<SEC-DOCUMENT>0001019687-13-004270.txt : 20131113
<SEC-HEADER>0001019687-13-004270.hdr.sgml : 20131113
<ACCEPTANCE-DATETIME>20131113170058
ACCESSION NUMBER:		0001019687-13-004270
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20131113
DATE AS OF CHANGE:		20131113

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Pacific Ethanol, Inc.
		CENTRAL INDEX KEY:			0000778164
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL ORGANIC CHEMICALS [2860]
		IRS NUMBER:				412170618
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-189713
		FILM NUMBER:		131215427

	BUSINESS ADDRESS:	
		STREET 1:		400 CAPITOL MALL, SUITE 2060
		CITY:			SACRAMENTO
		STATE:			CA
		ZIP:			95814
		BUSINESS PHONE:		916-403-2123

	MAIL ADDRESS:	
		STREET 1:		400 CAPITOL MALL, SUITE 2060
		CITY:			SACRAMENTO
		STATE:			CA
		ZIP:			95814

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	ACCESSITY CORP
		DATE OF NAME CHANGE:	20030627

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DRIVERSSHIELD COM CORP
		DATE OF NAME CHANGE:	20001115

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	FIRST PRIORITY GROUP INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>peix_424b3.htm
<DESCRIPTION>PROSPECTUS
<TEXT>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right"><B>Prospectus Supplement No. 2 filed pursuant
to Rule 424(b)(3) and 424(c)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: right"><B>Registration Statement No. 333-189713</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 6pt; text-align: center"><B>2,200,002 Shares<BR>
<BR>
PACIFIC ETHANOL, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in">This Prospectus Supplement No. 2 (the
&ldquo;Prospectus Supplement&rdquo;) amends, updates and supplements our prospectus dated July 8, 2013, as amended, updated and
supplemented by our prospectus supplement no. 1 dated August 6, 2013 (collectively, the &ldquo;Prospectus&rdquo;) related to a
public offering of 2,200,002 shares of our common stock, including 491,315 shares of common stock issuable, at our election, in
payment of interest under the terms of our senior unsecured notes and 1,708,687 shares of our common stock issuable upon exercise
of our warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in">This Prospectus Supplement is being filed
in order to incorporate into and to include in the Prospectus the information set forth in our Quarterly Report on Form 10-Q for
the quarter ended September 30, 2013 filed with the Securities and Exchange Commission on November 12, 2013, which is attached
hereto. This Prospectus Supplement should be read in conjunction with the Prospectus and is qualified by reference to the Prospectus
except to the extent that the information in this Prospectus Supplement supersedes the information contained therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in">Our common stock is currently traded
on The NASDAQ Capital Market under the symbol &ldquo;PEIX.&rdquo; The last reported price of our common stock on The NASDAQ Capital
Market on November 12, 2013, was $2.80 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in">Our principal offices are located at
400 Capitol Mall, Suite 2060, Sacramento, California 95814 and our telephone number is (916) 403-2123.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"><B>Investing in our shares of common
stock involves substantial risks. See &ldquo;Risk Factors&rdquo; beginning on page 8 of the Prospectus for factors you should consider
before buying shares of our common stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-indent: 0.5in"><B>Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus
Supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center">The date of this Prospectus Supplement
is November 13, 2013.</P>



<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>



<P STYLE="margin: 0"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">UNITED STATES SECURITIES AND
EXCHANGE COMMISSION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Washington, D.C. 20549</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 12pt 0 0; text-align: center"><B>FORM 10-Q</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">(Mark One)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0"><FONT STYLE="font-family: Wingdings 2">&#83;</FONT> <B>QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">For the quarterly period ended <B>September 30, 2013</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0"><FONT STYLE="font-family: Wingdings 2">&#163;</FONT> <B>TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">For the transition period from ______ to _______</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0; text-align: center">Commission File Number: <B>000-21467</B><BR>
<BR>
</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center; text-indent: 0in"><IMG SRC="image_001.jpg" ALT="" STYLE="height: 112px; width: 125px"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Exact name of registrant as specified in its
charter)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: center; font-size: 10pt"><FONT STYLE="font-size: 10pt"><B>Delaware</B></FONT><BR>
<FONT STYLE="font-size: 10pt">(State or other jurisdiction</FONT><BR>
<FONT STYLE="font-size: 10pt">of incorporation or organization)</FONT></TD>
    <TD STYLE="width: 50%; text-align: center; font-size: 10pt"><FONT STYLE="font-size: 10pt"><B>41-2170618</B></FONT><BR>
<FONT STYLE="font-size: 10pt; font-variant: small-caps">(</FONT><FONT STYLE="font-size: 10pt">I.R.S. Employer</FONT><BR>
<FONT STYLE="font-size: 10pt">Identification No.<FONT STYLE="font-variant: small-caps">)</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: center"><B>400 Capitol Mall, Suite 2060, Sacramento,
        California</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: center">(Address of principal executive offices)</P></TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: center"><B>95814</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: center"><FONT STYLE="font-weight: normal">(zip code)</FONT></P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="text-align: center; font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="2" STYLE="text-align: center; font-size: 10pt"><FONT STYLE="font-size: 10pt"><B>(916) 403-2123</B></FONT><BR>
<FONT STYLE="font-size: 10pt">(Registrant&rsquo;s telephone number, including area code)</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: left; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0; text-align: justify; text-indent: 0.5in">Indicate 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 <FONT STYLE="font-family: Wingdings 2">&#83;</FONT> No
<FONT STYLE="font-family: Wingdings 2">&#163;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files). Yes <FONT STYLE="font-family: Wingdings 2">&#83;</FONT>
No <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting
company&rdquo; in Rule 12b-2 of the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-top: 1pt; font-size: 10pt; text-align: left">Large
accelerated filer <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD>
    <TD STYLE="padding-top: 1pt; font-size: 10pt; text-align: center">Accelerated
filer <FONT STYLE="font-family: Wingdings 2">&#163;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt; text-align: left">Non-accelerated
    filer <FONT STYLE="font-family: Wingdings 2">&#163;</FONT> <FONT STYLE="font-size: 10pt">(Do not check if a smaller reporting
    company)</FONT></TD>
    <TD STYLE="font-size: 10pt; text-align: center">Smaller reporting
company <FONT STYLE="font-family: Wingdings 2">&#83;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes <FONT STYLE="font-family: Wingdings 2">&#163;</FONT>
No <FONT STYLE="font-family: Wingdings 2">&#83;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">As of November 8,
2013, there were 15,540,140 shares of Pacific Ethanol, Inc. common stock, $0.001 par value per share, outstanding.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">TABLE OF CONTENTS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 84%; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="width: 8%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B><U>Page</U></B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="text-align: right"><P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PART I</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">FINANCIAL INFORMATION</P>

</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 1.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">FINANCIAL STATEMENTS.</FONT></TD>
    <TD STYLE="text-align: center">3</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Consolidated Balance Sheets as of September 30, 2013 (unaudited) and December&nbsp;31, 2012</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012 (unaudited)</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (unaudited)</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">6</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Notes to Consolidated Financial Statements (unaudited)</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 2.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">23</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 3.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 4.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">CONTROLS AND PROCEDURES.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">37</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>PART II</B></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD COLSPAN="3" STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>OTHER INFORMATION</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 1.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">LEGAL PROCEEDINGS.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">38</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 1A.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">RISK FACTORS.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">38</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 2.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">38</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 3.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">DEFAULTS UPON SENIOR SECURITIES.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">39</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 4.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">MINE SAFETY DISCLOSURES.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">39</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 5.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">OTHER INFORMATION.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">39</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">ITEM 6.</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">EXHIBITS.</FONT></TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">40</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">SIGNATURES</FONT></TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">41</FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD COLSPAN="2"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">EXHIBITS FILED WITH THIS REPORT</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PART I - FINANCIAL INFORMATION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>ITEM 1.&nbsp;FINANCIAL STATEMENTS.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED BALANCE SHEETS<BR>
(in thousands)</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">*</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: center"><U>ASSETS</U></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Current Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-left: 20pt; text-indent: -10pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">9,175</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,586</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,102</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,051</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13,729</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,244</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Prepaid inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,232</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,422</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,036</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,129</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">63,274</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">57,432</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left">Property and equipment, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">156,309</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">150,409</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Other Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Intangible assets, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,378</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,734</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,508</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,388</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">6,886</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,122</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">Total Assets**</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">226,469</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">214,963</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left">_______________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">                                                                                                                                               <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>*</TD><TD STYLE="text-align: left"><FONT STYLE="font-weight: normal">Amounts
derived from the audited financial statements for the year ended December 31, 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 13.5pt"></TD><TD STYLE="width: 22.5pt">**</TD><TD STYLE="text-align: justify"><FONT STYLE="font-weight: normal">Assets of the consolidated variable interest entity that can only
be used to settle obligations of that entity were $162,440 and $156,192 as of September 30, 2013 and December 31, 2012, respectively.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">See accompanying notes to consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED BALANCE SHEETS (CONTINUED)<BR>
(in thousands, except par value and shares)</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">September 30,</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">December 31,</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">(unaudited)</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">*</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt"><U>LIABILITIES AND STOCKHOLDERS&rsquo;
    EQUITY</U></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Current Liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-left: 20pt; text-indent: -10pt">Accounts payable &ndash; trade</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">8,579</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">5,104</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,198</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,282</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Current portion &ndash; capital leases</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,129</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Current portion &ndash; long-term debt (including $750 to related party)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,133</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,029</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,039</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,415</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Long-term debt, net of current portion</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">108,834</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">117,253</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Accrued preferred dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,657</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,852</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Warrant liabilities and conversion features at fair value</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,630</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,892</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Capital lease liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,528</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Other liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,626</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,644</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Total Liabilities**</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">146,314</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">142,056</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Commitments and Contingencies (Notes 4, 5 and 8)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Stockholders&rsquo; Equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Pacific Ethanol, Inc. Stockholders&rsquo; Equity:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Preferred stock, $0.001 par value; 10,000,000 shares authorized; Series A: 1,684,375 shares authorized; 0 shares issued and outstanding as of September 30, 2013 and December&nbsp;31, 2012; Series B: 1,580,790 shares authorized; 926,942 shares issued and outstanding as of September 30, 2013 and December 31, 2012; liquidation preference of $21,733 as of September 30, 2013 </TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt; width: 66%">Common stock, $0.001 par value; 300,000,000 shares authorized; 14,737,127 and 9,789,408 shares issued and outstanding as of September 30, 2013 and December&nbsp;31, 2012, respectively</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">15</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="text-align: left; width: 1%">&nbsp;</TD><TD STYLE="text-align: right; width: 13%">10</TD><TD STYLE="text-align: left; width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">612,880</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">582,861</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20pt; text-indent: -10pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(540,630</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(530,310</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total Pacific Ethanol, Inc. Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,266</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">52,562</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Noncontrolling interest in variable interest entity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,889</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,345</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Total Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">80,155</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">72,907</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Total Liabilities and Stockholders&rsquo; Equity</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">226,469</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">214,963</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 13.5pt; text-align: left; text-indent: -13.5pt">_______________<BR></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: bold 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">                                                                                                                                               <TR STYLE="vertical-align: top">
<TD></TD><TD>*</TD><TD STYLE="text-align: justify"><FONT STYLE="font-weight: normal">Amounts derived from the audited financial statements for the year ended December 31, 2012.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 13.5pt"></TD><TD STYLE="width: 22.5pt">**</TD><TD STYLE="text-align: justify"><FONT STYLE="font-weight: normal">Liabilities of the consolidated variable interest entity for which
creditors do not have recourse to the general credit of Pacific Ethanol, Inc. were $119,509 and $105,315 as of September 30, 2013
and December 31, 2012, respectively.</FONT></TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif; text-align: center">See accompanying notes to consolidated financial statements.</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">(unaudited, in thousands, except per
share data)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended <BR>September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended <BR>September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: justify">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; text-indent: -10pt; padding-left: 10pt">Net sales</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">233,880</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">215,860</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">693,147</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">619,026</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Cost of goods sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">230,357</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">218,300</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">681,813</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">633,843</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Gross profit (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,523</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,440</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,334</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(14,817</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Selling, general and administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,511</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,898</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,649</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,400</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Income (loss) from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,012</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,338</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,685</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(24,217</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Fair value adjustments and warrant inducements</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">762</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(900</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,507</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">352</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Interest expense, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,530</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,378</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11,983</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,380</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Loss on extinguishments of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,573</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,795</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Other expense, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(106</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(105</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(321</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(499</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Loss before provision for income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,435</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,721</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,907</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(33,744</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Provision for income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Consolidated net loss</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,435</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9,721</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(10,907</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(33,744</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Net loss attributed to noncontrolling interest in variable interest entity</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">464</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,533</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">20,191</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Net loss attributed to Pacific Ethanol</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(4,971</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,971</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(9,374</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(13,553</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(946</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(949</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Loss available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,290</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,290</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(10,320</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(14,502</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Net loss per share, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.40</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.82</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.91</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.26</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Weighted-average shares outstanding, basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,177</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,712</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,380</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,414</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">See accompanying notes to consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PACIFIC ETHANOL, INC.<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
(unaudited, in thousands)</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended<BR>September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Operating Activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 66%; text-align: left; text-indent: -10pt; padding-left: 20pt">Consolidated net loss</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(10,907</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(33,744</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Depreciation and amortization of intangibles</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,979</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,216</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Interest expense added to Plant Owners&rsquo; debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,745</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,407</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Loss on extinguishments of debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,795</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Fair value adjustments on convertible debt and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,293</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(352</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Amortization of debt discount</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">875</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Amortization of deferred financing fees</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,621</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">455</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Inventory valuation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">275</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Non-cash compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,310</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">705</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Derivative instruments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,652</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(202</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Bad debt expense (recovery)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">231</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(15</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,282</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">642</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,507</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,482</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Prepaid expenses and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,696</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,480</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Prepaid inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,810</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,144</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 30pt; text-indent: -10pt">Accounts payable and accrued expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,138</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,085</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Net cash provided by (used in) operating activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,873</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(11,422</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Investing Activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Additions to property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,936</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,115</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Purchases of New PE Holdco ownership interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,836</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(10,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Net cash used in investing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,772</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,115</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Financing Activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Proceeds from senior unsecured notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">22,192</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Proceeds from series A and B convertible notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Proceeds from exercise of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,064</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Net proceeds from sales of common stock and warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,994</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Proceeds from Plant Owners&rsquo; borrowings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,522</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Net payments on Kinergy&rsquo;s line of credit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(599</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,273</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Principal payments on Plant Owners&rsquo; borrowings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,622</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Principal payments on senior unsecured notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,303</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Parent purchases of Plant Owners&rsquo; debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,273</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Debt issuance costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,560</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Preferred stock dividends paid</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(946</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(949</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Payments on capital leases</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(465</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 40pt; text-indent: -10pt">Net cash provided by financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">488</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,294</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Net increase in cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,589</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,757</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Cash and cash equivalents at beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,586</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,914</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Cash and cash equivalents at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,175</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,671</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; padding-left: 10pt; text-indent: -10pt">Supplemental Information:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,594</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,504</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Noncash financing and investing activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Corn oil separation capital leases</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,122</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Original discount on senior and convertible debt</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,558</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Debt extinguished with issuance of common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,475</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Notes issued for purchase of 33% ownership interest in New PE Holdco</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Preferred stock dividends paid in common stock</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,195</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">732</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Reclass of noncontrolling interest in VIE to APIC upon acquisitions of ownership positions in New PE Holdco</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">9,087</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Reclass of warrant liability to equity upon warrant exercises</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">260</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">See accompanying notes to consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>PACIFIC ETHANOL, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B><BR>
<B>(UNAUDITED)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0%"></TD><TD STYLE="width: 0.25in">1.</TD><TD><FONT STYLE="font-variant: small-caps">ORGANIZATION </FONT>AND BASIS OF PRESENTATION.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Organization and Business</U></I>
&ndash; The consolidated financial statements include, for all periods presented, the accounts of Pacific Ethanol, Inc., a Delaware
corporation (&ldquo;Pacific Ethanol&rdquo;), and its direct and indirect subsidiaries, including its wholly-owned subsidiaries,
Kinergy Marketing, LLC, an Oregon limited liability company (&ldquo;Kinergy&rdquo;), Pacific Ag. Products, LLC, a California limited
liability company (&ldquo;PAP&rdquo;) and Pacific Ethanol Management Services Corp., a Delaware corporation, and including its
majority-owned subsidiary, New PE Holdco LLC (&ldquo;New PE Holdco&rdquo;), which owns the Plant Owners (as defined below) (collectively,
the &ldquo;Company&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company is the leading
marketer and producer of low-carbon renewable fuels in the Western United States. The Company also sells ethanol co-products, including
wet distillers grain (&ldquo;WDG&rdquo;), a nutritious animal feed, syrup and corn oil. Serving integrated oil companies and gasoline
marketers who blend ethanol into gasoline, the Company provides transportation, storage and delivery of ethanol through third-party
service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado, Idaho and Washington.
The Company had an 85% and 67% ownership interest in New PE Holdco, the owner of four ethanol production facilities, as of September
30, 2013 and December 31, 2012, respectively. The facilities are near their respective fuel and feed customers, offering significant
timing, transportation cost and logistical advantages. The Company sells ethanol produced by the Pacific Ethanol Plants (as defined
below) and unrelated third parties to gasoline refining and distribution companies, sells its WDG to dairy operators and animal
feed distributors and sells its corn oil to poultry and biodiesel customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company manages the production and
operation of four ethanol production facilities, namely, Pacific Ethanol Madera LLC, Pacific Ethanol Columbia, LLC, Pacific Ethanol
Stockton, LLC and Pacific Ethanol Magic Valley, LLC (collectively, the &ldquo;Pacific Ethanol Plants&rdquo;) and their holding
company, Pacific Ethanol Holding Co. LLC (&ldquo;PEHC,&rdquo; and together with the Pacific Ethanol Plants, the &ldquo;Plant Owners&rdquo;).
PEHC is a wholly-owned subsidiary of New PE Holdco. These four facilities have an aggregate annual ethanol production capacity
of up to 200 million gallons. As of September 30, 2013, three of the facilities were operating and one of the facilities was idled.
As market conditions change, the Company may increase, decrease or idle production at one or more operational facilities or resume
operations at any idled facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Reverse Stock Split</U></I> &ndash;
On May 14, 2013, the Company effected a one-for-fifteen reverse stock split. All share and per share information has been restated
to retroactively show the effect of this stock split.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Liquidity</U></I> &ndash;
During the nine months ended September 30, 2013, the Company funded its operations primarily from cash flow from operations,
cash on hand, borrowings under its credit facilities and various capital raising transactions in which it raised aggregate
net proceeds of $36,696,000 through the issuances of senior unsecured notes, unsecured subordinated convertible notes and in
connection with the exercise of warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s current available capital
resources consist of cash on hand and amounts available for borrowing under Kinergy&rsquo;s credit facility. In addition, the Plant
Owners have credit facilities for use in the operations of the Pacific Ethanol Plants. The Company expects that its future available
capital resources will consist primarily of its remaining cash balances, cash flow from operations, if any, amounts available for
borrowing, if any, under Kinergy&rsquo;s credit facility, cash generated from Kinergy&rsquo;s ethanol marketing business, fees
paid under the asset management agreement relating to the Company&rsquo;s operation of the Pacific Ethanol Plants and distributions,
if any, in respect of the Company&rsquo;s ownership interest in New PE Holdco.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company believes
that current and future available capital resources, revenues generated from operations, and other existing sources of liquidity,
including its credit facilities, will be adequate to meet its anticipated working capital and capital expenditure requirements
for at least the next twelve months. If, however, the Company&rsquo;s capital requirements or cash flow vary materially from its
current projections, if crush and commodity margins, which reflect ethanol and co-product sales prices relative to ethanol production
inputs such as corn and natural gas, decline in any material respect, or if other unforeseen circumstances occur, the Company may
require additional financing. The Company also may require additional capital to restart its Madera, California facility. The Company&rsquo;s
failure to raise capital, if and when needed, could restrict its growth, or hinder its ability to compete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Accounts Receivable and Allowance
for Doubtful Accounts</U></I> &ndash; Trade accounts receivable are presented at face value, net of the allowance for doubtful
accounts. The Company sells ethanol to gasoline refining and distribution companies and sells WDG to dairy operators and animal
feed distributors generally without requiring collateral.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company maintains an allowance for
doubtful accounts for balances that appear to have specific collection issues. The collection process is based on the age of the
invoice and requires attempted contacts with the customer at specified intervals. If, after a specified number of days, the Company
has been unsuccessful in its collection efforts, a bad debt allowance is recorded for the balance in question. Delinquent accounts
receivable are charged against the allowance for doubtful accounts once uncollectibility has been determined. The factors considered
in reaching this determination are the apparent financial condition of the customer and the Company&rsquo;s success in contacting
and negotiating with the customer. If the financial condition of the Company&rsquo;s customers were to deteriorate, resulting in
an impairment of ability to make payments, additional allowances may be required.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Of the accounts receivable balance, approximately
$22,284,000 and $20,627,000 at September 30, 2013 and December 31, 2012, respectively, were used as collateral under Kinergy&rsquo;s
working capital line of credit. The allowance for doubtful accounts was $249,000 and $18,000 as of September 30, 2013 and December
31, 2012, respectively. The Company recorded net bad debt expense of $38,000 and $15,000 for the three months ended September 30,
2013 and 2012, respectively. The Company recorded net bad debt expense of $231,000 and $15,000 for the nine months ended September
30, 2013 and 2012, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Basis of Presentation</U></I><U>&ndash;<I>Interim
Financial Statements</I></U><FONT STYLE="font: 10pt Times New Roman, Times, Serif; color: black"> </FONT>&ndash; The accompanying
unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and the instructions to Form 10-Q and Rule&nbsp;10-01 of Regulation&nbsp;S-X.
Results for interim periods should not be considered indicative of results for a full year. These interim consolidated financial
statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company&rsquo;s
Annual Report on Form 10-K for the year ended December&nbsp;31, 2012. The accounting policies used in preparing these consolidated
financial statements are the same as those described in Note 1 to the consolidated financial statements in the Company&rsquo;s
Annual Report on Form 10-K for the year ended December 31, 2012. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair statement of the results for interim periods have been included. All significant
intercompany accounts and transactions have been eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant
estimates are required as part of determining the consolidation of variable interest entities, fair value of convertible notes
and warrants, allowance for doubtful accounts, estimated lives of property and equipment and intangibles, long-lived asset impairments,
valuation allowances on deferred income taxes and the potential outcome of future tax consequences of events recognized in the
Company&rsquo;s financial statements or tax returns. Actual results and outcomes may materially differ from management&rsquo;s
estimates and assumptions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Reclassifications of prior year&rsquo;s
data have been made to conform to 2013 classifications. Such classifications had no effect on net income (loss) reported in the
consolidated statements of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">2.</TD><TD>VARIABLE INTEREST ENTITY.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company concluded that at all times
since New PE Holdco&rsquo;s inception, New PE Holdco has been a variable interest entity because the other owners of New PE Holdco,
due to the Company&rsquo;s involvement through its contractual arrangements, have at all times lacked the power to direct the activities
that most significantly impacted its economic performance. Some of these activities include efficient management and operation
of the Pacific Ethanol Plants, sale of ethanol, the procurement of feedstock, sale of co-products and implementation of risk management
strategies. At the time of New PE Holdco&rsquo;s inception, however, the Company did not have an obligation to absorb losses or
receive benefits that could potentially be significant to New PE Holdco and, as a result, it was determined that the Company was
not New PE Holdco&rsquo;s primary beneficiary. Upon the Company&rsquo;s purchase of its 20% initial ownership interest in New PE
Holdco on October 6, 2010, the Company, through its ownership interest, had an obligation to absorb losses and receive benefits
that could potentially be significant to New PE Holdco. As a result, the Company then became the primary beneficiary of New PE
Holdco and began consolidating the financial results of New PE Holdco.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In January, March and June 2013, the Company
purchased an additional 13%, 3% and 2% of the ownership interests in New PE Holdco for $1,308,000, $331,000 and $197,000 in cash,
respectively, bringing its total ownership interest to 85% as of June 30, 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because the Company has a controlling financial
interest in New PE Holdco, it did not record any gain or loss on these purchases, but instead reduced the amount of noncontrolling
interest in variable interest entity on the consolidated balance sheets by an aggregate $10,923,000 and recorded the difference
of $9,087,000 for the nine months ended September 30, 2013, which represents the fair value of these purchases above the price
paid by the Company, to additional paid-in capital on the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Because New PE Holdco&rsquo;s results are
consolidated with the Company&rsquo;s financial results for financial reporting purposes, the acquisition of additional interests
in New PE Holdco did not impact the Company&rsquo;s reported consolidated net income (loss). However, the portion of New PE Holdco&rsquo;s
net income (loss) that is allocated to the Company increased from 34% to 67% during 2012 and from 67% to 85% in 2013, thus changing
the net income (loss) attributable to Pacific Ethanol after reducing the net income (loss) attributable to the noncontrolling interests
and the Company&rsquo;s earnings per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognized approximately $124,251,000
and $117,544,000 in net sales and $1,010,000 in net income and $2,327,000 in net loss attributed to New PE Holdco for the three
months ended September 30, 2013 and 2012, respectively. Had the Company held an 85% ownership interest in New PE Holdco, for the
three months ended September 30, 2012, the Company would have reported a net loss available to common stockholders of $8,560,000
and would have reported a loss per share of $1.11.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognized approximately $374,967,000
and $332,207,000 in net sales and $2,565,000 in net income and $16,011,000 in net loss attributed to New PE Holdco for the nine
months ended September 30, 2013 and 2012, respectively. Had the Company held an 85% ownership interest in New PE Holdco, for the
nine months ended September 30, 2013 and 2012, the Company&rsquo;s reported net loss available to common stockholders would have
been $10,759,000 and $29,690,000, respectively, and loss per share would have been $0.94 and $4.63, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying values and classification
of assets that are collateral for the obligations of New PE Holdco as of September 30, 2013 were as follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left; padding-left: 10pt; text-indent: -10pt">Cash and cash equivalents</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">60</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,821</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Property and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">151,612</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,947</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">162,440</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The liabilities of New PE Holdco for which creditors do not
have recourse to the general credit of Pacific Ethanol, Inc. as of September 30, 2013 were as follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 83%; text-align: left; padding-left: 10pt; text-indent: -10pt">Current liabilities</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">5,665</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Long-term debt</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">101,944</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Other liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,900</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Total liabilities</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">119,509</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&rsquo;s acquisition of its
ownership interest in New PE Holdco does not impact the Company&rsquo;s rights or obligations under any of its contractual agreements.
Further, creditors of New PE Holdco do not have recourse to the Company. Since its acquisition, the Company has not provided any
additional support to New PE Holdco beyond the terms of its contractual agreements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">3.</TD><TD>INVENTORIES.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventories consisted primarily of bulk
ethanol and unleaded fuel, and are valued at the lower-of-cost-or-market, with cost determined on a first-in, first-out basis.
Inventory balances consisted of the following (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">December 31, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-align: left; padding-left: 10pt; text-indent: -10pt">Finished goods</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,937</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">10,230</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Work in progress</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,622</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,846</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Raw materials</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,282</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,363</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Other</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">888</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">805</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 20pt; text-indent: -10pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,729</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,244</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">4.</TD><TD>DERIVATIVES.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The business and activities of the Company
expose it to a variety of market risks, including risks related to changes in commodity prices and interest rates. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Commodity Risk</U></I><U> &ndash;
<I>Cash Flow Hedges</I></U> &ndash; 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 ethanol sale and purchase commitments where the prices are set at a future date and/or if the
contracts specify a floating or index-based price for ethanol. In addition, the Company hedges anticipated sales of ethanol 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&rsquo;s purchase and sales prices. Ineffectiveness, which is defined as the degree
to which the derivative does not offset the underlying exposure, is recognized immediately in cost of goods sold. For the three
and nine months ended September 30, 2013 and 2012, the Company did not designate any of its derivatives as cash flow hedges.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Commodity Risk &ndash; Non-Designated
Hedges</U></I> &ndash; The Company uses derivative instruments to lock in prices for certain amounts of corn and ethanol by entering
into forward contracts for those commodities. These derivatives are not designated for special 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 losses of $1,168,000 and $52,000 as the change in the fair value of these contracts for the three months ended
September 30, 2013 and 2012, respectively. The Company recognized losses of $1,652,000 and gains of $202,000 as the change in the
fair value of these contracts for the nine months ended September 30, 2013 and 2012, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Non-Designated Derivative Instruments</U></I>
&ndash; The Company classified its derivative instruments not designated as hedging instruments of $128,000 and $44,000 in other
current assets and accrued liabilities, respectively, as of September 30, 2013 and $189,000 and $167,000 in other current assets
and accrued liabilities, respectively, as of December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The classification and amounts of the Company&rsquo;s
recognized gains (losses) for its derivatives not designated as hedging instruments are as follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Realized Losses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Type of Instrument</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">Statements of Operations Location</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Commodity contracts</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Cost of goods sold</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">(1,612</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">(440</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Unrealized Gains</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Type of Instrument</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">Statements of Operations Location</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Commodity contracts</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Cost of goods sold</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">444</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">388</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Realized Gains (Losses)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months
        Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Type of Instrument</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">Statements of Operations Location</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Commodity contracts</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Cost of goods sold</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">(1,714</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">277</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Unrealized Gains (Losses)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months
        Ended September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Type of Instrument</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid">Statements of Operations Location</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Commodity contracts</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 32%; text-align: left; padding-bottom: 2.5pt">Cost of goods sold</TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">62</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 2%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 2.5pt double; text-align: right">(479</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">5.</TD><TD>DEBT.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Long-term borrowings are summarized as
follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">September 30,<BR>2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">December 31,</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">2012</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Kinergy operating line of credit</TD><TD STYLE="width: 2%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 13%; color: black; text-align: right">19,112</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; color: black">&nbsp;</TD>
    <TD STYLE="width: 1%; color: black; text-align: left">$</TD><TD STYLE="width: 13%; color: black; text-align: right">19,711</TD><TD STYLE="width: 1%; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Senior unsecured notes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">16,889</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">&ndash;</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Subordinated convertible notes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">2,525</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">&ndash;</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Plant Owners&rsquo; term debt and accrued interest</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">59,565</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">54,821</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Plant Owners&rsquo; operating lines of credit</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">42,378</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">46,000</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Note payable to related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">750</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">141,219</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">121,282</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Less: Parent purchased Plant Owners&rsquo; term debt</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(27,088</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">&ndash;</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; text-align: left; padding-left: 10pt; text-indent: -10pt">Less: Unamortized discount on senior unsecured notes</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">(2,022</TD><TD STYLE="color: black; text-align: left">)</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">&ndash;</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less: Unamortized discount on convertible notes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,142</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="color: black; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: black; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">110,967</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black">&nbsp;</TD>
    <TD STYLE="color: black; text-align: left">&nbsp;</TD><TD STYLE="color: black; text-align: right">121,282</TD><TD STYLE="color: black; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="color: black; text-align: left; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less short-term portion</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,133</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,029</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="color: black; padding-bottom: 2.5pt; padding-left: 10pt; text-indent: -10pt">Long-term debt</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">108,834</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">117,253</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Kinergy Operating Line of Credit</U></I>
&ndash; For the nine months ended September 30, 2013, Kinergy repaid $599,000, net of borrowings, on its operating line of credit.
As of September 30, 2013, Kinergy had an available borrowing base under the credit facility of $5,451,000 and an outstanding principal
balance of $19,112,000. At September 30, 2013, the interest rate was approximately 2.75%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Senior Unsecured
Notes</U></I> &ndash; On January 11, 2013, under the terms of a securities purchase agreement dated December 19, 2012 among the
Company and five accredited investors, the Company issued and sold to the investors in a private offering $22,192,000 in aggregate
principal amount of its senior unsecured notes (&ldquo;January 2013 Notes&rdquo;) and warrants to purchase an aggregate of 1,708,700
shares of the Company&rsquo;s common stock (&ldquo;January 2013 Financing Transaction&rdquo;) for aggregate net proceeds of $22,072,000.
The warrants have an exercise price of $6.60 per share and expire in January 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Upon closing of the
January 2013 Financing Transaction, the Company recorded a debt discount of $2,657,000 associated with the value of the
warrants issued in connection with the financing. The debt discount will be amortized over the life of the January 2013 Notes
to approximate a yield adjustment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If at any time the Company receives net
cash proceeds from an issuance of equity or equity-linked securities of the Company, interest received from any purchased and outstanding
Plant Owners&rsquo; term debt, certain sales of assets or as a result of incurring certain indebtedness, then the Company will
be obligated to prepay the January 2013 Notes using 100% of all such net cash proceeds, provided that any net proceeds received
in connection with an equity-linked issuance must be used to either prepay the January 2013 Notes or purchase certain outstanding
debt issued by the Plant Owners. During the nine months ended September 30, 2013, the Company made principal payments on the January
2013 Notes in the aggregate amount of $5,303,000. In addition, the Company purchased $3,500,000 in certain outstanding debt issued
by the Plant Owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The January 2013 Notes mature on March 30, 2016 and bear interest
at a rate of 5% per annum, subject to adjustment. As of the filing of this report, the Company has repaid certain amounts and purchased
outstanding debt issued by the Plant Owners in the aggregate principal amount of $8,803,000. If, by January 15, 2014, the principal
balance of the January 2013 Notes is not less than $14,269,000, the interest rate will increase commencing on January 15, 2014
by 1% per annum on each of January 15, April 15, July 15 and October 15 until the aggregate outstanding principal balance is less
than $14,269,000. Payments due under the January 2013 Notes rank senior to all other indebtedness of the Company and its subsidiaries,
other than certain permitted senior indebtedness.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Interest on the January 2013 Notes is payable
in cash in arrears on the fifteenth calendar day of each month beginning on March 15, 2013 (each, an &ldquo;Interest Payment Date&rdquo;).
Subject to the satisfaction of certain equity conditions, at the option of the Company, the Company may elect to pay interest due
and payable in shares of its common stock, provided that the interest rate applicable to any outstanding amounts the Company pays
in shares will increase by 2% per annum from the then applicable interest rate for the period for which such interest is paid.
The number of shares to be issued on any particular Interest Payment Date equals the quotient of (x) the amount of interest payable
(assuming payment in shares) on such Interest Payment Date, divided by (y) the product of (i) the weighted average price of the
Company&rsquo;s common stock for the thirty trading days immediately preceding (but excluding) the Interest Payment Date, and (ii)
0.95. As of September 30, 2013, the Company had not made any interest payments in shares of its common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2013, the aggregate
outstanding principal balance of the January 2013 Notes was $16,889,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Restrictive Covenants</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The January 2013 Notes prohibit the Company
from engaging in various activities, including the following: (i) the Company and its subsidiaries may not incur other indebtedness,
except for certain permitted indebtedness; (ii) the Company and its subsidiaries may not incur any liens, except for certain permitted
liens; (iii) the Company and its subsidiaries may not, directly or indirectly, redeem or repay all or any portion of any indebtedness
(except for certain permitted indebtedness) if at the time such payment is due or is made or, after giving effect to such payment,
an event constituting, or that with the passage of time and without being cured would constitute, an event of default has occurred
and is continuing; (iv) the Company and its subsidiaries may not redeem, repurchase or pay any dividend or distribution on its
respective capital stock without the prior consent of the holders of the January 2013 Notes, other than certain permitted distributions;
and (v) the Company and its subsidiaries may not sell, lease, assign, transfer or otherwise dispose of any assets of the Company
or any subsidiary, except for certain permitted dispositions (including the sales of inventory or receivables in the ordinary course
of business).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Registration Rights Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The January 2013 Notes include registration
rights which required that the Company file a registration statement with the Securities and Exchange Commission within 30 days
of the closing date for the resale by the January 2013 Note holders of up to 2,200,000 shares of common stock underlying the warrants
and 491,300 shares of common stock that may be issued as interest shares under the January 2013 Notes. The Company filed the initial
registration statement by the 30 day deadline. As part of the Company&rsquo;s issuance of subordinated convertible notes in March
2013, the initial registration statement was withdrawn with the permission of the January 2013 Note holders. The Company filed
another registration statement with the Securities and Exchange Commission covering the warrant shares and interest shares on June
28, 2013, which has been declared effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Subordinated Convertible
Notes</U></I> &ndash; On March 28, 2013, the Company issued $6,000,000 in aggregate principal amount of its Series A Subordinated
Convertible Notes (&ldquo;Series A Notes&rdquo;), and warrants to purchase an aggregate of 1,839,600 shares of common stock for
aggregate gross proceeds of $6,000,000. On June 21, 2013, the Company issued $8,000,000 in aggregate principal amount of its Series
B Subordinated Convertible Notes (&ldquo;Series B Notes&rdquo;) for aggregate gross proceeds of $8,000,000. The warrants have an
exercise price of $7.70 per share. Of the warrants issued in the transaction, warrants to purchase 788,400 shares of common stock
expire in March 2015 and warrants to purchase 1,051,200 shares of common stock expire in June 2015. The net proceeds of these offerings
of $12,560,000 were used to (i) purchase $6,665,000 of the Plant Owners&rsquo; debt maturing in June 2013, the maturity of which
was also extended at the time from June 2013 to June 2016, and of which the Company immediately retired $1,122,000; (ii) acquire
an additional 5% ownership interest in New PE Holdco; and (iii) purchase and immediately retire an additional $3,500,000 of the
Plant Owners&rsquo; term debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Unless converted or redeemed
earlier, the Series A and B Notes will mature on March 28, 2014. The Series A and B Notes bear interest at 5%&nbsp;per annum, compounded
monthly. All amounts due under the Series A and B Notes are convertible at any time, in whole or in part, at the option of the
holders into shares of the Company&rsquo;s common stock at a conversion price (&ldquo;Fixed Conversion Price&rdquo;), which is
subject to adjustment as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Series A and B Notes
were initially convertible into shares of the Company&rsquo;s common stock at the initial Fixed Conversion Price of $15.00 per
share. If the Company sells or issues any securities with &ldquo;floating&rdquo; conversion prices based on the market price of
its common stock, the holder of a Series A or B Note will have the right thereafter to substitute the &ldquo;floating&rdquo; conversion
price for the Fixed Conversion Price upon conversion of all or part of the Series A or B Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amortization payments, together with accrued
and unpaid interest on the Series A and B Notes, are payable on monthly installment dates. On or prior to the tenth calendar day
before each installment date, the Company is required to deliver a notice electing to effect a redemption in cash or a conversion
of the installment amount due on the installment date into shares of its common stock. The Company&rsquo;s ability to pay an installment
amount in shares of its common stock is subject to numerous equity conditions, the failure of any of which, unless waived, will
require that the Company pay an installment amount solely in cash. On the applicable installment date, the Company is required
to deliver to the holders of Series A and B Notes an amount of shares of common stock equal to that portion of the installment
amount being converted divided by the lesser of the then existing Fixed Conversion Price and 85% of the Market Price on the installment
date (&ldquo;Company Conversion Price&rdquo;). The &ldquo;Market Price&rdquo; on any given date is equal to the lesser of (i) the
volume weighted average price on the trading day immediately preceding the date of determination, and (ii) the average of the three
lowest volume weighted average prices during the ten trading day period ending on the trading day immediately prior to the date
of determination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holder of a Series A or B Note may,
at the holder&rsquo;s election by giving notice to the Company, defer the payment of the installment amount due on any installment
date to another installment date, in which case the amount deferred will become part of the subsequent installment date and will
continue to accrue interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On any day during the period commencing
on an installment date and ending on the trading day prior to the next installment date, the holder of a Series A or B Note may,
at its election, convert the installment amounts due on up to four future installment dates at the Company Conversion Price in
effect on the current installment date, provided that if the Company had elected to convert the installment amount due on the current
installment date, the holder may only convert up to three future installment amounts. Upon the occurrence of certain events of
default, there will be no limitation on the number of installment amounts that the holder may accelerate and the Company Conversion
Price applicable to conversions made pursuant to this acceleration feature will equal the lesser of (i) the Company Conversion
Price on the current installment date, (ii) 85% of the Market Price, and (iii) the Fixed Conversion Price then in effect. At September
30, 2013, based on the Company&rsquo;s most recent conversion price of $3.07, the Series B Notes were convertible into an aggregate
of 888,000 shares of the Company&rsquo;s common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has determined that the conversion
feature in the Series A and B Notes and the related warrants require bifurcation and liability classification and measurement,
at fair value, and require evaluation at each reporting period. The initial fair values of the conversion feature of the Series
A Notes of $1,400,800 and the warrants of $882,500 are accounted for as a debt discount and will be amortized into interest expense
as a yield adjustment over the term of the Series A Notes. The initial fair values of the conversion feature of the Series B Notes
of $2,928,500 and the warrants of $689,300 are accounted for as a debt discount and will be amortized into interest expense as
a yield adjustment over the term of the Series B Notes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From April 1, 2013 through September 30,
2013, the Company made two installment payments and processed a number of conversions. In the aggregate, the Company issued 3,557,000
shares of its common stock in payment of principal and interest in an aggregate amount of $11,554,000 in respect of the Series
A and B Notes. In connection with these installment payments and conversions, the Company recorded losses on extinguishments of
debt of $2,573,000 and $3,611,000 for the three and nine months ended September 30, 2013, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2013, the
Series A Notes were fully retired and the aggregate outstanding principal balance of the Series B Notes was $2,525,000. See
Note 12 - Subsequent Events.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Plant Owners&rsquo;
Term Debt and Operating Lines of Credit</U></I> &ndash; The Plant Owners&rsquo; debt as of September 30, 2013 consisted of a $33,286,000
tranche A-1 term loan, a $26,279,000 tranche A-2 term loan and a $42,378,000 revolving credit facility. The term and revolving
debt require monthly interest payments at a floating rate equal to the three-month LIBOR or the Prime Rate of interest, at the
Plant Owners&rsquo; election, plus 10.0%. At September 30, 2013, the interest rate was approximately 13.25%. Repayments of principal
are based on available free cash flow of the Plant Owners, until maturity, when all principal amounts are due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">From July 13, 2012 through
June 30, 2013, the Plant Owners entered into transactions which amended the term and revolving debt and extended the maturity dates
in respect of the combined term loans and revolving debt from June 25, 2013 to June 30, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">Monthly interest payments
due to certain lenders on both the term and revolving debt was deferred and added to the principal amount of the loans. As of September
30, 2013, the extended principal balances above included $8,279,000 of accrued interest that was deferred by the Plant Owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Acquisitions of
Plant Debt</U></I> &ndash; On January 11, 2013, the Company used $21,500,000 of the proceeds of the January 2013 Financing Transaction
to purchase from certain lenders an aggregate amount of $21,500,000 of the Plant Owners&rsquo; tranche A-2 term loans. The Company
determined that the acquisition of the plant debt was a modification of terms because the lenders who held the acquired plant debt
were the lenders under the January 2013 Notes. Based on the Company&rsquo;s review of the present value of cash flows of the January
2013 Notes compared to the older plant debt, which resulted in a less than 10% change, the modification was not significant and
the Company did not record a gain or loss associated with the modification. The Company expensed certain legal costs associated
with the debt modification of approximately $408,000, rather than amortizing those expenses over the life of the debt. Because
the plant debt acquired is now held by Pacific Ethanol, this specific debt is eliminated in consolidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">On March 28, 2013, the
Company used proceeds from the issuance of its Series A Notes and warrants to purchase $3,500,000 of revolving credit facility
debt, at par, from a lender. Under the terms of the amended credit facility, the Company was obligated to immediately forgive the
purchased amount of revolving credit facility debt and has permanently reduced the maximum commitment on this facility to $36,500,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">On March 28, 2013, the
Company also used proceeds from the issuance of its Series A Notes and warrants to purchase $2,636,000 of tranche A-2 term loans
and an additional 3% ownership interest in New PE Holdco for a combined purchase price of $2,150,000. The Company first allocated
$331,000 of this payment to the New PE Holdco ownership interest and the remainder was allocated to the tranche A-2 term loans.
The $817,000 difference between the amount the Company allocated to the term loans and the face amount of $2,636,000 was recorded
as a gain on extinguishment of debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">On June 21, 2013, the
Company used proceeds from the issuance of its Series B Notes to purchase $1,122,000 of revolving credit facility debt at a discount.
Under the terms of the amended credit facility, the Company was obligated to immediately forgive the purchased amount of revolving
credit facility debt and has permanently reduced the maximum commitment on this facility to $35,378,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">On June 21, 2013, the
Company also used proceeds from the issuance of its Series B Notes to purchase $2,907,000 of tranche A-1 and A-2 term loans at
a discount and an additional 2% ownership interest in New PE Holdco for $197,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company recorded
a gain on extinguishment of debt of $998,000 related to the discount it paid for the revolving and term loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>New Operating Line of Credit</U></I>
&ndash; On October 29, 2012, the Plant Owners entered into a new revolving credit facility that initially provided for up to an
additional $10,000,000. The Plant Owners may request increases in the amount of the facility in increments of not less than $1,000,000,
up to a maximum additional credit limit of $5,000,000. The Plant Owners have the right at any time, and from time to time, but
subject to limitations imposed by an intercreditor agreement, to prepay in whole or in part the revolving loans and tranche A-1
loans (and the tranche A-2 loans following the payment in full of the revolving loans and tranche A-1 loans). However, in the event
of any prepayment of the tranche A-1 loans that have a maturity date of June 30, 2016, the Plant Owners must pay a premium equal
to the present value of all interest payments that would have accrued from the date of such payment through June 30, 2016, calculated
using a discount rate, applied quarterly, equal to the Treasury Rate as of such prepayment date plus 50 basis points. The credit
agreement also provides for mandatory prepayments in connection with certain customary events, including any sale of material assets;
however, certain mandatory prepayments are not subject to the prepayment premium. On January 4, 2013, the Plant Owners entered
into an amendment to the new revolving credit facility and extended the maturity date of the facility from June 25, 2013 to June
25, 2015. On March 28, 2013, the lenders approved $5,000,000 in additional availability for a maximum total credit limit of $15,000,000
under the facility. At September 30, 2013, the interest rate was approximately 8.75%. As of September 30, 2013, the Plant Owners
had unused availability under the new revolving credit facility of $8,000,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All of the term loans and revolving credit
facilities represent permanent financing and are secured by a perfected, first-priority security interest in all of the assets,
including inventories and all rights, title and interest in all tangible and intangible assets, of the Plant Owners. The Plant
Owners&rsquo; creditors do not have recourse to Pacific Ethanol, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Note Payable to Related Party</U></I>
&ndash; The Company had a note payable to its Chief Executive Officer totaling $750,000 as of September 30, 2013 and December 31,
2012. Interest on the unpaid principal amount accrues at a rate of 8.00% per annum. On February 7, 2013, the maturity date was
extended to March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">6.</TD><TD>CAPITAL LEASE LIABILITIES.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company financed
capital expenditures in connection with the implementation of corn oil separation technology at its Magic Valley and Stockton facilities.
The Company initially recorded aggregate capital lease liabilities of $12,122,000. The Company is required to pay these liabilities
with the proceeds from a portion of its corn oil sales, subject to certain minimum payment amounts. The Company has estimated,
based on its projected corn oil sales and future minimum payment amounts that its future minimum lease payments are to be $1,147,000
for the remainder of 2013, and $6,769,000, $3,005,000, $900,000, $900,000 and $675,000 for 2014, 2015, 2016, 2017 and 2018, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">7.</TD><TD>COMMON STOCK AND WARRANTS.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Grants of stock</U>
</I>&ndash; In January 2013, the Company granted 63,334 shares of restricted stock to members of the Company&rsquo;s Board of Directors,
with the exception of its Chief Executive Officer, that vest on the earlier of the date of the Company&rsquo;s 2013 annual meeting
of stockholders, or July 31, 2013, and had a grant date fair value of $5.25 per share. In January 2013, the Company granted an
additional 94,171 shares of restricted stock to the Company&rsquo;s non-executive employees that vest in equal amounts on each
of April 1, 2013, 2014 and 2015 and had a grant date fair value of $5.25 per share. In March and April 2013, the Company granted
an additional 130,002 shares of restricted common stock to its executive employees that vest in equal installments on each of April
1, 2013, 2014 and 2015 and had a grant date fair value of $5.70 per share. In June 2013, the Company granted an additional 327,775
shares of restricted stock and 229,025 options to the Company&rsquo;s directors and employees that vest in equal amounts on each
of April 1, 2014, 2015 and 2016 and had grant date fair values of $3.74 and $1.68 per share, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Warrant issuances</U>
</I>&ndash; In connection with the January 2013 Financing Transaction, the Company issued warrants to purchase an aggregate of
1,708,700 shares of common stock. The warrants have an exercise price of $6.60 per share and expire in January 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">In connection with the
Company&rsquo;s issuance of its Series A and B Notes, the Company issued warrants to purchase up to 788,400 and 1,051,200 shares
of common stock. The warrants have an exercise price of $7.70 per share and expire in March 2015 and June 2015, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">The Company has determined
that the warrants issued in the above transactions did not meet the conditions for classification in stockholders&rsquo; equity.
As a result, the Company has recorded the warrants as a liability at fair value. The Company will revalue the warrants at each
reporting period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><I><U>Warrant exercises</U></I>
&ndash; During February 2013, certain holders exercised warrants and received 267,733 shares of the Company&rsquo;s common stock
upon payment of an aggregate of $2,064,000 in cash. The Company paid $785,800 in cash to the warrant holders as an inducement for
these exercises, which was recorded as an expense. In March 2013, a holder exercised warrants on a cashless basis and received
11,356 shares of the Company&rsquo;s common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">8.</TD><TD>COMMITMENTS AND CONTINGENCIES.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Sales Commitments</U></I> &ndash;
At September 30, 2013, the Company had entered into sales contracts with its major customers to sell certain quantities of ethanol,
WDG, syrup and corn oil. The Company had open ethanol indexed-price contracts for 102,600,000 gallons of ethanol as of September
30, 2013. The Company had open WDG, syrup and corn oil fixed-price sales contracts valued at $134,000 and open indexed-price sales
contracts for 2,500 tons of WDG and syrup as of September 30, 2013. These sales contracts are expected to be completed over the
next twelve months.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Purchase Commitments</U></I> &ndash;
At September 30, 2013, the Company had fixed-price purchase contracts with its suppliers to purchase $14,200,000 of ethanol. These
contracts are expected to be satisfied over the next twelve months.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Litigation &ndash; General</U> &ndash;</I>
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&rsquo;s operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 24, 2013, GS CleanTech Corporation
(&ldquo;GS CleanTech&rdquo;), filed a suit in the United States District Court for the Eastern District of California, Sacramento
Division (Case No.: 2:13-CV-01042-JAM-AC), naming Pacific Ethanol, Inc. as a defendant. The suit alleges infringement of a patent
assigned to GS CleanTech by virtue of certain corn oil separation technology in use at one or more of the ethanol production facilities
in which the Company has an interest, including Pacific Ethanol Stockton, LLC, located in Stockton, California. The complaint seeks
preliminary and permanent injunctions against the Company, prohibiting future infringement on the patent owned by GS CleanTech
and damages in an unspecified amount adequate to compensate GS CleanTech for the alleged patent infringement, but in any event
no less than a reasonable royalty for the use made of the inventions of the patent, plus attorney&rsquo;s fees. Pacific Ethanol,
Inc. does not itself use any corn oil separation technology and may seek a dismissal on those grounds. Further, although two of
the Company&rsquo;s majority-owned subsidiaries do separate and market corn oil, the Company and its majority-owned subsidiaries
strongly disagree that any of the subsidiaries use corn oil separation technology that infringes the patent owned by GS CleanTech.
The Company has since answered the complaint and counterclaimed that the patent claims at issue are invalid and that the Company
is not infringing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">9.</TD><TD>FAIR VALUE MEASUREMENTS.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The fair value hierarchy prioritizes the
inputs used in valuation techniques into three levels as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 1 &ndash; Observable inputs &ndash; unadjusted quoted prices in active markets for identical
assets and liabilities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 2 &ndash; Observable inputs other than quoted prices included in Level 1 that are observable
for the asset or liability through corroboration with market data; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Level 3 &ndash; Unobservable inputs &ndash; 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.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recorded its warrants issued
from 2010 through 2013 at fair value and designated them as Level 3 on their issuance dates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Warrants</U></I> &ndash; Except for
the warrants issued September 26, 2012, the warrants were valued using a Monte Carlo Binomial Lattice-Based valuation methodology,
adjusted for marketability restrictions. The warrants issued September 26, 2012, did not contain any anti-dilution protection features.
As a result, the warrants were valued using the Black-Scholes Valuation Model. Of the various inputs used, the volatility and the
current price of the Company&rsquo;s common stock most significantly impact the fair value adjustments of the warrants. As the
Company&rsquo;s common stock increases or decreases, the valuation of the warrants will increase or decrease, respectively. As
the estimated volatility of the Company&rsquo;s common stock increases or decreases, the valuation of the warrants will increase
or decrease, respectively. These changes may result in significantly higher or lower fair value measurements from period to period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant assumptions used and related
fair values for the warrants as of September 30, 2013 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Original Issuance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Volatility</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Risk-Free</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Interest</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Rate</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Term</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">(years)</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Discount for marketability restrictions</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants Outstanding</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in; width: 23%">06/21/2013</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">7.70</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">58.7%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">0.22%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">1.49</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">27.7%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">1,051,200</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">494,600</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">03/28/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.70</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">58.7%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.22%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.49</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.7%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">788,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">370,300</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">01/11/2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.60</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">64.7%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.01%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.28</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,708,700</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,940,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">09/26/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8.85</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61.6%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.33%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.99</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,770,800</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">315,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">07/3/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.36</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63.7%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.01%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.76</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">43.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,812,400</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,018,100</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">07/3/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.68</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">48.2%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.02%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.26</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">42.8%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">803,900</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">34,700</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -1in; padding-left: 1in">12/13/2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8.92</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">61.0%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.63%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.21</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39.9%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">305,700</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">318,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: 8.6pt; padding-left: 1in">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,491,200</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Significant assumptions used and related
fair values for the warrants as of December 31, 2012 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid">Original Issuance</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Exercise Price</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Volatility</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Risk-Free</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Interest</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Rate</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Term</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">(years)</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Discount for marketability restrictions</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Warrants Outstanding</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in; width: 23%">09/26/2012</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="text-align: right; width: 7%">8.85</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">70.2%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">0.36%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">2.74</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">53.9%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">1,833,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">1,112,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">07/3/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.50</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76.1%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.72%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.51</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,867,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,756,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">07/3/2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">69.3%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.16%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.01</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">55.5%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">930,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">509,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">12/13/2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12.45</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">74.4%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.54%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.95</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52.3%</TD><TD STYLE="text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">330,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">480,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-bottom: 1pt; text-indent: -1in; padding-left: 1in">10/6/2010</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.80</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">76.0%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0.72%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.80</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">46.4%</TD><TD STYLE="padding-bottom: 1pt; text-align: left"></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">35,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: 8.6pt; padding-left: 1in">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,892,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Convertible Notes</U></I> &ndash;
The conversion feature imbedded in the convertible notes was valued using a combination of a Monte Carlo Binomial Lattice-Based
valuation methodology, adjusted for marketability restrictions. Significant assumptions used and related fair value for the conversion
feature as of September 30, 2013 were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; border-bottom: Black 1pt solid">Instrument</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Initial</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Conversion</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Price</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Volatility</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Risk-Free</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Interest</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Rate</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Term</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">(years)</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Discount for marketability restrictions</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Fair Value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; width: 22%">Series B Notes</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">15.00</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">50.7%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.04%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">0.50</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">14.2%</TD><TD STYLE="width: 1%; text-align: left"></TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 9%; border-bottom: Black 2.5pt double; text-align: right">1,139,100</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Other Derivative Instruments</U></I>
&ndash; The Company&rsquo;s other derivative instruments consist of commodity positions. The fair value of the commodity positions
are based on quoted prices on the commodity exchanges and are designated as Level 1.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes fair value measurements by level
at September 30, 2013 (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-top: 3pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-top: 3pt">Level 1</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; padding-top: 3pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-top: 3pt">Level 2</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; padding-top: 3pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-top: 3pt">Level 3</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; padding-top: 3pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid; padding-top: 3pt">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; padding-left: 10pt; padding-top: 3pt; text-indent: -10pt">Assets:</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 32%; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Commodity contracts<SUP>(1)</SUP></FONT></TD><TD STYLE="width: 2%; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">128</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">128</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt; padding-top: 3pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">128</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">128</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt">Liabilities:</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Warrants<SUP>(2)</SUP></FONT></TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">$</TD><TD STYLE="text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">$</TD><TD STYLE="text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">$</TD><TD STYLE="text-align: right; padding-top: 3pt">5,491</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">$</TD><TD STYLE="text-align: right; padding-top: 3pt">5,491</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Conversion feature<SUP>(2)</SUP></FONT></TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">1,139</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="text-align: right; padding-top: 3pt">1,139</TD><TD STYLE="text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Commodity contracts<SUP>(3)</SUP></FONT></TD><TD STYLE="padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">44</TD><TD STYLE="padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right; padding-top: 3pt">44</TD><TD STYLE="padding-bottom: 1pt; text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 30pt; padding-top: 3pt">Total Liabilities</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">44</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">6,630</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; padding-top: 3pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left; padding-top: 3pt">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right; padding-top: 3pt">6,674</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left; padding-top: 3pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(1)&nbsp;&nbsp;&nbsp;Included
in other current assets in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(2)&nbsp;&nbsp;&nbsp;Included
in warrant liabilities and conversion features at fair value in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(3)&nbsp;&nbsp;&nbsp;Included
in accrued liabilities in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following table summarizes fair value measurements by level
at December 31, 2012 (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-top: 3pt; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 1</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 2</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Level 3</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; padding-left: 10pt; padding-top: 3pt; text-indent: -10pt">Assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 32%; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Commodity contracts<SUP>(1)</SUP></FONT></TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">189</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 13%; border-bottom: Black 1pt solid; text-align: right">189</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt; padding-top: 3pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">189</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">189</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-indent: -10pt; padding-left: 10pt; padding-top: 3pt">Liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Warrants<SUP>(2)</SUP></FONT></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,892</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,892</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt; padding-top: 3pt"><FONT STYLE="font-size: 10pt">Commodity contracts<SUP>(3)</SUP></FONT></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">167</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">167</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 30pt; padding-top: 3pt">Total Liabilities</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">167</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4,892</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,059</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">__________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(1)&nbsp;&nbsp;&nbsp;Included
in other current assets in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(2)&nbsp;&nbsp;&nbsp;Included
in warrant liabilities and conversion features at fair value in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0; margin-bottom: 0pt">(3)&nbsp;&nbsp;&nbsp;Included
in accrued liabilities in the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For fair value measurements using significant
unobservable inputs (Level 3), 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. The changes in the Company&rsquo;s fair value of its Level
3 inputs were as follows (in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Conversion Features</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 66%; text-indent: -10pt; padding-left: 10pt">Balance, December 31, 2012</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">4,892</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">&ndash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Issuance of warrants in January offering</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,657</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Issuance of notes and warrants on March 28, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,572</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,401</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">Issuance of notes on June 21, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,929</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">Conversions of notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,269</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">Exercises of warrants</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(260</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Adjustments to fair value</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,370</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,078</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Balance, September 30, 2013</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,491</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,139</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other financial instruments not measured
at fair value on a recurring basis include accounts receivable, net, accounts payable &ndash; trade, accrued liabilities, current
portion &ndash; long-term debt, accrued preferred dividends, other liabilities and long-term debt. With the exception of long-term
debt, the carrying amount approximates fair value because of the short maturity of these instruments as reported on the Company&rsquo;s
consolidated balance sheets as of September 30, 2013 and December 31, 2012. The carrying value of the long-term debt either has
a short period to maturity or bears interest at a variable rate and therefore is also considered to approximate fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">10.</TD><TD>EARNINGS PER SHARE.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following tables compute basic and
diluted earnings per share (in thousands, except per share data):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Loss<BR>Numerator</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Denominator</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Per-Share</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Amount</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: justify; padding-left: 10pt; text-indent: -10pt">Net loss attributed to Pacific Ethanol</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(4,971</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less: Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Basic and diluted loss per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Loss available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(5,290</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">13,177</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.40</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended September 30, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Loss<BR>Numerator</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Denominator</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Per-Share</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Amount</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: justify; padding-left: 10pt; text-indent: -10pt">Net loss attributed to Pacific Ethanol</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(5,971</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less: Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(319</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Basic and diluted loss per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Loss available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(6,290</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">7,712</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.82</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended September 30, 2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Loss<BR>Numerator</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Denominator</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Per-Share</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Amount</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: justify; padding-left: 10pt; text-indent: -10pt">Net loss attributed to Pacific Ethanol</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(9,374</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less: Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(946</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Basic and diluted loss per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Loss available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(10,320</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,380</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.91</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="text-align: center; border-bottom: Black 1pt solid">Nine Months Ended September 30, 2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">Loss<BR>Numerator</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Denominator</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Per-Share</P>
                                                                               <P STYLE="margin-top: 0; margin-bottom: 0">Amount</P></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: justify; padding-left: 10pt; text-indent: -10pt">Net loss attributed to Pacific Ethanol</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">(13,553</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: justify; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt">Less: Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(949</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">Basic and diluted loss per share:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; text-indent: -10pt; padding-left: 10pt">Loss available to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(14,502</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,414</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(2.26</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were an aggregate of 2,094,000 and
1,503,000 potentially dilutive weighted-average shares from convertible securities outstanding for the three and nine months ended
September 30, 2013, respectively. These convertible securities were not considered in calculating diluted net loss per share for
the three and nine months ended September 30, 2013, as their effect would have been anti-dilutive.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0%"></TD><TD STYLE="width: 0.25in">11.</TD><TD>RELATED PARTY TRANSACTIONS.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Preferred
Dividends</U></I><FONT STYLE="font: 10pt Times New Roman, Times, Serif"> &ndash; The Company accrues dividends quarterly
in respect of its Series B Preferred Stock. Since the beginning of 2012, the Company has paid these dividends quarterly in
cash. During 2009, 2010 and 2011, however, the Company accrued but did not pay dividends aggregating $7,315,000. Beginning in
2012, the Company has entered into a series of agreements with the parties to whom unpaid dividends were owed under which the
Company issued shares of its common stock in satisfaction of a portion of the accrued and unpaid dividends. In connection
with each payment of accrued and unpaid dividends, the payees agreed to forebear for a term from exercising any rights they
may have with the respect to accrued and unpaid dividends. The following table summarizes the details of the
Company&rsquo;s agreements with the holders of its Series B Preferred Stock:</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 82%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Agreement Date</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Amount of</P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0">Dividends Paid</P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares of Common</P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0">Stock Issued</P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Extended</P>
                                                                                      <P STYLE="margin-top: 0; margin-bottom: 0">Forbearance Date</P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 18%; text-indent: -1in; padding-left: 1in">August 12, 2012</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">732,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; text-align: right">157,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 18%; text-indent: -1in; padding-left: 1in">January 1, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>December 26, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">732,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">144,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">June 30, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">March 27, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">732,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">September 30, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">July 26, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">731,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">December 31, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; padding-bottom: 1pt; text-indent: -1in; padding-left: 1in"><U STYLE="text-decoration: none">September 17, 2013</U></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">731,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">197,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-decoration: none; padding-bottom: 1pt; text-indent: -1in; padding-left: 1in">March 31, 2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; padding-bottom: 2.5pt; padding-left: 10pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,658,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">812,500</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-decoration: none; padding-bottom: 2.5pt; text-indent: -1in; padding-left: 1in"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD></TD>
    <TD STYLE="padding-left: 5.4pt"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt; padding-bottom: 2.5pt">Accrued and unpaid dividends</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">3,657,000</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0; text-align: justify">The Company believes it has adequate liquidity to continue to pay quarterly dividends in cash for at least
the next twelve months. The Company may continue to pay down the balance of accrued and unpaid dividends in respect of its Series
B Preferred Stock by issuing additional shares of common stock. The Company does not believe that these contemplated dividend payments
in cash and stock will materially impact its liquidity. If the Company fails to make ongoing quarterly cash dividend payments,
it will be in default under the terms of its agreements with the holders of its Series B Preferred Stock and the holders&rsquo;
current forbearance through March 31, 2015 will be ineffective. The Company could experience a material adverse effect on its liquidity
if it is required to pay in cash the entire current balance of accrued and unpaid dividends; however, the Company believes such
an outcome is remote.</P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Note Payable to Related Party</U></I>
&ndash; The Company had a note payable to its Chief Executive Officer totaling $750,000 as of September 30, 2013 and December 31,
2012. On February 7, 2013, the maturity date was extended to March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">12. SUBSEQUENT EVENTS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Series B Notes</U></I> &ndash; From
October 1, 2013 through November 8, 2013, the Company processed a number of conversions in respect of the Series B Notes. In the
aggregate, the Company issued 773,000 shares of its common stock in payment of principal in an aggregate amount of $2,275,000 plus
interest in respect of the Series B Notes. As of November 8, 2013, the Series B Notes had an aggregate outstanding principal balance
of $250,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><I><U>Sugar Feedstock Purchase</U></I>
&ndash; On October 1, 2013, the Company purchased $6,900,000 of raw beet sugar to be used as feedstock over the next twelve months.
The Company paid $1,900,000 in cash and financed $5,000,000, which amount is to be repaid in weekly installments based on the amount
of sugar shipped to the Company with any remaining principal amount and accrued interest due and payable at maturity on September
30, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 2.
MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following discussion
and analysis should be read in conjunction with our consolidated financial statements and notes to consolidated financial statements
included elsewhere in this report. This report and our consolidated financial statements and notes to consolidated financial statements
contain forward-looking statements, which generally include the plans and objectives of management for future operations, including
plans and objectives relating to our future economic performance and our current beliefs regarding revenues we might generate and
profits we might earn if we are successful in implementing our business and growth strategies. The forward-looking statements and
associated risks may include, relate to or be qualified by other important factors, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">fluctuations in the market price of ethanol and its co-products;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">fluctuations in the costs of key production input commodities such as corn and natural gas;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">the projected growth or contraction in the ethanol and co-product markets in which we operate;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our strategies for expanding, maintaining or contracting our presence in these markets;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to successfully manage and operate third party ethanol production facilities;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">anticipated trends in our financial condition and results of operations; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.5pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">our ability to distinguish ourselves from our current and future competitors.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">You are cautioned not
to place undue reliance on any forward-looking statements, which speak only as of the date of this report, or in the case of a
document incorporated by reference, as of the date of that document. We do not undertake to update, revise or correct any forward-looking
statements, except as required by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Any of the factors described
immediately above, or referenced from time to time in our filings with the Securities and Exchange Commission or in the &ldquo;Risk
Factors&rdquo; section of our Annual Report on Form 10-K for the year ended December 31, 2012 could cause our financial results,
including our net income (loss) or growth in net income (loss) to differ materially from prior results, which in turn could, among
other things, cause the price of our common stock to fluctuate substantially.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Overview</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We are the leading marketer and producer
of low-carbon renewable fuels in the Western United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">We market all the ethanol
produced by the Pacific Ethanol Plants, all the ethanol produced by two other ethanol producers in the Western United States and
ethanol purchased from other third-party suppliers throughout the United States. We also market ethanol co-products for the Pacific
Ethanol Plants, including WDG. In addition, we began producing and selling corn oil at our Magic Valley plant in June 2013 and
at our Stockton plant in October 2013.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We have extensive customer relationships
throughout the Western United States. Our ethanol customers are integrated oil companies and gasoline marketers who blend ethanol
into gasoline. We arrange for transportation, storage and delivery of ethanol purchased by our customers through our agreements
with third-party service providers in the Western United States, primarily in California, Arizona, Nevada, Utah, Oregon, Colorado,
Idaho and Washington. Our WDG customers are dairies and feedlots located near the Pacific Ethanol Plants. Our corn oil customers
are poultry and biodiesel producers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We have extensive supplier relationships
throughout the Western and Midwestern United States. In some cases, we have marketing agreements with suppliers to market all of
the output of their facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We hold an 85% ownership interest in New
PE Holdco which indirectly owns the Pacific Ethanol Plants through its ownership of the Plant Owners. We operate and maintain the
Pacific Ethanol Plants under the terms of an asset management agreement with New PE Holdco and the Plant Owners. We also market
ethanol and WDG produced by the Pacific Ethanol Plants under the terms of separate marketing agreements with the Plant Owners whose
facilities are operational. In addition, we provide operations, maintenance and accounting services for a 250,000 gallon per year
cellulosic integrated biorefinery owned by ZeaChem Inc. in Boardman, Oregon, which is adjacent to the Pacific Ethanol Columbia
plant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The Pacific Ethanol Plants are comprised
of the four facilities described immediately below and have an aggregate annual production capacity of up to 200 million gallons.
Three of the facilities are currently operational and one of the facilities is currently idled. As market conditions change, we
may increase, decrease or idle production at one or more operational facilities or resume operations at any idled facility.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; border-bottom: Black 1pt solid">Facility Name</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Facility Location</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Estimated Annual Capacity<BR> (gallons)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Current Operating Status</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 24%; text-align: left; text-indent: -5.8pt; padding-left: 5.8pt">Magic Valley</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 24%; text-align: center; padding-left: 0.05in">Burley, ID</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD><TD STYLE="width: 21%; text-align: center">60,000,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 23%; text-align: center">Operating</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -5.8pt; padding-left: 5.8pt">Columbia</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center; padding-left: 0.05in">Boardman, OR</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">40,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Operating</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -5.8pt; padding-left: 5.8pt">Stockton</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center; padding-left: 0.05in">Stockton, CA</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">60,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Operating</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -5.75pt; padding-left: 5.75pt">Madera</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center; padding-left: 0.05in">Madera, CA</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="text-align: center">40,000,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Idled</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.15pt; text-align: justify">We earn fees as follows under our asset
management and other agreements with New PE Holdco and the Plant Owners:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.15pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">ethanol marketing fees of approximately 1% of the net sales price, but not less than $0.015 per gallon and not more than $0.0225
per gallon;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>corn procurement and handling fees of $0.045 per bushel;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">WDG fees of 5% of the third-party purchase price, but not less than $2.00 per ton and not more than $3.50 per ton; and</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 56.15pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">asset management fees of $75,000 per month for each operating facility and $40,000 per month for each idled facility.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">We intend to advance our position as the
leading marketer and producer of low-carbon renewable fuels in the Western United States, in part by expanding our relationships
with customers and third-party ethanol producers to market higher volumes of ethanol and by expanding the market for ethanol by
continuing to work with state governments to encourage the adoption of policies and standards that promote ethanol as a fuel additive
and transportation fuel. Further, we may seek to provide management services for other third-party ethanol production facilities
in the Western United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Current Initiatives and Outlook</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">Our ownership interest in the Pacific Ethanol Plants is now at 85%. At current production margins, the Pacific
Ethanol Plants are operating profitably and contributing positively to our overall financial position. During the third quarter,
our corn basis&mdash;a measure of the immediate cash price of delivered corn versus the future price of corn for Chicago delivery&mdash;was
uncommonly high in the regions in which we operate, resulting in a higher delivered cost of corn and therefore lower margins. As
of the filing of this report, corn basis has, however, returned to normal levels. Our fourth quarter is a seasonally slow quarter,
but we expect a balanced supply and demand for ethanol during the fourth quarter and ethanol blend rates at least at current levels
through 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">As noted above, we began producing and
selling corn oil at our Magic Valley and Stockton facilities in June 2013 and October 2013, respectively, allowing us to diversify
our revenue and providing immediate incremental gross profit. We began producing corn oil in nominal amounts at our Magic Valley
facility in the third quarter of 2013. We are currently producing corn oil in meaningful amounts at both facilities. We are evaluating
whether and when to implement corn oil production technology at the remaining two Pacific Ethanol Plants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">We continue to focus on increasing operating
efficiencies and improving yields at the Pacific Ethanol Plants. To this end, we installed yield-enhancing Cellunators<SUP>TM</SUP>
technology at our Stockton facility, allowing us to increase yields by increasing available starch for conversion. This technology
also may allow us to produce cellulosic corn ethanol.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">The regulatory environment continues to
support the long-term demand for renewable fuels. California&rsquo;s Low-Carbon Fuel Standard requires refiners to reduce the carbon
intensity of their fuels by 10% between 2011 and 2020, which we believe is an aggressive requirement that will necessitate a significant
amount of low-carbon fuel to displace gasoline in the California fuel supply. We continue to reduce energy use at the Pacific Ethanol
Plants to lower the carbon intensity of our ethanol. We believe that we have a significant advantage in the marketplace because
we produce among the lowest-carbon ethanol commercially produced in the United States which enables us to capture a premium for
ethanol we produce.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">We also continue to diversify our feedstock
by using a blend of corn, sorghum and soon raw beet sugar, which reduces feedstock costs and reduces the carbon output of ethanol
we produce. The United States Department of Agriculture anticipates a record 2013-2014 corn crop, but we are uncertain how the
new crop will affect our ethanol production and intend to operate the Pacific Ethanol Plants with flexibility in anticipation of
the new crop.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">Our strategic goals for the balance of
2013 and into 2014 include further improving operating efficiencies at the Pacific Ethanol Plants; continuing to diversify our
revenue and feedstock; and continuing to increase the value of our produced ethanol by further reducing its carbon intensity, all
of which are directed at supporting sustained profitable growth.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 38.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Critical Accounting Policies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The preparation of our
financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States
of America, requires us to make judgments and estimates that may have a significant impact upon the portrayal of our financial
condition and results of operations. We believe that of our significant accounting policies, the following require estimates and
assumptions that require complex, subjective judgments by management that can materially impact the portrayal of our financial
condition and results of operations: revenue recognition; consolidation of variable interest entity; warrants and convertible notes
carried at fair value; impairment of long-lived and intangible assets; and allowance for doubtful accounts. These significant accounting
principles are more fully described in &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of
Operations&mdash;Critical Accounting Policies&rdquo; in our Annual Report on Form 10-K for the year ended December 31, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Results of Operations</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">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 &ldquo;Management&rsquo;s Discussion and Analysis of Financial
Condition and Results of Operations&rdquo; contained in this report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Certain performance metrics
that we believe are important indicators of our results of operations include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Three Months Ended</P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0">September 30,</P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Percentage</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><B>Nine Months Ended<BR>September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center"><B>Percentage</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Variance</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Variance</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt; width: 40%">Production gallons sold (in millions)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">37.1</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">33.5</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">10.7</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">109.2</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">106.0</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">3.0</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Third party gallons sold (in millions)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67.8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">73.8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8.1</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">197.7</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">232.7</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(15.0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Total gallons sold (in millions)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">104.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">107.3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2.2</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">306.9</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">338.7</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(9.4</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Average sales price per gallon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.62</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.65</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1.1</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.67</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.43</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9.9</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Corn cost per bushel &ndash; CBOT equivalent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.02</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.72</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(35.0</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.22</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.73</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7.6</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Average basis</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2.42</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.17</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">106.8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.68</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.09</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">54.1</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Average delivered cost of corn</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.44</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">8.89</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16.3</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.90</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.82</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Co-product revenues as % of delivered cost of corn</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29.2</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27.1</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.7</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28.3</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26.2</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Average CBOT ethanol price per gallon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.23</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.51</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(11.2</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.39</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2.29</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4.4</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt">Average CBOT corn price per bushel</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5.14</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7.83</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(34.4</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.29</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6.81</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7.6</TD><TD STYLE="text-align: left">)%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Net Sales, Cost
of Goods Sold and Gross Profit (Loss)</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">The following table
presents our net sales, cost of goods sold and gross profit (loss) in dollars and gross profit (loss) as a percentage of net sales
(in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.15pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Three Months Ended September 30, </B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Variance in</B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Nine Months Ended September 30,</B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Variance in</B></FONT></TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2013</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2012</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Dollars</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Percent</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2013</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>2012</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Dollars</B></FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Percent</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #E9E4E4">
    <TD STYLE="padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Net sales</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">233,880</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">215,860</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">18,020</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">8.3</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">%</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">693,147</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">619,026</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">74,121</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 6%; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12.0</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Cost of goods sold</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">230,357</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">218,300</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">12,057</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5.5</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">681,813</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">633,843</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">47,970</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7.6</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #E9E4E4">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Gross profit (loss)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3,523</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(2,440</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5,963</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"></TD>
    <TD STYLE="border-bottom: black 2.25pt double">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">NM</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></P></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">11,334</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(14,817</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">26,151</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">NM</P></TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>Percentage of net sales</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>1.5</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>(1.1</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I></I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>1.6</I></FONT></TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>(2.4</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Net Sales</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The increase in our net
sales for the three and nine months ended September 30, 2013 as compared to the same periods in 2012 was due to an increase in
our production gallons sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Our average
sales price per gallon decreased 1% to $2.62 and increased 10% to $2.67 for the three and nine months ended September 30,
2013 from average sales prices per gallon of $2.65 and $2.43 for the same periods in 2012, respectively. The decrease in our
average sales price per gallon for the three months ended September 30, 2013 was primarily due to lower ethanol prices in the
overall market, slightly offset by premiums received in the California market due to California&rsquo;s Low-Carbon Fuel
Standard, which we believe allows us to capture a premium for ethanol we produce and sell within California.  The
increased in our average sales price for the nine months ended September 30, 2013, was primarily related to higher ethanol
prices in the overall ethanol market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Our total volume of ethanol
gallons sold decreased by 2.4 million gallons, or 2%, to 104.9 million gallons and by 31.8 million gallons, or 9%, to 306.9 million
gallons for the three and nine months ended September 30, 2013 as compared to 107.3 million gallons and 338.7 million gallons for
the same periods in 2012, respectively. The overall decrease in our total volume of ethanol gallons sold is primarily attributable
to a reduction in gallons sold through our third-party ethanol marketing arrangements, predominantly due to the expiration without
renewal in May 2013 of our prior marketing arrangement with Front Range Energy, LLC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><I>Cost of Goods Sold and Gross Profit (Loss)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Our gross margin increased to a positive
1.5% for the three months ended September 30, 2013 from a negative 1.1% for the same period in 2012. Our gross profit (loss) increased
to $3.5 million for the three months ended September 30, 2013 from a loss of $2.4 million for the same period in 2012. Our gross
margin increased to positive 1.6% for the nine months ended September 30, 2013 from negative 2.4% for the same period in 2012.
Our gross profit (loss) increased to $11.3 million for the nine months ended September 30, 2013 from a loss of $14.8 million for
the same period in 2012. The increases in our gross margin and our gross profit for these periods were primarily due to significantly
improved crush and commodity margins and higher production yields. Crush and commodity margins reflect ethanol and co-product sales
prices relative to ethanol production inputs such as corn and natural gas.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Gross profit for the three and nine months ended September 30, 2013,
was tempered by uncommonly high corn basis in the regions in which we operate and related derivative losses. Corn basis represents
the difference between the immediate cash price of delivered corn and the future price of corn for Chicago delivery. During the
three months ended September 30, 2013, there was a significant drop in future corn prices in anticipation of a large corn harvest.
The market concurrently experienced a sharp increase in corn basis in response to actual tightness in present corn supplies. Our
basis costs are a combination of corn basis at various Midwest corn origination points, plus freight costs for delivery to our
plants in the Western United States. Corn buyers industry wide also experienced historically high corn basis when purchasing corn
for immediate delivery.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Selling, General
and Administrative Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our selling, general and administrative expenses, or SG&amp;A, in dollars and as a percentage of net sales (in thousands,
except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="text-align: center"><B>&nbsp;</B></TD><TD STYLE="text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="text-align: center"><B>&nbsp;</B></TD><TD STYLE="text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; width: 26%; text-indent: -10pt">Selling, general and administrative expenses</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2,511</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2,898</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(387</TD><TD STYLE="width: 1%">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(13.4</TD><TD STYLE="width: 1%">)%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">9,649</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">9,400</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">249</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2.6</TD><TD STYLE="width: 1%">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.1</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.3</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>1.4</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>1.5</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Our SG&amp;A decreased as a percentage of
net sales for the three and nine months ended September 30, 2013 as compared to the same periods in 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Our SG&amp;A decreased $0.4 million to $2.5
million for the three months ended September 30, 2013 as compared to $2.9 million for the same period in 2012. The decrease in
SG&amp;A is primarily due to the following factors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a decrease in lease expense of $0.3 million due to the expiration of certain lease agreements; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a decrease in payroll and compensation of $0.3 million due to lower administrative head count.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">These decreases were partially offset by
an increase in noncash compensation expenses of $0.2 million due to restricted stock and option awards to our employees and members
of our board of directors during the period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Our SG&amp;A increased $0.2 million to $9.6
million for the nine months ended September 30, 2013 as compared to $9.4 million for the same period in 2012. The increase in SG&amp;A
is primarily due to the following factors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">an increase in professional fees of $0.5 million due to non-capitalized expenses associated with the issuance of our senior
unsecured notes in January 2013;</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">an increase in other professional fees of $0.2 million due to expenses related to our special meeting of stockholders in May
2013; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">an increase in noncash compensation expenses of $0.6 million due to restricted stock and option awards to our employees and
members of our board of directors during the period.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">These increases were partially offset by:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">a decrease in lease expense of $0.5 million due to the expiration of certain lease agreements; and</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">a decrease in payroll and compensation of $0.5 million due to lower administrative head count.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.25in"><B><I>Fair Value Adjustments
and Warrant Inducements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our fair value adjustments and warrant inducements in dollars and as a percentage of net sales (in thousands, except
percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt">Fair value adjustments and warrant inducements</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">762</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(900</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,662</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">NM</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,507</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">352</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,155</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">328.1</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.3</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">(0.4</TD><TD STYLE="font-style: italic; text-align: left">)%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.2</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.1</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">We have issued
warrants in various financing transactions since 2010. These warrants were recorded at fair value. We adjusted the fair values
of the warrants and recorded aggregate adjustments reflecting gains of $0.8 million and losses of $0.9 million for the three months
ended September 30, 2013 and 2012, respectively. We adjusted the fair values of the warrants and recorded aggregate adjustments
reflecting gains of $2.3 million and $0.4 million for the nine months ended September 30, 2013 and 2012, respectively. These changes
were primarily due to changes in our stock price as compared to the beginning of those periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">In addition, for the
nine months ended September 30, 2013, we paid $0.8 million in cash to holders of certain warrants to induce the warrant holders
to exercise their warrants. The warrants had higher exercise prices than our stock price at the time. We recorded the $0.8 million
payment as an additional expense.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Interest Expense,
net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our interest expense, net in dollars and as a percentage of net sales (in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Interest expense, net</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">4,530</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">3,378</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,152</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">34.1</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">11,983</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">9,380</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2,603</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">27.8</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.9</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.6</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>1.7</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>1.5</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Interest expense, net
increased by $1.1 million to $4.5 million for the three months ended September 30, 2013 from $3.4 million for the same period in
2012. Interest expense, net increased by $2.6 million to $12.0 million for the nine months ended September 30, 2013 from $9.4 million
for the same period in 2012. The increase in interest expense, net for these periods is primarily due to increased average debt
balances, in part resulting from the issuance of our senior unsecured notes in January 2013 and our convertible notes in March
and June 2013. Proceeds from these issuances were used to repay certain higher interest rate bearing debt, reducing consolidated
interest expense, which, however, was partially offset by an increase in amortization of debt discounts resulting from these issuances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Loss on Extinguishments
of Debt</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table presents
our loss on extinguishments of debt in dollars and as a percentage of net sales (in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Loss on extinguishments of debt</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2,573</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">2,573</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">NM</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,795</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,795</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">NM</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.1</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.3</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&ndash;</TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">For the nine months
ended September 30, 2013, we extinguished New PE Holdco debt by paying $1.8 million in cash less than the amount of the debt, and
as such, recorded a gain on extinguishment of debt in an equivalent amount. Further, for the three and nine months ended September
30, 2013 we recorded losses of $2.6 and $3.6 million, respectively, related to conversions of our convertible notes into shares
of our common stock at a discount to prevailing market prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Other Expense,
net</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our other expense, net in dollars and as a percentage of net sales (in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Other expense, net</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">106</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">105</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1.0</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">321</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">499</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(178</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(35.7</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.0</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.0</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.0</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.1</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Other expense, net remained
flat for the three months ended September 30, 2013 compared to the same period in 2012. Other expense, net decreased by $0.2 million
to $0.3 million for the nine months ended September 30, 2013 from $0.5 million for the same period in 2012. The decreases in other
expense, net for these periods are primarily due to reductions in bank fees related to the Plant Owners&rsquo; debt.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Net Loss Attributed to Noncontrolling
Interest in Variable Interest Entity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table presents
the portion of our net loss attributed to noncontrolling interest in variable interest entity in dollars and as a percentage of
net sales (in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Net loss attributed to noncontrolling interest in variable interest entity</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">464</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">3,750</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(3,286</TD><TD STYLE="width: 1%">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(87.6</TD><TD STYLE="width: 1%">)%</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,533</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">20,191</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(18,658</TD><TD STYLE="width: 1%">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(92.4</TD><TD STYLE="width: 1%">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.2</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">1.7</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic"></TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.2</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>3.3</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Net loss attributed to
noncontrolling interest in variable interest entity relates to our consolidated treatment of New PE Holdco, a variable interest
entity. For the three and nine months ended September 30, 2013 and 2012, we consolidated the entire income statement of New PE
Holdco. However, because we owned only 85% and 67% of New PE Holdco for the three months ended September 30, 2013 and 2012, respectively,
we reduced our consolidated net loss for the noncontrolling interest, which was the ownership interest that we did not own. The
decreases in net loss for the periods are due to the increase in our ownership interest in New PE Holdco and caused by the substantial
increases in our gross profit for the periods, as discussed above, much of which was generated at the Pacific Ethanol Plant level.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Net Loss Attributed
to Pacific Ethanol</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our net loss attributed to Pacific Ethanol in dollars and as a percentage of net sales (in thousands, except percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Net loss attributed to Pacific Ethanol</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(4,971</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(5,971</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">1,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(16.7</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)%</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(9,374</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(13,553</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">4,179</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(30.8</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">(2.1</TD><TD STYLE="font-style: italic; text-align: left">)%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">(2.8</TD><TD STYLE="font-style: italic; text-align: left">)%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>(1.4</I></TD><TD STYLE="text-align: left"><I>)%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>(2.2</I></TD><TD STYLE="text-align: left"><I>)%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Net loss attributed to
Pacific Ethanol improved during the three and nine months ended September 30, 2013 as compared to the same periods in 2012, primarily
due to the substantial increases in our gross profit for the periods, as discussed above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt"><B><I>Preferred Stock
Dividends and Loss Available to Common Stockholders</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 16.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The following table
presents our Series B Cumulative Convertible Preferred Stock, or Series B Preferred Stock, dividends in dollars and as a percentage
of net sales, and our loss available to common stockholders in dollars and as a percentage of net sales (in thousands, except
percentages):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt; padding-left: 10pt; text-indent: -10pt"><P STYLE="margin-top: 0; margin-bottom: 0"></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>Three
                                                                                                  Months Ended</B></P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0; text-align: center"><B>September
                                                                                30,</B></P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center"><B>&nbsp;</B></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Nine Months Ended<BR> September 30,</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center"><B>&nbsp;</B></TD>
    <TD COLSPAN="6" STYLE="border-bottom: Black 1pt solid; text-align: center"><B>Variance in</B></TD><TD STYLE="padding-bottom: 1pt; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center; padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Dollars</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Percent</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt; width: 26%; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Preferred stock dividends&#9;</FONT></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">319</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">319</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">&ndash;</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">%</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">946</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">949</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left"></TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(3</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="width: 6%; border-bottom: Black 2.5pt double; text-align: right">(0.3</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 20pt">Percentage of net sales</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.1</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right">0.1</TD><TD STYLE="font-style: italic; text-align: left">%</TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD STYLE="font-style: italic">&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: left">&nbsp;</TD><TD STYLE="font-style: italic; text-align: right"></TD><TD STYLE="font-style: italic; text-align: left"></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.1</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><I>0.2</I></TD><TD STYLE="text-align: left"><I>%</I></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>

<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt"><FONT STYLE="font-size: 10pt">Loss available to common stockholders&#9;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(5,290</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(6,290</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1,000</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(15.9</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)%</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(10,320</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">(14,502</TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">$</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4,182</FONT></TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(28.8</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">)%</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 20pt; text-indent: -10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>Percentage of net sales</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>(2.3</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>(2.9</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>(1.5</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(<I>2.3</I></FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><I>)%</I></FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Shares of our Series B
Preferred Stock are entitled to quarterly cumulative dividends payable in arrears in an amount equal to 7% per annum of the purchase
price per share of the Series B Preferred Stock. We accrued and paid cash dividends on our Series B Preferred Stock in the aggregate
amount of $0.3 million for the three months ended September 30, 2013 and 2012, and $0.9 million for the nine months ended September
30, 2013 and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 33pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Liquidity and Capital Resources</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">During the nine months ended September 30,
2013, we funded our operations primarily from cash flow from operations, cash on hand, borrowings under our credit facilities and
various capital raising transactions in which we raised net proceeds of $36.7 million through the issuance of senior unsecured
notes, unsecured subordinated convertible notes and in connection with the exercise of warrants. These funds were used to fund
our operations, purchase Pacific Ethanol Plant debt of $27.1 million, make other debt related payments of $13.9 million and purchase
additional ownership interests in New PE Holdco for $1.8 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Our current available capital resources
consist of cash on hand and amounts available for borrowing under Kinergy&rsquo;s credit facility. In addition, the Plant Owners
have credit facilities for use in the operations of the Pacific Ethanol Plants. We expect that our future available capital resources
will consist primarily of our remaining cash balances, amounts available for borrowing, if any, under Kinergy&rsquo;s credit facility,
cash generated from Kinergy&rsquo;s ethanol marketing business, fees paid under our asset management agreement relating to our
operation of the Pacific Ethanol Plants and distributions, if any, in respect of our ownership interest in New PE Holdco.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">We believe that current
and future available capital resources, revenues generated from operations, and other existing sources of liquidity, including
our credit facilities, will be adequate to meet our anticipated working capital and capital expenditure requirements for at least
the next twelve months. If, however, our capital requirements or cash flow vary materially from our current projections, if crush
and commodity margins, which reflect ethanol and co-product sales prices relative to ethanol production inputs such as corn and
natural gas, decline in any material respect, or if other unforeseen circumstances occur, we may require additional financing.
We also may require additional capital to restart our Madera, California facility. Our failure to raise capital, if and when needed,
could restrict our growth or hinder our ability to compete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.15pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.25in"><I>Quantitative Quarter-End
Liquidity Status</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">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 &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results
of Operations&rdquo; contained in this report (dollars in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">September 30, 2013</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2012</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Variance</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 49%; text-align: left; padding-left: 1.45pt">Cash and cash equivalents&#9;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">9,175</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">7,586</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">20.9</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Current assets&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">63,274</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">57,432</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10.2</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Current liabilities&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">19,039</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12,415</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">53.4</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Current portion &ndash; long-term debt&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,133</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,029</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(47.1</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Notes payable, noncurrent portion&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">108,834</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">117,253</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7.2</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Total liabilities of variable interest entity&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">119,509</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">105,315</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Working capital&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">44,235</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">45,017</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1.7</TD><TD STYLE="text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 1.45pt">Working capital ratio&#9;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.32</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.63</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(28.3</TD><TD STYLE="text-align: left">)%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><I>Change in Working Capital and Cash Flows</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Working capital decreased to $44.2 million
at September 30, 2013 from $45.0 million at December&nbsp;31, 2012 primarily as a result of an increase in current liabilities
of $6.6 million, which was partially offset by an increase in current assets of $5.8 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Current assets increased
primarily due to increases in prepaid inventory of $5.8 million, cash of $1.6 million and accounts receivable, net of $1.1 million,
all of which were associated with higher net sales for the period, which were partially offset by decreases in inventories of
$2.5 million. Current liabilities increased primarily due to increases in current portion of capital leases of $5.1 million associated
with our implementation of corn oil separation technology, and trade accounts payable of $3.5 million, which was associated with
higher net sales for the period, partially offset by a decrease in current portion of long-term debt of $1.9 million due to our
repayment of long-term debt during the period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Cash provided by operating activities of
$4.9 million resulted primarily from a consolidated net loss of $10.9 million, depreciation and amortization of $9.0 million, interest
expense added to the Plant Owners&rsquo; debt of $4.7 million, an increase in accounts payable and accrued expenses of $3.1 million,
loss on extinguishments of debt of $1.8 million, amortization of deferred financing fees of $1.6 million and a decrease in inventories
of $2.5 million , partially offset by fair value adjustments and warrant inducements of $2.3 million, increases in prepaid inventory
of $5.8 million, prepaid expenses and other assets of $1.7 million and accounts receivable of $1.3 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Cash used in investing activities of $3.8
million resulted primarily from additions to property and equipment of $1.9 million and purchases of additional New PE Holdco ownership
interests for $1.8 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Cash provided by financing activities of
$0.5 million resulted from proceeds from the issuance of senior unsecured notes and convertible notes in the aggregate of $36.2
million, proceeds from exercises of warrants of $2.1 million and proceeds from borrowings of $5.0 million, partially offset by
purchases of the Plant Owners&rsquo; debt of $25.3 million, principal payments on senior unsecured notes and the Plant Owners&rsquo;
borrowings of $13.9 million, debt issuance costs of $1.6 million, cash payment of dividends in respect of our Series B Preferred
Stock of $0.9 million and capital lease payments of $0.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Kinergy Operating Line of Credit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Kinergy maintains an operating line of credit
for an aggregate amount of up to $30.0 million, with an optional accordion feature for up to an additional $10.0 million. The credit
facility expires on December 31, 2015. Interest accrues under the credit facility at a rate equal to (i)&nbsp;the three-month London
Interbank Offered Rate (&ldquo;LIBOR&rdquo;), plus (ii) a specified applicable margin ranging between 2.50% and 3.50%. The credit
facility&rsquo;s monthly unused line fee is 0.50% of the amount by which the maximum credit under the facility exceeds the average
daily principal balance. Payments that may be made by Kinergy to Pacific Ethanol as reimbursement for management and other services
provided by Pacific Ethanol to Kinergy are limited under the terms of the credit facility to $0.9 million per fiscal quarter in
2013, $1.0 million per fiscal quarter in 2014 and $1.1 million per fiscal quarter in 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The credit facility also includes the accounts
receivable of PAP, one of our indirect wholly-owned subsidiaries, as additional collateral. Payments that may be made by PAP to
Pacific Ethanol as reimbursement for management and other services provided by Pacific Ethanol to PAP are limited under the terms
of the credit facility to the extent that quarterly payments would result in PAP recording less than $0.1 million of net income
in the quarter.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Kinergy and PAP are collectively required
to generate aggregate earnings before interest, taxes, depreciation and amortization, or EBITDA, of $450,000 for each calendar
quarter and aggregate EBITDA of $1.1 million for each two consecutive calendar quarters. These amounts are required through December
31, 2013. In 2014, the required EBITDA amounts increase to $0.5 million per calendar quarter and $1.3 million for each two consecutive
calendar quarters. Further, for all monthly periods, Kinergy and PAP must collectively maintain a fixed charge coverage ratio (calculated
as a twelve-month rolling EBITDA 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 2.0 and are prohibited from
incurring any additional indebtedness (other than specific intercompany indebtedness) or making any capital expenditures in excess
of $0.1 million absent the lender&rsquo;s prior consent. Kinergy and PAP&rsquo;s obligations under the credit facility are secured
by a first-priority security interest in all of their assets in favor of the lender.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The following table summarizes Kinergy&rsquo;s
financial covenants and actual results for the periods presented (dollars in thousands):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Three Months Ended<BR> September 30,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="text-align: center; border-bottom: Black 1pt solid">Years Ended<BR> December 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2013</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2012</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="width: 32%; padding-left: 10pt; text-indent: -10pt">EBITDA Requirement &ndash; Three Months</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">450</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">450</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 13%; text-align: right">450</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 13%; text-align: right">N/A</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">879</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,117</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,165</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">429</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,667</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">715</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">N/A</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">EBITDA Requirement &ndash; Six Months</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,100</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">800</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,111</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,047</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">3,282</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">858</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,011</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,947</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,182</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">58</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; padding-left: 10pt; text-indent: -10pt">Fixed Charge Coverage Ratio Requirement</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Actual</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.53</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.63</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.26</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="padding-left: 10pt; text-indent: -10pt">Excess</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13.53</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.63</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.26</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Pacific Ethanol has guaranteed all of Kinergy&rsquo;s
obligations under the credit facility. As of September 30, 2013, Kinergy had an available borrowing base under the credit facility
of $5.5 million and an outstanding balance of $19.1 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Plant Owners&rsquo; Term Debt and
Operating Lines of Credit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The Plant Owners&rsquo;
debt as of September 30, 2013 consisted of a $33.3 million tranche A-1 term loan, a $26.3 million tranche A-2 term loan and a $42.4
million revolving credit facility. The term and revolving debt require monthly interest payments at a floating rate equal to the
three-month LIBOR or the Prime Rate of interest, at the Plant Owners&rsquo; election, plus 10.0%. At September 30, 2013, the interest
rate was approximately 13.25%. Repayments of principal are based on available free cash flow of the Plant Owners, until maturity,
when all principal amounts are due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">From July 13, 2012 through
March 31, 2013, the Plant Owners entered into transactions which amended the term and revolving debt and extended the maturity
dates of the combined term loans and revolving debt from June 25, 2013 to June 30, 2016.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Monthly interest payments
due to certain lenders on both the term and revolving debt was deferred and added to the principal amount of the loans. As of September
30, 2013, the extended principal balances above included $8.3 million of accrued interest that was deferred by the Plant Owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">On October 29, 2012,
the Plant Owners entered into a new revolving credit facility that provides for up to an additional $10.0 million. The Plant Owners
may request increases in the amount of the facility in increments of not less than $1.0 million, up to a maximum additional credit
limit of $5.0 million. The Plant Owners have the right at any time, and from time to time, but subject to limitations imposed by
an intercreditor agreement, to prepay in whole or in part the revolving loans and tranche A-1 loans (and the tranche A-2 loans
following the payment in full of the revolving loans and tranche A-1 loans). However, in the event of any prepayment of the tranche
A-1 loans that have a maturity date of June 30, 2016, the Plant Owners must pay a premium equal to the present value of all interest
payments that would have accrued from the date of such payment through June 30, 2016, calculated using a discount rate, applied
quarterly, equal to the Treasury Rate as of such prepayment date plus 50 basis points. The credit agreement also provides for mandatory
prepayments in connection with certain customary events, including any sale of material assets; however, certain mandatory prepayments
are not subject to the prepayment premium. On January 4, 2013, the Plant Owners entered into an amendment to the new revolving
credit facility and extended the maturity date of the facility from June 25, 2013 to June 25, 2015. On March 28, 2013, the lenders
approved $5.0 million in additional availability for a maximum total credit limit of $15.0 million under the facility. As of September
30, 2013, the Plant Owners had unused availability under the new revolving credit facility of $8.0 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">All of the term loans and revolving credit
facilities represent permanent financing and are secured by a perfected, first-priority security interest in all of the assets,
including inventories and all rights, title and interest in all tangible and intangible assets, of the Plant Owners. The Plant
Owners&rsquo; creditors do not have recourse to Pacific Ethanol, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><B><I>Pacific Ethanol Debt</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><I>Senior Unsecured Notes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">On January 11, 2013 we
issued and sold $22.2 million in aggregate principal amount of senior unsecured notes, or January 2013 Notes, and warrants to purchase
an aggregate of 1.7 million shares of our common stock for aggregate net proceeds of $22.1 million. The warrants have an exercise
price of $6.60 per share and expire in January 2018.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">If we issue equity or
equity-linked securities, receive interest from any purchased and outstanding Plant Owners&rsquo; term debt, conduct certain sales
of assets or incur certain indebtedness, then we will be obligated to prepay the January notes using all net cash proceeds from
the transaction, provided that any net proceeds received in connection with an equity-linked issuance must be used to either prepay
the notes or purchase certain outstanding debt issued by the Plant Owners. Interest on the notes is payable in cash in arrears
on the fifteenth day of each month beginning on March 15, 2013. Subject to the satisfaction of certain equity conditions, at our
option, we may elect to pay interest due and payable in shares of our common stock, provided that the interest rate applicable
to any outstanding amounts we pay in shares of common stock will increase by 2% per annum from the then applicable interest rate
for the period for which such interest is paid. The number of shares to be issued for any particular interest payment equals the
quotient of (x) the amount of interest payable (assuming payment in shares), divided by (y) the product of (i) the weighted average
price of our common stock for the thirty trading days immediately preceding (but excluding) the payment due date, and (ii) 0.95.
During the nine months ended September 30, 2013, we made principal payments on our January 2013 Notes of $5.3 million. In addition,
we purchased $3.5 million in certain outstanding debt issued by the Plant Owners.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The January 2013 Notes mature on March 30, 2016 and bear interest
at a rate of 5% per annum, subject to adjustment. As of the filing of this report, we have repaid certain amounts and purchased
outstanding debt issued by the Plant Owners in the aggregate principal amount of $8.8 million. If, by January 15, 2014, the principal
balance of the January 2013 Notes is not less than $14.3 million, the interest rate will increase commencing on January 15, 2014
by 1% per annum on each of January 15, April 15, July 15 and October 15 until the aggregate outstanding principal balance is less
than $14.3 million. Payments due under the January 2013 Notes rank senior to all of our other indebtedness, including the indebtedness
of our subsidiaries, other than certain permitted senior indebtedness.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">As of September 30,
2013, the aggregate outstanding principle balance of the January 2013 Notes was $16.9 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"><I>Series A and B Notes</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">On March 28, 2013, we
issued $6.0 million in Series A Subordinated Convertible Notes, or Series A Notes, and warrants to purchase an aggregate of 1.8
million shares of our common stock for aggregate gross proceeds of $6.0 million. The warrants have an exercise price of $7.70 per
share. Of the warrants issued in the transaction, warrants to purchase 0.8 million shares of common stock expire in March 2015
and warrants to purchase 1.0 million shares of common stock expire in June 2015. On June 21, 2013, we issued $8.0 million in Series
B Subordinated Convertible Notes, or Series B Notes, for aggregate gross proceeds of $8.0 million. We raised aggregate net proceeds
from these offerings of $12.6 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Unless converted or redeemed
earlier, the Series B Notes will mature on March 28, 2014. The Series B Notes bear interest at 5%&nbsp;per annum, compounded monthly.
All amounts due under the Series B Notes are convertible at any time, in whole or in part, at the option of the holders into shares
of our common stock at a conversion price, or Fixed Conversion Price, which is subject to adjustment as described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">The Series B Notes were
initially convertible into shares of our common stock at the initial Fixed Conversion Price of $15.00 per share. If we sell or
issue any securities with &ldquo;floating&rdquo; conversion prices based on the market price of our common stock, the holder of
a Series B Note will have the right thereafter to substitute the &ldquo;floating&rdquo; conversion price for the Fixed Conversion
Price upon conversion of all or part of the Series B Note.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Amortization payments, together with accrued
and unpaid interest on the Series B Notes, are payable on monthly installment dates. On or prior to the tenth calendar day before
each installment date, we are required to deliver a notice electing to effect a redemption in cash or a conversion of the installment
amount due on the installment date into shares of our common stock. Our ability to pay an installment amount in shares of our common
stock is subject to numerous equity conditions, the failure of any of which, unless waived, will require that we pay an installment
amount solely in cash. On the applicable installment date, we are required to deliver to the holders of the Series B Notes an amount
of shares of common stock equal to that portion of the installment amount being converted divided by the lesser of the then existing
Fixed Conversion Price and 85% of the Market Price on the installment date, or Company Conversion Price. The &ldquo;Market Price&rdquo;
on any given date is equal to the lesser of (i) the volume weighted average price on the trading day immediately preceding the
date of determination, and (ii) the average of the three lowest volume weighted average prices during the ten trading day period
ending on the trading day immediately prior to the date of determination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The holder of a Series B Note may, at the
holder&rsquo;s election by giving notice to us, defer the payment of the installment amount due on any installment date to another
installment date, in which case the amount deferred will become part of the subsequent installment date and will continue to accrue
interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">On any day during the period commencing
on an installment date and ending on the trading day prior to the next installment date, the holder of a Series B Note may, at
its election, convert the installment amounts due on up to four future installment dates at the Company Conversion Price in effect
on the current installment date, provided that if we had elected to convert the installment amount due on the current installment
date, the holder may only convert up to three future installment amounts. Upon the occurrence of certain events of default, there
will be no limitation on the number of installment amounts that the holder may accelerate and the Company Conversion Price applicable
to conversions made pursuant to this acceleration feature will equal the lesser of (i) the Company Conversion Price on the current
installment date, (ii) 85% of the Market Price (as defined below), and (iii) the Fixed Conversion Price then in effect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">As of September 30, 2013, the Series A Notes
were fully retired and the aggregate outstanding principal balance of the Series B Notes was $2.5 million.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify"><B><I>Note Payable to Related Party</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We have a note payable to our Chief Executive
Officer totaling $0.8 million that matures on March 31, 2014.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify"><B><I>Series B Preferred Stock Dividends</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We accrue
dividends quarterly in respect of our Series B Preferred Stock. Since the beginning of 2012, we have paid these dividends
quarterly in cash. During 2009, 2010 and 2011, however, we accrued but did not pay dividends aggregating $7.3 million.
Beginning in 2012, we entered into a series of agreements with the parties to whom unpaid dividends were owed under which we
issued shares of our common stock in satisfaction of a portion of the accrued and unpaid dividends. In connection with each
payment of accrued and unpaid dividends, the payees agreed to forebear for a term from exercising any
rights they may have with the respect to accrued and unpaid dividends. The following table summarizes the details of our
agreements with the holders of our Series B Preferred Stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="border-collapse: collapse; width: 82%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Agreement Date</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Amount of</P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0">Dividends Paid</P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Shares of Common</P>
                                                                                <P STYLE="margin-top: 0; margin-bottom: 0">Stock Issued</P></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><P STYLE="margin-top: 0; margin-bottom: 0">Extended</P>
                                                                                      <P STYLE="margin-top: 0; margin-bottom: 0">Forbearance Date</P></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 18%; text-indent: -1in; padding-left: 1in">August 12, 2012</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">732,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; text-align: right">157,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 18%; text-indent: -1in; padding-left: 1in">January 1, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD>December 26, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">732,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">144,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">June 30, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -1in; padding-left: 1in">March 27, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">732,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">139,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">September 30, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-indent: -1in; padding-left: 1in">July 26, 2013</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">731,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">175,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in">December 31, 2014</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-decoration: none; padding-bottom: 1pt; text-indent: -1in; padding-left: 1in"><U STYLE="text-decoration: none">September 17, 2013</U></TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">731,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">197,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-decoration: none; padding-bottom: 1pt; text-indent: -1in; padding-left: 1in">March 31, 2015</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-decoration: none; padding-bottom: 2.5pt; padding-left: 10pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,658,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">812,500</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="text-decoration: none; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-decoration: none; padding-bottom: 2.5pt; text-indent: -1in; padding-left: 1in"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 5.4pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD></TD>
    <TD STYLE="padding-left: 5.4pt"></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 10pt; padding-bottom: 2.5pt">Accrued and unpaid dividends</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; border-bottom: Black 2.5pt double">$</TD><TD STYLE="text-align: right; border-bottom: Black 2.5pt double">3,657,000</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left; padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-indent: -1in; padding-left: 1in; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We believe we have adequate liquidity to continue to pay quarterly
dividends in cash for at least the next twelve months. We may continue to pay down the balance of accrued and unpaid dividends
in respect of our Series B Preferred Stock by issuing additional shares of common stock. We do not believe that these contemplated
dividend payments in cash and stock will materially impact our liquidity. If we fail to make ongoing quarterly cash dividend payments,
we will be in default under the terms of our agreements with the holders of our Series B Preferred Stock and the holders&rsquo;
current forbearance through March 31, 2015 will be ineffective. We could experience a material adverse effect on our liquidity
if we are required to pay in cash the entire current balance of accrued and unpaid dividends; however, we believe such an outcome
is remote.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Effects of Inflation</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">The impact of inflation
was not significant to our financial condition or results of operations for the three and nine months ended September 30, 2013
and 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Impact of New Accounting Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; background-color: white">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 3.&#9;QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Not applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 4.&#9;CONTROLS AND
PROCEDURES.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -19.5pt"><FONT STYLE="font-weight: normal">Evaluation
of Disclosure Controls and Procedures</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -19.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">We conducted an evaluation
under the supervision and with the participation of our management, including our Chief Executive Officer and <FONT STYLE="color: black">Chief
Financial Officer,</FONT> of the effectiveness of the design and operation of our disclosure controls and procedures. The term
&ldquo;disclosure controls and procedures,&rdquo; as defined in Rules 13a-15(e) 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&rsquo;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&rsquo;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 September 30, 2013 that our disclosure controls and procedures were effective
at a reasonable assurance level.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -19.5pt"><FONT STYLE="font-weight: normal">Changes
in Internal Control over Financial Reporting</FONT></P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -19.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">There were no changes during the most recently
completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22.3pt">&nbsp;</P>

<P STYLE="font: italic 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -19.5pt"><I>Inherent Limitations on the Effectiveness
of Controls</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 22pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">PART II - OTHER INFORMATION</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 1.&#9;LEGAL PROCEEDINGS.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">On May 24, 2013, GS CleanTech
Corporation (&ldquo;GS CleanTech&rdquo;), filed a suit in the United States District Court for the Eastern District of California,
Sacramento Division (Case No.: 2:13-CV-01042-JAM-AC), naming Pacific Ethanol, Inc. as a defendant. The suit alleges infringement
of a patent assigned to GS CleanTech by virtue of certain corn oil separation technology in use at one or more of the ethanol production
facilities in which we have an interest, including Pacific Ethanol Stockton, LLC, located in Stockton, California. The complaint
seeks preliminary and permanent injunctions against us, prohibiting future infringement on the patent owned by GS CleanTech and
damages in an unspecified amount adequate to compensate GS CleanTech for the alleged patent infringement, but in any event no less
than a reasonable royalty for the use made of the inventions of the patent, plus attorney&rsquo;s fees. Pacific Ethanol, Inc. does
not itself use any corn oil separation technology and may seek a dismissal on those grounds. Further, although two of our majority-owned
subsidiaries do separate and market corn oil, we and our majority-owned subsidiaries strongly disagree that any of the subsidiaries
use corn oil separation technology that infringes the patent owned by GS CleanTech. We have since answered the complaint and counterclaimed
that the patent claims at issue are invalid and that we are not infringing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.75in">ITEM
1A.&#9;RISK FACTORS.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">In addition to the other information set
forth in this report, you should carefully consider the factors discussed under &ldquo;Risk Factors&rdquo; in our Annual Report
on Form 10-K for the year ended December 31, 2012, which could materially affect our business, financial condition and results
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.75in">ITEM
2.&#9;UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unregistered Sales of Equity Securities</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">Dividends</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">For the three
and nine months ended September 30, 2013 and 2012, we declared and paid in cash an aggregate of $0.3 million and $0.9
million, respectively, in dividends on our Series B Preferred Stock. We have never declared or paid cash dividends on our
common stock and do not currently intend to pay cash dividends on our common stock in the foreseeable future. We currently
anticipate that we will retain any earnings for use in the continued development of our business. The holders of our
outstanding Series B Preferred Stock are entitled to dividends of 7% per annum, payable quarterly. Accumulated and unpaid
dividends in respect of our Series B Preferred Stock must be paid prior to the payment of any dividends in respect of our
common stock. See &ldquo;Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Series B Preferred Stock Dividends.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 3.&#9;DEFAULTS UPON
SENIOR SECURITIES.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Not applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 4.&#9;MINE SAFETY
DISCLOSURES.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">Not applicable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 5.&#9;OTHER INFORMATION.</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-indent: -0.75in">ITEM 6.&#9;EXHIBITS.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 12%; text-align: center">Exhibit<BR>
<U>Number</U></TD>
    <TD STYLE="vertical-align: bottom; width: 88%"><U>Description</U></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">10.1</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Letter Agreement, dated July 26, 2013, by and among Pacific Ethanol, Inc. and holders of Series <FONT STYLE="color: black">B Cumulative Convertible Preferred Stock (1)</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">10.2</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Letter Agreement, dated September 13, 2013, by and among Pacific Ethanol, Inc. and holders of Series <FONT STYLE="color: black">B Cumulative Convertible Preferred Stock (2)</FONT></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">31.1</TD>
    <TD STYLE="text-align: justify">Certifications 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 (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">31.2</TD>
    <TD STYLE="text-align: justify">Certifications 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 (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">32.1</TD>
    <TD STYLE="text-align: justify">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 (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.INS</TD>
    <TD STYLE="text-align: left">XBRL Instance Document (*)(**)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.SCH</TD>
    <TD STYLE="text-align: left">XBRL Taxonomy Extension Schema (*)(**)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.CAL</TD>
    <TD STYLE="text-align: left">XBRL Taxonomy Extension Calculation Linkbase (*)(**)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.DEF</TD>
    <TD STYLE="text-align: left">XBRL Taxonomy Extension Definition Linkbase (*)(**)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.LAB</TD>
    <TD STYLE="text-align: left">XBRL Taxonomy Extension Label Linkbase (*)(**)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.PRE</TD>
    <TD STYLE="text-align: left">XBRL Taxonomy Extension Presentation Linkbase (*)(**)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in">____________________</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">(*)</TD><TD>Filed herewith.</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">(**)</TD><TD STYLE="text-align: justify">Pursuant to applicable securities laws and regulations, we are deemed to have complied with the reporting obligation relating
to the submission of interactive data files in such exhibits and are not subject to liability under any anti-fraud provisions of
the federal securities laws as long as we have made a good faith attempt to comply with the submission requirements and promptly
amend the interactive data files after becoming aware that the interactive data files fail to comply with the submission requirements.
Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are
not subject to liability.</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">(#)</TD><TD STYLE="text-align: justify">Certain of the agreements filed as exhibits to this report 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.</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">(1)</TD><TD STYLE="text-align: justify">Filed as an exhibit to the Registrant&rsquo;s current report on Form 8-K for July 26, 2013 filed with the Securities and Exchange
Commission on July 31, 2013.</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in">(2)</TD><TD STYLE="text-align: justify">Filed as an exhibit to the Registrant&rsquo;s current report on Form 8-K for September 13, 2013 filed with the Securities and
Exchange Commission on September 17, 2013.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif"></P>

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<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">SIGNATURES</P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">Pursuant to the requirements
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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">&nbsp;</P>

<TABLE BORDER="0" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2"><B>PACIFIC ETHANOL, INC.</B></TD>
</TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD></TR>
<TR>
    <TD STYLE="vertical-align: top; width: 50%">Dated: November 12, 2013</TD>
    <TD STYLE="width: 4%">By:</TD>
    <TD STYLE="vertical-align: top; width: 46%"><FONT STYLE="text-transform: uppercase">/s/ Bryon T. McGregor</FONT></TD>
</TR>
<TR>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; border-top: #000000 1px solid">Bryon T. McGregor<BR>Chief Financial Officer<BR>(Principal Financial and Accounting Officer)</TD>
</TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 6pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: 0pt; margin-top: 0pt; margin-bottom: 0pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><B>EXHIBITS
FILED WITH THIS REPORT</B></P>

<P STYLE="font: bold 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR>
    <TD STYLE="vertical-align: top; width: 11%; text-align: center">Exhibit<BR>
<U>Number</U></TD>
    <TD STYLE="text-align: left; width: 88%; vertical-align: bottom"><U>Description </U></TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; text-align: center">31.1</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify">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</TD></TR>
<TR STYLE="background-color: White">
    <TD STYLE="vertical-align: top; text-align: center">31.2</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify">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</TD></TR>
<TR STYLE="background-color: rgb(238,238,238)">
    <TD STYLE="vertical-align: top; text-align: center">32.1</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; text-align: justify">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</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.INS</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Instance Document (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.SCH</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Taxonomy Extension Schema (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.CAL</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Taxonomy Extension Calculation Linkbase (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.DEF</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Taxonomy Extension Definition Linkbase (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD STYLE="text-align: center">101.LAB</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Taxonomy Extension Label Linkbase (*)</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(238,238,238)">
    <TD STYLE="text-align: center">101.PRE</TD>
    <TD COLSPAN="2" STYLE="text-align: left">XBRL Taxonomy Extension Presentation Linkbase (*)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">____________________</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">(*)&#9;Pursuant to applicable securities
laws and regulations, we are deemed to have complied with the reporting obligation relating to the submission of interactive data
files in such exhibits and are not subject to liability under any anti-fraud provisions of the federal securities laws as long
as we have made a good faith attempt to comply with the submission requirements and promptly amend the interactive data files
after becoming aware that the interactive data files fail to comply with the submission requirements. Users of this data are advised
that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<DIV STYLE="font: 10pt Times New Roman, Times, Serif"><DIV STYLE="page-break-before: always"></DIV>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify"><B>EXHIBIT 31.1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>CERTIFICATION
OF PRINCIPAL EXECUTIVE OFFICER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><B>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">I, Neil M. Koehler, certify that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">1. I have reviewed this Quarterly Report
on Form 10-Q of Pacific Ethanol, Inc.;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 25pt; text-align: justify">3. Based on my
knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 25pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">4. The registrant&rsquo;s other certifying
officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(a) Designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(b) Designed such internal control over
financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(c) Evaluated the effectiveness of the
registrant&rsquo;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(d) Disclosed in
this report any change in the registrant&rsquo;s internal control over financial reporting that occurred during the registrant&rsquo;s
most recent fiscal quarter (the registrant&rsquo;s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant&rsquo;s internal control over financial reporting; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">5. The registrant&rsquo;s other certifying
officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant&rsquo;s
auditors and the audit committee of the registrant&rsquo;s board of directors (or persons performing the equivalent functions):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 24.5pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant&rsquo;s ability to record, process, summarize and report financial information; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt; text-align: justify">(b) Any fraud, whether or not material,
that involves management or other employees who have a significant role in the registrant&rsquo;s internal control over financial
reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-indent: 48.95pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" ALIGN="RIGHT" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%">Date:
November 12, 2013</TD>
    <TD STYLE="padding-left: 12pt; text-align: justify; text-indent: -12pt; border-bottom: Black 1pt solid; width: 50%"><FONT STYLE="text-transform: uppercase">/s/
    Neil M. Koehler</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 12pt; text-align: justify; text-indent: -12pt">Neil M. Koehler</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 12pt; text-align: justify; text-indent: -12pt">President
        and Chief Executive Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 12pt; text-align: justify; text-indent: -12pt">(Principal
        Executive Officer)</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: justify; text-indent: -12.2pt">&nbsp;</P>





</DIV><DIV STYLE="font: 10pt Times New Roman, Times, Serif"><DIV STYLE="page-break-before: always"></DIV>


<P STYLE="margin: 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; font-size: 10pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>EXHIBIT 31.2</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>CERTIFICATION OF PRINCIPAL FINANCIAL
                                OFFICER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY
ACT OF 2002</B></P>
</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">I, Bryon T. McGregor,
certify that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">1. I have reviewed this
Quarterly Report on Form 10-Q of Pacific Ethanol, Inc.;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 25pt">3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 25pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">4. The registrant&rsquo;s
other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
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;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(c) Evaluated the effectiveness
of the registrant&rsquo;s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(d) Disclosed in this
report any change in the registrant&rsquo;s internal control over financial reporting that occurred during the registrant&rsquo;s
most recent fiscal quarter (the registrant&rsquo;s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant&rsquo;s internal control over financial reporting; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">5. The registrant&rsquo;s
other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting,
to the registrant&rsquo;s auditors and the audit committee of the registrant&rsquo;s board of directors (or persons performing
the equivalent functions):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 24.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the registrant&rsquo;s ability to record, process, summarize and report financial information; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 48.95pt">(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant&rsquo;s internal control
over financial reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 48.95pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 50%; padding-left: 12.2pt; text-align: justify; font-size: 10pt; text-indent: -12.2pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Date: November 12, 2013</FONT></TD>
    <TD STYLE="width: 50%">
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; border-bottom: black 1pt solid">/S/ BRYON T.
        MCGREGOR</P></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD STYLE="padding-left: 12pt; text-align: justify; font-size: 10pt; text-indent: -12pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Bryon T. McGregor</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-size: 10pt">&nbsp;</TD>
    <TD>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 12.25pt; text-align: justify; text-indent: -12.25pt">Chief Financial
        Officer</P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 12.25pt; text-align: justify; text-indent: -12.25pt">(Principal
        Financial Officer)</P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 10pt">&nbsp;</P>

</DIV><DIV STYLE="font: 10pt Times New Roman, Times, Serif"><DIV STYLE="page-break-before: always"></DIV>


<P STYLE="margin: 0pt 0"><B>&nbsp;</B>EXHIBIT 32.1</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>CERTIFICATION
OF </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>CHIEF
EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>PURSUANT
TO 18 U.S.C. SECTION 1350,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>AS
ADOPTED PURSUANT TO</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.2pt; text-align: center; text-indent: -12.25pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">In connection with
the Quarterly Report on Form 10-Q of Pacific Ethanol, Inc. (the &ldquo;Company&rdquo;) for the period ended September 30, 2013
(the &ldquo;Report&rdquo;), the undersigned hereby certify in their capacities as Chief Executive Officer and Chief Financial Officer
of the Company, respectively, pursuant to 18&nbsp;U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">1.&nbsp;&nbsp;&nbsp;the Report fully
complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">2.&nbsp;&nbsp;&nbsp;the information
contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 3in; text-align: justify; text-indent: -3in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 50%; text-align: justify"><FONT STYLE="color: black">Dated:&nbsp;&nbsp;November 12, 2013</FONT></TD>
    <TD STYLE="width: 50%; text-align: justify; border-bottom: Black 1pt solid"><FONT STYLE="color: black">By: /S/ NEIL M. KOEHLER</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">&nbsp;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">Neil M. Koehler</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">President and Chief Executive Officer</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">(Principal Executive Officer)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">Dated:&nbsp;&nbsp;November 12, 2013</FONT></TD>
    <TD STYLE="text-align: justify; border-bottom: Black 1pt solid"><FONT STYLE="color: black">By: /S/ BRYON T. MCGREGOR</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="color: black">Bryon T. McGregor</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">Chief Financial Officer</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: justify">&nbsp;</TD>
    <TD STYLE="text-align: justify">(Principal Financial Officer)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: left; text-indent: 38.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 38.5pt">A signed original
of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the
signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been
provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff
upon request.</P>

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