UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

	For the quarterly period ended	June 30, ~~2021~~2022

	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)

Securities registered pursuant to Section 12(b) of the Act:


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

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

☒

Yes

☐

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

☒

Yes

☐

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


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o Yes o No

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

o Yes x☒ No

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

As of August ~~10, 2021,~~15, 2022, there were 40,148,160 Class A Membership Units issued and outstanding.

Table of Contents

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RED TRAIL ENERGY, LLC

Condensed Balance Sheets


ASSETS	ASSETS	June 30, 2021		September 30, 2020		ASSETS	June 30, 2022		September 30, 2021
		(Unaudited)					(Unaudited)
Current Assets	Current Assets					Current Assets
Cash and equivalents	Cash and equivalents	$	7,829,688	$	9,304,638	Cash and equivalents	$	19,122,569	$	508,521
Restricted cash - margin account	Restricted cash - margin account	3,824,172		1,807,851		Restricted cash - margin account	4,379,091		4,706,723
Accounts receivable, net, primarily related party	Accounts receivable, net, primarily related party	2,920,313		1,963,236		Accounts receivable, net, primarily related party	3,793,322		1,468,521

Commodities derivative instruments, at fair value (see note 3)		582,410		42,005

Inventory	Inventory	9,749,318		10,137,872		Inventory	15,034,811		11,546,842
Prepaid expenses	Prepaid expenses	648,387		371,283		Prepaid expenses	610,341		466,036
Total current assets	Total current assets	25,554,288		23,626,885		Total current assets	42,940,134		18,696,643

Property, Plant and Equipment	Property, Plant and Equipment					Property, Plant and Equipment
Land	Land	1,333,681		1,333,681		Land	1,333,681		1,333,681
Land improvements	Land improvements	4,465,311		4,465,311		Land improvements	4,465,311		4,465,311
Buildings	Buildings	8,135,994		8,135,994		Buildings	10,051,817		9,581,778
Plant and equipment	Plant and equipment	88,763,119		88,442,644		Plant and equipment	100,304,819		91,666,322
Construction in progress	Construction in progress	23,843,159		9,805,770		Construction in progress	37,918,571		29,154,711
		126,541,264		112,183,400			154,074,199		136,201,803
Less accumulated depreciation	Less accumulated depreciation	71,471,600		67,855,740		Less accumulated depreciation	76,095,307		72,777,271
Net property, plant and equipment	Net property, plant and equipment	55,069,664		44,327,660		Net property, plant and equipment	77,978,892		63,424,532

Other Assets	Other Assets					Other Assets
Right of use operating lease assets, net	Right of use operating lease assets, net	854,328		1,008,677		Right of use operating lease assets, net	509,334		762,847
Investment in RPMG	Investment in RPMG	605,000		605,000		Investment in RPMG	605,000		605,000
Patronage equity	Patronage equity	4,540,963		4,540,963		Patronage equity	4,924,123		4,924,123
Deposits	Deposits	40,000		40,000		Deposits	40,000		40,000
Total other assets	Total other assets	6,040,291		6,194,640		Total other assets	6,078,457		6,331,970

Total Assets	Total Assets	$	86,664,243	$	74,149,185	Total Assets	$	126,997,483	$	88,453,145

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	LIABILITIES AND MEMBERS' EQUITY	June 30, 2021		September 30, 2020		LIABILITIES AND MEMBERS' EQUITY	June 30, 2022		September 30, 2021
		(Unaudited)					(Unaudited)
Current Liabilities	Current Liabilities					Current Liabilities

Disbursements in excess of bank balances						Disbursements in excess of bank balances	$	—	$	1,343,608
Accounts payable	Accounts payable	$	3,206,996	$	4,299,764	Accounts payable	9,908,627		10,099,876
Accrued expenses	Accrued expenses	2,563,208		1,937,555		Accrued expenses	1,061,771		1,435,117

Accrued loss on firm purchase commitments (see notes 4 and 8)		0		130,000
Distribution payable						Distribution payable	4,014,816		—
Commodities derivative instruments, at fair value (see note 4)						Commodities derivative instruments, at fair value (see note 4)	963,925		—
Accrued loss on firm purchase commitments (see notes 5 and 9)						Accrued loss on firm purchase commitments (see notes 5 and 9)	1,069,000		184,000
Customer deposits	Customer deposits	7,334		0		Customer deposits	13,960		11,008
Current maturities of notes payable	Current maturities of notes payable	716,918		1,276,256		Current maturities of notes payable	18,744,513		723,775
Current portion of operating lease liabilities	Current portion of operating lease liabilities	370,150		364,862		Current portion of operating lease liabilities	343,798		372,986
Total current liabilities	Total current liabilities	6,864,606		8,008,437		Total current liabilities	36,120,410		14,170,370

Long-Term Liabilities	Long-Term Liabilities					Long-Term Liabilities
Notes payable	Notes payable	4,081,439		4,916,081		Notes payable	635,461		3,898,239
Long-term operating lease liabilities	Long-term operating lease liabilities	484,178		643,815		Long-term operating lease liabilities	165,536		389,861
Total long-term liabilities	Total long-term liabilities	4,565,617		5,559,896		Total long-term liabilities	800,997		4,288,100
Commitments and Contingencies (Notes 4, 5, 7 and 8)
Commitments and Contingencies (Notes 5, 6, 8 and 9)						Commitments and Contingencies (Notes 5, 6, 8 and 9)

Members’ Equity 40,148,160 Class A Membership Units issued and outstanding	Members’ Equity 40,148,160 Class A Membership Units issued and outstanding	75,234,020		60,580,852		Members’ Equity 40,148,160 Class A Membership Units issued and outstanding	90,076,076		69,994,675

Total Liabilities and Members’ Equity	Total Liabilities and Members’ Equity	$	86,664,243	$	74,149,185	Total Liabilities and Members’ Equity	$	126,997,483	$	88,453,145

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

Table of Contents

RED TRAIL ENERGY, LLC

Condensed Statements of Operations (Unaudited)


											Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
		Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020					(Restated)				(Restated)
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues, primarily related party	Revenues, primarily related party	$	42,741,846	$	22,670,742	$	104,563,490	$	72,649,799	Revenues, primarily related party	$	55,720,460	$	42,741,846	$	168,225,436	$	104,563,490

Cost of Goods Sold	Cost of Goods Sold									Cost of Goods Sold
Cost of goods sold	Cost of goods sold	32,371,643		19,220,909		84,150,555		71,726,947		Cost of goods sold	49,139,917		32,371,643		137,960,322		84,150,555
Lower of cost or net realizable value adjustment	Lower of cost or net realizable value adjustment	0		0		263,777		241,294		Lower of cost or net realizable value adjustment	53,953		—		53,953		263,777
Loss on firm purchase commitments	Loss on firm purchase commitments	0		0		0		100,000		Loss on firm purchase commitments	89,000		—		885,000		—
Total Cost of Goods Sold	Total Cost of Goods Sold	32,371,643		19,220,909		84,414,332		72,068,241		Total Cost of Goods Sold	49,282,870		32,371,643		138,899,275		84,414,332

Gross Profit	Gross Profit	10,370,203		3,449,833		20,149,158		581,558		Gross Profit	6,437,590		10,370,203		29,326,161		20,149,158

General and Administrative Expenses	General and Administrative Expenses	854,179		1,272,698		3,173,878		3,096,666		General and Administrative Expenses	798,990		796,550		2,556,029		2,256,505

Operating Income (Loss)		9,516,024		2,177,135		16,975,280		(2,515,108)
Operating Income										Operating Income	5,638,600		9,573,653		26,770,132		17,892,653

Other Income (Expense)	Other Income (Expense)									Other Income (Expense)
Interest income	Interest income	(615)		18,369		40,016		86,758		Interest income	21,154		(615)		57,684		40,016
Other income, net	Other income, net	2,587		9,099		888,316		145,178		Other income, net	4,265,190		2,587		6,923,733		888,316
Interest expense	Interest expense	(12,562)		(39)		(38,588)		(171)		Interest expense	(3,872)		(12,562)		(19,927)		(38,588)
Total other income, net	Total other income, net	(10,590)		27,429		889,744		231,765		Total other income, net	4,282,472		(10,590)		6,961,490		889,744

Net Income (Loss)		$	9,505,434	$	2,204,564	$	17,865,024	$	(2,283,343)
Net Income										Net Income	$	9,921,072	$	9,563,063	$	33,731,622	$	18,782,397

Weighted Average Units Outstanding	Weighted Average Units Outstanding									Weighted Average Units Outstanding
Basic	Basic	40,148,160		40,148,160		40,148,160		40,148,160		Basic	40,148,160		40,148,160		40,148,160		40,148,160

Diluted	Diluted	40,148,160		40,148,160		40,148,160		40,148,160		Diluted	40,148,160		40,148,160		40,148,160		40,148,160

Net Income (Loss) Per Unit
Net Income Per Unit										Net Income Per Unit
Basic	Basic	$	0.24	$	0.05	$	0.44	$	(0.06)	Basic	$	0.25	$	0.24	$	0.84	$	0.47

Diluted	Diluted	$	0.24	$	0.05	$	0.44	$	(0.06)	Diluted	$	0.25	$	0.24	$	0.84	$	0.47

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)

Nine Months Ended Nine Months Ended
June 30, 2021 June 30, 2020
Cash Flows from Operating Activities
Net income (loss) $ 17,865,024 $ (2,283,343)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 3,615,860 3,568,154
Loss (gain) on disposal of fixed assets 0 (8,212)
Change in fair value of derivative instruments (540,405) (39,716)
Lower of cost of net realizable value adjustment 263,777 241,294
Loss on firm purchase commitments 0 100,000
Loan forgiveness (873,400) 0
Changes in operating assets and liabilities:
Accounts receivable, net, primarily related party (957,077) 769,411
Inventory 124,776 (1,566,996)
Prepaid expenses (277,104) (443,571)
Customer deposits 7,334 0
Accounts payable (1,214,371) (2,749,658)
Accrued expenses 625,653 6,806,799
Accrued loss on firm purchase commitments (130,000) (55,000)
Net cash provided by operating activities 18,510,067 4,339,162
Cash Flows from Investing Activities
Proceeds from disposal of fixed assets 0 8,212
Capital expenditures (14,236,260) (6,062,324)
Net cash (used in) investing activities (14,236,260) (6,054,112)
Cash Flows from Financing Activities
Distribution paid (3,211,856) 0
Proceeds from notes payable 0 873,400
Debt repayments (520,580) (3,386)
Net cash provided by (used in) financing activities (3,732,436) 870,014
Net Change in Cash, Cash Equivalents and Restricted Cash 541,371 (844,936)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period 11,112,489 10,522,069
Cash, Cash Equivalents and Restricted Cash - End of Period $ 11,653,860 $ 9,677,133
Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents $ 7,829,688 $ 8,065,941
Restricted cash 3,824,172 1,611,192
Total Cash, Cash Equivalents and Restricted Cash $ 11,653,860 $ 9,677,133

~~Table of Contents~~

Supplemental Disclosure of Cash Flow Information
Interest paid $ 38,588 $ 12
Noncash Investing and Financing Activities
Finance lease asset acquired $ 0 $ 23,173
Operating lease asset acquired 81,729 168,300
Capital expenditures in accounts payable $ 121,604 $ 8,891


	Nine Months Ended		Nine Months Ended
	June 30, 2022		June 30, 2021
			(Restated)
Cash Flows from Operating Activities
Net income	$	33,731,622	$	18,782,397
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,318,035		3,615,860

Change in fair value of derivative instruments	963,925		(540,405)
Lower of cost of net realizable value adjustment	53,953		263,777
Loss on firm purchase commitments	885,000		—

Loan forgiveness	(2,650,773)		(873,400)
Changes in operating assets and liabilities:

Accounts receivable, net, primarily related party	(2,324,801)		(957,077)

Inventory	(4,426,922)		124,776
Prepaid expenses	(144,305)		(277,104)
Customer deposits	2,952		7,334
Accounts payable	(299,821)		(1,214,371)
Accrued expenses	(373,345)		625,653
Accrued loss on firm purchase commitments	885,000		(130,000)
Net cash provided by operating activities	29,620,520		19,427,440

Cash Flows from Investing Activities

Capital expenditures	(17,763,824)		(15,153,633)
Net cash used in investing activities	(17,763,824)		(15,153,633)

Cash Flows from Financing Activities
Distribution Paid	(9,635,404)		(3,211,856)
Disbursements in excess of bank balances	(1,343,608)		—

Proceeds from notes payable	18,000,000		—

Debt repayments	(591,268)		(520,580)
Net cash provided by (used in) financing activities	6,429,720		(3,732,436)

Net Change in Cash, Cash Equivalents and Restricted Cash	18,286,416		541,371
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	5,215,244		11,112,489
Cash, Cash Equivalents and Restricted Cash - End of Period	$	23,501,660	$	11,653,860

Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$	19,122,569	$	7,829,688
Restricted cash	4,379,091		3,824,172
Total Cash, Cash Equivalents and Restricted Cash	$	23,501,660	$	11,653,860

Supplemental Disclosure of Cash Flow Information
Interest paid	$	54,427	$	38,588
Noncash Investing and Financing Activities

Operating lease asset acquired	$	—	$	81,729
Distribution payable	$	4,014,816	$	—
Capital expenditures in accounts payable	$	108,572	$	121,604

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 JUNE 30, ~~2021~~2022

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, ~~2020,~~2021, 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, ~~2021.~~2022.

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 Adopted Accounting Pronouncements

Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 adds a current expected credit loss (“CECL”) impairment model to U.S. GAAP that is based on expected losses rather than incurred losses. Modified retrospective adoption is required with any cumulative-effect adjustment recorded to retained earnings as of the beginning of the period of adoption. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within the year of adoption. Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Effective October 1, 2020, the Company adopted ASU 2016-13 using the modified retrospective ~~approach. As of June 30, 2021 there has been~~approach, which had no impact ~~of adoption for the fiscal year ended September 30, 2021. The Company expects the impact of adopting the new standard to be immaterial on an ongoing basis.~~upon adoption.

~~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. Effective October 1, 2019 the Company adopted ASU No. 2016-02 using the modified retrospective approach. See note 7 for current operating and financing lease commitments.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2021~~2022

2. RESTATEMENTS OF PRIOR FINANCIAL INFORMATION

This quarterly report on form 10-Q of the Company for the three and nine months ended June 30, 2022 includes the restatement of the Company’s previously filed unaudited statement of operations and cash flow statements for the three and nine months ended June 30, 2021 due to expenditures that should have been capitalized as construction in progress. The Company’s management has concluded these figures should be re-stated in the statements of operations and cash flows for comparative purposes in 2022 filings. Accordingly, the Company has determined that prior financial statements should be corrected. Furthermore, from a quantitative and qualitative perspective, the Company has determined that correcting the previously filed June 30, 2021 financial statements would not require previously filed reports to be amended.


	Previously Reported Three Months Ended June 30, 2021 (unaudited)		Adjustments		Restated Three Months Ended June 30, 2021 (unaudited)
Statement of Operations
General and Administrative Expenses	$	854,179	$	(57,629)	$	796,550
Operating Income	$	9,516,024	$	57,629	$	9,573,653
Net Income	$	9,505,434	$	57,629	$	9,563,063


	Previously Reported Nine Months Ended June 30, 2021 (unaudited)		Adjustments		Restated Nine Months Ended June 30, 2021 (unaudited)
Statement of Operations
General and Administrative Expenses	$	3,173,878	$	(917,373)	$	2,256,505
Operating Income	$	16,975,280	$	917,373	$	17,892,653
Net Income	$	17,865,024	$	917,373	$	18,782,397

Statement of Cash Flows
Net Income	$	17,865,024	$	917,373	$	18,782,397
Net cash provided by operating activities	$	18,510,067	$	917,373	$	19,427,440
Capital expenditures	$	14,236,260	$	917,373	$	15,153,633
Net cash used in investing activities	$	14,236,260	$	917,373	$	15,153,633

3. REVENUE

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 shipment ~~depending~~(depending on the terms of the underlying ~~contracts.~~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 specified volumes of co-products over a contractual period of less than 12 months. In such instances, 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 aswhen 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 nine months ended June 30, ~~2021~~2022 and ~~2020.~~2021.

Revenues For the three months ended June 30, 2021 (unaudited) For the three months ended June 30, 2020 (unaudited) For the nine months ended June 30, 2021 (unaudited) For the nine months ended June 30, 2020 (unaudited)
Ethanol, E85 and Industrial Alcohol $ 32,583,227 $ 17,529,809 $ 80,799,293 $ 55,630,844
Distillers Grains 7,932,798 4,176,444 18,618,186 13,906,736
Syrup 476,873 59,274 877,630 253,344
Corn Oil 1,706,942 868,578 4,131,184 2,726,614
Other 42,006 36,637 137,197 132,261
Total revenue from contracts with customers $ 42,741,846 $ 22,670,742 $ 104,563,490 $ 72,649,799

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022


Revenues	For the three months ended June 30, 2022 (unaudited)		For the three months ended June 30, 2021 (unaudited)		For the nine months ended June 30, 2022 (unaudited)		For the nine months ended June 30, 2021 (unaudited)
Ethanol, E85 and Industrial Alcohol	$	41,848,981	$	32,583,227	$	129,429,510	$	80,799,293
Distillers Grains	10,210,240		7,932,798		28,377,801		18,618,186
Syrup	412,504		476,873		1,335,627		877,630
Corn Oil	3,215,625		1,706,942		8,940,871		4,131,184
Other	33,110		42,006		141,627		137,197
Total revenue from contracts with customers	$	55,720,460	$	42,741,846	$	168,225,436	$	104,563,490

Shipping and Handling Costs

We account for shipping and handling activities related to contracts with customers as costs to fulfill our promises 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.

Customer Deposits

Customer deposits are contract liabilities for payments in excess of revenue recognized. Customer deposits are recognized when modified distillers grains customers make prepayments on their contracts. The ending balances for accounts receivable and customer deposits were as follows as of October 1, 2021 and 2020 and for the nine months ended June 30, 2022 and 2021.


	October 1, 2021		October 1, 2020		For the nine months ended June 30, 2022 (unaudited)		For the nine months ended June 30, 2021 (unaudited)
Accounts receivable	$	1,468,521	$	1,963,236	$	3,793,322	$	2,920,313
Customer deposits	11,008		—		13,960		7,334

4. 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:	June 30, 2022 (unaudited)					September 30, 2021
Contract Type	# of Contracts	Notional Amount (Qty)		Fair Value		# of Contracts	Notional Amount (Qty)		Fair Value
Corn futures	140	700,000	bushels	$	(591,425)	—	—	bushels	$	—
Corn options	200	1,000,000	bushels	$	(372,500)	—	—	bushels	$	—





Total fair value				$	(963,925)				$	—
Amounts are combined on the balance sheet - negative numbers represent liabilities

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2021~~2022

As of: June 30, 2021 (unaudited) September 30, 2020
Contract Type # of Contracts Notional Amount (Qty) Fair Value # of Contracts Notional Amount (Qty) Fair Value
Corn futures 0 0 bushels $ 0 30 1,260,000 bushels $ 104,068
Corn options 100 500,000 bushels $ (75,625) 83 415,000 bushels $ (62,063)
Ethanol futures 35 1,470,000 gal $ 658,035 0 0 gal $ 0
Total fair value $ 582,410 $ 42,005
Amounts are combined on the balance sheet - negative numbers represent liabilities

The following tables provide details regarding the Company's derivative financial instruments at June 30, ~~2021~~2022 and September 30, ~~2020:~~2021:


Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:					Derivatives not designated as hedging instruments:

Balance Sheet - as of June 30, 2021 (unaudited)		Asset		Liability
Balance Sheet - as of June 30, 2022 (unaudited)						Balance Sheet - as of June 30, 2022 (unaudited)	Asset		Liability
Commodity derivative instruments, at fair value	Commodity derivative instruments, at fair value	$	582,410	$	0	Commodity derivative instruments, at fair value	0		$	963,925
Total derivatives not designated as hedging instruments for accounting purposes	Total derivatives not designated as hedging instruments for accounting purposes	$	582,410	$	0	Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	963,925

Balance Sheet - as of September 30, 2020		Asset		Liability
Balance Sheet - as of September 30, 2021						Balance Sheet - as of September 30, 2021	Asset		Liability
Commodity derivative instruments, at fair value	Commodity derivative instruments, at fair value	$	42,005	$	0	Commodity derivative instruments, at fair value	$	—	$	—
Total derivatives not designated as hedging instruments for accounting purposes	Total derivatives not designated as hedging instruments for accounting purposes	$	42,005	$	0	Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	—


Statement of Operations Income/(Expense)	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 June 30, 2021 (unaudited)		Amount of gain (loss) recognized in income during the three months ended June 30, 2020 (unaudited)		Amount of gain (loss) recognized in income during the nine months ended June 30, 2021 (unaudited)		Amount of gain (loss) recognized in income during the nine months ended June 30, 2020 (unaudited)		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 June 30, 2022 (unaudited)		Amount of gain (loss) recognized in income during the three months ended June 30, 2021 (unaudited)		Amount of gain (loss) recognized in income during the nine months ended June 30, 2022 (unaudited)		Amount of gain (loss) recognized in income during the nine months ended June 30, 2021 (unaudited)
Corn derivative instruments	Corn derivative instruments	Cost of Goods Sold	$	567,691	$	(270,925)	$	1,266,401	$	(539,099)	Corn derivative instruments	Cost of Goods Sold	$	373,089	$	567,691	$	1,437,628	$	1,266,401
Ethanol derivative instruments	Ethanol derivative instruments	Revenue	493,764		233,372		1,288,915		258,836		Ethanol derivative instruments	Revenue	—		493,764		424,770		1,288,915

Natural gas derivative instruments	Natural gas derivative instruments	Cost of Goods Sold	0		0		1,410		0		Natural gas derivative instruments	Cost of Goods Sold	—		—		(107,450)		1,410
Total	Total		$	1,061,455	$	(37,553)	$	2,556,726	$	(280,263)	Total		$	373,089	$	1,061,455	$	1,754,948	$	2,556,726

4.5. INVENTORY

Inventory is valued at the lower of cost or net realizable value. Inventory values as of June 30, ~~2021~~2022 and September 30, ~~2020~~2021 were as follows:


		June 30, 2021 (unaudited)		September 30, 2020			June 30, 2022 (unaudited)		September 30, 2021
Raw materials, including corn, chemicals and supplies	Raw materials, including corn, chemicals and supplies	$	5,032,919	$	4,031,086	Raw materials, including corn, chemicals and supplies	$	7,204,359	$	3,978,299
Work in process	Work in process	1,072,680		765,673		Work in process	1,594,160		1,321,862
Finished goods, including ethanol and distillers grains	Finished goods, including ethanol and distillers grains	2,091,975		3,914,117		Finished goods, including ethanol and distillers grains	4,518,142		4,622,007
Spare parts	Spare parts	1,551,744		1,426,996		Spare parts	1,718,150		1,624,674
Total inventory	Total inventory	$	9,749,318	$	10,137,872	Total inventory	$	15,034,811	$	11,546,842

Lower of cost or net realizable value adjustments for the three and nine months ended June 30, 2022 and 2021 were as follows:


	For the three months ended June 30, 2022 (unaudited)		For the three months ended June 30, 2021 (unaudited)		For the nine months ended June 30, 2022 (unaudited)		For the nine months ended June 30, 2021 (unaudited)
Loss on firm purchase commitments	$	89,000	$	—	$	885,000	$	—
Loss on lower of cost or net realizable value adjustment for inventory on hand	$	53,953	$	—	$	53,953	$	263,777
Total loss on lower of cost or net realizable value adjustments	$	142,953	$	—	$	938,953	$	263,777

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2021~~2022

~~Lower of cost or net realizable value adjustments for the three and nine months ended June 30, 2021 and 2020 were as follows:~~

For the three months ended June 30, 2021 (unaudited) For the three months ended June 30, 2020 (unaudited) For the nine months ended June 30, 2021 (unaudited) For the nine months ended June 30, 2020 (unaudited)
Loss on firm purchase commitments $ 0 $ 0 $ 0 $ 100,000
Loss on lower of cost or net realizable value adjustment for inventory on hand $ 0 $ 0 $ 263,777 $ 241,294
Total loss on lower of cost or net realizable value adjustments $ 0 $ 0 $ 263,777 $ 341,294

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 June 30, ~~2021,~~2022, 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 0$885,000 estimated loss on firm purchase commitments for the nine months ended June 30, ~~2021 and a $100,000~~2022 compared to no estimated loss on firm purchase commitments for the nine months ended June 30, ~~2020.~~2021. The loss is recorded in “Loss on firm purchase commitments” on the statement of operations and "Accrued loss on firm purchase commitments" on the balance sheet. 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, future losses on the outstanding purchase commitments could be recorded in future periods.

5.6. BANK FINANCING

Ethanol Recovery Program

On July 13, 2020, we received a $5.41 million loan through the Bank of North Dakota's Ethanol Recovery Program and Cornerstone Bank ("Cornerstone"). The Ethanol Recovery Program was developed by the North Dakota Ethanol Producers Association and the Bank of North Dakota to use the existing Biofuels Partnership in Assisting Community Expansion ("PACE") program and Value-added Guarantee Loan program to help ethanol production facilities weather the economic challenges caused by the COVID-19 pandemic. Ethanol producers could qualify for up to $15 million of a low interest loan of 1% based on the amount of such producers' annual corn grind. On December 3, 2021 we received forgiveness of $2.65 million of the loan. The forgiveness was recorded as other income. The outstanding balance as of June 30, ~~2021 is $4.78~~2022 was $1.37 million. The maturity date of the loan is July 13, 2025. The fixed interest rate on June 30, ~~2021~~2022 was 3.75% with an interest rate buy down through the Bank of North Dakota to 1%.

Revolving Loan

On February ~~1, 2021~~3, 2022 we renewed our $10 million revolving loan (the "Revolving Loan") with Cornerstone. ~~The~~On February 3, 2022 the maturity date ofwas extended to March 31, 2022. On April 8, 2022 the Revolving Loan was renewed. The new maturity date is ~~January 31, 2022.~~April 7, 2023. At June 30, ~~2021,~~2022, we had $10 million available under the Revolving Loan. The variable interest rate on June 30, ~~2021~~2022 was ~~3.00%~~3.25%.

Construction Loans

On January 22, 2020, we entered into a $7 million construction loan (the "Construction Loan") with Cornerstone. The original maturity date of the Construction Loan was June 1, 2021. On June 3, 2021 we extended the maturity date to February 1, 2022. On April 8, 2022 the Construction Loan was renewed. The new maturity date is October 8, 2022. At June 30, ~~2021,~~2022, we had $7 million available under the Construction Loan. The variable interest rate on June 30, ~~2021~~2022 was 3.00%.

On February 1, 2021 we entered into a $28 million construction loan (the "CCS Construction Loan") with Cornerstone for the carbon capture and storage project. The maturity date of the CCS Construction Loan iswas January 31, 2022. ~~At June 30, 2021~~On February 17, 2022 the maturity date was extended to March 15, 2022. On April 8, 2022 we ~~had $28 million available under~~renewed the CCS Construction Loan. The new maturity date is October 8, 2022. As of June 30, 2022 $18 million has been drawn on the CCS Construction Loan to finance construction of the carbon capture and storage project. Upon completion and final verification of the project the $18 million will be refinanced as long-term debt. The variable interest rate on June 30, ~~2021~~2022 was 3.00%.

~~On April 16, 2020, the Company received a Paycheck Protection Program Loan (the "PPP Loan") for $873,400 with Cornerstone. The maturity date~~Each of the ~~PPP Loan was April 16, 2022. The fixed interest rate was 1.00%. Under the terms~~Company's loans are secured by a lien on substantially all of the ~~PPP Loan, the Company applied for forgiveness~~assets of the entire amount of the PPP Loan on October 31, 2020, in accordance with PPP regulations, which provided for the possibility of loan forgiveness because the Company used all proceeds of the PPP Loan for qualifying expenses in accordance with PPP requirements. The entire amount of the PPP Loan was forgiven on January 20, 2021. The forgiven amount was recorded as other income.

Company.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2021~~2022

~~The Company's loans are secured by a lien on substantially all of the assets of the Company.~~


Schedule of debt maturities and lease liabilities for the twelve months ending June 30	Totals
2022	$	19,088,311
2023	714,755
2024	37,289
2025	36,531
2026	12,422
Total	$	19,889,308

Schedule of debt maturities for the twelve months ending June 30 Totals
2021 $ 716,918
2022 745,002
2023 772,869
2024 800,130
2025 1,763,438
Total $ 4,798,357

6.7. FAIR VALUE MEASUREMENTS

The following table provides information on those liabilities that are measured at fair value on a recurring basis as of June 30, ~~2021~~2022 and September 30, ~~2020,~~2021, respectively.


						Fair Value Measurement Using											Fair Value Measurement Using
		Carrying Amount as of June 30, 2021 (unaudited)		Fair Value as of June 30, 2021 (unaudited)		Level 1		Level 2		Level 3			Carrying Amount as of June 30, 2022 (unaudited)		Fair Value as of June 30, 2022 (unaudited)		Level 1		Level 2		Level 3
Assets
Liabilities												Liabilities
Commodities derivative instruments	Commodities derivative instruments	$	582,410	$	582,410	$	582,410	$	0	$	0	Commodities derivative instruments	$	963,925	$	963,925	$	963,925	$	—	$	—
Total	Total	$	582,410	$	582,410	$	582,410	$	0	$	0	Total	$	963,925	$	963,925	$	963,925	$	—	$	—

						Fair Value Measurement Using											Fair Value Measurement Using
		Carrying Amount as of September 30, 2020		Fair Value as of September 30, 2020		Level 1		Level 2		Level 3			Carrying Amount as of September 30, 2021		Fair Value as of September 30, 2021		Level 1		Level 2		Level 3
Assets	Assets											Assets
Commodities derivative instruments	Commodities derivative instruments	$	42,005	$	42,005	$	42,005	$	0	$	0	Commodities derivative instruments	$	—	$	—	$	—	$	—	$	—
Total	Total	$	42,005	$	42,005	$	42,005	$	0	$	0	Total	$	—	$	—	$	—	$	—	$	—

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

7.8. LEASES

Effective October 1, 2019, the Company adopted the provisions of ASU No. 2016-02, "Leases (topic 842)" using the modified retrospective approach which applies the provisions of ASU No. 2016-02 upon adoption, with no change to prior periods. This adoption resulted in the Company recognizing initial right of use assets and lease liabilities of $1,418,000. The adoption did not have a significant impact on the Company's statement of operations.

Upon the initial adoption of ASU No. 2016-02, the Company elected the following practical expedients allowable under the guidance: not to reassess whether any expired or existing contracts are or contain leases; not to reassess the lease classification for any expired or existing leases; not to reassess initial direct costs for any existing leases; not to separately identify lease and nonlease components; and not to evaluate historical land easements. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASU No. 2016-02 to only long-term (greater than one year) leases.

The Company leases railcar and plant equipment. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the

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~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED JUNE 30, 2021~~

present value of lease payments. For the nine months ended June 30, ~~2021,~~2022, the Company's estimated discount rate was 3.00%. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company determines if an arrangement is a lease or contains a lease at inception. The Company's existing leases have remaining lease terms of approximately one year to ~~four~~five years, which may include options to extend the leases when it is reasonably certain the Company will exercise those options. At June 30, ~~2021~~2022 the weighted average remaining lease term was two years. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants. The Company does not have any sublease agreements.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

The Company is generally responsible for maintenance, taxes, and utilities for leased equipment. Rent expense for operating leases was approximately ~~$506,900~~$767,000 and ~~$570,000~~$506,900 for the nine months ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Equipment under financing leases consists of office equipment and plant equipment. At June 30, ~~2021~~2022 and September 30, ~~2020,~~2021, equipment under financing leases was as follows:


		June 30, 2021		September 30, 2020			June 30, 2022		September 30, 2021
Equipment	Equipment	$	493,414	$	493,414	Equipment	$	493,414	$	493,414
Less accumulated amortization	Less accumulated amortization	(190,528)		(172,944)		Less accumulated amortization	(213,972)		(196,389)
Net equipment under financing lease	Net equipment under financing lease	$	302,886	$	320,470	Net equipment under financing lease	$	279,442	$	297,025

At June 30, ~~2021,~~2022, the Company had the following minimum commitments, which at inception had non-cancellable terms of more than one year. Amounts shown below are for the 12 month periods ending June 30:


		Operating Leases		Financing Leases			Operating Leases		Financing Leases
2021		$	370,150	$	4,534
2022	2022	350,220		4,568		2022	$	343,798	$	4,568
2023	2023	133,958		4,602		2023	81,130		4,602
2024	2024	0		1,836		2024	35,453		1,836

Thereafter		0		0
2025						2025	36,531		—
2026						2026	12,422		—
Total minimum lease commitments	Total minimum lease commitments	$	854,328	15,540		Total minimum lease commitments	$	509,334	11,006
Less amount representing interest	Less amount representing interest			0		Less amount representing interest			—
Present value of minimum lease commitments included in notes payable on the balance sheet	Present value of minimum lease commitments included in notes payable on the balance sheet			$	15,540	Present value of minimum lease commitments included in notes payable on the balance sheet			$	11,006

8.9. 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 June 30, ~~2021,~~2022, the Company had various fixed price contracts for the purchase of approximately ~~0.7~~3.2 million bushels of corn. Using the stated contract price for the fixed price contracts, the Company had commitments of approximately ~~$3.5~~$22.8 million related to the ~~0.7~~3.2 million bushels under contract.

Water

On April 21, 2015, we entered into a ten-year contract to purchase raw water from Southwest Water Authority in order to meet the Plant's water requirements. Our contract requires us to purchase a minimum of 160 million gallons of water per year. The minimum estimated obligation for this contract is $424,000 per year.

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~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED JUNE 30, 2021~~

Profit and Cost Sharing Agreement

The Company 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 of the Company 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 Profit and Cost Sharing Agreement provides that 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 prior to termination of this obligation in accordance with the $10 million cap or the ten-year term of this obligation. The Company ~~had~~has paid Bismarck Land Company, LLC ~~$28,315~~$1,047,581 as of June 30, ~~2021.~~2022.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

Carbon Capture and Storage Project

On July 30, 2018, the Company entered into a research agreement with the University of North Dakota Energy and Environmental Research Center to explore the feasibility of injecting carbon dioxide ("CO2") from the fermentation process into a saline formation to lower the carbon intensity value of our ethanol. The Company committed to fund up to $950,000 for this research. The Company had incurred $949,631 in expenses through the ~~third~~second quarter of the ~~2020~~2022 fiscal year which is recorded as consulting services under general and administrative expenses. The commitment was fully paid as of June 30, ~~2021.~~2022.

On October 1, 2020, the Company entered into an agreement with Salof LTD, Inc. for the design, engineering, fabrication and start up of the CO2 capture and liquefaction facility for the carbon capture and storage project. The price of the system including all equipment and services is $11,845,000. The Company ~~has~~had paid ~~$5,922,500~~$11,262,856 as of June 30, ~~2021~~2022, which is recorded as construction in progress.

On May 6, 2021, the Company entered into an agreement with Direct Automation for the DCS Computer System for the carbon capture and storage project. The price of the system including all equipment and installation is $800,992. The Company has paid ~~$342,825~~$779,895 as of June 30, ~~2021 which is recorded as construction in progress.~~

~~Industrial Alcohol Project~~

On October 6, 2020, the Company entered into an agreement with Praj Industries Limited to purchase a 25 million gallon per year Eco-Smart Distillation unit to produce United States Pharmacopeia ("USP") grade alcohol. The price of the system is $2,659,500, of which the Company had paid $2,659,500 as of June 30, 2021 which is recorded as construction in progress.

On April 13, 2021, the Company entered into an agreement with Tooz Construction, Inc. for the construction of the building foundation for the new distillation building for the Eco-Smart Distillation unit. The price of materials and labor is $178,057. The Company has paid $27,382 as of June 30, 20212022 which is recorded as construction in progress.

As of June 30, ~~2021~~2022 the Company has ~~paid~~incurred a total of ~~$4.3 million towards the Industrial Alcohol Project and a total of $15.1~~$37.1 million towards the Carbon Capture and Storage Project, which ~~are both~~is recorded as construction in progress. The project was completed and placed into service on June 16, 2022. The remaining cost ~~to complete the Industrial Alcohol Project is roughly $1.9 million and the remaining cost to complete~~for completion of the Carbon Capture and Storage Project is roughly ~~$14~~$0.5 million.

9.10. 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”). Significant related party activity affecting the financial statements is as follows:

~~Table of Contents~~


	June 30, 2022 (unaudited)		September 30, 2021
Balance Sheet
Accounts receivable	$	3,045,052	$	1,309,673
Accounts payable	1,186,415		788,050
Accrued expenses	1,449,570		832,904

~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED JUNE 30, 2021~~

June 30, 2021
(unaudited) September 30, 2020
Balance Sheet
Accounts receivable $ 2,701,564 $ 1,777,576
Accounts payable 121,374 188,457
Accrued expenses 448,758 650,833


		For the three months ended June 30, 2021 (unaudited)		For the three months ended June 30, 2020 (unaudited)		For the nine months ended June 30, 2021 (unaudited)		For the nine months ended June 30, 2020 (unaudited)			For the three months ended June 30, 2022 (unaudited)		For the three months ended June 30, 2021 (unaudited)		For the nine months ended June 30, 2022 (unaudited)		For the nine months ended June 30, 2021 (unaudited)
Statement of Operations	Statement of Operations									Statement of Operations
Revenues	Revenues	$	39,664,319	$	19,128,595	$	95,934,627	$	64,823,447	Revenues	$	53,334,537	$	39,664,319	$	155,186,145	$	95,934,627

Cost of goods sold	Cost of goods sold	533,438		260,158		1,605,195		1,551,865		Cost of goods sold	982,595		533,438		2,978,410		1,605,195
General and administrative	General and administrative	109,447		30,286		169,910		105,444		General and administrative	—		109,447		—		169,910
Other income		0		119,825		0		239,650

Inventory Purchases	Inventory Purchases	$	4,842,958	$	6,449,514	$	10,504,616	$	14,852,088	Inventory Purchases	$	5,672,336	$	4,842,958	$	30,069,765	$	10,504,616

~~10.~~11. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

During volatile market conditions, the Company experiences certain risks and uncertainties, which could 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

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2022

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 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, which has generally been 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~~corn.The cost of corn is generally impacted by factors such as supply and demand, weather, and government ~~policies and programs. The Company's risk management program is used~~programs, global political or economic issues, including but not limited to ~~protect against~~ the ~~price volatility of these commodities.~~war in Ukraine including sanctions associated therewith, or global damaging growing conditions, such as plant disease or adverse weather, including drought, increased fertilizer costs as well as global conflicts.

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, 2019, 2020 and ~~2020~~2021 RFS final rules. No final RFS has been established for ~~2021.~~2022.

On January 30, 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a “Public Health Emergency of International Concern” and on March 11, 2020, declared COVID-19 a pandemic. Quarantines, labor shortages, and other disruptions to the Company’s operations, and those of its customers, adversely impacted the Company’s revenues, ability to provide its services and operating results. Any future quarantines, labor shortages, or other disruptions to the Company's operations, or those of its customers may adversely impact the Company's revenues, ability to provide its services and operating results. Like the COVID-19 pandemic, any significant outbreak of epidemic, pandemic or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, including the geographical area in which the Company operates, resulting in an economic downturn that could affect demand for its goods and services. The extent to which COVID-19 will impact the Company’s long-term results will depend on future developments, which are highly uncertain and cannot be predicted, including new developments regarding continued distribution of the COVID-19 vaccine, new information which may emerge concerning the severity of the coronavirus, prevalence of new COVID-19 cases and actions taken to contain the coronavirus or its impact, among others.

The Company anticipates that the results of operations during the remainder of fiscal year ~~2021~~2022 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 and continued effects from decreased ethanol demand due to the travel restrictions that were implemented during the COVID-19 pandemic.~~industry.

12. MEMBER'S EQUITY

Changes in member's equity for the nine months ended June 30, 2022 and 2021.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2021~~2022

~~11. MEMBER'S EQUITY~~


	Class A Member Units		Additional Paid in Capital		Accumulated Deficit/Retained Earnings		Treasury Units		Total Member Equity
Balances - September 30, 2021	$	39,044,595	$	75,541	$	31,034,079	$	(159,540)	$	69,994,675
Net income					19,371,546				19,371,546
Balances December 31, 2021	$	39,044,595	$	75,541	$	50,405,625	$	(159,540)	$	89,366,221
Distribution $0.24 per unit					(9,624,072)				(9,624,072)
Net income					4,439,004				4,439,004
Balances - March 31, 2022	$	39,044,595	$	75,541	$	45,220,557	$	(159,540)	$	84,181,153
Distribution $0.10 per unit					$	(4,026,149)			$	(4,026,149)
Net income					$	9,921,072			$	9,921,072
Balances - June 30, 2022	$	39,044,595	$	75,541	$	51,115,480	$	(159,540)	$	90,076,076

~~Changes in member's equity for the nine months ended June 30, 2021 and 2020.~~

Class A Member Units Additional Paid in Capital Accumulated Deficit/Retained Earnings Treasury Units Total Member Equity
Balances - September 30, 2020 $ 39,044,595 $ 75,541 $ 21,620,256 $ (159,540) $ 60,580,852
Net income (loss) 2,265,694 2,265,694
Balances December 31, 2020 $ 39,044,595 $ 75,541 $ 23,885,950 $ (159,540) $ 62,846,546
Distribution (3,211,856) (3,211,856)
Net income (loss) 6,093,896 6,093,896
Balances - March 31, 2021 $ 39,044,595 $ 75,541 $ 26,767,990 $ (159,540) $ 65,728,586
Net income (loss) $ 9,505,434 $ 9,505,434
Balances - June 30, 2021 $ 39,044,595 $ 75,541 $ 36,273,424 $ (159,540) $ 75,234,020

Class A Member Units Additional Paid in Capital Accumulated Deficit/Retained Earnings Treasury Units Total Member Equity
Balances - September 30, 2019 $ 39,044,595 $ 75,541 $ 21,613,668 $ (159,540) $ 60,574,264
Net income (loss) (1,251,913) (1,251,913)
Balances - December 31, 2019 $ 39,044,595 $ 75,541 $ 20,361,755 $ (159,540) $ 59,322,351
Distribution $ 0 $ 0
Net income (loss) $ (3,235,994) $ (3,235,994)
Balances - March 31, 2020 $ 39,044,595 $ 75,541 $ 17,125,761 $ (159,540) $ 56,086,357
Net income (loss) — — 2,204,564 — 2,204,564
Balances - June 30, 2020 $ 39,044,595 $ 75,541 $ 19,330,325 $ (159,540) $ 58,290,921


	Class A Member Units		Additional Paid in Capital		Accumulated Deficit/Retained Earnings		Treasury Units		Total Member Equity
Balances - September 30, 2020	$	39,044,595	$	75,541	$	21,620,256	$	(159,540)	$	60,580,852
Net income					2,929,786				2,929,786
Balances - December 31, 2020	$	39,044,595	$	75,541	$	24,550,042	$	(159,540)	$	63,510,638
Distribution $0.08 per unit					$	(3,211,856)			$	(3,211,856)
Net income					$	6,289,548			$	6,289,548
Balances - March 31, 2021	$	39,044,595	$	75,541	$	27,627,734	$	(159,540)	$	66,588,330
Net income	—		—		9,563,063		—		9,563,063


Balances - June 30, 2021	$	39,044,595	$	75,541	$	37,190,797	$	(159,540)	$	76,151,393

~~12.~~13. SUBSEQUENT EVENTS

~~Management evaluated all other activity of~~On July 20, 2022 the Company ~~and concluded that no subsequent events have occurred that would require recognition in~~paid the ~~condensed financial statements or disclosure in the notes~~distribution payable to the ~~condensed financial statements.~~shareholders.

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

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and nine month periods ended June 30, ~~2021,~~2022, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the financial statements, notes and information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021. 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~~Increased inflation which can have an impact on the ~~RFS granted by~~costs of our raw materials;

•Higher natural gas prices in the ~~EPA;~~United States due to increased exports of natural gas to Europe;

•Market prices and availability of corn that we require to operate the ethanol plant;

•Continued economic impacts from the COVID-19 pandemic, including reduced gasoline demand;

•Continued economic impacts of the war in Ukraine, including increased commodities prices and effect of Sanctions;

•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 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.

On ~~February 1, 2021~~April 8, 2022 we renewed our $10 million Revolving Loan with Cornerstone ~~Bank. In addition,~~Bank and its new maturity date is October 8, 2022. Also on ~~February 1, 2021~~April 8, 2022, we ~~entered into a~~renewed both our $7 million Construction Loan and our $28 million ~~construction loan~~dollar CCS Construction Loan with Cornerstone Bank which both have maturity dates of October 8, 2022. Please see Note 6 - Bank Financing above for ~~the carbon capture and storage project. The maturity date of the loan is January 31, 2022. The variable interest rate is 3.00%. As of June 30, 2021 the Company has not drawn any funds on either loan.~~

additional details.

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Results of Operations for the Three Months Ended June 30, ~~2021~~2022 and ~~2020~~2021

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 June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three Months Ended June 30, 2021 (Unaudited)			Three Months Ended June 30, 2020 (Unaudited)				Three Months Ended June 30, 2022 (Unaudited)			Three Months Ended June 30, 2021 (Unaudited)
Statement of Operations Data	Statement of Operations Data	Amount		%	Amount		%	Statement of Operations Data	Amount		%	Amount		%
Revenues	Revenues	$	42,741,846	100.00	$	22,670,742	100.00	Revenues	$	55,720,460	100.00	$	42,741,846	100.00
Cost of Goods Sold	Cost of Goods Sold	32,371,643		75.74	19,220,909		84.78	Cost of Goods Sold	49,282,870		88.45	32,371,643		75.74
Gross Profit	Gross Profit	10,370,203		24.26	3,449,833		15.22	Gross Profit	6,437,590		11.55	10,370,203		24.26
General and Administrative Expenses	General and Administrative Expenses	854,179		2.00	1,272,698		5.61	General and Administrative Expenses	798,990		1.43	796,550		1.86
Operating Income	Operating Income	9,516,024		22.26	2,177,135		9.60	Operating Income	5,638,600		10.12	9,573,653		22.40
Other Income, net	Other Income, net	(10,590)		(0.02)	27,429		0.12	Other Income, net	4,282,472		7.69	(10,590)		(0.02)
Net Income	Net Income	$	9,505,434	22.24	$	2,204,564	9.72	Net Income	$	9,921,072	17.81	$	9,563,063	22.37

The following table shows additional data regarding production and price levels for our primary inputs and products for the three months ended June 30, ~~2021~~2022 and ~~2020.~~2021.


		Three Months Ended June 30, 2021 (unaudited)		Three Months Ended June 30, 2020 (unaudited)			Three Months Ended June 30, 2022 (unaudited)		Three Months Ended June 30, 2021 (unaudited)
Production:	Production:					Production:
Ethanol sold (gallons)	Ethanol sold (gallons)	14,335,793		11,885,715		Ethanol sold (gallons)	15,899,612		14,335,793
Industrial ethanol sold (gallons)		—		1,094,855

Dried distillers grains sold (tons)	Dried distillers grains sold (tons)	24,761		22,073		Dried distillers grains sold (tons)	28,122		24,761
Modified distillers grains sold (tons)	Modified distillers grains sold (tons)	27,608		20,160		Modified distillers grains sold (tons)	17,979		27,608
Corn oil sold (pounds)	Corn oil sold (pounds)	3,660,850		3,723,500		Corn oil sold (pounds)	4,336,920		3,660,850
Revenues:	Revenues:					Revenues:
Fuel grade ethanol average price per gallon (net of hedging)	Fuel grade ethanol average price per gallon (net of hedging)	$	2.28	$	1.17	Fuel grade ethanol average price per gallon (net of hedging)	$	2.63	$	2.28
Industrial ethanol average price per gallon		—		3.28

Dried distillers grains average price per ton	Dried distillers grains average price per ton	196.76		135.76		Dried distillers grains average price per ton	266.12		196.76
Modified distillers grains average price per ton	Modified distillers grains average price per ton	110.86		58.52		Modified distillers grains average price per ton	151.64		110.86
Corn oil average price per pound	Corn oil average price per pound	0.47		0.23		Corn oil average price per pound	0.74		0.47
Primary Inputs:	Primary Inputs:					Primary Inputs:
Corn ground (bushels)	Corn ground (bushels)	4,925,520		4,726,840		Corn ground (bushels)	5,535,187		4,925,520
Natural gas (MMBtu)	Natural gas (MMBtu)	354,266		319,470		Natural gas (MMBtu)	404,040		354,266
Costs of Primary Inputs:	Costs of Primary Inputs:					Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	Corn average price per bushel (net of hedging)	$	5.34	$	2.78	Corn average price per bushel (net of hedging)	$	7.43	$	5.34
Natural gas average price per MMBtu (net of hedging)	Natural gas average price per MMBtu (net of hedging)	2.59		1.84		Natural gas average price per MMBtu (net of hedging)	6.59		2.59
Other Costs (per gallon of ethanol sold):	Other Costs (per gallon of ethanol sold):					Other Costs (per gallon of ethanol sold):
Chemical and additive costs	Chemical and additive costs	$	0.087	$	0.081	Chemical and additive costs	$	0.085	$	0.087
Denaturant cost	Denaturant cost	0.038		0.028		Denaturant cost	0.054		0.038
Electricity cost	Electricity cost	0.048		0.055		Electricity cost	0.057		0.048
Direct labor cost	Direct labor cost	0.070		0.077		Direct labor cost	0.075		0.070

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Revenue

Our total revenue was higher in the third quarter of our ~~2021~~2022 fiscal year compared to the ~~same period~~third quarter of our ~~2020~~2021 fiscal year primarily due to higher average prices for our products along with increased quantity of ethanol and ~~distillers grains~~corn oil sold during the ~~2021~~2022 period. During the third quarter of our 2022 fiscal year, approximately 75.1% of our total revenue was derived from ethanol and industrial alcohol sales, approximately 18.3% was from distillers grains sales, approximately 1.1% was from syrup, and approximately 5.8% was from corn oil sales. During the third quarter of our 2021 fiscal year, approximately 76.2% of our total revenue was derived from ethanol and industrial alcohol sales, approximately 18.6% was from distillers grains sales, approximately 0.8% was from syrup and approximately 4.0% was from corn oil sales. During the third quarter of our 2020 fiscal year, approximately 77.3% of our total revenue was derived from ethanol sales, approximately 18.4% was from distillers grains sales and approximately 3.8% was from corn oil sales.

Ethanol

The average price we received for our ethanol was significantly higher during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year. Management attributes the increase in the price we received for our ethanol during the third quarter of our ~~2021~~2022 fiscal year to ~~decreased ethanol stocks along with~~ higher gasoline ~~demand~~prices and higher corn prices in the market. Management also believes that inflation has increased commodity prices, including ethanol. Gasoline ~~demand~~prices have increased ~~during~~significantly recently, especially due to uncertainty caused by the ~~third quarter of our 2021 fiscal year as the COVID-19 vaccination was distributed and certain COVID-19 restrictions were lifted. Management anticipates gasoline demand will continue to increase,~~war in Ukraine which ~~management believes will positively impact ethanol~~has resulted in higher oil prices. In addition, corn prices have ~~increased significantly~~been higher which ~~have~~has resulted in higher market ethanol prices.

We sold more gallons of ethanol during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to increased production at the ethanol plant during the ~~2021~~2022 period. Management attributes this increased production to less plant downtime ~~and improved corn to ethanol conversion rates~~ during the third quarter of our ~~2021~~2022 fiscal year compared to the same period of our ~~2020~~2021 fiscal year. Management anticipates ethanol production to remain at current levels provided market conditions allow us to continue to operate the ethanol plant at capacity. We anticipate continuing to focus on operating the ethanol plant as efficiently as possible in order to maximize our profitability.

From time to time we enter into forward sales contracts for our products. At June 30, ~~2021,~~2022, we ~~experienced a realized gain of approximately $494,000 related to our~~had no open ethanol ~~derivative instruments, which increased our revenue.~~futures contracts. At June 30, 2021, ~~we had open ethanol futures contracts for 1,470,000 gallons of ethanol with a fair value of approximately $658,000. At June 30, 2020,~~ we had no open ethanol futures contracts. We had no realized gain or loss on ethanol derivative instruments ~~during~~for the third quarter of our ~~2020~~2022 fiscal year.

Distillers Grains

During the third quarter of our ~~2021~~2022 fiscal year, we sold ~~more~~fewer tons of distillers grains compared to the same period of our ~~2020~~2021 fiscal year due to ~~decreased~~increased corn oil ~~production which~~production. As we produce more pounds of corn oil, it results in ~~more~~fewer tons of distillers grains ~~available for sale.~~production. We ~~also~~ sold a ~~greater percentage~~majority of ~~modified distillers grains compared to dried distillers~~our distiller grains during the ~~third quarter of our 2021 fiscal year compared to~~2022 period in the ~~same period of our 2020 fiscal year~~dried form due to market conditions ~~favoring modified distillers grains. Cattle producers in our geographical area have a higher percentage of cattle on feed~~ which ~~led to higher demand for modified distillers grains than in prior years.~~favored this product. The average price we received for both our dried and modified distillers grains was higher during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to increased demand for ~~modified~~ distillers grains along with higher corn prices. The average price we received for our dried distillers grains was higher during the third quarter of our 2021 fiscal year compared to the third quarter of our 2020 fiscal year due to higher corn prices and increased export demand. Management believes prices for distillers grains have been strong due to higher corn prices and reduced worldwide corn supplies. Management anticipates distillers grains prices will remain higher than the 2021 fiscal year during the rest of our ~~2021~~2022 fiscal year. Further, depending on the number of bushels of corn which ~~are~~will be harvested in the fall of ~~2021,~~2022, these higher distillers grains prices may continue into our ~~2022~~2023 fiscal year. Management anticipates relatively consistent distillers grains production throughout the remainder of our ~~2021~~2022 fiscal year provided we can maintain favorable operating margins.

Corn Oil

The total pounds of corn oil we sold was ~~lower~~higher during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to ~~lower~~increased corn oil production ~~from grinding lower quality corn.~~during the 2022 period. Due to higher corn oil prices during the 2022, we increased the amount of corn oil we were producing to maximize revenue. Management anticipates that our corn oil production will remain at current levels for the remaining ~~quarters~~quarter of our ~~2021~~2022 fiscal year provided market conditions allow us to continue to operate the ethanol plant at ~~capacity.~~capacity and provided the market price of corn oil remains at current levels. The average price we received for our corn oil during the third quarter of our ~~2021~~2022 fiscal year was higher compared to the average price we received during the third quarter of our

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~~2020~~ 2021 fiscal ~~year.~~year primarily due to increased corn oil demand and higher corn prices. In 2019, the biodiesel blenders' tax credit was renewed retroactively from January 1, 2018 through December 31, 2022. This extension of the tax credit has created greater certainty in the biodiesel industry, which has resulted in increased demand for corn oil. This increase in demand may not continue past December 31, 2022.

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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 greater for the third quarter of our ~~2021~~2022 fiscal year as compared to the third quarter of our ~~2020~~2021 fiscal year due primarily to increased corn costs per bushel and increased bushels of corn used along with increased natural gas costs per MMBtu ~~along with~~and increased ~~consumption of corn and~~ natural gas usage gas during the ~~2021~~2022 fiscal year.

Corn Costs

Our cost of goods sold related to corn was higher for the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to increased average corn costs per bushel, without taking derivative instrument positions into account, along with an increase in the number of bushels of corn used to produce ethanol. For the third quarter of our ~~2021~~2022 fiscal year, we used approximately ~~4.2%~~12.4% more bushels of corn compared to the third quarter of our ~~2020~~2021 fiscal year due to increased ethanol production ~~partially offset by improved~~and decreased corn to ethanol conversion ~~during the third quarter of our 2021 fiscal year.~~efficiency. The average price we paid per bushel of corn, without taking into account our derivative instruments, was approximately ~~92.1%~~39.1% higher for the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to higher market corn prices during the third quarter of our ~~2021~~2022 fiscal year. In addition, during the third quarter of our 2022 fiscal year, we had a realized gain of approximately $373,000 for our corn derivative instruments, which decreased our cost of goods sold related to corn. For the third quarter of our 2021 fiscal year, we had a realized gain of approximately $568,000 for our corn derivative instruments, which decreased our cost of goods sold related to ~~corn. For the third quarter of our 2020 fiscal year, we had a realized loss of approximately $271,000 for our corn derivative instruments, which increased our cost of goods sold related to~~ corn during that period. Management anticipates corn prices will ~~increase~~remain higher during the rest of our ~~2021~~2022 fiscal year due to ~~decreased~~increased corn ~~supplies~~demand in the market and uncertainty about the number of bushels of corn that will be harvested in the fall of ~~2021. Decreased corn supplies have resulted from a smaller corn crop during the 2020 crop year~~2022 along with ~~relatively stable corn demand.~~global uncertainty resulting for the conflict in Ukraine which is a major agricultural producing nation.

Natural Gas Costs

We ~~consumed~~used approximately ~~10.9%~~14.0% more MMBtu of natural gas during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to increased overall production at the ethanol plant. Our average cost per MMBtu of natural gas was approximately ~~40.8%~~154.4% higher during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to higher energy ~~price generally, having fewer hedged MMBtus during our 2021 fiscal year along with a colder winter which resulted in natural gas price spikes.~~prices generally. Management anticipates these higher natural gas prices will ~~continue~~remain higher during the rest of our ~~2021~~2022 fiscal ~~year.~~year and potentially into our 2023 fiscal year, especially if we experience increased natural gas exports to Europe due to uncertainty regarding the supply of natural gas from Russia during the winter of 2022/2023.

General and Administrative Expenses

Our general and administrative expenses were ~~lower~~comparable for the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020 fiscal year primarily due to a decrease in labor and consulting fees associated with the carbon capture and storage project during the third quarter of the~~ 2021 fiscal year.

Other Income/Expense

We had ~~less~~more interest income during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to having ~~less~~more cash on hand during our ~~2021~~2022 fiscal year. Our other income was ~~less~~significantly greater during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to the ~~forgiveness of finance charges.~~$4m USDA Biofuels Producers Relief payment we received during our 2022 fiscal year. We had ~~more~~less interest expense during the third quarter of our ~~2021~~2022 fiscal year compared to the third quarter of our ~~2020~~2021 fiscal year due to ~~increased~~decreased borrowing on our loans.

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Results of Operations for the Nine Months Ended June 30, ~~2021~~2022 and ~~2020~~2021

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 nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Nine Months Ended
June 30, 2021 (Unaudited) Nine Months Ended
June 30, 2020 (Unaudited)
Statement of Operations Data Amount % Amount %
Revenues $ 104,563,490 100.00 $ 72,649,799 100.00
Cost of Goods Sold 84,414,332 80.73 72,068,241 99.20
Gross Profit 20,149,158 19.27 581,558 0.80
General and Administrative Expenses 3,173,878 3.04 3,096,666 4.26
Operating Income (Loss) 16,975,280 16.23 (2,515,108) (3.46)
Other Income, net 889,744 0.85 231,765 0.32
Net Income (Loss) $ 17,865,024 17.09 $ (2,283,343) (3.14)

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	Nine Months Ended June 30, 2022 (Unaudited)			Nine Months Ended June 30, 2021 (Unaudited)
Statement of Operations Data	Amount		%	Amount		%
Revenues	$	168,225,436	100.00	$	104,563,490	100.00
Cost of Goods Sold	138,899,275		82.57	84,414,332		80.73
Gross Profit	29,326,161		17.43	20,149,158		19.27
General and Administrative Expenses	2,556,029		1.52	2,256,505		2.16
Operating Income	26,770,132		15.91	17,892,653		17.11
Other Income, net	6,961,490		4.14	889,744		0.85
Net Income	$	33,731,622	20.05	$	18,782,397	17.96

The following table shows additional data regarding production and price levels for our primary inputs and products for the nine months ended June 30, ~~2021~~2022 and ~~2020.~~2021.


		Nine Months Ended June 30, 2021 (unaudited)		Nine Months Ended June 30, 2020 (unaudited)			Nine Months Ended June 30, 2022 (unaudited)		Nine Months Ended June 30, 2021 (unaudited)
Production:	Production:					Production:
Ethanol sold (gallons)	Ethanol sold (gallons)	47,275,959		43,925,605		Ethanol sold (gallons)	50,354,306		47,275,959
Industrial ethanol sold (gallons)		—		1,094,855

Dried distillers grains sold (tons)	Dried distillers grains sold (tons)	57,012		62,173		Dried distillers grains sold (tons)	65,216		57,012
Modified distillers grains sold (tons)	Modified distillers grains sold (tons)	112,300		90,723		Modified distillers grains sold (tons)	108,593		112,300
Corn oil sold (pounds)	Corn oil sold (pounds)	10,746,450		11,512,650		Corn oil sold (pounds)	13,959,870		10,746,450
Revenues:	Revenues:					Revenues:
Fuel grade ethanol average price per gallon (net of hedging)	Fuel grade ethanol average price per gallon (net of hedging)	$	1.71	$	1.18	Fuel grade ethanol average price per gallon (net of hedging)	$	2.56	$	1.71
Industrial ethanol average price per gallon		—		3.28

Dried distillers grains average price per ton	Dried distillers grains average price per ton	176.05		134.11		Dried distillers grains average price per ton	237.55		176.05
Modified distillers grains average price per ton	Modified distillers grains average price per ton	76.42		61.38		Modified distillers grains average price per ton	117.96		76.42
Corn oil average price per pound	Corn oil average price per pound	0.38		0.24		Corn oil average price per pound	0.64		0.38
Primary Inputs:	Primary Inputs:					Primary Inputs:
Corn ground (bushels)	Corn ground (bushels)	15,378,054		16,020,466		Corn ground (bushels)	17,159,839		15,378,054
Natural gas (MMBtu)	Natural gas (MMBtu)	1,087,727		1,045,796		Natural gas (MMBtu)	1,193,681		1,087,727
Costs of Primary Inputs:	Costs of Primary Inputs:					Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	Corn average price per bushel (net of hedging)	$	4.18	$	3.13	Corn average price per bushel (net of hedging)	$	6.54	$	4.18
Natural gas average price per MMBtu (net of hedging)	Natural gas average price per MMBtu (net of hedging)	2.58		2.13		Natural gas average price per MMBtu (net of hedging)	5.61		2.58
Other Costs (per gallon of ethanol sold):	Other Costs (per gallon of ethanol sold):					Other Costs (per gallon of ethanol sold):
Chemical and additive costs	Chemical and additive costs	$	0.079	$	0.077	Chemical and additive costs	$	0.087	$	0.079
Denaturant cost	Denaturant cost	0.032		0.033		Denaturant cost	0.052		0.032
Electricity cost	Electricity cost	0.045		0.049		Electricity cost	0.049		0.045
Direct labor cost	Direct labor cost	0.064		0.068		Direct labor cost	0.067		0.064

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Revenue

Our total revenue was ~~greater~~higher in the nine months ended June 30, ~~2021~~2022 compared to the same period of our ~~2020 fiscal year~~nine months ended June 30, 2021 primarily due to ~~increased ethanol and distillers grains sales along with~~ higher ~~average~~ prices for our products ~~partially offset by lower~~along with increased quantity of ethanol and corn oil ~~production~~sold during the 2022 period. During the nine months ended June 30, 2022, approximately 76.9% of our total revenue was derived from ethanol and industrial alcohol sales, approximately 16.9% was from distillers grains sales, approximately 0.8% was from syrup sales and approximately 5.3% was from corn oil sales. During the nine months ended June 30, 2021, approximately 77.3% of our total revenue was derived from ethanol and industrial alcohol sales, approximately 17.8% was from distillers grains sales, approximately 0.06 from syrup sales and approximately 4.0% was from corn oil sales. ~~During the nine months ended June 30, 2020 approximately 76.6%~~

Table of ~~our total revenue was derived from ethanol sales, approximately 19.1% was from distillers grains sales and approximately 3.8% was from corn oil sales.~~Contents

Ethanol

The average price we received for our ethanol was significantly higher during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020.~~2021. Management attributes the increase in the price we received for our ethanol during the nine months ended June 30, ~~2021~~2022 to decreased ethanol stocks along with higher gasoline demand and ~~decreased ethanol supply~~prices and higher corn prices in the market. Gasoline demand increased during the nine months ended June 30, 2022 due to increased travel compared to the nine months ended June 30, 2021. Management anticipates gasoline demand will continue to increase, which management believes will positively impact ethanol prices. Management also believes that inflation has increased commodity prices, including ethanol. In addition, corn and energy prices have increased significantly which have resulted in higher market ethanol prices along with the uncertainty in Russia and Ukraine.

We sold more gallons of ethanol during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to increased production at the ethanol plant during the ~~2021~~2022 period. Management attributes this increased production to ~~improved operations at the ethanol~~less plant ~~which resulted in additional ethanol production~~downtime during the nine months ended June 30, ~~2021~~2022 compared to the same period of our nine months ended June 30, ~~2020. Production rates were slower during~~2021. Management anticipates ethanol production to remain at current levels provided market conditions allow us to continue to operate the ~~nine months ended June 30, 2020 due~~ethanol plant at capacity. We anticipate continuing to ~~lower new crop corn availability from~~focus on operating the ethanol plant as efficiently as possible in order to maximize our ~~producers.~~profitability.

From time to time we enter into forward sales contracts for our products. For the nine months ended June 30, ~~2021,~~2022, we experienced a realized gain of ~~approximately $1.3 million~~$424,770 related to our ethanol derivative instruments, which increased our revenue. ~~We experienced a gain of approximately $259,000 for~~For the nine months ended June 30, ~~2020, which increased our revenue during that period.~~2022, we had no open ethanol futures contracts. For the nine months ended June 30, 2021, we had no open ethanol futures ~~contracts for 1,470,000 gallons of ethanol with~~contracts. We had a ~~fair value~~realized gain of approximately ~~$658,000.~~

$1,289,000 on ethanol derivative instruments during the nine months ended June 30, 2021 which increased our revenue.

Distillers Grains

During the nine months ended June 30, ~~2021,~~2022, we sold ~~a larger percentage~~more tons of ~~our~~ distillers grains ~~in the modified form~~ compared to the ~~nine months ended June 30, 2020 due to market conditions which favored modified distillers grains. Cattle producers in~~same period of our geographical area had a higher percentage of cattle on feed which lead to higher demand for modified distillers grains than prior years. In addition, the total volume of distillers grains we sold was greater during the nine months ended June 30, 2021 ~~compared to the nine months ended June 30, 2020~~ due to increased ~~production during the nine months ended June 30, 2021.~~overall production. The average price we received for our modified distillers grains was higher during the nine months ended June 30, ~~2021~~2022 compared to the third quarter of our nine months ended June 30, ~~2020~~2021 due to increased demand for modified distillers ~~grains.~~grains along with higher corn prices. The average price we received for our dried distillers grains was higher during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to higher corn prices and ~~decreased~~increased export demand. Management believes prices for distillers grains have been strong due to higher corn ~~supplies~~prices and reduced worldwide corn supplies. Management anticipates distillers grains prices will remain higher than the 2021 fiscal year during the rest of our 2022 fiscal year. Further, depending on the number of bushels of corn which are harvested in the ~~market.~~fall of 2022, these higher distillers grains prices may continue into our 2023 fiscal year. Management anticipates relatively consistent distillers grains production throughout the remainder of our 2022 fiscal year provided we can maintain favorable operating margins.

Corn Oil

The total pounds of corn oil we sold was ~~lower~~higher during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to ~~lower~~increased corn oil production ~~from grinding lower quality corn.~~during the 2022 period primarily due to increased overall production. Due to market corn oil prices, we have focused on increasing the amount of corn oil we produce. Management anticipates that our corn oil production will remain at current levels for the remaining quarter of our 2022 fiscal year provided market conditions allow us to continue to operate the ethanol plant at capacity. The average price we received for our corn oil during the nine months ended June 30, ~~2021~~2022 was higher compared to the average price we received during the nine months ended June 30, ~~2020~~2021 primarily due to increased corn oil demand and higher ~~demand.~~ corn prices. In 2019, the biodiesel blenders' tax credit was renewed retroactively from January 1, 2018 through December 31, 2022. This extension of the tax credit has created greater certainty in the biodiesel industry, which has resulted in increased demand for corn oil.

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 ~~higher~~greater for the nine months ended June 30, ~~2021~~2022 as compared to the nine months ended June 30, ~~2020~~2021 due primarily to ~~higher average~~increased corn costs per bushel and increased natural gas costs per MMBtu along with increased consumption of corn and natural gas during the nine months ended June 30, ~~2021.~~2022.

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Corn Costs

Our cost of goods sold related to corn was ~~greater~~higher for the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to ~~higher~~increased average corn costs per bushel, without taking derivative instrument positions into

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account, ~~partially offset by a decreased~~along with an increase in the number of bushels of corn we used to produce ethanol. For the nine months ended June 30, ~~2021,~~2022, we used approximately ~~4.0% fewer~~11.59% more bushels of corn compared to the nine months ended June 30, ~~2020~~2021 due to ~~improved corn to~~increased ethanol ~~conversion rates during the nine months ended June 30, 2021.~~production. The average price we paid per bushel of corn, without taking into account our derivative instruments, was approximately ~~33.5%~~56.46% higher for the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to higher market corn prices during the ~~2021 period.~~nine months ended June 30, 2022. In addition, during the nine months ended June 30, ~~2021,~~2022, we had a realized gain of approximately ~~$1.3 million~~$1,438,000 for our corn derivative instruments, which decreased our cost of goods sold related to corn. For the nine months ended June 30, ~~2020,~~2021, we had a realized ~~loss~~gain of approximately ~~$539,000~~$1,266,000 for our corn derivative instruments, which ~~increased~~decreased our cost of goods sold related to corn during that period. Management anticipates corn prices will ~~increase~~remain higher during the rest of our ~~2021~~ fiscal ~~year due to increased exports and less acres seeded in our geographical area based on the amount of prevent plant acres registered in North Dakota.~~year.

Natural Gas Costs

We ~~consumed~~used approximately ~~4.0%~~9.74% more MMBtu of natural gas during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020,~~2021 due to increased overall production at the ethanol plant. Our average cost per MMBtu of natural gas was approximately ~~21.1%~~117.44% higher during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to ~~having fewer~~higher energy prices generally, and losses on our hedged MMBtus during our ~~2021 fiscal year.~~nine months ended June 30, 2022. Management anticipates these higher natural gas prices will ~~remain higher~~continue during the rest of our ~~2021 fiscal year.~~nine months ended June 30, 2022.

General and Administrative Expenses

Our general and administrative expenses were higher for the nine months ended June 30, 2022 compared to the nine months ended June 30, 2021 primarily due to an increase in professional fees and permitting expenses needed to incorporate the CCS and USP projects into the current environmental and safety plans during the nine months ended June 30, ~~2021 and the nine months ended June 30, 2020 due to an increase in insurance premiums.~~2022.

Other Income/Expense

We had ~~less~~more interest income during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to having ~~less~~more cash on hand during our ~~2021~~2022 fiscal year. Our other income was greater during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to ~~a gain on sale of used equipment no longer needed~~the forgiveness received for ~~operations~~the Ethanol Recovery Loan and ~~our PPP loan forgiveness.~~the USDA Biofuels Producers Relief payment we received. We had ~~more~~less interest expense during the nine months ended June 30, ~~2021~~2022 compared to the nine months ended June 30, ~~2020~~2021 due to ~~increased~~decreased borrowing on our loans.

Changes in Financial Condition for the Nine Months Ended June 30, ~~2021~~2022

Current Assets

We had ~~less~~more cash and cash equivalents at June 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 primarily due to ~~cash~~net income we ~~used for capital expenditures~~generated during our ~~2021~~2022 fiscal ~~year.~~year plus the draw we made on the CCS Construction Loan. We had ~~more~~less restricted cash at June 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 because we had ~~more~~less cash in our margin account associated with our hedging transactions. Due to higher prices for our products, the value of our accounts receivable was higher at June 30, ~~2021~~2022 compared to September 30, ~~2020.~~2021. We had ~~less~~more inventory on hand at June 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 due primarily to ~~less~~higher market prices for our finished goods ~~inventory~~and raw materials at June 30, ~~2021~~2022 compared to September 30, ~~2020 due to the timing of shipments of our goods at the end of each period.~~2021. Our prepaid expenses were higher at June 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 due to ~~a deposit to hold our natural gas contracts and~~ an increase in our insurance premiums paid for the year.

Property, Plant and Equipment

The value of our property, plant and equipment was higher at June 30, ~~2021~~2022 compared to September 30, ~~2020~~2021 due to construction of our carbon capture and storage project and industrial alcohol project partially offset by regular depreciation of our assets during the first nine months of our ~~2021~~2022 fiscal year.

~~Current Liabilities~~. Our accounts payable was less at June 30, 2021 compared to September 30, 2020 due to having fewer corn payments at June 30, 2021. Our accrued expenses were higher at June 30, 2021 compared to September 30, 2020 due to more basis contracts and deferred payments for corn deliveries at June 30, 2021 compared to September 30, 2020. We had fewer current payments due on our loans due to the forgiveness of our PPP loan.

~~Long-Term Liabilities~~. We had less notes payable at June 30, 2021 compared to September 30, 2020 due to payments we made on our long-term loans and the PPP loan forgiveness we received during our 2021 fiscal year. We had fewer long-term liabilities for our operating leases at June 30, 2021 due to amortization of our leases.

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Other Assets

Our right of use operating lease assets at June 30, 2022 was lower compared to September 30, 2021 due to amortization of our leases during our 2022 fiscal year.

Current Liabilities

We had less disbursements in excess of bank balances due to the increase in cash we had on hand at the end at June 30, 2022 to cover checks issued on our accounts. Our accounts payable was less at June 30, 2022 compared to September 30, 2021 due to having fewer deferred corn payables at June 30, 2022 compared to September 30, 2021. Our accrued expenses were higher at June 30, 2022 compared to September 30, 2021 due to the accrued distribution that was declared as of June 30, 2022 and interest accrued on the CCS Construction Loan at June 30, 2022. We had a larger loss on firm purchase commitments due to rising corn prices and the impact they have on our corn contracts at June 30, 2022 compared to September 30, 2021. We had a larger current maturity associated with our notes payable due to amounts outstanding on our CCS Construction Loan for our carbon capture project as of June 30, 2022 compared to September 30, 2021 along with the fact that these loans are schedule to mature in less than 12 months. We had less current portion of operating leases liabilities at June 30, 2022 compared to September 30, 2021 due to amortization of our leases during our 2022 fiscal year.

Long-Term Liabilities

We had less notes payable at June 30, 2022 compared to September 30, 2021 due to payments we made on our long-term loans, the Ethanol Recovery Program forgiveness we received during the second quarter of our 2022 fiscal year, and the PPP loan forgiveness we received during our 2021 fiscal year. We had less long-term liabilities for our operating leases at June 30, 2022 due to amortization of our long-term leases during our 2022 fiscal year.

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.~~months and beyond. We also anticipate refinancing the current CCS Construction Loan as long-term debt upon completion of the project. 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 nine months ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		June 30, 2021 (unaudited)		June 30, 2020 (unaudited)			June 30, 2022 (unaudited)		June 30, 2021 (unaudited)
Net cash provided by operating activities	Net cash provided by operating activities	$	18,510,067	$	4,339,162	Net cash provided by operating activities	$	29,620,520	$	19,427,440
Net cash (used in) investing activities		(14,236,260)		(6,054,112)
Net cash used in investing activities						Net cash used in investing activities	(17,763,824)		(15,153,633)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(3,732,436)		870,014		Net cash provided by (used in) financing activities	6,429,720		(3,732,436)
Net increase (decrease) in cash		$	541,371	$	(844,936)
Net increase in cash						Net increase in cash	$	18,286,416	$	541,371
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	11,653,860	$	9,677,133	Cash, cash equivalents and restricted cash, end of period	$	23,501,660	$	11,653,860

Cash Flow from Operations

Our operations provided more cash during the nine months ended June 30, ~~2021~~2022 compared to the same period of our ~~2020~~2021 fiscal year due primarily to increased net income during the ~~2021~~2022 period.

Cash Flow From Investing Activities

We used more cash for capital expenditures during the nine months ended June 30, ~~2021~~2022 compared to the same period of our ~~2020~~2021 fiscal year. During the ~~2021~~2022 period, our primary capital expenditures were for our carbon capture and storage project and our industrial alcohol project.

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Cash Flow from Financing Activities

Our financing activities ~~used more~~provided cash during the nine months ended June 30, ~~2021~~2022 compared to the same period of our ~~2020~~2021 fiscal year due to ~~increased~~proceeds we received from our debt instruments during the 2022 fiscal year partially offset by debt payments ~~and~~we have made. We also paid a larger distribution ~~payments~~to our members during the 2022 period compared to the 2021 ~~period.~~period which decreased cash provided by our financing activities.

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 for the next 12 ~~months.~~months and beyond.

Plans for Cash in the Short Term and in the Long Term

In the next 12 months, the Company plans to reinvest its cash into current business operations and to use the cash for the implementation of the new carbon capture and storage project and the industrial alcohol project. In the long term, the Company plans to reinvest its cash into current business operations and may provide further distributions to its members.

Capital Expenditures

The Company had approximately ~~$24~~$38 million in construction in progress as of June 30, ~~2021~~2022 primarily relating to the carbon capture and storage ~~project and industrial alcohol~~ project. The Company has secured two construction loans with Cornerstone Bank to finance these ~~projects.~~projects whose maturity dates were recently extended o October 8, 2022 as described below under the section entitled "Capital Resources".

Capital Resources

Revolving Loan

On January 22, 2020, we entered into a $10 million revolving loan (the "Revolving Loan") with Cornerstone Bank ("Cornerstone"). Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.2% less than the prime rate as published by the Wall Street Journal, adjusted monthly. The Revolving Loan has a minimum interest rate of 3.0%. The maturity date of the Revolving Loan was January ~~21, 2021.~~31, 2022. On February ~~1, 2021,~~3, 2022, the Revolving Loan was renewed, and the

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new maturity date ~~is January~~was March 31, 2022. On April 8, 2022, the Revolving Loan maturity date was extended to April 7, 2023. The Revolving Loan is secured by a lien on substantially all of our assets. At June 30, ~~2021,~~2022, we had $10 million available on the Revolving Loan. The variable interest rate on June 30, ~~2021~~2022 was ~~3.00%~~3.25%.

Construction Loans

On January 22, 2020, we entered into a new $7 million construction loan (the ~~"Construction~~"First Construction Loan") with Cornerstone to finance our carbon capture and storage project. Interest accrues on any outstanding balance on the First Construction Loan at a rate of 1.2% less than the prime rate as published by the Wall Street Journal, adjusted monthly. The original maturity date of the First Construction Loan iswas June 1, 2021. On June 3, 2021 the maturity date was extended to February 1, 2022. ~~The~~On April 8, 2022, the First Construction Loan ~~is secured by a lien on substantially all of our assets.~~was extended to October 8, 2022. At June 30, ~~2021,~~2022, we had $7 million available under the First Construction Loan. The variable interest rate on June 30, ~~2021~~2022 was 3.00%.

On February 1, 2021, we entered into a ~~new~~ $28 million construction loan (the ~~"CCS~~"Second Construction Loan") with Cornerstone to finance our carbon capture and storage project. Interest accrues on any outstanding balance on the ~~CCS~~Second Construction Loan at a rate of 1.2% less than the prime rate as published by the Wall Street Journal, adjusted monthly. The ~~CCS~~Second Construction Loan has a minimum interest rate of 3.0%. The maturity date of the ~~CCS~~Second Construction Loan iswas January 31, 2022. On February 17, 2022, the Second Construction Loan was extended to March 15, 2022. On April 8, 2022, the Second Construction Loan was again extended to October 8, 2022. The ~~CCS~~Second Construction Loan is secured by a lien on substantially all of our assets. At June 30, ~~2021,~~2022, we had ~~$28~~drawn $18 million on the loan and had $10 million available under the ~~CCS~~Second Construction Loan. The variable interest rate on June 30, ~~2021~~2022 was 3.00%.

~~Paycheck Protection Program Loan~~

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On April 16, 2020, we entered into a new $873,400 Paycheck Protection Program Loan (the "PPP Loan") with Cornerstone. The fixed interest rate on December 31, 2020 was 1.00%. The maturity date of the PPP Loan was April 16, 2022. Under the terms of the loan, we applied for forgiveness of the entire amount of the PPP Loan on October 31, 2020, in accordance with PPP regulations, which provided for the possibility of loan forgiveness because we used all proceeds of the PPP Loan for qualifying expenses in accordance with PPP requirements. The entire amount of the PPP Loan was forgiven on January 20, 2021. The forgiven amount was recorded as other income.

Ethanol Recovery Program

On July 13, 2020, we entered into a $5.41 million loan through the Bank of North Dakota's Ethanol Recovery Program and Cornerstone. The Ethanol Recovery Program was developed by the North Dakota Ethanol Producers Association and the Bank of North Dakota to use the existing Biofuels Partnership in Assisting Community Expansion ("PACE") program and Value-added Guarantee Loan program to help ethanol production facilities weather the economic challenges caused by the COVID-19 pandemic. Ethanol producers could qualify for up to $15 million of a low interest loan of 1% based on the amount of such producers' annual corn grind. The maturity date of the loan is July 13, 2025. The fixed interest rate as of June 30, ~~2021~~2022 was 3.75% with an interest rate buy down through the Bank of North Dakota to 1%. We typically make monthly payments of approximately $74,000 per ~~month,~~month. On December 3, 2021 we received forgiveness of $2.65 million of the loan, and the balance outstanding on June 30, ~~2021~~2022 was approximately ~~$4,780,000.~~$1.37 million.

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, ~~2020.~~2021. 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, ~~2020.~~2021. There has been no significant change in our critical accounting estimates since the end of our ~~2020~~2021 fiscal year. Effective October 1, 2020 the Company adopted ASU2016-13 using the modified retrospective approach. ~~Effective October 1, 2019 the Company adopted ASU No. 2016-02 using the modified retrospective approach (see note 7).~~

Off-Balance Sheet Arrangements

Praj Industries Limited ("Praj") has provided the Company with a Standby Letter of Credit of $265,950 as a performance guarantee for the Eco-Smart Distillation unit purchased for the Industrial Alcohol Project. The Eco-Smart Distillation unit will allow the Company to produce up to 25 million gallons per year of USP grade industrial alcohol. The Standby Letter of Credit covers Praj's liability toward under-performance of the distillation unit based on daily plant capacity, steam consumption, and quality of USP grade alcohol produced. The Standby Letter of Credit is payable upon written demand

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by the Company of non-performance of the distillation unit during the performance trial run. The Standby Letter of Credit ~~expires~~expired on March 31, 2022.

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. Our exposure to commodity price risk may be heightened due to the crisis in Ukraine.

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 one 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.

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

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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 June 30, ~~2021, we had fixed corn purchase contracts for approximately 662,000 bushels of corn, and we had no corn futures or option contracts. As of June 30, 2021~~2022 we had corn futures and option contracts for approximately ~~500,000~~1,700,000 bushels of corn. As of June 30, ~~2021~~2022 we had an unrealized loss of approximately ~~$76,000~~$964,000 related to our corn futures and options contracts.

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. At June 30, ~~2021,~~2022, we had no fixed ethanol sales contracts and ethanol futures and option ~~contracts for approximately 1,470,000 gallons of ethanol.~~contracts. As of June 30, ~~2021~~2022 we had anno unrealized gain ~~of approximately $658,000~~or loss related to ~~our~~ ethanol futures and option contracts.

We estimate that our corn usage will be between 21 million and 23 million bushels per 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 June 30, ~~2021,~~2022, 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 June 30, ~~2021.~~2022. The results of this analysis, which may differ from actual results, are as follows:

~~Table of Contents~~


		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	Ethanol	63,900,000	Gallons	10	%	$	(13,734,600)	Ethanol	63,900,000	Gallons	10	%	$	(15,975,000)
Corn	Corn	22,821,000	Bushels	10	%	$	(9,307,000)	Corn	22,821,000	Bushels	10	%	$	(12,327,000)
Natural gas	Natural gas	1,664,000	MMBtu	10	%	$	(499,000)	Natural gas	1,664,000	MMBtu	10	%	$	(1,431,000)

For comparison purposes, our sensitivity analysis for our quarter ended June 30, ~~2020~~2021 is set forth below:


		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	Ethanol	63,900,000	Gallons	10	%	$	(8,740,000)	Ethanol	63,900,000	Gallons	10	%	$	(13,734,600)
Corn	Corn	22,821,000	Bushels	10	%	$	(5,520,000)	Corn	22,821,000	Bushels	10	%	$	(9,307,000)
Natural gas	Natural gas	1,664,000	MMBtu	10	%	$	(262,000)	Natural gas	1,664,000	MMBtu	10	%	$	(499,000)

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 June 30, ~~2021.~~2022. Based on this review and evaluation, these officers believe that our disclosure controls and procedures ~~are~~were effective in ensuring that material information related to us is

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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 June 30, ~~2021,~~2022, 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.

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 have been no material changes to the risk factors which were previously disclosed in our annual report on Form 10-K for the fiscal year ended September 30, ~~2020.~~2021 except as set forth below.

The Company faces risks related to international conflicts, such as the ongoing conflict between Russia and Ukraine, that may adversely impact the Company's financial condition or results of operations.

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

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

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

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

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

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

The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels and/or the impact of sanctions on Russia related to the war in Ukraine may have a significant impact on natural gas commodity prices.

The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For

2728

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example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts expired on April 1, 2020. These actions led to an immediate and steep decrease in oil prices. Conversely, sanctions imposed on Russia in the last few months have increased prices. There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can there be any assurance that sanctions or other global conflicts will not further impact oil prices. Uncertainty regarding future sanctions or actions to be taken by OPEC+ members or other oil exporting countries could lead to increased volatility in the price of oil and natural gas, which could adversely affect our business, future financial condition and results of operations.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information

None.

Item 6. Exhibits.

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

Exhibit No.

Exhibits

~~Incorporated by Reference~~

31.1

Certificate Pursuant to 17 CFR 240.13a-14(a)*

31.2

Certificate Pursuant to 17 CFR 240.13a-14(a)*

32.1

Certificate Pursuant to 18 U.S.C. Section 1350*

32.2

Certificate Pursuant to 18 U.S.C. Section 1350*

101.INS*

Inline XBRL Instance Document

101.SCH*

Inline XBRL Schema Document

101.CAL*

Inline XBRL Calculation Document

101.LAB*

Inline XBRL Labels Linkbase Document

101.PRE*

Inline XBRL Presentation Linkbase Document

101.DEF*

Inline XBRL Definition Linkbase Document

104

The cover page from this Quarterly Report on Form 10-Q formatted in Inline XBRL.

(*) 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:	August ~~10, 2021~~15, 2022	/s/ Gerald Bachmeier
		Gerald Bachmeier
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	August ~~10, 2021~~15, 2022	/s/ Jodi Johnson
		Jodi Johnson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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			Page Number
PART I. FINANCIAL INFORMATION			43
Item 1. Financial Statements			43
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1817
Item 3. Quantitative and Qualitative Disclosures about Market Risk			2726
Item 4. Controls and Procedures			2827
PART II. OTHER INFORMATION			28
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities			29
Item 3. Defaults Upon Senior Securities			29
Item 4. Mine Safety Disclosures			29
Item 5. Other Information			29
Item 6. Exhibits			29
SIGNATURES			30


As of:	June 30, 2021 (unaudited)					September 30, 2020
Contract Type	# of Contracts	Notional Amount (Qty)		Fair Value		# of Contracts	Notional Amount (Qty)		Fair Value
Corn futures	0	0	bushels	$	0	30	1,260,000	bushels	$	104,068
Corn options	100	500,000	bushels	$	(75,625)	83	415,000	bushels	$	(62,063)


Ethanol futures	35	1,470,000	gal	$	658,035	0	0	gal	$	0


Total fair value				$	582,410				$	42,005
Amounts are combined on the balance sheet - negative numbers represent liabilities


	Nine Months Ended June 30, 2021 (Unaudited)			Nine Months Ended June 30, 2020 (Unaudited)
Statement of Operations Data	Amount		%	Amount		%
Revenues	$	104,563,490	100.00	$	72,649,799	100.00
Cost of Goods Sold	84,414,332		80.73	72,068,241		99.20
Gross Profit	20,149,158		19.27	581,558		0.80
General and Administrative Expenses	3,173,878		3.04	3,096,666		4.26
Operating Income (Loss)	16,975,280		16.23	(2,515,108)		(3.46)
Other Income, net	889,744		0.85	231,765		0.32
Net Income (Loss)	$	17,865,024	17.09	$	(2,283,343)	(3.14)