What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-09 · 438 added, 325 removed, 290 unchanged (72% of the section changed)

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

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

The following discussion and

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● fluctuations in the market prices of alcohols and essential

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

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

our carbon capture and storage, or CCS, initiative;

● regulatory developments relating to our initiatives and projects or to our business, including our CCS initiative;

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

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

● anticipated trends in our financial condition and results of operations;

● our ability to distinguish ourselves from our current and future competitors.

● fluctuations in the costs of key production input commodities

such as corn and natural gas;

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

our plant improvement initiatives and other capital projects, including our carbon capture and storage, or CCS, initiative;

● regulatory developments relating to our initiatives and projects

or to our business, including our CCS initiative, and the availability of, and our ability to qualify for and receive,

Section 45Z tax credits;

● the projected growth or contraction in the alcohol and essential

ingredients markets in which we operate;

● our strategies for expanding, maintaining or contracting our

presence in these markets;

● anticipated trends in our financial condition and results

of operations;

● our ability to distinguish ourselves from our current and

future competitors.

You are cautioned not to place

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in three distinct segments:

● Pekin production , which includes the production

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

to as our Pekin Campus;

● Marketing and distribution , which includes marketing

and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol

sourced from third parties;

● Western production , which includes the production

and sale of renewable fuels and essential ingredients and, beginning in 2025, liquid CO 2 produced at our western production

facilities, including our liquid CO 2 plant, on an aggregated basis, none of which are individually so significant as to be

considered a separately reportable segment.

● Pekin production , which includes the production and sale of alcohols and essential ingredients produced at our three

production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus;

● Marketing and distribution , which includes marketing and merchant trading for company-produced alcohols and essential

ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties;

● Western production , which includes the production and sale of renewable fuels and essential ingredients and, beginning

in 2025, liquid CO 2 produced at our Western production facilities, including our liquid CO 2 plant, on an aggregated

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

Our mission is to produce the highest quality,

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offering significant timing, product transportation cost and logistical advantages.

All of our production facilities, other than our

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

In January 2024, we temporarily hot-idled our Magic

Valley facility to minimize losses from negative regional crush margins and to expedite the installation of additional equipment to achieve

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

We restarted our Magic

Valley facility in July 2024 and by October 2024, the facility consistently achieved average ethanol production rates at full capacity,

the protein content yield from the plant reached 50% or greater, and we were able to expand our corn oil yields.

Increases in regional

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

of our plant improvements.

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

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

the region sustainably improves.

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

financial results in 2025 compared to 2024.

All of our production

facilities, other than our Magic Valley plant in Idaho, were operating for all of 2024 and 2025, subject to scheduled and

unscheduled downtimes to address facility repair and maintenance.

In January 2024, we

temporarily hot-idled our Magic Valley facility to minimize losses from negative regional crush margins – that is, revenue

from ethanol minus the cost of corn, also referred to as market crush – and to expedite the installation of additional

equipment to achieve the intended production rate, quality and consistency from our corn oil and high protein system at the

We restarted our Magic Valley facility in July 2024 and by October 2024, the facility consistently achieved average

ethanol production rates at full capacity, the protein content yield from the plant reached 50% or greater, and we were able to

expand our corn oil yields.

Increases in regional corn basis and declining market prices for protein and corn oil resulted in

overall margin compression, outweighing the economic benefits of our plant improvements.

As a consequence, we cold-idled our Magic

Valley facility on December 31, 2024 to minimize financial losses.

We continue to provide terminal services at the plant and intend

to resume operations at the facility when the economic environment in the region sustainably improves.

cold-idling of our Magic Valley facility has had a positive impact on our overall financial results in 2025 compared to 2024.

As market conditions change, we may increase, decrease

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

Current Initiatives and Outlook

Our first quarter

results for 2025 improved compared to the same period in 2024, as reflected in part by better gross margin and Adjusted EBITDA.

Adjusted EBITDA improved to negative $4.4 million for the first quarter from negative $7.1 million for the same period in 2024.

Adjusted EBITDA is defined and reconciled against consolidated net loss below.

These results include a savings of $4.8 million due

to the cold-idling of our Magic Valley plant at the end of the fourth quarter.

These results also reflect our operational uptime and

our carbon optimization initiative, which was driven by our acquisition on January 1, 2025 of a beverage-grade liquid CO 2

processing plant adjacent to our Columbia facility.

The combined ownership of our Columbia assets contributed $2.9 million of

improvement to our Adjusted EBITDA for the first quarter and has enabled synergies, allowing for reduced management and staffing

costs while enhancing operational coordination and overall productivity across the combined site.

We continue to optimize these

assets, which should facilitate additional benefits, such as longer-term feed sales commitments and expanded premium liquid

As anticipated, this acquisition improved our Columbia facility’s economics and increased its asset

During the first quarter, we continued our efforts

to rationalize our business and right size our staffing to better align with our current operational footprint.

During the fourth quarter

and into the first quarter, we reduced headcount by a total of 16%.

As a result, we expect to save approximately $8 million annually,

with the financial benefit starting in the second quarter.

We have completed our planned reorganization but will continue to evaluate

opportunities to reduce expenses.

We are prioritizing quick-return projects, including water and energy optimization, that would reduce

utility costs and lower our carbon footprint.

Our Pekin Campus’s results for the first

quarter illustrate our ability to quickly shift production to capitalize on favorable market trends.

For example, to diversify our revenue

streams, we earned International Sustainability and Carbon Certification, or ISCC, in the third quarter and in the fourth quarter began

exporting qualified renewable fuel to European markets.

This certification has enabled us to access higher margin sales compared to domestic

During the first quarter, we experienced solid demand for ISCC certified renewable fuel priced at a premium to domestic fuel-grade

In the first quarter, we also grew ISCC sales as a percentage of our total renewable fuel volume sold from our Pekin Campus.

As a result, ISCC sales partially offset some domestic market challenges.

Premiums on domestic high quality alcohol for the

first quarter were generally lower than in the same period in 2024 due to increased competition in the marketplace.

In addition, prices

for essential ingredients declined as a result of higher industry supply from increased soy crush to support renewable diesel fuel demand.

In late March and early April, we completed our

scheduled seasonal outages at our Pekin Campus facilities.

The repairs and maintenance successfully achieved our goal of sustaining the

improved plant utilization rates set last year following our biennial outage in the second quarter of 2024.

Unfortunately, in early April,

during a period of rapidly rising river levels, our Pekin Campus loadout dock was damaged, negatively impacting production, logistics

and overall Pekin Campus economics.

In response, we implemented temporary solutions and we are now back to full operation.

We are assessing

our long-term remediation options and we are also working with our insurance carrier to mitigate the financial impact of the damage and

the interruption to our business.

Thus far in 2025, we have experienced typical seasonal

market patterns with spreads between corn and ethanol prices comparable year over year.

These crush margins improved sequentially each

month during the first quarter and have further improved in April as a result of lower production rates associated with industry-wide

scheduled springtime plant outages.

Despite these improvements, margin expansion remains largely restrained due to high industry inventory

levels with production outpacing demand.

Absent a meaningful reduction in ethanol supply or a relative increase in demand, substantial

crush spread improvements may be constrained.

Although we remain optimistic that margins will continue to improve with higher demand during

the summer driving season, we have concerns over tariffs and restrictions on Chinese vessels, introducing greater uncertainty

around the export market.

While these factors are largely beyond our control, we will continue our efforts to minimize their impact on

our business.

Nevertheless, as noted above, we have experienced solid exports in the first quarter from our ISCC sales into European markets.

The Environmental

Protection Agency, or EPA, issued a recent E15 fuel waiver allowing higher blending rates for an extended period through May

Although this is a temporary waiver, we expect the EPA to issue new waivers to permit E15 blending through summer.

We are also optimistic that pending national legislation will pass later this year resulting in long-sought after permanent

year-round E15 adoption nationwide.

In addition, there is growing support for E15 adoption in California.

The California Assembly

recently passed a bill aimed at accelerating the approval process for E15 fuel blends.

Moreover, California’s Governor Newsom

has directed the California Air Resources Board to expedite its review, citing potential benefits such as lower gas prices and

reduced emissions.

According to the latest Energy Information Administration reports, California’s 13.4 billion gallons of

annual fuel consumption represents 11.6% of national volume.

A five-percentage point increase in ethanol blending from 10% to 15% in

California alone could result in an additional 670 million gallons sold annually.

Further, national adoption of year-round E15

blending could boost ethanol demand by an estimated 5 to 7 billion gallons.

Since the U.S.

has approximately 18 billion gallons of

ethanol production capacity and domestic demand is approximately 14.4 billion gallons, the national adoption of year-round E15

blending combined with strong exports would utilize, over time, much of the excess production capacity and produce greater margin

Beyond supply and demand considerations, we also believe that year-round E15 adoption would have positive economic and

environmental impacts, such as reducing greenhouse gas emissions, supporting farmers and lowering fuel costs for consumers.

Senate Bill 1723 in Illinois is under consideration

to prevent CO 2 sequestration activity that overlies, underlies or passes through a sole-source aquifer.

This would include

the Mahomet Aquifer, which underlies multiple counties across Illinois including an area currently contemplated for storage in our Class

VI permit application for our CCS initiative.

Together with our CCS partner, Vault 44.01, and other potentially affected parties, we are

working with elected officials to address concerns to minimize or eliminate the potential legal impact of this legislation on our CCS

We are also developing alternatives to ensure that we optimize the value of our CO 2 production despite the outcome

of this legislation, including the potential relocation of our proposed CO 2 storage location.

In addition, we are working with

leaders in Illinois on Senate Bill 41, named the Clean Transportation Standard Act, to develop clean ground transportation standards to

reduce the lifecycle carbon intensity of fuels that are similar to the standards adopted on the West Coast.

We continue to execute our long-term plan to diversify revenue and

mitigate the volatility of commodities.

We have leveraged our plant flexibility and our efforts are working.

New initiatives in beverage-grade

CO 2 and ISCC qualified renewable fuel have been economically beneficial.

Additionally, our efficiency measures have reduced

our expense run rate going forward.

Although the regulatory environment remains dynamic, there are encouraging developments, including

the increasing state and potential national adoption of year-round E15 blending.

Also, as noted above, the Illinois Clean Transportation

Standard Act presents exciting possibilities that could further support industry growth and innovation.

Our team will continue to proactively

evaluate alternatives for new revenue streams and value, leverage our flexible and unique plant assets, and work to drive long-term shareholder

value on a sustainable, consistent basis.

Financial Review, Current Initiatives and Outlook

Although our net loss worsened to $11.0 million

in the second quarter, primarily due to the non-cash effects of hedging activities, our Adjusted EBITDA improved by nearly $6.0 million

compared to the same period in 2024, reflecting the successful execution of our initiatives to increase efficiency and productivity.

quarter-over-quarter improvement in our Adjusted EBITDA reflects the benefit of multiple initiatives.

We improved our operating model

company-wide by rightsizing our corporate overhead to a level that aligns with our current business footprint and we are on track to exceed

our goal of saving approximately $8.0 million on an annualized basis from this initiative.

We will continue to evaluate our options to

improve operational efficiency and throughput, focus on growth in profitable market segments, and identify additional cost-saving opportunities

that, while smaller in amount than from our recent corporate reorganization, should in the aggregate meaningfully affect our long-term

profitability.

In the second quarter, the annual uptick in demand

from the summer driving season helped lift ethanol prices and improve crush spreads.

While it is difficult to predict market fluctuations,

we have seen additional spread improvement in the third quarter, with market crush averaging 30 cents per gallon for July, and we remain

optimistic for positive margins through the remainder of the summer.

Our Western assets turned profitable, improving

gross profit by $5.6 million compared to the prior year’s quarter, driven by our CO 2 facility acquisition at the beginning

of 2025 and other improvements at our Columbia ethanol plant, collectively improving gross profit by $3.0 million, as well as our decision

to cold-idle our Magic Valley facility due to adverse market conditions in the region, which improved gross profit by $2.6 million.

continue to use our Magic Valley facility primarily as a terminal.

Our marketing and distribution business also improved,

reflecting the integration of our bulk volume customers from our Eagle Alcohol business, a fostering of third-party ethanol marketing

relationships that met profitability criteria, and our transition away from business that offered limited returns.

Our Pekin Campus was negatively impacted by quarter-over-quarter

changes in derivatives and the continued impact of damage sustained to our loadout dock in April.

However, we partially offset these effects

by leveraging our operational flexibility by increasing sales of higher-margin International Sustainability and Carbon Certification,

or ISCC, products exported to Europe.

Given our success with these efforts, we continue

to focus on shorter-term projects with more immediate returns to support our path to profitability.

We intend to prioritize projects by

anticipated cost, timing and return on investment.

Projects under consideration include improvements to lower our carbon intensity and

capture more of the Section 45Z benefits available under the Inflation Reduction Act of 2022, expansion of our CO 2 utilization

at our Pekin Campus and at our Colombia facility, building on our success from our Alto Carbonic acquisition, and projects to improve

our prospects to monetize our Western assets.

In addition, as we did in the first and second quarters, we will continue projects to improve

efficiency and productivity.

Year to date, we have recorded $16 million in repairs and maintenance expense, in line with our 2025 estimate of $32 million.

Working with our bankers, we continue to make progress

on our plan to optimize and monetize our Western assets.

We are also evaluating strategic alternatives and interest for our Pekin Campus

and for the company as a whole.

Illinois Senate Bill 1723, which prohibits CO 2

sequestration directly through the Mahomet aquifer, as contemplated in our Class VI permit application with the EPA for our carbon capture

and storage, or CCS, project, was signed into law on August 1, 2025.

We are developing alternatives with Vault 44.01, our CCS partner,

and evaluating other promising, non-sequestration options to optimize the value of our CO 2 production.

The damage sustained by our Pekin Campus loadout

dock in April due to rapidly rising river levels impacted production, logistics and overall economics for most of the second quarter.

Since our last update in May, we have made progress recovering from this setback.

We were able to respond quickly to take interim steps

with third-party river transload vendors which, while more costly, helped minimize business interruption.

In addition, we worked with

our insurance carrier to confirm coverage for both property damage and business interruption.

Finally, we are reviewing remediation plans

with our carrier to ensure the best path forward.

While we expect work to extend into next year, we intend to commence the remediation

project ahead of the Midwest winter.

The One Big Beautiful Bill Act made positive updates

to the Section 45Z regulations, including extending tax credits through the end of 2029 as well as additional spending on farm programs,

that benefit the renewable fuels industry and improve our earnings profile and the intrinsic value of our production facilities.

also increased focus on domestic renewable fuel production and introduced new eligibility restrictions, particularly around foreign involvement.

For example, only fuel derived from feedstocks grown or produced in North America is eligible for the Section 45Z tax credit.

two of our plants, our Columbia plant and our Pekin dry mill, will participate in applying for Section 45Z tax credits.

An additional

benefit of the act is its disincentivizing exports from most dry mills, creating an opportunity for our Pekin Campus wet mill and ICP

distillery to place more of our products into European markets at a premium to domestic market prices.

We intend to pursue additional

options to capitalize on the Section 45Z tax credits, including through improvements to our Colombia plant to increase our anticipated

credit from 10 cents per gallon for 2025, based on our current carbon intensity scores, to up to 20 cents per gallon in 2026.

our Pekin Campus dry mill to qualify for 10 cents per gallon starting in 2026.

These credit amounts, based on nameplate production capacities

and carbon intensity scores, equal up to approximately $4.0 million in 2025 and $8.0 million in 2026 for which our Colombia plant may

be eligible and up to $6.0 million in 2026 for which our Pekin Campus dry mill may be eligible.

We plan to make improvements to our plants

to increase credit amounts across all eligible facilities.

One potential improvement is through low-carbon corn, which, while more expensive,

may be economically beneficial to source that particular feedstock to reduce our carbon footprint.

Through the two other plants at our Pekin Campus,

we will continue to produce higher quality alcohol and also take advantage of ISCC export market premiums for renewable fuel as the new

rules incentivize domestic ethanol sales from Section 45Z eligible dry mills.

The One Big Beautiful Bill Act also seeks to positively

impact farm programs by boosting sector profitability, reducing financial volatility, enhancing asset values and strengthening the overall

industry safety net with the intent to improve operational stability and long-term farm enterprise value.

Also contained in the act is

an increase in USDA commodity reference prices and base acres.

Corn will increase from $3.70 per bushel to $4.10 per bushel and soybeans

will increase from $8.40 per bushel to $10.00 per bushel.

Lastly, an additional 30 million base acres may now enroll in farm programs.

As a result, farmers will need new and expanded markets to absorb the additional production.

We believe these developments bode well for

the future of higher ethanol blends and new uses of American-grown feedstocks, making the U.S.

an even more attractive origin for international

sourcing of ethanol and other renewable fuel products.

The EPA extended E15 blending waivers nationally

for the duration of the summer, offering continued support for near-term domestic ethanol blending.

In California, regulatory momentum

continues to build for E15 blending but full-scale implementation is still pending further administrative review and regulatory updates.

In the second quarter, we finalized our Scope 1

and 2 greenhouse gas verifications and submitted our 2025 EcoVadis scorecard.

Use of Non-GAAP Financial Measures

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

We define EBITDA as unaudited

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

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

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

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

depreciation and amortization expense.

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

expense, interest income, unrealized derivative gains and losses, acquisition-related income and expense, asset impairments,

provision for income taxes and depreciation and amortization expense.

A table is provided below

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

Reconciliation of Adjusted

EBITDA to Consolidated Net Loss

Reconciliation of

Adjusted EBITDA to Consolidated Net Loss

Three Months Ended

Six Months Ended

(in thousands) (unaudited)

Consolidated net loss

Interest expense, net

Interest expense

Interest income

Unrealized derivative gains

Acquisition-related expense

Unrealized derivative losses (gains)

Acquisition-related (income) expense

Depreciation and amortization expense

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impairment of long-lived assets;

allowance for deferred taxes and derivative instruments.

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

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

Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2024.

valuation allowance for deferred taxes and

derivative instruments.

Except as noted below, these significant accounting principles are more fully described in “Management’s

Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our

Annual Report on Form 10-K for the year ended December 31, 2024.

Results of Operations

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Certain performance metrics

that we believe are important indicators of our results of operations:

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

Three Months Ended

Six Months Ended

Alcohol Sales (gallons in millions)

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Marketing and distribution

Average sales price per gallon

Consolidated sales price per gallon

Alcohol Production (gallons in millions)

Western production

Total production gallons

Corn Cost per Bushel

Western production

Average corn cost per bushel

Consolidated cost per bushel

Average Market Metrics

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CME Corn cost per bushel

Board corn crush per gallons (1)

Essential Ingredients Sold (thousand tons)

Pekin Campus:

Board corn crush per gallon (1)

Essential Ingredients Sold (in thousands of tons)

Distillers grains

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Syrup and other

Total Pekin Campus essential ingredients sold

Total Pekin Campus

Western production

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Syrup and other

Total Western production essential ingredients sold

Total Western Production

Total Essential Ingredients Sold

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costs consumed.

Net Sales, Cost of Goods

Sold and Gross Loss

Net Sales, Cost of

Goods Sold and Gross Profit (Loss)

The following table presents

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except percentages):

Three Months Ended June 30,

Six Months Ended June 30,

Cost of goods sold

Gross profit (loss)

Percentage of net sales

The decrease in our consolidated

net sales for the three months ended March 31, 2025 as compared to the same period in 2024 is attributable to fewer total gallons sold

as well as lower volumes and lower average sales prices of essential ingredients due to a lower commodity price environment, partially

offset by an increase in our average sales prices per gallon for both specialty alcohols and renewable fuel.

* Not meaningful

Three Months ended June 30, 2025 as compared to the Three Months

ended June 30, 2024

The decrease in our

consolidated net sales for the three months ended June 30, 2025 as compared to the same period in 2024 is primarily attributable to

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

essential ingredients due to a lower commodity price environment.

In addition, we had lower sales of renewable fuel, specialty

alcohol and essential ingredients due to the cold-idling of our Magic Valley plant at the end of 2024 and logistical constraints at

our Pekin Campus due to a damaged loading dock starting in April 2025.

Pekin Campus Production

Net sales of alcohol from our

Pekin Campus production segment declined by $6.5 million, or 6%, to $94.2 million for the three months ended June 30, 2025 as compared

to $100.7 million for the same period in 2024.

Our total volume of production gallons sold decreased by 2.7 million gallons, or 5%, to

48.1 million gallons for the three months ended June 30, 2025 as compared to 50.8 million gallons for the same period in 2024.

of $0.03, or 2%, in the segment’s average sales price per gallon for the three months ended June 30, 2025 as compared to the same

period in 2024 reduced our net sales from the segment by $1.4 million.

With the segment’s average sales price per gallon of $1.95

for the three months ended June 30, 2025, we generated $5.1 million less in net sales from the 2.7 million fewer gallons of alcohol sold

in the three months ended June 30, 2025 as compared to the same period in 2024.

Net sales of essential ingredients

from our Pekin Campus production segment improved by $0.2 million, or less than 1%, to $39.6 million for the three months ended June

30, 2025 as compared to $39.4 million for the same period in 2024.

Our total volume of essential ingredients sold remained stable at

210,000 tons for the three months ended June 30, 2025 and 2024.

The increase of $0.92, or less than 1%, in the segment’s average

sales price per ton for the three months ended June 30, 2025 as compared to the same period in 2024 increased our net sales from the

segment by $0.2 million.

Marketing and Distribution

Net sales of alcohol from our marketing and distribution

segment, excluding intersegment sales, declined by $12.0 million, or 17%, to $58.2 million for the three months ended June 30, 2025 as

compared to $70.2 million for the same period in 2024.

Our volume of

third-party alcohol sold reported gross by the segment decreased by 4.7 million gallons, or 14%, to 29.7 million gallons for the

three months ended June 30, 2025 as compared to 34.4 million gallons for the same period in 2024.

With the segment’s average

sales price per gallon of $1.96 for the three months ended June 30, 2025, we realized $2.8 million less in net sales from the 4.7

million fewer gallons of third-party alcohol sold gross in the three months ended June 30, 2025 as compared to the same period in

The $0.08 per gallon, or 4%, decrease in the segment’s

average sales price per gallon for the three months ended June 30, 2025 as compared to the same period in 2024 resulted in a $9.2 million

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

Western Production Segment

Net sales of alcohol from our

Western production segment declined by $0.9 million, or 5%, to $16.6 million for the three months ended June 30, 2025 as compared to

$17.5 million for the same period in 2024.

Our total volume of alcohol sold decreased by 0.7 million gallons, or 8%, to 8.3 million gallons

for the three months ended June 30, 2025 as compared to 9.0 million gallons for the same period in 2024.

With the segment’s average

sales price per gallon of $2.00 for the three months ended June 30, 2025, we realized $1.4 million less in net sales from the 0.7 million

fewer gallons of alcohol sold in the three months ended June 30, 2025 as compared to the same period in 2024.

The increase of $0.06,

or 3%, in the segment’s average sales price per gallon for the three months ended June 30, 2025 as compared to the same period

in 2024 increased our net sales from the segment by $0.5 million.

Net sales of essential ingredients

from our Western production segment increased by $2.3 million, or 39%, to $8.2 million for the three months ended June 30, 2025 as compared

to $5.9 million for the same period in 2024.

Our total volume of essential ingredients sold decreased 1,400 tons, or 2%, to 78,400 tons

for the three months ended June 30, 2025 from 79,800 tons for the same period in 2024.

The increase of $30.67, or 41%, in our average

sales price per ton for the three months ended June 30, 2025 as compared to the same period in 2024 increased our net sales of essential

ingredients from the segment by $2.5 million.

With the segment’s average sales price per ton of $105.23 for the three months ended

June 30, 2025, we generated $0.2 million less in net sales from the 1,400 fewer tons of essential ingredients sold in the three months

ended June 30, 2025 as compared to the same period in 2024.

Corporate and other

Net sales of alcohol from corporate

and other declined by $1.1 million, or 40%, to $1.7 million for the three months ended June 30, 2025 as compared to $2.8 million for

the same period in 2024.

These sales are from Eagle Alcohol’s business.

Cost of Goods Sold and Gross Profit (Loss)

Our consolidated gross profit

(loss) declined to a gross loss of $1.9 million for the three months ended June 30, 2025 from gross profit of $7.6 million for the same

period in 2024, representing a gross margin of negative 0.9% and positive 3.2% for the three months ended June 30, 2025 and 2024, respectively.

Our consolidated gross profit declined due to lower

sales and lower gross margins driven by a few key factors.

Our period-over-period change in unrealized non-cash derivatives was negative

$13.2 million and our realized derivative gain was $7.6 million, resulting in a net unfavorable change of $5.6 million compared to the

same period in 2024.

Although crush margins continued to improve during

the second quarter, market crush was on average 10 cents per gallon lower than for the same period in 2024, totaling $5.5 million of lower

crush margin for the second quarter of 2025.

In addition, high quality alcohol premiums were

15 cents per gallon less in the second quarter than for the same period in 2024 due to increased competition during the annual contracting

This premium differential translated to $3.0 million in margin, which we were able to offset by shifting higher volumes into

more profitable ISCC export markets, demonstrating the benefits of our strategy to diversify production to take advantage of market opportunities.

Our essential ingredients return at our Pekin Campus declined to 44.2% but without affecting profitability as we offset the impact with

our effective hedging strategy.

The total adverse impact to gross profit of our

loading dock outage was $2.7 million for the second quarter.

We are working with our insurance carrier to recover losses in excess of

our deductibles.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit, net of intercompany activity, declined by $16.0 million to a gross loss of $5.1 million for the three months ended June 30, 2025

as compared to gross profit of $10.9 million for the same period in 2024.

Of this decline, $16.3 million is attributable to lower alcohol

sales margins, partially offset by $0.3 million attributable to lower sales volumes at negative margins.

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit, net of intercompany activity, increased by $1.0 million to a gross profit of $1.5 million for the three months ended June

30, 2025 as compared to a gross profit of $0.5 million for the same period in 2024.

Of this improvement, $1.3 million is attributable

to higher margins from sales of third-party renewable fuel, partially offset by $0.3 million attributable to lower sales volumes.

Western Production Segment

Our Western production segment’s gross profit,

net of intercompany activity, increased by $5.3 million to a gross profit of $1.6 million for the three months ended June 30, 2025 as

compared to a gross loss of $3.7 million for the same period in 2024.

Of this improvement, $5.4 million is attributable to higher renewable

fuel margins, partially offset by $0.1 million attributable to lower sales volumes.

Corporate and other

Gross profit from corporate

and other increased by $0.2 million to a breakeven gross profit for the three months ended June 30, 2025 as compared to a gross loss

of $0.2 million for the same period in 2024, all of which were from Eagle Alcohol’s business.

Six Months ended June 30, 2025 as compared to the Six Months ended

June 30, 2024

The decrease in our consolidated

net sales for the six months ended June 30, 2025 as compared to the same period in 2024 is primarily attributable to lower sales of renewable

fuel and essential ingredients, partially offset by higher average sales prices per gallon from both our western production and marketing

and distribution segments.

Pekin Campus Production

Net sales of alcohol from our

Pekin Campus production segment declined by $1.2 million, or 1%, to $107.2 million for the three months ended March 31, 2025 as compared

Pekin Campus production segment declined by $7.6 million, or 4%, to $201.4 million for the six months ended June 30, 2025 as compared

to $209.0 million for the same period in 2024.

Our total volume of production gallons sold decreased by 3.2 million gallons, or 3%, to

56.5 million gallons for the three months ended March 31, 2025 as compared to 57.2 million gallons for the same period in 2024.

The segment’s

average sales price per gallon remained flat for the three months ended March 31, 2025 as compared to the same period in 2024.

segment’s average sales price per gallon of $1.90 for the three months ended March 31, 2025, we generated $1.2 million less in net

sales from the 0.7 million fewer gallons of alcohol sold in the three months ended March 31, 2025 as compared to the same period in 2024.

104.7 million gallons for the six months ended June 30, 2025 as compared to 107.9 million gallons for the same period in 2024.

of $0.02, or 1%, in the segment’s average sales price per gallon for the six months ended June 30, 2025 as compared to the same

period in 2024 reduced our net sales from the segment by $1.8 million.

With the segment’s average sales price per gallon of $1.92

for the six months ended June 30, 2025, we generated $5.8 million less in net sales from the 3.2 million fewer gallons of alcohol sold

in the six months ended June 30, 2025 as compared to the same period in 2024.

Net sales of essential ingredients

from our Pekin Campus production segment declined by $2.1 million, or 4%, to $44.6 million for the three months ended March 31, 2025 as

from our Pekin Campus production segment declined by $1.9 million, or 2%, to $84.2 million for the six months ended June 30, 2025 as

compared to $86.1 million for the same period in 2024.

Our total volume of essential ingredients sold increased by 25,300 tons, or 6%,

to 237,900 tons for the three months ended March 31, 2025 from 212,600 tons for the same period in 2024.

to 447,900 tons for the six months ended June 30, 2025 from 422,600 tons for the same period in 2024.

The decrease of $15.74, or 8%,

in the segment’s average sales price per ton for the three months ended March 31, 2025 as compared to the same period in 2024 reduced

in the segment’s average sales price per ton for the six months ended June 30, 2025 as compared to the same period in 2024 reduced

our net sales from the segment by $6.6 million.

With the segment’s average sales price per ton of $187.55 for the three months ended

March 31, 2025, we generated $4.7 million more in net sales from the 25,300 additional tons of essential ingredients sold in the three

months ended March 31, 2025 as compared to the same period in 2024.

With the segment’s average sales price per ton of $187.95 for the six months ended

June 30, 2025, we generated $4.7 million in additional net sales from the 25,300 additional tons of essential ingredients sold in the

six months ended June 30, 2025 as compared to the same period in 2024.

Marketing and Distribution

Net sales of alcohol from our marketing and distribution

segment, excluding intersegment sales, declined by $5.4 million, or 10%, to $49.1 million for the three months ended March 31, 2025 as

segment, excluding intersegment sales, declined by $17.5 million, or 14%, to $107.2 million for the six months ended June 30, 2025 as

compared to $124.7 million for the same period in 2024.

Our volume of third-party alcohol sold reported

gross by the segment declined by 5.3 million gallons, or 18%, to 24.4 million gallons for the three months ended March 31, 2025 as compared

to 29.7 million gallons for the same period in 2024.

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

ended March 31, 2025, we generated $10.6 million less in net sales from the 5.3 million fewer gallons of third-party alcohol sold gross

in the three months ended March 31, 2025 as compared to the same period in 2024.

The $0.18 per gallon, or 10%, increase in the segment’s

average sales price per gallon for the three months ended March 31, 2025 as compared to the same period in 2024 resulted in a $5.2 million

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

Our volume of third-party renewable fuel sold

reported gross by the segment decreased by 10.0 million gallons, or 16%, to 54.1 million gallons for the six months ended June 30, 2025

as compared to 64.1 million gallons for the same period in 2024.

With the segment’s average sales price per gallon of $1.98 for

the six months ended June 30, 2025, we realized $19.8 million less in net sales from the 10.0 million fewer gallons of third-party

renewable fuel sold gross in the six months ended June 30, 2025 as compared to the same period in 2024.

The $0.04 per gallon, or 2%,

increase in the segment’s average sales price per gallon for the six months ended June 30, 2025 as compared to the same period

in 2024 resulted in a $2.3 million increase in our net sales from third-party renewable fuel sold by the segment.

Western Production Segment

Net sales of alcohol from our

Western production segment declined by $4.0 million, or 20%, to $16.2 million for the three months ended March 31, 2025 as compared to

Western production segment declined by $4.9 million, or 13%, to $32.8 million for the six months ended June 30, 2025 as compared to $37.7

million for the same period in 2024.

Our total volume of alcohol sold decreased by 3.6 million gallons, or 18%, to 16.6 million gallons

for the three months ended March 31, 2025 as compared to 11.2 million gallons for the same period in 2024.

for the six months ended June 30, 2025 as compared to 20.2 million gallons for the same period in 2024.

With the segment’s average

sales price per gallon of $1.95 for the three months ended March 31, 2025, we generated $5.6 million less in net sales from the 2.9 million

fewer gallons of alcohol sold in the three months ended March 31, 2025 as compared to the same period in 2024.

However, the increase of

$0.15, or 8%, in the segment’s average sales price per gallon for the three months ended March 31, 2025 as compared to the same

period in 2024 increased our net sales from the segment by $1.6 million.

sales price per gallon of $1.98 for the six months ended June 30, 2025, we generated $7.1 million less in net sales from the 3.6 million

fewer gallons of alcohol sold in the six months ended June 30, 2025 as compared to the same period in 2024.

The increase of $0.12, or

7%, in the segment’s average sales price per gallon for the six months ended June 30, 2025 as compared to the same period in 2024

increased our net sales from the segment by $2.2 million.

Net sales of essential ingredients

from our Western production segment remained flat at $7.8 million for the three months ended March 31, 2025 and 2024.

Our total volume

of essential ingredients sold decreased by 27,900 tons, or 28%, to 72,900 tons for the three months ended March 31, 2025 from 100,800

tons for the same period in 2024.

With the segment’s average sales price per ton of $107.11 for the three months ended March 31,

2025, we generated $2.9 million less in net sales from the 27,900 fewer tons of essential ingredients sold in the three months ended March

31, 2025 as compared to the same period in 2024.

However, the increase of $29.47, or 38%, in our average sales price per ton for the three

months ended March 31, 2025 as compared to the same period in 2024 improved our net sales of essential ingredients from the segment by

$2.9 million.

from our Western production segment increased by $2.3 million, or 17%, to $16.1 million for the six months ended June 30, 2025 as compared

to $13.8 million for the same period in 2024.

Our total volume of essential ingredients sold decreased 29,300 tons, or 16%, to 151,300

tons for the six months ended June 30, 2025 from 180,600 tons for the same period in 2024.

The increase of $29.85, or 39%, in our average

sales price per ton for the six months ended June 30, 2025 as compared to the same period in 2024 increased our net sales of essential

ingredients from the segment by $5.4 million.

With the segment’s average sales price per ton of $106.13 for the six months ended

June 30, 2025, we generated $3.1 million less in net sales from the 29,300 fewer tons of essential ingredients sold in the six months

ended June 30, 2025 as compared to the same period in 2024.

Corporate and other

Net sales of alcohol from corporate

and other declined by $1.4 million, or 47%, to $1.6 million for the three months ended March 31, 2025 as compared to $3.0 million for

the same period in 2024.

and other declined by $2.5 million, or 43%, to $3.3 million for the six months ended June 30, 2025 as compared to $5.8 million for the

same period in 2024.

These sales are from Eagle Alcohol’s business.

Cost of Goods Sold and Gross Loss

Our consolidated gross

loss improved to a gross loss of $1.8 million for the three months ended March 31, 2025 from a gross loss of $2.4 million for the

same period in 2024, representing a gross margin of negative 0.8% and 1.0% for the three months ended March 31, 2025 and 2024,

respectively.

Our gross loss and gross margin improved due to multiple factors, including the cold-idling of our Magic Valley

facility, which reduced cost of goods sold by $10.0 million including cost savings of $4.8 million, over $1.0 million in lower

repairs and maintenance expenses, premium liquid CO 2 sales from our newly acquired Alto Carbonic processing facility and

other synergistic benefits totaling $2.9 million at our Columbia facility, and a $1.4 million benefit from ISCC certified renewable

fuel exports priced at a premium to domestic fuel-grade ethanol, all of which were partially offset by $4.6 million in lower

premiums for high quality alcohol, $3.8 million associated with lower returns on our essential ingredients, predominately from our

Pekin Campus, and $1.6 million less in unrealized gains on derivatives compared to the prior year’s quarter.

For the first

quarter, we recorded $7.0 million in repairs and maintenance expense, in line with our full-year 2025 estimate of $32 million.

Cost of Goods Sold and Gross Profit (Loss)

Our consolidated gross profit declined to a gross

loss of $3.7 million for the six months ended June 30, 2025 from gross profit of $5.2 million for the same period in 2024, representing

a gross margin of negative 0.8% and positive 1.1% for the six months ended June 30, 2025 and 2024, respectively.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit, net of intercompany activity, declined by $7.3 million to a gross loss of $2.2 million for the three months ended March 31, 2025

as compared to a gross profit of $5.1 million for the same period in 2024.

All of this decline is attributable to lower ethanol margins.

profit, net of intercompany activity, declined by $23.5 million to a gross loss of $7.8 million for the six months ended June 30, 2025

as compared to gross profit of $15.7 million for the same period in 2024.

Of this decline, $23.8 million is attributable to lower alcohol

sales margins, partially offset by $0.3 million attributable to lower sales volumes.

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit, net of intercompany activity, improved by $1.1 million to a gross profit of $1.7 million for the three months ended March

gross profit, net of intercompany activity, improved by $2.4 million to a gross profit of $3.8 million for the six months ended June

30, 2025 as compared to a gross profit of $1.4 million for the same period in 2024.

Of this improvement $3.1 million is attributable

to higher margins from sales of third-party fuel-grade ethanol, partially offset by $0.4 million attributable to lower sales volumes for

the three months ended March 31, 2025 as compared to the same period in 2024.

primarily to higher margins from sales of third-party renewable fuel, partially offset by $0.7 million from lower sales volumes for the

six months ended June 30, 2025 as compared to the same period in 2024.

Western Production Segment

Our Western production

segment’s gross profit, net of intercompany activity, improved by $7.1 million to a gross loss of $1.3 million for the three

months ended March 31, 2025 as compared to a gross loss of $8.4 million for the same period in 2024.

Of this improvement, $6.7

million is attributable to improved renewable fuel margins and $0.4 million is attributable to lower sales volumes at negative

margins of both renewable fuel and essential ingredients, both of which are primarily due to the cold-idling of our Magic Valley

Our Western production segment’s

gross profit, net of intercompany activity, improved by $12.4 million to a gross profit of $0.4 million for the six months ended June

30, 2025 as compared to a gross loss of $12.0 million for the same period in 2024.

Of this improvement, $12.5 million is attributable

to higher renewable fuel margins and increased CO 2 sales, partially offset by $0.1 million attributable to lower sales volumes.

Corporate and other

Gross profit from corporate

and other declined by $0.4 million to a gross loss of less than $0.1 million for the three months ended March 31, 2025 as compared to

a gross profit of $0.3 million for the same period in 2024, all of which were from Eagle Alcohol’s business.

and other declined by $0.2 million to a gross loss of $0.1 million for the six months ended June 30, 2025 as compared to gross profit

of $0.1 million for the same period in 2024, all of which were from Eagle Alcohol’s business.

Selling, General and

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

Three Months Ended

Six Months Ended

Selling, general and administrative expenses

Percentage of net sales

Our SG&A expenses decreased $0.7 million for

the three months ended March 31, 2025 as compared to the same period in 2024.

The reduction in SG&A expenses primarily reflects the conclusion of our acquisition-related

expenses for our acquisition of Eagle Alcohol.

Interest Expense, net

The following table presents

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

Interest expense, net

Percentage of net sales

Our interest expense,

net, increased for the three months ended March 31, 2025 as compared to the same period in 2024, primarily due to higher average

debt balances and higher average interest rates compared to the prior year period.

Our SG&A expenses

declined for the three and six months ended June 30, 2025 as compared to the same periods in 2024.

The period over period decreases

in SG&A expenses are primarily due to a $1.1 million reduction in acquisition-related expenses for our acquisition of Eagle

Alcohol, a $0.9 million decrease in compensation expenses from our efforts to rationalize our business and right size our staffing

to better align with our current operational footprint and a $0.9 million reduction in non-cash stock compensation.

exceeding our target annualized overhead savings of $8.0 million.

We also took additional steps to further lower our future costs,

including, for example, negotiating lower property taxes, improving terms with suppliers, reducing reliance on outside services and

other changes which we expect, in aggregate, will make a meaningful difference to our future profitability.

Net Loss Attributable

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our net loss attributable to common stockholders in dollars and as a percentage of net sales (in thousands, except percentages):

Three Months Ended

Six Months Ended

Net loss attributable to common stockholders

Percentage of net sales

The slight decrease in net loss attributable to common stockholders

is primarily due to lower SG&A expenses and lower net sales at negative margins as well as the other factors affecting gross profit

discussed above, partially offset by lower premiums for high quality alcohol, lower unrealized gains on derivatives and higher interest

expense, as also discussed above.

The increase in our net

loss attributable to common stockholders for the three and six months ended June 30, 2025 as compared to the same periods in 2024 is

primarily due to higher unrealized non-cash derivative losses, lower crush margins, lower high quality alcohol premiums and the impact of our loading dock outage, as discussed above.

Liquidity and Capital Resources

During the three months

ended March 31, 2025, we funded our operations primarily from cash on hand and proceeds from Kinergy’s operating line of

In addition to funding our operations, our capital resources were used to purchase Kodiak Carbonic and for capital

expenditures.

As of March 31, 2025, we had $27.2 million in cash, cash equivalents and restricted cash, $11.7 million available for

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

under our Orion term loan, subject to certain conditions.

During the six months ended June 30, 2025, we

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

In addition to funding

our operations, our capital resources were used to purchase Kodiak Carbonic, make our final payments relating to our acquisition of Eagle

Alcohol and for capital expenditures.

As of June 30, 2025, we had $30.5 million in cash, cash equivalents and restricted cash, $4.8 million

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

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

As of June 30, 2025, our derivative net asset position was $1.7 million.

We believe we have sufficient liquidity to meet our anticipated working

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

Quantitative Year-End Liquidity

Quantitative Period-End

Liquidity Status

We believe that the following

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The following selected financial information should be read in conjunction

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

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

report (dollars in thousands).

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

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

in this report (dollars in thousands).

Cash, cash equivalents and restricted cash

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Restricted Net Assets

At March 31, 2025, we had approximately $55.6 million

At June 30, 2025, we had approximately $49.5 million

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

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Changes in Working Capital and Cash Flows

Working capital improved to $100.3 million at March

31, 2025 from $95.3 million at December 31, 2024 as a result of a decrease of $4.7 million in current liabilities and an increase of $0.3

million in current assets.

Current assets increased primarily due to an increase

in accounts receivable, inventories, other current assets and derivative instruments, partially offset by a decrease in cash and cash

equivalents and restricted cash.

Our current liabilities decreased primarily due

to lower accounts payable and accrued liabilities as a result of timing of payments, and a decrease in derivative liabilities from changes

in commodity prices for open contracts.

Our cash, cash equivalents and restricted cash

declined by $9.0 million due to $18.2 million in cash used in our operating activities and $7.8 million used in our investing activities,

partially offset by $17.0 million in cash provided by our financing activities.

Working capital improved to $107.2 million at

June 30, 2025 from $95.3 million at December 31, 2024 as a result of a decrease of $15.3 million in current liabilities, partially offset

by a decrease of $3.4 million in current assets.

Current assets decreased primarily due to a decrease

in cash and cash equivalents and restricted cash, partially offset by an increase in inventories from December 31, 2024.

Our current liabilities

decreased primarily due to lower accounts payable and accrued liabilities as a result of the timing of payments, and a decrease in

other current liabilities as we paid the remaining purchase price for our acquisition of Eagle Alcohol.

Our cash, cash

equivalents and restricted cash declined by $5.7 million due to $19.1 million in cash used in our operating activities and $10.5

million in cash used in our investing activities, partially offset by $23.9 million in cash provided by our financing

Cash used in our Operating Activities

We used $19.1 million of cash in our operations

for the three months ended March 31, 2025 as compared to $1.4 million of cash provided by our operations for the same period in 2024.

Significant factors that contributed to the change in cash provided by our operating activities include:

● a decrease of $11.1 million related to lower inventories due

to reduced production volumes and the timing of sales;

● a decrease of $7.7 million related to accounts receivable balances

due to the timing of collections;

● a decrease of $1.7 million related to other assets, primarily due to the timing of payments on prepaid assets;

● an increase of $1.4 million related to accounts payable and accrued expenses due to the timing of payments.

for the six months ended June 30, 2025 as compared to $12.3 million for the same period in 2024.

Significant factors that contributed

to the change in cash provided by our operating activities include:

● a decrease of $12.5

million related to lower inventories due to reduced production volumes and the timing of

● an increase of $7.8

million in net loss due to lower margins;

● a decrease of $1.5

million related to other assets, primarily due to the timing of payments on prepaid assets.

These amounts were partially offset by:

● an increase of $1.6 million related to period-end commodity prices applicable to our derivative instruments.

● an increase of $7.2

million related to period-end commodity prices applicable to our derivative instruments;

● an increase of $5.8

million related to changes in accounts receivable balances due to the timing of our collections.

Cash used in our Investing Activities

We used $7.8 million in cash during the quarter

for the acquisition of Kodiak Carbonic and other capital expenditures.

We used a total of $10.5

million in cash during the period for our acquisition of Kodiak Carbonic, the final payment for our acquisition of Eagle Alcohol and

various capital expenditures.

During the second quarter, we used $0.5 million for capital expenditures, an amount much lower than

historical averages to manage liquidity and focus on our priorities.

Cash provided by our Financing Activities

Cash provided by our financing activities was

million for the three months ended March 31, 2025, which reflects net proceeds of $17.3 million from Kinergy’s operating line of

credit, partially offset by $0.3 million in preferred stock dividends paid.

$23.9 million for the six months ended June 30, 2025, which reflects net proceeds of $24.5 million from Kinergy’s operating line

of credit, partially offset by $0.6 million in preferred stock dividends paid.

Kinergy’s Operating Line of Credit

Kinergy maintains an operating line of credit for

an aggregate amount of up to $100.0 million.

Kinergy maintains an operating line of credit

for an aggregate amount of up to $100.0 million.

The credit facility matures on November 7, 2027.

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

to Kinergy are limited under the terms of the

credit facility to $1.5 million per fiscal quarter.

to Kinergy are limited under the terms of

the credit facility to $1.5 million per fiscal quarter.

The credit facility also includes the accounts receivable of our indirect wholly-owned

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

Three Months Ended

Fixed-Charge Coverage Ratio Requirement

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

As of March 31, 2025, Kinergy had an outstanding balance of $57.0

As of June 30, 2025, Kinergy had an outstanding balance of $64.2

million and $4.8 million of unused borrowing availability under the credit facility.

Orion Term Loan

On November 7, 2022, we entered

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

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

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

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

Interest accrues on the unpaid principal amount

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

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

On November 7, 2022, we

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

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

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

upon acceleration.

The Term Loan is secured by a first priority lien on certain of our assets and a second priority lien on certain assets

of Kinergy and Alto Nutrients.

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

We must prepay amounts outstanding

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of our excess cash flow based on a specified leverage ratio, as follows:

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

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

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

than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.

No prepayment was made or required to be made

for the three months ended March 31, 2025 and 2024.

As of March 31, 2025 and

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

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

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

less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.

No prepayment was made or required to be

made for the three and six months ended June 30, 2025 and 2024.

As of June 30, 2025 and

December 31, 2024, the principal amount outstanding under the Term Loan was $60.0 million.

Other Cash Obligations

As of March 31, 2025, we had

As of June 30, 2025, we had

future commitments for certain capital projects totaling $11.5 million.

These commitments are scheduled to be satisfied in 2025.

In connection with our acquisition

of Eagle Alcohol, contingent payments of up to $2.7 million in cash and 948,932 shares of common stock

are contractually scheduled for the first half of 2025, all of which were accrued for in 2024.

These commitments are scheduled to be satisfied through 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis