Sales Commitments – At June 30, 2016, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol and co-products. The Company had open indexed-price ethanol sales contracts for 261,372,000 gallons as of June 30, 2016 and open fixed-price ethanol sales contracts valued at $10,501,000 as of June 30, 2016. The Company had open fixed-price co-product sales contracts valued at $38,845,000 as of June 30, 2016 and open indexed-price co-product sales contracts for 10,300 tons as of June 30, 2016. These sales contracts are scheduled to be completed throughout 2016.

Purchase Commitments – At June 30, 2016, the Company had indexed-price purchase contracts to purchase 19,802,000 gallons of ethanol and fixed-price purchase contracts to purchase $17,655,000 of ethanol from its suppliers. The Company had fixed-price purchase contracts to purchase $30,691,000 of corn from its suppliers. These purchase commitments are scheduled to be satisfied throughout 2016.

Litigation – General – The Company is subject to various claims and contingencies in the ordinary course of its business, including those related to litigation, business transactions, employee-related matters, 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 there can be 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.

Pacific Ethanol, Inc., through a subsidiary acquired in its acquisition of Aventine, became involved in a pending lawsuit with Western Sugar Cooperative (“Western Sugar”) that pre-dated the Aventine acquisition.

On February 27, 2015, Western Sugar filed a complaint in the United States District Court for the District of Colorado (Case No. 1:15-cv-00415) naming Aventine Renewable Energy, Inc. (“ARE, Inc.”), one of Aventine’s subsidiaries, as defendant. Western Sugar amended its complaint on April 21, 2015. ARE, Inc. purchased surplus sugar through a United States Department of Agriculture program. Western Sugar was one of the entities that warehoused this sugar for ARE, Inc. The suit alleges that ARE, Inc. breached its contract with Western Sugar by failing to pay certain penalty rates for the storage of its sugar or alternatively failing to pay a premium rate for storage. Western Sugar alleges that the penalty rates apply because ARE, Inc. failed to take timely delivery or otherwise cause timely shipment of the sugar. Western Sugar claims “expectation damages” in the amount of approximately $8.6 million. ARE, Inc. filed answers to Western Sugar’s complaint and amended complaint generally denying Western Sugar’s allegations and asserting various defenses. The discovery phase of the case has just concluded, and the Company has filed a motion for summary judgment, seeking a determination that Western Sugar’s claims fail as a matter of law.

The Company has evaluated the above case as well as other pending cases. The Company currently has recorded $3.3 million as a litigation contingency liability with respect to these cases for amounts that are probable and estimable.