UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
	For the quarterly period ended June 30, 2019.
	OR
o	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 000-53036

CARDINAL ETHANOL, LLC

(Exact name of registrant as specified in its charter)

Indiana	20-2327916
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1554 N. County Road 600 E., Union City, IN 47390
(Address of principal executive offices)
(765) 964-3137
(Registrant's telephone number, including area code)

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.

x Yes     o No

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

x Yes     o No

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

Large Accelerated Filer o	Accelerated Filer  o
Non-Accelerated Filer x	Smaller Reporting Company o
	Emerging Growth Company o
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).

o Yes     x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 

As of August 2, 2019, there were 14,606 membership units outstanding.

1

INDEX

	Page Number
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures about Market Risk	34
Item 4. Controls and Procedures	35
PART II. OTHER INFORMATION	36
Item 1. Legal Proceedings	36
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3. Defaults Upon Senior Securities	37
Item 4. Mine Safety Disclosures	37
Item 5. Other Information	37
Item 6. Exhibits	37
SIGNATURES	38

2

PART I.        FINANCIAL INFORMATION

Item 1. Financial Statements

CARDINAL ETHANOL, LLC

Condensed Balance Sheets

ASSETS	June 30, 2019		September 30, 2018
	(Unaudited)
Current Assets
Cash	$	2,307,205	$	17,989,013
Restricted cash	3,785,056		1,248,979
Trade accounts receivable	16,468,561		9,539,007
Miscellaneous receivables	2,355,579		519,721
Inventories	27,307,849		16,552,600
Prepaid and other current assets	245,504		170,953
Futures & options derivatives	290,338		281,438
Forward purchase/sales derivatives	179,621		49,302
Total current assets	52,939,713		46,351,013
Property, plant, and equipment, net	89,966,652		96,948,671
Other Assets
Investment	1,259,770		1,295,192
Total other assets	1,259,770		1,295,192
Total Assets	$	144,166,135	$	144,594,876
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Checks written in excess of bank balances	$	5,039,874	$	—
Operating line of credit	2,168,160		—
Contract liabilities	506,463		—
Accounts payable	2,906,050		2,711,578
Accounts payable-grain	6,396,698		9,597,822
Accrued expenses	981,355		1,289,929
Futures & options derivatives	1,512,156		274,118
Forward purchase/sales derivatives	204,860		1,639,795
Current maturities of long-term debt	1,428,571		1,428,571
Total current liabilities	21,144,187		16,941,813
Long-Term Liabilities
Long-term debt, net of current maturities	5,801,580		7,314,867
Liability for railcar rehabilitation costs	1,080,000		—
Total long-term liabilities	6,881,580		7,314,867
Members’ Equity
Members' contributions, net of cost of raising capital, 14,606 units authorized, issued and outstanding	70,912,213		70,912,213
Retained earnings	45,228,155		49,425,983
Total members' equity	116,140,368		120,338,196
Total Liabilities and Members’ Equity	$	144,166,135	$	144,594,876

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

3

CARDINAL ETHANOL, LLC

Condensed Statements of Operations (Unaudited)

	Three Months Ended						Nine Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Revenues	$	63,665,456		$	71,197,328		$	178,171,882		$	192,765,153
Cost of Goods Sold	62,587,418			67,084,985			175,990,029			182,108,709
Gross Profit	1,078,038			4,112,343			2,181,853			10,656,444
Operating Expenses	1,591,335			1,866,720			5,268,004			5,192,734
Operating Income (Loss)	(513,297		)	2,245,623			(3,086,151		)	5,463,710
Other Income (Expense)
Interest expense	(82,838		)	(246,388		)	(290,602		)	(671,881		)
Miscellaneous income	590,408			14,433			639,528			75,214
Total	507,570			(231,955		)	348,926			(596,667		)
Net Income (Loss)	$	(5,727	)	$	2,013,668		$	(2,737,225	)	$	4,867,043
Weight Average Units Outstanding - basic and diluted	14,606			14,606			14,606			14,606
Net Income (Loss) Per Unit - basic and diluted	$	—		$	138		$	(187	)	$	333
Distributions Per Unit	$	100		$	100		$	100		$	700

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

4

CARDINAL ETHANOL, LLC

Condensed Statements of Cash Flows (Unaudited)

	Nine Months Ended			Nine Months Ended
	June 30, 2019			June 30, 2018
Cash Flows from Operating Activities
Net income (loss)	$	(2,737,225	)	$	4,867,043
Adjustments to reconcile net income (loss) to net cash used in operations:
Depreciation	8,433,872			8,707,377
Change in fair value of commodity derivative instruments	(336,116		)	(169,266		)
Loss (gain) on sale of equipment	1,218			(9,561		)
Loss On Abandonment of Equipment - Ethanol Division	1,197,917			—
Non-cash dividend income	—			(198,955		)
Investment redemption	35,422			—
Change in operating assets and liabilities:
Trade accounts receivables	(6,929,553		)	(1,205,128		)
Miscellaneous receivable	(1,835,858		)	74,623
Inventories	(10,755,249		)	(7,971,169		)
Prepaid and other current assets	(74,551		)	(23,775		)
Contract liabilities	506,463			—
Advances from customers	—			375,543
Accounts payable	63,971			(1,033,838		)
Accounts payable-grain	(3,201,124		)	(1,778,569		)
Accrued expenses	(308,579		)	1,150,576
Accrued rail car rehabilitation repairs	1,080,000			—
Net cash provided by (used in) operating activities	(14,859,392		)	2,784,901
Cash Flows from Investing Activities
Capital expenditures	(2,524,286		)	(118,953		)
Payments for construction in progress	—			(1,860,488		)
Proceeds from sale of equipment	3,800			10,000
Net cash used for investing activities	(2,520,486		)	(1,969,441		)
Cash Flows from Financing Activities
Checks written in excess of bank balances	5,039,874			—
Distributions paid	(1,460,600		)	(10,224,200		)
Proceeds from revolving credit loan	4,161,917			10,349,708
Payments against revolving credit loan	(1,993,757		)	(10,349,708		)
Proceeds from long-term debt	—			3,524,049
Payments on long-term debt	(1,513,287		)	(3,109,915		)
Net cash provided by (used for) financing activities	4,234,147			(9,810,066		)
Net Decrease in Cash and Restricted Cash	(13,145,731		)	(8,994,606		)
Cash and Restricted Cash – Beginning of Period	19,237,992			19,397,161
Cash and Restricted Cash – End of Period	$	6,092,261		$	10,402,555

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

5

CARDINAL ETHANOL, LLC

Condensed Statements of Cash Flows (Unaudited)

	Nine Months Ended		Nine Months Ended
	June 30, 2019		June 30, 2018
Reconciliation of Cash and Restricted Cash
Cash - Balance Sheet	$	2,307,205	$	10,138,977
Restricted Cash - Balance Sheet	3,785,056		263,578
Cash and Restricted Cash	6,092,261		10,402,555
Supplemental Cash Flow Information
Interest paid	$	330,790	$	651,915
Supplemental Disclosure of Non-cash Investing and Financing Activities
Construction in process included in accrued expenses and accounts payable	$	154,145	$	32,259

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

6

CARDINAL ETHANOL, LLC

Condensed Statements of Changes in Members' Equity (Unaudited)

	Member Contributions	Retained Earnings
September 30, 2017	$70,912,213	$55,670,618
Net Income	—	1,604,507
Member Distributions	—	(5,842,400)
December 31, 2017	70,912,213	51,432,725
Net Income	—	1,248,869
Member Distributions	—	(2,921,200)
March 31, 2018	$70,912,213	$49,760,394
Net Income	—	2,013,668
Member Distributions	—	(1,460,600)
June 30, 2018	$70,912,213	$50,313,462
	Member Contributions	Retained Earnings
September 30, 2018	$70,912,213	$49,425,983
Net Loss	—	(2,670,040)
December 31, 2018	70,912,213	46,755,943
Net Loss	—	(61,461)
March 31, 2019	$70,912,213	$46,694,482
Net Loss	—	(5,727)
Member Distributions		(1,460,600)
June 30, 2019	$70,912,213	$45,228,155

7

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended September 30, 2018, contained in the Company's annual report on Form 10-K.

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

Nature of Business

Cardinal Ethanol, LLC, (the “Company”) is an Indiana limited liability company currently producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. During the nine months ended June 30, 2019 and 2018, the Company produced approximately 94,904,000 and 95,662,000 gallons of ethanol, respectively.

Reportable Segments

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

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

• Trading Division. During 2017, the Company constructed a grain loading facility within our single site to buy, hold and sell inventories of agricultural grains, primarily soybeans. We perform no additional processing of these grains, unlike the corn inventory we hold and use in ethanol production. The activities of buying, selling and holding of grains other than for ethanol and co-product production comprise this financial reporting segment.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, the valuation of inventory purchase and sale commitments derivatives, inventory, patronage dividends, long-lived assets, railcar rehabilitation liability and inventory purchase commitments. Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made.

Restricted Cash

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

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CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Trade Accounts Receivable

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Amounts considered uncollectible are written off. The Company's estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At June 30, 2019 and September 30, 2018, the Company determined that an allowance for doubtful accounts was not necessary.

Contract Liabilities

The Company receives cash from time to time from customers before it fulfills its performance obligations to those customers. In those cases, the company records those advance payments as a current liability. The Company has not yet received advances that are expected to remain open beyond one year.

Inventories

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

Trading division inventories consist of grain. Soybeans were the only grains held and traded at June 30, 2019 and September 30, 2018. These inventories are stated at market value, which may include reductions for quality.

Property, Plant and Equipment

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

On November 6, 2018, we experienced an explosion in one of our distillers grain silos. During the quarter ended June 30, 2019 the Company abandoned the silo and recorded an insurance recovery of approximately $1,794,000, of which was included as a miscellaneous receivable at June 30, 2019 and the balance collected in the quarter ending September 30, 2019. For the quarter ended June 30, 2019, the Company has recorded a loss on the abandonment of the damaged DDGS silo in the amount of approximately $1,198,000.

The Company has various capital projects scheduled for the 2019 fiscal year in order to make certain improvements to our ethanol plant. We have executed an agreement with Nelson Engineering to construct an additional liquefaction tank and fermenter which are expected to cost approximately $3,200,000. We expect to use funds from operations and our existing debt facilities to fund these improvements. At June 30, 2019, the project is still in process and approximately $2,000,000 of these costs have been capitalized in property, plant and equipment.

Long-Lived Assets

The Company reviews its long-lived assets, such as property, plant and equipment and financing costs, subject to depreciation and amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

9

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Investments

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

Revenue Recognition

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

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

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

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

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

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

Derivative Instruments

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

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

10

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our financial statements.

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

Net Income (Loss) per Unit

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

Recently Issued or Adopted Accounting Pronouncements

Accounting for Leases (Evaluating)

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which provides guidance for accounting for leases. The new guidance requires companies to recognize the assets and liabilities for the rights and obligations created by leased assets, initially measured at the present value of the lease payments. The accounting guidance for lessors is largely unchanged. The ASU is effective for the Company beginning in October 2019. It is to be adopted using a modified retrospective approach. The Company is currently evaluating the impact that the adoption of this guidance will have on the Company’s financial statements and anticipates the new guidance will significantly impact its financial statements given the Company has leased a significant number of rail cars for transporting ethanol and dried distillers' grains with solubles (DDGS) to its customers.

Revenue Recognition (Adopted)

Effective October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers. Refer to Note 1 - Accounting policies and Note 2 - Revenue for further details.

2.  REVENUE

Adoption of ASC Topic 606

On October 1, 2018, the Company adopted the amended guidance in ASC Topic 606, Revenue from Contracts with Customers, and all related amendments (“new revenue standard”) and applied it to all contracts using the modified retrospective transition method. There were no adjustments to the October 1, 2018 balance sheet for the adoption of the new revenue standard. As such, comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. In addition, there was no impact of adoption on the statements of operations or balance sheets for the three and nine months ended June 30, 2019 and 2018.

Revenue Recognition

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

11

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Revenue by Source

All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following tables disaggregate revenue by major source for the three and nine month periods ended June 30, 2019:

Three Months Ended June 30, 2019

	Ethanol Production		Grain Trading		Total
Revenues from contracts with customers under ASC Topic 606
Ethanol	$	42,284,298	$	—	$	42,284,298
Distillers' grains	9,939,220		—		9,939,220
Corn Oil	1,885,100		—		1,885,100
Carbon Dioxide	123,375		—		123,375
Other	9,344		15,350		24,694
Total revenues from contracts with customers	54,241,337		15,350		54,256,687
Revenues from contracts accounted for as derivatives under ASC Topic 815 (1)
Soybeans and other grains	—		9,408,769		9,408,769
Total revenues from contracts accounted for as derivatives	—		9,408,769		9,408,769
Total Revenues	$	54,241,337	$	9,424,119	$	63,665,456

Nine Months Ended June 30, 2019

	Ethanol Production		Grain Trading		Total
Revenues from contracts with customers under ASC Topic 606
Ethanol	$	120,110,027	$	—	$	120,110,027
Distillers' grains	31,483,092		—		31,483,092
Corn Oil	5,524,019		—		5,524,019
Carbon Dioxide	386,270		—		386,270
Other	38,548		24,250		62,798
Total revenues from contracts with customers	157,541,956		24,250		157,566,206
Revenues from contracts accounted for as derivatives under ASC Topic 815 (1)
Soybeans and other grains	—		20,605,676		20,605,676
Total revenues from contracts accounted for as derivatives	—		20,605,676		20,605,676
Total Revenues	$	157,541,956	$	20,629,926	$	178,171,882

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

12

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Payment Terms

The Company has contractual payment terms with each respective marketer that sells ethanol and distillers grains. These terms are generally 10 - 20 days after the week of the transfer of control.

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

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

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

Shipping and Handling Costs

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

Contract Liabilities

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

3. CONCENTRATIONS

Two major customers accounted for approximately 78% of the outstanding accounts receivable balance at June 30, 2019 and 87% at September 30, 2018. These same two customers accounted for approximately 82% of revenue for the three and nine month periods ended June 30, 2019 and 79% of revenue for the three and nine month periods ended June 30, 2018.

4.  INVENTORIES

Inventories consist of the following as of:

	June 30, 2019 (Unaudited)		September 30, 2018
Ethanol Division:
Raw materials	$	8,547,422	$	7,053,371
Work in progress	1,368,366		1,299,716
Finished goods	2,773,987		1,929,177
Spare parts	3,310,223		2,927,438
Ethanol Division Subtotal	$	15,999,998	$	13,209,702
Trading Division:
Grain inventory	$	11,307,851	$	3,342,898
Trading Division Subtotal	$	11,307,851	$	3,342,898
Total Inventories	$	27,307,849	$	16,552,600

The Company had a net realizable value write-down of Ethanol Division inventory of approximately $102,000 and $0 for the three months ended June 30, 2019, and 2018, respectively and $886,000 and $83,000 for the nine months ended June 30, 2019, and 2018.

13

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

In the ordinary course of business, the Company enters into forward purchase contracts for its commodity purchases and sales. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. At June 30, 2019, the Company had forward corn purchase contracts at various fixed prices for various delivery periods through December 2020 for approximately 9.3% of expected production needs for the next 18 months. Approximately 8.0% of the forward corn purchases were with related parties. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts using a methodology similar to that used in the lower of cost or net realizable value evaluation with respect to inventory valuation, and has determined that no impairment existed at June 30, 2019 or September 30, 2018. The Company has elected not to apply the normal purchase and sale exemption to its forward soybean contracts and therefore treats them as derivative instruments.

At June 30, 2019, the Ethanol Division had forward dried distiller grains sales contracts for approximately 38.3% of expected production for the next 3 months at various fixed prices for delivery periods through September 2019. At June 30, 2019, the Company had forward corn oil contracts for approximately 100.0% of expected production for the next 1 month at various fixed prices for delivery through July 2019. Also, at June 30, 2019, the Company had forward natural gas contracts for approximately 44.9% of expected purchases for the next 16 months at various prices for various delivery periods through October 2020. Additionally, at June 30, 2019, the Trading Division had forward soybean purchase contracts for various delivery periods through March 2020. Approximately 14.0% of the forward soybean purchases were with related parties.

5. DERIVATIVE INSTRUMENTS

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

Commodity Contracts

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

At June 30, 2019, the Ethanol Division had a net long (buying) position of (1,136,000) bushels of corn under derivative contracts used to hedge its forward corn contracts, corn inventory and ethanol sales. These corn derivatives are traded on the Chicago Board of Trade as of June 30, 2019 and are forecasted to settle for various delivery periods through December 2021. These ethanol derivatives are traded on the New York Mercantile Exchange and are forecasted to settle for various delivery periods through September 2019. At June 30, 2019, the Trading Division also had a net short (selling) position of 1,525,000 bushels of soybeans under derivative contracts used to hedge its forward soybean contract purchases. These soybean derivatives are traded on the Chicago Board of Trade and are, as of June 30, 2019, forecasted to settle for various delivery periods through July 2020. These derivatives have not been designated as effective hedges for accounting purposes.

14

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

The following table provides balance sheet details regarding the Company's derivative financial instruments at June 30, 2019:

Instrument	Balance Sheet Location	Assets		Liabilities
Ethanol Futures and Options Contracts	Futures & Options Derivatives	$	—	$	97,755
Corn Futures and Options Contracts	Futures & Options Derivatives	$	—	$	1,414,401
Soybean Futures and Options Contracts	Futures & Options Derivatives	$	290,338	$	—
Soybean Forward Purchase and Sales Contracts	Forward Purchase/Sales Derivatives	$	179,621	$	204,860
Totals		$	469,959	$	1,717,016

As of June 30, 2019, the Company had approximately $3,785,000 cash collateral (restricted cash) related to ethanol, corn, and soybean derivatives held by four brokers.

The following table provides balance sheet details regarding the Company's derivative financial instruments at September 30, 2018:

Instrument	Balance Sheet Location	Assets		Liabilities
Ethanol Futures and Options Contracts	Futures & Options Derivatives	$	—	$	118,062
Corn Futures and Options Contracts	Futures & Options Derivatives	$	—	$	156,056
Soybean Futures and Options Contracts	Futures & Options Derivatives	$	281,438	$	—
Soybean Forward Purchase and Sales Contracts	Forward Purchase/Sales Derivatives	$	49,302	$	1,639,795
Totals		$	330,740	$	1,913,913

As of September 30, 2018, the Company had approximately $1,249,000 of cash collateral (restricted cash) related to ethanol, corn and soybean derivatives held by two brokers.

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

Instrument	Statement of Operations Location	Three Months Ended June 30, 2018			Nine Months Ended June 30, 2018			Three Months Ended June 30, 2019			Nine Months Ended June 30, 2019
Corn Futures and Options Contracts	Cost of Goods Sold	$	1,464,076		$	1,282,687		$	342,057		$	13,444
Ethanol Futures and Options Contracts	Revenues	(142,568		)	(467,644		)	288,574			474,015
Natural Gas Futures and Options Contracts	Cost of Goods Sold	8,577			165,590			(14,373		)	23,354
Soybean Futures and Options Contracts	Cost of Goods Sold	4,149,333			3,219,346			(24,080		)	263,812
Soybean Forward Purchase Contracts	Cost of Goods Sold	(3,963,696		)	(3,031,969		)	1,275,534			2,777,541
Totals		$	1,515,722		$	1,168,010		$	1,867,712		$	3,552,166

15

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

6. FAIR VALUE MEASUREMENTS

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of June 30, 2019:

Instruments	Carrying Amount			Fair Value			Level 1			Level 2			Level 3
Corn Futures and Options Contracts	$	(1,414,401	)	$	(1,414,401	)	$	66,439		$	(1,480,840	)	$	—
Ethanol Futures and Options Contracts	$	(97,755	)	$	(97,755	)	$	(97,755	)	$	—		$	—
Soybean Futures and Options Contracts	$	290,338		$	290,338		$	290,338					$	—
Soybean Forward Purchase Contracts	$	(25,239	)	$	(25,239	)	$	—		$	(25,239	)	$	—
Soybean Inventory	$	11,307,851		$	11,307,851		$	—		$	11,307,851		$	—

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2018:

Instruments	Carrying Amount			Fair Value			Level 1			Level 2			Level 3
Corn Futures and Options Contracts	$	(156,056	)	$	(156,056	)	$	(164,625	)	$	8,569		$	—
Ethanol Futures and Options Contracts	$	(118,062	)	$	(118,062	)	$	(118,062	)	$	—		$	—
Soybean Futures and Options Contracts	$	281,438		$	281,438		$	281,438		$	—		$	—
Soybean Forward Purchase Contracts	$	(1,590,493	)	$	(1,590,493	)	$	—		$	(1,590,493	)	$	—
Soybean Inventory	$	3,342,898		$	3,342,898		$	—		$	3,342,898		$	—

We determine the fair value of commodity futures derivative instruments utilizing Level 1 inputs by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. Corn and soybean futures and options and soybean forward purchase contracts are reported at fair value utilizing Level 2 inputs from current contract prices that are being issued by the Company. Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets and quality.

7.  BANK FINANCING

The Company has a loan agreement consisting of three loans, the Declining Revolving Loan (Declining Loan), the Revolving Credit Loan and the Grain Loadout Facility Loan (formerly the Construction Loan) in exchange for liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts and assignment of material contracts. The loan agreement assigns an interest rate of LIBOR plus 290 basis points (2.9%) to each of the individual loans. The Revolving Credit Loan is assigned the one month LIBOR rate which changes on the first day of every month. The Declining Loan and the Grain Loadout Facility Loan each have interest charged based on the ninety day (three month) LIBOR rate. The interest rate is assigned at the beginning of the ninety day period and not all of the loans have the same interest rate beginning and ending dates. The Company amended the loan agreement effective as of February 28, 2019, to extend the termination date of the Revolving Credit Loan from February 28, 2019 to February 28, 2020.

16

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

Declining Note

The maximum availability of the Declining Loan is $5,000,000 with such amount to be available for working capital purposes. The interest rate on the Declining Loan at June 30, 2019 was 5.50% and at September 30, 2018 was 5.24%. There were no borrowings outstanding on the Declining Loan at June 30, 2019 or at September 30, 2018.

Revolving Credit Loan

The Revolving Credit Loan has a limit of $15,000,000 supported by a borrowing base made up of the Company's corn, ethanol, dried distillers grain, corn oil and soybean inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds.The interest rate at June 30, 2019 was 5.34% and at September 30, 2018 was 5.01%. There were borrowing in the amount of approximately $2,168,000 outstanding on the Revolving Credit Loan at June 30, 2019 and no borrowing outstanding at September 30, 2018.

Grain Loadout Facility Loan

The Grain Loadout Facility Loan (formerly Construction Loan) had a limit of $10,000,000. The interest rate at June 30, 2019 was 5.43% and at September 30, 2018 was 5.23%. There were borrowings in the amount of approximately $7,230,000 and $8,743,000 outstanding on the Grain Loadout Facility Loan at June 30, 2019 and September 30, 2018, respectively. The principal balance on the Construction Loan of $10,000,000 was converted to term debt effective December 31, 2017. The Grain Loadout Facility Loan requires monthly installment payments of principal of approximately $119,000 plus interest accrued in arrears from the date of the last payment, such payments commenced on February 1, 2018, with a final maturity date of February 28, 2023.

These loans are subject to protective covenants, which require the Company to maintain various financial ratios. The covenants include a working capital requirement of $15,000,000, and a capital expenditures covenant that allows the Company $5,000,000 of expenditures per year without prior approval. There is also a requirement to maintain a minimum fixed charge coverage ratio of no less than 1.15:1.0 measured quarterly on a rolling four quarter basis.

Long-term debt, as discussed above, consists of the following at June 30, 2019:

Grain Loadout facility loan	$	7,230,151
Less amounts due within one year	$	1,428,571
Net long-term debt	$	5,801,580

The estimated maturities of long-term debt at June 30, 2019 are as follows:

July 1, 2019 to June 30, 2020	$	1,428,571
July 1, 2020 to June 30, 2021	1,428,571
July 1, 2021 to June 30, 2022	1,428,571
July 1, 2022 to June 30, 2023	2,944,437
Total long-term debt	$	7,230,151

8. LEASES

At June 30, 2019, the Company had entered into an agreement with its ethanol marketer to lease 225 tank cars needed for ethanol rail transportation at a rate up to current market rates per tank car per month through November 2022. The ethanol purchase and sale agreement was amended from the previous agreement which charged the Company a fixed price per gallon of ethanol through July 27, 2018. This amendment results in a commitment classified as an operating lease as reported in the table below.

17

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

At June 30, 2019, the Company had the following operating lease minimum commitments for payments of rentals under leases which at inception had a non-cancellable term of more than one year:

	Total
July 1, 2019 to June 30, 2020	$	2,869,560
July 1, 2020 to June 30, 2021	2,869,560
July 1, 2021 to June 30, 2022	2,334,060
July 1, 2022 to June 30, 2023	813,150
Total minimum lease commitments	$	8,886,330

9. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

Patent Infringement

In February 2010, a lawsuit against the Company was filed by an unrelated party claiming the Company's operation of the oil separation system in a patent infringement. In connection with the lawsuit, in February 2010, the agreement for the construction and installation of the tricanter oil separation system was amended. In this amendment the manufacturer and installer of the tricanter oil separation system indemnifies the Company against all claims of infringement of patents, copyrights or other intellectual property rights from the Company's purchase and use of the tricanter oil system and agrees to defend the Company in the lawsuit filed at no expense to the Company. On October 23, 2014, the court granted summary judgment finding that all of the patents claimed were invalid and that the Company had not infringed. In addition, on September 15, 2016, the United States District Court granted summary judgment finding that the patents were invalid due to inequitable conduct before the US Patent and Trademark Office by the inventors and their attorneys. The Company has since settled with the attorneys for the inventors. A motion to reconsider the decision regarding inequitable conduct is pending. In addition, an appeal regarding the current ruling on inequitable conduct has been filed. The manufacturer has, and the Company expects it will continue, to vigorously defend itself and the Company in these lawsuits and in any appeal filed.

If the ruling was to be successfully appealed, the Company estimates that damages sought in this litigation if awarded would be

based on a reasonable royalty to, or lost profits of, the plaintiff. If the court deems the case exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. The manufacturer has also agreed to indemnify the Company for these fees. However, in the event that damages are awarded and if the manufacturer is unable to fully indemnify the Company for any reason, the Company could be liable. In addition, the Company may need to cease use of its current oil separation process and seek out a replacement or cease oil production altogether.

Air Permit

On January 4, 2018, the Company received a letter from the Indiana Department of Environmental Management, Office of Air Quality (“IDEM”) alleging violations of the Company's air permit.  IDEM alleges that we (i) constructed and operated a fermenter without previous construction or operational approval; (ii) constructed and operated emission units (conveyors and legs) without the appropriate emission controls (two bag houses instead of one larger bag house); (iii) constructed and operated emission units (steel bins) without emission controls; and (iv) operated emission units above the emission limits. The Company entered into a settlement of this matter with IDEM in April 2019 and as part of that settlement paid a civil penalty in the amount of $27,000.

Rail Car Rehabilitation Costs

The Company leases 180 hopper rail cars under a multi-year agreement. Under the agreement, we may be charged amounts to rehabilitate each car for "damage" that is considered to be other than normal wear and tear upon turn in of the car(s). Prior to the quarter ending June 30, 2019, the Company believed ongoing repairs results in an insignificant future rehabilitation expense. During the quarter ending June 30, 2019, based on new information from the lessor, we re-evaluated our assumptions and believe that we may be assessed for damages incurred. Company management has estimated total costs to rehabilitate the cars at June 30, 2019, to be $1,080,000. During the quarter ended June 30, 2019, the Company has recorded an expense in cost of goods good and a corresponding estimated long-term liability totaling $1,080,000.

18

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

10. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are primarily derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales average approximately 67% of total revenues and corn costs average 68% of total cost of goods sold.

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

11. BUSINESS SEGMENTS

Based on the growth of the Company's Trading Division during the first quarter of fiscal 2018 and operations in fiscal 2018, the Company has determined it now has two reportable operating segments. Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. Segment income or loss does not include any allocation of shared-service costs.  Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated.

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

	Three Months Ended					Nine Months Ended
	June 30, 2019			June 30, 2018		June 30, 2019			June 30, 2018
Revenue:	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Ethanol production	$	54,241,337		$	57,912,534	$	157,541,956		$	164,337,421
Grain trading	$	9,424,119		$	13,284,794	$	20,629,926		$	28,427,732
Total Revenue	$	63,665,456		$	71,197,328	$	178,171,882		$	192,765,153
	Three Months Ended					Nine Months Ended
	June 30, 2019			June 30, 2018		June 30, 2019			June 30, 2018
Gross Profit:	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Ethanol production	$	311,720		$	3,427,027	$	1,497,603		$	9,646,359
Grain Trading	$	766,318		$	685,316	$	684,250		$	1,010,085
Total Gross Profit	$	1,078,038		$	4,112,343	$	2,181,853		$	10,656,444
	Three Months Ended					Nine Months Ended
	June 30, 2019			June 30, 2018		June 30, 2019			June 30, 2018
Operating Income (Loss):	(unaudited)			(unaudited)		(unaudited)			(unaudited)
Ethanol production	$	(962,372	)	$	1,756,168	$	(2,818,672	)	$	5,029,913
Grain trading	$	449,075		$	489,455	$	(267,479	)	$	433,797
Total Operating Income (Loss)	$	(513,297	)	$	2,245,623	$	(3,086,151	)	$	5,463,710

19

CARDINAL ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

June 30, 2019

	June 30, 2019		September 30, 2018
Grain Inventories:	(unaudited)
Ethanol production	$	8,547,422	$	7,053,371
Grain trading	$	11,307,851	$	3,342,898
Total Grain Inventories	$	19,855,273	$	10,396,269
	June 30, 2019		September 30, 2018
Total Assets:	(unaudited)
Ethanol production	$	118,495,972	$	128,960,169
Grain trading	$	25,670,163	$	15,634,707
Total Assets	$	144,166,135	$	144,594,876

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

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and nine month periods ended June 30, 2019, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2018.

Forward Looking Statements

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

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

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

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

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

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

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

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

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

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

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

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

• 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;

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

• Changes in federal and/or state laws;

• Changes and advances in ethanol production technology;

• Competition from alternative fuel additives;

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

• Changes in legislation benefiting renewable fuels;

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

• Volatile commodity and financial markets;

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

• Decreases in export demand due to the imposition of tariffs by foreign governments on ethanol and distillers grains produced in the United States.

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

Overview

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

21

On November 6, 2018, we experienced an explosion in one of our distillers grains silos. There were no injuries related to the incident and the damage was limited to the distillers grains silos and the associated materials handling equipment. Operations at the plant were temporarily suspended for four days pending an evaluation and assessment of the situation. The plant resumed operations but did not return to full production rates until mid to late December. We have now received final quotes to repair the damage to the silo of $1,794,000 and our insurance carrier has made a commitment to pay us that amount. However, our board of directors has voted to abandon the damaged silo and decided to instead build additional flat storage in its place due to the fact that flat storage is likely to be a safer alternative to a silo. We expect that the flat storage will be completed during the first quarter of our fiscal year 2020 at an estimated cost of approximately $1,900,000.

On February 19, 2019, we announced that our board of directors had decided to explore strategic options including the potential sale of our facility. In connection with these activities, we suspended all trading through FNC Ag Stock, LLC trading service (the "Trading Service") on the same date. On June 21, 2019, we announced that we are no longer actively pursuing a sale of the facility and resumed trading through the Trading Service effective July 1, 2019.

On May 21, 2019, our board of directors declared a cash distribution of $100 per membership unit to unit holders of record at the close of business on May 21, 2019, for a total distribution of $1,460,600. The distribution was paid in early June 2019.

We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities as amended. However, should we experience unfavorable operating conditions, we may need to seek additional funding.

Results of Operations for the Three Months Ended June 30, 2019 and 2018

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the three months ended June 30, 2019 and 2018:

	2019					2018
Statement of Operations Data	Amount			%		Amount			%
Revenue	$	63,665,456		100.0		$	71,197,328		100.0
Cost of Goods Sold	62,587,418			98.3		67,084,985			94.2
Gross Profit	1,078,038			1.7		4,112,343			5.8
Operating Expenses	1,591,335			2.5		1,866,720			2.6
Operating Income (Loss)	(513,297		)	(0.8	)	2,245,623			3.2
Other Income (Expense), Net	507,570			0.8		(231,955		)	(0.4	)
Net Income (Loss)	$	(5,727	)	0.7		$	2,013,668		2.8

Revenue

Operating Segments

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

We currently do not have or anticipate we will have any other lines of business or other significant sources of revenue other than the sale of ethanol, distillers’ grains, corn oil and and the trading of agricultural grains.  Refer to Note 11, “Business Segments”, of the notes to the condensed unaudited financial statements for financial information about our financial reporting segments. Revenues in each division also include net gains or losses from derivatives related to products sold.

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The following table shows the sources of our total revenue from the two segments and the approximate percentage of revenues to total revenues in our unaudited condensed consolidated statements of operations for the three months ended June 30, 2019 and 2018:

	2019				2018
Revenue:	Amount		% of Total Revenues		Amount		% of Total Revenues
Ethanol production	$	54,241,337	85.2	%	57,912,534		81.3	%
Grain trading	9,424,119		14.8		13,284,794		18.7
Total Revenue	$	63,665,456	100.0	%	$	71,197,328	100.0	%

Ethanol Division

The following table shows the sources of our revenues from our Ethanol Division for the three months ended June 30, 2019 and 2018:

	2019				2018
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Ethanol Sales	$	42,284,298	78.0	%	$	44,624,976	77.1	%
Distillers Grains Sales	9,939,220		18.3		11,348,365		19.6
Corn Oil Sales	1,885,100		3.5		1,802,185		3.1
Carbon Dioxide Sales	123,375		0.2		124,358		0.2
Other Revenue	9,344		—		12,650		—
Total Revenues	$	54,241,337	100.0	%	$	57,912,534	100.0	%

Ethanol

Our revenues from ethanol decreased in the three months ended June 30, 2019 as compared the to the same period in 2018.

We experienced an decrease in ethanol gallons sold of approximately 5.10% for the three months ended June 30, 2019 as compared to the same period in 2018 resulting primarily from timing of ethanol shipments. We are currently operating at approximately 37% above our nameplate capacity. Management expects ethanol production will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions in the ethanol industry that result in our limiting production.

The average price per gallon of ethanol sold for the three months ended June 30, 2019 was approximately 0.37%higher than the average price per gallon of ethanol sold for the same period in 2018. Ethanol market prices overall have increased as ethanol stocks have worked to keep up with the rising corn prices due to the substandard spring planting conditions resulting from wet weather and flooding in the upper Midwest. However, despite higher ethanol prices the margin between ethanol and corn prices has narrowed and has had a negative effect on our profitability for the three months ended June 30, 2019 as compared the to the same period in 2018.

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If corn, crude oil and gasoline prices decrease, that could have a significant negative impact on the market price of ethanol and our profitability particularly if domestic ethanol production remains high. A decline in ethanol exports due to trade disputes with foreign governments resulting in tariffs imposed on ethanol produced in the United States would also likely contribute to higher ethanol stocks unless additional demand is created domestically due to seasonal demand or year round sales of E-15. Finally, the granting of additional EPA waivers to refiners would have a negative effect on ethanol prices.

Distillers Grains

Our revenues from distillers grains decreased in the three months ended June 30, 2019 as compared to the same period in 2018. This decrease in revenues is the result of a decrease in the average market price per ton ton of distillers grains sold for the period ended June 30, 2019 as compared to the same period in 2018.

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The average price per ton of distillers grains sold for the three months ended June 30, 2019 was approximately 16.71%lower than the average price per ton of distillers grains sold for the same period in 2018. This decrease in the market price of distillers grains is primarily due to logistics issues experienced in the distillers grain market and consumers switching to lower priced alternatives for distiller's grains during the three months ended June 30, 2019. In addition, weak export demand from foreign markets due to international trade disputes combined with high industry-wide production had a negative effect on distiller's grains prices.

China has been a significant consumer of exported distillers grains. However, an anti-dumping investigation beginning in January of 2016 into distillers grains produced in the United States led to the imposition by China of preliminary anti-dumping and anti-subsidy duties on imports of ethanol produced in the United States in the fall of 2016 and a final ruling imposing even higher duties in January 2017. The investigation and imposition of these duties resulted in a decline in demand from China. Recent trade disputes with countries such as China, Mexico and the European Union have had a negative effect on export demand. If these trade disputes are not resolved, this could lead to continued low distillers grains prices unless additional demand can be sustained from domestic or other foreign markets.  

    We sold approximately 5.47%more tons of distillers grains in the three months ended June 30, 2019 as compared to the same period in 2018 resulting primarily from a slightly higher yield in our distillers grains production. Management expects that our annual distillers grains production volume will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions in the ethanol industry that result in our limiting production.

Corn Oil

Our revenues from corn oil sales increased in the three months ended June 30, 2019 as compared to the same period in 2018 which was mainly the result of higher corn oil prices. The average price per pound of corn oil was approximately 8.33%higher for the three months ended June 30, 2019 as compared to the same period in 2018 due primarily to the depressed state of prices in 2018. We sold approximately 4.75%less tons of corn oil in the three months ended June 30, 2019 as compared to the same period in 2018 due to lower corn oil yield on average resulting in lower corn oil production.

Management anticipates that higher production and an over-supply will keep prices consistent in the near term. Corn oil prices may be negatively affected if the biodiesel tax credit which was retroactively extended for 2017 is not further extended by Congress. In addition, recent international trade disputes have created additional uncertainty which could have a negative affect on corn oil prices. Management expects corn oil production will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions that result in our limiting production.

Trading Division

The following table shows the sources of our revenues from our Trading Division for the three months ended June 30, 2019 and 2018:

	2019				2018
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Soybean Sales	$	9,408,769	99.8	%	$	13,275,694	99.9	%
Other Revenue	15,350		0.2		$	9,100	0.1
Total Revenues	$	9,424,119	100.0	%	$	13,284,794	100.0	%

Soybeans

During the three months ended June 30, 2019 revenues from our Trading Division were derived primarily from transporting and selling soybeans. Our revenues from soybeans sales decreased in the three months ended June 30, 2019 as compared the to the same period in 2018. This decrease in revenues is the result of a decrease in bushels of soybeans sold of approximately 15.28% for the three months ended June 30, 2019 as compared to the same period in 2018 resulting primarily from smaller ending stocks, commonly referred to as carryout in the grain industry, in the local region for the three months ending June 30, 2019.

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We also experienced a decrease in the average price per bushel of soybeans sold for the three months ended June 30, 2019 that was approximately 17.14%lower than our average price per bushel of soybeans sold for the same period in 2018 due to ample harvest in both 2017 and 2018 resulting in a large carryout. Also international trade disputes caused weaker export demand. We expect that soybean prices will rise during the summer growing months. Summer growing season conditions will determine prices thereafter unless trade disputes cause unusual disruption.

Cost of Goods Sold

Ethanol Division

Our cost of goods sold for this division as a percentage of its total revenues was approximately 99.4% for the three months ended June 30, 2019 as compared to approximately 94.1% for the same period in 2018. This increase in cost of goods sold as a percentage of revenues was the result of steady corn costs and decreased ethanol sales for the three months ended June 30, 2019 as compared to the same period in 2018. Our two largest costs of production are corn and natural gas. Cost of goods sold also includes net gains or losses from derivatives related to our commodities purchases as well as our additional expense for our estimate of our rail car rehabilitation expense described below.

Corn

Our largest cost associated with the production of ethanol, distillers grains and corn oil is corn cost. During the three months ended June 30, 2019, we used approximately 1.20%more bushels of corn to produce our ethanol, distillers grain and corn oil as compared to the same period in 2018 due to higher ethanol production levels for the period. During the three months ended June 30, 2019, our average price paid per bushel of corn was approximately 2.56%lower as compared to the same period in 2018. However, corn prices were increasingly volatile during the three months ended June 30, 2019, primarily due to concerns that the size of the crop will be negatively affected by substandard spring planting conditions resulting from wet weather and flooding in the upper Midwest.

Weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. Wet weather which delayed planting may result in fewer acres, lower yields and higher corn prices. If corn prices rise, it will have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Volatility in the price of corn could significantly impact our cost of goods sold.

Natural Gas

Our natural gas cost after hedging was lower during the three months ended June 30, 2019 as compared to the same period in 2018. This decrease in cost of natural gas for the three months ended June 30, 2019 as compared to the same period in 2018 was primarily the result of a decrease of approximately 5.92% in the average price per MMBTU of natural gas. We used approximately 0.43%more natural gas for the three months ended June 30, 2019 as compared to the same period in 2018, mostly because of cold weather extending into the first part of the period.

Natural gas prices will be dependent upon summer temperatures as hot weather increases natural gas demand. If the nation were to experience a catastrophic weather event causing problems related to the supply of natural gas, this could result in higher natural gas prices.

Rail Car Rehabilitation Costs

The Company leases 180 hopper rail cars under a multi-year agreement. Under the agreement, we may be charged amounts to rehabilitate each car for "damage" that is considered to be other than normal wear and tear upon turn in of the cars. Prior to the quarter ending June 30, 2019, we believed that repairs that it performed on a routine and an ongoing basis would result in an insignificant future rehabilitation expense. During the quarter ending June 30, 2019, based on new information from the lessor, we re-evaluated our assumptions and believe that we may be assessed for damages incurred beyond normal wear and tear. Our management has estimated total costs to rehabilitate the cars at June 30, 2019, to be $1,080,000. During the quarter ended June 30, 2019, we have recorded an expense in cost of goods good and a corresponding estimated long-term liability totaling $1,080,000.

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Trading Division

The following table shows the costs incurred to procure various agricultural commodities for our Trading Division for the three months ended June 30, 2019 and 2018:

	2019				2018
	Amount		% of Revenues		Amount		% of Revenues
Soybeans	$	8,657,801	100.0	%	$	12,599,478	100.0	%
Total Cost of Goods Sold	$	8,657,801	100.0	%	$	12,599,478	100.0	%

Soybeans

During the three months ended June 30, 2019, our cost was primarily the procurement of soybeans sold. During the three months ended June 30, 2019, our average price paid per bushel of soybeans was approximately 19.05%lower as compared to the same period in 2018 due to ample harvest in both 2017 and 2018 resulting in a large carryout. Also international trade disputes caused weaker export demand.

Derivatives

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

Operating Expense

Our operating expenses as a percentage of revenues were approximately 2.5% for the three months ended June 30, 2019 as compared to operating expenses of approximately 2.6% of revenues for the same period in 2018. Operating expenses also include salaries and benefits of administrative employees, insurance, taxes, professional fees and other general administrative costs.

Operating Income

Our operating income for the three months ended June 30, 2019 was approximately 0.8% of revenues as compared to operating income of approximately 3.2% of revenues for the same period in 2018. The decrease in operating income for the three months ended June 30, 2019 was primarily the result of decreased ethanol sales. In addition, we experienced an increase in cost of goods sold for for the three months ended June 30, 2019 due to our recording $1,080,000 related to rail car rehabilitation costs as described above which resulted in an operating loss for the period.

Other Expense

Our other expense for the three months ended June 30, 2019 and 2018 was minimal and consisted primarily of interest expense.

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Results of Operations for the Nine Months Ended June 30, 2019 and 2018

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the nine months ended June 30, 2019 and 2018:

	2019				2018
Statement of Operations Data	Amount			%	Amount			%
Revenue	$	178,171,882		100.0	$	192,765,153		100.0
Cost of Goods Sold	175,990,029			98.8	182,108,709			94.5
Gross Profit	2,181,853			1.2	10,656,444			5.5
Operating Expenses	5,268,004			3.0	5,192,734			2.7
Operating Income (Loss)	(3,086,151		)	1.7	5,463,710			2.8
Other Income (Expense), Net	348,926			0.2	(596,667		)	(0.3	)
Net Income (Loss)	$	(2,737,225	)	1.5	$	4,867,043		2.5

Revenue

Operating Segments

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

We currently do not have or anticipate we will have any other lines of business or other significant sources of revenue other than the sale of ethanol, distillers’ grains, corn oil and and the trading of agricultural grains.  Refer to Note 11, “Business Segments”, of the notes to the condensed unaudited financial statements for financial information about our financial reporting segments. Revenues in each division also include net gains or losses from derivatives related to products sold.

The following table shows the sources of our total revenue from the two segments and the approximate percentage of revenues to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended June 30, 2019 and 2018:

	2019				2018
Revenue:	Amount		% of Total Revenues		Amount		% of Total Revenues
Ethanol production	$	157,541,956	88.4	%	$	164,337,421	85.3	%
Grain trading	$	20,629,926	11.6		$	28,427,732	14.7
Total Revenue	$	178,171,882	100.0	%	$	192,765,153	100.0	%

Ethanol Division

The following table shows the sources of our revenues from our Ethanol Division for the nine months ended June 30, 2019 and 2018:

	2019				2018
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Ethanol Sales	$	120,110,027	76.2	%	$	127,131,852	77.4	%
Distillers Grains Sales	$	31,483,092	20.0		30,733,044		18.7
Corn Oil Sales	$	5,524,019	3.5		5,858,735		3.6
Carbon Dioxide Sales	$	386,270	0.2		371,106		0.2
Other Revenue	$	38,548	0.1		242,684		0.1
Total Revenues	$	157,541,956	100.0	%	$	164,337,421	100.0	%

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Ethanol

Our revenues from ethanol decreased in the nine months ended June 30, 2019 as compared the to the same period in 2018.

The average price per gallon of ethanol sold for the nine months ended June 30, 2019 was approximately 4.15%lower than our average price per gallon of ethanol sold for the same period in 2018. This decrease in average market price for the nine months ended June 30, 2019 as compared to the same period in 2018 is due to months of increased industry-wide production in excess of demand resulting in higher ending ethanol stocks, inhibiting the growth of prices domestically.

We experienced a decrease in ethanol gallons sold of approximately 1.46% for the nine months ended June 30, 2019 as compared to the same period in 2018 resulting primarily from timing of ethanol shipments. We are currently operating at approximately 37% above our nameplate capacity. Management expects ethanol production will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions in the ethanol industry that result in our limiting production. In addition, this expected increase may be partially offset by the lower production we experienced in the nine months ended June 30, 2019 due to the silo accident temporarily delaying production in the Fall of 2018.

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If corn, crude oil and gasoline prices decrease, that could have a significant negative impact on the market price of ethanol and our profitability particularly if domestic ethanol production remains high. A decline in ethanol exports due to trade disputes with foreign governments resulting in tariffs imposed on ethanol produced in the United States would also likely contribute to higher ethanol stocks unless additional demand is created domestically due to seasonal demand or year round sales of E-15. Finally, the granting of additional EPA waivers to refiners would have a negative effect on ethanol prices.

Distillers Grains

Our revenues from distillers grains increased in the nine months ended June 30, 2019 as compared to the same period in 2018. This increase in revenues is primarily the result of an increase in the amount of distillers grain sold and an increase in the average market price per ton of distillers grains sold for the period ended June 30, 2019 as compared to the same period in 2018.

The average price per ton of distillers grains sold for the nine months ended June 30, 2019 was approximately 2.78%lower than the average price per ton of distillers grains sold for the same period in 2018. This decrease in the market price of distillers grains is primarily due to logistics issues experience in the distillers grain market and consumers switching to lower priced alternatives for distiller's grains during the nine months ended June 30, 2019. In addition, weak export demand from foreign markets due to international trade disputes combined with high industry-wide production had a negative effect on distiller's grains.

China has been a significant consumer of exported distillers grains. However, an anti-dumping investigation beginning in January of 2016 into distillers grains produced in the United States led to the imposition by China of preliminary anti-dumping and anti-subsidy duties on imports of ethanol produced in the United States in the fall of 2016 and a final ruling imposing even higher duties in January 2017. The investigation and imposition of these duties resulted in a decline in demand from China. Recent trade disputes with countries such as China, Mexico and the European Union have had a negative effect on export demand. If these trade disputes are not resolved, this could lead to continued low distillers grains prices unless additional demand can be sustained from domestic or other foreign markets.  

    We sold approximately 2.28%more tons of distillers grains in the nine months ended June 30, 2019 as compared to the same period in 2018 resulting primarily resulting primarily from a slightly higher yield in our distillers grains production. Management expects that our annual distillers grains production volume will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions in the ethanol industry that result in our limiting production.

Corn Oil

Our revenues from corn oil sales decreased in the nine months ended June 30, 2019 as compared to the same period in 2018 which was mainly the result of a decrease in quantity sold. The average price per pound of corn oil was approximately 4.00% higher for the nine months ended June 30, 2019 as compared to the same period in 2018 due primarily to depressed prices in 2018. We sold approximately 10.49%less tons of corn oil in the nine months ended June 30, 2019 as compared to the same period in 2018 due to lower corn oil yield on average resulting in lower corn oil production.

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Management anticipates that higher production and an over-supply will keep prices low in the near term. Corn oil prices may be negatively affected if the biodiesel tax credit which was retroactively extended for 2017 is not further extended by Congress. In addition, recent trade disputes have created additional uncertainty which could have a negative affect on corn oil prices. Management expects corn oil production will increase going forward due to plans for completion of various projects which are expected to increase our annual ethanol production rate to approximately 140 million gallons unless we experience unfavorable operating conditions that result in our limiting production.

Trading Division

The following table shows the sources of our revenues from our Trading Division for the nine months ended June 30, 2019 and 2018:

	2019				2018
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Soybean Sales	$	20,605,676	99.9	%	$	28,409,832	99.9	%
Other Revenue	$	24,250	0.1		$	17,900	0.1
Total Revenues	$	20,629,926	100.0	%	$	28,427,732	100.0	%

Soybeans

During the nine months ended June 30, 2019 our revenues were derived primarily from transporting and selling soybeans. Our revenues from soybeans sales decreased in the nine months ended June 30, 2019 as compared the to the same period in 2018. This decrease in revenues is the result of a decrease in bushels of soybeans sold of approximately 15.08% for the nine months ended June 30, 2019 as compared to the same period in 2018 resulting primarily from smaller ending stocks, commonly referred to as carryout in the grain industry for the period ended June 30, 2019.

    We experienced a decrease in the average price per bushel of soybeans sold for the nine months ended June 30, 2019 that was approximately 14.64%lower than our average price per bushel of soybeans sold for the same period in 2018 due to ample harvest in both 2017 and 2018 resulting in a large carryout. Also international trade disputes caused weaker export demand. We expect that soybean prices will rise into the summer growing months. Summer growing season conditions will determine prices thereafter unless trade disputes cause unusual disruption.

Cost of Goods Sold

Ethanol Division

Our cost of goods sold for this division as a percentage of its total revenues was approximately 98.78% for the nine months ended June 30, 2019 as compared to approximately 94.5% for the same period in 2018. This increase in cost of goods sold as a percentage of revenues was the result of decreased ethanol prices relative to the price of corn for the nine months ended June 30, 2019 as compared to the same period in 2018. Our two largest costs of production are corn and natural gas. Cost of goods sold also includes net gains or losses from derivatives related to our commodities purchases as well as our additional expense for our estimate of our rail car rehabilitation expense described below.

Corn

Our largest cost associated with the production of ethanol, distillers grains and corn oil is corn cost. During the nine months ended June 30, 2019, we used approximately 0.48%more bushels of corn to produce our ethanol, distillers grain and corn oil as compared to the same period in 2018 due to decreased ethanol yields for the period. During the nine months ended June 30, 2019, our average price paid per bushel of corn was approximately 0.27%lower as compared to the same period in 2018. However, corn prices were increasingly volatile during the nine months ended June 30, 2019, primarily due to concerns that the size of the crop will be negatively affected by substandard spring planting conditions resulting from wet weather and flooding in the upper Midwest.

Weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. Wet weather which delayed planting may result in fewer acres, lower yields and higher corn prices. If corn prices rise, it will have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Volatility in the price of corn could significantly impact our cost of goods sold.

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Natural Gas

Our natural gas cost after hedging was lower during the nine months ended June 30, 2019 as compared to the same period in 2018. This decrease in cost of natural gas for the nine months ended June 30, 2019 as compared to the same period in 2018 was primarily the result of a decrease of approximately 3.50% in the average price per MMBTU of natural gas. We also used approximately 0.31%less natural gas for the nine months ended June 30, 2019 as compared to the same period in 2018, mostly because of improved efficiencies in ethanol production levels for the period.

Natural gas prices will be dependent upon summer temperatures as hot weather increases natural gas demand. If the nation were to experience a catastrophic weather event causing problems related to the supply of natural gas, this could result in higher natural gas prices.

Rail Car Rehabilitation Costs

As discussed previously, the company recorded additional expense of $1,080,000 on a one-time basis related to rail car rehabilitation costs as described above. Management will reassess the sufficiency of this liability for expected costs periodically and adjust as needed, but we do not anticipate such a large increase at one time in the future.

Trading Division

The following table shows the costs incurred to procure various agricultural commodities for our Trading Division for the nine months ended June 30, 2019 and 2018:

	2019				2018
	Amount		% of Revenues		Amount		% of Revenues
Soybeans	$	19,945,676	100.0	%	$	27,417,647	100.0	%
Total Cost of Goods Sold	$	19,945,676	100.0	%	$	27,417,647	100.0	%

Soybeans

During the nine months ended June 30, 2019, our cost was primarily the procurement of soybeans sold. During the nine months ended June 30, 2019, our average price paid per bushel of soybeans was approximately 12.26%lower as compared to the same period in 2018 due to ample harvest in both 2017 and 2018 resulting in a large carryout. We also sold approximately 15.08%less bushels during the nine months ended June 30, 2019 as compared to the same period in 2018. Also international trade disputes caused weaker export demand.

Derivatives

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

Operating Expense

Our operating expenses as a percentage of revenues were approximately 3.0% for the nine months ended June 30, 2019 as compared to operating expenses of approximately 2.7% of revenues for the same period in 2018.Operating expenses also include salaries and benefits of administrative employees, insurance, taxes, professional fees and other general administrative costs. We expect our operating expenses to remain relatively consistent throughout our 2019 fiscal year.

Operating Income (Loss)

Our operating loss for the nine months ended June 30, 2019 was approximately 1.7% of revenues as compared to operating income of approximately 2.8% of revenues for the same period in 2018. The decrease in operating income for the nine months ended June 30, 2019 was primarily the result of decreased ethanol prices relative to the cost of corn and an increase in cost of goods sold due to our recording $1,080,000 of rail car rehabilitation costs as described above.

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Other Expense

Our other expense for the nine months ended June 30, 2019 and 2018 was minimal and consisted primarily of interest expense.

Changes in Financial Condition for the Nine Months Ended June 30, 2019

The following table highlights the changes in our financial condition:

	June 30, 2019 (Unaudited)		September 30, 2018
Current Assets	$	52,939,713	$	46,351,013
Current Liabilities	$	21,144,187	$	16,941,813
Long-Term Liabilities	$	6,881,580	7,314,867
Member's Equity	$	116,140,368	$	120,338,196

We experienced an increase in our current assets at June 30, 2019 as compared to September 30, 2018. This increase was primarily driven by an increase in our inventory, restricted cash and accounts receivable at June 30, 2019 as compared to September 30, 2018 due mostly to holding inventory at June 30, 2019 in order to capitalize on the carry opportunity in the soybean market and timing differences in our shipments on account. We also experienced a slight increase in our commodity derivative instrument assets. The value of our derivative instruments is most affected by movements in market prices. These increases were partially offset by a decrease in cash due to holding inventory to capitalize on the carry, rather than converting the inventory to sales.

We experienced an increase in our total current liabilities at June 30, 2019 as compared to September 30, 2018. This increase was primarily because of an increase in our borrowing on the Revolving Credit Loan due to higher ending inventories at June 30, 2019 as compared to September 30, 2018.

We experienced a decrease in our long-term liabilities as of June 30, 2019 as compared to September 30, 2018 as a result of scheduled principal payments on our outstanding debt. This decrease was partially offset by an increase in long-term liabilities due to our recording a $1,080,000 liability related to rail car rehabilitation costs as described above.

Liquidity and Capital Resources

Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our current credit facilities and cash from our operations to continue to operate the plant for the next 12 months. We do not anticipate seeking additional equity financing during our 2019 fiscal year. However, should we experience unfavorable operating conditions in the ethanol industry that prevent us from profitably operating the ethanol plant, we could have difficulty maintaining our liquidity and may need to rely on our revolving lines of credit for operations.

The following table shows cash flows for the nine months ended June 30, 2019 and 2018:

	2019			2018
Net cash provided by (used in) operating activities	$	(14,859,392	)	$	2,784,901
Net cash used for investing activities	$	(2,520,486	)	$	(1,969,441	)
Net cash provided by (used in) financing activities	$	4,234,147		$	(9,810,066	)
Net decrease in Cash and Restricted cash	$	(13,145,731	)	$	(8,994,606	)
Cash and Restricted cash, beginning of period	$	19,237,992		$	19,397,161
Cash and Restricted cash, end of period	$	6,092,261		$	10,402,555

Cash Flow from and used in Operations

We used more cash for operations for the nine months ended June 30, 2019 as compared to the same period in 2018. This was primarily the result of decreased net income resulting from the narrow to negative spread between ethanol prices and the cost of corn. Our increased production rates also increased the need for cash used for inventory and other working capital components for the nine months ended June 30, 2019 compared with the same period in 2018.

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Cash Flow used for Investing Activities

We used more cash in investing activities for the nine months ended June 30, 2019 as compared to the same period in 2018. This increase was primarily the result of increased payments for capital expenditures during the period ended June 30, 2019 compared with the same period in 2018.

Cash Flow used for Financing Activities

We used less cash in financing activities for the nine months ended June 30, 2019 as compared to the same period in 2018. This decrease was mainly the result of lower distributions and reduced borrowings on the Grain Loadout Facility Loan during the nine months ended June 30, 2019 compared with the same period in 2018.

Our liquidity, results of operations and financial performance will be impacted by many variables, including the market price for commodities such as, but not limited to, corn, ethanol and other energy commodities, as well as the market price for any co-products generated by the facility and the cost of labor and other operating costs.  Assuming future relative price levels for corn, ethanol and distillers grains improve relative to price levels as of June 30, 2019 as the markets indicate, we expect operations to generate adequate cash flows to maintain operations.

Short and Long Term Debt Sources

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

Declining Loan

The maximum availability of the Declining Loan is $5,000,000 with such amount to be available for working capital purposes. The interest rate on the Declining Loan is based on the 3-month LIBOR plus two hundred ninety basis points. The interest rate at June 30, 2019 was 5.50%. There was no borrowings outstanding on the Declining Loan at June 30, 2019 or September 30, 2018.

Revolving Credit Loan

The Revolving Credit Loan has a limit of $15,000,000 supported by a borrowing base made up of our corn, ethanol, dried distillers grain, corn oil and soybean inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds. The interest rate on the Revolving Credit Loan is based on the 1-month LIBOR plus two hundred ninety basis points. The interest rate at June 30, 2019 was 5.34%. There were borrowings in the amount of $2,168,160 outstanding on the Revolving Credit Note at June 30, 2019 and no borrowings outstanding at September 30, 2018.

Grain Loadout Facility Loan

The Grain Loadout Facility Loan (formerly construction loan) has a limit of $10,000,000. The interest rate on the Grain Loadout Facility Loan is based on the 3-month LIBOR plus two hundred ninety basis points and at June 30, 2019 was 5.43%. There were borrowings in the amount of approximately $7,230,000 outstanding on the Grain Loadout Facility Loan at June 30, 2019. There were borrowings of $8,743,438 on the Grain Loadout Facility Loan at September 30, 2018. The principal balance on the Construction Loan of $10,000,000 was converted to term debt effective December 31, 2017. The Grain Loadout Facility Loan requires monthly installment payments of principal of approximately $119,000 plus interest accrued in arrears from the date of the last payment, such payments commenced on February 1, 2018, with a final maturity date of February 28, 2023.

Covenants

During the term of the loans, we will be subject to certain financial covenants. Our minimum working capital is $15,000,000, which is calculated as our current assets plus the amount available for drawing under our long term revolving note, less current liabilities. Our minimum fixed charge coverage ratio is no less than 1.15:1.0 measured on a rolling four quarter average basis. However, for any reporting period, if our working capital is equal to or more than $25,000,000, we will be subject to maintaining a debt service charge coverage ratio of no less than 1.25:1.0 in lieu of the fixed charge coverage ratio.

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Our loan agreement also requires us to obtain prior approval from our lender before making, or committing to make, capital expenditures exceeding an aggregate amount of $5,000,000.

We are meeting our liquidity needs and complying with our financial covenants and the other terms of our loan agreements at June 30, 2019. Based on current management projections, we anticipate that future operations will be sufficient to generate enough cash flow to maintain operations, service any new debt and comply with our financial covenants and other terms of our loan agreements through June 30, 2020. Should market conditions deteriorate in the future, circumstances may develop which could result in us violating the financial covenants or other terms of our loan agreements. Should we violate the terms or covenants of our loan or fail to obtain a waiver of any such term or covenant, our primary lender could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans if we have a balance outstanding. In that event, our lender could also elect to proceed with a foreclosure action on our plant.

Capital Improvements

The board of directors has approved various capital projects for the 2019 fiscal year in order to make certain improvements to our ethanol plant. These improvements are expected to allow us to increase our annual ethanol production rate to approximately 140 million gallons. We have executed an agreement with Nelson Engineering to construct an additional liquefaction tank and fermenter which are expected to cost approximately $3,200,000. We expect to use funds from operations and our existing debt facilities to fund these improvements. We do not intend to start construction of these projects until we have received certain approvals from the Indiana Department of Environmental Management, Office of Air Quality (“IDEM”) related to our air permit. We anticipate these approvals will be received in Fall 2019.

In addition, we expect to build additional flat storage to replace our distillers grains silo that was damaged in an explosion. We expect that the flat storage will be completed during the first quarter of our fiscal year 2020 at an estimated cost of approximately $1,900,000. We expect to use proceeds from our insurance along with funds from operations and our existing debt facilities to fund this project.

Development Agreement

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

Tax Abatement

In October 2006, the real estate that our plant was constructed on was determined to be an economic revitalization area, which qualified us for tax abatement. The abatement period is for a ten year term, with an effective date beginning calendar year end 2009 for the property taxes payable in calendar year 2010. The program allows for 100% abatement of property taxes beginning in year 1, and then decreases on a ratable scale so that in year 11 the full amount of property taxes are due and payable. We must apply annually and meet specified criteria to qualify for the abatement program.

Critical Accounting Estimates

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Our most critical accounting estimates, which require the greatest use of judgment by management, are designated as critical accounting estimates and include policies related to the useful lives of fixed assets; allowance for doubtful accounts; the valuation of basis and delay price contracts on corn purchases; derivatives; inventory; patronage dividends, long-lived assets, railcar rehabilitation liability and inventory purchase commitments.  An in-depth description of these can be found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2018.  Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed financial statements in accordance with generally accepted accounting principles.  There have been no changes in the policies for our accounting estimates for the nine months ended June 30, 2019, although we did reassess our estimate of our railcar rehabilitation accrual as previously described.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

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

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our Declining Loan, Revolving Credit Loan and Grain Loadout Facility Loan (formerly Construction Loan) which bear variable interest rates.  The interest rate on the Declining Loan is the 3-month LIBOR plus 290 basis points with no minimum. There were no borrowings outstanding on the Declining Loan and the applicable interest rate was 5.50% at June 30, 2019. The interest rate for the Revolving Credit Note is the 1-month LIBOR rate plus 290 basis points with no minimum. There were borrowing in the amount of $2,168,000 outstanding on the Revolving Credit Loan at June 30, 2019 and the applicable interest rate was 5.34%. The interest rate on the Grain Loadout Facility Loan is the 3-month LIBOR plus 290 basis points with no minimum. There were borrowings in the amount of approximately $7,230,000 outstanding on the Grain Loadout Facility Loan and the applicable interest rate was 5.43% at June 30, 2019. The specifics of the Declining Loan, the Revolving Credit Loan and the Grain Loadout Facility Loan are discussed in greater detail above. If we were to experience a 10% adverse change in LIBOR, the annual effect such change would have on our statement of operations, based on the amount we had outstanding on our variable interest rate loans at June 30, 2019, would be approximately $50,000.

Commodity Price Risk

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

We seek to minimize the risks from fluctuations in the prices of raw material inputs, such as corn and natural gas, and finished products, such as ethanol and distiller's grains, through the use of hedging instruments. In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. Although we believe our hedge positions accomplish an economic hedge against our future purchases and sales, management has chosen not to use hedge accounting, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We are using fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in our cost of goods sold or as an offset to revenues. The immediate recognition of hedging gains and losses can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged.

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

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The following table provides details regarding the gains and (losses) from our derivative instruments in the statements of operations, none of which are designated as hedging instruments, for the three and nine months ended June 30, 2019 and 2018:

	Three Months Ended June 30, 2019			Nine Months Ended June 30, 2019		Three Months Ended June 30, 2018			Nine Months Ended June 30, 2018
Corn Futures and Options Contracts	$	342,057		$	13,444	$	1,464,076		$	1,282,687
Ethanol Futures and Options Contracts	288,574			474,015		(142,568		)	(467,644		)
Natural Gas Futures and Options Contracts	(14,373		)	23,354		8,577			165,590
Soybean Futures and Options Contracts	(24,080		)	263,812		4,149,333			3,219,346
Soybean Forward Purchase Contracts	1,275,534			2,777,541		(3,963,696		)	(3,031,969		)
Totals	$	1,867,712		$	3,552,166	$	1,515,722		$	1,168,010

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

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

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, corn oil, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas and average ethanol, distillers grains and corn oil prices as of June 30, 2019 net of the forward and future contracts used to hedge our market risk. The volumes are based on our expected use and sale of these commodities for a one year period from June 30, 2019. The results of this analysis, which may differ from actual results, are approximately as follows:

	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of June 30, 2019	Approximate Adverse Change to Income
Natural Gas	3,300,000	MMBTU	10%	$	283,777
Ethanol	135,000,000	Gallons	10%	$	20,209,500
Corn	43,170,488	Bushels	10%	$	17,568,878
DDGs	324,000	Tons	10%	$	4,450,058
Corn Oil	31,500,000	Pounds	10%	$	736,215
Soybeans	5,000,000	Bushels	10%	$	4,457,375

Liability Risk

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

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Item 4.  Controls and Procedures

Disclosure Controls and Procedures

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

Our management, including our Chief Executive Officer (the principal executive officer), Jeffrey Painter, along with our Chief Financial Officer (the principal financial officer), William Dartt, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of June 30, 2019.  Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our third quarter of our 2019 fiscal year that have materially affected, or are likely to materially affect, our internal control over financial reporting.

PART II.     OTHER INFORMATION

Item 1. Legal Proceedings

Patent Infringement

On June 27, 2008, we entered into a Tricanter Purchase and Installation Agreement with ICM, Inc. for the construction and installation of a Tricanter Oil Separation System. On February 12, 2010, GS CleanTech Corporation ("GS CleanTech") filed a lawsuit in the United States District Court for the Southern District of Indiana, claiming that the Company's operation of the oil recovery system manufactured and installed by ICM, Inc. infringes a patent claimed by GS CleanTech. GS CleanTech sought royalties and damages associated with the alleged infringement, as well as attorney's fees from the Company. GS CleanTech subsequently filed actions against at least fourteen other ethanol producing companies for infringement of its patent rights, adding several additional patents. GS CleanTech successfully petitioned for the cases to be joined in a multi-district litigation ("MDL") which was assigned to the United States District Court for the Southern District of Indiana (Case No. 1:10-ml-02181). We subsequently answered and counterclaimed that the patent claims at issue are invalid and that the Company is not infringing.

Motions for summary judgment were filed by the defendants, including the Company, and GS CleanTech. Meanwhile, GS CleanTech filed suit against another group of defendants which were joined with the MDL. On October 23, 2014, the United States District Court granted summary judgment finding that all of the patents claimed by GS CleanTech were invalid and that the Company had not infringed. In addition, on September 15, 2016, the United States District Court granted summary judgment finding that the patents were invalid due to inequitable conduct before the US Patent and Trademark Office by the inventors and their attorneys. GS CleanTech and its attorneys filed a Notice of Appeal appealing the rulings on summary judgment. The defendants have since settled with the attorneys for GS CleanTech.

On February 16, 2010, ICM, Inc. agreed to indemnify the Company from and against all claims, demands, liabilities, actions, litigations, losses, damages, costs and expenses, including reasonable attorney's fees arising out of any claim of infringement of patents, copyrights or other intellectual property rights by reason of our purchase and use of the oil recovery system and agrees to defend the Company. Several of the other defendants also use equipment and processes provided by ICM, Inc. ICM, Inc. has, and we expect it will continue, to vigorously defend itself and the Company in this lawsuit and the appeal filed by GS CleanTech. If GS CleanTech were to be successful in the appeal filed and allowed to continue to pursue its claims, we estimate that damages, if awarded, would be based on a reasonable royalty to, or lost profits of, GS CleanTech. Because of its rulings, it seems unlikely that the District Court would deem the case exceptional. However, in the event it would be deemed to be exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. ICM, Inc. has also agreed to indemnify us. However, in the event

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that damages were to be awarded, if ICM, Inc. does not fully indemnify us for any reason, we could be liable and could also be required to cease use of our oil separation process and seek out a replacement or cease oil production altogether.

Air Permit

On January 4, 2018, we received a letter from the Indiana Department of Environmental Management, Office of Air Quality (“IDEM”) alleging violations of our air permit.  IDEM alleges that we (i) constructed and operated a fermenter without previous construction or operational approval; (ii) constructed and operated emission units (conveyors and legs) without the appropriate emission controls (two baghouses instead of one larger baghouse); (iii) constructed and operated emission units (steel bins) without emission controls; and (iv) operated emission units above the emission limits.  We entered into a settlement of this matter with IDEM in April 2019 and as part of that settlement we paid a civil penalty in the amount of $27,000.

Item 1A.    Risk Factors

None.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

None.

Item 6. Exhibits.

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

Exhibit No.	Exhibit
31.1	Certificate Pursuant to 17 CFR 240.13a-14(a).*
31.2	Certificate Pursuant to 17 CFR 240.13a-14(a).*
32.1	Certificate Pursuant to 18 U.S.C. Section 1350.*
32.2	Certificate Pursuant to 18 U.S.C. Section 1350.*
101	The following financial information from Cardinal Ethanol, LLC's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of June 30, 2019 and September 30, 2018, (ii) Condensed Statements of Operations for the three and nine months ended June 30, 2019 and 2018, (iii) Condensed Statements of Cash Flows for the nine months ended June 30, 2019 and 2018, (iv) Condensed Statements of Changes in Members' Equity for the three months and nine ended June 30, 2019 and 2018, and (v) the Notes to Condensed Unaudited Financial Statements.**

*    Filed herewith.

**    Furnished herewith.

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SIGNATURES

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

		CARDINAL ETHANOL, LLC
Date:	August 2, 2019	/s/ Jeffrey Painter
		Jeffrey Painter
		President and Chief Executive Officer
		(Principal Executive Officer)
Date:	August 2, 2019	/s/ William Dartt
		William Dartt
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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