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”), Alto ICP, LLC, a Delaware limited liability company (“ICP”), and the Company’s production facilities in Oregon and Idaho and Eagle Alcohol Company LLC, a Missouri limited liability company (“Eagle Alcohol”).

As discussed in Note 2, on January 1, 2025, the Company’s wholly-owned subsidiary, Alto Carbonic, LLC (“Alto Carbonic”), acquired Kodiak Carbonic, LLC, a beverage-grade liquid CO₂ processor, for $7.6 million. Alto Carbonic’s facility is co-located at the Company’s Columbia ethanol plant in Boardman, Oregon. The Company began reporting the results of Alto Carbonic in the Company’s Western Production segment on January 1, 2025.

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

The Company has a combined alcohol production capacity of 330 million gallons per year and produces, on an annualized basis, over 1.2 million tons of essential ingredients. The Company’s Eagle Alcohol business specializes in break bulk distribution of specialty alcohols.

The Company focuses on Health, Home & Beauty; Food & Beverage; Industry & Agriculture; Essential Ingredients; and Renewable Fuels markets. Products for the Health, Home & Beauty market include specialty alcohols used in mouthwash, cosmetics, pharmaceuticals, hand sanitizers, disinfectants and cleaners. Products for the Food & Beverage markets include grain neutral spirits used in alcoholic beverages and vinegar as well as corn germ used for corn oils. Products for Industry & Agriculture markets include alcohols and other products for paint applications, inks, vehicle fluids and fertilizers. Products for Essential Ingredients markets include gas and liquid CO₂, dried yeast, corn protein meal, corn protein feed, corn germ, and distillers grains and liquid feed used in commercial animal feed and pet foods. Products for Renewable Fuels markets include fuel-grade ethanol and distillers corn oil used as a feedstock for renewable diesel and biodiesel fuels.

The Company’s production facilities, other than its Magic Valley plant located in Burley, Idaho, were operating for all periods presented subject to scheduled and unscheduled downtimes to address facility repair and maintenance. In January 2024, the Company temporarily hot-idled its Magic Valley facility to minimize losses from negative regional crush margins and to expedite the installation of additional equipment to achieve the intended production rate, quality and consistency from the Company’s corn oil and high protein system at the facility. The Company restarted its Magic Valley facility in July 2024 and by October 2024, the facility consistently achieved average ethanol production rates at full capacity, the protein content yield from the plant reached 50% or greater, and the Company was able to expand its corn oil yields. Increases in regional corn basis and declining market prices for protein and corn oil resulted in overall margin compression, outweighing the economic benefits of these plant improvements. As a consequence, the Company cold-idled its Magic Valley facility on December 31, 2024, and through all of 2025, to minimize financial losses. The Company continues to provide ethanol terminaling services at the plant.

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 that engages in business activities from which it may earn revenues and incur expenses, the operating results of which are regularly reviewed by the enterprise’s chief operating decision maker (“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. The Company 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 has adopted the guidance issued under ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances disclosures about the Company’s segments. The Company’s CODM is the Company’s executive committee, which is led by the Company’s Chief Executive Officer (“CEO”) and includes its Chief Financial Officer, Chief Operating Officer, Chief Commercial Officer and Chief Legal Officer (“Executive Committee”). The CODM manages and assesses the performance of its reportable segments by its gross profit (loss). As part of the Executive Committee’s review of segment-level performance, each member of the Executive Committee reviews the gross profit of the Company’s reportable segments and provides expertise and analysis from their respective areas which drive the evaluation of the performance of the Company’s reportable segments and allocation of resources to those segments. Even though the CEO has the authority to override the other members for strategic or other reasons, key decisions are made jointly by the Executive Committee.

The Company reports financial and operating performance in three reportable segments (1) Pekin production, which includes 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 and, beginning in 2025, its liquid CO₂ plant 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.

Restricted 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 renewable diesel 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, 2025 and 2024, as described below.

The carrying amount of accounts receivable is reduced by an allowance for credit losses 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 $41,379,000 and $44,750,000 at December 31, 2025 and 2024, respectively, were used as collateral under Kinergy’s operating line of credit. The allowance for credit losses was $76,000 and $23,000 as of December 31, 2025 and 2024, respectively. The Company recorded credit losses of $53,000, credit recoveries of $50,000 and credit losses of $427,000 for the years ended December 31, 2025, 2024 and 2023, respectively. The Company does not have any off-balance sheet credit exposure related to its customers.

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 one customer representing 10% or more of the Company’s total net sales, as follows.

The Company had accounts receivable due from this customer totaling $1,548,000 and $2,735,000, representing 3% and 5% of total accounts receivable, as of December 31, 2025 and 2024, 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:

As of December 31, 2025, approximately 51% of the Company’s employees were covered by a collective bargaining agreement.

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 $1,007,000 and $2,050,000 as of December 31, 2025 and 2024, respectively. Of the inventory balance, approximately $45,603,000 and $35,495,000 at December 31, 2025 and 2024, respectively, were used as collateral under Kinergy’s operating line of credit. Inventory balances consisted of the following (in thousands):

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

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 Topic 842, Leases (“ASC 842”), whereby lessees are required to recognize the following for all leases (other than short-term leases for which the Company has elected the recognition exemption) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured as the present value of the lease payments; 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.

Derivative 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.

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. The Company’s balances of accounts receivable, net of allowance for credit losses, were $55,069,000, $58,217,000 and $58,729,000, as of December 31, 2025, 2024 and 2023, respectively.

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.

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, 2025 and 2024.

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. When the estimated fair value of the asset group is less than its carrying value, the Company recognizes an impairment expense equal to the difference between the asset group’s carrying value and estimated fair value. 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 annual assessment resulted in an asset impairment of $803,000 related to abandoned projects for the year ended December 31, 2025. The Company’s annual assessment resulted in an asset impairment of $24,790,000 primarily from the cold-idling of the Company’s Magic Valley facility due to increased regional corn basis and overall margin compression and the Company’s changes to its Eagle Alcohol business for the year ended December 31, 2024. The Company’s annual assessment resulted in an asset impairment of $574,000 related to amendments to certain of the Company’s lease agreements, for the year ended December 31, 2023.

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 $1,013,000, $1,016,000 and $1,048,000 for the years ended December 31, 2025, 2024 and 2023, respectively. Unamortized deferred financing costs were approximately $2,671,000 and $3,684,000 as of December 31, 2025 and 2024, respectively, and are recorded as a reduction of long-term debt in the consolidated balance sheets.

Provision or Benefit 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, if any, 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.

Income (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) attributable 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.

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

There were an aggregate of 981,000 potentially dilutive shares from convertible securities outstanding for the years ended December 31, 2025, 2024 and 2023. These convertible securities were not considered in calculating diluted income (loss) per common share for the years ended December 31, 2025, 2024 and 2023 as their effect would be anti-dilutive.

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.

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).

Income from Cash Grant – For the year ended December 31, 2023, the Company received $2,812,000 in cash from the USDA’s Biofuel Producer Program. The Company did not receive any cash from this program for the years ended December 31, 2025 and 2024. 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 (“IAS”) 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.

Transferable Tax Credits, net – The Company generates and recognizes tax credits under Section 45Z of the Internal Revenue Code for domestic clean fuel production. The Company accounts for these tax credits under IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, the tax credits are recognized when there is reasonable assurance the Company will comply with the applicable provisions of the Internal Revenue Code and that the tax credits will be received.

For the year ended December 31, 2025, the Company’s Pekin dry mill and Columbia facilities both qualified for these tax credits. The Company recognized $7,500,000, net of estimated selling costs, for these tax credits which the Company plans to sell to third parties, which are recognized as transferable tax credits, net, in the accompanying balance sheets and statements of operations.

Excess Insurance Proceeds – In April 2025, the Company’s Pekin Campus loading dock was damaged, in which it filed a claim with its insurer and received gross proceeds of $10,000,000 in cash. A portion of these proceeds related to costs incurred due to logistical challenges as management sought to repair the dock. Of these proceeds, the Company received reimbursement of $3,312,000, of which $1,466,000 is recorded in cost of goods sold and $1,846,000 is recorded in other income, with the remaining proceeds of $6,688,000 recorded in income as excess insurance proceeds, 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 year ended December 31, 2023, the Company repurchased an aggregate of 1,685,000 shares for $3,674,000 in cash. No shares were repurchased during the years ended December 31, 2025 and 2024.

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, 2025, 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, 2025, 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 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.

Recent Accounting Pronouncements – In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures to enhance the transparency and usefulness of income tax disclosures. ASU 2023-09 updates disclosure requirements for the reconciliation of tax expense from continuing operations and modifies other income tax-related disclosures. The Company adopted ASU 2023-09 as of December 31, 2025 on a prospective basis.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40), which provides clarity in assessing an entity’s performance and prospects for future cash flows by disclosure of more detailed information about the types of expenses in commonly presented expense captions. ASU 2024-03 is effective for the Company’s fiscal year ended December 31, 2027. Early adoption is permitted. The Company is currently evaluating the impact of this ASU.

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.