We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three month period ended December 31, 2022, compared to the same period of the prior fiscal year. This discussion should be read in conjunction with the consolidated condensed financial statements (the "financial statements") and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2022.

Forward Looking Statements

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



•Reduction, delay, or elimination of the Renewable Fuel Standard;
•Changes in the availability and price of corn, natural gas and other grains;
•Our inability to secure credit or obtain additional equity financing we may
require in the future to continue our operations;
•Decreases in the price we receive for our ethanol, distiller grains, corn oil
and other grains;
•Our ability to satisfy the financial covenants contained in our credit
agreements with our senior lender;
•Our ability to profitably operate the ethanol plant and maintain a positive
spread between the selling price of our products and our raw material costs;
•Negative impacts that our hedging activities may have on our operations;
•Ethanol and distiller grains supply exceeding demand and corresponding price
reductions;
•Our ability to generate free cash flow to invest in our business and service
our debt;
•Changes in the environmental regulations that apply to our plant operations;
•Changes in our business strategy, capital improvements or development plans;
•Changes in plant production capacity or technical difficulties in operating the
plant;
•Changes in general economic conditions or the occurrence of certain events
causing an economic impact in the agriculture, oil or automobile industries;
•Lack of transport, storage and blending infrastructure preventing our products
from reaching high demand markets;
•Changes in federal and/or state laws;
•Changes and advances in ethanol production technology;
•Competition from alternative fuel additives;
•Changes in interest rates or the lack of credit availability;
•Changes in legislation benefiting renewable fuels;
•Competition from the increased use of electric vehicles;
•Our ability to retain key employees and maintain labor relations;
•Volatile commodity and financial markets;
•Limitations and restrictions contained in the instruments and agreements
governing our indebtedness;
•Decreases in export demand due to the imposition of tariffs by foreign
governments on ethanol, distillers grains and soybeans produced in the United
States;
•Use by the EPA of small refinery exemptions;
•A slowdown in global and regional economic activity, demand for our products
and the potential for labor shortages and shipping disruptions resulting from
COVID-19; and
•Global economic uncertainty, inflation, market disruptions and increased
volatility in commodity prices caused in part by the Russian invasion of Ukraine
and resulting sanctions by the United States and other countries.


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

Overview

Cardinal Ethanol, LLC is an Indiana limited liability company operating an ethanol plant in east central Indiana near Union City, Indiana. We began producing ethanol, distillers grains and corn oil at the plant in November 2008. In addition, we procure, transport and sell grain commodities through our grain trading business which began operations at the end of our fourth fiscal quarter of 2017.

On January 20, 2022, we entered into an Equipment Purchase and Installation Agreement (the "EPC Agreement") with ICM, Inc. pursuant to which ICM has agreed to engineer, procure, construct, and install its high protein feed system and license to us its proprietary, patent-protected technology to use, operate and maintain the system. Pursuant to the EPC Agreement and subsequent adjustments due to change orders executed by the parties, we expect to pay approximately $50,000,000, including recent change orders, which is payable in installments. This price is subject to further adjustment in the event additional change orders are executed. We will also pay license fees of $10 per ton of PROTOMAX™ produced by the system for a period of 10 years. We expect to fund the project from operations and from our current credit facilities as amended. We began installation of the system during the fourth quarter of our fiscal year 2022. This project is expected to be completed by Fall of 2023.

On September 14, 2022, we entered into Amendment No. 4 to the Ethanol Purchase and Sale Agreement with Murex, LLC (the "Murex Amendment"). The Murex Amendment amends the Ethanol Purchase and Sale Agreement dated December 18, 2006, as amended. The Murex Amendment was effective on December 1, 2022. Please refer to Item 1 - Financial Statements - Note 9 - Commitments and Contingencies for more information.

On November 15, 2022, our board of directors declared a cash distribution of $500 per membership unit to the holders of units of record at the close of business on November 15, 2022, for a total distribution of $7,303,000. The distribution was paid on November 18, 2022.

We have engaged with an unrelated third party to pursue the possible joint development of integrated carbon dioxide facilities, transportation infrastructure and a carbon sequestration site for the carbon dioxide emissions produced by our plant (the "CCS Project"). On January 16, 2023, Cardinal One Carbon Holdings, LLC, a wholly owned subsidiary of Cardinal Ethanol, LLC, entered into a Partnership Agreement (the "LPA") with Vault CCS Holdings LP pursuant to which Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP formed a joint venture operating under the name of One Carbon Partnership Holdings LP (the "Limited Partnership") to pursue the CCS Project. The LPA governs the rights, duties and responsibilities of the parties in connection with the ownership of the Limited Partnership. In addition, on the same date, Cardinal One Carbon Holdings, LLC and Vault CCS Holdings LP entered into an Amended and Restated Limited Liability Company Agreement (the "LLCA") of One Carbon Partnership GP LLC (the "GP"). The purpose of the GP is to serve as the general partner of the Limited Partnership. The CCS Project is still in its early stages and is subject to many variables that could have a material effect on its feasibility and the parties' ability to complete the CCS Project. Please refer to Item 1 - Financial Statements - Note 12 - Equity Method Investments for more information.

We have reached agreement with First National Bank of Omaha to amend our loan agreement. The terms of the amendment increase the maximum availability on the Declining Loan from $36,000,000 to $39,000,000, change the date at which the Declining Loan is expected to be converted to term debt from on or before February 1, 2024 to May 1, 2024, extend the date that the Revolving Credit Loan matures from February 28, 2023 to February 28, 2024 and increase the capital expenditures loan covenant from $5,000,000 per year to $6,000,000 per year of expenditures without prior approval. We expect that the amendment will be executed in February 2023.



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We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities as amended. If market conditions worsen affecting our ability to profitably operate the plant or if we are unable to transport ethanol, we may be forced to further reduce our ethanol production rate or even temporarily shut down ethanol production altogether.

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