# EDGAR Filing Document

**Accession Number:** 0001352081
**File Stem:** 0001352081-23-000006
**Filing Date:** 2023-2
**Character Count:** 144290
**Document Hash:** 495bff97cbe81ae72b527b277f01bf5a
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001352081-23-000006.hdr.sgml**: 20230206

**ACCESSION NUMBER**: 0001352081-23-000006

**CONFORMED SUBMISSION TYPE**: 10-Q

**PUBLIC DOCUMENT COUNT**: 62

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230206

**DATE AS OF CHANGE**: 20230206

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Cardinal Ethanol LLC
- **CENTRAL INDEX KEY:** 0001352081
- **STANDARD INDUSTRIAL CLASSIFICATION:** INDUSTRIAL ORGANIC CHEMICALS [2860]
- **IRS NUMBER:** 202327916
- **STATE OF INCORPORATION:** IN
- **FISCAL YEAR END:** 0930

**FILING VALUES:**
- **FORM TYPE:** 10-Q
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-53036
- **FILM NUMBER:** 23591476

**BUSINESS ADDRESS:**
- **STREET 1:** 1554 N. 600 E.
- **CITY:** UNION CITY
- **STATE:** IN
- **ZIP:** 47390
- **BUSINESS PHONE:** 765-964-3137

**MAIL ADDRESS:**
- **STREET 1:** 1554 N. 600 E.
- **CITY:** UNION CITY
- **STATE:** IN
- **ZIP:** 47390

?xml version="1.0" ? card-20221231

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

---

| | |
|:---|:---|
| ☒ | **Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.** |
|  | **For the quarterly period ended December 31, 2022.** |
|  | **OR** |
| ☐ | **Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.** |
| **For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .** | **For the transition period from&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; .** |
| **COMMISSION FILE NUMBER 000-53036** | **COMMISSION FILE NUMBER 000-53036** |

---

**CARDINAL ETHANOL, LLC**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Indiana** | **20-2327916** |
| (State or other jurisdiction of<br>incorporation or organization) | (I.R.S. Employer Identification No.) |

---

**1554 N. County Road 600 E., Union City, IN 47390**

(Address of principal executive offices)

**(765) 964-3137**

(Registrant's telephone number, including area code)

Securities registered pursuant to 12(b) of the Act: None.

Title of each class Trading Symbol(s) Name of each exchange on which registered <br>   

Securities registered pursuant to Section 12(g) of the Act: Membership Units.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

⌧Yes&nbsp;&nbsp;&nbsp;&nbsp; □No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

⌧Yes&nbsp;&nbsp;&nbsp;&nbsp; □No

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

---

| | | | |
|:---|:---|:---|:---|
| Large Accelerated Filer | ☐ | Accelerated Filer | ☐ |
| Non-Accelerated Filer | ⌧ | Smaller Reporting Company | ☐ |
| | | Emerging Growth Company | ☐ |

---

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes&nbsp;&nbsp;&nbsp;&nbsp; ⌧No

As of February 6, 2023, there were 14,606 membership units outstanding.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**INDEX**

---

| | |
|:---|:---|
| | **<u>Page Number</u>** |
| **<u>[PART I. FINANCIAL INFORMATION](#i43342546729e41ffb3f65a3f82635f66_10)</u>** | <u>[3](#i43342546729e41ffb3f65a3f82635f66_10)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1.](#i43342546729e41ffb3f65a3f82635f66_13)[Consolidated](#i43342546729e41ffb3f65a3f82635f66_13)[Financial Statements](#i43342546729e41ffb3f65a3f82635f66_13)</u> | <u>[3](#i43342546729e41ffb3f65a3f82635f66_13)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](#i43342546729e41ffb3f65a3f82635f66_61)</u> | <u>[24](#i43342546729e41ffb3f65a3f82635f66_61)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 3. Quantitative and Qualitative Disclosures about Market Risk](#i43342546729e41ffb3f65a3f82635f66_64)</u> | <u>[35](#i43342546729e41ffb3f65a3f82635f66_64)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 4. Controls and Procedures](#i43342546729e41ffb3f65a3f82635f66_67)</u> | <u>[37](#i43342546729e41ffb3f65a3f82635f66_67)</u> |
| **<u>[PART II. OTHER INFORMATION](#i43342546729e41ffb3f65a3f82635f66_70)</u>** | <u>[37](#i43342546729e41ffb3f65a3f82635f66_70)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1. Legal Proceedings](#i43342546729e41ffb3f65a3f82635f66_73)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_73)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 1A. Risk Factors](#i43342546729e41ffb3f65a3f82635f66_76)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_76)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](#i43342546729e41ffb3f65a3f82635f66_79)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_79)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 3. Defaults Upon Senior Securities](#i43342546729e41ffb3f65a3f82635f66_82)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_82)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 4. Mine Safety Disclosures](#i43342546729e41ffb3f65a3f82635f66_85)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_85)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 5. Other Information](#i43342546729e41ffb3f65a3f82635f66_88)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_88)</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;<u>[Item 6. Exhibits](#i43342546729e41ffb3f65a3f82635f66_91)</u> | <u>[38](#i43342546729e41ffb3f65a3f82635f66_91)</u> |
| **<u>[SIGNATURES](#i43342546729e41ffb3f65a3f82635f66_94)</u>** | <u>[39](#i43342546729e41ffb3f65a3f82635f66_94)</u> |

---

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**PART I.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL INFORMATION**

**Item 1. Financial Statements**

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Consolidated Condensed Balance Sheets**

---

| | | |
|:---|:---|:---|
| **ASSETS** | **December 31, 2022** | **September 30, 2022** |
|  | (Unaudited) |  |
| **Current Assets** |  |  |
| &nbsp;&nbsp;&nbsp;Cash and cash equivalents | $68622409 | $53937943 |
| &nbsp;&nbsp;&nbsp;Restricted cash | 10536562 | 9301671 |
| &nbsp;&nbsp;&nbsp;Investments in available-for-sale debt securities | 10795752 |  |
| &nbsp;&nbsp;&nbsp;Trade accounts receivable | 16265923 | 12511601 |
| &nbsp;&nbsp;&nbsp;Miscellaneous receivables | 618152 | 1114588 |
| &nbsp;&nbsp;&nbsp;Inventories | 36263785 | 23370767 |
| &nbsp;&nbsp;&nbsp;Prepaid and other current assets | 1490923 | 464498 |
| &nbsp;&nbsp;&nbsp;Futures and options derivatives | 144491 | 972041 |
| &nbsp;&nbsp;Forward purchase/sales derivatives | 559534 | 360620 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 145297531 | 102033729 |
| **Property, Plant, and Equipment, Net** | 83706170 | 78457058 |
| **Other Assets** |  |  |
| &nbsp;&nbsp;&nbsp;Operating lease right of use asset, net | 6012992 | 6808992 |
| &nbsp;&nbsp;&nbsp;Investments | 1424943 | 1656049 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets | 7437935 | 8465041 |
| **Total Assets** | $236441636 | $188955828 |
| **LIABILITIES AND MEMBERS' EQUITY** |  |  |
| **Current Liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Due to broker | $180419 | $— |
| &nbsp;&nbsp;&nbsp;Accounts payable | 3192405 | 4426732 |
| &nbsp;&nbsp;&nbsp;Accounts payable - grain | 46715405 | 12335894 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 3260712 | 3897364 |
| &nbsp;&nbsp;&nbsp;Futures and options derivatives | 2670754 | 2669433 |
| &nbsp;&nbsp;&nbsp;Forward purchase/sales derivatives | 228911 | 507408 |
| &nbsp;&nbsp;&nbsp;Operating lease liability current | 3591639 | 3594335 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 59840245 | 27431166 |
| **Long-Term Liabilities** |  |  |
| &nbsp;&nbsp;&nbsp;Long-term debt | 16185919 | 9000000 |
| &nbsp;&nbsp;&nbsp;Operating lease long-term liabilities | 2439008 | 3217532 |
| &nbsp;&nbsp;&nbsp;Liability for railcar rehabilitation costs | 2111013 | 2036638 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities | 20735940 | 14254170 |
| **Commitments and Contingencies** |  |  |
| **Members' Equity** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Members' contributions, net of cost of raising capital, 14,606 units authorized, issued and outstanding | 70912213 | 70912213 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive loss | (7706) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Retained earnings | 84960944 | 76358279 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total members' equity | 155865451 | 147270492 |
| **Total Liabilities and Members' Equity** | $236441636 | $188955828 |

---

Notes to Consolidated Condensed Unaudited Financial Statements are an integral part of this Statement.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Consolidated Condensed Statements of Operations (Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended** | **Three Months Ended** |
| | **December 31, 2022** | **December 31, 2021** |
| **Revenues** | $134948119 | $150256949 |
| **Cost of Goods Sold** | 117009175 | 115338341 |
| **Gross Profit** | 17938944 | 34918608 |
| **Operating Expenses** | 2272604 | 2135373 |
| **Operating Income** | 15666340 | 32783235 |
| **Other Income (Expense)** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest income | 421732 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Miscellaneous income (expense) | 48699 | (388071) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income (loss) on equity method investment | (231106) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | 239325 | (388071) |
| **Net Income** | $15905665 | $32395164 |
| **Weighted Average Units Outstanding - basic and diluted** | 14606 | 14606 |
| **Net Income Per Unit - basic and diluted** | $1089 | $2218 |
| **Distributions Per Unit** | $500 | $650 |
| Unrealized loss on available-for-sale debt securities | (7706) |  |
| &nbsp;&nbsp;&nbsp; Total comprehensive loss | (7706) |  |
| **Net Comprehensive Income** | $15897959 | $— |

---

Notes to Consolidated Condensed Unaudited Financial Statements are an integral part of this Statement.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Consolidated Condensed Statements of Cash Flows (Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended**<br>**December 31, 2022** | **Three Months Ended**<br>**December 31, 2021** |
| **Cash Flows from Operating Activities** | | |
| &nbsp;&nbsp;&nbsp;Net income | $15905665 | $32395164 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash provided by operations: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization | 2881483 | 2862894 |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in fair value of commodity derivative instruments | 351460 | 7300012 |
| &nbsp;&nbsp;&nbsp;&nbsp;Accrued interest income | (48794) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-cash lease expense | 14780 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Loss from equity method investment | 231106 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Change in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade accounts receivable | (3754322) | (932046) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Miscellaneous receivables | 496436 | (240270) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (12893018) | (4975650) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid and other current assets | (1026425) | (991943) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable | (926821) | 70305 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable - grain | 34379511 | 31952624 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued expenses | (606738) | 510262 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Liability for railcar rehabilitation costs | 74375 | 79380 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to broker | 180419 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash provided by operating activities** | 35259117 | 68030732 |
| **Cash Flows from Investing Activities** |  |  |
| &nbsp;&nbsp;&nbsp;Payments for construction in progress | (8468015) | (136773) |
| &nbsp;&nbsp;&nbsp;Purchases of investments in debt securities | (10754664) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **Net cash used for investing activities** | (19222679) | (136773) |
| **Cash Flows from Financing Activities** |  |  |
| &nbsp;&nbsp;&nbsp;Distributions paid | (7303000) | (9493900) |
| &nbsp;&nbsp;&nbsp;Proceeds from long-term debt | 7185919 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Net cash used for financing activities** | (117081) | (9493900) |
| **Net Increase in Cash, Cash Equivalents, and Restricted Cash** | 15919357 | 58400059 |
| **Cash, Cash Equivalents, and Restricted Cash – Beginning of Period** | 63239614 | 33895947 |
| **Cash, Cash Equivalents, and Restricted Cash – End of Period** | $79158971 | $92296006 |

---

Notes to Consolidated Condensed Unaudited Financial Statements are an integral part of this Statement.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Consolidated Condensed Statements of Cash Flows (Unaudited)**

---

| | | |
|:---|:---|:---|
| | **Three Months Ended**<br>**December 31, 2022** | **Three Months Ended**<br>**December 31, 2021** |
| **Reconciliation of Cash, Cash Equivalents, and Restricted Cash** | | |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents - Balance Sheet | $68622409 | $78379391 |
| &nbsp;&nbsp;&nbsp;&nbsp;Restricted Cash - Balance Sheet | 10536562 | 13916615 |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash, Cash Equivalents, and Restricted Cash | $79158971 | $92296006 |
| **Supplemental Cash Flow Information** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Interest paid | $131741 | $— |
| **Supplemental Disclosure of Non-cash Investing and Financing Activities** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Construction in progress included in accrued expenses and accounts payable | $5720 | $258 |
| &nbsp;&nbsp;&nbsp;&nbsp; Construction period interest capitalized in property plant and equipment | $225014 | $— |

---

Notes to Consolidated Condensed Unaudited Financial Statements are an integral part of this Statement.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Consolidated Condensed Statements of Changes in Members' Equity (Unaudited)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Member <br>Contributions** | **Retained<br>Earnings** | **Accumulated Other Comprehensive Loss** | **Total** |
| **Balance September 30, 2021** | $70912213 | $53825365 | $— | $124737578 |
| Net Income |  | 32395164 |  | 32395164 |
| Member Distributions |  | (9493900) |  | (9493900) |
| **Balance December 31, 2021** | $70912213 | $76726629 | $— | $147638842 |
|  | **Member Contributions** | **Retained Earnings** | **Accumulated Other Comprehensive Loss** | **Total** |
| **Balance September 30, 2022** | $70912213 | $76358279 | $— | $147270492 |
| Net Income |  | 15905665 |  | 15905665 |
| Member Distributions |  | (7303000) |  | (7303000) |
| Unrealized loss on available-for-sale debt securities |  |  | (7706) | (7706) |
| **Balance December 31, 2022** | $70912213 | $84960944 | $(7706) | $155865451 |

---

Notes to Consolidated Condensed Unaudited Financial Statements are an integral part of this Statement.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

The accompanying unaudited consolidated condensed financial statements (the "financial statements") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended September 30, 2022, contained in the Company's annual report on Form 10-K.

In the opinion of management, the interim condensed financial statements reflect all adjustments considered necessary for fair presentation.

*<u>Nature of Business</u>*

Cardinal Ethanol, LLC and Subsidiaries (the "Company") is an Indiana limited liability company currently producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. During the three months ended December 31, 2022 and 2021, the Company produced approximately 34,254,000 and 36,023,000 gallons of ethanol, respectively.

In addition, the Company procures, transports, and sells grain commodities through grain operations.

*<u>Basis of Accounting</u>*

The Company prepared the accompanying financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The financial statements include the operations, assets and liabilities of the Company. In the opinion of the Company's management, the accompanying financial statements contain all adjustments, consisting of normal recurring accruals, necessary to fairly present the accompanying financial statements.

*<u>Principles of Consolidation</u>*

The accompanying financial statements include the accounts of Cardinal Ethanol, LLC and its wholly owned subsidiaries, Cardinal Ethanol Export Sales, Inc. and Cardinal One Carbon Holdings, LLC (collectively, the Company). Cardinal Ethanol Export Sales, Inc. is an Interest Charge Domestic to International Sales Company ("IC-DISC") designed to take advantage of certain tax incentives for export sales to other countries. Cardinal One Carbon Holdings, LLC was formed to hold the partnership interest for the investigation and pursuit of carbon dioxide capture and sequestration. All inter-company balances and transactions have been eliminated in consolidation.

*<u>Reportable Segments</u>*

Accounting Standard Codification ("ASC") 280, "Segment Reporting," establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ethanol Division. Based on the nature of the products and production process and the expected financial results, the Company's operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Trading Division. The Company has a grain loading facility within the Company's single site to buy, hold and sell inventories of agricultural grains, primarily soybeans. The Company performs no additional processing of these grains,

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

unlike the corn inventory the Company holds and uses in ethanol production. The activities of buying, selling and holding of grains other than for ethanol and co-product production comprise this financial reporting segment.

*<u>Accounting Estimates</u>*

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Ethanol Division uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, inventories, the assumptions used in the analysis of the impairment of long lived assets, railcar rehabilitation costs, and inventory purchase commitments.

The Trading Division uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, the valuation of inventory purchase and sale commitment derivatives and inventory at market.

Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ materially from those estimates.

*<u>Cash and Cash Equivalents</u>*

The Company maintains its accounts primarily at two financial institutions. At times throughout the year the Company's cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation. Cash equivalents represent money market funds or short-term investments with original maturities of three months or less from the date of purchase, except for those amounts that are held in the investment portfolio for long-term investment.

*<u>Restricted Cash</u>*

As a part of its commodities hedging activities, the Company is required to maintain cash balances with its commodities trading companies for initial and maintenance margins on a per futures contract basis. Changes in the market value of contracts may increase these requirements. As the futures contracts expire, the margin requirements also expire. Accordingly, the Company records the cash maintained with the traders in the margin accounts as restricted cash. Since this cash is immediately available upon request when there is a margin excess, the Company considers this restricted cash to be a current asset.

*<u>Investments in Available-for-Sale Debt Securities</u>*

The Company holds funds in a short-term investments in debt securities, such as U.S. treasury bills or treasury notes. As some of the investments in debt securities have an original maturity date greater than three months, these investments are classified as available-for-sale. The Company is holding these short-term investments until maturity or for sale in the event cash is needed. Unrealized gains and losses on the Company's investments classified as available-for-sale are recognized in other comprehensive income (loss) until realized.

*<u>Trade Accounts Receivable</u>*

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Amounts considered uncollectible are written off. The Company's estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At December 31, 2022 and September 30, 2022, the Company determined that an allowance for doubtful accounts was not necessary.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

*<u>Inventories</u>*

Ethanol Division (see Reportable Segments) inventories consist of raw materials, work in process, finished goods and spare parts. Corn is the primary raw material. Finished goods consist of ethanol, dried distiller grains and corn oil. Inventories are stated at the lower of weighted average cost or net realizable value. Net realizable value is the estimated selling prices in the normal course of business, less reasonably predictable selling costs.

Trading Division (see Reportable Segments) inventories consist of grain. Soybeans were the only grains held and traded at December 31, 2022 and September 30, 2022. These inventories are stated at market value less estimated selling costs, which may include reductions for quality.

*<u>Property, Plant and Equipment</u>*

Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight-line depreciation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service.

The Company has various capital projects scheduled for the 2023 fiscal year in order to make certain improvements to the ethanol plant and maintain the facility. These improvements include updates to the 190 condenser, rail siding, sieve vaporizer, cyber security, grain scales, spare parts storage, and other small miscellaneous projects. The Company has plans to install a high protein feed system, costing approximately $50,000,000, including recent change orders, and be funded from operations and from our current credit facilities as amended. Installation of the system commenced during the fourth quarter of our 2022 fiscal year. This project is expected to be completed by Fall of 2023.

*<u>Long-Lived Assets</u>*

The Company reviews its long-lived assets, such as property, plant and equipment and financing costs, subject to depreciation and amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Management evaluated and determined no impairment write-downs were considered necessary for the three months ended December 31, 2022 and 2021.

*<u>Investments</u>*

Investments consist of the capital stock and patron equities of the Company's distillers grains marketer. The investment is stated at the lower of cost or fair value and adjusted for non-cash patronage equities and cash equity redemptions received. Non-cash patronage dividends are recognized when received and included within revenue in the statements of operations.

The Company has also created certain subsidiaries to achieve some of its varying business interests that are not directly related to ethanol production or trading of grain. One has been formed as a corporation, while the other has been formed as a limited liability company (LLC) to hold interests in affiliated companies for carbon capture and underground sequestration (CCS). Through its LLC, the company owns a fifty percent interest in a joint venture which is accounted for as an equity method investment as described in detail in <u>Note 12 - Equity Method Investments.</u>

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

*<u>Revenue Recognition</u>*

Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company's contracts primarily consist of agreements with marketing companies and other customers as described below. The Company's performance obligations consist of the delivery of ethanol, distillers grains, corn oil, soybeans and carbon dioxide to its customers. The consideration the Company receives for these products is fixed based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. The Company's contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. The Company sells each of the products via different marketing channels as described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ethanol. The Company sells its ethanol via a marketing agreement with Murex, LLC. Murex markets one hundred percent of the Company's ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Murex and the Company. Murex then provides a schedule of deliveries required and an order for each rail car or tankers needed to fulfill their commitment with the end user. These are individual performance obligations of the Company. The marketing agreement calls for control and title to pass when the delivery vehicle is filled. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and insurance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Distillers grains. The Company engages another third-party marketing company, CHS, Inc, to market one hundred percent of the distillers grains it produces at the plant. The process for selling the distillers grains is like that of ethanol, except that CHS takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon among the three parties, and CHS provides schedules and orders representing performance obligations. Revenue is recognized net of commissions, freight, and fees.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Distillers corn oil (corn oil). The Company sells its production of corn oil directly to commercial customers. The customer is provided with a delivery schedule and pick up orders representing performance obligations. These are fulfilled when the customer's driver picks up the scheduled load. The price is agreed upon at the time each contract is made, and the Company recognizes revenue at the time of delivery at that price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Carbon dioxide. The Company sells a portion of the carbon dioxide it produces to a customer that maintains a plant on-site for a set price per ton. Delivery is defined as transference of the gas from the Company's stream to their plant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Soybeans and other grains. The Company sells soybeans exclusively to commercial mills, processors or grain traders. Contracts are negotiated directly with the parties at prices based on negotiated prices.

*<u>Cost of Goods Sold</u>*

Cost of goods sold include corn, trading division grains, natural gas and other components which includes processing ingredients, electricity, railcar lease, railcar maintenance, depreciation of ethanol production fixed assets and wages, salaries and benefits of production personnel.

*<u>Operating Expenses</u>*

Operating expenses include wages, salaries and benefits of administrative employees at the plant, insurance, professional fees, depreciation of trading division fixed assets, property taxes and similar costs.

*<u>Derivative Instruments</u>*

From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheet at fair value.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in the statement of operations, depending on the item being hedged.

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally 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. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our financial statements.

The Company has elected for its Ethanol Division to apply the normal purchase normal sale exemption to all forward commodity contracts. For the Trading Division, the Company has elected not to apply the normal purchase normal sale exemption to its forward purchase and sales contracts and therefore, marks these derivative instruments to market.

*<u>Net Income per Unit</u>*

Basic net income per unit is computed by dividing net income by the weighted average number of members' units outstanding during the period. Diluted net income per unit is computed by dividing net income by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

**2. REVENUE**

*Revenue Recognition*

Revenue is recognized at a single point in time when the Company satisfies its performance obligation under the terms of a contract with a customer. Generally, this occurs with the transfer of control of products or services. Revenue is measured as the amount of consideration expected, as specified in the contract with a customer, to be received in exchange for transferring goods or providing services.

*Revenue by Source*

All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

The following tables disaggregate revenue by major source for the three months ended December 31, 2022 and 2021:

Three Months Ended December 31, 2022 (Unaudited)

---

| | | | |
|:---|:---|:---|:---|
| | Ethanol Division | Trading Division | Total |
| Revenues from contracts with customers under ASC Topic 606 |  |  |  |
| Ethanol | $86311246 | $— | $86311246 |
| Distillers grains | 15363951 |  | 15363951 |
| Corn Oil | 8029640 |  | 8029640 |
| Carbon Dioxide | 121094 |  | 121094 |
| Total revenues from contracts with customers | 109825931 |  | 109825931 |
| Revenues from contracts accounted for as derivatives under ASC Topic 815 <sup>(1)</sup> |  |  |  |
| Soybeans and other grains |  | 25122188 | 25122188 |
| Total revenues from contracts accounted for as derivatives |  | 25122188 | 25122188 |
| Total Revenues | $109825931 | $25122188 | $134948119 |

---

Three Months Ended December 31, 2021 (Unaudited)

---

| | | | |
|:---|:---|:---|:---|
| | Ethanol Division | Trading Division | Total |
| Revenues from contracts with customers under ASC Topic 606 |  |  |  |
| Ethanol | $102522928 | $— | $102522928 |
| Distillers grains | 13766898 |  | 13766898 |
| Corn Oil | 6161538 |  | 6161538 |
| Carbon Dioxide | 114386 |  | 114386 |
| Other Revenue | 24475 | 49325 | 73800 |
| Total revenues from contracts with customers | 122590225 | 49325 | 122639550 |
| Revenues from contracts accounted for as derivatives under ASC Topic 815 <sup>(1)</sup> |  |  |  |
| Soybeans and other grains |  | 27617399 | 27617399 |
| Total revenues from contracts accounted for as derivatives |  | 27617399 | 27617399 |
| Total Revenues | $122590225 | $27666724 | $150256949 |

---

(1) Revenues from contracts accounted for as derivatives represent physically settled derivative sales that are outside the scope of ASC Topic 606, *Revenue from Contracts with Customers* (ASC Topic 606), where the company recognizes revenue when control of the inventory is transferred within the meaning of ASC Topic 606 as required by ASC Topic 610-20, *Gains and Losses from the Derecognition of Nonfinancial Assets.*

*Payment Terms*

The Company has contractual payment terms with each respective marketer that sells ethanol and distillers grains. These terms are generally 7 - 14 days after the week of the transfer of control.

The Company has standard payment terms of net 10 days for its sale for corn oil.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

The Company has standard payments terms due upon delivery for its sale of soybeans.

The contractual terms with the carbon dioxide customer calls for an annual settlement.

*Shipping and Handling Costs*

Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue.

*Contract Liabilities*

The Company records unearned revenue when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services to the customer under the terms of its contracts with customers.

**3. CONCENTRATIONS**

Two major customers accounted for approximately 92% and 82% of the outstanding accounts receivable balance at December 31, 2022 and September 30, 2022, respectively. These same two customers accounted for approximately 75% of revenue for the three months ended December 31, 2022 and 77% of revenue for the three months ended December 31, 2021.

**4. INVENTORIES**

Inventories consist of the following as of:

---

| | | |
|:---|:---|:---|
| | December 31, 2022 (Unaudited) | September 30, 2022 |
| *Ethanol Division:* |  |  |
| Raw materials | $17257233 | $7206914 |
| Work in progress | 2648814 | 2442453 |
| Finished goods | 5595980 | 7513988 |
| Spare parts | 4730733 | 4178807 |
| &nbsp;&nbsp;&nbsp;Ethanol Division Subtotal | $30232760 | $21342162 |
| *Trading Division:* |  |  |
| Grain inventory | $6031025 | $2028605 |
| &nbsp;&nbsp;&nbsp;Trading Division Subtotal | 6031025 | 2028605 |
| Total Inventories | $36263785 | $23370767 |

---

The Company had a net realizable value write-down of $872,000 for ethanol inventory for the three months ended December 31, 2022. The Company did not have a net realizable value write down for ethanol inventory for the three months ended December 31, 2021.

In the ordinary course of its ethanol business, the Company enters into forward purchase contracts for its commodity purchases and sales. Certain contracts for the ethanol division that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. At December 31, 2022, the Company had forward corn purchase contracts at various fixed prices for various delivery periods through March 2024 for approximately 11% of expected production needs for the next 15 months. Approximately 3% of the forward corn purchases were with related parties. Given the uncertainty of future commodity prices, the Company could incur a loss on the outstanding purchase contracts in future periods. Management has evaluated these forward contracts using the lower of cost or net realizable value evaluation, and the Company has not recognized any impairment at December 31, 2022 and September 30, 2022. The Company has elected not to

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

apply the normal purchase and sale exemption to its forward soybean contracts of the trading division and therefore, treats them as derivative instruments.

At December 31, 2022, the Ethanol Division had forward dried distiller grains sales contracts for approximately 45% of expected production for the next month at various fixed prices for delivery periods through January 2023. At December 31, 2022, the Company had forward corn oil contracts for approximately 143% of expected production for the next month at various fixed prices for delivery through January 2023. Additionally, at December 31, 2022, the Trading Division had forward soybean purchase contracts for approximately 18% of expected origination for various delivery periods through January 2024. Approximately 14% of the forward soybean purchases were with related parties.

**5. DERIVATIVE INSTRUMENTS**

The Company enters into corn, ethanol, natural gas, soybean oil and soybean derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company must designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure.

<u>Commodity Contracts</u>

The Company enters into commodity-based derivatives, for corn, ethanol, natural gas, soybean oil and soybeans in order to protect cash flows from fluctuations caused by volatility in commodity prices and to protect gross profit margins from potentially adverse effects of market and price volatility on commodity based purchase commitments where the prices are set at a future date. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. The changes in the fair market value of ethanol derivative instruments are included as a component of revenue. The changes in the fair market value of corn, natural gas, soybean oil, and soybean derivative instruments are included as a component of cost of goods sold.

At December 31, 2022, the Ethanol Division had a net short (selling) position of 11,345,000 bushels of corn under derivative contracts used to hedge its forward corn purchase contracts, corn inventory and ethanol sales. These corn derivatives are traded on the Chicago Board of Trade and other markets as of December 31, 2022 and are forecasted to settle for various delivery periods through March 2024. The Ethanol Division had a net short (selling) position of 12,180,000 gallons of ethanol under derivative contracts used to hedge its future ethanol sales. These ethanol derivatives are traded on the New York Mercantile Exchange and are forecasted to settle for various delivery periods through September 2023. The Ethanol Division had no open positions of soybean oil under derivative contracts as of December 31, 2022. Soybean oil derivatives are traded on the Chicago Board of Trade. At December 31, 2022, the Ethanol Division had a net long (buying) position of 400,000 mmbtus of natural gas under derivative contracts used to hedge its forward natural gas purchase contracts. These natural gas derivatives are traded on the New York Mercantile Exchange and other markets and are forecasted to settle for various delivery periods through March 2023. At December 31, 2022, the Trading Division had a net short (selling) position of 985,000 bushels of soybeans under derivative contracts used to hedge its forward soybean purchase contracts. These soybean derivatives are traded on the Chicago Board of Trade and are, as of December 31, 2022, forecasted to settle for various delivery periods through January 2024. These derivatives have not been designated as effective hedges for accounting purposes.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

The following table provides balance sheet details regarding the Company's derivative financial instruments at December 31, 2022:

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| | | | |
|:---|:---|:---|:---|
| Instrument | Balance Sheet Location | Assets | Liabilities |
| Ethanol Futures and Options Contracts | Futures and Options Derivatives | $144491 | $— |
| Corn Futures and Options Contracts | Futures and Options Derivatives | $— | $1775982 |
| Natural Gas Futures and Options Contracts | Futures and Options Derivatives | $— | $626470 |
| Soybean Futures and Options Contracts | Futures and Options Derivatives | $— | $268302 |
| Soybean Forward Purchase and Sales Contracts | Forward Purchase/Sales Derivatives | $559534 | $228911 |

---

As of December 31, 2022, the Company had approximately $10,537,000 of cash collateral (restricted cash) related to ethanol, corn, natural gas, and soybean derivatives held by three brokers.

The following table provides balance sheet details regarding the Company's derivative financial instruments at September 30, 2022:

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| | | | |
|:---|:---|:---|:---|
| Instrument | Balance Sheet Location | Assets | Liabilities |
| Ethanol Futures and Options Contracts | Futures and Options Derivatives | $— | $841470 |
| Corn Futures and Options Contracts | Futures and Options Derivatives | $— | $1827963 |
| Soybean Futures and Options Contracts | Futures and Options Derivatives | $972041 | $— |
| Soybean Forward Purchase and Sales Contracts | Forward Purchase/Sales Derivatives | $360620 | $507408 |

---

As of September 30, 2022, the Company had approximately $9,302,000 of cash collateral (restricted cash) related to ethanol, corn, and soybean derivatives held by three brokers.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

The following table provides details regarding the gains and (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments:

---

| | | | |
|:---|:---|:---|:---|
| Instrument | Statement of Operations Location | Three Months Ended December 31, 2022 | Three Months Ended December 31, 2021 |
| Corn Futures and Options Contracts | Cost of Goods Sold | $2145852 | $(433760) |
| Ethanol Futures and Options Contracts | Revenues | 2411665 | (16008798) |
| Natural Gas Futures and Options Contracts | Cost of Goods Sold | (776052) | (39039) |
| Soybean Oil Futures and Options Contracts | Cost of Goods Sold | (16927) | 153970 |
| Soybean Futures and Options Contracts | Cost of Goods Sold | (1552337) | (772340) |
| Soybean Forward Purchase and Sales Contracts | Cost of Goods Sold | 550043 | 638729 |
| Totals |  | $2762244 | $(16461238) |

---

**6. FAIR VALUE MEASUREMENTS**

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Instruments** | **Carrying Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| Corn Futures and Options Contracts | $(1775982) | $(1775982) | $(1786725) | $10743 | $— |
| Ethanol Futures and Options Contracts | $144491 | $144491 | $144491 | $— | $— |
| Natural Gas Futures and Options Contracts | $(626470) | $(626470) | (421640) | $(204830) | $— |
| Soybean Futures and Options Contracts | $(268302) | $(268302) | $(268302) | $— | $— |
| Soybean Forward Purchase Contracts | $330623 | $330623 | $— | $330623 | $— |
| Soybean Inventory | $6031025 | $6031025 | $— | $6031025 | $— |
| Accounts Payable | $13337455 | $13337455 | $— | $13337455 | $— |
| Treasury Bills (classified as investments in available-for-sale debt securities) | $10795752 | $10795752 | $10795752 | $— | $— |
| Treasury Bills (classified as cash equivalents) | $1188588 | $1188588 | $1188588 | $— | $— |

---

The Company's investments in available-for-sale debt securities consisted of Treasury Bills at December 31, 2022. The scheduled maturity date is May 25, 2023. Unrealized losses on these investments are included as accumulated other comprehensive loss in the statements of changes in members' equity. As of December 31, 2022, the unrealized holding losses total approximately $7,700.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Instruments** | **Carrying Amount** | **Fair Value** | **Level 1** | **Level 2** | **Level 3** |
| Corn Futures and Options Contracts | $(1827963) | $(1827963) | $(1827963) | $— | $— |
| Ethanol Futures and Options Contracts | $(841470) | $(841470) | $(841470) | $— | $— |
| Soybean Futures and Options Contracts | $972041 | $972041 | $972041 | $— | $— |
| Soybean Forward Purchase Contracts | $(146788) | $(146788) | $— | $(146788) | $— |
| Soybean Inventory | $2028605 | $2028605 | $— | $2028605 | $— |
| Accounts Payable | $(4379251) | $(4379251) | $— | $(4379251) | $— |
| Treasury Bills (classified as cash equivalents) | $33228697 | $33228697 | $33228697 | $— | $— |

---

We determine the fair value of commodity futures derivative instruments utilizing Level 1 inputs by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange.

We determine the fair value of treasury bills utilizing Level 1 inputs by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data based on quoted market prices in active markets.

We determine the fair value of corn and soybean futures and options Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above. Soybean forward purchase and sale contracts are reported at fair value using Level 2 inputs from current contract prices that are being issued by the Company.

Soybean inventory held in the trading division is reported at fair value using Level 2 inputs which are based on purchases and sales transactions that occurred on or near December 31, 2022 and September 30, 2022.

Accounts payable is generally stated at historical amounts, with the exception of approximately $13,337,000 and $4,379,000 at December 31, 2022 and September 30, 2022, respectively, related to certain delivered inventory for which the payable fluctuates based on changes in commodity prices. These payables are hybrid financial instruments for which the Company has elected the fair value option.

The Company believes the fair value of its long-term debt to be the carrying value of $16,185,919 at December 31, 2022 and $9,000,000 at September 30, 2022. The Company considers this to be a Level 2 input. The fair value and carrying values consider the terms of the related debt and exclude the impacts of discounts and derivative/hedging activity.

**7. BANK FINANCING**

The Company has a loan agreement consisting of two loans, the Declining Revolving Loan (Declining Loan) and the Revolving Credit Loan in exchange for liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts and assignment of material contracts. The loan agreement assigns an interest rate based upon the U.S. prime rate published in the Wall Street Journal to each of the individual loans. The interest rates on each of the loans changes daily.

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<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

*<u>Declining Loan</u>*

The maximum availability of the Declining Loan was formerly $5,000,000 and such amount was to be available for working capital purposes. However, the maximum availability of the Declining Loan was increased from $5,000,000 to $36,000,000 in order to provide financing to fund the construction and installation of a high protein feed system at the plant. The interest rate on the Declining Loan is currently based on the prime rate minus five basis points (.05%) subject to a floor of 2.85%. The interest rate was 7.45% and 6.20% at December 31, 2022 and September 30, 2022, respectively. The Company is required to make monthly interest payments on the Declining Loan during the draw period. The principal balance of the Declining Loan is expected to be converted to term debt on or before February 1, 2024, to be repaid in 60 equal monthly installments based on a ten year amortization period. In addition, the Company will be required to make mandatory annual prepayments on the term debt within 120 days following the end of each fiscal year beginning with the fiscal year ended September 30, 2024. The annual prepayment will be in the amount of the lesser of 40% of excess cash flow or $7,200,000, up to an aggregate amount paid of $18,000,000. The Company had borrowings outstanding of $16,185,919 and $9,000,000 on the Declining Loan at December 31, 2022 and September 30, 2022, respectively.

The Company has reached agreement with its lender to amend its loan agreement. The terms of the amendment increase the maximum availability of the Declining Loan from $36,000,000 to $39,000,000 and change the date at which the Declining Loan is expected to be converted to term debt to on or before May 1, 2024. The Company expects that the amendment will be executed in February 2023.

*<u>Revolving Credit Loan</u>* 

The Revolving Credit Loan has a limit of $20,000,000 supported by a borrowing base made up of the Company's corn, ethanol, dried distillers grain, corn oil and soybean inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds. The interest rate on the Revolving Credit Loan is the prime rate minus twenty-five basis points (.25%) and is subject to a floor of 2.75%. The interest rate was 7.25% and 6.00% at December 31, 2022 and September 30, 2022, respectively. There were no borrowings outstanding on the Revolving Credit Loan at December 31, 2022 and September 30, 2022. The Revolving Credit Loan is set to mature on February 28, 2023.

The Company has reached agreement with its lender to amend its loan agreement. The terms of the amendment extend the maturity date of the Revolving Credit Loan to February 28, 2024. The Company expects that the amendment will be executed in February 2023.

These loans are subject to protective covenants, which require the Company to maintain various financial ratios. The covenants include a working capital requirement of $15,000,000, and a capital expenditures covenant that allows the Company $5,000,000 of expenditures per year without prior approval. The cost of the high protein feed system is excluded from the capital expenditures calculation until the principal balance of the Declining Loan converts to term debt. There is also a requirement to maintain a minimum fixed charge coverage ratio of no less than 1.15:1.0 measured quarterly. A debt service charge coverage ratio of no less than 1.25:1.0 in lieu of the fixed charge coverage ratio will apply for any reporting period that working capital is equal to or more than $23,000,000. The Company had no borrowings on the Revolving Credit Loan as of December 31, 2022 and September 30, 2022.

The Company has reached agreement with its lender to amend its loan agreement. The terms of the amendment increase the capital expenditures covenant to $6,000,000 of expenditures per year without prior approval. The Company expects that the amendment will be executed in February 2023.

The estimated maturities of long-term debt at December 31, 2022 are as follows:

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**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

---

| | |
|:---|:---|
| January 1, 2023 to December 31, 2023 | $— |
| January 1, 2024 to December 31, 2024 | 1761977 |
| January 1, 2025 to December 31, 2025 | 1947040 |
| January 1, 2026 to December 31, 2026 | 2097151 |
| January 1, 2027 to December 31, 2027 | 2258837 |
| Thereafter | 8120914 |
| Total long-term debt | $16185919 |

---

**8. LEASES**

The Company leases rail cars for its facility to transport ethanol and dried distillers grains to its end customers. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease payments. For the three months ended December 31, 2022, the Company's weighted average discount rate was 5.18%. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company determines if an arrangement is a lease or contains a lease at inception. The Company's leases have remaining lease terms of approximately 1 year to 2 years, which may include options to extend the lease when it is reasonably certain the Company will exercise those options. For the three months ended December 31, 2022, the weighted average remaining lease term was 1.74 years. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants. The Company does not have any material finance lease obligations nor sublease agreements.

The following table summarizes the remaining maturities of the Company's operating lease liabilities as of December 31, 2022:

---

| | |
|:---|:---|
| For the Fiscal Year Ending September 30, |  |
| 2023 | 3807030 |
| 2024 | 2496340 |
| Totals | 6303370 |
| Amount representing interest | (272723) |
| Lease liabilities | $6030647 |

---

For the three months ended December 31, 2022, the Company recorded operating lease costs of approximately $944,000 in cost of goods sold in the Company's statement of operations.

**9. COMMITMENTS AND CONTINGENCIES**

<u>Marketing Agreement</u>

The Company entered into an agreement with an unrelated company for the purpose of marketing and selling all the distillers grains the Company is expected to produce. The buyer agrees to remit a fixed percentage rate of the actual selling price to the Company for distillers dried grain solubles and wet distiller grains. The agreement may be terminated by either party at its unqualified option, by providing written notice of not less than 120 days to the other party.

The Company entered into an agreement with an unrelated company to sell all of the ethanol the Company produces at the plant. The Company agrees to pay a commission of a fixed percent of the net purchase price for marketing and distribution. In July 2009, the initial term of the agreement was extended to eight years and the commission increased in exchange for reducing the payment terms from 14 days to 7 days after shipment. In November 2012, the Company amended this agreement to extend

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**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

the initial term of the agreement to eleven years, expiring in 2019, in exchange for capping the commissions at $1,750,000 per year. Effective November 18, 2018, the two companies amended the marketing agreement. The amendment added a renewal term to the initial agreement that extended the contract until November 30, 2022. It provided for the payment of the commission to Murex to be calculated on each net gallon of ethanol taken under the agreement. It modified how the cost of rail car shipments are charged to the Company, moving from a per gallon fee to requiring that the marketer provide a minimum 225 rail cars to the Company on a per car per month lease basis as described in Note 8. Finally, it reduced the delivery to payment period. On September 14, 2022, the Company executed an amendment to extend the term until December 31, 2024, subject to automatic renewals thereafter for one-year periods unless either party gives notice of non-renewal at least 90 days prior to the end of the current term. The agreement may also be terminated due to the insolvency or intentional misconduct of either party or upon the default of one of the parties as set forth in the agreement. In addition, the amendment added a provision that allows the Company to terminate the agreement on 90 days prior written notice upon a "Material Change in Control". Upon termination of the agreement for any reason, the Company may be obligated to continue to deliver ethanol for a period of time to cover certain contractual commitments for which the Company gave prior written approval. The amendment also provides for certain adjustments to the purchase price for sales made to the marketer for its own account or for sales of exported ethanol. If this adjusted price can not be finalized at time of payment, the parties may agree upon a provisional price which shall be trued up later. The amendment was effective on December 1, 2022.

<u>Rail Car Rehabilitation Costs</u>

The Company leases 180 hopper rail cars under a multi-year agreement which ends in November 2023. Under the agreement, the Company is required to pay to rehabilitate each car for "damage" that is considered to be other than normal wear and tear upon turn in of the car(s) at the termination of the lease.

Company management has estimated total costs to rehabilitate the cars at December 31, 2022, to be approximately $2,111,000. During the three months ended December 31, 2022, the Company has recorded a corresponding expense in cost of goods sold of approximately $90,000. The Company accrues the estimated cost of railcar damages over the term of the lease.

<u>High Protein System Installation Agreement</u>

On January 20, 2022, the Company contracted with ICM, Inc. to install a system to produce high protein feed which is expected to cost approximately $50,000,000, including recent change orders, and be funded from operations and from our current credit facilities as amended. This project is expected to be completed by Fall of 2023.

**10. RISKS AND UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS**

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are primarily derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. During the three months ended December 31, 2022, ethanol sales averaged approximately 64% of total revenues and corn costs averaged 65% of total cost of goods sold.

The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol, distillers grains and corn oil, and the related cost of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and the unleaded gasoline and petroleum markets, although, since 2005, the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.

Economic conditions for the ethanol industry were favorable during fiscal year 2022. However, the military invasion of Ukraine by Russia in the second quarter of fiscal year 2022 and sanctions imposed by other countries as a result have created global economic uncertainty and contributed to increased inflation, significant market disruptions and increased volatility in

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**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

commodity prices such as corn, oil and natural gas. The economic impact of this war and the potential effects on the Company's operating and financial performance is currently unknown. Additionally, there have been economic indicators that the United States could be facing a possible recession which have primarily resulted in interest rate hikes by the Federal Reserve in an attempt to reduce inflation. The Company continues to monitor economic conditions that might affect our profitability. The Company believes that its cash on hand and available debt from its lender will provide sufficient liquidity to meets its anticipated working capital, debt service and other liquidity needs through the next twelve months. If market conditions worsen affecting the Company's ability to profitably operate the plant or if the Company is unable to transport ethanol, it may be forced to further reduce the ethanol production rate or even temporarily shut down ethanol production altogether.

**11. BUSINESS SEGMENTS**

The Company has two reportable operating segments. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. Segment income or loss does not include any allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated.

The following tables summarize financial information by segment and provide a reconciliation of segment revenue, gross profit, grain inventories, operating income, and total assets:

---

| | | |
|:---|:---|:---|
| | Three Months Ended | Three Months Ended |
| | December 31, 2022 | December 31, 2021 |
| **Revenue:** | (unaudited) | (unaudited) |
| Ethanol division | $109825931 | $122590225 |
| Trading division | 25122188 | 27666724 |
| &nbsp;&nbsp;&nbsp;Total Revenue | $134948119 | $150256949 |
|  | Three Months Ended | Three Months Ended |
|  | December 31, 2022 | December 31, 2021 |
| **Gross Profit:** | (unaudited) | (unaudited) |
| Ethanol division | $17571180 | $33294124 |
| Trading division | 367764 | 1624484 |
| &nbsp;&nbsp;&nbsp;Total Gross Profit | $17938944 | $34918608 |
|  | Three Months Ended | Three Months Ended |
|  | December 31, 2022 | December 31, 2021 |
| **Operating Income:** | (unaudited) | (unaudited) |
| Ethanol division | $15615819 | $31475994 |
| Trading division | 50521 | 1307241 |
| &nbsp;&nbsp;&nbsp;Total Operating Income | $15666340 | $32783235 |

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**CARDINAL ETHANOL, LLC AND SUBSIDIARIES**

**Notes to Consolidated Condensed Unaudited Financial Statements**

**December 31, 2022**

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| | | |
|:---|:---|:---|
| | December 31, 2022 | September 30, 2022 |
| **Grain Inventories:** | (unaudited) |  |
| Ethanol division | $17257233 | $7206914 |
| Trading division | 6031025 | 2028605 |
| &nbsp;&nbsp;&nbsp;Total Grain Inventories | $23288258 | $9235519 |
|  | December 31, 2022 | September 30, 2022 |
| **Total Assets:** | (unaudited) |  |
| Ethanol division | $233605504 | $188055176 |
| Trading division | 2836132 | 900652 |
| &nbsp;&nbsp;&nbsp;Total Assets | $236441636 | $188955828 |

---

**12. EQUITY METHOD INVESTMENTS**

The Company, through its wholly owned subsidiary, Cardinal One Carbon Holdings, LLC, owns a fifty percent interest in a limited partnership. That partnership was formed as a joint venture with another unrelated investor to investigate and pursue carbon dioxide capture and underground sequestration. The Company accounts for this investment using joint venture accounting and, therefore, under the equity method. Cardinal One Carbon Holdings, LLC was formed on June 22, 2022 to hold the partnership interest in the limited partnership and began its administrative operations on September 1, 2022.

The Company's policy related to investments in both common stock and in-substance common stock that give the Company the ability to exercise significant influence over the operating and financial polices of an entity in which it invests even though the Company holds 50% or less of the common stock or in-substance common stock (or both common and in-substance common stock) is to account for such investment under the equity method. The Company considers its financial position and results of operations in evaluating the extent of disclosures of the financial position and results of operations of an entity in which the Company invests.

As the Company owns a fifty percent interest in the limited partnership, an investment in affiliate of approximately $165,000 was reflected on the balance sheet as of December 31, 2022 and approximately $396,000 was reflected on the balance sheet as of September 30, 2022. A loss on equity method investment of $231,106 was reflected on the statement of operations for the three months ended December 31, 2022.

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**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**

&nbsp;&nbsp;&nbsp;&nbsp;We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three month period ended December 31, 2022, compared to the same period of the prior fiscal year. This discussion should be read in conjunction with the consolidated condensed financial statements (the "financial statements") and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

**Forward Looking Statements**

This report contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases you can identify forward-looking statements by the use of words such as "may," "will," "should," "anticipate," "believe," "expect," "plan," "future," "intend," "could," "estimate," "predict," "hope," "potential," "continue," or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties, including, but not limited to those listed below and those business risks and factors described elsewhere in this report and our other Securities and Exchange Commission filings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Reduction, delay, or elimination of the Renewable Fuel Standard;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the availability and price of corn, natural gas and other grains;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our inability to secure credit or obtain additional equity financing we may require in the future to continue our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Decreases in the price we receive for our ethanol, distiller grains, corn oil and other grains;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to satisfy the financial covenants contained in our credit agreements with our senior lender;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Negative impacts that our hedging activities may have on our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ethanol and distiller grains supply exceeding demand and corresponding price reductions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to generate free cash flow to invest in our business and service our debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the environmental regulations that apply to our plant operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in our business strategy, capital improvements or development plans;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in plant production capacity or technical difficulties in operating the plant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Lack of transport, storage and blending infrastructure preventing our products from reaching high demand markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in federal and/or state laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes and advances in ethanol production technology;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Competition from alternative fuel additives;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in interest rates or the lack of credit availability;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in legislation benefiting renewable fuels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Competition from the increased use of electric vehicles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to retain key employees and maintain labor relations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Volatile commodity and financial markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Limitations and restrictions contained in the instruments and agreements governing our indebtedness;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Decreases in export demand due to the imposition of tariffs by foreign governments on ethanol, distillers grains and soybeans produced in the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Use by the EPA of small refinery exemptions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A slowdown in global and regional economic activity, demand for our products and the potential for labor shortages and shipping disruptions resulting from COVID-19; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Global economic uncertainty, inflation, market disruptions and increased volatility in commodity prices caused in part by the Russian invasion of Ukraine and resulting sanctions by the United States and other countries.

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The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements even though our situation may change in the future. We cannot guarantee future results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements with these cautionary statements.

**Overview**

Cardinal Ethanol, LLC is an Indiana limited liability company operating an ethanol plant in east central Indiana near Union City, Indiana. We began producing ethanol, distillers grains and corn oil at the plant in November 2008. In addition, we procure, transport and sell grain commodities through our grain trading business which began operations at the end of our fourth fiscal quarter of 2017.

On January 20, 2022, we entered into an Equipment Purchase and Installation Agreement (the "EPC Agreement") with ICM, Inc. pursuant to which ICM has agreed to engineer, procure, construct, and install its high protein feed system and license to us its proprietary, patent-protected technology to use, operate and maintain the system. Pursuant to the EPC Agreement and subsequent adjustments due to change orders executed by the parties, we expect to pay approximately $50,000,000, including recent change orders, which is payable in installments. This price is subject to further adjustment in the event additional change orders are executed. We will also pay license fees of $10 per ton of PROTOMAX™ produced by the system for a period of 10 years. We expect to fund the project from operations and from our current credit facilities as amended. We began installation of the system during the fourth quarter of our fiscal year 2022. This project is expected to be completed by Fall of 2023.

On September 14, 2022, we entered into Amendment No. 4 to the Ethanol Purchase and Sale Agreement with Murex, LLC (the "Murex Amendment"). The Murex Amendment amends the Ethanol Purchase and Sale Agreement dated December 18, 2006, as amended. The Murex Amendment was effective on December 1, 2022. Please refer to ***Item 1 - Financial Statements - Note 9 - Commitments and Contingencies*** for more information.

On November 15, 2022, our board of directors declared a cash distribution of $500 per membership unit to the holders of units of record at the close of business on November 15, 2022, for a total distribution of $7,303,000. The distribution was paid on November 18, 2022.

We have engaged with an unrelated third party to pursue the possible joint development of integrated carbon dioxide facilities, transportation infrastructure and a carbon sequestration site for the carbon dioxide emissions produced by our plant (the "CCS Project"). On January 16, 2023, Cardinal One Carbon Holdings, LLC, a wholly owned subsidiary of Cardinal Ethanol, LLC, entered into a Partnership Agreement (the "LPA") with Vault CCS Holdings LP pursuant to which Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP formed a joint venture operating under the name of One Carbon Partnership Holdings LP (the "Limited Partnership") to pursue the CCS Project. The LPA governs the rights, duties and responsibilities of the parties in connection with the ownership of the Limited Partnership. In addition, on the same date, Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP entered into an Amended and Restated Limited Liability Company Agreement (the "LLCA") of One Carbon Partnership GP LLC (the "GP"). The purpose of the GP is to serve as the general partner of the Limited Partnership. The CCS Project is still in its early stages and is subject to many variables that could have a material effect on its feasibility and the parties' ability to complete the CCS Project. Please refer to ***Item 1 - Financial Statements - Note 12 - Equity Method Investments*** for more information.

We have reached agreement with First National Bank of Omaha to amend our loan agreement. The terms of the amendment increase the maximum availability on the Declining Loan from $36,000,000 to $39,000,000, change the date at which the Declining Loan is expected to be converted to term debt from on or before February 1, 2024 to May 1, 2024, extend the date that the Revolving Credit Loan matures from February 28, 2023 to February 28, 2024 and increase the capital expenditures loan covenant from $5,000,000 per year to $6,000,000 per year of expenditures without prior approval. We expect that the amendment will be executed in February 2023.

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We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities as amended. If market conditions worsen affecting our ability to profitably operate the plant or if we are unable to transport ethanol, we may be forced to further reduce our ethanol production rate or even temporarily shut down ethanol production altogether.

**Results of Operations for the Three Months Ended December 31, 2022 and 2021** 

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the three month ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| **Statement of Operations Data** | **Amount** | **%** | **Amount** | **%** |
| Revenue | $134948119 | 100.0 | $150256949 | 100.0 |
| Cost of Goods Sold | 117009175 | 86.7 | 115338341 | 76.8 |
| Gross Profit | 17938944 | 13.3 | 34918608 | 23.2 |
| Operating Expenses | 2272604 | 1.7 | 2135373 | 1.4 |
| Operating Income | 15666340 | 11.6 | 32783235 | 21.8 |
| Other Income (Expense) | 239325 | 0.2 | (388071) | (0.3) |
| Net Income | $15905665 | 11.8 | $32395164 | 21.5 |

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***Revenue***

*<u>Operating Segments</u>*

&nbsp;&nbsp;&nbsp;&nbsp;Operating segments are defined as components of an enterprise for which separate financial information is available that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the nature of the products, services and operations and the expected financial results, we review our operations within the two operating segments-the Ethanol Division and the Trading Division. Our revenues from operations from our Ethanol Division come from three primary sources: sales of fuel ethanol, distillers grains and corn oil. Revenues from operations of our Trading Division are derived from procuring, transporting and selling grain commodities.

&nbsp;&nbsp;&nbsp;&nbsp;Our current lines of business and sources of revenue are the sale of ethanol, distillers grains, corn oil and and the trading of agricultural grains. We expect that PROTOMAX™, a high protein feed product, will become a significant new source of revenue once the installation of a system to manufacture high protein feed is complete and the system is operating. Please refer to ***Item 1 - Financial Statements - Note 11 - Business Segments*** for more financial information about our financial reporting segments. Ethanol revenues in the ethanol division also include net gains or losses from derivatives. Net derivative gains or losses for corn, natural gas, and corn oil are included in cost of goods sold in the ethanol division and soybean gains or losses from derivatives are included in cost of goods sold in the trading division.

&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the sources of our total revenue from the two segments and the approximate percentage of revenues to total revenues in our statements of operations for the three months ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| **Revenue:** | **Amount** | **% of Total Revenues** | **Amount** | **% of Total Revenues** |
| Ethanol division | $109825931 | 81.4% | $122590225 | 81.6% |
| Trading division | 25122188 | 18.6% | 27666724 | 18.4% |
| &nbsp;&nbsp;&nbsp;Total Revenue | $134948119 | 100.0% | $150256949 | 100.0% |

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*<u>Ethanol Division</u>*

&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the sources of our revenues from our Ethanol Division for the three months ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| **Revenue Source** | **Amount** | **% of Revenues** | **Amount** | **% of Revenues** |
| Ethanol | $86311246 | 78.6% | $102522928 | 83.6% |
| Distillers Grains | 15363951 | 14.0 | 13766898 | 11.3 |
| Corn Oil | 8029640 | 7.3 | 6161538 | 5.0 |
| Carbon Dioxide | 121094 | 0.1 | 114386 | 0.1 |
| Other Revenue |  |  | 24475 |  |
| Total Revenues | $109825931 | 100.0% | $122590225 | 100.0% |

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&nbsp;&nbsp;&nbsp;&nbsp;<u>Ethanol</u>

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;Our revenues from ethanol decreased in the three months ended December 31, 2022 as compared to the the same period in 2021. This decrease in revenues is primarily the result of a decrease in the price per gallon of ethanol sold for the three months ended December 31, 2022 as compared to the same period in 2021. Revenue also includes the net gains or losses from derivatives related to the commodities purchased.

&nbsp;&nbsp;&nbsp;&nbsp;The average price per gallon of ethanol sold for the three months ended December 31, 2022 was approximately 6% lower than the average price per gallon of ethanol sold for the same period in 2021. Ethanol market prices have overall been lower due to a decrease in energy prices, including crude oil and gasoline prices, for the current period compared to the same period in 2021. In addition, industry-wide production in excess of demand has had a negative effect on ethanol prices.

Management believes that ethanol prices will continue to be influenced by corn and energy prices, shipping disruptions, inventory levels, and inflationary factors. If energy prices further decrease that would likely contribute to lower ethanol prices. Industry over-production due to a period of positive operating margins could also continue to have a negative effect on ethanol prices unless foreign or domestic demand reduce inventory levels. Domestic demand is typically lower in the winter months due to decreased driving.

&nbsp;&nbsp;&nbsp;&nbsp;We experienced a decrease in ethanol gallons sold of approximately 10% for the three months ended December 31, 2022 as compared to the same period in 2021 resulting primarily from decreased ethanol production rates for the period due to scheduled maintenance resulting in down time at the plant. We are currently operating at a rate of approximately 137 million gallons annually. We have installed an ethanol recovery system which we expect will result in an increase in efficiencies allowing us to achieve higher ethanol production rates going forward. However, we expect this will likely be offset by temporary shutdowns of our plant from time to time during our 2023 fiscal year in connection with the installation of our high protein feed system which could result in an overall reduction in gallons of ethanol produced. In addition, management continues to monitor economic conditions carefully. If market conditions worsen affecting our ability to profitably operate the plant, we may be forced to reduce our ethanol production rate or even temporarily shut down ethanol production altogether. &nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<u>Distillers Grains</u>

&nbsp;&nbsp;&nbsp;&nbsp;Our revenues from distillers grains increased in the three months ended December 31, 2022 as compared to the same period in 2021. This increase in revenues is primarily the result of an increase in the average price per ton of distillers grains sold for the period ended December 31, 2022 as compared to the same period in 2021.

&nbsp;&nbsp;&nbsp;&nbsp;The average price per ton of distillers grains sold for the three months ended December 31, 2022 was approximately 20% higher than the average price per ton of distillers grains sold for the same period in 2021. This increase in the market price

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of distillers grains is primarily due to higher corn and soybean meal prices for the current period which resulted in end users seeking out distillers grains as the lower cost alternative. In addition, vomitoxin levels in some distillers grains produced by some plants in our region have reduced supply and allowed us to receive a premium on our distillers grains. Distillers grains ground from corn contaminated with vomitoxin can sicken livestock.

&nbsp;&nbsp;&nbsp;&nbsp;Management anticipates that distillers grains prices will continue to be affected by the price of corn and soybean meal. In addition, persisting vomitoxin levels in distillers grains will likely have an effect on distillers grains prices until a new corn crop is harvested. Trade disputes with foreign countries, such as China, will continue to have a negative effect on distillers grains prices unless additional demand can be sustained from domestic or other foreign markets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sold approximately 7% less tons of distillers grains in the three months ended December 31, 2022 as compared to the same period in 2021 resulting primarily from lower ethanol production levels and a slightly lower yield for the period which resulted in decreased distillers grains production. An increase or decrease in ethanol production rates in the future would result in a corresponding change in distillers grains production.

<u>Corn Oil</u>

&nbsp;&nbsp;&nbsp;&nbsp;Our revenues from corn oil sales increased in the three months ended December 31, 2022 as compared to the same period in 2021 which was mainly the result of an increase in the average price per pound for corn oil. The average price per pound of corn oil was approximately 35% higher for the three months ended December 31, 2022 as compared to the same period in 2021. Higher soybean oil prices along with increased biodiesel production had a positive effect on corn oil prices for the period. Soybean oil is the primary competitor with distillers corn oil.

&nbsp;&nbsp;&nbsp;&nbsp;

Management anticipates that corn oil prices will continue to follow soybean oil prices. Corn oil prices are also likely to be negatively affected by an industry increase in corn oil supply due to improved operating conditions. However, the extension of the biodiesel tax credit by Congress is likely to continue to have a positive impact on demand from biodiesel producers and corn oil prices.

&nbsp;&nbsp;&nbsp;&nbsp;We also sold approximately 3% less pounds of corn oil in the three months ended December 31, 2022 as compared to the same period in 2021 resulting primarily from lower ethanol production. An increase or decrease in ethanol production rates in the future would result in a corresponding change in corn oil production.

*<u>Trading Division</u>*

&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the sources of our revenues from our Trading Division for the three months ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| **Revenue Source** | **Amount** | **% of Revenues** | **Amount** | **% of Revenues** |
| Soybean Sales | $25122188 | 100.0% | $27617399 | 99.8% |
| Other Revenue |  |  | 49325 | 0.2 |
| Total Revenues | $25122188 | 100.0% | $27666724 | 100.0% |

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<u>Soybeans</u>

&nbsp;&nbsp;&nbsp;&nbsp;During the three months ended December 31, 2022 revenues from our Trading Division were derived from transporting and selling soybeans. Our revenues from soybeans sales decreased in the three months ended December 31, 2022 as compared to the same period in 2021. This decrease in revenues is the result of a decrease in the bushels of soybeans sold of approximately 20% for the three months ended December 31, 2022 as compared to the same period in 2021 the reduction was due to delayed timing of soybean sales in order to capture a more conducive market. The lower quantity sold was offset by an increase of 14% in the average price per bushel of soybeans sold for the three months ended December 31, 2022 as compared to

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the same period in 2021. Management anticipates that soybean sales over the remainder of the fiscal year will be consistent with recent fiscal years.

*Cost of Goods Sold*

*<u>Ethanol Division</u>*

Our cost of goods sold for this division as a percentage of its total revenues was approximately 84% for the three months ended December 31, 2022 as compared to approximately 73% for the same period in 2021. This increase in cost of goods sold as a percentage of revenues was the result of a weakened relationship between the prices of ethanol and corn, offset by increased natural gas costs for the three months ended December 31, 2022 as compared to the same period in 2021. Our two largest costs of production are corn and natural gas. Cost of goods sold also includes net gains or losses from derivatives related to our commodity purchases as well as our additional expense for our estimate of our rail car rehabilitation expense described below.

<u>Corn</u>

Our largest cost associated with the production of ethanol, distillers grains and corn oil is corn cost. During the three months ended December 31, 2022, we used approximately 6% less bushels of corn to produce our ethanol, distillers grains and corn oil as compared to the same period in 2021 due to lower ethanol production levels for the period. During the three months ended December 31, 2022, our average price paid per bushel of corn was approximately 16% higher as compared to the same period in 2021 due primarily to a smaller crop carryout in some areas from the 2022 harvest due to droughts. In addition, global economic uncertainty, market disruptions and increased volatility in commodity prices due to the Russian invasion of Ukraine have contributed to higher corn prices during the period.

Weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. Higher corn prices and increased volatility due to a smaller corn crop will continue to have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Volatility in the price of corn could significantly impact our cost of goods sold.

<u>Natural Gas</u>

&nbsp;&nbsp;&nbsp;&nbsp;Our natural gas cost after hedging was higher during the three months ended December 31, 2022 as compared to the same period in 2021. This increase in cost of natural gas for the three months ended December 31, 2022 as compared to the same period in 2021 was primarily the result of an increase in natural gas prices. Our average price per MMBTU of natural gas was approximately 20% higher during the three months ended December 31, 2022 due to increased demand, an increase in the price of crude oil and increased volatility in prices due to the Russian invasion of Ukraine. The increase in our cost of natural gas was partially offset by the use of approximately 6% less natural gas for the three months ended December 31, 2022 as compared to the same period in 2021 due to lower ethanol production for the period.

&nbsp;&nbsp;&nbsp;&nbsp;Management expects that natural gas prices will be dependent upon government policy and the severity of the winter weather. If the nation were to experience a recession this could also influence natural gas prices. In addition, natural gas supply shortages due to a catastrophic weather event or the Russian invasion of Ukraine could continue to have a negative effect on natural gas prices.

<u>Rail Car Rehabilitation Costs</u>

&nbsp;&nbsp;&nbsp;&nbsp;

We lease 180 hopper rail cars under a multi-year agreement which ends in November 2023. Under the agreement, we are required to pay to rehabilitate each car for "damage" that is considered to be other than normal wear and tear upon turn in of each car at the termination of the lease. We have evaluated the condition of the cars and believe that it is probable that we may be assessed for damages incurred. During the three months ended December 31, 2022, we have recorded an expense in cost of

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goods sold of approximately $90,000. We accrue the estimated cost per railcar damages of $30,060 per month over the term of the lease. The accrued liability for these rehabilitation costs is approximately $2,111,000 at December 31, 2022.

*<u>Trading Division</u>*

&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the costs incurred to procure various agricultural commodities for our Trading Division for the three months ended December 31, 2022 and 2021:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** |
| | **Amount** | **% of Revenues** | **Amount** | **% of Revenues** |
| Soybeans | $24754424 | 98.5% | $26042240 | 94.1% |
| Total Cost of Goods Sold | $24754424 | 98.5% | $26042240 | 94.1% |

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&nbsp;&nbsp;&nbsp;&nbsp;

<u>Soybeans</u>

&nbsp;&nbsp;&nbsp;&nbsp;During the three months ended December 31, 2022, our cost was primarily the procurement of soybeans sold. During the three months ended December 31, 2022, our average price paid per bushel of soybeans was approximately 13% higher as compared to the same period in 2021 due to concerns over a smaller carryout of soybean inventory from the 2022 harvest. We also purchased approximately 34% less bushels of soybeans in the three months ended December 31, 2022 compared to 2021 due mostly to a cash price that was not conducive to producer selling.

*Derivatives*

&nbsp;&nbsp;&nbsp;&nbsp;We enter into hedging instruments to minimize price fluctuations in the prices of our finished products and inputs. As the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in our revenues and our cost of goods sold. These commodity-based derivatives are not designated as effective hedges for accounting purposes. Please refer to ***Item 3 - Quantitative and Qualitative Disclosures About Market Risk - Commodity Price Risk*** for information on our derivatives.

*Operating Expense*

&nbsp;&nbsp;&nbsp;&nbsp;Our operating expenses as a percentage of revenues was approximately 2% and 1% for the three months ended December 31, 2022 and 2021, respectively. Operating expenses include salaries and benefits of administrative employees, insurance, taxes, professional fees, depreciation of trading division fixed assets, property taxes and other general administrative costs. Operating expenses on a per gallon basis increased somewhat for the three months ended December 31, 2022 compared to the same period in 2021. We have seen rises in the cost of salaries due to shortages in the local labor market and increases in insurance rates for property and casualty.

*Operating Income*

&nbsp;&nbsp;&nbsp;&nbsp;Our income from operations for the three months ended December 31, 2022 was approximately 12% of revenues as compared to 22% of revenues for the same period in 2021. The decrease for the three months ended December 31, 2022 was primarily the result of weakened ethanol to corn margins.

*Other Income (Expense)*

&nbsp;&nbsp;&nbsp;&nbsp;Our other income was approximately 0.2% of revenues for the three months ended December 31, 2022 as compared to other expense of approximately (0.3)% of revenues for the three months ended December 31, 2021. Our other income consisted primarily of the interest income received during the three months ended December 31, 2022.

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**Changes in Financial Condition for the Three Months Ended December 31, 2022** 

&nbsp;&nbsp;&nbsp;&nbsp;The following table highlights the changes in our financial condition:

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| | | |
|:---|:---|:---|
| | **December 31, 2022<br>(Unaudited)** | **September 30, 2022** |
| Current Assets | $145297531 | $102033729 |
| Long Term Assets | $91144105 | $86922099 |
| Current Liabilities | $59840245 | $27431166 |
| Long-Term Liabilities | $20735940 | $14254170 |
| Members' Equity | $155865451 | $147270492 |

---

&nbsp;&nbsp;&nbsp;&nbsp;We experienced an increase in our current assets at December 31, 2022 as compared to September 30, 2022. This increase was primarily driven by an increase in cash, investments, inventory, and receivables at December 31, 2022 as compared to September 30, 2022. Increased profit margins during fiscal year 2022 and into the three months ended December 31, 2022 improved cash balances which in turn allowed us to invest in securities available for sale.

&nbsp;&nbsp;&nbsp;&nbsp;We experienced an increase in our long term assets at December 31, 2022 as compared to September 30, 2022. Fluctuation was largely attributed to additional capital projects during the three months ended December 31, 2022 as compared to September 30, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;We experienced an increase in our total current liabilities at December 31, 2022 as compared to September 30, 2022. This increase was primarily due to an increase in our accounts payable grain because our farmer producers deferred more bushels for payment until January 2023 at December 31, 2022 compared to September 30, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;We experienced an increase in our long-term liabilities as of December 31, 2022 as compared to September 30, 2022 primarily as a result of increased borrowing for capital expenditures.

**Liquidity and Capital Resources**

We have engaged ICM, Inc. to install a system to produce high protein feed which is currently expected to cost approximately $50,000,000, including recent change orders. The agreement calls for a down payment and scheduled payments at key points during the construction and installation process, which began during the fourth quarter of fiscal 2022.

The prices of ethanol, corn, natural gas and soybeans have risen substantially over the last several months. We believe that we have sufficient cash and credit facilities to provide liquidity over the next twelve months. However, if the prices continue to rise, we may explore options with our primary lender to expand the funding of our working capital.

Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our credit facilities and cash from our operations to continue to operate the ethanol plant for the next 12 months. However, should operating conditions in the ethanol industry deteriorate or continue for a prolonged period, we could have difficulty maintaining our liquidity and may need to rely on our revolving lines of credit or seek to increase our limits for operations.

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The following table shows cash flows for the three months ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
| | **2022** | **2021** |
| Net cash provided by operating activities | $35259117 | $68030732 |
| Net cash used for investing activities | (19222679) | (136773) |
| Net cash used for financing activities | (117081) | (9493900) |
| Net increase in Cash, Cash Equivalents, and Restricted Cash | 15919357 | 58400059 |
| Cash, Cash Equivalents, and Restricted Cash, beginning of period | 63239614 | 33895947 |
| Cash, Cash Equivalents, and Restricted Cash, end of period | $79158971 | $92296006 |

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*Cash Flow provided by Operating Activities* 

We experienced a decrease in our cash flow from operating activities for the three months ended December 31, 2022 as compared to the same period in 2021. This decrease was primarily due to weakened margins on our primary products for the three months ended December 31, 2022 as compared to the same period in 2021.

*Cash Flow used for Investing Activities* 

We used more cash in investing activities for the three months ended December 31, 2022 as compared to the same period in 2021. This increase was primarily the result of increased amounts paid for construction in progress coupled with an increase in purchase of investments in debt securities during the three months ended December 31, 2022 as compared with the same period in 2021.

*Cash Flow used for Financing Activities*

We used less cash for financing activities for the three months ended December 31, 2022 as compared to the same period in 2021. This decrease was primarily the result of borrowings for capital projects offset by payments in the form of distributions to our investors during the three months ended December 31, 2022.

&nbsp;&nbsp;&nbsp;&nbsp;Our liquidity, results of operations and financial performance will be impacted by many variables, including the market price for commodities such as, but not limited to, corn, ethanol, soybeans and other energy commodities, as well as the market price for any co-products generated by the facility and the cost of labor and other operating costs. We expect operations to generate adequate cash flows to maintain operations.

*Short and Long Term Debt Sources* 

We have a loan agreement consisting of two loans, the Declining Revolving Loan ("Declining Loan") and the Revolving Credit Loan. In exchange for these loans, we granted liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts, and assignment of material contracts. Please refer to ***Item 1 - Financial Statements, Note 7 - Bank Financing*** for additional details.

*<u>Declining Loan</u>*

&nbsp;&nbsp;&nbsp;&nbsp;The maximum availability of the Declining Loan was formerly $5,000,000 and such amount was to be available for working capital purposes. However, the maximum availability of the Declining Loan was increased from $5,000,000 to $36,000,000 in order to provide financing to fund the construction and installation of a new high protein feed system at the plant. The interest rate on the Declining Loan is currently based on the prime rate minus five basis points (.05%) subject to a floor of 2.85%. The interest rate was 7.45% and 6.20% at December 31, 2022 and September 30, 2022, respectively. We will be required to make monthly interest payments on the Declining Loan during the draw period. The principal balance of the

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Declining Loan is expected to be converted to term debt on or before February 1, 2024, to be repaid in 60 equal monthly installments based on a ten year amortization period. In addition, we will be required to make mandatory annual prepayments on the term debt within 120 days following the end of each fiscal year beginning with the fiscal year ended September 30, 2024. The annual prepayment will be in the amount of the lesser of 40% of excess cash flow or $7,200,000, up to an aggregate amount paid of $18,000,000. There were borrowings outstanding of approximately $16,186,000 and $9,000,000 on the Declining Loan at December 31, 2022 and September 30, 2022, respectively.

We have reached agreement with our lender to amend our loan agreement. The terms of the amendment increase the maximum availability of the Declining Loan from $36,000,000 to $39,000,000 and change the date at which the Declining Loan is expected to be converted to term debt to on or before May 1, 2024. We expect that the amendment will be executed in February 2023.

*<u>Revolving Credit Loan</u>* 

The Revolving Credit Loan has a limit of $20,000,000 supported by a borrowing base made up of our corn, ethanol, dried distillers grain, corn oil and soybean inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds. The interest rate on the Revolving Credit Loan is the prime rate minus twenty-five basis points (.25%) and is subject to a floor of 2.75%. The interest rate was 7.25% and 6.00% at December 31, 2022 and September 30, 2022, respectively. There were no borrowings outstanding at December 31, 2022 and September 30, 2022. The Revolving Credit Loan is set to mature on February 28, 2023.

We have reached agreement with our lender to amend our loan agreement. The terms of the amendment extend the maturity date of the Revolving Credit Loan to February 28, 2024. We expect that the amendment will be executed in February 2023.

*<u>Covenants</u>*

&nbsp;&nbsp;&nbsp;&nbsp;During the term of the loans, we will be subject to certain financial covenants. Our minimum working capital is $15,000,000, which is calculated as our current assets plus the amount available for drawing under our long term revolving note, less current liabilities. Our minimum fixed charge coverage ratio is no less than 1.15:1.0 measured on a rolling four quarter average basis. However, for any reporting period, if our working capital is equal to or more than $23,000,000, we will be subject to maintaining a debt service charge coverage ratio of no less than 1.25:1.0 in lieu of the fixed charge coverage ratio.

&nbsp;&nbsp;&nbsp;&nbsp;Our loan agreement also requires us to obtain prior approval from our lender before making, or committing to make, capital expenditures exceeding an aggregate amount of $5,000,000. The cost of the high protein feed system is excluded from the capital expenditures calculation until the principal balance of the Declining Loan converts to term debt.

We have reached agreement with our lender to amend our loan agreement. The terms of the amendment increase the capital expenditures covenant to $6,000,000 of expenditures per year without prior approval. We expect that the amendment will be executed in February 2023.

We are complying with our financial covenants and the other terms of our loan agreements at December 31, 2022. Based on current management projections, we anticipate that future operations will be sufficient to generate enough cash flow to maintain operations, service any new debt and comply with our financial covenants and other terms of our loan agreements for the next twelve months. Should market conditions deteriorate in the future, circumstances may develop which could result in us violating the financial covenants or other terms of our loan agreements. Should we violate the terms or covenants of our loan or fail to obtain a waiver of any such term or covenant, our primary lender could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans if we have a balance outstanding. In that event, our lender could also elect to proceed with a foreclosure action on our plant.

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*<u>Capital Improvements</u>*

&nbsp;&nbsp;&nbsp;&nbsp;We are planning various capital projects scheduled for the 2023 fiscal year in order to make certain improvements to the ethanol plant and maintain the facility. These improvements include updates to the 190 condenser, rail siding, sieve vaporizer, cyber security, grain scales, spare parts storage, and other small miscellaneous projects which are expected to cost approximately $5,000,000 and be funded from operations and our current credit facilities as amended.

We have also engaged ICM, Inc. to install a system to produce high protein feed which is currently expected to cost approximately $50,000,000, including recent change orders, and be funded from operations and our current credit facilities as amended. We will also license from ICM technology to use, operate and maintain the system and expect to pay license fees of $10 per ton of PROTOMAX™ produced for a period of 10 years. Installation of the system commenced during the fourth quarter of our 2022 fiscal year. This project is expected to be completed by Fall of 2023.

*CCS Project*

We engaged with an unrelated third party to pursue the possible joint development of integrated carbon dioxide facilities, transportation infrastructure and a carbon sequestration site for the carbon dioxide emissions produced by our plant (the "CCS Project"). We performed an initial study and assessment of the technical and economic feasibility of the CCS Project and optimal commercial structure.

On January 16, 2023, Cardinal One Carbon Holdings, LLC, our wholly owned subsidiary, entered into a Partnership Agreement (the "LPA") with Vault CCS Holdings LP pursuant to which Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP formed a joint venture operating under the name of One Carbon Partnership Holdings LP (the "Limited Partnership") to pursue the CCS Project. Cardinal One Carbon Holdings, LLC owns a 50% limited partnership interest in the Limited Partnership. The LPA contemplates that Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP will make capital contributions to fund the Project and receive distributions in accordance with their respective ownership interests. As of January 31, 2023, Cardinal One Carbon Holdings, LLC has made capital contributions of $1,750,000 to the LP. It is currently expected that the Project will require Cardinal One Carbon Holdings, LLC to invest up to $20,000,000 to reach commercial operations.

In addition, on the same date, Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP entered into an Amended and Restated Limited Liability Company Agreement (the "LLCA") of One Carbon Partnership GP LLC (the "GP"). The purpose of the GP is to serve as the general partner of the Limited Partnership. Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP each own 50% of the GP and have the right to appoint three directors to the board of directors of the GP. Such directors may only be removed or replaced by the member that appointed them. Actions taken by the board of directors must be approved by a majority of the directors. Vault CCS Holdings LP or its affiliate will be responsible for management of construction of the Project and day-to-day operations. Certain material actions require approval by the board of directors of the GP.

We have also taken certain steps towards implementing the CCS Project including filing the application for the necessary permitting and acquiring rights from landowners that will be needed in order to complete the CCS Project. In addition, we have granted rights to the joint venture including a surface easement and a lease of pore space below the surface of our property for use in sequestration if the CCS Project is successful. The CCS Project is still in its early stages and is subject to many variables that could have a material effect on its feasibility and the parties' ability to complete the Project. Please refer to ***Item 1 - Financial Statements - Note 12 - Equity Method Investments*** for more information.

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*<u>Development Agreement</u>*

&nbsp;&nbsp;&nbsp;&nbsp;In September 2007, we entered into a development agreement with Randolph County Redevelopment Commission ("the Commission") to promote economic development in the area. Under the terms of this agreement, beginning in January 2008 through December 2028, the money we pay toward property tax expense is allocated to an expense and an acquisition account. The funds in the acquisition account can be used by the Commission to purchase equipment, at our direction, for the plant. We do not have title to or control over the funds in the acquisition account, no amounts have been recorded in the balance sheet relating to this account.

**Critical Accounting Estimates**

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Our most critical accounting estimates, which require the greatest use of judgment by management, are designated as critical accounting estimates and include policies related to the useful lives of fixed assets; allowance for doubtful accounts; the valuation of basis and delay price contracts on corn purchases; derivatives; inventories; long-lived assets, railcar rehabilitation costs and inventory purchase commitments. The Ethanol Division uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, inventories, patronage dividends, long lived assets, railcar rehabilitation costs, and inventory purchase commitments. The Trading Division uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, the valuation of inventory purchase and sale commitments derivatives and inventory at market. An in-depth description of these can be found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022. Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed financial statements in accordance with generally accepted accounting principles. There have been no changes in the policies for our accounting estimates for the three months ended December 31, 2022.

**Item 3.**&nbsp;&nbsp;&nbsp;&nbsp;**Quantitative and Qualitative Disclosures About Market Risk.**

We are exposed to the impact of market fluctuations associated with interest rates and commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the commodity prices of corn and natural gas. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes.

**Interest Rate Risk**

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our Declining Loan and Revolving Credit Loan which bear variable interest rates. There were borrowings in the amount of approximately $16,186,000 outstanding on the Declining Loan and the applicable interest rate was 7.45% at December 31, 2022. There were no borrowings outstanding on the Revolving Credit Loan at December 31, 2022. The specifics of the Declining Loan and Revolving Credit Loan are discussed in greater detail above. If we were to experience a 10% adverse change in the applicable interest rate, the annual effect of such change would have on our statement of operations, based on the amount we had outstanding on our variable interest rate loans at December 31, 2022, would be approximately $120,000.

**Commodity Price Risk**

We expect to be exposed to market risk from changes in commodity prices. Exposure to commodity price risk results from our dependence on corn in the ethanol production process and the sale of ethanol.

We seek to minimize the risks from fluctuations in the prices of raw material inputs, such as corn and natural gas, and finished products, such as ethanol and distillers grains, through the use of hedging instruments. In practice, as markets move,

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we actively manage our risk and adjust hedging strategies as appropriate. Although we believe our hedge positions accomplish an economic hedge against our future purchases and sales, management has chosen not to use hedge accounting, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We are using fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in our cost of goods sold or as an offset to revenues. The immediate recognition of hedging gains and losses can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged.

We enter into forward contracts for our commodity purchases and sales on a regular basis. It is our intent that, as we enter in to these contracts, we will use various hedging instruments to maintain a near even market position. For example, if we have 1 million bushels of corn under fixed price contracts we would generally expect to enter into a short hedge position to offset our price risk relative to those bushels we have under fixed price contracts. Because our ethanol marketing company is selling substantially all of the gallons it markets on a spot basis we also include the corn bushel equivalent of the ethanol we have produced that is inventory but not yet priced as bushels that need to be hedged.

&nbsp;&nbsp;&nbsp;&nbsp;

The following table provides details regarding the gains and (losses) from our derivative instruments in the statements of operations, none of which are designated as hedging instruments, for the three months ended December 31, 2022 and 2021:

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| | | |
|:---|:---|:---|
| | **Three Months Ended December 31, 2022** | **Three Months Ended December 31, 2021** |
| Corn Derivative Contracts | $2145852 | $(433760) |
| Ethanol Derivative Contracts | 2411665 | (16008798) |
| Natural Gas Derivative Contracts | (776052) | (39039) |
| Soybean Oil Derivative Contracts | (16927) | 153970 |
| Soybean Derivative Contracts | (1552337) | (772340) |
| Soybean Forward Purchase and Sales Contracts | 550043 | 638729 |
| Totals | $2762244 | $(16461238) |

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These soybean forward purchase contracts will be marked to market as the contract periods expire. This means that any gains or losses realized will be recognized in our gross margin at each month end until they are delivered upon. Due to the volatility and risk involved in the commodities market, we cannot be certain that these gains or losses will be realized.

As corn prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, corn oil, corn, natural gas and soybeans price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas and average ethanol, distillers grains, corn oil and soybeans prices as of December 31, 2022 net of the forward and future contracts used to hedge our market risk. The volumes are based on our expected use, purchase and sale of these commodities for a one year period from December 31, 2022. The results of this analysis, which may differ from actual results, are approximately as follows:

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)** | **Unit of Measure** | **Hypothetical Adverse Change in Price as of December 31, 2022** | **Approximate Adverse Change to Income** |
| Natural Gas | 3300000 | MMBTU | 10% | $967000 |
| Ethanol | 138000000 | Gallons | 10% | $31602000 |
| Corn | 46800000 | Bushels | 10% | $27761000 |
| DDGs | 324000 | Tons | 10% | $7322000 |
| Corn Oil | 43980000 | Pounds | 10% | $2627000 |
| Soybeans - Sale | 5000000 | Bushels | 10% | $7188000 |
| Soybeans - Purchase | 5000000 | Bushels | 10% | $5839000 |

---

**Liability Risk**

We participate in a captive reinsurance company (the "Captive"). The Captive re-insures losses related to worker's compensation, commercial property and general liability. Premiums are accrued by a charge to income for the period to which the premium relates and is remitted by our insurer to the captive re-insurer. The Captive re-insures catastrophic losses in excess of a predetermined amount. Our premiums are structured such that we have made a prepaid collateral deposit estimated for losses related to the above coverage. The Captive insurer has estimated and collected an amount in excess of the estimated losses but less than the catastrophic loss limit insured by the Captive. We cannot be assessed in excess of the amount in the collateral fund.

**Item 4. Controls and Procedures**

**Disclosure Controls and Procedures**

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

Our management, including our Chief Executive Officer (the principal executive officer), Jeffrey Painter, along with our Chief Financial Officer (the principal financial officer), William Dartt, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of December 31, 2022. Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

**Changes in Internal Control over Financial Reporting**

&nbsp;&nbsp;&nbsp;&nbsp;There were no changes in our internal control over financial reporting during our first quarter ended of our 2023 fiscal year that have materially affected, or are likely to materially affect, our internal control over financial reporting.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**PART II. &nbsp;&nbsp;&nbsp;&nbsp;OTHER INFORMATION**

**Item 1. Legal Proceedings**

None.

**Item 1A.&nbsp;&nbsp;&nbsp;&nbsp;Risk Factors**

&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;None.

**Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**

&nbsp;&nbsp;&nbsp;&nbsp;

None.

**Item 3. Defaults Upon Senior Securities**

&nbsp;&nbsp;&nbsp;&nbsp;None.

**Item 4. Mine Safety Disclosures**

&nbsp;&nbsp;&nbsp;&nbsp;None.

**Item 5. Other Information**

None.

**Item 6. Exhibits.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)The following exhibits are filed as part of this report.

---

| | |
|:---|:---|
| **Exhibit No.** | **Exhibit** |
| <u>[31.1](a311certification12-31x2022.htm)</u> | Certificate Pursuant to 17 CFR 240.13a-14(a).\* |
| <u>[31.2](a312certification12-31x2022.htm)</u> | Certificate Pursuant to 17 CFR 240.13a-14(a).\* |
| <u>[32.1](a321certification12-31x2022.htm)</u> | Certificate Pursuant to 18 U.S.C. Section 1350.\* |
| <u>[32.2](a322certification12-31x2022.htm)</u> | Certificate Pursuant to 18 U.S.C. Section 1350.\* |
| 101.INS | Inline XBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. |
| 101.PRE | Inline XBRL Presentation Linkbase Document. |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101). |

---

\*&nbsp;&nbsp;&nbsp;&nbsp;Filed herewith.

\*\*&nbsp;&nbsp;&nbsp;&nbsp;Furnished herewith.

------

<u>[**Table of Contents**](#i43342546729e41ffb3f65a3f82635f66_7)</u>

**<u>SIGNATURES</u>**

&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| | | **CARDINAL ETHANOL, LLC** |
| Date: | February 6, 2023 | /s/ Jeffrey Painter |
|  |  | Jeffrey Painter |
|  |  | President and Chief Executive Officer |
|  |  | (Principal Executive Officer) |
| Date: | February 6, 2023 | /s/ William Dartt |
|  |  | William Dartt |
|  |  | Chief Financial Officer |
|  |  | (Principal Financial and Accounting Officer) |

---

&nbsp;&nbsp;&nbsp;&nbsp;

## Exhibit 31.1

**CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)**

**(SECTION 302 CERTIFICATION)**

I, Jeffrey Painter, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this quarterly report on Form 10-Q of Cardinal Ethanol, LLC;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | February 6, 2023 | /s/ Jeffrey Painter |
| | | Jeffrey Painter, Chief Executive Officer <br>(President and Principal Executive Officer) |

---

## Exhibit 31.2

**CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)**

**(SECTION 302 CERTIFICATION)**

I, William Dartt, certify that:

1.&nbsp;&nbsp;&nbsp;&nbsp;I have reviewed this quarterly report on Form 10-Q of Cardinal Ethanol, LLC;

2.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.&nbsp;&nbsp;&nbsp;&nbsp;Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.&nbsp;&nbsp;&nbsp;&nbsp;The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a)&nbsp;&nbsp;&nbsp;&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b)&nbsp;&nbsp;&nbsp;&nbsp;Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

---

| | | |
|:---|:---|:---|
| Date: | February 6, 2023 | /s/ William Dartt |
| | | William Dartt, Chief Financial Officer<br>(Principal Financial Officer) |

---

## Exhibit 32.1

 **CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

&nbsp;&nbsp;&nbsp;&nbsp;In connection with the quarterly report on Form 10-Q in accordance with Rule 15(d)-2 of the Securities Exchange Act of 1934 of Cardinal Ethanol, LLC (the "Company") for the fiscal quarter ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey Painter, President and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| /s/ Jeffrey Painter | /s/ Jeffrey Painter |
| Jeffrey Painter, Chief Executive Officer | Jeffrey Painter, Chief Executive Officer |
| (President and Principal Executive Officer) | (President and Principal Executive Officer) |
| Dated: | February 6, 2023 |

---

## Exhibit 32.2

**CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

&nbsp;&nbsp;&nbsp;&nbsp;In connection with the quarterly report on Form 10-Q in accordance with Rule 15(d)-2 of the Securities Exchange Act of 1934 of Cardinal Ethanol, LLC (the "Company") for the fiscal quarter ended December 31, 2022, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, William Dartt, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

---

| | |
|:---|:---|
| /s/ William Dartt | /s/ William Dartt |
| William Dartt, Chief Financial Officer | William Dartt, Chief Financial Officer |
| (Principal Financial Officer) | (Principal Financial Officer) |
| Dated: | February 6, 2023 |

---

<br>