RED TRAIL ENERGY, LLC MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

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Results of operations for the years ended September 30, 2021 and 2020

The following table presents the results of our operations and the percentages of revenues, cost of goods sold, general and administrative expenses and other items compared to total revenues in our statements of operations for the years ended.
September 30, 2021 and 2020:

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                                                                  Year Ended                                      Year Ended
                                                              September 30, 2021                              September 30, 2020
Statement of Operations Data                             Amount            
         %                   Amount                   %
Revenues                                         $       119,084,611                100.00          $  94,175,793                100.00
Cost of Goods Sold                                       104,115,501                 87.43             90,134,689                 95.71
Gross Profit                                              14,969,110                 12.57              4,041,104                  4.29
General and Administrative Expenses                        3,239,245                  2.72              4,329,824                  4.60
Operating Income (Loss)                                   11,729,865                  9.85               (288,720)                (0.31)
Other Income                                                 895,814                  0.75                295,308                  0.31
Net Income                                       $        12,625,679                 10.60          $       6,588                  0.01



  The following table shows additional data regarding production and price
levels for our primary inputs and products for the years ended September 30,
2021 and 2020:
                                                              Year Ended                   Year Ended
                                                          September 30, 2021           September 30, 2020
Production:
 Ethanol sold (gallons)                                             51,893,094                   56,510,517
 Industrial ethanol sold (gallons)                                           -                    1,130,347
 Dried distillers grains sold (tons)                                    62,904                       91,073
 Modified distillers grains sold (tons)                                127,718                      109,691
Corn oil sold (pounds)                                              12,472,550                   15,385,430

Income:

 Ethanol average price per gallon (net of
hedging)                                                $              1.74          $              1.20
 Industrial ethanol average price per gallon                              -                         3.27
 Dried distillers grains average price per ton                       178.06                       128.63
 Modified distillers grains average price per ton                     78.46                        59.20
Corn oil average price per pound                                       0.41                         0.24
Primary Inputs:
 Corn ground (bushels)                                           17,717,130                   21,346,380
Natural gas (MMBtu)                                               1,261,294                    1,425,450
Costs of Primary Inputs:
 Corn average price per bushel (net of hedging)         $              4.46          $              2.98
Natural gas average price per MMBtu (net of                            2.77                         2.06

blanket)

Other costs (per gallon of ethanol sold):

 Chemical and additive costs                            $             0.083          $             0.077
 Denaturant cost                                                      0.035                        0.030
 Electricity cost                                                     0.045                        0.042
 Direct labor cost                                                    0.080                        0.067




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Revenue

  For our 2021 fiscal year, ethanol sales comprised approximately 76.9% of our
revenues, distillers grains sales comprised approximately 17.8% of our revenues
and corn oil sales comprised approximately 4.4% of our revenues. For our 2020
fiscal year, ethanol sales comprised approximately 76.1% of our revenues,
distillers grains sales comprised approximately 19.4% of our revenues and corn
oil sales comprised approximately 4.0% of our revenues.

Our total revenue for our 2021 fiscal year was approximately 24.4% higher than our 2020 fiscal year, resulting in an increase in net profit in the 2021 period compared to the 2020 period.

Ethanol

  The average price we received per gallon of ethanol sold was approximately
42.5% higher during our 2021 fiscal year compared to our 2020 fiscal year.
Following reduced gasoline demand in 2020 due to the effects of the COVID-19
pandemic, travel restrictions were lifted and gasoline demand rebounded. During
2021, ethanol stocks remained lower which resulted in increased ethanol demand
and prices. In addition to the lower ethanol stocks, gasoline prices were higher
during our 2021 fiscal year which positively impacted ethanol demand and prices.
Our ethanol revenue during our 2020 fiscal year was supported by industrial
ethanol sales. We did not have any industrial ethanol sales during our 2021
fiscal year.

  We sold approximately 7.3% fewer gallons of ethanol during our 2021 fiscal
year compared our 2020 fiscal year as we worked to maximize the amount of
ethanol we produced per bushel of corn we ground along with longer plant
shutdowns which impacted production. Our efficiency in converting corn to
ethanol increased significantly during our 2021 fiscal year which positively
impacted our profitability. This improved efficiency was important during our
2021 fiscal year due to the fact that our average cost per bushel of corn ground
was higher during our 2021 fiscal year compared to our 2020 fiscal year.

We recorded a gain of around $ 1,488,000 related to our ethanol derivatives during our 2021 fiscal year, which increased our revenue. We recorded a gain of around $ 383,000 related to our ethanol derivative instruments during our fiscal year 2020, which increased our sales.

Distilling the cereals

  The average price we received for our dried distillers grains during our 2021
fiscal year was approximately 38.4% greater than the average price we received
during our 2020 fiscal year primarily due to higher average corn prices during
our 2021 fiscal year which typically impacts distillers grains prices. The
average price we received from our modified distillers grains during our 2021
fiscal year was approximately 32.5% higher compared to our 2020 fiscal year due
to stronger local demand for distillers grains along with higher corn prices.
Our modified distillers grains are primarily sold in our local market.
Management anticipates higher distillers grains prices during our 2022 fiscal
year due to continued higher corn prices. Further, the United States experienced
strong distillers grains export demand during 2021 which increased domestic
distillers grains prices. If export demand for distillers grains increases
during our 2022 fiscal year, it could result in significantly higher distillers
grains prices.

  We produced approximately 28.5% fewer tons of dried distillers grains and
approximately 14.2% more tons of modified distillers grains during our 2021
fiscal year compared to our 2020 fiscal year. Our overall decreased production
had a corresponding impact on distillers grains production. We produced more
modified distillers grains due to strong local demand for distillers grains
which favors the modified distillers grains product. In addition, we produced
less corn oil per bushel of corn used during the 2021 period which resulted in
more total distillers grains we produced during the 2021 fiscal year. When we
produce more corn oil, it results in fewer tons of distillers grains produced.
We decide whether to produce dried distillers grains versus modified/wet
distillers grains based on market conditions and the relative cost of producing
each form of distillers grains. Management anticipates that distillers grains
production will remain at its current mix during our 2022 fiscal year unless
distillers grains exports increase significantly which could favor producing
more dried distillers grains.

  Corn Oil

  The average price we received for our corn oil was approximately 73.9% higher
during our 2021 fiscal year compared to our 2020 fiscal year primarily due to
additional corn oil demand from the biodiesel industry along with higher corn
and soybean oil prices which positively impact market corn oil prices. On
December 17, 2019, Congress renewed the biodiesel blenders' credit retroactively
for 2019 and for a total of five years. This certainty for the biodiesel
blenders' credit has positively impacted demand for corn oil during that time
period which has supported market corn oil prices. If the biodiesel blenders'
credit expires in the future, we anticipate that corn oil demand will be lower.
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  Our corn oil sales decreased by approximately 27.2% during our 2021 fiscal
year compared to our 2020 fiscal year due to reduced overall production at the
ethanol plant along with lower corn oil extraction efficiency during our 2021
fiscal year. Management anticipates that corn oil production will continue to be
higher during our 2022 fiscal year.

Cost of goods sold

  Our cost of goods sold is primarily made up of corn and energy expenses. Our
total cost of goods sold was approximately 10.7% higher for our 2021 fiscal year
compared to our 2020 fiscal year due primarily to higher corn and natural gas
costs during our 2021 fiscal year, partially offset by lower corn and natural
gas consumption.

Corn Costs

Our cost of goods sold related to corn was approximately 18.8% higher during our
2021 fiscal year compared to our 2020 fiscal year due to higher average corn
costs per bushel partially offset by fewer bushels of corn used during our 2021
fiscal year. Our average cost per bushel of corn used, without including our
derivative instrument gains and losses, was approximately 49.7% higher during
our 2021 fiscal year compared to our 2020 fiscal year. Management attributes
this increase in corn costs to higher corn demand from the ethanol industry
during our 2021 fiscal year along with a smaller corn crop which was harvested
in the fall of 2020 which reduced corn availability. The corn crop harvested in
the fall of 2021 was larger than in 2020 which may have a positive impact on
corn prices during our 2022 fiscal year. Management believes that there will be
sufficient corn in our local market to continue to operate the ethanol plant at
capacity during our 2022 fiscal year but we may experience higher prices in
order to purchase the corn we need. Our corn use decreased by approximately
17.0% during our 2021 fiscal year compared to our 2020 fiscal year due to
decreased overall production at the ethanol plant. Management anticipates that
we will use a comparable amount of corn in the future provided operating margins
remain favorable.

From time to time we enter into forward purchase contracts for our commodity
purchases and sales. At September 30, 2021, we had forward corn purchase
contracts for various delivery periods through March 2022 for a total commitment
of approximately $34.5 million for a total of approximately 5.7 million bushels
of corn. We had a gain of approximately $1,367,000 related to our corn
derivative instruments which decreased our cost of goods sold during our 2021
fiscal year. We had a loss of approximately $455,000 related to our corn
derivative instruments during our 2020 fiscal year which increased our cost of
goods sold. We recognize the gains or losses that result from the changes in the
value of our derivative instruments from corn in cost of goods sold as the
changes occur.  As corn prices fluctuate, the value of our derivative
instruments is impacted, which affects our financial performance.

Natural gas costs

  Our total natural gas costs to operate the ethanol plant were higher for our
2021 fiscal year compared to our 2020 fiscal year due primarily to increased
natural gas costs per MMBtu during the 2021 period partially offset by decreased
natural gas consumption. Our average cost per MMBtu of natural gas was
approximately 34.5% higher during our 2021 fiscal year compared to our 2020
fiscal year. Management believes this increase in natural gas costs during our
2021 fiscal year was due to higher energy prices generally during our 2021
fiscal year. We used approximately 11.5% fewer MMBtu of natural gas during our
2021 fiscal year compared to our 2020 fiscal year due to reduced overall
production at the ethanol plant. Management expects that natural gas prices will
increase during our 2022 fiscal year due to strong energy markets and the amount
of natural gas available in the market, particularly during the winter months
when natural gas demand for heating needs is higher.

General and administrative expenses

  Our general and administrative expense was lower during our 2021 fiscal year
and our 2020 fiscal year due to less labor and consulting costs during the 2021
period. During our 2020 fiscal year we had increased labor and consulting costs
associated with our carbon capture and storage project which is designed to
decrease the carbon intensity of our ethanol, making it more valuable in the
California fuel market.

Other Income/Expense

  We had less interest income during our 2021 fiscal year compared to our 2020
fiscal year due to having less cash on hand during the 2021 period. Our other
income was higher during our 2021 fiscal year compared to our 2020 fiscal year
due to a gain on the sale of used equipment no longer needed for operations and
the PPP loan forgiveness.
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Results of operations for the years ended September 30, 2020 and 2019

  The following table shows the results of our operations and the percentages of
revenues, cost of goods sold, general and administrative expenses and other
items to total revenues in our statements of operations for the years ended
September 30, 2020 and 2019:
                                                               Year Ended                                      Year Ended
                                                           September 30, 2020                              September 30, 2019
Statement of Operations Data                          Amount               
   %                      Amount                      %
Revenues                                         $  94,175,793                100.00          $       103,697,726                100.00
Cost of Goods Sold                                  90,134,689                 95.71                  104,690,474                100.96
Gross Profit (Loss)                                  4,041,104                  4.29                     (992,748)                (0.96)
General and Administrative Expenses                  4,329,824                  4.60                    3,135,825                  3.02
Operating Loss                                        (288,720)                (0.31)                  (4,128,573)                (3.98)
Other Income (Expense)                                 295,308                  0.31                      385,884                  0.37
Net Profit (Loss)                                $       6,588                  0.01          $        (3,742,689)                (3.61)



  The following table shows additional data regarding production and price
levels for our primary inputs and products for the years ended September 30,
2020 and 2019:
                                                              Year Ended                   Year Ended
                                                          September 30, 2020           September 30, 2019
Production:
 Ethanol sold (gallons)                                             56,510,517                   63,401,876
Industrial ethanol sold (gallons)                                    1,130,347                            -
 Dried distillers grains sold (tons)                                    91,073                       98,758
 Modified distillers grains sold (tons)                                109,691                      127,310
Corn oil sold (pounds)                                              15,385,430                   10,697,030

Income:

 Ethanol average price per gallon (net of
hedging)                                                $              1.20          $              1.27
Industrial ethanol average price per gallon                            3.27                            -
 Dried distillers grains average price per ton                       128.63                       135.15
 Modified distillers grains average price per ton                     59.20                        52.73
Corn oil average price per pound                                       0.24                         0.23
Primary Inputs:
 Corn ground (bushels)                                           21,346,380                   22,641,392
Natural gas (MMBtu)                                               1,425,450                    1,630,853
Costs of Primary Inputs:
 Corn average price per bushel (net of hedging)         $              2.98          $              3.56
Natural gas average price per MMBtu (net of                            2.06                         2.42

blanket)

Other costs (per gallon of ethanol sold):

 Chemical and additive costs                            $             0.077          $             0.080
 Denaturant cost                                                      0.030                        0.034
 Electricity cost                                                     0.042                        0.038
 Direct labor cost                                                    0.067                        0.062




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Revenue

  For our 2020 fiscal year, ethanol sales comprised approximately 76.1% of our
revenues, distillers grains sales comprised approximately 19.4% of our revenues
and corn oil sales comprised approximately 4.0% of our revenues. For our 2019
fiscal year, ethanol sales comprised approximately 77.7% of our revenues,
distillers grains sales comprised approximately 19.3% of our revenues and corn
oil sales comprised approximately 2.5% of our revenues.

  Our total revenue for our 2020 fiscal year was approximately 9.6% less
compared to our 2019 fiscal year, however, our cost of goods sold was less
during our 2020 fiscal year compared to our 2019 fiscal year which resulted in
positive net income during the 2020 period compared to a net loss during the
2019 period.

  Ethanol

  The average price we received per gallon of ethanol sold was approximately
5.5% less during our 2020 fiscal year compared to our 2019 fiscal year. The
ethanol industry struggled during both our 2020 fiscal year and 2019 fiscal year
with lower ethanol prices due to decreased domestic demand. This decreased
domestic demand was due to small refinery waivers from the ethanol use
requirements under the RFS granted by the EPA which reduced the volume of
ethanol which was required to be used in the United States. Early in 2020, lower
oil prices resulted in decreased gasoline and ethanol prices. In addition,
starting in March 2020, social distancing measures resulted in significant
decreases in ethanol demand. Many states instituted social distancing measures
which resulted in less gasoline demand as people stayed home to avoid infection.
While we were able to maintain production due to commitments we had in place
during our second quarter of 2020, we saw a 40% decrease in ethanol demand and a
32% decrease in ethanol price during that time due to the COVID-19 pandemic.
Approximately 3.9% of our ethanol sales were from industrial alcohol sales made
during our 2020 fiscal year due to shortages experienced early in the COVID-19
pandemic.

  We sold approximately 11.1% fewer gallons of ethanol during our 2020 fiscal
year compared our 2019 fiscal year due to significantly lower gasoline demand
due to the COVID-19 social distances measures which were implemented during our
2020 fiscal year.

  We experienced a gain of approximately $383,000 related to our ethanol
derivative instruments during our 2020 fiscal year which increased our revenue.
We had no soybean oil derivative instruments during our 2020 fiscal year. We
held no ethanol or soybean oil derivative instruments during our 2019 fiscal
year.

  Distillers Grains

  The average price we received for our dried distillers grains during our 2020
fiscal year was approximately 4.8% less than the average price we received
during our 2019 fiscal year primarily due to lower average corn prices during
our 2020 fiscal year which typically impacts distillers grains prices. The
average price we received from our modified distillers grains during our 2020
fiscal year was approximately 12.3% more compared to our 2019 fiscal year due to
stronger local demand for distillers grains. Our modified distillers grains are
primarily sold in our local market.

  We produced approximately 7.0% fewer tons of dried distillers grains and
approximately 16.4% fewer tons of modified distillers grains during our 2020
fiscal year compared to our 2019 fiscal year due to decreased overall production
during our 2020 fiscal year because of market disruptions from COVID-19. We
significantly reduced production during March and April 2020 which negatively
impacted our production for the year. In addition, we produced more corn oil
during the 2020 period which resulted in a net decrease in the total distillers
grains we produced during the 2020 fiscal year. When we produce more corn oil,
it results in fewer tons of distillers grains produced. We decide whether to
produce dried distillers grains versus modified/wet distillers grains based on
market conditions and the relative cost of producing each form of distillers
grains.

  Corn Oil

  The average price we received for our corn oil was approximately 4.0% greater
during our 2020 fiscal year compared to our 2019 fiscal year primarily due to
additional corn oil demand from the biodiesel industry. In addition, due to
reductions in the amount of ethanol produced during our 2020 fiscal year, the
supply of corn oil in the market was lower during our 2020 fiscal year. On
December 17, 2019, Congress renewed the biodiesel blenders' credit retroactively
for 2019 and for a total of five years. This certainty for the biodiesel
blenders' credit has positively impacted demand for corn oil during that time
period which has supported market corn oil prices.

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  Our corn oil sales increased by approximately 37.2% during our 2020 fiscal
year compared to our 2019 fiscal year due to increased corn oil production per
bushel of corn we ground. This increase in the amount of corn oil we produced
per bushel of corn we ground was due to a change in chemicals used during the
production process which resulted in more corn oil being extracted.

Cost of goods sold

  Our cost of goods sold is primarily made up of corn and energy expenses. Our
total cost of goods sold was approximately 14.0% less for our 2020 fiscal year
compared to our 2019 fiscal year due primarily to lower corn and natural gas
costs during our 2020 fiscal year.

Corn costs

Our cost of goods sold related to corn was approximately 22.5% lower during our
2020 fiscal year compared to our 2019 fiscal year due to lower average corn
costs per bushel along with slightly fewer bushels of corn used during our 2020
fiscal year. Our average cost per bushel of corn used, without including our
derivative instrument gains and losses, was approximately 16.3% lower during our
2020 fiscal year compared to our 2019 fiscal year. Management attributes this
decrease in corn costs to lower corn demand from the ethanol industry during our
2020 fiscal year. Our corn use decreased by approximately 5.7% during our 2020
fiscal year compared to our 2019 fiscal year due to decreased overall production
at the ethanol plant.

From time to time we enter into forward purchase contracts for our commodity
purchases and sales. At September 30, 2020, we had forward corn purchase
contracts for various delivery periods through March 2021 for a total commitment
of approximately $9.42 million for a total of approximately 2.8 million bushels
of corn. We had a loss of approximately $455,000 related to our corn derivative
instruments which increased our cost of goods sold during our 2020 fiscal year.
We had a gain of approximately $4.4 million related to our corn derivative
instruments during our 2019 fiscal year which decreased our cost of goods sold.
We recognize the gains or losses that result from the changes in the value of
our derivative instruments from corn in cost of goods sold as the changes
occur.  As corn prices fluctuate, the value of our derivative instruments is
impacted, which affects our financial performance.

Natural gas costs

  Our total natural gas costs to operate the ethanol plant were lower for our
2020 fiscal year compared to our 2019 fiscal year due primarily to decreased
natural gas costs per MMBtu during the 2020 period. Our average cost per MMBtu
of natural gas was approximately 14.9% lower during our 2020 fiscal year
compared to our 2019 fiscal year. Management believes this decrease in natural
gas costs during our 2020 fiscal year was due to lower energy prices generally
during our 2020 fiscal year. We used approximately the same amount of natural
gas during both our 2020 fiscal year and our 2019 fiscal year. Management
expects that natural gas prices will remain steady during our 2021 fiscal year
unless we experience supply disruptions which impact the amount of natural gas
available in the market, particularly during the winter months when natural gas
demand for heating needs is higher.

General and administrative expenses

  Our general and administrative expense was higher during our 2020 fiscal year
and our 2019 fiscal year due to increased labor and consulting costs related to
the carbon capture and storage project which is designed to decrease the carbon
intensity of our ethanol, making it more valuable in the California fuel market.

Other income / expenses

  We had more interest income during our 2020 fiscal year compared to our 2019
fiscal year due to having more cash on hand during the 2020 period. Our other
income was lower during our 2020 fiscal year compared to our 2019 fiscal year
due to a lower capital account distribution from RPMG, our marketer.
Changes in Financial Condition for the Year Ended September 30, 2021 and 2020

  Current Assets. We had less cash and equivalents on our balance sheet at
September 30, 2021 compared to September 30, 2020 due to cash we used for
capital expenditures for our carbon sequestration project along with an increase
in restricted cash related to our derivative instruments at September 30, 2021
compared to September 30, 2020. We had more restricted cash at September 30,
2021 compared to September 30, 2020 as a result of having more cash deposited in
our margin
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account with our commodities broker related to our risk management positions. We
had less accounts receivable at September 30, 2021 compared to September 30,
2020 due primarily to the timing of payments from our product marketers at the
end of our 2021 fiscal year compared to the end of our 2020 fiscal year. We had
more inventory on hand at September 30, 2021 compared to September 30, 2020 due
to more finished goods inventory at September 30, 2021 due in part to higher
ethanol prices which are used to value our inventory.

  Property, Plant and Equipment. The gross value of our property, plant and
equipment was higher at September 30, 2021 compared to September 30, 2020 due
primarily to the start of construction on our carbon capture and storage project
during our 2021 fiscal year. The carbon capture and storage project, which was
started during our 2019 fiscal year, will inject CO2 from the fermentation
process into a saline formation to lower the carbon intensity value of our
ethanol so it qualifies for the west coast clean fuels programs.

  Other Assets. Our other assets were higher at September 30, 2021 than at
September 30, 2020 due primarily to an increase in our patronage equity with
Roughrider Electric Cooperative The net right of use asset related to our
operating leases was lower at September 30, 2021 than at September 30, 2020 due
to amortization of our operating leases during our 2021 fiscal year.

  Current Liabilities. We had checks issued in excess of our bank balances at
September 30, 2021. When checks are presented for payment which exceed our cash
balances, we use our revolving loan to pay the amounts owed. Our accounts
payable was higher at September 30, 2021 and at September 30, 2020 due to
deferred corn payments. Our accrued expenses were lower at September 30, 2021
compared to September 30, 2020 due to having fewer corn payables at
September 30, 2021 compared to September 30, 2020. We had a larger accrued loss
on our firm corn purchase commitments at September 30, 2021 compared to
September 30, 2020 due to corn price increases. The current maturities of our
long-term debt was lower at September 30, 2021 compared to September 30, 2020
due to forgiveness of our Paycheck Protection Program ("PPP") loan during our
2021 fiscal year. The current portion of our operating lease liability was
higher at September 30, 2021 compared to September 30, 2020 due to increased
amortization of our operating leases.

  Long-term Liabilities. We had less long-term liabilities at September 30, 2021
compared to September 30, 2020 due to forgiveness of our PPP loan along with
payments on our long term debt during our 2021 fiscal year. We had a smaller
long-term liability related to operating leases at September 30, 2021 compared
to September 30, 2020 due to regular amortization of our operating leases.

Critical accounting policies

  Management uses 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. Of the significant accounting policies described in the notes to
our financial statements, we believe that the following are the most critical.

Inventory

  Corn is the primary raw material and, along with other raw materials and
supplies, is stated at the lower of cost or net realizable value on a first-in,
first-out (FIFO) basis.  Work in process and finished goods, which consists of
ethanol, distillers grains and corn oil produced, is stated at the lower of
average cost or net realizable value.  Spare parts inventory is valued at lower
of cost or net realizable value on a FIFO basis.

Provision for bad debts

  Management's estimate of the Allowance for Doubtful Accounts is based on
management's estimate of the collectability of identified receivables, as well
as the aging of customer accounts. A 10% change in management's estimate
regarding the Allowance for Doubtful Accounts as of September 30, 2021 could
impact net income by approximately $38,000 for our 2022 fiscal year.

Revenue recognition

  The Company sells ethanol and related products pursuant to marketing
agreements. The Company recognizes revenue from sales of ethanol and co-products
at the point in time when the performance obligations in the contract are met,
which is when the customer obtains control of such products and typically occurs
upon shipment depending on the terms of the underlying contracts. Revenue is
measured as the amount of consideration expected to be received in exchange for
transferring
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goods or providing services. In some instances, the Company enters into
contracts with customers that contain multiple performance obligations to
deliver volumes of co-products over a contractual period of less than 12 months.
The Company allocates the transaction price to each performance obligation
identified in the contract based on relative standalone selling prices and
recognizes the related revenue as control of each individual product is
transferred to the customer in satisfaction of the corresponding performance
obligation. Revenues are shown net of any fees incurred under the terms of the
Company's agreements for the marketing and sale of ethanol and related products.

Long-term assets

  Property, plant, and equipment are stated at cost. Depreciation is provided
over estimated useful lives by use of the straight line method. Maintenance and
repairs are expensed as incurred. Major improvements and betterments are
capitalized. The present values of finance lease obligations are classified as
long-term debt and the related assets are included in property, plant and
equipment. Amortization of equipment under finance leases is included in
depreciation expense. Management does not believe it is reasonably likely that
the valuation of its property, plant and equipment will change in any material
manner in future estimates.

Liquidity and capital resources

  Based on financial forecasts performed by our management, we anticipate that
we will have sufficient cash from our expected credit facilities and cash from
our operations to continue to operate the ethanol plant for the next 12 months.
Should we experience unfavorable operating conditions in the future, we may have
to secure additional debt or equity sources for working capital or other
purposes. We do not have any planned capital projects for which we anticipate
requiring additional borrowing.

The following table presents the cash flows for the years ended September 30, 2021
and 2020:

                                                                2021        

2020

  Net cash provided by operating activities                $ 19,721,836     

$ 3,292,949

  Net cash (used in) investing activities                   (23,053,910)    

(8 871 441)

Net cash provided by (used in) financing activities (2,565,171)

6 168 912

  Net increase (decrease) in cash                          $ (5,897,245)    

$ 590,420

  Cash and equivalents, end of period                      $  5,215,244      $ 11,112,489



Cash Flow from Operations

Our operations provided more cash during our 2021 fiscal year compared to our
2020 fiscal year due primarily to a larger net income we generated during the
2021 period compared. We had a significant increase in accounts payable and
accrued expenses related to deferred corn payments which provided more cash
during our 2021 fiscal year.

Cash flow from investing activities

We used more cash for capital expenditures during our 2021 fiscal year compared
to our 2020 fiscal year. During our 2021 fiscal year, we had capital
expenditures primarily related to our carbon sequestration project. During our
2020 fiscal year, we also had capital expenditures related to our carbon
sequestration project and our industrial alcohol project.

Cash flow from financing activities

Our financing activities used cash during our 2021 fiscal year due primarily to
a dividend we paid during our 2021 fiscal year. We also used more cash for debt
and lease repayments during our 2021 fiscal year compared to our 2020 fiscal
year.

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, we expect operations to generate
adequate cash flows to maintain operations.


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The following table presents the cash flows for the years ended September 30, 2020
and 2019:

                                                            2020            

2019

Net cash flow generated by operating activities $ 3,292,949 $

378,740

       Net cash (used in) investing activities           (8,871,441)        

(725,559)

       Net cash (used in) financing activities            6,168,912         

(4,451)

       Net increase (decrease) in cash                 $    590,420      $  

(351,270)

       Cash and equivalents, end of period             $ 11,112,489      $
10,522,069



Cash Flow from Operations

Our operations provided more cash during our 2020 fiscal year compared to our
2019 fiscal year due to net income we generated during the 2020 period compared
to a net loss during the 2019 period. Our derivative instruments, accounts
receivable and accounts payable positively impacted the cash generated by our
operating activities during our 2020 fiscal year.

Cash flow from investing activities

We used more cash for capital expenditures during our 2020 fiscal year compared
to our 2019 fiscal year. During our 2020 fiscal year, we had capital
expenditures primarily related to our carbon sequestration project. During our
2019 fiscal year, we had capital expenditures primarily related to improvements
to our centrifuges and heat exchangers.

Cash flow from financing activities

Our financing activities generated liquidity in our fiscal 2020 due to increased liquidity from our debt instruments. We used cash during our 2019 fiscal year for lease refunds.

Capital Expenditures

We had about $ 29.2 million under construction in progress at
September 30, 2021 linked to our carbon capture and storage and industrial alcohol projects. During the closed financial year September 30, 2021, we have put into service approximately $ 4.7 million in capital projects.

Capital resources

  On January 22, 2020, we entered into a series of loans with Cornerstone Bank
("Cornerstone"), described below. On February 1, 2021 we renewed our $10 million
Revolving Loan with Cornerstone Bank. In addition, on February 1, 2021 we
entered into a $28 million construction loan with Cornerstone Bank for the
carbon capture and storage project described below.

Revolving loan

On January 22, 2020, we entered into a new $10 million revolving loan (the
"Revolving Loan") with Cornerstone which was renewed on February 1, 2021.
Interest accrues on any outstanding balance on the Revolving Loan at a rate of
1.2% less than the prime rate as published by the Wall Street Journal, adjusted
monthly. The Revolving Loan has a minimum interest rate of 3.0%. The maturity
date of the Revolving Loan is January 21, 2022. The Revolving Loan is secured by
a lien on all of our assets. At September 30, 2021, we had $10 million available
on the Revolving Loan. The variable interest rate on September 30, 2021 was
3.00%.

Construction loan

On January 22, 2020, we entered into a new $7 million construction loan (the
"Construction Loan") with Cornerstone to finance our carbon capture and storage
project. Interest accrues on any outstanding balance on the Construction Loan at
a rate of 1.2% less than the prime rate as published by the Wall Street Journal,
adjusted monthly. The maturity date of the Construction Loan is February 1,
2022. The Construction Loan is secured by a lien on all of our assets. At
September 30, 2021, we had $7 million available on the Construction Loan. The
variable interest rate on September 30, 2021 was 3.00%.

On February 1, 2021, we entered into a new $28 million construction loan (the
"CCS Construction Loan") with Cornerstone to finance our carbon capture and
storage project. Interest accrues on any outstanding balance on the CCS
Construction Loan at a rate of 1.2% less than the prime rate as published by the
Wall Street Journal, adjusted monthly. The
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CCS Construction Loan has a minimum interest rate of 3.0%. The maturity date of
the CCS Construction Loan is January 31, 2022. The CCS Construction Loan is
secured by a lien on substantially all of our assets. At September 30, 2021, we
had $28 million available under the CCS Construction Loan. The variable interest
rate on September 30, 2021 was 3.00%.

Paycheque Protection Program Loan

On April 16, 2020, we entered into a new $873,400 Paycheck Protection Program
Loan (the "PPP Loan) with Cornerstone. Interest accrued on any outstanding
balance on the PPP Loan at a rate of 1.0%. The maturity date of the PPP Loan was
April 16, 2022. Under the terms of the loan, the Company applied for forgiveness
of the entire amount of the PPP Loan on October 31, 2020, in accordance with PPP
regulations, which provided for the possibility of loan forgiveness because the
Company used all the proceeds of the PPP Loan for qualifying expenses in
accordance with PPP requirements. The entire amount of the PPP Loan was forgiven
on January 20, 2021. The forgiven amount was recorded as other income.

Ethanol recovery program

On July 13, 2020, we entered into a loan with the Bank of North Dakota Ethanol
Recovery Program and Cornerstone for $5.41 million. The Ethanol Recovery Program
was developed by the North Dakota Ethanol Producers Association and the Bank of
North Dakota to use the existing Biofuels Pace program and value-added loan
guarantee program to help ethanol production facilities weather the pandemic
economic challenges. Ethanol producers could qualify for up to $15 million
dollars of a low interest loan of 1% based on the amount of annual corn grind.
The maturity date of the loan is July 13, 2025. The fixed interest rate as of
September 30, 2021 was 3.75% with an interest rate buy down through the Bank of
North Dakota to 1%. We make monthly payments of approximately $74,000 per month
with the balance outstanding on September 30, 2021 of approximately $4,600,000.

Contractual obligations and commercial commitments

We have the following contractual obligations from September 30, 2021:

  Contractual Obligations:           Total          Less than 1 Yr        

1-3 years 3-5 years

Long-term debt obligations * $ 4,607,606 $ 719,233 $ 3,888,373 $ –

  Corn purchases *                  5,686,021            5,686,021
  Water purchases                   1,908,000              424,000        

1,272,000 212,000

  Operating lease obligations         762,847              372,987          389,860
  Finance leases                       14,409                4,542            9,867
  Total                          $ 12,978,883      $     7,206,783      $ 5,560,100      $ 212,000


* – Amounts determined by assuming the prices, including transport costs, at which the maize had been contracted for the spot maize contracts and the current market prices as of
September 30, 2021 for basic contracts which had not yet been fixed.

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