GOING CONCERN	3 Months Ended
Jan. 31, 2013
GOING CONCERN
GOING CONCERN	2. GOING CONCERN The financial statements have been prepared on a going-concern basis, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has previously disclosed lower working capital than desired and operating losses related to difficult market conditions and operating performance. The Company has instances of unwaived debt covenant violations at January 31, 2013, failed to pay when due the required monthly principal payments on December 1, 2012 and January 1, 2013, and has failed to pay requirement monthly installments of principal on February 1, 2013, March 1, 2013, April 1, 2013 and May 1, 2013, and is operating under a forbearance agreement with AgStar. These conditions contributed to the long-term debt with AgStar being classified as current at January 31, 2013 as well as working capital to be negative. These factors and the continued volatility in commodity prices raise substantial doubt about the Company’s ability to continue as a going concern. The Company has continued to make changes to plant operations, including converting from a coal-fired ethanol plant to a natural gas plant in October 2011 and the addition of corn oil separation in February 2012. While these changes have improved the operating performance of the plant, and lead to lower operating costs, market conditions have resulted in losses. These losses and the repayment of debt have caused working capital to decline and contributed to the debt covenant violations at January 31, 2013. The Company did not timely make required principal payments to AgStar on the first day of December 2012 through May 2013. Payment for December 2012 and January 2013 were made pursuant to a forbearance agreement with AgStar dated April 12, 2013. As of the date of filing of this Form 10-Q, the Company has paid required installments of principal that were due February 1, 2013, March 1, 2013, April 1, 2013, May 1, 2013, and June 1, 2013, under its renegotiated loan agreement with AgStar, using the proceeds of the Board of Govenors subordinated loan to the Company. As mentioned above, the Company closed on Elevator Sale on February 1, 2013. The net proceeds from this sale of approximately $3.7 million were used to pay the Company’s indebtedness to AgStar as required by the amended and restated forbearance agreement dated January 22, 2013. As a path forward the Company renegotiated its loans with AgStar into a Term Loan and a Revolving Term Loan and entered into a Sixth Amended and Restated Master Loan Agreement with AgStar on May 17, 2013. The Revolving Term Loan will be used by the Company to optimize its cash management. As a part of the loan program, the Company plans to raise a minimum of $6.4 million by issuing convertible secured subordinated debt. Prior to the planned offering of the convertible secured subordinated debt, the Company’s Board of Governors loaned the Company $1.4 million in convertible secured subordinated debt, which was used to bring the previous AgStar loans up to date. A minimum of an additional $5 million must be raised from members or outside investors. These funds will be used to improve working capital by paying down the Revolving Term Loan and meeting the required $5 million payment obligation on the Revolving Term Loan by July 31, 2013. Should the minimum debt of $6.4 million not be raised and the Company could not make the required $5 million payment, the Company would consider other go-forward options including the possibility of selling the plant, and AgStar could exercise its rights and remedies under the loan agreements for payment default.

2. GOING CONCERN

The financial statements have been prepared on a going-concern basis, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business. The Company has previously disclosed lower working capital than desired and operating losses related to difficult market conditions and operating performance. The Company has instances of unwaived debt covenant violations at January 31, 2013, failed to pay when due the required monthly principal payments on December 1, 2012 and January 1, 2013, and has failed to pay requirement monthly installments of principal on February 1, 2013, March 1, 2013, April 1, 2013 and May 1, 2013, and is operating under a forbearance agreement with AgStar. These conditions contributed to the long-term debt with AgStar being classified as current at January 31, 2013 as well as working capital to be negative. These factors and the continued volatility in commodity prices raise substantial doubt about the Company’s ability to continue as a going concern.

The Company has continued to make changes to plant operations, including converting from a coal-fired ethanol plant to a natural gas plant in October 2011 and the addition of corn oil separation in February 2012. While these changes have improved the operating performance of the plant, and lead to lower operating costs, market conditions have resulted in losses. These losses and the repayment of debt have caused working capital to decline and contributed to the debt covenant violations at January 31, 2013. The Company did not timely make required principal payments to AgStar on the first day of December 2012 through May 2013. Payment for December 2012 and January 2013 were made pursuant to a forbearance agreement with AgStar dated April 12, 2013. As of the date of filing of this Form 10-Q, the Company has paid required installments of principal that were due February 1, 2013, March 1, 2013, April 1, 2013, May 1, 2013, and June 1, 2013, under its renegotiated loan agreement with AgStar, using the proceeds of the Board of Govenors subordinated loan to the Company.

As mentioned above, the Company closed on Elevator Sale on February 1, 2013. The net proceeds from this sale of approximately $3.7 million were used to pay the Company’s indebtedness to AgStar as required by the amended and restated forbearance agreement dated January 22, 2013.

As a path forward the Company renegotiated its loans with AgStar into a Term Loan and a Revolving Term Loan and entered into a Sixth Amended and Restated Master Loan Agreement with AgStar on May 17, 2013. The Revolving Term Loan will be used by the Company to optimize its cash management. As a part of the loan program, the Company plans to raise a minimum of $6.4 million by issuing convertible secured subordinated debt. Prior to the planned offering of the convertible secured subordinated debt, the Company’s Board of Governors loaned the Company $1.4 million in convertible secured subordinated debt, which was used to bring the previous AgStar loans up to date. A minimum of an additional $5 million must be raised from members or outside investors. These funds will be used to improve working capital by paying down the Revolving Term Loan and meeting the required $5 million payment obligation on the Revolving Term Loan by July 31, 2013. Should the minimum debt of $6.4 million not be raised and the Company could not make the required $5 million payment, the Company would consider other go-forward options including the possibility of selling the plant, and AgStar could exercise its rights and remedies under the loan agreements for payment default.