal to 0.25 % to 0.375 % depending on the average daily principal balance

during the immediately preceding month.

Payments that may be made by Kinergy to the Company as reimbursement for management and other

services provided by the Company to Kinergy are limited under the terms of the credit facility to $ 1,500,000 per fiscal quarter.

credit facility also includes the accounts receivable of Alto Nutrients as additional collateral.

Payments that may be made by Alto Nutrients

to the Company as reimbursement for management and other services provided by the Company to Alto Nutrients are limited under the terms

of the credit facility to $ 500,000 per fiscal quarter.

Kinergy and Alto Nutrients may also make distributions to the Company of up to

75 % of their excess cash flow.

the monthly excess borrowing availability of Kinergy and Alto Nutrients falls below certain thresholds, they are collectively required

to 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 first-priority security interests in all of their

assets in favor of the lender.

Alto Ingredients has guaranteed all of Kinergy’s obligations under the line of credit.

As of December

31, 2023, Kinergy had $ 33.3 million in unused borrowing availability under the credit facility.

Term Loan – On November 7, 2022, the Company entered into a credit agreement with certain funds managed by Orion Infrastructure

Capital (collectively, the “Lenders”), and OIC Investment Agent, LLC, as administrative agent and collateral agent (“OIC”),

under which the Lenders agreed to extend a senior secured credit facility in the amount of up to $ 125,000,000 (the “Term Loan”).

The Term Loan is secured by a first priority lien on certain assets of the Company and a second priority lien on certain assets of Kinergy

and Alto Nutrients.

Lenders agreed to advance to the Company up to $ 100,000,000 , with up to an additional $ 25,000,000 upon the satisfaction of certain conditions.

The Company also agreed to issue to the Lenders upon its first funding request, an aggregate of 1,282,051 shares of the Company’s

common stock, and up to an additional 320,513 shares of the Company’s common stock upon additional funding or fundings.

On November 23, 2022, the Company received its

initial funding of $ 60,000,000 and issued 1,282,051 shares of common stock.

As of December 31, 2023 and 2022, the principal amount outstanding

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

The Company allocated $ 3,912,000 of the loan proceeds to additional paid-in capital for the common

stock issued based on the relative fair values of the debt and equity instruments and recorded a corresponding amount as a debt issuance

discount that will be amortized to interest expense over the term of the loan.

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

The credit facility’s monthly unused line fee

is an annual rate equal to 0.25 % to 0.375 % depending on the average daily principal balance during the immediately preceding month.

that may be made by Kinergy to the Company as reimbursement for management and other services provided by the Company to Kinergy are limited

under the terms of the credit facility to $ 1,500,000 per fiscal quarter.

The credit facility also includes the accounts receivable of

Alto Nutrients as additional collateral.

Payments that may be made by Alto Nutrients to the Company as reimbursement for management and

other services provided by the Company to Alto Nutrients are limited under the terms of the credit facility to $ 500,000 per fiscal quarter.

Kinergy and Alto Nutrients may also make distributions to the Company of up to 75 % of their excess cash flow.

If the monthly excess borrowing availability of Kinergy and Alto Nutrients

falls below certain thresholds, they are collectively required to 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).

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The obligations of Kinergy and Alto Nutrients under

the credit facility are secured by first-priority security interests in all of their assets in favor of the lender.

Alto Ingredients has

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

As of December 31, 2024, Kinergy had $ 23.1 million in unused borrowing

availability under the credit facility.

Orion Term Loan – On November 7, 2022, the Company

entered into a credit agreement with certain funds managed by Orion Infrastructure Capital (collectively, the “Lenders”),

and OIC Investment Agent, LLC, as administrative agent and collateral agent (“OIC”), under which the Lenders agreed to extend

a senior secured credit facility in the amount of up to $ 125,000,000 (the “Term Loan”).

The Term Loan is secured by a first

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

The Lenders agreed to advance to the Company up to $ 100,000,000 , with

up to $ 25,000,000 more upon the satisfaction of certain additional conditions.

The Company also agreed to issue to the Lenders upon its

first funding request, an aggregate of 1,282,051 shares of the Company’s common stock, and up to an additional 320,513 shares of

the Company’s common stock upon additional funding or fundings.

On November 23, 2022, the Company received its initial funding of $ 60,000,000

and issued 1,282,051 shares of common stock.

As of December 31, 2024, 2023 and 2022, the principal amount outstanding under the Term Loan

was $ 60,000,000 .

The Company allocated $ 3,912,000 of the loan proceeds to additional paid-in capital for the common stock issued based

on the relative fair values of the debt and equity instruments and recorded a corresponding amount as a debt issuance discount that will

be amortized to interest expense over the term of the loan.

As of December 31, 2024, interest accrued on the unpaid principal amount

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

On January 1, 2025, the annual fixed rate of interest on the Term Loan increased to

10.75 % in connection with the Company’s amendment of various terms under the Term Loan.

The Term Loan matures on November 7, 2028,

or earlier upon acceleration.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Company must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ended December

31, 2023 in an amount equal to a percentage of the Company’s excess cash flow based on a specified leverage ratio, as follows:

(i) if the leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of the Company’s

excess cash flow, (ii) if the leverage ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount

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

amount will equal 25% of the Company’s excess cash flow.

terms and conditions of the Term Loan also contain customary and other representations, warranties, covenants and obligations, including

events of default, and other terms and conditions.

Rights Agreement - On November 7, 2022, the Company entered into a registration rights agreement with the Lenders and agreed to register

for resale with the Securities and Exchange Commission the shares of common stock issued to the Lenders under the Term Loan.

registration statement has been declared effective by the Securities and Exchange Commission.

Act Loans – On May 4, 2020, Alto Ingredients and Alto Pekin, received loan proceeds from Bank of America, NA under the Coronavirus

Aid, Relief, and Economic Security Act of 2020 (“CARES Act”), through the Paycheck Protection Program administered by the

Small Business Administration (“SBA”).

Alto Ingredients received $ 6.0 million and Alto Pekin received $ 3.9 million in

loan proceeds.

Under the terms of the loans, certain amounts may be forgiven if they are used for qualifying expenses as described in

the CARES Act.

In June 2021, the SBA approved Alto Pekin’s forgiveness application for the full amount of $ 3.9 million.

2021, the SBA approved Alto Ingredients’ forgiveness application for the full amount of $ 6.0 million.

As a result, the Company

recognized income from loan forgiveness of $ 9.9 million for the year ended December 31, 2021.

The SBA may audit the loan forgiveness

applications and further examine eligibility for forgiveness, including the facts and circumstances existing at the time the loans were

The Company can provide no assurance that any loan forgiven will not require repayment following an audit by the SBA.

of Long-term Debt – The Company’s long-term debt matures as follows (in thousands):

Company leases equipment and land for certain of its facilities.

Operating lease right of use assets and liabilities are recognized at

commencement date based on the present value of lease payments over the lease term.

The Company uses its estimated incremental borrowing

rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease

For the years ended December 31, 2023 and 2022, the Company’s weighted-average discount rate was 7.50 %.

Operating lease

expense is recognized on a straight-line basis over the lease term.

the adoption of ASC 842, the Company elected the following practical expedients allowable under the guidance:

not to reassess whether

any expired or existing contracts are or contain leases;

not to reassess the lease classification for any expired or existing leases;

The Company must prepay amounts outstanding under the Term Loan on

a semi-annual basis beginning with the six-month period ended December 31, 2023 in an amount equal to a percentage of the Company’s

excess cash flow based on a specified leverage ratio, as follows:

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

mandatory prepayment amount will equal 100 % of the Company’s excess cash flow, (ii) if the leverage ratio is less than 3.0x and

greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50 % of the Company’s excess cash flow and (iii) if

the leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25 % of the Company’s excess cash flow.

The terms and conditions of the Term Loan also contain customary and

other representations, warranties, covenants and obligations, including events of default, and other terms and conditions.

Registration Rights Agreement - On November 7, 2022,

the Company entered into a registration rights agreement with the Lenders and agreed to register for resale with the Securities and Exchange

Commission the shares of common stock issued to the Lenders under the Term Loan.

The related registration statement has been declared

effective by the Securities and Exchange Commission.

Maturities of Long-term Debt – The Company’s

long-term debt matures as follows (in thousands):

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company leases equipment and land for certain of its facilities.

Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over

the lease term.

The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount

rate for each lease in determining the present value of lease payments.

For the years ended December 31, 2024 and 2023, the Company’s

weighted-average discount rate was approximately 7.78 %.

Operating lease expense is recognized on a straight-line basis over the lease

Upon the adoption of ASC 842, the Company elected the following practical

expedients allowable under the guidance:

not to reassess whether any expired or existing contracts are or contain leases;

not to reassess

the lease classification for any expired or existing leases;

not to reassess initial direct costs for any existing leases;

not to separately identify lease and non-lease components;

and not to evaluate

historical land easements.

Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC

842 to only long-term (greater than 1 year) leases.

Company determines if an arrangement is a lease or contains a lease at inception.

The Company’s leases have remaining lease terms

of approximately 1 year to 52 years, which includes options to extend the lease when it is reasonably certain the Company will exercise

those options.

For the year ended December 31, 2023, the weighted-average remaining lease terms of equipment and land-related leases

were 4.73 years and 15.41 years, respectively.

The Company does not have lease arrangements with residual value guarantees, sale-leaseback

terms or material restrictive covenants.

The Company does not have any material finance lease obligations nor sublease agreements.

not to separately

identify lease and non-lease components;

and not to evaluate historical land easements.

Additionally, the Company elected the short-term

lease exemption policy, applying the requirements of ASC 842 to only long-term (greater than 1 year) leases.

The Company determines if an arrangement is a lease or contains a lease

at inception.

The Company’s leases have remaining lease terms of approximately 1 year to 51 years, which includes options to extend

the lease when it is reasonably certain the Company will exercise those options.

For the year ended December 31, 2024, the weighted-average

remaining lease terms of equipment and land-related leases were 4.14 years and 16.42 years, respectively.

For the year ended December

31, 2023, the weighted-average remaining lease terms of equipment and land-related leases were 4.73 years and 15.41 years, respectively.

The Company does not have lease arrangements with residual value guarantees, sale-leaseback terms or material restrictive covenants.

Company does not have any material finance lease obligations nor sublease agreements.

Leases consist of the following (in thousands):

Classification

Right of use operating lease assets, net

Operating - Current

Current portion, operating leases

Operating - Noncurrent

Operating leases, net of current portion

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Components of lease costs were as follows (in thousands) :

Classification December 31,

Assets 2024 2023

Operating Right of use operating lease assets, net $ 20,553 $ 22,597

Operating - Current Current portion, operating leases $ 4,851 $ 4,333

Operating - Noncurrent Operating leases, net of current portion $ 16,913 $ 19,029

The Components of lease costs were as follows (in thousands):

Years Ended December 31,

2 unchanged sentences

Net lease cost

following table summarizes the remaining maturities of the Company’s operating lease liabilities, assuming all land lease extensions

are taken, as of December 31, 2023 (in thousands) :

Plan - The Company sponsors a defined benefit pension plan (the “Retirement Plan”) that is noncontributory, and covers

only “grandfathered” unionized employees at its Alto Pekin production facilities.

Benefits are based on a prescribed formula

based upon the employee’s years of service.

Employees hired after November 1, 2010, are not eligible to participate in the Retirement

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

The Company’s funding policy is to make the minimum

annual contribution required by applicable regulations.

related to the Retirement Plan as of and for the years ended December 31, 2023 and 2022 is presented below (dollars in thousands):

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the remaining maturities

of the Company’s operating lease liabilities, assuming all land lease extensions are taken, as of December 31, 2024 (in thousands):

Less interest

PENSION PLANS.

Retirement Plan - The Company sponsors

a defined benefit pension plan (the “Retirement Plan”) that is noncontributory, and covers only “grandfathered”

unionized employees at its Alto Pekin production facilities.

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

years of service.

Employees hired after November 1, 2010, are not eligible to participate in the Retirement Plan.

The Company uses a December

31 st measurement date for its Retirement Plan.

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

required by applicable regulations.

Information related to the Retirement Plan as of

and for the years ended December 31, 2024 and 2023 is presented below (dollars in thousands):

Changes in plan assets:

Fair value of plan assets, beginning

Actual gains (losses)

Benefits paid

3 unchanged sentences

projected accumulated benefit obligation

Funded status, (underfunded)/overfunded

Funded status, overfunded (underfunded)

Amounts recognized in the consolidated balance sheets:

Other liabilities

Accumulated other comprehensive loss

Accumulated other comprehensive income

Assumptions used in computation of benefit obligations:

2 unchanged sentences

Rate of compensation increase

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

Components of net periodic benefit costs are as follows:

return on plan assets

periodic cost (benefit)

Company does not expect to make any contributions in the year ending December 31, 2024.

Net periodic benefit cost for 2024 is estimated

at less than $ 0.1 million.

following table summarizes the expected benefit payments for the Company’s Retirement Plan for each of the next five fiscal years

and in the aggregate for the five fiscal years thereafter (in thousands):

Note 16 for discussion of the Retirement Plan’s fair value disclosures.

and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for

each asset class.

The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real

rate of return, and the associated risk premium.

A weighted-average rate was developed based on those overall rates and the target asset

allocation of the Retirement Plan.

Company’s pension committee is responsible for overseeing the investment of pension plan assets.

The pension committee is responsible

for determining and monitoring the appropriate asset allocations and for selecting or replacing investment managers, trustees, and custodians.

The Retirement Plan’s current investment target allocations are 50 % equities and 50 % debt.

The pension committee periodically reviews

the actual asset allocation in light of these targets and rebalances investments as necessary.

The pension committee also evaluates the

performance of investment managers as compared to the performance of specified benchmarks and peers and monitors the investment managers

to ensure adherence to their stated investment style and to the Retirement Plan’s investment guidelines.

Postretirement

Plan - The Company also sponsors a health care plan and life insurance plan (the “Postretirement Plan”) that provides

postretirement medical benefits and life insurance to certain “grandfathered” unionized employees at its Alto Pekin production

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

The plan is contributory,

with contributions required at the same rate as active employees.

Benefit eligibility under the plan reduces at age 65 from a defined

benefit to a defined dollar cap based upon years of service.

related to the Postretirement Plan as of December 31, 2023 and 2022 is presented below (dollars in thousands):

Interest cost

Expected return on plan assets

Net periodic cost (benefit)

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company does not expect to make any contributions

in the year ending December 31, 2025.

Net periodic benefit for 2025 is estimated to be approximately $ 0.5 million.

The following table summarizes the expected benefit

payments for the Company’s Retirement Plan for each of the next five fiscal years and in the aggregate for the five fiscal years

thereafter (in thousands):

See Note 15 for discussion of the Retirement Plan’s fair value

Historical and future expected returns of multiple

asset classes were analyzed to develop a risk-free real rate of return and risk premiums for each asset class.

The overall rate for each

asset class was developed by combining a long-term inflation component, the risk-free real rate of return, and the associated risk premium.

A weighted-average rate was developed based on those overall rates and the target asset allocation of the Retirement Plan.

The Company’s pension committee is responsible

for overseeing the investment of pension plan assets.

The pension committee is responsible for determining and monitoring the appropriate

asset allocations and for selecting or replacing investment managers, trustees, and custodians.

The Retirement Plan’s current investment

target allocations are 50 % equities and 50 % debt.

The pension committee periodically reviews the actual asset allocation in light of these

targets and rebalances investments as necessary.

The pension committee also evaluates the performance of investment managers as compared

to the performance of specified benchmarks and peers and monitors the investment managers to ensure adherence to their stated investment

style and to the Retirement Plan’s investment guidelines.

Postretirement Plan - The Company also

sponsors a health care plan and life insurance plan (the “Postretirement Plan”) that provides postretirement medical benefits

and life insurance to certain “grandfathered” unionized employees at its Alto Pekin production facilities.

Employees hired

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

The plan is contributory, with contributions required

at the same rate as active employees.

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

cap based upon years of service.

Information related to the Postretirement Plan as of December 31, 2024

and 2023 is presented below (dollars in thousands):

Amounts at the end of the year:

Accumulated/projected

benefit obligation

Fair value of plan

status, (underfunded)/overfunded

Amounts recognized in

the consolidated balance sheets:

Accumulated/projected benefit obligation

Fair value of plan assets

Funded status, underfunded

Amounts recognized in the consolidated balance sheets:

Accrued liabilities

Other liabilities

Accumulated other comprehensive

Discount rate used in

computation of benefit obligations

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Ended December 31,

Accumulated other comprehensive income

Discount rate used in computation of benefit obligations

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years Ended December 31,

Components of net periodic benefit costs are as follows:

of prior service cost

periodic benefit cost

Amounts recognized

in the plan for the year:

contributions

Company does not expect to recognize any amortization of net actuarial loss during the year ended December 31, 2024.

following table summarizes the expected benefit payments for the Company’s Postretirement Plan for each of the next five fiscal

years and in the aggregate for the five fiscal years thereafter (in thousands):

purposes of determining the cost and obligation for pre-Medicare postretirement medical benefits, a 7.50 % annual rate of increase in

the per capita cost of covered benefits (i.e., health care trend rate) was assumed for the Postretirement Plan in 2025, adjusted to a

rate of 4.50 % in 2034.

Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans.

Company recorded a provision for income taxes as follows (in thousands):

Interest cost

Amortization of prior service cost

Net periodic benefit cost

Amounts recognized in the plan for the year:

Participant contributions

Benefits paid

The Company does not expect to recognize any amortization

of net actuarial loss during the year ended December 31, 2025.

The following table summarizes the expected benefit

payments for the Company’s Postretirement Plan for each of the next five fiscal years and in the aggregate for the five fiscal years

thereafter (in thousands):

December 31 :

For purposes of determining the cost and obligation

for pre-Medicare postretirement medical benefits, a 8.50 % annual rate of increase in the per capita cost of covered benefits (i.e., health

care trend rate) was assumed for the Postretirement Plan in 2026, adjusted to a rate of 4.50 % in 2035.

Assumed health care cost trend

rates have a significant effect on the amounts reported for health care plans.

INCOME TAXES.

The Company recorded a provision for income taxes as follows (in thousands):

Ended December 31,

1 unchanged sentence

Deferred provision

reconciliation of the differences between the United States statutory federal income tax rate and the effective tax rate as provided

in the consolidated statements of operations is as follows:

Years Ended December 31,

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A reconciliation of the differences between the United States statutory

federal income tax rate and the effective tax rate as provided in the consolidated statements of operations is as follows:

Ended December 31,

Statutory rate

3 unchanged sentences

Non-deductible items

Income from loan forgiveness

Effective rate

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying

amounts and the tax bases of assets and liabilities using presently enacted tax rates and laws.

The components of deferred income taxes

included in the consolidated balance sheets were as follows (in thousands):

Deferred income taxes are provided using the asset and liability method

to reflect temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using presently

enacted tax rates and laws.

The components of deferred income taxes included in the consolidated balance sheets were as follows (in thousands):

Deferred tax assets:

Net operating

loss carryforwards

Net operating loss carryforwards

Disallowed interest

R&D, Energy and

R&D, Energy and AMT credits

Pension liability

1 unchanged sentence

Stock-based compensation

Allowance for credit losses

and other assets

Allowance for credit losses and other assets

Total gross deferred tax assets

valuation allowance

Total deferred tax assets, net of valuation

Total deferred tax assets, net of valuation allowance

Deferred tax liabilities:

1 unchanged sentence

Total deferred tax liabilities

Net deferred tax liabilities,

included in other liabilities

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

portion of the Company’s net operating loss carryforwards are subject to provisions of the tax law that limit the use of losses

incurred by a corporation prior to the date certain ownership changes occur.

These limitations also apply to certain depreciation deductions

associated with assets on hand at the time of the ownership change and otherwise allowable during the five-year period following the

ownership change.

As the five-year limitation period lapsed in 2019, these disallowed deductions are reflected in property and equipment

in the schedule above but continue to be subject to the annual limitation that applies to the pre-change net operating losses.

the limitation on the use of net operating losses and depreciation deductions, a significant portion of these carryforwards will expire

regardless of whether the Company generates future taxable income.

After reducing these net operating loss carryforwards for the amount

which will expire due to this limitation, the Company had remaining federal net operating loss carryforwards of approximately $ 207,481,000

and state net operating loss carryforwards of approximately $ 227,772,000 at December 31, 2023.

These net operating loss carryforwards

expire as follows (in thousands):

Net deferred tax liabilities, included in other liabilities

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A portion of the Company’s net operating loss carryforwards are

subject to provisions of the tax law that limit the use of losses incurred by a corporation prior to the date certain ownership changes

These limitations also apply to certain depreciation deductions associated with assets on hand at the time of the ownership change

and otherwise allowable during the five-year period following the ownership change.

As the five-year limitation period lapsed in 2019,

these disallowed deductions are reflected in property and equipment in the schedule above but continue to be subject to the annual limitation

that applies to the pre-change net operating losses.

Due to the limitation on the use of net operating losses and depreciation deductions,

a significant portion of these carryforwards will expire regardless of whether the Company generates future taxable income.

After reducing

these net operating loss carryforwards for the amount which will expire due to this limitation, the Company had remaining federal net

operating loss carryforwards of approximately $ 227,673,000 and state net operating loss carryforwards of approximately $ 276,424,000 at

December 31, 2024.

These net operating loss carryforwards expire as follows (in thousands):

2040 and after*

* Includes indefinite life federal net operating losses of $ 108.5 million generated after 2017.

Approximately

$ 135,260,000 is available to utilize against federal taxable income for 2024.

the extent amounts are not utilized in any year, they may be carried forward to the next year until expiration.

These amounts may change

if there are future additional limitations on their utilization.

capital loss of $100,487,000 may be carried forward for 5 years and will expire in 2025.

State capital loss of $95,469,000 may be carried

forward for 5 years for most of the states in which the Company files returns and will expire in 2025.

assessing whether the deferred tax assets are realizable, a more likely than not standard is applied.

If it is determined that it is

more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods

in which the associated temporary differences become deductible.

Management considers the scheduled reversal of deferred tax liabilities,

projected future taxable income and tax planning strategies in making this assessment.

valuation allowance was established in the amount of $ 93,506,000 and $ 87,949,000 as of December 31, 2023 and 2022, respectively,

based on the Company’s assessment of the future realizability of certain deferred tax assets.

The valuation allowance on deferred

tax assets is related to future deductible temporary differences and net operating loss carryforwards for which the Company has concluded

it is more likely than not that these items will not be realized in the ordinary course of operations.

the year ended December 31, 2023, the Company recorded an increase in valuation allowance of $ 5,557,000 .

This was primarily related to

additional net operating losses accumulated for the year.

For the year ended December 31, 2022, the Company recorded an increase in valuation

allowance of $ 12,365,000 .

* Includes indefinite life federal net operating losses of $ 128.8

million generated after 2017.

Approximately $ 155,452,000 is available to utilize against federal

taxable income for 2025.

To the extent amounts are not utilized in any year, they may be carried

forward to the next year until expiration.

These amounts may change if there are future additional limitations on their utilization.

Federal capital loss of $ 100,487,000 may be carried forward for 5 years

and will expire in 2025.

State capital loss of $ 95,469,000 may be carried forward for 5 years for most of the states in which the Company

files returns and will expire in 2025.

In assessing whether the deferred tax assets are realizable, a more

likely than not standard is applied.

If it is determined that it is more likely than not that deferred tax assets will not be realized,

a valuation allowance must be established against the deferred tax assets.

The ultimate realization of deferred tax assets is dependent

upon the generation of future taxable income during the periods in which the associated temporary differences become deductible.

considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this

A valuation allowance was established in the amount of $ 110,687,000

and $ 93,506,000 as of December 31, 2024 and 2023, respectively, based on the Company’s assessment of the future realizability

of certain deferred tax assets.

The valuation allowance on deferred tax assets is related to future deductible temporary differences and

net operating loss carryforwards for which the Company has concluded it is more likely than not that these items will not be realized

in the ordinary course of operations.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the year ended December 31, 2024, the Company recorded an increase

in valuation allowance of $ 17,181,000 .

This was primarily related to additional net operating losses accumulated for the year.

For the year ended

December 31, 2021, the Company recorded a decrease in valuation allowance of $ 10,104,000 .

This was primarily related to utilization of

net operating losses as the Company generated taxable income for the year.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

reconciliation of the beginning balance and the ending balance of gross unrecognized tax benefits, before interest and penalties, for

the period presented is as follows (in thousands):

Unrecognized tax benefits at beginning

year ended December 31, 2023, the Company recorded an increase in valuation allowance of $ 5,557,000 .

This was primarily related to additional

net operating losses accumulated for the year.

For the year ended December 31, 2022, the Company recorded an increase in valuation allowance

of $ 12,365,000 .

This was primarily related to additional net operating losses accumulated for the year.

Unrecognized Tax Benefits

A reconciliation of the beginning balance and the ending balance of

gross unrecognized tax benefits, before interest and penalties, for the period presented is as follows (in thousands):

Unrecognized tax benefits at beginning of year

Increases related to current year tax positions

2 unchanged sentences

Decreases related to prior year tax positions

Decreases related to expiration of prior year

tax positions

Decreases related to

settlements of prior year tax positions

Unrecognized tax benefits

at end of year

Company recorded unrecognized tax benefits for uncertain tax positions of approximately $ 739,000 as of December 31, 2023, of which $ 739,000

would impact the effective tax rate, if recognized.

Company recognizes interest and penalties related to income tax matters as a component of interest expense and other income, net, respectively.

As of December 31, 2023, the Company accrued penalties of $ 74,000 and interest of $ 75,000 related to uncertain tax positions.

does not expect the unrecognized tax benefits to change significantly over the next 12 months.

Company is subject to income tax in the United States federal jurisdiction and various state jurisdictions and has identified its federal

tax return and tax returns in state jurisdictions below as “major” tax filings.

These jurisdictions, along with the years

still open to audit under the applicable statutes of limitation, are as follows:

Decreases related to expiration of prior year tax positions

Decreases related to settlements of prior year tax positions

Unrecognized tax benefits at end of year

The Company recorded unrecognized tax benefits for

uncertain tax positions of approximately $ 739,000 as of December 31, 2024 and 2023, of which $ 739,000 would impact the effective tax rate,

if recognized.

The Company recognizes interest and penalties related

to income tax matters as a component of interest expense and other income, net, respectively.

As of December 31, 2024, the Company accrued

penalties of $ 74,000 and interest of $ 134,000 related to uncertain tax positions.

The Company does not expect the unrecognized tax benefits

to change significantly over the next 12 months.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is subject to income tax in the United

States federal jurisdiction and various state jurisdictions and has identified its federal tax return and tax returns in state jurisdictions

below as “major” tax filings.

These jurisdictions, along with the years still open to audit under the applicable statutes

of limitation, are as follows:

Jurisdiction Tax Years

Federal 2021 – 2023

Alabama 2021 – 2023

Arizona 2020 – 2023

Arkansas 2021 – 2023

California 2020 – 2023

Colorado 2020 – 2023

Connecticut 2021 – 2023

Georgia 2021 – 2023

Idaho 2021 – 2023

Illinois 2021 – 2023

Indiana 2021 – 2023

Iowa 2021 – 2023

Kansas 2021 – 2023

Louisiana 2021 – 2023

Michigan 2021 – 2023

Minnesota 2021 – 2023

Mississippi 2021 – 2023

Missouri 2021 – 2023

Nebraska 2021 – 2023

New Mexico 2021 – 2023

Oklahoma 2021 – 2023

Oregon 2021 – 2023

Pennsylvania 2021 – 2023

Rhode Island 2021 – 2023

South Carolina 2021 – 2023

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

because the Company had net operating losses and credits carried forward in several of the jurisdictions, including the United States

federal and California jurisdictions, certain items attributable to closed tax years are still subject to adjustment by applicable taxing

authorities through an adjustment to tax attributes carried forward to open years.

Company has 6,734,835 undesignated shares of authorized and unissued preferred stock, which may be designated and issued in the future

on the authority of the Company’s Board of Directors.

As of December 31, 2023, the Company had the following designated classes

of preferred stock:

A Preferred Stock – The Company has authorized 1,684,375 shares of Series A Cumulative Redeemable Convertible Preferred Stock

(“Series A Preferred Stock”), with none outstanding at December 31, 2023 and 2022.

Shares of Series A Preferred Stock that

are converted into shares of the Company’s common stock revert to undesignated shares of authorized and unissued preferred stock.

any issuance, the Series A Preferred Stock would rank senior in liquidation and dividend preferences to the Company’s common stock.

Holders of Series A Preferred Stock would be entitled to quarterly cumulative dividends payable in arrears in cash in an amount equal

to 5 % per annum of the purchase price per share of the Series A Preferred Stock.

The holders of the Series A Preferred Stock would have

conversion rights initially equivalent to two shares of common stock for each share of Series A Preferred Stock, subject to customary

antidilution adjustments.

Certain specified issuances will not result in antidilution adjustments.

The shares of Series A Preferred Stock

would also be subject to forced conversion upon the occurrence of a transaction that would result in an internal rate of return to the

holders of the Series A Preferred Stock of 25 % or more.

Accrued but unpaid dividends on the Series A Preferred Stock are to be paid in

cash upon any conversion of the Series A Preferred Stock.

holders of Series A Preferred Stock would have a liquidation preference over the holders of the Company’s common stock equivalent

to the purchase price per share of the Series A Preferred Stock plus any accrued and unpaid dividends on the Series A Preferred Stock.

A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the

Company’s capital stock or assets or a merger, consolidation, share exchange, reorganization or other transaction or series of

related transactions, unless holders of 66 2/3% of the Series A Preferred Stock vote affirmatively in favor of or otherwise consent to

such transaction.

B Preferred Stock – The Company has authorized 1,580,790 shares of Series B Cumulative Convertible Preferred Stock (“Series

B Preferred Stock”), with 926,942 shares outstanding at December 31, 2023 and 2022.

Shares of Series B Preferred Stock that are

converted into shares of the Company’s common stock revert to undesignated shares of authorized and unissued preferred stock.

Series B Preferred Stock ranks senior in liquidation and dividend preferences to the Company’s common stock.

Holders of Series

B Preferred Stock are entitled to quarterly cumulative dividends payable in arrears in cash in an amount equal to 7.00 % per annum of

the purchase price per share of the Series B Preferred Stock;

however, subject to the provisions of the Letter Agreement described below,

such dividends may, at the option of the Company, be paid in additional shares of Series B Preferred Stock based initially on the liquidation

value of the Series B Preferred Stock.

In addition to the quarterly cumulative dividends, holders of the Series B Preferred Stock are

entitled to participate in any common stock dividends declared by the Company to its common stockholders.

The holders of Series B Preferred

Stock have a liquidation preference over the holders of the Company’s common stock initially equivalent to $ 19.50 per share of

the Series B Preferred Stock plus any accrued and unpaid dividends on the Series B Preferred Stock.

A liquidation will be deemed to occur

upon the happening of customary events, including the transfer of all or substantially all of the capital stock or assets of the Company

or a merger, consolidation, share exchange, reorganization or other transaction or series of related transaction, unless holders of 66

2/3% of the Series B Preferred Stock vote affirmatively in favor of or otherwise consent that such transaction shall not be treated as

a liquidation.

The Company believes that such liquidation events are within its control and therefore has classified the Series B Preferred

Stock in stockholders’ equity .

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2023, the Series B Preferred Stock was convertible into 980,712 shares of the Company’s common stock.

The conversion

ratio is subject to customary antidilution adjustments.

In addition, antidilution adjustments are to occur in the event that the Company

issues equity securities, including derivative securities convertible into equity securities (on an as-converted or as-exercised basis),

at a price less than the conversion price then in effect.

The shares of Series B Preferred Stock are also subject to forced conversion

upon the occurrence of a transaction that would result in an internal rate of return to the holders of the Series B Preferred Stock of

25 % or more.

The forced conversion is to be based upon the conversion ratio as last adjusted.

Accrued but unpaid dividends on the Series

B Preferred Stock are to be paid in cash upon any conversion of the Series B Preferred Stock.

holders of Series B Preferred Stock vote together as a single class with the holders of the Company’s common stock on all actions

to be taken by the Company’s stockholders.

Each share of Series B Preferred Stock entitles the holder to approximately 0.03 votes

per share on all matters to be voted on by the stockholders of the Company.

Notwithstanding the foregoing, the holders of Series B Preferred

Stock are afforded numerous customary protective provisions with respect to certain actions that may only be approved by holders of a

majority of the shares of Series B Preferred Stock.

2008, the Company entered into Letter Agreements with Lyles United LLC (“Lyles United”) and other purchasers under which

the Company expressly waived its rights under the Certificate of Designations relating to the Series B Preferred Stock to make dividend

payments in additional shares of Series B Preferred Stock in lieu of cash dividend payments without the prior written consent of Lyles

United and the other purchasers.

Rights Agreement – In connection with the sale of its Series B Preferred Stock, the Company entered into a registration rights

agreement with Lyles United.

The registration rights agreement is effective until the holders of the Series B Preferred Stock, and their

affiliates, as a group, own less than 10 % for each of the series issued, including common stock into which such Series B Preferred Stock

has been converted.

The registration rights agreement provides that holders of a majority of the Series B Preferred Stock, including

common stock into which such Series B Preferred Stock has been converted, may demand and cause the Company to register on their behalf

the shares of common stock issued, issuable or that may be issuable upon conversion of the Preferred Stock and as payment of dividends

thereon, and upon exercise of the related warrants (collectively, the “Registrable Securities”).

The Company is required

to keep such registration statement effective until such time as all of the Registrable Securities are sold or until such holders may

avail themselves of Rule 144 for sales of Registrable Securities without registration under the Securities Act of 1933, as amended.

holders are entitled to two demand registrations on Form S-1 and unlimited demand registrations on Form S-3;

provided, however, that

the Company is not obligated to effect more than one demand registration on Form S-3 in any calendar year.

In addition to the demand

registration rights afforded the holders under the registration rights agreement, the holders are entitled to unlimited “piggyback”

registration rights.

These rights entitle the holders who so elect to be included in registration statements to be filed by the Company

with respect to other registrations of equity securities.

The Company is responsible for all costs of registration, plus reasonable fees

of one legal counsel for the holders, which fees are not to exceed $ 25,000 per registration.

The registration rights agreement includes

customary representations and warranties on the part of both the Company and the holders and other customary terms and conditions.

COMPENSATION.

June 16, 2016, the Company’s shareholders approved the 2016 Stock Incentive Plan, which authorizes the issuance of incentive stock

options and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, direct stock issuances

and other stock-based awards to the Company’s officers, directors or key employees or to consultants that do business with the

Company initially for up to an aggregate of 1,150,000 shares of common stock.

On June 14, 2018, the Company’s shareholders approved

an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 3,650,000 shares.

On November 7, 2019,

the Company’s shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan

to 5,650,000 shares.

On November 18, 2020, the Company’s shareholders approved an increase to the aggregate number of shares authorized

Tennessee 2021 – 2023

Texas 2020 – 2023

However, because the Company had net operating losses and credits carried

forward in several of the jurisdictions, including the United States federal and California jurisdictions, certain items attributable

to closed tax years are still subject to adjustment by applicable taxing authorities through an adjustment to tax attributes carried forward

to open years.

PREFERRED STOCK.

The Company has 6,734,835 undesignated shares of authorized and unissued

preferred stock, which may be designated and issued in the future on the authority of the Company’s Board of Directors.

As of December

31, 2024, the Company had the following designated classes of preferred stock:

Series A Preferred Stock – The Company has authorized

1,684,375 shares of Series A Cumulative Redeemable Convertible Preferred Stock (“Series A Preferred Stock”), with none outstanding

at December 31, 2024 and 2023.

Shares of Series A Preferred Stock that are converted into shares of the Company’s common stock revert

to undesignated shares of authorized and unissued preferred stock.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Upon any issuance, the Series A Preferred Stock would rank senior

in liquidation and dividend preferences to the Company’s common stock.

Holders of Series A Preferred Stock would be entitled to

quarterly cumulative dividends payable in arrears in cash in an amount equal to 5 % per annum of the purchase price per share of the Series

A Preferred Stock.

The holders of the Series A Preferred Stock would have conversion rights initially equivalent to two shares of common

stock for each share of Series A Preferred Stock, subject to customary antidilution adjustments.

Certain specified issuances will not

result in antidilution adjustments.

The shares of Series A Preferred Stock would also be subject to forced conversion upon the occurrence

of a transaction that would result in an internal rate of return to the holders of the Series A Preferred Stock of 25% or more.

but unpaid dividends on the Series A Preferred Stock are to be paid in cash upon any conversion of the Series A Preferred Stock.

The holders of Series A Preferred Stock would have a liquidation preference

over the holders of the Company’s common stock equivalent to the purchase price per share of the Series A Preferred Stock plus

any accrued and unpaid dividends on the Series A Preferred Stock.

A liquidation would be deemed to occur upon the happening of customary

events, including transfer of all or substantially all of the Company’s capital stock or assets or a merger, consolidation, share

exchange, reorganization or other transaction or series of related transactions, unless holders of 66 2/3% of the Series A Preferred

Stock vote affirmatively in favor of or otherwise consent to such transaction.

Series B Preferred Stock – The Company has authorized

1,580,790 shares of Series B Cumulative Convertible Preferred Stock (“Series B Preferred Stock”), with 926,942 shares outstanding

at December 31, 2024 and 2023.

Shares of Series B Preferred Stock that are converted into shares of the Company’s common stock

revert to undesignated shares of authorized and unissued preferred stock.

The Series B Preferred Stock ranks senior in liquidation

and dividend preferences to the Company’s common stock.

Holders of Series B Preferred Stock are entitled to quarterly cumulative

dividends payable in arrears in cash in an amount equal to 7.00 % per annum of the purchase price per share of the Series B Preferred

however, subject to the provisions of the Letter Agreement described below, such dividends may, at the option of the Company,

be paid in additional shares of Series B Preferred Stock based initially on the liquidation value of the Series B Preferred Stock.

addition to the quarterly cumulative dividends, holders of the Series B Preferred Stock are entitled to participate in any common stock

dividends declared by the Company to its common stockholders.

The holders of Series B Preferred Stock have a liquidation preference over

the holders of the Company’s common stock initially equivalent to $ 19.50 per share of the Series B Preferred Stock plus any accrued

and unpaid dividends on the Series B Preferred Stock.

A liquidation will be deemed to occur upon the happening of customary events, including

the transfer of all or substantially all of the capital stock or assets of the Company or a merger, consolidation, share exchange, reorganization

or other transaction or series of related transactions (each, a “transaction”), unless holders of 66 2/3% of the Series B

Preferred Stock vote affirmatively in favor of or otherwise consent that such transaction shall not be treated as a liquidation.

Company believes that such liquidation events are within its control and therefore has classified the Series B Preferred Stock in stockholders’

As of December 31, 2024, the Series B Preferred

Stock was convertible into 980,712 shares of the Company’s common stock.

The conversion ratio is subject to customary antidilution

In addition, antidilution adjustments are to occur in the event that the Company issues equity securities, including derivative

securities convertible into equity securities (on an as-converted or as-exercised basis), at a price less than the conversion price then

The shares of Series B Preferred Stock are also subject to forced conversion upon the occurrence of a transaction that would

result in an internal rate of return to the holders of the Series B Preferred Stock of 25% or more.

The forced conversion is to be based

upon the conversion ratio as last adjusted.

Accrued but unpaid dividends on the Series B Preferred Stock are to be paid in cash upon

any conversion of the Series B Preferred Stock.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The holders of Series B Preferred Stock vote together

as a single class with the holders of the Company’s common stock on all actions to be taken by the Company’s stockholders.

Each share of Series B Preferred Stock entitles the holder to approximately 0.03 votes per share on all matters to be voted on by the

stockholders of the Company.

Notwithstanding the foregoing, the holders of Series B Preferred Stock are afforded numerous customary protective

provisions with respect to certain actions that may only be approved by holders of a majority of the shares of Series B Preferred Stock,

including, among other provisions, the right to approve any transaction that does not result in an internal rate of return of at least

25 % to the holders of the Series B Preferred Stock.

In 2008, the Company entered into Letter Agreements

with Lyles United LLC (“Lyles United”) and other purchasers under which the Company expressly waived its rights under the

Certificate of Designations relating to the Series B Preferred Stock to make dividend payments in additional shares of Series B Preferred

Stock in lieu of cash dividend payments without the prior written consent of Lyles United and the other purchasers.

Registration Rights Agreement –

In connection with the sale of its Series B Preferred Stock, the Company entered into a registration rights agreement with Lyles United.

The registration rights agreement is effective until the holders of the Series B Preferred Stock, and their affiliates, as a group, own

less than 10% for each of the series issued, including common stock into which such Series B Preferred Stock has been converted.

registration rights agreement provides that holders of a majority of the Series B Preferred Stock, including common stock into which

such Series B Preferred Stock has been converted, may demand and cause the Company to register on their behalf the shares of common stock

issued, issuable or that may be issuable upon conversion of the Preferred Stock and as payment of dividends thereon, and upon exercise

of the related warrants (collectively, the “Registrable Securities”).

The Company is required to keep such registration statement

effective until such time as all of the Registrable Securities are sold or until such holders may avail themselves of Rule 144 for sales

of Registrable Securities without registration under the Securities Act of 1933, as amended.

The holders are entitled to two demand registrations

on Form S-1 and unlimited demand registrations on Form S-3;

provided, however, that the Company is not obligated to effect more than

one demand registration on Form S-3 in any calendar year.

In addition to the demand registration rights afforded the holders under the

registration rights agreement, the holders are entitled to unlimited “piggyback” registration rights.

These rights entitle

the holders who so elect to be included in registration statements to be filed by the Company with respect to other registrations of

equity securities.

The Company is responsible for all costs of registration, plus reasonable fees of one legal counsel for the holders,

which fees are not to exceed $ 25,000 per registration.

The registration rights agreement includes customary representations and warranties

on the part of both the Company and the holders and other customary terms and conditions.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

STOCK-BASED COMPENSATION.

On June 16, 2016, the Company’s shareholders approved the 2016

Stock Incentive Plan, which authorizes the issuance of incentive stock options and non-qualified stock options, restricted stock, restricted

stock units, stock appreciation rights, direct stock issuances and other stock-based awards to the Company’s officers, directors

or key employees or to consultants that do business with the Company initially for up to an aggregate of 1,150,000 shares of common stock.

On June 14, 2018, the Company’s shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock

Incentive Plan to 3,650,000 shares.

On November 7, 2019, the Company’s shareholders approved an increase to the aggregate number

of shares authorized under the 2016 Stock Incentive Plan to 5,650,000 shares.

On November 18, 2020, the Company’s shareholders

approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 7,400,000 shares.

2022, the Company’s shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive

Plan to 8,900,000 shares.

On June 22, 2023, the Company’s shareholders approved an increase to the aggregate number of shares authorized

under the 2016 Stock Incentive Plan to 11,400,000 shares.

On June 23, 2022, the Company’s shareholders approved an increase to the

aggregate number of shares authorized under the 2016 Stock Incentive Plan to 8,900,000 shares.

On June 22, 2023, the Company’s

shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 11,400,000 shares.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

Stock – A summary of unvested restricted stock activity is as follows (shares in thousands):

On June 20, 2024, the Company’s shareholders approved an increase to

the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 15,200,000 shares.

Restricted Stock – A summary

of unvested restricted stock activity is as follows (shares in thousands):

Unvested at December 31, 2022

1 unchanged sentence

Unvested at December 31, 2024

fair value of the common stock at vesting aggregated $ 929,000 , $ 6,900,000 and $ 8,810,000 for the years ended December 31, 2023, 2022

and 2021, respectively.

Stock-based compensation expense related to employee and non-employee restricted stock and option grants recognized

in the accompanying consolidated statements of operations, was as follows (in thousands):

Ended December 31,

The fair value of the common stock at vesting aggregated $ 3,142,000 ,

$ 929,000 and $ 6,900,000 for the years ended December 31, 2024, 2023 and 2022, respectively.

Stock-based compensation expense related

to employee and non-employee restricted stock and option grants recognized in the accompanying consolidated statements of operations,

was as follows (in thousands):

Years Ended December 31,

Non-employees

stock-based compensation expense

grants typically have a two or three-year vesting schedule, while non-employee grants have a one-year vesting schedule.

At December 31,

2023, the total compensation expense related to unvested awards which had not been recognized was $ 8,281,000 and the associated weighted-average

period over which the compensation expense attributable to those unvested awards will be recognized was approximately 0.67 years.

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

AND CONTINGENCIES.

– The following is a description of significant commitments at December 31, 2023:

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

of alcohol and essential ingredients.

The Company had open alcohol indexed-price contracts for 102,874,000 gallons as of December 31,

2023 and open fixed-price alcohol sales contracts totaling $ 285,802,000 as of December 31, 2023.

The Company had open fixed-price sales

contracts for essential ingredients totaling $ 6,374,000 and open indexed-price sales contracts of essential ingredients for 85,000 tons

Total stock-based compensation expense

Employee grants typically have a two or three-year vesting schedule,

while non-employee grants have a one-year vesting schedule.

At December 31, 2024, the total compensation expense related to unvested

awards which had not been recognized was $ 3,678,000 and the associated weighted-average period over which the compensation expense attributable

to those unvested awards will be recognized was approximately 0.67 years.

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COMMITMENTS AND CONTINGENCIES.

Commitments – The following is a description of

significant commitments at December 31, 2024:

Sales Commitments – At December 31, 2024, the

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

Company had open alcohol indexed-price contracts for 74,375,000 gallons as of December 31, 2024 and open fixed-price alcohol sales

contracts totaling $ 166,794,000 as of December 31, 2024.

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

$ 5,952,000 and open indexed-price sales contracts of essential ingredients for 47,000 tons as of December 31, 2024.

These sales contracts

are scheduled for completion over the next twelve months.

Purchase Commitments – At December 31, 2024, the

Company had indexed-price purchase contracts to purchase 23,028,000 gallons of alcohol and fixed-price purchase contracts to purchase

$ 220,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts to purchase $ 34,731,000 of corn from its suppliers

as of December 31, 2024.

These sales contracts are scheduled for completion over the next twelve months.

Commitments – At December 31, 2023, the Company had indexed-price purchase contracts to purchase 26,332,000 gallons of alcohol

and fixed-price purchase contracts to purchase $ 1,705,000 of alcohol from its suppliers.

The Company had fixed-price purchase contracts

to purchase $ 30,100,000 of corn from its suppliers as of December 31, 2023.

The Company had fixed-price purchase contracts for natural

gas totaling $ 4,663,000 .

The Company also had future commitments for certain capital projects totaling $ 15,629,000 .

These purchase commitments

are scheduled to be satisfied through 2024.

Contingencies

– The following is a description of significant contingencies at December 31, 2023:

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

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

When the Company is aware of a claim or potential claim,

it assesses the likelihood of any loss or exposure.

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

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

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

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

While the Company can provide no assurances, the Company does not expect that any of its pending legal proceedings will

have a material financial impact on the Company’s operating results.

VALUE MEASUREMENTS.

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

1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities;

2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration

with market data;

3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable.

For fair value measurements using significant unobservable inputs, a description of the inputs and the information used to develop the

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

INGREDIENTS, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

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

mutual funds.

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

Each pooled separate account

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

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

Derivative Instruments – The Company’s other derivative instruments consist of commodity positions.

The fair values of

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

following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2023 (in thousands):

The Company had indexed-price purchase contracts for 2,520,000 MMBTU of natural gas.

The Company had future

commitments for certain capital projects totaling $ 9,059,000 .

The Company also had a future commitment for $ 7,250,000 for the purchase

of Kodiak Carbonic, LLC.

These purchase commitments are scheduled to be satisfied through 2025.

Contingencies – The following is a description

of significant contingencies at December 31, 2024:

Litigation – The Company is subject to various

claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related

matters, and others.

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

it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for

If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the

likelihood of a potential loss is reasonably possible, and the amount involved could be material.

While the Company can provide no assurances,

the Company does not expect that any of its pending legal proceedings will have a material financial impact on the Company’s operating

FAIR VALUE MEASUREMENTS.

The fair value hierarchy prioritizes the inputs used in valuation

techniques into three levels, as follows:

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

assets and liabilities;

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

for the asset or liability through corroboration with market data;

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

one or more significant inputs are unobservable.

For fair value measurements using significant

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

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

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pooled Separate Accounts – Pooled separate accounts

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

The net asset value is used as a practical

expedient to determine fair value for these accounts.

Each pooled separate account provides for redemptions by the Retirement Plan at

reported net asset values per share, with little to no advance notice requirement, therefore these funds are classified within Level

2 of the valuation hierarchy.

Derivative Instruments – The Company’s derivative

instruments consist of commodity positions.

The fair values of the commodity positions are based on quoted prices on the commodity exchanges

and are designated as Level 1 inputs.

Long-Lived Assets – Long-lived assets consist

of the Company’s estimated fair value associated with its Magic Valley facility.

See Note 1 for additional information.

value of the long-lived assets are based on present value of estimated future cash flows and are designated as Level 3 inputs.

The following table summarizes recurring and nonrecurring fair value

measurements by level at December 31, 2024 (in thousands):

financial instruments

Defined benefit plan

assets(1) (pooled separate accounts):

Long-lived assets –

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

Small/Mid U.S.

2 unchanged sentences

financial instruments

following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2022 (in thousands):

financial instruments

Defined benefit plan

assets(1) (pooled separate accounts):

ALTO INGREDIENTS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes recurring and nonrecurring fair value

measurements by level at December 31, 2023 (in thousands):

Derivative financial instruments

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

Small/Mid U.S.

1 unchanged sentence

Fixed Income(5)

financial instruments

Derivative financial instruments

(1) See Note 10 for accounting discussion.

9 unchanged sentences

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

Purchase Agreement dated April 23, 2021 by and among the Registrant, Pacific Ethanol Madera LLC and Seaboard Energy California, LLC

Amendment to Asset Purchase Agreement dated July 30, 2021 by and among the Registrant, Pacific Ethanol Madera LLC and Seaboard Energy

California, LLC

Purchase Agreement dated November 5, 2021 by and among the Registrant, Pacific Ethanol Stockton LLC and Pelican Acquisition LLC

of Incorporation

of Designations, Powers, Preferences and Rights of the Series A Cumulative Redeemable Convertible Preferred Stock

of Designations, Powers, Preferences and Rights of the Series B Cumulative Convertible Preferred Stock

of Amendment to Certificate of Incorporation dated June 3, 2010

of Amendment to Certificate of Incorporation effective June 8, 2011

of Amendment to Certificate of Incorporation effective May 14, 2013

of Amendment to Certificate of Incorporation effective July 1, 2015

SUBSEQUENT EVENTS.

On January 1, 2025, the Company’s wholly-owned subsidiary, Alto

Carbonic, LLC, acquired 100 % of the equity interests in Kodiak Carbonic, LLC, a beverage-grade liquid CO 2 processor for $ 7.6

million in cash.

The transaction also involved an improved, long-term sales contract with a third party for the sale of beverage-grade

liquid CO 2 , which will improve the financial results of the production facility.

Alto Carbonic’s facility is co-located

at the Columbia ethanol facility.

Based on its preliminary assessment, the Company expects to record at fair value $ 3.9 million in property

and equipment and $ 3.7 million of intangible assets related to the long-term sales contract.

The Company does not expect to record any

goodwill with the transaction and plans to report the results of Alto Carbonic in the Company’s Western Production segment.

INDEX TO EXHIBITS

Where Located

Certificate of Incorporation

Certificate of Designations, Powers, Preferences and Rights of the Series A Cumulative Redeemable Convertible Preferred Stock

Certificate of Designations, Powers, Preferences and Rights of the Series B Cumulative Convertible Preferred Stock

Certificate of Amendment to Certificate of Incorporation dated June 3, 2010

Certificate of Amendment to Certificate of Incorporation effective June 8, 2011

Certificate of Amendment to Certificate of Incorporation effective May 14, 2013

Certificate of Amendment to Certificate of Incorporation effective July 1, 2015

Certificate of Amendment to Certificate of Incorporation effective January 12, 2021

Amended and Restated Bylaws

of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

2016 Stock Incentive Plan, as amended#

of Employee Restricted Stock Agreement under 2016 Stock Incentive Plan#

INDEX TO EXHIBITS

of Non-Employee Director Restricted Stock Agreement under 2016 Stock Incentive Plan#

Amended and Restated Executive Employment Agreement dated September 17, 2023 between the Registrant and Bryon T.

and Restated Executive Employment Agreement dated November 7, 2016 between the Registrant and James R.

Amended and Restated Employment Agreement dated September 18, 2023 between the Registrant and Michael D.

Agreement dated February 1, 2022 between the Registrant and Auste M.

Amended and Restated Employment Agreement dated September 17, 2023 between the Registrant and Robert R.

of Indemnity Agreement between the Registrant and each of its Executive Officers and Directors#

for Recoupment of Incentive Compensation dated March 29, 2018#

of Clawback Policy Acknowledgement and Agreement#

Rights Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

Agreement dated May 22, 2008 among the Registrant, Neil M.

Form of Employee Restricted Stock Agreement under 2016 Stock Incentive Plan#

Form of Non-Employee Director Restricted Stock Agreement under 2016 Stock Incentive Plan#

Form of Performance Share Agreement under 2016 Stock Incentive Plan#

Second Amended and Restated Executive Employment Agreement dated September 17, 2023 between the Registrant and Bryon T.

Amended and Restated Executive Employment Agreement dated November 7, 2016 between the Registrant and James R.

Where Located

Second Amended and Restated Employment Agreement dated April 1, 2024 between the Registrant and Todd E.

Employment Agreement dated February 1, 2022 between the Registrant and Auste M.

Second Amended and Restated Employment Agreement dated September 17, 2023 between the Registrant and Robert R.

Form of Indemnity Agreement between the Registrant and each of its Executive Officers and Directors#

Policy for Recoupment of Incentive Compensation dated March 29, 2018#

Form of Clawback Policy Acknowledgement and Agreement#

Registration Rights Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

Letter Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

Letter Agreement dated May 22, 2008 among the Registrant, Neil M.

Koehler, Bill Jones, Paul P.

Koehler and Thomas D.

INDEX TO EXHIBITS

Amended and Restated Credit Agreement dated August 2, 2017 among Kinergy Marketing LLC, Pacific Ag.

Products, LLC, Wells Fargo Bank,

National Association, and the parties thereto from time to time as lenders

Second Amended and Restated Credit Agreement dated August 2, 2017 among Kinergy Marketing LLC, Pacific Ag.

Products, LLC, Wells Fargo Bank, National Association, and the parties thereto from time to time as lenders

Amendment No.

1 to Second Amended and Restated Credit Agreement dated March 27, 2019 by and among Kinergy Marketing LLC, Pacific Ag.

LLC and Wells Fargo Bank, National Association

Products, LLC and Wells Fargo Bank, National Association

Amendment No.

2 to Second Amended and Restated Credit Agreement dated July 31, 2019 by and among Kinergy Marketing LLC, Pacific Ag.

LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

Products, LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

Amendment No.

3 to Second Amended and Restated Credit Agreement dated November 19, 2019 by and among Kinergy Marketing LLC, Pacific Ag.

LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

Consent and Amendment No.

4 to Second Amended and Restated Credit Agreement dated March 8, 2021 by and among Kinergy Marketing LLC,

Alto Nutrients, LLC and Wells Fargo Bank, National Association

Consent, and Amendment No.

5 to Second Amended and Restated Credit Agreement dated June 10, 2021 by and among Kinergy Marketing LLC,

Alto Nutrients, LLC and Wells Fargo Bank, National Association

6 to Second Amended and Restated Credit Agreement dated November 7, 2022 by and among Kinergy Marketing LLC, Alto Nutrients,

LLC and Wells Fargo Bank, National Association

INDEX TO EXHIBITS

Amended and Restated Guarantee dated August 2, 2017 by the Registrant in favor of Wells Fargo Bank, National Association, for and

on behalf of the lenders

Agreement dated November 7, 2022 by and among the Registrant, the subsidiary guarantors signatory thereto, Orion Energy Credit Opportunities

Fund III, L.P., Orion Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P.,

Orion Energy Credit Opportunities Fund III PV, L.P., and OIC Investment Agent, LLC

Products, LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

Where Located

Waiver, Consent and Amendment No.

4 to Second Amended and Restated Credit Agreement dated March 8, 2021 by and among Kinergy Marketing LLC, Alto Nutrients, LLC and Wells Fargo Bank, National Association

Waiver, Consent, and Amendment No.

5 to Second Amended and Restated Credit Agreement dated June 10, 2021 by and among Kinergy Marketing LLC, Alto Nutrients, LLC and Wells Fargo Bank, National Association

Amendment No.

6 to Second Amended and Restated Credit Agreement dated November 7, 2022 by and among Kinergy Marketing LLC, Alto Nutrients, LLC and Wells Fargo Bank, National Association

Second Amended and Restated Guarantee dated August 2, 2017 by the Registrant in favor of Wells Fargo Bank, National Association, for and on behalf of the lenders

Credit Agreement dated November 7, 2022 by and among the Registrant, the subsidiary guarantors signatory thereto, Orion Energy Credit Opportunities Fund III, L.P., Orion Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P., Orion Energy Credit Opportunities Fund III PV, L.P., and OIC Investment Agent, LLC

First Amendment to Credit Agreement dated November 6, 2023 between the Registrant and OIC Investment Agent, LLC

Rights Agreement dated November 7, 2022 by and among Alto Ingredients, Inc., Orion Energy Credit Opportunities Fund III, L.P., Orion

Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P.

and Orion Energy Credit

Opportunities Fund III PV, L.P.

of the Registrant

Second Amendment to Credit Agreement dated November 6, 2024 between the Registrant and OIC Investment Agent, LLC

Consent and Third Amendment to Credit Agreement dated January 1, 2025 between the Registrant and OIC Investment Agent, LLC

Registration Rights Agreement dated November 7, 2022 by and among the Registrant, Orion Energy Credit Opportunities Fund III, L.P., Orion Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P.

and Orion Energy Credit Opportunities Fund III PV, L.P.

CO2 Transportation and Sequestration Agreement dated November 4, 2024 between Alto Pekin, LLC and Vault Dragon CCS Holdings LP

Where Located

Policy Statement on Insider Trading and Other Prohibited Trading Activities

Subsidiaries of the Registrant

Consent of Independent Registered Public Accounting Firm

5 unchanged sentences

Dodd-Frank Clawback Policy

Instance Document

Taxonomy Extension Schema

Taxonomy Extension Calculation Linkbase

Taxonomy Extension Definition Linkbase

Taxonomy Extension Label Linkbase

Taxonomy Extension Presentation Linkbase

Cover Page Interactive

Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

contract, compensatory plan or arrangement to which a director or executive officer is a

party or in which one or more directors or executive officers are eligible to participate.

of the agreements filed as exhibits contain representations and warranties made by the parties

The assertions embodied in such representations and warranties are not necessarily

assertions of fact, but a mechanism for the parties to allocate risk.

Accordingly, investors

should not rely on the representations and warranties as characterizations of the actual

state of facts or for any other purpose at the time they were made or otherwise.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized on this 13th day of March, 2024.

INGREDIENTS, INC.

President and Chief Executive

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

Registrant and in the capacities and on the dates indicated.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema

Inline XBRL Taxonomy Extension Calculation Linkbase

Inline XBRL Taxonomy Extension Definition Linkbase

Inline XBRL Taxonomy Extension Label Linkbase

Inline XBRL Taxonomy Extension Presentation Linkbase

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information

contained in Exhibits 101)

(#) A contract, compensatory plan or arrangement to which a director or executive

officer is a party or in which one or more directors or executive officers are eligible to

(*) Certain of the agreements filed as exhibits contain representations and

warranties made by the parties thereto.

The assertions embodied in such representations and

warranties are not necessarily assertions of fact, but a mechanism for the parties to allocate

Accordingly, investors should not rely on the representations and warranties as characterizations

of the actual state of facts or for any other purpose at the time they were made or otherwise.

Pursuant to the requirements of Section 13 or

15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,

thereunto duly authorized on this 13th day of March, 2025.

ALTO INGREDIENTS, INC.

President and Chief Executive Officer

Pursuant to the requirements of the Securities

Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and

on the dates indicated.

/s/ DOUGLAS L.

Chairman of the Board and Director

March 13, 2025

President and Chief Executive

President, Chief Executive Officer

March 13, 2025

(Principal Executive Officer)

(Principal Executive Officer) and Director

/s/ ROBERT R.

Chief Financial Officer

March 13, 2025

(Principal Financial and Accounting

Acting Chief Operating Officer

(Principal Financial and Accounting Officer)

/s/ MICHAEL D.

March 13, 2025

/s/ GILBERT E.

March 13, 2025

/s/ DIANNE S.

March 13, 2025

1 unchanged sentence

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 9A. Controls and Procedures