UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

	For the quarterly period ended March 31, ~~2018~~2019

	OR

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

	For the transition period from to .

	COMMISSION FILE NUMBER 000-52033

RED TRAIL ENERGY, LLC

(Exact name of registrant as specified in its charter)



North Dakota				76-0742311
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

3682 Highway 8 South, P.O. Box 11, Richardton, ND 58652
(Address of principal executive offices)

(701) 974-3308
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

x Yes o No

Indicate by check mark whether the registrant has submitted electronically ~~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).

x Yes o No

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



Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer x	Smaller Reporting Company o
	Emerging Growth Company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

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

As of May ~~14, 2018~~10, 2019, there were ~~41,466,340~~40,148,160 Class A Membership Units outstanding.

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INDEX

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PART II. FINANCIAL INFORMATION

Item 1. Financial Statements

RED TRAIL ENERGY, LLC

Condensed Balance Sheets


ASSETS	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
	(Unaudited)				(Unaudited)
Current Assets
Cash and equivalents	$	9,275,708	$	3,223,342	$	7,613,156	$	4,573,858
Restricted cash - margin account	6,240,642		5,906,666		7,219,464		6,299,481
Accounts receivable, primarily related party	3,187,599		4,059,227		3,657,246		3,029,314
Other receivables	1,600		8,764
Inventory	15,683,437		16,413,742		7,274,045		10,971,056
Prepaid expenses	199,818		33,364		283,834		110,974
Total current assets	34,588,804		29,645,105		26,047,745		24,984,683

Property, Plant and Equipment
Land	1,342,381		1,342,381		1,342,381		1,342,381
Land improvements	4,266,953		4,266,953		4,465,311		4,465,311
Buildings	8,036,031		8,036,031		8,111,074		8,091,522
Plant and equipment	87,194,526		86,460,902		87,764,475		87,740,511
Construction in progress	317,541		628,454		338,454		42,742
	101,157,432		100,734,721		102,021,695		101,682,467
Less accumulated depreciation	55,951,041		53,592,985		60,706,595		58,325,210
Net property, plant and equipment	45,206,391		47,141,736		41,315,100		43,357,257

Other Assets
Investment in RPMG	605,000		605,000		605,000		605,000
Patronage equity	3,270,279		3,270,279		3,478,552		3,478,552
Deposits	40,000		40,000		40,000		40,000
Total other assets	3,915,279		3,915,279		4,123,552		4,123,552

Total Assets	$	83,710,474	$	80,702,120	$	71,486,397	$	72,465,492

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

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RED TRAIL ENERGY, LLC

Condensed Balance Sheets


LIABILITIES AND MEMBERS' EQUITY	March 31, 2018		September 30, 2017		March 31, 2019		September 30, 2018
	(Unaudited)				(Unaudited)
Current Liabilities
Accounts payable	$	723,356	$	2,409,171	$	2,239,641	$	4,689,119
Accrued expenses	12,624,342		3,670,338		3,654,462		1,005,067
Commodities derivative instruments, at fair value (see note 2)	131,250		933,312
Accrued loss on firm purchase commitments (see notes 3 and 7)	13,000		5,000
Commodities derivative instruments, at fair value (see note 3)					2,283,200		2,245,650
Accrued loss on firm purchase commitments (see notes 4 and 8)					11,000		204,000
Current maturities of notes payable	2,627		2,617		1,605		2,921
Total current liabilities	13,494,575		7,020,438		8,189,908		8,146,757

Long-Term Liabilities
Notes payable	1,605		2,921

Members’ Equity (41,466,340 as of March 31, 2018 and September 30, 2017, respectively, of Class A Membership Units issued and outstanding)	70,214,294		73,678,761
Commitments and Contingencies (Notes 5, 7 and 8)
Members’ Equity 40,148,160 Class A Membership Units issued and outstanding					63,296,489		64,318,735

Total Liabilities and Members’ Equity	$	83,710,474	$	80,702,120	$	71,486,397	$	72,465,492

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

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RED TRAIL ENERGY, LLC

Condensed Statements of Operations (Unaudited)


													Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended			March 31, 2019			March 31, 2018			March 31, 2019			March 31, 2018
	March 31, 2018			March 31, 2017			March 31, 2018			March 31, 2017			(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenues, primarily related party	$	26,366,732		$	27,074,946		$	52,489,589		$	57,079,406		$	26,231,799		$	26,366,732		$	52,140,936		$	52,489,589

Cost of Goods Sold
Cost of goods sold	24,188,309			26,885,515			51,931,593			54,013,447			27,253,765			24,188,309			52,110,107			51,931,593
Lower of cost or net realizable value adjustment	11,103			—			82,082			—			—			11,103			—			82,082
Loss on firm purchase commitments	—			—			8,000			—			—			—			5,000			8,000
Total Cost of Goods Sold	24,199,412			26,885,515			52,021,675			54,013,447			27,253,765			24,199,412			52,115,107			52,021,675

Gross Profit	2,167,320			189,431			467,914			3,065,959
Gross Profit (Loss)													(1,021,966		)	2,167,320			25,829			467,914

General and Administrative Expenses	785,008			747,812			1,500,919			1,438,745			655,880			785,008			1,330,765			1,500,919

Operating Income (Loss)	1,382,312			(558,381		)	(1,033,005		)	1,627,214			(1,677,846		)	1,382,312			(1,304,936		)	(1,033,005		)

Other Income (Expense)
Interest income	23,839			24,865			47,267			42,977			7,318			23,839			34,761			47,267
Other income	16,047			70,462			423,280			638,731			247,224			16,047			249,720			423,280
Interest expense	(24		)	(14		)	(34		)	(28		)	(4		)	(24		)	(9		)	(34		)
Total other income (expense), net	39,862			95,313			470,513			681,680
Total other income, net													254,538			39,862			284,472			470,513

Net Income (Loss)	$	1,422,174		$	(463,068	)	$	(562,492	)	$	2,308,894		$	(1,423,308	)	$	1,422,174		$	(1,020,464	)	$	(562,492	)

Weighted Average Units Outstanding
Basic	41,466,340			41,480,466			41,466,340			41,443,380			40,148,160			41,466,340			40,148,160			41,466,340

Diluted	41,466,340			41,480,466			41,466,340			41,443,380			40,148,160			41,466,340			40,148,160			41,466,340

Net Income (Loss) Per Unit
Basic	$	0.03		$	(0.01	)	$	(0.01	)	$	0.06		$	(0.04	)	$	0.03		$	(0.03	)	$	(0.01	)

Diluted	$	0.03		$	(0.01	)	$	(0.01	)	$	0.06		$	(0.04	)	$	0.03		$	(0.03	)	$	(0.01	)

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

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RED TRAIL ENERGY, LLC

Condensed Statements of Cash Flows (Unaudited)


	Six Months Ended			Six Months Ended			Six Months Ended			Six Months Ended
	March 31, 2018			March 31, 2017			March 31, 2019			March 31, 2018
Cash Flows from Operating Activities
Net income (loss)	$	(562,492	)	$	2,308,894		$	(1,020,464	)	$	(562,492	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	2,358,057			2,339,638			2,381,386			2,358,057
Loss (gain) on disposal of fixed assets							7,094			(802,063		)
Change in fair value of derivative instruments	(802,063		)	(37,899		)	37,550			82,082
Lower of cost or net realizable value adjustment	82,082			—
Loss on firm purchase commitments	8,000			—			5,000			8,000
Noncash patronage equity	—			(2,591		)
Change in operating assets and liabilities:
Restricted cash	(333,976		)	(1,146,998		)
Changes in operating assets and liabilities:
Accounts receivable	871,628			(639,038		)	(627,932		)	871,628
Other receivables	7,164			(63,005		)	—			7,164
Inventory	640,224			(8,040,578		)	3,692,011			640,224
Prepaid expenses	(166,455		)	(86,124		)	(172,860		)	(166,455		)
Accounts payable	(1,685,815		)	(848,702		)	(2,449,478		)	(1,685,815		)
Accrued expenses	8,944,380			17,737,791			2,649,394			8,944,380
Accrued purchase commitment losses	8,000			(74,000		)
Accrued loss on firm purchase commitments							(193,000		)	8,000
Net cash provided by operating activities	9,368,734			11,447,388			4,308,701			9,702,710

Cash Flows from Investing Activities
Proceeds from disposal of fixed assets							6,160			—
Capital expenditures	(422,711		)	(228,096		)	(352,482		)	(422,711		)
Net cash (used in) investing activities	(422,711		)	(228,096		)	(346,322		)	(422,711		)

Cash Flows from Financing Activities
Dividends paid	(2,892,350		)	(32,955		)	(1,782		)	(2,892,350		)
Unit repurchase	—			(681,820		)
Debt repayments	(1,307		)	(1,296		)	(1,316		)	(1,307		)
Net cash (used in) financing activities	(2,893,657		)	(716,071		)	(3,098		)	(2,893,657		)

Net Increase in Cash and Equivalents	6,052,366			10,503,221
Cash and Equivalents - Beginning of Period	3,223,342			10,274,166
Cash and Equivalents - End of Period	$	9,275,708		$	20,777,387
Net Increase in Cash, Cash Equivalents and Restricted Cash							3,959,281			6,386,342
Cash, Cash Equivalents and Restricted Cash - Beginning of Period							10,873,339			9,130,008
Cash, Cash Equivalents and Restricted Cash - End of Period							$	14,832,620		$	15,516,350

Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents							$	7,613,156		$	9,275,708
Restricted cash							7,219,464			6,240,642
Total Cash, Cash Equivalents and Restricted Cash							$	14,832,620		$	15,516,350

Supplemental Disclosure of Cash Flow Information
Interest paid	$	959		$	28		$	9		$	959
Distribution declared but not paid	9,625			—			—			9,625
Units issued in exchange for property	$	—		$	3,320,000

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

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, ~~2018~~2019

The accompanying condensed unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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 fiscal year ended September 30, ~~2017,~~2018, contained in the Company's Annual Report on Form 10-K.

In the opinion of management, the interim condensed unaudited financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, ~~2018.~~2019.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Red Trail Energy, LLC, a North Dakota limited liability company (the “Company”), owns and operates a 50 million gallon annual name-plate production ethanol plant near Richardton, North Dakota (the “Plant”).

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, inventory and allowance for doubtful accounts. Actual results could differ from those estimates.

Net Income Per Unit

Net income per unit is calculated on a basic and fully diluted basis using the weighted average units outstanding during the period.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the FASB issued ~~ASU No. 2014-09,~~ASC 606, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ~~ASU 2014-09~~ASC 606 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. ~~The~~Effective October 1, 2018, the Company ~~has evaluated the new standard and anticipates a change in the reporting~~adopted ASC 606 for all of revenue as enhanced disclosures will be required. The Company does not anticipate a significant impact on our financial statements due to the nature of our revenue streams and our revenue recognition policy.

~~Simplifying the Measurement of Inventory~~

~~In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurements of Inventory" regarding inventory that is measured~~its contracts using the first-in, first-out or average cost method. The guidance does not apply to inventory measured using the last-in, first-out or the retail inventory method. The guidance requires inventory within its scope to be measured at the lower of cost or net realizable value, which is the estimated selling price in the normal course of business less reasonable predictable costs of completion, disposal and transportation. These amendments more closely align GAAP with International Financial Reporting Standards (IFRS). ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period, and should be applied prospectively with early adoption permitted as of the beginning of an interim or annual reporting period. The Company has adopted the new standard during last quarter and there has been no significant impact to our financial statements.

~~Table of Contents~~

~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED MARCH 31, 2018~~

~~Lease Accounting Standards~~

In February 2016, the FASB issued ASU No. 2016-02, "Leases (topic 842)" which requires a lessee to recognize a right to use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, included interim periods within those years with early adoption permitted. The Company has evaluated the new standard and expects it will have a material impact on the financial statements as we will have to begin capitalizing leases on the balance sheet when the new standard is implemented.modified retrospective approach. See note ~~6 for current operating lease commitments.~~2.

Statement of Cash Flows; Restricted Cash

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for annal periods beginning after December 15, 2017, and interim periods within those annual periods.

Effective October 1, 2018 the Company retrospectively adopted ASU No. 2016-18. As a result, net cash used in operating activities for the six months ended March 31, 2018 was adjusted to exclude the change in restricted cash and increased the previously reported balance by approximately $334,000. Also the previously reported cash and cash equivalent balance was adjusted to include restricted cash and has increased by approximately $6,241,000.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, 2019

Lease Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, "Leases (topic 842)" which requires a lessee to recognize a right to use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, included interim periods within those years with early adoption permitted. The Company has evaluated the new standard and ~~anticipates~~expects it will have a ~~change in the presentation of restricted cash~~material impact on the ~~cash flow statement once~~financial statements as we will have to begin capitalizing leases on the balance sheet when the new standard is ~~adopted.~~implemented. See note 7 for current operating lease commitments.

2. REVENUE

Adoption of ASC 606

Effective October 1, 2018, the Company adopted ASC 606 using the modified retrospective approach for all of its contracts. Following the adoption of ASC 606, the Company continues to recognize revenue at a point-in-time when control of goods transfers to the customer. This is consistent with the Company's previous revenue recognition accounting policy under which the Company recognized revenue when title and risk of loss pass to the customer and collectability was reasonably assured. ASC 606 did not impact the Company's presentation of revenue on a gross or net basis. The Company recognizes revenue primarily from sales of ethanol and its related co-products. In addition, there was no impact of adoption on the statement of operations or balance sheet for the six months ended March 31, 2019. The Company expects the impact of adopting the new revenue standard to be immaterial to net income on an ongoing basis.

Revenue Recognition

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 delivery depending on the terms of the underlying contracts. Revenue is measured as the amount of consideration expected to be received in exchange for transferring 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.

Revenue by Source

The following table disaggregates revenue by major source for the three and six months ended March 31, 2019 and 2018.



Revenues	For the three months ended March 31, 2019 (unaudited)		For the three months ended March 31, 2018 (unaudited)		For the six months ended March 31, 2019 (unaudited)		For the six months ended March 31, 2018 (unaudited)
Ethanol and E85	$	20,115,563	$	19,958,835	$	39,654,732	$	39,564,008
Distillers Grains	5,291,939		5,485,733		10,908,715		11,016,298
Syrup	102,001		80,470		194,010		159,480
Corn Oil	688,004		799,362		1,293,145		1,668,719
Other	34,292		42,332		90,334		81,084
Total revenue from contracts with customers	$	26,231,799	$	26,366,732	$	52,140,936	$	52,489,589

Shipping and Handling Costs

We account for shipping and handling activities related to contracts with customers as costs to fulfill our promise to transfer the associated products. Accordingly, we record customer payments associated with shipping and handling costs as a component of revenue, and classify such costs as a component of cost of goods sold.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, 2019

2.3. DERIVATIVE INSTRUMENTS

Commodity Contracts

As part of its hedging strategy, the Company may enter into ethanol, soybean, soybean oil, natural gas and corn commodity-based derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices in order to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sales, corn oil sales, and corn 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. Ethanol derivative fair market value gains or losses are included in the results of operations and are classified as revenue and corn derivative changes in fair market value are included in cost of goods sold.

As of: March 31, 2018 (unaudited) September 30, 2017
Contract Type # of Contracts Notional Amount (Qty) Fair Value # of Contracts Notional Amount (Qty) Fair Value
Corn futures —
—
bushels $ —
81
405,000
bushels $ 16,688
Corn options 500
2,500,000
bushels $ (131,250 ) 1,800
9,000,000
bushels $ (950,000 )
Total fair value $ (131,250 ) $ (933,312 )
Amounts are combined on the balance sheet - negative numbers represent liabilities

~~Table of Contents~~

~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED MARCH 31, 2018~~



As of:	March 31, 2019 (unaudited)						September 30, 2018
Contract Type	# of Contracts	Notional Amount (Qty)		Fair Value			# of Contracts	Notional Amount (Qty)		Fair Value
Corn futures	520	2,600,000	bushels	$	(306,325	)	800	4,000,000	bushels	$	(319,400	)
Corn options	2,100	10,500,000	bushels	$	(1,976,875	)	2,800	14,000,000	bushels	$	(1,926,250	)
Total fair value				$	(2,283,200	)				$	(2,245,650	)
Amounts are combined on the balance sheet - negative numbers represent liabilities

The following tables provide details regarding the Company's derivative financial instruments at March 31, ~~2018~~2019 and September 30, ~~2017:~~2018:


Derivatives not designated as hedging instruments:

Balance Sheet - as of March 31, 2018 (unaudited)	Asset		Liability
Balance Sheet - as of March 31, 2019 (unaudited)					Asset		Liability
Commodity derivative instruments, at fair value	$	—	$	131,250	$	—	$	2,283,200
Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	131,250	$	—	$	2,283,200

Balance Sheet - as of September 30, 2017	Asset		Liability
Balance Sheet - as of September 30, 2018					Asset		Liability
Commodity derivative instruments, at fair value	$	—	$	933,312	$	—	$	2,245,650
Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	933,312	$	—	$	2,245,650


Statement of Operations Income/(Expense)	Location of gain (loss) in fair value recognized in income	Amount of gain(loss) recognized in income during the three months ended March 31, 2018 (unaudited)		Amount of gain (loss) recognized in income during the three months ended March 31, 2017 (unaudited)		Amount of gain(loss) recognized in income during the six months ended March 31, 2018 (unaudited)		Amount of gain (loss) recognized in income during the six months ended March 31, 2017 (unaudited)		Location of gain (loss) in fair value recognized in income	Amount of gain (loss) recognized in income during the three months ended March 31, 2019 (unaudited)			Amount of gain (loss) recognized in income during the three months ended March 31, 2018 (unaudited)		Amount of gain (loss) recognized in income during the six months ended March 31, 2019 (unaudited)			Amount of gain (loss) recognized in income during the six months ended March 31, 2018 (unaudited)
Corn derivative instruments	Cost of Goods Sold	$	1,702,775	$	545,897	$	1,134,239	$	764,255	Cost of Goods Sold	$	(1,186,069	)	$	1,702,775	$	(882,433	)	$	1,134,239
Ethanol derivative instruments	Revenue	—		265,230		1,800		306,180		Revenue	—			—		—			1,800
Soybean oil derivative instruments	Revenue	—		62,466		—		74,682
Natural gas derivative instruments	Cost of Goods Sold	—		280		—		10,780
Total		$	1,702,775	$	873,873	$	1,136,039	$	1,155,897		$	(1,186,069	)	$	1,702,775	$	(882,433	)	$	1,136,039

~~3. INVENTORY~~

~~Inventory is valued at the lower of cost or net realizable value. Inventory values as of March 31, 2018 and September 30, 2017 were as follows:~~

As of
March 31, 2018
(unaudited)
September 30, 2017
Raw materials, including corn, chemicals and supplies $ 11,293,737
$ 11,952,560
Work in process 723,739
773,786
Finished goods, including ethanol and distillers grains 1,619,788
1,577,066
Spare parts 2,046,173
2,110,330
Total inventory $ 15,683,437
$ 16,413,742

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, ~~2018~~2019

4. INVENTORY

Inventory is valued at the lower of cost or net realizable value. Inventory values as of March 31, 2019 and September 30, 2018 were as follows:



As of	March 31, 2019 (unaudited)		September 30, 2018
Raw materials, including corn, chemicals and supplies	$	2,370,644	$	6,684,322
Work in process	795,628		738,991
Finished goods, including ethanol and distillers grains	1,842,419		1,405,806
Spare parts	2,265,354		2,141,937
Total inventory	$	7,274,045	$	10,971,056

Lower of cost or net realizable value adjustments for the three and six months ended March 31, ~~2018~~2019 and ~~2017~~2018 were as follows:


	For the three months ended March 31, 2018 (unaudited)		For the three months ended March 31, 2017 (unaudited)		For the six months ended March 31, 2018 (unaudited)		For the six months ended March 31, 2017 (unaudited)		For the three months ended March 31, 2019 (unaudited)		For the three months ended March 31, 2018 (unaudited)		For the six months ended March 31, 2019 (unaudited)		For the six months ended March 31, 2018 (unaudited)
Loss on firm purchase commitments	$	—	$	—	$	8,000	$	—	$	—	$	—	$	5,000	$	8,000
Loss on lower of cost or net realizable value adjustment for inventory on hand	$	11,103	$	—	$	82,082	$	—	$	—	$	11,103	$	—	$	82,082
Total loss on lower of cost or net realizable value adjustments	$	11,103	$	—	$	90,082	$	—	$	—	$	11,103	$	5,000	$	90,082

The Company has entered into forward corn purchase contracts under which it is required to take delivery at the contract price. At the time the contracts were created, the price of the contract approximated market price. Subsequent changes in market conditions could cause the contract prices to become higher or lower than market prices. As of March 31, ~~2018,~~2019, the average price of corn purchased under certain fixed price contracts, that had not yet been delivered, was greater than approximated market price. Based on this information, the Company has ~~an $8,000~~a $5,000 estimated loss on firm purchase commitments for the six months ended March 31, ~~2018 and no estimated loss for the six months ended March 31, 2017.~~2019. The loss is recorded in “Loss on firm purchase commitments” on the statement of operations. The amount of the potential loss was determined by applying a methodology similar to that used in the impairment valuation with respect to inventory. Given the uncertainty of future ethanol prices, further losses on the outstanding purchase commitments could be recorded in future periods.

4.5. BANK FINANCING

As of March 31, 2018 (unaudited) September 30, 2017
Capital lease obligations (Note 6) $ 4,232
$ 5,538
Total Long-Term Debt 4,232
5,538
Less amounts due within one year 2,627
2,617
Total Long-Term Debt Less Amounts Due Within One Year $ 1,605
$ 2,921

~~The Company had a $10 million operating line-of-credit with First National Bank of Omaha that matured on March 20, 2017.~~



As of	March 31, 2019 (unaudited)		September 30, 2018
Capital lease obligations (Note 7)	$	1,605	$	2,921
Total Long-Term Debt	1,605		2,921
Less amounts due within one year	1,605		2,921
Total Long-Term Debt Less Amounts Due Within One Year	$	—	$	—

On ~~March 20, 2017,~~May 31, 2018, we ~~entered into a new~~renewed our $10 million revolving loan (the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). The ~~Revolving Loan replaced the revolving loan we had with First National Bank of Omaha. The~~ maturity date of the Revolving Loan is May 31, ~~2018.~~2019. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in the Credit Agreement. At March 31, ~~2018,~~2019 we had ~~$10,000,000~~$4,300,000 available on the Revolving Loan, taking into account the borrowing base calculation. At September 30, 2018 we had $8,800,000 available on the Revolving Loan. We had $0 drawn on the Revolving Loan as of March 31, 2019 and September 30, 2018. The variable interest rate on March 31, ~~2018~~2019 was ~~3.71%~~4.27%. Of the $10 million revolving line-of-credit, the Company was not allowed to draw $687,597 which is reserved as a source of funds to support a guaranteed payment the Company agreed to related to its natural gas pipeline. While the Company does not expect that it will be required to make a direct payment for the natural gas pipeline, the Company's agreement requires it to have funds available in the event the Company is required to make the guaranteed payment. See note 67 for the Company's additional future minimum lease commitments.

The Company's loans are secured by a lien on substantially all of the assets of the Company. As of March 31, ~~2018,~~2019, the Company was in compliance with ~~all of~~ its quarterly debt ~~covenants.~~covenant.

~~5. FAIR VALUE MEASUREMENTS~~

~~The following table provides information on those assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2018 and September 30, 2017, respectively.~~

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, ~~2018~~2019

6. FAIR VALUE MEASUREMENTS

The following table provides information on those liabilities that are measured at fair value on a recurring basis as of March 31, 2019 and September 30, 2018, respectively.


					Fair Value Measurement Using										Fair Value Measurement Using
	Carrying Amount as of March 31, 2018 (unaudited)		Fair Value as of March 31, 2018 (unaudited)		Level 1		Level 2		Level 3		Carrying Amount as of March 31, 2019 (unaudited)		Fair Value as of March 31, 2019 (unaudited)		Level 1		Level 2		Level 3
Liabilities
Commodities derivative instruments	$	131,250	$	131,250	$	131,250	$	—	$	—	$	2,283,200	$	2,283,200	$	2,283,200	$	—	$	—
Total	$	131,250	$	131,250	$	131,250	$	—	$	—	$	2,283,200	$	2,283,200	$	2,283,200	$	—	$	—

					Fair Value Measurement Using										Fair Value Measurement Using
	Carrying Amount as of September 30, 2017		Fair Value as of September 30, 2017		Level 1		Level 2		Level 3		Carrying Amount as of September 30, 2018		Fair Value as of September 30, 2018		Level 1		Level 2		Level 3
Liabilities
Commodities derivative instruments	$	933,312	$	933,312	$	933,312	$	—	$	—	$	2,245,650	$	2,245,650	$	2,245,650	$	—	$	—
Total	$	933,312	$	933,312	$	933,312	$	—	$	—	$	2,245,650	$	2,245,650	$	2,245,650	$	—	$	—

The fair value of the corn, ethanol, soybean oil and natural gas derivative instruments is based on quoted market prices in an active market.

6.7. LEASES

The Company leases equipment under operating and capital leases through ~~January~~July 2023. The Company is generally responsible for maintenance, taxes, and utilities for leased equipment. Equipment under operating ~~lease~~leases includes a locomotive and rail cars. Rent expense for operating leases was approximately ~~$158,000~~$156,000 and ~~$166,000~~$158,000 for the three months ended March, 31, ~~2018~~2019 and ~~2017,~~2018, respectively, and ~~$311,000~~$317,000 and ~~$258,000~~$311,000 for the six months ended March 31, ~~2018~~2109 and ~~2017,~~2018, respectively. Equipment under capital leases consists of office equipment and plant equipment.

Equipment under capital leases is as follows at:


As of	March 31, 2018 (unaudited)			September 30, 2017			March 31, 2019			September 30, 2018
Equipment	$	483,488		$	483,488		$	483,488		$	483,488
Less accumulated amortization	(130,759		)	(120,029		)	(152,218		)	(141,488		)
Net equipment under capital lease	$	352,729		$	363,459		$	331,270		$	342,000

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, ~~2018~~2019

At March 31, ~~2018,~~2019, the Company had the following minimum commitments, which at inception had non-cancelable terms of more than one year. Amounts shown below are for the 12 months period ending ~~December~~March 31:


	Operating Leases		Capital Leases		Operating Leases		Capital Leases
2018	$	460,383	$	2,627
2019	391,555		1,605		$	469,705	$	1,605
2020	295,463		—		365,663		—
2021	243,696		—		313,896		—
2022	188,700		—		258,900		—
2023					17,550		—
Thereafter					—		—
Total minimum lease commitments	$	1,579,797	4,232		$	1,425,714	1,605
Less amount representing interest			—				—
Present value of minimum lease commitments included in current maturities of long-term debt on the balance sheet			$	4,232			$	1,605

7.8. COMMITMENTS AND CONTINGENCIES

Firm Purchase Commitments for Corn

To ensure an adequate supply of corn to operate the Plant, the Company enters into contracts to purchase corn from local farmers and elevators. At March 31, ~~2018,~~2019, the Company had various fixed price contracts for the purchase of approximately ~~2.7~~1.6 million bushels of corn. Using the stated contract price for the fixed price contracts, the Company had commitments of approximately ~~$9.2~~$5.6 million related to the ~~2.7~~1.6 million bushels under contract. The Company also has various unpriced basis contracts for the purchase of approximately ~~2.76 million~~982,000 bushels of corn that have been delivered to the Plant. The purchase price of these bushels will be set at the time of pricing the contracts at the July ~~2018~~2019 index price less basis. The estimated accrued payable for these bushels is ~~$10.67~~$3.25 million. The deadline for pricing these ~~2.76 million~~982,000 bushels is June ~~29, 2018.~~21, 2019.

Water

To meet the plant's water requirements, we entered into a ten-year contract with Southwest Water Authority to purchase raw water. Our contract requires us to purchase a minimum of 160 million gallons of water per year. The minimum estimated liability for this contract is $424,000 per year.

Profit and Cost Sharing Agreement

The Company has entered into a Profit and Cost Sharing Agreement with Bismarck Land Company, LLC which became effective on November 1, 2016. The Profit and Cost Sharing Agreement provides that the Company will share 70% of the net revenue generated by the Company from business activities which are brought to the Company by Bismarck Land Company, LLC and conducted on the real estate purchased from the Bismarck Land Company, LLC. The real estate was initially purchased in exchange for 2 million membership units at $1.66 per unit. This obligation will terminate ten years after the real estate closing date of October 11, 2016 or after Bismarck Land Company, LLC receives $10 million in proceeds from the agreement. In addition, the Company will pay Bismarck Land Company, LLC 70% of any net proceeds received by the Company from the sale of the subject real estate if a sale were to occur in the future, subject to the $10 million cap and the 10 year termination of this obligation. No payments have been made to the Bismarck Land Company, LLC at this time.

8.9. RELATED PARTY TRANSACTIONS

The Company has balances and transactions in the normal course of business with various related parties for the purchase of corn, sale of distillers grains and sale of ethanol. The related parties include unit holders, members of the board of governors of the Company, and RPMG, Inc. (“RPMG”). ~~During the Company's first quarter of 2018, the~~The Company received a capital account refund from RPMG of $267,111 during the second quarter of 2019 which is included in other income (expense) in the Company's Statement of Operations. A refund of $140,539 was received during the Company's first quarter of 2018. Significant related party activity affecting the financial statements is as follows:

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, ~~2018~~2019


	March 31, 2018 (unaudited)		September 30, 2017		March 31, 2019 (unaudited)		September 30, 2018
Balance Sheet
Accounts receivable	$	2,639,086	$	4,027,061	$	3,078,947	$	2,680,445
Accounts Payable	105,208		1,569		85,243		312,701
Accrued Expenses	2,526,995		925,503		1,262,421		95,704


	For the three months ended March 31, 2018 (unaudited)		For the three months ended March 31, 2017 (unaudited)		For the six months ended March 31, 2018 (unaudited)		For the six months ended March 31, 2017 (unaudited)		For the three months ended March 31, 2019 (unaudited)		For the three months ended March 31, 2018 (unaudited)		For the six months ended March 31, 2019 (unaudited)		For the six months ended March 31, 2018 (unaudited)
Statement of Operations
Revenues	$	24,174,597	$	25,912,237	$	48,972,741	$	54,911,008	$	23,788,432	$	24,174,597	$	47,976,575	$	48,972,741
Cost of goods sold	6,462		20,221		12,924		29,951		—		6,462		14,104		12,924
General and administrative	19,244		16,887		38,311		33,048		55,684		19,244		86,594		38,311
Other income/expense	—		—		140,539		247,307		267,111		—		267,111		140,539
Inventory Purchases	$	6,031,607	$	13,586,244	$	10,325,586	$	19,665,230	$	3,245,390	$	6,031,607	$	6,948,455	$	10,325,586

9.10. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the United States. Corn for the production process is supplied to the Plant primarily from local agricultural producers and from purchases on the open market. The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol and distillers grains and by the cost at which it is able to purchase corn for operations. The price of ethanol is influenced by factors such as prices, supply and demand, weather, government policies and programs, and 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.

The Company's financial performance is highly dependent on the Federal Renewable Fuels Standard ("RFS") which requires that a certain amount of renewable fuels must be used each year in the United States. Corn based ethanol, such as the ethanol the Company produces, can be used to meet a portion of the RFS requirement. In November 2013, the EPA issued a proposed rule which would reduce the RFS for 2014, including the RFS requirement related to corn based ethanol. The EPA proposed rule was subject to a comment period which expired in January 2014. On November 30, 2015, the EPA released its final ethanol use requirements for 2014, 2015 and 2016 which were lower than the statutory requirements in the RFS. However, the final RFS for 2017 equaled the statutory requirement which was also the case for the 2018 and 2019 RFS final ~~rule.~~rules.

The Company anticipates that the results of operations during the remainder of fiscal year ~~2018~~2019 will continue to be affected by volatility in the commodity markets. The volatility is due to various factors, including uncertainty with respect to the availability and supply of corn, increased demand for grain from global and national markets, speculation in the commodity markets and demand for corn from the ethanol industry.

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~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED MARCH 31, 2018~~

~~10.~~11. MEMBER'S EQUITY

Unregistered Units Sales by the Company.

On October 10, 2016, the Company issued two million of the Company's membership units to Bismarck Land Company, LLC as part of the consideration for the acquisition of 338 acres of land adjacent to the ethanol plant that the Company will use to expand

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED MARCH 31, 2019

its rail yard. The membership units were issued pursuant to the exemption from registration set forth in Regulation D, Rule 506(b), as Bismarck Land Company, LLC is an accredited investor.

Unit Purchases By the Company.

(a) (b) (c) (d)
Period Total Number of Units Purchased Average Price Paid per Unit Total Number of Units Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of the Units that May Yet Be Purchased Under the Plans or Programs
October 2016 None None None None
November 2016 None None None None
December 2016 564,963 $1.00 None None
January 2017 116,857 $1.00 None None
February 2017 None None None None
March 2017 None None None None
April 2017 None None None None
May 2017 None None None None
June 2017 None None None None
Total 681,820 $1.00 None None



	(a)	(b)	(c)	(d)
Period	Total Number of Units Purchased	Average Price Paid per Unit	Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of the Units that May Yet Be Purchased Under the Plans or Programs
April 2018	None	None	None	None
May 2018	1,318,180	$1.00	None	None
June 2018	None	None	None	None
Total	1,318,180	$1.00	None	None

*~~681,820~~1,318,180 Units were purchased other than through a publicly announced plan or program, pursuant to a Membership Unit Repurchase Agreement, a private transaction between the Company and a Member. No other activity has occurred since the third quarter of our 2018 fiscal year.

Changes in member's equity for the six months ended March 31, 2019 and 2018.



	Class A Member Units		Additional Paid in Capital		Accumulated Deficit/Retained Earnings			Treasury Units			Total Member Equity
Balances - September 30, 2017	$	40,362,775	$	75,541	$	33,399,985		$	(159,540	)	$	73,678,761
Net income (loss)	—		—		(1,984,666		)	—			(1,984,666		)
Balances - December 31, 2017	40,362,775		75,541		31,415,319			(159,540		)	71,694,095
Distribution, $0.05 per unit	—		—		(2,901,975		)	—			(2,901,975		)
Net income	—		—		1,422,174			—			1,422,174
Balances - March 31, 2018	$	40,362,775	$	75,541	$	29,935,518		$	(159,540	)	$	70,214,294



	Class A Member Units		Additional Paid in Capital		Accumulated Deficit/Retained Earnings			Treasury Units			Total Member Equity
Balances - September 30, 2018	$	39,044,595	$	75,541	$	25,358,139		$	(159,540	)	$	64,318,735
Net income	—		—		402,844			—			402,844
Balances December 31, 2018	39,044,595		75,541		25,760,983			(159,540		)	64,721,579
Distribution	—		—		(1,782		)	—			(1,782		)
Net income (loss)	—		—		(1,423,308		)	—			(1,423,308		)
Balances - March 31, 2019	$	39,044,595	$	75,541	$	24,335,893		$	(159,540	)	$	63,296,489

~~11.~~12. SUBSEQUENT ~~EVENT~~EVENTS

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed financial statements or disclosure in the notes to the condensed financial statements.

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

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and six month periods ended March 31, ~~2018~~2019, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the ~~condensed~~ financial statements, notes and information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017~~2018. Unless otherwise stated, references in this report to particular years, quarters, months, or periods refer to our fiscal years ended in September and the associated quarters, months, or periods of those fiscal years.

Forward Looking Statements

This report contains forward-looking statements that involve future events, our future performance and our future operations and actions. In some cases you can identify forward-looking statements by the use of words such as "may," "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. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the following factors:

Reductions in the corn-based ethanol use requirement in the Federal Renewable Fuels Standard;

Small refinery exemptions from the RFS granted by the EPA;

Lower oil prices which result in lower ethanol prices;

Negative operating margins which result from lower ethanol prices;

Lower distillers grains prices which result from the Chinese anti-dumping and countervailing duty tariffs;

Lower ethanol prices due to the Chinese ethanol tariff and the Brazilian ethanol tariff;

Logistics difficulties preventing us from delivering our products to our customers;

Fluctuations in the price and market for ethanol, distillers grains and corn oil;

Availability and costs of products and raw materials, particularly corn and natural gas;

Changes in the environmental regulations that apply to our plant operations and our ability to comply with such regulations;

Ethanol supply exceeding demand and corresponding ethanol price reductions impacting our ability to operate profitably and maintain a positive spread between the selling price of our products and our raw material costs;

Our ability to generate and maintain sufficient liquidity to fund our operations and meet ~~debt service requirements and~~our necessary capital expenditures;

Our ability to continue to meet our loan covenants;

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

Results of our hedging transactions and other risk management strategies;

Changes and advances in ethanol production technology; and

Competition from alternative fuels and alternative fuel additives.

Overview

Red Trail Energy, LLC, a North Dakota limited liability company (the "Company," "Red Trail," or "we," "our," or "us"), owns and operates a 50 million gallon annual name-plate production ethanol plant near Richardton, North Dakota. Our revenues are derived from the sale and distribution of our ethanol, distillers grains and corn oil primarily in the continental United States. Corn is our largest cost component and our profitability is highly dependent on the spread between the price of corn and the price of ethanol.

The ethanol industry is dependent on several economic incentives to produce ethanol, the most significant of which is the Federal Renewable Fuels Standard (the "RFS"). The RFS requires that in each year, a certain amount of renewable fuels must be used in the United States. The RFS statutory volume requirement increases incrementally each year until the United States is required to use 36 billion gallons of renewable fuels by 2022. The United States Environmental Protection Agency (the "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. The RFS statutory Renewable Volume Obligation ("RVO") for ~~all renewable fuels for 2017 was 24 billion gallons, of which~~ corn-based ethanol ~~could meet~~was 15 billion gallons ~~of the RVO. On November 30, 2017, the final RVO~~ for 2018 ~~was set at 19.29~~and 2019. However, during our 2018 fiscal year we learned that the EPA issued exemptions to the RFS use requirements for certain small refineries. Management believes that these small refinery exemptions reduced ethanol demand by more than 2 billion gallons ~~and~~during 2018 which severely impacted ethanol demand during our 2018 fiscal year. This practice of granting RFS waivers has continued into our 2019 fiscal year which has

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continued to negatively impact ethanol demand. Management expects this negative impact to continue so long as the ~~corn-based ethanol RVO was set at 15 billion gallons.~~EPA issues these small refinery exemptions from the RFS.

In recent years, the ethanol industry in the United States has increased exports of ethanol and distillers grains. However, in 2017 China instituted tariffs on ethanol and distillers grains produced in the United States and Brazil instituted a tariff on ethanol

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produced in the United ~~States.~~States, and now more recently, in April 2018, the Chinese government increased the tariff on United States ethanol imports into China from 30% to 45%. Further, the Chinese again increased the ethanol tariff to 65% on an un-denatured basis. Due to other recent tariff activity between the United States and China, management does not expect these Chinese tariffs to be removed in the near ~~term.~~term but trade talks are continuing regarding this tariff and others. Both China and Brazil have been major sources of import demand for United States ethanol and distillers grains. These trade actions may result in negative operating margins for ~~U.S.~~United States ethanol producers.

On March 20, 2017, we entered into a new $10 million revolving loan (the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). As part of this transaction, we signed a Credit Agreement dated March 17, 2017 (the "Credit Agreement"). The Revolving Loan replaces our credit facilities with First National Bank of Omaha. Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.77% in excess of the one-month London Interbank Offered Rate ("LIBOR"). The maturity date of the Revolving Loan is May 31, 2018. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in the Credit Agreement. The Revolving Loan is subject to certain financial covenants as set forth in the Credit Agreement. The most significant financial covenants require us to maintain a fixed charge coverage ratio of no less than 1.25:1.00 and a current ratio of no less than 1.50:1.00. Our fixed charge coverage ratio measures our ability to pay our fixed expenses. Our current ratio measures our liquidity and ability to pay short-term and long-term obligations.

Results of Operations for the Three Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

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 unaudited statements of operations for the three months ended March 31, ~~2018~~2019 and ~~2017~~:2018:


	Three Months Ended March 31, 2018 (Unaudited)			Three Months Ended March 31, 2017 (Unaudited)					Three Months Ended March 31, 2019 (Unaudited)					Three Months Ended March 31, 2018 (Unaudited)
Statement of Operations Data	Amount		%	Amount			%		Amount			%		Amount		%
Revenues	$	26,366,732	100.00	$	27,074,946		100.00		$	26,231,799		100.00		$	26,366,732	100.00
Cost of Goods Sold	24,199,412		91.78	26,885,515			99.30		27,253,765			103.90		24,199,412		91.78
Gross Profit	2,167,320		8.22	189,431			0.70
Gross Profit (Loss)									(1,021,966		)	(3.90	)	2,167,320		8.22
General and Administrative Expenses	785,008		2.98	747,812			2.76		655,880			2.50		785,008		2.98
Operating Income (Loss)	1,382,312		5.24	(558,381		)	(2.06	)	(1,677,846		)	(6.40	)	1,382,312		5.24
Other Income	39,862		0.15	95,313			0.35
Other Income, net									254,538			0.97		39,862		0.15
Net Income (Loss)	$	1,422,174	5.39	$	(463,068	)	(1.71	)	$	(1,423,308	)	(5.43	)	$	1,422,174	5.39

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The following table shows additional data regarding production and price levels for our primary inputs and products for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018.


	Three Months ended March 31, 2018 (unaudited)		Three Months ended March 31, 2017 (unaudited)		Three Months Ended March 31, 2019 (unaudited)		Three Months Ended March 31, 2018 (unaudited)
Production:
Ethanol sold (gallons)	15,351,960		16,489,312		15,834,210		15,351,960
Dried distillers grains sold (tons)	21,205		19,997		19,307		21,205
Modified distillers grains sold (tons)	40,084		36,941		46,660		40,084
Corn oil sold (pounds)	3,087,540		4,202,980		2,853,980		3,087,540
Revenues:
Ethanol average price per gallon (net of hedging)	$	1.30	$	1.35	$	1.27	$	1.30
Dried distillers grains average price per ton	137.64		104.44		148.84		137.64
Modified distillers grains average price per ton	64.04		40.82		51.83		64.04
Corn oil average price per pound	0.26		0.25		0.24		0.26
Primary Inputs:
Corn ground (bushels)	5,672,421		5,695,831		5,910,079		5,672,421
Natural gas (MMBtu)	415,714		391,050		421,620		415,714
Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	$	3.39	$	3.56	$	3.30	$	3.39
Natural gas average price per MMBtu (net of hedging)	2.49		3.08		2.84		2.49
Other Costs (per gallon of ethanol sold):
Chemical and additive costs	$	0.099	$	0.065	$	0.076	$	0.099
Denaturant cost	0.038		0.028		0.031		0.038
Electricity cost	0.048		0.041		0.048		0.048
Direct labor cost	0.065		0.056		0.060		0.065

Revenue

Our revenue was ~~lower for~~greater in the second quarter of our ~~2018~~2019 fiscal year compared to the same period of our ~~2017~~2018 fiscal year due to ~~a decrease in~~increased ethanol and distillers grain production along with increased market dried distillers grains prices. During the ~~average sales prices we received for our ethanol during the first~~second quarter of our ~~2018~~2019 fiscal ~~year.~~year, approximately 75.9% of our total revenue was derived from ethanol sales, approximately 21.0% was from distillers grains sales and approximately 2.6% was from corn oil sales. During the second quarter of our 2018 fiscal year, approximately 75.7% of our total revenue was derived from ethanol sales, approximately 20.8% was from distillers grains sales and approximately 3.0% was from corn oil sales. During the second quarter of our 2017 fiscal year, approximately 82.5% of our total revenue was derived from ethanol sales, approximately 13.3% was from distillers grains sales and approximately 3.9% was from corn oil sales.

Ethanol

The average price we received for our ethanol was ~~approximately 3.7% less~~lower during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year. Management attributes ~~this~~the decrease in the price we received for our ethanol during the second quarter of our ~~2018~~2019 fiscal year to ~~excess~~demand destruction related to the EPA's small refinery exemptions from the RFS, partially offset by stronger ethanol ~~supply in the market which impacted market~~exports. Ethanol exports have supported domestic ethanol prices, especially early in the second quarter of our 2018 fiscal year. Management anticipates that ethanol prices will be higher during the rest of our 2018 fiscal year due to strong export demand for ethanol which has positively impacted ethanol demand along with the summer driving season which results in increased ethanol demand. However,however, export markets are not as reliable as the domestic ethanol market which can lead to ethanol price volatility. If export demand slows in the future, it could negatively impact ethanol demand, especially due to increased production capacity in the United States. Management anticipates that ethanol prices will remain lower unless domestic ethanol demand increases. Management believes that domestic ethanol demand will only increase through increased usage of higher level blends of ethanol, such as E15, used in the United States. While the Trump administration has indicated they will allow the use of E15 year-round, regulations allowing for year-round E15 have not yet become effective.

We sold ~~fewer~~slightly more gallons of ethanol during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to switching from a manifest rail car shipper to a unit train shipper during the second quarter of our 2017 fiscal. Our first unit train was shipped the end of the second quarter of our 2017 fiscal year which increased the amount of rail cars shipped that quarter.year. Management anticipates that our ethanol production and sales will ~~remain consistent~~be comparable during the rest of our ~~2018~~2019 fiscal year compared to our ~~2017 fiscal year since we are now running a regular unit train shipping schedule. In addition, the amount of ethanol we produced per bushel of corn we ground decreased for the second quarter of our~~ 2018 fiscal year ~~compared~~provided we do not encounter any plant production issues which prevent us from operating at capacity during our 2019 fiscal year.

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to the second quarter of our 2017 fiscal year, which negatively impacted our profitability. We continue to work to maximize the additional production capacity of our ethanol plant and improve our ethanol production efficiency.

From time to time we enter into forward sales contracts for our products. At March 31, ~~2018,~~2019, we had no open ethanol futures contracts. ~~Ethanol~~We also had no ethanol futures contracts for the second quarter of our ~~2017~~2019 fiscal ~~year resulted in a gain of approximately $265,000.~~year.

Distillers Grains

Previously, we sold a majority of our distillers grains in the dried form due to market conditions which favored that product. However, due to the Chinese anti-dumping and countervailing duty tariffs which have decreased export demand for distillers grains, we increased the amount of modified distillers grains we produced and sold. Modified distillers grains are used in our local market and are less impacted by world distillers grains markets. The average ~~prices~~price we received for ~~both~~ our dried ~~and modified~~ distillers grains were higher during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal ~~year.~~year while the average price we received for our modified distillers grains were lower. Management attributes ~~these increases~~the increase to improved distillers grains exports from countries other than China and overall demand for distillers grains. Higher corn prices have also positively impacted distillers grains prices. Management anticipates distillers grains prices will remain ~~at current levels~~higher for the rest of our ~~2018~~2019 fiscal ~~year.~~year, especially if weather conditions and late planting raise concerns regarding the size of the 2019 corn crop.

We produced and sold more total tons of distillers grains during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to ~~decreased corn oil~~increased overall production during the second quarter of our ~~2018~~2019 fiscal ~~year.~~year along with decreased corn oil production. When we produce fewer pounds of corn oil, it increases the volume of distillers grains we produce. Management anticipates relatively consistent distillers grains production going forward.

Corn Oil

The total pounds of corn oil we sold was less during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to a change in chemicals used during the production process which ~~results~~resulted in less corn oil being extracted. Management anticipates that our corn oil production will ~~continue to~~ remain ~~less~~lower for the remaining quarters of our ~~2018~~2019 fiscal year. The average price we received for our corn oil during the second quarter of our 2019 fiscal year was ~~slightly higher during~~approximately 8% less compared to the second quarter of our 2018 fiscal year ~~compared~~due to ~~the second quarter of our 2017 fiscal year due primarily to increased corn oil demand from the~~decreased biodiesel ~~industry.~~demand.

Cost of Goods Sold

Our cost of goods sold is primarily made up of corn and natural gas expenses. Our cost of goods sold was ~~lower~~higher for the second quarter of our ~~2018~~2019 fiscal year as compared to the second quarter of our ~~2017~~2018 fiscal year due ~~primarily~~ to ~~decreased~~increased production which increased corn and natural gas ~~prices, partially offset by increased~~consumption along with higher natural gas ~~consumption~~prices during the 2019 period. The increase in our cost of goods sold was greater than the increase in our revenue during the second quarter of our ~~2018~~2019 fiscal year as compared to the second quarter of our ~~2017 fiscal year. The decrease in our cost of goods sold was greater than the decrease in our revenue during the second quarter of our~~ 2018 ~~fiscal year as compared to the second quarter of our 2017~~ fiscal year, which resulted in ~~improved~~decreased profitability during the ~~2018~~2019 period.

Corn Costs

Our cost of goods sold related to corn was ~~less~~greater for the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to increased corn consumption, partially offset by decreased corn costs per bushel. For the second quarter of our ~~2018~~2019 fiscal year, we used approximately ~~0.4% fewer~~4.2% more bushels of corn compared to the second quarter of our ~~2017~~2018 fiscal ~~year.~~year due to increased production at the plant. The average price we paid per bushel of corn, without taking into account our derivative instruments, was approximately ~~4.8%~~2.7% less for the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year. In addition, during the second quarter of our 2019 fiscal year, we had a realized loss of approximately $1.2 million for our corn derivative instruments which increased our cost of goods sold related to corn. For the second quarter of our 2018 fiscal year, we had a realized gain of approximately ~~$1,703,000 for our corn derivative instruments which decreased our cost of goods sold related to corn. For the second quarter of our 2017 fiscal year, we had a realized gain of approximately $546,000~~$1.7 million for our corn derivative instruments which decreased our cost of goods sold related to corn. Management anticipates that corn prices will remain at current levels during our 2018 fiscal year due to plentiful corn supplies and relatively stable corn demand. However, the late planting in many parts of the United States could negatively impactcomparable corn prices during ~~our 2018 fiscal year and~~ the ~~beginning~~rest of our 2019 fiscal ~~year.~~year unless unfavorable weather conditions and late planting negatively impact the 2019 growing season which could result in higher corn prices.

Natural Gas Costs

We consumed approximately ~~6.3%~~1.4% more MMBtu of natural gas during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year, due to increased production ~~and colder weather~~ during the ~~2018~~2019 period. Our average cost per MMBtu of natural gas was approximately ~~19.2% less~~14.1% greater during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to ~~ample local~~a colder winter which resulted in increased natural gas ~~supply.~~demand for heating purposes.

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General and Administrative Expenses

Our general and administrative expenses were ~~higher~~less for the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to ~~higher~~less consulting fees paid ~~in 2018 for our line of credit.~~during the 2019 period.

Other Income/Expense

We had less interest income during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to having less cash on hand during our ~~2018~~2019 fiscal year. We had ~~less~~more other income during the second quarter of our ~~2018~~2019 fiscal year compared to the second quarter of our ~~2017~~2018 fiscal year due to receiving less land rent during the 2018 period. Our interest expense was higher during the second quarter of our 2018 fiscal year compared to the second quarter of our 2017 fiscal year due to amounts outstanding on our leases.a capital account refund received from RPMG.

Results of Operations for the Six Months Ended March 31, ~~2018~~2019 and ~~2017~~2018

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 unaudited statements of operations for the six months ended March 31, ~~2018~~2019 and ~~2017:~~2018:


	Six Months Ended March 31, 2018 (Unaudited)					Six Months Ended March 31, 2017 (Unaudited)			Six Months Ended March 31, 2019 (Unaudited)					Six Months Ended March 31, 2018 (Unaudited)
Statement of Operations Data	Amount			%		Amount		%	Amount			%		Amount			%
Revenues	$	52,489,589		100.00		$	57,079,406	100.00	$	52,140,936		100.00		$	52,489,589		100.00
Cost of Goods Sold	52,021,675			99.11		54,013,447		94.63	52,115,107			99.95		52,021,675			99.11
Gross Profit	467,914			0.89		3,065,959		5.37	25,829			0.05		467,914			0.89
General and Administrative Expenses	1,500,919			2.86		1,438,745		2.52	1,330,765			2.55		1,500,919			2.86
Operating Income (Loss)	(1,033,005		)	(1.97	)	1,627,214		2.85	(1,304,936		)	(2.50	)	(1,033,005		)	(1.97	)
Other Income	470,513			0.90		681,680		1.19
Other Income, net									284,472			0.55		470,513			0.90
Net Income (Loss)	$	(562,492	)	(1.07	)	$	2,308,894	4.05	$	(1,020,464	)	(1.96	)	$	(562,492	)	(1.07	)

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The following table shows additional data regarding production and price levels for our primary inputs and products for the six months ended March 31, ~~2018~~2019 and ~~2017.~~2018.


	Six Months ended March 31, 2018 (unaudited)		Six Months ended March 31, 2017 (unaudited)		Six Months Ended March 31, 2019 (unaudited)		Six Months Ended March 31, 2018 (unaudited)
Production:
Ethanol sold (gallons)	31,979,066		32,692,147		32,463,812		31,979,066
Dried distillers grains sold (tons)	52,168		49,622		47,422		52,168
Modified distillers grains sold (tons)	67,590		62,063		80,684		67,590
Corn oil sold (pounds)	6,204,580		8,616,600		5,554,280		6,204,580
Revenues:
Ethanol average price per gallon (net of hedging)	$	1.24	$	1.43	$	1.22	$	1.24
Dried distillers grains average price per ton	128.41		104.39		141.79		128.41
Modified distillers grains average price per ton	63.88		45.34		51.87		63.88
Corn oil average price per pound	0.27		0.26		0.23		0.27
Primary Inputs:
Corn ground (bushels)	11,393,364		11,383,445		11,951,038		11,393,364
Natural gas (MMBtu)	847,677		806,636		853,885		847,677
Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	$	3.33	$	3.55	$	3.25	$	3.33
Natural gas average price per MMBtu (net of hedging)	2.58		2.91		2.84		2.58
Other Costs (per gallon of ethanol sold):
Chemical and additive costs	$	0.102	$	0.081	$	0.092	$	0.102
Denaturant cost	0.037		0.031		0.034		0.037
Electricity cost	0.043		0.043		0.047		0.043
Direct labor cost	0.065		0.062		0.060		0.065

Revenue

Our revenue was lower for the six months ended March 31, ~~2018~~2019 compared to the same period of our ~~2017~~2018 fiscal year due to ~~a decrease in~~decreased corn oil revenue, partially offset by higher distillers grains revenue. During the ~~average sales prices we received for our ethanol during the first quarter~~six months ended March 31, 2019, approximately 75.9% of our ~~2018 fiscal year.~~total revenue was derived from ethanol sales, approximately 21.0% was from distillers grains sales and approximately 2.6% was from corn oil sales. During the six months ended March 31, 2018, approximately 75.4% of our total revenue was derived from ethanol sales, approximately 21.0% was from distillers grains sales and approximately 3.2% was from corn oil sales. During the six months ended March 31, 2017, approximately 81.7% of our total revenue was derived from ethanol sales, approximately 14.0% was from distillers grains sales and approximately 3.9% was from corn oil sales.

Ethanol

The average price we received for our ethanol was approximately ~~13.29%~~1.61% less during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017. Management attributes this decrease in~~2018 due to demand decreases which resulted from the ~~price we received for our ethanol during~~small refinery waivers issued by the ~~2018 fiscal year to increased market supplies of ethanol along with relatively stable ethanol demand.~~EPA.

We sold ~~fewer~~slightly more gallons of ethanol during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due to switching from a manifest rail car shipper to a unit train shipper last fiscal year. More gallons were shipped during the transition period last year compared to that same time frame this year. In addition, the amount of ethanol we produced per bushel of corn we ground was slightly less for the six months ended March 31, 2018 compared to the six months ended March 31, 2017, which negatively impacted our profitability.increased plant production.

From time to time we enter into forward sales contracts for our products. At March 31, ~~2018,~~2019, we had no open ethanol futures contracts. We also had no ethanol futures contracts for the six months ended March 31, 2019. Ethanol futures contracts resulted in a gain of approximately $1,800 during the six months ended March 31, 2018. ~~Ethanol futures contracts~~

Distillers Grains

The average prices we received for our dried distillers grains was approximately 10.42% greater during the six months ended March 31, ~~2017 resulted in a gain of approximately $306,000.~~

2019 compared to the six months ended March 31, 2018 due to increased export demand for distillers

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~~Distillers Grains~~

We ~~produced and~~ sold ~~more total~~approximately 9.10% fewer tons of dried distillers grains during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017 due to decreased corn oil production~~2018. We sold approximately 19.37% more total tons of modified distillers grains during the six months ended March 31, ~~2018. When~~2019 compared to the six months ended March 31, 2018 due to productions decisions we ~~produce fewer pounds~~make based on local market demand and the relative costs of ~~corn oil, it increases the volume of~~producing dried distillers grains ~~we produce.~~versus modified distillers grains.

Corn Oil

The total pounds of corn oil we sold was approximately 10.48% less during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due to a change in chemicals used during the production process which ~~results~~resulted in lower corn oil production. The average price we received for our corn oil was ~~slightly higher~~approximately 14.81% lower during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due primarily to ~~increased~~decreased corn oil demand from the biodiesel industry.

Cost of Goods Sold

Our cost of goods sold is primarily made up of corn and natural gas expenses. Our cost of goods sold was ~~less~~higher for the six months ended March 31, ~~2018~~2019 as compared to the six months ended March 31, ~~2017~~2018 due primarily to ~~decreased~~higher corn and natural gas ~~prices~~costs during the six months ended March 31, ~~2018~~2019 as compared to the six months ended March 31, 2017. The decrease in our cost of goods sold was less than the decrease in our revenue during the six months ended March 31, 2018 as compared to the six months ended March 31, 2017, which reduced our profitability during the 2018 period.2018.

Corn Costs

Our cost of goods sold related to corn was ~~less~~approximately 2.46% greater for the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due to ~~decreased~~increased corn ~~costs per bushel along with relatively stable~~consumption, partially offset by lower market corn ~~consumption.~~prices. During six months ended March 31, ~~2018,~~2019, we used approximately ~~0.9%~~4.89% more bushels of corn compared to the six months ended March 31, ~~2017.~~2018. The average price we paid per bushel of corn, without taking into account our derivative instruments, was approximately ~~6.2%~~2.40% less for the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017.~~2018. In addition, during the six months ended March 31, 2019, we had a realized loss of approximately $900,000 for our corn derivative instruments which increased our cost of goods sold. For the six months ended March 31, 2018, we had a realized gain of approximately ~~$1,134,000 for our corn derivative instruments which decreased our cost of goods sold. For the six months ended March 31, 2017, we had a realized gain of approximately $764,000~~$1.1 million for our corn derivative instruments which decreased our cost of goods sold.

Natural Gas Costs

We consumed approximately ~~5.09%~~0.73% more MMBtu of natural gas during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017,~~2018, due to increased ~~production and colder weather during the 2018 period.~~production. Our average cost per MMBtu of natural gas was approximately ~~11.34% less~~10.08% more during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017 due to ample local natural gas supply.~~2018.

General and Administrative Expenses

Our general and administrative expenses were ~~higher~~lower for the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due to ~~additional~~fewer consulting services needed during our ~~2018~~2019 fiscal ~~year.~~year and less bad debt expense.

Other Income/Expense

~~We had more interest income during the six months ended March 31, 2018 compared to the six months ended March 31, 2017 due to increased cash on hand during the 2018 period.~~ We had less other income during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 due to ~~a lower capital account refund we received from our marketer~~having less interest income due to having less cash on hand during the ~~2018 period. We had more interest expense during~~2019 period along with having a loss on sale of corn that could not be used in the ~~six months ended March 31, 2018 compared to the six months ended March 31, 2017 due to amounts outstanding on our lease agreements.~~

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production process.

Changes in Financial Condition for the Six Months Ended March 31, ~~2018~~2019

Current Assets. We had more cash and equivalents at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 primarily due to an increase in our ~~accounts payable~~accrued expenses due to deferred corn payments owed to our corn suppliers in our ~~2018~~2019 fiscal year. We had more restricted cash at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 related to cash we deposit in our margin account for our hedging transactions. Due to the timing of payments from our marketers, we had ~~fewer~~more accounts receivable at March 31, ~~2018~~2019 compared to September 30, ~~2017.~~2018. We had less inventory on hand at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 due primarily to having less ~~ethanol and finished goods~~corn inventory at March 31, ~~2018.~~2019.

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Property, Plant and Equipment. The value of our property, plant and equipment was lower at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 primarily due to the regular depreciation of our assets.

Current Liabilities. Our accounts payable were lower at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 due to having fewer deferred corn payments at March 31, ~~2018.~~2019. Our accrued expenses were higher at March 31, ~~2018~~2019 compared to September 30, ~~2017~~2018 because we had more unpriced corn deliveries at March 31, ~~2018~~2019 compared to September 30, ~~2017.~~

~~Long-term Liabilities. Our long-term liabilities were less at March 31, 2018 compared to September 30, 2017 because of capital lease payments we made during our 2018 fiscal year.~~2018.

Liquidity and Capital Resources

Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our current credit facilities and cash from our operations to continue to operate the 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.

The following table shows cash flows for the six months ended March 31, ~~2018~~2019 and ~~2017~~2018:


	March 31, 2018 (unaudited)			March 31, 2017 (unaudited)			March 31, 2019 (unaudited)			March 31, 2018 (unaudited)
Net cash provided by operating activities	$	9,368,734		$	11,447,388		$	4,308,701		$	9,702,710
Net cash (used in) investing activities	(422,711		)	(228,096		)	(346,322		)	(422,711		)
Net cash (used in) financing activities	(2,893,657		)	(716,071		)	(3,098		)	(2,893,657		)
Net increase in cash	$	6,052,366		$	10,503,221		$	3,959,281		$	6,386,342
Cash and cash equivalents, end of period	$	9,275,708		$	20,777,387
Cash, cash equivalents and restricted cash, end of period							$	14,832,620		$	15,516,350

Cash Flow from Operations

Our operations provided less cash during the six months ended March 31, ~~2018~~2019 compared to the same period of our ~~2017~~2018 fiscal year due to decreased ~~profitability during the 2018 period along with decreased accrued expenses. There are fewer~~net income. In addition, there were less outstanding payables to our corn customers during the ~~2018~~2019 period compared to the ~~2017 period.~~2018 period which impacted cash generated by our operations.

Cash Flow From Investing Activities

We used ~~more~~less cash for capital expenditures during the six months ended March 31, ~~2018~~2019 compared to the same period of our ~~2017~~2018 fiscal year. During the ~~2018~~2019 period, our primary capital expenditures were for ~~completing the hammer mill project that was started last fiscal year plus upgrades being made~~improvements to the ~~bin sweeps.~~centrifuges and heat exchangers.

Cash Flow from Financing Activities

We used ~~more~~less cash for financing activities during the six months ended March 31, ~~2018~~2019 compared to the six months ended March 31, ~~2017~~2018 because ~~of increased distributions paid~~we did not make a distribution to our members during the ~~2018~~2019 period.

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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Capital Expenditures

The Company had approximately ~~$317,000~~$338,000 in construction in progress as of March 31, ~~2018~~2019 primarily relating to improvements being made to the ~~bin sweeps~~centrifuges and the ~~additional land~~Carbon Capture and ~~railroad track purchased last fiscal year.~~Storage project.

Capital Resources

Revolving Loan

On March 20, 2017, we entered into a new $10 million revolving loan (the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). ~~The Revolving Loan replaced a similar revolving loan we had with First National Bank of Omaha.~~ Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.77% in excess of the one-month London Interbank Offered Rate ("LIBOR"). ~~The maturity date of~~On May 31, 2018 we renewed the Revolving Loan isextending the maturity

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date to May 31, ~~2018.~~2019. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in the Credit Agreement. At March 31, ~~2018,~~2019, we had ~~$10 million~~approximately $4,300,000 available on the Revolving Loan. We had $0 drawn on the Revolving Loan as of March 31, ~~2018.~~2019. Interest accrued on the Revolving Loan as of March 31, ~~2018~~2019 at a rate of ~~3.71%~~4.27%.

Restrictive Covenants

The Revolving Loan is subject to certain financial covenants as set forth in the Credit Agreement. The most significant financial covenants require us to maintain a fixed charge coverage ratio of no less than 1.25:1.00 and a current ratio of no less than 1.50:1.00. Our fixed charge coverage ratio is calculated annually and measures our ability to pay our fixed expenses. Our current ratio is calculated quarterly and measures our liquidity and ability to pay short-term and long-term obligations.

As of March 31, ~~2018,~~2019, we were in compliance with our loan covenants.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018. We discuss our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018. There has been no significant change in our ~~significant accounting policies or~~ critical accounting estimates since the end of our ~~2017~~2018 fiscal year. Effective October 1, 2018, the Company has adopted ASC 606 using the modified retrospective approach for all of its contracts. The Company also retrospectively adopted ASU No. 2016-18 on October 1, 2018.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to the impact of market fluctuations associated with commodity prices as discussed below. 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 ethanol. 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 pursuant to the requirements of Generally Accepted Accounting Principles ("GAAP").

Commodity Price Risk

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

We enter into fixed price contracts for corn purchases on a regular basis. It is our intent that, as we enter into these contracts, we will use various hedging instruments (puts, calls and futures) 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 (RPMG) is selling substantially all of the gallons it markets on a spot basis we also include the corn bushel equivalent of the ethanol we have produced that is inventory but not yet priced as bushels that need to be hedged.

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Although we believe our hedge positions will accomplish an economic hedge against our future purchases, they are not designated as hedges for accounting purposes, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We use fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the gains and losses are immediately recognized in our cost of sales. The immediate recognition of hedging gains and losses under fair value accounting can cause net income to be volatile from quarter to quarter and year to year due to the timing of the change in value of derivative instruments relative to the cost of the commodity being hedged. However, it is likely that commodity cash prices will have the greatest impact on the derivatives instruments with delivery dates nearest the current cash price.

As of March 31, ~~2018~~2019, we had fixed corn purchase contracts for approximately ~~2,680,000~~1,589,000 bushels of corn and we had corn futures and option contracts for approximately ~~2.5~~13.1 million bushels of corn. As of March 31, ~~2018~~2019 we had an unrealized loss of approximately ~~$131,000~~$2,283,200 related to our corn futures and option contracts.

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It is the current position of our ethanol marketing company, RPMG, that under current market conditions selling ethanol in the spot market will yield the best price for our ethanol. RPMG will, from time to time, contract a portion of the gallons they market with fixed price contracts.

We estimate that our corn usage will be between 21 million and 23 million bushels per calendar year for the production of approximately 59 million to 64 million gallons of ethanol. 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.

A sensitivity analysis has been prepared to estimate our exposure to corn, natural gas and ethanol price risk. Market risk related to our corn, natural gas and ethanol prices 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 our average ethanol sales price as of March 31, ~~2018,~~2019, net of the forward and future contracts used to hedge our market risk for corn, natural gas and ethanol. The volumes are based on our expected use and sale of these commodities for a one year period from March 31, ~~2018.~~2019. The results of this analysis, which may differ from actual results, are as follows:


	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income			Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income
Ethanol	63,900,000	Gallons	10	%	$	(8,307,000	)	63,900,000	Gallons	10	%	$	(8,307,000	)
Corn	22,820,000	Bushels	10	%	$	(5,820,000	)	22,821,000	Bushels	10	%	$	(6,148,000	)
Natural gas	1,664,000	MMBtu	10	%	$	(383,000	)	1,664,000	MMBtu	10	%	$	(433,000	)

Item 4. Controls and Procedures

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

Our management, including our President and Chief Executive Officer (the principal executive officer), Gerald Bachmeier, along with our Chief Financial Officer, (the principal financial officer), Jodi Johnson, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of March 31, ~~2018.~~2019. Based on this review and evaluation, these officers believe that our disclosure controls and procedures are effective in ensuring that material information related to us is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission.

For the fiscal quarter ended March 31, ~~2018,~~2019, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time in the ordinary course of business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers' compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings.

Item 1A. Risk Factors

There ~~has not~~have been ~~any~~no material ~~change~~changes to the risk factors previously ~~disclosed~~discussed in our annual report on Form 10-K for the fiscal year ended September 30, ~~2017.~~2018.

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

None.

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Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information

None.

Item 6. Exhibits.


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



Exhibit No.			Exhibits
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 13501350
32.2			Certificate Pursuant to 18 U.S.C. Section 13501350
101			The following financial information from Red Trail Energy, LLC's Quarterly Report on Form 10-Q for the quarter ended March 31, ~~2018,~~2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of March 31, ~~2018~~2019 and September 30, ~~2017,~~2018, (ii) Statements of Operations for the three and six months ended March 31, ~~2018~~2019 and ~~2017,~~2018, (iii) Statements of Cash Flows for the three and six months ended March 31, ~~2018~~2019 and ~~2017,~~2018, and (iv) the Notes to Unaudited Condensed Financial Statements.**

(*) Filed herewith.

(**) Furnished herewith.

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SIGNATURES

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



		RED TRAIL ENERGY, LLC

Date:	May ~~14, 2018~~10, 2019	/s/ Gerald Bachmeier
		Gerald Bachmeier
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	May ~~14, 2018~~10, 2019	/s/ Jodi Johnson
		Jodi Johnson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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	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	15
Item 3. Quantitative and Qualitative Disclosures about Market Risk	23
Item 4. Controls and Procedures	24
PART II. OTHER INFORMATION	2524
Item 1. Legal Proceedings	2524
Item 1A. Risk Factors	2524
Item 2. Unregistered Sales of Equity Securities	2524
Item 3. Defaults Upon Senior Securities	25
Item 4. Mine Safety Disclosures	25
Item 5. Other Information	25
Item 6. Exhibits	25
SIGNATURES	2625