0001350420-22-000040.txt : 20220519 0001350420-22-000040.hdr.sgml : 20220519 20220519150953 ACCESSION NUMBER: 0001350420-22-000040 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 58 CONFORMED PERIOD OF REPORT: 20220331 FILED AS OF DATE: 20220519 DATE AS OF CHANGE: 20220519 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Lincolnway Energy, LLC CENTRAL INDEX KEY: 0001350420 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL ORGANIC CHEMICALS [2860] IRS NUMBER: 201118105 STATE OF INCORPORATION: IA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-51764 FILM NUMBER: 22942496 BUSINESS ADDRESS: STREET 1: 59511 W. LINCOLN HIGHWAY CITY: NEVADA STATE: IA ZIP: 50201 BUSINESS PHONE: 515-817-0153 MAIL ADDRESS: STREET 1: 59511 W. LINCOLN HIGHWAY CITY: NEVADA STATE: IA ZIP: 50201 10-Q 1 lwenergy-20220331.htm 10-Q lwenergy-20220331
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedMarch 31, 2022
or
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ______________________ to _______________________
 
Commission File Number: 000-51764

LINCOLNWAY ENERGY, LLC
Exact name of registrant as specified in its charter)
Iowa20-1118105
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
59511 W. Lincoln Highway, Nevada, Iowa
50201
(Address of principal executive offices)(Zip Code)
515-232-1010
(Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

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

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

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.
þ  Yes     o   No

Indicate by check mark whether the registrant has submitted 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 and post such files).
þ   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  
Accelerated filer  
Non-accelerated filer 
Smaller reporting company  
Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: The number of units outstanding as of May 19, 2022 was 105,122 units consisting of 42,049 Common Units, 56,086 Class A Units and 6,987 Class B Units.



LINCOLNWAY ENERGY, LLC
FORM 10-Q
For the Quarter Ended March 31, 2022

INDEX

   Page
    
Part I.Financial Information 
    
 Item 1.Unaudited Financial Statements 
    
  a)   Balance Sheets
  b)   Statements of Operations
c)   Statements of Members' Equity
  d)   Statements of Cash Flows
  e)   Notes to Unaudited Financial Statements
    
 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
 Item 3.Quantitative and Qualitative Disclosures About Market Risk
 Item 4.Controls and Procedures
    
Part II.Other Information 
    
 Item 1.Legal Proceedings
 Item 1A.Risk Factors
 Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
 Item 3.Defaults Upon Senior Securities
Item 4.Mine Safety Disclosures
 Item 5.Other Information
 Item 6.Exhibits
    
Signatures
  
Exhibits Filed With This Report 
 Rule 13a-14(a) Certification of President and Chief Executive OfficerE-1
 Rule 13a-14(a) Certification of Interim Chief Financial OfficerE-2
 Section 1350 Certification of President and Chief Executive OfficerE-3
 Section 1350 Certification of Interim Chief Financial OfficerE-4
Interactive Data Files (filed electronically herewith)




PART I - FINANCIAL INFORMATION

Item 1.    Unaudited Financial Statements.

Lincolnway Energy, LLC
Balance Sheets    
March 31, 2022September 30, 2021
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents$10,091,524 $12,174,756 
Derivative financial instruments (Note 8 and 9)2,381,263 1,457,349 
Trade accounts receivable (Note 7)8,604,281 6,560,607 
Inventories (Note 3)14,755,362 8,863,559 
Prepaid expenses and other715,435 376,250 
Total current assets36,547,865 29,432,521 
PROPERTY AND EQUIPMENT
Land and land improvements7,156,465 7,156,465 
Buildings and improvements7,558,860 7,558,860 
Plant and process equipment87,823,666 87,332,590 
Office furniture and equipment368,699 380,585 
Construction in progress10,770,978 8,405,166 
113,678,668 110,833,666 
Accumulated depreciation(77,206,274)(74,862,270)
Total property and equipment
36,472,394 35,971,396 
OTHER ASSETS
Right of use asset operating leases, net (Note 7)5,668,802 6,392,611 
Other930,057 1,062,808 
Total other assets
6,598,859 7,455,419 
Total assets
$79,619,118 $72,859,336 

See Notes to Unaudited Financial Statements.
2


 
Lincolnway Energy, LLC
Balance Sheets (continued)

March 31, 2022September 30, 2021
(Unaudited)
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable$3,703,053 $3,726,825 
Accounts payable, related party (Note 6)363,067 1,470,139 
Accrued expenses2,207,918 748,005 
Current maturities of long-term debt (Note 5)1,500,000 5,000,000 
Current portion of operating lease liability (Note 7)2,151,735 2,181,951 
Total current liabilities9,925,773 13,126,920 
NONCURRENT LIABILITIES  
Long-term debt, less current maturities (Note 4)16,500,000 15,000,000 
Operating lease liability, less current portion (Note 7)3,517,067 4,210,660 
Other1,460,993 1,302,167 
Total noncurrent liabilities21,478,060 20,512,827 
 
COMMITMENTS AND CONTINGENCIES (Note 7 and 9)
MEMBERS' EQUITY   
Member contributions 105,122 units issued and outstanding
46,490,105 46,490,105 
Retained earnings (deficit)1,725,180 (7,270,516)
Total members' equity
48,215,285 39,219,589 
Total liabilities and members' equity
$79,619,118 $72,859,336 

3


Lincolnway Energy, LLC
Statements of Operations (Unaudited)

Three Months EndedSix Months Ended
March 31, 2022March 31, 2021March 31, 2022March 31, 2021
Revenues (Notes 2 and 7)$56,911,411 $37,976,400 $111,963,716 $67,315,146 
Cost of goods sold (Note 6 and 7)50,023,999 35,339,043 95,878,088 64,857,159 
Gross profit 6,887,412 2,637,357 16,085,628 2,457,987 
General and administrative expenses824,811 642,618 1,751,697 1,437,413 
Operating income 6,062,601 1,994,739 14,333,931 1,020,574 
Other income (expense):
Interest income375 284 658 2,177 
Interest expense(171,325)(197,052)(354,612)(408,210)
Other income271,217 162,807 271,819 253,011 
100,267 (33,961)(82,135)(153,022)
Net income$6,162,868 $1,960,778 $14,251,796 $867,552 
Weighted average units outstanding105,122 105,122 105,122 105,122 
Net income per unit - basic and diluted$58.63 $18.65 $135.57 $8.25 
Distributions per unit - basic & diluted$ $ $50.00 $ 

See Notes to Unaudited Financial Statements.

 




4


Lincolnway Energy, LLC
Statements of Members' Equity (Unaudited)


Member ContributionsRetained earnings (Deficit)Total
Balance, September 30, 2021$46,490,105 $(7,270,516)$39,219,589 
Net income 8,088,928 8,088,928 
        Distributions ( $50 per unit) (5,256,100)(5,256,100)
Balance, December 31, 202146,490,105 (4,437,688)42,052,417 
Net income  6,162,868 6,162,868 
Balance, March 31, 2022$46,490,105 $1,725,180 $48,215,285 




Member ContributionsRetained earnings (Deficit)Total
Balance, September 30, 2020$46,490,105 $(13,919,737)$32,570,368 
Net (loss) (1,093,226)(1,093,226)
Balance, December 31, 202046,490,105 (15,012,963)31,477,142 
Net income 1,960,778 1,960,778 
Balance, March 31, 2021$46,490,105 $(13,052,185)$33,437,920 


See Notes to Unaudited Financial Statements.

5



Lincolnway Energy, LLC Six Months EndedSix Months Ended
Statements of Cash FlowsMarch 31, 2022March 31, 2021
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income$14,251,796 $867,552 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation2,359,801 2,319,631 
(Gain) Loss on disposal of property and equipment(212)9,385 
Changes in working capital components:
Trade account receivable(2,043,674)(1,433,937)
Inventories(5,891,803)(2,198,533)
Prepaid expenses and other(47,608)263,304 
Accounts payable(23,772)(189,659)
Accounts payable, related party(1,107,072)366,510 
Accrued expenses1,459,913 (74,089)
Derivative financial instruments(923,914)(27,127)
Net cash provided by (used in) operating activities8,033,455 (96,963)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment(2,860,587)(645,474)
Net cash (used in) investing activities(2,860,587)(645,474)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term borrowings(2,000,000)(1,000,000)
  Member distributions(5,256,100) 
Net cash (used in) financing activities(7,256,100)(1,000,000)
Net decrease in cash and cash equivalents(2,083,232)(1,742,437)
CASH AND CASH EQUIVALENTS
Beginning12,174,756 7,201,372 
Ending$10,091,524 $5,458,935 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
Cash paid for interest$354,612 $461,203 
See Notes to Unaudited Financial Statements.
6

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements
_____________________________________________________________________________________________________

Note 1.    Nature of Business and Significant Accounting Policies

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

Basis of presentation and other information: The balance sheet as of September 30, 2021 was derived from the Company's audited balance sheet as of that date.  The accompanying financial statements as of March 31, 2022 and for the three and six months ended March 31, 2022 and 2021 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods.  These unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto, for the year ended September 30, 2021 contained in the Company's Annual Report  on Form 10-K.  The results of operations and cash flows for the interim periods presented are not necessarily indicative of the results for the entire year.

Use of estimates:  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates significant to the financial statements include impairment of long-lived assets and inventory at lower of cost or net realizable value. Actual results could differ from those estimates.

Risks and Uncertainties: The COVID-19 pandemic is currently impacting countries, communities, supply chains and commodities markets, in addition to the global financial markets. This pandemic has resulted in social distancing, travel bans, governmental stay-at-home orders, and quarantines, and these may limit access to our facilities, customers, suppliers, management, support staff and professional advisors. At this time it is not possible to fully assess the impact of the COVID-19 pandemic on the Company’s operations and capital requirements, but the aforementioned factors, among other things, may impact our operations, financial condition and demand for our products, as well as our overall ability to react timely and mitigate the impact of this event. Depending on its severity and longevity, the COVID-19 pandemic may have a material adverse effect on our business, customers, and members.

Cash and cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash accounts in one bank which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts.

Trade accounts receivable: Trade accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers financial condition, credit history and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables written off are recorded when received. A receivable is considered past due if any portion of the receivable is outstanding more than 90 days. There was no allowance for doubtful accounts as of March 31, 2022 and September 30, 2021.

Inventories:  Inventories are stated at the lower of net realizable value or actual cost using the first-in, first-out method.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. As of March 31, 2022 and September 30, 2021 the Company recognized no write-downs for a lower of net realizable value or cost of inventory adjustment.

Property and equipment: Property and equipment is stated at cost. Construction in progress is comprised of costs related to the projects that are not completed. Depreciation is computed using the straight-line method over the estimated useful lives. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized.

The Company evaluates the carrying value of long-lived tangible assets when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases
7

Lincolnway Energy, LLC
Notes to Unaudited Financial Statements
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
in the market value of the asset, adverse changes in the extent or manner in which the asset is being used, significant changes in the business climate, or current or projected cash flow losses associated with the use of the assets. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such assets are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held for use in future operations and for fixed (tangible) assets, fair value is determined primarily using either the projected cash flows discounted at a rate commensurate with the risk involved or an appraisal. For long-lived assets to be disposed of by sale or other means, fair value is determined in a similar manner, except that fair values are reduced for disposal costs.

Derivative financial instruments:  The Company periodically enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.  The Company does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the balance sheet at their fair market value.  Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes.   Accordingly, any realized or unrealized gain or loss related to corn and natural gas derivatives is recorded in the statement of operations as a component of cost of goods sold.  Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue. The Company reports all contracts with the same counter party on a net basis on the balance sheet. Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements. Forward contracts with delivery dates within 30 days that can be reasonably estimated are subject to a lower of cost or net realizable value assessment. The Company recognized no accrued loss on purchase commitments as of March 31, 2022 or September 30, 2021.

Revenue recognition:  The Company records revenue following the guidance presented in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

sales of ethanol
sales of distillers grains
sales of corn oil

Shipping costs incurred by the Company in the sale of ethanol, distiller grains and corn oil are not specifically identifiable and as a result, are recorded based on the net selling price. Railcar lease costs incurred by the Company in the sale of its products are included in the cost of goods sold.

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

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

Earnings per unit:  Basic and diluted net income (loss) per unit have been computed on the basis of the weighted average number of units outstanding during each period presented. The current issuance of Class A Units is 56,086 units and the total
8

Lincolnway Energy, LLC
Notes to Unaudited Financial Statements
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
issuance of Class B Units is 6,987 units. There are also 42,049 Common Units outstanding for an aggregate number of 105,122 units outstanding comprised of Class A Units, Class B Units and Common Units. The weighted average number of units is based on days outstanding for the reporting period. The Class A Units and Class B Units have a liquidation preference which provides that in the event of a liquidation or deemed liquidation, the Class A and Class B members will receive the return of their capital contributions, reduced by the amount of distributions received, prior to the holders of Common Units receiving any proceeds.

Note 2.    Revenues

Components of revenues are as follows:
Three Months EndedSix Months Ended
March 31, 2022March 31, 2021March 31, 2022March 31, 2021
Ethanol, net of hedging gain (loss)$42,957,379 $27,630,797 $86,032,803 $49,317,104 
Distillers Grains9,755,435 8,384,809 17,653,095 14,440,871 
Distilled Corn Oil4,008,780 1,770,806 7,926,530 3,203,890 
Other189,817 189,988 351,288 353,281 
Total$56,911,411 $37,976,400 $111,963,716 $67,315,146 


Note 3.    Inventories

Inventories consist of the following:
March 31, 2022September 30, 2021
Raw materials, including corn, chemicals, parts and supplies$7,887,854 $5,487,085 
Work in process1,720,665 1,476,019 
Ethanol and distillers grains5,146,843 1,900,455 
Total$14,755,362 $8,863,559 

Note 4. Revolving Credit

The Company has a revolving credit line, which was amended on June 29, 2021 to provide for loans not to exceed $7,500,000 at any time which accrues interest at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3.25% (3.61% at March 31, 2022). Under the terms of the revolving credit line, the Company also has to pay a commitment fee on the average daily unused portion of the loan at the rate of 0.25% per annum, payable monthly. The loan is secured by substantially all assets of the Company and subject to certain financial and nonfinancial covenants as defined in the master loan agreement.

There was no outstanding balance on the revolving credit loan as of March 31, 2022 and September 30, 2021. The revolving credit line matures on August 1, 2022.


Note 5.    Long-Term Debt

On March 24, 2022 the Company entered into two new long-term loans with a bank which replaced the Company's prior $20,000,000 revolving loan. As of March 24, 2022, the Company has a $10,000,000 fixed rate loan (the "Fixed Rate Loan") and the second is a $10,000,000 variable rate revolving loan (the "Long-Term Revolver"). As of March 31, 2022, the Company had $8,000,000 outstanding on the Long-Term Revolver and $10,000,000 outstanding on the Fixed Rate Loan. As of September 30, 2021, the Company had $20,000,000 outstanding pursuant to the Company's prior variable rate loan. The Fixed Rate Loan has a fixed interest rate of 5.934% per annum. The Long-Term Revolver has a variable interest rate equal to 3.6% plus the Secured Overnight Financing Rate (SOFR), subject to a floor rate of 3.6% (3.89% as of March 31, 2022). The
9

Lincolnway Energy, LLC
Notes to Unaudited Financial Statements
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Company will make semi-annual payments on the Fixed Rate Loan of $750,000 starting on September 20, 2022. The maturity date of the Fixed Rate Loan is September 20, 2026. The maturity date of the Long-Term Revolver is October 20, 2026. The availability of the Long-Term Revolver is reduced by $2,000,000 each year starting on September 20, 2022. The Company pays a commitment fee equal to 0.500% on the unused portion of the Long-Term Revolver. The loans are is secured by substantially all assets of the Company and subject to certain financial and nonfinancial covenants as defined in the master loan agreement. A maximum commitment amount reduction schedule as seen in the 10-k but updated for the new commitment reductions for the new long term revolver.

In connection with these loans, the Company has entered into an Amended and Restated Letter of Credit Promissory Note dated June 29, 2021. The maximum amount of the letter of credit commitment is $1,051,525 and expires on May 1, 2023. There were no amounts drawn on the available letter of credit as of March 31, 2022.


Note 6.    Related-Party Transactions

The Company had the following related-party activity with members during the three and six months ended March 31, 2022 and 2021:

Corn Commitment:
March 31, 2022
Corn Forward Purchase CommitmentBasis Corn Commitment (Bushels)Commitment ThroughAmount Due
Related Parties$7,246,055 1,680,000 March 2023$134,400 

Corn Purchased:
Three Months Ended March 31, 2022Three Months Ended March 31, 2021Six Months Ended March 31, 2022Six Months Ended March 31, 2021
Related Parties$27,874,658 $22,372,079 $48,727,359 $36,089,047 

The Company is a party to a Management Services Agreement with HALE, LLC (“HALE”) for management services pertaining to the Company’s ethanol facility. Under the Management Services Agreement, HALE provides management services to the Company’s ethanol facility, including providing the Company with individuals to (a) serve in various roles including Chief Executive Officer, Environmental and Safety Manager, Commodity Risk Manager and to fill such other positions, including without limitation the Controller, as may be necessary from time to time and (b) perform the respective management services for each such positions. For the three months ending March 31, 2022 and March 31, 2021 incurred expenses approximately of $112,000 and $151,000 respectively. For the six months ended March 31, 2022 and 2021, the Company incurred expenses approximately of $275,000 and $265,000 respectively, pertaining to this agreement.

Note 7.    Commitments, Major Customers and Lease Obligations

The Company has an agreement with an unrelated entity for marketing, selling and distributing all of the ethanol produced by the Company. Revenues from this entity were approximately $42,770,000 and $27,655,000 for three months ending March 31, 2022 and 2021. Revenues from this entity were approximately $97,661,000 and $49,418,000 respectively for six months ended March 31, 2022 and 2021. Trade accounts receivable of approximately $7,449,000 and $5,371,000 were due from this entity as of March 31, 2022 and September 30, 2021, respectively. As of March 31, 2022, the Company had ethanol unpriced sales commitments with this entity of approximately 11.1 million gallons through June 2022. The Company incurred marketing expenses approximately of $117,000 and $100,000 for the three months ended March 31, 2022 and 2021, respectively. The Company incurred marketing expenses approximately of $234,000 and $201,000 for six months ended March 31, 2022 and 2021, respectively.

10

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements
_____________________________________________________________________________________________________
The Company has an agreement with an unrelated entity for marketing, selling and distributing all of the distillers grains produced by the Company. Revenues from this entity including both distillers grains and corn oil were approximately $9,755,000 and $10,156,000 respectively, for the three months ended March 31, 2022 and 2021. Revenues by this Company was approximately $17,653,000 and $17,645,000 respectively for six months ended March 31, 2022 and 2021. The Company sells corn oil to this entity as a third party broker independent of its agreement with the entity relating to distillers grain sales. Trade accounts receivable of approximately $441,000 and $589,000 were due from this entity as of March 31, 2022 and September 30, 2021, respectively. The Company had distillers grain sales open commitments with this entity of approximately 33,000 tons, for a total sales commitment of approximately $7.4 million.

As of March 31, 2022, the Company had purchase commitments for corn forward contracts with various unrelated parties, totaling approximately $8.6 million. These contracts mature at various dates through March 2023. The Company has basis contract commitments with unrelated parties to purchase corn in the amount of 400 thousand bushels from April 2022 through May 2022.

The Company has an agreement with an unrelated party for the transportation of natural gas to the Company's ethanol plant. Under the agreement, the Company is committed to future monthly usage fees totaling approximately $3.6 million over the 10 year term which commenced in November 2014. The Company assigned an irrevocable standby letter of credit to the counter-party to stand as security for the Company's obligation under the agreement maturing May 2023. The letter of credit is reduced over time as the Company makes payments under the agreement. At March 31, 2022, the remaining commitment was approximately $940,000.

As of March 31, 2022, the Company had purchase commitments for natural gas basis contracts with an unrelated party for 576,675 MMBTUS with an approximate value of $2.5 million maturing at various dates through March 2022.

The Company recognized a lease liability equal to the present value of future lease payments based on an estimated interest rate commensurate with the rate the Company would pay to borrow equivalent funds. A lease asset was recognized based on the right of use value and adjusted for any prepaid lease payments or lease incentives. The lease term at the commencement date includes any renewal options or termination options when it is reasonably certain that the Company will exercise or not exercise those options, respectively.

The Company leases railcars and is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. Rent expense for the operating leases during the three months ended March 31, 2022 and 2021 were $809,000 and $584,000 respectively. Rent expense for the operating lease during the six months ended March 31, 2022 and 2021 were approximately $1,227,000 and $1,200,000 respectively. The lease agreements have maturity dates ranging from April 2022 to September 2026.

The discount rate used in determining the lease liability ranged from 3.68% to 6.23% and was determined by incremental borrowing rates at the time the lease commenced. The right of use asset and liability at March 31, 2022 was approximately $5,668,802.

At March 31, 2022 the Company had the following minimum rental commitments under non-cancellable operating leases for the twelve-month period ended March 31:

2023$2,175,465 
20241,879,575 
20251,388,100 
2026612,800 
202752,800 
Total$6,108,740


11

Lincolnway Energy, LLC

Notes to Unaudited Financial Statements
_____________________________________________________________________________________________________
A reconciliation of the undiscounted future payments in the schedule above and the lease liability recognized in the balance sheet as of March 31, 2022 is shown below:
Undiscounted future payments$6,108,740 
Discount effect439,938 
$5,668,802 


Note 8.    Risk Management

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

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

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchase and sale contracts.  Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn derivatives and through revenue for ethanol derivatives. The Company treats all contracts with the same counterparty where right of offset exists on a net basis on the balance sheet.

Derivatives not designated as hedging instruments are as follows:
March 31, 2022September 30, 2021
Derivative assets - corn contracts$4,049,688 $524,500 
Derivative assets - ethanol contracts 104,160 
Derivative liabilities - corn contracts(4,734,725)(68,900)
Derivative liabilities - ethanol contracts(430,979)(395,640)
Due from broker3,497,279 1,293,229 
Total $2,381,263 $1,457,349 

12

Lincolnway Energy, LLC
Notes to Unaudited Financial Statements
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
The effects on operating income (loss) from derivative activities for three and six months ended March 31, 2022 and 2021 are as follows:
 Three Months EndedSix Months Ended
 March 31, 2022 March 31, 2021March 31, 2022March 31, 2021
Gains (losses) in revenues due to derivatives related to ethanol sales:
Realized (loss)$(1,947,674)$(17,925)$(11,489,194)$(160,981)
Unrealized gain (loss)2,134,568(5,849)(139,499)60,260 
Total effect on revenues$186,894  $(23,774)$(11,628,693)$(100,721)
Gains (losses) in cost of goods sold due to derivatives related to corn costs:
Realized gain (loss)$1,843,099  $(1,814,918)$2,178,567 $(2,224,191)
Unrealized gain (loss)(1,744,188) 974,538 (1,140,638)246,788 
    Total effect on cost of goods sold98,911 (840,380)1,037,929 (1,977,403)
Total gain (loss) due to derivative activities$285,805  $(864,154)$(10,590,764)$(2,078,124)

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


Note 9. Fair Value Measurements

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

Level 1 -Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 -Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
Level 3 -Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.  These valuation methodologies were applied to all of the Company's financial assets and financial liabilities carried at fair value.
 
Derivative financial instruments:  Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs.  For these contracts, the Company obtains fair value measurements from an independent pricing service.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the CME and NYMEX markets.  The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets. 

13

Lincolnway Energy, LLC
Notes to Unaudited Financial Statements
________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and September 30, 2021, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
March 31, 2022
 Total Level 1 Level 2 Level 3
Assets, derivative financial instruments$4,049,688  $4,049,688   
Liabilities, derivative financial instruments$(5,165,704)$(5,165,704)
September 30, 2021
Total Level 1 Level 2 Level 3
Assets, derivative financial instruments$628,660 $628,660 $ $ 
Liabilities, derivative financial instruments$(464,540)$(464,540)$ $ 



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

General
The following discussion and analysis provides information which management of Lincolnway Energy, LLC (the “Company”, “we,” “us,” and “our”) believes is relevant to an assessment and understanding of our financial condition and results of operations. This discussion should be read in conjunction with the financial statements included herewith and notes to the financial statements and our Annual Report on Form 10-K for the year ended September 30, 2021 ("Fiscal 2021") including the financial statements, accompanying notes and the risk factors contained herein.

Cautionary Statement on Forward-Looking Statements
Various discussions and statements in this quarterly report are or contain forward-looking statements that express our current beliefs, forecasts, projections and predictions about future events.  All statements other than statements of historical fact are forward-looking statements, and include statements with respect to financial results and condition; anticipated trends in business, revenues, net income, net profits or net losses; projections concerning ethanol prices, distillers grain prices, corn prices, gas prices, operations, capital needs and cash flow; investment, business, growth, joint venture, expansion, acquisition and divestiture opportunities and strategies; management's plans or intentions for the future; competitive position or circumstances; and other forecasts, projections, predictions and statements of expectation.  Words such as "expects," "anticipates," "estimates," "plans," "may," "will," "contemplates," "forecasts," "strategy," "future," "potential," "predicts," "projects," "prospects," "possible," "continue," "hopes," "intends," "believes," "seeks," "should," "could," "thinks," "objectives" and other similar expressions or variations of those words or those types of words help identify forward-looking statements.

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

Changes in the availability and price of corn and natural gas;
Negative impacts resulting from the reduction in the renewable fuel volume requirements under the Renewable Fuel Standard issued by the Environmental Protection Agency;
Changes in federal mandates relating to the blending of ethanol with gasoline, including, without limitation reductions to, or the elimination of, the Renewable Fuel Standard volume obligations;
The inability to comply with the covenants and other requirements of the Company's various loan agreements;
Negative impacts that hedging activities may have on the Company's operations or financial condition;
Decreases in the market prices of ethanol and distiller's grains;
Ethanol supply exceeding demand and corresponding ethanol price reductions;
Changes in the environmental regulations that apply to the Company's plant operations;
Changes in plant production capacity or technical difficulties in operating the plant;
Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;
Changes in other federal or state laws and regulations relating to the production and use of ethanol;
Changes and advances in ethanol production technology;
Competition from larger producers as well as competition from alternative fuel additives;
Changes in interest rates and lending conditions of the loan covenants in the Company loan agreements;
Volatile commodity and financial markets;
Decreases in export demand due to the imposition of duties and tariffs by foreign governments on ethanol and distiller's grains produced in the United States;
Disruptions, failures; security breaches or other cybersecurity threats relating to or impacting our information technology infrastructure;
The continuing impact of trade actions, particularly those affecting the agriculture sector and related industries; and
Disruption caused by health epidemics/pandemics, such as the novel strain of the coronavirus (COVID-19), and the adverse impacts of such epidemics/pandemics on global economic and business conditions, including reduced demand for our products, transport disruptions, labor shortages and disruptions in our workforce.

These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Our actual results or actions could and likely will differ materially from those anticipated in the forward-looking statements for many reasons, including the reasons described in this report.   Any
15


expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in this report and in the section titled “Risk Factors” in our Annual Report on Form 10-K for Fiscal 2021 and in our other prior Securities and Exchange Commission filings. These and many other factors could affect our future financial condition and operating results and could cause actual results to differ materially from expectations based on forward-looking statements made in this document or elsewhere by the Company or on its behalf.  We undertake no obligation to revise or update any forward-looking statements.  The forward-looking statements contained in this report are included in the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

General Overview
Lincolnway Energy, LLC is an Iowa limited liability company that operates a dry mill, natural gas fired ethanol plant located in Nevada, Iowa.  We have been processing corn into fuel grade ethanol and distillers grains at the ethanol plant since May 22, 2006.  Our ethanol plant has a nameplate production capacity of 50,000,000 gallons of ethanol per year.

All of the ethanol we produce is marketed by Eco-Energy, LLC (“Eco-Energy”) and all of our distillers grains are marketed by Gavilon Ingredients, LLC (“Gavilon”). Our revenues are derived primarily from the sale of our ethanol and distillers grains.

We also extract corn oil from the syrup generated in the production of ethanol. We market and distribute all of our corn oil directly to end users and third party brokers within the domestic market.

Air Products and Chemicals, Inc., formerly known as EPCO Carbon Dioxide Products, Inc. (“Air Products”), has a plant located on the Company’s site that collects the carbon dioxide gas that is produced as part of the fermentation process and converts that raw carbon dioxide gas into liquid carbon dioxide. Air Products also markets and sells the liquid carbon dioxide.

Executive Summary
Highlights for the three months ended March 31, 2022 are as follows:
Total revenues increased approximately 49.9%, or $19 million, compared to the same period in 2021.

Total cost of goods sold increased approximately 41.6%, or $14.7 million, compared to the same period in 2021. At the same time the profit margin increased approximately $4.3 million or 2.6 times the previous year in 2021.

Net income was approximately $6 million, compared to a net income of approximately $1.9 million for the same period in 2021.

Results of Operations

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

Three Months Ended March 31,Six Months Ended March 31,
(Unaudited)
Income Statement Data2022202120222021
(dollars in thousands)
Revenue$56,911 100.0 %$37,976100.0 %$111,964 100.0 %$67,315100.0 %
Cost of goods sold50,024 88.0 35,33993.1 95,878 86.0 64,85796.3 
Gross profit 6,887 12.0 2,6376.9 16,086 14.0 2,4583.7 
General and administrative expenses824 1.0 6421.7 1,752 2.0 1,4372.1 
Operating income 6,063 11.0 1,9955.3 14,334 13.0 1,0211.5 
Other income (expense), net100  (34)(0.1)(82)— (153)(0.2)
Net income $6,163 11.0 %$1,9615.2 %$14,252 13.0 %$8681.3 %


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Results of Operations for the Three Months Ended March 31, 2022 as Compared to the Three Months Ended March 31, 2021
Revenues. Total revenues increased by approximately 49.9% for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. For the three months ended March 31, 2022, ethanol revenue increased by $15.1 million due primarily to increased gallons of ethanol sold and an increase in the average price we received for our ethanol compared to the three months ended March 31, 2021. We sold approximately 2.9 million more gallons of ethanol during the three months ended March 31, 2022 as compared to the same period of 2021. The average price we received per gallon of ethanol sold increased by approximately 31.6% during the three months ended March 31, 2022 as compared to the same period of 2021. Ethanol prices were higher during our second quarter of fiscal year 2022 due to a combination of significantly higher corn and gasoline prices and low ethanol stocks which combined to positively impact market ethanol prices. By comparison, ethanol prices were lower during our second quarter of fiscal 2021 due to excess ethanol supply in the market. Travel restrictions associated with COVID-19 negatively impacted ethanol demand during our second quarter of 2021.

Sales from co-products increased by approximately $3.6 million or 34.9% for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. Co-products include dried distillers grains, wet distillers grains, corn oil and carbon dioxide. The change in co-product sales resulted primarily from an increase in distillers grain and corn oil revenue partially offset by lower carbon dioxide sales. Distillers grain revenue increased due to a combination of higher average prices per ton of distillers grains sold and an increase in distillers grains production for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. The higher average price per ton of distillers grains sold for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was due to an increase in the market price for corn. Corn oil revenue was higher for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 due to an increase in the average price we received per pound of corn oil sold along with an increase in the amount of corn oil we sold. Corn oil prices were higher due to increased corn oil demand for the renewable diesel feedstock.
Cost of goods sold. Cost of goods sold consist of corn expense, process chemicals, denaturant, natural gas costs, electricity, production labor, repairs and maintenance and depreciation. Cost of goods sold increased by 41.6%, or approximately $14.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 primarily due to increases in corn costs and natural gas costs of approximately $14.4 million and $1.4 million, respectively.

Corn costs, including hedging, increased by approximately $13.4 million, or approximately 46.5%, for the three months ended March 31, 2022 compared to the same period of 2021. Our corn costs increased due partially to increasing corn prices due to the limited supply in our immediate draw area. For the three months ended March 31, 2022 corn costs included an approximately $98,000 combined realized and unrealized gain from corn derivative instruments as compared to an approximately $840,000 combined realized and unrealized loss on our corn derivative instruments during the same period of the prior year. Corn costs represented 85% of cost of goods for three months ended March 31, 2022 compared to 82% of cost of goods sold for the three months ended March 31, 2021.

Repairs and maintenance costs increased by approximately 4% for the three months ended March 31, 2022 as compared to the same period of 2021. The increase was due to increased production gallons for preventive maintenance to avoid larger costly repairs. Depreciation expense increased by approximately $25,800 for the three months ended March 31, 2022 as compared to the same period of 2021 because of capitalizing equipment installation for higher ethanol production.

General and administrative costs increased by approximately $63,000, for the three months ended March 31, 2022 as compared to the same period of 2021. The increase was due to wages, industry dues and memberships, and insurance while decreasing legal expense.

Other Income (expense) increased by approximately $15,000 for the three months ended March 31, 2022 as compared to the same period of 2021 due primarily to an increase in other miscellaneous income and a decrease in interest expense along with a decrease in patronage income as our borrowings were reduced.

Results of Operations for the Six Months Ended March 31, 2022 as Compared to the Six Month Ended March 31, 2021
Revenues. Total revenues increased by approximately 66.3% for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021. For the six months ended March 31, 2022, ethanol revenue increased by $44.6 million due primarily to increased gallons of ethanol sold and an increase in the average price we received for our ethanol compared to the six months ended March 31, 2021. We sold approximately 5.9 million more gallons of ethanol during the six months ended March 31, 2022 as compared to the same period of 2021. The average price we received per gallon of ethanol sold increased by approximately 67.8% during the six months ended March 31, 2022 as compared to the same period of 2021. Ethanol prices
17


were higher during the 6 months ending March 31, 2022 due to a combination of significantly higher corn and gasoline prices and low ethanol stocks which combined to positively impact market ethanol prices. By comparison, ethanol prices were lower during this same time period ending March 31, 2021 due to excess ethanol supply in the market. Travel restrictions associated with COVID-19 negatively impacted ethanol demand during our second quarter of 2021.

Sales from co-products increased by approximately $7.9 million or 44% for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021. Co-products include dried distillers grains, wet distillers grains, corn oil and carbon dioxide. The change in co-product sales resulted primarily from an increase in distillers grain and corn oil revenue partially offset by lower carbon dioxide sales. Distillers grain revenue increased due to a combination of higher average prices per ton of distillers grains sold and an increase in distillers grains production for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021. The higher average price per ton of distillers grains sold for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021 was due to an increase in the market price for corn. Corn oil revenue was higher for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021 due to an increase in the average price we received per pound of corn oil sold along with an increase in the amount of corn oil we sold. Corn oil prices were higher due to increased corn oil demand for the renewable diesel feedstock.
Cost of goods sold. Cost of goods sold consist of corn expense, process chemicals, denaturant, natural gas costs, electricity, production labor, repairs and maintenance and depreciation. Cost of goods sold increased by 47.8%, or approximately $31 million for the six months ended March 31, 2022 as compared to the six months ended March 31, 2021 primarily due to increases in corn costs and natural gas costs of approximately $30 million and $1.5 million, respectively.

Corn costs, including hedging, increased by approximately $27 million, or approximately 51.5%, for the six months ended March 31, 2022 compared to the same period of 2021. Our corn costs increased due partially to increasing corn prices due to the limited supply of corn in our immediate draw area. For the six months ended March 31, 2022, corn costs included an approximately $1 million combined realized and unrealized gain from corn derivative instruments as compared to an approximately $2 million combined realized and unrealized loss on our corn derivative instruments during the same period of the prior year. Corn costs represented 83% of cost of goods for six months ended March 31, 2022 compared to 81% of cost of goods sold for the six months ended March 31, 2021.

Repairs and maintenance costs decreased by approximately 4% for the six months ended March 31, 2022 as compared to the same period of 2021. The decrease was due to already completing deferred and preventive maintenance to avoid larger costly repairs. Depreciation expense decreased by approximately $39,000 for the six months ended March 31, 2022 as compared to the same period of 2021.

General and administrative costs increased by approximately $195,000 for the six months ended March 31, 2022 as compared to the same period of 2021. The increase was due to wages, industry dues and memberships, and insurance while decreasing legal expense.

Other (expense) increased by approximately $48,000 for six months ended March 31, 2022 as compared to the same period of 2021 due primarily to an increase in other miscellaneous income and a decrease in interest expense along with a decrease in patronage income as our borrowings were reduced.

Liquidity and Capital Resources

Although there is uncertainty related to the continuing impact of the COVID-19 pandemic on the global economy, the ethanol industry and our future financial results, we believe our current cash reserves and the available cash under our revolving term loan leave us well-positioned to manage our business through this crisis as it continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and the financial impacts associated with the COVID-19 pandemic include, but are not limited to, reduced production levels, lower net sales and potential incremental costs associated with mitigating the effects of the pandemic, including storage and logistics costs and other expenses. On June 29, 2021 our lender set up a revolving credit facility in the amount of $7.5 million for corn purchases and hedging requirements. This credit facility matures on August 1, 2022.

Although we were in compliance with our financial covenants set forth in our credit agreement as of March 31, 2022, the continuing impact of the COVID-19 pandemic could adversely impact our operating results which could result in our inability to comply with certain of these financial covenants and require our lenders to waive compliance with, or agree to amend, any such covenant to avoid a default. Our inability to satisfy our financial covenants under our credit agreement would also adversely impact our ability to negotiate a new revolving credit line with our lender or the terms available to us. However,
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based on our current forecast of market conditions and our financial performance, we expect that we will be in a position to satisfy all of the financial covenants in the credit agreement for the next twelve months.

We plan to closely monitor existing cash, our current credit facilities, and cash from operations to continue to operate the ethanol plant over the next 6 to 12 months. Working capital was approximately $24.6 million on March 31, 2022. Management currently projects that liquid working capital will be sufficient based on current cash balances and credit facilities available for the remainder of Fiscal 2022, but management will continue to monitor our liquidity position on a weekly basis.

Our financial position and liquidity are, and will continue to be, influenced by a variety of factors, including, without limitation:
our ability to generate cash flows from operations;
the level of our outstanding indebtedness and the interest we are obligated to pay;
our ability to obtain ongoing credit from our primary lender and, if needed, to obtain waivers of covenant violations;
our margin maintenance requirements on all commodity trading accounts.

The following table summarizes our sources and uses of cash and cash equivalents from the unaudited statement of cash flows for the periods presented:
Six Months Ended March 31,
(Unaudited)
Cash Flow Data:20222021
Net cash provided by (used in) operating activities$8,033,455 $(96,963)
Net cash (used in) investing activities(2,860,587)(645,474)
Net cash (used in) financing activities(7,256,100)(1,000,000)
Net decrease in cash and cash equivalents$(2,083,232)$(1,742,437)

Cash Flow - Operating Activities

For the six months ended March 31, 2022, net cash from operating activities increased primarily due to increased net income. The increase in net income was partially offset by higher corn and ethanol prices which increased our working capital components including trade receivable and inventory.

Cash Flow - Investing Activities

The increase in cash flows used in investing activities reflects the impact of property and equipment acquired for the ethanol plant. Net cash used in investing activities was approximately $2.8 million for the six months ended March 31, 2022 compared to approximately $1 million for the six months ended March 31, 2021. During the period ended March 31, 2022, the plant used more cash for capital improvements compared to the six months ended March 31, 2021.

Cash Flow - Financing Activities

Cash flows from financing activities include transactions and events whereby cash is obtained from, or paid to, depositors, creditors or investors. Net cash (used in) financing activities increased $5.3 million for a distribution to members during the second quarter and increased $1 million for debt pay down on long term borrowings for the six months ended March 31, 2022. In comparison, during the six months ended March 31, 2021, net cash (used in) financing activities totaled $1 million.
Critical Accounting Estimates and Accounting Policies

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which we operate. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes the following policies are both important to the portrayal of our financial condition and results of
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operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.

Revenue Recognition

The Company records revenue following the guidance presented in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606). Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

sales of ethanol
sales of distillers grains
sales of corn oil

Shipping costs incurred by the Company in the sale of ethanol, distiller grains and corn oil are not specifically identifiable and as a result, are recorded based on the net selling price. Railcar lease costs incurred by the Company in the sale of its products are included in the cost of goods sold.

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

Derivative Instruments

The Company periodically enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales.  The Company does not typically enter into derivative instruments other than for hedging purposes.  All the derivative contracts are recognized on the balance sheet at their fair market value.  Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes.   Accordingly, any realized or unrealized gain or loss related to corn and natural gas derivatives is recorded in the statement of operations as a component of cost of goods sold.  Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue. The Company reports all contracts with the same counter party on a net basis on the balance sheet. Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements. Forward contracts with delivery dates within 30 days that can be reasonably estimated are subject to a lower of cost or net realizable value assessment. The Company didn't recognize any accrued loss on purchase commitments as of March 31, 2022 or September 30, 2021.

Inventories and Lower of Cost or Market

Inventories are stated at the lower of net realizable value or actual cost using the first-in, first-out method.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. As of March 31, 2022 and September 30, 2021 the Company recognized no write-downs for a lower of net realizable value or cost of inventory adjustment.

Property and Equipment

Property and equipment is stated at cost. Construction in progress is comprised of costs related to the projects that are not completed. Depreciation is computed using the straight-line method over the estimated useful lives. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. When circumstances or events arise that questions an asset's usefulness, the asset is evaluate for future use and appropriate carrying value.

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The Company evaluates the carrying value of long-lived tangible assets when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases in the market value of the asset, adverse changes in the extent or manner in which the asset is being used, significant changes in business climate, or current or projected cash flow losses associated with the use of the assets. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such assets are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held for use in future operations and for fixed (tangible) assets, fair value is determined primarily using either the projected cash flows discounted at a rate commensurate with the risk involved or an appraisal. For long-lived assets to be disposed of by sale or other than sale, fair value is determined in a similar manner, except that fair values are reduced for disposal costs.

Off-Balance Sheet Arrangements

We currently do not have any off-balance sheet arrangements.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

In addition to the various risks inherent in the ethanol industry and our operations, we are exposed to various market risks. The primary market risks arise as a result of possible changes in certain commodity prices and changes in interest rates.

Commodity Price Risk

We are exposed to market risk with respect to the price of ethanol, which is our principal product, and the price and availability of corn and natural gas, which are the principal commodities we use to produce ethanol.  Our other primary product is distillers grains, and we are also subject to market risk with respect to the price for distillers grains.  The prices for ethanol, distillers grains, corn and natural gas are volatile, and we may experience market conditions where the prices we receive for our ethanol and distillers grains are declining, but the price we pay for our corn, natural gas and other inputs is increasing. Our results will therefore vary substantially over time, and include the possibility of losses, which could be substantial.

In general, rising ethanol and distillers grains prices result in higher profit margins, and therefore represent favorable market conditions.  We are, however, subject to various material risks related to our production of ethanol and distillers grains and the price for ethanol and distillers grains.  For example, ethanol and distillers grains prices are influenced by various factors beyond the control of our management, including the supply and demand for gasoline, the availability of substitutes, international trade and the effects of domestic and foreign laws, regulations and government policies.

In general, rising corn prices result in lower profit margins and, accordingly, represent unfavorable market conditions. We will generally not be able to pass along increased corn costs to our ethanol customers. We are subject to various material risks related to the availability and price of corn, many of which are beyond our control. For example, the availability and price of corn is subject to wide fluctuations due to various unpredictable factors, including weather conditions, crop yields, farmer planting decisions, governmental policies with respect to agriculture, and local, regional, national and international trade, demand and supply. If our corn costs were to increase $0.10 per bushel from one year to the next, the impact on costs of goods sold would be approximately $2.1 million for the year, assuming corn use of 21 million bushels during the year.

Falling ethanol prices indicate weak market conditions and will usually negatively impact profit margins. We will typically be unable to pass through the impact of decreased ethanol revenues to its corn suppliers. We are subject to various material risks related to the demand for and price of ethanol, many of which are beyond the control of the Company. For example, the demand for and price of ethanol is subject to significant fluctuations due to various unpredictable factors which are beyond the control of our management, including driving habits, consumer vehicle buying decisions, petroleum price movement, plant capacity utilization, and government policies with respect to biofuel use, railroad transportation requirements, national and international trade and supply and demand. If our ethanol revenue were to decrease $0.05 per gallon from one year to the next, the impact on gross revenues would be approximately $3.1 million for the year.

During the quarter ended March 31, 2022, corn prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $5.88 per bushel in January 2022 to a high of $7.65 during March 2022. The corn prices based on the Chicago Mercantile Exchange daily futures data during the quarter ended March 31, 2021 ranged from a low of $4.84 per bushel during January 2021 delivery to a high of $5.65 per bushel during March 2021 delivery.

The average price we received for our ethanol FOB Nevada, Iowa, during the six months ended March 31, 2022 was $2.06 compared to the six months ended March 31, 2021 at $1.52 per gallon.
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During the quarter ended March 31, 2022, ethanol prices based on the Chicago Mercantile Exchange Ethanol Platts settlement daily futures data ranged from a low of $1.99 per gallon for February 2022 delivery to a high of $2.57 per gallon for March 2022 delivery. During the quarter ended March 31, 2021, the ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $1.49 per gallon for January 2021 delivery to a high of $1.88 per gallon for March 2021 delivery.

We may from time to time take various cash, futures, options or other positions in an attempt to minimize or reduce our price risks related to corn and ethanol. The extent to which we enter into such positions may vary substantially from time to time and based on various factors, including seasonal factors and our views as to future market trends. Those activities are, however, also subject to various material risks, including that price movements in the cash and futures corn and ethanol markets are highly volatile and are influenced by many factors and occurrences that are beyond our control. We could incur substantial losses on our cash, futures, options or other positions.

Although we intend our futures and option positions to accomplish an economic hedge against our future purchases of corn or futures sales of ethanol, we have chosen not to use hedge accounting for those positions, which would match the gain or loss on the positions to the specific commodity purchase being hedged. To avoid the higher costs associated with hedge accounting, we are instead using fair value accounting for the positions. Generally that means as the current market price of the positions changes, the realized or unrealized gains and losses are immediately recognized in our costs of goods sold in the statement of operations for corn positions or as a component of revenue in the statement of operations for ethanol positions. The immediate recognition of gains and losses on those positions can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the commodity being hedged. For example, our net gain on corn derivative financial instruments that decreased our cost of goods sold for the six months ended March 31, 2022 was net gain $1,037,929 compared to a net loss of $1,977,403 for the six months ended March 31, 2021.

We attempt to offset or hedge some of the risk involved with changing corn prices through the trading of futures and options on the Chicago Mercantile Exchange, as well as through purchase and physical delivery contracts from suppliers. We continue to stay at a near neutral corn position due to an uptrend in ethanol sales margins. We continue to monitor and attempt to ensure adequate corn supply and protection against rapid price increases. As noted above those activities are, however, subject to various material risks, including that price movements in the cash corn and corn futures markets are highly volatile and are influenced by many factors and occurrences which are beyond our control.

Another important raw material for our production of ethanol is natural gas. Our cost per MMBTU is subject to various factors that are outside of the control of our management. The factors include changes in weather, increase in transportation costs and the overall economic activity. Our natural gas costs will therefore vary, and the variations could be material. Our natural gas costs for the six months ended March 31, 2022 represented approximately 6.6% of our total cost of goods sold for that period, compared to 5.0% for the six months ended March 31, 2021.

Interest Rate Risk

We have various outstanding loan agreements that expose us to market risk related to changes in the interest rate imposed under the loan agreement and promissory notes.

We have entered into loan agreements, including an irrevocable letter of credit, with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (collectively, "Farm Credit"). The interest rate on the Farm Credit revolving term loan and irrevocable letter of credit is a variable interest rate based on the 3.6% plus the Secured Overnight Financing Rate (SOFR), subject to a floor rate of 3.6%. We anticipate interest rates will increase during Fiscal 2022.

Item 4.    Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

Our management, including our President and General Manager (the principal executive officer), Seth Harder, along with our interim Chief Financial Officer (the principal financial officer), Jeff Kistner, 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 Securities Exchange Act of
22


1934, as amended) as of March 31, 2022. Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

For the six months ended March 31, 2022, there has been no change in our internal control over financial reporting.


PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

From time to time the Company is involved in various litigation matters arising in the ordinary course of its business. None of these matters, either individually or in the aggregate, currently is material to the Company except as reported in the Company's annual report on Form 10-K for the fiscal year ended September 30, 2021, there were no material developments to such matters.

Item 1A. Risk Factors.

The following risk factors are provided due to material changes from the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended September 30, 2021. The risk factors set forth below should be read in conjunction with the risk factors section and the Management's Discussion and Analysis section for the fiscal year ended September 30, 2021, included in our annual report on Form 10-K.
    
The Company faces risks related to international conflicts, such as the ongoing conflict between Russia and Ukraine, that may adversely impact the Company's financial condition or results of operations.

In late February of 2022, Russia initiated a military operation in Ukraine. The Black Sea region is a key international grain and fertilizer export market and the conflict between Russia and Ukraine could continue to disrupt supply and logistics, cause volatility in prices, and impact global margins due to increased commodity, energy, and input costs. The Company currently does not purchase products directly from this region, however, the impact to the global supply could put the Company’s ability to secure product at risk over time.

To the extent the conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening other risks disclosed in Part I, “Item 1A. Risk Factors” in the Company's 2021 Annual Report on Form 10-K, any of which could materially and adversely affect the Company's financial condition and results of operations. However, due to the continually evolving nature of the conflict, the potential impact that the conflict could have on such risk factors, and others that cannot yet be identified, remains uncertain. The Company continues to monitor the conflict and assess alternatives to mitigate these risks.

Inflation, including as a result of commodity price inflation or supply chain constraints due to the war in Ukraine, may adversely impact our results of operations.

We have experienced inflationary impacts on business expenses. Commodity prices in particular have risen significantly over the past year. Inflation and its negative impacts could escalate in future periods.

Ukraine is the third largest exporter of grain in the world. Russia is one of the largest producers of natural gas and oil and is the largest exporter of fertilizers. The commodity price impact of the war in Ukraine has been a sharp and sustained rise in grain and energy prices, including corn and natural gas. In addition, the war in Ukraine has adversely affected and may continue to adversely affect global supply chains resulting in further commodity price inflation for our production inputs. Lower fertilizer supplies may also impact future growing seasons, further impacting grain supplies and prices. Also, given high global grain prices, U.S. farmers may prefer to lock in prices and export additional volumes, reducing domestic grain supplies and resulting in further inflationary pressures.

We may not be able to include these additional costs in the prices of the products we sell. As a result, inflation may have a material adverse effect on our results of operations and financial condition.

The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels and/or the impact of sanctions on Russia related to the war in Ukraine may have a significant impact on natural gas commodity prices.
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The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts expired on April 1, 2020. These actions led to an immediate and steep decrease in oil prices. Conversely, sanctions imposed on Russia in the last few months have increased prices. There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can there be any assurance that sanctions or other global conflicts will not further impact oil prices. Uncertainty regarding future sanctions or actions to be taken by OPEC+ members or other oil exporting countries could lead to increased volatility in the price of oil and natural gas, which could adversely affect our business, future financial condition and results of operations.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.
    
None.

Item 3.    Defaults Upon Senior Securities.

None.

Item 4.     Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

None.

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Item 6.    Exhibits.

The following exhibits are filed as part of this quarterly report.
Exhibit No. Description of ExhibitIncorporated by ReferencePage
Multiple Advance Term Promissory Note between Farm Credit Services of America and Lincolnway Energy, LLC dated March 24, 20229
Amended and Restated Revolving Term Promissory Note between Farm Credit Services of America and Lincolnway Energy, LLC dated March 24, 20229
Rule 13a-14(a) Certification of President and Chief Executive OfficerE-1
Rule 13a-14(a) Certification of Interim Chief Financial OfficerE-2
Section 1350 Certification of President and Chief Executive Officer †E-3
Section 1350 Certification of Interim Chief Financial Officer †E-4
101.INSInline XBRL Instance Document - the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document**
101.SCHInline XBRL Taxonomy Extension Schema Document**
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document**
101.LABInline XBRL Taxonomy Extension Labels Linkbase Document**
101.PREInline XBRL Presentation Linkbase Document**
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101).
† This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.
** Furnished electronically herewith pursuant to Rule 405 of Regulation S-T.

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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.

LINCOLNWAY ENERGY, LLC
May 19, 2022By:/s/ Seth Harder
Name:    Seth Harder
Title:     General Manager, President and Chief Executive Officer
May 19, 2022By:/s/   Jeff Kistner
Name:    Jeff Kistner
Title:      Interim Chief Financial Officer




26
EX-10.1 2 ex-101xmultipleadvancete.htm EX-10.1 ex-101xmultipleadvancete
CoBANK CoAu',E CONflEii[D COM1 Loan No. 0003 1748T04 MULTIPLE ADVANCE TERM PROMISSORY NOTE THIS MULTIPLE ADVANCE TERM PROMISSORY NOTE (this "Promissory Note") to the Credit Agreement dated July 3, 2017 (such agreement, as may be amended, hereinafter referred to as the "Credit Agreement"), is entered into as of between FARM CREDIT SERVICES OF AMERICA, FLCA, a federally-chartered instrumentality of the United States ("Lender") and LINCOLNWAY ENERGY, LLC, Nevada, Iowa, a limited liability company (together with its permitted successors and assigns, the "Borrower"). Capitalized terms not otherwise defined in this Promissory Note will have the meanings set forth in the Credit Agreement, SECTION 1. MULTIPLE ADVANCE TERM COMMITMENT. On the terms and conditions set forth in the Credit Agreement and this Promissory Note, Lender agrees to make loans to the Borrower from time to time during the period set forth below in an aggregate principal amount not to exceed $10,000,000.00 (the "Commitment"). Under the Commitment, amounts borrowed and later repaid may not be re-borrowed. SECTION 2. PURPOSE. The purpose of the Commitment is to provide working capital to the Borrower. SECTION 3. TERM. The term of the Commitment will be from the date hereof, up to 12:00 p.m. Denver, Colorado time on March 31, 2022, or on such later date as Agent may, in its sole discretion, authorize in writing (the "Term Expiration Date"). SECTION 4. LIMITS ON ADVANCES, AVAILABILITY, ETC. The loans will be made available as provided in Article 2 of the Credit Agreement. SECTION 5. INTEREST. The Borrower agrees to pay interest on the unpaid balance of the loan(s) in accordance with the following interest rate option(s): (A) Daily Simple SOFR. At a variable rate per annum equal at all times to 3.600% (the "Daily Simple SOFR Margin") plus the higher of: (1) zero percent (0.00%); and (2) Daily Simple SOFR (as defined below). Borrowings may only be made on a day which is a Business Day (as defined below) and requests for borrowings must be received by 12:00 p.m. Denver, Colorado time on the date the borrowing is desired. Information about the then-current rate will be made available upon telephonic request. For purposes of this Promissory Note, Daily Simple SOFR shall be considered a variable rate option. For purposes hereof, (a) "Daily Simple SOFR" means SOFR (as defined below) for the day that is five U.S. Government Securities Business Days (as defined below) prior to (i) if such day is a U.S. Government Securities Business Day, such day or (ii) if such day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such day. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower; (b) "SOFR" means, for any U.S. Government Securities Business Day, a rate per annum equal to the secured overnight financing rate for such day published (at such time as Agent may determine in its sole discretion) by the SOFR Administrator on its website (or any successor source identified by the SOFR Administrator from time to time) on the immediately succeeding U.S. Government Securities Business Day; (c) "SOFR Administrator" means the Federal Reserve Bank of March 24, 2022


 
LINCOLN WAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T04 New York (or a successor administrator of the secured overnight financing rate); (d) "U.S. Government Securities Business Day" means any day except for (i) a Saturday, (ii) a Sunday, or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities; and (e) "Business Day" means a day on which Agent and the Federal Reserve Banks are open for business. (B) Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period will be 365 days; (2) amounts may be fixed in an amount not less than $100,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time will be five. The Borrower will select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. If the Borrower fails to elect an interest rate option, interest will accrue at the variable interest rate option. Upon the expiration of any fixed rate period, interest will automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed for periods expiring after the maturity date of the loans and rates may not be fixed in such a manner as to cause the Borrower to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein will be made telephonically or in writing and must be received by 12:00 p.m. Denver, Colorado time. Interest will be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and will be payable monthly in arrears by the 20th day of the following month or on such other day as Agent will require in a written notice to the Borrower ("Interest Payment Date"). SECTION 6. PROMISSORY NOTE. The Borrower promises to repay the unpaid principal balance of the loans as follows: (A) in 13 equal, consecutive, semi-annual installments of $750,000.00, payable on the 20th day of each September and March, with the first installment due on September 20, 2022; and (B) a final installment in an amount equal to the remaining unpaid principal balance of the loan(s) on March 20, 2029. In addition to the above, the Borrower promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth herein. SECTION 7. PREPAYMENT. Subject to the broken funding surcharge provision of the Credit Agreement, the Borrower may, on one Business Day's prior written notice, prepay all or any portion of the loan(s). Unless otherwise agreed by Agent, all prepayments will be applied to principal installments in the inverse order of their maturity and to such balances, fixed or variable, as Agent will specify. SECTION 8. SECURITY. The Borrower's obligations hereunder and, to the extent related hereto, under the Credit Agreement, will be secured as provided in Section 2.4 of the Credit Agreement. SECTION 9. FEES. INTENTIONALLY OMITTED. SECTION 10. BENCHMARK AND TENOR REPLACEMENT AND MODIFICATION. Notwithstanding anything to the contrary in this promissory note or in any other loan document, (A) if at any time Agent determines that (1) any interest rate offered hereunder (each such interest rate, a "Benchmark") or any tenor of such Benchmark has been, or is likely to be, discontinued; (2) 2


 
LINCOLN WAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 l748T04 any Benchmark or any tenor of any Benchmark is not or is likely to not be representative of the underlying market and economic reality that such Benchmark or tenor is intended to measure; or (3) any Benchmark or any tenor of any Benchmark does not, or is likely not to, adequately and fairly reflect the cost to Agent of making or maintaining loans hereunder, or (4) any Benchmark or any tenor of any Benchmark is, or is likely to be, unlawful, Agent may amend this Promissory Note and any other Loan Document to replace such Benchmark or tenor with a Benchmark Replacement or to remove such tenor. The selection of a Benchmark Replacement by Agent may be for one, some or all tenors of the then-current Benchmark. "Benchmark Replacement" means, for any Benchmark or tenor, a replacement benchmark rate, which may include a spread adjustment, that has been selected by Agent in its sole discretion, giving due consideration to (a) any recommendation by a relevant governmental body of a replacement benchmark rate, the mechanism for determining such a rate or a spread adjustment, or (b) any evolving or then-prevailing market convention for determining a benchmark rate or a spread adjustment. Agent may effect such amendments to this Promissory Note and the other Loan Documents as Agent in its sole discretion deems appropriate to reflect the adoption and implementation of such replacement rate, which amendments will become effective without any further action or consent of any other party to this Promissory Note or any other Loan Document; provided that Agent shall give the Borrower notice of any such amendment. In no event shall any Benchmark Replacement be less than zero percent (0.00%). (B) if at any time Agent determines in its discretion that any Benchmark or any tenor of any Benchmark is unavailable for any reason on a temporary basis, Agent may (i) calculate such Benchmark or tenor using such previous or historical publications of such Benchmark or tenor as Agent determines in its discretion to be appropriate, (ii) suspend the availability of such tenor or (ii) select and apply a Benchmark Replacement during such period. (C) Agent will have the right to make from time to time any technical, administrative or operational changes that Agent decides in its discretion may be appropriate to permit or enhance the efficient administration of any Benchmark or any tenor of any Benchmark or the adoption, implementation or administration of any Benchmark Replacement or any tenor of any Benchmark Replacement. Any amendments implementing such changes will become effective without any further action or consent of any other party to this Promissory Note or any other Loan Document; provided that Agent shall give the Borrower notice of any such amendment. SIGNATURE PAGE FOLLOWS


 


 
LINCOLNWAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T04 SIGNATURE PAGE TO PROMISSORY NOTE IN WITNESS WHEREOF, the parties have caused this Promissory Note to the Credit Agreement to be executed by their duly authorized officer(s). FARM CREDITRVICES OF AMERICA, FLCA Name: Title:


 
EX-10.2 3 ex-102xamendedandrestate.htm EX-10.2 ex-102xamendedandrestate
!CoBANK COC)PUUU/1 CO HIECIFI) CC)MMII)[)E Loan No. 0003 1748T02-F AMENDED AND RESTATED REVOLVING TERM PROMISSORY NOTE THIS AMENDED AND RESTATED REVOLVING TERM PROMISSORY NOTE (this "Promissory Note") to the Credit Agreement dated July 3, 2017 (such agreement, as may be amended, hereinafter referred to as the "Credit Agreement"), is entered into as of between FARM CREDIT SERVICES OF AMERICA, FLCA, a federally-chartered instrumentality of the United States ("Lender") and LINCOLNWAY ENERGY, LLC, Nevada, Iowa, a limited liability company (together with its permitted successors and assigns, the "Borrower"). Capitalized terms not otherwise defined in this Promissory Note will have the meanings set forth in the Credit Agreement. RECITALS (A) This Promissory Note amends, restates, replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Amended and Restated Revolving Term Promissory Note numbered 0003 1748T02-E, dated as of March 9, 2021, between Lender and the Borrower. SECTION 1. REVOLVING TERM COMMITMENT. On the terms and conditions set forth in the Credit Agreement and this Promissory Note, Lender agrees to make loans to the Borrower during the period set forth below in an aggregate principal amount not to exceed the Maximum Commitment Amount (as set forth below) at any one time outstanding (the "Commitment"). The "Maximum Commitment Amount" will be initially $10,000,000.00 and will be reduced by $2,000,000.00 on the 20th day of each October beginning October 20, 2022, and continuing through and including October 20, 2025, with a final reduction equal to the remaining balance due on October 20, 2026. Within the limits of the Commitment, the Borrower may borrow, repay, and re-borrow. SECTION 2. PURPOSE. The purpose of the Commitment is to finance construction projects and provide working capital to the Borrower. SECTION 3. TERM. The term of the Commitment will be from the date hereof, up to and including October 20, 2026, or such later date as Agent may, in its sole discretion, authorize in writing (the "Term Expiration Date"). SECTION 4. LIMITS ON ADVANCES, AVAILABILITY, ETC. The loans will be made available as provided in Article 2 of the Credit Agreement. SECTION 5. INTEREST. The Borrower agrees to pay interest on the unpaid balance of the loan(s) in accordance with the following interest rate option(s): (A) Daily Simple SOFR. At a variable rate per annum equal at all times to 3.600% (the "Daily Simple SOFR Margin") plus the higher of: (1) zero percent (0.00%); and (2) Daily Simple SOFR (as defined below). Borrowings may only be made on a day which is a Business Day (as defined below) and requests for borrowings must be received by 12:00 p.m. Denver, Colorado time on the date the borrowing is desired. Information about the then-current rate will be made available upon telephonic request. For March 24, 2022


 
LINCOLNWAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T02-F purposes of this Promissory Note, Daily Simple SOFR shall be considered a variable rate option. For purposes hereof, (a) "Daily Simple SOFR" means SOFR (as defined below) for the day that is five U.S. Government Securities Business Days (as defined below) prior to (i) if such day is a U.S. Government Securities Business Day, such day or (ii) if such day is not a U.S. Government Securities Business Day, the U.S. Government Securities Business Day immediately preceding such day. Any change in Daily Simple SOFR due to a change in SOFR shall be effective from and including the effective date of such change in SOFR without notice to the Borrower; (b) "SOFR" means, for any U.S. Government Securities Business Day, a rate per annum equal to the secured overnight financing rate for such day published (at such time as Agent may determine in its sole discretion) by the SOFR Administrator on its website (or any successor source identified by the SOFR Administrator from time to time) on the immediately succeeding U.S. Government Securities Business Day; (c) "SOFR Administrator" means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate); (d) "U.S. Government Securities Business Day" means any day except for (i) a Saturday, (ii) a Sunday, or (iii) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities; and (e) "Business Day" means a day on which Agent and the Federal Reserve Banks are open for business. (B) Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sole discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period will be 365 days; (2) amounts may be fixed in an amount not less than $100,000.00 or multiples thereof; and (3) the maximum number of fixes in place at any one time will be five. The Borrower will select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. If the Borrower fails to elect an interest rate option, interest will accrue at the variable rate option. Upon the expiration of any fixed rate period, interest will automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. All elections provided for herein will be made telephonically or in writing and must be received by 12:00 p.m. Denver, Colorado time. Interest will be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and will be payable monthly in arrears by the 20th day of the following month or on such other day as Agent will require in a written notice to the Borrower ("Interest Payment Date"). SECTION 6. PROMISSORY NOTE. The Borrower promises to repay on the date of each reduction in the Commitment set forth in the schedule in Section 1 above, the outstanding principal, if any, that is in excess of the reducing Commitment amount set forth in the aforementioned schedule, followed by a final installment in an amount equal to the remaining unpaid principal balance of the loans on the Term Expiration Date. In addition to the above, the Borrower promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth herein. SECTION 7. SECURITY. The Borrower's obligations hereunder and, to the extent related hereto, under the Credit Agreement, will be secured as provided in Section 2.4 of the Credit Agreement. SECTION 8. FEES. 2


 
LINCOLN WAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T02-F (A) Commitment Fee. In consideration of the Commitment, the Borrower agrees to pay to Agent a commitment fee on the average daily unused available portion of the Commitment at the rate of 0.500% per annum (calculated on a 360-day basis), payable monthly in arrears by the 20th day following each month. Such fee will be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment. SECTION 9. LETTERS OF CREDIT. INTENTIONALLY OMITTED. SECTION 10. OVERADVANCES. Agent shall not be obligated to make advances in excess of the Commitment ("Overadvances"), but may elect to do so in its sole discretion. Each such Overadvance shall be secured hereunder and under Section 2.4 of the Credit Agreement. If Agent approves an Overadvance, the Borrower shall reimburse Lender immediately and without notice or demand for (1) the full amount of each overadvance; (2) all overadvance fees and charges that Agent may impose from time to time; (3) interest on the amount of each overadvance at the rate that applies to the loan(s) for the day such overadvance was created and for each following day until it has been repaid, and (4) all losses Agent incurs in collecting the overadvance and any fees, charges, expenses or interest relating to it. In addition to all other rights and remedies available to Agent, Agent may (and the Borrower specifically gives Agent the authority to): (1) set off the unpaid balance of any overadvance against any debt or other amount that Agent or Lender owes to the Borrower; (2) liquidate any investments or other assets in any account the Borrower maintains with Agent or Lender or in connection with the loan(s); and (3) enforce its interests in any available collateral it holds to secure the Borrower's obligations hereunder and under the Credit Agreement. If Agent elects to make an advance in excess of the Commitment, doing so does not obligate Agent or Lender to make or permit future Overadvances under the Commitment. SECTION 11. BENCHMARK AND TENOR REPLACEMENT AND MODIFICATION. Notwithstanding anything to the contrary in this promissory note or in any other loan document, (A) if at any time Agent determines that (1) any interest rate offered hereunder (each such interest rate, a "Benchmark") or any tenor of such Benchmark has been, or is likely to be, discontinued; (2) any Benchmark or any tenor of any Benchmark is not or is likely to not be representative of the underlying market and economic reality that such Benchmark or tenor is intended to measure; or (3) any Benchmark or any tenor of any Benchmark does not, or is likely not to, adequately and fairly reflect the cost to Agent of making or maintaining loans hereunder, or (4) any Benchmark or any tenor of any Benchmark is, or is likely to be, unlawful, Agent may amend this Promissory Note and any other Loan Document to replace such Benchmark or tenor with a Benchmark Replacement or to remove such tenor. The selection of a Benchmark Replacement by Agent may be for one, some or all tenors of the then-current Benchmark. "Benchmark Replacement" means, for any Benchmark or tenor, a replacement benchmark rate, which may include a spread adjustment, that has been selected by Agent in its sole discretion, giving due consideration to (a) any recommendation by a relevant governmental body of a replacement benchmark rate, the mechanism for determining such a rate or a spread adjustment, or (b) any evolving or then-prevailing market convention for determining a benchmark rate or a spread adjustment. Agent may effect such amendments to this Promissory Note and the other Loan Documents as Agent in its sole discretion deems appropriate to reflect the adoption and implementation of such replacement rate, which amendments will become effective without any further action or consent of any other party to this Promissory Note or any other Loan Document; provided that Agent shall give the Borrower notice of any such amendment. In no event shall any Benchmark Replacement be less than zero percent (0.00%). (B) if at any time Agent determines in its discretion that any Benchmark or any tenor of any Benchmark is unavailable for any reason on a temporary basis, Agent may (i) calculate such Benchmark or


 
LINCOLNWAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T02-F tenor using such previous or historical publications of such Benchmark or tenor as Agent determines in its discretion to be appropriate, (ii) suspend the availability of such tenor or (ii) select and apply a Benchmark Replacement during such period. (C) Agent will have the right to make from time to time any technical, administrative or operational changes that Agent decides in its discretion may be appropriate to permit or enhance the efficient administration of any Benchmark or any tenor of any Benchmark or the adoption, implementation or administration of any Benchmark Replacement or any tenor of any Benchmark Replacement. Any amendments implementing such changes will become effective without any further action or consent of any other party to this Promissory Note or any other Loan Document; provided that Agent shall give the Borrower notice of any such amendment. SIGNATURE PAGE FOLLOWS ru


 


 
LINCOLNWAY ENERGY, LLC Nevada, Iowa Promissory Note No. 0003 1748T02-F SIGNATURE PAGE TO PROMISSORY NOTE IN WITNESS WHEREOF, the parties have caused this Promissory Note to the Credit Agreement to be executed by their duly authorized officer(s). FARM CREDIT RVICES OF AMERICA, FLCA By: Name: Title:


 
EX-31.1 4 exhibit3113312022q2.htm EX-31.1 Document


RULE 13a-14(a) CERTIFICATION

I, Seth Harder, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Lincolnway Energy, LLC.

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

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

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

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

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

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

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

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

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

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

Date: May 19, 2022

/s/ Seth Harder
 Name:  Seth Harder
 Title: President and Chief Executive Officer



EX-31.2 5 exhibit3123312022q2.htm EX-31.2 Document

RULE 13a-14(a) CERTIFICATION

I, Jeff Kistner, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Lincolnway Energy, LLC.

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

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

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

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

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

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

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

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

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

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

Date: May 19, 2022

/s/ Jeff Kistner
 Name:  Jeff Kistner
 Title: Interim Chief Financial Officer

E-4
EX-32.1 6 exhibit3213312022q2.htm EX-32.1 Document

SECTION 1350 CERTIFICATION

Pursuant to 18 U.S.C. Section 1350, I, Seth Harder, President and Chief Executive Officer of Lincolnway Energy, LLC, certify that to my knowledge (i) Lincolnway Energy, LLC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lincolnway Energy, LLC.

Date:  May 19, 2022

 /s/  Seth Harder
 Name:  Seth Harder
 Title:  President and Chief Executive Officer

[A signed original of this written statement has been provided to Lincolnway Energy, LLC and will be retained by Lincolnway Energy, LLC and furnished to the Securities and Exchange Commission or its staff upon request.]

E-5
EX-32.2 7 exhibit3223312022q2.htm EX-32.2 Document

SECTION 1350 CERTIFICATION

Pursuant to 18 U.S.C. Section 1350, I, Jeff Kistner, Interim Chief Financial Officer of Lincolnway Energy, LLC, certify that to my knowledge (i) Lincolnway Energy, LLC's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Lincolnway Energy, LLC.

Date:  May 19, 2022 .

 /s/ Jeff Kistner
 Name:  Jeff Kistner
 Title:  Interim Chief Financial Officer

[A signed original of this written statement has been provided to Lincolnway Energy, LLC and will be retained by Lincolnway Energy, LLC and furnished to the Securities and Exchange Commission or its staff upon request.]

E-6
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