UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2018

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ______________

Commission File Number: 000-51764

 LINCOLNWAY ENERGY, LLC

(Exact name of registrant as specified in its charter) 

Iowa	20-1118105
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

59511 W. Lincoln Highway, Nevada, Iowa	50201
(Address of principal executive offices)	(Zip Code)

Registrant's telephone number, including area code: (515) 232-1010

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

Securities registered pursuant to Section 12(g) of the Act:  Limited Liability Company Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes   ¨      No        þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.          Yes    ¨      No        þ

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     þ     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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      þ      No          ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.           ¨

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	þ	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.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).         Yes      ¨      No      þ

The aggregate market value of the units held by non-affiliates of the registrant was $36,772,027 as of March 31, 2018. The units are not listed on an exchange or otherwise publicly traded.  The value of the units for this purpose has been based upon the $942 book value per-unit as of March 31, 2018.  In determining this value, the registrant has assumed that all of its directors and its president are affiliates, but this assumption shall not apply to or be conclusive for any other purpose.

The number of units outstanding as of November 30, 2018 was 42,049.

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission with respect to the 2019 annual meeting of the members of the registrant are incorporated by reference into Item 11 of Part III of this Form 10-K.

LINCOLNWAY ENERGY, LLC

FORM 10-K

For the Fiscal Year Ended September 30, 2018

INDEX

Part I.
	Item 1.	Business.	1
	Item 1A.	Risk Factors.	21
	Item 2.	Properties.	35
	Item 3.	Legal Proceedings.	36
	Item 4.	Mine Safety Disclosures	37
Part II.
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	37
	Item 6.	Selected Financial Data.	39
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	40
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	52
	Item 8.	Financial Statements and Supplementary Data.	55
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	72
	Item 9A.	Controls and Procedures.	72
	Item 9B.	Other Information.	73
Part III.
	Item 10.	Directors, Executive Officers and Corporate Governance.	74
	Item 11.	Executive Compensation.	74
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	74
	Item 13.	Certain Relationships and Related Transactions, and Director Independence.	74
	Item 14.	Principal Accountant Fees and Services.	74
Part IV.
	Item 15.	Exhibits and Financial Statement Schedules.	75
SIGNATURES

Certification of President and Chief Executive Officer.	E-1
Certification of Director of Finance.	E-2
Section 1350 Certification of President and Director of Finance.	E-3
Section 1350 Certification of Director of Finance.	E-4

CAUTIONARY STATEMENTS ON FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K of Lincolnway Energy, LLC (the “Company,” or “Lincolnway Energy”) contains historical information as well as forward looking statements that involve known and unknown risks and relate to Lincolnway Energy’s beliefs, future events and expectations relating to the Company’s future, including, without limitation the Company’s future performance, operations, financial results and condition, anticipated trends in business, revenues, net income, net profits or net losses; projections concerning ethanol prices, corn prices, gas prices, capital needs and cash flow, investment, business, growth, expansion, acquisition and divestiture opportunities and strategies, management's plans or intentions for the future, competitive position or circumstances, and other forecasts, projections, predictions and statements of expectation.  Words such as "expects," "anticipates," "estimates," "plans," "may," "will," "contemplates," "forecasts," "strategy," "future," "potential," "predicts," "projects," "prospects," "possible," "continue," "hopes," "intends," "believes," "seeks," "should," "could," "thinks," "objectives" and other similar expressions or variations of those words or those types of words help identify forward looking statements.

Actual future performance, outcomes and results may differ materially from those suggested by or expressed in forward looking statements as a result of numerous and varied factors, risks and uncertainties, some that are known and some that are not known, and many of which are beyond the control of Lincolnway Energy and its management.  Lincolnway Energy cannot guarantee its future results, performance or business conditions, and strong or undue reliance must not be placed on any forward looking statements, which speak only as of the date of this report or the date of the document incorporated by reference in this report. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by the Company include:

• Changes in the availability and price of corn and natural gas;

• Negative impacts resulting from the reduction in the renewable fuel volume requirements under the Renewable Fuel Standard issued by the Environmental Protection Agency;

• Changes in federal mandates relating to the blending of ethanol with gasoline, including, without limitation reductions to, or the elimination of, the Renewable Fuel Standard volume obligations;

• The inability to comply with the covenants and other requirements of Lincolnway Energy’s various loan agreements;

• Negative impacts that hedging activities may have on Lincolnway Energy’s operations or financial condition;

• Decreases in the market prices of ethanol and distiller’s grains;

• Ethanol supply exceeding demand and corresponding ethanol price reductions;

• Changes in the environmental regulations that apply to the Lincolnway Energy plant operations;

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

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

• Changes in other federal or state laws and regulations relating to the production and use of ethanol;

• Changes and advances in ethanol production technology;

• Competition from larger producers as well as completion from alternative fuel additives;

• Changes in interest rates and lending conditions of the loan covenants in the Company loan agreements;

• Volatile commodity and financial markets;

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• Decreases in export demand due to the imposition of duties and tariffs by foreign governments on ethanol and distiller's grains produced in the United States; and

• Trade actions by the Trump Administration, particularly those affecting the agriculture sector and related industries.

These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include various assumptions that underlie such statements.  Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed below and in the section titled “Risk Factors.” Other risks and uncertainties are disclosed in the Company’s prior Securities and Exchange Commission (“SEC”) filings. These and many other factors could affect the Company’s future financial condition and operating results and could cause actual results to differ materially from expectations set forth in the forward-looking statements made in this document or elsewhere by Company or on its behalf.  Lincolnway Energy is not under any obligation, and the Company expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise.  The forward-looking statements contained in this Form 10-K are included in the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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Item 1.    Business.

General Overview

Lincolnway Energy, LLC (“Lincolnway Energy” or the “Company”) is an Iowa limited liability company that operates a dry mill ethanol plant located in Nevada, Iowa.  Lincolnway Energy has been processing corn into fuel grade ethanol and distiller’s grains at the ethanol plant since May 2006.

The ethanol plant has a nameplate production capacity of 50,000,000 gallons of ethanol per year, which, at that capacity, would also generate approximately 136,000 tons of distiller’s grains per year. Lincolnway Energy anticipates, however, being able to operate the plant at anywhere from 10% to 30% above the nameplate production capacity. Lincolnway Energy operated its plant at approximately 23% over nameplate capacity during the fiscal year ended September 30, 2018 (“Fiscal 2018”).

Lincolnway Energy extracts corn oil from the syrup that is generated in the production of ethanol.  Lincolnway Energy estimates that it will produce approximately 8,500 tons of corn oil per year at the plant.

Air Products and Chemicals, Inc., formerly known as EPCO Carbon Dioxide Products, Inc. ("Air Products") has a plant on Lincolnway Energy's site that collects the carbon dioxide that is produced as part of the ethanol production process and converts that raw carbon dioxide into liquid carbon dioxide.  Air Products markets and sells the liquid carbon dioxide.  Lincolnway Energy estimates that it will sell approximately 74,500 tons of carbon dioxide per year.

Financial Information

Please refer to “Item 7-Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about Lincolnway Energy’s revenue, profit and loss measurements and total assets and liabilities, and “Item 8 - Financial Statements and Supplementary Data” for its financial statements and supplementary data.

Principal Products and Their Distribution Markets

Lincolnway Energy's principal products are fuel grade ethanol and distiller’s grains. In addition, Lincolnway Energy is extracting corn oil for sale and capturing a portion of the raw carbon dioxide produced for sale. The table below shows the approximate percentage of Lincolnway Energy’s total revenue which is attributed to each of its products during the last three fiscal years.

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Product	Fiscal Year 2018	Fiscal Year 2017	Fiscal Year 2016
Ethanol	77%	80%	78%
Distiller’s Grain	16%	13%	17%
Corn Oil	5%	5%	3%
Carbon Dioxide/Other	2%	2%	2%
	100%	100%	100%

Ethanol

Lincolnway Energy’s primary product is fuel grade ethanol which it produces from corn. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains, which can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide vehicle emissions; and (iii) a non-petroleum-based gasoline substitute.  More than 99% of all ethanol produced in the United States is used in its primary form for blending with unleaded gasoline and other fuel products.  

Lincolnway Energy and Eco-Energy, Inc. ("Eco-Energy") are parties to an Ethanol Marketing Agreement effective October 2, 2015 which the parties amended effective June 28, 2018. Under the agreement, Eco-Energy has the exclusive right to purchase all of the ethanol that is produced by Lincolnway Energy. Eco-Energy is required to use commercially reasonable and diligent efforts to market all of Lincolnway Energy’s output of ethanol and to obtain the best price for the ethanol. The purchase price payable to Lincolnway Energy under the agreement is the purchase price set forth in the applicable purchase order, less a marketing fee payable to Eco- Energy. The term of the agreement runs until September 30, 2020 and then renews for successive renewal terms of two years each unless either Lincolnway Energy or Eco-Energy give the other written notice at least 90 days prior to the end of the then current two year term. Lincolnway also has the right to terminate the agreement upon 60 days advance notice if Eco-Energy fails to represent a minimum of 9 ethanol production facilities in its ethanol marketing program. Lincolnway Energy is dependent upon its agreement with Eco-Energy for the marketing and sale of Lincolnway Energy’s ethanol, and Lincolnway Energy’s loss of the agreement, or Lincolnway Energy’s inability to negotiate a new agreement with Eco-Energy or another ethanol marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

The primary purchasers of ethanol are refiners, blenders or wholesale marketers of gasoline.  Lincolnway Energy anticipates that its ethanol production will be sold in various regional markets given the availability of rail service at Lincolnway Energy's ethanol plant and local markets that will be shipped by truck, but Eco-Energy controls the marketing of all of Lincolnway Energy's ethanol output.

Lincolnway Energy’s primary means of shipping and distributing ethanol is by rail and truck. Lincolnway Energy leases 175 tank rail cars that are used for transporting ethanol. The scheduled terms of the leases vary with the leases expiring between March 2019 and September 2024.

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The nameplate production capacity of Lincolnway Energy's ethanol plant is 50,000,000 gallons of ethanol per year, or approximately 4,167,000 gallons per month.  The ethanol plant exceeded the nameplate production capacity for the fiscal year ended September 30, 2018, however, by approximately 23%, with about 61,500,000 gallons of ethanol produced during that period and an average daily production of 175,500 gallons. This is a 1.6% decrease from the prior fiscal year due to production and regenerative thermal oxidizer issues. Lincolnway Energy anticipates that the ethanol plant will produce ethanol at a similar rate during the fiscal year ending September 30, 2019 ("Fiscal 2019").

Lincolnway Energy's revenues from the sale of ethanol during the fiscal years ended September 30, 2018, 2017 and 2016 accounted for approximately 77%, 80% and 78%, respectively, of Lincolnway Energy's total revenues during those periods. 

Distiller’s Grains

Lincolnway Energy's other primary product is distiller’s grains, which is a byproduct of the ethanol production process.  Distiller’s grains are the solids that are left after the processing and fermentation of corn into ethanol.  Distiller’s grains are a high protein feed supplement that are marketed primarily in the swine, dairy and beef industries.  Distiller’s grains can also be used in poultry and other livestock feed.

A dry mill ethanol process such as that utilized by Lincolnway Energy can produce wet distiller’s grains and dried distiller’s grains.  Wet distiller’s grain contains approximately 60% moisture, and has a shelf life of approximately ten days.  Wet distiller’s grains can therefore only be sold to users located within relatively close proximity to the ethanol plant.  Dried distiller’s grain is wet distiller’s grain that has been dried to 10% to 12% moisture.  Dried distiller’s grain has an extended shelf life and may be sold and shipped to any market.

The Company has also developed a new high quality species specific animal feed which it has branded as PureStream™protein. Lincolnway Energy currently intends to market this new product to the growing swine and poultry markets in Iowa. When compared to traditional distiller's grains, the new PureStream™ protein animal feed products are expected to be higher in crude protein and richer in the essential amino acids that drive growth in swine and poultry.

Lincolnway Energy entered into a Distiller’s Grain Off-Take Agreement with Gavilon Ingredients, LLC effective January 1, 2014. Under this agreement, Gavilon was required to purchase all of the distiller’s grains produced at Lincolnway Energy’s ethanol plant. The purchase price was the corresponding price being paid to Gavilon for the distiller’s grains in question, less certain logistics costs and a service fee. Gavilon was required to use commercially reasonable efforts to achieve the highest price available under prevailing marketing conditions.

On September 22, 2017, Lincolnway Energy entered into an Amended and Restated Distiller's Grain Off-Take Agreement with Gavilon which became effective October 1, 2017. Under the amended and restated agreement, Gavilon is required to purchase all of the distiller's grains and all of the PureStream™ protein products produced at Lincolnway Energy's ethanol plant. Gavilon will market the distiller's grains on a global basis and the PureStream™ protein products in certain states. Gavilon will receive a marketing fee less certain logistics costs. Upon expiration of the initial term on October 1, 2020, the amended and

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restated agreement will renew for successive renewal terms unless either Lincolnway Energy or Gavilon give the other written notice at least 90 days prior to the end of the then current term.

Lincolnway Energy is dependent upon its marketing agreement with Gavilon for the marketing and sale of Lincolnway Energy's distiller’s grains and PureStream™ protein products, and Lincolnway Energy's loss of the agreement, or Lincolnway Energy's inability to negotiate a new agreement with Gavilon or another marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

The primary purchasers of distiller’s grains are individuals or companies involved in dairy, beef or other livestock production.  Lincolnway Energy anticipates that approximately 7% of its distiller’s grains will be locally marketed to nearby livestock producers, but Lincolnway Energy’s distiller’s grains marketer controls the marketing of all of Lincolnway Energy's distiller’s grains. The primary purchasers of the PureStream™ protein products are expected to be domestic swine and poultry producers operating within a geographic area near the Lincolnway Energy plant.

Lincolnway Energy's primary means of shipping and distributing distiller’s grain and PureStream™ protein products is by rail and truck.  Local livestock producers are also able to pick up distiller’s grains directly from the ethanol plant. Lincolnway Energy leases 90 hopper rail cars which are used for transporting distiller’s grains. Lincolnway Energy's lease for the hopper rail cars expires in June 2019.

Lincolnway Energy produced approximately 170,600 tons of distiller’s grains during the fiscal year ended September 30, 2018, or approximately 14,200 tons of distiller’s grains per month.  The composition of the distiller’s grains was approximately 34% wet distiller’s grains and 66% dried distiller’s grains. Dried distiller’s production was approximately the same as the prior fiscal year. Lincolnway Energy anticipates distiller’s grains production to decrease during Fiscal 2019 with the completion of the new PureStream™ protein process.

Lincolnway Energy's revenues from the sale of distiller’s grains during the fiscal years ended September 30, 2018, 2017 and 2016 accounted for approximately 16%, 13% and 17%, respectively, of Lincolnway Energy's total revenues during those periods. 

Corn Oil

Lincolnway Energy has a corn oil extraction system that extracts corn oil from thin stillage that is generated in the production of ethanol. Lincolnway Energy markets and distributes all of the corn oil it produces directly to end users and third party brokers within the domestic market. Lincolnway Energy's primary means of shipping and distributing corn oil is by truck.

Lincolnway Energy estimates that it will produce and sell approximately 8,500 tons of corn oil per year at the plant.  Lincolnway Energy’s corn oil sales were approximately $5,545,000, $6,054,000 and $3,475,000 respectively, for the fiscal years ended September 30, 2018, 2017 and 2016, which represented approximately 5%, 5% and 3% of Lincolnway Energy's total revenues for those respective fiscal years.  Lincolnway Energy's corn oil production increased approximately 8% during the fiscal

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year ended September 30, 2018 when compared to the prior fiscal year. The increase resulted from the implementation of various process improvements.

Carbon Dioxide

Lincolnway Energy has a Carbon Dioxide Purchase and Sale Agreement and a related Non-Exclusive CO2 Facility Site Lease Agreement with Air Products. Under those agreements, Air Products maintains a plant on Lincolnway Energy's site to collect the carbon dioxide which is produced as part of the ethanol production process and to convert that raw carbon dioxide into liquid carbon dioxide.

Air Products also markets and sells the liquid carbon dioxide gas under those agreements.  The purchase price payable by Air Products for the raw carbon dioxide provided by Lincolnway Energy is based upon shipped tons of liquid carbon dioxide.  The agreement also includes a "take or pay" term which requires Air Products to purchase, during each contract year, the greater of a specified number of shipped tons per day or a percentage of the annual liquid carbon dioxide production capacity of the Air Products plant at full capacity.  The annual liquid carbon dioxide production capacity of the Air Products plant will be determined based upon the capacity run procedures as set out in the agreement.  The take or pay obligation is trued up at the end of each contract year, and the purchase price for any "take or pay" tons will be the average per shipped ton purchase price paid by Air Products during the contract year. The term of the marketing agreement with Air Products is ten years from the date on which liquid carbon dioxide was first produced at the plant, which was during August, 2010, unless the agreement is earlier terminated in accordance with the terms of the agreement. Air Products is required to remove the plant and related equipment following any termination of the agreement.

Air Products is responsible for the shipment of all liquid carbon dioxide, which Lincolnway Energy expects will continue to be shipped by truck.

Lincolnway Energy estimates it will sell approximately 74,500 tons of carbon dioxide per year to Air Products. Lincolnway Energy does not, however, anticipate that revenues from the sale of carbon dioxide to Air Products will be a material product of Lincolnway Energy, given that Lincolnway Energy estimates that those revenues will constitute around 2% or less of Lincolnway Energy's total revenues during any fiscal year.

Principal Product Markets

As described above in the section entitled “Principal Products and Their Distribution Methods,” Lincolnway Energy markets and distributes all of its ethanol and distiller’s grains through third party marketers.  Lincolnway Energy’s ethanol and distiller’s grains are primarily sold in the domestic market; however, as markets allow, its products can be and have been sold in the export markets.

According to the Renewable Fuels Association (the “RFA”), based on U.S. ethanol exports through June 2018 which increased by 33% as compared to the same period in 2017, U.S. ethanol exports in 2018 are on pace to shatter the 2017 record exports of 1.38 billion gallons. In the first half of 2018, Brazil, Canada, India, China, South Korea and the Philippines represented

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the top export markets with exports to Brazil up 28% over the same period in 2017 and exports to Canada up 8% over the same period in 2017. Exports to India increased over 20% as compared to the same period in 2017 due to strong industrial sector demand within India.

Although China is included in the top export markets during the first half of 2018, approximately 99% of the exports to China occurred in the first three months of 2018 and since then U.S. ethanol exports to China have reduced to nearly zero due to increased tariffs. As a result of recent trade actions announced by the Trump administration on April 2, 2018, the Chinese government increased the tariff on U.S. ethanol imports into China from 30% to 45% which has led to the loss of China as a current export market. On September 13, 2017, China’s National Development and Reform Commission, the National Energy Board and 15 other state departments issued a joint plan to expand the use and production of biofuels containing up to 10% ethanol by 2020. Although the U.S. ethanol industry hoped that this joint plan would support increased exports to China, in light of the recent implementation of a significant tariff on imports of U.S. ethanol into China there has been little positive impact on domestic exports to China resulting from this joint plan and there is no guarantee that any such positive impacts will develop.

Ethanol export demand remains more unpredictable than domestic demand given the vagaries of political and monetary forces in other countries. While Chinese imports of U.S. ethanol have collapsed as a result of the tariffs imposed on U.S. ethanol, other importers of U.S. ethanol are more flexible and responsive to market forces. According to the United States Department of Agriculture (the “USDA”) Foreign Agriculture Service, year-to-date domestic ethanol exports through August 31, 2018 were up 27% when compared to the prior period in 2017 and Brazil remained the largest export destination for U.S. ethanol accounting for 32% of domestic ethanol exports. Ethanol exports to Brazil increased despite the 20% tariff on U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter, imposed in September 2017 by Brazil’s Chamber of Foreign Trade (CAMEX). A rise in crude oil prices and the domestic price of high gasoline blends in Brazil has made ethanol importation economic even after paying the tariff. It remains to be seen if Brazil’s CAMEX will raise tariffs further in response, especially as new corn ethanol plants come on line in Brazil.

The wide discount of U.S. ethanol to gasoline has also caused other countries to increase imports and 2018 U.S. ethanol exports should exceed the record set in 2017. However, the tariffs imposed by China and Brazil on ethanol imports from the U.S. combined with the potential for the imposition of tariffs on U.S. ethanol by other countries due to the trade disputes may reduce ethanol exports. In addition, ethanol export demand is generally less predictable than domestic demand and is prone to fluctuations in response to monetary and political factors in other countries. For instance, the strengthening of the U.S. dollar may negatively impact ethanol exports from the United States.

Although the forecast for ethanol exports for 2018 remains strong, any further increase in tariffs or other economic factors that impact the demand for exports of domestic ethanol will have a negative impact on prices for ethanol produced in the United States.

World-wide acceptance of distiller’s grains as an animal feed with both desirable starch and protein properties has continued to advance.

Historically, the United States ethanol industry exported a significant amount of distiller’s grains to China; however, exports to China have significantly decreased as a result of the Chinese antidumping and countervailing investigations and the

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implementation of significant duties on importing into China distiller’s grains produced in the United States. In January 2017, China announced a final ruling which set the antidumping duties at a range between 42.2% and 53.7%, an increase over the 33.5% duty set forth in its preliminary decision.  China also increased the anti-subsidy duties from a range from 10% to 10.7% in its preliminary decision to a range from 11.2% to 12%. The imposition of these duties resulted in plummeting demand from this top importer requiring United States producers to seek out alternatives markets

Despite the virtual elimination of exports to China due to the anti-dumping duties, according to the USDA Foreign Agriculture Service, U.S. distiller’s grains exports through August 31, 2018 increased 8.6% over the same period in 2017. The principal export markets for U.S. distiller’s grains during the first 8 months of 2018 include Mexico, South Korea, Vietnam, Thailand, Indonesia and Turkey which accounted for approximately 58% of the total U.S. distiller’s grain exports. Shipments of distiller’s grains to Southeast Asia increased 90% year over year due to growing demand for protein. On September 1, 2017, the Minister of Agriculture and Rural Development of Vietnam lifted the suspension which blocked imports of U.S. dried distiller’s grains which had been in place since December 2016. Prior to the implementation of the suspension, Vietnam had historically been a substantial export market for U.S. distiller’s grains representing the third largest export market for U.S. distiller's grains. The lift of this suspension has led to increased exports to Vietnam; however, there is no guarantee that the Vietnamese export market will continue to achieve significant growth.

Prices for distillers grains in 2017 were similar to the levels achieved in 2016 as the market sought replacement for Chinese demand. Mexico, Turkey and Southeast Asia have increased their offtake and thus far in 2018, prices achieved as a percentage of corn have exceeded those achieved in both 2017 and 2016. U.S. domestic offtake has remained steady despite some weakness in animal feeding margins. During August and September 2018, distiller’s grains prices have been virtually flat. This may be considered a positive as U.S. corn prices fell 6% during that same period.

World demand for U.S. beef has risen as diets continue to improve worldwide to include increased animal protein. This could signal that exports of distiller’s grains may continue to increase during the first quarter of Fiscal 2019 which could positively impact the market price for distiller’s grains.

Lincolnway Energy expects its third party marketing agents to explore all markets for its products, including export markets, and believes that there is some potential for increased international sales of its products. However, due to high transportation costs, and the fact that Lincolnway Energy is not located near a major international shipping port, Lincolnway Energy expects the majority of its ethanol and distiller’s grains to continue to be marketed and sold domestically.

As described above in the section entitled “Principal Products and Their Distribution Methods,” Lincolnway Energy sells carbon dioxide to Air Products and Lincolnway Energy markets and distributes all of the corn oil it produces directly to end users and third party brokers in the domestic market.

Sources and Availability of Raw Materials

Corn

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The principal raw material necessary to produce ethanol, distiller’s grain and corn oil is corn. Lincolnway Energy is significantly dependent on the availability and price of corn which are affected by supply and demand factors such as crop production, carryout, exports, government policies and programs, risk management and weather.  With the volatility of the weather and commodity markets, Lincolnway Energy cannot predict the future price of corn. The market price of ethanol is not correlated to corn prices. Lincolnway Energy, like most ethanol producers, is not able to compensate for increases in the cost of corn through adjustments in its prices for its ethanol. Lincolnway Energy does see increases in the prices of its distiller’s grain during times of higher corn prices. However, given that ethanol sales comprise the majority of Lincolnway Energy’s revenues, the inability of the Company to adjust its ethanol prices can result in a negative impact on its profitability during periods of high corn prices.

In order to produce approximately 62,500,000 gallons of ethanol per year, Lincolnway Energy needs approximately 21,186,000 bushels of corn per year at its ethanol plant. Lincolnway Energy purchased 21,010,865 bushels of corn during fiscal year ended September 30, 2018 and 21,677,804 and 20,703,796 bushels during the fiscal years ended September 30, 2017 and 2016, respectively.

Lincolnway Energy's ethanol plant is located in Nevada, Iowa, which is located in Story County. Although Lincolnway Energy anticipates purchasing corn from various sources and areas, Lincolnway Energy believes that Story County will produce a sufficient supply of corn, assuming normal growing conditions, to generate the necessary annual requirements of corn for the ethanol plant.  There is not, however, any assurance that Lincolnway Energy will be able to purchase sufficient corn supplies from Story County or regarding the supply or availability of corn given the numerous factors that affect the supply and price for corn.

On November 8, 2018, the USDA released a report estimating the 2018 corn crop at 14.6 billion bushels, which is less than .5% larger than the 2017 production, with yields averaging 178.9 bushels per acre. These projections are in line with trade expectations.

Corn prices remained steady during the fiscal year ended September 30, 2018 compared to the same period in 2017 within a slightly narrower range. Lincolnway Energy’s management expects that corn prices will continue to remain depressed through the first two quarters of Fiscal 2019 as a result of the high levels of production and yield forecasted by the USDA. However, if corn prices rise again, due to unforeseen circumstances, unless Lincolnway Energy can increase the price it receives for its ethanol and distiller’s grains so that such revenues outpace the rising corn prices, there will be an adverse impact on Lincolnway Energy’s operating margins and profitability. Management continually monitors corn prices and the availability of corn near its plant and also attempts to minimize the effects of the volatility of corn costs on profitability through its risk management strategies, including hedging positions taken in the corn market.

There is also uncertainty regarding climate change, and any climate changes could adversely affect corn production in Lincolnway Energy's primary market area or other corn production areas in the United States and elsewhere, and thereby also adversely impact both the supply and price of corn.

Lincolnway Energy originates its corn needs in house and procures corn from various sources which is delivered to the plant by truck. Lincolnway Energy has corn storage capabilities for approximately 20 days of continuous ethanol production.

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Natural Gas

The Company has natural gas pipeline transportation contracts with two entities, Northern Natural Gas Pipeline and Alliant Energy. The Northern Natural Gas Pipeline contract provides for the transport of natural gas from Canada and the Dakotas to a hub in Story City, Iowa. The contract is for 5 years and expires in March 2021. The Alliant Energy contract provides for the transport of natural gas from Story City, Iowa directly into the plant and expires in 2024. Natural gas is purchased through a broker that contracts on behalf of Lincolnway Energy. Lincolnway Energy consumes approximately 5,000 MMBTUs per day or 1.8 million MMBTUs per year. Lincolnway Energy purchased approximately 1.7 million MMBTUs of natural gas for $6.0 million during the fiscal year ended September 30, 2018.

Electricity and Water

Lincolnway Energy's ethanol plant also requires a significant amount of electricity and water. Lincolnway Energy's electricity needs are currently met by Alliant Energy.  Lincolnway Energy pays the general service rates for its electricity. Approximately 145,000 kWh of electricity are used per day of production.

Lincolnway Energy utilizes approximately two gallons of water to produce a gallon of ethanol, which results in the use of approximately 625,000 gallons of water per day.  Lincolnway Energy discharges 160,000 gallons of water per day that has been purified by a reverse osmosis system. Lincolnway Energy's water needs are currently met by the City of Nevada.

Rail Access

Rail access is critical to the operation of Lincolnway Energy's ethanol plant because rail is used for the shipment and distribution of ethanol and distiller’s grains.  Lincolnway Energy utilizes rail track owned by Lincolnway Energy and tracks owned by the Union Pacific.  Lincolnway Energy has agreements with the Union Pacific Railroad regarding the use of its railroad tracks.

Technology Changes

Lincolnway Energy continues to monitor and evaluate any opportunities that may arise with respect to possible technological improvements and alternative energy sources for its ethanol plant.    For example, Lincolnway Energy previously used coal as the source for process heat energy. This put Lincolnway Energy at a cost disadvantage to other dry grind ethanol producers. Through collaboration between two entities and a natural gas line provider, Lincolnway Energy brought natural gas supply to Lincolnway Energy's plant. In addition to the cost benefits of running natural gas, Lincolnway Energy has realized other potential benefits such as reduced energy usage, reduced environmental compliance cost, and reduced fly ash disposal cost.

In April 2014, Lincolnway Energy installed a Selective Milling Technology ("SMT") machine. The SMT allows a more uniform and consistent feedstock giving the Company more consistent production. In the spring of 2015, Lincolnway Energy implemented a series of technology improvements focused on increased oil production including centrifuge capacity. These improvements allow the Company to maximize corn oil production. In October 2015, the Company installed some additional technology that separates fermentable starches and sugars. These efficiencies increase yields and the reliability of the plant.

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In the fiscal year ended September 30, 2017 ("Fiscal 2017"), several technology improvements were made in the distillation area increasing efficiencies in ethanol production and energy usage. Also in Fiscal 2017, the Company began a large capital project to install a new drying and cooling system designed to aid in the development of Lincolnway Energy's new high quality species specific animal feed, PureStream™ protein. This project is anticipated to be completed in the second quarter of Fiscal 2019.

Lincolnway Energy continues to monitor technological developments in the industry, especially those aimed at increasing operating or production efficiencies. Research is currently being conducted on various processes.

Competition

Domestic Ethanol Competitors

Lincolnway Energy's competitors in the U.S. include regional farmer-owned entities, the major oil companies and other large companies. Competition in the ethanol industry has increased during the past five years, with sustained periods of declining ethanol prices, excess supplies of ethanol and volatile corn prices. According to the RFA, as of October 22, 2018, there were 205 ethanol plants in the United States capable of producing 16.7 billion gallons based on nameplate capacity and two plants under expansion or construction with capacity to produce an additional 167 million gallons. Further, the RFA estimates that virtually none of the ethanol production capacity in the United States is currently idled.

The top five producers account for approximately 43% of production.  Lincolnway Energy is in direct competition with many of these top five producers as well as other national producers, many of whom have greater resources and experience than Lincolnway Energy and each of which is producing significantly more ethanol than Lincolnway Energy produces. In addition, Lincolnway Energy believes that the ethanol industry will continue to consolidate leading to a market where a small number of large ethanol producers with substantial production capacities will control an even larger portion of the U.S. ethanol production.

In recent years, the ethanol industry has also seen increased competition from oil companies who have purchased ethanol production facilities. These oil companies are required to blend a certain amount of ethanol each year. Lincolnway Energy is at a competitive disadvantage compared to the oil companies and its larger competitors who have greater production capacity, greater access to capital and other financial resources, multiple ethanol plants that may help them achieve certain efficiencies and other benefits that Lincolnway Energy cannot achieve with one ethanol plant or may enable them to operate at times when it is unprofitable for Lincolnway Energy to operate. For instance, ethanol producers that own multiple plants may be able to compete in the marketplace more effectively, especially during periods when operating margins are unfavorable, because they have the flexibility to run certain production facilities while reducing production or shutting down production at other facilities. These large producers may also be able to realize economies of scale which Lincolnway Energy is unable to realize or they may have better negotiating positions with purchasers.  Further, new products or methods of ethanol production developed by larger and better-financed competitors could provide them competitive advantages over Lincolnway Energy. All of these factors could put Lincolnway Energy at a competitive disadvantage to the oil companies and larger competitors.

Foreign Competition

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In recent years, the ethanol industry has experienced increased competition from international suppliers of ethanol and although ethanol imports have decreased during the past few years, if competition from ethanol imports were to increase again, such increased imports could negatively impact demand for domestic ethanol which could adversely impact the Company's financial results.

Many international suppliers produce ethanol primarily from inputs other than corn, such as sugarcane, and have cost structures that may be substantially lower than Lincolnway Energy's and other U.S. based ethanol producers. Many of these international suppliers are companies with much greater resources than Lincolnway Energy with greater production capacities.

Brazil is the world’s second largest ethanol producer. Brazil makes ethanol primarily from sugarcane as opposed to corn, and depending on feedstock prices, may be less expensive to produce. Under the Renewable Fuel Standard (the "RFS"), 15 billion gallons of corn-based ethanol was mandated during 2018 when U.S. ethanol production was estimated to exceed 16 billion gallons. Many in the ethanol industry are concerned that certain provisions of the RFS may disproportionately benefit ethanol produced from sugarcane. This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market. If this were to occur, it could reduce demand for the ethanol produced by Lincolnway Energy. In recent years, sugarcane ethanol imported from Brazil has been one of the most economical means for certain obligated parties to comply with the RFS requirement to blend advanced biofuels. Energy Information Administration (the "EIA") data shows that during the first eight months of 2018, U.S. ethanol imports decreased to 21 million gallons from 42 million gallons in the first eight months of calendar 2017. Increases in imports from Brazil may occur due to the stronger United States Dollar compared to the Brazilian Real along with favorable prices for sugarcane based ethanol in the United States, specifically in California. Any increase in ethanol imports from Brazil in Fiscal 2019 will further increase domestic ethanol supplies in the United States and may result in ethanol price decreases.

Although ethanol imported from foreign countries, including Brazil, may be less expensive than domestically-produced ethanol, foreign demand, transportation costs and infrastructure constraints may temper the market impact on the United States.

Local Competition and Smaller Competitors

Because the Lincolnway Energy ethanol plant is located in the center of Iowa, and because ethanol producers generally compete primarily with local and regional producers, the ethanol producers located in Iowa presently constitute the Company’s primary competition.  According to the Ethanol Producers Magazine estimates, as of October 22, 2018, Iowa had 44 ethanol refineries in production, with a combined nameplate capacity to produce 4.5 billion gallons of ethanol.

In addition, smaller competitors also pose a threat. Farmer-owned cooperatives and independent companies consisting of groups of individual farmers and investors have been able to compete successfully in the ethanol industry; although Lincolnway Energy believes that smaller ethanol plants may have increasing difficulty in competing with larger plants over the longer term especially if the volatile market conditions of the last few years continue. These smaller competitors operate smaller facilities which do not affect the local price of corn grown in the proximity to the facility as much as larger facilities do, and some of the smaller competitors are farmer-owned and the farmer-owners either commit, or are incented by their ownership in the facility, to sell corn to the facility.

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Competition from Alternative Renewable Fuels

Lincolnway Energy anticipates increased competition from renewable fuels that do not use corn as feedstock. Many of the current ethanol production incentives are designed to encourage the production of renewable fuels using raw materials other than corn, including cellulose. Cellulose is the main component of plant cell walls and is the most common organic compound on earth. Cellulose is found in wood chips, corn stalks, rice straw, amongst other common plants. Cellulosic ethanol is ethanol produced from cellulose. Research continues regarding cellulosic ethanol, and various companies are in various stages of developing and constructing some of the first generation cellulosic plants. Several companies have commenced pilot projects to study the feasibility of commercially producing cellulosic ethanol and are producing cellulosic ethanol on a small scale and a few companies in the United States have begun producing on a commercial scale. Additional commercial scale cellulosic ethanol plants could be completed in the near future. Although these cellulosic ethanol plants have faced some financial and technological issues, if this technology can be profitably employed on a commercial scale, it could potentially lead to ethanol that is less expensive to produce than corn based ethanol. Cellulosic ethanol may also capture more government subsidies and assistance than corn based ethanol. This could decrease demand for the Company's product or result in competitive disadvantages for the Company's ethanol production process.

A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids, electric cars or clean burning gaseous fuels. Like ethanol, the emerging fuel cell industry offers a technological option to address worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. If the fuel cell industry continues to expand and gain broad acceptance and becomes readily available to consumers for motor vehicle use, the Company may not be able to compete effectively. This additional competition could reduce the demand for ethanol, which would negatively impact Lincolnway Energy’s profitability.

Some competitors operate their ethanol plant and produce ethanol using different sources of energy than coal or gas or using various other sources of energy. The other sources of energy include biomass and various forms of waste type products, such as woodwaste, tires, construction waste and other waste products. Those competitors may have lower production and input costs and/or higher operating efficiencies than Lincolnway Energy, which would allow them to produce and market their ethanol at lower prices than Lincolnway Energy.

Since ethanol is a commodity, competition in the industry is predominately based on price and therefore, Lincolnway Energy's ability to compete successfully in the ethanol industry will depend upon its ability to price its ethanol competitively, which in turn will depend on many factors, many of which are beyond the control of Lincolnway Energy and its management. As indicated above, one of those factors is that Lincolnway Energy is subject to material and substantial competition, including from competitors who will be able to produce or market significantly higher volumes of ethanol and at lower prices.

Distiller’s Grain Competition

Ethanol plants in the Midwest produce the majority of distiller’s grains and primarily compete with other ethanol producers in the production and sales of distiller’s grains. According to the RFA's Ethanol Industry Outlook 2018 (the “RFA 2018

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Outlook”), ethanol plants produced more than 42 million metric tons of distiller’s grains and other animal feed in 2017.  The Company competes with other producers of distiller’s grains products both locally and nationally.

The primary customers of distiller’s grains are dairy and beef cattle, according to the RFA 2018 Outlook. In recent years, an increasing amount of distiller’s grains have been used in the swine and poultry markets. Numerous feeding trials show advantages in milk production, growth, rumen health, and palatability over other dairy cattle feeds. With the advancement of research into the feeding rations of poultry and swine, Lincolnway Energy expects these markets to expand and create additional demand for distiller’s grains. In addition, the Company has developed a new high quality species specific animal feed which it has branded as PureStream™ protein which it currently intends to market to the growing swine and poultry markets in Iowa. When compared to traditional distiller's grains, the new PureStream™ protein animal feed products are expected to be higher in crude protein and richer in the essential amino acids that drive growth in swine and poultry. The Company's new PureStream™ protein products could enable the Company to further expand these markets. However, no assurance can be given that these markets will in fact develop or expand, or if they do, that the Company will benefit from such development or expansion.

The market for distiller’s grains and animal feeds is generally confined to locations where freight costs allow it to be competitively priced against other feed ingredients. Distiller’s grains compete with three other feed formulations: corn gluten feed, dry brewers grain and mill feeds. The primary value of these products as animal feed is their protein content. Dry brewers grain and distiller’s grains have about the same protein content, and corn gluten feed and mill feeds have slightly lower protein contents. Distiller’s grains contain nutrients, fat content, and fiber that Lincolnway Energy believes will differentiate its distiller’s grains products from other feed formulations. However, producers of other forms of animal feed may also have greater experience and resources than Lincolnway Energy does and their products may have greater acceptance among producers of beef and dairy cattle, poultry and hogs.

Principal Supply & Demand Factors

Lincolnway Energy's gross margin will depend significantly on the spread between ethanol and corn prices, and in particular the spread (sometimes referred to as the crush spread) between the price of a gallon of ethanol and the price for the amount of corn required to produce a gallon of ethanol. The price of ethanol and corn fluctuates frequently and widely, however, so any favorable spread between ethanol and corn prices which may exist from time to time cannot be relied upon as indicative of the future. It is possible for the circumstance to arise where corn costs increase and ethanol prices decrease to the point where Lincolnway Energy could be required to suspend operations. Any suspension of operations could have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

The supply and cost of other inputs needed by Lincolnway Energy can also vary greatly, such as natural gas, electric and other energy costs. Lincolnway Energy's ethanol plant currently utilizes natural gas as its primary energy source, and Lincolnway Energy estimates that natural gas costs will, on average, make up approximately 6% of Lincolnway Energy's annual total operating costs. The prices for and availability of natural gas are subject to numerous market conditions and factors which are beyond Lincolnway Energy's control. Significant disruptions in the supply of natural gas would impair Lincolnway Energy's ability to produce ethanol, and increases in natural gas prices or changes in Lincolnway Energy's natural gas costs relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.

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Lincolnway Energy may attempt to offset a portion of the effects of such fluctuations by entering into forward contracts to supply ethanol and to purchase corn by engaging in hedging and other futures related activities, but those activities also involve substantial risks and may be ineffective to mitigate price fluctuations and may in fact lead to substantial losses.

Transportation issues and costs can also be a factor in the price for ethanol because ethanol is currently shipped by truck or by rail, and not by pipeline, and because ethanol generally needs to be shipped relatively long distances to a terminal where the ethanol can be blended with gasoline.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or of corn, natural gas and other inputs could adversely affect Lincolnway Energy's business, results of operation and financial position. Also, as a result of the volatility of the prices for these commodities, Lincolnway Energy's results will likely fluctuate substantially over time. Lincolnway Energy may experience periods during which the prices for ethanol and distiller’s grains decline and the costs of Lincolnway Energy's raw materials increase, which would result in lower profits or operating losses, which could be material at times, and which will adversely affect Lincolnway Energy's financial condition.

Federal Ethanol Support and Governmental Regulations

RFS and Related Federal Legislation

The ethanol industry is dependent on the Federal Renewable Fuels Standard (the “RFS”) , a federal ethanol support and economic incentive which mandates ethanol use, and the RFS continues to be a driving factor in the growth of ethanol usage. The RFS requires that in each year a certain amount of renewable fuels must be used in the United States. The RFS is a national program that does not require that any renewable fuels be used in any particular area or state, allowing refiners to use renewable fuel blends in those areas where it is most cost-effective.   The U.S. Environmental Protection Agency (the “EPA”) is responsible for revising and implementing regulations to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel.

The RFS usage requirements increase incrementally each year through 2022 when the mandate requires that the United States use 36 billion gallons of renewable fuels.  Starting in 2009, the RFS required that a portion of the RFS must be met by certain “advanced” renewable fuels. These advanced renewable fuels include ethanol that is not made from corn, such as cellulosic ethanol and biomass based biodiesel. The use of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used in the United States.

Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligation. On July 5, 2017, the EPA released a proposed rule to set the 2018 renewable volume requirements which proposed setting the annual volume requirements for renewable fuel at 19.24 billion gallons of renewable fuels per year (the “Proposed 2018 Rule”). On November 30, 2017, the EPA issued the final rule for 2018 which varied only slightly from the Proposed 2018 Rule with the annual volume requirement for renewable fuel set at 19.29 billion gallons of renewable fuels per year (the “Final 2018 Rule”). Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the final 2017 renewable fuel volume requirements, the 2018 volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018

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with significant reductions in the volume requirements for advanced biofuels. However, the Final 2018 Rule does maintain the number of gallons which may be met by conventional renewable fuels such as corn-based ethanol at 15.0 billion gallons.

On June 26, 2018, the EPA issued a proposed rule that would set the 2019 annual volume requirements for renewable fuel at 19.88 billion gallons of renewable fuels per year and maintaining the number of gallons which may be met by conventional renewable fuels such as corn based ethanol at 15 billion gallons (the “Proposed 2019 Rule”). On November 30, 2018, the EPA issued the final rule that set the 2019 annual volume requirements for renewable rule at 19.92 billion gallons of renewable fuels per year and maintained the number of gallons that may be met by conventional renewable fuels such as corn based ethanol at 15.0 billion gallons (the "Final 2019 Rule")."

Under the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total proposed volume requirements are more than 20% below statutory levels, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. The Final 2019 Rule is approximately 29% below the statutory levels; therefore, the reset will be triggered under the RFS and the EPA will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the volume requirements post-2022. In October 2018, the Trump administration released timelines for certain EPA rulemaking initiatives relating to the RFS including the “reset” of the statutory blending targets. The EPA is expected to propose rules modifying the applicable volume targets for cellulosic biofuel, advanced biofuel, and total renewable fuel for the years 2020-2022. The proposed rules are also expected to include proposed diesel renewable volume obligations for 2021 and 2022. The timetable for the consideration of the proposed rule is expected to overlap with the annual standard-setting rulemaking, therefore, it is expected that the proposed rule will also include the applicable renewable volume obligations for 2020. The rule is scheduled to be proposed in January and finalized by December 2019.

On October 19, 2017, EPA Administrator Pruitt issued a letter (the “Pruitt Letter”) to several U.S. Senators representing states in the Midwest reiterating his commitment to the text and spirit of the RFS, among other topics, he stated the EPA is actively exploring its authority to remove arbitrary barriers to the year-round use of E15 and other mid-level ethanol blends so that E15 may be sold throughout the year without disruption and that the EPA will not pursue regulations to allow ethanol exports to generate renewable identification numbers (“RINs”). In addition, on April 12, 2018, as part of a series of meetings focused on RIN prices and E15 year-round sales involving President Trump, Senators, key federal agency and industry leaders, President Trump indicated that EPA would be moving forward to authorize year-round sales of E15 by rulemaking designed to address the waiver that currently inhibits sales of E15 in certain markets during summer driving months. The letter and these statements represent actions that would likely have a positive impact on the ethanol industry either directly or indirectly.

On October 8, 2018, President Trump directed the EPA to begin rulemaking to permit the sale of E15 year round and the President has stated a goal of having a final rule out before the start of summer driving season on June 1, 2019. However, the EPA has not yet taken steps to enact the year round sale of E15 and its is unclear when the EPA may take such action. Also, any final rule from the agency is susceptible to legal challenges.

The Pruitt Letter also stated that the EPA would soon finalize a decision to deny the request to change the point of obligation for renewable identification numbers, or RINs, from refiners and importers to blenders. The EPA assigns individual refiners, blenders and importers the volume of renewable fuels they are obligated to use based on their percentage of total fuel sales. Obligated parties use RINs to show compliance with RFS-mandated volumes. RINs are attached to renewable fuels by producers and detached when the renewable fuel is blended with transportation fuel or traded in the open market. The market price

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of detached RINs affects the price of ethanol in certain markets and influences purchasing decisions by obligated parties. Consistent with the position in his letter, on November 22, 2017, the EPA issued a Notice of Denial of Petitions for rulemaking to change the RFS point of obligation which resulted in the EPA confirming the point of obligation will not change.

Despite the Pruitt Letter and the recent actions by President Trump relating to E15, there continues to be uncertainty regarding the future of the RFS as a result of the recently revealed EPA grants of a number of small refiner exemptions from the volume purchase requirements of the RFS, as well as an exemption granted to a refiner as part of bankruptcy proceedings. When the EPA issues waivers to the refineries, the refineries are no longer required to earn or purchase blending credits known as "RINS". Additionally, the EPA has announced that it is reviewing RFS waivers denied to small refiners by the Obama administration and has retroactively awarded biofuels credits to at least two refiners to alleviate their 2018 obligations. The joint impact of large increases in small refiner waivers granted by the EPA and the expected reduction in Chinese imports has had a very negative impact on ethanol D6 RIN prices. RIN prices have fallen by over 60%, largely removing a powerful blending incentive from the ethanol marketplace. The reduction in RIN prices can also have an adverse impact on ethanol prices. If the EPA continues to grant discretionary waivers and the RIN prices continue to fall, it could negatively affect ethanol prices.

Legal challenges are underway to the EPA’s recent reductions in the RFS volume requirements, including the Final 2018 Rule and the Proposed 2019 Rule as well as the denial of petitions to change the RFS point of obligation and the recent small refiner waivers. If the EPA’s decision to reduce the volume requirements under the RFS is allowed to stand, if the volume requirements are further reduced, if the RFS point of obligation were changed or if the EPA continues to grant waivers to small refiners, the market price and demand for ethanol would be adversely effective which would negatively impact our financial performance.

On May 18, 2018, the Advanced Biofuel Association initiated a legal challenge to the EPA’s process for granting exemptions from compliance under the RFS to small refineries. In its petition, the Advanced Biofuel Association seeks judicial review of the EPA’s decision to modify criteria to lower the threshold by which the agency determines whether to grant small refineries an exemption for the RFS for reasons of disproportionate economic hardship.

Additionally, on May 29, 2018, the National Corn Growers Association, National Farmers Union and the Renewable Fuels Association filed a petition challenging the EPA’s grant of waivers to three specific refineries seeking that the court reject the waivers granted to the three as an abuse of EPA authority.  These waived gallons are not redistributed to obligated parties, and in effect, reduce the aggregate RVOs under the RFS. If the specific waivers granted by the EPA and/or its lower criteria for granting small refinery waivers under the RFS are allowed to stand, or if the volume requirements are further reduced, it could have an adverse effect on the market price and demand for ethanol which would negatively impact our financial performance.

Related to the recent lawsuits, the Renewable Fuels Association, American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association, Biotechnology Industry Organization, and National Farmers Union petitioned the EPA on June 4, 2018 to change its regulations to account for lost volumes of renewable fuel resulting from the retroactive small refinery exemptions. This petition to the EPA seeks a broader, forward-looking remedy to account for the collective lost volumes caused by the recent increase in retroactive small refinery RVO exemptions. It is unclear what regulatory changes, if any, will emerge from the petition to the EPA.

Although the maintenance of the 15 billion gallon threshold for volume requirements that may be met with corn-based ethanol in the Final 2018 Rule and the Proposed 2019 Rule together with the Pruitt Letter, President Trump’s directive relating to

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permitting the year round sale of E15 and the resulting actions taken by the EPA consistent with the Pruitt Letter signals support from the EPA and the Trump administration for domestic ethanol production, there is still significant uncertainty about the level of support for the RFS within the Trump administration. The Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS and it is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of any such reforms; however, any such reform could adversely affect the demand and price for ethanol and the Company’s profitability.

State Initiatives and Mandates

In 2006, Iowa passed legislation promoting the use of renewable fuels in Iowa.  One of the most significant provisions of the Iowa renewable fuels legislation is a renewable fuels standard encouraging 10% of the gasoline sold in Iowa to consist of renewable fuels.  This renewable fuels standard increases incrementally to 25% of the gasoline sold in Iowa by 2020.

Higher Ethanol Blends

Demand for ethanol has been affected by moderately increased consumption of E85 fuel, a blend of 85% ethanol and 15% gasoline.  In addition to use as a fuel in flexible fuel vehicles, E85 can be used as an aviation fuel, as reported by the National Corn Growers Association, and as a hydrogen source for fuel cells. According to the RFA, there are currently more than 22 million flexible fuel vehicles capable of operating on fuel blends up to 85% ethanol in the United States and major automakers such General Motors, Ford/Mercury/Lincoln,Chrysler/Dodge/Jeep, Toyota, Audi and Mercedes-Benz have available flexible fuel models and have indicated plans to produce several million more flexible fuel vehicles per year.  The U.S. Department of Energy reports that as of March 2018 there were more than 3,200 retail gasoline stations supplying E85 in over 40 states.  While the number of retail E85 suppliers has increased each year, this remains a relatively small percentage of the total number of U.S. retail gasoline stations, which is approximately 170,000.  In order for E85 fuel to increase demand for ethanol, it must be available for consumers to purchase it.  As public awareness of ethanol and E85 increases along with E85’s increased availability, management anticipates some growth in demand for ethanol associated with increased E85 consumption.

Changes in Corporate Average Fuel Economy (“CAFE”) standards have also benefited the ethanol industry by encouraging use of E85 fuel products. CAFE provides an effective 54% efficiency bonus to flexible-fuel vehicles running on E85. This variance encourages auto manufacturers to build more flexible-fuel models, particularly in trucks and sport utility vehicles that are otherwise unlikely to meet CAFE standards.

E15 is a blend of gasoline of up to 15% ethanol.   In June 2012, the EPA gave final approval for the sale and use of E15 ethanol blends in light duty vehicles made since 2001, representing nearly two-thirds of all vehicles on the road. In July 2012, the first retail sales of E15 ethanol blends in the U.S. occurred. According to Growth Energy, as of September 30, 2018, there were 1,628 retail stations selling E15 in 30 states, up from 1,043 stations as of October 5, 2017. One of the historic challenges with the growth of the E15 market is the fact that, the waiver in the Clean Air Act, known as the One-Pound Waiver, which allows E10 to be sold year-round, does not apply to E15 or higher blends, even though it has similar physical properties to E10, so its sale is limited to flex-fuel vehicles only during the June 1 to September 15 summer driving season. However, On October 8, 2018, President Trump directed the EPA to begin rulemaking to expand the One-Pound Waiver to E15 so it can be sold year round. The

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President has stated a goal of having a final rule out before the start of summer driving season on June 1, 2019; however, the EPA has not yet taken steps to enact the year round sale of E15 and it is unclear when the EPA may take such action. Also, any final rule from the agency is susceptible to legal challenges.

In May 2015, the USDA announced that the agency will make significant investments in a biofuels infrastructure partnership to double the number of renewable fuel blender pumps that can supply consumers with higher ethanol blends, like E15 and E85. The program provides competitive grants, matched by states, to help implement “blender pumps” in the United States in order to increase demand for ethanol and to help offset the cost of introducing mid-level ethanol blends into the United States retail gasoline market. A blender pump is a gasoline pump that can dispense a variety of different ethanol/gasoline blends. Blender pumps typically can dispense E10, E15, E20, E30, E40, E50 and E85. These blender pumps accomplish these different ethanol/gasoline blends by internally mixing ethanol and gasoline which are held in separate tanks at the retail gas stations. Many in the ethanol industry believe that increased use of blender pumps will increase demand for ethanol by allowing gasoline retailers to provide various mid-level ethanol blends in a cost effective manner and allowing consumers with flex-fuel vehicles to purchase more ethanol through these mid-level blends. However, the expense of blender pumps has delayed their availability in the retail gasoline market. The USDA biofuels infrastructure partnership program has provided $210 million to fund the installation of new ethanol infrastructure at more than 1,400 stations in 29 states. Installations began in 2016 and are expected to be completed in 2018, which will significantly increase the number of stations selling both E15 and E85.

Cellulosic Ethanol

The Energy Independence and Security Act provided numerous funding opportunities in support of cellulosic ethanol. In addition, the RFS mandates an increasing level of production of biofuels which are not derived from corn. These policies suggest an increasing policy preference away from corn ethanol and toward cellulosic ethanol.

Environmental and Other Regulations

Ethanol production involves the emission of various airborne pollutants, including particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide.  Ethanol production also requires the use of significant volumes of water, a portion of which is treated and discharged into the environment.  Lincolnway Energy is required to maintain various environmental and operating permits.  Even though it has successfully acquired the permits necessary for operations, any retroactive change in environmental regulations, either at the federal or state level, could require Lincolnway Energy to obtain additional or new permits or spend considerable resources on complying with such regulations.  In addition, if Lincolnway Energy sought to expand the plant’s capacity in the future, above its current 50 million gallons, it would likely be required to acquire additional regulatory permits and could also be required to install additional pollution control equipment.   The failure of Lincolnway Energy to obtain and maintain any environmental and/or operating permits currently required or which may be required in the future could force the Company to make material changes to its plant or to shut down altogether.

The U.S. Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. As stated above, the Company believes the final RFS2 regulations

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grandfather the plant at its current operating capacity, though expansion of the plant will need to meet a threshold of a 20% reduction in greenhouse gas emissions from a baseline measurement to produce ethanol eligible for the RFS2 mandate.

Separately, the California Air Resources Board (“CARB”) has adopted a Low Carbon Fuel Standard (the “LCFS”) requiring a 10% reduction in greenhouse gas emissions from transportation fuels by 2020 using a lifecycle greenhouse gas emissions calculation, On December 29, 2011, a federal district court in California ruled that the California LCFS was unconstitutional which halted implementation of the California LCFS. CARB appealed this court ruling and on September 18, 2013, the federal appellate court reversed the federal district court finding the LCFS constitutional and remanding the case back to federal district court to determine whether the LCFS imposes a burden on interstate commerce that is excessive in light of the local benefits. On June 30, 2014, the United States Supreme Court declined to hear the appeal of the federal appellate court ruling and CARB recently re-adopted the LCFS with some slight modifications. The LCFS could have a negative impact on the overall market demand for corn-based ethanol and result in decreased ethanol prices.    

Part of Lincolnway Energy’s business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge and disposal of hazardous materials. Other examples of government policies that can have an impact on the Company’s business include tariffs, duties, subsidies, import and export restrictions and outright embargoes.

The Company also employs maintenance and operations personnel at its plant. In addition to the attention that the Company places on the health and safety of its employees, the operations at the plant are governed by the regulations of the Occupational Safety and Health Administration.

The Company has obtained all of the necessary permits to operate the plant. Although Lincolnway Energy has been successful in obtaining all of the permits currently required, any retroactive change in environmental or other applicable regulations, either at the federal or state level, could require the Company to obtain additional or new permits or spend considerable resources in complying with such regulations.

Dependence on One or a Few Major Customers

As discussed above, Lincolnway Energy has marketing agreements with certain third parties for the purpose of marketing and distributing of its principal products, ethanol and distiller’s grain. Currently, Lincolnway Energy does not have the ability to market its ethanol and distiller’s grains internally should its third party marketers be unable or refuse to market these products at acceptable prices.  However, Lincolnway Energy anticipates that it would be able to secure competitive marketers should it need to replace any of its current marketers for any reason.

Working Capital

Lincolnway Energy primarily uses its working capital for purchases of raw materials necessary to operate the ethanol plant, for payments on its credit facilities, for distributions to its members and for capital expenditures to maintain and upgrade the ethanol plant. Lincolnway Energy’s primary sources of working capital are income from operations as well as various loan arrangements, including a revolving term loan with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA.

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Seasonality of Sales

Lincolnway Energy experiences some seasonality of demand for its ethanol and distiller’s grains. Since ethanol is predominantly blended with conventional gasoline for use in automobiles, ethanol demand tends to shift in relation to gasoline demand. As a result, Lincolnway Energy experiences some seasonality of demand for ethanol in the summer months and during holiday seasons related to increased driving.

Patents, Trademarks, Licenses, Franchises and Concessions

Lincolnway, Lincolnway Energy and PureStream are common law trademarks and/or service marks of the Company. Other parties’ marks referred to in this report are the property of their respective owners. Lincolnway Energy was granted a perpetual license by ICM, Inc. (“ICM”) to use certain ethanol production technology necessary to operate its plant.  There is no ongoing fee or definitive calendar term for this license.

Employees

As of November 30, 2018, Lincolnway Energy had 43 employees, with 4 open positions.

Financial Information about Geographic Areas

All of Lincolnway Energy’s operations are domiciled in the United States. All of the products sold to Lincolnway Energy’s customers for fiscal years 2018, 2017 and 2016 were produced in the United States and all of its long-lived assets are domiciled in the United States.

As discussed above, Lincolnway Energy has engaged third-party marketers who decide where to market Lincolnway Energy’s ethanol and distiller’s grains and the Company has no control over the marketing decisions made by its third-party marketers. These third-party marketers may decide to sell Lincolnway Energy’s products in countries other than the United States. Although exports of ethanol and distiller’s grains produced in the United States have increased in the past several years, despite such increase and the potential for the sale of Lincolnway Energy’s products in the international market by its marketers, the Company anticipates that its products will still be marketed and sold principally in the domestic market.

Lincolnway Energy sells its corn oil directly to end users and third party brokers in the domestic market and its carbon dioxide is sold to Air Products which operates a carbon dioxide liquefaction plant on the Lincolnway Energy property.

Available Information

Information about the Company is available on its website at www.lincolnwayenergy.com under the “Investors” tab which includes links to the reports the Company has filed with the SEC. The information found on the Company’s website is not part of this or any other report the Company files with or furnishes to the SEC.

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The public may read and copy any materials Lincolnway Energy files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

PART I

Item 1A.        Risk Factors.

You should carefully read and consider the risks and uncertainties below and the other information contained in this report. The risks and uncertainties described below are not the only ones Lincolnway Energy may face. The following risks, together with additional risks and uncertainties not currently known to the Company or that the Company currently deems immaterial, could impair the Company’s financial condition and results of operation.

Risks Relating to Lincolnway Energy and Its Business

Declines In The Price Of Ethanol Would Significantly Reduce The Company’s Revenues.     Although Lincolnway Energy's ethanol plant produces distiller’s grains, corn oil and carbon dioxide, ethanol is the primary and material source of revenue for Lincolnway Energy, having generated approximately 77%, 80% and 78% of Lincolnway Energy's total revenues for the fiscal years ended September 30, 2018, 2017 and 2016, respectively. The sales prices of ethanol can be volatile as a result of a number of factors such as overall supply and demand, the price of gasoline and corn, levels of government support, and the availability and price of competing products. The Company is dependent on a favorable spread between the price the Company receives for its ethanol and the price it pays for corn and natural gas. Any lowering of ethanol prices, especially if it is associated with increases in corn and natural gas prices, may affect the Company’s ability to operate profitably.

One of the most significant factors influencing the price of ethanol has been the substantial increase in ethanol production in recent years. According to the RFA, domestic ethanol production capacity increased from an annualized rate of 1.5 billion gallons per year in 1999 to a record 15.84 billion gallons in 2017. In addition, if ethanol production margins improve, owners of ethanol production facilities may increase production levels, thereby resulting in further increases in domestic ethanol inventories. Any increase in the supply of ethanol may not be commensurate with increases in the demand for ethanol, thus leading to lower ethanol prices. Also, demand for ethanol could be impaired due to a number of factors, including regulatory developments, increases in, or the imposition of new, foreign tariffs and reduced United States gasoline consumption. Reduced gasoline consumption has occurred in the past and could occur in the future as a result of increased gasoline or oil prices or other factors such as increased automobile fuel efficiency. Any of these outcomes could have a material adverse effect on the Company's results of operations, cash flows and financial condition.

Lincolnway Energy anticipates the price of ethanol to continue to be volatile during Fiscal 2019 as a result of the net effect of changes in the price of gasoline and corn and increased ethanol supply which may be offset by increased ethanol demand. Declines in the prices the Company receives for its ethanol will lead to decreased revenues and may result in our inability to operate the ethanol plant profitably for an extended period of time.

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If ethanol prices decline to the point where it is unprofitable to produce ethanol and remain at that level, Lincolnway Energy could be required to suspend operations until the price increases to a level where it is once again economical or profitable to produce and market the ethanol. Any suspension of operations would have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

Decreasing Oil And Gasoline Prices Resulting In Ethanol Trading At A Premium To Gasoline Could Negatively Impact The Ability To Operate Profitably. Ethanol has historically traded at a discount to gasoline; however, with the recent decline in gasoline prices, at times ethanol may trade at a premium to gasoline, causing a financial disincentive for discretionary blending of ethanol beyond the rates required to comply with the Renewable Fuel Standard. Discretionary blending is an important secondary market which is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. In past years, the price of ethanol has been less than the price of gasoline which increased demand for ethanol from fuel blenders. Lower oil prices drive down the price of gasoline which reduces the spread between the price of gasoline and the price of ethanol which could discourage discretionary blending, dampen the export market and result in a downward market adjustment in the price of ethanol. Any extended period where oil and gasoline prices remain lower than ethanol prices for a significant period of time could have a material adverse effect on the Company’s business, results of operation and financial condition which could decrease the value of its units.

Demand For Ethanol May Not Continue To Grow Unless Ethanol Can Be Blended Into Gasoline In Higher Percentage Blends For Conventional Automobiles. Currently, ethanol is blended with conventional gasoline for use in standard (non-flex fuel) vehicles to create a blend which is 10% ethanol and 90% conventional gasoline. In order to expand demand for ethanol, higher percentage blends of ethanol must be utilized in conventional automobiles. Such higher percentage blends of ethanol have become a contentious issue with automobile manufacturers and environmental groups having fought against higher percentage ethanol blends. E15 is a blend which is 15% ethanol and 85% conventional gasoline. Although there have been significant developments towards the availability of E15 and E85 in the marketplace including the recent actions by President Trump to authorize the sale of E15 year round, there are still obstacles to meaningful market penetration by E15 and E85. As a result, the availablity of E15 and E85 may not significantly increase demand for ethanol

A Reduction In Ethanol Exports To Brazil Due To The Imposition By The Brazilian Government Of A Tariff On U.S. Ethanol Could Have A Negative Impact On Ethanol Prices. Brazil has historically been a top destination for ethanol produced in the United States. However, in 2017 Brazil imposed a tariff on ethanol which is produced in the United States and exported to Brazil. Although the imposition of this tariff has not materially reduced exports of U.S. ethanol to Brazil during 2018, changes in the economic circumstances within Brazil, decreases in the price of sugar leading to more cost-effective production of sugarcane based ethanol or increases to the tariff may result in a decline in demand for ethanol from Brazil and could negatively impact the market price of ethanol in the United States and our ability to profitably operate the ethanol plant.

Decreased Prices For Distiller’s Grains Could Adversely Affect The Company’s Results Of Operations And Its Ability To Operate At A Profit. Distiller’s grains compete with other protein-based animal feed products. The price of distiller’s grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which these products are derived. Downward pressure on

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commodity prices, such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distiller’s grains.

Historically, sales prices for distiller’s grains have correlated with prices of corn. However, there have been occasions when the price increase for this co-product has lagged behind increases in corn prices. In addition, the Company’s distiller’s grains co-product competes with products made from other feedstocks, the cost of which may not have risen as corn prices have risen. Consequently, the price the Company may receive for distiller’s grains may not rise as corn prices rise, thereby lowering its cost recovery percentage relative to corn.

Due to industry increases in U.S. dry mill ethanol production, the production of distiller’s grains in the United States has increased dramatically, and this trend may continue. This may cause distiller’s grains prices to fall in the United States, unless demand increases or other market sources are found. To date, demand for distiller’s grains in the United States has increased roughly in proportion to supply. Lincolnway Energy believes this is because U.S. farmers use distiller’s grains as a feedstock, and distiller’s grains are slightly less expensive than corn, for which it is a substitute. However, if prices for distiller’s grains in the United States fall, it may have an adverse effect on the Company’s business and financial condition.

The Chinese Antidumping and Counterveiling Duty Investigation and Anti-Subsidy Duty May Have a Negative Effect on the Price of and Demand for Distiller’s Grains in the U.S. and Negatively Affect Lincolnway Energy’s Profitability. On January 12, 2016, the Chinese government began an antidumping and countervailing duty investigation related to distiller’s grains imported from the United States which contributed to a decline in distiller’s grains shipped to China. China issued a preliminary ruling on the anti-dumping investigation imposing an immediate duty on distiller’s grains that are produced in the United States and implemented an anti-subsidy duty on September 30, 2016. In January 2017, China announced a final ruling which set the antidumping duties at a range between 42.2% and 53.7% and established anti-subsidy duties at a range between 11.2% and 12%. The imposition of these duties resulted in plummeting demand from this top importer requiring United States producers to seek out alternatives markets, most notably in Mexico and Canada. The imposition of these duties create significant trade barriers and have significantly decreased demand from China and the prices for distiller’s grains produced in the United States. If alternative markets are not found, the failure of China to return as a significant export market for U.S. distiller's grains combined with lower domestic corn prices could negatively impact the Company’s ability to profitably operate its ethanol plant.

The Lincolnway Energy Business Is Not Diversified. The success of the Company depends largely on its ability to profitably operate its ethanol plant. Lincolnway Energy does not have any other lines of business or other sources of revenue if it is unable to operate its ethanol plant and manufacture ethanol, distiller’s grains, corn oil and carbon dioxide. If economic or political factors adversely affect the market for ethanol, distiller’s grain, corn oil or carbon dioxide, the Company has no other line of business to fall back on. Lincolnway Energy’s business would also be significantly harmed if the ethanol plant could not operate at full capacity for any extended period of time.

If The Company’s Marketers Fail To Sell All Of The Ethanol And Distiller’s Grain Produced By The Plant It Could Negatively Impact Profitability. Lincolnway Energy relies on its ethanol and distiller’s grain marketers to sell all of its principal products. Currently the Company has an agreement with Eco-Energy which markets all of the Company’s ethanol and an agreement with Gavilon to market all of the Company’s distiller’s grain. Nearly all of the Company’s revenue is from the sale of its ethanol and distiller grains; representing 93% of the Company’s revenues in Fiscal 2018. The inability of the Company’s marketers to

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sell all of the ethanol and distiller's grains produced by the Company, or their inability to sell such products at prices that allow the Company to operate profitability, could have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition. Although management believes that the Company could secure alternative marketers, if either of the current marketers fails to or elects not to renew the marketing agreement with the Company, switching marketers may negatively impact cash flow and the ability of the Company to operate profitably which could decrease the value of the Company’s units.

Lincolnway Energy May At Times Be Leveraged And Have Debt And Debt Service Requirements.  Lincolnway Energy will have loans outstanding from time to time, and may at times be highly leveraged. The use of leverage creates risks.  For example, if Lincolnway Energy ever became unable to generate profits and cash flow to service its debt and its ongoing operations and working capital needs, Lincolnway Energy could be forced to reduce or delay capital expenditures or any expansion plans, sell assets or operations, obtain additional loans or capital or attempt to restructure its loans and other debt.  Lincolnway Energy also may not be able to renew, extend or replace any existing loans or financing arrangements it may have in place from time to time.  If any of those events occur, Lincolnway Energy will need to attempt to obtain additional financing through the sale of additional units or debt in Lincolnway Energy or through additional loans from other lenders, but there is no assurance that any of those steps would be successful.

Lincolnway Energy must also comply with the various restrictions and covenants included as part of Lincolnway Energy's credit and loan agreements.  The restrictions and covenants include prohibitions or limitations on incurring additional debt, granting additional security interests or liens, acquiring additional assets, mergers, the issuance of additional units, and making distributions to Lincolnway Energy's members.  The credit and loan agreements also require Lincolnway Energy to maintain various financial ratios and other similar financial covenants.  On September 13, 2018, we received a waiver of compliance from our lenders waiving compliance with its Debt Service Coverage Ratio covenant for the period ended September 30, 2018. We were in compliance with all other covenants as of September 30, 2018. If the Company fails to satisfy the financial covenants there is no guarantee that our lenders will provide similar waivers. If we violate these covenants, or any of the other terms of our credit and loan agreements and we are unable to secure a waiver from our lenders, our lenders could deem us in default and require us to immediately repay any outstanding balances. These restrictions and requirements may also limit Lincolnway Energy's flexibility in planning for, or reacting to, competition or changes in the ethanol industry and Lincolnway Energy's ability to pursue other perceived business opportunities.

Lincolnway Energy's loans are secured by liens on all of Lincolnway Energy's assets, and if Lincolnway Energy breaches any of its agreements with its lenders, the lenders will be able to foreclose on Lincolnway Energy's assets.

Continued Growth In The Ethanol Industry Depends On Use Of Increased Ethanol Blends And Related Expansion Of Infrastructure, Change In Public Views And Regulatory Support, Which May Not Occur On A Timely Basis, If At All.  Most experts believe that for ethanol use to grow significantly over both the near and longer term, there must be increased use of ethanol blends in excess of 10%, such as E15, E20, E30 and, in particular, E85. Although the EPA approved the use of E15 in June 2012, the approval was limited to vehicles manufactured in 2001 or newer and all flex fuel vehicles and prohibited year round sales of E15. There was also resistance to increasing the percentage from 10% to 15%, and there is strong resistance from some groups to increasing the percentage above 15%. There are also various areas that need development and expansion in order for there to be any material increase in the use of higher ethanol blends, including E15, such as expanded production of flex fuel vehicles and the expanded use of pumps that can utilize higher ethanol blends, such as blender pumps. A blender pump allows a driver to fill

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his or her vehicle with any blend of ethanol from 0% to 85% depending on the type of vehicle they drive. Despite the increases in infrastructure for E15 in recent years and the recent actions by President Trump to authorize the year round sale of E15, there will likely need to be further government subsidies and support, however, in order to cause service stations to install those types of pumps on a larger scale. In addition there will also need to be changes in the public's views and perceptions of ethanol in order for there to be increased use of higher blends of ethanol, as well as regulatory developments at both the federal and state level which allow the use of, and promote the use of, higher ethanol blends and the use of blender pumps and flex fuel vehicles.

Reports continue to be issued by various groups, however, such as the American Petroleum Institute, the American Fuel & Petrochemical Manufacturers and the National Research Council, that question the use of ethanol and other biofuels, both from an economic and environmental perspective. Ethanol organizations disagree with, and respond to, most of those types of reports, but the reports continue to cause governmental, regulatory and public perception concerns and issues for the ethanol industry.

Lincolnway Energy's Results Of Operations, Financial Position And Business Outlook Will Likely Fluctuate Substantially Because Lincolnway Energy's Business Is Highly Dependent On Commodity Prices, Which Are Subject To Significant Volatility And Uncertainty, And On The Availability Of Raw Materials Supplies.  Lincolnway Energy's results of operations are substantially dependent on commodity prices, especially prices for corn, natural gas, ethanol and unleaded gasoline. The prices of these commodities are volatile and beyond Lincolnway Energy's control.

Lincolnway Energy estimates that corn costs will, on the average, make up approximately 70% of Lincolnway Energy's total annual operating costs, but the percentage could be higher or lower dependent on the price of corn and other operating costs from time to time. Accordingly, rising corn prices could lower profit margins, and, at certain levels, corn prices could make ethanol uneconomical to produce. The supply and price of corn are influenced by many factors, including drought, hail and other adverse weather conditions; insects or disease; farmer planting decisions; imports; government policies and subsidies with respect to agriculture and international trade; and global and local demand and supply. The price for corn in the market area encompassing Lincolnway Energy's ethanol plant could be higher than the corn price payable in other markets. Lincolnway Energy also competes for corn with the livestock producers and elevators located within Lincolnway Energy's market area.

There is also uncertainty regarding climate change, and any climate changes could adversely affect corn production in Lincolnway Energy's primary market area or other corn production areas in the United States and elsewhere, and thereby both the supply and price of corn.

Lincolnway Energy's gross margin depends significantly on the spread between ethanol and corn prices, and in particular the spread (sometimes referred to as the crush spread) between the price of a gallon of ethanol and the price for the amount of corn required to produce a gallon of ethanol. The price of ethanol and corn fluctuates frequently and widely, however, so any favorable spread between ethanol and corn prices which may exist from time to time cannot be relied upon as indicative of the future. It is possible for the circumstance to arise where corn costs increase and ethanol prices decrease to the point where Lincolnway Energy could be required to suspend operations. Any suspension of operations would have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

The supply and cost of other inputs needed by Lincolnway Energy can also vary greatly, such as natural gas, electric and other energy costs. Lincolnway Energy's ethanol plant currently utilizes natural gas as its primary energy source, and

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Lincolnway Energy estimates that natural gas costs will, on average, make up approximately 5% of Lincolnway Energy's annual total operating costs. The prices for and availability of natural gas are subject to numerous market conditions and factors which are beyond Lincolnway Energy's control. Significant disruptions in the supply of natural gas would impair Lincolnway Energy's ability to produce ethanol, and increases in natural gas prices or changes in Lincolnway Energy's natural gas costs relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.

Lincolnway Energy may attempt to offset a portion of the effects of such fluctuations by entering into forward contracts to supply ethanol and to purchase corn by engaging in hedging and other futures related activities, but those activities also involve substantial risks and may be ineffective to mitigate price fluctuations and may in fact lead to substantial losses.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or of corn, natural gas and other inputs will adversely affect Lincolnway Energy's business, results of operation and financial position. Also, as a result of the volatility of the prices for these commodities, Lincolnway Energy's results fluctuate substantially over time. Lincolnway Energy may experience periods during which the prices for ethanol and distiller’s grains decline and the costs of Lincolnway Energy's raw materials increase, which will result in lower profits or operating losses, which could be material at times, and could adversely affect Lincolnway Energy's financial condition.

The Use Of The Futures Markets By Lincolnway Energy Could Be Unsuccessful And Result In Substantial Losses.  Lincolnway Energy seeks to minimize the effects of the volatility of natural gas, corn, ethanol, distiller’s grains and other prices by entering into forward pricing contracts and taking positions in the futures markets. The primary intent of those positions is to attempt to protect the supply of, and the price at which Lincolnway Energy can buy natural gas and corn and the price at which Lincolnway Energy can sell its ethanol or distiller’s grains, but not all of the positions may be able to be properly categorized as being for hedging purposes. Any attempt by Lincolnway Energy to use forward pricing contracts or the futures markets, whether in the form of hedging strategies or for more speculative trading purposes, may be unsuccessful, and in fact could result in substantial losses because commodity price movements and price movements in futures contracts and options are highly volatile and speculative, and are influenced by many factors that are beyond the control of the Company.

Lincolnway Energy will likely vary the amount of forward pricing, hedging and other risk mitigation strategies Lincolnway Energy may undertake from time to time, and Lincolnway Energy may at times choose not to engage in hedging transactions in the future. As a result, Lincolnway Energy's results of operations and financial position may be adversely affected by increases in the price of natural gas or corn or decreases in the price of ethanol or unleaded gasoline.

Futures markets will also sometimes be illiquid, and Lincolnway Energy may not be able to execute a buy or sell order at the desired price, or to close out an open position in a timely manner. The inability to close out an open position in a timely manner may result in substantial losses to Lincolnway Energy. Lincolnway Energy's potential losses and liabilities for any futures or options positions are not limited to margin amounts or to the amount held in or the value of Lincolnway Energy's trading account. In the event of a deficiency in Lincolnway Energy's trading account due to a margin call made to the trading account, a loss exceeding the value of the trading account, or otherwise, Lincolnway Energy will be responsible for the full amount of the deficiency. Given the volatility of futures trading, margin calls can occur frequently and the amount of a margin call can be significant.

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Lincolnway Energy Competes With Larger, Better Financed Entities, Which Could Negatively Impact The Ability To Operate Profitably. There is significant competition among ethanol producers with numerous producers and privately-owned ethanol plants throughout the Midwest and elsewhere in the United States.  The Company’s business faces a competitive challenge from larger plants, from plants that can produce a wider range of products than the Company, and from other plants similar to the Lincolnway Energy plant.  Large ethanol producers such as Archer Daniels Midland, Flint Hills Resources LP, Green Plains Inc., Valero Renewable Fuels and POET Biorefining, among others, are capable of producing a significantly greater amount of ethanol than the Company produces. Further, many believe that there will be further consolidation occurring in the ethanol industry in the near future which will likely lead to a few companies who control a significant portion of the ethanol production market. The Company may not be able to compete with these larger entities.

Increased Ethanol Industry Penetration By Oil Companies May Adversely Impact the Company’s Margins. The ethanol industry is a highly competitive environment and it is principally comprised of entities that engage exclusively in ethanol production and large integrated grain companies that produce ethanol along with their base grain businesses. The Company has historically always faced competition with other small independent producers as well as larger, better financed producers for capital, labor, corn and other resources. Until recently, oil companies, petrochemical refiners and gasoline retailers have not been engaged in ethanol production to a large extent. These companies, however, form the primary distribution networks for marketing ethanol through blended gasoline. During the past few years, several large oil companies have begun to penetrate the ethanol production market. If these companies increase their ethanol plant ownership or other oil companies seek to engage in direct ethanol production, there may be a decrease in the demand for ethanol from smaller independent ethanol producers like Lincolnway Energy which could result in an adverse effect on the Company’s operations, cash flows and financial condition.

Changes And Advances In Ethanol Production Technology Could Require The Company To Incur Costs To Update The Company’s Plant Or Could Otherwise Hinder The Ability To Compete In The Ethanol Industry Or Operate Profitably.  Technological advances in the processes and procedures for producing ethanol and in the efficiency of ethanol plants are continually occurring, and further ongoing advances should be expected. Such advances and changes may make the technology installed in the Lincolnway Energy plant less desirable or obsolete.  These advances could also allow competitors to produce ethanol at a lower cost than the Company.  If the Company is unable to adopt or incorporate technological advances, its ethanol production methods and processes could be less efficient than those of its competitors, which could cause the Lincolnway Energy plant to become uncompetitive or completely obsolete.  If competitors develop, obtain or license technology that is superior to the Company’s or that makes the Company’s technology obsolete, the Company may be required to incur significant costs to enhance or acquire new technology so that its ethanol production remains competitive.  Alternatively, Lincolnway Energy may be required to seek third-party licenses, which could also result in significant expenditures.  The Company cannot guarantee that third-party licenses will be available or, once obtained, will continue to be available on commercially reasonable terms, if at all.  These costs could negatively impact the Company’s financial performance by increasing its operating costs and reducing the Company’s net income.

Competition From The Advancement Of Alternative Fuels May Decrease The Demand For Ethanol And Negatively Impact Profitability. Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development.  A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, hydrogen, electric or solar powered vehicles or clean burning gaseous fuels.  Like ethanol, the emerging fuel cell industry offers a technological option to address increasing worldwide energy costs, the long-term availability of petroleum reserves and

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environmental concerns.  Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions.  Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to lower fuel costs, decrease dependence on crude oil and reduce harmful emissions.  If the fuel cell and hydrogen industries continue to expand and gain broad acceptance, and hydrogen becomes readily available to consumers for motor vehicle use, the Company may not be able to compete effectively.  This additional competition could reduce the demand for ethanol, which would negatively impact the Company’s profitability.

Corn-Based Ethanol May Compete With Cellulose-Based Ethanol In The Future, Which Could Make It More Difficult For The Company To Produce Ethanol On A Cost-Effective Basis. Most ethanol produced in the U.S. is currently produced from corn and other raw grains, such as milo or sorghum - especially in the Midwest.  The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass, such as agricultural waste, forest residue, municipal solid waste and energy crops.  This trend is driven by the fact that cellulose-based biomass is generally cheaper than corn, and producing ethanol from cellulose-based biomass would create opportunities to produce ethanol in areas which are unable to grow corn.  The RFS offers a strong incentive to develop commercial scale cellulosic ethanol as the statutory volume requirement in the RFS requires that 16 billion gallons per year of advanced bio-fuels be consumed in the United States by 2022 (although recent actions by the EPA have reduced the statutorily required volume requirements for 2014, 2015, 2016, 2017, 2018 and 2019). Additionally, state and federal grants have been awarded to several companies who are seeking to develop commercial-scale cellulosic ethanol plants. As a result, a few companies have reportedly already begun producing on a commercial scale and a few companies have begun construction on commercial scale cellulosic ethanol plants some of which may be completed in the near future. If an efficient method of producing ethanol from cellulose-based biomass is developed, the Company may not be able to compete effectively.  It may not be practical or cost-effective to convert the Lincolnway Energy plant into a plant which will use cellulose-based biomass to produce ethanol.  If the Company is unable to produce ethanol as cost-effectively as cellulose-based producers, the Company’s ability to generate revenue will be negatively impacted.

Although Lincolnway Energy believes there will continue to be a place for corn based ethanol production within the ethanol industry, it is possible that at some point in the future governmental and public support of the ethanol industry may be focused primarily upon, and provide significant advantages or benefits to, cellulosic and other developing ethanol technologies, which could have adverse effects on Lincolnway Energy and corn based ethanol production in general. The requirements for the use of cellulosic and other advanced biofuels in the Energy Independence and Security Act of 2007 are evidence of the government's support of, and trending to, those types of biofuels. The public may also eventually support cellulosic and other advanced biofuels because of the perception that those types of biofuels do not have some of the perceived negative effects of corn based ethanol, such as the food versus fuel debate, given that cellulosic and other advanced biofuels are not made from products otherwise used in the food chain and are in some cases produced from waste type products.

Depending On Commodity Prices, Foreign Producers May Produce Ethanol At A Lower Cost Which May Result In Lower Ethanol Prices Which Would Adversely Affect Financial Results. The Company faces competition from foreign ethanol producers with Brazil currently the second largest ethanol producer in the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and, depending on feedstock prices, may be less expensive to produce. Under the RFS, certain parties are obligated to meet an advanced biofuel standard and sugarcane ethanol imported from Brazil has historically been one of the most economical means for obligated parties to meet this standard. Other foreign producers may be able to produce ethanol at lower input costs, including costs of feedstock, facilities and personnel, than the Company. While foreign demand, transportation

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costs and infrastructure constraints may temper the market impact throughout the United States, competition from imported ethanol may affect the Company’s ability to sell its ethanol profitably, which may have an adverse effect on its operations, cash flows and financial position.

If significant additional foreign ethanol production capacity is created, such facilities could create excess supplies of ethanol on world markets, which may result in lower prices of ethanol throughout the world, including the United States. Such foreign competition is a risk to the Lincolnway Energy business. Any penetration of ethanol imports into the domestic market may have a material adverse effect on the Company’s operations, cash flows and financial position.

Interruptions In The Supply Of Water, Electricity, Natural Gas Or Other Energy Sources Or Other Interruptions In Production Would Have An Adverse Effect On Lincolnway Energy's Ethanol Plant.  Interruptions in the supply of water, electricity, natural gas or other energy sources at Lincolnway Energy's ethanol plant would have a material adverse impact on operations, and could require Lincolnway Energy to halt production at the ethanol plant. Interruptions in or the loss of the supply of water, electricity, natural gas or other energy sources could occur as a result of cybersecurity threats or other information technology issues at the ethanol plant or at the plants of the suppliers of the water, electricity, natural gas or other energy.  Lincolnway Energy's and any suppliers' use of software and other technology systems will be subject to cybersecurity threats, and to failure or interruption through equipment failures, viruses, acts of God and other events beyond the control of Lincolnway Energy or a supplier.

Lincolnway Energy's operations are also subject to significant interruption if its ethanol plant experiences a major accident or is damaged by severe weather or other natural disasters.  Lincolnway Energy's operations are also subject to labor disruptions and unscheduled down time, and other operational hazards inherent in the ethanol industry, such as equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and natural disasters.  Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and equipment or environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties against Lincolnway Energy.

Lincolnway Energy's business is dependent upon the continuing availability of railroads, railcars, truck fleets and other infrastructure necessary for the production, transportation and use of ethanol.  Any disruptions or interruptions in that infrastructure could have a material adverse effect on Lincolnway Energy.

Lincolnway Energy may not have insurance covering any of these types of matters or occurrences.  Any insurance Lincolnway Energy may have in place may not be adequate to fully cover the potential losses and hazards, and Lincolnway Energy may not be able to renew the insurance on commercially reasonable terms or at all.

There Are Potential Conflicts Of Interest In The Structure And Operation Of Lincolnway Energy.  Although Lincolnway Energy does not believe any conflict of interest exists which in practice will be detrimental to Lincolnway Energy, potential conflicts of interest are inherent in the structure and operation of Lincolnway Energy and its business.  For example, the directors and officers of Lincolnway Energy are not required to devote their full time attention to Lincolnway Energy, and they are all involved in other full time businesses and may provide services to others.  Some of the directors or officers might be owners

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or otherwise interested in other ethanol plants.  The directors and the officers will experience conflicts of interest in allocating their time and services between Lincolnway Energy and their other businesses and interests.

The various companies that provide marketing and other services to Lincolnway Energy are also not required to devote their full time attention to those services, and they will very likely be involved in other ethanol plants and ethanol related businesses and possibly other businesses or ventures, including having ownership or other interests in other ethanol plants.  The companies will therefore experience conflicts of interest in allocating their time and services between Lincolnway Energy and their various other ethanol plants or business ventures.  The companies providing ethanol and distiller’s grains marketing services to Lincolnway Energy will be providing those same services to other ethanol plants, and may experience conflicts of interest in allocating favorable sales and sales when the supply of ethanol or distiller’s grains exceeds the demand.

Tank Cars Used To Transport Crude Oil And Ethanol May Need To Be Retrofitted Or Replaced To Meet Proposed New Rail Safety Regulations. The U.S. ethanol industry has long relied on railroads to deliver its product to market. The Company has leased approximately 175 ethanol cars. These leased cars may need to be retrofitted or replaced to comply with final regulations adopted by the U.S. Department of Transportation (the "DOT") to address concerns related to safety are adopted, which could in turn cause a shortage of compliant tank cars. The regulations call for a phase out within four years of the use of legacy DOT-111 tank cars for transporting highly-flammable liquids, including ethanol. The DOT expects about 66,000 tank cars to be retrofitted and about 23,000 cars to be shifted to transporting other liquids. The Canadian government also adopted new tank car standards which align with the new DOT standards and requires that its nation’s rail shippers use sturdier tank cars for transportation of crude oil and ethanol. Compliance with these final regulations could require upgrades or replacements of the Company’s tank cars and could have an adverse effect on the Company’s operations as lease costs for tank cars may increase. Additionally, existing tank cars could be out of service for a period of time while such upgrades are made, tightening supply in an industry that is highly dependent on such railcars to transport its product.

Lincolnway Energy Is Increasingly Dependent On Information Technology; Disruptions, Failures Or Security Breaches Of Its Information Technology Infrastructure Could Have A Material Adverse Effect On Operations.  Lincolnway Energy utilizes various software applications in connection with its ethanol operation and the Company’s software and other information technology is critically important to the Company’s business operations. The Company relies on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information, to manage a variety of business processes and activities, including production, manufacturing, financial, logistics, sales, marketing and administrative functions. Lincolnway Energy depends on its information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. The Company also uses information technology networks and systems to comply with regulatory, legal and tax requirements. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events. If any of the Company’s significant information technology systems suffer severe damage, disruption or shutdown, and the Company’s disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, the Company’s product sales, financial condition and results of operations may be materially and adversely affected.

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            In addition, if the Company is unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, the Company may encounter significant disruptions in the Company’s operations including its production and manufacturing processes, which can cause it to suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties. Any such disruption could materially and adversely impact the Company’s reputation, business, financial condition and results of operations.

Such breaches may also result in the unauthorized disclosure of confidential information belonging to the Company or to its partners, customers, suppliers or employees which could further harm the Company’s reputation or cause it to suffer financial losses or be subject to litigation or other costs or penalties. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage its reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a negative impact on the Company’s reputation, business, financial condition and results of operations.

Exports To Europe Have Decreased Due To The Imposition By The European Union Of A Tariff On U.S. Ethanol Which Has Negatively Impacted Ethanol Prices. In 2013, the European Union imposed a tariff on ethanol which is produced in the United States and exported to Europe. As a result of such tariff, exports of ethanol to Europe have decreased which has negatively impacted the market price of ethanol in the United States. The European Union tariff is scheduled to expire in 2018 which could result in increased demand for domestic ethanol from the European Union. Additional demand for ethanol from the European Union could help offset decreased demand from China and Brazil and have a positive impact on domestic ethanol prices. However, it will take time for ethanol prices to reflect any positive impact resulting from the expiration of the European Union tariff and there is no guarantee that any positive impact will result.

Recent trade actions by the Trump Administration, particularly those affecting the agriculture sector and related industries, could adversely affect our operations and profitability. Government policies and regulations significantly impact domestic agricultural commodity production and trade flows and governmental policies affecting the agricultural industry, such as taxes, trade tariffs, duties, subsidies, import and export restrictions on commodities and commodity products, can influence industry profitability, the planting of certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports. International trade disputes can also adversely affect trade flows by limiting or disrupting trade between countries or regions. Future governmental policies, regulations or actions affecting our industry may adversely affect the supply of, demand for and prices of our products, restrict our ability to do business and cause our financial results to suffer.

As a result of recent trade actions announced by the Trump administration and responsive actions announced by our trading partners, including by China, we may experience negative impacts of higher ethanol tariffs and other disruptions to international agricultural trade. On April 2, 2018, the Chinese government increased the tariff on U.S. ethanol imports into China from 30% to 45%. The increased tariff is expected to reduce overall U.S. ethanol export demand, which could have a negative effect on U.S. domestic ethanol prices, especially given the current oversupply in domestic ethanol inventories.

Risks Associated With Government Regulation and Subsidization

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The Ethanol Industry Is Highly Dependent On Government Mandates Relating To The Production And Use Of Ethanol And Changes To Such Mandates And Related Regulations Could Adversely Affect The Market For Ethanol And The Company’s Results Of Operations. The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. Future demand for ethanol will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline versus ethanol, taking into consideration the relative octane value of ethanol, environmental requirements and the RFS mandate. The RFS mandate helps support a market for ethanol that might disappear without this incentive.

Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. In the past, the EPA has set the renewable volume obligations below the statutory volume requirements. On July 5, 2017, the EPA released a proposed rule to set the 2018 renewable volume requirements which proposed setting the annual volume requirements for renewable fuel at 19.24 billion gallons of renewable fuels per year (the “Proposed 2018 Rule”). On November 30, 2017, the EPA issued the final rule for 2018 which varied only slightly from the Proposed 2018 Rule with the annual volume requirement for renewable fuel set at 19.29 billion gallons of renewable fuels per year (the “Final 2018 Rule”). Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the final 2017 renewable fuel volume requirements, the 2018 volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018 with significant reductions in the volume requirements for advanced biofuels.

On June 26, 2018, the EPA issued a proposed rule that would set the 2019 annual volume requirements for renewable fuel at 19.88 billion gallons of renewable fuels per year and maintaining the number of gallons which may be met by conventional renewable fuels such as corn based ethanol at 15 billion gallons (the “Proposed 2019 Rule”). It is expected that the EPA will finalize the rule by November 30, 2018.

The EPA has the authority to waive the RFS statutory volume requirement, in whole or in part, provided certain conditions have been met. If the EPA were to significantly reduce the volume requirements under the RFS or if the RFS were to be otherwise reduced or eliminated by the exercise of the EPA waiver authority or by Congress, the market price and demand for ethanol could decrease which will negatively impact our financial performance

Our operations could be adversely impacted by legislation, EPA actions or actions of the Trump administration that may reduce the RFS mandate including the continued granting of waivers of the RFS renewable volume obligations for certain small refiners. Similarly, should federal mandates regarding renewable volume obligations be repealed, the market for domestic ethanol could be adversely impacted. Economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the RFS mandate, may affect future demand. A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices. Moreover, changes to RFS could negatively impact the price of ethanol or cause imported sugarcane ethanol to become more economical than domestic ethanol.

To the extent that such federal or state laws or regulations are modified, the demand for ethanol may be reduced, which could negatively and materially affect the Company’s ability to operate profitably.

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The Company Is Subject To Extensive Environmental Regulation And Operational Safety Regulations That Impact Expenses And Could Reduce Profitability. Ethanol production involves the emission of various airborne pollutants, including particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide. The Company is subject to regulations on emissions from the EPA and the IDNR (Iowa Department of Natural Resources). The EPA’s and IDNR’s environmental regulations are subject to change and often such changes are not favorable to industry.  Consequently, even if the Company has the proper permits now, it may be required to invest or spend considerable resources to comply with future environmental regulations.

The Company’s failure to comply or the need to respond to threatened actions involving environmental laws and regulations may adversely affect the Company’s business, operating results or financial condition. The Company must follow procedures for the proper handling, storage, and transportation of finished products and materials used in the production process and for the disposal of waste products.  In addition, state or local requirements also restrict the Company’s production and distribution operations. The Company could incur significant costs to comply with applicable laws and regulations.  Changes to current environmental rules for the protection of the environment may require the Company to incur additional expenditures for equipment or processes.

Lincolnway Energy is subject to federal and state laws regarding operational safety.  Risks of substantial compliance costs and liabilities are inherent in ethanol production.  Costs and liabilities related to worker safety may be incurred.  Possible future developments-including stricter safety laws for workers or others, regulations and enforcement policies and claims for personal or property damages resulting from the Company’s operation could result in substantial costs and liabilities that could reduce the amount of cash that the Company would otherwise have to distribute to members or use to further enhance the Company’s business.

Lincolnway Energy May Become Subject To Various Environmental And Health And Safety And Property Damage Type Claims And Liabilities.  The nature of Lincolnway Energy's operations will expose it to the risk of environmental and health claims, safety claims and property damage claims. For example, if any of Lincolnway Energy's operations are found to have polluted the air or surface water or ground water, such as through an ethanol spill, Lincolnway Energy could become liable for substantial investigation, clean-up and remediation costs, both for its own property and for the property of others that may have been affected by the pollution or spill. Those types of claims could also be made against Lincolnway Energy based upon the acts or omissions of other persons, including persons transporting or handling ethanol. Environmental and property damages claims and issues can also arise due to spills, losses or other occurrences arising from events outside of Lincolnway Energy's control and which are possible in Lincolnway Energy's business, such as fire, explosions or blowouts.

A serious environmental violation or repeated environmental violations could result in Lincolnway Energy being unable to construct or operate any additional ethanol plants and the loss of defenses to nuisance suits. Lincolnway Energy may also be unable to obtain financing or additional necessary permits if Lincolnway Energy is subject to any pending administrative or legal action regarding environmental matters.

Any environmental, health, safety or property damage claim could have a material adverse effect on Lincolnway Energy's financial condition and future prospects.

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Carbon Dioxide May Be Regulated By The EPA In The Future As An Air Pollutant, Requiring The Company To Obtain Additional Permits And Install Additional Environmental Mitigation Equipment, Which May Adversely Affect Financial Performance.     The Company’s plant emits carbon dioxide as a by-product of the ethanol production process and the Company sells a portion of its carbon dioxide by-product to Air Products pursuant to a Carbon Dioxide Purchase and Sale Agreement. The United States Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions.  Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as the Company’s ethanol plant under the Clean Air Act.  While there are currently no regulations applicable to the Company concerning carbon dioxide, if Iowa or the federal government, or any appropriate agency, decides to regulate carbon dioxide emissions by plants similar to the Company’s ethanol plant, the Company may have to apply for additional permits or may be required to install carbon dioxide mitigation equipment or take other steps unknown to the Company at this time in order to comply with such law or regulation.  Compliance with future regulation of carbon dioxide, if it occurs, could be costly and may prevent the Company from operating the plant profitably.

The California Low Carbon Fuel Standard May Decrease Demand For Corn Based Ethanol Which Could Negatively Impact Profitability. California passed a Low Carbon Fuels Standard ("LCFS") which requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which reductions are measured using a lifecycle analysis. Management believes that the California LCFS and other state regulations aimed at reducing greenhouse gas emissions could impact the price of corn-based ethanol which could have an adverse impact on the market for corn-based ethanol produced in the Midwest. This could result in a reduction of the Company’s revenues and negatively impact the Company’s ability to profitably operate the ethanol plant.

There Is Continuing And Growing Negative Press And Public Sentiment Against The Ethanol Industry Which Could Lead To Reduced Governmental And Public Support For The Use Of Ethanol.  There continues to be negative press and public sentiment against the ethanol industry. The negative press and claims include that the use of corn to produce ethanol drives up grain prices, which hurts livestock farmers and also consumers due to increased food prices.  The claims also include environmental based allegations, including that increased corn acreage and ethanol production strain water supplies and worsen pollution in rivers and streams.  The criticisms also include that ethanol production is leading to land use changes, including the clearing of rain forests, prairies and other native lands for purposes of growing corn or other crops to be used for the production of ethanol or to replace land which is now used to produce crops for ethanol, which also in turn releases carbon into the atmosphere that has been stored in the soil and otherwise has negative environmental impacts, such as erosion and other land stewardship issues.  Critics also claim that ethanol, in particular at levels of 15% of higher, damages or is otherwise harmful to engines.

The negative press and public sentiment is also developing towards the "next generation" biofuels that are a significant component of achieving the use mandates in the RFS. Next generation biofuels are those made from non-feed stocks/cellulose, such as corn stalks, wheat straw, grasses and trees. Some organizations, including the National Resource Council, have issued reports critical of those biofuels, including that such biofuels are not economical without heavy government subsidies and will not have any positive overall environmental effect, and may have negative environmental results.

Risks Relating To Lincolnway Energy's Units

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Lincolnway Energy's Units Are Not A Liquid Investment.  No market exists for Lincolnway Energy's units.  A market will not develop for the units because the units are not freely transferable and can only be sold, assigned or otherwise transferred in compliance with the federal and applicable state securities laws and the terms and conditions of the current operating agreement, as amended (the "Operating Agreement"), and unit assignment policy of Lincolnway Energy, which require the prior approval of the board for all sales and assignments of any units.  The restrictions set out in the securities laws, the Operating Agreement and the unit assignment policy may at times preclude the transfer of a unit.  The units are therefore not a liquid investment.

There Is No Guarantee Of Any Distributions From Lincolnway Energy.  Lincolnway Energy is not required to make any distributions to its members.  Lincolnway Energy could also be prohibited, or at least limited or restricted, from making any distributions under the terms of Lincolnway Energy's credit and loan agreements.  Lincolnway Energy's financial situation may also not allow it to make any distributions to its members.  The payment of distributions is at the discretion of the board of Lincolnway Energy and will depend on, among other things, the board's analysis of Lincolnway Energy's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions regarding the payment of distributions and any other considerations that the board deems relevant.  There is therefore no assurance of regular distributions, or any distributions at all, to Lincolnway Energy's members.

The Staggered Terms Of Lincolnway Energy's Board May Delay Or Prevent Lincolnway Energy's Acquisition By A Third Party.  The Operating Agreement provides for three classes of directors, based upon the term of office, with each director holding a three year term.  Some view that type of provision as making more difficult, or as deterring, a merger, tender offer or acquisition involving Lincolnway Energy that might result in the members receiving a premium for their units.

Members Will Owe Taxes On Lincolnway Energy's Profits But May Never Receive Any Distributions From Lincolnway Energy.  Lincolnway Energy is not required to make any distributions, and it is possible that no distributions will be made by Lincolnway Energy, even if Lincolnway Energy has profits. Any Lincolnway Energy profits will be taxable to its members in accordance with the members' respective percentage ownership of the units, whether or not the profits have been distributed.  Even if distributions are made, the distributions may not equal the taxes payable by a member on the member's share of Lincolnway Energy's profits. Lincolnway Energy could also sustain losses offsetting the profits of a prior tax period, so a member might never receive a distribution or be able to sell the member's units for an amount equal to the taxes which have already been paid by the member.

Item 2.    Properties.

Lincolnway Energy's office and its ethanol plant are located on approximately 64 acres in Nevada, Iowa.  Lincolnway Energy owns the real estate and its office and ethanol plant, but all of those properties are subject to mortgages and security interests held by Lincolnway Energy's lenders.

Lincolnway Energy's office building has approximately 1,400 square feet.  Lincolnway Energy utilizes the office building for office space for Lincolnway Energy's management and other staff.  Lincolnway Energy was utilizing approximately

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95% of the available office space as of the date of this annual report, with the remaining 5% available to accommodate any expansion of Lincolnway Energy's staff.  The office building also includes grain receiving facilities.

Lincolnway Energy also owns approximately 147 acres of real estate which is adjacent to the 64 acre parcel noted above.  Approximately 54 acres of this real estate was used to construct additional railroad spur tracks. The remaining 93 acres are available for future development, but Lincolnway Energy does not, currently, have any definite plans for the use of that real estate in Lincolnway Energy's ethanol operations, and most of the real estate will likely be rented for farming during Fiscal 2019.

DuPont Danisco Cellulosic Ethanol, LLC ("DDCE") purchased approximately 59.05 acres of real estate from Lincolnway Energy in October, 2011. The real estate is located to the southwest of the real estate on which Lincolnway Energy's ethanol plant is located. DDCE constructed a cellulosic ethanol plant on the real estate. Lincolnway Energy and DDCE entered into a Load Out Services Agreement in October 2011. The Load Out Services Agreement provides, in general, that DDCE will construct an aboveground pipeline from DDCE's plant to a holding tank on Lincolnway Energy's property, and that Lincolnway Energy will load out DDCE's product at Lincolnway Energy's rail or truck facilities. The Load Out Services Agreement sets forth the various fees and other amounts that DDCE will pay to Lincolnway Energy for those services, as well as allocating various costs and expenses between Lincolnway Energy and DDCE. The Load Out Services Agreement provides that if it is terminated, then Lincolnway Energy will grant DDCE an easement for the purpose of DDCE constructing its own rail tracks, and that Lincolnway Energy and DDCE will also at that time enter into a track usage agreement that will address how Lincolnway Energy and DDCE will jointly use certain tracks of Lincolnway Energy and other related matters. Lincolnway Energy completed the construction of the tank; however, DDCE never began production as it ceased operations at this cellulosic ethanol plant. On November 9, 2018, DDCE announced it had entered into an agreement to sell the facility to a third party that intends to operate a renewable natural gas facility using corn stover and other cellulosic crop residues at the site.

Item 3.    Legal Proceedings.

On May 3, 2010, GS CleanTech Corporation ("CleanTech"), a wholly owned subsidiary of GS (Green Shift) CleanTech Corporation filed a complaint against the Company alleging that the Company’s operation of a corn oil extraction process infringes proprietary rights owned by CleanTech related to methods for the separation of corn oil from the by-product stream of the dry mill ethanol manufacturing process, and post-oil removal processing methods.

The lawsuit was initially filed in the United States District Court for the Norther District of Iowa but was moved with numerous similar cases to the United States District Court for the Southern District of Indiana. The Company, together with multiple other defendants in a consolidated multi-district litigation proceeding collectively filed Motions for Summary Judgment asserting that each did not infringe the patents-at-issue and, further, that said patents are invalid. On November 13, 2014, the U.S. District Court released its Ruling & Order on Summary Judgment. The Court held that Lincolnway Energy did not infringe the patents-at-issue and further ruled that said patents are invalid and, thus, unenforceable against Lincolnway Energy. The Court also denied CleanTech's Motion for Summary Judgment of Infringement and Enforceability against Lincolnway Energy.

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In September 2016, the Court issued an opinion rendering the CleanTech patents unenforceable due to inequitable conduct.  This ruling is in addition to the prior favorable court decisions on non-infringement.  CleanTech has asked the Court to reconsider its decision regarding inequitable conduct. In addition, CleanTech's appeal concerning its loss on summary judgment is currently pending and being briefed in the Court of Appeals for the Federal Circuit.

Lincolnway Energy is unable as of the date of this annual report to determine the ultimate likelihood of an unfavorable outcome if CleanTech were to be successful in any appeal filed and allowed to continue to pursue its claims or the amount or range of possible loss or whether the lawsuit will have a material adverse effect on Lincolnway Energy. The lawsuit has, however, increased Lincolnway Energy's legal costs.

From time to time, we may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters, if any, are currently not determinable, we do not expect that the ultimate costs to resolve these matters, if any, would have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Lincolnway Energy is authorized to issue an unlimited number of units, but member approval is required in order to issue more than 90,000 units.  Lincolnway Energy had 42,049 outstanding units as of November 30, 2018, which were held of record by 952 different members. The determination of the number of members is based upon the number of record holders of the units as reflected in Lincolnway Energy's internal unit records.

Lincolnway Energy's units are not listed on any exchange, and there is no public trading market for Lincolnway Energy's units.  However, the Company does provide access to a qualified matching service for its members, which provides a system for limited transfers of the Company’s units.

The Operating Agreement provides that no member shall, directly or indirectly, own, hold or control more than 49% of the outstanding units at any time, unless the member exceeds that percentage by reason of Lincolnway Energy purchasing units.  

The Operating Agreement also establishes restrictions on the sale, assignment or other transfer of units, providing that a member may not sell, transfer, assign or otherwise dispose of or convey any units, whether voluntarily or involuntarily, or grant a security interest in any units, except in compliance with the Operating Agreement. All transfers require the prior written approval

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of the board of Lincolnway Energy and compliance with the policies and procedures adopted from time to time by the board.  The board is authorized to adopt and implement those policies and procedures for any reasonable purpose, as determined by the board.  The policies and procedures adopted by the board regarding the assignment of units are referred to as the unit assignment policy.  

There have been some sales of units pursuant to Lincolnway Energy's qualified matching service.  The purchase price and other terms of any transactions pursuant to Lincolnway Energy's qualified matching service are negotiated and established solely by the seller and the buyer.  Lincolnway Energy does not endorse or recommend any sale of units and is not responsible for the fairness of the purchase price paid in any transactions made pursuant to the qualified matching service, or for the payment or other terms of any transaction.  Lincolnway Energy therefore does not represent or guarantee in any way that any of the prices paid pursuant to the qualified matching service are fair or accurately reflect the value of Lincolnway Energy's units, and Lincolnway Energy does not endorse or recommend any sales of units at any of the prices listed by a member in the qualified matching service or on the same or similar terms.

The payment of distributions to members by Lincolnway Energy is within the discretion of the Board of Lincolnway Energy, and there is no assurance of any distributions from Lincolnway Energy. The payment of distributions is also subject to Lincolnway Energy's compliance with various covenants and requirements of Lincolnway Energy's credit and loan agreements, and it is possible that those covenants and requirements will at times prevent Lincolnway Energy from paying a distribution to its members if Lincolnway Energy fails to meet certain financial metrics or is in default under the provisions of the credit and loan agreements

Lincolnway Energy declared a distribution on December 11, 2017 in the amount of $25 per unit, resulting in an aggregate distribution of $1,051,225. The Company did not make any distributions in Fiscal 2017.

Performance Graph

The following graph shows a comparison of cumulative total member return since September 30, 2013, calculated on a dividend reinvested basis, for the Company, the NASDAQ Composite Index (the “NASDAQ”) and an index of other companies that have the same SIC code as the Company (the “Industry Index”). The graph assumes $100 was invested in each of our units, the NASDAQ and the Industry Index on September 30, 2013. Data points on the graph are annual. Note that historic unit price performance is not necessarily indicative of future unit price performance.

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Pursuant to the rules and regulations of the Securities and Exchange Commission, the performance graph and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 6.    Selected Financial Data.

The following information is summary selected financial data for Lincolnway Energy for the fiscal years ended September 30, 2018, 2017, 2016, 2015 and 2014 with respect to statements of operations data and balance sheet data. The data is qualified by, and must be read in conjunction with, Item 1A of this annual report, "Risk Factors", Item 7 of this annual report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and with the financial statements and supplementary data included in Item 8 of this annual report.

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Statement of Operations Data:	2018			2017			2016			2015			2014
Revenue	$102,050,976			$110,845,184			$101,141,768			$115,927,769			$147,334,193
Cost of goods sold	102,333,910			103,151,272			99,340,675			110,311,445			125,501,344
Gross profit (loss)	(282,934		)	7,693,912			1,801,093			5,616,324			21,832,849
General and administrative expenses	3,236,616			3,136,379			3,379,164			2,952,005			3,771,961
Operating income (loss)	(3,519,550		)	4,557,533			(1,578,071		)	2,664,319			18,060,888
Other income (expense)	572,335			(53,685		)	(62,325		)	(12,755		)	(34,360		)
Net income (loss)	$	(2,947,215	)	$	4,503,848		$	(1,640,396	)	$	2,651,564		$	18,026,528
Weighted average units outstanding	42,049			42,049			42,049			42,049			42,049
Net income (loss) per unit - basic and diluted	$	(70.09	)	$	107.11		$	(39.01	)	$	63.06		$	428.70
Cash distributions per unit	$	25.00		$	—		$	45.00		$	425.00		$	—

Balance Sheet Data:	2018		2017		2016		2015		2014
Working Capital	$	4,483,431	$	5,176,444	$	5,265,892	$	3,767,450	$	25,489,532
Net Property Plant & Equipment	48,715,820		39,945,183		34,929,124		37,638,404		31,991,348
Total Assets	58,403,472		51,173,323		46,085,438		49,065,346		62,747,637
Long-Term Obligations	16,029,885		3,942,960		3,542,593		1,218,312		1,881,851
Members' Equity	37,999,198		41,997,638		37,493,790		41,026,391		56,245,652
Book Value per Member Unit	$	904	$	999	$	892	$	976	$	1,338

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties, and which speak only as of the date of this annual report.  No one should place strong or undue reliance on any forward looking statements.  Lincolnway Energy's actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in Item 1A and elsewhere in this annual report.  This Item should be read in conjunction with the financial statements and related notes and with the understanding that Lincolnway Energy's actual future results may be materially different from what is currently expected or projected by Lincolnway Energy.

Overview

Lincolnway Energy is an Iowa limited liability company that operates as a dry mill ethanol plant located in Nevada, Iowa. Lincolnway Energy has been processing corn into fuel grade ethanol and distiller’s grains since May 22, 2006. Lincolnway Energy's plant also produces corn oil and carbon dioxide.

The ethanol plant has a nameplate production capacity of 50,000,000 gallons, which, at that capacity, would also generate approximately 136,000 tons of distiller’s' grains per year. The ethanol plant produced 61,546,393 gallons of ethanol and 170,602 tons of distiller’s' grains during the fiscal year ended September 30, 2018. Lincolnway Energy had planned shut downs during the months of October 2017 and April 2018 to complete routine maintenance work.

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Comparison of Fiscal Years Ended September 30, 2018 and 2017

Statements of Operations Data:	2018					2017
	Amount			%		Amount			%
Revenues	$	102,050,976		100.0	%	$	110,845,184		100.0	%
Cost of goods sold	102,333,910			100.3	%	103,151,272			93.1	%
Gross profit (loss)	(282,934		)	(0.3	)%	7,693,912			6.9	%
General and administrative expense	3,236,616			3.2	%	3,136,379			2.8	%
Operating income (loss)	(3,519,550		)	(3.5	)%	4,557,533			4.1	%
Interest expense	(19,390		)	—	%	(57,633		)	(0.1	)%
Interest income	8,403			—	%	3,948			—	%
Other income	583,322			0.6	%	—			—	%
Net income (loss)	$	(2,947,215	)	(2.9	)%	$	4,503,848		4.0	%

Net loss was approximately $2.9 million in the fiscal year ended September 30, 2018, which was a $7.5 million decrease when compared to the net income for the 2017 fiscal year. The decrease in net income for fiscal year 2018 resulted from a 1.5% decrease in production levels for ethanol and lower market prices for ethanol and corn oil.

Revenues from operations for the fiscal year ended September 30, 2018 were approximately $102.1 million, consisting of $77.7 million of ethanol sales (net of hedging activity), or 77.1% of revenues, $16.8 million in distiller's grains sales, or 16.5% of revenues, and $7.5 million of corn oil, syrup, CO2 and other sales, or 7.4% of revenues.  Revenues decreased in fiscal year 2018 by approximately 7.9%, when compared to the fiscal year 2017. The decrease in revenues for the fiscal year ended September 30, 2018 resulted principally from lower ethanol prices and lower production. Ethanol prices decreased due to the oversupply in the domestic market which was not met by increased demand as well as continued concern within the market relating to recent international trade disputes and the small refiner waivers granted by the EPA which negatively impacted prices. Ethanol average price per gallon decreased 11.9% from fiscal year 2017. Production decreased due to equipment issues with our regenerative thermal oxidizer, forcing the plant to run at slower rates. Revenues in fiscal year 2018 included a $26,649 net loss for derivatives related to ethanol sales, compared to a $160,215 net loss in fiscal year 2017.

Decreases in ethanol revenue were partially offset by a $2.9 million increase in distiller's grains revenue. The average price per ton increased 21.2% when compared to the prior fiscal year. Management believes the increase in the price for distiller's grains was in response to stronger domestic demand resulting from increased prices of soybean meal and increased export demand particularly from Argentina as it suffered from continued drought.

Corn oil revenue decreased 8.4% in fiscal year 2018 or $.4 million when compared to fiscal year 2017. The decrease is due to a 17.2% decrease in market price resulting from the lower prices for soybean oil which can be used as a substitute for corn oil in certain circumstances and is frequently a competing raw material to corn oil for biodiesel production. Corn oil production increased 7.9% in fiscal year 2018 when compared to fiscal year 2017.

Lincolnway Energy's cost of goods sold for the fiscal year ended September 30, 2018 totaled approximately $102.3 million, which was an decrease of 0.8% when compared to fiscal year 2017.  The decrease in cost of goods sold for the 2018 fiscal

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year is primarily due to decreases in corn costs.  Cost of goods sold major components consists of corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process equipment depreciation, and ethanol and distiller's grain freight expense and marketing fees.

Corn costs including hedging activity for the fiscal year ended September 30, 2018 totaled approximately $70.1 million compared to $72.0 million for fiscal year 2017. There were .6 million less bushels ground due to improved production yields and a slight decrease in production levels during fiscal year 2018 while the average cost of corn remained relatively the same. Corn hedging activity for fiscal year 2018 included a combined unrealized and realized net gain of $1.7 million from derivative instruments compared to a $1.3 million combined unrealized and realized net gain for fiscal year 2017.  Corn costs, including the combined unrealized and realized net gain from derivative instruments, represented 68.5% of cost of goods sold for the fiscal year ended September 30, 2018, compared to 69.8% of costs of goods sold for fiscal year 2017.

Energy costs for the fiscal year ended September 30, 2018 totaled approximately $9.3 million , or 9.1% of cost of goods sold, compared to $9.8 million or 9.5% of cost of goods sold, for the 2017 fiscal year.  Energy costs consist of natural gas and electricity costs.  For fiscal year 2018, Lincolnway Energy purchased 1,725,266 MMBTUs of natural gas at an average price of $3.49. In comparison, in fiscal year 2017 the Company used 1,798,334 MMBTUs of natural gas at an average price of $3.65. Electricity costs amounted to approximately $3.3 million in fiscal year 2018 and 2017.

Ingredient costs for the fiscal year ended September 30, 2018 totaled approximately $6.6 million, or 6.5% of cost of goods sold, which represents a $.7 million increase as compared to the 2017 fiscal year in which ingredient costs totaled $5.9 million, or 5.8% of cost of goods sold.  The increase is due to higher denaturant (natural gasoline) prices and switching to higher priced process chemicals as required by government regulations for animal food. Ingredient costs consist of denaturant, enzymes, fermentation and process chemicals.

Production labor, repairs and maintenance and other plant costs totaled approximately $8.5 million, or 8.3% of cost of goods sold, for the fiscal year ended September 30, 2018, compared to $8.1 million, or 7.9% of cost of goods sold, for fiscal year 2017. The increase is due to higher maintenance and repair costs on equipment that is getting older. The Company has also increased its focus on preventative maintenance to reduce downtime and maintain higher production rates.

Depreciation totaled approximately $3.9 million, or 3.8% of cost of goods sold, for the fiscal year ended September 30, 2018, compared to $3.3 million, or 3.2% of cost of goods sold, for fiscal year 2017. The increase in depreciation resulted from the addition of several assets including a decanter, buildings for the new dryer system and a fermenter.

Ethanol, distiller's grain and corn oil freight expense and marketing fees totaled approximately $3.2 million, or 3.2% of cost of goods sold, during the fiscal year ended September 30, 2018, compared to $3.7 million, or 3.6% of cost of goods sold, for fiscal year 2017.  The decrease is due to the expiration of several ethanol railcar leases that were not renewed in fiscal year 2018. In addition, fiscal year 2017 included repairs and cleaning costs done on ethanol railcars required during a 10-year inspection.

General and administrative expenses totaled approximately $3.2 million during the fiscal year ended September 30, 2018, compared to $3.1 million for fiscal year 2017. The $.1 million increase is due to higher legal fees and professional fees .

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Other income increased $.6 million in fiscal year 2018 from fiscal year 2017. The increase is due to a settlement payment received by Lincolnway Energy in a litigation matter.

Comparison of Fiscal Years Ended September 30, 2017 and 2016

Statements of Operations Data:	2017					2016
	Amount			%		Amount			%
Revenues	$	110,845,184		100.0	%	$	101,141,768		100.0	%
Cost of goods sold	103,151,272			93.1	%	99,340,675			98.2	%
Gross profit	7,693,912			6.9	%	1,801,093			1.8	%
General and administrative expense	3,136,379			2.8	%	3,379,164			3.3	%
Operating income (loss)	4,557,533			4.1	%	(1,578,071		)	(1.5	)%
Interest expense	(57,633		)	(0.1	)%	(66,306		)	(0.1	)%
Interest income	3,948			—	%	3,981			—	%
Net income (loss)	$	4,503,848		4.0	%	$	(1,640,396	)	(1.6	)%

Net income was approximately $4.5 million in the fiscal year ended September 30, 2017, which was a 375% increase when compared to the net loss for the 2016 fiscal year. The increase in net income for fiscal year 2017 resulted from increased production levels for both ethanol and corn oil and higher market prices for ethanol.

Revenues from operations for the fiscal year ended September 30, 2017 were approximately $110.8 million, consisting of $89.0 million of ethanol sales (net of hedging activity), or 80.3% of revenues, $13.9 million in distiller's grains sales, or 12.5% of revenues, and $7.9 million of corn oil, syrup,CO2 and other sales, or 7.2% of revenues.  Revenues increased in fiscal year 2017 by approximately 9.6%, when compared to the fiscal year 2016. The increase in revenues for the fiscal year ended September 30, 2017 resulted principally from increased production rates with the implementation of new process improvements, a 3.6% increase in the average price for ethanol and a 11.5% increase in average price per corn oil tons as compared to the previous fiscal year. Ethanol prices increased due to higher gasoline demand as well as increased exports earlier in the year. Revenues in fiscal year 2017 included a $160,215 net loss for derivatives related to ethanol sales, compared to a $68,738 net gain in fiscal year 2016.

The increases in ethanol and corn oil revenue were partially offset by a $3.3 million decrease in distiller's grains revenue. The average price per ton decreased 19.7% when compared to the prior fiscal year. Management believes the decrease in the price for distiller's grains resulted from lower corn prices and lower domestic and export demand, principally relating to the decreased demand from China. Management cannot anticipate whether demand from China will increase in the upcoming fiscal years and distiller’s grains prices could remain low unless additional demand can be created from other foreign markets or domestically.

Corn oil revenue increased 74.2% in fiscal year 2017 or $2.6 million when compared to fiscal year 2016. The increase is due to record level production after the implementation of several process improvements. Corn oil production increased 61.1% in fiscal year 2017 when compared to fiscal year 2016. The market price for corn oil increased 11.5% resulting from increased demand from the biodiesel industry due to the expansion of the RFS advanced biofuel mandate increasing the demand for biodiesel.

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However, in light of the EPA's reduction of the volume requirements for advanced biofuels in the Final 2018 Rule as compared to the statutory mandate, this increased demand for corn oil may not continue during the fiscal year ending September 30, 2018.

Lincolnway Energy's cost of goods sold for the fiscal year ended September 30, 2017 totaled approximately $103.2 million, which was an increase of 3.8% when compared to fiscal year 2016.  The increase in cost of goods sold for the 2017 fiscal year is primarily due to increases in corn costs and natural gas as well as repairs and maintenance costs which were partially offset by a decrease in depreciation.  Cost of goods sold major components consists of corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process equipment depreciation, and ethanol and distiller's grain freight expense and marketing fees.

Corn costs including hedging activity for the fiscal year ended September 30, 2017 totaled approximately $72.0 million compared to $69.3 million for fiscal year 2016. There were 1.6 million more bushels ground due to an increase in ethanol production during fiscal year 2017 while the average cost of corn per bushel decreased 5.5%. The decrease in corn price is partially attributed to good growing conditions and substantial yields in 2017. Corn hedging activity for fiscal year 2017 included a combined unrealized and realized net gain of $1.3 million from derivative instruments compared to a $2.6 million combined unrealized and realized net gain for fiscal year 2016.  Corn costs, including the combined unrealized and realized net gain from derivative instruments, represented 69.8% of cost of goods sold for the fiscal year ended September 30, 2017, compared to 69.7% of costs of goods sold for fiscal year 2016. During most of fiscal year 2017, corn prices trended lower as a result of the abundant 2016 harvest and an increase in national corn stocks.

Energy costs for the fiscal year ended September 30, 2017 totaled approximately $9.8 million , or 9.5% of cost of goods sold, compared to $8.7 million or 8.8% of cost of goods sold, for the 2016 fiscal year.  Energy costs consist of natural gas and electricity costs.  For fiscal year 2017, Lincolnway Energy purchased 1,798,334 MMBTUs of natural gas at an average price of $3.65. In comparison, in fiscal year 2016 the Company used 1,699,182 MMBTUs of natural gas at an average price of $3.38. Fiscal year 2017, running at higher run rates, produced 5.5 million more gallons of ethanol when compared to fiscal year 2016. Electricity costs amounted to approximately $3.3 million, an increase of $.3 million from fiscal year 2016. The increase in electricity is due to higher production rates and additional electricity used to run capital equipment installed to improve production.

Ingredient costs for the fiscal year ended September 30, 2017 totaled approximately $5.9 million, or 5.8% of cost of goods sold, which represents a $.2 million decrease as compared to the 2016 fiscal year in which ingredient costs totaled $6.1 million, or 6.1% of cost of goods sold.  Ingredient costs consist of denaturant, enzymes, fermentation and process chemicals.

Production labor, repairs and maintenance and other plant costs totaled approximately $8.1 million, or 7.9% of cost of goods sold, for the fiscal year ended September 30, 2017, compared to $6.7 million, or 6.8% of cost of goods sold, for fiscal year 2016. The increase is due to higher maintenance and repair costs on equipment that is getting older. The Company has also increased its focus on preventative maintenance to reduce downtime and maintain higher production rates.

Depreciation totaled approximately $3.3 million, or 3.2% of cost of goods sold, for the fiscal year ended September 30, 2017, compared to $5.1 million, or 5.1% of cost of goods sold, for fiscal year 2016. The decrease in depreciation resulted from the fact that the plant has completed 10 years of operation and a majority of the original assets are now fully depreciated.

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Ethanol, distiller's grain and corn oil freight expense and marketing fees totaled approximately $3.7 million, or 3.6% of cost of goods sold, during the fiscal year ended September 30, 2017, compared to $3.4 million, or 3.4% of cost of goods sold, for fiscal year 2016.  The increase is due to repairs and cleaning costs done on ethanol railcars during a required 10-year inspection and the transition of cars at the expiration of a lease term.

General and administrative expenses totaled approximately $3.1 million during the fiscal year ended September 30, 2017, compared to $3.4 million for fiscal year 2016. The $.3 million decrease is due to the loss on the disposition of the coal combustor in Fiscal 2016.

Risks, Trends and Factors that May Affect Future Operating Results

The operations and profitability of Lincolnway Energy are highly dependent on the prices of the key commodities utilized and sold as part of the ethanol production process.  These include corn, ethanol, distillers' grain and corn oil.  Since the correlation of prices between these commodities is not perfect, and is in fact often very volatile, Lincolnway Energy is at risk of diminishing returns in periods of rising corn prices and decreasing ethanol prices.  The prices of these commodities are determined by a variety of factors, including growing season weather, governmental policies, political change, international trade, and macroeconomic trends.  Lincolnway Energy attempts to mitigate or hedge some of these risks through the use of various pricing mechanisms including cash contracts, futures contracts, options on futures, and derivative instruments.

Corn

In fiscal year 2018, corn values continued the now 6-year bear market that commenced after the drought of 2012. Prices were generally defensive as above normal and timely rains in virtually all growing areas suggested a trend yield, or higher. The favorable weather brought forth steady country corn selling and cash basis was historically weak throughout the entire growing season. Despite significantly lower planted acreage, the corn market could only muster a 38 cent summertime rally. Excellent weather outside the main corn belt despite diminished South American crops kept a tight lid on the U.S. corn market. Futures prices and basis remained on the defensive. Riding a forecast for another plentiful harvest, farm movement was steady right into harvest. With a yield reported by USDA at 181 bushels per acre, Lincolnway Energy is expecting another year with a projected total supply near 17 billion bushels. The USDA currently forecasts steady ending stocks of 1.8 billion bushels, or 12.0% of usage, and management expects relatively stable corn futures and basis for the first half of 2019. Because national corn acreage will likely increase in 2019 due to less favorable soybean prices versus corn prices favorable weather conditions in 2018 both in the U.S. and South America are less necessary in order to achieve the expected stability in the second half of the fiscal year.

Ethanol

As the 2018 calendar year ends, we continue to maintain a steady increase in ethanol production, and we are experiencing significant margin weakness in the ethanol industry. Ethanol stocks have built to record high levels, abundant corn supplies are expected and the industry is again proving its ability to run consistently at ever higher production rates. Imports from Brazil have contracted. Exports have been a very bright spot as low ethanol prices have overcome rising crude oil and gasoline prices. Foreign demand has not been curtailed in the last 8 months despite the loss of China as a significant export destination. The octane enhancing qualities of ethanol blends has been recognized overseas, and export demand from the rest of the world is currently

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covering for the loss of one of our two largest foreign markets. However given the current over supply in domestic ethanol inventories, any decrease in export demand will have an adverse impact on market price and negatively impact our margins.

The forward environment for the U.S. ethanol industry is very much in question as the Company enters Fiscal 2019. Organic capacity growth, new green field plant additions and continuing large feedstock supplies again will ensure record production. If corn prices remain low or further decrease, this could have a significantly negative impact on the market price of ethanol and the Company’s profitability, especially if domestic ethanol stocks outstrip storage capabilities. A decline in U.S. exports due to the actions of Brazil and China or other factors may also contribute to higher domestic ethanol stocks unless additional demand can be created from other foreign markets or domestically. In addition, the EPA has adopted reductions of the renewable volume obligations compared to the statutory mandates for the years 2014 through 2018. The adoption of these reduced volume requirements have had a negative impact on demand for ethanol and market prices and any further reductions could have a material adverse effect on demand and market prices which could adversely impact the Company's operations and financial condition. Of particular concern are the small refiner exemptions granted by the EPA in 2018 without the reduced usage requirements of the small refiners being passed along to large refiners.

Higher gasoline prices have stunted demand increases in the domestic market. Gasoline demand has stagnated or even fallen year over year in recent months as pump prices rose 24% during the spring and summer. With 89% of U.S. ethanol production consumed domestically, if domestic demand growth stalls, the industry may experience a weaker margin environment. The stronger U.S. economy has been an important factor in the expansion of miles driven. But unemployment rates are unlikely to move any lower, meaning at best negligible growth during fiscal 2019, and industry capacity expansion appears to be moving beyond the gasoline market’s ability to absorb more ethanol.

Other/Regulatory/Governmental

The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. Future demand for ethanol will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline versus ethanol, taking into consideration the relative octane value of ethanol, environmental requirements and the RFS mandate. The RFS mandate helps support a market for ethanol that might disappear without this incentive.

The RFS usage requirements increase incrementally each year through 2022 when the mandate requires that the United States use 36 billion gallons of renewable fuels.  Starting in 2009, the RFS required that a portion of the RFS must be met by certain “advanced” renewable fuels. These advanced renewable fuels include ethanol that is not made from corn, such as cellulosic ethanol and biomass based biodiesel. The use of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used in the United States.

Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligation. On July 5, 2017, the EPA released a proposed rule to set the 2018 renewable volume requirements which proposed setting the annual volume requirements for renewable fuel at 19.24 billion gallons of renewable fuels per year (the “Proposed 2018 Rule”). On November 30, 2017, the EPA issued the final rule for 2018 which varied only slightly from the Proposed 2018 Rule with the annual volume requirement for

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renewable fuel set at 19.29 billion gallons of renewable fuels per year (the “Final 2018 Rule”). Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the final 2017 renewable fuel volume requirements, the 2018 volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018 with significant reductions in the volume requirements for advanced biofuels. However, the Final 2018 Rule does maintain the number of gallons which may be met by conventional renewable fuels such as corn-based ethanol at 15.0 billion gallons.

On June 26, 2018, the EPA issued a proposed rule that would set the 2019 annual volume requirements for renewable fuel at 19.88 billion gallons of renewable fuels per year and maintaining the number of gallons which may be met by conventional renewable fuels such as corn based ethanol at 15 billion gallons (the “Proposed 2019 Rule”). "On November 30, 2018, the EPA issued the final rule that set the 2019 annual volume requirements for renewable fuel at 19.92 billion gallons of renewable fuels per year and maintained the number of gallons that may be conventional renewable fuels such as corn based ethanol at 15.0 billion gallons (the "Final 2019 Rule")."

Under the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total proposed volume requirements are more than 20% below statutory levels, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. The Final 2019 Rule is approximatley 29% below the statutory levels; therefore, the reset will be triggered under the RFS and the EPA will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the volume requirements post-2022.

Although the maintenance of the 15 billion gallon threshold for volume requirements that may be met with corn-based ethanol in the Final 2018 Rule and the Proposed 2019 Rule together with the Pruitt Letter, President Trump’s directive relating to permitting the year round sale of E15 and the resulting actions taken by the EPA consistent with Pruitt Letter signals support from the EPA and the current administration for domestic ethanol production, there is still significant uncertainty about the level of support for the RFS within the Trump administration. The Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS and it is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of any such reforms; however, any such reform could adversely affect the demand and price for ethanol and the Company’s profitability.

There have also been recent proposals in Congress to reduce or eliminate the RFS. The EPA’s reduction of the volume requirements under the RFS and its granting of small refiner waivers combined with further reduction to or elimination of the RFS requirements could materially decrease the market price and demand for ethanol which will negatively impact the Company’s financial performance.

Critical Accounting Estimates and Accounting Policies

Lincolnway Energy's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which Lincolnway Energy operates.  This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes.  These estimates, assumptions and judgments are based on information available as of the

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date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements.  Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.  Management believes the following policies are both important to the portrayal of Lincolnway Energy's financial condition and results of operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.

Revenue Recognition

Revenue from the sale of Lincolnway Energy's ethanol and distiller's grains is recognized at the time title and all risks of ownership transfer to the marketing company.  This generally occurs upon the loading of the product.  For ethanol, title passes from Lincolnway Energy at the time the product crosses the loading flange in either a railcar or truck.   For distiller's grains, title passes upon the loading of distiller's grains into trucks or railcars.  Shipping and handling costs incurred by Lincolnway Energy for the sale of ethanol and distiller's grain are included in costs of goods sold.

Derivative Instruments

Lincolnway Energy periodically enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.   Lincolnway Energy does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the September 30, 2018 and 2017 balance sheets at fair value.  Although Lincolnway Energy believes Lincolnway Energy's derivative positions are economic hedges, none has been designated as a hedge for accounting purposes.  Accordingly, any realized or unrealized gain or loss related to these derivative instruments is recorded in the statement of operations as a component of cost of goods sold in the case of corn and natural gas contracts and as a component of revenue in the case of ethanol sales.

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed "normal purchases and normal sales", and therefore are not marked to market in Lincolnway Energy's financial statements, but are subject to a lower of cost or net realizable value assessment.

For the year ended September 30, 2018, the Company had a lower of cost or net realizable adjustment on future corn contract of approximately $366,000.

Inventories at Lower of Cost or Net Realizable Value

Inventories are generally valued at the lower of net realizable value or actual costs using the first-in, first-out method.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation.

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For the years ended September 30, 2018 and 2017, Lincolnway Energy had a lower of cost or net realizable value inventory adjustment of $279,960 and $0, respectively.

Off-Balance Sheet Arrangements

Lincolnway Energy currently does not have any off-balance sheet arrangements.

Liquidity and Capital Resources

On September 30, 2018, Lincolnway Energy had $.7 million in cash and cash equivalents and approximately $5.8 million available under committed loan agreements.  Lincolnway Energy’s business is highly impacted by commodity prices, including prices for corn, ethanol and distiller's grains.  There are times that Lincolnway Energy may operate at negative operating margins.

The following table shows cash flows for the fiscal years ended September 30, 2018 and 2017:

	Year ended September 30,
	2018			2017
Net cash provided by operating activities	$	2,440,190		$	8,146,327
Net cash (used in) investing activities	(13,611,022		)	(8,541,382		)
Net cash provided by financing activities	11,148,775			472,429

For the fiscal year ended September 30, 2018, cash provided by operating activities was $2.4 million, compared to cash provided by operating activities of $8.1 million for the fiscal year ended 2017. The $5.7 million decrease is due primarily to the Company's decrease in net income (loss) and the timing in working capital components.

Cash flows from investing activities reflect the impact of property and equipment acquired for the ethanol plant.  Net cash used in investing activities increased by $5.1 million for the fiscal year ended September 30, 2018, when compared to the fiscal year ended 2017.  The increase is primarily due to a new fermenter installed in July 2018 and progress payments on the installation of a grains drying and cooling system. Management estimates that these projects will be complete in the first and second quarter of fiscal year 2019, respectively.

Cash flows from financing activities include transactions and events whereby cash is obtained or paid back to or from creditors or investors.  Net cash provided by financing activities increased by $10.7 million for the fiscal year ended September 30, 2018, when compared to the fiscal year ended September 30, 2017.  The increase is due to increased borrowing on our revolving credit line in fiscal year 2018 offset by $1.1 million in distributions paid in fiscal year 2017.

  Lincolnway Energy anticipates keeping cash balances at an acceptable level that will meet covenants and allow it to continue with several capital projects.  If Lincolnway Energy should get in a negative cash position, Lincolnway Energy will have access to the $5.8 million available on its term loan agreement.

Loans and Agreements

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Lincolnway Energy entered into a Master Loan Agreement on August 21, 2012 with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (collectively, the “Lender”) and on June 2, 2016 entered into various related supplements and collateral related agreements and documents thereunder. CoBank, ACB (“CoBank”) had a participation interest in the underlying loans and served as administrative agent for the loans, and was therefore also a party to certain of the agreements and documents.

In July 2017, the Company entered into a new Credit Agreement (the “Credit Agreement”) with the Lender dated July 3, 2017 which amended, restated and superseded the Master Loan Agreement between the Company and the Lender dated August 21, 2012, as amended (the “Prior Agreement”). The Company and the Lender entered into two amendments to the Credit Agreement effective February 23, 2018 and September 24, 2018, respectively (the Credit Agreement as amended, the “Amended Credit Agreement”). CoBank, continues to have a participation interest in the underlying loans issued under the Amended Credit Agreement and continues to serve as administrative agent for the Amended Credit Agreement. The terms of the Amended Credit Agreement will apply to all supplements and promissory notes entered into between the parties pursuant to the Prior Agreement and to any new supplements and promissory notes that may be issued under the Amended Credit Agreement in the future.

In connection with the execution of the Credit Agreement in July 2017, the Company and the Lender entered into an Amended and Restated Revolving Term Promissory Note dated July 3, 2017 (the “Revolving Term Note”) which amended, restated and superseded the Revolving Term Loan Supplement dated June 2, 2016 entered into under the Prior Agreement (the “Prior Revolving Term Supplement”). The Company and the Lender entered into two amendments to the Revolving Term Note effective February 23, 2018 and September 24, 2018, respectively (the “Amended Revolving Term Note”). The Amended Revolving Term Note will expire on July 1, 2024. The Amended Revolving Term Note provides that the aggregate principal amount that the Lender may loan to the Company under the Amended Revolving Term Note shall not exceed $21,000,000 which maximum commitment amount will reduce during the term of the Amended Revolving Term Note as follows:

Maximum Commitment Amount	From	Up to and Including
$17,400,000	July 1, 2020	June 30, 2021
$13,800,000	July 1, 2021	June 30, 2022
$10,200,000	July 1, 2022	June 30, 2023
$6,600,000	July 1, 2023	July 1, 2024

Effective as of September 24, 2018, outstanding amounts under the Amended Revolving Term Note will accrue interest at a variable interest rate (adjusting on a weekly basis) based upon the one-month LIBOR index rate plus 3.40%. Under the Prior Agreement and the Amended Revolving Term Note prior to the September 24, 2018 amendment, outstanding amounts accrued interest at a variable interest rate (adjusting on a weekly basis) based upon the one-month LIBOR index rate plus 3.15%.

In connection with the execution of the Credit Agreement in July 2017, the Company and Lender also entered into an Amended and Restated Letter of Credit Promissory Note dated July 3, 2017 (“Revolving Letter of Credit Note”) which amended, restated and superseded the Revolving Credit Supplement dated June 2, 2016 entered into under the Prior Agreement (the “Prior Letter of Credit Supplement”). Effective, February 23, 2018, the Company and the Lender amended the Revolving Letter of Credit Note (the “Amended Revolving Letter of Credit Note”) to reduce the aggregate principal amount the Lender may

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loan to the Company under the Amended Restated Letter of Credit Note to reflect payments made by the Company. The term of the Amended Revolving Letter of Credit Note expires on May 1, 2021. The Amended Revolving Letter of Credit Note provides that the aggregate principal amount the Lender may loan to the Company under the Revolving Letter of Credit Note shall not exceed $1,937,400. Outstanding amounts under the Amended Revolving Letter of Credit Note continue to accrue interest at a variable interest rate (adjusting on a weekly basis) based upon the one-month LIBOR index rate plus 3.15%. The Amended Revolving Letter of Credit Note continues to serve as security for the Company’s natural gas transportation agreement.

The Amended Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings, including in connection with the disbursement of the loan. Effective February 23, 2018, the Company and the Lender amended the Credit Agreement to add an additional financial covenant requiring Debt Service Coverage Ratio of not less than 1.50 to 1.00 at the end of each of the Company’s fiscal years. Under the February 2018 amendment, Debt Service Coverage Ratio is defined as: (a) net income (after taxes), plus depreciation and amortization, minus non-cash investment income (plus loss), minus extraordinary gains (plus losses), minus gains (plus loss) on asset sale; divided by (b) $3,600,000 (all as determined in accordance with the Accounting Standards). Effective September 24, 2018, the Company and the Lender further amended the Credit Agreement to modify the Debt Service Coverage Ratio to provide that the Company shall not have a Debt Service Coverage Ratio of (i) less than 1.50 to 1.00 at the end of the Company’s fiscal year ended September 30, 2018 or (ii) less than 1.70 to 1.00 for each fiscal year thereafter. The financial covenants set forth in the Amended Credit Agreement also require the Company to maintain a minimum working capital of $10,000,000 and a minimum net worth of $35,000,000.

On September 13, 2018, the Company received a waiver of compliance from our lenders waiving compliance with its Debt Service Coverage Ratio covenant for the period ended September 30, 2018. We were in compliance with all other covenants as of September 30, 2018.

The Amended Credit Agreement and all loans made thereunder, including the Amended Revolving Term Note and the Amended Revolving Letter of Credit Note, are secured by first priority liens covering all of the Company’s assets and properties, including the Company's inventory, receivables, plant, real estate and commodity trading accounts.

Under the Prior Agreement, the Company had also entered into a Revolving Credit Supplement dated June 2, 2016 which provided for a maximum loan in an aggregate principal amount not to exceed $8,500,000 (the “Revolving Credit Supplement”). The Revolving Credit Supplement had a term that expired on July 1, 2017 (the “Expiration Date”). The Company did not extend, amend or restate the Revolving Credit Supplement under the Credit Agreement and therefore, the Revolving Credit Supplement expired in accordance with its terms on the Expiration Date.

The Amended Revolving Term Note is discussed further in Note 4 to the financial statements and the Amended Revolving Letter of Credit is discussed further in Note 7 to the financial statements.

Lincolnway Energy leases 90 hopper rail cars which are used for transporting distiller's grains. Lincolnway Energy's lease for the hopper rail cars expires in June 2019. Lincolnway Energy also leases 175 tank rail cars that are used for transporting ethanol. The scheduled terms of the leases vary with the leases expiring between March 2019 and September 2024.

Contractual Obligations Table

51

In addition to long-term debt obligations, Lincolnway Energy has certain other contractual cash obligations and commitments.  The following table provides information regarding Lincolnway Energy's contractual obligations and commitments as of September 30, 2018:

			Payment Due By Period
		Less than	One to	Three to	More than
Contractual Obligations	Total	One Year	Three Years	Five Years	Five Years
Long Term Debt	$15,200,000	$0	$1,400,000	$7,200,000	$6,600,000
Interest on Long Term Debt	4,036,663	847,476	1,675,438	1,237,762	275,987
Operating Lease Obligations	5,489,584	1,867,240	2,068,880	1,173,514	379,950
Purchase Obligations	10,048,269	9,281,719	398,550	368,000	—
Capital Purchase Obligations	$1,609,609	1,609,609	—	—	—
Total	$36,384,125	$13,606,044	$5,542,868	$9,979,276	$7,255,937

 The long-term debt obligations in the table above include both estimated principal and interest payments applicable to the borrowings against the Term Loan. The operating lease obligations in the table above include our railcars and small office equipment lease obligations as of September 30, 2018. Purchase obligations consist of forward contracted corn contracts and natural gas purchases and monthly demand charge.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

In addition to the risks inherent in the ethanol industry and Lincolnway Energy's operation, Lincolnway Energy is exposed to various market risks.  The primary market risks arise as a result of possible changes in interest rates and certain commodity prices.

Interest Rate Risk

Lincolnway Energy has outstanding loan agreements that expose Lincolnway Energy to market risk related to changes in the interest rate imposed under those loan agreements.

Lincolnway Energy has a loan agreement and an irrevocable letter of credit, with the following entities, and with the principal balance and interest rates indicated:

	Principal Balance
Lender	As of September 30, 2018
Farm Credit - revolving term loan	$	15,200,000
Farm Credit - revolving letter of credit *	—
* Letter of credit issued is $1,727,925	$	15,200,000

The interest rate on the Farm Credit revolving term loan and revolving letter of credit is a variable interest rate based on the one-month LIBOR index plus 3.40% adjusted weekly. For more information on the payments see Item 7 -Loans and Agreements.

Lincolnway Energy does not anticipate any material increase in interest rates during 2019.

52

 Commodity Price Risk

Lincolnway Energy is also exposed to market risk with respect to the price of ethanol, Lincolnway Energy's principal product, the price and availability of corn, the principal commodity used by Lincolnway Energy to produce ethanol, and the price of natural gas. The other primary products of Lincolnway Energy are distiller's grains and corn oil, and Lincolnway Energy is also subject to market risk with respect to the prices for both of these products. The prices for ethanol, distiller's grains, corn oil, corn and natural gas are volatile, and Lincolnway Energy may experience market conditions where the prices Lincolnway Energy receives for its ethanol, distiller's grains and corn oil are declining, but the prices Lincolnway Energy pays for its corn, natural gas and other inputs are increasing. Lincolnway Energy's results will therefore vary substantially over time, and include the possibility of losses, which could be substantial.

In general, rising ethanol, distiller's grains and corn oil prices result in higher profit margins, and therefore represent favorable market conditions. Lincolnway Energy is, however, subject to various material risks related to its production of ethanol, distiller's grains and corn oil and the prices for ethanol, distiller's grains and corn oil. For example, ethanol, distiller's grains and corn oil prices are influenced by various factors beyond the control of Lincolnway Energy's management, including the supply and demand for gasoline, the availability of substitutes and the effect of laws and regulations.

Rising corn prices generally result in lower profit margins and, accordingly, represent unfavorable market conditions. Lincolnway Energy will generally not be able to pass along increased corn costs to its ethanol customers. Lincolnway Energy is subject to various material risks related to the availability and price of corn, many of which are beyond the control of Lincolnway Energy. For example, the availability and price of corn is subject to wide fluctuations due to various unpredictable factors which are beyond the control of Lincolnway Energy's management, including weather conditions, crop yields, farmer planting decisions, governmental policies with respect to agriculture and local, regional, national and international trade, demand and supply. If Lincolnway Energy's corn costs were to increase $.10 cents per bushel from one year to the next, the impact on cost of goods sold would be approximately $2.1 million for the year.

Falling ethanol prices indicate weak market conditions and will usually negatively impact profit margins. Lincolnway Energy will typically be unable to pass through the impact of decreased ethanol revenues to its corn suppliers. Lincolnway Energy is subject to various material risks related to the demand for and price of ethanol, many of which are beyond the control of the Company. For example, the demand for and price of ethanol is subject to significant fluctuations due to various unpredictable factors which are beyond the control of Lincolnway Energy's management, including driving habits, consumer vehicle buying decisions, petroleum price movement, plant capacity utilization, and government policies with respect to biofuel use, railroad transportation requirements, national and international trade and supply and demand. If Lincolnway Energy's ethanol revenue were to decrease $.05 per gallon from one year to the next, the impact on gross revenues would be approximately $3.1 million for the year.

During the fiscal year ended September 30, 2018, corn prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $3.35 per bushel in December 2017 to a high of $4.12 per bushel in May 2018. During the fiscal year

53

ended September 30, 2017, corn prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $3.28 per bushel in August 2017 to a high of $4.05 per bushel in July 2017.

During the fiscal year ended September 30, 2018, ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $1.26 per gallon in December 2017 to a high of $1.53 per gallon in March 2018. During the fiscal year ended September 30, 2017, ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $1.42 per gallon in August 2017 to a high of $1.77 per gallon in December 2016.

Lincolnway Energy may from time to time take various cash, futures, options or other positions with respect to its corn and ethanol needs in an attempt to minimize or reduce Lincolnway Energy's price risks related to corn and ethanol. Those activities are, however, also subject to various material risks, including that price movements in the cash and futures corn and ethanol markets are highly volatile and influenced by many factors and occurrences that are beyond the control of Lincolnway Energy.

Although Lincolnway Energy intends that its futures and option positions accomplish an economic hedge against Lincolnway Energy's future purchases of corn or future sales of ethanol, Lincolnway Energy has chosen not to use hedge accounting for those positions, which would match the gain or loss on the positions to the specific commodity purchase being hedged. Lincolnway Energy is instead using fair value accounting for the positions, which generally means that as the current market price of the positions changes, the realized or unrealized gains and losses are immediately recognized in Lincolnway Energy's costs of goods sold in the statement of operations for corn positions or as a component of revenue in the statement of operations for ethanol positions. The immediate recognition of gains and losses on those positions can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the commodity being hedged. For example, Lincolnway Energy's corn position gain and (loss) that was included in its earnings for the fiscal year ended September 30, 2018 was a gain of $1,658,195, as compared to a gain of $1,294,394 for the fiscal year ended September 30, 2017, and a gain of $2,634,323 for the fiscal year ended September 30, 2016. Lincolnway Energy's ethanol position gain and (loss) that was included in its earnings for the fiscal year ended September 30, 2018 was a loss of $26,649, as compared to a loss of $160,215 for the fiscal year ended September 30, 2017, and a gain of $68,378 for the fiscal year ended September 30, 2016.

The extent to which Lincolnway Energy may enter into arrangements with respect to its ethanol or corn during the year may vary substantially from time to time based upon a number of factors, including supply and demand factors affecting the needs of customers to purchase ethanol or suppliers to sell Lincolnway Energy raw materials on a fixed price basis, and Lincolnway Energy's views as to future market trends, seasonal factors and the cost of future contracts.    

54

Item 8.    Financial Statements and Supplementary Data.

Contents

Report of Independent Registered Public Accounting Firm	56
Financial Statements
Balance Sheets	57
Statements of Operations	59
Statements of Members’ Equity	60
Statements of Cash Flows	61
Notes to Financial Statements	63

55

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Members

Lincolnway Energy, LLC

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Lincolnway Energy, LLC (the Company) as of September 30, 2018 and 2017, the related statements of operations, members’ equity and cash flows for each of the three years in the period ended September 30, 2018, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company’s auditor since 2006.

Des Moines, Iowa

December 14, 2018

56

Lincolnway Energy, LLC

Balance Sheets

September 30, 2018 and 2017

	2018			2017
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	668,456		$	690,513
Derivative financial instruments (Notes 8 and 9)	555,127			428,666
Trade and other accounts receivable (Note 7)	2,786,498			3,229,474
Inventories (Note 3)	4,556,703			5,684,729
Prepaid expenses and other	291,036			375,787
Total current assets	8,857,820			10,409,169
PROPERTY AND EQUIPMENT
Land and land improvements	7,148,360			7,148,360
Buildings and improvements	6,019,001			3,220,876
Plant and process equipment	85,732,218			80,951,321
Construction in progress	11,610,970			6,178,622
Office furniture and equipment	478,173			473,517
	110,988,722			97,972,696
Accumulated depreciation	(62,272,902		)	(58,027,513		)
	48,715,820			39,945,183
OTHER ASSETS	829,832			818,971
	$	58,403,472		$	51,173,323

See Notes to Financial Statements.

57

Lincolnway Energy, LLC

Balance Sheets (Continued)

September 30, 2018 and 2017

	2018			2017
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	2,378,921		$	3,276,755
Accounts payable, related party (Note 6)	657,133			642,726
Accrued loss on firm purchase commitments	366,168			—
Accrued expenses	972,167			1,313,244
Total current liabilities	4,374,389			5,232,725
NONCURRENT LIABILITIES
Long-term debt, less current maturities (Note 4)	15,200,000			3,000,000
Deferred revenue	296,296			444,444
Other	533,589			498,516
Total noncurrent liabilities	16,029,885			3,942,960
COMMITMENTS AND CONTINGENCY (Notes 5 and 7)	—			—
MEMBERS’ EQUITY (Note 2)
Member contributions, 42,049 units issued and outstanding	38,990,105			38,990,105
Retained earnings (deficit)	(990,907		)	3,007,533
	37,999,198			41,997,638
	$	58,403,472		$	51,173,323

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Lincolnway Energy, LLC

Statements of Operations

Years Ended September 30, 2018, 2017 and 2016

	2018			2017			2016
Revenues (Notes 1 and 7)	$	102,050,976		$	110,845,184		$	101,141,768
Cost of goods sold (Notes 6 and 7)	102,333,910			103,151,272			99,340,675
Gross profit (loss)	(282,934		)	7,693,912			1,801,093
General and administrative expenses	3,236,616			3,136,379			3,379,164
Operating income (loss)	(3,519,550		)	4,557,533			(1,578,071		)
Other income (expense):
Interest income	8,403			3,948			3,981
Interest expense	(19,390		)	(57,633		)	(66,306		)
Other income	583,322			—			—
	572,335			(53,685		)	(62,325		)
Net income (loss)	$	(2,947,215	)	$	4,503,848		$	(1,640,396	)
Weighted average units outstanding	42,049			42,049			42,049
Net income (loss)  per unit - basic and diluted	$	(70.09	)	$	107.11		$	(39.01	)

See Notes to Financial Statements.

59

Lincolnway Energy, LLC

Statements of Members' Equity

Years Ended September 30, 2018, 2017 and 2016

	Member Contributions		Retained Earnings (Deficit)			Total
Balance, September 30, 2015	$	38,990,105	$	2,036,286		$	41,026,391
Net (loss)	—		(1,640,396		)	(1,640,396		)
Distributions ($45 per unit)	—		(1,892,205		)	(1,892,205		)
Balance, September 30, 2016	38,990,105		(1,496,315		)	37,493,790
Net (loss)	—		4,503,848			4,503,848
Balance, September 30, 2017	38,990,105		3,007,533			41,997,638
Net (loss)	—		(2,947,215		)	(2,947,215		)
Distributions ($25 per unit)	—		$	(1,051,225	)	$	(1,051,225	)
Balance, September 30, 2018	$	38,990,105	$	(990,907	)	$	37,999,198

See Notes to Financial Statements.

60

Lincolnway Energy, LLC

Statements of Cash Flows

Years Ended September 30, 2018, 2017 and 2016

	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(2,947,215	)	$	4,503,848		$	(1,640,396	)
Adjustments to reconcile net income (loss)  to net cash provided by operating activities:
Depreciation and amortization	4,477,811			3,902,575			5,745,867
Loss on sale or disposal of property and equipment	43,693			17,676			653,745
Accrued loss on firm purchase commitments	366,168			—			—
Changes in working capital components:
Trade and other accounts receivable	442,976			(140,516		)	888,306
Inventories	1,128,026			41,374			(1,716,207		)
Prepaid expenses and other	108,963			57,390			(21,974		)
Accounts payable	(801,762		)	(36,210		)	1,251,738
Accounts payable, related party	14,407			(137,577		)	29,535
Accrued expenses	(118,268		)	16,905			(185,735		)
Deferred revenue	(148,148		)	(148,149		)	(148,148		)
Derivative financial instruments	(126,461		)	69,011			248,501
Net cash provided by operating  activities	2,440,190			8,146,327			5,105,232
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(13,611,022		)	(8,548,970		)	(4,891,183		)
Proceeds from sale of property and equipment	—			7,588			—
Net cash (used in) investing activities	(13,611,022		)	(8,541,382		)	(4,891,183		)
CASH FLOWS FROM FINANCING ACTIVITIES
Member distributions	(1,051,225		)	—			(1,892,205		)
Proceeds from long-term borrowings	69,550,000			500,000			2,500,000
Payments on long-term borrowings	(57,350,000		)	(27,571		)	(54,280		)
Change in checks in excess of bank balance	—			—			(1,656,923		)
Net cash provided by (used in) financing activities	11,148,775			472,429			(1,103,408		)
Net increase (decrease) in cash and cash equivalents	(22,057		)	77,374			(889,359		)
CASH AND CASH EQUIVALENTS
Beginning	690,513			613,139			1,502,498
Ending	$	668,456		$	690,513		$	613,139
(Continued)

61

Lincolnway Energy, LLC

Statements of Cash Flows (Continued)

Years Ended September 30, 2018, 2017 and 2016

	2018		2017		2016
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, including capitalized interest of $515,242, $90,338 and $27,156	$	535,402	$	114,603	$	55,030
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Construction in progress included in accounts payable	$	86,928	$	183,000	$	36,442
Construction in progress included in accrued expenses	$	—	$	222,809	$	1,244

See Notes to  Financial Statements.

62

Lincolnway Energy, LLC

Notes to Financial Statements

Note 1.    Nature of Business and Significant Accounting Policies

Principal business activity:  Lincolnway Energy, LLC (the "Company"), located in Nevada, Iowa, was formed in May 2004 to pool investors to build a 50 million gallon annual production dry mill corn-based ethanol plant.  The Company began making sales on May 30, 2006 and became operational during the quarter ended June 30, 2006. The Company is directly influenced by commodity markets and the agricultural and energy industries and, accordingly, its results of operations and financial condition may be significantly affected by cyclical market trends and the regulatory, political and economic conditions in these industries.

A summary of significant accounting policies follows:

Use of estimates:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Cash and cash equivalents:  The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Although the Company maintains its cash accounts in one bank, the Company believes it is not exposed to any significant credit risk on cash and cash equivalents. 

Trade accounts receivable:  Trade accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers financial condition, credit history and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables written off are recorded when received. A receivable is considered past due if any portion of the receivable is outstanding more than 90 days. There is no allowance for doubtful accounts as of September 30, 2018 and September 30, 2017.

Deferred revenue: Deferred revenue represents fees received under a service agreement in advance of services being performed. The related revenue is deferred and recognized as the services are performed through September 2021.

Inventories:  Inventories are generally valued at the lower of net realizable value or actual cost using the first-in, first-out method.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. For the fiscal years ended September 30, 2018 and September 30, 2017 the Company recognized a reserve and resulting loss of approximately $280,000 and $0, respectively, for a lower of net realizable value or cost inventory adjustment.

Property and equipment:  Property and equipment is stated at cost.  Construction in progress is comprised of costs related to the projects that are not completed.  Depreciation is computed using the straight-line method over the following estimated useful lives:

63

	Years
Land improvements	20
Buildings and improvements	40
Plant and process equipment	5 – 20
Office furniture and equipment	3 – 7

Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.  When circumstances or events arise that questions an asset's usefulness, the asset is evaluated for future use and appropriate carrying value. The Company has assets in construction in progress that are guaranteed with a promissory note due to the Company totaling approximately $4 million, if the assets fail to meet required specifications.

Derivative financial instruments:  The Company periodically enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.  The Company does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the balance sheet at their fair market value.  Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes.   Accordingly, any realized or unrealized gain or loss related to corn and natural gas derivatives is recorded in the statement of operations as a component of cost of goods sold.  Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue. The Company reports all contracts with the same counter party on a net basis on the balance sheet. Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements. Forward contracts with delivery dates with 30 days that can be reasonably estimated are subject to a lower of cost or net realizable value assessment.   

Revenue recognition:  Revenue from the sale of the Company’s ethanol and distiller's grains is recognized at the time title and all risks of ownership transfer to the marketing company.  This generally occurs upon the loading of the product.  For ethanol, title passes at the time the product crosses the loading flange in either a railcar or truck.  For distiller’s grain, title passes upon the loading into trucks or railcars.    Corn oil is marketed internally. Revenue is recognized when title transfers, upon loading. Shipping and handling costs incurred by the Company for the sale of distiller’s grain are included in costs of goods sold. Ethanol revenue is reported free on board (FOB) and all shipping and handling costs are incurred by the ethanol marketer. Commissions for the marketing and sale of ethanol and distiller grains are included in costs of goods sold.

Revenue by product is as follows:

(In thousands)	2018		2017		2016
Ethanol	$	77,709	$	89,040	$	78,616
Distiller's Grain	16,821		13,875		17,204
Other	7,521		7,930		5,322

Income taxes:  The Company is organized as a partnership for federal and state income tax purposes and generally does not incur income taxes.  Instead, the Company’s earnings and losses are included in the income tax returns of the members.  Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Management has evaluated the Company's material tax positions and determined there were no uncertain tax positions that require adjustment to the financial statements. The Company does not currently anticipate significant changes in its uncertain tax positions over the next twelve months.

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Earnings per unit:  Basic and diluted net income (loss) per unit have been computed on the basis of the weighted average number of units outstanding during each period presented.

Fair value of financial instruments:  The carrying amounts of cash and cash equivalents, derivative financial instruments, trade and other accounts receivable, accounts payable and accrued expenses approximate fair value.   These instruments are considered Level 1 measurements under the fair value hierarchy. Long term debt approximates fair value and commensurates with the market as the agreement was recently amended in the current year. The inputs for long term debt are considered a Level 3.

Recently Issued Accounting Pronouncements: In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The Company adopted the standard on October 1, 2018 and utilized the modified retrospective transition method. The standard will not have a material impact on the Company's financial statements, however it will expand certain disclosures of it revenue streams.

In February 2016, FASB issued ASU No. 2016-2 "Leases" ("ASU 2016-02)". ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than on year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. The Company will not implement ASU 2016-02 until October 2019, when fiscal year 2020 starts. The Company is evaluating the impact of the new standard on the financial statements.

Note 2.    Members' Equity

The Company has one class of membership units with 90,000 units authorized.  

Income and losses are allocated to all members based on their pro rata ownership interest. All unit transfers are effective the last day of the month.  Units may be issued or transferred only to persons eligible to be members of the Company and only in compliance with the provisions of the Company's operating agreement and unit assignment policy.

The Company is organized as an Iowa limited liability company. Members' liability is limited as specified in the Company's operating agreement and pursuant to the Iowa Limited Liability Company Act. The duration of the Company shall be perpetual unless dissolved as provided in the operating agreement.

Note 3.    Inventories

Inventories consist of the following as of September 30:

65

	2018		2017
Raw materials, including corn, chemicals, parts and supplies	$	3,297,104	$	4,166,618
Work in process	794,844		773,978
Ethanol and distiller's grain	464,755		744,133
Total	$	4,556,703	$	5,684,729

Note 4.    Long-Term Debt

The Company has a revolving term loan, with a bank, available for up to $21,000,000. Available borrowings will be reduced by $3,600,000 each year starting July 1, 2020 until July 1, 2023. On July 1, 2024, a final payment of $6,600,000 is due when the loan expires. The Company will pay interest on the unpaid balance at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3.40%. Principal payments are not required until July 1, 2024 when the term loan expires. The Company will also pay a commitment fee on the average daily unused portion of the loan at the rate of .50% per annum, payable monthly. The loan is secured by substantially all assets of the Company and subject to certain financial and nonfinancial covenants as defined in the master loan agreement. At September 30, 2018 and 2017 the outstanding balance on the revolving term loan was $15,200,000 and $3,000,000, respectively. The table below shows amounts due by fiscal year.

Long Term Debt Payment Due by Fiscal Year
Fiscal Year	Amount Due
2019	$0
2020	—
2021	1,400,000
2022	3,600,000
2023	3,600,000
2024	6,600,000
Total	$15,200,000

On September 13, 2018, the Company received a waiver of compliance from our lenders waiving compliance with its Debt Service Coverage Ratio covenant for the period ended September 30, 2018. We were in compliance with all other covenants as of September 30, 2018.

The payment of distributions is also subject to the Company's compliance with the various covenants and requirements of the Company's credit and loan agreements, and it is possible that those covenants and requirements will at times prevent the Company from paying a distribution to its members if the Company fails to meet certain financial metrics or is in default under the provisions of the credit and loan agreements.

66

Note 5.    Lease Commitments

The Company leases various rail cars and office equipment under operating lease agreements with the following future minimum commitments as of September 30, 2018.

Years ending September 30:
2019	$	1,867,240
2020	1,123,315
2021	945,565
2022	687,145
2023	486,369
Thereafter	379,950
Total	$5,489,584

Rent expense under the above operating leases totaled approximately $2,156,000, $2,264,000 and $2,313,000 for the years ended September 30, 2018, 2017 and 2016 respectively.

Note 6.    Related-Party Transactions

The Company had the following related-party activity with members as of or during the year ending September 30:

		2018		2017		2016
Member A	Corn purchased for fiscal year	$	17,960,954	$	14,002,381	$	16,846,207
	Corn forward purchase commitment	$	6,647	$	898,563	$	301,237
	Basis corn commitment - bushels	400,000		200,000		650,000
	Miscellaneous purchases	$	2,579	$	3,054	$	15,100
	Amount due at fiscal year end	$	65,387	$	184,382	$	159,562
Member B	Corn purchased for fiscal year	$	11,818,241	$	10,572,044	$	7,736,002
	Corn forward purchase commitment	$	14,103	$	400,750	$	320,540
	Basis corn commitment - bushels	150,000		—		—
	Amount due at fiscal year end	$	98,179	$	97,350	$	—
Member C	Corn purchased for fiscal year	$	5,146,781	$	6,942,708	$	8,633,206
	Corn forward purchase commitment	$	34,366	$	—	$	—
	Basis corn commitment - bushels	205,000		—		—
	Amount due at fiscal year end	$	234,238	$	—	$	—
Other Members	Corn purchased for fiscal year	$	7,614,288	$	10,432,740	$	13,120,874
	Corn forward purchase commitment	$	1,761,514	$	1,224,837	$	2,679,675
	Basis corn commitment - bushels	—		—		100,000
	Amount due at fiscal year end	$	259,329	$	360,994	$	620,741

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Note 7.    Commitments and Major Customers

The Company has an agreement with an unrelated entity for marketing, selling and distributing all of the ethanol produced by the Company. Revenues with this customer were $77,735,847, $89,200,642, and $78,547,436 for the years ended September 30, 2018, 2017 and 2016, respectively. Trade accounts receivable of $1,741,269 and $2,163,366 was due from the customer as of September 30, 2018 and 2017, respectively. As of September 30, 2018, the Company has ethanol sales commitments with the unrelated entity of 12,440,000 unpriced gallons through December 2018.

The Company also has an agreement with an unrelated entity for marketing, selling and distributing the distiller's grains. Revenues with this customer, including both distiller's grains and corn oil, were $16,932,753, $14,760,656 and $18,169,000 for the years ended September 30, 2018, 2017 and 2016 , respectively. Trade accounts receivable of $262,325 and $417,106 was due from the customer as of September 30, 2018 and 2017, respectively. The Company has distiller’s grain sales commitments with the unrelated entity of approximately 1,225 tons for a total sales commitment of approximately $148,319 less marketing fees.

As of September 30, 2018, the Company had purchase commitments for corn cash forward contracts with various unrelated parties, totaling approximately $5,209,164, representing 1,401,816 bushels. These contracts mature at various dates through August 2019. The Company had basis contract purchase commitments with unrelated parties totaling 276,700 bushels through December 2018.

The Company has an agreement with an unrelated party for the transportation of natural gas to the Company's ethanol plant. Under the agreement, the Company committed to future monthly fees totaling approximately $3.6 million over the 10 year term, commencing November 2014. On June 2, 2016, the Company assigned an irrevocable standby letter of credit to the counter-party to stand as security for the Company's obligation under the agreement. The letter of credit will be reduced over time as the Company makes payments under the agreement. On July 3, 2017, in conjunction with the amended revolving credit loan agreement, the Company amended the letter of credit and extended the maturity to May 2021. At September 30, 2018, the remaining commitment was approximately $1.6 million.

As of September 30, 2018, the Company had purchase commitments for natural gas forward contracts with an unrelated party for a total commitment of approximately $1,820,025. The Company had purchase commitments for natural gas basis contracts with an unrelated party totaling 1,005,125 MMBtu's. These contracts mature at various dates through December 2019.

The Company signed contracts with unrelated parties for the installation of a distiller's grain drying and cooling system. The total commitments are for $11.5 million. The Company made progress payments of $10.7 million under this contract through September 30, 2018. The remaining payments will be made as invoiced throughout the life of the project. The project is estimated to be completed in the second quarter of fiscal year 2019.

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The Company has an agreement with an unrelated party for a new regenerative thermal oxidizer. The total commitment is for $1.8 million. Through September 30, 2018, the Company made progress payments of $0.9 million. The remaining payments will be made as invoiced throughout the life the project. The project is estimated to be completed in the first quarter of fiscal year 2019.

Note 8.    Risk Management

The Company’s activities expose it to a variety of market risks, including the effects of changes in commodity prices.  These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program.  The Company’s risk management program focuses on the unpredictability of commodity markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market fluctuations.  The Company’s specific goal is to protect the Company from large moves in the commodity costs.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchases and sales contracts.

Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn and natural gas derivatives and through revenue for ethanol derivatives.

Derivatives not designated as hedging instruments as of September 30 are as follows:

	2018			2017
Derivative assets - corn contracts	$	819,613		$	506,187
Derivative assets - ethanol contracts	2,640			—
Derivative liabilities - corn contracts	(813		)	(275		)
Derivative liabilities - ethanol contracts	—			(12,310		)
Derivative liabilities - natural gas contracts	—			(1,980		)
Cash (due to) broker	(266,313		)	(62,956		)
Total	$	555,127		$	428,666

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The effects on operating income from derivative activities for the years ending September 30, are as follows:

	2018			2017			2016
Gains (losses) in revenue due to derivatives related to ethanol sales:
Realized gain (loss)	$	(26,649	)	$	(288,138	)	$	63,308
Unrealized gain	—			127,923			5,070
Total effect on revenues	(26,649		)	(160,215		)	68,378
Gains (losses) in cost of goods sold due to derivatives related to corn costs:
Realized gain	1,332,317			1,849,319			1,955,350
Unrealized gain (loss)	325,878			(554,925		)	678,973
Total effect on corn costs	1,658,195			1,294,394			2,634,323
Gains (losses) in cost of goods sold due to derivatives related to natural gas costs:
Realized gain	65,769			27,950			81,850
Unrealized gain (loss)	3,940			(14,290		)	1,880
Total effect on natural gas costs	69,709			13,660			83,730
Total effect on cost of goods sold	$	1,727,904		$	1,308,054		$	2,718,053
Total gain to operating income due to derivative activities	$	1,701,255		$	1,147,839		$	2,786,431

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Note 9.    Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value, the Company uses various methods including market, income and cost approaches.  Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique.  These inputs can be readily observable, market-corroborated, or generally unobservable inputs.  The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.  Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy.  The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.  Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2Valuations for assets and liabilities traded in less active dealer or broker markets.  Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

Derivative financial instruments:  Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs.  For these contracts, the Company obtains 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 CME and NYMEX markets.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets.

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2018 and 2017, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	2018
	Total		Level 1		Level 2		Level 3
Assets, derivative financial instruments	$	822,253	$	822,253	$	—	$	—
Liabilities, derivative financial instruments	$	813	$	813	$	—	$	—
	2017
	Total		Level 1		Level 2		Level 3
Assets, derivative financial instruments	$	506,187	$	506,187	$	—	$	—
Liabilities, derivative financial instruments	$	14,565	$	14,565	$	—	$	—

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Note 10.    Employee Benefit Plan

The Company adopted a 401(k) plan covering substantially all employees.  The Company provides matching contributions of 50% for up to 6% of employee compensation.  Company contributions and plan expenses for the years ended September 30, 2018, 2017 and 2016 totaled $58,112, $68,442 and $69,497, respectively.

Note 11.    Quarterly Financial Data (Unaudited)

The following table presents summarized quarterly financial data for the years ended September 30, 2018 and 2017.

	12/31/2017		3/31/2018		6/30/2018		9/30/2018
Revenue	$22,470,128		$26,788,654		$27,100,886		$25,691,308
Gross profit (loss)	(307,195	)	293,334		867,856		(1,136,929	)
Operating income (loss)	(1,252,954	)	(490,425	)	132,137		(1,908,308	)
Net income (loss)	(947,021	)	(393,169	)	322,504		(1,929,529	)
Basic & diluted earnings (loss) per unit	(22.52	)	(9.35	)	7.67		(45.89	)
	12/31/2016		3/31/2017		6/30/2017		9/30/2017
Revenue	$28,561,716		$27,316,985		$26,292,741		$28,673,742
Gross profit (loss)	3,196,752		1,131,926		(80,718	)	3,445,952
Operating income (loss)	2,439,834		305,834		(922,560	)	2,734,425
Net income (loss)	2,417,530		299,746		(960,823	)	2,747,395
Basic & diluted earnings (loss) per unit	57.49		7.13		(22.85	)	65.34

Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Lincolnway Energy has not had any change in its accountants or any disagreements with its accountants which are required to be disclosed under this Item.

Item 9A.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Lincolnway Energy's management, with the participation of Lincolnway Energy's president and chief executive officer and director of finance, have evaluated the  effectiveness of Lincolnway Energy's disclosure  controls and procedures  (as defined in Rule  13a-15(e)  under  the Securities Exchange  Act of 1934) as of the end of the  period  covered by this annual report.  As a result of such evaluation,  the president and chief executive officer and the director of finance have  concluded  that such  disclosure  controls and procedures are effective to provide  reasonable  assurance that the  information required to be disclosed in the reports Lincolnway Energy  files or submits  under the Securities Exchange  Act of 1934 is (i)  recorded,  processed,  summarized  and reported within the time  periods specified  in the  Securities  and  Exchange Commission's   rules  and  forms, 

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and (ii)  accumulated  and  communicated  to management,  including Lincolnway Energy's  principal executive and principal financial officers or persons performing such functions,  as appropriate,  to allow timely decisions regarding  disclosure. Lincolnway Energy believes that a control system, no matter how well designed and operated,  cannot provide absolute assurance that the  objectives of the control system are met, and no evaluation of controls can provide  absolute  assurance that all control issues and instances of fraud,  if any, within a company have been detected

Management's Annual Report on Internal Control Over Financial Reporting

The management of Lincolnway Energy is responsible for establishing and maintaining adequate internal control over financial reporting for Lincolnway Energy.  Lincolnway Energy's internal control system was designed to, in general, provide reasonable assurance to Lincolnway Energy's management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Lincolnway Energy's management assessed the effectiveness of Lincolnway Energy's internal control over financial reporting as of September 30, 2018.  The framework used by management in making that assessment was the criteria set forth by the "Internal Control – Integrated Framework" (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, Lincolnway Energy's management has determined that as of September 30, 2018, Lincolnway Energy's internal control over financial reporting was effective for the purposes for which it is intended.

An attestation report from Lincolnway Energy's accounting firm on Lincolnway Energy's internal control over financial reporting is not included in this annual report because an attestation report is only required under the regulations of the Securities and Exchange Commission for accelerated filers or large accelerated filers.

Changes in Internal Control over Financial Reporting

No change in Lincolnway Energy's internal control over financial  reporting occurred during the fourth quarter of the fiscal year ended September 30, 2018 that has materially affected,  or is  reasonably  likely to materially  affect,  Lincolnway Energy's internal  control over  financial reporting.

Item 9B.    Other Information.

None.

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PART III

The information required by this Item is incorporated by reference from the definitive proxy statement for the Lincolnway Energy 2019 Annual Meeting of Members (the “2019 Proxy Statement”) to be filed with the SEC within 120 days after the end of the Company’s fiscal year ended September 30, 2018.

Item 10.    Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

Item 11.    Executive Compensation.

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

Item 13.    Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

Item 14.    Principal Accountant Fees and Services.

The information required by this Item is incorporated herein by reference to the 2019 Proxy Statement.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

(a)(1)    Financial Statements.

The financial statements are set forth in Item 8 of this annual report.  

(a)(2)    Financial Statement Schedules.

Financial statement schedules have been omitted because they are not required or are not applicable, or the information is otherwise included in this annual report.

(a)(3)    Exhibits.

			Incorporated by Reference
Exhibit		Filed Herewith		Period		Filing
Number	Exhibit Description		Form	Ending	Exhibit	Date
3.1	Restatement of the Certificate of Organization		10-K	9/30/2010	3.1	12/21/2010
3.2	Second Amended and Restated Operating Agreement and Unit Assignment Policy. See Exhibit 3.2.1 for an amendment to this Agreement.		10-K	9/30/2010	3.2	12/21/2010
3.2.1	Amendment to Second Amended and Restated Operating Agreement		8-K		3.2.1	3/6/2013
10.1	Distiller’s Grain Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC.		10-K	9/30/2007	10.7	12/21/2007
10.1.1	Amendment to Distiller’s Grains Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC		10-K	9/30/2012	10.7.1	12/21/2012
10.2	Industry Track Contract Between Lincolnway Energy, LLC and Union Pacific Railroad		10-Q	6/30/2006	10.13	8/14/2006
10.3	Master Loan Agreement and Amendment Among Farm Credit Services of America, FLCA; Farm Credit Services of America, PCA; and Lincolnway Energy, LLC.		10-K	9/30/2012	10.16	12/21/2012
*10.4	Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC		10-Q	12/30/2012	10.19	2/14/2013
*10.5	Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.		10-Q	12/30/2012	10.20	2/14/2013
10.6	Main Extension and Gas Transportation Agreement Between Lincolnway Energy, LLC and Interstate Power and Light Company		10-Q	3/31/2013	10.21	5/15/2013
**10.7	Employment Agreement Between Lincolnway Energy, LLC and Eric Hakmiller		10-Q	3/31/2013	10.22	5/15/2013
10.8	Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC		10-Q	3/31/2013	10.23	5/15/2013
*10.9	Distiller’s Grain Off-Take Agreement Between Lincolnway Energy, LLC and Gavilon Ingredients, LLC		10-K/A	9/30/2013	10.27	4/23/2014

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10.10	Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC	10-Q	6/30/2014	10.28	8/13/2014
10.11	Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC	10-Q	6/30/2016	10.1	8/12/2016
10.12	Revolving Term Loan Supplement Between Farm Credit Services of America, FLCA and Lincolnway Energy, LLC dated June 2, 2016	10-K/A	9/30/2016	10.12	1/4/2017
10.13	Revolving Credit Supplement (Letter of Credit) Between Farm Credit Services of America, PCA and Lincolnway Energy, LLC dated June 2, 2016	10-K/A	9/30/2016	10.13	1/4/2017
10.14	Revolving Credit Supplement Between Farm Credit Services of America, PCA and Lincolnway Energy, LLC dated June 2, 2016	10-K/A	9/30/2016	10.14	1/4/2017
*10.15	Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC	8-K		10.1	12/9/2016
10.16	Credit Agreement dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA.	8-K		10.1	7/18/2017
*10.17	Amended and Restated Revolving Term Promissory Note dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.2	7/18/2017
*10.18	Amended and Restated Distiller’s Grain Off-Take Agreement between the Company and Gavilon Ingredients, LLC effective October 1, 2017	8-K		10.1	9/28/2017
10.19	Amended and Restated Letter of Credit Promissory Note dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.3	7/18/2017
10.20	Amendment dated February 23, 2018 to the Credit Agreement dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.1	2/26/2018
10.21	Amended and Restated Revolving Term Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.2	2/26/2018
10.22	Amended and Restated Letter of Credit Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.3	2/26/2018
10.23	Amendment dated September 24, 2018 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.1	10/11/2018
*10.24	Amendment No. 1 Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC dated June 28, 2018	8-K		10.1	7/3/2018
10.25	Amendment dated September 24, 2018 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA	8-K		10.1	10/11/2018

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10.26	Amended and Restated Revolving Term Promissory Note dated September 24, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA		8-K		10.2	10/11/2018
14	Code of Ethics		10-K	9/30/2009	14.0	12/22/2009
31.1	Rule 13a-14(a) Certification of President and Chief Executive Officer	Filed Herewith
31.2	Rule 13a-14(a) Certification of Chief Financial Officer	Filed Herewith
†32.1	Section 1350 Certification of President and Chief Executive Officer	Filed Herewith
†32.2	Section 1350 Certification of Chief Financial Officer	Filed Herewith
101	Interactive Data Files (furnished electronically herewith pursuant to Rule 405 of Regulation S-T)
*	Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.
**	Management Contract or Compensatory Plan
†	This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

December 14, 2018	/s/ Eric Hakmiller
	Eric Hakmiller, President and Chief Executive Officer
December 14, 2018	/s/ Kristine Strum
	Kristine Strum, Director of Finance

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

December 14, 2018	/s/ William Couser
	William Couser, Director
December 14, 2018	/s/ Jeff Taylor
	Jeff Taylor, Director
December 14, 2018	/s/ Timothy Fevold
	Timothy Fevold, Director
December 14, 2018	/s/ Terrill Wycoff
	Terrill Wycoff, Director
December 14, 2018	/s/ Kurt Olson
	Kurt Olson, Director
December 14, 2018	/s/ James Hill
	James Hill, Director
December 14, 2018	/s/ Brian Conrad
	Brian Conrad, Director

December 14, 2018	/s/ James Dickson
	James Dickson, Director
December 14, 2018	/s/ Rick Vaughan
	Rick Vaughan, Director
December 14, 2018	/s/ Eric Hakmiller
	Eric Hakmiller, President and Chief Executive Officer
December 14, 2018	/s/ Kristine Strum
	Kristine Strum, Director of Finance

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