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<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>1. Organization, Nature of Business, and Liquidity Considerations</b></p>
<p style="text-indent: 0.5in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Organization and Nature of Business</i></b></p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">BioFuel Energy Corp. (the “Company”, “we”, “our” or “us”) produces and sells ethanol, distillers grain and corn oil through its two ethanol production facilities located in Wood River, Nebraska (“Wood River”) and Fairmont, Minnesota (“Fairmont”). Both facilities, with a combined annual undenatured nameplate production capacity of approximately 220 million gallons per year (“Mmgy”), commenced start-up and began commercial operations in June 2008. At each location Cargill, Incorporated (“Cargill”), with whom we have an extensive commercial relationship, has a strong local presence and owns adjacent grain storage and handling facilities. Cargill provides corn procurement services, purchases the ethanol we produce and provides transportation logistics for our two plants under long-term contracts. In addition, we lease their adjacent grain storage and handling facilities at each of our plants.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">We were incorporated as a Delaware corporation on April 11, 2006 to invest solely in BioFuel Energy, LLC (the “LLC”), a limited liability company organized on January 25, 2006 to build and operate ethanol production facilities in the Midwestern United States. The Company’s headquarters are located in Denver, Colorado.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">At March 31, 2012, the Company owned 85.0% of the LLC membership units with the remaining 15.0% owned by certain individuals and by certain investment funds affiliated with some of the original equity investors of the LLC. The Class B common shares of the Company are held by the same individuals and investment funds who held 18,622,944 membership units in the LLC as of March 31, 2012 that, together with the corresponding Class B shares, can be exchanged for newly issued shares of common stock of the Company on a one-for-one basis. The proportionate value of the LLC membership units held by individuals or entities other than the Company are recorded as noncontrolling interest on the consolidated balance sheets. Holders of shares of Class B common stock have no economic rights but are entitled to one vote for each share held. Shares of Class B common stock are retired upon exchange of the related membership units in the LLC.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The aggregate book value of the assets of the LLC at March 31, 2012 and December 31, 2011 was $296.1 million and $309.2 million, respectively, of which substantially all of such assets are collateral for the LLC’s subsidiaries’ obligations under its senior secured bank facility with a group of lenders (the “Senior Debt Facility”) (see Note 5 — Long-Term Debt). The Senior Debt Facility also imposes restrictions on the ability of the LLC’s subsidiaries that own and operate our Wood River and Fairmont plants to pay dividends or make other distributions to us, which restricts our ability to pay dividends.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Liquidity Considerations</i></b></p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Our operations and cash flows are subject to wide and unpredictable fluctuations primarily due to changes in commodity prices, specifically, the price of our main commodity input, corn, relative to the price of our main commodity product, ethanol, which is known in the industry as the “crush spread”. The prices of these commodities are volatile and beyond our control. As a result of the volatility of the prices for these and other items, our results fluctuate substantially and in ways that are largely beyond our control. As shown in the accompanying consolidated financial statements, the Company incurred a net loss of $11.1 million for the three months ended March 31, 2012 due to narrow commodity margins.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Narrow commodity margins present a significant risk to our cash flows and liquidity. We have had, and continue to have, limited liquidity, with $11.7 million of cash and cash equivalents as of March 31, 2012.  In addition, we have relied upon extensions of payment terms by Cargill as an additional source of liquidity and working capital.   As of March 31, 2012 we owed Cargill $6.5 million for accounts payable related to corn purchases. Pursuant to an arrangement with Cargill, we have been permitted to extend corn payment terms beyond the $10.0 million contractual limit so long as the amounts Cargill owes us for ethanol exceed the accounts payable balance by an amount that is satisfactory to Cargill. This arrangement may be terminated at any time on little or no notice, in which case we would need to use cash on hand or other sources of liquidity, if available, to fund our operations.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  <b> </b></p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Should current commodity margins continue for an extended period of time, we may not generate sufficient cash flow from operations to both service our debt and operate our plants.  We are required to make, under the terms of our Senior Debt Facility, quarterly principal payments in a minimum amount of $3,150,000, plus accrued interest. We cannot predict when or if crush spreads will fluctuate again or if the current commodity margins will improve or worsen. If crush spreads were to remain at current levels for an extended period of time, we may expend all of our sources of liquidity, in which event we would not be able to pay principal and interest on our debt.  Any inability to pay principal and interest on our debt would lead to an event of default under our Senior Debt Facility, which, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, could require us to seek relief through a filing under the U.S. Bankruptcy Code. We expect fluctuations in the crush spread to continue.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Since we commenced operations, we have from time to time entered into derivative financial instruments such as futures contracts, swaps and options contracts with the objective of limiting our exposure to changes in commodities prices. In the past, we have only been able to conduct such hedging activities on a limited basis due to our lack of financial resources and, while we are currently engaged in some hedging activities, we may not have the financial resources to increase or conduct hedging activities in the future.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>2. Summary of Significant Accounting Policies</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Principles of Consolidation and Noncontrolling Interest</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying consolidated financial statements include the Company, the LLC and its wholly owned subsidiaries: BFE Holdings, LLC; BFE Operating Company, LLC; Buffalo Lake Energy, LLC; and Pioneer Trail Energy, LLC. All inter-company balances and transactions have been eliminated in consolidation. The Company treats all exchanges of LLC membership units for Company common stock as equity transactions, with any difference between the fair value of the Company’s common stock and the amount by which the noncontrolling interest is adjusted being recognized in equity.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Use of Estimates</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures in the accompanying notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Revenue Recognition</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company sells its ethanol, distillers grain and corn oil products under the terms of marketing agreements. Revenue is recognized when risk of loss and title transfers upon shipment of ethanol, distillers grain or corn oil. In accordance with our marketing agreements, the Company records its revenues based on the amounts payable to us at the time of our sales of ethanol, distillers grain or corn oil. For our ethanol that is sold within the United States, the amount payable is equal to the average delivered price per gallon received by the marketing pool from Cargill’s customers, less average transportation and storage charges incurred by Cargill, and less a commission. We also sell a portion of our ethanol production to Cargill for export, which sales are shipped undenatured and are excluded from the marketing pool. For exported ethanol sales, the amount payable is equal to the contracted delivered price per gallon, less transportation and storage charges, and less a commission. The amount payable for distillers grain and corn oil is equal to the market price at the time of sale less a commission.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Cost of goods sold</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Cost of goods sold primarily includes costs of materials (primarily corn, natural gas, chemicals and denaturant), electricity, purchasing and receiving costs, inspection costs, shipping costs, lease costs, plant management, certain compensation costs and general facility overhead charges, including depreciation expense.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>General and administrative expenses</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">General and administrative expenses consist of salaries and benefits paid to our management and administrative employees, expenses relating to third party services, travel, office rent, marketing and other expenses, including certain expenses associated with being a public company, such as fees paid to our independent auditors associated with our annual audit and quarterly reviews, directors’ fees, and listing and transfer agent fees.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Cash and Cash Equivalents</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Cash and cash equivalents include highly liquid investments with an original maturity of three months or less. Cash equivalents are currently comprised of money market mutual funds. At March 31, 2012, we had $11.7 million held at three financial institutions, which is in excess of FDIC insurance limits.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Accounts Receivable</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction to bad debt expense when received. As of March 31, 2012 and December 31, 2011, no allowance was considered necessary.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Concentrations of Credit Risk</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">During the three months ended March 31, 2012 and 2011, the Company recorded sales to Cargill representing 78% and 94%, respectively, of total net sales. As of March 31, 2012 and December 31, 2011, the LLC, through its subsidiaries, had receivables from Cargill of $16.6 million and $12.0 million, respectively, representing 91% and 88% of total accounts receivable, respectively.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The LLC, through its subsidiaries, purchases corn, its largest cost component in producing ethanol, from Cargill. During the three months ended March 31, 2012 and 2011, corn purchases from Cargill totaled $111.8 million and $129.6 million, respectively. As of March 31, 2012 and December 31, 2011, the LLC, through its subsidiaries, had payables to Cargill of $6.5 million and $5.6 million, respectively, related to corn purchases.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Inventories</i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Raw materials inventories, which consist primarily of corn, denaturant, supplies and chemicals, and work in process inventories are valued at the lower-of-cost-or-market, with cost determined on a first-in, first-out basis. Finished goods inventories consist of ethanol and distillers grain and are stated at lower of average cost or market.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A summary of inventories is as follows (in thousands):</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">March 31,<br />2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">December 31,<br />2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 76%;">Raw materials</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">11,325</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">16,818</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Work in process</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,887</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">5,672</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Finished goods</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,697</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,698</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -10pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">18,909</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">26,188</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Derivative Instruments and Hedging Activities</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Derivatives are recognized on the balance sheet at their fair value and are included in the accompanying balance sheets as “derivative financial instruments”. On the date the derivative contract is entered into, the Company may designate the derivative as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge). Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income, net of tax effect, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable rate asset or liability are recorded in earnings). Changes in the fair value of undesignated derivative instruments or derivatives that do not qualify for hedge accounting are recognized in current period operations.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Accounting guidance for derivatives requires a company to evaluate contracts to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempted as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. The Company’s contracts for corn and natural gas purchases and ethanol sales that meet these requirements and are designated as either normal purchase or normal sale contracts are exempted from the derivative accounting and reporting requirements </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <br /><b><i>Property, Plant and Equipment</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Property, plant and equipment is recorded at cost. All costs related to purchasing and developing land or the engineering, design and construction of a plant are capitalized. Maintenance, repairs and minor replacements are charged to operating expenses while major replacements and improvements are capitalized. Depreciation is computed by the straight line method over the following estimated useful lives:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 90%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: white; vertical-align: bottom;">
<td style="width: 90%;"> </td>
<td style="width: 2%; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; width: 8%; font-weight: bold;"><b>Years</b></td>
</tr>
<tr style="vertical-align: bottom;">
<td>Land improvements</td>
<td> </td>
<td style="text-align: center;">20 – 30</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Buildings and improvements</td>
<td> </td>
<td style="text-align: center;">7 – 40</td>
</tr>
<tr style="vertical-align: bottom;">
<td>Machinery and equipment: </td>
<td> </td>
<td style="text-align: center;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-left: 6.4pt;">Railroad equipment</td>
<td> </td>
<td style="text-align: center;">20 – 39</td>
</tr>
<tr style="vertical-align: bottom;">
<td style="padding-left: 6.4pt;">Facility equipment</td>
<td> </td>
<td style="text-align: center;">20 – 39</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Other</td>
<td> </td>
<td style="text-align: center;">5 – 7</td>
</tr>
<tr style="vertical-align: bottom;">
<td>Office furniture and equipment</td>
<td> </td>
<td style="text-align: center;">3 – 10</td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Debt Issuance Costs</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Debt issuance costs are stated at cost, less accumulated amortization. Debt issuance costs included in noncurrent assets at March 31, 2012 and December 31, 2011 represent costs incurred related to the Company’s Senior Debt Facility and tax increment financing agreements. These costs are being amortized through interest expense over the term of the related debt. Estimated future debt issuance cost amortization as of March 31, 2012 is as follows (in thousands):</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 90%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 88%;">Remainder of 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">763</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">978</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">704</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Thereafter</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">41</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2,502</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Impairment of Long-Lived Assets</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has two asset groups, its ethanol facility in Fairmont and its ethanol facility in Wood River, which are evaluated separately when considering whether the carrying value of these assets has been impaired. The Company continually monitors whether or not events or circumstances exist that would warrant impairment testing of its long-lived assets. In evaluating whether impairment testing should be performed, the Company considers several factors including the carrying value of the long-lived assets, projected production volumes at its facilities, projected ethanol and distillers grain prices that we expect to receive, and projected corn and natural gas costs we expect to incur. In the ethanol industry, operating margins, and consequently undiscounted future cash flows, are primarily driven by the crush spread. In the event that the crush spread is sufficiently depressed to result in negative operating cash flow at its facilities for an extended time period, the Company will evaluate whether an impairment of its long-lived assets may have occurred.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Recoverability is measured by comparing the carrying value of an asset with estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the risk involved, quoted market prices or appraised values, depending on the nature of the assets. As of March 31, 2012, no circumstances existed that would indicate the carrying value of long-lived assets may not be fully recoverable. Therefore, no recoverability test was performed.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Stock-Based Compensation</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Expense associated with stock-based awards and other forms of equity compensation is based on fair value at grant and recognized on a straight line basis in the financial statements over the requisite service period for those awards that are expected to vest.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Asset Retirement Obligations</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Asset retirement obligations are recognized when a contractual or legal obligation exists and a reasonable estimate of the amount can be made. Changes to the asset retirement obligation resulting from revisions to the timing or the amount of the original undiscounted cash flow estimates shall be recognized as an increase or decrease to both the carrying amount of the asset retirement obligation and the related asset retirement cost capitalized as part of the related property, plant and equipment. At March 31, 2012, the Company had accrued asset retirement obligation liabilities of $145,000 and $183,000 for its plants at Wood River and Fairmont, respectively. At December 31, 2011, the Company had accrued asset retirement obligation liabilities of $144,000 and $181,000 for its plants at Wood River and Fairmont, respectively.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The asset retirement obligations accrued for Wood River relate to the obligations in our contracts with Cargill and Union Pacific Railroad (“Union Pacific”). According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator may be required at Cargill’s discretion to be removed at the end of the lease. In addition, according to the contract with Union Pacific, the buildings that are built near their land in Wood River may be required at Union Pacific’s request to be removed at the end of our contract with them. The asset retirement obligations accrued for Fairmont relate to the obligations in our contracts with Cargill and in our water permit issued by the state of Minnesota. According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator being leased may be required at Cargill’s discretion to be removed at the end of the lease. In addition, the water permit in Fairmont requires that we secure all above ground storage tanks whenever we discontinue the use of our equipment for an extended period of time in Fairmont. The estimated costs of these obligations have been accrued at the current net present value of these obligations at the end of an estimated 20 year life for each of the plants. These liabilities have corresponding assets recorded in property, plant and equipment, which are being depreciated over 20 years.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Income Taxes</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews historical and anticipated future pre-tax results of operations to determine whether the Company will be able to realize the benefit of its deferred tax assets. A valuation allowance is required to reduce the potential deferred tax asset when it is more likely than not that all or some portion of the potential deferred tax asset will not be realized due to the lack of sufficient taxable income. The Company establishes reserves for uncertain tax positions that reflect its best estimate of deductions and credits that may not be sustained on a more likely than not basis. As the Company has incurred tax losses since its inception and expects to continue to incur tax losses for the foreseeable future, we will provide a valuation allowance against deferred tax assets until the Company believes that such assets will be realized. The Company includes interest on tax deficiencies and income tax penalties in the provision for income taxes.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Fair Value of Financial Instruments</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. Any derivative financial instruments are carried at fair value. The fair value of the Company’s senior debt and notes payable are not materially different from their carrying amounts based on anticipated interest rates that management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Segment Reporting</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. Each of our plants is considered its own unique operating segment under these criteria. However, when two or more operating segments have similar economic characteristics, accounting guidance allows for them to be aggregated into a single operating segment for purposes of financial reporting. Our two plants are very similar in all characteristics and accordingly, the Company presents a single reportable segment, the manufacture of fuel-grade ethanol and the co-products of the ethanol production process.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Recent Accounting Pronouncements</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, our management believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>3. Property, Plant and Equipment</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Property, plant and equipment, stated at cost, consist of the following at March 31, 2012 and December 31, 2011 (in thousands):</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 93%; font: 10pt times new roman, times, serif; margin-left: 0.4in;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">March 31,<br />2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">December 31,<br />2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; width: 76%;">Land and land improvements</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">19,643</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">19,643</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Construction in progress</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">26</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,126</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Buildings and improvements</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">49,832</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">49,832</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Machinery and equipment</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">249,930</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">248,247</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Office furniture and equipment</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">6,456</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">6,432</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -0.1in; padding-left: 0.1in;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">325,887</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">325,280</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Accumulated depreciation</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(96,189</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(89,392</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;">Property, plant and equipment, net</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">229,698</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">235,888</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Depreciation expense related to property, plant and equipment was $6,797,000 and $6,756,000 for the three months ended March 31, 2012 and 2011, respectively.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>4. Earnings Per Share</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per share are calculated using the treasury stock method and includes the effect of all dilutive securities, including stock options, restricted stock and Class B common shares. For those periods in which the Company incurred a net loss, the inclusion of the potentially dilutive shares in the computation of diluted weighted average shares outstanding would have been anti-dilutive to the Company’s loss per share, and, accordingly, all potentially dilutive shares have been excluded from the computation of diluted weighted average shares outstanding in those periods.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">For the three months ended March 31, 2012 and 2011, 1,458,118 shares and 1,784,811 shares, respectively, issuable upon the exercise of stock options were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A summary of the reconciliation of basic weighted average shares outstanding to diluted weighted average shares outstanding follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 85%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 76%;">Weighted average common shares outstanding – basic</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">102,791,785</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">71,300,731</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Potentially dilutive common stock equivalents</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Class B common shares</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,622,944</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">15,670,578</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Stock options</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">25,000</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Restricted stock</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,076,508</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">346,215</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">20,699,452</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">16,041,793</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">123,491,237</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">87,342,524</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Less anti-dilutive common stock equivalents</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(20,699,452</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(16,041,793</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Weighted average common shares outstanding – diluted</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">102,791,785</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">71,300,731</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>5. Long-Term Debt</b></p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table summarizes long-term debt as of March 31, 2012 and December 31, 2011 (in thousands):</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">March 31,<br />2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">December 31,<br />2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; width: 76%;">Term loans</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">173,630</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">176,780</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Notes payable</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">333</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">380</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Capital leases</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,483</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,487</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-indent: -0.1in; padding-left: 0.1in;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">176,446</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">179,647</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Less current portion</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(12,662</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(12,710</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;">Long-term portion</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">163,784</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">166,937</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Senior Debt Facility</i></b></p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In September 2006, certain subsidiaries of the LLC (the “Operating Subsidiaries”) entered into the Senior Debt Facility to finance the construction of and provide working capital to operate our ethanol plants. Neither the Company nor the LLC is a borrower under the Senior Debt Facility, although the equity interests and assets of our subsidiaries are pledged as collateral to secure the debt under the facility. Principal payments under the Senior Debt Facility are payable quarterly at a minimum amount of $3,150,000, with additional pre-payments to be made out of available cash flow. As of March 31, 2012, there remained $173.6 million in aggregate principal amounts outstanding under the Senior Debt Facility. These term loans mature in September 2014.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Interest rates on the Senior Debt Facility are, at management’s option, set at: i) a base rate, which is the higher of the federal funds rate plus 0.5% or the administrative agent’s prime rate, in each case plus a margin of 2.0%; or ii) at LIBOR plus 3.0%. Interest on base rate loans is payable quarterly and, depending on the LIBOR rate elected, as frequently as monthly on LIBOR loans, but no less frequently than quarterly. The weighted average interest rate in effect on the borrowings at March 31, 2012 was 3.2%.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Senior Debt Facility is secured by a first priority lien on all right, title and interest in and to the Wood River and Fairmont plants and any accounts receivable or property associated with those plants and a pledge of all of our equity interests in the Operating Subsidiaries. The Operating Subsidiaries have established collateral deposit accounts maintained by an agent of the banks, into which our revenues are deposited, subject to security interests to secure any outstanding obligations under the Senior Debt Facility. These funds are then allocated into various sweep accounts held by the collateral agent, including accounts that provide funds for the operating expenses of the Operating Subsidiaries. The collateral accounts have various provisions, including historical and prospective debt service coverage ratios and debt service reserve requirements, which determine whether there is, and the amount of, cash available to the LLC from the collateral accounts each month. The terms of the Senior Debt Facility also include covenants that impose certain limitations on, among other things, the ability of the Operating Subsidiaries to incur additional debt, grant liens or encumbrances, declare or pay dividends or distributions, conduct asset sales or other dispositions, merge or consolidate, and conduct transactions with affiliates. The terms of the Senior Debt Facility also include customary events of default including failure to meet payment obligations, failure to pay financial obligations, failure of the Operating Subsidiaries of the LLC to remain solvent and failure to obtain or maintain required governmental approvals. Under the terms of separate management services agreements between our Operating Subsidiaries and the LLC, the Operating Subsidiaries pay a monthly management fee of $869,000 to the LLC to cover salaries, rent, and other operating expenses of the LLC, which payments are unaffected by the terms of the Senior Debt Facility or the collateral accounts.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Debt issuance fees and expenses of $7.9 million ($2.4 million, net of accumulated amortization) have been incurred in connection with the Senior Debt Facility through March 31, 2012. These costs have been deferred and are being amortized and expensed as interest over the term of the Senior Debt Facility.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <br /><b><i>Capital Lease</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The LLC, through its subsidiary that constructed the Fairmont plant, has entered into an agreement with the local utility pursuant to which the utility has built and owns and operates a substation and distribution facility in order to supply electricity to the plant. The LLC is paying a fixed facilities charge based on the cost of the substation and distribution facility of $34,000 per month, over the 30-year term of the agreement. This fixed facilities charge is being accounted for as a capital lease in the accompanying financial statements. The agreement also includes a $25,000 monthly minimum energy charge that also began in the first quarter of 2008.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Notes Payable</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Notes payable relate to certain financing agreements in place at each of our sites. The subsidiaries of the LLC that constructed the plants entered into financing agreements in the first quarter of 2008 for the purchase of certain rolling stock equipment to be used at the facilities for $748,000. The notes have fixed interest rates (weighted average rate of approximately 5.6%) and require 48 monthly payments of principal and interest, maturing in the first and second quarter of 2012. In addition, the subsidiary of the LLC that constructed the Wood River facility had entered into a note payable for $2,220,000 with a fixed interest rate of 11.8% for the purchase of our natural gas pipeline. The note required 36 monthly payments of principal and interest and matured in the first quarter of 2011. In addition, the subsidiary of the LLC that constructed the Wood River facility has entered into a note payable for $419,000 with the City of Wood River for special assessments related to street, water, and sanitary improvements at our Wood River facility. This note requires ten annual payments of $58,000, including interest at 6.5% per annum, and matures in 2018.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table summarizes the aggregate maturities of our long-term debt as of March 31, 2012 (in thousands):</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 88%;">Remainder of 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">9,509</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">12,652</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">151,636</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">57</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">60</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Thereafter</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,532</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">176,446</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>6. Tax Increment Financing</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In February 2007, the subsidiary of the LLC that constructed the Wood River plant received $6.0 million from the proceeds of a tax increment revenue note issued by the City of Wood River, Nebraska. The proceeds funded improvements to property owned by the subsidiary. The City of Wood River will pay the principal and interest of the note from the incremental increase in the property taxes related to the improvements made to the property. The interest rate on the note is 7.85%. The proceeds have been recorded as a liability which is reduced as the subsidiary of the LLC remits property taxes to the City of Wood River, which began in 2008 and will continue through 2021. The LLC has guaranteed the principal and interest of the tax increment revenue note if, for any reason, the City of Wood River fails to make the required payments to the holder of the note or the subsidiary of the LLC fails to make the required payments to the City of Wood River.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table summarizes the aggregate maturities of the tax increment financing debt as of March 31, 2012 (in thousands):</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 88%;">Remainder of 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">370</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">399</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">431</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">464</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">501</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Thereafter</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">3,072</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">5,237</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>7. Stockholders’ Equity</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Rights Offering and LLC Concurrent Private Placement</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On September 24, 2010, the Company entered into a Rights Offering Letter Agreement with certain affiliates of Greenlight Capital, Inc. and certain affiliates of Third Point LLC pursuant to which the Company conducted a rights offering to its stockholders (the “Rights Offering”). The Rights Offering entailed a distribution to our common stockholders of rights to purchase depositary shares representing fractional interests in shares of Series A Non-Voting Convertible Preferred Stock (the “Preferred Stock”). Concurrent with the Rights Offering, the LLC conducted a private placement of LLC interests that was structured to provide the holders of the membership interests in the LLC (other than the Company) with a private placement that was economically equivalent to the Rights Offering. On February 2, 2011, the Company’s stockholders approved an increase in the number of authorized shares of common stock of the Company, which resulted in the automatic conversion of shares of the Preferred Stock into shares of the Company’s common stock such that subscribers in the Rights Offering were issued one share of common stock in lieu of each depositary share subscribed for. These transactions were completed and 63,773,603 shares of common stock, at a price of $0.56 per share, and 18,369,262 LLC membership interests, at a price of $0.56 per unit (along with an equivalent number of shares of Class B common stock), were issued on February 4, 2011. The aggregate gross proceeds of the Rights Offering and the concurrent private placement were $46.0 million. The proceeds of the transaction were used to (i) repay in full $20.3 million owed under a bridge loan previously provided by certain affiliates of Greenlight Capital, Inc. and certain affiliates of Third Point LLC, (ii) repay in full $21.5 million owed under our then outstanding subordinated debt, (iii) repay $2.8 million of debt owed to Cargill and (iv) pay certain fees and expenses incurred in connection with the Rights Offering and the LLC’s concurrent private placement.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In contemplation of the Rights Offering, on September 23, 2010, we entered into a Letter Agreement with Cargill pursuant to which we agreed to (i) use a portion of the proceeds from the Rights Offering (to the extent available) to repay a portion of certain indebtedness owed to Cargill, upon which Cargill would forgive a like amount of principal and any accrued interest on such forgiven principal according to its original terms and (ii) upon successful completion of the Rights Offering, issue a number of depositary shares in exchange for forgiveness by Cargill of the remaining principal balance of the debt. On February 15, 2011, the Company issued 6,597,790 shares of common stock to Cargill in exchange for the extinguishment of the remaining amount owed to Cargill. An additional $2.0 million that was carried on our balance sheet at December 31, 2010 due to troubled debt restructuring accounting was also extinguished. This amount, in addition to the $2.8 million forgiven, was accounted for as a capital contribution to additional paid-in capital because the Company and Cargill were considered related parties.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Stock Repurchase Plan</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">On October 15, 2007, the Company announced the adoption of a stock repurchase plan authorizing the repurchase of up to $7.5 million of the Company’s common stock. Purchases will be funded out of cash on hand and made from time to time in the open market. From the inception of the buyback program through March 31, 2012, the Company had repurchased 809,606 shares at an average price of $5.30 per share, leaving $3,184,000 available under the repurchase plan. The shares repurchased are being held as treasury stock. As of March 31, 2012, there were no plans to repurchase any additional shares.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Dividends</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has not declared any dividends on its common stock and does not anticipate paying dividends in the foreseeable future. In addition, the terms of the Senior Debt facility contain restrictions on the ability of the Operating Subsidiaries of the LLC to pay dividends or other distributions, which will restrict the Company’s ability to pay dividends in the future.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>8. Derivative Financial Instruments</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company offsets amounts of cash collateral deposited with counterparties arising from certain derivative instruments executed with the same counterparty against the fair value amounts reported for those derivative instruments. The effects of derivative instruments on our consolidated financial statements were as follows as of March 31, 2012 and December 31, 2011, and for the three months ended March 31, 2012 and 2011(in thousands) (amounts presented exclude any income tax effects and have not been adjusted for the amount attributable to the noncontrolling interest).</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Fair Value of Derivative Instruments in Consolidated Balance Sheet</i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<table style="width: 95%; font: 10pt times new roman, times, serif; margin-left: 0.25in;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt;"> </td>
<td colspan="2"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6">Derivative Assets (Liabilities)</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; font-weight: bold;" colspan="2">Consolidated Balance Sheet Location</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">March 31,<br />2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">December 31,<br />2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; width: 40%; font-weight: bold;">Derivative not designated as hedging instrument:</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 33%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">Commodity contract</td>
<td> </td>
<td style="text-align: left;" colspan="2">Other current assets</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(128</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;">$</td>
<td style="text-align: right;">(470</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Cash collateral held or provided with counterparty</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;" colspan="2">Other current assets</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">240</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">781</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="text-align: right; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">112</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">311</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> <b><i> </i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Effects of Derivative Instruments on Income</i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 95%; font: 10pt times new roman, times, serif; margin-left: 0.25in;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; font-weight: bold;" colspan="5">Consolidated Statements of Operations Location</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">gain (loss)</td>
<td> </td>
<td> </td>
<td style="text-align: center;" colspan="2">gain (loss)</td>
<td> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; font-weight: bold;">Derivative not designated as hedging instrument:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in; width: 40%;">Commodity contract</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: left; width: 33%;">Net sales</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(880</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(532</td>
<td style="text-align: left; width: 1%;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Commodity contract</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;">Cost of goods sold</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">190</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="text-align: left; padding-bottom: 2.5pt;">Net amount recognized in earnings</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(690</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(532</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In accordance with these provisions, we have categorized our financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Financial assets and liabilities recorded on the Company’s consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. We currently do not have any Level 1 financial assets or liabilities.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);</font></td>
</tr>
<tr style="vertical-align: top;">
<td> </td>
<td> </td>
<td> </td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and</font></td>
</tr>
<tr style="vertical-align: top;">
<td> </td>
<td> </td>
<td> </td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 0.5in;"></td>
<td style="width: 0.25in;"><font style="font-family: symbol;">·</font></td>
<td><font style="font-family: times new roman, times, serif;">Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).</font></td>
</tr>
</table>
<p style="text-indent: -0.25in; margin: 0pt 0px 0pt 0.5in; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">See tables above for Level 2 financial assets and liabilities.<br /><br /></p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. We currently do not have any Level 3 financial assets or liabilities.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>9. Stock-Based Compensation</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table summarizes the stock-based compensation expense incurred by the Company (in thousands):</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6">Three Months Ended<br />March 31,</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; font-weight: bold;">(In thousands)</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 76%;">Stock options</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">295</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">341</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Restricted stock</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">112</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">12</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">407</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">353</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>2007 Equity Incentive Compensation Plan</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Immediately prior to the Company’s initial public offering, the Company adopted the 2007 Equity Incentive Compensation Plan (“2007 Plan”). The 2007 Plan provides for the grant of options intended to qualify as incentive stock options, non-qualified stock options, stock appreciation rights or restricted stock awards and any other equity-based or equity-related awards. The 2007 Plan is administered by the Compensation Committee of the Board of Directors. Subject to adjustment for changes in capitalization, the aggregate number of shares that may be delivered pursuant to awards under the 2007 Plan was originally 3,000,000; however in March 2011 the Board of Directors approved an adjustment to such aggregate number of shares to account for the Rights Offering and related increase in the number of authorized shares of common stock of the Company, as described in Note 7 – Stockholders’ Equity.  As a result of this adjustment, the aggregate number of shares that may be delivered pursuant to awards under the 2007 Plan is 7,100,000.  The term of the 2007 Plan is ten years, expiring in June 2017.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Stock Options</u> — Except as otherwise directed by the Compensation Committee, the exercise price for options cannot be less than the fair market value of our common stock on the grant date. Other than the stock options issued to Directors, the options will generally vest and become exercisable with respect to 30%, 30% and 40% of the shares of our common stock subject to such options on each of the first three anniversaries of the grant date. Compensation expense related to these options is expensed on a straight line basis over the three year vesting period. Options issued to Directors generally vest and become exercisable on the first anniversary of the grant date. All stock options have a five year term from the date of grant. During the three months ended March 31, 2012 and 2011, the Company did not issue any stock options under the 2007 Plan.</p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A summary of stock option activity under the 2007 Plan as of March 31, 2012, and the changes during the three months ended March 31, 2012 is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 80%; font: 10pt times new roman, times, serif; margin-left: 0.3in;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Weighted<br />Average<br />Exercise<br />Price</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Weighted<br />Average<br />Remaining<br />Life<br />(years)</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Aggregate<br />Intrinsic<br />Value</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -0.1in; padding-left: 0.1in; width: 52%;">Options outstanding, January 1, 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">1,472,118</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">3.22</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Granted</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Exercised</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Forfeited</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(14,000</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">5.59</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;">Options outstanding, March 31, 2012</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">1,458,118</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3.20</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2.6</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.00</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt; text-indent: -0.1in; padding-left: 0.1in;">Options exercisable, March 31, 2012</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">1,111,055</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">3.28</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2.5</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.00</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A summary of the status of our unvested stock options as of March 31, 2012, and the changes during the three months ended March 31, 2012 is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 70%; font: 10pt times new roman, times, serif; margin-left: 0.3in;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Weighted<br />Average<br />Grant Date<br />Fair Value</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 76%;">Unvested, January 1, 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">660,854</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">2.49</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Granted</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">—</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Vested</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(313,791</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">2.52</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Forfeited</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Unvested, March 31, 2012</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">347,063</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2.47</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">As of March 31, 2012, there was $726,598 of unrecognized compensation expense related to the unvested portion of stock options outstanding. This expense is expected to be recognized over one year.<br /><br /></p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><u>Restricted Stock</u>  — Other than restricted stock issued to Directors, the restricted stock issued will generally vest in equal increments of 25% on each of the first four anniversaries of the grant date. Compensation expense related to restricted stock issued is expensed on a straight line basis over the four year vesting period. Restricted stock issued to Directors generally vests on the first anniversary of the grant date with compensation expense being expensed on a straight line basis over the one year vesting period. During the three months ended March 31, 2012 and 2011, the Company granted 1,577,000 and 1,746,000 shares, respectively, under the 2007 Plan to certain of our employees and our non-employee Directors.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">A summary of restricted stock activity under the 2007 Plan as of March 31, 2012, and the changes during the three months ended March 31, 2012 is as follows:</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 70%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Shares</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Weighted<br />Average<br />Grant Date<br />Fair Value<br />per Award</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">Aggregate<br />Intrinsic<br />Value</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-indent: -0.1in; padding-left: 0.1in; width: 64%;">Restricted stock outstanding, January 1, 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">1,879,000</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">0.75</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td>Granted</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">1,577,000</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.65</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Vested</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(519,750</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">0.80</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Cancelled or expired</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="text-align: right; padding-bottom: 1pt;"> </td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Restricted stock outstanding, March 31, 2012</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">2,936,250</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">0.68</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">1,908,563</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">  </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">As of March 31, 2012, there was $1,993,245 of unrecognized compensation expense related to the unvested portion of restricted stock outstanding. This expense is expected to be recognized over four years.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">After considering the stock option and restricted stock awards issued and outstanding, the Company had 2,086,798 shares of common stock available for future grant under our 2007 Plan at March 31, 2012.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>10. Income Taxes</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has not recognized any income tax provision (benefit) for the three months ended March 31, 2012 and 2011 due to continuing losses from operations.</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The U.S. statutory federal income tax rate is reconciled to the Company’s effective income tax rate as follows (in thousands):</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 76%;">Tax benefit at 35% federal statutory rate</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">3,883</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">3,167</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">State tax benefit, net of federal benefit</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">55</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">45</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Noncontrolling interest</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(598</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(493</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Valuation allowance</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(3,051</td>
<td style="text-align: left;">)</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,107</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(289</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(612</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The effects of temporary differences and other items that give rise to deferred tax assets and liabilities are presented below (in thousands):</p>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">March 31,<br />2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2" nowrap="nowrap">December 31,<br />2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Deferred tax assets:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; width: 76%;">Capitalized start up costs</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">3,461</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">3,558</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td>Stock-based compensation</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">591</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">665</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">Net operating loss carryover</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">71,792</td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">67,671</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Other</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">172</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">163</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 10pt;">Deferred tax assets</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">76,016</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">72,057</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Valuation allowance</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(36,206</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(33,155</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">Deferred tax liabilities:</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;"> </td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Property, plant and equipment</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(39,810</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(38,902</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; padding-left: 10pt;">Deferred tax liabilities</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(39,810</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">(38,902</td>
<td style="text-align: left; padding-bottom: 1pt;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Net deferred tax asset</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-indent: 15pt; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company assesses the recoverability of deferred tax assets and the need for a valuation allowance on an ongoing basis. In making this assessment, management considers all available positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized in future periods. This assessment requires significant judgment and estimates involving current and deferred income taxes, tax attributes relating to the interpretation of various tax laws, historical bases of tax attributes associated with certain assets and limitations surrounding the realization of deferred tax assets.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">As of March 31, 2012, the net operating loss carryforward was $202 million, which will begin to expire if not used by December 31, 2028. The U.S. federal statute of limitations remains open for our 2006 and subsequent tax years.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>11. Employee Benefit Plans</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The LLC sponsors a 401(k) profit sharing and savings plan for its employees. Employee participation in this plan is voluntary and the LLC matches 50% of eligible employee contributions, up to an amount equal to 3% of employee compensation, on a biweekly basis. For the three months ended March 31, 2012 and 2011, contributions to the plan by the LLC totaled $83,000 and $68,000, respectively.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>12. Commitments and Contingencies</b></p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The LLC, through its subsidiaries, entered into two operating lease agreements with Cargill. Cargill’s grain handling and storage facilities, located adjacent to the Wood River and Fairmont plants, are being leased for 20 years, which began in September 2008 for both plants. Minimum annual payments initially were $800,000 for the Fairmont plant and $1,000,000 for the Wood River plant so long as the associated corn supply agreements with Cargill remain in effect. Should the Company not maintain its corn supply agreements with Cargill, the minimum annual payments under each lease increase to $1,200,000 and $1,500,000, respectively. The leases contain escalation clauses which are based on the percentage change in the Midwest Consumer Price Index. The escalation clauses are considered to be contingent rent and, accordingly, are not included in minimum lease payments. Rent expense is recognized on a straight line basis over the terms of the leases. Events of default under the leases include failure to fulfill monetary or non-monetary obligations and insolvency. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two operating lease agreements were modified, for a period of one year, to defer a portion of the monthly lease payments. The deferred lease payments were to be paid back to Cargill over a two year period beginning September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a letter agreement (“Letter Agreement”) whereby (i) effective October 2010 the minimum annual payments under the leases were reduced to $50,000 for the Fairmont plant and $250,000 for the Wood River plant and (ii) repayment of the deferred lease payments have been deferred for an indefinite period of time. As of March 31, 2012, the deferred lease payments totaled $1.6 million and are included in other non-current liabilities.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Beginning in the second quarter of 2008, subsidiaries of the LLC entered into agreements to lease railroad cars over a period of ten years. Pursuant to these lease agreements, the subsidiaries are currently leasing 785 railroad cars for approximately $6.7 million per year. Monthly rental charges escalate if modifications of the cars are required by governmental authorities or mileage exceeds 30,000 miles in any calendar year. Rent expense is recognized on a straight line basis over the terms of the leases. Events of default under the leases include failure to fulfill monetary or non-monetary obligations and insolvency.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In April 2008, the LLC entered into a five year lease that began July 1, 2008 for office space for its corporate headquarters. Rent expense is being recognized on a straight line basis over the term of the lease.</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">In October 2011, subsidiaries of the LLC entered into two operating lease agreements to lease corn oil extraction systems, one for each of its plants. Each lease agreement is for a period of two years and commenced in April 2012 when funding was completed. Pursuant to these lease agreements, each subsidiary is paying approximately $4.3 million per year for the corn oil extraction systems. Rent expense is recognized on a straight line basis over the terms of the leases. Events of default under the leases include failure to fulfill monetary or non-monetary obligations and insolvency.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Future minimum operating lease payments at March 31, 2012 are as follows (in thousands):</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="width: 88%;">Remainder of 2012</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">8,619</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">11,452</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">8,392</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">6,972</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">6,972</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="padding-bottom: 1pt;">Thereafter</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">12,168</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;">Total</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">54,575</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Rent expense recorded for the three months ended March 31, 2012 and 2011 totaled $2,822,000 and $1,914,000, respectively.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Pursuant to long-term agreements, Cargill is the exclusive supplier of corn to the Wood River and Fairmont plants for twenty years commencing September 2008. The price of corn purchased under these agreements is based on a formula including cost plus an origination fee of $0.045 per bushel. The minimum annual origination fee payable to Cargill per plant under the agreements is $1.2 million. The agreements contain events of default that include failure to pay, willful misconduct, purchase of corn from another supplier, insolvency or the termination of the associated grain facility lease. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two corn supply agreements were modified, for a period of one year, extending payment terms for our corn purchases which were to revert back to the original terms on September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a Letter Agreement whereby the extended payment terms for our corn purchases will remain in effect for the remainder of the two corn supply agreements.</p>
<p style="text-align: left; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">At March 31, 2012, the LLC, through its subsidiaries, had contracted to purchase 4,055,000 bushels of corn to be delivered between April 2012 and March 2013 at our Fairmont location, and 5,363,000 bushels of corn to be delivered between April 2012 and October 2013 at our Wood River location. These purchase commitments represent 10% and 8% of the projected corn requirements during those periods for Fairmont and Wood River, respectively. The purchase price of the corn will be determined at the time of delivery.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Cargill has agreed to purchase all ethanol produced at the Wood River and Fairmont plants through September 2016. Under the terms of the ethanol marketing agreements, the Wood River and Fairmont plants generally participate in a marketing pool in which all parties receive the same net price. That price is generally the average delivered price per gallon received by the marketing pool less average transportation and storage charges and less a commission. In certain circumstances, the plants may elect not to participate in the marketing pool. Minimum annual commissions are payable to Cargill equal to 1% of Cargill’s average selling price for 82.5 million gallons of ethanol from each plant. The ethanol marketing agreements contain events of default that include failure to pay, willful misconduct and insolvency. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two ethanol marketing agreements were modified, for a period of one year, to defer a portion of the monthly ethanol commission payments. The deferred commission payments were to be paid to Cargill over a two year period beginning September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a Letter Agreement whereby (i) effective September 24, 2010 the ethanol commissions were reduced and (ii) repayment of the deferred commission payments have been deferred for an indefinite period of time with any repayment at the discretion of the subsidiaries of the LLC. As of March 31, 2012, the deferred ethanol commissions totaled $1.2 million and are included in other non-current liabilities.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company is not currently a party to any material legal, administrative or regulatory proceedings that have arisen in the ordinary course of business or otherwise that would result in loss contingencies.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>13. Noncontrolling Interest</b></p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Noncontrolling interest consists of equity issued to members of the LLC upon the Company’s initial public offering in June 2007. As provided in the LLC agreement, the exchange ratio of the various existing classes of equity of the LLC for the single class of equity at the time of the Company’s initial public offering was based on the Company’s initial public offering price of $10.50 per share and the resulting implied valuation of the Company. The exchange resulted in the issuance of 17,957,896 LLC membership units and Class B common shares. Each LLC membership unit combined with a share of Class B common stock is exchangeable at the holder’s option into one share of Company common stock. The LLC may make distributions to members as determined by the Company.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The following table summarizes the exchange activity since the Company’s initial public offering:</p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 100%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 88%;">LLC Membership Units and Class B common shares outstanding at initial public offering, June 2007</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;"> </td>
<td style="text-align: right; width: 9%;">17,957,896</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">LLC Membership Units and Class B common shares exchanged in 2007</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(561,210</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">LLC Membership Units and Class B common shares exchanged in 2008</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(7,314,438</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left;">LLC Membership Units and Class B common shares exchanged in 2009</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(2,633,663</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">LLC Membership Units and Class B common shares exchanged in 2010</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(336,600</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; text-indent: -0.1in; padding-left: 0.1in;">LLC Membership Units and Class B common shares issued in connection with the LLC concurrent private placement in February 2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">18,369,262</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left;">LLC Membership Units and Class B common shares exchanged in 2011</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">(6,858,303</td>
<td style="text-align: left;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">LLC Membership Units and Class B common shares exchanged in the three months ended March 31, 2012</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Remaining LLC Membership Units and Class B common shares at March 31, 2012</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: right;">18,622,944</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">At the time of its initial public offering, the Company owned 28.9% of the LLC membership units of the LLC. At March 31, 2012, the Company owned 85.0% of the LLC membership units. The noncontrolling interest will continue to be reported until all Class B common shares and LLC membership units have been exchanged for the Company’s common stock.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The table below shows the effects of the changes in BioFuel Energy Corp.’s ownership interest in the LLC on the equity attributable to BioFuel Energy Corp.’s common stockholders for the three months ended March 31, 2012 and 2011 (in thousands):</p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Net Loss Attributable to BioFuel Energy Corp.’s Common Stockholders and</b></p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>Transfers from the Noncontrolling Interest</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table align="center" style="width: 80%; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="6" nowrap="nowrap">Three Months Ended March 31,</td>
<td style="padding-bottom: 1pt; font-weight: bold;" nowrap="nowrap"> </td>
</tr>
<tr style="vertical-align: bottom;">
<td> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2012</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
<td style="border-bottom: black 1pt solid; text-align: center; font-weight: bold;" colspan="2">2011</td>
<td style="padding-bottom: 1pt; font-weight: bold;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 76%;">Net loss attributable to BioFuel Energy Corp.</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(9,408</td>
<td style="text-align: left; width: 1%;">)</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 9%;">(7,662</td>
<td style="text-align: left; width: 1%;">)</td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt; text-indent: -0.1in; padding-left: 0.1in;">Increase in BioFuel Energy Corp. stockholders equity from issuance of common shares in exchange for Class B common shares and units of BioFuel Energy, LLC</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">—</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">2,280</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;">Change in equity from net loss attributable to BioFuel Energy Corp. and transfers from noncontrolling interest</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(9,408</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">(5,382</td>
<td style="text-align: left; padding-bottom: 2.5pt;">)</td>
</tr>
</table>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Tax Benefit Sharing Agreement</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Membership units in the LLC combined with the related Class B common shares held by the historical equity investors may be exchanged in the future for shares of our common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. The LLC will make an election under Section 754 of the IRS Code effective for each taxable year in which an exchange of membership units and Class B shares for common shares occurs, which may result in an adjustment to the tax basis of the assets owned by the LLC at the time of the exchange. Increases in tax basis, if any, would reduce the amount of tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the tax basis increases, and a court could sustain such a challenge. The Company has entered into tax benefit sharing agreements with its historical LLC investors that will provide for a sharing of these tax benefits, if any, between the Company and the historical LLC equity investors. Under these agreements, the Company will make a payment to an exchanging LLC member of 85% of the amount of cash savings, if any, in U.S. federal, state and local income taxes the Company actually realizes as a result of this increase in tax basis. The Company and its common stockholders will benefit from the remaining 15% of cash savings, if any, in income taxes realized. For purposes of the tax benefit sharing agreement, cash savings in income tax will be computed by comparing the Company’s actual income tax liability to the amount of such taxes the Company would have been required to pay had there been no increase in the tax basis in the assets of the LLC as a result of the exchanges. The term of the tax benefit sharing agreement commenced on the Company’s initial public offering in June 2007 and will continue until all such tax benefits have been utilized or expired, unless a change of control occurs and the Company exercises its resulting right to terminate the tax benefit sharing agreement for an amount based on agreed payments remaining to be made under the agreement.</p>
<p style="text-align: right; margin: 0pt 0px; font: 10pt times new roman, times, serif;"></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>True Up Agreement</i></b></p>
<p style="text-align: center; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">At the time of formation of the LLC, the founders agreed with certain of our principal stockholders as to the relative ownership interests in the Company of our management members and affiliates of Greenlight Capital, Inc. (“Greenlight”) and Third Point LLC (“Third Point”). Certain management members and affiliates of Greenlight and Third Point agreed to exchange LLC membership interests, shares of common stock or cash at a future date, referred to as the “true-up date”, depending on the Company’s performance. This provision functions by providing management with additional value if the Company’s value improves and by reducing management’s interest in the Company if its value decreases, subject to a predetermined rate of return accruing to Greenlight and Third Point. In particular, if the value of the Company increases from the time of the initial public offering to the “true-up date”, the management members will be entitled to receive LLC membership units, shares of common stock or cash from the affiliates of Greenlight and Third Point. On the other hand, if the value of the Company decreases from the time of the initial public offering to the “true-up date” or if a predetermined rate of return is not met, the affiliates of Greenlight and Third Point will be entitled to receive LLC membership units or shares of common stock from the management members.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-indent: 0.25in; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The “true-up date” will be the earlier of (1) the date on which the Greenlight and Third Point affiliates sell a number of shares of our common stock equal to or greater than the number of shares of common stock or Class B common stock received by them at the time of our initial public offering in respect of their original investment in the LLC, or (2) five years from the date of the initial public offering which is June 2012. On the “true-up date”, the LLC’s value will be determined, based on the prices at which the Greenlight and Third Point affiliates sold shares of our common stock prior to that date, with any remaining shares (or LLC membership units exchangeable for shares) held by them deemed to have been sold at the then-current trading price. If the number of LLC membership units held by the management members at the time of the offering is greater than the number of LLC membership units the management members would have been entitled to in connection with the “true-up” valuation, the management members will be obligated to deliver to the Greenlight and Third Point affiliates a portion of their LLC membership units or an equivalent number of shares of common stock. Conversely, if the number of LLC membership units the management members held at the time of the offering is less than the number of LLC membership units the management members would have been entitled to in connection with the “true-up” valuation, the Greenlight and Third Point affiliates will be obligated to deliver, at their option, to the management members a portion of their LLC membership interests or an equivalent amount of cash or shares of common stock. In no event will any management member be required to deliver more than 50% of the membership units in the LLC, or an equivalent number of shares of common stock, held on the date of the initial public offering, provided that Mr. Thomas J. Edelman, our former chairman, may be required to deliver up to 100% of his LLC membership units, or an equivalent amount of cash or number of shares of common stock. No new shares will be issued as a result of the “true-up”. As a result there will be no impact on our public stockholders, but rather a redistribution of shares among certain members of our management group and our two largest investors, Greenlight and Third Point. This agreement was considered a modification of the awards granted to the participating management members; however, no incremental fair value was created as a result of the modification.</p>
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