10-Q



x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

	For the quarterly period ended December 31, 2015.

	OR

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

For the transition period from to .

COMMISSION FILE NUMBER 000-53036

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.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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).



ASSETS	December 31, 2015		September 30, 2015
	(Unaudited)
Current Assets
Cash	$	26,787,043	$	20,827,614
Restricted cash	631,936		1,211,476
Trade accounts receivable	11,760,407		11,962,357
Miscellaneous receivables	202,972		384,705
Inventories	14,321,411		13,754,452
Prepaid and other current assets	584,628		506,197
Commodity derivative instruments	1,227,745		—
Total current assets	55,516,142		48,646,801

Property, plant, and equipment, net	107,626,589		107,998,425

Other Assets
Investment	823,494		823,494
Total other assets	823,494		823,494

Total Assets	$	163,966,225	$	157,468,720



LIABILITIES AND MEMBERS' EQUITY	December 31, 2015		September 30, 2015
	(Unaudited)
Current Liabilities
Accounts payable	$	2,808,291	$	3,616,302
Accounts payable-corn	15,215,999		6,757,174
Accrued expenses	1,433,952		1,555,286
Commodity derivative instruments	503,631		68,479
Total current liabilities	19,961,873		11,997,241

Long-Term Debt	8,956,973		4,865,236

Commitments and Contingencies

Members’ Equity
Members' contributions, net of cost of raising capital, 14,606 units authorized, issued and outstanding	70,912,213		70,912,213
Retained earnings	64,135,166		69,694,030
Total members' equity	135,047,379		140,606,243

Total Liabilities and Members’ Equity	$	163,966,225	$	157,468,720



	Three Months Ended			Three Months Ended
	December 31, 2015			December 31, 2014

Revenues	$	57,545,036		$	65,858,591

Cost of Goods Sold	54,394,074			44,541,860

Gross Profit	3,150,962			21,316,731

Operating Expenses	1,369,605			1,354,005

Operating Income	1,781,357			19,962,726

Other Income (Expense)
Interest expense	(59,092		)	—
Miscellaneous income	21,869			23,458
Total	(37,223		)	23,458

Net Income	$	1,744,134		$	19,986,184

Weight Average Units Outstanding - basic and diluted	14,606			14,606

Net Income Per Unit - basic and diluted	$	119		$	1,368

Distributions Per Unit	$	500		$	1,700



	Three Months Ended			Three Months Ended
	December 31, 2015			December 31, 2014

Cash Flows from Operating Activities
Net income	$	1,744,134		$	19,986,184
Adjustments to reconcile net income to net cash provided by operations:
Depreciation	2,282,639			2,221,712
Change in fair value of commodity derivative instruments	(2,013,052		)	1,489,722
Gain on sale of equipment	—			(11,827		)
Change in operating assets and liabilities:
Restricted cash	579,540			(608,194		)
Trade accounts receivables	201,950			12,273,308
Miscellaneous receivable	181,733			(109,807		)
Inventories	(566,959		)	(13,283,413		)
Prepaid and other current assets	(78,431		)	(309,114		)
Commodity derivative instruments	1,220,459			(1,974,009		)
Accounts payable	(808,009		)	(632,071		)
Accounts payable-corn	8,458,825			9,863,566
Accrued expenses	(559,688		)	(145,863		)
Net cash provided by operating activities	10,643,141			28,760,194

Cash Flows from Investing Activities
Capital expenditures	(1,472,449		)	(744,611		)
Proceeds from sale of equipment	—			35,000
Net cash used for investing activities	(1,472,449		)	(709,611		)

Cash Flows from Financing Activities
Distributions paid	(7,303,000		)	(24,830,201		)
Proceeds from long-term debt	4,091,737			—
Net cash used for financing activities	(3,211,263		)	(24,830,201		)

Net Increase in Cash	5,959,429			3,220,382

Cash – Beginning of Period	20,827,614			27,731,976

Cash – End of Period	$	26,787,043		$	30,952,358

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended September 30, 2015, contained in the Company's annual report on Form 10-K.

Cardinal Ethanol, LLC, (the “Company”) is an Indiana limited liability company currently producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. The Company's plant has an approximate annual production capacity between 100 and 120 million gallons.

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

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

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

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

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

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

The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. The Company believes that there are no ethanol sales, during any given month, which should be considered contingent and recorded as deferred revenue. The Company's products are sold Free on Board (FOB) shipping point.

In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees, commissions and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these commissions and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products.

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

Two major customers accounted for approximately 96% of the outstanding accounts receivable balance at December 31, 2015 and September 30, 2015. These same two customers accounted for approximately 97% of revenue for the three month period ended December 31, 2015. Revenue percentages for the same two customers for the three month period ended December 31, 2014 were 96%.

In the ordinary course of business, the Company enters into forward purchase contracts for its commodity purchases and sales. At December 31, 2015, the Company had forward corn purchase contracts at various fixed prices for various delivery periods through March 2017 for approximately 8.4% of expected production needs for the next fifteen months. Approximately 12.0% of the forward corn purchases were with related parties. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts using a methodology similar to that used in the lower of cost or net realizable value evaluation with respect to inventory valuation, and has determined that no impairment existed at December 31, 2015 or September 30, 2015. At December 31, 2015, the Company had forward dried distiller grains sales contracts for approximately 16.0% of expected production for the next twelve months at various fixed prices for various delivery periods through June 2016. At December 31, 2015, the Company had forward corn oil contracts for approximately 7.2% of expected production for the next twelve months at various prices for various delivery periods through January 2016. Also, at December 31, 2015, the Company had forward natural gas contracts for approximately 36.4% of expected purchases for the next two years and three months at various prices for various delivery periods through March 2018.

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

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

At December 31, 2015, the Company had a net short (selling) position of 6,017,000 bushels of corn under derivative contracts used to hedge its forward corn contracts, corn inventory and ethanol sales. The Company had a net short (selling) position of 3,080,000 bushels of corn under derivative contracts as of September 30, 2015. These corn derivatives are traded on the Chicago Board of Trade and are forecasted to settle for various delivery periods through May 2017, as of December 31, 2015. At December 31, 2015, the Company had a net long (buying) position of 5,460,000 gallons of ethanol under derivative contracts used to hedge its future ethanol sales. The Company had a net long (buying) position of 1,260,000 gallons of ethanol under derivative contracts as of September 30, 2015. These ethanol derivatives are traded on the New York Mercantile Exchange and are forecasted to settle for various delivery periods through September 2016, as of December 31, 2015. At December 31, 2015, the Company had a net long (buying) position of 1,120,000 MMBTUs of natural gas under derivative contracts used to hedge its forward natural



Instrument	Balance Sheet Location	Assets		Liabilities

Ethanol derivative contracts	Commodity Derivative Instruments - Current	$	—	$	417,375
Corn derivative contracts	Commodity Derivative Instruments - Current	$	1,227,745	$	—
Natural gas derivative contracts	Commodity Derivative Instruments - Current	$	—	$	86,256

We determine the fair value of commodity futures derivative instruments utilizing Level 1 inputs by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. We determine the fair value of natural gas Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above.

The Company has a loan agreement consisting of two loans, the Declining Revolving Loan (Declining Loan) and the Revolving Credit Loan in exchange for liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts, and assignment of material contracts.

On April 22, 2015, the Company executed a Fourth Amendment of First Amended and Restated Construction Loan Agreement with FNBO (the "Fourth Amendment"). The Fourth Amendment had an effective date of March 31, 2015, and extended the termination date of the Revolving Credit Loan from March 31, 2015 to February 28, 2016 and changed the interest rate on the Revolving Credit Loan to the 1-month LIBOR plus two hundred ninety basis points. On July 23, 2015, the Company executed a Fifth Amendment of First Amended and Restated Construction Loan Agreement with FNBO (the "Fifth Amendment") in order to obtain additional financing to fund a construction project which is expected to add storage capacity and increase production capacity at the plant. Please refer to Note 8 Commitments and Contingencies below for more information on the project. In connection therewith, the Company executed a Second Amended and Restated Declining Revolving Credit Note and a First Amended and Restated Construction Loan Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statements.

The Fifth Amendment increases the maximum availability of the Declining Loan for construction and working capital advances from $5,000,000 to $20,000,000 and lowers the interest rate on the Declining Loan to the 3-month LIBOR plus two hundred ninety basis points. The Fifth Amendment requires quarterly interest payments on the Declining Loan during the draw period and then the balance of the construction advances will be converted to term debt amortized over seven years on or before the draw period ending May 31, 2016, with a final maturity date of February 28, 2021. Any balance remaining after conversion of the principal balance of the construction advances will continue to be available for working capital purposes. The Fifth Amendment reinstates a prior requirement to maintain a minimum fixed charge coverage ratio of no less than 1.15:1.0 measured quarterly upon completion of the expansion project. The cost of the expansion project is excluded from the $5,000,000 annual limit on capital expenditures.

The Revolving Credit Loan has a limit of $15,000,000 supported by a borrowing base made up of the Company's corn, ethanol, dried distillers grain and corn oil inventories reduced by accounts payable associated with those inventories having a priority. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds. The interest rate on the Revolving Credit Loan is based on the 1-month LIBOR plus two hundred ninety basis points. The interest rate at December 31, 2015 was 3.33%. There were no borrowings outstanding on the Revolving Credit Loan at December 31, 2015 or September 30, 2015.

The Board of Directors has approved a management proposal of projects which are expected to add storage capacity and also increase production capacity to near 135 million gallons over the next twelve months, up from fiscal year 2015 production of 117 million gallons per year. The projects are expected to cost approximately $18,200,000. In connection with the expansion, the Company executed a Construction Agreement dated April 15, 2015 with Custom Agri Builders, LLC to construct two grain bins, a grain dryer and an unloading pit at the plant for a fixed price of approximately $8,892,000, subject to execution of additional written change orders for modifications. The expansion projects, including the grain bins, grain dryer and unloading pit are ongoing and are expected to be completed by our 2016 fiscal year end.

In February 2010, a lawsuit against the Company was filed by an unrelated party claiming the Company's operation of the oil separation system in a patent infringement. In connection with the lawsuit, in February 2010, the agreement for the construction and installation of the tricanter oil separation system was amended. In this amendment the manufacturer and installer of the tricanter oil separation system indemnifies the Company against all claims of infringement of patents, copyrights or other intellectual property rights from the Company's purchase and use of the tricanter oil system and agrees to defend the Company in the lawsuit filed at no expense to the Company. On October 23, 2014, the court granted summary judgment finding that all of the patents claimed were invalid and that the Company had not infringed. However, this ruling is subject to appeal. The manufacturer has, and the Company expects it will continue, to vigorously defend itself and the Company in these lawsuits and in any appeal filed.

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

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales average approximately 80% of total revenues and corn costs average 82% of total cost of goods sold.

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

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three month period ended December 31, 2015, compared to the same period of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2015.

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

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

Cardinal Ethanol, LLC is an Indiana limited liability company currently operating a 100 million gallon per year nameplate capacity ethanol plant in east central Indiana near Union City, Indiana. We began producing ethanol and distillers grains at the plant in November 2008. We are currently operating at above our 100 million gallons per year nameplate capacity and expect to continue to operate above our nameplate capacity into the near future.

Our revenues are primarily derived from the sale of our ethanol, distillers grains and corn oil. We market and sell our products primarily in the continental United States using third party marketers. Murex, LLC markets all of our ethanol. Our distillers grains are marketed by CHS, Inc. We market and distribute all of the corn oil we produce directly to end users and third party brokers.

We are in the process of adding storage capacity to our plant and increasing production capacity to approximately 135 million gallons over the next twelve months. The projects are expected to cost approximately $18,200,000. In connection with the expansion, we executed a Construction Agreement dated April 15, 2015 with Custom Agri Builders, LLC to construct two grain bins, a grain dryer and an unloading pit at our plant for a fixed price of approximately $8,892,000 subject to execution of additional written change orders for modifications. The expansion projects, including the grain bins, grain dryer and unloading pit, are ongoing and expected to be completed by our 2016 fiscal year end.

The ethanol industry is dependent on several economic incentives which if reduced or eliminated could significantly impact ethanol demand. One of these is the Renewable Fuels Standard (“RFS”) program which requires that, in each year, a certain amount of renewable fuels be used in the United States. However, the United States Environmental Protection Agency ("EPA") has the authority to waive the RFS statutory volume requirement, in whole or in part, provided one of the following two conditions have been met: (1) there is inadequate domestic renewable fuel supply; or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. However, the EPA decided to delay finalizing the rule on the 2014 and 2015 RFS standards until after the end of 2014. On November 30, 2015, the EPA released the final renewable volume obligations for 2014, 2015 and 2016. The statutory volumes and the EPA's volumes for 2014, 2015 and 2016 (in billion gallons) are as follows:

Certain ethanol and agriculture industry groups have recently petitioned a federal appeals court to hear a legal challenge to the EPA's final rules. If the EPA's decision to reduce the volume requirements under the RFS is allowed to stand, it could have an adverse effect on the market price and demand for ethanol which could negatively impact our financial performance.

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



	2015					2014
Statement of Operations Data	Amount			%		Amount		%
Revenue	$	57,545,036		100.00		$	65,858,591	100.00
Cost of Goods Sold	54,394,074			94.52		44,541,860		67.63
Gross Profit	3,150,962			5.48		21,316,731		32.37
Operating Expenses	1,369,605			2.38		1,354,005		2.06
Operating Income	1,781,357			3.10		19,962,726		30.31
Other Income, net	(37,223		)	(0.06	)	23,458		0.04
Net Income	$	1,744,134		3.04		$	19,986,184	30.35

Our revenues from operations come from three primary sources: sales of fuel ethanol, distillers grains and corn oil. Revenues also include net gains or losses from derivatives related to products sold. The following table shows the sources of our revenue for the three months ended December 31, 2015 and 2014:



	Three Months Ended December 31, 2015				Three Months Ended December 31, 2014
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Ethanol Sales	$	45,939,126	79.83	%	$	50,580,497	76.80	%
Distillers Grains Sales	9,658,346		16.78		12,763,953		19.38
Corn Oil Sales	1,886,329		3.28		2,342,672		3.56
Carbon Dioxide Sales	61,235		0.11		88,985		0.13
Other Revenue	—		—		82,484		0.13
Total Revenues	$	57,545,036	100.00	%	$	65,858,591	100.00	%

Our revenues from ethanol decreased for the three months ended December 31, 2015 as compared to the three months ended December 31, 2014. This decrease in revenues is the result of a decrease in the average price per gallon of ethanol sold during the three months ended December 31, 2015 as compared to the same period in 2014.

We experienced an increase in ethanol gallons sold of approximately 19.6% for the three months ended December 31, 2015 as compared to the same period in 2014 resulting primarily from an increase in ethanol production yields and timing of ethanol shipments. We are currently operating at approximately 17% above our nameplate capacity. Management anticipates that the gallons of ethanol sold by our plant will continue to increase due to our plans to increase our production capacity to approximately 135 million gallons during our fiscal year ended September 30, 2016.

Our average price per gallon of ethanol sold for the three months ended December 31, 2015 was approximately 23.8% lower than our average price per gallon of ethanol sold for the same period in 2014. This decline in average market price for the three months ended December 31, 2015 as compared to the three months ended December 31, 2014 is due to several factors. Industry-wide production outpaced domestic consumption and net exports during the quarter causing an increase in national ethanol supply resulting in lower ethanol prices. In addition, because ethanol prices are typically directionally consistent with changes in corn and energy prices, lower crude oil and unleaded gasoline prices put downward pressure on ethanol prices. The reduction of the volume obligations set forth in the RFS by the EPA in November 2015 also had a negative effect on ethanol prices.

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If crude oil and unleaded gasoline prices remain low or further decrease, that could have a significant negative impact on the market price of ethanol and our profitability particularly should ethanol stocks remain high. A decline in U.S. ethanol exports due to the

premium on the price of ethanol as compared to unleaded gasoline or other factors may contribute to higher ethanol stocks unless additional demand can be created from other foreign markets or domestically. In addition,the EPA's reduction of the renewable volume obligations set forth in the RFS may limit demand for ethanol negatively impacting ethanol prices. Operating conditions deteriorated towards the end of our first fiscal quarter and the subsequent period and management expects margins will continue to be tight and possibly negative at times during our second fiscal quarter.

Our revenues from distillers grains decreased in the three months ended December 31, 2015 as compared to the same period in 2014. This decrease in revenues is the result of both a decrease in the average market price per ton of distillers grains and a decrease in distillers grains sold for the period ended December 31, 2015 compared to the same period in 2014.

The average price per ton of distillers grains sold for the three months ended December 31, 2015 was approximately 20.5% lower than the average price per ton of distillers grains sold for the same period in 2014. This decline in the market price of distillers grains is due to lower domestic and export demand which has resulted in a decline in the price of distillers grains as a percentage of corn values for the three months ended December 31, 2015 as compared to the same period in 2014.

China has been a significant consumer of exported distillers grains particularly since December 2014 following the resolution of a dispute related to China's objection to the presence of an unapproved genetically modified organism in some U.S. shipments. However, a softening in export demand from China has had a negative effect on distillers grains prices. In addition, China has recently opened an anti-dumping investigation into distillers grains produced in the U.S. which may further decrease export demand particularly if China were to impose anti-dumping tariffs on U.S. imports. If demand in the export market remains low, distillers grains prices could continue to decline unless additional demand can be created from other foreign markets or domestically.

We sold approximately 4.5% fewer distillers grains in the three months ended December 31, 2015 as compared to the same period in 2014 due to increased ethanol production yields which resulted in lower distiller grains yields. Management anticipates that the distillers grains sold by our plant will increase due to our plans to increase our ethanol production capacity to approximately 135 million gallons during our fiscal year ended September 30, 2016 which would also increase our distillers grains production.

Our revenues from corn oil sales decreased approximately 19.5% in the three months ended December 31, 2015 as compared to the same period in 2014 which was primarily a result of a decline in the average price per pound received for our corn oil in the three months ended December 31, 2015 as compared to the same period in 2014. The average price per pound of corn oil was approximately 20.7% lower for the three months ended December 31, 2015 as compared to the same period in 2014 due to increased local supplies. We sold approximately 1.6% more corn oil in the three months ended December 31, 2015 as compared to the same period in 2014 due primarily to increased oil extraction rates per bushel of corn.

Management expects corn oil prices will remain lower due to an oversupply from widespread adoption of corn oil extraction throughout the ethanol industry. Until oversupply is corrected, these lower prices will persist. Management expects that our corn oil production will increase due to our plans to increase our ethanol production capacity to approximately 135 million gallons during our fiscal year ended September 30, 2016, which would also increase our corn oil production.

Our cost of goods sold as a percentage of revenues was approximately 94.5% for the three months ended December 31, 2015 as compared to approximately 67.6% for the same period in 2014. This increase in cost of goods sold as a percentage of revenues was the result of increased corn prices relative to the price of ethanol for the three months ended December 31, 2015 as compared to the same period in 2014. Our two largest costs of production are corn and natural gas. Cost of goods sold also includes net gains or losses from our commodity derivatives investment position.

Our largest cost associated with the production of ethanol, distillers grains and corn oil is corn cost. During the three months ended December 31, 2015, we used approximately 0.5% fewer bushels of corn to produce our ethanol, distillers grain and corn oil as compared to the same period in 2014. During the three months ended December 31, 2015, our average price paid per bushel of corn increased approximately 35.4% as compared to the same period in 2014 due to lower corn yields locally as a result

Management expects that corn prices will be relatively steady through our second and third fiscal quarters. However, weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. In addition, corn prices could increase if export demand remains high. If corn prices rise, it will have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Volatility in the price of corn could significantly impact our cost of goods sold.

Our natural gas cost was lower during our three months ended December 31, 2015 as compared to the three months ended December 31, 2014. This decrease in cost of natural gas for the three months ended December 31, 2015 as compared to the same period in 2014 was primarily the result of a decrease of approximately 31.3% in the average price per MMBTU of our natural gas due to plentiful supply. We used approximately 0.5% more natural gas for the three months ended December 31, 2015 as compared to the same period in 2014 because of higher ethanol production.

Unless we experience a catastrophic weather event that would cause problems related to the supply of natural gas, management anticipates that natural gas prices will continue to remain at current levels as natural gas production has replenished stock shortages from last year and is currently outpacing demand.

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

Our operating expenses as a percentage of revenues were approximately 2.4% for the three months ended December 31, 2015 compared to operating expenses of approximately 2.1% of revenues for the same period in 2014. Operating expenses include salaries and benefits of administrative employees, insurance, taxes, professional fees and other general administrative costs. Our efforts to optimize efficiencies and maximize production may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses generally do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady throughout the remainder of the 2016 fiscal year.

Our income from operations for the three months ended December 31, 2015 was approximately 3.1% of our revenues compared to operating income of approximately 30.3% of revenues for the same period in 2014. The decrease in operating income for the three months ended December 31, 2015 was primarily the result of the decreased ethanol prices relative to the price of corn.

Our other expense for the three months ended December 31, 2015 and our other income the same period in 2014 were minimal. Our other expense for the three months ended December 31, 2015 consisted primarily of interest expense due to our borrowing funds to pay for construction costs in connection with our ongoing expansion projects. Our other income for the three months ended December 31, 2014 consisted primarily of miscellaneous and rent income.

We experienced an increase in our current assets at December 31, 2015 compared to September 30, 2015. This increase was primarily driven by an increase in our cash, inventories and commodity derivative instruments at December 31, 2015 as compared to September 30, 2015. We experienced an increase in cash at December 31, 2015 compared to September 30, 2015 due to positive cash flow from operations and to borrowing on our Declining Note, which was partially offset by capital expenditures. We had an increase in our corn inventory due to the addition of two steel grain bins that were filled near harvest causing an increase in our inventories at December 31, 2015 compared to September 30, 2015. Commodity derivative instruments increased at December 31, 2015 compared to September 30, 2015 due to price increases in the corn futures markets. These increases were partially offset by a decrease in our restricted cash at December 31, 2015 as compared to September 30, 2015 because of positive corn market price movements decreasing our required margin requirements.

We experienced an increase in our total current liabilities at December 31, 2015 compared to September 30, 2015. This increase was primarily due to an increase in our accounts payable for corn at December 31, 2015 as compared to September 30, 2015 due to having more corn inventory purchased, year-end deferral of payments by farmers and producers and an increase in our commodity derivative instruments at December 31, 2015 as compared to September 30, 2015 due to declining prices in the ethanol and natural gas futures markets. These increases were partially offset by a decrease in our accrued expenses and our accounts payable at December 31, 2015 as compared to September 30, 2015 as we converted short-term payables for the expansion project to long term debt on the Declining Revolving Loan.

We experienced an increase in our long-term liabilities as of December 31, 2015 compared to September 30, 2015. At December 31, 2015, we had $8,956,973 of outstanding borrowings in the form of long-term loans, compared to $4,865,236 at September 30, 2015. The increase is due to borrowing additional funds to pay for construction costs in connection with our ongoing expansion projects.

Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our current credit facilities and cash from our operations to continue to operate the ethanol plant for the next 12 months. We do not anticipate seeking additional equity financing during our 2016 fiscal year. However, operating margins narrowed towards the end of our first fiscal quarter and are expected to continue to be slim and possibly negative at times during our second fiscal quarter. Should we experience unfavorable operating conditions in the ethanol industry that prevent us from profitably operating the ethanol plant, we could have difficulty maintaining our liquidity and may need to rely on our revolving lines of credit for operations.



	2015			2014
Net cash provided by operating activities	$	10,643,141		$	28,760,194
Net cash used for investing activities	$	(1,472,449	)	$	(709,611	)
Net cash used for financing activities	$	(3,211,263	)	$	(24,830,201	)
Net increase in cash	$	5,959,429		$	3,220,382
Cash, beginning of period	$	20,827,614		$	27,731,976
Cash, end of period	$	26,787,043		$	30,952,358

We experienced a decrease in our cash flow from operations for the three months ended December 31, 2015 as compared to the same period in 2014. This was primarily the result of decreased ethanol and distillers grain prices relative to the cost of corn for the three months ended December 31, 2015 compared with the same period in 2014.

We used more cash in investing activities for the three months ended December 31, 2015 as compared to the same period in 2014. Cash used in investing activities increased because of an increase in payments for construction in progress because of our ongoing expansion project described below in Capital Improvements.

Cash used in financing activities was less for the three months ended December 31, 2015 as compared to the same period in 2014. This decrease was the result of our making distributions of approximately $7,303,000 for the three months ended December 31, 2015 as compared to distributions of approximately $24,830,000 for the three months ended December 31, 2014. We also borrowed money on the Declining Revolving Loan for the expansion project which we had not done in the three months ended December 31, 2014.

Our liquidity, results of operations and financial performance will be impacted by many variables, including the market price for commodities such as, but not limited to, corn, ethanol and other energy commodities, as well as the market price for any co-products generated by the facility and the cost of labor and other operating costs. Assuming future relative price levels for corn, ethanol and distillers grains remain consistent with the relative price levels as of December 31, 2015, we expect operations to generate adequate cash flows to maintain operations.

We have a loan agreement consisting of two loans, the Declining Revolving Loan ("Declining Loan") and the Revolving Credit Loan. In exchange, we granted liens on all property (real and personal, tangible and intangible) which include, among other things, a mortgage on the property, a security interest on commodity trading accounts, and assignment of material contracts.

On April 22, 2015, we executed a Fourth Amendment of First Amended and Restated Construction Loan Agreement with FNBO (the "Fourth Amendment"). The Fourth Amendment had an effective date of March 31, 2015, and extended the termination date of the Revolving Credit Loan from March 31, 2015 to February 28, 2016 and changed the interest rate on the Revolving Credit Loan to the 1-month LIBOR plus two hundred ninety basis points. On July 23, 2015, we executed a Fifth Amendment of First Amended and Restated Construction Loan Agreement with FNBO (the "Fifth Amendment") in order to obtain additional financing to fund a construction project which is expected to add storage capacity and increase production capacity at our plant. Please refer to Capital Improvements below for more information on our project. In connection therewith, we also executed a Second Amended and Restated Declining Revolving Credit Note and a First Amendment of Amended and Restated Construction Loan Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement.

The Fifth Amendment increases the maximum availability of the Declining Loan for construction and working capital advances from $5,000,000 to $20,000,000 and lowers the interest rate on the Declining Loan to the 3-month London Interbank Offered Rate ("LIBOR") plus two hundred ninety basis points. The Fifth Amendment provides for quarterly interest payments on the Declining Loan during the draw period and then the principal balance of the construction advances will be converted to term debt amortized over seven years on or before the draw period ending May 31, 2016, with a final maturity date of February 28, 2021. Any availability on the Declining Loan remaining after conversion of the principal balance of the construction advances will continue to be available for future capital expenditures. The interest rate at December 31, 2015 was 3.52%. There was $8,956,973 outstanding on the Declining Loan at December 31, 2015 and $4,865,236 outstanding at September 30, 2015.

The Revolving Credit Loan has a limit of $15,000,000 supported by a borrowing base made up of our corn, ethanol, dried distillers grain and corn oil inventories reduced by accounts payable associated with those inventories having a priority over FNBO. It is also supported by the eligible accounts receivable and commodity trading account excess margin funds. The interest rate on the Revolving Credit Loan is the 1-month LIBOR plus two hundred ninety basis points. The interest rate at December 31, 2015 was 3.33%. There were no borrowings outstanding on the Revolving Credit Note at December 31, 2015 or September 30, 2015.

During the term of the loans, we will be subject to certain financial covenants. Our minimum working capital is $15,000,000, which is calculated as our current assets plus the amount available for drawing under our long term revolving note, less current liabilities. The Fifth Amendment reinstates a prior requirement to maintain a minimum fixed charge coverage ratio of no less than 1.15:1.0 measured quarterly upon completion of the expansion project.

Our loan agreement also requires us to obtain prior approval from our lender before making, or committing to make, capital expenditures exceeding an aggregate amount of $5,000,000 in any single fiscal year. The cost of the expansion project is excluded from the $5,000,000 annual limit on capital expenditures.

We are meeting our liquidity needs and complying with our financial covenants and the other terms of our loan agreements at December 31, 2015. Based on current management projections, we anticipate that future operations will be sufficient to generate enough cash flow to maintain operations, service any new debt and comply with our financial covenants and other terms of our loan agreements through December 31, 2015. Should market conditions deteriorate in the future, circumstances may develop which could result in us violating the financial covenants or other terms of our loan agreements. Should we violate the terms or covenants of our loan or fail to obtain a waiver of any such term or covenant, our primary lender could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans if we have a balance outstanding. In that event, our lender could also elect to proceed with a foreclosure action on our plant.

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

We began a project during our third fiscal quarter 2015 which is expected to add storage capacity and also increase production capacity to approximately 135 million gallons over the next twelve months. The project is expected to cost approximately $18,200,000 and will be funded by cash from our operations and our expanded credit facilities. Please refer to Short and Long Term Debt Sources above for information on our credit facilities. In connection with the expansion, we executed a Construction Agreement dated April 15, 2015 with Custom Agri Builders, LLC to construct two grain bins, a grain dryer and an unloading pit at our plant. The fixed price is currently approximately $8,892,000, subject to execution of additional written change orders for modifications. The expansion projects, including the grain bins, grain dryer and unloading pit, are ongoing and expected to be completed by our 2016 fiscal year end.

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Our most critical accounting estimates, which require the greatest use of judgment by management, are designated as critical accounting estimates and include policies related to the useful lives of fixed assets; the valuation of basis and delay price contracts on corn purchases; derivatives; inventory; patronage dividends, long-lived and inventory purchase commitments. An in-depth description of these can be found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2015. Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed financial statements in accordance with generally accepted accounting principles. There have been no changes in the policies for our accounting estimates for the three months ended December 31, 2015.

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

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our Declining Loan and our Revolving Credit Loan which bear variable interest rates. The interest rate for the Declining Loan is the 3-month LIBOR rate plus 290 basis points with no minimum. There were borrowings in the amount of $8,956,973 outstanding on the Declining Loan and the applicable interest rate was3.52% at December 31, 2015. The interest rate for the Revolving Credit Loan is the 1-month LIBOR rate plus 290 basis points with no minimum. There were no outstanding balances on the Revolving Credit Loan at December 31, 2015. The specifics of the Declining Loan and the Revolving Credit Loan are discussed in greater detail above. If we were to experience a 10% adverse change in LIBOR, the annual effect such change would have on our statement of operations, based on the amount we had outstanding on our variable interest rate loans at December 31, 2015, would be approximately $6,000.

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

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

At December 31, 2015, we had a net long (buying) position of 5,460,000 gallons of ethanol under derivative contracts used to hedge our future ethanol sales for various delivery periods through September 2016, a net short (selling) position of 6,017,000 bushels of corn under derivative contracts used to hedge our forward corn contracts, corn inventory and ethanol sales for various delivery periods through May 2017, and a net long (buying) position of 1,120,000 MMBTUs of natural gas under derivative contracts used to hedge our forward natural gas purchases. These derivatives have not been designated as an effective hedge for accounting purposes. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above. The following table provides details regarding the gains and (losses) from our derivative instruments in the statements of operations, none of which are designated as hedging instruments for the three months ended December 31, 2015:

At December 31, 2015, we had forward corn purchase contracts at various fixed prices for various delivery periods through March 2017 for approximately 8.4% of our expected production needs for the next fifteen months, forward dried distiller grains sales contracts at various fixed prices for various delivery periods through June 2016 for approximately 16.0% of expected production for the next twelve months and forward corn oil contracts at various prices for various delivery periods through January 2016 for approximately 7.2% of expected production for the next twelve months. Also, at December 31, 2015, we had forward natural gas contracts for approximately 36.4% of expected purchases for the next two years and three months at various prices for various delivery periods through March 2018. As contracts are delivered, any gains or losses realized will be recognized in our gross margin. Due to the volatility and risk involved in the commodities market, we cannot be certain that these gains or losses will be realized.

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

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, corn oil, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas and average ethanol, distillers grains and corn oil prices as of December 31, 2015 net of the forward and future contracts used to hedge our market risk. The volumes are based on our expected use and sale of these commodities for a one year period from December 31, 2015. The results of this analysis, which may differ from actual results, are approximately as follows:



	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of December 31, 2015		Approximate Adverse Change to Income
Natural Gas	1,650,000	MMBTU	10	%		$	38,800
Ethanol	118,000,000	Gallons	10	%		$	16,874,000
Corn	36,650,000	Bushels	10	%		$	14,330,000
DDGs	266,000	Tons	10	%		$	3,452,000
Corn Oil	30,615,000	Pounds	10	%		$	750,000

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

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the

Securities and Exchange Commission's rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

Our management, including our Chief Executive Officer (the principal executive officer), Jeff Painter, along with our Chief Financial Officer (the principal financial officer), William Dartt, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of December 31, 2015. 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.

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

Motions for summary judgment were filed by the defendants, including the Company, and GS CleanTech. Meanwhile, GS Cleantech filed suit against another group of defendants which were joined with the MDL. On October 23, 2014, the United States District Court granted summary judgment finding that all of the patents claimed by GS CleanTech were invalid and that the Company had not infringed. We expect that GS CleanTech will appeal the ruling on the motions for summary judgment. However, no appeal has yet been filed as we are currently awaiting a ruling from the United States District Court on one counterclaim related to allegations of inequitable conduct by GS CleanTech that was not resolved by the rulings on summary judgment.

On February 16, 2010, ICM, Inc. agreed to indemnify the Company from and against all claims, demands, liabilities, actions, litigations, losses, damages, costs and expenses, including reasonable attorney's fees arising out of any claim of infringement of patents, copyrights or other intellectual property rights by reason of our purchase and use of the oil recovery system and agrees to defend the Company. Several of the other defendants also use equipment and processes provided by ICM, Inc. ICM, Inc. has, and we expect it will continue, to vigorously defend itself and the Company in this lawsuit and in any appeal filed by GS CleanTech. If GS CleanTech were to be successful in any appeal filed and allowed to continue to pursue its claims, we estimate that damages, if awarded, would be based on a reasonable royalty to, or lost profits of, GS CleanTech. Because of its October 23, 2014 ruling, it seems unlikely that the District Court would deem the case exceptional. However, in the event it would be deemed to be exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. ICM, Inc. has also agreed to indemnify us. However, in the event that damages were to be awarded, if ICM, Inc. does not fully indemnify us for any reason, we could be liable and could also be required to cease use of our oil separation process and seek out a replacement or cease oil production altogether.



Exhibit No.			Exhibit
31.1			Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2			Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1			Certificate Pursuant to 18 U.S.C. Section 1350*
32.2			Certificate Pursuant to 18 U.S.C. Section 1350*
101			The following financial information from Cardinal Ethanol, LLC's Quarterly Report on Form 10-Q for the quarter ended December 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets as of December 31, 2015 and September 30, 2015, (ii) Condensed Statements of Operations and Comprehensive Income for the three months ended December 31, 2015 and 2014, (iii) Statements of Cash Flows for the three months ended December 31, 2015 and 2014, and (iv) the Notes to Condensed Financial Statements.**



Indiana				20-2327916
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

1554 N. County Road 600 E., Union City, IN 47390
(Address of principal executive offices)

(765) 964-3137
(Registrant's telephone number, including area code)



Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer x	Smaller Reporting Company o



	Page Number
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3. Quantitative and Qualitative Disclosures about Market Risk	21
Item 4. Controls and Procedures	23
PART II. OTHER INFORMATION	24
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3. Defaults Upon Senior Securities	25
Item 4. Mine Safety Disclosures	25
Item 5. Other Information	25
Item 6. Exhibits	25
SIGNATURES	26



	Three Months Ended		Three Months Ended
	December 31, 2015		December 31, 2014

Supplemental Cash Flow Information
Interest paid	$	37,303	$	—

Supplemental Disclosure of Noncash Investing and Financing Activities
Construction in process included in accrued expenses	$	438,354	$	15,974



	December 31, 2015 (Unaudited)		September 30, 2015
Raw materials	$	8,825,746	$	5,166,402
Work in progress	1,250,730		1,320,961
Finished goods	1,934,629		5,058,449
Spare parts	2,310,306		2,208,640
Total	$	14,321,411	$	13,754,452



Instrument	Statement of Operations Location	Amount
Corn Derivative Contracts	Cost of Goods Sold	$	2,178,514
Ethanol Derivative Contracts	Revenues	(79,206		)
Natural Gas Derivative Contracts	Cost of Goods Sold	(86,256		)
Totals		$	2,013,052



Derivatives	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
Corn Derivative Contracts	$	1,227,745		$	1,227,745		$	1,227,745	—			—
Ethanol Derivative Contracts	$	417,375		$	417,375		$	417,375	—			—
Natural Gas Derivative Contracts	$	(86,256	)	$	(86,256	)			$	(86,256	)	—



	Total
January 1, 2016 to December 31, 2016	$	1,172,964
January 1, 2017 to December 31, 2017	1,172,964
January 1, 2018 to December 31, 2018	975,829
Total minimum lease commitments	$	3,321,757


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


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


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


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


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


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


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


•	Reduction or elimination of the Renewable Fuel Standard;


•	Changes in federal and/or state laws;


•	Competition from alternative fuel additives;


•	Changes in legislation benefiting renewable fuels;


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


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


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


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


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


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


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


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


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



Date Declared	Distribution Declared Per Unit		Total Distribution Amount		Month Distribution Paid
November 17, 2015	$	500	$	7,303,000	November 2015



		Total Renewable Fuel Volume Requirement	Portion of Volume Requirement That Can Be Met By Corn-based Ethanol
2014	Statutory	18.15	14.40
2014	EPA Rule 11/30/2015	16.28	13.61
2015	Statutory	20.50	15.00
2015	EPA Rule 11/30/2015	16.93	14.05
2016	Statutory	22.25	15.00
2016	EPA Rule 11/30/15	18.11	14.50



	December 31, 2015 (Unaudited)		September 30, 2015
Current Assets	$	55,516,142	$	48,646,801
Current Liabilities	$	19,961,873	$	11,997,241
Long-Term Liabilities	$	8,956,973	$	4,865,236
Member's Equity	$	135,047,379	$	140,606,243



		CARDINAL ETHANOL, LLC

Date:	February 4, 2016	/s/ Jeff Painter
		Jeff Painter
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	February 4, 2016	/s/ William Dartt
		William Dartt
		Chief Financial Officer
		(Principal Financial and Accounting Officer)