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, 2020, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2019.

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;

• 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 and distillers grains produced in the United
       States;

• Use by the EPA of small refinery exemptions; and




•      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.

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



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procure, transport and sell grain commodities through our grain trading business which began operations at the end of our fourth fiscal quarter of 2017.

The ethanol industry experienced industry-wide record low ethanol prices throughout most of 2018 and 2019 due to reduced demand and high industry inventory levels. This has continued into 2020 and the situation has been compounded by the recent impact of the COVID-19 pandemic. In response to these unfavorable operating conditions and a slowdown in global and regional economic activity resulting from COVID-19, we reduced our ethanol production rate by approximately 20%. However, beginning in May of 2020, we returned to full production and have been operating at an ethanol production rate of approximately 135 million gallons annually which is approximately 35% above the nameplate capacity for the plant.

On April 20, 2020, we received a loan in the approximate amount of $856,000 through the Paycheck Protection Program which offers loans to small businesses impacted by the COVID-19 pandemic. These loans are forgiven to the extent proceeds are spent on certain qualifying costs and other conditions are met. Management anticipates that the loan will be substantially forgiven. To the extent it is not forgiven, we would be required to repay that portion at an interest rate of interest of 1% over eighteen months beginning six months after the loan is executed.

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 of 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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