UNITED
STATES

 SECURITIES
AND EXCHANGE COMMISSION

 Washington,
D.C. 20549

 FORM

 (Mark
One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the fiscal year ended December 31, 2023

 OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 For
the transition period from to

 Commission
file number: 000-21467

 ALTO

 (Exact
name of registrant as specified in its charter)

 Delaware

 41-2170618

 (State or other jurisdiction of
 incorporation or organization)

 (I.R.S. Employer
 Identification No.)

 1300 South Second Street, Pekin, Illinois

 61554

 (Address of principal executive offices)

 (Zip Code)

 Registrant's
telephone number, including area code: (916) 403-2123

 Securities
registered pursuant to Section 12(b) of the Act:

 Title of each Class

 Trading Symbol

 Name of Exchange on Which Registered

 Common Stock, $0.001 par value

 ALTO

 The Nasdaq Stock Market LLC
 ( Nasdaq Capital Market)

 Securities
registered pursuant to Section 12(g) of the Act: None

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes No

by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No

by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 Large accelerated filer

 Accelerated filer

 Non-accelerated filer

 Smaller reporting company

 Emerging growth company

 If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.

 If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b).

by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No

 The
aggregate market value of the voting and non-voting common equity held by nonaffiliates of the registrant computed by reference to the
closing sale price of such stock, was approximately $ 210.8 million as of June 30, 2023, the last business day of the registrant's
most recently completed second fiscal quarter.

 As
of March 12, 2024, there were 75,697,150 shares of the registrant's common stock, $0.001 par value per share, and 896 shares of
the registrant's non-voting common stock, $0.001 par value per share, outstanding.

 DOCUMENTS
INCORPORATED BY REFERENCE: Part III incorporates by reference certain information from the registrant's proxy statement (the "Proxy
Statement") for the 2024 Annual Meeting of Stockholders to be filed on or before April 29, 2024.

 TABLE
OF CONTENTS

 PAGE

 Item 1.

 Business

 Item 1A.

 Risk Factors

 Item 1B.

 Unresolved Staff Comments

 Item 1C.

 Cybersecurity

 Item 2.

 Properties

 Item 3.

 Legal Proceedings

 Item 4.

 Mine Safety Disclosures

 Item 5.

 Market
 For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 Item 6.

 [Reserved]

 Item 7.

 Management's Discussion
 and Analysis of Financial Condition and Results of Operations

 Item 7A.

 Quantitative
 and Qualitative Disclosures About Market Risk

 Item 8.

 Financial Statements and Supplementary
 Data

 Item 9.

 Changes in and Disagreements
 with Accountants on Accounting and Financial Disclosure

 Item 9A.

 Controls and Procedures

 Item 9B.

 Other Information

 Item 9C.

 Disclosure Regarding Foreign
 Jurisdictions that Prevent Inspections

 Item 10.

 Directors, Executive Officers
 and Corporate Governance

 Item 11.

 Executive Compensation

 Item 12.

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

 Item 13.

 Certain Relationships and
 Related Transactions, and Director Independence

 Item 14.

 Principal Accountant Fees
 and Services

 Item 15.

 Exhibits and Financial Statement
 Schedules

 Item 16.

 Form 10-K Summary

 Index to Consolidated
 Financial Statements

 - i -

 CAUTIONARY
STATEMENT

 All statements included or incorporated by
reference in this Annual Report on Form 10-K, other than statements or characterizations of historical fact, are forward-looking
statements. Examples of forward-looking statements include, but are not limited to, statements concerning projected net sales, costs
and expenses, and margins; projected additional EBITDA or Adjusted EBITDA; the expected timing, cost and effects of our capital
improvement projects, including our carbon capture and storage project and our corn oil and high protein system at our Magic Valley
facility, and other strategic and business initiatives; expectations surrounding our repairs and maintenance activities and their
timing, costs and effects; our business outlook and expected performance in future periods; the sufficiency of our liquidity and
capital resources; our ability to continue as a going concern; our accounting estimates, assumptions and
judgments; the demand for specialty alcohols and essential ingredients; the competitive nature of and anticipated growth in our
industry; production capacity and goals; our ability to consummate acquisitions, if any, and integrate their operations
successfully; and our prospective needs for additional capital. These forward-looking statements are based on our current
expectations, estimates, approximations and projections about our industry and business, management's beliefs, and certain
assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as
"anticipates," "expects," "intends," "plans," "predicts,"
"believes," "seeks," "estimates," "may," "will," "should,"
"would," "could," "potential," "continue," "ongoing," similar
expressions and variations or negatives of these words. These statements are not guarantees of future performance and are subject to
risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and
adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under
"Risk Factors" in Item 1A of this report. These forward-looking statements speak only as of the date of this report. We
undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by
law.

 - ii -

 PART
I

 Item
1. Business.

 Business

 We produce and distribute renewable fuel and essential
ingredients. We are also the largest producer of specialty alcohols 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 350 million gallons, including both fuel-grade ethanol and specialty alcohols ranging from industrial-,
pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount, we can produce up to 110 million gallons annually
of specialty alcohols, depending on our product mix among high-quality beverage-grade alcohol and alcohols of other quality specifications.
We market and distribute all the alcohols produced at our facilities as well as alcohols produced by third parties. In 2023, we marketed
and distributed approximately 383 million gallons combined of our own alcohols as well as fuel-grade ethanol produced by third parties,
and over 1.5 million tons of essential ingredients on a dry matter basis.

 We also specialize in break bulk distribution of
specialty alcohols through our Eagle Alcohol subsidiary. We purchase bulk alcohol from suppliers and then store, denature, package, and
resell alcohol products in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols.
We deliver products to customers in the beverage, food, industrial and related-process industries via our own dedicated trucking fleet
and common carrier.

 We report our financial and operating performance
in three segments: (1) Pekin production, which includes the production and sale of alcohols and essential ingredients produced at our
three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus, (2) marketing and distribution, which includes
marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade
ethanol sourced from third parties, and (3) Western production, which includes the production and sale of renewable fuel and essential
ingredients produced at our two western production facilities on an aggregated basis, none of which are individually so significant as
to be considered a separately reportable segment.

 Our
mission is to produce the highest quality, sustainable ingredients from renewable resources 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.

Segments

 We produce specialty alcohols, fuel-grade ethanol
and essential ingredients, focusing on five key markets: Health, Home & Beauty; Food & Beverage; Industry &
Agriculture; Essential Ingredients; and Renewable Fuels. Products for the Health, Home & Beauty markets include
specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for the Food
& Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils.
Products for Industry & Agriculture markets include alcohols and other products for paint applications and fertilizers. Products
for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and
liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption. Our products for the Renewable
Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels. Our
specialty alcohols for the Industry & Agriculture, Food & Beverage and Health, Home & Beauty markets represented
approximately 6%, 4% and 2%, respectively, of our sales in 2023 from these three product segments.

 - 1 -

 We produce our alcohols and essential ingredients
at our production facilities described below. Our production facilities located in Illinois are in the heart of the Corn Belt, benefit
from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide our products to both domestic
and international markets via truck, rail or barge. Our production facilities located in Oregon and Idaho are near their respective fuel
and feed customers, offering significant timing, transportation cost and logistical advantages.

 All of our production facilities, other than our
Magic Valley plant, were operating for all of 2023, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.
On January 1, 2023, we temporarily hot-idled our Magic Valley production facility due to extreme natural gas prices, other unfavorable
market conditions and to facilitate the installation of our new corn oil and high protein system. We brought the facility back online
in April 2023. In January 2024, we again temporarily hot-idled our Magic Valley production facility to minimize losses from negative regional
crush margins and to expedite the installation of additional equipment needed to achieve our intended production rate, quality and consistency
from our corn oil and high protein system. We intend to restart Magic Valley production in the second quarter once the upgrades are complete
and crush margins have improved. As market conditions change, we may increase, decrease or idle production at one or more operating facilities
or resume operations at any idled facility.

 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 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 fuel customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and
gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade
ethanol and manage the logistics and timing of delivery. Our customers collectively require fuel-grade ethanol volumes in excess of the
supplies we produce at our facilities. We secure additional fuel-grade ethanol supplies from third-party ethanol producers. 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 our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities. These customers
use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry
and biodiesel customers. We do not market essential ingredients from other producers.

 See
"Note 5 – Segments" to our Notes to Consolidated Financial Statements included elsewhere in this report for financial
information about our business segments.

 - 2 -

 Company
History

 We
are a Delaware corporation formed in 2005. Our common stock trades on The Nasdaq Capital Market under the symbol "ALTO."
Our Internet website address is  Information contained on our website is not part of this Annual Report
on Form 10-K. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such
reports filed with or furnished to the Securities and Exchange Commission and other Securities and Exchange Commission filings are available
free of charge through our website as soon as reasonably practicable after the reports are electronically filed with, or furnished to,
the Securities and Exchange Commission.

 Business
Strategy

 The key elements of our business
and growth strategy include:

 Focus
 on our customer relationships. Although we continue to produce more fuel-grade ethanol
 than specialty alcohols, we have repositioned our business to focus on expanding the production
 and sale of specialty alcohols and essential ingredients. As a result, our business is now
 more service-oriented and focused on specialty products compared to a price-taking business
 focused on commodity products. We strive to make our business ever more customer-centric
 to enable our premium services to support premium prices and new differentiated and higher-margin
 products.

 Implement carbon capture and storage at our Pekin Campus, lowering our carbon footprint. The
 Inflation Reduction Act of 2022 raised the carbon capture tax credit to $85 per metric ton, reflecting the 45Q tax incentive
 benefits established under the Act. We produce over 600,000 metric tons of carbon dioxide, CO 2, per year at our Pekin
 Campus, which sits atop the Mount Simon formation, identified as one of the best and largest aquafers in the country for carbon
 storage. We are prioritizing our carbon capture and storage, or CCS, project over other long-term capital projects. We believe the
 financial benefits under the Inflation Reduction Act and the substantial additional economic benefits of the environmental
 attributes associated with low carbon ethanol will result in excellent returns on investment.

 Expand
 product offerings. We are pursuing initiatives to broaden our product offerings to appeal
 to a wider range of customers and uses in our key markets. For example, we have secured ISO
 9001, ICH Q7 and EXCiPACT certifications at all of our Pekin Campus production facilities.
 These certifications appeal to customers with stringent quality demands and enable us to
 offer alcohol certified for use as an active pharmaceutical ingredient, or API, and as an
 excipient—an inactive component of a drug or medication, such as solvents, carriers
 or tinctures—in the pharmaceutical industry. All ingredients we produce for use in
 beverages, human and pet foods are third-party certified for ISO 9001 and hazard analysis
 and critical control points (HACCP). In addition, all of our alcohols with pharmaceutical
 end-uses are ICH Q7, EXCiPACT and ISO 9001 certified, and our animal feed production, including
 at our Oregon and Idaho facilities, has undergone third-party Food Safety Modernization Act
 (FSMA) auditing. We are reviewing additional certifications and product positioning within
 our key markets to expand the range of customers we serve and the uses our products support.

 Implement new equipment and technologies.
We are evaluating and plan to implement new equipment and technologies to increase our production yields, improve our operating efficiencies
and reliability, reduce our overall carbon footprint, diversify our products and revenues, and increase our profitability as financial
resources and market conditions justify these investments.

 - 3 -

 Increase
 our break bulk capabilities. With the addition of Eagle Alcohol, we have further diversified
 our business to include break bulk distribution of specialty alcohols. We can now store,
 denature, package and resell alcohol in smaller sizes, including tank trucks, totes and drums
 that typically garner a premium price to bulk specialty alcohols. We deliver these products
 to customers in the Health, Home & Beauty, Food & Beverage and related-process
 industries using our own trucking fleet and common carrier. We intend to leverage Eagle Alcohol's
 transportation expertise across our entire distribution platform, replacing a portion of
 our third-party trucking services, reducing our logistics costs and improving margins. We
 are also in the process of expanding our distribution territory into new geographies such
 as Southern California.

 Evaluate
 and pursue strategic opportunities. We are examining opportunities to expand our business
 such as joint ventures, strategic partnerships, synergistic acquisitions and other opportunities.
 We intend to pursue these opportunities as financial resources and business prospects make
 these opportunities desirable.

 Competitive
Strengths

 We believe that our competitive strengths include:

 Customer and supplier relationships.
We have extensive and long-standing close customer and supplier relationships, both domestic and international, for our specialty alcohols
and essential ingredients. We have an excellent reputation for developing specialty alcohols under stringent quality control standards,
particularly at our Pekin Campus. Our quality management systems are supported by ISO 9001, ICH Q7, and EXCiPACT certifications which
are viewed by our customers as important attestations of our quality control standards.

 Diverse product mix. We offer
a wide range of specialty alcohol, essential ingredient and other products to meet customer demand. We offer multiple alcohol quality
grades ranging from industrial-grade alcohol to the highest beverage grade low moisture 200 proof alcohol available. We also offer a wide
variety of essential ingredients and other products for food, feed and other markets.

 Barriers
 to entry. Our production facilities use specialized equipment, technologies and processes
 to achieve stringent quality controls, higher yields and efficient production of alcohols
 and essential ingredients. Our specialized equipment, technologies and processes, together
 with our quality management certifications, strict regulatory requirements, and close customer
 and supplier relationships create significant barriers to entry to new market participants.

 Our
 experienced management. Our senior management team has a proven track record with significant
 operational and financial expertise and many years of experience in the alcohol production
 industry. Our senior executives have successfully navigated a wide variety of business and
 industry-specific challenges and deeply understand the business of successfully producing
 and marketing specialty alcohols and essential ingredients.

 - 4 -

 The
strategic location of our Midwest production facilities. We operate three distinct but integrated production facilities at our Pekin
Campus in the Midwest. We are able to participate from that location in the largest regional specialty alcohol market in the United States
as well as international markets.

 We
believe that our Midwest location enhances our overall hedging opportunities with a greater correlation to the highly liquid physical
and paper markets in Chicago.

 Our
 Midwest location provides excellent logistical access via rail, truck and barge. In particular,
 barge access via the Illinois River to the Mississippi River enables us to efficiently bring
 our products to international markets.

 The
 relatively unique wet milling process at one of our production facilities at our Pekin Campus
 allows us to extract the highest use and value from each component of the corn kernel. As
 a result, the wet milling process generates a higher level of cost recovery from corn than
 that produced at a dry mill.

 Our
 Midwest location allows us deep market insight and engagement in major specialty alcohol,
 fuel-grade ethanol, pet food and feed markets, thereby improving pricing opportunities.

 Our Midwest location sits atop the
Mount Simon formation, identified as one of the best and largest aquafers in the country for carbon storage, potentially allowing us to
benefit from this close proximity to store CO 2.

of Our Key Markets and Market Opportunity

 We produce specialty alcohols, fuel-grade ethanol
and essential ingredients, focusing on five key markets: Health, Home & Beauty; Food & Beverage; Industry &
Agriculture; Essential Ingredients; and Renewable Fuels.

 Health,
Home & Beauty

 Our
products for the health, home and beauty markets include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers,
disinfectants and cleaners. We offer a variety of specialty alcohols for the health, home and beauty markets, depending on usage and
regulatory requirements, including API-grade, United States Pharmacopeia, or USP, -grade ethyl alcohols, and industrial-grade ethyl alcohol.

 We
have ISO 9001, ICH Q7 and EXCiPACT certifications at each of our Pekin Campus production facilities, all of which are viewed as important
attestations of quality control standards. In particular, our ICH Q7 certification qualifies our specialty alcohols for use as an API,
and our EXCiPACT certification qualifies our specialty alcohols for use as an excipient in the pharmaceutical industry. These certifications
enable us to offer products to a wider group of customers and generally at more profitable margins.

 - 5 -

 Food & Beverage

 Our products for the food and beverage market include
specialty alcohols used in alcoholic beverages, flavor extracts and vinegar as well as corn germ used for corn oils and CO 2
used for beverage carbonation and dry ice. The principal specialty alcohol we offer for beverage-grade product is our grain neutral spirits,
or GNS, alcohol. In addition, we primarily sell FCC 190 and USP 190 Ultra into vinegar markets. We are also introducing new high-quality
192 proof and low-moisture 200-proof GNS products to our existing and target customers in the beverage, food, flavor, personal care and
pharmaceutical industries.

 We
believe the key drivers in the food and beverage market include consumer preferences for the social currency of brand authenticity and
heritage; consumers seeking unique and personalized experiences; improved consumer access to spirits products; the growth of craft distillers;
and the ability to meet wide-ranging consumer preferences through a broad diversity of spirits categories and cocktails.

 Industry & Agriculture

 Our products for the industry and agriculture market
include alcohols and other products for paint applications and fertilizers.

Ingredients

 Our
essential ingredients include dried yeast, corn gluten meal, corn gluten feed, and distillers grains and liquid feed used in commercial
animal feed and pet foods. We also sell yeast for human consumption. The raw materials for our essential ingredients are generated as
co-products from our production of alcohols. These co-products are further manufactured, altered and refined into our essential ingredients,
including for special customer applications.

 Many
of our essential ingredients are used in a variety of food products to affect their nutrition, including protein and fat content, as
well as other product attributes such as taste, texture, palatability and stability. Our high quality and high purity manufacturing enable
our customers to use some of our essential ingredients in human foods while others are used in pet foods and animal feed.

 We
expect the essential ingredients market to grow significantly due to global demand for higher-grade protein feed, such as feed used in
fisheries and other applications.

 Renewable
Fuels

 Our
renewable fuels products include fuel-grade ethanol used as transportation fuel and distillers corn oil used as a biodiesel feedstock.
Our renewable fuels business is supported by our own production of fuel-grade ethanol as well as fuel-grade ethanol produced by third
parties.

 Renewable
fuels, primarily fuel-grade ethanol, are used for a variety of purposes, including as octane enhancers for premium gasoline and to enable
refiners to produce greater quantities of lower octane blend stock; for fuel blending to extend fuel supplies and reduce reliance on
crude oil and refined products; and to comply with a variety of governmental programs, in particular, the national Renewable Fuel Standard,
or RFS, which was enacted to promote alternatives to fossil fuels. Under the RFS, the mandated use of all renewable fuels rose incrementally
and peaked at 36.0 billion gallons in 2022, of which 15.0 billion gallons were required to be produced from conventional, or corn-based,
ethanol. The RFS allows the Environmental Protection Agency, or EPA, to adjust the annual requirement based on certain facts and circumstances.
The EPA has set its annual requirements for conventional ethanol to 15.0 billion gallons for each of 2023, 2024 and 2025. See "—Governmental
Regulation".

 - 6 -

 According to the Renewable Fuels Association, the
domestic fuel-grade ethanol industry produced over 15.5 billion gallons of ethanol in 2023, up from 15.4 billion gallons in 2022. According
to the United States Department of Energy, total annual gasoline consumption in the United States is approximately 137 billion gallons
and total annual fuel-grade ethanol blended with gasoline represented approximately 10.4% of this amount in 2023. We anticipate that continued
limited opportunities for gasoline refinery expansions and the growing importance of reducing CO 2 emissions using renewable
fuels will generate additional growth in the demand for fuel-grade ethanol.

of Alcohol Production Process

production from starch- or sugar-based feedstock is a highly-efficient process. Modern alcohol production requires large amounts of corn,
or other high-starch grains, and water as well as chemicals, enzymes and yeast, in addition to natural gas and electricity.

 Dry
Milling Process

 In
the dry milling process, corn or other high-starch grain is first ground into flour, then slurried with water to form a mash. Enzymes
are added to the mash to convert the starch into dextrose, a simple sugar. The mash is processed through a high temperature cooking procedure,
which reduces bacteria levels prior to fermentation. The mash is then cooled and transferred to fermenters, where yeast is added and
the conversion of sugar to alcohol and CO2 begins.

 After fermentation, the resulting "beer"
is transferred to distillation where the alcohol is separated from the residual "stillage." The resulting alcohol is concentrated
to 190 proof using conventional distillation methods and then is dehydrated to approximately 200 proof, representing 100% alcohol levels,
in either a molecular sieve system or a grits system. For fuel-grade ethanol, the resulting anhydrous alcohol is then blended with approximately
2.5% denaturant, which is usually gasoline, and is then ready for shipment to renewable fuels markets. For specialty alcohols, the products
can be sold pure or as one of the Tobacco Tax & Trade Bureau (TTB) approved specially denatured alcohol (SDA) formulations to meet
customer specifications.

 The
residual stillage is separated into a coarse grain portion and a liquid portion through a screw press or centrifugation process. The
soluble liquid portion is concentrated to about 40% dissolved solids by an evaporation process. This intermediate state is called condensed
distillers solubles, or syrup. The coarse grain and syrup portions are then mixed to produce wet distillers grains, or WDG, or can be
mixed and dried to produce dried distillers grains with solubles, or DDGS. Both WDG and DDGS are high-protein animal feed products.

 Wet
Milling Process

 In
the wet milling process, corn or other high-starch grain is first soaked or "steeped" in sulfurous acid for approximately
24 hours to soften the whole corn kernel ahead of milling. After steeping, the grain goes through coarse milling to gently open the kernels
to separate the corn germ from which the corn oil can be further extracted in a separate process. The remaining fiber, gluten and starch
components are further separated and sold.

 The
stillage from the fermentation process is concentrated in an evaporator and is co-dried with the fiber component to be sold as corn gluten
feed. The gluten component is filtered and dried to produce a high protein corn gluten meal.

 The
starch is then processed into alcohol through fermentation. The fermentation process for alcohol at this stage is similar to the dry
milling process. In addition, we separate and dry yeast to produce distillers yeast.

 - 7 -

of Distillers Grains Market

 Distillers
grains are produced as a co-product of alcohol production and are valuable components of feed rations primarily to dairies and beef cattle
markets, both nationally and internationally. Our plants produce both WDG and DDGS. WDG is sold to customers proximate to the plants
and DDGS is delivered by truck, rail and barge to customers in domestic and international markets. Producing WDG also allows us to use
up to one-third less process energy, thus reducing production costs and lowering the carbon footprint of our production facilities.

 Historically,
the market price for distillers grains has generally tracked the price of corn. We believe that the market price of WDG and DDGS is determined
by a number of factors, including the market prices of corn, soybean meal and other competitive ingredients, the performance or value
of WDG and DDGS in a particular feed formulation and general market forces of supply and demand, including export markets for these co-products.
The market price of distillers grains is also often influenced by nutritional models that calculate the feed value of distillers grains
by nutritional content, as well as reliability of consistent supply.

 Customers

 We
market and sell through our wholly-owned subsidiary, Kinergy Marketing LLC, or Kinergy, all of the alcohols we produce. Kinergy also
markets fuel-grade ethanol produced by third parties. We market and sell through our wholly-owned subsidiary, Alto Nutrients, LLC, all
of the essential ingredients we produce. We also sell break bulk quantities through Eagle Alcohol to customers in the beverage, food,
industrial and related-process industries.

 We
have extensive and long-standing customer relationships, both domestic and international, for our specialty alcohols and essential ingredients,
including yeast for pet food and human foods. 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 fuel customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and
gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade
ethanol and manage the logistics and timing of delivery. We secure additional fuel-grade ethanol supplies from third-party fuel-grade
ethanol plants.

 We
market our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities. These customers
use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry,
renewable diesel and biodiesel customers. We do not market essential ingredients from other producers.

 Our
Pekin Campus production segment generated $502.2 million, $521.3 million and $498.2 million in net sales for the years ended December
31, 2023, 2022 and 2021, respectively, from the sale of alcohols. Our Pekin Campus production segment generated $217.7 million, $225.9
million and $189.5 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of essential
ingredients.

 - 8 -

 During 2023, 2022 and 2021, our Pekin Campus production
segment sold an aggregate of approximately 208.9 million, 204.6 million and 213.0 million gallons of alcohols and 878,400, 850,300 and
875,100 tons of essential ingredients, respectively, on a dry matter basis.

 Our
Western production segment generated $167.0 million, $253.6 million and $107.9 million in net sales for the years ended December 31,
2023, 2022 and 2021, respectively, from the sale of alcohols. Our Western production segment generated $57.3 million, $90.2 million and
$31.1 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from the sale of essential ingredients.

 During 2023, 2022 and 2021, our Western production
segment sold an aggregate of approximately 67.0 million, 92.4 million and 37.6 million gallons of alcohols and 642,300, 787,100 and 361,000
tons of essential ingredients, respectively, on a dry matter basis.

 Our marketing and distribution segment generated
$263.0 million, $228.9 million and $381.2 million in net sales for the years ended December 31, 2023, 2022 and 2021, respectively, from
the sale of all alcohols.

 Our Corporate and other segment generated $15.8
million in net sales from Eagle Alcohol's business for each of the years ended December 31, 2023 and 2022, and sold 4.0 million
gallons of alcohols for each of those years.

 During 2023, 2022 and 2021, we produced or purchased
from third parties and resold an aggregate of 382.5 million, 418.9 million and 479.6 million gallons of alcohols to approximately 88,
114 and 99 customers, respectively. For 2023, 2022 and 2021, sales to our two largest customers, Shell Trading US Company and Chevron
Products USA represented an aggregate of approximately 16%, 20% and 22% of our net sales, respectively. For 2023, 2022 and 2021, sales
to each of our other customers represented less than 10% of our net sales.

 Suppliers

 Pekin
Campus and Western Production Segments

 Our
production operations depend upon various raw materials suppliers, including suppliers of corn, natural gas, electricity and water. The
cost of corn is the most important variable cost associated with our alcohol production. We source corn for our plants using standard
contracts, including spot purchase, forward purchase and basis contracts. When resources are available, we seek to limit the exposure
of our production operations to raw material price fluctuations by purchasing forward a portion of our corn requirements on a fixed price
basis and by purchasing corn and other raw materials futures contracts and options.

2023, 2022 and 2021, purchases of corn from our three largest suppliers represented an aggregate of approximately 26%, 38% and 28% of
our total corn purchases, respectively, for those periods. Purchases from each of our other corn suppliers represented less than 10%
of total corn purchases in each of 2023, 2022 and 2021.

 Our
marketing and distribution operations include alcohols and essential ingredients we produce but also depend upon various third-party
producers of fuel-grade ethanol. In addition, we provide transportation, storage and delivery services through third-party service providers
with whom we have contracted to receive fuel-grade ethanol at agreed upon locations from our third-party suppliers and to store and/or
deliver the ethanol to agreed-upon locations on behalf of our customers. These contracts generally run from year-to-year, subject to
termination by either party upon advance written notice before the end of the then-current annual term.

 - 9 -

2023, 2022 and 2021, we purchased and resold from third parties an aggregate of approximately 103 million, 118 million and 229 million
gallons, respectively, of fuel-grade ethanol.

2023, 2022 and 2021, purchases of fuel-grade ethanol from our four largest third-party suppliers represented 86%, 69% and 76%, respectively,
of our total third-party ethanol purchases for each of those periods. Purchases from each of our other third-party ethanol suppliers
represented less than 10% of total third-party ethanol purchases in each of 2023, 2022 and 2021.

Facilities

 We
operate five alcohol production facilities. Three of our production facilities are located in Illinois, one is located in Oregon and
another is located in Idaho. We have an annual alcohol production capacity of up to 350 million gallons, including both fuel-grade ethanol
and specialty alcohols ranging from industrial-, pharmaceutical-, and high-quality food- and beverage-grade alcohols. Of this amount,
we are able to produce up to 110 million gallons annually of specialty alcohols, depending on our product mix among high-quality beverage-grade
alcohol and alcohols of other quality specifications. As market conditions change, we may increase, decrease or idle production at one
or more operating facilities or resume operations at any idled facility. The tables below provide an overview of our five production
facilities.

 Pekin
Campus Production Facilities

 Pekin

 Wet Facility

 Pekin

 Dry Facility

 Pekin

 ICP Facility

 Location

 Pekin, IL

 Pekin, IL

 Pekin, IL

 operating status

 maximum annual alcohol production capacity (in millions of gallons)

 maximum annual specialty alcohol production capacity (in millions of gallons)

 —

 milling process

 Wet

 Dry

 Dry

 Primary
 energy source

Production Facilities

 Magic
 Valley
 Facility

 Columbia

 Facility

 Location

 Burley, ID

 Boardman, OR

 operating status

 Hot-Idled

 maximum annual fuel-grade ethanol production capacity (in millions of gallons)

 milling process

 Dry

 Dry

 Primary
 energy source

Risk Management

 We
employ various risk mitigation techniques. For example, we may seek to mitigate our exposure to commodity price fluctuations by purchasing
forward a portion of our corn and natural gas requirements through fixed-price or variable-price contracts with our suppliers, as well
as entering derivative contracts for fuel-grade ethanol, corn and natural gas. To mitigate fuel-grade ethanol inventory price risks,
we may sell a portion of our production forward under fixed- or index-price contracts, or both. We may hedge a portion of the price risks
by entering exchange-traded futures contracts and options. Proper execution of these risk mitigation strategies can reduce the volatility
of our gross profit margins.

 - 10 -

 Specialty alcohols have relatively low price volatility
and are usually priced at significant premiums to fuel-grade ethanol. The market price of fuel-grade ethanol is volatile, however, and
subject to large fluctuations. Given the nature of our business, we cannot effectively hedge against extreme volatility or certain market
conditions. For example, fuel-grade ethanol prices, as reported by the Chicago Mercantile Exchange, or CME, ranged from $1.58 to $2.67
per gallon during 2023, from $2.00 to $2.88 per gallon during 2022 and from $1.48 to $3.75 per gallon during 2021; and corn prices, as
reported by the CME, ranged from $4.50 to $6.85 per bushel during 2023, from $5.64 to $8.18 per bushel during 2022 and from $4.84 to $7.73
per bushel during 2021.

 Climate-Related
and Other Risks

 Short-
to medium-term climate-related and other risks include high sensitivity to certain commodity prices such as corn and natural gas; regulatory
changes and political volatility, both domestic and international; ethanol supply and demand imbalances; logistics and storage constraints
from river access during inclement or volatile weather conditions; lack of automation of process optimization; high repair, maintenance
and production costs resulting from older facilities; poor cooling capacity of our older facilities as water temperatures increase; and
international market competition.

 Long-term
climate-related risks include water resource limitations; lower or volatile grain availability in local markets; market transition away
from combustion fuels that include renewables; and the energy cost impact of technology such as wet milling and multiple distillation
processes for high-quality alcohol. We also may be impacted by costs and regulatory burdens associated with carbon emissions from our
production and distribution as well as truck transport and packaging associated with Eagle Alcohol's use of drums and totes. See
"Risk Factors."

Arrangements

 We market all the alcohols and essential ingredients
produced at our facilities. We also market and distribute alcohols produced by third parties.

 Competition

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

 Other
significant producers of specialty alcohols in the United States are Archer-Daniels-Midland Company, Grain Processing Corporation, CIE
and Greenfield Global Inc., which collectively make up a significant majority of the total installed specialty alcohol production capacity
in the United States along with many smaller producers.

 The
largest producers of fuel-grade ethanol in the United States are POET, LLC, Valero Renewable Fuels Company, LLC, Archer-Daniels-Midland
Company and Green Plains Inc., collectively with approximately 40% of the total installed fuel-grade ethanol production capacity in the
United States. In addition, there are many mid-sized fuel-grade ethanol producers with several plants under ownership, smaller producers
each with one or two plants, and several fuel-grade ethanol marketers that create significant competition. Overall, we believe there
are over 200 fuel-grade ethanol production facilities in the United States with a total installed production capacity of approximately
17.8 billion gallons and many brokers and marketers with whom we compete for sales of fuel-grade ethanol and its co-products.

 - 11 -

 Our
fuel-grade ethanol also competes on a global market against production from other countries, such as Brazil, which may have lower production
costs than United States producers. Lower feedstock input costs such as sugarcane used in Brazil as compared to corn used in the Unites
States may give foreign producers a competitive advantage. In addition, fuel-grade ethanol from sugarcane feedstock qualifies as an advanced
biofuel, unlike corn ethanol, allowing certain producers to economically satisfy an advanced biofuel standard. Moreover, new products
and production technologies are under continuous development, many of which, if adopted by competitors, could harm our ability to compete.

 We believe that our competitive strengths include
our customer and supplier relationships, our diverse product mix, the barriers to entry to our most profitable lines of business—including
our modern technologies and certifications at our production facilities—our experienced management, and the strategic location of
our Midwest production facilities. See "—Competitive Strengths."

 Governmental
Regulation

 Our
business is subject to a wide range of federal, state and local laws and regulations directed at protecting public health and the environment,
including those promulgated by the Occupational Safety and Health Administration, or OSHA, the U.S. Food and Drug Administration, or
FDA, the EPA, and numerous state, local and international authorities. These laws, their underlying regulatory requirements and their
potential enforcement, some of which are described below, impact, or may impact, nearly every aspect of our operations, including our
production of alcohols (including distillation), our production of essential ingredients, our storage facilities, and our water usage,
wastewater discharge, disposal of hazardous wastes and emissions, and other matters pertaining to our existing and proposed business
by imposing:

 restrictions
 on our existing and proposed operations and/or the need to install enhanced or additional
 controls;

 special
 requirements applicable to food and drug additives;

 the
 need to obtain and comply with permits and authorizations;

 liability
 for exceeding applicable permit limits or legal requirements, in some cases for the remediation
 of contaminated soil and groundwater at our production facilities, contiguous and adjacent
 properties and other properties owned and/or operated by third parties; and

 other
 specifications for the specialty alcohols and essential ingredients we produce and market.

 In
addition, some governmental regulations are helpful to our production and marketing business. The fuel-grade ethanol industry in particular
is supported by federal and state mandates and environmental regulations that favor the use of fuel-grade ethanol in motor fuel blends
in North America. Some of the governmental regulations applicable to our production and marketing business are briefly described below.

 Food
and Drug Regulation

 Our
products for the Health, Home & Beauty, Food & Beverage and Essential Ingredients markets are subject to
regulation by the FDA as well as similar state agencies. Under the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA regulates the
processing, formulation, safety, manufacture, packaging, labeling and distribution of food ingredients, vitamins, cosmetics and pharmaceuticals
for active and inactive ingredients. Many of the FDA's and FDCA's rules and regulations apply directly to us as well as indirectly
through their application in our customers' products. To be properly marketed and sold in the United States, a relevant product
must be generally recognized as safe, approved and not adulterated or misbranded under the FDCA and relevant regulations issued under
the FDCA. The FDA has broad authority to enforce the provisions of the FDCA. Failure to comply with the laws and regulations of the FDA
or similar state agencies could prevent us from selling certain of our products or subject us to liability.

 - 12 -

 Renewable
Fuels Energy Legislation

 Under
the RFS, the mandated use of all renewable fuels, including fuel-grade ethanol, rose incrementally and peaked at 36.0 billion gallons
in 2022, of which 15.0 billion gallons are required from conventional, or corn-based, ethanol for each of 2023, 2024 and 2025. Under
the provisions of the Energy Independence and Security Act of 2007, the EPA has the authority to waive the mandated RFS requirements
in whole or in part. To grant a waiver, the EPA administrator must determine, in consultation with the Secretaries of Agriculture and
Energy, that there is inadequate domestic renewable fuel supply or implementation of the requirement would severely harm the economy
or environment of a state, region or the United States as a whole.

 Various
bills in Congress introduced from time to time are also directed at altering existing renewable fuels energy legislation, but none have
passed in recent years. Some legislative bills are directed at halting or reversing expansion of, or even eliminating, the renewable
fuel program, while other bills are directed at bolstering the program or enacting further mandates or grants that would support the
renewable fuels industry.

 The EPA has allowed fuel and fuel-additive manufacturers
to introduce into commercial gasoline up to 15% fuel-grade ethanol by volume, or E15, for vehicles from model year 2001 and after. According
to the Renewable Fuels Association, E15 is explicitly approved by the manufacturer for use in approximately 95% of model year 2024 cars
and light trucks based on its annual review of vehicle owner's manuals and warranty statements. Commercial sales of E15 have begun
in a majority of states. E15 has historically been prohibited in most states during the summer driving season due to concerns over evaporative
emissions and to meet federal clean air standards. For the 2022 and 2023 summer driving seasons, the EPA issued emergency fuel waivers
to allow the sale of E15 to help alleviate high gasoline prices. E15 may, however, be sold year-round in states that have a reformulated
gasoline program. In addition, the EPA proposed in late 2023 that E15 be permitted for sale year-round in various Midwestern states effective
in April 2024. The U.S. Office of Management and Budget approved the proposal in February 2024 but deferred the effective date to April
2025.

 Various states including California, Oregon and
Washington, and other regions such as the Canadian province of British Columbia, have implemented low carbon fuel standards focused on
reducing the carbon intensity of transportation fuels. Other states, including New York, Vermont, Massachusetts, Michigan, Illinois, Colorado
and New Mexico, currently have proposed legislation or policies that would establish a low carbon fuel standard program. Blending fuel-grade
ethanol into gasoline is one of the primary means of attaining these goals.

 Additional
Environmental Regulations

 In
addition to the governmental regulations applicable to the alcohol production and marketing industry described above, our business is
subject to additional federal, state and local environmental regulations, including regulations established by the EPA and state regulatory
agencies related to water quality and air pollution control. We cannot predict the manner by which, or extent to which, these regulations
will harm or help our business or the alcohol production and marketing industry in general.

 Human
Capital Resources

 As
of March 12, 2024, we had approximately 460 full-time employees. Our human capital resources objectives include attracting and retaining
well-qualified and highly skilled and motivated employees and executives. As of that same date, approximately 44% of our employees were
represented by a labor union and covered by a collective bargaining agreement. We have never had a work stoppage or strike and we consider
our relations with our employees to be good.

 Our
compensation program is designed to attract, retain and motivate our personnel. We use a mix of competitive salaries and other benefits
to attract and retain employees and executives. Some of these benefits include matching 401K contributions of up to 6% of salary, health
and wellness programs and a paid service day for employees to give back to their communities. At the direction and with the involvement
of an environmental, social and governance, or ESG, committee established by our board of directors, we have established an ESG working
committee that draws from our many administrative and operational departments to review key policies and procedures, conduct employee
engagement surveys and training, champion volunteering and charitable drives, develop and implement recruiting efforts which promote
diversity and inclusion and prioritize collecting and improving on key metrics from industry frameworks such as the Global Reporting
Initiative and Sustainability Accounting Standards Board standards which are maintained by the International Sustainability Standards
Board of the IFRS Foundation.

 - 13 -

 Item
1A. Risk Factors.

 Before
deciding to purchase, hold or sell our common stock, you should carefully consider the risks described below in addition to the other
information contained in this Report and in our other filings with the Securities and Exchange Commission, including subsequent reports
on Forms 10-Q and 8-K. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also affect our business. If any of these known or unknown risks or
uncertainties actually occurs with material adverse effects on Alto Ingredients, our business, financial condition, results of operations
and/or liquidity could be seriously harmed. In that event, the market price for our common stock will likely decline, and you may lose
all or part of your investment.

 Risks
Related to our Business

 Our
results of operations and our ability to operate at a profit are largely dependent on our ability to manage the costs of corn, natural
gas and other production inputs, with the prices of our alcohols and essential ingredients, all of which are subject to volatility and
uncertainty.

 Our
results of operations are highly impacted by commodity prices, including the cost of corn, natural gas and other production inputs that
we must purchase, and the prices of alcohols and essential ingredients that we sell. Prices and supplies are subject to and determined
by numerous market and other forces over which we have no control, such as inclement or favorable weather, domestic and global demand,
supply excesses or shortages, export conditions, inflationary conditions, global geopolitical tensions and various governmental policies
in the United States and throughout the world.

 Price
volatility of corn, natural gas and other production inputs, and alcohols and essential ingredients, may cause our results of operations
to fluctuate significantly. We may fail to generate expected levels of net sales and profits even under fixed-price and other contracts
for the sale of specialty alcohols used in consumer products. Our customers may not pay us timely or at all, even under longer-term,
fixed-price contracts for our specialty alcohols, and may seek to renegotiate prices under those contracts during periods of falling
prices or high price volatility.

 Over
the past several years, for example, the spread between corn and fuel-grade ethanol prices has fluctuated significantly. Fluctuations
are likely to continue to occur. A sustained negative or narrow spread, whether as a result of sustained high or increased corn prices
or sustained low or decreased alcohol or essential ingredient prices, would adversely affect our results of operations and financial
condition. Revenues from sales of alcohols, particularly fuel-grade ethanol, and essential ingredients have in the past and could in
the future decline below the marginal cost of production, which have in the past and may again in the future force us to suspend production,
particularly fuel-grade ethanol production, at some or all of our facilities. For example, we hot-idled our Magic Valley facility in
early 2023 due to unfavorable market conditions and again hot-idled our Magic Valley facility in early 2024 in part due to unfavorable
market conditions.

 In
addition, some of our fuel-grade ethanol marketing and distribution activities will likely be unprofitable in a market of generally declining
prices due to the nature of our business. For example, to satisfy customer demand, we maintain certain quantities of fuel-grade ethanol
inventory for subsequent resale. Moreover, we procure much of our fuel-grade ethanol inventory outside of contracted third-party marketing
and distribution arrangements and therefore must buy fuel-grade ethanol at a price established at the time of purchase and sell fuel-grade
ethanol at an index price established later at the time of sale that is generally reflective of movements in the market price of fuel-grade
ethanol. As a result, our margins for fuel-grade ethanol sold in these transactions generally decline and may turn negative as the market
price of fuel-grade ethanol declines.

 - 14 -

 We
can provide no assurances that corn, natural gas or other production inputs can be purchased at or near current or any specific prices,
or that our alcohols or essential ingredients will sell at or near current or any particular prices. Consequently, our results of operations
and financial condition may be adversely affected by increases in the prices of corn, natural gas and other production inputs or decreases
in the prices of our alcohols and essential ingredients.

 The
prices of our products are volatile and subject to large fluctuations, which may cause our results of operations to fluctuate significantly.

 The
prices of our products are volatile and subject to large fluctuations. For example, the market price of fuel-grade ethanol is dependent
upon many factors, including the supply of ethanol and the price of gasoline, which is in turn dependent upon the price of petroleum
which itself is highly volatile, difficult to forecast and influenced by a wide variety of global economic and geopolitical conditions,
including decisions concerning petroleum output by the Organization of Petroleum Exporting Countries (OPEC) and their allies, an intergovernmental
organization that seeks to manage the price and supply of oil on the global energy market. Other important factors that impact the price
of petroleum include war and threats of war, attacks on or threats to shipping vessels as has recently occurred in the Red Sea, the consequent
rerouting of supply lines to less direct or more expensive paths, and other supply chain disruptions.

 Our
fuel-grade ethanol sales are tied to prevailing spot market prices rather than long-term, fixed-price contracts. Fuel-grade ethanol prices,
as reported by the Chicago Mercantile Exchange, ranged from $1.58 to $2.67 per gallon in 2023, from $2.00 to $2.88 per gallon in 2022
and from $1.48 to $3.75 per gallon in 2021. In addition, even under longer-term, fixed-price contracts for our specialty alcohols, our
customers may seek to renegotiate prices under those contracts during periods of falling prices or high price volatility. Fluctuations
in the prices of our products may cause our results of operations to fluctuate significantly.

 We
may engage in hedging transactions and other risk mitigation strategies that could harm our results of operations and financial condition.

 To
partially offset the effects of production input and product price volatility, in particular, corn and natural gas costs and fuel-grade
ethanol prices, we may enter into contracts to purchase a portion of our corn or natural gas requirements on a forward basis or fix the
sale price of portions of our alcohol production. In addition, we may engage in other hedging transactions involving exchange-traded
futures contracts for corn, natural gas and unleaded gasoline from time to time. The financial statement impact of these activities is
dependent upon, among other things, the prices involved and our ability to sell sufficient products to use all of the corn and natural
gas for which forward commitments have been made. We have recognized losses in the past, and may suffer losses in the future, from our
hedging arrangements. For example, for the year ended December 31, 2023, we recognized net losses of $8.0 million related to the change
in the fair values of hedging contracts.

 Hedging
arrangements also expose us to the risk of financial loss in situations where our counterparty to the hedging contract defaults on its
contract or, in the case of exchange-traded contracts, where there is a change in the expected differential between the underlying price
in the hedging agreement and the actual prices paid or received by us. In addition, our open contract positions may require cash deposits
to cover margin calls, negatively impacting our liquidity. As a result, our hedging activities and fluctuations in the price of corn,
natural gas, fuel-grade ethanol and unleaded gasoline may adversely affect our results of operations, financial condition and liquidity.

 - 15 -

 Disruptions
in our production or distribution, including from climate change and other weather effects, may adversely affect our business, results
of operations and financial condition.

 Our
business depends on the continuing availability of rail, road, port, storage and distribution infrastructure. In particular, due to limited
storage capacity at some of our production facilities and other considerations related to production efficiencies, certain facilities
depend on timely delivery of corn. Alcohol production also requires a significant and uninterrupted supply of other raw materials and
energy, primarily water, electricity and natural gas. Local water, electricity and gas utilities may fail to reliably supply the water,
electricity and natural gas that our production facilities need or may fail to supply those resources on acceptable terms. In the past,
poor weather has caused disruptions in rail transportation, which slowed the delivery of fuel-grade ethanol by rail, a key method by
which fuel-grade ethanol from our Pekin Campus is transported to market.

 For
example, in the third quarter of 2023 we experienced unusually high unscheduled production downtime for repairs and maintenance which
reduced sales volumes and profits. In 2022, a lightning strike at the utility servicing our Pekin Campus disrupted our operations, cutting
power to our facilities and materially affecting our production, resulting in unexpected repair and maintenance costs, lost production
and degradation in the quality of work-in-progress inventories. In addition, in 2020, we experienced closure of the Illinois River for
lock repairs which required greater use of less cost-effective modes of product transport such as via rail and truck, which resulted
in higher costs and negatively affected our results of operations.

 Disruptions
in production or distribution, whether caused by labor difficulties, unscheduled downtimes and other operational hazards inherent in
the alcohol production industry, including equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation
accidents, climate change and natural disasters such as earthquakes, floods and storms, or other weather effects, or human error or malfeasance
or other reasons, could prevent timely deliveries of corn or other raw materials and energy, and could delay transport of our products
to market, and may require us to halt production at one or more production facilities, any of which could have a material adverse effect
on our business, results of operations and financial condition.

 Some
of these operational hazards may also cause personal injury or loss of life, severe damage to or destruction of property and equipment
or environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties. Our insurance
may not fully cover the potential hazards described above or we may be unable to renew our insurance on commercially reasonable terms
or at all.

 Increased
alcohol or essential ingredient production or higher inventory levels may cause a decline in prices for those products, and may have
other negative effects, materially and adversely impacting our results of operations, cash flows and financial condition.

 The
prices of our alcohols and essential ingredients are highly impacted by competing third-party supplies of those products. In addition,
if fuel-grade ethanol production margins improve, we anticipate that owners of production facilities operating at below capacity, or
owners of idled production facilities, will increase production levels, thereby resulting in more abundant fuel-grade ethanol supplies
and inventories. Increases in the supply of alcohols and essential ingredients may not be commensurate with increases in demand for alcohols
and essential ingredients, thus leading to lower prices. Any of these outcomes could have a material adverse effect on our results of
operations, cash flows and financial condition.

 - 16 -

 We
may suffer impairments in the value of our long-lived assets which may materially and adversely affect our results of operations.

 We
evaluate our long-lived assets annually for impairment or when circumstances indicate that the full carrying value of an asset may be
unrecoverable. These evaluations rely on financial and other assumptions concerning the assets, any of which may not materialize in the
future. For example, we recognized asset impairments of $6.5 million and $3.1 million for the years ended December 31, 2023 and 2021,
respectively. We may recognize additional impairments of the values of our long-lived assets in the future based on then-prevailing financial
and other circumstances. Impairments of our long-lived assets may materially and adversely affect our results of operations.

 Our alcohol production relies on traditional corn-based
feedstock and process technologies. New technologies could make corn-based alcohol production and traditional process technologies less
competitive or even obsolete, materially and adversely harming our business.

 We produce our alcohols from corn. Moreover, our
plants are constructed and operate exclusively as corn-based alcohol production facilities. Competitors and other third parties have undertaken
research to develop competing products to corn-based alcohols, and ethanol in particular, as well as new process technologies. These research
efforts seek alternatives to corn-based ethanol and traditional process technologies aimed at improving real or perceived problems with
the fuel, such as the carbon and energy intensity of its production, its lower energy content compared to gasoline and its hydrophobic
nature resulting in water separation in transit or at other times. Competitors and other third parties may develop new alcohols and processes
that improve on any of these or other real or perceived problems with corn-based alcohols, including ethanol. If viable competing products
or new process technologies are developed and attract widespread or even modest adoption, we may be forced to modify our production facilities,
including our process technologies, if possible, to transition in full or in part to these other products or process technologies to remain
competitive. Modifying our production facilities may require expertise that our personnel may not possess and would likely require significant
capital expenditures the funding for which we may not have. An inability to remain competitive due to the introduction and adoption of
competing products or new process technologies, or significant costs associated with the adoption of new products and process technologies,
would materially and adversely affect our business, financial condition and results of operations.

 Inflation
and sustained higher prices may adversely impact our results of operations and financial condition.

 We
have experienced adverse inflationary impacts on key production inputs, wages and other costs of labor, equipment, services, and other
business expenses. In addition, we have experienced adverse inflationary impacts on our budgets and expenses for many of our in-process
and planned capital projects. Inflation and its negative impacts could escalate in future periods. Even if inflation stabilizes or abates,
the prices of key production inputs, wages and other costs of labor, equipment, services, and other business expenses, and for our capital
projects, may remain at elevated levels. We may not be able to include these additional costs in the prices of the products we sell.
As a result, inflation and sustained higher prices may have a material adverse effect on our results of operations and financial condition.

 Climate
change, and governmental regulations aimed at addressing climate-related issues, may affect conditions to which our business is highly
sensitive, many of which could materially and adversely harm our business, results of operations and financial condition.

 Our
business is highly sensitive to commodity prices, in particular, the prices of corn and natural gas. Inclement weather from climate change,
including extreme temperatures or drought, may adversely affect growing conditions, which may reduce available corn supplies, our primary
production input, and other grain substitutes, driving up prices and thereby increasing our production input costs. In addition, governmental
regulators may disfavor carbon-based energy sources, such as natural gas, leading to regulations that disincentivize their use or otherwise
make their production more difficult and costly, driving up their prices. Higher natural gas prices would likewise increase our production
input costs.

 - 17 -

 Other
factors that may result from climate change, or that may result from governmental regulations aimed at addressing climate-related issues,
may also adversely affect our business, including the following:

 water
 is one of our key production inputs; water resource limitations may result from drought and
 other inclement weather; water resource limitations may also result from rationing and other
 governmental regulations limiting water use;

 higher
 water temperatures due to increased global or regional temperatures may negatively affect
 production efficiencies due to water temperature production requirements given the poor cooling
 capacities of our older facilities;

 flooding
 and other inclement weather may negatively affect our river access, other transportation
 logistics and costs, and storage requirements;

 an
 overall increase in energy costs will negatively impact our production costs generally and
 may critically impact certain high energy-intensive production technologies, such as our
 wet milling and multiple distillation processes for high-quality alcohol;

 regulatory
 and market transition away from combustion fuels and fuel-grade ethanol blending may threaten
 the viability of our renewable fuels business; and

 costs and regulatory burdens associated with governmental regulations
that limit or tax greenhouse gas emissions, such as CO 2, from alcohol production and distribution, or from truck transport
and packaging associated with Eagle Alcohol's business and use of drums and totes, will negatively impact us.

 New
legislation in the United States to address climate change issues, including at the federal, state and local levels, likely will continue.
This includes new or expanded cap-and-trade programs that may layer additional costs on any business that emits greenhouse gases. New
legislation, including new or expanded cap-and-trade programs, could materially and adversely impact our production cost structure and
the market viability of our products.

 Any
of these factors could materially and adversely harm our business, results of operations and financial condition.

 Risks
Related to our Finances

 We
have incurred significant losses and negative operating cash flow in the past and we may incur losses and negative operating cash flow
in the future, which may hamper our operations and impede us from expanding our business.

 We
have incurred significant losses and negative operating cash flow in the past. For example, for the three months ended December 31, 2023
and the years ended December 31, 2023 and 2022, we incurred consolidated net losses of approximately $19.0 million, $28.0 million and
$41.6 million, respectively. We may incur losses and negative operating cash flow in the future. We expect to rely on cash on hand, cash,
if any, generated from our operations, borrowing availability under our lines of credit and proceeds from our future financing activities,
if any, to fund all of the cash requirements of our business. Additional losses and negative operating cash flow may hamper our operations
and impede us from expanding our business.

 - 18 -

 We are engaged in a wide variety of capital improvement
projects. These projects, and their financing, costs, timing and effects, are based on our plans, expectations and various assumptions
that may not eventuate. We may therefore be unable to timely achieve, or achieve at all, the results we expect, including as to projected
additional EBITDA and Adjusted EBITDA.

 We are engaged
in a wide variety of capital improvement projects to diversify and enhance our revenue streams and to expand margins and profitability
by reducing costs. These projects have different timelines, returns on investment and risk profiles. In addition, we must raise significant
additional capital to complete some of our projects, including our carbon capture and storage project. Our expected financial and other
results from these projects are based on assumptions around many factors, including their costs, timing, operation and market prices
prevailing at project completion and thereafter, as well as tax and other favorable environmental attributes associated with low carbon
ethanol that may accrue to our benefit. For example, our assumptions around the anticipated results of our CCS project rely heavily on
the tax benefits that may accrue to us under the Inflation Reduction Act of 2022 as well as other favorable environmental attributes
associated with carbon capture and storage and low carbon alcohol production. These tax and other benefits may change, including as a
result of new or repealed laws, new administrations and the implementation or interpretation of existing laws. We can provide no assurances
that any particular benefit will be available to us upon completion of our CCS project, or thereafter, or any other capital improvement
project.

 Capital improvement
projects require significant outlays of capital and are often subject to material execution risks. We may have insufficient financial
resources, and we may be unable to raise sufficient capital, to complete our projects timely or at all. Although we intend to use reputable
third-party contractors with expertise in their fields to implement our projects, adverse conditions and events as well as delays in capital
projects are not uncommon. Moreover, the projects' interaction with existing processes may result in the degradation of other plant
operations. For example, operation of our corn oil and high protein system at our Magic Valley facility has resulted in inconsistent product
quality and degraded other operations at the plant, including production rates. We continue to work to resolve the system's issues
but can provide no assurance that the system will perform as anticipated or perform sufficiently well to justify continued operation or
expansion to our three other dry mills. In the past, we have extended our expected completion dates for various projects and, as circumstances
require, may have to do so again.

 We can provide
no assurances that our projects will be completed, or if completed, will be completed timely. We also can provide no assurances that our
project assumptions will reflect prevailing future conditions or that our projects will achieve the results we expect, including as to
projected additional EBITDA and Adjusted EBITDA. Failure to achieve our expected results may have a material adverse effect on our business,
financial condition and results of operations.

 We
regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, and any interruption
in our operations would harm our operating performance.

 We
regularly incur significant expenses to repair, maintain and upgrade our production facilities and operating equipment, estimated at
an average of $30.0 million per year. The machines and equipment we use to produce our alcohols and essential ingredients are complex,
have many parts, and some operate on a continuous basis. We must perform routine equipment maintenance and must periodically replace
a variety of parts such as motors, pumps, pipes and electrical parts, and engage in other repairs. In addition, our production facilities
require periodic shutdowns to perform major maintenance and upgrades. Our production facilities also occasionally require unscheduled
shutdowns to perform repairs. For example, in the third quarter of 2023 we experienced unusually high unscheduled production downtime
for repairs and maintenance at our Pekin Campus which reduced sales volumes and increased losses. These scheduled and unscheduled shutdowns
result in lower sales and increased costs in the periods during which a shutdown occurs and could result in unexpected operational issues
in future periods resulting from changes to equipment and operational and mechanical processes made during shutdown.

 - 19 -

 Our
indebtedness may expose us to risks that could negatively impact our business, prospects, liquidity, cash flows and results of operations.

 We
have incurred, and anticipate incurring additional, substantial indebtedness for our capital improvement projects. We expect that these
projects, when completed, will generate financial returns sufficient to service and ultimately repay or refinance our indebtedness. However,
the costs, timing, and effects of our capital improvement projects may not meet our projections. In addition, our indebtedness could:

 make
 it more difficult to repay or refinance our indebtedness if it becomes due during adverse economic
 and industry conditions;

 result
 in adverse consequences due to a breach of our financial or other covenants and obligations
 in favor of our lenders;

 limit our flexibility to pursue
 strategic opportunities or react to changes in our business and the industries in which we operate and, consequently, place us at
 a competitive disadvantage to our competitors who have less debt;

 require
 a substantial portion of our cash flows from operations for debt service payments, thereby
 reducing the availability of our cash flows to fund working capital, additional capital expenditures,
 acquisitions, dividend payments and for other general corporate purposes; or

 limit
 our ability to procure additional financing for working capital or other purposes.

 Our
ability to generate operating results and sufficient cash to make all required principal and interest payments when due, and to satisfy
our financial covenants and other obligations, depends on our performance, which is subject to a variety of factors beyond our control,
including the cost of key production inputs, the supply of and demand for alcohols and essential ingredients, and many other factors
related to the industries in which we operate. We cannot provide any assurance that we will be able to timely service or satisfy our
debt obligations, including our financial covenants. Our failure to timely service or satisfy our debt obligations, including to meet
our financial covenants, could result in our indebtedness being immediately due and payable, and would have a material adverse effect
on our business, business prospects, liquidity, financial condition, cash flows and results of operations.

 Our
ability to utilize net operating loss carryforwards and certain other tax attributes may be limited.

 Federal
and state income tax laws impose restrictions on our use of net operating loss, or NOL, and tax credit carryforwards in the event that
an "ownership change" occurs for tax purposes, as defined by Section 382 of the Internal Revenue Code, or Code. In general,
an ownership change occurs when stockholders owning 5% or more of a corporation entitled to use NOL or other loss carryforwards have
increased their ownership by more than 50 percentage points during any three-year period. The annual base limitation under Section 382
of the Code is calculated by multiplying the corporation's value at the time of the ownership change by the greater of the long-term
tax-exempt rate determined by the Internal Revenue Service in the month of the ownership change or the two preceding months. Our ability
to utilize our NOL and other loss carryforwards may be substantially limited. These limitations could result in increased future tax
obligations, which could have a material adverse effect on our financial condition and results of operations.

 Risks
Related to Legal and Regulatory Matters

 We
may be adversely affected by environmental, health and safety laws and regulations, as well as related liabilities that may not be adequately
covered by insurance.

 We
are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of materials
into the air, water and ground; the generation, storage, handling, use, transportation and disposal of hazardous materials and wastes;
and the health and safety of our employees. In addition, some of these laws and regulations require us to operate under permits that
are subject to renewal or modification. These laws, regulations and permits often require expensive pollution control equipment or operational
changes to limit actual or potential impacts to the environment. Any violation of these laws and regulations or permit conditions may
result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or production facility shutdowns. In
addition, we have made, and expect to make, significant capital expenditures on an ongoing basis to comply with increasingly stringent
environmental laws, regulations and permits.

 - 20 -

 We
may be liable for the investigation and cleanup of environmental contamination at each of our production facilities and at off-site locations
where we arrange for the disposal of hazardous substances or wastes. If these substances or wastes have been or are disposed of or released
at sites that undergo investigation and/or remediation by regulatory agencies, we may be responsible under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, or other environmental laws for all or part of the costs of investigation and/or remediation,
and for damages to natural resources. We may also be subject to related claims by private parties alleging property damage and personal
injury due to exposure to hazardous or other materials at or from those properties. Some of these matters may require us to expend significant
amounts for investigation, cleanup or other costs not covered by insurance.

 In
addition, new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments
could require us to make significant additional expenditures. Continued government and public emphasis on environmental issues will likely
result in increased future investments for environmental controls at our production facilities. Present and future environmental laws
and regulations, and interpretations of those laws and regulations, applicable to our operations, more vigorous enforcement policies
and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results
of operations and financial condition.

 The
hazards and risks associated with producing and transporting our products (including fires, natural disasters, explosions and abnormal
pressures and blowouts) may also result in personal injury claims or damage to property and third parties. As protection against operating
hazards, we maintain insurance coverage against some, but not all, potential losses. However, we could sustain losses for uninsurable
or uninsured risks, or in amounts in excess of existing insurance coverages. Events that result in significant personal injury or damage
to our property or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our
results of operations and financial condition.

 We
may be adversely affected by food and drug laws and regulations, as well as related liabilities that may not be adequately covered by
insurance.

 Some
of our products are subject to regulation by the U.S. Food and Drug Administration, or FDA, as well as similar state agencies. The FDA
regulates, under the Federal Food, Drug, and Cosmetic Act, or FDCA, the processing, formulation, safety, manufacture, packaging, labeling
and distribution of food ingredients, vitamins, cosmetics and pharmaceuticals for active and inactive ingredients. Many of the FDA's
and FDCA's rules and regulations apply directly to us as well as indirectly through their application in our customers' products.
To be properly marketed and sold in the United States, a relevant product must be generally recognized as safe, approved and not adulterated
or misbranded under the FDCA and relevant regulations issued under the FDCA.

 If
we fail to comply with laws and FDA regulations or those of similar state agencies, we may be prevented from selling certain of our products
and may also be subject to government agency enforcement liability. In addition, we may be subject to product liability and other claims
by our customers or by individuals alleging personal injury from our products as food and drug additives.

 - 21 -

 We
maintain insurance coverage against some, but not all, potential losses. Some of these matters, if they arise, may require us to expend
significant amounts for investigation and defense or other costs not covered by insurance. We could sustain losses for uninsurable or
uninsured risks, or in amounts in excess of existing insurance coverages. Events that result in significant personal injury or other
losses that are not fully covered by insurance could have a material adverse effect on our results of operations and financial condition.

 The
United States fuel-grade ethanol industry is highly dependent upon various federal and state laws and regulations and any changes in
those laws or regulations could have a material adverse effect on our results of operations, cash flows and financial condition.

 The
domestic market for fuel-grade ethanol is significantly impacted by federal mandates for volumes of renewable fuels (such as ethanol)
required to be blended with gasoline. Future demand for fuel-grade ethanol will largely depend on incentives to blend ethanol into motor
fuels, including the price of ethanol relative to the price of gasoline, the relative octane value of ethanol, constraints on the ability
of vehicles to use higher ethanol blends, and the Environmental Protection Agency's, or EPA's, established volumes from time
to time, small refinery waivers, and other applicable environmental requirements.

 The EPA has implemented the Renewable Fuel Standard
under the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. The EPA, in coordination with the Secretary
of Energy and the Secretary of Agriculture, determines annual quotas for the quantity of renewable fuels (such as fuel-grade ethanol)
that must be blended into motor fuels consumed in the United States. The EPA finalized mandatory volumes of 15.0 billion gallons for each
of 2023, 2024, and 2025 of conventional renewable fuel, or corn-based fuel-grade ethanol, which could decline in future years.

 The
EPA may issue small refinery waivers, in full or in part, to reduce or eliminate annual renewable fuel volume requirements for small
refineries that process fewer than 75,000 barrels of petroleum daily. In the past, the EPA has issued small refinery waivers that have
materially and adversely affected overall demand for and the price of fuel-grade ethanol. The U.S. Court of Appeals for the Fifth Circuit,
in the fourth quarter of 2023, struck down the EPA's decision to deny numerous small refinery waivers, finding that the EPA's
denials were impermissibly retroactive, contrary to law and counter to evidence in the litigation record. Accordingly, small refinery
waivers from the EPA may be more likely in the future and could again materially and adversely affect overall demand for and the price
of fuel-grade ethanol.

 Various
bills in Congress introduced from time to time are also directed at altering existing renewable fuels energy legislation, but none have
passed in recent years. Some legislative bills are directed at halting or reversing expansion of, or even eliminating in its entirety,
the renewable fuel program.

 Our
results of operations, cash flows and financial condition could be adversely impacted if the EPA reduces mandatory volumes or issues
significant small refinery waivers, or if any legislation is enacted that reduces volume requirements.

 - 22 -

 Future
demand for fuel-grade ethanol is uncertain and may be affected by changes to federal mandates, public perception, consumer acceptance
and overall consumer demand for transportation fuel, any of which could negatively affect demand for fuel-grade ethanol and our results
of operations.

 Although
many trade groups, academics and governmental agencies support ethanol as a fuel additive that promotes a cleaner environment, others
criticize fuel-grade ethanol production and use as consuming considerably more energy and emitting more greenhouse gases than other biofuels
and potentially depleting water resources. Some studies suggest that corn-based ethanol is less efficient than ethanol produced from
other feedstock and that it negatively impacts consumers by causing increased prices for dairy, meat and other food generated from livestock
that consume corn. Additionally, critics of fuel-grade ethanol contend that corn supplies are redirected from international food markets
to domestic fuel markets. If negative views of corn-based ethanol production gain broader acceptance, support for existing measures promoting
use and domestic production of corn-based ethanol as a fuel additive could decline, leading to a reduction or repeal of federal ethanol
usage mandates, which would materially and adversely affect the demand for fuel-grade ethanol. These views could also negatively impact
public perception of the fuel-grade ethanol industry and acceptance of ethanol as an alternative fuel.

 There
are limited markets for fuel-grade ethanol beyond those established by federal mandates. Discretionary blending and E85 blending (i.e.,
gasoline blended with up to 85% fuel-grade ethanol by volume) are important secondary markets. Discretionary blending is often determined
by the price of fuel-grade ethanol relative to the price of gasoline. In periods when discretionary blending is financially unattractive,
the demand for fuel-grade ethanol may decline. Also, the demand for fuel-grade ethanol is affected by the overall demand for transportation
fuel. Demand for transportation fuel is affected by the number of miles traveled by consumers and vehicle fuel economy. Lower demand
for fuel-grade ethanol and essential ingredients, including through the transition by consumers to alternative fuel vehicles such as
electric vehicles and hybrid vehicles, would reduce the value of our ethanol and related products, erode our overall margins and diminish
our ability to generate revenue or to operate profitably. In addition, we believe that additional consumer acceptance of E15 and E85
fuels is necessary before fuel-grade ethanol can achieve any significant growth in market share relative to other transportation fuels.

 Risks
Related to Ownership of our Common Stock

 Our
stock price is highly volatile, which could result in substantial losses for investors purchasing shares of our common stock and in litigation
against us.

 The
market price of our common stock has fluctuated significantly in the past and may continue to fluctuate significantly in the future.
The market price of our common stock may continue to fluctuate in response to one or more of the following factors, or any of the other
risks or uncertainties discussed in this report, many of which are beyond our control:

 fluctuations
 in our quarterly or annual operating results;

 fluctuations
 in the market prices of our products;

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

 the timing, cost and effects
 of our capital improvement projects, including with respect to our CCS project and our corn oil and high
protein system at our Magic Valley facility;

 anticipated trends in our financial
 condition and results of operations;

 our ability to obtain any necessary
 financing;

 the volume and timing of the
 receipt of orders for our products from major customers, including annual contracted sales volumes for our specialty alcohols;

 competitive pricing pressures;

 changes in market valuations
 of companies similar to us;

 - 23 -

 stock market price and volume
 fluctuations generally;

 regulatory developments or
 increased enforcement;

 additions or departures of
 key personnel;

 environmental, product or other
 liabilities we may incur;

 our financing activities and
 future sales of our common stock or other securities; and

 our ability to maintain contracts
 that are critical to our operations.

 The
price at which you purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. You
may be unable to sell your shares of common stock at or above your purchase price, which may result in substantial losses to you and
which may include the complete loss of your investment. In the past, securities class action litigation has often been brought against
a company following periods of high stock price volatility. We may be the target of similar litigation in the future. Securities litigation
could result in substantial costs and divert management's attention and our resources away from our business.

 Any
of the risks described above could have a material adverse effect on our results of operations, the price of our common stock, or both.

 Because
we do not plan to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their
shares unless and until they sell them.

 We
intend to retain a significant portion of any future earnings to finance the development, operation and expansion of our business. We
do not anticipate paying any cash dividends on our common stock in the near future. The declaration, payment, and amount of any future
dividends will be made at the discretion of our board of directors, and will depend upon, among other things, our results of operations,
cash flows, and financial condition, operating and capital requirements, compliance with any applicable debt covenants, and other factors
our board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there
is no assurance of the amount of any such dividend. Unless our board of directors determines to pay dividends, our stockholders will
be required to look solely to appreciation in the value of our common stock to realize any gain on their investment. There can be no
assurance that any such appreciation will occur.

 Our bylaws contain exclusive forum provisions that
could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees
or agents.

 Our
bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Delaware Court of Chancery shall be the
sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach
of a fiduciary duty owed by any director, officer or other employee of us to us or our stockholders, (c) any action asserting a claim
arising pursuant to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal
affairs doctrine.

 Our bylaws also provide that, unless we consent
in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law, the federal district courts of
the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under
the Securities Act of 1933, as amended, or the Securities Act, including all causes of action asserted against any defendant named in
such complaint, including our officers and directors, underwriters for any offering giving rise to such complaint, and any other professional
entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the
documents underlying the offering.

 For the avoidance of doubt, the exclusive forum
provisions described above do not apply to any claims arising under the Securities Act or the Securities Exchange Act of 1934, as amended,
or the Exchange Act, to the extent federal law requires otherwise. Section 27 of the Exchange Act creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder, and Section
22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability
created by the Securities Act or the rules and regulations thereunder.

 - 24 -

 The choice of forum provisions in our bylaws may
limit our stockholders' ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors,
officers, employees, agents or other third parties, which may discourage such lawsuits against us and our directors, officers, employees,
agents and other third parties even though an action, if successful, might benefit our stockholders. The applicable courts may also reach
different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would
otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. With respect
to the provision making the Delaware Court of Chancery the sole and exclusive forum for certain types of actions, stockholders who do
bring a claim in the Delaware Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they
do not reside in or near Delaware. Finally, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in
respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such
matters in other jurisdictions, which could have a material adverse effect on us.

 General
Risk Factors

 Cyberattacks
through security vulnerabilities could lead to disruption of our business, reduced revenue, increased costs, liability claims, or harm
to our reputation or competitive position.

 Security
vulnerabilities may arise from our hardware, software, employees, contractors or policies we have deployed, which may result in external
parties gaining access to our networks, data centers, cloud data centers, corporate computers, manufacturing systems, and/or access to
accounts we have at our suppliers, vendors or customers. External parties may gain access to our data or our customers' data, or
attack the networks causing denial of service or attempt to hold our data or systems in ransom. The vulnerability could be caused
by inadequate account security practices such as the failure to timely remove employee access when terminated. To mitigate these security
issues, we have implemented measures throughout our organization, including firewalls, backups, encryption, employee information technology
policies and user account policies. However, there can be no assurance that these measures will be sufficient to avoid cyberattacks.
If any of these types of security breaches were to occur and we were unable to protect sensitive data, our relationships with our business
partners and customers could be materially damaged, our reputation could be materially harmed, and we could be exposed to a risk of litigation
and possible significant liability.

 Further,
if we fail to adequately maintain our information technology infrastructure, we may have outages and data loss. Excessive outages may
affect our ability to timely and efficiently deliver products to customers or develop new products. Such disruptions and data loss may
adversely impact our ability to fulfill orders and interrupt other processes. Delayed sales or lost customers resulting from these disruptions
could adversely affect our financial results, stock price and reputation.

 Our
and our business partners' or contractors' failure to fully comply with applicable data privacy or similar laws could lead
to significant fines and require onerous corrective action. In addition, data security breaches experienced by us or our business partners
or contractors could result in the loss of trade secrets or other intellectual property, public disclosure of sensitive commercial data,
and the exposure of personally identifiable information (including sensitive personal information) of our employees, customers, suppliers,
contractors and others.

 - 25 -

 Unauthorized
use or disclosure of, or access to, any personal information maintained by us or on our behalf, whether through breach of our systems,
breach of the systems of our suppliers or vendors by an unauthorized party, or through employee or contractor error, theft or misuse,
or otherwise, could harm our business. If any such unauthorized use or disclosure of, or access to, such personal information was to
occur, our operations could be seriously disrupted, and we could be subject to demands, claims and litigation by private parties, and
investigations, related actions, and penalties by regulatory authorities. In addition, we could incur significant costs in notifying
affected persons and entities and otherwise complying with the multitude of foreign, federal, state and local laws and regulations relating
to the unauthorized access to, or use or disclosure of, personal information. Finally, any perceived or actual unauthorized access to,
or use or disclosure of, such information could harm our reputation, substantially impair our ability to attract and retain customers
and have an adverse impact on our business, financial condition and results of operations.

 Item
1B. Unresolved Staff Comments.

 We
have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission
that were issued 180 days or more preceding the end of our 2023 fiscal year and that remain unresolved.

 Item
1C. Cybersecurity.

 We
recognize the critical importance of maintaining the trust and confidence of our customers, business partners, employees and other stakeholders.
We engage in active oversight of cybersecurity, a cornerstone of our comprehensive enterprise risk management (ERM) program. Our cybersecurity
framework is rooted in the National Institute of Standards and Technology, or NIST, Cybersecurity Framework, or CSF, as well as the International
Organization for Standardization (ISO/IEC 27001), reflecting our commitment to uphold the highest cybersecurity standards. We align our
policies, standards and practices with these benchmarks and dynamically refine them to address evolving cybersecurity threats.

 Risk
Management and Strategy

 We
maintain a cybersecurity program aligned with NIST CSF standards designed to identify critical assets and vulnerabilities, protect them
with appropriate safeguards, promptly detect cybersecurity events, respond effectively to mitigate their impact and recover from incidents
to restore services. Our cybersecurity program is designed to safeguard the confidentiality, integrity and availability of information.
Our cybersecurity risk management strategy includes:

 Governance:
 The Audit Committee of our Board of Directors oversees our cybersecurity
risk management. Our Chief Financial Officer and Director of Information Technology, along with key executives, have roles in governance
and facilitating alignment across our organization.

 Compliance
 and Standards: We design our cybersecurity program for compliance with industry-specific
 and other regulations (e.g., the General Data Protection Regulation (GDPR) and the California
 Consumer Privacy Act (CCPA)) demonstrating our commitment to both domestic and international
 information security standards.

 Technical
Safeguards

 We
deploy technical defenses against cybersecurity risks of attack and other incidents, including firewalls, intrusion detection and prevention
systems and access controls. We refine these measures based on our ongoing assessments, including cybersecurity threat intelligence updates.

 Incident
 Response and Recovery Planning: We maintain incident response and recovery frameworks,
 tested twice yearly through simulations and tabletop exercises, to improve our preparedness
 to effectively manage and mitigate cybersecurity incidents.

 - 26 -

 Education
 and Awareness: Our personnel undergo mandatory periodic training on cybersecurity threats,
 with updated insights into effective defense mechanisms and our evolving cybersecurity policies
 and practices.

 Use
 of Third Parties: We collaborate with external cybersecurity
 service providers, including auditors and consultants, to refine our cybersecurity measures.
 These service providers carry out cybersecurity risk evaluations such as periodic assessments
 and vulnerability scans to pinpoint potential security flaws and suggest enhancements. In
 addition, we employ third-party technology and other solutions to enhance our protection
 against cybersecurity risks. These solutions include our use of a managed security service
 provider to support our in-house technology team, an endpoint detection and response, or
 EDR, system for ongoing surveillance, detection, and action against threats, as well as a
 security information and event management, or SIEM, system designed to automate the real
 time identification, investigation and prioritization of critical alerts.

 Third-Party
 Risk Management: We use a comprehensive due diligence process to manage third-party risks,
 emphasizing continuous monitoring and to ensure our business partners' cybersecurity
 practices meet our stringent standards.

 As
of the filing of this report, we do not believe that any risks from cybersecurity threats, including as a result of any previous cybersecurity
incidents, have materially affected or are reasonably likely to materially affect, Alto Ingredients, Inc.

 Governance

 We take a comprehensive and forward-looking approach to cybersecurity
risk management under the oversight of our Audit Committee. Management, including our Chief Financial Officer and our Director of Information
Technology, provide regular updates to ensure a strategic, unified response to cybersecurity challenges. Management is notified of, and
monitors, cybersecurity incidents through our EDR and SIEM systems.

 Our Director of Information Technology has over 20 years of experience
in information technology and five years of experience serving directly as a Chief Information Security Officer for other organizations.

 Our
 networks and systems are continuously monitored by a combination of third-party service providers
 and an internal cybersecurity team. Management is promptly notified of cybersecurity incidents.

 Our
 Audit Committee is promptly notified by our management of any material cybersecurity breach.

 Our
 Board of Directors is briefed at least annually on the state of our cybersecurity program.

 Our
 internal cybersecurity team collaborates with external cybersecurity service providers, including
 auditors and consultants, to refine our cybersecurity measures. These service providers carry
 out cybersecurity risk evaluations such as periodic assessments and vulnerability scans to
 pinpoint potential security flaws and suggest enhancements.

 - 27 -

 Engagement
and Continuous Improvement

 We
periodically evaluate our cybersecurity measures through internal and external audits and assessments to ensure our cybersecurity program
is at the forefront of industry best practices. The results of these audits and assessments inform adjustments to our cybersecurity program
to improve our resilience against emerging cybersecurity threats.

 Item
2. Properties.

 Our
corporate headquarters, located in Pekin, Illinois, consists of plants and facilities comprising our Pekin Campus production segment
and totaling 145 acres on land we own. In Sacramento, California, we lease office space totaling approximately 3,400 square feet under
a lease expiring in 2026. In St. Louis, Missouri, we lease warehouse space totaling approximately 84,000 square feet under a lease expiring
in 2030. We have plants located in Boardman, Oregon, at a 25-acre facility, and Burley, Idaho, at a 25-acre facility. The land in Boardman,
Oregon is leased under a lease expiring in 2076. We own the land in Burley, Idaho. The plants and facilities in Oregon and Idaho comprise
our Western production segment. See "Business—Production Facilities." Our properties are subject to deeds of trust
and other encumbrances in favor of our lenders.

 Item
3. Legal Proceedings.

 We
are subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the amounts claimed may be
substantial, the ultimate liability cannot presently be determined because of considerable uncertainties that exist. Therefore, it is
possible that the outcome of those legal proceedings, claims and litigation could adversely affect our quarterly or annual operating
results or cash flows when resolved in a future period. However, based on facts currently available, management believes such matters
will not adversely affect in any material respect our financial position, results of operations or cash flows.

 Item
4. Mine Safety Disclosures.

 Not
applicable.

 - 28 -

 PART
II

 Item
5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 Market
Information

 Our common stock trades on The Nasdaq Capital Market under the symbol
"ALTO." We also have non-voting common stock outstanding, which is convertible into our voting common stock, and which is
not listed on an exchange.

 Security
Holders

 As of March 12, 2024, we had 75,697,150 shares of common stock outstanding
held of record by approximately 320 stockholders and 896 shares of non-voting common stock outstanding held of record by one stockholder.
These holders of record include depositories that hold shares of stock for brokerage firms which, in turn, hold shares of stock for numerous
beneficial owners. On March 12, 2024, the closing sales price of our common stock on The Nasdaq Capital Market was $2.01 per share.

 Performance
Graph

 The
graph below shows a comparison of the cumulative total stockholder return on our common stock with the cumulative total return on The
Nasdaq Composite Index and The Nasdaq Clean Edge Green Energy Index, or Peer Group, in each case over the five-year period ended December
31, 2023.

 The
graph assumes $100 invested at the indicated starting date in our common stock and in each of The Nasdaq Composite Index and the Peer
Group, with the reinvestment of all dividends. We have not paid or declared any cash dividends on our common stock and do not anticipate
paying any cash dividends on our common stock in the foreseeable future. Stockholder returns over the indicated periods should not be
considered indicative of future stock prices or stockholder returns. This graph assumes that the value of the investment in our common
stock and each of the comparison groups was $100 on December 31, 2018.

 - 29 -

 Years Ended

 12/2018

 12/2019

 12/2020

 12/2021

 12/2022

 12/2023

 Alto
 Ingredients, Inc.

 100.00

 75.49

 630.66

 558.65

 334.49

 308.94

 Nasdaq
 Composite

 100.00

 136.69

 198.10

 242.03

 163.28

 236.17

 Nasdaq
 Clean Edge Green Energy

 100.00

 142.67

 406.35

 395.62

 276.35

 248.97

 Dividend
Policy

 We
have never paid cash dividends on our common stock and do not intend to pay cash dividends on our common stock in the foreseeable future.
We anticipate that we will retain any earnings for use in the continued development of our business.

 Our
current and future debt financing arrangements may limit or prevent cash distributions from our subsidiaries to us, depending upon the
achievement of specified financial and other operating conditions and our ability to properly service our debt, thereby limiting or preventing
us from paying cash dividends. Further, the holders of our outstanding Series B Preferred Stock are entitled to dividends of 7% per annum,
payable quarterly in arrears. Accrued and unpaid dividends in respect of our Series B Preferred Stock must be paid prior to the payment
of any dividends in respect of shares of our common stock.

 For
2023, 2022 and 2021, we declared and paid cash dividends on our outstanding shares of Series B Preferred Stock as they became due.

 Recent
Sales of Unregistered Securities

 None.

 Purchases
of Equity Securities by the Issuer and Affiliated Purchasers

 The
following table sets forth information about repurchases of our common stock for the three months ended December 31, 2023:

 Period

 Total number
 of shares

 purchased (1)

 Average price
 paid per share

 Total
 number of
 shares purchased

 as part of
 publicly-
 announced plans
 or programs (2)

 dollar
 value
 of
 shares that may
 yet be purchased
 under plans or
 programs (2)(3)

 October 1 to October 31, 2023

 —

 $
 —

 —

 $
 —

 November 1 to November 30, 2023

 436,000

 $
 2.27

 436,000

 $
 45,001,000

 December 1 to December 31, 2023

 —

 $
 —

 —

 $
 —

 Three months ended December 31, 2023

 436,000

 $
 2.27

 436,000

 $
 45,001,000

 (1)
 We
 repurchased 436,000 shares as part of our publicly announced share repurchase program during
 the three months ended December 31, 2023 and received no shares transferred from employees
 in satisfaction of minimum statutory tax withholding obligations upon the vesting of restricted
 stock during the period.

 (2)
 On
 September 12, 2022, we announced a share repurchase program under which we may repurchase
 up to $50 million of our common stock with an initial purchase authorization of $10 million.
 Our lenders have further limited our purchase authorization to $5 million. Amounts in excess
 of our lenders' initial purchase authorization of $5 million will require additional
 lender consent and amounts in excess of the initial purchase authorization of $10 million
 will require additional board and preferred stockholder authorization. The share repurchase
 program does not have an expiration date, does not require the repurchase of any particular
 amount of shares, and may be implemented, modified, suspended or discontinued in whole or
 in part at any time and without further notice.

 (3)
 represents the share repurchase program size of $50 million less approximately $5 million
 in aggregate share repurchases, but is subject to authorizations for purchases in excess
 of our lenders' purchase authorization of $5 million and our board and preferred stockholders'
 initial purchase authorization of $10 million.

 - 30 -

 Item
6. [Reserved]

 Not
Applicable.

 Item
7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

 The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and notes to consolidated financial statements included elsewhere in this report. This discussion contains forward-looking
statements, reflecting our plans and objectives that involve risks and uncertainties. Actual results and the timing of events may differ
materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section
entitled "Risk Factors" and elsewhere in this report.

 We produce and distribute renewable fuel and essential ingredients.
We are also the largest producer of specialty alcohols in the United States.

 We operate five alcohol production facilities. Three of our production
facilities are located in Illinois, one is located in Oregon and another is located in Idaho. We have an annual alcohol production capacity
of up to 350 million gallons, including both fuel-grade ethanol and specialty alcohols ranging from industrial-, pharmaceutical-, and
high-quality food- and beverage-grade alcohols. Of this amount, we are able to produce up to 110 million gallons annually of specialty
alcohols, depending on our product mix among high-quality beverage-grade alcohol and alcohols of other quality specifications. We market
and distribute all of the alcohols produced at our facilities as well as alcohols produced by third parties. In 2023, we marketed and
distributed approximately 383 million gallons combined of our own alcohols as well as fuel-grade ethanol produced by third parties, and
over 1.5 million tons of essential ingredients on a dry matter basis.

 We also specialize in break bulk distribution of specialty alcohols
through our Eagle Alcohol subsidiary. We purchase bulk alcohol from suppliers and then store, denature, package, and resell alcohol products
in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols. We deliver products to
customers in the beverage, food, industrial and related-process industries via our own dedicated trucking fleet and common carrier.

 We report our financial and operating performance
in three segments: (1) Pekin production, which includes the production and sale of alcohols and essential ingredients produced at our
three production facilities located in Pekin, Illinois, which we refer to as our Pekin Campus, (2) marketing and distribution, which includes
marketing and merchant trading for company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade
ethanol sourced from third parties, and (3) Western production, which includes the production and sale of renewable fuel and essential
ingredients produced at our two western production facilities on an aggregated basis, none of which are individually so significant as
to be considered a separately reportable segment.

 Our
mission is to produce the highest quality, sustainable ingredients from renewable resources 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.

 - 31 -

Segments

 We produce specialty alcohols, fuel-grade ethanol
and essential ingredients, focusing on five key markets: Health, Home & Beauty; Food & Beverage; Industry &
Agriculture; Essential Ingredients; and Renewable Fuels. Products for the Health, Home & Beauty markets include
specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for the Food
& Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils.
Products for Industry & Agriculture markets include alcohols and other products for paint applications and fertilizer s.
 Products for Essential Ingredients markets include dried yeast, corn protein meal, corn protein feed, corn germ, and distillers
grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human consumption. Our products for the Renewable
Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.

 We
produce our alcohols and essential ingredients at our production facilities. Our production facilities located in Illinois are in the
heart of the Corn Belt, benefit from relatively low-cost and abundant feedstock and enjoy logistical advantages that enable us to provide
our products to both domestic and international markets via truck, rail or barge. Our production facilities located in Oregon and Idaho
are near their respective fuel and feed customers, offering significant timing, transportation cost and logistical advantages.

 All of our production facilities are currently operating except our
Magic Valley plant, which we temporarily hot-idled in January 2024 to minimize losses from negative regional crush margins and to expedite
the installation of additional equipment needed to achieve our intended production rate, quality and consistency from our corn oil and
high protein system. We intend to restart Magic Valley production in the second quarter once the upgrades are complete and crush margins
have improved. As market conditions change, we may increase, decrease or idle production at one or more operating facilities or resume
operations at any idled facility.

 We market and distribute all of 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 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 fuel customers are located throughout the Western and Midwestern United States and consist of integrated oil companies and
gasoline marketers who blend fuel-grade ethanol into gasoline. Our customers depend on us to provide a reliable supply of fuel-grade
ethanol and manage the logistics and timing of delivery. Our customers collectively require fuel-grade ethanol volumes in excess of the
supplies we produce at our facilities. We secure additional fuel-grade ethanol supplies from third-party ethanol producers. 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 our essential ingredient feed products to dairies and feedlots, in many cases located near our production facilities. These customers
use our feed products for livestock as a substitute for corn and other sources of starch and protein. We sell our corn oil to poultry
and biodiesel customers. We do not market essential ingredients from other producers.

 See
"Note 5 – Segments" to our Notes to Consolidated Financial Statements included elsewhere in this report for financial
information about our business segments.

 Financial
Review, Current Initiatives and Outlook

 In 2023, we continued
our transformation to produce a variety of essential ingredients and the highest-grade beverage alcohol in the industry. We invested significant
capital in our facilities to improve efficiency and capacity utilization rates and to expand margins long term. These strategies have
begun to mitigate the impact of negative commodity price fluctuations. Although ethanol crush margins exhibited greater volatility in
the second half of 2023, both our fourth quarter and full year 2023 results significantly outperformed those same periods in 2022 despite
lower overall plant utilization rates.

 Gross loss declined by $18.8 million in the fourth
quarter of 2023 compared to the same period in 2022. We generated $16 million in gross profit for the full year 2023, an improvement of
$43 million over 2022.

 We reported positive Adjusted EBITDA of $3 million
for the fourth quarter of 2023, an improvement of $19 million compared the same period in 2022. We also reported positive Adjusted EBITDA
of approximately $21 million for all of 2023, an increase of $27 million over the prior year, representing a significant year-over-year
improvement, particularly in light of $20 million less in USDA cash grants in 2023 as compared to 2022.

 - 32 -

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

 Renewable fuel margins were strong for the second
and third quarters of 2023. As a result, we shifted part of our production to renewable fuel to take advantage of the higher margin environment.
Ethanol crush margins exhibited extreme volatility in the second half of 2023, peaking in the mid-60 cents per gallon in September and
declining thereafter to slightly negative in December. Margin volatility impacted the production volumes we were willing to sell, the
prices at which we sold and the volume of third-party production we contracted for sale. Overall sales volume declined for 2023 due to
these factors as well as the hot-idling of our Magic Valley facility in the first quarter of the year, ongoing challenges with the corn
oil and high protein system at the facility, and longer than expected unscheduled downtime in the third quarter at our Pekin Campus.

 Thus far in 2024, although crush margins have been
break-even or slightly negative, they have begun to improve compared to the end of 2023. In addition, margins were approximately 20 cents
per gallon higher for January and February 2024 compared to the same period in 2023. In January 2024, however, a polar vortex in the Midwest
negatively impacted both operations and logistics at our Pekin Campus. Despite significant preparations ahead of the freeze and timely
recovery response efforts, we experienced a shift to lower margin feed products and reduced alcohol production by approximately one million
gallons due to frozen river conditions. In addition, the hot-idle of our Magic Valley facility in January 2024 will lower renewable fuel
production, shifting sales volumes to higher third-party production compared to the fourth quarter of 2023.

 We have contracted approximately 93 million gallons
of fixed-price, high-quality alcohol at an average premium to renewable fuel of 31 cents per gallon, with additional capacity to take
advantage of spot sales.

 Our overall outlook for 2024 is favorable in light
of good corn inventories, low corn and natural gas prices, higher sugar prices, domestic regulatory support for summer blending and expected
global demand growth for U.S.-sourced ethanol. These factors should result in an improved crush margin environment in the coming months
and yield positive crush spreads through most of 2024. Markets are dynamic but we remain agile and financially prudent while we seek to
capitalize on the best opportunities. We remain enthusiastic about our prospects and confident in our long-term growth strategy.

 During the fourth quarter, repairs and maintenance
expense across our plants was $7.7 million compared to $7.1 million for the same period in 2022, bringing total repairs and maintenance
expense to $29.5 million for 2023 as compared to $30.0 million for 2022.

 Our wet mill, yeast facility and distillery capabilities
at our Pekin Campus provide significant differentiation and greater production capabilities than the typical dry mill. However, given
the nature and age of these facilities, they require consistent, ongoing repairs and maintenance, and capital upgrades integral to the
longevity, sustainable performance and modernization of these assets. To maintain reliable and efficient operations, we normally address
smaller concerns as needed and conduct larger scheduled outages approximately every two years.

 We originally scheduled our biennial Pekin Campus
wet mill repair and maintenance outage for August 2023 but due to favorable crush margins and sufficient corn supply at the time, we postponed
the outage to this coming April. We expect the repairs and maintenance activities will take approximately ten days, lowering production
in the second quarter. The repairs and maintenance are projected to cost approximately $4.0 million. For the full year 2024, we expect
to track to our typical repairs and maintenance run rate of around $30.0 million, bringing the total, including the upcoming outage expense,
to $34.0 million for 2024.

 We invested $5.0 million in capital expenditures
in the fourth quarter of 2023, bringing our year-end total to $30.0 million for all of 2023, compared to $13.0 million in the fourth quarter
of 2022 and $38.0 million for all of 2022. We plan for capital expenditures of approximately $25.0 million in 2024 for equipment upgrades,
process improvements and projects with short-term paybacks. We believe that these ongoing repairs and maintenance efforts and our capital
improvement projects position us for a much stronger future. Our biennial outages have historically increased reliability and production
run rates. We expect these positive effects will benefit 2024, in particular as we head into the typically more favorable summer months.

 We continue to pursue a number of strategic capital
investment initiatives. In the fourth quarter of 2023 and into 2024, we continued our ongoing evaluation of these initiatives. Based on
current market dynamics, recent findings from our updated front-end engineering and design (FEED) studies, interest from potential strategic
partners and expected project return profiles, we decided to designate our carbon capture and storage, or CCS, project as our top priority.

 Under the Inflation Reduction Act, we have a compelling
opportunity to capture and store biogenic CO 2 we generate at our Pekin Campus. Together with associated energy upgrades, we
believe that our CCS project provides excellent economics. Given the significant time, personnel and financial resources necessary to
complete our CCS project, we decided to pause further development of our primary yeast and biogas conversion projects. These projects
continue as opportunities for potential future development as resources permit.

 - 33 -

 We are encouraged by recent progress on many aspects
of CCS. This progress includes overall system design, community outreach, financing, vendor negotiations, EPA application preparation
and schedule alignment to procure equipment and install power and compression. We have also signed an exclusive non-binding letter of
intent with Vault 44.01 and we are nearing the execution of definitive agreements to develop our CCS project. The project, as currently
planned, involves our installation of equipment to capture CO 2 generated at our Pekin Campus and our project partner safely
transporting and permanently storing those emissions deep underground in a secure geologic reservoir located in close proximity to the
facility. Our intent is to substantially reduce CO 2 emissions from the alcohol production process while providing direct value
to the surrounding communities. Unfortunately, the EPA has extended its CCS application approval process from 18 to 24 months, and equipment
manufacturing and installation times have grown longer than originally anticipated. We intend to make positive use of this additional
time to better align our various project schedules and reduce our overall financial risk. Overall, we believe we can generate over $30.0
million in EBITDA annually from our CCS project, after accounting for operating and storage costs, and excluding any of the substantial
additional economic benefits of the environmental attributes associated with low carbon ethanol.

 In addition to CCS, we are pursuing two attractive
alternatives to increase energy capacity at our Pekin Campus with either our current utility provider or a highly regarded, independent
energy company that would build, own and operate onsite energy facilities. Both alternatives would greatly reduce our capital requirements
and long-term energy costs while lowering our carbon footprint. These capital-light energy alternatives may result in better earnings
accretion from our CCS project than originally estimated.

 We continue to assess our current portfolio of
assets, especially our Western production facilities, as we evaluate our path to higher margins, improved profitability and the highest
return to our shareholders. Our intent is to leverage the distinct strengths and opportunities of these facilities by investing in new
equipment and applications. While we work on these projects, we may also consider disposing of one or both of our Western production facilities.
As demonstrated with the sale of our California and Nebraska facilities, we remain steadfast in our commitment to appropriate decisions
to optimize long-term value.

 Over the past two years we have completed numerous
upgrades. Some of our larger in-progress or completed initiatives over the prior twelve months include the completion in February 2024
of a new, high efficiency boiler at our Pekin Campus that replaced two inefficient, high-pressure boilers. We expect full boiler utilization
by the end of the first quarter, reducing our energy needs and operating costs, and increasing annualized incremental EBITDA by $2.0 million.
In addition, in the second quarter of 2023, our new grain silo at our Pekin Campus became fully operational, doubling our days of corn
storage capacity. This achieved our goal to increase flexibility around the timing of corn deliveries while lowering costs related to
quick or last-minute shipments and to reduce corn premiums during extended weekends and harsh weather conditions. This project has already
exceeded our target of contributing annualized incremental EBITDA of $2.0 million.

 We continue to expand into higher quality alcohol
and our ability to differentiate our product offerings has been very important considering market trends. For example, in 2021 and for
part of 2022, the higher margin for specialty alcohol attracted many new producers, increasing product availability and supply. These
factors, combined with ebbing consumer demand growth and supply chain dynamics, resulted in margin compression over the past 18 months.
Starting in 2022, in anticipation these changing market conditions, we began strategic investments to produce a higher volume of beverage
grade alcohols that leverage the capabilities of our Pekin Campus. We developed our highly differentiated 192 proof and low-moisture 200
proof grain neutral spirits, or GNS, which became available in early 2023. These new products were well received by our customers and
actively sold in the spot market, generating significant sales and bolstering our gross margins for the year.

 - 34 -

 In our pursuit to expand higher margin corn oil
and high-protein products at our Magic Valley facility, working with our corn oil and high protein system vendor, Harvesting Technology,
we engaged equipment manufacturers and independent third-party engineers in the fourth quarter of 2023 to conduct an in-depth analysis
of our challenges. The team formulated a plan, including extensive design modifications, to achieve the intended production rate, quality
and consistency. We decided in January 2024 to temporarily hot-idle the facility to minimize losses from negative regional crush margins
and expedite the installation of additional equipment at the plant. Harvesting Technology has borne the direct costs associated with their
design and equipment. We are confident in the extensive design modifications under way and in achieving our corn oil and high-protein
targets in 2024. We intend to restart production in the second quarter once the upgrades are complete and crush margins have improved.
The operation of the upgraded high-protein system at our Magic Valley facility will influence our decision and timing to roll out the
system at our other dry mills. In the interim, we are operating the Magic Valley facility as a terminal to service our renewable fuel
customers. We are also working with the local feed distributor and our feed customers to meet their supply requirements.

 Going forward, we intend to discuss our various
capital projects individually and not in the aggregate, using three categories: In Operation, which includes completed projects,
such as our corn storage and boiler upgrades, our beverage grade GNS alcohols and Eagle Alcohol distribution infrastructure; Under
Development, which includes high priority strategic opportunities that have the greatest expected returns as well as initiatives that
support our near-term operational goals, such as CCS and potential partnerships for cogeneration and a natural gas pipeline; and For
Future Evaluation, which includes potential opportunities with attractive expected returns to be assessed as resources permit, such
as primary yeast, biogas conversion, the installation of higher margin corn oil and high protein systems at our three other dry mills,
sustainable aviation fuel, blue ethanol, ethanol-to-jet fuel and synthetic natural gas.

 As a renewables company, we remain dedicated to
implementing sustainable best practices that are good for our business, our stakeholders and our planet. In December, we published our
first Sustainability Summary. Our Sustainability Summary provides a review of our strategy and vision for advancements in sustainability,
responsible sourcing and risk management. We are focused on continuous improvement in environmental, health and safety, product quality,
and diversification by integrating innovative practices at our facilities to ensure optimal efficiency, contributing to a lower carbon
footprint. Our efforts improved our sustainability scores across the board with all three rating agencies, which is important to our customers.
Looking ahead, we are working to obtain third-party greenhouse gas verifications, improve transportation safety and earn additional EcoVadis
awards.

 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 EBITDA and Adjusted EBITDA as non-GAAP financial measures 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.

 To increase transparency
to our operating physical margins and conform our reporting to management's evaluation of our financial performance, we now exclude
the impact of unrealized non-cash derivative gains and losses when calculating Adjusted EBITDA. Unrealized derivative gains and losses
are non-cash, mark-to-market adjustments of derivative instruments on open positions related to future period purchases and sales that
are recorded as part of cost of goods sold.

 A table is provided below
to reconcile Adjusted EBITDA to its most directly comparable GAAP measure, consolidated net income (loss). EBITDA and Adjusted EBITDA
are not measures of financial performance under GAAP and should not be considered as alternatives 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. EBITDA and Adjusted EBITDA have limitations as analytical tools and you should not consider these
measures in isolation or as a substitute for analysis of our results as reported under GAAP.

 Information reconciling
forward-looking EBITDA or 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 EBITDA or 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.

 - 35 -

 Reconciliation of Adjusted
EBITDA to Consolidated Net Loss

 Three Months Ended

 Years Ended

 (in thousands) (unaudited)

 2023

 2022

 2023

 2022

 Consolidated net loss

 $
 (18,945
)

 $
 (33,072
)

 $
 (28,005
)

 $
 (41,597
)

 Adjustments:

 Interest expense, net

 2,126

 7,425

 1,827

 Interest income

 (265
)

 (169
)

 (854
)

 (510
)

 Unrealized derivative losses

 8,162

 8,037

 9,679

 4,017

 Acquisition-related expense

 2,800

 3,500

 Asset impairments

 5,970

 —

 6,544

 —

 Provision for income taxes

 1,925

 1,925

 Depreciation and amortization expense

 5,698

 5,973

 23,080

 25,095

 Total adjustments

 22,488

 17,609

 48,771

 35,854

 Adjusted EBITDA

 $
 3,543

 $
 (15,463
)

 $
 20,766

 $
 (5,743
)

 2023
Financial Performance Summary

 Our
consolidated net sales declined by $0.1 billion to $1.2 billion for 2023 from $1.3 billion for 2022. Our net loss available to common
stockholders improved by $13.6 million to a net loss of $29.3 million for 2023 from a net loss of $42.9 million for 2022.

 Factors
that contributed to these results of operations for 2023 include:

 Net
sales. Our net sales declined by $0.1 billion to $1.2 billion for 2023 from $1.3 billion for 2022 due to a decrease in total alcohol
gallons sold, a decline in our average sales price per gallon and fewer tons of essential ingredients sold.

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

 Our renewable fuel production sales volume declined by 5.3 million
gallons, or 3%, to 203.2 million gallons for 2023 from 208.5 million gallons for 2022, primarily from reduced production in 2023 as our
Magic Valley facility was hot-idled in the first quarter of 2023 coupled with unusually high unscheduled production downtime later in
the year at our Pekin Campus for repairs and maintenance.

 Our specialty alcohol production sales volume declined by 15.8 million
gallons, or 17%, to 76.7 million gallons for 2023 from 92.5 million gallons for 2022 primarily due to reduced customer demand for specialty
alcohols during the year, a portion of which was shifted to 2024.

 Our third-party sales volume declined by 15.3 million gallons, or 13%,
to 102.6 million gallons for 2023 from 117.9 million gallons for 2022. Consistent with our efforts over the past two years, we continued
to intentionally reduce sales of third-party fuel-grade ethanol in geographic areas less important to our business to focus on sales of
inventory from our own production in 2023.

 o
 Our
 average sales price per gallon declined by $0.17, or 6%, to $2.47 for 2023 from $2.64 for
 2022. The decline was primarily driven by lower renewable fuel prices in 2023 largely due
 to lower oil and gasoline prices.

 o
 Our
 volume of essential ingredients sold declined by 0.1 million tons, or 7%, to 1.5 million
 tons for 2023 from 1.6 million tons for 2022 primarily due to lower alcohol production volumes
 during 2023. Our average sales price for our essential ingredients also declined primarily
 due to lower corn prices.

 - 36 -

 Gross
 Profit (Loss). Our gross profit improved by $43.2 million to a gross profit of $15.7
 million for 2023 from a gross loss of $27.5 million for 2022 due to improved commodity crush
 margins from lower corn prices and successful efficiency initiatives. Our gross profit and
 margins were tempered, however, due to production challenges at our Magic Valley plant as
 we continued to implement our high-protein system at the facility coupled with unusually
 high unscheduled downtime at our Pekin Campus that reduced sales volumes, shifted our overall
 product mix toward lower margin products, and resulted in significant increases in repair
 and maintenance costs.

 Sales
and Margins

 We
generate sales by marketing all of the alcohols produced by our three production facilities in Illinois, all of the fuel-grade ethanol
produced by our production facilities in Oregon and Idaho, and fuel-grade ethanol purchased from third-party suppliers throughout the
United States. We also market essential ingredients produced by our production facilities, including dried yeast, corn gluten meal, corn
gluten feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. We also sell yeast for human
consumption.

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

 Our consolidated average alcohol sales price declined by 6% to $2.47
per gallon for 2023 compared to $2.64 per gallon for 2022. The average price of fuel-grade ethanol as reported by the Chicago Mercantile
Exchange, or CME, declined by 10% to $2.22 per gallon for 2023 compared to $2.47 per gallon for 2022. Our average cost of corn declined
by 15% to $6.58 per bushel for 2023 from $7.77 per bushel for 2022. The average price of corn as reported by the CME declined by 19% to
$5.64 per bushel for 2023 from $6.94 per bushel for 2022.

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

 the
 prices of our specialty alcohols and the market price of fuel-grade ethanol, the latter of
 which is impacted by the price of gasoline and related petroleum products, and government
 regulation, including government ethanol mandates;

 the
 market prices of key production input commodities, such as corn (including corn basis) and
 natural gas;

 the
 market prices of our essential ingredients;

 our
 ability to anticipate trends in the market and contracted prices of our alcohols, essential
 ingredients, and costs of key input commodities, and our ability to implement appropriate
 risk management through hedging and other means, and opportunistic pricing strategies;

 the
 proportion of our sales of specialty alcohols to our sales of fuel-grade ethanol produced
 at our facilities relative to their respective market and contracted prices; and

 the
 proportion of our sales of fuel-grade ethanol produced at our facilities to our sales of
 fuel-grade ethanol produced by unrelated third-parties relative to the market price of fuel-grade
 ethanol and marketing and distribution fees payable for third-party sales.

 We seek to optimize our gross profit margins by anticipating the factors
above and, when resources are available, implementing hedging transactions and taking other actions designed to lock in margins, limit
risk and otherwise address these factors. For example, we may seek to reduce inventory levels in anticipation of declining alcohol or
essential ingredient prices and increase production and inventory levels in anticipation of rising alcohol or essential ingredient prices.
We may also seek to alter our proportion or timing, or both, of purchase and sales commitments.

 Our
inability to anticipate the factors described above or their relative importance, and adverse movements in the factors themselves, could
result in declining or even negative gross profit margins over certain periods of time. Our ability to anticipate these factors or favorable
movements in these factors may enable us to generate above-average gross profit margins. However, given the difficulty associated with
successfully forecasting any of these factors, we are unable to estimate our future sales or gross profit margins.

 Results
of Operations

 Selected
Financial Information

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

 - 37 -

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

 Sales and Operating Metrics (unaudited)

 Years Ended

 Percentage

Change

 2023

 2022

 2021

 2023 vs

2022

 2022 vs

2021

 Alcohol Sales (gallons in millions)

 Pekin Campus renewable fuel gallons sold

 136.2

 116.1

 123.5

 %

 (6
)%

 Western production renewable fuel gallons sold

 67.0

 92.4

 37.6

 (27
)%

 %

 Third party renewable fuel gallons sold

 102.6

 117.9

 229.0

 (13
)%

 (49
)%

 Total renewable fuel gallons sold

 305.8

 326.4

 390.1

 (6
)%

 (16
)%

 Specialty alcohol gallons sold

 76.7

 92.5

 89.5

 (17
)%

 %

 Total gallons sold

 382.5

 418.9

 479.6

 (9
)%

 (13
)%

 Sales Price per Gallon

 Pekin Campus

 $
 2.40

 $
 2.55

 $
 2.34

 (6
)%

 %

 $
 2.49

 $
 2.75

 $
 2.87

 (9
)%

 (4
)%

 Marketing and distribution

 $
 2.56

 $
 2.83

 $
 2.69

 (10
)%

 %

 Total

 $
 2.47

 $
 2.64

 $
 2.46

 (6
)%

 %

 Alcohol Production (gallons in millions)

 Pekin Campus

 209.7

 208.8

 212.9

 %

 (2
)%

 68.1

 91.2

 38.8

 (25
)%

 %

 Total

 277.8

 300.0

 251.7

 (7
)%

 %

 Corn Cost per Bushel

 Pekin Campus

 $
 6.32

 $
 7.32

 $
 6.06

 (14
)%

 %

 $
 7.45

 $
 8.97

 $
 7.40

 (17
)%

 %

 Total

 $
 6.58

 $
 7.77

 $
 6.22

 (15
)%

 %

 Average Market Metrics

 PLATTS Ethanol price per gallon

 $
 2.22

 $
 2.47

 $
 2.29

 (10
)%

 %

 CME Corn cost per bushel

 $
 5.64

 $
 6.94

 $
 5.82

 (19
)%

 %

 Board corn crush per gallon(1)

 $
 0.21

 $
 -

 $
 0.21

 Essential Ingredients Sold (thousand tons)

 Pekin Campus:

 Distillers grains

 332.7

 334.4

 338.5

 (1
)%

 (1
)%

 CO2

 182.4

 164.8

 164.9

 %

 %

 Corn wet feed

 95.0

 89.9

 88.1

 %

 %

 Corn dry feed

 90.6

 81.6

 78.8

 %

 %

 Corn oil and germ

 73.8

 66.7

 69.0

 %

 (3
)%

 Syrup and other

 41.2

 56.9

 77.9

 (28
)%

 (27
)%

 Corn meal

 36.8

 32.1

 33.9

 %

 (5
)%

 Yeast

 25.9

 23.9

 24.0

 %

 %

 Total Pekin Campus essential ingredients sold

 878.4

 850.3

 875.1

 %

 (3
)%

 Western production:

 Distillers grains

 459.7

 643.7

 274.0

 (29
)%

 %

 Syrup and other

 119.1

 77.4

 26.3

 %

 %

 CO2

 55.5

 55.8

 57.1

 (1
)%

 (2
)%

 Corn oil

 8.0

 10.2

 3.7

 (22
)%

 %

 Total Western production essential ingredients sold

 642.3

 787.1

 361.1

 (18
)%

 %

 Total Essential Ingredients Sold

 1,520.7

 1,637.4

 1,236.2

 (7
)%

 %

 Ingredients Return % (2)

 Pekin Campus return

 45.7
 %

 41.3
 %

 40.4
 %

 %

 %

 Western production return

 33.4
 %

 31.6
 %

 31.5
 %

 %

 %

 Consolidated total return

 42.4
 %

 37.9
 %

 38.8
 %

 %

 (2
)%

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

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

 - 38 -

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

 F

 Results as
 a Percentage

 Dollar

 Percentage

 of Net Sales
 for the

 Years
 Ended

 Change

 Change

 Years
 Ended

 31,

 Favorable

 Favorable

 31,

 2023

 2022

 (Unfavorable)

 (Unfavorable)

 2023

 2022

 (dollars in
 thousands)

 Net
 sales

 $
 1,222,940

 $
 1,335,621

 $
 (112,681
)

 (8.4
)%

 100.0
 %

 100.0
 %

 Cost
 of goods sold

 1,207,287

 1,363,171

 155,884

 11.4
 %

 98.7
 %

 102.1
 %

 Gross
 profit (loss)

 15,653

 (27,550
)

 43,203

 *NM

 1.3
 %

 (2.1
)%

 Selling,
 general and administrative expenses

 (32,664
)

 (31,579
)

 (1,085
)

 (3.4
)%

 (2.7
)%

 (2.4
)%

 Loss
 on disposal of assets

 (293
)

 (2,230
)

 1,937

 86.9
 %

 (0.0
)%

 (0.2
)%

 Asset
 impairments

 (6,544
)

 —

 (6,544
)

 (100.0
)%

 (0.5
)%

 —
 %

 Loss
 from operations

 (23,848
)

 (61,359
)

 37,511

 61.1
 %

 (2.0
)%

 (4.6
)%

 from cash grant

 2,812

 22,652

 (19,840
)

 (87.6
)%

 0.2
 %

 1.7
 %

 expense, net

 (7,425
)

 (1,827
)

 (5,598
)

 (306.4
)%

 (0.6
)%

 (0.1
)%

 Other
 income, net

 (309
)

 (35.8
)%

 0.0
 %

 0.1
 %

 Loss
 before income taxes

 (27,908
)

 (39,672
)

 11,764

 29.7
 %

 (2.3
)%

 (3.0
)%

 Provision
 for income taxes

 1,925

 1,828

 95.0
 %

 0.0
 %

 0.1
 %

 Consolidated
 net loss

 $
 (28,005
)

 $
 (41,597
)

 $
 13,592

 32.7
 %

 (2.3
)%

 (3.1
)%

 stock dividends

 (1,265
)

 (1,265
)

 —

 —
 %

 (0.1
)%

 (0.1
)%

 Loss
 available to common stockholders

 $
 (29,270
)

 $
 (42,862
)

 $
 13,592

 31.7
 %

 (2.4
)%

 (3.2
)%

 *
 Not
meaningful.

 Net
Sales

 The
decline in our consolidated net sales for 2023 as compared to 2022 was due to a decrease in the average sales price per gallon for our
alcohols, fewer total gallons sold and lower volumes of essential ingredients sold at lower prices. Our average sales price per gallon
decreased primarily due to lower fuel-grade ethanol prices largely driven by lower oil and gasoline prices. Fewer total gallons sold
for 2023 as compared to 2022 resulted primarily from the hot-idling of our Magic Valley facility in the first quarter of 2023 coupled
with unusually high unscheduled production downtime later in the year at our Pekin Campus for repairs and maintenance. In addition, we
produced and sold fewer tons of essential ingredients primarily due to lower alcohol production in 2023 compared to 2022. Our average
sales price for our essential ingredients declined primarily due to lower corn prices. As we did in 2021 and 2022, we continued to intentionally
reduce sales of third-party fuel-grade ethanol in geographical areas less important to our business and to instead focus on sales of
inventory from our own production in 2023.

 Pekin
Campus Production Segment

 Net sales of alcohol from our Pekin Campus production segment declined
by $19.1 million, or 4%, to $502.2 million for 2023 as compared to $521.3 million for 2022. Our total volume of production gallons sold,
however, increased by 4.3 million gallons, or 2%, to 208.9 million gallons for 2023 as compared to 204.6 million gallons for 2022, due
to an extended shut down for maintenance during the summer of 2022. At the segment's average sales price per gallon of $2.49 for
2023, we generated $10.3 million in additional net sales from the 4.3 million additional gallons of alcohol sold in 2023 as compared to
2022. However, a decrease of $0.14, or 6%, in the segment's average sales price per gallon in 2023 as compared to 2022 resulted
in a $29.4 million decline in net sales as compared to 2022.

 Net sales of essential ingredients declined by $8.2 million, or 4%,
to $217.7 million for 2023 as compared to $225.9 million for 2022. Our total volume of essential ingredients sold increased by 28,100
tons, or 3%, to 878,400 tons for 2023 from 850,300 tons for 2022. Sales volumes of essential ingredients were higher in 2023 due to an
extended shut down for maintenance during the summer of 2022. At our average sales price per ton of $247.84 for 2023, we generated $6.9
million in additional net sales from the 28,100 additional tons of essential ingredients sold in 2023 as compared to 2022. A decrease
of $17.80, or 7%, in our average sales price per ton in 2023 as compared to 2022 resulted in a $15.1 million decline in net sales as compared
to 2022.

 - 39 -

 Net
sales of renewable fuel from our marketing and distribution segment, excluding intersegment sales, increased by $34.1 million, or 15%,
to $263.0 million for 2023 as compared to $228.9 million for 2022.

 Our volume of third-party renewable fuel sold reported gross by the
segment increased by 22.1 million gallons, or 28%, to 102.6 million gallons for 2023 as compared to 80.5 million gallons for 2022. This
increase resulted from a shift in the source of renewable fuel from our Magic Valley facility, as we hot-idled the facility in early 2023,
to third-party suppliers. At the segment's average sales price per gallon of $2.56 for 2023, net sales were $56.6 million higher
as a result of the 22.1 million additional gallons sold in 2023 as compared to 2022. This increase was partially offset by the $0.27 decrease
in our average sales price per gallon for 2023. The decrease of $0.27, or 10%, in our average sales price per gallon in 2023 as compared
to 2022 resulted in a $21.6 million decline in net sales from our third-party renewable fuel sold by the segment compared to 2022.

 Our
volume of third-party fuel-grade ethanol sold reported net by the segment declined by 37.4 million gallons, or 100%, to no gallons sold
net for 2023 as compared to 37.4 million gallons for 2022. The decline in sales reported net resulted in a decrease of $0.9 million in
net sales.

Production Segment

 Net sales of alcohol from our Western production segment declined by
$86.6 million, or 34%, to $167.0 million for 2023 as compared to $253.6 million for 2022. Our total volume of gallons sold declined by
25.4 million gallons, or 27%, to 67.0 million gallons for 2023 as compared to 92.4 million gallons for 2022. This decline in sales volume
primarily resulted from lower production from our Magic Valley facility as we hot-idled the facility in the first quarter of 2023. At
the segment's average sales price of $2.49 per gallon for 2023, net sales were $63.2 million lower as a result of the 25.4 million
fewer gallons sold in 2023 as compared to 2022. A decline of $0.26, or 9%, in our average sales price per gallon in 2023 as compared to
2022 resulted in a $23.4 million decrease in net sales of alcohol from the segment compared to 2022.

 Net sales of essential ingredients declined by $32.9 million, or 36%,
to $57.3 million for 2023 as compared to $90.2 million for 2022. Our total volume of essential ingredients sold declined by 144,800 tons,
or 18%, to 642,300 tons for 2023 from 787,100 tons for 2022. At our average sales price of $89.15 per ton for 2023, net sales were $12.9
million lower as a result of the 144,800 fewer tons sold in 2023 as compared to 2022. In addition, our sales price declined by $25.45
per ton for 2023. The decline of $25.45, or 22%, in our average sales price per ton in 2023 as compared to 2022 resulted in a decrease
of $20.0 million in net sales of essential ingredients from the segment compared to 2022.

and Other Segment

 Net
sales from our Corporate and other segment were flat at $15.8 million for each of 2023 and 2022. These sales are from Eagle Alcohol's
business.

 - 40 -

 Cost
of Goods Sold and Gross Profit (Loss)

 Our consolidated gross profit (loss) improved to
a gross profit of $15.7 million, representing a gross margin of 1.3% for 2023, from a gross loss of $27.6 million, representing a gross
margin of negative 2.1%, for 2022. Our consolidated gross profit improved due to improved commodity crush margins, particularly for renewable
fuel, primarily due to lower corn costs, but was partially offset by $9.7 million in unrealized non-cash derivative losses from mark-to-market
adjustments on open positions related to future period sales and $2.2 million in lower-of-cost-or-market charges in the fourth quarter
of 2023 on our ending renewable fuel inventories and related fixed corn purchase commitments due to negative crush margins heading into
year-end 2023 and the first quarter of 2024.

 Pekin
Campus Production Segment

 Our Pekin Campus production segment's gross
profit improved by $35.5 million to a gross profit of $13.7 million from a gross loss of $21.8 million. Of this increase, $35.2 million
is attributable to higher commodity crush margins and $0.3 million is attributable to increased sales volumes in 2023 as compared to 2022.

 Our
marketing and distribution segment's gross profit improved by $4.1 million to a gross profit of $3.7 million for 2023 from a gross
loss of $0.4 million for 2022. Of this increase, $3.3 million is attributable to higher margins from sales of third-party renewable fuel,
and $0.8 million attributable to higher marketing volumes of third-party renewable fuel sold reported gross in 2023 as compared to 2022.

Production Segment

 Our Western production segment's gross loss
improved by $3.5 million to a gross loss of $5.5 million for 2023 as compared to a gross loss of $9.0 million for 2022, despite lower
production from our Magic Valley facility during the year. Of this improvement, $1.4 million is attributable to higher margins for renewable
fuel and $2.1 million is attributable to lower sales volumes at negative margins in 2023 as compared to 2022.

and Other Segment

 Gross
profit from our Corporate and other segment was flat at $3.7 million for each of 2023 and 2022. This gross profit was from Eagle Alcohol's
business.

 Selling,
General and Administrative Expenses

 Our
selling, general and administrative, or SG&A, expenses increased by $1.1 million to $32.7 million for 2023 as compared to $31.6 million
for 2022. SG&A expenses increased primarily due to higher compensation-related expenses and litigation accruals, partially offset
by lower accruals for deferred cash payments attributable to our acquisition of Eagle Alcohol.

 Asset Impairments

 We recorded an asset impairment charge of $6.5
million for 2023 as compared to none for 2022, of which $6.0 million is attributable to an impairment to the goodwill associated with
our acquisition of Eagle Alcohol in 2022. This charge primarily reflects revisions to current market premiums and adjustments to projections
in our required annual goodwill valuation.

from Cash Grant

 We
received cash grants under the USDA's Biofuel Producer Program in the amount of $2.8 million and $22.7 million for 2023 and 2022,
respectively. The program was created as part of the CARES Act of 2020, which allocated $700 million to support biofuel producers that
experienced market losses due to the pandemic. We are neither required to repay the grants nor will they recur in the future.

 - 41 -

Expense, net

expense, net, increased by $5.6 million to $7.4 million for 2023 from $1.8 million for 2022. The increase in interest expense, net, is
primarily due to higher debt balances under our term loan to fund our capital improvement projects, as well as higher interest rates
under Kinergy's line of credit consistent with an overall higher interest rate environment.

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

 An
analysis of our financial results comparing 2022 to 2021 can be found under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in Part II, Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31,
2022, filed with the Securities and Exchange Commission on March 14, 2023, which is available free of charge on the Securities and Exchange
Commission's website at www.sec.gov.

 Liquidity
and Capital Resources

the year ended December 31, 2023, we funded our operations primarily from cash on hand, cash flow from operations and proceeds from Kinergy's
operating line of credit. In addition to funding our operations, we used our capital resources to continue our capital improvement projects,
make an annual payment related to our acquisition of Eagle Alcohol, repurchase shares of our common stock and pay preferred stock dividends.

 As of December 31, 2023, we had $30.0 million in
cash and cash equivalents and $33.3 million available for borrowing under Kinergy's operating line of credit. In addition, we have
up to an additional $65.0 million that may be available for capital improvement projects under our Orion term loan, subject to certain
conditions. We believe we have sufficient sources of liquidity to meet our anticipated working capital, debt service, capital expenditure
and other liquidity needs for at least the next twelve months from the date of this report.

 Quantitative
Year-End Liquidity Status

 We
believe that the following amounts provide insight into our liquidity and capital resources. The following selected financial information
should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements included elsewhere
in this report, and the other sections of "Management's Discussion and Analysis of Financial Condition and Results of Operations"
contained in this report (dollars in thousands).

 2023

 2022

 Change

 Cash, cash
 equivalents and restricted cash

 $
 45,480

 $
 49,525

 (8.2
)%

 Current assets

 $
 168,770

 $
 199,121

 (15.2
)%

 Property and equipment,
 net

 $
 248,748

 $
 239,069

 4.0
 %

 Current liabilities

 $
 65,288

 $
 78,017

 (16.3
)%

 Long-term debt, noncurrent
 portion

 $
 82,097

 $
 68,356

 20.1
 %

 Working capital

 $
 103,482

 $
 121,104

 (14.6
)%

 Working capital ratio

 2.59

 2.55

 1.6
 %

 - 42 -

Net Assets

 At
December 31, 2023, we had approximately $64.6 million of net assets at our subsidiaries that were not available to be transferred to
Alto Ingredients, Inc. in the form of dividends, distributions, loans or advances due to restrictions contained in our subsidiaries'
credit facilities.

 Changes
in Working Capital and Cash Flows

 Working
capital declined to $103.5 million at December 31, 2023 from $121.1 million at December 31, 2022 as a result of a $30.3 million decrease
in current assets, partially offset by a $12.7 million decrease in current liabilities.

assets declined primarily due to decreases in cash and cash equivalents, accounts receivable, inventories and derivative instruments,
partially offset by an increase in restricted cash.

 Our
current liabilities declined primarily due to decreases in accounts payable, accrued liabilities and other current liabilities, partially
offset by increases in derivative instruments and the current portion of our operating lease payment obligations.

 Our
cash, cash equivalents and restricted cash declined by $4.0 million due to $33.0 million used in our investing activities primarily for
our capital improvement projects, partially offset by $22.0 million in cash provided by our operating activities and $7.0 million in
cash provided by our financing activities.

 Cash
provided by our Operating Activities

 We
generated $22.0 million in cash from our operating activities during 2023, as compared to $6.0 million in 2022. Specific factors that
contributed significantly to the change in cash generated by our operating activities include:

 a decline of $13.6 million in net loss
primarily due to improved commodity crush margins resulting from lower corn costs;

 an
 increase related to inventories of $27.3 million due to the timing of production and sales
 where an increase in production did not result in a commensurate increase in sales by the
 end of the period; and

 an
 increase of $27.3 million related to changes in the fair value of our derivative instruments
 due to changes in commodity prices at period end 2023 as compared to 2022.

 These
amounts were partially offset by:

 a
 decrease of $33.1 million related to accounts payable and accrued expenses due to lower corn
 costs and the timing of payments; and

 a
 decrease $14.5 million related to accounts receivable balances primarily due to the timing
 of sales and collections.

 Cash
used in our Investing Activities

 We
used $33.0 million of cash in our investing activities for 2023, of which $29.5 million is attributable to additions to property and
equipment resulting from our capital improvement projects and $3.5 million is attributable to cash paid for our acquisition of Eagle
Alcohol.

 - 43 -

 Cash
provided by our Financing Activities

 Cash
provided by our financing activities was $7.0 million for 2023, of which $12.6 million is attributable to net proceeds from Kinergy's
line of credit, partially offset by $3.7 million in repurchases of our common stock, $1.3 million of preferred stock dividends and $0.7
million of debt issuance costs.

 Kinergy's
Operating Line of Credit

 Kinergy
maintains an operating line of credit for an aggregate amount of up to $100.0 million. The credit facility matures on November 7, 2027.
Interest accrues under the credit facility at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified
applicable margin ranging from 1.25% to 1.75%. The credit facility's monthly unused line fee is 0.25% to 0.375% of the amount by
which the maximum credit under the facility exceeds the average daily principal balance during the immediately preceding month. Payments
that may be made by Kinergy to Alto Ingredients, Inc. as reimbursement for management and other services provided by Alto Ingredients,
Inc. to Kinergy are limited under the terms of the credit facility to $1.5 million per fiscal quarter. The credit facility also includes
the accounts receivable of our indirect wholly-owned subsidiary, Alto Nutrients, LLC, or Alto Nutrients, as additional collateral. Payments
that may be made by Alto Nutrients to Alto Ingredients, 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 1.1 and are prohibited from incurring certain additional indebtedness
(other than specific intercompany indebtedness). The obligations of Kinergy and Alto Nutrients under the credit facility are secured
by all of our tangible and intangible assets.

 We
believe Kinergy and Alto Nutrients are in compliance with the fixed-charge coverage ratio covenant as of the filing of this report. The
following table sets forth the fixed-charge coverage ratio financial covenant and the actual results for the periods presented:

 Years
 Ended

 2023

 2022

 Fixed Charge Coverage Ratio Requirement

 1.10

 1.10

 Actual

 5.22

 3.54

 Excess

 4.12

 2.44

 Alto
Ingredients, Inc. has guaranteed all of Kinergy's obligations under the credit facility. As of December 31, 2023, Kinergy had an
outstanding balance of $30.7 million and $33.3 million of unused borrowing availability under the credit facility.

 - 44 -

 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.

 The Lenders agreed to advance to us up to $125.0
million upon the satisfaction of certain conditions. We committed to issue to the Lenders pro rata an aggregate of 1,282,051 shares of
our common stock at the initial funding and up to an additional 320,513 shares of our common stock based upon certain further fundings
under the credit facility. On November 23, 2022, we received our initial funding of $60.0 million under the credit facility and issued
an aggregate of 1,282,051 shares of our common stock to the Lenders. We received no separate consideration for the shares of common stock
issued.

accrues on the unpaid principal amount of the Term Loan at a fixed rate of 10% per annum. The Term Loan matures on November 7, 2028,
or earlier upon acceleration.

 We
must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ending December 31, 2023
in an amount equal to a percentage of our excess cash flow based on a specified leverage ratio, as follows: (i) if our leverage ratio
is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of our excess cash flow, (ii) if our leverage
ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount will equal 50% of our excess cash flow,
and (iii) if our leverage ratio is less than 1.5x, then the mandatory prepayment amount will equal 25% of our excess cash flow.

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

 Share
Repurchase Program

 For
the three months ended December 31, 2023, we repurchased 436,000 shares of our common stock as part of our publicly announced share repurchase
program at an average price per share of $2.27 for an aggregate expenditure of approximately $1.0 million during the period. See "Item
5 – Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities –
Purchases of Equity Securities by the Issuer and Affiliated Purchasers."

 For
the year ended December 31, 2023, we repurchased 1,685,000 shares of our common stock as part of our publicly announced share repurchase
program at an average price per share of $2.18 for an aggregate expenditure of $3.7 million during the period.

 Other
Cash Obligations

 As
of December 31, 2023, we had future commitments for certain capital projects totaling $15.6 million. These commitments are scheduled
to be satisfied through 2024.

 In
connection with our acquisition of Eagle Alcohol, we committed to contingent payments of up to $5.5 million in cash over the next two
years if certain financial targets and other conditions are met.

 - 45 -

 Critical
Accounting Policies and Estimates

 Our
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amount of net sales and expenses for each
period. The following represents a summary of our critical accounting policies and related estimates, defined as those policies that
we believe are the most important to the portrayal of our financial condition and results of operations and that require management's
most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are
inherently uncertain.

 Accounting
for Business Combinations

 Determining
the fair value of assets acquired and liabilities assumed in a business combination is considered a critical accounting estimate because
the allocation of the purchase price to assets acquired and liabilities assumed based upon fair values requires significant management
judgment and the use of subjective measurements. Variability in industry conditions and changes in assumptions or subjective measurements
used to allocate fair value are reasonably possible and may have a material impact on our financial position, liquidity or results of
operations.

 Revenue
Recognition

 We
recognize revenue primarily from sales of alcohols and essential ingredients.

 We
have five alcohol production facilities from which we produce and sell alcohols to our customers through our subsidiary, Kinergy. Kinergy
enters into sales contracts with customers under exclusive intercompany sales agreements with each of our five production facilities.
Kinergy also acts as a principal when it purchases third party fuel-grade ethanol which it resells to its customers. Finally, in 2022
and 2021, Kinergy had exclusive sales agreements with two third-party owned fuel-grade ethanol plants under which it sold the plants'
fuel-grade ethanol production for a fee plus the costs to deliver the ethanol to Kinergy's customers. Kinergy has since terminated
these contracts. These sales are referred to as third-party agent sales. Revenue from these third-party agent sales is recorded on a
net basis, with Kinergy recognizing its predetermined fees and any associated delivery costs.

 We
have five production facilities from which we produce and sell essential ingredients to our customers through our subsidiary, Alto Nutrients.
Alto Nutrients enters into sales contracts with essential ingredient customers under exclusive intercompany sales agreements with each
of our five production facilities.

 We
recognize revenue from sales of alcohols and essential ingredients at the point in time when the customer obtains control of the products,
which typically occurs upon delivery depending on the terms of the underlying contracts. In some instances, we enter into contracts with
customers that contain multiple performance obligations to deliver volumes of alcohols or essential ingredients over a contractual period
of less than 12 months. We allocate the transaction price to each performance obligation identified in the contract based on relative
standalone selling prices and recognize the related revenue as control of each individual product is transferred to the customer in satisfaction
of the corresponding performance obligations.

 - 46 -

 When
we are the agent, the supplier controls the products before they are transferred to the customer because the supplier is primarily responsible
for fulfilling the promise to provide the product, has inventory risk before the product has been transferred to a customer and has discretion
in establishing the price for the product. When we are the principal, we control the products before they are transferred to the customer
because we are primarily responsible for fulfilling the promise to provide the products, we have inventory risk before the product has
been transferred to a customer and we have discretion in establishing the price for the product.

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

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

 Our
long-lived assets have been primarily associated with our production facilities, reflecting their original cost, adjusted for depreciation
and amortization and any subsequent impairment.

 We
assess the impairment of long-lived assets, including property and equipment, when events or changes in circumstances indicate that the
fair value of an asset group could be less than the net book value of the asset group. Generally, we assess long-lived assets for impairment
by first determining the forecasted, undiscounted cash flows each asset is expected to generate plus the net proceeds expected from the
sale of the asset group. If the total amount of the undiscounted cash flows is less than the carrying value of the asset group, we then
determine the fair value of the asset group. An impairment loss would be recognized when the fair value is less than the related net
book value, and an impairment expense would be recorded in the amount of the difference. Forecasts of future cash flows are estimates
based on our experience and knowledge of our operations and the industry in which we operate. These estimates could be significantly
affected by future changes in market conditions, the economic environment, including inflation, and the purchasing decisions of our customers.
As a result, we recorded an asset impairment of $0.6 million with respect to our right of use assets associated with our operating leases.
We did not record any impairment on our right of use assets for the years ended December 31, 2022 and 2021.

 We review our intangible assets, including goodwill,
with indefinite lives at least annually or more frequently if impairment indicators arise. In our review, we determine the fair value
of these assets using market multiples and discounted cash flow modeling and compare it to the net book value of the reporting unit. Any
assessed impairments will be recorded permanently and expensed in the period in which the impairment is determined. We performed our annual
review of impairment and recognized an asset impairment loss of $6.0 million against our goodwill for the year ended December 31, 2023.
We recognized no asset impairments against intangible assets for the years ended December 31, 2022 and 2021.

 Assets
held-for-sale are assessed for impairment by comparing the carrying values to their expected net sales proceeds. In 2020, our Board of
Directors approved a plan to sell our fuel-grade ethanol production facilities in Madera and Stockton, California, which were ultimately
sold in 2021. We reviewed the criteria for held-for-sale classification of the long-lived assets associated with these asset groups.
Our analysis concluded that these assets should be classified as held-for-sale as of December 31, 2020, and as such, we estimated an
aggregate corresponding asset impairment of $22.3 million for 2020. We further evaluated the original estimate and recorded an additional
asset impairment on these assets held-for-sale of $1.2 million for 2021. In 2021, we decided to sell our property and equipment located
in Canton, Illinois. We reviewed the criteria for held-for-sale classification of the long-lived assets for this asset group. We concluded
that these assets should be classified as held-for-sale as of December 31, 2021, and as such, we estimated a corresponding asset impairment
of $1.9 million for 2021. We did not record any impairments for assets held-for-sale for December 31, 2023 or 2022.

 - 47 -

 Valuation
Allowance for Deferred Taxes

 We
account for income taxes under the asset and liability approach, where deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities, and are measured using enacted tax rates and laws that are expected
to be in effect when the differences reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the
amounts expected to be realized.

 We
evaluate our deferred tax asset balance for realizability. To the extent we believe it is more likely than not that some portion or all
of our deferred tax assets will not be realized, we will establish a valuation allowance against the deferred tax assets. Realization
of our deferred tax assets is dependent upon future taxable income during the periods in which the associated temporary differences become
deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies
in making this assessment. These changes, if any, may require possible material adjustments to these deferred tax assets, resulting in
a reduction in net income or an increase in net loss in the period when such determinations are made.

 We had pre-tax consolidated net losses of $27.9
million and $39.7 million for the years ended December 31, 2023 and 2022, respectively. We had pre-tax consolidated net income of $47.6
million for the year ended December 31, 2021. Based on our current and prior results, we do not have significant evidence to support a
conclusion that we will more likely than not be able to benefit from our remaining deferred tax assets. As such, we have recorded
a valuation allowance against our net deferred tax assets.

Instruments

 We
evaluate our contracts to determine whether the contracts are derivative instruments. Management may elect to exempt certain forward
contracts that meet the definition of a derivative from derivative accounting as normal purchases or normal sales. Normal purchases and
normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument
that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts
that meet the requirements of normal purchases or sales are documented as normal and exempted from the fair value accounting and reporting
requirements of derivative accounting.

 We
enter into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of fuel-grade
ethanol and managing exposure to changes in commodity prices. All of our exchange-traded derivatives are designated as non-hedge derivatives
for accounting purposes, with changes in fair value recognized in net income. Although the contracts are economic hedges of specified
risks, they are not designated or accounted for as hedging instruments.

 Realized
and unrealized gains and losses related to exchange-traded derivative contracts are included as a component of cost of goods sold in
the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying
balance sheet as derivative assets or liabilities. The selection of normal purchase or sales contracts, and use of hedge accounting,
are accounting policies that can change the timing of recognition of gains and losses in the statement of operations.

 - 48 -

 Item
7A. Quantitative and Qualitative Disclosures About Market Risk.

 We
are exposed to various market risks, including changes in commodity prices, as discussed below. Market risk is the potential loss arising
from adverse changes in market rates and prices. In the ordinary course of business, we may enter into various types of transactions
involving financial instruments to manage and reduce the impact of changes in commodity prices. We do not have material exposure to interest
rate risk. We do not expect to have any exposure to foreign currency risk as we conduct all of our transactions in U.S. dollars.

 We
produce and distribute specialty alcohol, fuel-grade ethanol and essential ingredients. Our business is sensitive to changes in the prices
of ethanol and corn. In the ordinary course of business, we may enter into various types of transactions involving financial instruments
to manage and reduce the impact of changes in ethanol and corn prices. We do not enter into derivatives or other financial instruments
for trading or speculative purposes.

 We
are subject to market risk with respect to ethanol and corn pricing. Ethanol prices are sensitive to global and domestic ethanol supply;
crude-oil supply and demand; crude-oil refining capacity; carbon intensity; government regulation; and consumer demand for alternative
fuels. Our ethanol sales are priced using contracts that are either based on a fixed price or an indexed price tied to a specific market,
such as Chicago Ethanol (Platts) or the Oil Price Information Service. Under these fixed-priced arrangements, we are exposed to risk
of a decrease in the market price of ethanol between the time the price is fixed and the time the alcohol is sold.

 We
satisfy our physical corn needs, the principal raw material used to produce alcohol and essential ingredients, based on purchases from
our corn vendors. Generally, we determine the purchase price of our corn at or near the time we begin to grind. Additionally, we also
enter into volume contracts with our vendors to fix the purchase price. As such, we are also subject to market risk with respect to the
price of corn. The price of corn is subject to wide fluctuations due to unpredictable factors such as weather conditions, farmer planting
decisions, governmental policies with respect to agriculture and international trade and global supply and demand. Under the fixed price
arrangements, we assume the risk of a decrease in the market price of corn between the time the price is fixed and the time the corn
is utilized.

ingredients are sensitive to various demand factors such as numbers of livestock on feed, prices for feed alternatives and supply factors,
primarily production of ethanol co-products by ethanol plants and other sources.

 As
noted above, we may attempt to reduce the market risk associated with fluctuations in the price of ethanol or corn by employing a variety
of risk management and hedging strategies. Strategies include the use of derivative financial instruments such as futures and options
executed on the CME and/or the New York Mercantile Exchange, as well as the daily management of physical corn.

 These
derivatives are not designated for special hedge accounting treatment, and as such, the changes in the fair values of these contracts
are recorded on the balance sheet and recognized immediately in cost of goods sold. We recognized net losses of $8.0 million, net gains
of $19.3 million and net gains of $21.6 million related to the change in the fair values of these contracts for the years ended December
31, 2023, 2022 and 2021, respectively.

 - 49 -

 We
prepared a sensitivity analysis as of December 31, 2023 to estimate our exposure to ethanol and corn. Market risk related to these factors
was estimated as the potential change in pre-tax income resulting from a hypothetical 10% adverse change in the prices of our expected
ethanol and corn volumes. The analysis uses average CME prices for the year and does not factor in future contracted volumes. The results
of this analysis for the year ended December 31, 2023, which may differ materially from actual results, are as follows (in millions):

 Volume

 Unit of Measure

 Adverse Change to
 Pre-Tax Income

 Ethanol

 305.9

 Gallons

 $
 45.5

 Corn

 72.6

 Bushels

 $
 41.0

 Item
8. Financial Statements and Supplementary Data.

 Reference
is made to the financial statements, which begin at page F-1 of this report.

 Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 None.

 Item
9A. Controls and Procedures.

 We conducted an evaluation under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined
in Rules 13a-15I and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or Exchange Act, means controls and other procedures
of a company that are designed to ensure that information required to be disclosed by the company in the reports it files or submits under
the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's
rules and forms. Disclosure controls and procedures also include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated
to the company's management, including its principal executive and principal financial officers, or persons performing similar functions,
as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded as of December 31, 2023 that our disclosure controls and procedures were effective at a reasonable assurance
level.

 Management's
Report on Internal Control over Financial Reporting

 Our
management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

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

 (ii)
 provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management
and directors; and

 (iii)
 provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could
have a material effect on our financial statements.

 - 50 -

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

 A
material weakness is defined by the Public Company Accounting Oversight Board's Audit Standards AS 2201 as being a deficiency,
or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis by the
company's internal controls.

 Under
the supervision and with the participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in
 Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under the framework set forth in Internal Control — Integrated Framework (2013), our management
concluded that our internal control over financial reporting was effective as of December 31, 2023.

 RSM
US LLP, an independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting
as of December 31, 2023. That report is included in Part IV of this report.

 Inherent
Limitations on the Effectiveness of Controls

 Management
does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all
errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective
control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error
or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

 These
inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a
simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people,
or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future
conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 Changes
in Internal Control over Financial Reporting

 There
has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

 Item
9B. Other Information.

the three months ended December 31, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act
of 1934, as amended) informed us of the adoption or termination of a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement
(as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

 Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

 Not
applicable.

 - 51 -

 PART
III

 Item
10. Directors, Executive Officers and Corporate Governance.

 The
information under the captions "Information about our Board of Directors, Board Committees and Related Matters" appearing
in the Proxy Statement, is hereby incorporated by reference.

 Item
11. Executive Compensation.

 The
information under the caption "Executive Compensation and Related Information," appearing in the Proxy Statement, is hereby
incorporated by reference.

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

 The
information under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation
Plan Information," appearing in the Proxy Statement, is hereby incorporated by reference.

 Item
13. Certain Relationships and Related Transactions, and Director Independence.

 The
information under the captions "Certain Relationships and Related Transactions" and "Information about our Board of
Directors, Board Committees and Related Matters—Director Independence" appearing in the Proxy Statement, is hereby incorporated
by reference.

 Item
14. Principal Accountant Fees and Services.

 The
information under the caption "Audit Matters—Principal Accountant Fees and Services," appearing in the Proxy Statement,
is hereby incorporated by reference.

 - 52 -

 PART
IV

 Item
15. Exhibits and Financial Statement Schedules.

 (a)(1)
Financial Statements

 Reference
is made to the financial statements listed on and attached following the Index to Consolidated Financial Statements contained on page
F-1 of this report.

 (a)(2)
Financial Statement Schedules

 None.

 (a)(3)
Exhibits

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

 Item
16. Form 10-K Summary.

 None.

 - 53 -

 I ndex
to Consolidated Financial Statements

 Reports of Independent Registered Public Accounting Firm (PCAOB ID: 49)

 Consolidated Balance Sheets as of December 31, 2023 and 2022

 Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2023, 2022 and 2021

 Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022 and 2021

 Notes to Consolidated Financial Statements

 F- 1

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

 Opinion
on the Financial Statements

 We have audited the accompanying consolidated
balance sheets of Alto Ingredients, Inc. and its subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2023, and the related notes to the consolidated financial statements (collectively, the financial statements). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023
and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity
with accounting principles generally accepted in the United States of America.

 We have also audited, in accordance
with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's
internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated March 13,
2024, expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

 Basis
for Opinion

 These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

 We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.

 Critical
Audit Matters

 The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

 F- 2

 Evaluation
of indicators of long-lived asset impairment

 As described
in Note 1 to the financial statements, the Company assesses the impairment of long-lived assets, including property and equipment, when
events or changes in circumstances indicate that the fair value of assets could be less than their net book value. The Company's
assessment did not result in an impairment for the year ended December 31, 2023.

 We identified
the evaluation of impairment indicators for long-lived assets as a critical audit matter because of the significant assumptions management
makes when determining whether events or changes in circumstances have occurred indicating that the carrying amounts of property and
equipment may not be recoverable. This required a high degree of auditor judgment when performing audit procedures to evaluate whether
management appropriately identified and evaluated impairment indicators.

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

 We obtained an understanding of management's process and internal
controls over management's evaluation of potential indicators of impairment and tested the operating effectiveness of the controls

 We obtained management's analysis of potential indicators of
impairment and evaluated management's analysis by:

 -
 Agreeing current period operating profits or losses for all identifiable
asset groups to respective trial balances

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

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

 Evaluating
publicly available information related to sales of comparable production facilities

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

 -
 Reading
board of directors meeting minutes, press releases, and publicly available information for indications of significant changes in the
manner of or the use of the asset group

 /s/ RSM US LLP

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

 Rochester,
Minnesota

 March
13, 2024

 F- 3

 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

 Opinion
on the Internal Control Over Financial Reporting

 We have audited Alto Ingredients, Inc.'s
(the Company) internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control
— Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on
criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission in 2013.

 We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated
balance sheets as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), stockholders'
equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes to the consolidated financial
statements of the Company and our report dated March 13, 2024 expressed an unqualified opinion.

 Basis
for Opinion

 The
Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment
of the effectiveness of internal control over financial reporting in the accompanying Management's Report on Internal Control over
Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based
on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company
in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and
the PCAOB.

 We
conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis
for our opinion.

 Definition
and Limitations of Internal Control Over Financial Reporting

 A company's internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the company's assets that could have a material effect on the financial statements.

 Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.

 /s/ RSM US LLP

 Rochester,
Minnesota

 March 13,
2024

 F- 4

 ALTO

CONSOLIDATED BALANCE SHEETS

(in thousands, except shares and par value)

 31,

 2023

 2022

 ASSETS

 Cash
 and cash equivalents

 $
 30,014

 $
 36,456

 cash

 15,466

 13,069

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

 58,729

 68,655

 Inventories

 52,611

 66,628

 instruments

 2,412

 4,973

 Other
 current assets

 9,538

 9,340

 Total
 current assets

 168,770

 199,121

 Property
 and equipment, net

 248,748

 239,069

 Other

 Right
 of use operating lease assets, net

 22,597

 18,937

 Intangible
 assets, net

 8,498

 9,087

 Goodwill

 —

 5,970

 Other
 assets

 5,628

 6,137

 Total
 other assets

 36,723

 40,131

 Total
 Assets

 $
 454,241

 $
 478,321

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

 F- 5

 ALTO

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(in thousands, except shares and par value)

 31,

 LIABILITIES
 AND STOCKHOLDERS' EQUITY

 2023

 2022

 Current Liabilities:

 Accounts
 payable

 $
 20,752

 $
 28,115

 Accrued
 liabilities

 20,205

 26,556

 portion – operating leases

 4,333

 3,849

 instruments

 13,849

 6,732

 Other
 current liabilities

 6,149

 12,765

 Total
 current liabilities

 65,288

 78,017

 Long-term
 debt, net

 82,097

 68,356

 leases, net of current portion

 19,029

 15,062

 Other
 liabilities

 8,270

 8,797

 Total
 Liabilities

 174,684

 170,232

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

 Stockholders'
 Equity:

 Preferred stock, $ 0.001 par value; 10,000,000 shares authorized:

 Series A: 1,684,375 shares authorized; no shares issued and outstanding as of December 31, 2023 and 2022

 —

 —

 Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of December 31, 2023 and 2022; liquidation preference of $ 18,075 as of December 31, 2023

 Common stock, $ 0.001 par value; 300,000,000 shares authorized; 75,703,100 and 75,154,495 shares issued and outstanding as of December 31, 2023 and 2022, respectively

 Non-voting common stock, $ 0.001 par value; 3,553,000 shares authorized; 896 shares issued and outstanding as of December 31, 2023 and 2022

 —

 —

 Additional
 paid-in capital

 1,040,912

 1,040,834

 other comprehensive income

 2,481

 1,822

 deficit

 ( 763,913
)

 ( 734,643
)

 Total
 stockholders' equity

 279,557

 308,089

 Total
 Liabilities and Stockholders' Equity

 $
 454,241

 $
 478,321

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

 F- 6

 ALTO

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 2023

 2022

 2021

 Net sales

 $
 1,222,940

 $
 1,335,621

 $
 1,207,892

 Cost of goods sold

 1,207,287

 1,363,171

 1,140,108

 Gross profit (loss)

 15,653

 ( 27,550
)

 67,784

 Selling, general and administrative expenses

 ( 32,664
)

 ( 31,579
)

 ( 29,185
)

 Gain (loss) on sale (disposal) of assets

 ( 293
)

 ( 2,230
)

 4,571

 Asset impairments

 ( 6,544
)

 —

 ( 3,100
)

 Income (loss) from operations

 ( 23,848
)

 ( 61,359
)

 40,070

 Income from cash grant

 2,812

 22,652

 —

 Income from loan forgiveness

 —

 —

 9,860

 Interest expense, net

 ( 7,425
)

 ( 1,827
)

 ( 3,587
)

 Other income, net

 1,208

 Income (loss) before provision for income taxes

 ( 27,908
)

 ( 39,672
)

 47,551

 Provision for income taxes

 1,925

 1,469

 Consolidated net income (loss)

 $
)

 $
)

 $

 Preferred stock dividends

 $
)

 $
)

 $
)

 Income allocated to participating securities

 $
 —

 $
 —

 $
 ( 600
)

 Income (loss) available to common stockholders

 $
 ( 29,270
)

 $
 ( 42,862
)

 $
 44,217

 Income (loss) per share, basic

 $
 ( 0.40
)

 $
 ( 0.60
)

 $
 0.62

 Income (loss) per share, diluted

 $
 ( 0.40
)

 $
 ( 0.60
)

 $
 0.61

 Weighted-average shares outstanding, basic

 73,339

 71,944

 71,098

 Weighted-average shares outstanding, diluted

 73,339

 71,944

 72,219

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

 F- 7

 ALTO

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 Years

 2023

 2022

 2021

 Consolidated
 net income (loss)

 $
)

 $
)

 $

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

 benefit pension plans

 2,106

 3,594

 Total
 comprehensive income (loss)

 $
 ( 27,346
)

 $
 ( 39,491
)

 $
 49,676

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

 F- 8

 ALTO

 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY

 (in
thousands)

 Stock

 Common
 Stock and
 Non-Voting Common

 Additional

 Paid-In

 Accum. Other

 Comprehensive

 Capital

 Deficit

 (Loss)

 Total

 Balances,
 December 31, 2020

 $

 72,487

 $

 $
 1,036,638

 $
 ( 736,598
)

 $
 ( 3,878
)

 $
 296,235

 Stock-based
 compensation

 —

 —

 —

 —

 2,883

 —

 —

 2,883

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

 —

 —

 ( 2,778
)

 —

 —

 ( 2,777
)

 Common
 stock issuances

 —

 —

 —

 —

 —

 Pension
 plan adjustment

 —

 —

 —

 —

 —

 —

 3,594

 3,594

 stock dividends

 —

 —

 —

 —

 —

)

 —

)

 Net
 income

 —

 —

 —

 —

 —

 —

 Balances,
 December 31, 2021

 $

 72,778

 $

 $
 1,037,205

 $
 ( 691,781
)

 $
 ( 284
)

 $
 345,214

 Stock-based
 compensation

 —

 —

 —

 —

 3,333

 —

 —

 3,333

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

 —

 —

 —

 ( 2,291
)

 —

 —

 ( 2,291
)

 issued for Eagle

 —

 —

 —

 —

 —

 issued to Orion

 —

 —

 1,282

 3,912

 —

 —

 3,913

 Stock
 repurchases

 —

 —

 ( 351
)

 —

 ( 1,325
)

 —

 —

 ( 1,325
)

 Pension
 plan adjustment

 —

 —

 —

 —

 —

 —

 2,106

 2,106

 stock dividends

 —

 —

 —

 —

 —

)

 —

)

 Net
 loss

 —

 —

 —

 —

 —

)

 —

)

 Balances,
 December 31, 2022

 $

 75,154

 $

 $
 1,040,834

 $
 ( 734,643
)

 $
 1,822

 $
 308,089

 Stock-based
 compensation

 —

 —

 —

 —

 3,896

 —

 —

 3,896

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

 —

 —

 2,234

 ( 145
)

 —

 —

 ( 143
)

 Stock
 repurchases

 —

 —

 ( 1,685
)

 ( 1
)

 ( 3,673
)

 —

 —

 ( 3,674
)

 Pension
 plan adjustment

 —

 —

 —

 —

 —

 —

 stock dividends

 —

 —

 —

 —

 —

)

 —

)

 Net
 loss

 —

 —

 —

 —

 —

)

 —

)

 Balances,
 December 31, 2023

 $

 75,703

 $

 $
 1,040,912

 $
 ( 763,913
)

 $
 2,481

 $
 279,557

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

 F- 9

 ALTO

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 For
 the Years Ended December 31,

 2023

 2022

 2021

 Operating Activities:

 Consolidated
 net income (loss)

 $

)

 $

)

 $

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

 Depreciation and amortization
 of intangibles

 23,080

 25,095

 23,292

 Asset impairments

 6,544

 —

 3,100

 Income from loan forgiveness

 —

 —

 ( 9,860

)

 (Gain) loss on (sale)
 disposal of assets

 2,230

 ( 4,571

)

 Inventory valuation

 2,201

 4,612

 —

 Losses (gains) on derivative
 instruments

 8,031

 ( 19,263

)

 ( 21,619

)

 Amortization of deferred
 financing costs

 1,048

 Amortization of debt
 discounts (premiums)

 ( 230

)

 Noncash compensation

 3,896

 3,333

 2,883

 Bad debt expense (recovery)

 ( 217

)

 Changes
 in operating assets and liabilities:

 Accounts receivable

 9,499

 23,967

 ( 43,554

)

 Inventories

 11,816

 ( 15,479

)

 ( 16,448

)

 Other current assets

 7,690

 38,989

 Operating leases

 ( 5,362

)

 ( 5,128

)

 ( 4,216

)

 Assets held-for-sale

 —

 —

 ( 3,483

)

 Liabilities held-for-sale

 —

 —

 2,305

 Accounts
 payable and accrued expenses

 ( 12,554

)

 20,503

 13,215

 Net
 cash provided by operating activities

 $

 22,025

 $

 6,049

 $

 26,821

 Investing
 Activities:

 Additions to property
 and equipment

 $

 ( 29,531

)

 $

 ( 37,744

)

 $

 ( 16,384

)

 Deferred purchase price
 payments for Eagle Alcohol

 ( 3,500

)

 —

 —

 Purchase of Eagle Alcohol,
 net of cash acquired

 —

 ( 14,685

)

 —

 Proceeds from principal
 payments on notes receivable

 —

 14,766

 —

 Proceeds from sale of Stockton

 —

 —

 24,000

 Proceeds
 from sale of Madera

 —

 —

 19,500

 Net
 cash (used in) provided by investing activities

 $

 ( 33,031

)

 $

 ( 37,663

)

 $

 27,116

 Financing
 Activities:

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

 $

 12,614

 $

 ( 32,325

)

 $

 17,889

 Net proceeds from term loan

 —

 59,100

 —

 Stock repurchases

 ( 3,674

)

 ( 1,325

)

 —

 Preferred stock dividend
 payments

)

)

 ( 2,853

)

 Debt issuance costs

 ( 714

)

 ( 5,171

)

 —

 Proceeds from issuances
 of common stock and warrants

 —

 —

 Payments on plant borrowings

 —

 —

 ( 29,964

)

 Payments
 on senior notes

 —

 —

 ( 25,533

)

 Net
 cash provided by (used in) financing activities

 $

 6,961

 $

 19,014

 $

 ( 39,999

)

 Net increase (decrease)
 in cash, cash equivalents and restricted cash

 ( 4,045

)

 ( 12,600

)

 13,938

 Cash,
 cash equivalents and restricted cash at beginning of period

 49,525

 62,125

 48,187

 Cash,
 cash equivalents and restricted cash at end of period

 $

 45,480

 $

 49,525

 $

 62,125

 Reconciliation of total cash, cash equivalents
 and restricted cash:

 Cash
 and cash equivalents

 $

 30,014

 $

 36,456

 $

 50,612

 Restricted cash

 15,466

 13,069

 11,513

 Total cash, cash equivalents
 and restricted cash

 $

 45,480

 $

 49,525

 $

 62,125

 Supplemental Information:

 paid (net of capitalized interest)

 $

 7,923

 $

 2,208

 $

 3,489

 Capitalized
 interest

 $

 2,454

 $

 $

 tax payments

 $

 $

 2,262

 $

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

 F- 10

 ALTO

 NOTES

 1.
 ORGANIZATION
 AND SIGNIFICANT ACCOUNTING POLICIES.

 Organization
and Business – The consolidated financial statements include, for all periods presented, the accounts of Alto Ingredients,
Inc., a Delaware corporation ("Alto Ingredients"), and its direct and indirect wholly-owned subsidiaries (collectively, the
"Company"), including Kinergy Marketing LLC, an Oregon limited liability company ("Kinergy"), Alto Nutrients,
LLC, a California limited liability company ("Alto Nutrients"), Alto Op Co., a Delaware corporation, Alto Pekin, LLC, a Delaware
limited liability company ("Alto Pekin") and Alto ICP, LLC, a Delaware limited liability company ("ICP"), and
the Company's production facilities in Oregon and Idaho. As discussed in Note 3, on May 14, 2021 and November 4, 2021, the Company
completed the sale of its production facilities located in Madera and Stockton, California, respectively.

 As discussed in Note 2, on January
14, 2022, the Company acquired Eagle Alcohol Company LLC, a Missouri limited liability company ("Eagle Alcohol"). On that
date, Eagle Alcohol became a wholly-owned subsidiary of the Company. Eagle Alcohol specializes in break bulk distribution of specialty
alcohols. Eagle Alcohol purchases bulk alcohol from suppliers, including the Company. Then it stores, denatures, packages, and resells
alcohol products in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols. Eagle
Alcohol delivers products to customers in the beverage, food, industrial and related-process industries via its own dedicated trucking
fleet and common carrier. The acquisition has provided the Company further vertical integration and access to new markets in the specialty
alcohol industry.

 The Company produces and distributes renewable fuel, essential ingredients and specialty alcohols. The Company also
produces and markets fuel-grade ethanol. The Company's production facilities in Pekin, Illinois are located in the heart of the
Corn Belt. The Company's two production facilities in Oregon and Idaho are located in close proximity to both feed and fuel-grade
ethanol customers.

 The
Company has a combined alcohol production capacity of 350 million gallons per year and produces, on an annualized basis, over 1.6 million
tons of essential ingredients, such as dried yeast, corn gluten meal, corn gluten feed, corn germ, and distillers grains and liquid feed
used in commercial animal feed and pet foods. In addition, the Company markets and distributes fuel-grade ethanol produced by third parties.

 The Company focuses on five
key markets: Health, Home & Beauty; Food & Beverage; Industry & Agriculture; Essential Ingredients; and
 Renewable Fuels. Products for the Health, Home & Beauty market include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals,
hand sanitizers, disinfectants and cleaners. Products for the Food & Beverage markets include grain neutral spirits used in alcoholic
beverages and vinegar as well as corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other
products for paint applications and fertilizers. Products for Essential Ingredients markets include dried yeast, corn gluten meal, corn
gluten feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. Products for Renewable Fuels
markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.

 The Company's production
facilities were operating for all of 2022, subject to scheduled and unscheduled downtimes to address facility repair and maintenance.
On January 1, 2023, the Company temporarily hot-idled its Magic Valley production facility due to extreme natural gas prices, other unfavorable
market conditions and to facilitate the installation of its new corn oil and high protein system, bringing the facility back online in
April 2023. In January 2024, the Company again temporarily hot-idled the facility to minimize losses from negative regional crush margins
and to expedite the installation of additional equipment needed to achieve the Company's intended production rate, quality and consistency
from the corn oil and high protein system. As market conditions change, the Company may increase, decrease or idle production at one or
more operating facilities or resume operations at any idled facility.

 F- 11

 ALTO

 NOTES

 Basis
of Presentation – The consolidated financial statements and related notes have been prepared in accordance with accounting
principles generally accepted in the United States ("GAAP") and include the accounts of the Company. All significant intercompany
accounts and transactions have been eliminated in consolidation.

 Segments – A segment is a
component of an enterprise whose operating results are regularly reviewed by the enterprise's chief operating decision maker to
make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information
is available. The Company determines and discloses its segments in accordance with the Financial Accounting Standards Board's ("FASB")
Accounting Standards Codification ("ASC") Section 280, Segment Reporting, which defines how to determine segments.
The Company reports financial and operating performance in three reportable segments (1) Pekin production, which includes the entire campus
in Pekin, Illinois ("Pekin Campus"), (2) marketing and distribution, which includes marketing and merchant trading for Company-produced
specialty alcohols, fuel-grade ethanol and essential ingredients, and sales of fuel-grade ethanol sourced from third parties, and (3)
Western production, which includes the Company's two western production facilities on an aggregated basis ("Western production").

 Cash
and Cash Equivalents – The Company considers all highly-liquid investments with an original maturity of three months or less
to be cash equivalents. The Company maintains its accounts at several financial institutions. These cash balances regularly exceed amounts
insured by the Federal Deposit Insurance Corporation; however, the Company does not believe it is exposed to any significant credit risk
on these balances.

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

 Accounts
Receivable and Allowance for Credit Losses – Trade accounts receivable are presented at original invoice amount, net of the
allowance for credit losses. The Company sells specialty alcohols to large consumer product companies, sells fuel-grade ethanol to gasoline
refining and distribution companies, sells essential ingredients to animal feed customers, including distillers grains and other feed
co-products to dairy operators and animal feedlots and corn oil to poultry and biodiesel customers, in each case generally without requiring
collateral. Due to a limited number of customers, the Company had significant concentrations of credit risk from sales as of December
31, 2023 and 2022, as described below.

 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 $ 51,315,000 and $ 55,667,000 at December 31, 2023 and 2022, respectively, were used as
collateral under Kinergy's operating line of credit. The allowance for credit losses was $ 85,000 and $ 105,000 as of December 31,
2023 and 2022, respectively. The Company recorded a bad debt expense of $ 427,000, a bad debt recovery of $ 217,000 and a bad debt expense
of $ 158,000 for the years ended December 31, 2023, 2022 and 2021, respectively. The Company does not have any off-balance sheet credit
exposure related to its customers.

 F- 12

 ALTO

 NOTES

 Concentration
Risks – Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed
completely to perform as contracted. Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments
exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other conditions described below. Financial instruments that
subject the Company to credit risk consist of cash balances maintained in excess of federal depository insurance limits and accounts
receivable which have no collateral or security. The Company has not experienced any significant losses in such accounts.

 The
Company sells specialty alcohols to consumer product companies and fuel-grade ethanol to gasoline refining and distribution companies.
The Company sold to customers representing 10% or more of the Company's total net sales, as follows.

 Years

 2023

 2022

 2021

 Customer A

 %

 %

 %

 Customer B

 %

 %

 %

 The
Company had accounts receivable due from these customers totaling $ 4,302,000 and $ 10,469,000, representing 7 % and 15 % of total accounts
receivable, as of December 31, 2023 and 2022, respectively.

 The
Company purchases corn, its largest cost component in producing alcohols, from its suppliers. The Company purchased corn from suppliers
representing 10% or more of the Company's total corn purchases, as follows:

 Years

 2023

 2022

 2021

 Supplier A

 %

 %

 %

 Supplier B

 %

 %

 %

 Supplier C

 —
 %

 %

 %

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

 F- 13

 ALTO

 NOTES

 Inventories
 – Inventories consisted primarily of bulk ethanol, specialty alcohols, corn, essential ingredients and unleaded fuel, and are
valued at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Inventory is net of valuation
adjustments of $ 2,201,000 and $ 4,612,000 as of December 31, 2023 and 2022, respectively. Of the inventory balance, approximately $ 41,041,000
and $ 43,484,000 at December 31, 2023 and 2022, respectively, were used as collateral under Kinergy's operating line of credit.
 Inventory balances consisted of the following (in thousands):

 31,

 2023

 2022

 Finished goods

 $
 35,765

 $
 47,736

 Work in progress

 5,063

 6,396

 Raw materials

 10,313

 11,197

 Other

 1,470

 1,299

 Total

 $
 52,611

 $
 66,628

 Property
and Equipment – Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the
following estimated useful lives:

 Buildings

 40 years

 Facilities and plant equipment

 10 – 25 years

 Other equipment, vehicles and furniture

 5 – 10 years

 The
cost of normal maintenance and repairs is charged to operations as incurred. Significant capital expenditures that increase the life
of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of property and equipment
sold, or otherwise disposed of, and the related accumulated depreciation or amortization are removed from the accounts, and any resulting
gains or losses are reflected in current operations.

 Intangible
Assets – The Company amortizes intangible assets with definite lives using the straight-line method over their estimated lives
of 10 - 12 years. Additionally, the Company assesses indefinite-lived intangible assets for impairment annually, or more frequently if
circumstances indicate impairment may have occurred. If the carrying value of an indefinite-lived intangible asset exceeds its fair value,
an impairment loss is recognized in an amount equal to that excess. If the Company determines that an impairment charge is needed, the
charge will be recorded as an asset impairment in the consolidated statements of operations.

 Leases
 – The Company accounts for leases under ASC Section 842, Leases ("ASC 842), whereby lessees are required to recognize
the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee's
obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a "right of use"
asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. See Note 10 for further
information.

Instruments and Hedging Activities – Derivative transactions, which can include exchange-traded futures contracts, options
and futures positions on the New York Mercantile Exchange or the Chicago Mercantile Exchange, are recorded on the balance sheet as assets
and liabilities based on the derivative's fair value. Changes in the fair value of derivative contracts are recognized currently
in income unless specific hedge accounting criteria are met. If derivatives meet those criteria, and hedge accounting is elected, effective
gains and losses are deferred in accumulated other comprehensive income (loss) and later recorded together with the hedged item in consolidated
income (loss). For derivatives designated as a cash flow hedge, the Company formally documents the hedge and assesses the effectiveness
with associated transactions. The Company has designated and documented contracts for the physical delivery of commodity products to
and from counterparties as normal purchases and normal sales.

 F- 14

 ALTO

 NOTES

 Revenue
Recognition – The Company recognizes revenue under ASC Section 606, Revenue from Contracts with Customers ("ASC
606"). The provisions of ASC 606 include a five-step process by which an entity will determine revenue recognition, depicting the
transfer of goods or services to customers in amounts reflecting the payment to which an entity expects to be entitled in exchange for
those goods or services. ASC 606 requires the Company to apply the following steps: (1) identify the contract with the customer; (2)
identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the
performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies the performance obligation.

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

 The
Company has five production facilities from which it produces and sells alcohols to its customers through Kinergy. Kinergy enters into
back-to-back sales contracts with its customers under exclusive intercompany sales agreements with each of the Company's five production
facilities. Kinergy also acts as a principal when it purchases third party fuel-grade ethanol which it resells to its customers. Finally,
for the years ended December 31, 2022 and 2021, Kinergy had exclusive sales agreements with certain third-party owned fuel-grade ethanol
production facilities under which it sold the facilities' fuel-grade ethanol for a fee plus the costs to deliver the ethanol to
Kinergy's customers. These sales were referred to as third-party agent sales. Revenue from these third-party agent sales was recorded
on a net basis, with Kinergy recognizing its predetermined fees and any associated delivery costs. Kinergy has terminated these contracts,
and as a result, did not have any related sales for the year ended December 31, 2023.

 The
Company has five production facilities from which it produces and sells essential ingredients to its customers through Alto Nutrients.
Alto Nutrients enters into sales contracts with essential ingredient customers under exclusive intercompany sales agreements with each
of the Company's five production facilities.

 The
Company recognizes revenue from sales of alcohols and essential ingredients at the point in time when the customer obtains control of
the products, which typically occurs upon delivery depending on the terms of the underlying contracts. In some instances, the Company
enters into contracts with customers that contain multiple performance obligations to deliver volumes of alcohols or essential ingredients
over a contractual period of less than 12 months. The Company allocates the transaction price to each performance obligation identified
in the contract based on relative standalone selling prices and recognizes the related revenue as control of each individual product
is transferred to the customer in satisfaction of the corresponding performance obligations.

 When
the Company is the agent, the supplier controls the products before they are transferred to the customer because the supplier is primarily
responsible for fulfilling the promise to provide the product, has inventory risk before the product has been transferred to a customer
and has discretion in establishing the price for the product. When the Company is the principal, the Company controls the products before
they are transferred to the customer because the Company is primarily responsible for fulfilling the promise to provide the products,
has inventory risk before the product has been transferred to a customer and has discretion in establishing the price for the product.

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

 F- 15

 ALTO

 NOTES

 Shipping
and Handling Costs – The Company accounts for shipping and handling costs relating to contracts with customers as costs to
fulfill its promise to transfer its products. Accordingly, the costs are classified as a component of cost of goods sold in the accompanying
consolidated statements of operations.

 Selling
Costs – Selling costs associated with the Company's product sales are classified as a component of selling, general and
administrative expenses in the accompanying consolidated statements of operations.

 Stock-Based
Compensation – The Company accounts for the cost of employee services received in exchange for the award of equity instruments
based on the fair value of the award, determined on the date of grant. The expense is recognized over the period during which an employee
is required to provide services in exchange for the award. The Company accounts for forfeitures as they occur. The Company recognizes
stock-based compensation expense as a component of either cost of goods sold or selling, general and administrative expenses in the consolidated
statements of operations.

 Goodwill
 – Goodwill represents the excess of cost of an acquired entity over the net of the amounts assigned to net assets acquired
and liabilities assumed. Annually, or more frequently, if indications of impairment arise, the Company performs a review for impairment.
This review includes the determination of each reporting unit's fair value using market multiples and discounted cash flow modeling.
The estimates of future cash flows are judgments based on management's experience and knowledge of the Company's operations
and the industries in which the Company operates. These estimates can be significantly affected by future changes in market conditions,
the economic environment, including inflation, and capital spending decisions of the Company's customers. Any assessed impairments
will be permanent and expensed in the period in which the impairment is determined. If the Company determines through its assessment
process that any of its goodwill requires impairment charges, the charges will be recorded in asset impairment expenses in the consolidated
statements of operations.

 The Company performed its annual review of impairment
of goodwill and recognized an asset impairment loss of $ 6.0 million for the year ended December 31, 2023. No impairment losses for
goodwill were recognized for the years ended December 31, 2022 and 2021.

 Impairment
of Long-Lived Assets – The Company assesses the impairment of long-lived assets, including property and equipment, internally
developed software and purchased intangibles subject to amortization, when events or changes in circumstances indicate that the fair
value of assets could be less than their net book value. In such event, the Company assesses long-lived assets for impairment by first
determining the forecasted, undiscounted cash flows the asset group is expected to generate plus the net proceeds expected from the sale
of the asset group. If this amount is less than the carrying value of the asset, the Company will then determine the fair value of the
asset group. An impairment loss would be recognized when the fair value is less than the related asset group's net book value,
and an impairment expense would be recorded in the amount of the difference. Forecasts of future cash flows are judgments based on the
Company's experience and knowledge of its operations and the industries in which it operates. These forecasts could be significantly
affected by future changes in market conditions, the economic environment, including inflation, and purchasing decisions of the Company's
customers. The Company's assessment resulted in an asset impairment of $ 574,000, $ 0 and $ 3,100,000 for the years ended December
31, 2023, 2022 and 2021, respectively.

 F- 16

 ALTO

 NOTES

 Deferred
Financing Costs – Deferred financing costs are costs incurred to obtain debt financing, including all related fees, and are
amortized as interest expense over the term of the related financing using the straight-line method, which approximates the effective
interest rate method. Amortization of deferred financing costs, included in interest expense, net, in the accompanying consolidated statements
of operations, was approximately $ 1,048,000, $ 177,000 and $ 778,000 for the years ended December 31, 2023, 2022 and 2021, respectively.
Unamortized deferred financing costs were approximately $ 4,700,000 and $ 5,034,000 as of December 31, 2023 and 2022, respectively, and
are recorded as a reduction of long-term debt in the consolidated balance sheets.

 Provision
for Income Taxes – Income taxes are accounted for under the asset and liability approach, where deferred tax assets and liabilities
are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted
tax rates and laws that are expected to be in effect when the differences reverse. Valuation allowances are established when necessary
to reduce deferred tax assets to the amounts expected to be realized.

 The
Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The
first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be
sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit
as the largest amount which is more than 50 % likely of being realized upon ultimate settlement. An uncertain tax position is considered
effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied. Should the Company
incur interest and penalties relating to tax uncertainties, such amounts would be classified as a component of interest expense, net,
and other income (expense), net, respectively. Deferred tax assets and liabilities are classified as noncurrent in the Company's
consolidated balance sheets.

 The
Company files a consolidated federal income tax return. This return includes all wholly owned subsidiaries as well as the Company's
pro-rata share of taxable income from pass-through entities in which the Company owns less than 100 %. State tax returns are filed on
a consolidated, combined or separate basis depending on the applicable laws relating to the Company and its subsidiaries. The Company
does not have any foreign operations.

(Loss) Per Share – Basic income (loss) per share is computed on the basis of the weighted-average number of shares of common
stock outstanding during the period. Preferred dividends are deducted from net income (loss) attributed to Alto Ingredients, Inc. and
are considered in the calculation of income (loss) available to common stockholders in computing basic income (loss) per share. Common
stock equivalents to preferred stock are considered participating securities and are also included in this calculation when dilutive.

 F- 17

 ALTO

 NOTES

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

 Year
 Ended December 31, 2023

 Loss

Numerator

 Denominator

 Per-Share

 Consolidated net loss

 $
)

 Less: Preferred stock
 dividends

)

 Basic and diluted loss per share:

 Loss available to common stockholders

 $
 ( 29,270
)

 73,339

 $
 ( 0.40
)

 Year
 Ended December 31, 2022

 Loss

Numerator

 Denominator

 Per-Share

 Consolidated net loss

 $
)

 Less: Preferred stock
 dividends

)

 Basic and diluted loss per share:

 Loss available to common stockholders

 $
 ( 42,862
)

 71,944

 $
 ( 0.60
)

 Year
 Ended December 31, 2021

 Numerator

 Denominator

 Per-Share

 Consolidated
 net income

 $

 Less:
 Preferred stock dividends

)

 Less:
 Income allocated to participating securities

 ( 600
)

 Basic
 income per share:

 available to common stockholders

 $
 44,217

 71,098

 $
 0.62

 Add:
 Dilutive securities

 —

 1,121

 Diluted
 income per share:

 available to common stockholders

 $
 44,217

 72,219

 $
 0.61

 F- 18

 ALTO

 NOTES

 There
were an aggregate of 981,000, 964,000 and 964,000 potentially dilutive shares from convertible securities outstanding for the years ended
December 31, 2023, 2022 and 2021, respectively. These convertible securities were not considered in calculating diluted loss per common
share for the years ended December 31, 2023, 2022 and 2021 as their effect would be anti-dilutive. In addition, there were an aggregate
of 3,188,000 and 8,900,500 weighted-average anti-dilutive shares from outstanding out-of-the-money warrants for the years ended December
31, 2022 and 2021, respectively.

 Financial
Instruments – The carrying values of cash and cash equivalents, restricted cash, accounts receivable, derivative instruments,
accounts payable and accrued liabilities are reasonable estimates of their fair values because of the short maturity of these items.
The Company believes the carrying value of its long-term debt instruments are not considered materially different than fair value because
they were recently issued.

 Business
Combinations – Business acquisitions are accounted for in accordance with ASC Section 805, Business Combinations.
ASC 805 requires the reporting entity to identify the acquirer, determine the acquisition date, recognize and measure the identifiable
tangible and intangible assets acquired and liabilities assumed and recognize and measure goodwill or a gain from the purchase. Assets
acquired and liabilities assumed are recorded at their fair values and the excess of the purchase price over the amounts assigned is
recorded as goodwill. Adjustments to fair value assessments are recorded to goodwill over the measurement period (not longer than twelve
months).

from Cash Grant – For the years ended December 31, 2023 and 2022, the Company received $ 2,812,000 and $ 22,652,000, respectively,
in cash from the USDA's Biofuel Producer Program. The program was created as part of the CARES Act of 2020, which allocated $ 700,000,000
to support biofuel producers who experienced market losses due to the pandemic. The Company is not required to repay the grants. Since
these funds are provided to subsidize historical losses of the Company, and are not required to be repaid, the Company accounted for
the proceeds by analogy to International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance,
and reported the amount as income from cash grant in the accompanying consolidated statements of operations.

 Employment-related
Benefits – Employment-related benefits associated with pensions and postretirement health care are expensed based on actuarial
analysis. The recognition of expense is affected by estimates made by management, such as discount rates used to value certain liabilities,
investment rates of return on plan assets, increases in future wage amounts and future health care costs. Discount rates are determined
based on a spot yield curve that includes bonds with maturities that match the expected timing of benefit payments under the plan.

 Share
Repurchase Program – On September 12, 2022, the Company announced a share repurchase program under which it may repurchase
up to $ 50,000,000 of its common stock with an initial purchase authorization of $ 10,000,000. The Company's lender has further limited
the Company's purchase authorization to $ 5,000,000. Amounts in excess of the purchase authorization of $ 5,000,000 will require
additional lender consent and amounts in excess of the initial purchase authorization of $ 10,000,000 will require additional board and
preferred stockholder authorization. The share repurchase program does not have an expiration date, does not require the repurchase of
any particular amount of shares, and may be implemented, modified, suspended or discontinued in whole or in part at any time and without
further notice. As repurchases are made, the Company will retire the shares, resulting in a reduction of issued and outstanding shares.
For the years ended December 31, 2023 and 2022, the Company repurchased an aggregate of 1,685,000 shares and 351,000 shares for $ 3,674,000
and $ 1,325,000 in cash, respectively.

 F- 19

 ALTO

 NOTES

 Nonvoting
Common Stock – In 2015, the Company issued nonvoting common stock convertible at a holder's election into voting common
stock. As of December 31, 2023, an aggregate of 3,539,236 shares of nonvoting common stock had been converted into an equal number of
shares of the Company's voting common stock. As of December 31, 2023, there were 896 shares of nonvoting common stock outstanding.

 Estimates
and Assumptions – The preparation of the consolidated financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates
are required as part of determining the allowance for credit losses, net realizable value of inventory, long-lived asset impairments,
goodwill impairment, valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized
in the Company's financial statements or tax returns, and the valuation of assets acquired and liabilities assumed as a result
of business combinations. Actual results and outcomes may materially differ from management's estimates and assumptions.

 Subsequent
Events – Management evaluates, as of each reporting period, events or transactions that occur after the balance sheet date
through the date that the financial statements are issued for either disclosure or adjustment to the consolidated financial results.

 2.
 ACQUISITION
 OF EAGLE ALCOHOL.

 On
January 14, 2022, the Company purchased 100 % of the membership interests of Eagle Alcohol. The purchase price was $ 14.0 million in cash
plus an estimated net working capital adjustment of $ 1.3 million in cash. The selling members of Eagle Alcohol were eligible to receive
up to an additional $ 14.0 million of contingent consideration, payable through a combination of $ 9.0 million in cash over the succeeding
three years and an aggregate of $ 5.0 million in the Company's common stock on the fourth- and fifth-year anniversaries of the closing
date, subject to the satisfaction of certain conditions, including continued employment with the Company. With respect to these payments,
the Company accrued $ 2.8 million and $ 3.5 million in other current liabilities in the accompanying consolidated balance sheets as of
December 31, 2023 and 2022, respectively, with the expense included in selling, general and administrative expenses in the accompanying
consolidated statements of operations for the years then ended.

 Eagle Alcohol specializes in break bulk distribution
of specialty alcohols. Eagle Alcohol purchases bulk alcohol from suppliers and then stores, denatures, packages, and resells alcohol products
in smaller sizes, including tank trucks, totes and drums that typically garner a premium price to bulk alcohols. Eagle Alcohol delivers
products to customers in the beverage, food, industrial and related-process industries via its own dedicated trucking fleet and common
carrier. The acquisition has provided the Company further vertical integration and access to new markets in the specialty alcohol industry.

 F- 20

 ALTO

 NOTES

 As
part of the Company's allocation of purchase price for its acquisition of Eagle Alcohol, the Company recorded a customer relationships
intangible asset of $ 6.5 million, a trade name intangible asset of $ 0.4 million and goodwill of $ 6.0 million. See Note 7.

 3.
 ASSET
 SALES.

 Stockton
and Madera

 In
October 2020, the Company's Board of Directors approved a plan to sell the Company's fuel-grade ethanol production facilities
located in Madera and Stockton, California. The analysis of these potential sales resulted in an aggregate asset impairment of $ 1.2 million
in the Company's Western production segment for the year ended December 31, 2021.

 On
May 14, 2021, the Company closed the sale of its Madera facility for total consideration of $ 28.3 million, comprised of $ 19.5 million
in cash and $ 8.8 million in assumption of liabilities, resulting in a net loss on sale of less than $ 0.1 million, included in gain (loss)
on sale (disposal) of assets in the Company's consolidated statements of operations. All of the cash proceeds were used to repay
a significant portion of the Company's term debt and accrued interest.

 On
November 5, 2021, the Company closed the sale of its Stockton facility for gross proceeds of $ 24.0 million in cash, resulting in a net
gain on sale of $ 4.6 million, recorded in gain (loss) on sale (disposal) of assets in the Company's consolidated statements of
operations. With the net cash proceeds, the Company repaid in full its senior secured notes and loans made to Alto Pekin and ICP.

 For
the year ended December 31, 2021, net sales attributed to the results of operations for Stockton and Madera were $ 2.6 million and $ 0,
respectively. For the year ended December 31, 2021, pre-tax loss attributed to the results of operations for Stockton and Madera was
$ 2.8 million and $ 2.0 million, respectively. The above pre-tax results include asset impairments associated with Stockton and Madera
recorded for the year ended December 31, 2021 of $ 0 and $ 1.2 million, respectively.

 Canton

2021, the Company agreed to sell certain assets of the Company's property and equipment in Canton, Illinois. The analysis of the
potential sale resulted in an asset impairment of $ 1.9 million in the Company's Western production segment for the year ended December
31, 2021. The Company sold these assets in 2022. For the years ended December 31, 2022 and 2021, there were no sales from Canton. For
the years ended December 31, 2022 and 2021, pre-tax losses attributed to Canton were less than $ 1.0 million for each year.

 4.
 INTERCOMPANY
 AGREEMENTS.

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

 Affiliate
Management Agreement – Alto Ingredients entered into an Affiliate Management Agreement ("AMA") with its operating
subsidiaries under which Alto Ingredients agreed to provide operational, administrative and staff support services. These services generally
include, but are not limited to, administering the subsidiaries' compliance with their credit agreements and performing billing,
collection, record keeping and other administrative and ministerial tasks. Alto Ingredients agreed to supply all labor and personnel
required to perform its services under the AMA, including the labor and personnel required to operate and maintain the production facilities
and marketing activities. These services are billed at a predetermined amount per subsidiary each month plus out of pocket costs such
as employee wages and benefits.

 F- 21

 ALTO

 NOTES

 The
AMAs had an initial term of one year and have automatic successive one year renewal periods. Alto Ingredients may terminate the AMA,
and any subsidiary may terminate the AMA, at any time by providing at least 90 days prior notice of termination.

 Alto
Ingredients recorded revenues of approximately $ 13,200,000 $ 12,403,000 and $ 9,774,000 related to the AMAs in place for the years ended
December 31, 2023, 2022 and 2021, respectively. These amounts have been eliminated upon consolidation.

 Ethanol
Marketing Agreements – Kinergy entered into separate marketing agreements with each of the Company's production facilities
which granted Kinergy the exclusive right to purchase, market and sell the alcohols produced at those facilities. Under the terms of
the marketing agreements, within ten days after delivering alcohol to Kinergy, an amount is paid to Kinergy equal to (i) the estimated
purchase price payable by the third-party purchaser of the alcohol, minus (ii) the estimated amount of transportation costs to be incurred,
minus (iii) the estimated incentive fee payable to Kinergy, which equals 1% of the aggregate third-party purchase price, provided that
the marketing fee shall not be less than $0.015 per gallon and not more than $0.0225 per gallon. Each of the marketing agreements had
an initial term of one year and has successive one year renewal periods at the option of the production facility.

 Kinergy
recorded revenues of approximately $ 5,431,000, $ 5,746,000 and $ 4,496,000 related to the marketing agreements for the years ended December
31, 2023, 2022 and 2021, respectively. These amounts have been eliminated upon consolidation.

 Corn Procurement and Handling Agreements
– Alto Nutrients entered into separate corn procurement and handling agreements with each of the Company's production facilities.
Under the terms of the corn procurement and handling agreements, each facility appointed Alto Nutrients as its exclusive agent to solicit,
negotiate, enter into and administer, on its behalf, corn supply arrangements to procure the corn necessary to operate the facility. Alto
Nutrients also provides grain handling services including, but not limited to, receiving, unloading and conveying corn into the facility's
storage and, in the case of whole corn delivered, processing and hammering the whole corn.

 Under
these agreements, Alto Nutrients receives a fee of $ 0.03 per bushel of corn delivered to each production facility as consideration for
its procurement and handling services, payable monthly. Each corn procurement and handling agreement had an initial term of one year
and successive one year renewal periods at the option of the individual facility. Alto Nutrients recorded revenues of approximately $ 3,007,000,
$ 3,207,000 and $ 2,694,000 related to the corn procurement and handling agreements for the years ended December 31, 2023, 2022 and 2021,
respectively. These amounts have been eliminated upon consolidation.

 F- 22

 ALTO

 NOTES

Ingredients Marketing Agreements – Alto Nutrients entered into separate marketing agreements with each of the Company's
production facilities (except for the Company's Magic Valley facility), which grant Alto Nutrients the exclusive right to market,
purchase and sell the various essential ingredients produced at each facility. Under the terms of the marketing agreements, within ten
days after a facility delivers essential ingredients to Alto Nutrients, the production facility is paid an amount equal to (i) the estimated
purchase price payable by the third-party purchaser of the essential ingredients, minus (ii) the estimated amount of transportation costs
to be incurred, minus (iii) the estimated amount of fees and taxes payable to governmental authorities in connection with the tonnage
of the essential ingredients produced or marketed, minus (iv) the estimated incentive fee payable to the Company, which equals (a) 5%
of the aggregate third-party purchase price for wet corn gluten feed, wet distillers grains, corn condensed distillers solubles and distillers
grains with solubles, or (b) 1% of the aggregate third-party purchase price for corn gluten meal, dry corn gluten feed, dry distillers
grains, corn germ and corn oil. Each marketing agreement had an initial term of one year and has successive one year renewal periods
at the option of the production facility.

 Alto
Nutrients recorded revenues of approximately $ 3,216,500, $ 3,505,000 and $ 2,871,000 related to the marketing agreements for the years
ended December 31, 2023, 2022 and 2021, respectively. These amounts have been eliminated upon consolidation.

 5.
 SEGMENTS.

 The Company reports its financial and operating
performance in three segments: (1) Pekin Campus production, which includes the production and sale of alcohols and essential ingredients
produced at the Company's Pekin, Illinois campus, (2) marketing and distribution, which includes marketing and merchant trading
for Company-produced alcohols and essential ingredients on an aggregated basis, and sales of fuel-grade ethanol sourced from third parties,
and (3) Western production, which includes the production and sale of fuel-grade ethanol and essential ingredients produced the Company's
two western production facilities on an aggregated basis, none of which are individually so significant to be considered a separately
reportable segment.

before provision for income taxes includes management fees charged by Alto Ingredients to the segments. The Pekin Campus production segment
incurred $ 5,280,000, $ 5,046,000 and $ 4,344,000 in management fees for the years ended December 31, 2023, 2022 and 2021, respectively.
The marketing and distribution segment incurred $ 3,960,000, $ 3,840,000 and $ 3,480,000 in management fees for the years ended December
31, 2023, 2022 and 2021, respectively. The Western production segment incurred $ 2,640,000, $ 2,400,000 and $ 1,950,000 in management fees
for the years ended December 31, 2023, 2022 and 2021, respectively. Corporate and other includes the results of Eagle Alcohol and selling,
general and administrative expenses, consisting primarily of corporate employee compensation, professional fees and overhead costs not
directly related to a specific operating segment.

the normal course of business, the segments do business with each other. The preponderance of this activity occurs when the Company's
marketing and distribution segment markets alcohol produced by the production segments for a marketing fee, as discussed in Note 4. These
intersegment activities are considered arms'-length transactions. Consequently, although these transactions impact segment performance,
they do not impact the Company's consolidated results since all revenues and corresponding costs are eliminated upon consolidation.

 F- 23

 ALTO

 NOTES

 For
the years ended December 31, 2023, 2022 and 2021, capital expenditures incurred by the Pekin Campus segment were approximately $ 17.7
million, $ 25.7 million and $ 14.3 million, and capital expenditures incurred by the Western production segment were approximately $ 11.8
million, $ 12.3 million $ 2.1 million, respectively.

 The
following tables set forth certain financial data for the Company's operating segments (in thousands):

 Net
 Sales:

 2023

 2022

 2021

 Pekin Campus production, recorded as gross:

 sales

 $
 502,217

 $
 521,273

 $
 498,195

 ingredient sales

 217,702

 225,871

 189,535

 Intersegment
 sales

 1,427

 1,212

 1,193

 Total
 Pekin Campus sales

 721,346

 748,356

 688,923

 Marketing and distribution:

 sales, gross

 $
 262,587

 $
 227,626

 $
 379,422

 sales, net

 1,225

 1,753

 Intersegment
 sales

 11,654

 12,459

 10,061

 Total
 marketing and distribution sales

 274,606

 241,310

 391,236

 Western Production, recorded as gross:

 sales

 $
 166,971

 $
 253,605

 $
 107,931

 ingredient sales

 57,264

 90,209

 31,056

 Intersegment
 sales

 Total
 Western production sales

 224,369

 343,836

 139,951

 and other

 15,834

 15,812

 —

 Intersegment eliminations

 ( 13,215
)

 ( 13,693
)

 ( 12,218
)

 Net
 sales as reported

 $
 1,222,940

 $
 1,335,621

 $
 1,207,892

 Cost
 of goods sold:

 Pekin Campus production

 $
 710,088

 $
 772,755

 $
 638,371

 Marketing and distribution

 259,234

 229,288

 371,371

 230,445

 353,775

 136,401

 Corporate and other

 12,122

 12,167

 —

 Intersegment eliminations

 ( 4,602
)

 ( 4,814
)

 ( 6,035
)

 Cost of goods sold as reported

 $
 1,207,287

 $
 1,363,171

 $
 1,140,108

 (loss) before provision for income taxes:

 Pekin
 Campus production

 $
 ( 1,560
)

 $
 ( 27,376
)

 $
 41,622

 and distribution

 7,644

 3,748

 11,756

 production

 ( 13,506
)

 ( 7,209
)

 ( 3,762
)

 and other

 ( 20,486
)

 ( 8,835
)

 ( 2,065
)

 $
 ( 27,908
)

 $
 ( 39,672
)

 $
 47,551

 Depreciation
 and amortization expense:

 Pekin
 Campus production

 $
 19,789

 $
 19,136

 $
 17,352

 production

 2,381

 5,085

 5,890

 and other

 $
 23,080

 $
 25,095

 $
 23,292

 expense, net of capitalized interest:

 Pekin
 Campus production

 $
 ( 207
)

 $
 ( 381
)

 $

 and distribution

 1,658

 production

 1,164

 ( 339
)

 and other

 5,646

 1,701

 $
 7,425

 $
 1,827

 $
 3,587

 F- 24

 ALTO

 NOTES

 The
following table sets forth the Company's total assets by operating segment (in thousands):

 2023

 2022

 Total
 assets:

 Pekin Campus production

 $
 251,048

 257,089

 Marketing and distribution

 101,196

 114,755

 57,533

 51,886

 Corporate and other

 44,464

 54,591

 $
 454,241

 $
 478,321

 6.
 PROPERTY
 AND EQUIPMENT.

 Property
and equipment consisted of the following (in thousands):

 2023

 2022

 Facilities and plant equipment

 $
 405,010

 $
 386,932

 Land

 3,687

 3,687

 Other equipment, vehicles and furniture

 9,719

 9,876

 Construction in progress

 50,505

 37,538

 468,921

 438,033

 Accumulated depreciation

 ( 220,173
)

 ( 198,964
)

 $
 248,748

 $
 239,069

 Depreciation
expense was $ 22,492,000, $ 24,528,000 and $ 23,292,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

 The
Company capitalized interest of $ 2,454,000, $ 720,000 and $ 628,000 for the years ended December 31, 2023, 2022 and 2021, respectively,
related to its capital investment activities.

 The
Company's property and equipment are substantially collateralized under the Company's Term Loan.

 7.
 INTANGIBLE
 ASSETS.

 Intangible
assets, including goodwill, consisted of the following (in thousands):

 2023

 2022

 Useful Life
(Years)

 Gross

 Amortization/

Impairment

 Net
 Book
 Value

 Gross

 Amortization

 Net
 Book
 Value

 Non-Amortizing:

 Goodwill

 $
 5,970

 $
 ( 5,970
)

 $
 —

 $
 5,970

 $
 —

 $
 5,970

 Kinergy tradename

 2,678

 —

 2,678

 2,678

 —

 2,678

 Amortizing:

 Customer relationships

 6,556

 ( 1,074
)

 5,482

 6,556

 ( 527
)

 6,029

 Eagle
 Alcohol tradename

 ( 82
)

 ( 40
)

 Total
 goodwill and intangible assets

 $
 15,624

 $
 ( 7,126
)

 $
 8,498

 $
 15,624

 $
 ( 567
)

 $
 15,057

 F- 25

 ALTO

 NOTES

 Goodwill
– As discussed in Note 2, the Company's recorded goodwill of $ 5,970,000 in its Corporate and other segment resulted from
the Company's acquisition of Eagle Alcohol. As part of the Company's annual goodwill testing, it impaired the full amount
of goodwill of $ 5,970,000 and recognized the amount in asset impairments in the consolidated statements of operations for the year ended
December 31, 2023. The Company did not record any goodwill impairment for the years ended December 31, 2022 and 2021.

 Kinergy
Tradename – The Company recorded tradename of $ 2,678,000 as part of the Company's merger with Kinergy in 2006. The Company
determined that the tradename has an indefinite life and therefore, rather than being amortized, will be tested annually for impairment.
The Company did not record any impairment on its tradename for the years ended December 31, 2023, 2022 and 2021.

 Customer
Relationships – The Company recorded customer relationships of $ 6,556,000 from the Company's acquisition of Eagle Alcohol.
See Note 2. The Company has established a useful life of twelve years for these customer relationships.

 Eagle
Alcohol Tradename – The Company recorded tradename of $ 420,000 from the Company's acquisition of Eagle Alcohol. See Note
2. The Company has established a useful life of ten years for the tradename.

 Amortization
expense associated with intangible assets totaled $ 588,000 and $ 567,000 for the years ended December 31, 2023 and 2022. The weighted-average
unamortized life of the customer relationships and tradename is 9.9 years.

 The
expected amortization expense relating to amortizable intangible assets in each of the five years after December 31, 2023 are (in thousands):

 Years

 2024

 $

 2025

 2026

 2027

 2028

 Thereafter

 2,880

 Total

 $
 5,820

 8.
 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.

Risk – Cash Flow Hedges – The Company uses derivative instruments to protect cash flows from fluctuations caused
by volatility in commodity prices for periods of up to twelve months in order to protect gross profit margins from potentially adverse
effects of market and price volatility on alcohol sales and purchase commitments where the prices are set at a future date and/or if
the contracts specify a floating or index-based price. In addition, the Company hedges anticipated sales of alcohol to minimize its exposure
to the potentially adverse effects of price volatility. These derivatives may be designated and documented as cash flow hedges and effectiveness
is evaluated by assessing the probability of the anticipated transactions and regressing commodity futures prices against the Company's
purchase and sales prices. Ineffectiveness, which is defined as the degree to which the derivative does not offset the underlying exposure,
is recognized immediately in cost of goods sold. For the years ended December 31, 2023, 2022 and 2021, the Company did not designate
any of its derivatives as cash flow hedges.

Risk – Non-Designated Hedges – The Company uses derivative instruments to lock in prices for certain amounts of corn
and alcohols by entering into exchange-traded futures contracts or options for those commodities. These derivatives are not designated
for hedge accounting treatment. The changes in fair value of these contracts are recorded on the balance sheet and recognized immediately
in cost of goods sold. The Company recognized net losses of $ 8,031,000 and net gains of $ 19,263,000 and $ 21,619,000 as the change in
the fair value of these contracts for the years ended December 31, 2023, 2022 and 2021, respectively.

 F- 26

 ALTO

 NOTES

 Non-Designated
Derivative Instruments – The classification and amounts of the Company's derivatives not designated as hedging instruments,
and related cash collateral balances, are as follows (in thousands):

 As
 of December 31, 2023

 Assets

 Liabilities

 Type
 of Instrument

 Balance
 Sheet Location

 Fair
 Value

 Balance
 Sheet Location

 Fair
 Value

 Cash collateral
 balance

 Restricted cash

 $
 15,466

 Commodity contracts

 Derivative instruments

 $
 2,412

 Derivative instruments

 $
 13,849

 As
 of December 31, 2022

 Assets

 Liabilities

 Type
 of Instrument

 Balance
 Sheet Location

 Fair
 Value

 Balance
 Sheet Location

 Fair
 Value

 Cash collateral
 balance

 cash

 $
 13,069

 Commodity contracts

 Derivative instruments

 $
 4,973

 Derivative instruments

 $
 6,732

 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 recognized gains (losses) for its derivatives not designated as hedging instruments
are as follows (in thousands):

 Realized
 Gains

 For
 the Years Ended December 31,

 Type
 of Instrument

 Statements
 of Operations Location

 2023

 2022

 2021

 contracts

 Cost
 of goods sold

 $
 1,647

 $
 23,280

 $
 32,618

 $
 1,647

 $
 23,280

 $
 32,618

 Unrealized
 Losses

 For
 the Years Ended December 31,

 Type
 of Instrument

 Statements
 of Operations Location

 2023

 2022

 2021

 contracts

 Cost
 of goods sold

 $
 ( 9,678
)

 $
 ( 4,017
)

 $
 ( 10,999
)

 $
 ( 9,678
)

 $
 ( 4,017
)

 $
 ( 10,999
)

 F- 27

 ALTO

 NOTES

 9.
 DEBT.

 Long-term
borrowings are summarized as follows (in thousands):

 31,

 2023

 31,

 2022

 Kinergy line of credit

 $
 30,690

 $
 18,076

 Orion term loan

 60,000

 60,000

 90,690

 78,076

 Less unamortized debt discount

 ( 3,893
)

 ( 4,686
)

 Less unamortized debt financing costs

 ( 4,700
)

 ( 5,034
)

 Less current portion

 —

 —

 Long-term debt

 $
 82,097

 $
 68,356

 Kinergy
Line of Credit – Kinergy has an operating line of credit for an aggregate amount of up to $ 100,000,000. The line of credit
matures on November 7, 2027. The credit facility is based on Kinergy's eligible accounts receivable and inventory levels, subject
to certain concentration reserves. The credit facility is subject to certain other sublimits, including inventory loan limits. Interest
accrues under the line of credit at a rate equal to (i) the daily Secured Overnight Financing Rate, plus (ii) a specified applicable
margin ranging between 1.25 % and 1.75 %. The applicable margin was 1.25 %, for a total rate of 6.74 %, at December 31, 2023. The credit
facility's monthly unused line fee is an annual rate equal to 0.25 % to 0.375 % depending on the average daily principal balance
during the immediately preceding month. Payments that may be made by Kinergy to the Company as reimbursement for management and other
services provided by the Company to Kinergy are limited under the terms of the credit facility to $ 1,500,000 per fiscal quarter. The
credit facility also includes the accounts receivable of Alto Nutrients as additional collateral. Payments that may be made by Alto Nutrients
to the Company as reimbursement for management and other services provided by the Company to Alto Nutrients are limited under the terms
of the credit facility to $ 500,000 per fiscal quarter. Kinergy and Alto Nutrients may also make distributions to the Company of up to
 75 % of their excess cash flow.

 If
the monthly excess borrowing availability of Kinergy and Alto Nutrients falls below certain thresholds, they are collectively required
to maintain a fixed-charge coverage ratio (calculated as a twelve-month rolling earnings before interest, taxes, depreciation and amortization
divided by the sum of interest expense, capital expenditures, principal payments of indebtedness, indebtedness from capital leases and
taxes paid during such twelve-month rolling period) of at least 1.1 and are prohibited from incurring certain additional indebtedness
(other than specific intercompany indebtedness).

 The
obligations of Kinergy and Alto Nutrients under the credit facility are secured by first-priority security interests in all of their
assets in favor of the lender. Alto Ingredients has guaranteed all of Kinergy's obligations under the line of credit. As of December
31, 2023, Kinergy had $ 33.3 million in unused borrowing availability under the credit facility.

 Orion
Term Loan – On November 7, 2022, the Company entered into a credit agreement with certain funds managed by Orion Infrastructure
Capital (collectively, the "Lenders"), and OIC Investment Agent, LLC, as administrative agent and collateral agent ("OIC"),
under which the Lenders agreed to extend a senior secured credit facility in the amount of up to $ 125,000,000 (the "Term Loan").
The Term Loan is secured by a first priority lien on certain assets of the Company and a second priority lien on certain assets of Kinergy
and Alto Nutrients.

 The
Lenders agreed to advance to the Company up to $ 100,000,000, with up to an additional $ 25,000,000 upon the satisfaction of certain conditions.
The Company also agreed to issue to the Lenders upon its first funding request, an aggregate of 1,282,051 shares of the Company's
common stock, and up to an additional 320,513 shares of the Company's common stock upon additional funding or fundings.

 On November 23, 2022, the Company received its
initial funding of $ 60,000,000 and issued 1,282,051 shares of common stock. As of December 31, 2023 and 2022, the principal amount outstanding
under the Term Loan was $ 60,000,000. The Company allocated $ 3,912,000 of the loan proceeds to additional paid-in capital for the common
stock issued based on the relative fair values of the debt and equity instruments and recorded a corresponding amount as a debt issuance
discount that will be amortized to interest expense over the term of the loan.

accrues on the unpaid principal amount of the Term Loan at a fixed rate of 10 % per annum. The Term Loan matures on November 7, 2028,
or earlier upon acceleration.

 F- 28

 ALTO

 NOTES

 The
Company must prepay amounts outstanding under the Term Loan on a semi-annual basis beginning with the six-month period ended December
31, 2023 in an amount equal to a percentage of the Company's excess cash flow based on a specified leverage ratio, as follows:
(i) if the leverage ratio is greater than or equal to 3.0x, then the mandatory prepayment amount will equal 100% of the Company's
excess cash flow, (ii) if the leverage ratio is less than 3.0x and greater than or equal to 1.5x, then the mandatory prepayment amount
will equal 50% of the Company's excess cash flow and (iii) if the leverage ratio is less than 1.5x, then the mandatory prepayment
amount will equal 25% of the Company's excess cash flow.

 The
terms and conditions of the Term Loan also contain customary and other representations, warranties, covenants and obligations, including
events of default, and other terms and conditions.

 Registration
Rights Agreement - On November 7, 2022, the Company entered into a registration rights agreement with the Lenders and agreed to register
for resale with the Securities and Exchange Commission the shares of common stock issued to the Lenders under the Term Loan. The related
registration statement has been declared effective by the Securities and Exchange Commission.

 CARES
Act Loans – On May 4, 2020, Alto Ingredients and Alto Pekin, received loan proceeds from Bank of America, NA under the Coronavirus
Aid, Relief, and Economic Security Act of 2020 ("CARES Act"), through the Paycheck Protection Program administered by the
U.S. Small Business Administration ("SBA"). Alto Ingredients received $ 6.0 million and Alto Pekin received $ 3.9 million in
loan proceeds. Under the terms of the loans, certain amounts may be forgiven if they are used for qualifying expenses as described in
the CARES Act. In June 2021, the SBA approved Alto Pekin's forgiveness application for the full amount of $ 3.9 million. In September
2021, the SBA approved Alto Ingredients' forgiveness application for the full amount of $ 6.0 million. As a result, the Company
recognized income from loan forgiveness of $ 9.9 million for the year ended December 31, 2021. The SBA may audit the loan forgiveness
applications and further examine eligibility for forgiveness, including the facts and circumstances existing at the time the loans were
made. The Company can provide no assurance that any loan forgiven will not require repayment following an audit by the SBA.

 Maturities
of Long-term Debt – The Company's long-term debt matures as follows (in thousands):

 December 31:

 2027

 $

 30,690

 2028

 60,000

 $

 90,690

 1 0.
 LEASES.

 The
Company leases equipment and land for certain of its facilities. Operating lease right of use assets and liabilities are recognized at
commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing
rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease
payments. For the years ended December 31, 2023 and 2022, the Company's weighted-average discount rate was 7.50 %. Operating lease
expense is recognized on a straight-line basis over the lease term.

 Upon
the adoption of ASC 842, the Company elected the following practical expedients allowable under the guidance: not to reassess whether
any expired or existing contracts are or contain leases; not to reassess the lease classification for any expired or existing leases;
not to reassess initial direct costs for any existing leases; not to separately identify lease and non-lease components; and not to evaluate
historical land easements. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC
842 to only long-term (greater than 1 year) leases.

 The
Company determines if an arrangement is a lease or contains a lease at inception. The Company's leases have remaining lease terms
of approximately 1 year to 52 years, which includes options to extend the lease when it is reasonably certain the Company will exercise
those options. For the year ended December 31, 2023, the weighted-average remaining lease terms of equipment and land-related leases
were 4.73 years and 15.41 years, respectively. The Company does not have lease arrangements with residual value guarantees, sale-leaseback
terms or material restrictive covenants. The Company does not have any material finance lease obligations nor sublease agreements.

 Leases consist of the following (in thousands):

 Classification

 2023

 2022

 Right of use operating lease assets, net

 $
 22,597

 $
 18,937

 Liabilites:

 Operating - Current

 Current portion, operating leases

 $
 4,333

 $
 3,849

 Operating - Noncurrent

 Operating leases, net of current portion

 $
 19,029

 $
 15,062

 F- 29

 ALTO

 NOTES

 The
Components of lease costs were as follows (in thousands):

 2023

 2022

 2021

 Fixed lease cost

 $
 5,722

 $
 5,224

 $
 4,500

 Variable lease cost

 Net lease cost

 $
 6,593

 $
 5,348

 $
 4,738

 The
following table summarizes the remaining maturities of the Company's operating lease liabilities, assuming all land lease extensions
are taken, as of December 31, 2023 (in thousands):

 Year
 Ended:

 Equipment

 Land

 Related

 2024

 $
 4,959

 $

 2025

 4,506

 1,178

 2026

 3,860

 1,156

 2027

 3,350

 1,129

 2028

 2,655

 1,142

 2029-76

 1,278

 4,666

 Less
 interest

 ( 3,720
)

 ( 3,788
)

 $
 16,888

 $
 6,474

 11.
 PENSION
 PLANS.

 Retirement
Plan - The Company sponsors a defined benefit pension plan (the "Retirement Plan") that is noncontributory, and covers
only "grandfathered" unionized employees at its Alto Pekin production facilities. Benefits are based on a prescribed formula
based upon the employee's years of service. Employees hired after November 1, 2010, are not eligible to participate in the Retirement
Plan. The Company uses a December 31st measurement date for its Retirement Plan. The Company's funding policy is to make the minimum
annual contribution required by applicable regulations.

 Information
related to the Retirement Plan as of and for the years ended December 31, 2023 and 2022 is presented below (dollars in thousands):

 2023

 2022

 Changes in plan assets:

 Fair value of plan assets, beginning

 $
 16,688

 $
 19,987

 Actual gains (losses)

 2,376

 ( 3,315
)

 Benefits paid

 ( 834
)

 ( 784
)

 Company contributions

 Participant contributions

 —

 —

 Fair value of plan assets, ending

 $
 18,485

 $
 16,688

 Less: projected accumulated benefit obligation

 $
 18,590

 $
 17,956

 Funded status, (underfunded)/overfunded

 $
 ( 105
)

 $
 ( 1,268
)

 Amounts recognized in the consolidated balance sheets:

 Other liabilities

 $
 ( 105
)

 $
 ( 1,268
)

 Accumulated other comprehensive loss

 $
 ( 2,231
)

 $
 ( 1,166
)

 Assumptions used in computation of benefit obligations:

 Discount rate

 4.90
 %

 5.15
 %

 Expected long-term return on plan assets

 6.50
 %

 6.50
 %

 Rate of compensation increase

 —

 —

 F- 30

 ALTO

 NOTES

 2023

 2022

 2021

 Components of net periodic benefit costs are as follows:

 Service
 cost

 $

 $

 $

 cost

 Amortization
 of net loss

 —

 —

 Expected
 return on plan assets

 ( 993
)

 ( 1,090
)

 ( 952
)

 Net
 periodic cost (benefit)

 $

 $
 ( 31
)

 $

 The
Company does not expect to make any contributions in the year ending December 31, 2024. Net periodic benefit cost for 2024 is estimated
at less than $ 0.1 million.

 The
following table summarizes the expected benefit payments for the Company's Retirement Plan for each of the next five fiscal years
and in the aggregate for the five fiscal years thereafter (in thousands):

 December 31:

 2024

 $

 2025

 1,030

 2026

 1,070

 2027

 1,100

 2028

 1,140

 2029-33

 6,280

 $

 11,580

 See
Note 16 for discussion of the Retirement Plan's fair value disclosures.

 Historical
and future expected returns of multiple asset classes were analyzed to develop a risk-free real rate of return and risk premiums for
each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk-free real
rate of return, and the associated risk premium. A weighted-average rate was developed based on those overall rates and the target asset
allocation of the Retirement Plan.

 The
Company's pension committee is responsible for overseeing the investment of pension plan assets. The pension committee is responsible
for determining and monitoring the appropriate asset allocations and for selecting or replacing investment managers, trustees, and custodians.
The Retirement Plan's current investment target allocations are 50 % equities and 50 % debt. The pension committee periodically reviews
the actual asset allocation in light of these targets and rebalances investments as necessary. The pension committee also evaluates the
performance of investment managers as compared to the performance of specified benchmarks and peers and monitors the investment managers
to ensure adherence to their stated investment style and to the Retirement Plan's investment guidelines.

 Postretirement
Plan - The Company also sponsors a health care plan and life insurance plan (the "Postretirement Plan") that provides
postretirement medical benefits and life insurance to certain "grandfathered" unionized employees at its Alto Pekin production
facilities. Employees hired after December 31, 2000, are not eligible to participate in the Postretirement Plan. The plan is contributory,
with contributions required at the same rate as active employees. Benefit eligibility under the plan reduces at age 65 from a defined
benefit to a defined dollar cap based upon years of service.

 Information
related to the Postretirement Plan as of December 31, 2023 and 2022 is presented below (dollars in thousands):

 2023

 2022

 Amounts at the end of the year:

 Accumulated/projected
 benefit obligation

 $
 4,294

 $
 3,907

 Fair value of plan
 assets

 —

 —

 Funded
 status, (underfunded)/overfunded

 $
 ( 4,294
)

 $
 ( 3,907
)

 Amounts recognized in
 the consolidated balance sheets:

 Accrued liabilities

 $
 ( 320
)

 $
 ( 310
)

 Other liabilities

 $
 ( 3,974
)

 $
 ( 3,597
)

 Accumulated other comprehensive
 loss

 $
 ( 250
)

 $
 ( 656
)

 Discount rate used in
 computation of benefit obligations

 4.75
 %

 4.95
 %

 F- 31

 ALTO

 NOTES

 Years

 2023

 2022

 2021

 Components of net periodic benefit costs are as follows:

 Service
 cost

 $

 $

 $

 cost

 Amortization
 of prior service cost

 ( 53
)

 —

 Net
 periodic benefit cost

 $

 $

 $

 Amounts recognized
 in the plan for the year:

 Participant
 contributions

 $

 $

 $

 Benefits
 paid

 $

 $

 $

 The
Company does not expect to recognize any amortization of net actuarial loss during the year ended December 31, 2024.

 The
following table summarizes the expected benefit payments for the Company's Postretirement Plan for each of the next five fiscal
years and in the aggregate for the five fiscal years thereafter (in thousands):

 December 31:

 2024

 $

 2025

 2026

 2027

 2028

 2029-2033

 1,940

 $

 3,930

 For
purposes of determining the cost and obligation for pre-Medicare postretirement medical benefits, a 7.50 % annual rate of increase in
the per capita cost of covered benefits (i.e., health care trend rate) was assumed for the Postretirement Plan in 2025, adjusted to a
rate of 4.50 % in 2034. Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans.

 12.
 INCOME
 TAXES.

 The
Company recorded a provision for income taxes as follows (in thousands):

 Years

 2023

 2022

 2021

 Current provision

 $

 $
 1,925

 $
 1,469

 Deferred provision

 —

 —

 —

 Total

 $

 $
 1,925

 $
 1,469

 A
reconciliation of the differences between the United States statutory federal income tax rate and the effective tax rate as provided
in the consolidated statements of operations is as follows:

 2023

 2022

 2021

 Statutory rate

 21.0
 %

 21.0
 %

 21.0
 %

 State income taxes, net of federal benefit

 4.6

 5.8

 6.0

 Change in valuation allowance

 ( 23.4
)

 ( 33.9
)

 ( 18.8
)

 Stock-based compensation

 ( 2.3
)

 3.1

 —

 Non-deductible items

 0.8

 ( 1.6
)

 0.4

 Income from loan forgiveness

 —

 —

 ( 5.5
)

 Other

 ( 1.0
)

 0.6

 ( 0.1
)

 Effective rate

 ( 0.3
)%

 ( 5.0
)%

 3.0
 %

 F- 32

 ALTO

 NOTES

 Deferred
income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying
amounts and the tax bases of assets and liabilities using presently enacted tax rates and laws. The components of deferred income taxes
included in the consolidated balance sheets were as follows (in thousands):

 31,

 2023

 2022

 Deferred tax assets:

 Net operating
 loss carryforwards

 $
 57,870

 $
 58,131

 Capital loss

 26,518

 26,043

 Disallowed interest

 3,457

 2,395

 R&D, Energy and
 AMT credits

 3,742

 3,742

 Derivatives

 3,051

 Intangibles

 1,201

 Pension liability

 1,173

 1,354

 Railcar contracts

 Stock-based compensation

 Allowance for credit losses
 and other assets

 Other

 3,340

 3,208

 Total gross deferred tax assets

 102,162

 97,153

 Less: valuation allowance

 ( 93,506
)

 ( 87,949
)

 Total deferred tax assets, net of valuation
 allowance

 8,656

 9,204

 Deferred tax liabilities:

 Property and equipment

 ( 7,720
)

 ( 9,125
)

 Other

 ( 1,172
)

 ( 315
)

 Total deferred tax liabilities

 ( 8,892
)

 ( 9,440
)

 Net deferred tax liabilities,
 included in other liabilities

 $
 ( 236
)

 $
 ( 236
)

 F- 33

 ALTO

 NOTES

 A
portion of the Company's net operating loss carryforwards are subject to provisions of the tax law that limit the use of losses
incurred by a corporation prior to the date certain ownership changes occur. These limitations also apply to certain depreciation deductions
associated with assets on hand at the time of the ownership change and otherwise allowable during the five-year period following the
ownership change. As the five-year limitation period lapsed in 2019, these disallowed deductions are reflected in property and equipment
in the schedule above but continue to be subject to the annual limitation that applies to the pre-change net operating losses. Due to
the limitation on the use of net operating losses and depreciation deductions, a significant portion of these carryforwards will expire
regardless of whether the Company generates future taxable income. After reducing these net operating loss carryforwards for the amount
which will expire due to this limitation, the Company had remaining federal net operating loss carryforwards of approximately $ 207,481,000
and state net operating loss carryforwards of approximately $ 227,772,000 at December 31, 2023. These net operating loss carryforwards
expire as follows (in thousands):

 Tax Years

 Federal

 State

 2024–2028

 $
 —

 $
 94,913

 2029–2033

 15,245

 5,637

 2034–2038

 83,771

 93,390

 2039 and after*

 108,465

 33,832

 Total
 NOLs

 $
 207,481

 $
 227,772

 *
 Includes indefinite life federal net operating losses of $ 108.5 million generated after 2017.

 Approximately
$ 135,260,000 is available to utilize against federal taxable income for 2024.

 To
the extent amounts are not utilized in any year, they may be carried forward to the next year until expiration. These amounts may change
if there are future additional limitations on their utilization.

 Federal
capital loss of $100,487,000 may be carried forward for 5 years and will expire in 2025. State capital loss of $95,469,000 may be carried
forward for 5 years for most of the states in which the Company files returns and will expire in 2025.

 In
assessing whether the deferred tax assets are realizable, a more likely than not standard is applied. If it is determined that it is
more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax
assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods
in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies in making this assessment.

 A
valuation allowance was established in the amount of $ 93,506,000 and $ 87,949,000 as of December 31, 2023 and 2022, respectively,
based on the Company's assessment of the future realizability of certain deferred tax assets. The valuation allowance on deferred
tax assets is related to future deductible temporary differences and net operating loss carryforwards for which the Company has concluded
it is more likely than not that these items will not be realized in the ordinary course of operations.

 For
the year ended December 31, 2023, the Company recorded an increase in valuation allowance of $ 5,557,000. This was primarily related to
additional net operating losses accumulated for the year. For the year ended December 31, 2022, the Company recorded an increase in valuation
allowance of $ 12,365,000. This was primarily related to additional net operating losses accumulated for the year. For the year ended
December 31, 2021, the Company recorded a decrease in valuation allowance of $ 10,104,000. This was primarily related to utilization of
net operating losses as the Company generated taxable income for the year.

 F- 34

 ALTO

 NOTES

 Unrecognized
Tax Benefits

 A
reconciliation of the beginning balance and the ending balance of gross unrecognized tax benefits, before interest and penalties, for
the period presented is as follows (in thousands):

 31,

 2023

 2022

 Unrecognized tax benefits at beginning
 of year

 $

 $
 —

 Increases related to current year tax positions

 —

 —

 Decreases related to current year tax positions

 —

 —

 Increases related to prior year tax positions

 —

 Decreases related to prior year tax positions

 —

 —

 Decreases related to expiration of prior year
 tax positions

 —

 —

 Decreases related to
 settlements of prior year tax positions

 —

 —

 Unrecognized tax benefits
 at end of year

 $

 $

 The
Company recorded unrecognized tax benefits for uncertain tax positions of approximately $ 739,000 as of December 31, 2023, of which $ 739,000
would impact the effective tax rate, if recognized.

 The
Company recognizes interest and penalties related to income tax matters as a component of interest expense and other income, net, respectively.
As of December 31, 2023, the Company accrued penalties of $ 74,000 and interest of $ 75,000 related to uncertain tax positions. The Company
does not expect the unrecognized tax benefits to change significantly over the next 12 months.

 The
Company is subject to income tax in the United States federal jurisdiction and various state jurisdictions and has identified its federal
tax return and tax returns in state jurisdictions below as "major" tax filings. These jurisdictions, along with the years
still open to audit under the applicable statutes of limitation, are as follows:

 Jurisdiction

 Tax
 Years

 Federal

 Alabama

 Arizona

 2019 – 2022

 Arkansas

 California

 2019 – 2022

 Colorado

 2019 – 2022

 Connecticut

 Georgia

 Idaho

 Illinois

 Indiana

 Iowa

 Kansas

 Louisiana

 Michigan

 Minnesota

 Mississippi

 Missouri

 Nebraska

 New Mexico

 Oklahoma

 Oregon

 Pennsylvania

 Rhode Island

 South Carolina

 Tennessee

 Texas

 2019 – 2022

 F- 35

 ALTO

 NOTES

 However,
because the Company had net operating losses and credits carried forward in several of the jurisdictions, including the United States
federal and California jurisdictions, certain items attributable to closed tax years are still subject to adjustment by applicable taxing
authorities through an adjustment to tax attributes carried forward to open years.

 13.
 PREFERRED
 STOCK.

 The
Company has 6,734,835 undesignated shares of authorized and unissued preferred stock, which may be designated and issued in the future
on the authority of the Company's Board of Directors. As of December 31, 2023, the Company had the following designated classes
of preferred stock:

 Series
A Preferred Stock – The Company has authorized 1,684,375 shares of Series A Cumulative Redeemable Convertible Preferred Stock
("Series A Preferred Stock"), with none outstanding at December 31, 2023 and 2022. Shares of Series A Preferred Stock that
are converted into shares of the Company's common stock revert to undesignated shares of authorized and unissued preferred stock.

 Upon
any issuance, the Series A Preferred Stock would rank senior in liquidation and dividend preferences to the Company's common stock.
Holders of Series A Preferred Stock would be entitled to quarterly cumulative dividends payable in arrears in cash in an amount equal
to 5 % per annum of the purchase price per share of the Series A Preferred Stock. The holders of the Series A Preferred Stock would have
conversion rights initially equivalent to two shares of common stock for each share of Series A Preferred Stock, subject to customary
antidilution adjustments. Certain specified issuances will not result in antidilution adjustments. The shares of Series A Preferred Stock
would also be subject to forced conversion upon the occurrence of a transaction that would result in an internal rate of return to the
holders of the Series A Preferred Stock of 25 % or more. Accrued but unpaid dividends on the Series A Preferred Stock are to be paid in
cash upon any conversion of the Series A Preferred Stock.

 The
holders of Series A Preferred Stock would have a liquidation preference over the holders of the Company's common stock equivalent
to the purchase price per share of the Series A Preferred Stock plus any accrued and unpaid dividends on the Series A Preferred Stock.
A liquidation would be deemed to occur upon the happening of customary events, including transfer of all or substantially all of the
Company's capital stock or assets or a merger, consolidation, share exchange, reorganization or other transaction or series of
related transactions, unless holders of 66 2/3% of the Series A Preferred Stock vote affirmatively in favor of or otherwise consent to
such transaction.

 Series
B Preferred Stock – The Company has authorized 1,580,790 shares of Series B Cumulative Convertible Preferred Stock ("Series
B Preferred Stock"), with 926,942 shares outstanding at December 31, 2023 and 2022. Shares of Series B Preferred Stock that are
converted into shares of the Company's common stock revert to undesignated shares of authorized and unissued preferred stock.

 The
Series B Preferred Stock ranks senior in liquidation and dividend preferences to the Company's common stock. Holders of Series
B Preferred Stock are entitled to quarterly cumulative dividends payable in arrears in cash in an amount equal to 7.00 % per annum of
the purchase price per share of the Series B Preferred Stock; however, subject to the provisions of the Letter Agreement described below,
such dividends may, at the option of the Company, be paid in additional shares of Series B Preferred Stock based initially on the liquidation
value of the Series B Preferred Stock. In addition to the quarterly cumulative dividends, holders of the Series B Preferred Stock are
entitled to participate in any common stock dividends declared by the Company to its common stockholders. The holders of Series B Preferred
Stock have a liquidation preference over the holders of the Company's common stock initially equivalent to $ 19.50 per share of
the Series B Preferred Stock plus any accrued and unpaid dividends on the Series B Preferred Stock. A liquidation will be deemed to occur
upon the happening of customary events, including the transfer of all or substantially all of the capital stock or assets of the Company
or a merger, consolidation, share exchange, reorganization or other transaction or series of related transaction, unless holders of 66
2/3% of the Series B Preferred Stock vote affirmatively in favor of or otherwise consent that such transaction shall not be treated as
a liquidation. The Company believes that such liquidation events are within its control and therefore has classified the Series B Preferred
Stock in stockholders' equity.

 F- 36

 ALTO

 NOTES

 As
of December 31, 2023, the Series B Preferred Stock was convertible into 980,712 shares of the Company's common stock. The conversion
ratio is subject to customary antidilution adjustments. In addition, antidilution adjustments are to occur in the event that the Company
issues equity securities, including derivative securities convertible into equity securities (on an as-converted or as-exercised basis),
at a price less than the conversion price then in effect. The shares of Series B Preferred Stock are also subject to forced conversion
upon the occurrence of a transaction that would result in an internal rate of return to the holders of the Series B Preferred Stock of
 25 % or more. The forced conversion is to be based upon the conversion ratio as last adjusted. Accrued but unpaid dividends on the Series
B Preferred Stock are to be paid in cash upon any conversion of the Series B Preferred Stock.

 The
holders of Series B Preferred Stock vote together as a single class with the holders of the Company's common stock on all actions
to be taken by the Company's stockholders. Each share of Series B Preferred Stock entitles the holder to approximately 0.03 votes
per share on all matters to be voted on by the stockholders of the Company. Notwithstanding the foregoing, the holders of Series B Preferred
Stock are afforded numerous customary protective provisions with respect to certain actions that may only be approved by holders of a
majority of the shares of Series B Preferred Stock.

 In
2008, the Company entered into Letter Agreements with Lyles United LLC ("Lyles United") and other purchasers under which
the Company expressly waived its rights under the Certificate of Designations relating to the Series B Preferred Stock to make dividend
payments in additional shares of Series B Preferred Stock in lieu of cash dividend payments without the prior written consent of Lyles
United and the other purchasers.

 Registration
Rights Agreement – In connection with the sale of its Series B Preferred Stock, the Company entered into a registration rights
agreement with Lyles United. The registration rights agreement is effective until the holders of the Series B Preferred Stock, and their
affiliates, as a group, own less than 10 % for each of the series issued, including common stock into which such Series B Preferred Stock
has been converted. The registration rights agreement provides that holders of a majority of the Series B Preferred Stock, including
common stock into which such Series B Preferred Stock has been converted, may demand and cause the Company to register on their behalf
the shares of common stock issued, issuable or that may be issuable upon conversion of the Preferred Stock and as payment of dividends
thereon, and upon exercise of the related warrants (collectively, the "Registrable Securities"). The Company is required
to keep such registration statement effective until such time as all of the Registrable Securities are sold or until such holders may
avail themselves of Rule 144 for sales of Registrable Securities without registration under the Securities Act of 1933, as amended. The
holders are entitled to two demand registrations on Form S-1 and unlimited demand registrations on Form S-3; provided, however, that
the Company is not obligated to effect more than one demand registration on Form S-3 in any calendar year. In addition to the demand
registration rights afforded the holders under the registration rights agreement, the holders are entitled to unlimited "piggyback"
registration rights. These rights entitle the holders who so elect to be included in registration statements to be filed by the Company
with respect to other registrations of equity securities. The Company is responsible for all costs of registration, plus reasonable fees
of one legal counsel for the holders, which fees are not to exceed $ 25,000 per registration. The registration rights agreement includes
customary representations and warranties on the part of both the Company and the holders and other customary terms and conditions.

 14.
 STOCK-BASED
 COMPENSATION.

 On
June 16, 2016, the Company's shareholders approved the 2016 Stock Incentive Plan, which authorizes the issuance of incentive stock
options and non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights, direct stock issuances
and other stock-based awards to the Company's officers, directors or key employees or to consultants that do business with the
Company initially for up to an aggregate of 1,150,000 shares of common stock. On June 14, 2018, the Company's shareholders approved
an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 3,650,000 shares. On November 7, 2019,
the Company's shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan
to 5,650,000 shares. On November 18, 2020, the Company's shareholders approved an increase to the aggregate number of shares authorized
under the 2016 Stock Incentive Plan to 7,400,000 shares. On June 23, 2022, the Company's shareholders approved an increase to the
aggregate number of shares authorized under the 2016 Stock Incentive Plan to 8,900,000 shares. On June 22, 2023, the Company's
shareholders approved an increase to the aggregate number of shares authorized under the 2016 Stock Incentive Plan to 11,400,000 shares.

 F- 37

 ALTO

 NOTES

Stock – A summary of unvested restricted stock activity is as follows (shares in thousands):

 of

 Weighted-

 Average
 Grant Date
Fair Value
Per Share

 Unvested at December 31,
 2021

 1,387

 $
 3.30

 Issued

 $
 6.21

 Vested

 ( 1,051
)

 $
 2.66

 Canceled

 ( 39
)

 $
 6.23

 Unvested at December 31, 2022

 1,169

 $
 5.95

 Issued

 2,375

 $
 1.87

 Vested

 ( 547
)

 $
 5.61

 Canceled

 ( 56
)

 $
 3.14

 Unvested at December 31, 2023

 2,941

 $
 2.77

 The
fair value of the common stock at vesting aggregated $ 929,000, $ 6,900,000 and $ 8,810,000 for the years ended December 31, 2023, 2022
and 2021, respectively. Stock-based compensation expense related to employee and non-employee restricted stock and option grants recognized
in the accompanying consolidated statements of operations, was as follows (in thousands):

 Years

 2023

 2022

 2021

 Employees

 $
 3,345

 $
 2,689

 $
 1,758

 Non-employees

 1,125

 Total
 stock-based compensation expense

 $
 3,896

 $
 3,333

 $
 2,883

 Employee
grants typically have a two or three-year vesting schedule, while non-employee grants have a one-year vesting schedule. At December 31,
2023, the total compensation expense related to unvested awards which had not been recognized was $ 8,281,000 and the associated weighted-average
period over which the compensation expense attributable to those unvested awards will be recognized was approximately 0.67 years.

 F- 38

 ALTO

 NOTES

 15.
 COMMITMENTS
 AND CONTINGENCIES.

 Commitments
 – The following is a description of significant commitments at December 31, 2023:

 Sales
Commitments – At December 31, 2023, the Company had entered into sales contracts with its major customers to sell certain quantities
of alcohol and essential ingredients. The Company had open alcohol indexed-price contracts for 102,874,000 gallons as of December 31,
2023 and open fixed-price alcohol sales contracts totaling $ 285,802,000 as of December 31, 2023. The Company had open fixed-price sales
contracts for essential ingredients totaling $ 6,374,000 and open indexed-price sales contracts of essential ingredients for 85,000 tons
as of December 31, 2023. These sales contracts are scheduled for completion over the next twelve months.

 Purchase
Commitments – At December 31, 2023, the Company had indexed-price purchase contracts to purchase 26,332,000 gallons of alcohol
and fixed-price purchase contracts to purchase $ 1,705,000 of alcohol from its suppliers. The Company had fixed-price purchase contracts
to purchase $ 30,100,000 of corn from its suppliers as of December 31, 2023. The Company had fixed-price purchase contracts for natural
gas totaling $ 4,663,000. The Company also had future commitments for certain capital projects totaling $ 15,629,000. These purchase commitments
are scheduled to be satisfied through 2024.

 Contingencies
 – The following is a description of significant contingencies at December 31, 2023:

 Litigation
– The Company is subject to various claims and contingencies in the ordinary course of its business, including those related
to litigation, business transactions, employee-related matters, and others. When the Company is aware of a claim or potential claim,
it assesses the likelihood of any loss or exposure. 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 financial impact on the Company's operating results.

 16.
 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.

 F- 39

 ALTO

 NOTES

 Pooled
Separate Accounts – Pooled separate accounts invest primarily in domestic and international stocks, commercial paper or single
mutual funds. The net asset value is used as a practical expedient to determine fair value for these accounts. Each pooled separate account
provides for redemptions by the Retirement Plan at reported net asset values per share, with little to no advance notice requirement,
therefore these funds are classified within Level 2 of the valuation hierarchy.

 Other
Derivative Instruments – The Company's other derivative instruments consist of commodity positions. The fair values of
the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1 inputs.

 The
following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2023 (in thousands):

 Fair

 Value

 Level

 Level

 Level

 Benefit
 Plan

 Percentage

 Allocation

 financial instruments

 $
 2,412

 $
 2,412

 $
 —

 $
 —

 Defined benefit plan
 assets(1) (pooled separate accounts):

 Large U.S. Equity(2)

 5,608

 —

 5,608

 —

 %

 Small/Mid U.S. Equity(3)

 3,350

 —

 3,350

 —

 %

 International Equity(4)

 2,682

 —

 2,682

 —

 %

 Fixed Income(5)

 6,845

 —

 6,845

 —

 %

 $
 20,897

 $
 2,412

 $
 18,485

 $
 —

 Liabilities:

 financial instruments

 $
 13,849

 $
 13,849

 $
 —

 $
 —

 The
following table summarizes recurring and nonrecurring fair value measurements by level at December 31, 2022 (in thousands):

 Benefit Plan

 Fair

 Percentage

 Value

 Level

 Level

 Level

 Allocation

 financial instruments

 $
 4,973

 $
 4,973

 $
 —

 $
 —

 —

 Defined benefit plan
 assets(1) (pooled separate accounts):

 Large U.S. Equity(2)

 4,586

 —

 4,586

 —

 %

 Small/Mid U.S. Equity(3)

 2,986

 —

 2,986

 —

 %

 International Equity(4)

 2,406

 —

 2,406

 —

 %

 Fixed Income(5)

 6,710

 —

 6,710

 —

 %

 $
 21,661

 $
 4,973

 $
 16,688

 $
 —

 Liabilities:

 financial instruments

 $
 6,732

 $
 6,732

 $
 —

 $
 —

 (1)
 See Note 11 for accounting discussion.

 (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.

 F- 40

TO EXHIBITS

 Where
 Located

 Description*

 Form

 File

 Filing
 Date

 Filed

 Herewith

 2.1

 Asset
 Purchase Agreement dated April 23, 2021 by and among the Registrant, Pacific Ethanol Madera LLC and Seaboard Energy California, LLC

 10.1

 08/10/2021

 2.2

 First
 Amendment to Asset Purchase Agreement dated July 30, 2021 by and among the Registrant, Pacific Ethanol Madera LLC and Seaboard Energy
 California, LLC

 10.2

 08/10/2021

 2.3

 Asset
 Purchase Agreement dated November 5, 2021 by and among the Registrant, Pacific Ethanol Stockton LLC and Pelican Acquisition LLC

 2.3

 03/15/2022

 3.1

 of Incorporation

 3.1

 3.2

 of Designations, Powers, Preferences and Rights of the Series A Cumulative Redeemable Convertible Preferred Stock

 3.2

 3.3

 of Designations, Powers, Preferences and Rights of the Series B Cumulative Convertible Preferred Stock

 3.3

 3.4

 of Amendment to Certificate of Incorporation dated June 3, 2010

 3.4

 3.5

 of Amendment to Certificate of Incorporation effective June 8, 2011

 3.5

 3.6

 of Amendment to Certificate of Incorporation effective May 14, 2013

 3.6

 3.7

 of Amendment to Certificate of Incorporation effective July 1, 2015

 3.7

 3.8

 Certificate of Amendment to Certificate of Incorporation effective January 12, 2021

 3.1

 01/13/2021

 3.9

 Amended and Restated Bylaws

 3.1

 03/06/2024

 4.1

 Description
 of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934

 4.1

 03/30/2020

 10.1

 2016 Stock Incentive Plan, as amended#

 S-8

 333-272836

 4.11

 06/22/2023

 10.2

 Form
 of Employee Restricted Stock Agreement under 2016 Stock Incentive Plan#

 10.5

 03/15/2018

 - 54 -

 INDEX TO EXHIBITS

 Where
 Located

 Description*

 Form

 File

 Filing
 Date

 Filed

 Herewith

 10.3

 Form
 of Non-Employee Director Restricted Stock Agreement under 2016 Stock Incentive Plan#

 10.6

 03/15/2017

 10.4

 Second
 Amended and Restated Executive Employment Agreement dated September 17, 2023 between the Registrant and Bryon T. McGregor#

 10.1

 09/20/2023

 10.5

 Amended
 and Restated Executive Employment Agreement dated November 7, 2016 between the Registrant and James R. Sneed#

 10.12

 03/15/2017

 10.6

 Third
 Amended and Restated Employment Agreement dated September 18, 2023 between the Registrant and Michael D. Kandris#

 10.2

 09/20/2023

 10.7

 Employment
 Agreement dated February 1, 2022 between the Registrant and Auste M. Graham#

 10.9

 03/15/2022

 10.8

 Second
 Amended and Restated Employment Agreement dated September 17, 2023 between the Registrant and Robert R. Olander#

 10.3

 09/20/2023

 10.9

 Form
 of Indemnity Agreement between the Registrant and each of its Executive Officers and Directors#

 10.46

 03/31/2010

 10.10

 Policy
 for Recoupment of Incentive Compensation dated March 29, 2018#

 10.17

 03/18/2019

 10.11

 Form
 of Clawback Policy Acknowledgement and Agreement#

 10.18

 03/18/2019

 10.12

 Registration
 Rights Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

 10.4

 03/27/2008

 10.13

 Letter
 Agreement dated March 27, 2008 between the Registrant and Lyles United, LLC

 10.5

 03/27/2008

 10.14

 Letter
 Agreement dated May 22, 2008 among the Registrant, Neil M. Koehler, Bill Jones, Paul P. Koehler and Thomas D. Koehler#

 10.3

 05/23/2008

 - 55 -

 INDEX TO EXHIBITS

 Where
 Located

 Description*

 Form

 File

 Filing
 Date

 Filed

 Herewith

 10.15

 Second
 Amended and Restated Credit Agreement dated August 2, 2017 among Kinergy Marketing LLC, Pacific Ag. Products, LLC, Wells Fargo Bank,
 National Association, and the parties thereto from time to time as lenders

 10.1

 08/08/2017

 10.16

 Amendment
 No. 1 to Second Amended and Restated Credit Agreement dated March 27, 2019 by and among Kinergy Marketing LLC, Pacific Ag. Products,
 LLC and Wells Fargo Bank, National Association

 10.7

 05/03/2019

 10.17

 Amendment
 No. 2 to Second Amended and Restated Credit Agreement dated July 31, 2019 by and among Kinergy Marketing LLC, Pacific Ag. Products,
 LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

 10.1

 08/06/2019

 10.18

 Amendment
 No. 3 to Second Amended and Restated Credit Agreement dated November 19, 2019 by and among Kinergy Marketing LLC, Pacific Ag. Products,
 LLC, the parties thereto from time to time as lenders and Wells Fargo Bank, National Association

 10.61

 03/30/2020

 10.19

 Waiver,
 Consent and Amendment No. 4 to Second Amended and Restated Credit Agreement dated March 8, 2021 by and among Kinergy Marketing LLC,
 Alto Nutrients, LLC and Wells Fargo Bank, National Association

 10.20

 03/15/2022

 10.20

 Waiver,
 Consent, and Amendment No. 5 to Second Amended and Restated Credit Agreement dated June 10, 2021 by and among Kinergy Marketing LLC,
 Alto Nutrients, LLC and Wells Fargo Bank, National Association

 10.21

 03/15/2022

 10.21

 Amendment
 No. 6 to Second Amended and Restated Credit Agreement dated November 7, 2022 by and among Kinergy Marketing LLC, Alto Nutrients,
 LLC and Wells Fargo Bank, National Association

 10.2

 11/14/2022

 - 56 -

 INDEX TO EXHIBITS

 Where
 Located

 Description*

 Form

 File

 Filing
 Date

 Filed

 Herewith

 10.22

 Second
 Amended and Restated Guarantee dated August 2, 2017 by the Registrant in favor of Wells Fargo Bank, National Association, for and
 on behalf of the lenders

 10.2

 08/08/2017

 10.23

 Credit
 Agreement dated November 7, 2022 by and among the Registrant, the subsidiary guarantors signatory thereto, Orion Energy Credit Opportunities
 Fund III, L.P., Orion Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P.,
 Orion Energy Credit Opportunities Fund III PV, L.P., and OIC Investment Agent, LLC

 10.1

 11/14/2022

 10.24

 First Amendment to Credit Agreement dated November 6, 2023 between the Registrant and OIC Investment Agent, LLC

 X

 10.25

 Registration
 Rights Agreement dated November 7, 2022 by and among Alto Ingredients, Inc., Orion Energy Credit Opportunities Fund III, L.P., Orion
 Energy Credit Opportunities Fund III GPFA PV, L.P., Orion Energy Credit Opportunities Fund III GPFA, L.P. and Orion Energy Credit
 Opportunities Fund III PV, L.P.

 10.3

 11/14/2022

 21.1

 Subsidiaries
 of the Registrant

 21.1

 03/14/2023

 23.1

 Consent of Independent Registered Public Accounting Firm

 X

 31.1

 Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 X

 31.2

 Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 X

 32.1

 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 X

 97.1

 Alto Ingredients, Inc. Dodd-Frank Clawback Policy

 X

 101.INS

 Instance Document

 X

 101.SCH

 Taxonomy Extension Schema

 X

 101.CAL

 Taxonomy Extension Calculation Linkbase

 X

 101.DEF

 Taxonomy Extension Definition Linkbase

 X

 101.LAB

 Taxonomy Extension Label Linkbase

 X

 101.PRE

 Taxonomy Extension Presentation Linkbase

 X

 Cover Page Interactive

 X

 (#)
 A
 contract, compensatory plan or arrangement to which a director or executive officer is a
 party or in which one or more directors or executive officers are eligible to participate.

 (*)
 Certain
 of the agreements filed as exhibits contain representations and warranties made by the parties
 thereto. The assertions embodied in such representations and warranties are not necessarily
 assertions of fact, but a mechanism for the parties to allocate risk. Accordingly, investors
 should not rely on the representations and warranties as characterizations of the actual
 state of facts or for any other purpose at the time they were made or otherwise.

 - 57 -

 SIGNATURES

 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on this 13th day of March, 2024.

 ALTO

 /s/
 BRYON T. MCGREGOR

 Bryon T. McGregor

 President and Chief Executive
 Officer

 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

 Signature

 Title

 Date

 /s/
 DOUGLAS L. KIETA

 Chairman of the Board and Director

 Douglas L. Kieta

 /s/
 BRYON T. MCGREGOR

 President and Chief Executive
 Officer

 Bryon
 T. McGregor

 (Principal Executive Officer)

 /s/
 ROBERT R. OLANDER

 Chief Financial Officer

 Robert
 R. Olander

 (Principal Financial and Accounting
 Officer)

 /s/
 MICHAEL D. KANDRIS

 Acting Chief Operating Officer
 and

 Michael D. Kandris

 Director

 /s/
 GILBERT E. NATHAN

 Director

 Gilbert
 E. Nathan

 /s/
 DIANNE S. NURY

 Director

 Dianne S. Nury

 /s/
 MARIA G. GRAY

 Director

 Maria G. Gray

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