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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 280 added, 457 removed, 112 unchanged (87% of the section changed)

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and

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

statements included elsewhere in this report.

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

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

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

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

The forward-looking statements and

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

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

The following discussion and analysis should be read in conjunction with our condensed consolidated financial statements and notes to condensed consolidated financial statements included elsewhere in this report.

This report and our condensed consolidated financial statements and notes to condensed consolidated financial statements contain forward-looking statements, which generally include the plans and objectives of management for future operations, including plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate and profits we might earn if we are successful in implementing our business and growth strategies, and statements of the assumptions underlying or relating to any of the foregoing.

The forward-looking statements and associated risks may include, relate to or be qualified by other important factors, including:

● fluctuations in the market prices of alcohols and essential ingredients;

2 unchanged sentences

● regulatory developments relating to our initiatives and projects or to our business;

● our ability to qualify for and receive Section 45Z clean fuel production tax credits under the Internal Revenue Code, as added by

the Inflation Reduction Act of 2022, including in anticipated amounts and at the expected times;

● our ability to qualify for and receive Section 45Z clean fuel production tax credits under the Internal Revenue Code, as added by the Inflation Reduction Act of 2022 and amended by the One Big Beautiful Bill Act, including in anticipated amounts and at the expected times;

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

2 unchanged sentences

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

You are cautioned not to place

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

by reference, as of the date of that document.

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

as required by law.

Any of the factors described

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

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

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

We are a leading producer and distributor of specialty

alcohols, renewable fuels and essential ingredients in the United States.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the case of a document incorporated by reference, as of the date of that document.

We do not undertake to update, revise or correct any forward-looking statements, except as required by law.

Any of the factors described immediately above or referenced from time to time in our filings with the Securities and Exchange Commission or in the “Risk Factors” section below could cause our financial results, including our net income or loss or growth in net income or loss, to differ materially from prior results, which in turn could, among other things, cause the price of our common stock to fluctuate substantially.

We are a leading producer and distributor of specialty alcohols, renewable fuels and essential ingredients in the United States.

We operate five alcohol production facilities.

Three of our production facilities are located in Illinois, one is located in Oregon, and another is located in Idaho.

We have an annual

alcohol production capacity of 330 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-,

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

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

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

We market and distribute

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

In 2025, we marketed and distributed approximately

350 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.2 million

tons of essential ingredients.

We also own and operate a liquid carbon dioxide,

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

to liquid CO 2 and subsequent sale.

We have an annual alcohol production capacity of 330 million gallons, including both renewable fuels and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols.

Of this amount, we can produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and other quality specification alcohols.

We market and distribute all of the alcohols produced at our facilities as well as alcohols produced by third parties.

In 2025, we marketed and distributed approximately 350 million gallons combined of our own produced alcohols as well as fuel-grade ethanol produced by third parties, and over 1.2 million tons of essential ingredients.

We also own and operate a liquid carbon dioxide, or CO 2 , production facility adjacent to our plant in Oregon for the offtake of CO 2 gas from the plant for conversion to liquid CO 2 and subsequent sale.

In addition, we break bulk and distribute specialty alcohols produced by us and third parties.

We report our financial and operating performance

in three distinct segments:

● Pekin production , which includes the production and sale of alcohols and other products we refer to as “essential

ingredients” described below, produced at our three production facilities located in Pekin, Illinois, which we refer to as our Pekin

● 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 produced at

our production facilities located in Burley, Idaho and Boardman, Oregon, including our liquid CO 2 plant, on an aggregated basis,

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

Our mission is to produce the highest quality,

sustainable ingredients that make everyday products better.

We intend to accomplish this goal in part by investing in our specialized

and higher value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients,

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

and by capturing a greater portion of the value stream.

We report our financial and operating performance in three distinct segments:

● Pekin production , which includes the production and sale of alcohols and other products we refer to as “essential ingredients” described below, 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 produced at our production facilities located in Burley, Idaho and Boardman, Oregon, including our liquid CO 2 plant, on an aggregated basis, none of which is individually so significant as to be considered a separately reportable segment.

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

We intend to accomplish this goal in part by investing in our specialized and higher-value specialty alcohol production and distribution infrastructure, expanding production in high-demand essential ingredients, expanding and extending the sale of our products into new regional and international markets, building efficiencies and economies of scale and by capturing a greater portion of the value stream.

Production Segments

We produce specialty alcohols, renewable fuels

and essential ingredients, focusing on five key markets:

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

Health, Home & Beauty ;

Food & Beverage ;

Agriculture ;

Industry & Agriculture ;

Essential Ingredients ;

and Renewable Fuels .

Products for Health, Home & Beauty markets include

specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners.

Products for Food &

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

for Industry & Agriculture markets include alcohols and other products for paint applications, inks, vehicle fluids and fertilizers.

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

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

We also sell yeast and gas and liquid CO 2

for human consumption.

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

a feedstock for renewable diesel and biodiesel fuels.

Our specialty alcohols for the Industry & Agriculture, Food & Beverage

and Health, Home & Beauty markets represented approximately 11%, 6% and 2%, respectively, of our sales in 2025 to customers

in these three markets.

We produce our alcohols and essential ingredients

at our facilities described above.

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

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

markets via truck, rail or barge.

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

offering significant timing, product transportation cost and logistical advantages.

All of our production facilities, other than our

Magic Valley plant, were operating for all of 2025, other than for scheduled and unscheduled downtimes to address facility repair and

Our Magic Valley facility remained cold-idled for

all of 2025, the first quarter of 2026 and through the filing of this report to minimize financial losses.

We continue to provide ethanol

terminaling services at the plant and may resume operations at the facility if the economic environment in the region sustainably improves.

As market conditions change, we may increase, decrease

or idle production at one or more operating facilities or resume operations at any idled facility.

Products for Health, Home & Beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners.

Products for 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, inks, vehicle fluids and fertilizers.

Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, distillers grains, gas and liquid CO 2 and liquid feed used in commercial animal feed and pet foods.

We also sell yeast, and gas and liquid CO 2 for human consumption.

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

Our specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented approximately 11%, 6% and 2%, respectively, of our sales in 2025 to customers in these three markets.

We produce our alcohols and essential ingredients at our facilities described above.

Our production facilities located in Illinois are in the heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic and international markets via truck, rail or barge.

Our production facilities located in Oregon and Idaho are near their respective fuel and feed customers, offering significant timing, product transportation cost and logistical advantages.

All of our production facilities, other than our Magic Valley plant, were operating for all of 2025, other than for scheduled and unscheduled downtimes to address facility repair and maintenance.

Our Magic Valley facility remained cold-idled for all of 2025, the first quarter of 2026 and through the filing of this report to minimize financial losses.

We continue to provide ethanol terminaling services at the plant and may resume operations at the facility if the economic environment in the region sustainably improves.

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

Marketing and Distribution Segment

We market and distribute all the alcohols and essential

ingredients we produce at our facilities.

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

We also market and distribute alcohols produced by third parties.

We have extensive and long-standing customer relationships,

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

These customers include producers

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

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

Our renewable fuels customers are located throughout

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

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

These customers include producers and distributors of ingredients for cosmetics, sanitizers and related products, distilled spirits producers, food products manufacturers, producers of personal health/consumer health and personal care hygiene products, and global trading firms.

Our renewable fuels customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and gasoline marketers who blend fuel-grade ethanol into gasoline.

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

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

We secure additional

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

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

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

from a variety of sources.

We market food-grade essential ingredients to human

and pet food markets, our feed products (such as distillers grains) primarily to export markets from our Pekin Campus, and other feed

products to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock

as a substitute for corn and other sources of starch and protein.

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

We arrange for transportation, storage and delivery of fuel-grade ethanol purchased by our customers through our agreements with third-party service providers in the Western United States as well as in the Midwest from a variety of sources.

We market food-grade essential ingredients to human and pet food markets, our feed products (such as distillers grains) primarily to export markets from our Pekin Campus, and other feed products to dairies and feedlots, in many cases located near our production facilities.

These customers use our feed products for livestock as a substitute for corn and other sources of starch and protein.

We sell our corn oil to poultry, renewable diesel and biodiesel customers.

See “Note 2 – Segments” to our

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

Current Initiatives and Outlook

The first quarter is a seasonally weak period for

us and for the ethanol industry, reflecting the build-up of inventories and lower demand following the winter months.

In contrast, our

first quarter 2026 results were strong relative to our historical performance for this period.

We generated profitability on both an adjusted

EBITDA and net income basis, supported by higher crush margins, an improved product mix that emphasized higher-value renewable fuel export

sales and incremental earnings from transferrable Section 45Z clean fuel production tax credits.

Importantly, even without the contribution

from Section 45Z tax credits, our operations were profitable in the quarter.

We believe these results demonstrate the benefits of our

strategic realignment, operational improvements, and continued success in capturing premiums over domestic renewable fuel.

We remain focused on maximizing value from our

diversified portfolio of assets and on pursuing multiple revenue opportunities in response to market demand.

Our priorities are to improve

utilization and reliability across our platform, execute our 2026 optimization and capital projects on time and within budget, and advance

our commercial strategy, including expanding the value we capture from Section 45Z tax credits and optimally monetizing the value of our

biogenic CO 2 production across our facilities to lower our carbon footprint.

During the first quarter of 2026, unusually cold

weather in the first half of the quarter disrupted river logistics and led us to curtail production at our Pekin Campus.

unplanned downtime to accelerate a portion of our planned wet mill biennial outage work that had originally been scheduled for the second

This will allow us to recapture some of the lost production later in the year when crush margins are typically stronger and help

us stay on track toward our goal of increasing total 2026 alcohol volumes and prioritizing product mix that delivers premiums to domestic

renewable fuel.

We also executed a planned outage at our Columbia

facility during what is typically a seasonally slower quarter for liquid CO 2 sales.

Combined with an outage taken in December

2025, this work addressed certain deferred process-related activities intended to improve production performance and plant reliability

for the remainder of 2026.

These efforts are designed to help ensure our Columbia plant can run at optimal rates to support the growing

needs of our CO 2 offtake customers during the higher-demand summer months and to enable us to qualify additional gallons for

Section 45Z tax credits.

We are planning a normal outage at our ICP facility in the second quarter, consistent with 2025.

At our Pekin Campus, we began both the repairs

on our original loading dock and the construction of a second loadout dock.

As previously discussed, the second dock is intended to provide

redundancy and enhance our logistical capabilities.

We are currently on track to complete both projects by the end of 2026.

Once the original

dock is restored and the second dock is in service, we expect to reduce bottlenecks and increase loadout capacity.

We also commenced a project to increase throughput

and storage capacity at our Columbia liquid CO 2 processing facility by adding a third storage tank.

We believe this project

will position us to further capitalize on favorable liquid CO 2 market conditions, particularly the growing demand in the Pacific

Northwest and limited supply of premium liquid CO 2 in the region.

Combined with the process improvements described above, this

investment is intended to enhance our ability to serve existing customers, support incremental volumes and monetize more of the CO 2

produced at our Columbia plant.

At our Pekin dry mill, which is our most efficient

ethanol plant, we are moving the planned outage from the third quarter into June.

During this downtime, we expect to complete a debottlenecking

project designed to increase annual production capacity by approximately 8%, or about 5 million gallons.

We expect to fully realize the

benefits of these improved production rates in the fourth quarter of 2026.

If successful, this project should provide incremental margin

and allow us to qualify additional volumes for Section 45Z tax credits.

In addition to the capital projects already underway

or planned for 2026, we continue to evaluate large-scale CO 2 utilization and sequestration opportunities at our Pekin Campus.

These potential projects are intended to lower our facilities’ carbon intensity scores and provide additional earnings opportunities

through Section 45Z tax credits and higher-value liquid CO 2 sales.

With respect to Section 45Z transferable tax credits

for 2026, we expect to qualify approximately 90 million gallons of combined annual production at our Columbia and Pekin dry mill facilities

at $0.20 per gallon, which would result in approximately $15 million of net proceeds after estimated monetization costs.

For the first

quarter of 2026, we recorded $3.9 million in Section 45Z credit earnings.

The sale of all of our 2025 Section 45Z credits is underway

at values consistent with previously recorded estimates, and we currently expect to complete that transaction in the second quarter of

We are working to qualify additional gallons and further reduce our carbon intensity scores in order to capture more of the Section

45Z benefits in future periods.

As we manage liquidity and continue to focus on

our priorities, we remain disciplined in our capital allocation.

We expect to spend approximately $25 million on capital expenditures

in 2026, primarily on maintenance and optimization projects with the highest projected returns.

Capital expenditures in the first quarter

of 2026 were approximately $1 million, with the majority of spending planned over the remaining three quarters as our 2026 projects progress.

We also repaid $16.6 million of term debt in the first quarter, as planned, and ended the quarter with $38.4 million outstanding on our

With a lower debt balance, interest expense decreased compared to the prior-year quarter, reflecting our focus on minimizing

idle cash, maintaining ample borrowing availability and reducing our interest burden.

We are closely monitoring macroeconomic and geopolitical

developments, including unrest in the Middle East, which can indirectly affect our business through energy and commodity price volatility,

as well as freight and export logistics.

We seek to actively manage these exposures through our commercial strategy, hedging activities

and operational flexibility.

We are also encouraged by continued progress on E15.

In California, Assembly Bill 30 has provided a pathway

for year-round E15 sales, and we are monitoring the state’s implementation process.

At the federal level, momentum in Congress for

legislation allowing year-round E15 continues to build.

We view expanded E15 access as an important demand-side complement to production

incentives such as Section 45Z because it can help ensure the market is able to absorb additional low-carbon renewable fuel gallons over

Without corresponding demand growth, production incentives alone could contribute to industry overproduction and margin pressure.

Overall, we believe our first quarter 2026 results

demonstrate that our operating model—focusing on improving margins through higher-value revenue opportunities and disciplined cost

management—is working.

With multiple product streams, we have the flexibility to respond quickly as markets shift and we are continuing

to strengthen our ability to perform through commodity cycles.

We intend to continue executing on our 2026 optimization and capital projects,

improving utilization and reliability across our asset base, and advancing our commercial strategy, including expanding the value we capture

from Section 45Z credits and further monetizing our biogenic CO 2 production across our facilities.

We remain committed to further

enhancing shareholder value over both the near- and longer-term.

See “Note 2 – Segments” to our Notes to Condensed Consolidated Financial Statements included elsewhere in this report for financial information about our business segments.

Financial Review, Current Initiatives and Outlook

The second quarter represents our fourth consecutive quarter of positive gross profit, income from operations, net income and Adjusted EBITDA.

We have been consistently profitable during this period even without the contributions from Section 45Z clean fuel production tax credits.

Our results demonstrate the strength of our diversified operating model, which gives us the flexibility to shift production toward the most attractive end-markets and capture premium-value opportunities.

We remain focused on disciplined execution of our strategic plan and unlocking additional value across our asset portfolio.

Our trailing 12-month results are also a testament to our efforts to drive profitability, maximize the value of our asset base, and make smart decisions around capital allocations, including purchasing our Alto Carbonic business and investing in projects to optimize our dry mill and reduce the carbon intensity of our production.

For the second quarter, our results also reflect strong domestic demand and improved essential ingredient values compared to the same period last year.

The second quarter’s market crush margins improved significantly to $0.33 per gallon from $0.11 per gallon in the same period last year.

This increase was driven by robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages.

As a result, ethanol prices improved during the quarter, supported by strong Renewable Volume Obligation, or RVO, blending requirements.

Meanwhile, favorable crop conditions and larger projected grain supplies contributed to lower corn costs, boosting margins.

Second quarter crush margins were not only significantly higher than those in the same period last year but were also strong by historical standards.

Third quarter margins thus far, which in the past have marked the annual peak, continue to be healthy and profitable.

While European demand remained robust, ongoing geopolitical disruptions in the Middle East negatively impacted renewable fuel export economics from the United States during the second quarter.

Higher freight costs and reduced certainty of vessel availability to transport renewable fuel from the Gulf Coast compressed the U.S.-to-Europe trade arbitrage, increasing the competitiveness of Brazilian exports to Europe.

As a result, we reduced our renewable fuel export volumes compared to the second quarter of last year but still generated higher overall revenue from export volumes for the quarter due to higher premiums to domestic renewable fuel compared to the second quarter of last year.

Given the strength of domestic ethanol markets, we successfully optimized our product mix toward fuel-grade ethanol sales in U.S.

This outcome underscores the benefits of our diversified commercial platform, which enabled us to adapt and capture the value of a strong domestic crush-margin environment.

During the second quarter, we also continued to improve utilization, reliability and throughput, with the goal of increasing total volume for 2026 over 2025.

At our Pekin campus, we completed the planned outage of our dry mill along with a debottlenecking project to increase annual production capacity by approximately 8%, or 5 million gallons.

This outcome illustrates our dedication to projects with highly attractive returns on investment.

By increasing production capacity at our dry mill, our most efficient facility, we are positioned to capture additional gross margin and to qualify for additional Section 45Z clean fuel production tax credits.

After a successful restart of our dry mill, we are now ramping up to our new production capacity and expect to realize the full benefit of this additional capacity in the fourth quarter.

We also performed our routine spring outage at our ICP facility during the second quarter.

We remain on track to finish the repairs on our Pekin campus’ existing dock and complete the installation of a second alcohol loadout by year end, improving our logistics and loading capacity.

At our Columbia facility, we began work to add a third CO2 storage tank and expect the tank to be operational in the fourth quarter.

This expanded storage capacity will allow us to further capitalize on the growing demand for premium CO2 in the Pacific Northwest.

We continue advancing multiple pathways to further monetize CO2 production, including opportunities for utilization and sequestration.

Our strategy emphasizes low-capital, high-return projects while preserving flexibility as regulatory and commercial markets continue to evolve.

We intend to move quickly by pursuing partnerships with stakeholders that already have compression capabilities, allowing us to accelerate commercialization.

Capital expenditures for the second quarter were $10.6 million for a total of $11.5 million year to date.

We are on track to meet our annual capital expenditure budget of $25 million.

We are focused on increasing our Section 45Z clean fuel production tax credits by producing higher volumes of qualifying fuel.

We also continue to explore opportunities to lower our carbon scores without significant capital investment by working with our farmer partners to encourage them to lower the carbon intensity of their corn.

We remain on track to qualify 90 million gallons, or more, of combined production this year, supporting an expected minimum of $15 million in income from Section 45Z clean fuel production tax credits, net of monetization costs.

We remain encouraged by the growing momentum to adopt year-round E15 blending.

As an example, the Renewable Fuels Association recently reported that about 72% of U.S.

voters support year-round E15 blending, the highest level recorded since polling began in 2016.

We believe that the ongoing geopolitical disruptions in the Middle East create conditions that drive domestic support for implementing year-round E15 blending.

Nationally, support continues to build around the promise of E15 to reduce fuel costs, strengthen energy security and increase demand for domestically produced renewable fuels.

Meanwhile, several Midwestern states have moved forward with permanent year-round E15 blending, providing an important blueprint for broader adoption nationwide.

California is also making progress toward E15 blending following the passage of Assembly Bill 30.

While final implementation steps remain, we believe the state’s transition toward E15 blending represents a meaningful long-term demand opportunity given California’s position as one of the largest gasoline markets in the country.

Taken together, expanding adoption of E15 at both the federal and state levels has the potential to drive significant incremental demand for ethanol, improve industry capacity utilization, and support a more favorable margin environment over time.

Use of Non-GAAP Financial Measures

Management believes that

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

Management provides Adjusted EBITDA as a non-GAAP financial measure so that investors will have the same financial information that management

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

We define Adjusted EBITDA

as unaudited consolidated net income or loss before interest expense, interest income, unrealized derivative gains and losses, excess

insurance proceeds, acquisition-related expense or recoveries, provision or benefit for income taxes, asset impairments, and depreciation

and amortization expense.

A table is provided below

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

Adjusted EBITDA is not a measure

of financial performance under GAAP and should not be considered as an alternative to consolidated net income (loss) or any other measure

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

of liquidity.

Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute

for analysis of our results as reported under GAAP.

Information reconciling

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

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

We are not able to provide

a quantitative reconciliation of forward-looking Adjusted EBITDA to forward-looking consolidated net income (loss) because certain items

required for reconciliation are uncertain, outside of our control and/or cannot reasonably be predicted, such as net sales, cost of goods

sold, unrealized derivative gains and losses, asset impairments and provision (benefit) for income taxes, which we view as the most material

components of consolidated net income (loss) that are not presently estimable.

Reconciliation of Adjusted

EBITDA to Consolidated Net Income (Loss)

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

Management provides Adjusted EBITDA as a non-GAAP financial measure so that investors will have the same financial information that management uses, which may assist investors in properly assessing our performance on a period-over-period basis.

We define Adjusted EBITDA as unaudited consolidated net income or loss before interest expense, interest income, unrealized derivative gains and losses, excess insurance proceeds, acquisition-related income or expense, provision or benefit for income taxes, asset impairments, and depreciation and amortization expense.

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

Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to consolidated net income (loss) or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity.

Adjusted EBITDA has limitations as an analytical tool and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP.

Reconciliation of Adjusted EBITDA to Consolidated Net Income (Loss)

Three Months Ended

June 30, Six Months Ended

(in thousands) (unaudited) 2026 2025 2026 2025

Consolidated net income (loss)

Interest expense, net

Net income (loss) $ 11,701 $ (10,997 ) $ 15,972 $ (22,676 )

Interest expense 1,960 2,811 4,158 5,540

Interest income (87 ) (67 ) (165 ) (150 )

Unrealized derivative gains

Unrealized derivative losses (gains) 3,634 2,117 (4,439 ) 483

Acquisition-related income — (460 ) — (460 )

Depreciation and amortization expense 6,452 6,365 12,819 12,631

2 unchanged sentences

Critical Accounting Estimates

Our discussion and analysis

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

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

The preparation of these financial statements

requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets

and liabilities at the date of the financial statements and the reported amounts of net sales and expenses for each period.

that of our critical accounting estimates, defined as those estimates that we believe are the most important to the portrayal of our financial

condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result

of the need to make estimates about the effects of matters that are inherently uncertain:

impairment of long-lived assets and valuation

allowance for deferred taxes.

These critical accounting estimates are more fully described in “Management’s Discussion and

Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K

for the year ended December 31, 2025.

Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net sales and expenses for each period.

We believe that our critical accounting estimates, defined as those estimates that we believe are the most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain, are:

impairment of long-lived assets and valuation allowance for deferred taxes.

These critical accounting estimates are more fully described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no material changes to our critical accounting estimates as described in our Annual Report on Form 10-K for the year ended December 31, 2025.

Results of Operations

Selected Financial Information

The following selected financial

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

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

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

Certain performance metrics

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

The following selected financial information should be read in conjunction with our condensed consolidated financial statements and notes to our condensed consolidated financial statements included elsewhere in this report, and the other sections of “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this report.

Certain performance metrics that we believe are important indicators of our results of operations:

Three Months Ended

June 30, Percentage Six Months Ended

June 30, Percentage

2026 2025 Variance 2026 2025 Variance

Alcohol Sales (gallons in millions)

6 unchanged sentences

Sales Price per Gallon

Pekin Campus $ 2.09 $ 1.95 7.2 % $ 2.05 $ 1.92 6.8 %

Western production $ 2.20 $ 2.00 10.0 % $ 2.13 $ 1.98 7.6 %

2 unchanged sentences

Alcohol Production (gallons in millions)

Pekin Campus 51.8 50.9 1.8 % 103.0 105.2 (2.1 )%

Western production 9.0 8.3 8.4 % 16.9 16.6 1.8 %

Total production gallons 60.8 59.2 2.7 % 119.9 121.8 (1.6 )%

Corn Cost per Bushel

Pekin Campus $ 4.58 $ 4.86 (5.8 )% $ 4.51 $ 4.75 (5.1 )%

Western production $ 5.59 $ 5.71 (2.1 )% $ 5.57 $ 5.83 (4.5 )%

Average corn cost per bushel

Average cost per bushel $ 4.73 $ 4.98 (5.0 )% $ 4.65 $ 4.89 (4.9 )%

Average Market Metrics

2 unchanged sentences

Board corn crush per gallon (1) $ 0.33 $ 0.11 200.0 % $ 0.25 $ 0.07 257.1 %

Essential Ingredients Sold (thousand tons)

Pekin Campus:

Essential Ingredients Sold (in thousands of tons)

Distillers grains 68.2 70.2 (2.8 )% 148.6 160.9 (7.6 )%

CO 2 45.2 45.1 0.2 % 88.5 90.4 (2.1 )%

Corn wet feed 26.3 28.7 (8.4 )% 56.2 63.2 (11.1 )%

2 unchanged sentences

Syrup and other 11.9 11.7 1.7 % 21.1 19.9 6.0 %

Corn meal 8.2 8.3 (1.2 )% 17.7 17.7 0.0 %

Yeast 5.9 5.7 3.5 % 12.0 12.1 (0.8 )%

Total Pekin Campus essential ingredients sold 209.5 210.0 (0.2 )% 427.0 447.9 (4.7 )%

1 unchanged sentence

Distillers grains 67.0 61.8 8.4 % 127.1 119.9 6.0 %

CO 2 14.5 14.4 0.7 % 27.3 27.0 1.1 %

Corn oil 0.9 1.0 (10.0 )% 1.7 2.4 (29.2 )%

Syrup and other 0.6 1.2 (50.0 )% 1.4 2.0 (30.0 )%

7 unchanged sentences

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

Net Sales, Cost of Goods

Sold and Gross Profit (Loss)

The following table presents

our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage of net sales (in thousands,

except percentages):

Net Sales, Cost of Goods Sold and Gross Profit (Loss)

The following table presents our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage of net sales (in thousands, except percentages):

Three Months Ended

June 30, Variance in Six Months Ended

June 30, Variance in

2026 2025 Dollars Percent 2026 2025 Dollars Percent

Net sales $ 245,698 $ 218,436 $ 27,262 12.5 % $ 470,378 $ 444,976 $ 25,402 5.7 %

Cost of goods sold 229,062 220,373 8,689 3.9 % 444,523 448,720 (4,197 ) (0.9 )%

Gross profit (loss)

Gross profit (loss) $ 16,636 $ (1,937 ) $ 18,573 NM* $ 25,855 $ (3,744 ) $ 29,599 NM*

Percentage of net sales 6.8 % (0.9 )% 5.5 % (0.8 )%

The decrease in our consolidated

net sales for the three months ended March 31, 2026 as compared to the same period in 2025 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, 2026 as compared to the Three Months ended June 30, 2025

The increase in our consolidated net sales for the three months ended June 30, 2026 as compared to the same period in 2025 is primarily attributable to higher average sales prices per gallon across all of our business segments as well as higher average sales prices of essential ingredients due to a stronger commodity price environment.

Net sales also improved due to higher total volumes sold of alcohols and essential ingredients.

Pekin Campus Production Segment

Net sales of alcohol from our

Pekin Campus production segment increased by $0.7 million, or 1%, to $108.0 million for the three months ended March 31, 2026 as compared

to $107.3 million for the same period in 2025.

The segment’s average sales price per gallon increased by $0.10, or 5%, to $2.00

for the three months ended March 31, 2026 from $1.90 for the same period in 2025.

Our total volume of production gallons sold decreased

by 2.6 million gallons, or 5%, to 53.9 million gallons for the three months ended March 31, 2026 as compared to 56.5 million gallons for

the same period in 2025.

The increase of $0.10, or 5%, in the segment’s average sales price per gallon for the three months ended

March 31, 2026 as compared to the same period in 2025 increased our net sales from the segment by $5.9 million.

With the segment’s

average sales price per gallon of $2.00 for the three months ended March 31, 2026, we generated $5.2 million in fewer net sales from the

2.6 million fewer gallons of alcohol sold in the three months ended March 31, 2026 as compared to the same period in 2025.

Net sales of essential ingredients

from our Pekin Campus production segment declined by $0.6 million, or 1%, to $44.0 million for the three months ended March 31, 2026 as

compared to $44.6 million for the same period in 2025.

Our total volume of essential ingredients sold decreased by 20,400 tons, or 9%,

to 217,500 tons for the three months ended March 31, 2026 from 237,900 tons for the same period in 2025.

The increase of $14.72, or 8%,

in the segment’s average sales price per ton for the three months ended March 31, 2026 as compared to the same period in 2025 increased

our net sales from the segment by $3.5 million.

With the segment’s average sales price per ton of $202.27 for the three months ended

March 31, 2026, we generated $4.1 million less in net sales from the 20,400 fewer tons of essential ingredients sold in the three months

ended March 31, 2026 as compared to the same period in 2025.

Marketing and Distribution

Net sales of alcohol from our marketing and distribution

segment, excluding intersegment sales, declined by $1.7 million, or 3%, to $47.3 million for the three months ended March 31, 2026 as

compared to $49.0 million for the same period in 2025.

Our volume of third-party alcohol sold reported

gross by the segment declined by 0.9 million gallons, or 4%, to 23.5 million gallons for the three months ended March 31, 2026 as compared

to 24.4 million gallons for the same period in 2025.

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

ended March 31, 2026, we generated $1.7 million less in net sales from the 0.9 million fewer gallons of third-party alcohol sold gross

in the three months ended March 31, 2026 as compared to the same period in 2025.

Net sales of alcohol from our Pekin Campus production segment increased by $20.2 million, or 21%, to $114.4 million for the three months ended June 30, 2026 as compared to $94.2 million for the same period in 2025.

Our total volume of production gallons sold increased by 6.5 million gallons, or 14%, to 54.6 million gallons for the three months ended June 30, 2026 as compared to 48.1 million gallons for the same period in 2025.

The increase of $0.14, or 7%, in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 improved our net sales from the segment by $6.6 million.

With the segment’s average sales price per gallon of $2.09 for the three months ended June 30, 2026, we generated $13.6 million more in net sales from the 6.5 million additional gallons of alcohol sold in the three months ended June 30, 2026 as compared to the same period in 2025.

Net sales of essential ingredients from our Pekin Campus production segment improved by $5.5 million, or 14%, to $45.1 million for the three months ended June 30, 2026 as compared to $39.6 million for the same period in 2025.

The increase of $26.73, or 14%, in the segment’s average sales price per ton for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $5.6 million.

Our total volume of essential ingredients sold slightly decreased to 209,500 tons for the three months ended June 30, 2026 as compared to 210,000 tons for the same period in 2025, which resulted in $0.1 million less in net sales compared to 2025.

Marketing and Distribution Segment

Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $3.5 million, or 6%, to $54.7 million for the three months ended June 30, 2026 as compared to $58.2 million for the same period in 2025.

Our volume of third-party alcohol sold reported gross by the segment decreased by 5.7 million gallons, or 19%, to 24.0 million gallons for the three months ended June 30, 2026 as compared to 29.7 million gallons for the same period in 2025.

With the segment’s average sales price per gallon of $2.27 for the three months ended June 30, 2026, we realized $12.9 million less in net sales from the 5.7 million fewer gallons of third-party alcohol sold gross in the three months ended June 30, 2026 as compared to the same period in 2025.

The $0.31 per gallon, or 16%, increase in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 resulted in a $9.4 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 increased by $0.5 million, or 3%, to $16.7 million for the three months ended March 31, 2026 as compared to

$16.2 million for the same period in 2025.

Our total volume of alcohol sold decreased by 0.1 million gallons, or 1%, to 8.2 million gallons

for the three months ended March 31, 2026 as compared to 8.3 million gallons for the same period in 2025.

With the segment’s average

sales price per gallon of $2.03 for the three months ended March 31, 2026, we generated $0.2 million less in net sales from the 0.1 million

fewer gallons of alcohol sold in the three months ended March 31, 2026 as compared to the same period in 2025.The increase of $0.08, or

4%, in the segment’s average sales price per gallon for the three months ended March 31, 2026 as compared to the same period in

2025 increased our net sales from the segment by $0.7 million.

Net sales of essential ingredients

from our Western production segment declined by $0.5 million, or 6%, to $7.3 million for the three months ended March 31, 2026 as compared

to $7.8 million for the same period in 2025.

Our total volume of essential ingredients sold increased by 1,600 tons, or 2%, to 74,500

tons for the three months ended March 31, 2026 from 72,900 tons for the same period in 2025.

With the segment’s average sales price

per ton of $97.72 for the three months ended March 31, 2026, we generated $0.2 million in increased net sales from the 1,600 additional

tons of essential ingredients sold in the three months ended March 31, 2026 as compared to the same period in 2025.

However, the decrease

of $9.39, or 9%, in our average sales price per ton for the three months ended March 31, 2026 as compared to the same period in 2025 reduced

our net sales of essential ingredients from the segment by $0.7 million.

Net sales of alcohol from our Western production segment increased by $4.2 million, or 25%, to $20.8 million for the three months ended June 30, 2026 as compared to $16.6 million for the same period in 2025.

Our total volume of alcohol sold increased by 1.1 million gallons, or 13%, to 9.4 million gallons for the three months ended June 30, 2026 as compared to 8.3 million gallons for the same period in 2025.

With the segment’s average sales price per gallon of $2.20 for the three months ended June 30, 2026, we realized $2.5 million in additional net sales from the 1.1 million additional gallons of alcohol sold in the three months ended June 30, 2026 as compared to the same period in 2025.

The increase of $0.20, or 10%, in the segment’s average sales price per gallon for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $1.7 million.

Net sales of essential ingredients from our Western production segment increased by $0.6 million, or 7%, to $8.8 million for the three months ended June 30, 2026 as compared to $8.2 million for the same period in 2025.

Our total volume of essential ingredients sold increased by 4,600 tons, or 6%, to 83,000 tons for the three months ended June 30, 2026 from 78,400 tons for the same period in 2025.

The increase of $1.31, or 1%, in our average sales price per ton for the three months ended June 30, 2026 as compared to the same period in 2025 increased our net sales of essential ingredients from the segment by $0.1 million.

With the segment’s average sales price per ton of $106.54 for the three months ended June 30, 2026, we generated $0.5 million in additional net sales from the 4,600 additional tons of essential ingredients sold in the three months ended June 30, 2026 as compared to the same period in 2025.

Corporate and other

Net sales of alcohol from corporate

and other declined by $0.2 million, or 13%, to $1.4 million for the three months ended March 31, 2026 as compared to $1.6 million for

the same period in 2025.

Net sales of alcohol from corporate and other increased by $0.2 million, or 12%, to $1.9 million for the three months ended June 30, 2026 as compared to $1.7 million for the same period in 2025.

These sales are from Eagle Alcohol’s business.

Cost of Goods Sold and Gross Profit (Loss)

Our consolidated gross profit improved to $9.2 million for the three

months ended March 31, 2026 from a gross loss of $1.8 million for the same period in 2025, representing a gross margin of 4.1% and a negative

gross margin of 0.8% for the three months ended March 31, 2026 and 2025, respectively.

Higher gross margin for the first quarter of 2026

was primarily driven by improved crush margins, including from a product mix that emphasized higher-value renewable fuel export sales,

and unrealized gains on our derivative instruments.

Our consolidated gross profit (loss) improved to a gross profit of $16.6 million for the three months ended June 30, 2026 from a gross loss of $1.9 million for the same period in 2025, representing a positive gross margin of 6.8% for the three months ended June 30, 2026 as compared to a negative gross margin of 0.9% for the same period in 2025.

Our consolidated gross profit improved due to higher sales and margins primarily driven by a few key factors.

Our average sales prices per gallon improved across all of our business segments, reaching a combined average sales price of $2.15 per gallon, an over 10% increase compared to the second quarter of 2025.

In addition, we benefitted from favorable overall production input costs, largely due to a lower cost of corn, which, together with higher average sales prices, significantly improved market crush margins to $0.33 cents per gallon for the second quarter of 2026 from $0.11 cents per gallon for the same period last year, driven by robust export demand, strong domestic blending activity, and tighter ethanol inventories following industry-wide spring maintenance outages.

In addition, with RVOs for 2026 set, strong demand for corn oil and germ as a feedstock for biodiesel and renewable diesel drove essential ingredient prices higher.

Our essential ingredients return improved to 51.6% for the three months ended June 30, 2026 compared to 45.2% for the same period in 2025.

Improved crush margins contributed approximately $17 million of incremental gross profit for the second quarter, partially offset by $2 million of higher repairs and maintenance expenses arising from our Pekin dry mill and ICP facility spring outages and continued work at our Alto Carbonic facility to ensure we were prepared to reliably support the increased demand for our premium CO 2 during the seasonally strong summer months.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross

profit, net of intercompany activity, improved by $11.2 million to a gross profit of $9.0 million for the three months ended March 31,

2026 as compared to a gross loss of $2.2 million for the same period in 2025.

Of this improvement, $11.7 million is attributable to higher

margins, partially offset by $0.5 attributable to lower sales volumes for the three months ended March 31, 2026 as compared to the same

period in 2025.

Our Pekin Campus production segment’s gross profit, net of intercompany activity, increased by $17.4 million to a gross profit of $12.4 million for the three months ended June 30, 2026 as compared to gross loss of $5.0 million for the same period in 2025.

Of this increase, $15.9 million is attributable to improved alcohol sales margins and $1.5 million is attributable to higher sales volumes.

Marketing and Distribution Segment

Our marketing and distribution segment’s

gross profit, net of intercompany activity, decreased by $0.7 million to a gross profit of $1.1 million for the three months ended March

31, 2026 as compared to a gross profit of $1.8 million for the same period in 2025.

Of this decrease, $0.6 million is attributable to

slightly lower margins from sales of third-party fuel-grade ethanol and $0.1 million is attributable to lower sales volumes for the three

months ended March 31, 2026 as compared to the same period in 2025.

Our marketing and distribution segment’s gross profit, net of intercompany activity, decreased by $0.1 million to a gross profit of $1.4 million for the three months ended June 30, 2026 as compared to a gross profit of $1.5 million for the same period in 2025.

Of this decline, $0.2 million is attributable to higher margins from sales of third-party renewable fuel, offset by $0.3 million attributable to lower sales volumes.

Western Production Segment

Our Western production segment’s gross profit,

net of intercompany activity, remained flat at a gross loss of $1.3 million for the three months ended March 31, 2026 and 2025.

Our Western production segment’s gross profit, net of intercompany activity, increased by $0.4 million to a gross profit of $2.0 million for the three months ended June 30, 2026 as compared to a gross profit of $1.6 million for the same period in 2025.

Of this improvement, $0.2 million is attributable to higher renewable fuel margins and $0.2 million is attributable to higher sales volumes.

Corporate and other

Gross profit from corporate

and other improved by $0.5 million to a gross profit of $0.4 million for the three months ended March 31, 2026 as compared to a gross

loss of $0.1 million for the same period in 2025, all of which were from Eagle Alcohol’s business.

Selling, General and

Administrative Expenses

The following table presents

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

Gross profit from corporate and other increased by $0.9 million for the three months ended June 30, 2026, from a breakeven gross profit for the three months ended June 30, 2025, all of which were from Eagle Alcohol’s business.

Six Months ended June 30, 2026 as compared to the Six Months ended June 30, 2025

The increase in our consolidated net sales for the six months ended June 30, 2026 as compared to the same period in 2025 is primarily attributable to higher average sales prices per gallon across all of our business segments as well as higher average sales prices of essential ingredients due to a stronger commodity price environment, partially offset by a slight decrease in volumes sold.

Pekin Campus Production Segment

Net sales of alcohol from our Pekin Campus production segment increased by $20.9 million, or 10%, to $222.3 million for the six months ended June 30, 2026 as compared to $201.4 million for the same period in 2025.

Our total volume of production gallons sold increased by 3.8 million gallons, or 4%, to 108.5 million gallons for the six months ended June 30, 2026 as compared to 104.7 million gallons for the same period in 2025.

The increase of $0.13, or 7%, in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $13.1 million.

With the segment’s average sales price per gallon of $2.05 for the six months ended June 30, 2026, we generated $7.8 million in additional net sales from the 3.8 million additional gallons of alcohol sold in the six months ended June 30, 2026 as compared to the same period in 2025.

Net sales of essential ingredients from our Pekin Campus production segment increased by $4.9 million, or 6%, to $89.1 million for the six months ended June 30, 2026 as compared to $84.2 million for the same period in 2025.

Our total volume of essential ingredients sold decreased by 20,900 tons, or 5%, to 427,000 tons for the six months ended June 30, 2026 from 447,900 tons for the same period in 2025.

The increase of $20.63, or 11%, in the segment’s average sales price per ton for the six months ended June 30, 2026 as compared to the same period in 2025 increased our net sales from the segment by $9.2 million.

With the segment’s average sales price per ton of $208.58 for the six months ended June 30, 2026, we generated $4.3 million in fewer net sales from the 20,900 fewer tons of essential ingredients sold in the six months ended June 30, 2026 as compared to the same period in 2025.

Marketing and Distribution Segment

Net sales of alcohol from our marketing and distribution segment, excluding intersegment sales, declined by $5.2 million, or 5%, to $102.0 million for the six months ended June 30, 2026 as compared to $107.2 million for the same period in 2025.

Our volume of third-party renewable fuel sold reported gross by the segment decreased by 6.6 million gallons, or 12%, to 47.5 million gallons for the six months ended June 30, 2026 as compared to 54.1 million gallons for the same period in 2025.

With the segment’s average sales price per gallon of $2.14 for the six months ended June 30, 2026, we realized $14.1 million less in net sales from the 6.6 million fewer gallons of third-party renewable fuel sold gross in the six months ended June 30, 2026 as compared to the same period in 2025.

The $0.16 per gallon, or 8%, increase in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 resulted in a $8.9 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 increased by $4.7 million, or 14%, to $37.5 million for the six months ended June 30, 2026 as compared to $32.8 million for the same period in 2025.

Our total volume of alcohol sold increased by 1.0 million gallons, or 6%, to 17.6 million gallons for the six months ended June 30, 2026 as compared to 16.6 million gallons for the same period in 2025.

With the segment’s average sales price per gallon of $2.13 for the six months ended June 30, 2026, we generated $2.1 million in additional net sales from the 1.0 million additional gallons of alcohol sold in the six months ended June 30, 2026 as compared to the same period in 2025.

The increase of $0.15, or 8%, in the segment’s average sales price per gallon for the six months ended June 30, 2026 as compared to the same period in 2025 improved our net sales from the segment by $2.6 million.

Net sales of essential ingredients from our Western production segment remained flat at $16.1 million for the six months ended June 30, 2026 as compared to the same period in 2025.

Our total volume of essential ingredients sold increased by 6,200 tons, or 4%, to 157,500 tons for the six months ended June 30, 2026 from 151,300 tons for the same period in 2025.

With the segment’s average sales price per ton of $102.37 for the six months ended June 30, 2026, we generated $0.6 million in additional net sales from the 6,200 additional tons of essential ingredients sold in the six months ended June 30, 2026 as compared to the same period in 2025.

The decrease of $3.77, or 4%, in our average sales price per ton for the six months ended June 30, 2026 as compared to the same period in 2025 reduced our net sales of essential ingredients from the segment by $0.6 million.

Corporate and other

Net sales of alcohol from corporate and other increased by $0.1 million, or 3%, to $3.4 million for the six months ended June 30, 2026 as compared to $3.3 million for the same period in 2025.

These sales are from Eagle Alcohol’s business.

Cost of Goods Sold and Gross Profit (Loss)

Our consolidated gross profit improved to a gross profit of $25.9 million for the six months ended June 30, 2026 from a gross loss of $3.7 million for the same period in 2025, representing a positive gross margin of 5.5% for the six months ended June 30, 2026 as compared to a negative gross margin of 0.8% for the same period in 2025.

Our consolidated gross profit improved due to higher sales and margins primarily driven by the same factors that improved our second quarter results, as discussed above.

Our average sales prices per gallon improved across all of our business segments, reaching a combined average sales price of $2.08 per gallon, an over 7% increase compared to the same period in 2025.

In addition, our essential ingredients return improved to 52.5% for the six months ended June 30, 2026 as compared to 46.7% for the same period in 2025.

Pekin Campus Production Segment

Our Pekin Campus production segment’s gross profit, net of intercompany activity, improved by $27.9 million to a gross profit of $20.0 million for the six months ended June 30, 2026 as compared to a gross loss of $7.9 million for the same period in 2025.

Of this improvement, $27.2 million is attributable to higher alcohol sales margins and $0.7 million is attributable to higher sales volumes.

Marketing and Distribution Segment

Our marketing and distribution segment’s gross profit, net of intercompany activity, declined by $1.2 million to a gross profit of $3.0 million for the six months ended June 30, 2026 as compared to a gross profit of $4.2 million for the same period in 2025.

Of this decline, $0.8 million is attributable primarily to lower margins from sales of third-party renewable fuel and $0.4 million is attributable to lower sales volumes for the six months ended June 30, 2026 as compared to the same period in 2025.

Western Production Segment

Our Western production segment’s gross profit, net of intercompany activity, improved by $1.4 million to a gross profit of $1.4 million for the six months ended June 30, 2026 as compared to a breakeven gross profit for the same period in 2025, related to higher margins on ethanol sales.

Corporate and other

Gross profit from corporate and other improved by $1.4 million to a gross profit of $1.3 million for the six months ended June 30, 2026 as compared to gross loss of $0.1 million for the same period in 2025, all of which were from Eagle Alcohol’s business.

Selling, General and Administrative Expenses

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

Three Months Ended

June 30, Variance in Six Months Ended

June 30, Variance in

2026 2025 Dollars Percent 2026 2025 Dollars Percent

Selling, general and administrative expenses $ 8,017 $ 6,171 $ 1,846 29.9 % $ 14,716 $ 13,361 $ 1,355 10.1 %

Percentage of net sales 3.3 % 2.8 % 3.1 % 3.0 %

Our SG&A expenses declined by $0.5 million

for the three months ended March 31, 2026 as compared to the same period in 2025.

The decline in SG&A expenses primarily reflects

reduced compensation expenses and professional fees.

Net Income (Loss) Attributable

to Common Stockholders

The following table presents

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

Three Months Ended

Our SG&A expenses increased for the three and six months ended June 30, 2026 as compared to the same periods in 2025.

The period over period increases in SG&A expenses are primarily due to an $0.8 million accrual for performance compensation as well as an $0.8 million one-time gain in 2025 related to the final payment for our acquisition of Eagle Alcohol that did not recur in 2026.

Excluding those two notable items, SG&A expenses were comparable over the 2026 and 2025 periods despite higher net sales in the current year, reflecting the benefits of last year’s initiatives to right-size our staffing levels and cut costs.

Net Income (Loss) Attributable to Common Stockholders

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

Three Months Ended

June 30, Variance in Six Months Ended

June 30, Variance in

2026 2025 Dollars Percent 2026 2025 Dollars Percent

Net income (loss) attributable to common stockholders $ 11,386 $ (11,312 ) $ 22,698 NM $ 15,345 $ (23,303 ) $ 38,648 NM

Percentage of net sales 4.6 % (5.2 )% 3.3 % (5.2 )%

The significant improvement in

net income (loss) attributable to common stockholders is primarily due to higher margins, income from transferable tax credits, lower

SG&A expenses and lower interest expense as well as the other factors affecting gross profit discussed above.

The increase in our net income attributable to common stockholders for the three and six months ended June 30, 2026 as compared to the same periods in 2025 is primarily due to improved margins, as discussed above, Section 45Z clean fuel production tax credits, and reduced interest expense due to lower debt balances.

For the three and six month periods in 2026, we had no tax provision as we expect to use a portion of our net operating losses to offset income for the year.

Liquidity and Capital Resources

During the three months ended March 31, 2026, our

operations generated positive cash flow, and we supplemented our liquidity with cash on hand and net proceeds from Kinergy’s operating

line of credit.

In addition to funding our operations, our capital resources were used to make principal payments on our term debt.

of March 31, 2026, we had $21.6 million in cash, cash equivalents and restricted cash, $29.3 million of unused borrowing availability

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

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

We believe that the following

amounts provide insight into our liquidity and capital resources.

The following selected financial information should be read in conjunction

with our condensed consolidated financial statements and notes to condensed 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).

During the six months ended June 30, 2026, we generated positive cash flow from our operations, and we supplemented our liquidity with net proceeds from Kinergy’s operating line of credit.

In addition to funding our operations, we used our capital resources to make principal payments on our term debt, including an $8.5 million payment for the second quarter, ending the quarter with $29.9 million in term debt outstanding.

Year to date, we have made a total of $25.1 million in principal payments on our term debt.

As of June 30, 2026, we had $24.0 million in cash, cash equivalents and restricted cash, $41.3 million of unused borrowing availability under Kinergy’s operating line of credit and $65.0 million that may be available for capital improvement projects under our Orion term loan.

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 Period-End Liquidity Status

We believe that the following amounts provide insight into our liquidity and capital resources.

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

2026 December 31,

Cash, cash equivalents and restricted cash $ 23,962 $ 25,673 (6.7 )%

6 unchanged sentences

Restricted Net Assets

At March 31, 2026, we had approximately $59.1 million

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

in the form of dividends, distributions,

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

At June 30, 2026, we had approximately $68.5 million of net assets at our subsidiaries that were not available to be transferred to Alto Ingredients, Inc.

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

Changes in Working Capital and Cash Flows

Working capital improved to $116.9 million at March

31, 2026 from $96.8 million at December 31, 2025 as a result of a decrease of $17.4 million in current liabilities and an increase of

$2.6 million in current assets.

Current assets increased primarily due to an increase

in accounts receivable, transferable tax credits and derivative instruments, partially offset by a decrease in cash and cash equivalents

and restricted cash and inventories.

Our current liabilities decreased primarily due

to lower current portion of long-term debt and derivative instruments, partially offset by increases in accounts payable and accrued liabilities

as a result of timing of payments.

Our cash, cash equivalents and restricted cash

declined by $4.0 million due to $7.3 million in cash used in our financing activities and $0.9 million used in our investing activities,

partially offset by $4.2 million in cash provided by our operating activities.

Working capital improved to $110.4 million at June 30, 2026 from $96.8 million at December 31, 2025 as a result of a decrease of $8.7 million in current liabilities and an increase of $4.9 million in current assets.

Current assets increased primarily due to an increase in accounts receivable, transferable tax credits and derivative instruments, partially offset by a decrease in inventories.

Our current liabilities decreased primarily due to lower current portion of long-term debt and derivative instruments, partially offset by increases in accounts payable as a result of timing of payments.

Our cash, cash equivalents and restricted cash declined by $1.7 million due to $22.9 million in cash used in our financing activities and $11.5 million used in our investing activities, nearly offset by $32.7 million in cash provided by our operating activities.

Cash provided by our Operating Activities

We generated $4.2 million of cash from our operations

for the three months ended March 31, 2026 as compared to $18.2 million of cash used in our operations for the same period in 2025.

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

We generated $32.7 million of cash from our operations for the six months ended June 30, 2026 as compared to $19.1 million of cash used in our operations for the same period in 2025.

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

● an increase in net income of $38.6 million;

● an increase of $10.6 million related to lower inventories due to reduced production volumes and the timing of sales;

● an increase of $20.6 million related to changes in accounts payable and accrued liabilities;

● an increase of $15.5 million related to lower inventories due to reduced production volumes and the timing of sales;

● an increase of other assets of $7.1 million related to transferable tax credits.

These amounts were partially offset by:

● income from transferable tax credits of $3.9 million;

● an increase of $2.4 million related to changes in accounts receivables;

● an increase of approximately $6.6 million related to our derivative instruments.

● non-cash income of $9.0 million from transferable tax credits;

● a decrease of $13.3 million related to changes in accounts receivable due to higher sales volumes and the timing of payments;

● a decrease of approximately $6.3 million related to our derivative instruments.

Cash used in our Investing Activities

We used $0.9 million in cash during the three months

ended March 31, 2026 for capital expenditures.

We used $11.5 million in cash during the six months ended June 30, 2026 for capital expenditures.

Cash used in our Financing Activities

Cash used in our financing activities was $7.3

million for the three months ended March 31, 2026, which reflects $16.6 million in principal payments on our term debt and $0.3 million

in preferred stock dividends paid, partially offset by $9.6 million in proceeds from Kinergy’s operating line of credit.

Cash used in our financing activities was $22.9 million for the six months ended June 30, 2026, which reflects $25.1 million in principal payments on our term debt, $2.2 million for employee taxes paid for stock vesting in lieu of shares and $0.6 million in preferred stock dividends paid, partially offset by $5.0 million in net proceeds from Kinergy’s operating line of credit.

Kinergy’s Operating Line of Credit

Kinergy maintains an operating line of credit for

an aggregate amount of up to $85.0 million.

Kinergy maintains an operating line of credit for an aggregate amount of up to $85.0 million.

The credit facility matures on November 7, 2027.

Interest accrues under the credit facility

at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging from 1.25% to

The credit facility provides for an unused line fee, payable monthly in arrears, at an annual rate of 0.25% to 0.375% on the amount

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

Payments that may

be made by Kinergy to Alto Ingredients, Inc.

Interest accrues under the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable margin ranging from 1.25% to 1.75%.

The credit facility provides for an unused line fee, payable monthly in arrears, at an annual rate of 0.25% to 0.375% on the amount by which the maximum credit under the facility exceeds the average daily principal balance during the preceding month.

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

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

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

The credit facility also includes the accounts

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

Payments that may

be made by Alto Nutrients to Alto Ingredients, Inc.

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

The credit facility also includes the accounts receivable of our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral.

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

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

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

Alto Nutrients markets our essential

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

In addition, the amount of cash distributions that

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

For all monthly periods in which excess borrowing

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

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

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

of at least 1.10 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness).

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

We believe Kinergy and Alto Nutrients are in compliance

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

The following table sets forth the fixed-charge

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

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

In addition, the amount of cash distributions that Kinergy or Alto Nutrients may make to us is also limited to up to 75% of excess cash flow.

For all monthly periods in which excess borrowing availability falls below a specified level, Kinergy and Alto Nutrients must collectively maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and taxes paid during such twelve-month rolling period) of at least 1.10 and are prohibited from incurring certain additional indebtedness (other than specific intercompany indebtedness).

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

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

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

Three Months Ended

June 30, Years Ended

2026 2025 2025 2024

Fixed-Charge Coverage Ratio Requirement 1.10 1.10 1.10 1.10

Actual 6.50 3.64 4.03 3.53

Excess 5.40 2.54 2.93 2.43

Alto Ingredients, Inc.

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

As of March 31, 2026, Kinergy had an outstanding balance of $39.2

million and $29.3 million of unused borrowing availability under the credit facility.

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

As of June 30, 2026, Kinergy had an outstanding balance of $34.6 million and $41.3 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.

On November 7, 2022, we entered into a credit agreement with certain funds managed by Orion Infrastructure Capital, or Lenders, under which the Lenders extended a senior secured credit facility in the amount of up to $125.0 million, or Term Loan.

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

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

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

We must prepay amounts outstanding

under the Term Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023 in an amount equal to a percentage

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

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

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

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

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

As of March 31, 2026 and

December 31, 2025, the principal amount outstanding under the Term Loan was $38.4 million and $55.0 million, respectively.

We must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023 in an amount equal to a percentage of our excess cash flow based on a specified leverage ratio, as follows:

(i) if our leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of our excess cash flow, (ii) if our leverage ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50% of our excess cash flow, and (iii) if our leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.

As of June 30, 2026 and December 31, 2025, the principal amount outstanding under the Term Loan was $29.9 million and $55.0 million, respectively.

Other Cash Obligations

As of March 31, 2026, we had

future commitments for certain capital projects totaling $18.4 million.

These commitments are scheduled to be satisfied in 2026.

As of June 30, 2026, we had future commitments for certain capital projects totaling $12.0 million.

These commitments are scheduled to be satisfied through 2026.

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