Alto Ingredients, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS. ALTO INGREDIENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 2026 2025 (unaudited) * ASSETS Current Assets: Cash and cash equivalents $ 23,962 $ 23,415 Restricted cash — 2,258 Accounts receivable (net of allowance for credit losses of $ 38 and $ 76 , respectively) 67,889 55,069 Inventories 51,609 61,676 Transferable tax credits, net 8,265 7,500 Derivative instruments 4,173 525 Other current assets 4,926 5,474 Total current assets 160,824 155,917 Property and equipment, net 197,479 198,501 Other Assets: Right of use operating lease assets, net 21,492 16,931 Intangible assets, net 7,264 7,574 Other assets 10,011 9,863 Total other assets 38,767 34,368 Total Assets $ 397,070 $ 388,786 * Amounts derived from the audited consolidated financial statements for the year ended December 31, 2025. See accompanying notes to condensed consolidated financial statements. 1 ALTO INGREDIENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (in thousands, except par value) June 30, December 31,   2026 2025 (unaudited) * LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 24,219 $ 14,509 Accrued liabilities 16,424 16,691 Current portion – long-term debt — 16,600 Current portion – operating leases 4,916 4,958 Derivative instruments 277 1,067 Other current liabilities 4,561 5,246 Total current liabilities 50,397 59,071 Long-term debt, net 60,469 63,027 Operating leases, net of current portion 17,553 13,012 Other liabilities 8,774 8,435 Total Liabilities 137,193 143,545 Commitments and Contingencies (Note 6) Stockholders’ Equity: Preferred stock, $ 0.001 par value; 10,000 shares authorized; Series A: 1,684 shares authorized; no shares issued and outstanding as of June 30, 2026 and December 31, 2025; Series B: 1,581 shares authorized; 927 shares issued and outstanding as of June 30, 2026 and December 31, 2025; liquidation preference of $ 18,075 as of June 30, 2026 1 1 Common stock, $ 0.001 par value; 300,000 shares authorized; 77,576 and 77,307 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively 78 77 Non-voting common stock, $ 0.001 par value; 3,553 shares authorized; 1 share issued and outstanding as of June 30, 2026 and December 31, 2025, respectively — — Additional paid-in capital 1,051,085 1,051,795 Accumulated other comprehensive income 5,461 5,461 Accumulated deficit ( 796,748 ) ( 812,093 ) Total Stockholders’ Equity 259,877 245,241 Total Liabilities and Stockholders’ Equity $ 397,070 $ 388,786 * Amounts derived from the audited consolidated financial statements for the year ended December 31, 2025. See accompanying notes to condensed consolidated financial statements. 2 ALTO INGREDIENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited, in thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net sales $ 245,698 $ 218,436 $ 470,378 $ 444,976 Cost of goods sold 229,062 220,373 444,523 448,720 Gross profit (loss) 16,636 ( 1,937 ) 25,855 ( 3,744 ) Selling, general and administrative expenses 8,017 6,171 14,716 13,361 Income (loss) from operations 8,619 ( 8,108 ) 11,139 ( 17,105 ) Interest expense, net ( 1,960 ) ( 2,811 ) ( 4,158 ) ( 5,540 ) Transferable tax credits, net 5,112 — 9,012 — Other expense, net ( 70 ) ( 78 ) ( 21 ) ( 31 ) Income (loss) before provision for income taxes 11,701 ( 10,997 ) 15,972 ( 22,676 ) Provision for income taxes — — — — Net income (loss) $ 11,701 $ ( 10,997 ) $ 15,972 $ ( 22,676 ) Preferred stock dividends $ ( 315 ) $ ( 315 ) $ ( 627 ) $ ( 627 ) Net income (loss) attributable to common stockholders $ 11,386 $ ( 11,312 ) $ 15,345 $ ( 23,303 ) Net income (loss) per share, basic $ 0.15 $ ( 0.15 ) $ 0.20 $ ( 0.31 ) Net income (loss) per share, diluted $ 0.15 $ ( 0.15 ) $ 0.20 $ ( 0.31 ) Weighted-average shares outstanding, basic 75,588 74,611 75,191 74,232 Weighted-average shares outstanding, diluted 77,071 74,611 76,609 74,232 See accompanying notes to condensed consolidated financial statements. 3 ALTO INGREDIENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended June 30, 2026 2025 Operating Activities: Net income (loss) $ 15,972 $ ( 22,676 ) Adjustments to reconcile net income (loss) to Net cash provided by (used in) operating activities: Depreciation and amortization 12,819 12,631 Transferable tax credits, net, generated ( 9,012 ) — Inventory valuation — 1,649 Gains on derivative instruments ( 10,666 ) ( 4,371 ) Stock-based compensation 1,518 1,474 Amortization of deferred financing fees 501 502 Amortization of debt discount 397 397 Credit loss recovery ( 38 ) ( 1 ) Changes in operating assets and liabilities, net of business acquisition: Accounts receivable ( 12,782 ) 480 Inventories 10,067 ( 5,448 ) Other assets 9,326 2,242 Operating leases ( 3,275 ) ( 3,180 ) Accounts payable and accrued liabilities 17,861 ( 2,778 ) Net cash provided by (used in) operating activities 32,688 ( 19,079 ) Investing Activities: Additions to property and equipment ( 11,487 ) ( 1,016 ) Purchase of Kodiak Carbonic, net of cash acquired — ( 7,278 ) Deferred purchase price payments for Eagle Alcohol — ( 2,240 ) Net cash used in investing activities ( 11,487 ) ( 10,534 ) Financing Activities: Net proceeds from Kinergy’s line of credit 5,042 24,520 Taxes paid for employee stock vesting in lieu of shares ( 2,227 ) — Principal payments on term debt ( 25,100 ) — Preferred stock dividends paid ( 627 ) ( 627 ) Net cash (used in) provided by financing activities ( 22,912 ) 23,893 Net change in cash, cash equivalents and restricted cash ( 1,711 ) ( 5,720 ) Cash, cash equivalents and restricted cash at beginning of period 25,673 36,211 Cash, cash equivalents and restricted cash at end of period $ 23,962 $ 30,491 Reconciliation of total cash, cash equivalents and restricted cash: Cash and cash equivalents $ 23,962 $ 29,768 Restricted cash — 723 Total cash, cash equivalents and restricted cash $ 23,962 $ 30,491 Supplemental Information: Interest paid $ 3,316 $ 4,596 Noncash lease additions $ 4,998 $ — Shares vested for Eagle Alcohol $ — $ 5,000 See accompanying notes to condensed consolidated financial statements. 4 ALTO INGREDIENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited, in thousands) Preferred Stock Common Stock Additional Paid-In Accumulated Accum. Other Comprehensive Shares Amount Shares Amount Capital Deficit Income Total Balances, January 1, 2026 927 $ 1 77,307 $ 77 $ 1,051,795 $ ( 812,093 ) $ 5,461 $ 245,241 Stock-based compensation — — — — 705 — — 705 Restricted stock issued to employees and directors, net of cancellations and tax — — 639 1 ( 28 ) — — ( 27 ) Preferred stock dividends — — — — — ( 312 ) — ( 312 ) Net income — — — — — 4,271 — 4,271 Balances, March 31, 2026 927 $ 1 77,946 $ 78 $ 1,052,472 $ ( 808,134 ) $ 5,461 $ 249,878 Stock-based compensation — — — — 813 — — 813 Restricted stock issued to employees and directors, net of cancellations and tax — — ( 370 ) — ( 2,200 ) — — ( 2,200 ) Preferred stock dividends — — — — — ( 315 ) — ( 315 ) Net income — — — — — 11,701 — 11,701 Balances, June 30, 2026 927 $ 1 77,576 $ 78 $ 1,051,085 $ ( 796,748 ) $ 5,461 $ 259,877 Balances, January 1, 2025 927 $ 1 76,565 $ 77 $ 1,044,176 $ ( 824,166 ) $ 4,975 $ 225,063 Stock-based compensation — — — — 848 — — 848 Restricted stock issued to employees and directors, net of cancellations and tax — — ( 68 ) — — — — — Preferred stock dividends — — — — — ( 312 ) — ( 312 ) Net loss — — — — — ( 11,679 ) — ( 11,679 ) Balances, March 31, 2025 927 $ 1 76,497 $ 77 $ 1,045,024 $ ( 836,157 ) $ 4,975 $ 213,920 Stock-based compensation — — — — 626 — — 626 Restricted stock issued to employees and directors, net of cancellations and tax — — 704 — ( 389 ) — — ( 389 ) Shares vested for Eagle Alcohol — — — — 5,000 — — 5,000 Preferred stock dividends — — — — — ( 315 ) — ( 315 ) Net loss — — — — — ( 10,997 ) — ( 10,997 ) Balances, June 30, 2025 927 $ 1 77,201 $ 77 $ 1,050,261 $ ( 847,469 ) $ 4,975 $ 207,845 See accompanying notes to condensed consolidated financial statements. 5 ALTO INGREDIENTS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND BASIS OF PRESENTATION. Organization and Business – The condensed consolidated financial statements include, for all periods presented, the accounts of Alto Ingredients, Inc., a Delaware corporation (“Alto Ingredients”), and its direct and indirect wholly-owned subsidiaries (collectively, the “Company”), including Kinergy Marketing LLC, an Oregon limited liability company (“Kinergy”), Alto Nutrients, LLC, a California limited liability company (“Alto Nutrients”), Alto Op Co., a Delaware corporation, Alto Pekin, LLC, a Delaware limited liability company (“Alto Pekin”) and Alto ICP, LLC, a Delaware limited liability company (“ICP”), and the Company’s production facilities in Oregon and Idaho. On January 1, 2025, the Company’s wholly-owned subsidiary, Alto Carbonic, LLC (“Alto Carbonic”), acquired Kodiak Carbonic, LLC, a beverage-grade liquid carbon dioxide, or CO 2 , processor, for $ 7.6 million. Alto Carbonic’s facility is co-located at the Company’s Columbia ethanol plant in Boardman, Oregon. The Company began reporting the results of Alto Carbonic in the Company’s Western Production segment on January 1, 2025. The Company produces and distributes specialty alcohols, renewable fuels and essential ingredients. The Company also markets fuel-grade ethanol produced by third parties. The Company’s production facilities in Pekin, Illinois are located in the heart of the Corn Belt. The Company’s two production facilities in Boardman, Oregon and Burley, Idaho are located in close proximity to both feed and fuel-grade ethanol customers. The Company has a combined alcohol production capacity of 330 million gallons per year and produces, on an annualized basis, over 1.2 million tons of essential ingredients. The Company’s Eagle Alcohol business specializes in break bulk distribution of specialty alcohols. The Company focuses on Health, Home & Beauty ; Food & Beverage ; Industry & Agriculture; Essential Ingredients ; and Renewable Fuels markets. Products for the Health, Home & Beauty market include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for the Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other products for paint applications, inks, vehicle fluids and fertilizers. Products for Essential Ingredients markets include gas and liquid CO 2 , dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. Products for Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels. The Company’s production facilities, other than its Magic Valley plant located in Burley, Idaho, were operating for all periods presented subject to scheduled and unscheduled downtimes to address facility repair and maintenance. In January 2024, the Company temporarily hot-idled its Magic Valley facility to minimize losses from negative regional crush margins and to expedite the installation of additional equipment to achieve the intended production rate, quality and consistency from the Company’s corn oil and high protein system at the facility. The Company restarted its Magic Valley facility in July 2024 and by October 2024, the facility consistently achieved average ethanol production rates at full capacity, the protein content yield from the plant reached 50 % or greater, and the Company was able to expand its corn oil yields. Increases in regional corn basis and declining market prices for protein and corn oil resulted in overall margin compression, outweighing the economic benefits of these plant improvements. As a consequence, the Company cold-idled its Magic Valley facility on December 31, 2024, and through the filing of this report, to minimize financial losses. The Company continues to provide ethanol terminaling services at the plant. Basis of Presentation – Interim Financial Statements – The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Results for interim periods should not be considered indicative of results for a full year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in Note 1 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. 6 Accounts Receivable and Allowance for Credit Losses – Trade accounts receivable is presented at original invoice amount, net of the allowance for credit losses. The Company sells specialty alcohols to large consumer product companies, sells fuel-grade ethanol to gasoline refining and distribution companies, sells essential ingredients such as dried yeast for human and pet food and to animal feed customers, including distillers grains to export markets, sells those same and other feed co-products to dairy operators and animal feedlots and sells corn oil to poultry, renewable diesel and biodiesel customers, in each case generally without requiring collateral. The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected. The Company regularly reviews accounts receivable and based on assessments of current customer creditworthiness, estimates the portion, if any, of the customer balance that will not be collected. Of the accounts receivable balance, approximately $ 59,716,000 and $ 41,379,000 at June 30, 2026 and December 31, 2025, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for credit losses was $ 38,000 and $ 76,000 as of June 30, 2026 and December 31, 2025, respectively. The Company recorded a credit loss recovery of $ 23 ,000 and $ 16 ,000 for the three months ended June 30, 2026 and 2025, respectively. The Company recorded a credit loss recovery of $ 38 ,000 and $ 1 ,000 for the six months ended June 30, 2026 and 2025, respectively. The Company does not have any off-balance sheet credit exposure related to its customers. Transferable Tax Credits, net – The Company generates and recognizes tax credits under Section 45Z of the Internal Revenue Code for domestic clean fuel production. The Company accounts for these tax credits under IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance . In accordance with IAS 20, the tax credits are recognized when there is reasonable assurance the Company will comply with the applicable provisions of the Internal Revenue Code and that the tax credits will be received. Financial Instruments – The carrying values of cash and cash equivalents, restricted cash, accounts receivable, derivative assets, accounts payable, accrued liabilities and derivative liabilities are reasonable estimates of their fair values because of the short maturity of these items. The Company believes the carrying values of its long-term debt instruments are not considered materially different than their fair values. Estimates and Assumptions – The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates are required as part of determining the allowance for credit losses, net realizable value of inventory, long-lived asset impairments, valuation allowances on deferred income taxes, the potential outcome of future tax consequences of events recognized in the Company’s financial statements or tax returns, and the valuation of assets acquired, and liabilities assumed as a result of business combinations. Actual results and outcomes may materially differ from management’s estimates and assumptions. 2. SEGMENTS. A segment is a component of an enterprise whose operating results are regularly reviewed by the enterprise’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Company’s CODM is the Company’s executive committee, which is led by the Company’s Chief Executive Officer (“CEO”) and includes its Chief Financial Officer, Chief Operating Officer, Chief Commercial Officer and Chief Legal Officer (“ Executive Committee ”). The Company manages and assesses the performance of its reportable segments by its gross profit (loss). As part of the Executive Committee’s review of segment-level performance, each member of the Executive Committee reviews the gross profit of the Company’s reportable segments and provides expertise and analysis from their respective areas which drive the evaluation of the performance of the Company’s reportable segments and allocation of resources to those segments. Even though the CEO has the authority to override the other members for strategic or other reasons, key decisions are made jointly by the Executive Committee. The Company reports financial and operating performance in three reportable segments (1) Pekin production, which includes three production facilities located in Pekin, Illinois (“Pekin Campus”), (2) marketing and distribution, which includes marketing and merchant trading for Company-produced specialty alcohols, fuel-grade ethanol and essential ingredients, and sales of fuel-grade ethanol sourced from third parties, and (3) Western production, which includes the Company’s two production facilities located in Burley, Idaho and Boardman, Oregon, and its liquid CO 2 plant on an aggregated basis (“Western production”). 7 The following tables set forth certain financial data for the Company’s operating segments (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2026 2025 2026 2025 Net Sales Pekin Campus production: Alcohol sales $ 114,370 $ 94,155 $ 222,321 $ 201,390 Essential ingredient sales 45,071 39,565 89,064 84,183 Intersegment sales 229 183 492 481 Total Pekin Campus sales 159,670 133,903 311,877 286,054 Marketing and distribution: Alcohol sales, gross $ 54,612 $ 58,106 $ 101,889 $ 107,101 Alcohol sales, net 60 80 109 142 Intersegment sales 2,512 2,334 4,962 4,840 Total marketing and distribution sales 57,184 60,520 106,960 112,083 Western production: Alcohol sales $ 20,798 $ 16,604 $ 37,479 $ 32,798 Essential ingredient sales 8,843 8,250 16,123 16,058 Intersegment sales 449 505 848 769 Total Western production sales 30,090 25,359 54,450 49,625 Corporate and other 1,944 1,676 3,393 3,304 Intersegment eliminations ( 3,190 ) ( 3,022 ) ( 6,302 ) ( 6,090 ) Net sales as reported $ 245,698 $ 218,436 $ 470,378 $ 444,976 Cost of goods sold: Pekin Campus production $ 148,148 $ 139,748 $ 292,918 $ 294,974 Marketing and distribution 53,404 56,518 99,442 104,167 Western production 27,955 23,501 52,707 49,024 Corporate and other 1,010 1,705 2,046 3,386 Intersegment eliminations ( 1,455 ) ( 1,099 ) ( 2,590 ) ( 2,831 ) Cost of goods sold as reported $ 229,062 $ 220,373 $ 444,523 $ 448,720 Gross profit (loss): Pekin Campus production $ 11,522 $ ( 5,845 ) $ 18,959 $ ( 8,920 ) Marketing and distribution 3,780 4,002 7,518 7,916 Western production 2,135 1,858 1,743 601 Corporate and other 934 ( 29 ) 1,347 ( 82 ) Intersegment eliminations ( 1,735 ) ( 1,923 ) ( 3,712 ) ( 3,259 ) Gross profit (loss) as reported $ 16,636 $ ( 1,937 ) $ 25,855 $ ( 3,744 ) Income (loss) before provision for income taxes: Pekin Campus production $ 9,667 $ ( 9,923 ) $ 15,276 $ ( 17,291 ) Marketing and distribution 1,282 1,795 2,707 3,359 Western production 2,106 ( 1,453 ) 1,100 ( 5,356 ) Corporate and other ( 1,354 ) ( 1,416 ) ( 3,111 ) ( 3,388 ) $ 11,701 $ ( 10,997 ) $ 15,972 $ ( 22,676 ) Depreciation and amortization expense: Pekin Campus production $ 5,589 $ 5,348 $ 11,091 $ 10,804 Western production 735 845 1,472 1,483 Corporate and other 128 172 256 344 $ 6,452 $ 6,365 $ 12,819 $ 12,631 Interest expense, net of capitalized interest: Pekin Campus production $ 642 $ 615 $ 1,280 $ 1,226 Marketing and distribution 76 81 162 163 Western production 478 1,430 1,228 2,789 Corporate and other 764 685 1,488 1,362 $ 1,960 $ 2,811 $ 4,158 $ 5,540 8 The following table sets forth the Company’s total assets by operating segment (in thousands): June 30, 2026 December 31, 2025 Total assets: Pekin Campus production $ 215,965 $ 208,947 Marketing and distribution 109,125 103,911 Western production 45,593 43,131 Corporate and other 26,387 32,797 $ 397,070 $ 388,786 3. INVENTORIES. Inventories consisted primarily of bulk ethanol, specialty alcohols, corn, essential ingredients and unleaded fuel, and are valued at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Inventory is net of a valuation allowance of $ 0 and $ 1,007,000 as of June 30, 2026 and December 31, 2025, respectively. Inventory balances consisted of the following (in thousands): June 30, 2026 December 31, 2025 Finished goods $ 31,838 $ 40,735 Raw materials 8,788 10,041 Work in progress 4,631 4,620 Other 6,352 6,280 Total $ 51,609 $ 61,676 4. DERIVATIVES. The business and activities of the Company expose it to a variety of market risks, including risks related to changes in commodity prices. The Company monitors and manages these financial exposures as an integral part of its risk management program. This program recognizes the unpredictability of financial markets and seeks to reduce the potentially adverse effects that market volatility could have on operating results. Commodity Risk – Cash Flow Hedges – The Company uses derivative instruments to protect cash flows from fluctuations caused by volatility in commodity prices for periods of up to twelve months in order to protect gross profit margins from potentially adverse effects of market and price volatility on alcohol sales and purchase commitments where the prices are set at a future date and/or if the contracts specify a floating or index-based price. In addition, the Company hedges anticipated sales of alcohol to minimize its exposure to the potentially adverse effects of price volatility. These derivatives may be designated and documented as cash flow hedges and effectiveness is evaluated by assessing the probability of the anticipated transactions and regressing commodity futures prices against the Company’s purchase and sales prices. Ineffectiveness, which is defined as the degree to which the derivative does not offset the underlying exposure, is recognized immediately in cost of goods sold. For the three and six months ended June 30, 2026 and 2025, the Company did not designate any of its derivatives as cash flow hedges. Commodity Risk – Non-Designated Hedges – The Company uses derivative instruments to lock in prices for certain amounts of corn and alcohols by entering into exchange-traded futures contracts or options for those commodities. These derivatives are not designated for hedge accounting treatment. The changes in fair value of these contracts are recorded on the balance sheet and recognized immediately in cost of goods sold. The Company recognized net gains of $ 2,250,000 and $ 2,598,000 as the change in the fair value of these contracts for the three months ended June 30, 2026 and 2025, respectively. The Company recognized net gains of $ 10,666,000 and $ 4,371,000 as the change in the fair value of these contracts for the six months ended June 30, 2026 and 2025, respectively. 9 Non-Designated Derivative Instruments – The classification and amounts of the Company’s derivatives not designated as hedging instruments, and related cash collateral balances, are as follows (in thousands): As of June 30, 2026 Assets Liabilities  Type of Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value Cash collateral balance Restricted cash $ — Commodity contracts Derivative instruments $ 4,173 Derivative instruments $ 277 As of December 31, 2025 Assets Liabilities Type of Instrument Balance Sheet Location Fair Value Balance Sheet Location Fair Value Cash collateral balance Restricted cash $ 2,258 Commodity contracts Derivative instruments $ 525 Derivative instruments $ 1,067 The above amounts represent the gross balances of the contracts; however, the Company does have a right of offset with each of its derivative brokers, but the Company’s intent is to close out positions individually, therefore, the positions are reported at gross. The classification and amounts of the Company’s realized and unrealized gains and losses for its derivatives not designated as hedging instruments are as follows (in thousands): Realized Gains For the Three Months Ended June 30, Type of Instrument Statements of Operations Location 2026 2025 Commodity contracts Cost of goods sold $ 5,884 $ 4,715 $ 5,884 $ 4,715 Realized Gains For the Six Months Ended June 30, Type of Instrument Statements of Operations Location 2026 2025 Commodity contracts Cost of goods sold $ 6,227 $ 4,854 $ 6,227 $ 4,854 Unrealized Losses For the Three Months Ended June 30, Type of Instrument Statements of Operations Location 2026 2025 Commodity contracts Cost of goods sold $ ( 3,634 ) $ ( 2,117 ) $ ( 3,634 ) $ ( 2,117 ) 10 Unrealized Gains (Losses) For the Six Months Ended June 30, Type of Instrument Statements of Operations Location 2026 2025 Commodity contracts Cost of goods sold $ 4,439 $ ( 483 ) $ 4,439 $ ( 483 ) 5. DEBT. Long-term borrowings are summarized as follows (in thousands): June 30, 2026 December 31, 2025 Kinergy line of credit $ 34,628 $ 29,586 Orion term loan 29,900 55,000 64,528 84,586 Less unamortized debt discount ( 1,891 ) ( 2,288 ) Less unamortized debt financing costs ( 2,168 ) ( 2,671 ) Less current portion — ( 16,600 ) Long-term debt $ 60,469 $ 63,027 Excess Availability – As of June 30, 2026, Kinergy had $ 41.3 million in unused borrowing availability under its line of credit and the Company had $ 65.0 million that may be available for capital improvement projects under its Orion term loan, subject to certain conditions. 6. COMMITMENTS AND CONTINGENCIES. Sales Commitments – At June 30, 2026, the Company had entered into sales contracts with its major customers to sell certain quantities of alcohol and essential ingredients. The Company had open indexed-price alcohol sales contracts for 90,485,000 gallons as of June 30, 2026 and open fixed-price alcohol sales contracts totaling $ 193,341,000 as of June 30, 2026. The Company had open fixed-price sales contracts for essential ingredients totaling $ 10,004,000 and open indexed-price sales contracts of essential ingredients for 12,000 tons as of June 30, 2026. These sales contracts are scheduled to be completed throughout 2026. Purchase Commitments – At June 30, 2026, the Company had indexed-price purchase contracts to purchase 22,534,000 gallons of alcohol and fixed-price purchase contracts to purchase $ 593,000 of alcohol from its suppliers. The Company had fixed-price purchase contracts to purchase $ 33,181,000 of corn from its suppliers as of June 30, 2026. The Company had indexed-price contracts to purchase 3,323,000 MMBTU of natural gas as of June 30, 2026. The Company also had future commitments for certain capital projects totaling $ 12,013,000 . These purchase commitments are scheduled to be satisfied throughout 2026. Litigation – General – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, environmental regulations, and others. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. If the loss is not probable or the amount of the loss cannot be reasonably estimated, the Company discloses the claim if the likelihood of a potential loss is reasonably possible and the amount involved could be material. While the Company can provide no assurances, the Company does not expect that any of its pending legal proceedings will have a material impact on the Company’s financial condition or results of operations. 11 7. PENSION AND RETIREMENT BENEFIT PLANS. The Company sponsors a defined benefit pension plan (the “Retirement Plan”) and a healthcare and life insurance plan (the “Postretirement Plan”). The Retirement Plan is noncontributory and covers only “grandfathered” unionized employees at the Company’s Pekin, Illinois facility who fulfill minimum age and service requirements. Benefits are based on a prescribed formula based upon the employee’s years of service. The Retirement Plan, which is part of a collective bargaining agreement, covers only union employees hired prior to November 1, 2010. The Company uses a December 31 measurement date for its Retirement Plan. The Company’s funding policy is to make the minimum annual contribution required by applicable regulations. As of December 31, 2025, the Retirement Plan’s accumulated projected benefit obligation was $ 18.0 million, with a fair value of plan assets of $ 22.1 million. The overfunded amount of $ 4.1 million is recorded on the Company’s condensed consolidated balance sheets in other assets. Components of the Retirement Plan’s net periodic cost are as follows (in thousands): Three Months Ended June 30, 2026 2025 Interest cost $ 236 $ 234 Service cost 50 57 Expected return on Plan Assets ( 331 ) ( 313 ) Net periodic benefit $ ( 45 ) $ ( 22 ) Six Months Ended June 30, 2026 2025 Interest cost $ 472 $ 468 Service cost 100 114 Expected return on Plan Assets ( 662 ) ( 625 ) Net periodic benefit $ ( 90 ) $ ( 43 ) The Postretirement Plan provides postretirement medical benefits and life insurance to certain “grandfathered” unionized employees at the Company’s Pekin, Illinois facility. Employees hired after December 31, 2000 are not eligible to participate in the Postretirement Plan. The Postretirement Plan is contributory, with contributions required at the same rate as active employees. Benefit eligibility under the plan reduces at age 65 from a defined benefit to a defined dollar cap based upon years of service. As of December 31, 2025, the Postretirement Plan’s accumulated projected benefit obligation was $ 4.0 million and is recorded on the Company’s condensed consolidated balance sheets in other liabilities. The Company’s funding policy is to make the minimum annual contribution required by applicable regulations. Components of the Postretirement Plan’s net periodic cost are as follows (in thousands): Three Months Ended June 30, 2026 2025 Interest cost $ 47 $ 48 Service cost 4 4 Amortization of net gains ( 7 ) ( 27 ) Net periodic expense $ 44 $ 25 12 Six Months Ended June 30, 2026 2025 Interest cost $ 93 $ 97 Service cost 8 7 Amortization of net gains ( 13 ) ( 54 ) Net periodic expense $ 88 $ 50 8. FAIR VALUE MEASUREMENTS. The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels, as follows: ● Level 1 – Observable inputs – unadjusted quoted prices in active markets for identical assets and liabilities; ● Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability through corroboration with market data; and ● Level 3 – Unobservable inputs – includes amounts derived from valuation models where one or more significant inputs are unobservable. For fair value measurements using significant unobservable inputs, a description of the inputs and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period. Pooled separate accounts – Pooled separate accounts invest primarily in domestic and international stocks, commercial paper or single mutual funds at December 31, 2025. The net asset value is used as a practical expedient to determine fair value for these accounts. Each pooled separate account provides for redemptions by the Retirement Plan at reported net asset values per share, with little to no advance notice requirement, therefore these funds are classified within Level 2 of the valuation hierarchy. Derivative Financial Instruments – The Company’s derivative financial instruments consist of commodity positions. The fair values of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs. Transferable Tax Credits – Transferable tax credits consist of the Company’s estimated net proceeds from the sale of credits. The fair value is based on estimates of, among others, actual gallons qualified for sale, gross tax credit per gallon, sales discount, broker fees and insurance costs and are designated as Level 3 inputs. See Note 1 for additional information. The following table summarizes recurring and nonrecurring fair value measurements by level at June 30, 2026 (in thousands): Fair Value Level 1 Level 2 Level 3 Assets: Transferable tax credits, net $ 8,265 $ — $ — $ 8,265 Derivative financial instruments 4,173 4,173 — — $ 12,438 $ 4,173 $ — $ 8,265 Liabilities: Derivative financial instruments $ 277 $ 277 $ — $ — 13 The following table summarizes recurring fair value measurements by level at December 31, 2025 (in thousands): Benefit Plan Percentage Fair Value Level 1 Level 2 Level 3 Allocation Assets: Derivative financial instruments $ 525 $ 525 $ — $ — Transferable tax credits 7,500 — — 7,500 Defined benefit plan assets(1) (pooled separate accounts): Large U.S. Equity(2) 8,060 — 8,060 — 36 % Small/Mid U.S. Equity(3) 3,574 — 3,574 — 16 % International Equity(4) 3,479 — 3,479 — 16 % Fixed Income(5) 6,988 — 6,988 — 32 % $ 30,126 $ 525 $ 22,101 $ 7,500 Liabilities: Derivative financial instruments $ 1,067 $ 1,067 $ — $ — (1) Included in other assets in the condensed consolidated balance sheets. (2) This category includes investments in funds comprised of equity securities of large U.S. companies. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. (3) This category includes investments in funds comprised of equity securities of small- and medium-sized U.S. companies. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. (4) This category includes investments in funds comprised of equity securities of foreign companies including emerging markets. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. (5) This category includes investments in funds comprised of U.S. and foreign investment-grade fixed income securities, high-yield fixed income securities that are rated below investment-grade, U.S. treasury securities, mortgage-backed securities, and other asset-backed securities. The funds are valued using the net asset value method in which an average of the market prices for the underlying investments is used to value the fund. The following table summarizes the roll-forward of Level 3 fair value measurements as of June 30, 2026 (in thousands): Fair Value as of December 31, 2025 $ 7,500 Generated transferable tax credits 3,900 Other 130 Fair Value as of March 31, 2026 $ 11,530 Generated transferable tax credits 5,112 Proceeds from sale of 2025 tax credits ( 8,852 ) Other 475 Fair Value as of June 30, 2026 $ 8,265 14 9. EARNINGS PER SHARE. The following tables compute basic and diluted earnings per share (in thousands, except per share data): Three Months Ended June 30, 2026 Income Numerator Shares Denominator Per-Share Amount Consolidated net income $ 11,701 Less: Preferred stock dividends ( 315 ) Basic income per share: Income attributable to common stockholders $ 11,386 75,588 $ 0.15 Add: Dilutive securities — 1,483 Diluted income per share: Income attributable to common stockholders $ 11,386 77,071 $ 0.15 Six Months Ended June 30, 2026 Income Numerator Shares Denominator Per-Share Amount Consolidated net income $ 15,972 Less: Preferred stock dividends ( 627 ) Basic income per share: Income attributable to common stockholders $ 15,345 75,191 $ 0.20 Add: Dilutive securities — 1,418 Diluted income per share: Income attributable to common stockholders $ 15,345 76,609 $ 0.20 Three Months Ended June 30, 2025 Loss Numerator Shares Denominator Per-Share Amount Net loss $ ( 10,997 ) Less: Preferred stock dividends ( 315 ) Basic and diluted loss per share: Loss attributable to common stockholders $ ( 11,312 ) 74,611 $ ( 0.15 ) Six Months Ended June 30, 2025 Loss Numerator Shares Denominator Per-Share Amount Net loss $ ( 22,676 ) Less: Preferred stock dividends ( 627 ) Basic and diluted loss per share: Loss attributable to common stockholders $ ( 23,303 ) 74,232 $ ( 0.31 ) There were an additional aggregate potentially dilutive weighted-average shares of 981,000 from convertible securities outstanding for the three and six months ended June 30, 2026 and June 30, 2025. These securities were not considered in calculating diluted net income (loss) per share for the three and six months ended June 30, 2026 and 2025, as their effect would have been anti-dilutive. 15