Cardinal Ethanol LLC (Form: 10-K, Received: 12/11/2012 15:25:58)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K



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

	For the fiscal year ended September 30, 2012

	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 000-53036

CARDINAL ETHANOL, LLC

(Exact name of registrant as specified in its charter)



Indiana				20-2327916
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

1554 N. County Road 600 E., Union City, IN 47390
(Address of principal executive offices)

(765) 964-3137
(Registrant's telephone number, including area code)

Securities registered pursuant to 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Membership Units.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o Yes x No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

o Yes x No

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

x Yes o No

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

x Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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



Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer x	Smaller Reporting Company o

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

o Yes x No

As of March 31, 2012, the aggregate market value of the membership units held by non-affiliates (computed by reference to the most recent offering price of such membership units) was $53,570,000. There is no established public trading market for our membership units. The aggregate market value was computed by reference to the price at which membership units were last sold by the registrant ($5,000 per unit)

As of December 11, 2012 , there were 14,606 membership units outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required in Part III of this Annual Report is incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended September 30, 2012.

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INDEX



	Page Number

PART I	3
Item 1. Business	3
Item 1A. Risk Factors	13
Item 2. Properties	18
Item 3. Legal Proceedings	18
Item 4. Mine Safety Disclosures	19
PART II	19
Item 5. Market for Registrant's Common Equity, Related Member Matters and Issuer Purchases of Equity Securities	19
Item 6. Selected Financial Data	22
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	36
Item 8. Financial Statements and Supplementary Data	38
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	59
Item 9A. Controls and Procedures	59
Item 9B. Other Information	60
PART III	60
Item 10. Directors, Executive Officers and Corporate Governance	60
Item 11. Executive Compensation	60
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Member Matters	60
Item 13. Certain Relationships and Related Transactions, and Director Independence	60
Item 14. Principal Accountant Fees and Services	60
PART IV	60
Item 15. Exhibits, Financial Statement Schedules	60
SIGNATURES	64

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CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains historical information, as well as forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance, or our expected future operations and actions. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “future,” “intend,” “could,” “hope,” “predict,” “target,” “potential,” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions based upon current information 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 reasons described in this report. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:


•	Changes in the availability and price of corn and natural gas;


•	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 and corn oil;


•	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 including the Renewable Fuel Standard;


•	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.

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. Furthermore, we cannot guarantee future results, events, 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 by these cautionary statements.

AVAILABLE INFORMATION

Information about us is also available at our website at www.cardinalethanol.com, under "SEC Filings" which includes links to the reports we have filed with the Securities and Exchange Commission. The contents of our website are not incorporated by reference in this Annual Report on Form 10-K.

PART I

ITEM 1. BUSINESS

Business Development

Cardinal Ethanol, LLC is an Indiana limited liability company. It was formed on February 7, 2005 with the name of Indiana Ethanol, LLC. On September 27, 2005, we changed our name to Cardinal Ethanol, LLC. References to “we,” “us,” “our,” “Cardinal” and the “Company” refer to Cardinal Ethanol, LLC. We were formed for the purpose of raising capital to develop,

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construct, own and operate a 100 million gallon per year 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 August 2010, we obtained a new Title V air permit allowing us to increase our annual ethanol production to 140 million gallons compared to 110 million gallons under our previous permit. We have been operating at a rate of approximately 108 million gallons for the fiscal year ended 2012. We expect to continue at this level for the next twelve months. However, inability to buy corn at prices that allow us to operate profitably could require us to decrease or halt production.

Financial Information

Please refer to "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" for information about our revenue, profit and loss measurements and total assets and liabilities and "Item 8 - Financial Statements and Supplementary Data" for our financial statements and supplementary data.

Principal Products and Markets

The principal products we are producing at the plant are fuel-grade ethanol and distillers grains. In addition, we are extracting corn oil for sale. Raw carbon dioxide gas is another co-product of the ethanol production process. We have entered into an agreement with EPCO Carbon Dioxide Products to capture a portion of the raw carbon dioxide we produce at the plant.

The table below shows the approximate percentage of our total revenue which is attributed to each of our primary products for each of our last three fiscal years.



Product	Fiscal Year 2012		Fiscal Year 2011		Fiscal Year 2010
Ethanol	78	%	82	%	85	%
Distiller Grains	19	%	16	%	14	%
Corn Oil	3	%	2	%	1	%
Carbon Dioxide	>1%		>1%		>1%

Ethanol

Our primary product is ethanol. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains. The ethanol we produce is manufactured from corn. Although the ethanol industry continues to explore production technologies employing various feedstocks, such as biomass, corn-based production technologies remain the most practical and provide the lowest operating risks. Corn produces large quantities of carbohydrates, which convert into glucose more easily than most other kinds of biomass. The Renewable Fuels Association estimates current domestic ethanol production for operating plants at approximately 13.4 billion gallons as of November 6, 2012.

An ethanol plant is essentially a fermentation plant. Ground corn and water are mixed with enzymes and yeast to produce a substance called “beer,” which contains about 10% alcohol and 90% water. The “beer” is boiled to separate the water, resulting in ethyl alcohol, which is then dehydrated to increase the alcohol content. This product is then mixed with a certified denaturant to make the product unfit for human consumption and commercially saleable.

Ethanol can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide emissions; and (iii) a non-petroleum-based gasoline substitute. Approximately 95% of all ethanol is used in its primary form for blending with unleaded gasoline and other fuel products. Used as a fuel oxygenate, ethanol provides a means to control carbon monoxide emissions in large metropolitan areas. The principal purchasers of ethanol are generally the wholesale gasoline marketer or blender. The principal markets for our ethanol are petroleum terminals in the northeastern United States.

Distillers Grains

The principal co-product of the ethanol production process is distillers grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy, beef, poultry and swine industries. Distillers grains contain by-pass protein that is thought to be superior to other protein supplements such as cottonseed meal and soybean meal. Dry mill ethanol processing creates three forms of distiller grains: Distillers Wet Grains with Solubles ("DWS"), Distillers Modified Wet Grains with Solubles ("DMWS") and Distillers Dried Grains with Solubles ("DDGS"). DWS is processed corn mash that contains approximately 70% moisture. DWS has a shelf life of approximately three days and can be sold only to farms within the immediate vicinity of an ethanol plant. DMWS is DWS that has been dried to approximately 50% moisture. DMWS have a slightly longer shelf life of

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approximately ten days and are often sold to nearby markets. DDGS is DWS that has been dried to 10% to 12% moisture. DDGS has an almost indefinite shelf life and may be sold and shipped to any market regardless of its vicinity to an ethanol plant.

Corn Oil

In November 2008, we began separating some of the corn oil contained in our distiller's grains for sale. We anticipate continuing to fine tune the operation of our corn oil extraction equipment and investigate ways to improve production levels. The corn oil that we produce is not food grade corn oil and therefore cannot be used for human consumption without further refining. However, corn oil can be used as the feedstock to produce biodiesel, as a feed ingredient and has other industrial uses.

Carbon Dioxide

In March 2010, we entered into an Agreement with EPCO Carbon Dioxide Products, Inc. (“EPCO”) under which EPCO purchases a portion of the carbon dioxide gas produced at our plant. In addition, we entered into a Site Lease Agreement with EPCO under which EPCO leases a portion of our property, on which it is operating a carbon dioxide liquefaction plant. We supply to EPCO, at the liquefaction plant, carbon dioxide gas meeting certain specifications and at a rate sufficient for EPCO to produce 150 tons of liquid carbon dioxide per day. EPCO pays Cardinal a contractual price per ton of liquid carbon dioxide shipped out of the liquefaction plant by EPCO. In November 2011, the Company amended this agreement to allow for an expansion of the carbon dioxide liquefaction plant. Under the amendment, the Company shall be paid for a new minimum of 98,700 tons each year or approximately $493,500 annually. The amendment took effect in September 2012.

Ethanol, Distillers Grains and Corn Oil Markets

As described below in " Distribution of Principal Products ," we market and distribute our ethanol and distillers grains through third parties. Our ethanol and distillers grains marketers make all decisions, in consultation with management, with regard to where our products are marketed. Our ethanol and distillers grains are predominately sold in the domestic market. Specifically, we ship a substantial portion of the ethanol we produce to the New York harbor. However, as domestic production of ethanol, distillers grains and corn oil continue to expand, we anticipate increased international sales of our products. The United States ethanol industry exported a significant amount of distillers grains to Mexico, Canada and China. Management anticipates that demand for distillers grains in the Asian market may continue to increase in the future as distillers grains are used in animal feeding operations in China and because China recently terminated an 18-month anti-dumping investigation with respect to distillers grains imported from the United States. Over the last year, exports of ethanol have decreased. We expect our ethanol and distillers grains marketers to explore all markets for our products, including export markets. However, due to high transportation costs, and the fact that we are not located near a major international shipping port, we expect a majority of our products to continue to be marketed and sold domestically.

We market and distribute all of the corn oil we produce directly to end users and third party brokers.

Distribution of Principal Products

Our ethanol plant is located near Union City, Indiana in Randolph County. We selected the site because of its location to existing ethanol consumption and accessibility to road and rail transportation. Our site is in close proximity to rail and major highways that connect to major population centers such as Indianapolis, Cincinnati, Columbus, Cleveland, Toledo, Detroit, New York and Chicago.

Ethanol Distribution

We entered into an Ethanol Purchase and Sale Agreement with Murex, N.A., Ltd. ("Murex") for the purpose of marketing and distributing all of the ethanol we produce at the plant. The initial term of the agreement was five years commencing on the date of first delivery of ethanol with automatic renewal for one year terms thereafter unless otherwise terminated by either party. The agreement may be terminated due to the insolvency or intentional misconduct of either party or upon the default of one of the parties as set forth in the agreement.

Under the terms of the agreement, Murex markets all of our ethanol unless we choose to sell a portion at a retail fueling station owned by us or one of our affiliates. Murex pays to us the purchase price invoiced to the third-party purchaser less all resale costs, taxes paid by Murex and Murex's commission. Murex has agreed to purchase on its own account and at market price any ethanol which it is unable to sell to a third party purchaser. Murex has promised to use its best efforts to obtain the best purchase price available for our ethanol. In addition, Murex has agreed to promptly notify us of any and all price arbitrage opportunities. Under the agreement, Murex is responsible for all transportation arrangements for the distribution of our ethanol.

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On November 22, 2011, we amended our agreement to provide for an annual cap on the commission paid to Murex. We also agreed to extend the initial term of the agreement to an eleven year period, which now expires in 2019.

Distillers Grains Distribution

We have entered into an agreement with CHS, Inc. to market all our distillers grains we produce at the plant. CHS, Inc. is a diversified energy, grains and foods company owned by farmers, ranchers and cooperatives. CHS, Inc. provides products and services ranging from grain marketing to food processing to meet the needs of its customers around the world. We receive a percentage of the selling price actually received by CHS, Inc. in marketing our distillers grains to its customers. The initial term of our agreement with CHS, Inc. was for one year commencing as of November 1, 2008. Thereafter, the agreement will remain in effect unless otherwise terminated by either party with 120 days notice. Under the agreement, CHS, Inc. will be responsible for all transportation arrangements for the distribution of our distillers grains.

Corn Oil Distribution

We market and distribute all of the corn oil we produce directly to end users and third party brokers. Our corn oil is mainly used as a feed ingredient and as a feedstock in biodiesel production.

Federal Ethanol Supports and Governmental Regulation

Federal Ethanol Supports

The ethanol industry is dependent on several economic incentives to produce ethanol, including federal tax incentives and ethanol use mandates. One significant federal ethanol support is the Federal Renewable Fuels Standard (the “RFS”). The RFS requires that in each year, a certain amount of renewable fuels must be used in the United States. The RFS is a national program that does not require that any renewable fuels be used in any particular area or state, allowing refiners to use renewable fuel blends in those areas where it is most cost-effective. The RFS requirement increases incrementally each year until the United States is required to use 36 billion gallons of renewable fuels by 2022. Starting in 2009, the RFS required that a portion of the RFS must be met by certain “advanced” renewable fuels. These advanced renewable fuels include ethanol that is not made from corn, such as cellulosic ethanol and biomass based biodiesel. The use of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used in the United States.

The RFS for 2012 was approximately 15.2 billion gallons, of which corn based ethanol could be used to satisfy approximately 13.2 billion gallons. The RFS for 2013 is approximately 16.55 billion gallons, of which corn based ethanol can be used to satisfy approximately 13.8 billion gallons. Current ethanol production capacity exceeds the 2013 RFS requirement which can be satisfied by corn based ethanol.

In February 2010, the EPA issued new regulations governing the RFS. These new regulations have been called RFS2. The most controversial part of RFS2 involves what is commonly referred to as the lifecycle analysis of green house gas emissions. Specifically, the EPA adopted rules to determine which renewable fuels provided sufficient reductions in green house gases, compared to conventional gasoline, to qualify under the RFS program. RFS2 establishes a tiered approach, where regular renewable fuels are required to accomplish a 20% green house gas reduction compared to gasoline, advanced biofuels and biomass-based biodiesel must accomplish a 50% reduction in green house gases, and cellulosic biofuels must accomplish a 60% reduction in green house gases. Any fuels that fail to meet this standard cannot be used by fuel blenders to satisfy their obligations under the RFS program. The scientific method of calculating these green house gas reductions has been a contentious issue. Many in the ethanol industry were concerned that corn based ethanol would not meet the 20% green house gas reduction requirement based on certain parts of the environmental impact model that many in the ethanol industry believed was scientifically suspect. However, RFS2 as adopted by the EPA provides that corn-based ethanol from modern ethanol production processes does meet the definition of a renewable fuel under the RFS program. Our ethanol plant was grandfathered into the RFS due to the fact that it was constructed prior to the effective date of the lifecycle green house gas requirement and is not required to prove compliance with the lifecycle green house gas reductions. Many in the ethanol industry are concerned that certain provisions of RFS2 as adopted may disproportionately benefit ethanol produced from sugarcane. This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market. If this were to occur, it could reduce demand for the ethanol that we produce.

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Most ethanol that is used in the United States is sold in a blend called E10. E10 is a blend of 10% ethanol and 90% gasoline. E10 is approved for use in all standard vehicles. Estimates indicate that gasoline demand in the United States is approximately 133 billion gallons per year. Assuming that all gasoline in the United States is blended at a rate of 10% ethanol and 90% gasoline, the maximum demand for ethanol is 13.3 billion gallons per year. This is commonly referred to as the “blending wall,” which represents a theoretical limit where more ethanol cannot be blended into the national gasoline pool. This is a theoretical limit because it is believed that it would not be possible to blend ethanol into every gallon of gasoline that is being used in the United States and it discounts the possibility of additional ethanol used in higher percentage blends such as E85 used in flex fuel vehicles. The RFS for 2012 was approximately 15.2 billion gallons, of which corn based ethanol could be used to satisfy approximately 13.2 billion gallons. The RFS requires that 36 billion gallons of renewable fuels must be used each year by 2022, which equates to approximately 27% renewable fuels used per gallon of gasoline currently sold.

Many in the ethanol industry believe that it will be difficult to meet the RFS requirement in future years without an increase in the percentage of ethanol that can be blended with gasoline for use in standard (non-flex fuel) vehicles. The United States Environmental Protection Agency (the "EPA") has approved the use of E15, gasoline which is blended at a rate of 15% ethanol and 85% gasoline, in vehicles manufactured in the model year 2001 and later. However, there were still significant federal and state regulatory hurdles that needed to be addressed. The EPA has made recent gains towards clearing those federal regulatory hurdles. In February 2012, the EPA approved health effects and emissions testing on E15 which was required by the Clean Air Act before E15 can be sold into the market. In March 2012, the EPA approved a model Misfueling Mitigation Plan and fuel survey which must be submitted by applicants before E15 registrations can be approved. In April 2012, the EPA approved the first E15 registrations approving twenty producers who have successfully registered their product to be used as E15. Finally, in June 2012, the EPA gave the final approval to allow the sale of E15. Although management believes that these developments are significant steps towards introduction of E15 in the marketplace, there are still obstacles to meaningful market penetration by E15. Many states still have regulatory issues that prevent the sale of E15. Sales of E15 may be limited because it is not approved for use in all vehicles, the EPA requires a label that management believes may discourage consumers from using E15, and retailers may choose not to sell E15 due to concerns regarding liability. In addition, different gasoline blendstocks may be required at certain times of the year in order to use E15 due to federal regulations related to fuel evaporative emissions. This may prevent E15 from being used during certain times of the year in various states. As a result, management believes that E15 may not have an immediate impact on ethanol demand in the United States.

The Volumetric Ethanol Excise Tax Credit ("VEETC") provided a volumetric ethanol excise tax credit of 4.5 cents per gallon of gasoline that contains at least 10% ethanol (total credit of 45 cents per gallon of ethanol blended which is 4.5 divided by the 10% blend). VEETC expired on December 31, 2011. In addition to the expiration of the tax incentives, a 54 cent per gallon tariff imposed on ethanol imported into the United States also expired on December 31, 2011. The ethanol industry in the United States experienced increased competition from ethanol produced outside of the United States during 2012. These increased ethanol imports were likely at least in part due to the expiration of the tariff on imported ethanol. Elimination of the tariff could continue to lead to increased importation of ethanol produced in other countries, especially in areas of the United States that are easily accessible by international shipping ports. Ethanol imported from other countries may be a less expensive alternative to domestically produced ethanol and may affect our ability to sell our ethanol profitably. Management believes that the expiration of VEETC has not had a significant effect on ethanol demand and does not expect it to have a significant effect in the future provided the RFS is maintained.

If the RFS were to be repealed, ethanol demand may be significantly impacted. Recently, there have been proposals in Congress to reduce or eliminate the RFS. In addition, in August of 2012, governors from eight states filed formal requests with the EPA to waive the requirements of the RFS. These waiver requests were subject to a public comment period which expired on October 11, 2012. On November 16, 2012, the EPA announced that the waiver requests were denied. However, if future waiver requests were to be granted or if the RFS is otherwise reduced or eliminated , the market price and demand for ethanol will likely decrease which could negatively impact our financial performance.

The United States Department of Agriculture (“USDA”) also provides financial assistance to help implement “blender pumps” in the United States in order to increase demand for ethanol and to help offset the cost of introducing mid-level ethanol blends into the United States retail gasoline market. A blender pump is a gasoline pump that can dispense a variety of different ethanol/gasoline blends. Blender pumps typically can dispense E10, E20, E30, E40, E50 and E85. These blender pumps accomplish these different ethanol/gasoline blends by internally mixing ethanol and gasoline which are held in separate tanks at the retail gas stations. Many in the ethanol industry believe that increased use of blender pumps will increase demand for ethanol by allowing gasoline retailers to provide various mid-level ethanol blends in a cost effective manner and allowing consumers with flex-fuel vehicles to purchase more ethanol through these mid-level blends. However, blender pumps cost approximately $25,000 each, so it may take time before they become widely available in the retail gasoline market.

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Effect of Governmental Regulation

The government's regulation of the environment changes constantly. We are subject to extensive air, water and other environmental regulations and we have been required to obtain a number of environmental permits to construct and operate the plant. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which could increase our operating costs and expenses. It also is possible that federal or state environmental rules or regulations could be adopted that could have an adverse effect on the use of ethanol. For example, changes in the environmental regulations regarding the required oxygen content of automobile emissions could have an adverse effect on the ethanol industry. Plant operations are governed by the Occupational Safety and Health Administration (“OSHA”). OSHA regulations may change such that the costs of operating the plant may increase. Any of these regulatory factors may result in higher costs or other adverse conditions effecting our operations, cash flows and financial performance.

In late 2009, California passed a Low Carbon Fuels Standard ("LCFS"). The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which is measured using a lifecycle analysis, similar to the RFS. On December 29, 2011, a federal court in California ruled that the California LCFS was unconstitutional which halted implementation of the California LCFS. However, the California Air Resources Board ("CARB") appealed this court ruling and on April 23, 2012, a federal appellate court in California granted a request to temporarily reinstate the LCFS while the case is on appeal. This decision will allow the CARB to continue implementation of the LCFS. Oral arguments regarding the constitutionality of the California LCFS were presented to the federal appeals court on October 16, 2012 and a decision is expected in the near future. If the CARB is successful in its appeal, the reinstatement of the California LCFS could become permanent which could negatively impact demand for corn-based ethanol and result in decreased ethanol prices.

We have obtained all of the necessary permits to operate the plant. In the fiscal year ended September 30, 2012 , we incurred costs and expenses of approximately $86,000 complying with environmental laws. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations.

Competition

We are in direct competition with numerous ethanol producers, many of whom have greater resources than we do. Following the significant growth during 2005 and 2006, the ethanol industry has grown at a much slower pace. As of November 6, 2012, the Renewable Fuels Association estimates that there are 211 ethanol production facilities in the U.S. with capacity to produce approximately 14.7 billion gallons of ethanol and another 4 plants under expansion or construction with capacity to produce an additional 158 million gallons. However, the Renewable Fuels Association estimates that approximately 9% of the ethanol production capacity in the United States is currently idled.

Since ethanol is a commodity product, competition in the industry is predominantly based on price. We have also experienced increased competition from oil companies who have started purchasing ethanol production facilities. These oil companies are required to blend a certain amount of ethanol each year. Therefore, the oil companies may be able to operate their ethanol production facilities at times when it is unprofitable for us to operate. Larger ethanol producers may be able to realize economies of scale that we are unable to realize. This could put us at a competitive disadvantage to other ethanol producers. The ethanol industry is continuing to consolidate where a few larger ethanol producers are increasing their production capacities and are controlling a larger portion of the United States ethanol production. Further, some ethanol producers own multiple ethanol plants which may allow them to compete more effectively by providing them flexibility to run certain production facilities while they have other facilities shut down. This added flexibility may allow these ethanol producers to compete more effectively, especially during periods when operation margins are unfavorable in the ethanol industry.

The largest ethanol producers include Archer Daniels Midland, Aventine Renewable Energy, LLC, Flint Hill Resources LP, Green Plains Renewable Energy, POET Biorefining and Valero Renewable Fuels, each of which are capable of producing significantly more ethanol than we produce.

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The following table identifies the majority of the largest ethanol producers in the United States along with their production capacities.

U.S. FUEL ETHANOL PRODUCTION CAPACITY

BY TOP PRODUCERS

Producers of Approximately 400

million gallons per year (mmgy) or more



Company	Current Capacity (mmgy)	Under Construction/ Expansions (mmgy)
Archer Daniels Midland	1,720.0	—
POET Biorefining	1,629.0	—
Valero Renewable Fuels	1,130.0	—
Green Plains Renewable Energy	730.0	—
Aventine Renewable Energy, LLC	460.0	—
Flint Hill Resources LP	440.0	—

Updated: November 6, 2012

The ethanol industry in the United States experienced increased competition from ethanol produced outside of the United States during 2012. These increased ethanol imports were likely the result of the expiration of the tariff on imported ethanol which expired on December 31, 2011, along with higher ethanol prices during 2012. This increased competition from ethanol imports may have negatively impacted demand for ethanol produced in the United States and led to lower operating margins in 2012.

We also anticipate increased competition from renewable fuels that do not use corn as the feedstock. Many of the current ethanol production incentives are designed to encourage the production of renewable fuels using raw materials other than corn. One type of ethanol production feedstock is cellulose. Cellulose is the main component of plant cell walls and is the most common organic compound on earth. Cellulose is found in wood chips, corn stalks, rice, straw, amongst other common plants. Cellulosic ethanol is ethanol produced from cellulose. Several companies and researchers have commenced pilot projects to study the feasibility of commercially producing cellulosic ethanol and are producing cellulosic ethanol on a small scale. A handful of companies have begun construction on commercial scale cellulosic ethanol plants which are expected to be completed by the end of 2013. If this technology can be profitably employed on a commercial scale, it could potentially lead to ethanol that is less expensive to produce than corn based ethanol, especially if corn prices remain high. Cellulosic ethanol may also capture more government subsidies and assistance than corn based ethanol. This could decrease demand for our product or result in competitive disadvantages for our ethanol production process.

Our ethanol plant also competes with producers of other gasoline additives having similar octane and oxygenate values as ethanol. Alternative fuels, gasoline oxygenates and alternative ethanol production methods are also continually under development. The major oil companies have significantly greater resources than we have to market other additives, to develop alternative products, and to influence legislation and public perception of ethanol. These companies also have sufficient resources to begin production of ethanol should they choose to do so.

A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids, electric cars or clean burning gaseous fuels. Electric car technology has recently grown in popularity, especially in urban areas. While currently there are a limited number of vehicle recharging stations, making electric cars not feasible for all consumers, there has been increased focus on developing these recharging stations which may make electric car technology more widely available in the future. This additional competition from alternate sources could reduce the demand for ethanol, which would negatively impact our profitability.

Distillers Grains Competition

Ethanol plants in the Midwest produce the majority of distillers grains and primarily compete with other ethanol producers in the production and sales of distillers grains. According to the Renewable Fuels Association's Ethanol Industry Outlook 2012, ethanol plants produced more than 33 million metric tons of distillers grains in 2010/2011 and are expected to produce an estimated 35.7 million metric tons in 2011/2012. The amount of distillers grains produced is expected to fluctuate with changes in ethanol production.

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The primary consumers of distillers grains are dairy and beef cattle, according to the Renewable Fuels Association's Ethanol Industry Outlook 2012. In recent years, an increasing amount of distillers grains have been used in the swine and poultry markets. Numerous feeding trials show advantages in milk production, growth, rumen health, and palatability over other dairy cattle feeds. With the advancement of research into the feeding rations of poultry and swine, we expect these markets to expand and create additional demand for distillers grains; however, no assurance can be given that these markets will in fact expand, or if they do, that we will benefit from it. The market for distillers grains is generally confined to locations where freight costs allow it to be competitively priced against other feed ingredients. Distillers grains compete with three other feed formulations: corn gluten feed, dry brewers grain and mill feeds. The primary value of these products as animal feed is their protein content. Dry brewers grain and distillers grains have about the same protein content, and corn gluten feed and mill feeds have slightly lower protein contents.

Sources and Availability of Raw Materials

Corn Feedstock Supply

The major raw material required for our ethanol plant to produce ethanol, distillers grain and corn oil is corn. To produce 100 million gallons of ethanol per year, our ethanol plant needs approximately 36 million bushels of corn per year, or approximately 100,000 bushels per day, as the feedstock for its dry milling process. We primarily purchase the corn supply for our plant from local markets, but we have also recently purchased some of the corn we need from other non-traditional markets and transported it to our plant via rail. Traditionally, corn grown in the area of the plant site has been fed locally to livestock or exported for feeding or processing and/or overseas export sales.

We have entered into a Corn Feedstock Supply Agency Agreement with Bunge North America (East), LLC (Bunge). The purpose of the agreement is to set out the terms upon which Bunge has agreed to serve as our exclusive third-party agent to procure corn to be used as feedstock at our ethanol production facility. Pursuant to the agreement, Bunge provides two grain originators to work at the facility to negotiate and execute contracts on our behalf and arrange the shipping and delivery of the corn required for ethanol production. In return for providing these services, Bunge receives an agency fee which is equal to an amount per bushel of corn delivered subject to an annual minimum amount. We may also directly procure corn to be used for our feedstock. The initial term of the agreement was for five years to automatically renew for successive three-year periods unless properly terminated by one of the parties. The parties also each have the right to terminate the agreement in certain circumstances, including, but not limited to, material breach by, bankruptcy and insolvency of, or change in control of, the other party. We have given notice to Bunge indicating that we will not be renewing the term of the agreement and that term is now set to expire on or about October 15, 2013 unless the parties mutually agree to an earlier termination. After the agreement has terminated, we plan to directly procure the corn we need for our feedstock from suppliers. We anticipate that Bunge will remain a valuable customer and trading partner for Cardinal.

We are significantly dependent on the availability and price of corn. The price and availability of corn are subject to significant fluctuations depending upon a number of factors affecting grain commodity prices in general, including crop conditions, weather, governmental programs and foreign purchases. Because the market price of ethanol is not directly related to grain prices, ethanol producers are generally not able to compensate for increases in the cost of grain feedstock through adjustments in prices charged for their ethanol. We therefore anticipate that our plant's profitability will be negatively impacted during periods of high grain prices.

In an attempt to minimize the effects of the volatility of corn costs on operating profits, we take hedging positions in corn futures markets. Hedging means protecting the price at which we buy corn and the price at which we will sell our products in the future. It is a way to attempt to reduce the risk caused by price fluctuation. The effectiveness of hedging activities is dependent upon, among other things, the cost of corn and our ability to sell sufficient amounts of ethanol and distillers grains to utilize all of the corn subject to the futures contracts. Hedging activities can result in costs to us because price movements in grain contracts are highly volatile and are influenced by many factors beyond our control. These costs may be significant.

The price at which we purchase corn will depend on prevailing market prices. On November 9, 2012, the United States Department of Agriculture (“USDA”) released its Crop Production report, which estimated the 2012 grain corn crop at 10.7 billion bushels down 13% from 2011. This represents the lowest production in the United States since 2006. The USDA forecasted area harvested for grain at 87.7 million acres, up 4% from 2011. Crop yields and production were adversely impacted by extensive drought conditions experienced during 2012. Corn prices were high during our third quarter and increased significantly in July in response to concerns regarding projected corn crop. Corn prices remained at these levels for much of our fourth quarter trending down toward the end of our fiscal year. We expect corn prices will remain high and that we will experience continued volatility in the price of corn, which could significantly impact our costs of goods sold.

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We had difficulty obtaining the corn we needed towards the end of our fiscal year and subsequent to our fiscal year end. We anticipate that we will continue to experience such difficulties throughout 2013 due to the effects of competition for a limited 2012 corn crop and low carry. We anticipate that corn prices will continue to be extremely volatile. We anticipate that we may continue to rail in some of our corn feedstock in the future, which additional transportation costs may reduce our profit margins. Management will continue to monitor the availability of corn in our area. However, should we experience unfavorable operating conditions that prevent us from profitably operating the ethanol plant, we may need to reduce or even halt production at our plant.

Risk Management Services

We entered into a Risk Management Agreement with John Stewart & Associates ("JS&A") under which JS&A provides risk management and related services pertaining to grain hedging, grain pricing information, aid in purchase of grain, and assistance in risk management as it pertains to ethanol and our co-products. In exchange for JS&A's risk management services, we pay JS&A a fee of $1,500 per month. The term of the agreement is for one year and will continue on a month to month basis thereafter. The agreement may be terminated by either party at any time upon written notice.

We have also entered into an agreement with Advance Trading to assist us with hedging corn, ethanol and natural gas. We pay them a fee of $1,000 per month for these services. The term of the agreement is a month to month agreement, and may be terminated by either party at any time upon proper notice.

Utilities

We engaged U.S. Energy Services, Inc. to provide us with on-going energy management services. U.S. Energy manages the procurement and delivery of energy to their clients' locations. U.S. Energy Services is an independent, employee-owned company, with their main office in Minneapolis, Minnesota and branch offices in Kansas City, Kansas and Omaha, Nebraska. U.S. Energy Services manages energy costs through obtaining, organizing and tracking cost information. Their major services include supply management, price risk management and plant site development. Their goal is to develop, implement, and maintain a dynamic strategic plan to manage and reduce their clients' energy costs. A large percentage of U.S. Energy Services' clients are ethanol plants and other renewable energy plants. We pay U.S. Energy Services, Inc. a monthly fee of $4,258 plus pre-approved travel expenses. The monthly fee will increase 4% per year on the anniversary date of the agreement. The agreement is year to year.

Natural Gas Natural gas is also an important input commodity to our manufacturing process. Our natural gas usage for our fiscal year ended September 30, 2012 was approximately 3,032,000 MMBTU, constituting approximately 3.19% of our total costs of goods sold. We are using natural gas to produce process steam and to dry our distillers grain products to a moisture content at which they can be stored for long periods of time, and can be transported greater distances, so that we can market the product to broader livestock markets, including poultry and swine markets in the continental United States.

On March 20, 2007, we entered into a Long-Term Transportation Service Contract for Redelivery of Natural Gas with Ohio Valley. Under the contract, Ohio Valley receives, transports and redelivers natural gas to us for all of our natural gas requirements up to a maximum of 100,000 therms per purchase gas day and our estimated annual natural gas requirements of 34,000,000 therms. For all gas received for and redelivered to us by Ohio Valley, we pay a throughput rate in the amount of $0.0138 per therm for the first five years of the contract term, and $0.0138 increased by the compounded inflation rate as established and determined by the U.S. Consumer Price Index - All Urban Consumers for Transportation for the following five years. In addition, we pay a service charge for all gas received for and redelivered to us by Ohio Valley in the amount of $750 per delivery meter per billing cycle per month for the first five years of the contract term and $750 increased by the compounded inflation rate over the initial rate as established and determined by the U.S. Consumer Price Index - All Urban Consumers for Transportation for the following five years. The initial term of the contract is ten years. Provided neither party terminates the contract, the contract will automatically renew for a series of not more than three consecutive one year periods.

Electricity We require a significant amount of electrical power to operate the plant. On May 2, 2007, we entered into an agreement with Indiana Michigan Power Company to furnish our electric energy. The initial term of the contract is 30 months from the time service is commenced and continues thereafter unless terminated by either party with 12 months written notice. We pay Indiana Michigan Power Company monthly pursuant to their standard rates.

Water We require a significant supply of water. Engineering specifications show our plant's water requirements to be approximately 774 gallons per minute, 1.1 million gallons per day, depending on the quality of water. We have assessed our water needs and available supply and have determined that we have an adequate supply. Union City Water Works is supplying the water necessary to operate our plant.

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Much of the water used in our ethanol plant is recycled back into the process. There are, however, certain areas of production where fresh water is needed. Those areas include boiler makeup water and cooling tower water. Boiler makeup water is treated on-site to minimize all elements that will harm the boiler and recycled water cannot be used for this process. Cooling tower water is deemed non-contact water because it does not come in contact with the mash, and, therefore, can be regenerated back into the cooling tower process. The makeup water requirements for the cooling tower are primarily a result of evaporation. Much of the water can be recycled back into the process, which minimizes the discharge water. This will have the long-term effect of lowering wastewater treatment costs. Many new plants today are zero or near zero effluent discharge facilities. Our plant design incorporates the ICM/Phoenix Bio-Methanator wastewater treatment process resulting in a zero discharge of plant process water.

Employees

We currently have 47 full-time employees.

Research and Development

We do not conduct any research and development activities associated with the development of new technologies for use in producing ethanol and distillers grains.

Patents, Trademarks, Licenses, Franchises and Concessions

We do not currently hold any patents, trademarks, franchises or concessions. We were granted a license by ICM, Inc. to use certain ethanol production technology necessary to operate our ethanol plant. The cost of the license granted by ICM, Inc. was included in the amount we paid to Fagen, Inc. to design and build our ethanol plant.

In addition, we were granted a license by ICM, Inc. to use certain corn oil technologies necessary to extract corn oil during our plant operations.

Seasonality of Ethanol Sales

We experience some seasonality of demand for ethanol. Since ethanol is predominantly blended with conventional gasoline for use in automobiles, ethanol demand tends to shift in relation to gasoline demand. As a result, we experience some seasonality of demand for ethanol in the summer months related to increased driving. In addition, we experience some increased ethanol demand during holiday seasons related to increased gasoline demand.

Working Capital

We primarily use our working capital for purchases of raw materials necessary to operate the ethanol plant. Our primary source of working capital is our operations along with our short-term revolving line of credit with our primary lender First National Bank of Omaha. At September 30, 2012, we have approximately $15,000,000 available to draw on the short-term revolving line of credit. We currently have no outstanding borrowings under our short-term revolving line of credit.

Dependence on One or a Few Major Customers

As discussed above, we have entered into a marketing agreement with Murex for the purpose of marketing and distributing our ethanol and have engaged CHS, Inc. for the purpose of marketing and distributing our distillers grains. We rely on Murex for the sale and distribution of our ethanol and CHS, Inc. for the sale and distribution of our distillers grains. Therefore, although there are other marketers in the industry, we are highly dependent on Murex and CHS, Inc. for the successful marketing of our products. Any loss of Murex or CHS, Inc. as our marketing agent for our ethanol and distillers grains respectively could have a significant negative impact on our revenues.

Financial Information about Geographic Areas

All of our operations are domiciled in the United States. All of the products sold to our customers for fiscal years 2012, 2011 and 2010 were produced in the United States and all of our long-lived assets are domiciled in the United States. We have engaged third-party professional marketers who decide where our products are marketed and we have no control over the marketing decisions made by our third-party professional marketers. These third-party marketers may decide to sell our products in countries other than the United States. Currently, a significant amount of distillers grains are exported to Mexico, Canada and China. However, exports of ethanol have decreased. We anticipate that our products will still primarily be marketed and sold in the United States.

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ITEM 1A. RISK FACTORS

You should carefully read and consider the risks and uncertainties below and the other information contained in this report. The risks and uncertainties described below are not the only ones we may face. The following risks, together with additional risks and uncertainties not currently known to us or that we currently deem immaterial could impair our financial condition and results of operation.

Risks Relating to Our Business

The Federal Volumetric Ethanol Excise Tax Credit (“VEETC”) expired on December 31, 2011, which could negatively impact our profitability . The ethanol industry is benefited by VEETC which is a federal excise tax credit of 4.5 cents per gallon of ethanol blended with gasoline at a rate of at least 10%. The tax credit expired on December 31, 2011. Although we do not believe that the expiration of the credit has had a significant impact on our operations there is no guarantee that it will not negatively impact the price we receive for our ethanol and negatively impact our profitability in the future.

Our existing debt financing agreements contain, and our future debt financing agreements may contain, restrictive covenants that limit distributions and impose restrictions on the operation of our business. The use of debt financing makes it more difficult for us to operate because we must make principal and interest payments on the indebtedness and abide by covenants contained in our debt financing agreements. Although we have significantly reduced our level of debt, the restrictive covenants contained in our financing agreements may have important implications on our operations, including, among other things: (a) limiting our ability to obtain additional debt or equity financing; (b) placing us at a competitive disadvantage because we may be more leveraged than some of our competitors; (c) subjecting all or substantially all of our assets to liens, which means that there may be no assets left for unit holders in the event of a liquidation; and (d) limiting our ability to make business and operational decisions regarding our business, including, among other things, limiting our ability to pay dividends to our unit holders, make capital improvements, sell or purchase assets or engage in transactions we deem to be appropriate and in our best interest.

Recently operating margins in the ethanol industry have decreased which has had an adverse impact on profitability. Our ability to profitably operate the ethanol plant is primarily dependent on the spread between the price we pay for corn and the price we receive for our ethanol. Recently, the price of corn has been comparatively higher in relation to the price of ethanol than it has been historically. This has resulted in tighter operating margins, both at our ethanol plant and in the ethanol industry generally. These decreased operating margins affect our profitability and have caused some ethanol producers to reduce production or cease operations. While in recent years the price of ethanol has followed the price of corn, this correlation has been less reliable during calendar year 2012 due to higher ethanol supplies and relatively lower ethanol demand. If this supply and demand imbalance continues and our operating margins continue to be tight, it may adversely impact our ability to profitably operate which could negatively impact the value of our units and force us to reduce production or cease operating altogether.

Drought conditions experienced this summer in much of the Midwestern United States have had an adverse effect on corn supply and led to increased corn prices which may force us to reduce or cease production if we are unable to secure the corn we require. Our operations depend on an adequate supply of corn at a price at which we can profitably operate our ethanol plant. Weather conditions can have a dramatic effect on the price and availability of corn. Much of the Midwestern United States experienced severe drought conditions which has led to a smaller harvest and increased corn prices and price volatility. We have recently experienced difficulty obtaining the corn we need to operate. If this shortage continues, we may have to slow or even halt plant operations which may adversely impact our profitability and the value of our units.

Increases in the price of corn or natural gas would reduce our profitability. Our primary source of revenue is from the sale of ethanol, distiller's grains and corn oil. Our results of operations and financial condition are significantly affected by the cost and supply of corn and natural gas. Changes in the price and supply of corn and natural gas are subject to and determined by market forces over which we have no control including weather and general economic factors.

Ethanol production requires substantial amounts of corn. Generally, higher corn prices will produce lower profit margins and, therefore, negatively affect our financial performance. If a period of high corn prices were to be sustained for some time, such pricing may reduce our ability to operate profitably because of the higher cost of operating our plant. We may not be able to offset any increase in the price of corn by increasing the price of our products. If we cannot offset increases in the price of corn, our financial performance may be negatively affected.

The prices for and availability of natural gas are subject to volatile market conditions. These market conditions often are affected by factors beyond our control such as higher prices as a result of colder than average weather conditions or natural disasters, overall economic conditions and foreign and domestic governmental regulations and relations. Significant disruptions in the supply of natural gas could impair our ability to manufacture ethanol and more significantly, distiller's grains for our customers.

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Furthermore, increases in natural gas prices or changes in our natural gas costs relative to natural gas costs paid by competitors may adversely affect our results of operations and financial condition. We seek to minimize the risks from fluctuations in the prices of corn and natural gas through the use of hedging instruments. However, these hedging transactions also involve risks to our business. See “ Risks Relating to Our Business - We engage in hedging transactions which involve risks that could harm our business .” If we were to experience relatively higher corn and natural gas costs compared to the selling prices of our products for an extended period of time, the value of our units may be reduced.

Declines in the price of ethanol or distiller's grain would significantly reduce our revenues. The sales prices of ethanol and distiller's grains can be volatile as a result of a number of factors such as overall supply and demand, the price of gasoline and corn, levels of government support, and the availability and price of competing products. We are dependent on a favorable spread between the price we receive for our ethanol and distiller's grains and the price we pay for corn and natural gas. Any lowering of ethanol and distiller's grains prices, especially if it is associated with increases in corn and natural gas prices, may affect our ability to operate profitably. We anticipate the price of ethanol and distiller's grains to continue to be volatile in our 2013 fiscal year as a result of the net effect of changes in the price of gasoline and corn and increased ethanol supply offset by increased ethanol demand. Declines in the prices we receive for our ethanol and distiller's grains will lead to decreased revenues and may result in our inability to operate the ethanol plant profitably for an extended period of time which could decrease the value of our units.

We may violate the terms of our credit agreements and financial covenants which could result in our lender demanding immediate repayment of our loans. We were in compliance with all financial covenants at September 30, 2012 except that we were not in compliance with the fixed charge coverage ratio. We subsequently received a waiver of this violation and an amendment to the calculation of the covenant measuring the fixed charge coverage ratio for three quarters beginning October 1, 2012 through July 1, 2013. Current management projections indicate that we will be in compliance with our loan covenants, as now revised, through September 30, 2013. However, unforeseen circumstances may develop which could result in us violating our loan covenants. If we violate the terms of our credit agreement, our primary lender could deem us in default of our loans and require us to immediately repay the entire outstanding balance of our loans. If we do not have the funds available to repay the loans or we cannot find another source of financing, we may fail which could decrease or eliminate the value of our units.

Our inability to secure credit facilities we may require in the future may negatively impact our liquidity. Due to current conditions in the credit markets, it has been difficult for businesses to secure financing. While we do not currently require more financing than we have, in the future we may need additional financing. If we require financing in the future and we are unable to secure such financing, or we are unable to secure the financing we require on reasonable terms, it may have a negative impact on our liquidity. This could negatively impact the value of our units.

The ethanol industry is an industry that is changing rapidly which can result in unexpected developments that could negatively impact our operations and the value of our units. The ethanol industry has grown significantly in the last decade. According to the Renewable Fuels Association, the ethanol industry has grown from approximately 1.5 billion gallons of production per year in 1999 to approximately 13.4 billion gallons of current domestic ethanol production for operating plants. This rapid growth has resulted in significant shifts in supply and demand of ethanol over a very short period of time. As a result, past performance by the ethanol plant or the ethanol industry generally might not be indicative of future performance. We may experience a rapid shift in the economic conditions in the ethanol industry which may make it difficult to operate the ethanol plant profitably. If changes occur in the ethanol industry that make it difficult for us to operate the ethanol plant profitably, it could result in the reduction in the value of our units.

We engage in hedging transactions which involve risks that could harm our business. We are 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. We seek to minimize the risks from fluctuations in the prices of corn, natural gas and ethanol through the use of hedging instruments. The effectiveness of our hedging strategies is dependent on the price of corn, natural gas and ethanol and our ability to sell sufficient products to use all of the corn and natural gas for which we have futures contracts. Our hedging activities may not successfully reduce the risk caused by price fluctuation which may leave us vulnerable to high corn and natural gas prices. Alternatively, we may choose not to engage in hedging transactions in the future and our operations and financial conditions may be adversely affected during periods in which corn and/or natural gas prices increase. Utilizing cash for margin calls has an impact on the cash we have available for our operations which could result in liquidity problems during times when corn prices rise or fall significantly.

Price movements in corn, natural gas and ethanol contracts are highly volatile and are influenced by many factors that are beyond our control. There are several variables that could affect the extent to which our derivative instruments are impacted by price fluctuations in the cost of corn or natural gas. 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. We may incur such costs and they may be significant which could impact our ability to profitably operate the plant and may reduce the value of our units.

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Our business is not diversified. Our success depends largely on our ability to profitably operate our ethanol plant. We do not have any other lines of business or other sources of revenue if we are unable to operate our ethanol plant and manufacture ethanol, distiller's grains and corn oil. If economic or political factors adversely affect the market for ethanol, distiller's grains or corn oil, we have no other line of business to fall back on. Our business would also be significantly harmed if the ethanol plant could not operate at full capacity for any extended period of time.

We depend on our management and key employees, and the loss of these relationships could negatively impact our ability to operate profitably. We are highly dependent on our management team to operate our ethanol plant. We may not be able to replace these individuals should they decide to cease their employment with us, or if they become unavailable for any other reason. While we seek to compensate our management and key employees in a manner that will encourage them to continue their employment with us, they may choose to seek other employment. Any loss of these officers and key employees may prevent us from operating the ethanol plant profitably and could decrease the value of our units.

Changes and advances in ethanol production technology could require us to incur costs to update our plant or could otherwise hinder our ability to compete in the ethanol industry or operate profitably. Advances and changes in the technology of ethanol production are expected to occur. Such advances and changes may make the ethanol production technology installed in our plant less desirable or obsolete. These advances could also allow our competitors to produce ethanol at a lower cost than we are able. If we are unable to adopt or incorporate technological advances, our ethanol production methods and processes could be less efficient than our competitors, which could cause our plant to become uncompetitive or completely obsolete. If our competitors develop, obtain or license technology that is superior to ours or that makes our technology obsolete, we may be required to incur significant costs to enhance or acquire new technology so that our ethanol production remains competitive. Alternatively, we may be required to seek third-party licenses, which could also result in significant expenditures. These third-party licenses may not be available or, once obtained, they may not continue to be available on commercially reasonable terms. These costs could negatively impact our financial performance by increasing our operating costs and reducing our net income.

We are subject to litigation involving our corn oil extraction technology. We have been sued by GS CleanTech Corporation asserting its intellectual property rights to certain corn oil extraction processes we obtained from ICM, Inc. in August 2008. GS CleanTech is seeking to enforce its patent rights against ICM and the Company. According to information available through the U.S. Patent and Trademark Office, certain patents have been issued and other patents will be issued to GS CleanTech. If GS CleanTech is successful in its infringement action against the Company, we may be forced to pay damages to GS CleanTech as a result of our use of such technology and cease our production of corn oil.

Risks Related to Ethanol Industry

Demand for ethanol may not continue to grow unless ethanol can be blended into gasoline in higher percentage blends for conventional automobiles. Currently, ethanol is blended with conventional gasoline for use in standard (non-flex fuel) vehicles to create a blend which is 10% ethanol and 90% conventional gasoline. Estimates indicate that approximately 133 billion gallons of gasoline are sold in the United States each year. Assuming that all gasoline in the United States is blended at a rate of 10% ethanol and 90% gasoline, the maximum demand for ethanol is 13.3 billion gallons. This is commonly referred to as the “blending wall,” which represents a theoretical limit where more ethanol cannot be blended into the national gasoline pool. Many in the ethanol industry believe that the ethanol industry has reached this blending wall. In order to expand demand for ethanol, higher percentage blends of ethanol must be utilized in conventional automobiles. Such higher percentage blends of ethanol have recently become a contentious issue. Automobile manufacturers and environmental groups have fought against higher percentage ethanol blends. The EPA has approved the use of E15, gasoline which is blended at a rate of 15% ethanol and 85% gasoline, in vehicles manufactured in the model year 2001 and later. However, there were still significant federal and state regulatory hurdles that needed to be addressed. The EPA has made recent gains towards clearing those federal regulatory hurdles. In February 2012, the EPA approved health effects and emissions testing on E15 which was required by the Clean Air Act before E15 can be sold into the market. In March 2012, the EPA approved a model Misfueling Mitigation Plan and fuel survey which must be submitted by applicants before E15 registrations can be approved. In April 2012, the EPA approved the first E15 registrations approving twenty producers who have successfully registered their product to be used as E15. Finally, in June 2012, the EPA gave the final approval to allow the sale of E15. Although these developments are significant steps towards introduction of E15 in the marketplace, there are still obstacles to meaningful market penetration by E15. Many states still have regulatory issues that prevent the sale of E15. Sales of E15 may be limited because it is not approved for use in all vehicles, the EPA requires a label that management believes may discourage consumers from using E15, and retailers may choose not to sell E15 due to concerns regarding liability. In addition, different gasoline blendstocks may be required at certain times of the year in order to use E15 due to federal regulations related to fuel evaporative emissions. This may prevent E15 from being used during certain times of the year in various states. Additionally, according to EPA estimates, flex-fuel vehicles make up approximately 9 million of the 240 million vehicles on the nation's roads and there are only about 2,900 E85 retail stations in the United States. As a result, the approval of E15 may not

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significantly increase demand for ethanol.

Technology advances in the commercialization of cellulosic ethanol may decrease demand for corn based ethanol which may negatively affect our profitability. The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass, such as agricultural waste, forest residue, municipal solid waste, and energy crops. This trend is driven by the fact that cellulose-based biomass is generally cheaper than corn, and producing ethanol from cellulose-based biomass would create opportunities to produce ethanol in areas which are unable to grow corn. The Energy Independence and Security Act of 2007 and the 2008 Farm Bill offer a very strong incentive to develop commercial scale cellulosic ethanol. The RFS requires that 16 billion gallons per year of advanced bio-fuels be consumed in the United States by 2022. Additionally, state and federal grants have been awarded to several companies who are seeking to develop commercial-scale cellulosic ethanol plants. We expect this will encourage innovation that may lead to commercially viable cellulosic ethanol plants in the near future. If an efficient method of producing ethanol from cellulose-based biomass is developed, we may not be able to compete effectively. If we are unable to produce ethanol as cost-effectively as cellulose-based producers, our ability to generate revenue and our financial condition will be negatively impacted.

Decreasing prices of ethanol could reduce our ability to operate profitably . Decreases in the price of ethanol reduce our revenue. Our profitability depends on a favorable spread between our corn and natural gas costs and the price we receive for our ethanol. If ethanol prices fall during times when corn and/or natural gas prices are high, we may not be able to operate our ethanol plant profitably.

Growth in the ethanol industry is dependent on growth in the fuel blending infrastructure to accommodate ethanol, which may be slow and could result in decreased demand for ethanol. The ethanol industry depends on the fuel blending industry to blend the ethanol that is produced with gasoline so it may be sold to the end consumer. In many parts of the country, the blending infrastructure cannot accommodate ethanol so no ethanol is used in those markets. Substantial investments are required to expand this blending infrastructure and the fuel blending industry may choose not to expand the blending infrastructure to accommodate ethanol. Should the ability to blend ethanol not expand at the same rate as increases in ethanol supply, it may decrease the demand for ethanol which may lead to a decrease in the selling price of ethanol which could impact our ability to operate profitably.

We operate in an intensely competitive industry and compete with larger, better financed entities which could impact our ability to operate profitably. There is significant competition among ethanol producers. There are numerous producer-owned and privately-owned ethanol plants planned and operating throughout the Midwest and elsewhere in the United States. in addition, we have seen increased competition from oil companies who have purchased ethanol production facilities. We also face competition from outside of the United States. The passage of the Energy Policy Act of 2005 included a renewable fuels mandate. The RFS was increased in December 2007 to 36 billion gallons by 2022. Further, some states have passed renewable fuel mandates. All of these increases in ethanol demand have encouraged companies to enter the ethanol industry. The largest ethanol producers include Archer Daniels Midland, Aventine Renewable Energy, LLC, Flint Hill Resources LP, Green Plains Renewable Energy, POET Biorefining and Valero Renewable Fuels, all of which are each capable of producing significantly more ethanol than we produce. Further, many believe that there will be consolidation occurring in the ethanol industry in the near future which will likely lead to a few companies who control a significant portion of the ethanol production market. We may not be able to compete with these larger entities. These larger ethanol producers may be able to affect the ethanol market in ways that are not beneficial to us which could affect our financial performance.

Competition from the advancement of alternative fuels may lessen the demand for ethanol. Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids, electric cars or clean burning gaseous fuels. Like ethanol, these emerging technologies offer an option to address worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. If these alternative technologies continue to expand and gain broad acceptance and become readily available to consumers for motor vehicle use, we may not be able to compete effectively. This additional competition could reduce the demand for ethanol, resulting in lower ethanol prices that might adversely affect our results of operations and financial condition.

Consumer resistance to the use of ethanol based on the belief that ethanol is expensive, uses too much corn, adds to air pollution, harms engines and/or takes more energy to produce than it contributes may affect the demand for ethanol. Certain individuals believe that use of ethanol will have a negative impact on gasoline prices at the pump and that ethanol uses too much of the available corn supply. Many also believe that ethanol adds to air pollution and harms car and truck engines. Still other consumers believe that the process of producing ethanol actually uses more fossil energy, such as oil and natural gas, than the amount of energy that is produced. These consumer beliefs could potentially be wide-spread and may be increasing as a result of recent efforts to increase the allowable percentage of ethanol that may be blended for use in conventional automobiles. If consumers choose not to buy ethanol based on these beliefs, it would affect the demand for the ethanol we produce which could negatively

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affect our profitability and financial condition.

Risks Related to Regulation and Governmental Action

Government incentives for ethanol production may be eliminated in the future, which could hinder our ability to operate at a profit . The ethanol industry is assisted by various federal ethanol production and tax incentives, including the RFS set forth in the Energy Policy Act of 2005. The RFS helps support a market for ethanol that might disappear without this incentive. In August 2012, governors from eight states petitioned the EPA for a waiver of the RFS requirement. The EPA announced on November 16, 2012, that the requests for waivers of the RFS requirement were denied. However, if the EPA were to approve future waiver requests or if the RFS were to be eliminated or modified; it may lead to a significant decrease in ethanol demand which could negatively impact our results of operations.

In addition, VEETC expired at the end of the 2011 calendar year. The elimination of tax incentives previously available to gasoline refiners and blenders, could also reduce the market demand for ethanol, which could reduce prices and our revenues by making it more costly or difficult for us to produce and sell ethanol. Elimination of these federal tax incentives could result in decreased demand for ethanol, which could negatively impact our ability to operate profitably.

Also, the tariff that protects the United States ethanol industry expired at the end of 2011. The ethanol industry in the United States experienced increased competition from ethanol produced outside of the United States during 2012. These increased ethanol imports were likely at least in part due to the expiration of the tariff on imported ethanol. The expiration of the tariff could lead to continued increases in the importation of ethanol produced in other countries, especially in areas of the United States that are easily accessible by international shipping ports which could result in an increase of ethanol supplies and decreased ethanol prices.

Changes in environmental regulations or violations of these regulations could be expensive and reduce our profitability. We are subject to extensive air, water and other environmental laws and regulations. In addition, some of these laws require our plant to operate under a number of environmental permits. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, damages, criminal sanctions, permit revocations and/or plant shutdowns. In the future, we may be subject to legal actions brought by environmental advocacy groups and other parties for actual or alleged violations of environmental laws or our permits. Additionally, any changes in environmental laws and regulations, both at the federal and state level, could require us to spend considerable resources in order to comply with future environmental regulations. The expense of compliance could be significant enough to reduce our profitability and negatively affect our financial condition.

Carbon dioxide may be regulated in the future by the EPA as an air pollutant requiring us to obtain additional permits and install additional environmental mitigation equipment, which could adversely affect our financial performance . In 2007, the Supreme Court decided a case in which it ruled that carbon dioxide is an air pollutant under the Clean Air Act for the purposes of motor vehicle emissions. The Supreme Court directed the EPA to regulate carbon dioxide from vehicle emissions as a pollutant under the Clean Air Act. Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as our ethanol plant under the Clean Air Act. Our plant produces a significant amount of carbon dioxide. While there are currently no regulations applicable to us concerning carbon dioxide, if the EPA or the State of Indiana were to regulate carbon dioxide emissions by plants such as ours, we may have to apply for additional permits or we may be required to install carbon dioxide mitigation equipment or take other as yet unknown steps to comply with these potential regulations. Compliance with any future regulation of carbon dioxide, if it occurs, could be costly and may prevent us from operating the ethanol plant profitably which could decrease or eliminate the value of our units.

The California Low Carbon Fuel Standard may decrease demand for corn based ethanol which could negatively impact our profitability . California passed a Low Carbon Fuels Standard ("LCFS"). The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which reductions are measured using a lifecycle analysis. Management believes that these regulations could preclude corn based ethanol produced in the Midwest from being used in California. California represents a significant ethanol demand market. If we are unable to supply ethanol to California, it could significantly reduce demand for the ethanol we produce. While implementation of the California LCFS was delayed by a court ruling that the law is unconstitutional, the effect of this ruling was appealed by the State of California. The federal appeals court which is reviewing the California LCFS has allowed enforcement to continue until the court of appeals decides the case. Any decrease in ethanol demand as a result of the California LCFS regulations could negatively impact ethanol prices which could reduce our revenues and negatively impact our ability to profitably operate the ethanol plant.

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ITEM 2. PROPERTIES

Our plant site is made up of two adjacent parcels which together total approximately 295 acres in east central Indiana near Union City, Indiana. The address of our plant is 1554 N. County Road 600 E., Union City, Indiana 47390. In November 2008, the plant was substantially completed and plant operations commenced. The plant consists of the following buildings:


•	A grains area, fermentation area, distillation - evaporation area;


•	A dryer/energy center area;


•	A tank farm;


•	An auxiliary area; and


•	An administration building.

Our plant is in excellent condition and is capable of functioning at over 100% of its 100 million gallons per year nameplate production capacity.

All of our tangible and intangible property, real and personal, serves as the collateral for the debt financing with First National Bank of Omaha, which is described below under " Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations."

ITEM 3. LEGAL PROCEEDINGS

Patent Infringement

On June 27, 2008, we entered into a Tricanter Purchase and Installation Agreement with ICM, Inc. for the construction and installation of a Tricanter Oil Separation System. On February 12, 2010, GS CleanTech Corporation filed a lawsuit in the United States District Court for the Southern District of Indiana, claiming that the Company's operation of the oil recovery system manufactured and installed by ICM, Inc. infringes a patent claimed by GS CleanTech Corporation. GS CleanTech Corporation sought a preliminary injunction, which was denied, and seeks royalties and damages associated with the alleged infringement, as well as attorney's fees from the Company. On February 16, 2010, ICM, Inc. agreed to indemnify, at ICM's expense, the Company from and against all claims, demands, liabilities, actions, litigations, losses, damages, costs and expenses, including reasonable attorney's fees arising out of any claim of infringement of patents, copyrights or other intellectual property rights by reason of the Company's purchase and use of the oil recovery system.

GS CleanTech Corporation subsequently filed actions against at least fourteen other ethanol producing companies for infringement of its patent rights. Several of the other defendants also use equipment and processes provided by ICM, Inc. GS CleanTech Corporation then petitioned for the cases to be joined in a multi-district litigation ("MDL"). This petition was granted and the MDL was assigned to the United States District Court for the Southern District of Indiana (Case No. 1:10-ml-02181). The Company has since answered and counterclaimed that the patent claims at issue are invalid and that the Company is not infringing. Motions for summary judgment have been filed by both GS Cleantech Corporation and the Company and are currently pending. It is not anticipated that rulings on the pending motions will resolve the case due to the addition of newly granted patent rights. The Company anticipates that after rulings are entered regarding the pending motions and discovery issues common to all of the defendants have been determined in the MDL, the cases will proceed in the respective districts in which they were originally filed.

The Company is not currently able to predict the outcome of this litigation with any degree of certainty. ICM, Inc. has, and the Company expects it will continue, to vigorously defend itself and the Company in these lawsuits. The Company estimates that damages sought in this litigation if awarded would be based on a reasonable royalty to, or lost profits of, GS CleanTech Corporation. If the court deems the case exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. ICM, Inc. has also agreed to indemnify the Company. However, in the event that damages are awarded, if ICM, Inc. is unable to fully indemnify the Company for any reason, the Company could be liable. In addition, the Company may need to cease use of its current oil separation process and seek out a replacement or cease oil production altogether.

Air Emissions Permit

In January of 2010 we applied for a Title V Operating Permit for air emissions from the Indiana Department of Environmental Management ("IDEM"). IDEM issued the permit on August 5, 2010. This permit increased our operating capacity and emission limits. The new permit increased Cardinal's potential to emit criteria pollutants, which includes particulate matter. Each criteria pollutant must be less than 250 tons per consecutive twelve month period. This provision was based on a rule change issued by the Environmental Protection Agency ("EPA") on May 1, 2007, which allowed ethanol plants to emit up to 250 tons per criteria pollutant, excluding fugitive dust, instead of only 100 tons per criteria pollutant, including fugitive dust.

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On September 8, 2010, the National Resource Defense Council ("NRDC") filed an administrative appeal of Cardinal's Title V Operating Permit challenging IDEM's authority to grant the Title V Operating Permit. NRDC is arguing the IDEM failed to incorporate the May 1, 2007 EPA rule change into the EPA - approved State Implementation Plan ("SIP") and that as a result, the Permit was improperly issued as the existing SIP still limited ethanol plants to 100 tons of particulate matter. The NRDC appeal regarding our Title V Operating Permit has been stayed pending resolution of similar administrative appeals filed by NRDC against other ethanol plants in Indiana.

NRDC was successful in one of its administrative appeals, resulting in a January 11, 2011 ruling by an administrative law judge that IDEM cannot change its interpretation of Indiana's rules to match the EPA's rules without first revising the Indiana SIP. That decision was later reversed on appeal in a decision issued on May 15, 2012 by the Marion County Superior Court. The NRDC has appealed this ruling to the Indiana Court of Appeals. Although we intend to vigorously defend our Title V Operating Permit and believe we have legal arguments not available to the other ethanol plants whose permits have been appealed, should NRDC's challenge of our Permit be successful, we would be limited to our original operating permit parameters which would in turn decrease our production of ethanol and distillers grains.

ITEM 4. MINE SAFETY DISCLOSURES

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED MEMBER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of December 11, 2012, we had approximately 14,606 membership units outstanding and approximately 1,134 unit holders of record. There is no public trading market for our units.

However, we have established through Alerus Securities a Unit Trading Bulletin Board, a private online matching service, in order to facilitate trading among our members. The Unit Trading Bulletin Board has been designed to comply with federal tax laws and IRS regulations establishing an “alternative trading service,” as well as state and federal securities laws. Our Unit Trading Bulletin Board consists of an electronic bulletin board that provides a list of interested buyers with a list of interested sellers, along with their non-firm price quotes. The Unit Trading Bulletin Board does not automatically affect matches between potential sellers and buyers and it is the sole responsibility of sellers and buyers to contact each other to make a determination as to whether an agreement to transfer units may be reached. We do not become involved in any purchase or sale negotiations arising from our Unit Trading Bulletin Board and have no role in effecting the transactions beyond approval, as required under our operating agreement, and the issuance of new certificates. We do not give advice regarding the merits or shortcomings of any particular transaction. We do not receive, transfer or hold funds or securities as an incident of operating the Unit Trading Bulletin Board. We do not receive any compensation for creating or maintaining the Unit Trading Bulletin Board. In advertising our alternative trading service, we do not characterize Cardinal Ethanol as being a broker or dealer or an exchange. We do not use the Unit Trading Bulletin Board to offer to buy or sell securities other than in compliance with the securities laws, including any applicable registration requirements.

There are detailed timelines that must be followed under the Unit Trading Bulletin Board Rules and Procedures with respect to offers and sales of membership units. All transactions must comply with the Unit Trading Bulletin Board Rules, our operating agreement, and are subject to approval by our board of directors.

As a limited liability company, we are required to restrict the transfers of our membership units in order to preserve our partnership tax status. Our membership units may not be traded on any established securities market or readily traded on a secondary market (or the substantial equivalent thereof). All transfers are subject to a determination that the transfer will not cause the Company to be deemed a publicly traded partnership.

The following table contains historical information by fiscal quarter for the past two fiscal years regarding the actual unit transactions that were completed by our unit-holders during the periods specified. We believe this most accurately represents the current trading value of the Company's units. The information was compiled by reviewing the completed unit transfers that occurred on our qualified matching service bulletin board during the quarters indicated.

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Quarter	Low Price		High Price		Average Price		# of Units Traded
2011 1 ^st	$	3,350	$	3,650	$	3,541	26
2011 2 ^nd	$	3,500	$	3,800	$	3,572	39
2011 3 ^rd	$	3,110	$	3,600	$	3,447	53
2011 4 ^th	$	3,500	$	4,000	$	3,906	77
2012 1 ^st	$	3,750	$	4,000	$	3,874	84
2012 2 ^nd	$	3,750	$	4,400	$	3,962	86
2012 3 ^rd	$	3,850	$	4,300	$	4,062	42
2012 4 ^th	$	3,500	$	4,300	$	3,749	39

The following table contains the bid and asked prices that were posted on the Company's alternative trading service bulletin board and includes some transactions that were not completed. The Company believes the table above more accurately describes the trading value of its units as the bid and asked prices below include some offers that never resulted in completed transactions. The information was compiled by reviewing postings that were made on the Company's alternative trading service bulletin board.



Sellers Quarter	Low Price		High Price		Average Price		# of Units Listed
2011 1 ^st	$	3,450	$	3,650	$	3,504	211
2011 2 ^nd	$	3,500	$	3,800	$	3,588	44
2011 3 ^rd	$	3,110	$	5,100	$	3,778	67
2011 4 ^th	$	3,500	$	5,200	$	4,106	120
2012 1 ^st	$	3,750	$	5,000	$	4,100	105
2012 2 ^nd	$	3,750	$	5,000	$	4,101	117
2012 3 ^rd	$	3,850	$	5,000	$	4,248	79
2012 4 ^th	$	3,500	$	6,000	$	4,058	76

We made distributions of $430 per unit to our members during our fiscal year ended September 30, 2012 . We did not make any distributions to our members during our fiscal year ended September 30, 2011. Except for restrictions imposed in our loan agreement our board of directors has complete discretion over the timing and amount of distributions to our unit holders. Provided that we are not in default on loan covenants, and with the prior approval of our lender, which may not be unreasonably withheld, our loan agreement allows us to make cash distributions at such times and in such amounts as will permit our unit holders to satisfy their income tax liability in a timely fashion. Our expectations with respect to our ability to make future distributions are discussed in greater detail in " Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. "

Performance Graph

The following graph shows a comparison of cumulative total member return since September 30, 2007, calculated on a dividend reinvested basis, for the Company, the NASDAQ Composite Index (the “NASDAQ”) and an index of other companies that have the same SIC code as the Company (the “Industry Index”). The graph assumes $100 was invested in each of our units, the NASDAQ, and the Industry Index on September 30, 2007. Data points on the graph are annual. Note that historic stock price performance is not necessarily indicative of future unit price performance.

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Pursuant to the rules and regulations of the Securities and Exchange Commission, the performance graph and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

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ITEM 6. SELECTED FINANCIAL DATA

The following table presents selected financial and operating data as of the dates and for the periods indicated. The selected balance sheet financial data as of the periods ended September 30, 2010, 2009 and 2008 and the selected income statement data and other financial data for the periods ended September 30, 2009 and 2008 have been derived from our audited financial statements that are not included in this Form 10-K. The selected balance sheet financial data for the periods ended September 30, 2012 and 2011 and the selected income statement data and other financial data for the periods ended September 30, 2012 , 2011 and 2010 have been derived from the audited Financial Statements included elsewhere in this Form 10-K. You should read the following table in conjunction with " Item 7- Management Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the accompanying notes included elsewhere in this Form 10-K. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following financial data.



Statement of Operations Data:	2012			2011			2010			2009			2008
Revenues	$	321,194,387		$	337,019,930		$	224,807,338		$	167,738,057		$	—

Cost Goods Sold	311,971,054			302,690,475			195,880,762			160,674,617			—

Gross Profit	9,223,333			34,329,455			28,926,576			7,063,440			—

Operating Expenses	4,680,729			4,250,752			3,735,530			3,726,051			1,266,368

Operating Income (Loss)	4,542,604			30,078,703			25,191,046			3,337,389			(1,266,368		)

Other Income (Expense)	(2,690,624		)	(4,569,566		)	(4,740,467		)	(4,288,574		)	258,114

Net Income (Loss)	$	1,851,980		$	25,509,137		$	20,450,579		$	(951,185	)	$	(1,008,254	)

Weighted Average Units Outstanding	14,606			14,606			14,606			14,606			14,606

Net Income (Loss) Per Unit	$	126.80		$	1,746.48		$	1,400.15		$	(65.12	)	$	(69.03	)

Cash Distributions Per Unit	$	430.00		$	—		$	60.00		$	—		$	—

Balance Sheet Data:	2012			2011			2010			2009			2008
Current Assets	$	35,973,410		$	49,830,340		$	31,898,901		$	22,049,914		$	741,508

Net Property and Equipment	117,825,363			125,169,711			132,780,346			137,209,571			140,285,656

Other Assets	730,992			876,699			851,732			1,068,767			2,397,795

Total Assets	154,529,765			175,876,750			165,530,979			160,328,252			143,424,959

Current Liabilities	16,662,886			18,628,361			20,562,149			13,036,275			11,682,082

Long-Term Debt	27,943,975			42,960,017			56,188,380			77,427,000			61,818,344

Derivative Instrument - Interest Rate Swap	628,358			1,961,239			3,130,402			3,269,980			—

Members' Equity	109,294,546			112,327,133			85,650,048			66,594,997			69,924,533

* See Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion of our financial results.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report. We are not under any duty to update the forward-looking statements contained in this report. 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 by these cautionary statements.

Overview

Cardinal Ethanol, LLC is an Indiana limited liability company. It was formed on February 7, 2005 with the name of Indiana Ethanol, LLC. On September 27, 2005, we changed our name to Cardinal Ethanol, LLC. We were formed for the purpose of raising capital to develop, construct, own and operate a 100 million gallon per year 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. We are currently operating at above our 100 million gallons per year nameplate capacity. During the fiscal year ended 2012, the ethanol plant processed approximately 38 million bushels of corn per year into 108 million gallons of denatured fuel grade ethanol, 303,000 tons of dried distillers grains with solubles, and 21 million pounds of corn oil.

Our revenues are derived from the sale of our ethanol, distillers grains and corn oil. We market and sell our products primarily in the continental United States using third party marketers. Murex, N.A., Ltd. markets all of our ethanol. Our distillers grains are marketed by CHS, Inc. We market and distribute all of the corn oil we produce directly to end users and third party brokers.

Effective November 20, 2012, we entered into an Eleventh Amendment of Construction Loan Agreement which amended our Construction Loan Agreement originally dated December 19, 2006 with First National Bank of Omaha. The amendment waived our violation for the fiscal quarter ended September 30, 2012 of the fixed charge coverage ratio covenant in the Construction Loan Agreement. In addition, the amendment amended the calculation of the covenant measuring the fixed charge coverage ratio for three fiscal quarters beginning October 1, 2012 through June 30, 2013. It will now be measured on a stand alone quarterly basis, reverting to the rolling twelve month basis for the year ending September 30, 2013.

We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities. However, based on volatility in the cost of corn and potentially tight or even negative margins throughout the period, we may need to seek additional funding.

Comparison of the Fiscal Years Ended September 30, 2012 and 2011

Results of Operations

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the fiscal years ended September 30, 2012 and 2011 :



	Fiscal Year Ended					Fiscal Year Ended
	September 30, 2012					September 30, 2011
Statement of Operations Data	Amount			%		Amount			%
Revenue	$	321,194,387		100.0		$	337,019,930		100.0
Cost of Goods Sold	311,971,054			97.1		302,690,475			89.8
Gross Profit	9,223,333			2.9		34,329,455			10.2
Operating Expenses	4,680,729			1.5		4,250,752			1.3
Operating Income	4,542,604			1.4		30,078,703			8.9
Other Expense, net	(2,690,624		)	(0.8	)	(4,569,566		)	(1.4	)
Net Income	$	1,851,980		0.6		$	25,509,137		7.6

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Our revenues from operations come from three primary sources: sales of fuel ethanol, distillers grains and corn oil. The following table shows the sources of our revenue for the fiscal years ended September 30, 2012 and 2011 .



	Fiscal Year Ended September 30, 2012				Fiscal Year Ended September 30, 2011
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Ethanol Sales	$	250,212,033	77.9	%	$	276,082,661	81.9	%
Dried Distillers Grains Sales	61,772,969		19.2		53,681,618		15.9
Wet Distillers Grains Sales	176,074		0.1		161,035		—
Corn Oil Sales	8,749,940		2.7		6,475,079		1.9
Other Revenue	283,371		0.1		619,537		0.2
Total Revenues	$	321,194,387	100	%	$	337,019,930	100	%

The following table shows additional data regarding production and price levels for our primary inputs and products for the fiscal years ended September 30, 2012 and 2011 .



	Fiscal Year Ended September 30, 2012		Fiscal Year Ended September 30, 2011
Production:
Ethanol sold (gallons)	108,253,779		114,661,886
Distillers grains sold (tons)	302,835		318,785
Corn oil sold (pounds)	21,443,120		13,934,980

Revenues:
Ethanol average price per gallon	$	2.41	$	2.40
Distillers grains average price per ton	$	209	$	169
Corn oil average price per pound	$	0.41	$	0.46

Primary Inputs:
Corn ground (bushels)	38,476,033		39,356,259
Natural gas purchased (MMBTU)	3,032,069		3,120,976

Costs of Primary Inputs:
Corn average price per bushel ground	$	6.96	$	6.63
Natural gas average price per MMBTU	$	3.26	$	4.59

Other Costs:
Chemical and additive costs per gallon of ethanol sold	$	0.071	$	0.073
Denaturant cost per gallon of ethanol sold	$	0.053	$	0.056
Electricity cost per gallon of ethanol sold	$	0.032	$	0.030
Direct Labor cost per gallon of ethanol sold	$	0.021	$	0.019

Revenues

Our revenues are derived from the sale of our ethanol, distillers grains and corn oil. For the fiscal year ended September 30, 2012 , we received approximately 78% of our revenue from the sale of fuel ethanol, approximately 19% of our revenue from the sale of distillers grains and approximately 3% of our revenue from sale of corn oil. Sales of carbon dioxide represented less than 1% of our total sales. Comparatively, for the fiscal year ended September 30, 2011 , we received approximately 82% of our revenue from the sale of fuel ethanol, approximately 16% of our revenue from the sale of distillers grains and approximately 2% of total sales from corn oil. Sales of carbon dioxide represented less than 1% of our total sales for the fiscal year ended September 30, 2011 .

Ethanol

Our revenues from ethanol significantly decreased for our fiscal year ended September 30, 2012 as compared to our fiscal

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year ended September 30, 2011 . Our decrease in revenues for our fiscal year ended September 30, 2012 as compared to 2011 was the result of lower ethanol production rates in the fiscal year ended September 30, 2012 as compared to the same period in 2011 . We are currently operating at approximately 8% above our nameplate capacity.

During the fiscal year ended September 30, 2012 , the market price of ethanol varied between $1.96 per gallon and $3.13 per gallon. Our average price per gallon of ethanol sold, including the effects of our risk management/hedging, was $2.41 for the fiscal year ended September 30, 2012 . During the fiscal year ended September 30, 2011 , the market price of ethanol varied between $2.07 per gallon and $3.07 per gallon. Our average price per gallon of ethanol sold was $2.40 per gallon, for the fiscal year ended September 30, 2011 .

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. At September 30, 2012 , we have no forward ethanol sales contracts. As of September 30, 2012 , we have open short (selling) positions for 19,572,000 gallons of ethanol and open long (buying) position for 19,152,000 gallons of ethanol on the Chicago Board of Trade and the New York Mercantile Exchange to hedge our forward corn contracts and ethanol inventory. Our ethanol derivatives are forecasted to settle through December 2012. For the fiscal years ended September 30, 2012 and 2011 , we recorded net gains on our ethanol derivative contracts of $974,555 and net losses of $116,899 , respectively. These gains and losses were recorded with our revenues in the statement of operations.

Ethanol prices trended slightly downward throughout the fourth quarter rising subsequent to year end. Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. Ethanol prices could potentially rise in correlation with corn prices if the price of corn rises as a result of a short 2012 crop due to drought conditions experienced in the Midwestern United States. An increase in ethanol prices may also be supported by decreased ethanol production due to shut downs in the industry. However, the correlation between the price of ethanol and corn prices has been less reliable in calendar year 2012 and management believes that lower gasoline and export demand along with excess ethanol supply and increased imports from Brazil could negatively impact ethanol prices.

While operating margins were positive early in the fiscal year 2012, a substantial downturn in operating conditions resulted in negative operating margins in the third and fourth fiscal quarters. Management expects that operating margins will remain tight and perhaps negative throughout our fiscal year 2013.

We experienced a decrease in the gallons of ethanol sold for the fiscal year ended September 30, 2012 as compared to the same period in 2011 due primarily to low corn quality and unscheduled maintenance shutdowns at the plant. We sold approximately 108,254,000 gallons of ethanol during the fiscal year ended September 30, 2012 compared to approximately 114,662,000 , for the same period in 2011 .

Management anticipates that ethanol sales will remain relatively consistent during our 2013 fiscal year. However, drought conditions experienced in much of the Midwestern United States may result in our inability to secure corn at prices that allow us to operate the ethanol plant profitably. If that occurs, we may be required to decrease or halt production for a period of time.

Distillers Grains

Our revenues from distillers grains increased in the fiscal year ended September 30, 2012 as compared to the same period in 2011 . This increase was primarily the result of an increase in the average price per ton of distillers grains in the fiscal year ended September 30, 2012 as compared to the same period in 2011 which offset a decrease in the amount of distillers grains sold.

During the fiscal year ended September 30, 2012 , the market price of distillers grains varied between $149 per ton of distillers grains and $290 per ton of distillers grains. Our average price per ton of distillers grains sold was $209 per ton for the fiscal year ended September 30, 2012 as compared to an average price of $169 for the fiscal year ended September 30, 2011 . The amount of distillers grains sold in the fiscal year ended September 30, 2012 decreased as compared to the same period in 2011 due to a decrease in ethanol production levels.

Management believes that the market prices for distillers grains change in relation to the prices of other animal feeds, such as corn and soybean meal. We primarily sell dried distillers grains nationally through our marketer. Distillers grains prices have been increasing throughout our fourth fiscal quarter in relation to strong corn prices which have faced pressure from a poor crop caused by the drought experienced in the Midwestern United States. Typically, distillers grain prices as a percentage of corn value are approximately 80% or better. During our fourth quarter, distillers grain prices were significantly higher as a percentage of corn value than expected. Management believes that distillers grains prices will generally continue to follow corn; however we expect distillers grains prices to revert closer to traditional levels as a percentage of corn value. In addition, management believes that a decrease in export demand and concerns related to aflatoxin could negatively impact distiller grain prices.

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We sold approximately 303,000 tons and 319,000 tons of distillers grains during the fiscal year ended September 30, 2012 and 2011 , respectively.

Corn Oil

Our corn oil sales increased in the fiscal year ended September 30, 2012 as compared to the same period in 2011 which was primarily a result of higher yields of corn oil production in the fiscal year ended September 30, 2012 as compared to the same period in 2011 . Corn oil yields increased during our fourth fiscal quarter as compared to the previous fiscal quarter and management expects yields to continue at a similar rate. However, management continues to refine the operation of our corn oil extraction equipment and investigate ways to improve production levels.

The average price per pound of corn oil was $0.41 per pound for the fiscal year ended September 30, 2012 as compared to $0.46 for the same period in 2011 . Management expects corn oil prices will remain relatively steady in the near term but could decrease due to the elimination of the biodiesel tax credit and the fact that the 2012 RFS for biodiesel was reached in late September or early October 2012 which resulted in a decrease in biodiesel production. Also, additional plants entering into the market and producing corn oil could result in an oversupply negatively affecting prices unless additional demand can be created.

Cost of Goods Sold

Our cost of goods sold as a percentage of revenues was 97% for the fiscal year ended September 30, 2012 as compared to 90% for the same period in 2011 . This increase in cost of goods sold as a percentage of revenues was primarily the result of an increase in the price of corn relative to the price of ethanol and distillers grains for the fiscal year ended September 30, 2012 as compared to the same period in 2011 . Our two largest costs of production are corn and natural gas.

Corn Costs

Our largest cost associated with the production of ethanol, distillers grains and corn oil is corn cost. During the fiscal year ended September 30, 2012 , our average price paid per bushel of corn increased as compared to the same period in 2011 .

During the fiscal year ended September 30, 2012 , we used approximately 38,476,000 bushels of corn to produce our ethanol, distillers grain and corn oil as compared to approximately 39,356,000 bushels for the same period in 2011 . During the fiscal year ended September 30, 2012 , we sold less gallons of ethanol and tons of distillers grains as compared to the same period in 2011 . During the fiscal year ended September 30, 2012 , the market price of corn varied between $5.14 per bushel and $8.80 per bushel. Our average price per bushel of corn ground was $6.96 , including the effects of our risk management/hedging. During the fiscal year ended September 30, 2011 , the market price of corn varied between $4.24 and $8.34 per bushel. Our average price per bushel of corn ground was $6.63 , including the effects of our risk management/hedging. Corn prices rose substantially during our fourth quarter in response to drought conditions and concerns regarding the effects on the 2012 corn crop. Corn prices trended downwards slightly subsequent to our fiscal year end. Management expects that corn prices will remain volatile through the winter of 2012 as a result of an increase in demand for corn and a limited supply. High corn prices will have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices.

In the ordinary course of business, we entered into forward purchase contracts for our commodity purchases. At September 30, 2012 , we have forward corn purchase contracts for various delivery periods through February 2014 for a total commitment of approximately $17,653,000 . Approximately $2,137,000 of the forward corn purchases were with a related party. As of September 30, 2012 , we also have open short (selling) positions for 2,855,000 bushels of corn on the Chicago Board of Trade and long (buying) positions for 85,000 bushels of corn on the Chicago Board of Trade to hedge our forward corn contracts and corn inventory. Our corn derivatives are forecasted to settle through March 2014. For the fiscal years ended September 30, 2012 and 2011 , we recorded net losses on our corn derivative contracts of $7,004,120 and $5,008,132 , respectively. These losses were recorded against cost of goods sold in the statement of operations. Volatility in the price of corn could significantly impact our cost of goods sold.

Natural Gas Costs

Our natural gas costs were lower during our fiscal year ended September 30, 2012 as compared to the fiscal year ended September 30, 2011 . This decrease in cost of natural gas for the fiscal year ended September 30, 2012 as compared to the same period in 2011 was primarily the result of a decrease in the average price per MMBTU of our natural gas.

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During our fiscal year ended September 30, 2012 , we purchased approximately 3,032,000 MMBTU's of natural gas as compared to 3,121,000 MMBTU's for the fiscal year ended September 30, 2011 . Management attributes this decrease in natural gas to the increased efficiency of some of the plant's mechanical systems as well as lower production during the year. During the fiscal year ended September 30, 2012 the market price of natural gas varied between $2.23 per MMBTU and $4.41 per MMBTU. Our average price per MMBTU of natural gas for the fiscal year ended September 30, 2012 was $3.26 after considering the effects of our risk management/hedging. During the fiscal year ended September 30, 2011 the market price of natural gas varied between $3.66 per MMBTU and $5.39 per MMBTU. Our average price per MMBTU of natural gas was $4.59 . For the fiscal years ended September 30, 2012 and 2011 , we recorded net losses of $60,224 and $6,536,843 , respectively on our natural gas derivative contracts. These net losses were recorded in our cost of good sold in our statement of operations.

Natural gas prices have remained at historically low levels although they trended upward slightly during our fourth fiscal quarter. Management anticipates higher natural gas prices during the winter months but expects that natural gas prices will remain relatively low throughout our coming fiscal year unless we experience a catastrophic weather event that would cause problems related to the supply of natural gas. Should the economy continue to improve, we believe that increased industrial production could also result in increased energy demand which could result in an increase in natural gas prices.

Operating Expense

Our operating expenses as a percentage of revenues were approximately 1% for the fiscal year s ended September 30, 2012 and 2011. Operating expenses include salaries and benefits of administrative employees, insurance, taxes, professional fees and other general administrative costs. We experienced an increase in actual operating expenses of approximately $430,000 for the fiscal year ended September 30, 2012 as compared to the same period in 2011 primarily due to our E15 registration, donations to the Growth Energy E15 campaign and increases in our property taxes. Our efforts to optimize efficiencies and maximize production may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses generally do not vary with the level of production at the plant, we expect our operating expenses to remain steady.

Operating Income

Our income from operations for the fiscal year ended September 30, 2012 was approximately 1% of our revenues compared to an operating income of 9% of our revenues for the same period in 2011 . The decrease in operating income for the fiscal year ended September 30, 2012 compared to the same period in 2011 was primarily the result of decreased ethanol production levels and increases in the price of corn relative to the price of ethanol which resulted in negative operating margins in our third and fourth fiscal quarters.

Other Expense

Our other expense for the fiscal year ended September 30, 2012 was approximately 0.8% of our revenues compared to other expense of approximately 1.4% of revenues for the same period in 2011 . Our other expense for the fiscal year ended September 30, 2012 and 2011 consisted primarily of interest expense.

Changes in Financial Condition

The following table highlights the changes in our financial condition for the fiscal years ended September 30, 2012 and 2011 :



	September 30, 2012		September 30, 2011
Current Assets	$	35,973,410	$	49,830,340
Current Liabilities	$	16,662,886	$	18,628,361
Member's Equity	$	109,294,546	$	112,327,133

We experienced a decrease in our total current assets at September 30, 2012 compared to our fiscal year ended September 30, 2011 . We had cash of approximately $683,000 at September 30, 2012 as compared to $10,802,000 at September 30, 2011 . This decrease in cash is because of substantial debt reduction and the payment of distributions to members. Commodity derivative instruments decreased approximately $4,651,000 at September 30, 2012 compared to September 30, 2011 . This decrease is the result of a smaller volume of hedged positions in the futures markets. We also experienced a decrease of approximately $2,403,000 in the value of our inventory at September 30, 2012 compared to September 30, 2011 . At September 30, 2012 , we had trade accounts receivable of approximately $21,786,000 compared to trade accounts receivable at September 30, 2011 of

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approximately $19,101,000 .

We experienced a decrease in our total current liabilities at September 30, 2012 compared to September 30, 2011 . The decrease is primarily due to a decrease in our current maturities of long term debt to approximately $3,634,000 at September 30, 2012 as compared to approximately $9,228,000 at September 30, 2011 as result of paying off the variable rate and corn oil notes. We experienced an increase in our accounts payable related to corn of approximately $6,862,000 at September 30, 2012 as compared to approximately $4,060,000 at September 30, 2011 . The increase in corn payables is due to the increase in producers deferring payment on corn until the first of the year. Our commodity derivative instruments also increased to approximately $1,111,000 at September 30, 2012 as compared to approximately $88,000 at September 30, 2011 .

We experienced a decrease in our long-term liabilities as of September 30, 2012 compared to September 30, 2011 . At September 30, 2012 we had approximately $27,944,000 outstanding in the form of long-term loans, compared to approximately $42,960,000 at September 30, 2011 . The decrease is primarily due to scheduled principal repayments made on our term loans, the payoff of the variable rate note in October 2011 and the payoff of the corn oil extraction note in February 2012.

Comparison of Fiscal Years Ended September 30, 2011 and 2010

Results of Operation

The following table shows the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our statements of operations for the fiscal years ended September 30, 2011 and 2010 :



	Fiscal Year Ended September 30, 2011					Fiscal Year Ended September 30, 2010
Statement of Operations Data	Amount			Percent		Amount			Percent
Revenues	$	337,019,930		100.0	%	$	224,807,338		100.0	%
Cost of Goods Sold	302,690,475			89.8		195,880,762			87.1
Gross Profit	34,329,455			10.2		28,926,576			12.9
Operating Expenses	4,250,752			1.3		3,735,530			1.7
Operating Income	30,078,703			8.9		25,191,046			11.2
Other Expense, net	(4,569,566		)	(1.4	)	(4,740,467		)	(2.1	)
Net Income	$	25,509,137		7.6	%	$	20,450,579		9.1	%

The following table shows the sources of our revenue for the fiscal years ended September 30, 2011 and September 30, 2010 .



	Fiscal Year Ended September 30, 2011				Fiscal Year Ended September 30, 2010
Revenue Source	Amount		% of Revenues		Amount		% of Revenues
Ethanol Sales	$	276,082,661	81.9	%	$	191,276,457	85.1	%
Dried Distillers Grains Sales	53,681,618		15.9		31,163,445		13.9
Wet Distillers Grains Sales	161,035		—		107,211		—
Corn Oil Sales	6,475,079		1.9		1,789,945		0.8
Other Revenue	619,537		0.2		470,280		0.2
Total Revenues	$	337,019,930	100	%	$	224,807,338	100	%

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The following table shows additional data regarding production and price levels for our primary inputs and products for the fiscal years ended September 30, 2011 and 2010 :



	Fiscal Year Ended September 30, 2011		Fiscal Year Ended September 30, 2010
Production:
Ethanol sold (gallons)	114,661,886		109,986,252
Distillers grains sold (tons)	318,785		321,087
Corn oil sold (pounds)	13,934,980		6,796,940

Revenues:
Ethanol average price per gallon	$	2.40	$	1.74
Distillers grains average price per ton	$	168.90	$	97.39
Corn oil average price per pound	$	0.46	$	0.26

Primary Inputs:
Corn ground (bushels)	39,356,259		39,408,254
Natural gas purchased (MMBTU)	3,120,976		3,126,888

Costs of Primary Inputs:
Corn average price per bushel ground	$	6.63	$	3.85
Natural gas average price per MMBTU	$	4.59	$	5.01

Other Costs:
Chemical and additive costs per gallon of ethanol sold	$	0.073	$	0.062
Denaturant cost per gallon of ethanol sold	$	0.056	$	0.042
Electricity cost per gallon of ethanol sold	$	0.030	$	0.031
Direct Labor cost per gallon of ethanol sold	$	0.019	$	0.018

Revenues

For the fiscal year ended September 30, 2011 , ethanol sales comprised approximately 82% of our revenues and distillers grains sales comprised approximately 16% of our revenues, while corn oil and carbon dioxide sales comprised approximately 2% of our revenues. For the fiscal year ended September 30, 2010 , ethanol sales comprised approximately 85% of our revenue and distillers grains sales comprised approximately 14% of our revenue, while corn oil comprised approximately 1% of our revenues.

Ethanol

Our revenues from ethanol increased for our fiscal year ended September 30, 2011 as compared to the fiscal year ended September 30, 2010 primarily as a result of an increase in our ethanol production and higher ethanol prices on average per gallon in the fiscal year ended September 30, 2011 .

During the fiscal year ended September 30, 2011 , the market price of ethanol varied between $2.07 per gallon and $3.07 per gallon. Our average price per gallon of ethanol sold, including the effects of risk management/hedging, was $2.40 per gallon for the fiscal year ended September 30, 2011 . During the fiscal year ended September 30, 2010 , the market price of ethanol varied between $1.57 and $2.43 per gallon. Our average price per gallon of ethanol sold was $1.74 . During the fiscal year ended September 30, 2011 , we sold approximately 114,662,000 gallons of ethanol as compared to our sales of approximately 109,986,000 gallons of ethanol for the same period in 2010 . For the fiscal year ended September 30, 2011 , we recorded net losses on our ethanol derivative contracts of $116,899 . These losses were recorded against our revenues in the statement of operations. We recorded net gains on our ethanol derivative contracts of $33,217 during the fiscal year ended September 30, 2010 .

Distillers Grains

Our revenues from distillers grains increased in the fiscal year ended September 30, 2011 as compared to the same period in 2010 . This increase was primarily the result of an increase in the average price per ton of distillers grains in the fiscal year ended September 30, 2011 as compared to the same period in 2010 .

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During the fiscal year ended September 30, 2011 the market price of distillers grains varied between approximately $105 and $220 per ton. Our average price per ton of distillers grains sold was approximately $169 . During the fiscal year ended September 30, 2010 , the market price of distillers grains varied between approximately $93 per ton and $140 per ton. Our average price per ton of distillers grains sold was approximately $97 . During our fiscal year ended September 30, 2011 we sold approximately 319,000 tons of distillers grains compared to approximately 321,000 for the same period in 2010 .

Cost of Goods Sold

Our costs of goods sold as a percentage of revenues were approximately 90% for the fiscal year ended September 30, 2011 compared to 87% for the same period of 2010 . Our two largest costs of production are corn and natural gas.

Corn Costs

During the fiscal year ended September 30, 2011 we used approximately 39,356,000 bushels of corn to produce our ethanol, distillers grain and corn oil as compared to approximately 39,408,000 bushels for the same period in 2010 . During the fiscal year ended September 30, 2011 , the market price of corn varied between $4.24 per bushel and $8.34 per bushel. Our average price per bushel of corn ground was $6.63 after considering the effects of our risk management/hedging. During the fiscal year ended September 30, 2010 , the market price of corn varied between $3.40 and $4.81 per bushel. Our average price per bushel of corn ground was $3.85 after considering the effects of our risk management/hedging. For the fiscal year ended September 30, 2011 and 2010 , we recorded net losses on our corn derivative contracts of $5,008,132 and $2,424,135 , respectively. These net losses were recorded in our costs of goods sold in our statement of operations.

Natural Gas

During our fiscal year ended September 30, 2011 , we purchased approximately 3,121,000 MMBTU's of natural gas as compared to approximately 3,127,000 MMBTU's for the same period in 2010 . During the fiscal year ended September 30, 2011 , the market price of natural gas varied between $3.66 per MMBTU and $5.39 per MMBTU. Our average price per MMBTU of natural gas was $4.59 . During the fiscal year ended September 30, 2010 , the market price of natural gas varied between $3.70 per MMBTU and $6.10 per MMBTU. Our average price per MMBTU of natural gas was $5.01 .

Operating Expense

Our operating expenses were higher for the fiscal year ended September 30, 2011 than they were for the same period ended September 30, 2010 . This increase in operating expenses is primarily due to an increase in general and administrative expenses. These increased expenses are the result of increased salaries and property taxes.

Operating Income

Our income from operations for the fiscal year ended September 30, 2011 was approximately 9% of our revenues compared to operating income of approximately 11% of our revenues for the fiscal year ended September 30, 2010 . This decrease in our profitability was primarily the result of the extremely favorable market conditions and resulting operating margins we experienced in the fiscal year ended 2010 compared with more modest conditions and margins in the fiscal year ended 2011. Higher prices have resulted in higher profits that are lower percentage-wise relative to revenues.

Other Expense

Other expense for the fiscal year ended September 30, 2011 was approximately 1.4% of our revenue and totaled approximately $4,570,000 . Other expense for the fiscal year ended September 30, 2010 was approximately 2.1% of our revenue and totaled approximately $4,740,000 . Other expense consisted primarily of interest expense.

Critical Accounting Estimates

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:

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We enter into derivative instruments to hedge the variability of expected future cash flows related to interest rates. We

do not typically enter into derivative instruments other than for economic hedging purposes. All derivative instruments are recognized on the September 30, 2012 balance sheet at their fair market value. Changes in the fair value of a derivative instrument that is designated as and meets all of the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged items affect earnings.

At September 30, 2012 , we had an interest rate swap with a fair value of $2,086,757 recorded as derivative instruments in the current and long-term liabilities section of the balance sheet and as a deferred loss in accumulated other comprehensive loss. We have an interest rate swap with a fair value of $3,482,770 for the same period ended in 2011 . The interest rate swap is designated as a cash flow hedge.

As of September 30, 2012 , we have open short positions for 2,855,000 bushels of corn and long positions of 85,000 for corn on the Chicago Board of Trade and short positions of 19,572,000 gallons of ethanol and long positions of 19,152,000 gallons of ethanol on the New York Mercantile Exchange. These derivatives have not been designated as an effective hedge for accounting purposes. Corn and ethanol positions are forecasted to settle through March 2014 and December 2012, respectively. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above.

We carry our long-lived assets at the original acquisition cost as required by current generally accepted accounting principles. Due to business conditions and the business environment in which our industry operates, the fair market value of those assets could, theoretically, fall below the amount which we carry them in our financial statements. In such cases, those assets would be known as impaired. Thus, we periodically perform an assessment of the fair value of these assets. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the assessment of the useful lives of property and equipment to be a critical accounting estimate. Our assessment shows us that the fair value of our long-lived assets as a group is substantially in excess of its carrying value.

We value our inventory at the lower of cost or market. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions which do not reflect unanticipated events and circumstances that may occur. In our analysis, we consider future corn costs and ethanol prices, break-even points for our plant and our risk management strategies in place through our derivative instruments and forward contracts. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuation of the lower of cost or market on inventory to be a critical accounting estimate.

We enter forward contracts for corn purchases to supply the plant. These contracts represent firm purchase commitments which must be evaluated for potential losses. We have determined that there are no losses that are required to be recognized on these firm purchase commitments related to corn contracts in place at September 30, 2012 . Our estimates include various assumptions including the future prices of ethanol, distillers grains and corn.

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. We do not anticipate seeking additional equity financing during our 2013 fiscal year.

However, while operating margins were positive early in the fiscal year 2012, a substantial downturn in operating conditions resulted in negative operating margins in the third and fourth fiscal quarters. Management believes that this is the result of decreasing ethanol prices along with rising commodity markets due to ongoing drought conditions experienced in much of the Midwestern United States. Management expects that operating margins will remain tight and perhaps negative throughout our fiscal year 2013. A short corn supply could substantially increase corn prices putting pressure on liquidity or resulting in unavailability of corn which could require us to decrease production for a period of time. In addition, an over supply of ethanol could also negatively impact ethanol prices. While we have reduced our reliance on our revolving lines of credit and paid off the balance on our variable rate note and our corn oil extraction note, should we continue to experience unfavorable operating conditions in the ethanol industry that prevent us from profitably operating the ethanol plant, we could have difficulty maintaining our liquidity and may need to rely on our revolving lines of credit for operations.

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The following table shows cash flows for the fiscal year ended September 30, 2012 and 2011 :



	2012			2011
Net cash provided by operating activities	$	18,003,110		$	21,649,488
Net cash used in investing activities	(1,231,316		)	(770,137		)
Net cash used for financing activities	(26,890,923		)	(13,395,099		)
Net increase (decrease) in cash	(10,119,129		)	7,484,252
Cash, beginning of period	10,802,072			3,317,820
Cash, end of period	682,943			10,802,072

Cash Flow from Operations

We experienced a decrease in our cash flow from operations for the fiscal year ended September 30, 2012 as compared to the same period in 2011 . Approximately $18,003,000 of cash was provided by operating activities for the fiscal year ended September 30, 2012 as compared to approximately $21,649,000 provided by operating activities for the fiscal year ended September 30, 2011 . Our net income from operations for the fiscal year ended September 30, 2012 was approximately $1,852,000 as compared to net income of approximately $25,509,000 for the same period in 2011 .

The change in the fair value of our derivative instruments decreased by approximately $6,090,000 for the fiscal year ended September 30, 2012 as compared to decreasing by $11,662,000 for the same period in 2011 . Our restricted cash also increased by approximately $1,245,000 for the fiscal year ended September 30, 2012 as compared to decreasing $2,192,000 for the same period in 2011 and our inventory decreased by approximately $2,403,000 for the fiscal year ended September 30, 2012 as compared to increasing by $3,400,000 for the same period in 2011 . During the fiscal year ended September 30, 2012 , corn prices have been less volatile than in the same period ended 2011 . We also held a smaller hedge position in the fiscal year ended September 30, 2012 as compared to the same period in 2011 . These two factors are the primary reasons in the variation in the changes in these accounts for the two periods.

Finally, our trade accounts receivable decreased $2,685,000 for the fiscal year ended September 30, 2012 as compared to decreasing $5,874,000 for the same period in 2011 . This is mainly a reflection of the timing of ethanol shipments and collections between the two periods.

Cash Flow Used in Investing Activities

Cash used in investing activities was approximately $1,231,000 for the fiscal year ended September 30, 2012 as compared to approximately $770,000 for the same period in 2011 . Cash used in investing activities increased due to an increase in payments for construction in process and capital expenditures for the fiscal year ended September 30, 2012 as compared to the same period in 2011 .

Cash Flow Used in Financing Activities

Cash used in financing activities was approximately $26,891,000 for the fiscal year ended September 30, 2012 as compared to cash used in financing activities of approximately $13,395,000 for the same period in 2011 . We had net payments of approximately $20,608,000 on our long term debt for the fiscal year ended September 30, 2012 as compared to approximately $13,389,000 for the fiscal year ended September 30, 2011 . We also received proceeds of approximately $29,800,000 from our line of credit and long-term debt facilities for the fiscal year ended September 30, 2011 . We also paid a dividend to our members in the amount of approximately $6,281,000 in the fiscal year ended September 30, 2012 .

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 with the relative price levels as of September 30, 2012 , we expect operations to generate adequate cash flows to maintain operations. This expectation assumes that we will be able to sell all the ethanol that is produced at the plant.

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The following table shows cash flows for the fiscal years ended September 30, 2011 and 2010:



	2011			2010
Net cash provided by operating activities	$	21,649,488		$	19,940,794
Net cash used in investing activities	(770,137		)	(3,765,300		)
Net cash used for financing activities	(13,395,099		)	(20,122,799		)
Net increase (decrease) in cash	7,484,252			(3,947,305		)
Cash, beginning of period	3,317,820			7,265,125
Cash, end of period	10,802,072			3,317,820

Cash Flow from Operations

Approximately $21,649,000 of cash was provided by operating activities for the fiscal year ended September 30, 2011

as compared to approximately $19,941,000 provided by operating activities for the fiscal year ended September 30, 2010. Our

net income from operations for the fiscal year ended September 30, 2011 was approximately $25,509,000 as compared to net

income of approximately $20,451,000 for the same period in 2010.

Cash Flow Used in Investing Activities

Cash used in investing activities was approximately $770,000 for the fiscal year ended September 30, 2011 as compared to approximately $3,765,000 for the same period in 2010. Cash used in investing is for our capital expenditures.

Cash Flow Used in Financing Activities

Cash used in financing activities was approximately $13,395,000 for the fiscal year ended September 30, 2011 as compared to cash used in financing activities of approximately $20,123,000 for the same period in 2010. This change in cash used in financing activities was the result of payments made on our long term debt financing.

Short and Long Term Debt Sources

On December 19, 2006, we entered into a loan agreement with First National Bank of Omaha establishing a senior credit facility for the construction of our plant. The credit facility was in the amount of $96,000,000, consisting of an $83,000,000 construction note, a $10,000,000 revolving line of credit and a $3,000,000 letter of credit. We also entered into an interest rate swap agreement for $41,500,000 of the construction term loan in order to achieve a fixed rate on a portion of this loan.

In April 2009, the construction loan was converted into multiple term loans one of which was a $41,500,000 Fixed Rate Note, which will be applicable to the interest rate swap agreement, a $31,500,000 Variable Rate Note, and a $10,000,000 Long Term Revolving Note. The term loans have a maturity of five years with a ten-year amortization.

Effective February 14, 2012, we entered into a Tenth Amendment of Construction Loan Agreement and a Seventh Amended and Restated Revolving Promissory Note which amended our Construction Loan Agreement originally dated December 19, 2006 and the Sixth Amended and Restated Revolving Promissory Note executed in May 2011 with First National Bank of Omaha.

Subsequent to the end of the period covered by this report, we entered into an Eleventh Amendment of Construction Loan Agreement which amended our Construction Loan Agreement originally dated December 19, 2006 with First National Bank of Omaha. The amendment waived our violation for the fiscal quarter ended September 30, 2012 of the fixed charge coverage ratio. In addition, the amendment amends the calculation of the covenant measuring the fixed charge coverage ratio for three quarters beginning October 1, 2012 through June 30, 2013. It will now be measured on a stand alone quarterly basis, reverting to the rolling quarter basis for the year ending September 30, 2013.

Line of Credit

Our revolving line of credit in the amount of $15,000,000 expires on February 13, 2013. The interest rate is the 30-day LIBOR rate plus 350 basis points with no minimum interest rate. At September 30, 2012 and at September 30, 2011 there were no outstanding borrowings on the revolving line of credit.

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Fixed Rate Note

As indicated above, we have an interest rate swap agreement in connection with the Fixed Rate Note payable to our senior lender. This interest rate swap helps protect our exposure to increases in interest rates and the swap effectively fixes the rate on the loan at 8.11% until April 2014. As of September 30, 2012 and September 30, 2011 we had an interest rate swap liability with a fair value of $2,086,757 and $3,482,770 respectively, recorded in current and long term liabilities.

The Fixed Rate Note will accrue interest at a rate equal to the 3-month LIBOR rate plus 300 basis points. We began repaying principal on the Fixed Rate Note in July 2009. The outstanding balance on this note was $31,577,979 and $34,920,938 at September 30, 2012 and September 30, 2011 , respectively, and is included in current liabilities and long-term debt.

Variable Rate Note and Long Term Revolving Note

At September 30, 2012 and September 30, 2011 , the balance on the variable rate note was $0 and $14,464,452 , respectively. We have no ability to draw upon the variable rate note.

At September 30, 2012 and September 30, 2011 there were no outstanding borrowings on the long term revolving note. If we were to draw upon the long term revolving note, interest would accrue at the 90-Day LIBOR plus 350 basis points with no minimum interest rate. At September 30, 2012 , the interest rate was 4.01%. The maximum availability on the long term revolving note at September 30, 2012 was $6,750,000 , which reduces by $250,000 each quarter.

Corn Oil Extraction Note

Effective July 31, 2008, we amended our construction loan agreement to include a new loan up to the maximum amount of $3,600,000 for the purchase and installation of a corn oil extraction system and related equipment. On April 8, 2009, the corn oil extraction note converted into a Corn Oil Extraction Term Note, which accrued interest at a rate equal to 3-month LIBOR plus 300 basis points, or 5%, whichever was greater. As of September 30, 2012 and September 30, 2011 , we had $0 and $2,790,000 outstanding on our corn oil extraction loan respectively. In January 2012, we paid the Corn Oil Extraction Term Note in full.

Covenants

Our loans are secured by our assets and material contracts. In addition, during the term of the loans, we will be subject to certain financial covenants.

We were in compliance with all loan covenants at September 30, 2012 except for the fixed charge coverage ratio. We subsequently received a waiver of this violation from First National Bank of Omaha. Our fixed charge coverage ratio is no less than 1.15:1.00 and is calculated by comparing our “adjusted” EBITDA, meaning EBITDA less taxes, capital expenditures and allowable distributions, to our scheduled payments of the principal and interest on our obligations to our lender, other than principal repaid on our revolving loan and long term revolving note. It was previously measured on a rolling twelve month basis but has now been amended for three quarters beginning October 1, 2012 through June 30, 2013. It is currently measured on a stand alone quarterly basis, reverting to the rolling twelve month for the year ending September 30, 2013.

Our minimum working capital is $15,000,000, which is calculated as our current assets plus the amount available for drawing under our long term revolving note, less current liabilities.

Our loan agreement also requires us to obtain prior approval from our lender before making, or committing to make, capital expenditures exceeding an aggregate amount of $4,000,000 in any single fiscal year. We may make distributions to our members to cover their respective tax liabilities. In addition, we may also distribute up to 70% of net income provided we maintain certain leverage ratios and are in compliance with all financial ratio requirements and loan covenants before and after any such distributions are made to our members.

We are currently meeting our liquidity needs and complying with our financial covenants, as revised, and the other terms of our loan agreements. Based on current management projections, we anticipate that future operations will be sufficient to generate enough cash flow to maintain operations, service our debt and comply with our revised financial covenants in our loan agreements through September 30, 2013. However, we are currently operating at narrow to negative margin levels. Should market conditions deteriorate further in the future, circumstances may develop which could result in us violating the financial covenants or other terms of our loan agreements. We will continue to evaluate our liquidity needs for the upcoming months and work with our lenders to try to ensure that the terms of the loan agreements, including the financial covenants, are met going forward. However, we cannot provide any assurance that our actions will result in sustained profitable operations or that we will not be in violation of

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our revised loan covenants or other terms of our loan agreements. Should we violate the terms or revised covenants of our loan or fail to obtain a waiver of any such term or covenant, our primary lender could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans. Our lender could also elect to proceed with a foreclosure action on our plant.

Tax Abatement

In October 2006, the real estate that our plant was constructed on was determined to be an economic revitalization area, which qualified us for tax abatement. The abatement period is for a ten year term, with an effective date beginning calendar year end 2009 for the property taxes payable in calendar year 2010. The program allows for 100% abatement of property taxes beginning in year 1, and then decreases on a ratable scale so that in year 11 the full amount of property taxes are due and payable. We must apply annually and meet specified criteria to qualify for the abatement program.

Capital Improvements

During the first quarter of fiscal year 2012 we conducted a bottlenecking analysis of our facility and operations in order to find ways to improve production efficiency. At the present time, we continue to evaluate projects identified by that analysis to determine whether we will proceed. These projects may be deferred until market conditions improve.

Contractual Cash Obligations

In addition to our long-term debt obligations, we have certain other contractual cash obligations and commitments. The following tables provide information regarding our contractual obligations and approximate commitments as of September 30, 2012 :



	Payment Due By Period
Contractual Cash Obligations	Total		Less than One Year		One to Three Years		Three to Five Years		After Five Years
Long-Term Debt Obligations	$	31,577,979	$	3,634,004	$	27,943,975	$	—	$	—
Operating Lease Obligations	1,193,624		1,071,804		109,786		12,034		—
Purchase Obligations	17,653,000		17,345,808		307,192		—		—
Total Contractual Cash Obligations	$	50,424,603	$	22,051,616	$	28,360,953	$	12,034	$	—

The long-term debt obligations in the table above include both principal and interest payments, and payments on the interest rate swap agreement at the interest rates applicable to the obligations as of September 30, 2012 . These long term debt obligations exclude interest on the operating line of credit.

Subsequent Events

Effective November 20, 2012, we entered into an Eleventh Amendment of Construction Loan Agreement which amended our Construction Loan Agreement originally dated December 19, 2006 with First National Bank of Omaha. The amendment waived our violation for the fiscal quarter ended September 30, 2012 of the fixed charge coverage ratio covenant in the Construction Loan Agreement. In addition, the amendment amended the calculation of the covenant measuring the fixed charge coverage ratio for three fiscal quarters beginning October 1, 2012 through June 30, 2013. It will now be measured on a stand alone quarterly basis, reverting to the rolling quarter basis for the year ending September 30, 2013.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of market fluctuations associated with interest rates and commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. 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 natural gas. 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. We used derivative financial instruments to alter our exposure to interest rate risk. We entered into a interest rate swap agreement that we designated as a cash flow hedge.

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from holding a revolving line of credit and term loans which bear variable interest rates. However, as of September 30, 2012 we did not have any amounts outstanding on our revolving line of credit and term loans bearing variable interest rates.

The specifics of each note are discussed in greater detail in “Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations -Liquidity and Capital Resources .”

We manage our floating rate debt using an interest rate swap. We entered into a fixed rate swap to alter our exposure to the impact of changing interest rates on our results of operations and future cash outflows for interest. We use interest rate swap contracts to separate interest rate risk management from the debt funding decision. The interest rate swaps held by us as of September 30, 2012 qualified as a cash flow hedge. For this qualifying hedge, the effective portion of the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative's gains and losses to offset related results from the hedged item on the income statement. As of September 30, 2012 , our interest rate swap had a liability fair value of $2,086,757 .

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 in the ethanol production process and the sale of ethanol.

We seek to minimize the risks from fluctuations in the prices of raw material inputs, such as corn and natural gas, and finished products, such as ethanol and distiller's grains, through the use of hedging instruments. In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. Although we believe our hedge positions accomplish an economic hedge against our future purchases and sales, management has chosen not to use hedge accounting, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We are using fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in our cost of goods sold or as an offset to revenues. The immediate recognition of hedging gains and losses under fair value accounting can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged.

We enter into fixed price contracts for corn purchases on a regular basis. It is our intent that, as we enter in to these contracts, we will use various hedging instruments to maintain a near even market position. For example, if we have 1 million bushels of corn under fixed price contracts we would generally expect to enter into a short hedge position to offset our price risk relative to those bushels we have under fixed price contracts. Because our ethanol marketing company (Murex) 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.

As of September 30, 2012 , we have open short (selling) positions for 2,855,000 bushels of corn on the Chicago Board of Trade and open short (selling) positions for 19,572,000 gallons of ethanol on the New York Mercantile Exchange and Chicago Board of Trade to hedge our forward corn contracts and corn inventory. As of September 30, 2012 , we have open long (buying) positions for 85,000 bushels of corn on the Chicago Board of Trade. We have open long (buying) positions for 19,152,000 gallons of ethanol on the New York Mercantile Exchange and Chicago Board of Trade. We do not have any open positions for natural gas on the New York Mercantile Exchange. These derivatives have not been designated as an effective hedge for accounting purposes. Corn derivatives are forecasted to settle through March 2014 and ethanol derivatives are forecasted to settle through December 2012. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above.

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For the fiscal years ended September 30, 2012 , we recorded a loss due to the change in fair value of our outstanding corn derivative positions of $7,004,120 and a gain due to the change in fair value of our outstanding ethanol derivative positions of $974,555 . We also recorded a loss due to changes in fair value of our outstanding natural gas derivative positions of $60,224 .

At September 30, 2012 , we have committed to purchase approximately 2,821,000 bushels of corn through February 2014 at an average bushel price of $7.19 and the spot price at September 30, 2012 was $7.86 per bushel. As contracts are delivered, any gains realized will be recognized in our gross margin. Due to the volatility and risk involved in the commodities market, we cannot be certain that these gains will be realized.

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. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us. As of September 30, 2012 we had price protection in place for approximately 7% of our anticipated corn needs for the next 12 months.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, corn and natural gas price risk. Market risk related to these factors 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 prices and average ethanol price as of September 30, 2012 of the forward and future contracts used to hedge our market risk for corn and natural gas usage requirements. The volumes are based on our expected use and sale of these commodities for a one year period from September 30, 2012 . The results of this analysis, which may differ from actual results, are approximately as follows:



	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of September 30, 2012		Approximate Adverse Change to Income
Natural Gas	3,162,500	MMBTU	10	%		$	1,144,825
Ethanol	114,000,000	Gallons	10	%		$	26,704,500
Corn	37,178,586	Bushels	10	%		$	29,222,369
DDGs	285,120	Tons	10	%		$	7,869,312

For comparison purposes, the results of our sensitivity analysis as of September 30, 2011 were approximately as follows:



	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of 9/30/11		Approximate Adverse Change to Income
Natural Gas	3,100,000	MMBTU	10	%	$	1,099,899
Ethanol	114,000,000	Gallons	10	%	$	29,095,741
Corn	40,000,000	Bushels	10	%	$	22,011,400
DDGs	318,000	Tons	10	%	$	5,265,000

Liability Risk

We participate in a captive reinsurance company (the “Captive”). The Captive reinsures losses related to worker's compensation, commercial property and general liability. Premiums are accrued by a charge to income for the period to which the premium relates and is remitted by our insurer to the captive reinsurer. The Captive reinsures catastrophic losses in excess of a predetermined amount. Our premiums are structured such that we have made a prepaid collateral deposit estimated for losses related to the above coverage. The Captive insurer has estimated and collected an amount in excess of the estimated losses but less than the catastrophic loss limit insured by the Captive. We cannot be assessed in excess of the amount in the collateral fund.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Members of Cardinal Ethanol, LLC

We have audited the accompanying balance sheets of Cardinal Ethanol, LLC as of September 30, 2012 and 2011, and the related statements of operations and comprehensive income, cash flows, and changes in members' equity for each of the fiscal years in the three year period ended September 30, 2012. Cardinal Ethanol, LLC's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cardinal Ethanol, LLC as of September 30, 2012 and 2011, and the results of its operations and its cash flows for each of the fiscal years in the three year period ended September 30, 2012, in conformity with accounting principles generally accepted in the United States of America.

/s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P

Minneapolis, Minnesota

December 11, 2012

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CARDINAL ETHANOL, LLC

Balance Sheets



ASSETS	September 30, 2012			September 30, 2011

Current Assets
Cash	$	682,943		$	10,802,072
Restricted cash	3,603,580			2,358,802
Trade accounts receivable, net of an allowance of $0 and $23,500, respectively	21,785,960			19,100,842
Miscellaneous receivables	192,514			471,403
Inventories	9,329,684			11,732,998
Deposits	—			192,250
Prepaid and other current assets	293,259			435,282
Commodity derivative instruments	85,470			4,736,691
Total current assets	35,973,410			49,830,340

Property, Plant, and Equipment
Land and land improvements	21,124,597			21,105,097
Plant and equipment	122,149,377			121,310,752
Building	6,996,908			6,991,721
Office equipment	529,507			356,516
Vehicles	31,928			31,928
Construction in process	99,461			—
	150,931,778			149,796,014
Less accumulated depreciation	(33,106,415		)	(24,626,303		)
Net property, plant, and equipment	117,825,363			125,169,711

Other Assets
Deposits	80,000			80,000
Investment	474,837			453,676
Financing costs, net of amortization	176,155			343,023
Total other assets	730,992			876,699

Total Assets	$	154,529,765		$	175,876,750

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

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CARDINAL ETHANOL, LLC

Balance Sheets



LIABILITIES AND MEMBERS' EQUITY	September 30, 2012			September 30, 2011

Current Liabilities
Accounts payable	$	2,390,221		$	2,081,140
Accounts payable-corn	6,861,610			4,059,970
Construction retainage payable	—			101,928
Accrued expenses	1,207,414			1,547,097
Commodity derivative instruments	1,111,238			88,390
Derivative instruments - interest rate swap	1,458,399			1,521,531
Current maturities of long-term debt and capital lease obligations	3,634,004			9,228,305
Total current liabilities	16,662,886			18,628,361

Long-Term Debt and Capital Lease Obligations	27,943,975			42,960,017

Derivative Instruments - interest rate swap	628,358			1,961,239

Commitments and Contingencies

Members’ Equity
Member contributions, net of cost of raising capital, 14,606 units authorized, issued and outstanding	70,912,213			70,912,213
Accumulated other comprehensive loss	(2,086,758		)	(3,482,769		)
Distributions to members	(6,280,580		)	—
Retained earnings	46,749,671			44,897,689
Total members' equity	109,294,546			112,327,133

Total Liabilities and Members’ Equity	$	154,529,765		$	175,876,750

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

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CARDINAL ETHANOL, LLC

Statements of Operations and Comprehensive Income



	Fiscal Year Ended			Fiscal Year Ended			Fiscal Year Ended
	September 30, 2012			September 30, 2011			September 30, 2010

Revenues	$	321,194,387		$	337,019,930		$	224,807,338

Cost of Goods Sold	311,971,054			302,690,475			195,880,762

Gross Profit	9,223,333			34,329,455			28,926,576

Operating Expenses	4,680,729			4,250,752			3,735,530

Operating Income	4,542,604			30,078,703			25,191,046

Other Income (Expense)
Interest income	2,808			3,891			2,792
Interest expense	(2,824,100		)	(4,412,755		)	(4,797,649		)
Miscellaneous income (expense)	130,668			(160,702		)	54,390
Total	(2,690,624		)	(4,569,566		)	(4,740,467		)

Net Income	$	1,851,980		$	25,509,137		$	20,450,579

Weight Average Units Outstanding - basic and diluted	14,606			14,606			14,606

Net Income Per Unit - basic and diluted	$	126.80		$	1,746.48		$	1,400.15

Distributions Per Unit	$	430.00		$	—		$	60.00

Comprehensive Income:
Net income	$	1,851,980		$	25,509,137		$	20,450,579
Interest rate swap fair value change and reclassification, net	1,396,011			1,167,948			(519,168		)
Comprehensive Income	$	3,247,991		$	26,677,085		$	19,931,411

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

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CARDINAL ETHANOL, LLC

Statements of Cash Flows



	Fiscal Year Ended			Fiscal Year Ended			Fiscal Year Ended
	September 30, 2012			September 30, 2011			September 30, 2010

Cash Flows from Operating Activities
Net income	$	1,851,980		$	25,509,137		$	20,450,579
Adjustments to reconcile net income to net cash from operations:
Depreciation and amortization	8,657,575			8,542,898			8,451,832
Change in fair value of commodity derivative instruments	6,089,789			11,661,874			2,424,135
(Gain) Loss on disposal of fixed asset	562			—			(266,583		)
Non-cash dividend income	(21,161		)	(187,093		)	—
Provision for uncollectible accounts	—			35,847			—
Change in operating assets and liabilities:
Restricted cash	(1,244,778		)	2,191,863			—
Trade accounts receivables	(2,685,118		)	(5,874,049		)	(7,317,494		)
Miscellaneous receivable	278,889			558,794			(8,718		)
Inventories	2,403,314			(3,399,858		)	(2,541,838		)
Prepaid and other current assets	142,023			529,817			(118,328		)
Deposits	192,250			217,690			923,947
Derivative instruments	(415,720		)	(18,889,962		)	(4,260,000		)
Accounts payable	309,081			(73,230		)	824,585
Accounts payable-corn	2,801,640			793,190			1,709,592
Construction retainage payable	—			(249,772		)	—
Accrued expenses	(357,216		)	282,342			(330,915		)
Net cash provided by operating activities	18,003,110			21,649,488			19,940,794

Cash Flows from Investing Activities
Capital expenditures	(1,131,855		)	(770,137		)	(284,978		)
Payments for construction in process	(99,461		)	—			(3,480,322		)
Net cash used for investing activities	(1,231,316		)	(770,137		)	(3,765,300		)

Cash Flows from Financing Activities
Distributions paid	(6,280,580		)	—			(876,360		)
Payments for capital lease obligations	(2,010		)	(6,113		)	(7,770		)
Proceeds from long-term debt	—			29,800,000			—
Payments on long-term debt	(20,608,333		)	(43,188,986		)	(19,238,669		)
Net cash used for financing activities	(26,890,923		)	(13,395,099		)	(20,122,799		)

Net Increase (Decrease) in Cash	(10,119,129		)	7,484,252			(3,947,305		)

Cash – Beginning of Period	10,802,072			3,317,820			7,265,125

Cash – End of Period	$	682,943		$	10,802,072		$	3,317,820

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

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CARDINAL ETHANOL, LLC

Statements of Cash Flows



	Fiscal Year Ended		Fiscal Year Ended		Fiscal Year Ended
	September 30, 2012		September 30, 2011		September 30, 2010

Supplemental Cash Flow Information
Interest paid	$	3,115,561	$	4,559,126	$	5,067,484

Supplemental Disclosure of Noncash Investing and Financing Activities
Construction costs in construction retainage and accounts payable	$	—	$	101,928	—
Gain (Loss) on derivative instruments included in other comprehensive income	$	1,396,011	$	1,167,948	$	(519,168	)
Equipment purchase price adjustment included in accounts payable	$	107,213	$	—	$	—
Capital expenditures included in accrued expenses and accounts receivable	$	17,533	$	66,264	$	62,497

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

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CARDINAL ETHANOL, LLC

Statements of Changes in Members' Equity



						Accumulated
			Retained			Other
	Member		Earnings			Comprehensive
	Contributions		(Deficit)			Loss
Balance - September 30, 2009	70,912,213		(185,667		)	(4,131,549		)

Net income for year ended September 30, 2010	—		20,450,579			—

Members Distributions			(876,360		)

Other comprehensive income
Unrealized loss on derivative contracts, net	—		—			(519,168		)

Balance - September 30, 2010	70,912,213		19,388,552			(4,650,717		)

Net income for year ended September 30, 2011	—		25,509,137			—

Other comprehensive income
Unrealized gain on derivative contracts, net	—		—			1,167,948

Balance - September 30, 2011	70,912,213		44,897,689			(3,482,769		)

Net income for year ended September 30, 2012	—		1,851,980			—

Members Distributions	—		(6,280,580		)	—

Other comprehensive income
Unrealized gain on derivative contracts, net	—		—			1,396,011

Balance - September 30, 2012	$	70,912,213	$	40,469,089		$	(2,086,758	)

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

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Cardinal Ethanol, LLC, (the “Company”) is an Indiana limited liability company currently producing fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States. During the fiscal years ended September 30, 2012 and 2011, the Company produced approximately 108 million and 115 million gallons of ethanol, respectively.

Fiscal Reporting Period

The Company has adopted a fiscal year ending September 30 for reporting financial operations.

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. The Company uses estimates and assumptions in accounting for the following significant matters, among others; the useful lives of fixed assets, allowance for doubtful accounts, the valuation of basis and delay price contracts on corn purchases, derivatives, inventory, patronage dividends, long-lived assets and inventory purchase commitments. Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made.

Cash

The Company maintains its accounts primarily at two financial institutions. At times throughout the year the Company's cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation.

Restricted Cash

As a part of its commodities hedging activities, the company is required to maintain cash balances with our commodities trading companies for initial and maintenance margins on a per futures contract basis. Changes in the market value of contracts may increase these requirements. As the futures contracts expire, the margin requirements also expire. Accordingly, we record the cash maintained with the traders in the margin accounts as restricted cash. Since this cash is immediately available to us upon request when there is a margin excess, we consider this restricted cash to be a current asset.

Accounts Receivable

Credit terms are extended to customers in the normal course of business. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral. Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company's credit terms. Amounts considered uncollectible are written off. The Company's estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At September 30, 2012 and 2011 , the Company had an allowance for doubtful accounts of $0 and $23,500 , respectively.

Inventories

Inventories are stated at the lower of cost or market. Inventories consist of raw materials, work in process, finished goods and parts. Corn is the primary raw material. Finished goods consist of ethanol, dried distiller grains and corn oil. Cost for substantially all inventory is determined using the lower of (average) cost or market. Market is based on current replacement values except that it does not exceed net realizable values and it is not less than net realizable values reduced by allowances from normal profit margins.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

Property, Plant and Equipment

Property, plant, and equipment are stated at cost. Depreciation is provided over estimated useful lives by use of the straight line depreciation method. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. Construction in progress expenditures will be depreciated using the straight-line method over their estimated useful lives once the assets are placed into service.



	Minimum years	Maximum years
Land improvements	15	20
Office building	10	40
Office equipment	5	5
Process and grain handling equipment	10	20
Plant buildings	15	40

Long-Lived Assets

The Company reviews its long-lived assets, such as property, plant and equipment and financing costs, subject to depreciation and amortization, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Financing Costs

Costs associated with the issuance of loans are classified as financing costs. Financing costs are amortized over the term of the related debt by use of the effective interest method, beginning when Company draws on the loans. Amortization for the years ended September 30, 2012 , 2011 and 2010 was approximately $167,000 , $162,000 and $195,000 , respectively.

Grants

The Company recognizes grant proceeds as other income upon complying with the conditions of the grant. For reimbursements of incremental expenses (expenses the Company otherwise would not have incurred had it not been for the grant), the grant proceeds are recognized as a reduction of the related expense. For reimbursement of capital expenditures, the grants are recognized as a reduction of the basis of the asset upon complying with the conditions of the grant.

Investments

Investments consist of the capital stock and patron equities of the Company's distillers grains marketer. The investments are stated at the lower of cost or fair value and adjusted for non cash patronage equities received.

Interest income is recognized as earned. Patronage dividends are recognized when received.

Revenue Recognition

The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. The Company believes that there are no ethanol sales, during any given month, which should be considered contingent and recorded as deferred revenue. The Company's products are sold FOB shipping point.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees, commissions and freight due to the marketers are deducted from the gross sales price at the time incurred. Commissions were approximately $2,841,000 , $3,388,000 and $2,500,000 for the years ended September 30, 2012 , 2011 and 2010 , respectively. Freight was approximately $8,493,000 , $9,929,000 and $10,280,000 for the years ended September 30, 2012 , 2011 and 2010 , respectively. Revenue is recorded net of these commissions and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products.

Derivative Instruments

From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives in the balance sheet at fair value.

In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in the statement of operations, depending on the item being hedged.

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our financial statements.

Fair Value of Financial Instruments

The Company follows guidance for accounting for fair value measurements of financial assets and financial liabilities and for fair value measurements of nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring and nonrecurring basis. The guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:


•	Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.


•	Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.


•	Level 3 inputs are unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which a fair measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

The carrying value of cash, accounts receivable, accounts payable and accrued liabilities approximates fair value at September 30, 2012 and 2011 due to the short maturity nature of these instruments. The fair value of derivative instruments and debt is disclosed in Note 7.

Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value on our balance sheets, the Company has elected not to record any other assets or liabilities at fair value. No events occurred during the fiscal years ended September 30, 2012 or 2011 that required adjustment to the recognized balances of assets or liabilities, which are recorded at fair value on a nonrecurring basis.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

Environmental Liabilities

The Company's operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health, and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the financial liability, which could result from such events. Environmental liabilities are recorded when the liability is probable and the costs can be reasonably estimated. No liabilities were recorded at September 30, 2012 or 2011 .

Cost of Goods Sold

We include corn procurement costs including inbound freight, warehousing, inspection and hedging costs in our cost of goods sold. We also include ethanol and co-product conversion costs such as costs of denaturant, chemicals, natural gas and other utilities, wages and benefits, repairs and maintenance, other production costs and an allocation for production related depreciation in cost of goods sold.

General and Administrative Expenses

General and administrative costs are administrative and non-production related costs of running the business. These include executive and administrative salaries, wages and benefits, advertising, insurance, taxes, fees, subscriptions and other similar expenses. We include an allocation for depreciation related to non-production long-lived assets in this category. Also included is amortization of financing costs incurred prior to the start of operations.

Net Income per Unit

Basic net income per unit is computed by dividing net income by the weighted average number of members' units outstanding during the period. Diluted net income per unit is computed by dividing net income by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

Income Taxes

Cardinal Ethanol LLC is treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, their income or losses are included in the income tax returns of the members and partners. Accordingly, no provision or liability for federal or state income taxes has been included in these financial statements. The Company had no significant uncertain tax positions as of September 30, 2012 or 2011 . Differences between the financial statement basis of assets and tax basis of assets is related to capitalization and amortization of organization and start-up costs for tax purposes, whereas these costs are expensed for financial statement purposes. In addition, the Company uses the modified accelerated cost recovery system method (MACRS) for tax depreciation instead of the straight-line method that is used for book depreciation, which also causes temporary differences. For years before 2009, the Company is no longer subject to U.S. Federal income tax examinations.

2. CONCENTRATIONS

One major customer accounted for approximately 86% and 92% of the outstanding accounts receivable balance at September 30, 2012 and September 30, 2011 , respectively. This same customer also accounted for approximately 78% and 82% of revenue for the year ended September 30, 2012 and 2011 , respectively.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

3. INCOME TAXES

The differences between financial statement basis and tax basis of assets and liabilities at September 30, 2012 and 2011 are as follows:



	2012			2011
Financial statement basis of assets	$	154,529,765		$	175,876,750
Organization and start-up costs	1,976,610			1,976,610
Book to tax depreciation and amortization	(80,123,774		)	(65,044,844		)
Book to tax derivative instruments	(85,470		)	(4,648,301		)
Capitalized Inventory	80,000			250,000
Income tax basis of assets	$	76,377,131		$	108,410,215

Financial statement basis of liabilities	$	45,235,219		$	63,549,617
Interest rate swap	(2,086,758		)	(3,482,770		)
Book to tax derivative instruments	$	(1,111,238	)	$	—
Income tax basis of liabilities	$	42,037,223		$	60,066,847

4. MEMBERS' EQUITY

The Company has one class of membership units, which include certain transfer restrictions as specified in the operating agreement and pursuant to applicable tax and securities laws. Income and losses are allocated to all members based upon their respective percentage of units held.

On January 17, 2012, the board of directors approved a distribution of $430 per unit, for a total distribution of $6,280,580 , for members of record as of that date. The distribution was paid in February 2012.

5. INVENTORIES

Inventories consist of the following as of September 30, 2012 and September 30, 2011 :



	September 30, 2012		September 30, 2011
Raw materials	$	2,035,607	$	6,061,116
Work in progress	2,536,420		2,409,106
Finished goods	3,258,153		2,065,407
Spare parts	1,499,504		1,197,369
Total	$	9,329,684	$	11,732,998

For the fiscal year ended ended September 30, 2012 , the Company recorded losses of approximately $104,000 related to ethanol inventory where the market value was less than the cost basis, attributable primarily to decrease in market price of ethanol for the inventory on hand. The loss was recorded in cost of goods sold in the statement of operations.

In the ordinary course of business, the Company enters into forward purchase contracts for its commodity purchases and sales. At September 30, 2012 , the Company had forward corn purchase contracts at various fixed prices for various delivery periods through February 2014 for a total commitment of approximately $17,653,000 . Approximately $2,137,000 of the forward corn purchases were with a related party. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts using a methodology similar to that used in the lower of cost or market evaluation with respect to inventory valuation, and has determined that no impairment existed at September 30, 2012 . At September 30, 2012 , the Company has no forward, fixed price ethanol sales contracts. In addition, the Company has forward dried distiller grains sales contracts of approximately 32,880 tons at various fixed prices for various delivery periods.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

6. DERIVATIVE INSTRUMENTS

The Company enters into corn, ethanol and natural gas derivative instruments and interest rate swap agreements, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company must designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The Company formally documents, designates, and assesses the effectiveness of transactions that receive hedge accounting initially and on an on-going basis.

Commodity Contracts

The Company enters into commodity-based derivatives, for corn, ethanol and natural gas in order to protect cash flows from fluctuations caused by volatility in commodity prices and to protect gross profit margins from potentially adverse effects of market and price volatility on commodity based 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. The changes in the fair market value of ethanol derivative instruments are included as a component of revenue. The changes in the fair market value of corn and natural gas derivative instruments are included as a component of cost of goods sold

The table below shows the underlying quantities of corn, ethanol and natural gas resulting from the short (selling) positions and long (buying) positions that the Company had to hedge its forward corn contracts, corn inventory, ethanol sales and natural gas purchases. Corn positions are traded on the Chicago Board of Trade and ethanol and natural gas positions are traded on the New York Mercantile Exchange. These derivatives have not been designated as an effective hedge for accounting purposes. Corn and ethanol derivatives are forecasted to settle for various delivery periods through March 2014 and December 2012, respectively, as of September 30, 2012 .

The following table indicates the bushels of corn under derivative contract as of September 30, 2012 and September 30, 2011 :



	September 30, 2012	September 30, 2011
Short	2,855,000	5,910,000
Long	85,000	5,235,000

The following table indicates the gallons of ethanol under derivative contract as of September 30, 2012 and September 30, 2011 :



	September 30, 2012	September 30, 2011
Short	19,572,000	29,431,000
Long	19,152,000	840,000

The following table indicates the MMBTUs of natural gas under derivative contract as of September 30, 2012 and September 30, 2011 :



	September 30, 2012	September 30, 2011
Long	—	210,000

Interest Rate Contract

The Company manages part of its floating rate debt using an interest rate swap associated with the "Fixed Rate Note" as defined in our loan agreement. Please see Note 8 below. The Company entered into a fixed rate swap to alter its exposure to the impact of changing interest rates on its results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce the Company's risk of the possibility of increased interest costs. Interest rate swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision.

At September 30, 2012 , the Company had approximately $31,578,000 of notional amount outstanding in the swap agreement that exchange variable interest rates (LIBOR) for fixed interest rates over the terms of the agreements and are designated as cash flow

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

hedges of the interest rate risk attributable to forecasted variable interest payments. The effective portion of the fair value gains or losses on this swap is included as a component of accumulated other comprehensive income.

The interest rate swaps held by the Company as of September 30, 2012 qualified as a cash flow hedge. For this qualifying hedge, the effective portion of the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative's gains and losses to offset related results from the hedged item on the income statement.

The following table provides balance sheet details regarding the Company's derivative financial instruments at September 30, 2012 :



Instrument	Balance Sheet Location	Assets		Liabilities

Interest rate swap	Derivative Instruments - Current	$	—	$	1,458,399
Interest rate swap	Derivative Instruments - Long Term	$	—	$	628,358
Ethanol derivative contracts	Commodity Derivative Instruments - Current	$	85,470	$	—
Corn derivative contracts	Commodity Derivative Instruments - Current	$	—	$	1,111,238

As of September 30, 2012 the Company had approximately $3,604,000 of cash collateral (restricted cash) related to ethanol and corn derivatives held by two brokers.

The following table provides balance sheet details regarding the Company's derivative financial instruments at September 30, 2011 :



Instrument	Balance Sheet Location	Assets		Liabilities

Interest rate swap	Derivative Instruments - Current	$	—	$	1,521,531
Interest rate swap	Derivative Instruments - Long Term	$	—	$	1,961,239
Ethanol derivative contracts	Commodity Derivative Instruments - Current	$	2,418,028	$	—
Corn derivative contracts	Commodity Derivative Instruments - Current	$	2,318,663	$	—
Natural gas derivative contracts	Commodity Derivative Instruments - Current	$	—	$	88,390

As of September 30, 2011 the Company had approximately $2,359,000 of cash collateral (restricted cash) related to ethanol and corn derivatives held by two brokers.

The following tables provide details regarding the gains and (losses) from the Company's derivative instruments in other comprehensive income and statement of operations for the fiscal years ended September 30, 2012 :



Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized In OCI on Derivative - for the year ended September 30, 2012			Location of Loss Reclassified From Accumulated OCI into Income	Amount of Gain Reclassified From Accumulated OCI into Income on Derivative - for the year ended September 30, 2012		Location of Gain Recognized in Income	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective portion) year ended September 30, 2012
Interest rate swap	$	(211,339	)	Interest expense	$	1,607,350	Interest expense	$	—

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011



Derivatives in Cash Flow Hedging Relationship	Amount of Loss Recognized In OCI on Derivative - for the year ended September 30, 2011			Location of Loss Reclassified From Accumulated OCI into Income	Amount of Gain Reclassified From Accumulated OCI into Income on Derivative - for the year ended September 30, 2011		Location of Gain Recognized in Income	Amount of Gain or (Loss) Recognized in Income on Derivative (ineffective portion) year ended September 30, 2011
Interest rate swap	$	(623,344	)	Interest expense	$	1,791,291	Interest expense	$	—

The following table provides details regarding the gains and (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments for the fiscal years ended September 30, 2012 :



Instrument	Statement of Operations Location	Amount
Corn Derivative Contracts	Cost of Goods Sold	$	(7,004,120	)
Ethanol Derivative Contracts	Revenues	974,555
Natural Gas Derivative Contracts	Cost of Goods Sold	(60,224		)
Totals		$	(6,089,789	)

The following table provides details regarding the losses from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments for the fiscal year ended ended September 30, 2011 :



Instrument	Statement of Operations Location	Amount
Corn Derivative Contracts	Cost of Goods Sold	$	(5,008,132	)
Ethanol Derivative Contracts	Revenues	(116,899		)
Natural Gas Derivative Contracts	Cost of Goods Sold	(6,536,843		)
Totals		$	(11,661,874	)

7. FAIR VALUE MEASUREMENTS

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 :



Derivatives	Carrying Amount			Fair Value			Level 1			Level 2			Level 3
Interest Rate Swap Liability	$	(2,086,757	)	$	(2,086,757	)	$	—		$	(2,086,757	)	$	—
Corn Derivative Contracts	$	(1,111,238	)	$	(1,111,238	)	$	(1,111,238	)	$	—		$	—
Ethanol Derivative Contracts	$	85,470		$	85,470		$	85,470		$	—		$	—
Natural Gas Derivative Contracts	$	—		$	—		$	—		$	—		$	—

The following table provides information on those assets and liabilities measured at fair value on a recurring basis as of September 30, 2011 :



Derivatives	Carrying Amount			Fair Value			Level 1			Level 2			Level 3
Interest Rate Swap Liability	$	(3,482,770	)	$	(3,482,770	)	$	—		$	(3,482,770	)	$	—
Corn Derivative Contracts	$	2,318,663		$	2,318,663		$	2,318,663		$	—		$	—
Ethanol Derivative Contracts	$	2,418,028		$	2,418,028		$	2,418,028		$	—		$	—
Natural Gas Derivative Contracts	$	(88,390	)	$	(88,390	)	$	(88,390	)	$	—		$	—

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

We determine the fair value of the interest rate swap shown in the table above by using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each instrument. The analysis reflects the contractual terms of the swap agreement, including the period to maturity and uses observable market-based inputs and uses the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. We determine the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange.

Financial Instruments Not Measured at Fair Value

The estimated fair value of the company's long-term debt, including the short-term portion, at September 30, 2012 and 2011 approximated the carrying value of approximately $31.6 million and $52.2 million , respectively. Fair value was estimated using estimated market interest rates at September 30, 2012 and 2011 , which are level 2 inputs. The fair values and carrying values consider the terms of the related debt and exclude the impacts of discounts and derivative/hedging activity.

8. BANK FINANCING

On December 19, 2006, the Company entered into a definitive loan agreement with a financial institution for a construction loan of up to $83,000,000 , a short-term revolving line of credit of $10,000,000 and letters of credit of $3,000,000 . In connection with this agreement, the Company also entered into an interest rate swap agreement fixing the interest rate on $41,500,000 of debt. In April 2009, the construction loan was converted into three separate term loans: a fixed rate note, a variable rate note, and a long term revolving note. The fixed rate note is applicable to the interest rate swap agreement. The term loans have a maturity of five years with a ten-year amortization.

Line of Credit

In February 2012, the Company amended the $15,000,000 short-term line of credit through February 2013 and adjusted the interest rate to the 30-day LIBOR rate plus 350 basis points with no minimum interest rate. Prior to this Amendment, the interest rate was calculated as the greater of the 3-month LIBOR rate plus 400 basis points or 4.0% and a minimum rate of 5% . This short-term line of credit is also subject to certain borrowing base limitations. The fixed charge coverage ratio covenant is reduced from 1.25:1.0 to 1.15:1.0, and the tangible net worth covenant is eliminated. The working capital covenant is increased from $10,000,000 to $15,000,000 , and the capital expenditures covenant is raised to allow the Company $4,000,000 of expenditures per year instead of $1,000,000 without prior approval. There were no borrowings outstanding on the line of credit at September 30, 2012 or September 30, 2011 .

Fixed Rate Note

The Company has an interest rate swap contract in connection with the note payable to its bank that contains a variable rate. The agreement requires the Company to hedge this original note principal balance, up to $41,500,000 , and matures on April 8, 2014. The variable interest rate is determined quarterly based on the 3-month LIBOR rate plus 300 basis points. The fixed interest rate set by the swap is 8.11% .

The fair value of the interest rate swap at September 30, 2012 was $2,086,757 and was $3,482,770 at September 30, 2011 and is included in current and long term liabilities on the balance sheet (Note 6). The Company is required to make quarterly principal and accrued interest payments through April 2014. The outstanding balance of this note was $31,577,979 and $34,920,938 at September 30, 2012 and September 30, 2011 , respectively, and is included in current liabilities and long-term debt.

Variable Rate Note and Long Term Revolving Note

At September 30, 2012 and September 30, 2011 the balance on the variable rate note was $0 and $14,464,452 , respectively. We have no ability to draw upon the variable rate note.

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

minimum rate. At September 30, 2012 , the interest rate was 3.86% . The maximum availability on the long term revolving note at September 30, 2012 was $6,750,000 , which reduces by $250,000 each quarter.

Corn Oil Extraction Note

In July 2008, the Company and the financial institution amended the construction loan for an additional $3,600,000 to be used for the installation of a corn oil extraction system and related equipment. At September 30, 2012 and September 30, 2011 the balance on the corn oil extraction note was $0 and $2,790,000 , respectively. We have no ability to draw upon the corn oil note.

These loans are subject to protective covenants, which restrict distributions and require the Company to maintain various financial ratios, are secured by all business assets, and require additional loan payments based on excess cash flow. The covenants went into effect in April 2009.

Long-term debt, as discussed above, consists of the following at September 30, 2012 :



Fixed rate loan	$	31,577,979
Totals	31,577,979
Less amounts due within one year	3,634,004
Net long-term debt	$	27,943,975

The estimated maturities of long-term debt at September 30, 2012 are as follows:



October 1, 2012 to September 30, 2013	$	3,634,004
October 1, 2013 to September 30, 2014	27,943,975
Total long-term debt	$	31,577,979

9. LEASES

At September 30, 2012 , the Company had the following commitments for payments of rentals under operating leases which at inception had a non-cancellable term of more than one year:



	Total
October 1, 2012 to September 30, 2013	$	1,071,804
October 1, 2013 to September 30, 2014	96,658
October 1, 2014 to September 30, 2015	6,564
October 1, 2015 to September 30, 2016	6,564
October 1, 2016 to September 30, 2017	6,564
Thereafter	5,470
Total minimum lease commitments	1,193,624

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

10. COMMITMENTS AND CONTINGENCIES

Corn Procurement

In July 2008, the Company entered into an agreement with an unrelated party to procure 100% of the corn to be used as feedstock at the Company's ethanol production facility. The Company pays a monthly agency fee equal to an amount per bushel of corn delivered subject to an annual minimum amount. These fees totals $421,000 , $400,000 and $500,000 , for the years ended September 30, 2012, 2011 and 2010. We have given notice to Bunge indicating that we will not be renewing the term of the agreement and that term is now set to expire on or about October 15, 2013 unless the parties mutually agree to an earlier termination. After the agreement has terminated, we plan to directly procure the corn we need for our feedstock from suppliers.

Marketing Agreement

The Company entered into an agreement with an unrelated company for the purpose of marketing and selling all the distillers grains the Company is expected to produce. The buyer agrees to remit a fixed percentage rate of the actual selling price to the Company for distiller's dried grain solubles and wet distiller grains. The agreement may be terminated by either party at its unqualified option, by providing written notice of not less than 120 days to the other party.

The Company entered into an agreement with an unrelated company to sell all of the ethanol the Company produces at the plant. The Company agrees to pay a commission of a fixed percent of the net purchase price for marketing and distribution. In July 2009, the initial term of the agreement was extended to eight years and the commission increased in exchange for reducing the payment terms from 20 days to 7 days after shipment. Subsequent to year end, the Company amended this agreement to extend the initial term of the agreement to eleven years, expiring in 2019, in exchange for capping the commissions at $1,750,000 per year.

Utility Agreement

The Company entered into a natural gas services contract with an initial term of ten years and automatic renewals for up to three consecutive one year periods. Under the contract, the Company agrees to pay a fixed transportation charge per therm delivered for the first five years. For the remaining five years, the fixed transportation charge will be increased by the compounded inflation rate (as determined by the Consumer Price Index). The contract commenced in November 2008 when plant operations began.

The Company has a commitment to buy electricity from a utility. The Company pays the utility company monthly pursuant to their standard rates.

Development Agreement

In September 2007, the Company entered into a development agreement with Randolph County Redevelopment Commission (“the Commission”) to promote economic development in the area. Under the terms of this agreement, beginning in January 2008 through December 2028, the money the Company pays toward property tax expense is allocated to an expense and an acquisition account. The funds in the acquisition account can be used by the Commission to purchase equipment, at the Company's direction, for the plant. At September 30, 2012, there is approximately $187,000 in this account. However, as the Company does not have title to or control over the funds in the acquisition account, no amounts have been recorded in the balance sheet relating to this account.

Tax abatement

In October 2006, the real estate that the plant was developed on was determined to be an economic revitalization area, which qualified the Company for tax abatement. The abatement period is for a 10 year term , with an effective date beginning calendar year end 2009 for the property taxes payable in calendar year 2011. The program allows for 100% abatement of property taxes beginning in year 1, and then decreases on a ratable scale so that in year 11 the full amount of property taxes are due and payable. The Company must apply annually and meet specified criteria to qualify for the abatement program.

Carbon Dioxide Agreement

In March 2010, the Company entered into an agreement with an unrelated party to sell the raw carbon dioxide gas produced as a

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

byproduct at the Company's ethanol production facility. As part of the agreement, the unrelated company leased a portion of the Company's property to construct a carbon dioxide liquefaction plant. The Company shall supply raw carbon dioxide to the plant at a rate sufficient for production of 150 tons of liquid carbon dioxide per day and will receive a price of $5.00 per ton of liquid carbon dioxide shipped, with price incentives for increased production levels specified in the contract. The Company shall be paid for a minimum of 40,000 tons each year or approximately $200,000 annually. The initial term of the agreement is for a period of ten years commencing on the start-up date of the plant, but no later than June 1, 2010 and will automatically renew for two additional five year terms thereafter unless otherwise terminated pursuant to the agreement. The carbon dioxide liquefaction plant began operations in June 2010. In November 2011, the Company amended this agreement to allow for an expansion of the carbon dioxide liquefaction plant. Under the amendment, the Company shall be paid for a new minimum of 98,700 tons each year or approximately $493,500 annually. The amendment took effect in September 2012.

Legal Proceedings and Contingencies

The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. While the ultimate outcome of these matters is not presently determinable, it is in the opinion of management that the resolution of outstanding claims will not have a material adverse effect on the financial position or results of operations of the Company. Due to the uncertainties in the settlement process, it is at least reasonably possible that management's view of outcomes will change in the near term.

In February 2010, a lawsuit against the Company was filed by another unrelated party claiming the Company's operation of the oil separation system in a patent infringement. In connection with the lawsuit, in February 2010, the agreement for the construction and installation of the tricanter oil separation system was amended. In this amendment the manufacturer and installer of the tricanter oil separation system indemnifies the Company against all claims of infringement of patents, copyrights or other intellectual property rights from the Company's purchase and use of the tricanter oil system and agrees to defend the Company in the lawsuit filed at no expense to the Company. The Company is not currently able to predict the outcome of this litigation with any degree of certainty. The manufacturer has, and the Company expects it will continue, to vigorously defend itself and the Company in these lawsuits. The Company estimates that damages sought in this litigation if awarded would be based on a reasonable royalty to, or lost profits of, the plaintiff. If the court deems the case exceptional, attorney's fees may be awarded and are likely to be $1,000,000 or more. The manufacturer has also agreed to indemnify the Company for these fees. However, in the event that damages are awarded, if the manufacturer is unable to fully indemnify the Company for any reason, the Company could be liable. In addition, the Company may need to cease use of its current oil separation process and seek out a replacement or cease oil production altogether.

11. EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan available to all of its qualified employees. The Company contributes up to 100% of the contributions of the employee up to 3% of the eligible salary of each employee and an additional 50% of the contributions of the employee for percentages 4% and 5% . In order to receive a contribution, the employee must have worked 1,000 hours in the plan year and be employed as of the last day of the calendar year. The Company contributed approximately $73,000 and $34,000 to the defined contribution plan during the years ended September 30, 2012 and 2011 , respectively.

12. ACCUMULATED OTHER COMPREHENSIVE LOSS AND COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive loss consists of changes in the fair value of derivative instruments that are designated as and meet all of the required criteria for a cash flow hedge. Changes in accumulated other comprehensive loss all related to the interest rate swap for the fiscal year ended September 30, 2012 and 2011 were as follows:



	2012			2011
Balance at beginning of year	$	3,482,769		$	4,650,717
Unrealized loss on derivative instruments	211,339			623,343
Amount reclassified into income	(1,607,350		)	(1,791,291		)
Balance at end of year	$	2,086,758		$	3,482,769

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

The statement of comprehensive income for the fiscal year ended September 30, 2012 and 2011 were as follows:



	2012		2011
Net income	$	1,851,980	$	25,509,137
Interest rate swap fair value change, net	1,396,011		1,167,948
Comprehensive income	$	3,247,991	$	26,677,085

13. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distillers grains and corn oil to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales average approximately 80% of total revenues and corn costs average 84% of total cost of goods sold.

The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol, distillers grains and corn oil, and the related cost of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and the unleaded gasoline markets and the petroleum markets, although, since 2005, the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.

14. QUARTERLY FINANCIAL DATA (UNAUDITED)

Summary quarterly results are as follows:



	First Quarter		Second Quarter		Third Quarter			Fourth Quarter
Fiscal year ended September 30, 2012
Revenues	$	87,476,615	$	77,692,498	$	69,530,510		$	86,494,764
Gross profit (loss)	8,834,094		3,457,382		(872,970		)	(2,195,173		)
Operating income (loss)	7,677,558		2,406,546		(2,333,749		)	(3,207,751		)
Net income (loss)	6,899,308		1,827,743		(3,011,583		)	(3,863,488		)
Basic and diluted earnings (loss) per unit	$	472.36	$	125.14	$	(206.19	)	$	(264.51	)



	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
Fiscal year ended September 30, 2011
Revenues	$	73,394,639		$	81,258,148	$	92,284,735	$	90,082,408
Gross profit	1,434,050			9,853,448		15,669,998		7,371,959
Operating income	365,177			8,826,508		14,536,024		6,350,994
Net income (loss)	(789,985		)	7,652,667		13,452,114		5,194,341
Basic and diluted earnings (loss) per unit	$	(54.09	)	$	523.94	$	921.00	$	355.63



	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
Fiscal year ended September 30, 2010
Revenues	$	63,549,871	$	54,805,570	$	47,654,811	$	58,797,086
Gross profit	12,951,536		8,610,842		3,462,355		3,901,843
Operating income	12,047,683		7,652,759		2,499,980		2,990,624
Net income	10,786,825		6,456,611		1,330,075		1,877,068
Basic and diluted earnings per unit	$	738.52	$	442.05	$	91.06	$	128.51

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CARDINAL ETHANOL, LLC

Notes to Audited Financial Statements

September 30, 2012 and 2011

The above quarterly financial data is unaudited, but in the opinion of management, all adjustments necessary for a fair presentation of the selected data for these periods presented have been included.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Boulay, Heutmaker, Zibell & Co., P.L.L.P. has been our independent auditor since the Company's inception and is the Company's independent auditor at the present time. The Company has had no disagreements with its auditors.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

Our management, including our Chief Executive Officer (the principal executive officer), Jeff Painter, along with our Chief Financial Officer (the principal financial officer), William Dartt, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of September 30, 2012 . Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

Inherent Limitations Over Internal Controls

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management's Annual Report on Internal Control Over Financial Reporting .

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control-Integrated Framework

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issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management has concluded that our internal control over financial reporting was effective as of September 30, 2012 .

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. As we are a non-accelerated filer, management's report is not subject to attestation by our registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 that permit us to provide only management's report in this annual report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of our 2012 fiscal year, which were identified in connection with management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated by reference from the definitive proxy statement for our 2013 Annual Meeting of Members to be filed with the Securities and Exchange Commission within 120 days after the end of our 2012 fiscal year. This proxy statement is referred to in this report as the 2013 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from the 2013 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED MEMBER MATTERS

The information required by this Item is incorporated by reference from the 2013 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference from the 2013 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from the 2013 Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

The following exhibits and financial statements are filed as part of, or are incorporated by reference into, this report:


(1)	Financial Statements

The financial statements appear beginning at page 40 of this report.


(2)	Financial Statement Schedules

All supplemental schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes.

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(3) Exhibits



Exhibit No.	Exhibit	Filed Herewith	Incorporated by Reference
3.1	Articles of Organization of the registrant.		Exhibit 3.1 to the registrant's registration statement on Form SB-2 (Commission File 333-131749) filed on February 10, 2006.
3.1A	Name Change Amendment		Exhibit 3.1A to the registrant's registration statement on Form SB-2 (Commission File 333-131749) filed on February 10, 2006.
3.2	Second Amended and Restated Operating Agreement of the registrant		Exhibit 3.2 to the registrant's registration statement on Form SB-2 (Commission File 333-131749) filed on February 10, 2006.
4.1	Form of Membership Unit Certificate.		Exhibit 4.2 to the registrant's registration statement on Form SB-2 (Commission File 333-131749) filed on February 10, 2006.
10.1	Energy Management Agreement dated January 23, 2006 between Cardinal Ethanol, LLC and U.S. Energy Services, Inc.		Exhibit 10.9 to the registrant's registration statement on Form SB-2 (Commission File 333-131749) filed on February 10, 2006.
10.2	Distiller's Grain Marketing Agreement dated December 13, 2006 between Cardinal Ethanol, LLC and Commodity Specialist Company.		Exhibit 10.19 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.3	Ethanol Purchase and Sale Agreement dated December 18, 2006 between Cardinal Ethanol, LLC and Murex N.A., Ltd.		Exhibit 10.21 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.4	Construction Loan Agreement dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.22 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.5	Construction Note dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.23 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.6	Revolving Note dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.24 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.7	Letter of Credit Promissory Note and Continuing Letter of Credit Agreement dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.25 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.8	Construction Loan Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture Financing Statement dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.26 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.9	Security Agreement dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.27 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.10	Master Agreement dated December 19, 2006 between Cardinal Ethanol, LLC and First National Bank of Omaha.		Exhibit 10.28 to the registrant's Form 10-KSB filed with the Commission on December 22, 2006.
10.11	Employment Agreement dated January 22, 2007 between Cardinal Ethanol, LLC and Jeff Painter.		Exhibit 10.29 to the registrant's Form 10-QSB filed with the Commission on February 14, 2007.
10.12	Long Term Transportation Service Contract for Redelivery of Natural Gas between Ohio Valley Gas Corporation and Cardinal Ethanol, LLC dated March 20, 2007.		Exhibit 10.32 to the registrant's Form 10-QSB filed with the Commission on May 15, 2007.

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10.13	Agreement between Indiana Michigan Power Company and Cardinal Ethanol, LLC dated April 18, 2007.	Exhibit 10.33 to the registrant's Form 10-QSB filed with the Commission on May 15, 2007.
10.14	Risk Management Agreement entered into between Cardinal Ethanol, LLC and John Stewart & Associates, Inc. dated July 16, 2007.	Exhibit 10.34 to the registrant's Form 10-QSB filed with the Commission on August 3, 2007.
10.15	Consent to Assignment and Assumption of Marketing Agreement between Commodity Specialists Company and Cardinal Ethanol, LLC dated August 28, 2007.	Exhibit 10.37 to the registrant's Form 10-KSB filed with the Commission on December 17, 2007.
10.16	Tricanter Installation and Purchase Agreement between ICM, Inc. and Cardinal Ethanol, LLC dated June 27, 2008.	Exhibit 10.1 to the registrant's Form 10-QSB filed with the Commission on August 14, 2008
10.17	Corn Oil Extraction Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated July 31, 2008.	Exhibit 10.2 to the registrant's Form 10-QSB filed with the Commission on August 14, 2008
10.18	First Amendment of Construction Loan Mortgage between First National Bank of Omaha and Cardinal Ethanol, LLC dated July 31, 2008.	Exhibit 10.3 to the registrant's Form 10-QSB filed with the Commission on August 14, 2008
10.19	Third Amendment of Construction Loan Agreement between First National Bank of Omaha and Cardinal Ethanol, LLC dated July 31, 2008.	Exhibit 10.4 to the registrant's Form 10-QSB filed with the Commission on August 14, 2008.
10.20	Fixed Rate Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated April 8, 2009.	Exhibit 10.1 to the registrant's Form 10-Q filed with the Commission on May 20, 2009.
10.21	Long Term Revolving Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated April 8, 2009.	Exhibit 10.2 to the registrant's Form 10-Q filed with the Commission on May 20, 2009.
10.22	Variable Rate Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated April 8, 2009.	Exhibit 10.3 to the registrant's Form 10-Q filed with the Commission on May 20, 2009.
10.23	Corn Oil Extraction Term Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated April 8, 2009.	Exhibit 10.4 to the registrant's Form 10-Q filed with the Commission on May 20, 2009.
10.24	Amendment No 1 to Ethanol Purchase and Sale Agreement between Murex N.A., LTD and Cardinal Ethanol, LLC dated July 2, 2009.	Exhibit 99.1 to the registrant's Form 8-K filed with the Commission on July 7, 2009.
10.25	Results Guarantee Agreement between Pavilion Technologies and Cardinal Ethanol, LLC dated September 30, 2009.	Exhibit 10.6 to the registrant's Form 10-K filed with the Commission on December 28, 2009.
10.26	Amendment to Tricanter Purchase and Installation Agreement between ICM, Inc. and Cardinal Ethanol, LLC dated February 16, 2010.	Exhibit 10.1 to the registrant's Form 10-Q filed with the Commission on May 14, 2010.
10.27	Carbon Dioxide Purchase and Sale Agreement between EPCO Carbon Dioxide Products, Inc. and Cardinal Ethanol, LLC dated March 8, 2010.	Exhibit 10.2 to the registrant's Form 10-Q filed with the Commission on May 14, 2010.
10.28	Construction Agreement between LAH Development, LLC and Cardinal Ethanol, LLC dated May 11, 2010.	Exhibit 10.3 to the registrant's Form 10-Q filed with the Commission on May 14, 2010.
10.29	Non-Exclusive Co2 Facility Site Lease Agreement between EPCO Carbon Dioxide Products, Inc and Cardinal Ethanol, LLC dated August 11, 2010.	Exhibit 10.1 to the registrant's Form 10-Q filed with the Commission on August 12, 2010.

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10.30	Ninth Amendment of Construction Loan Agreement between First National Bank of Omaha and Cardinal Ethanol, LLC dated May 25, 2011.		Exhibit 10.1 to the registrant's Form 10-Q filed with the Commission on August 10, 2011.
10.31	Sixth Amended and Restated Revolving Promissory Note between First National Bank of Omaha and Cardinal Ethanol, LLC dated May 25, 2011.		Exhibit 10.2 to the registrant's Form 10-Q filed with the Commission on August 10, 2011.
10.32	Employee Bonus Plan for 2011/2012.		Exhibit 10.34 to the registrant's Form 10-K filed with the Commission on December 13, 2011
10.33	Amendment No. 2 to Ethanol Purchase and Sale Agreement between Cardinal Ethanol, LLC and Murex N.A., LTD. dated November 22, 2011.		Exhibit 10.35 to the registrant's Form 10-K filed with the Commission on December 13, 2011
10.34	First Amendment to Carbon Dioxide Purchase and Sale Agreement between EPCO Carbon Dioxide Products, Inc. and Cardinal Ethanol, LLC dated November 22, 2011.		Exhibit 10.36 to the registrant's Form 10-K filed with the Commission on December 13, 2011
10.35	Seventh Amended and Restated Revolving Promissory Note between Cardinal Ethanol, LLC and First National Bank of Omaha dated February 14, 2012.		Exhibit 10.1 to the registrant's Form 10-Q filed with the Commission on May 4, 2012.
10.36	Tenth Amendment of Construction Loan Agreement between Cardinal Ethanol, LLC and First National Bank of Omaha dated February 14, 2012.		Exhibit 10.2 to the registrant's Form 10-Q filed with the Commission on May 4, 2012.
10.37	Eleventh Amendment of Construction Loan Agreement between Cardinal Ethanol, LLC and First National Bank of Omaha dated November 20, 2012.	X
10.38	Employee Bonus Plan for 2012/2013	X
14.1	Code of Ethics of Cardinal Ethanol, LLC.	X
31.1	Certificate Pursuant to 17 CFR 240.13a-14(a)	X
31.2	Certificate Pursuant to 17 CFR 240.13a-14(a)	X
32.1	Certificate Pursuant to 18 U.S.C. Section 1350	X
32.2	Certificate Pursuant to 18 U.S.C. Section 1350	X
101	The following financial information from Cardinal Ethanol, LLC's Annual Report for the Fiscal Year Ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets as of September 30, 2012 and September 30, 2011, (ii) Condensed Statements of Operations for fiscal years ended September 30, 2012, 2011 and 2010, (iii) Statements of Cash Flows for the fiscal years ended September 30, 2012, 2011, and 2010, (iv) Statements of Changes in Members' Equity, and (iv) the Notes to Financial Statements.**

(+) Confidential Treatment Requested.

(X) 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.



		CARDINAL ETHANOL, LLC

Date:	December 11, 2012	/s/ Jeffrey L. Painter
		Jeffrey L. Painter
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	December 11, 2012	/s/ William Dartt
		William Dartt
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Date:	December 11, 2012	/s/ Robert Davis
		Robert Davis. Chairman and Director

Date:	December 11, 2012	/s/ Dale Schwieterman
		Dale Schwieterman, Treasurer and Director

Date:	December 11, 2012	/s/ Tom Chalfant
		Tom Chalfant, Secretary and Director

Date:	December 11, 2012	/s/ Troy Prescott
		Troy Prescott, Vice Chairman and Director

Date:	December 11, 2012	/s/ Ralph Brumbaugh
		Ralph Brumbaugh, Director

Date:	December 11, 2012	/s/ Thomas C. Chronister
		Thomas C. Chronister, Director

Date:	December 11, 2012	/s/ David Matthew Dersch
		David Matthew Dersch, Director

Date:	December 11, 2012	/s/ Everett Leon Hart
		Everett Leon Hart, Director

Date:	December 11, 2012	/s/ Cyril G. LeFevre
		Cyril G. LeFevre, Director

Date:	December 11, 2012	/s/ C. Allan Rosar
		C. Allan Rosar, Director

Date:	December 11, 2012	/s/ William Garth
		William Garth, Director

Date:	December 11, 2012	/s/ Robert Baker
		Robert Baker, Director

Date:	December 11, 2012	/s/ Lewis M. Roch III
		Lewis M.Roch III, Director

ELEVENTH AMENDMENT OF

CONSTRUCTION LOAN AGREEMENT

THIS ELEVENTH AMENDMENT OF CONSTRUCTION LOAN AGREEMENT ("Amendment") is made this 20th day of November, 2012 between FIRST NATIONAL BANK OF OMAHA, a national bau icing association ("Bank") and CARDINAL ETHANOL, LLC, an Indiana limited liability company ("Borrower"). This Amendment amends that certain Construction Loan Agreement dated December 19, 2006 between Bank and Borrower (as amended, the "Loan Agreement").

WHEREAS, pursuant to the Loan Agreement and the other Loan Documents, Bank extended the Construction Loan, Revolving Loan and other financial accommodations and extensions of credit described in the Loan Agreement to Borrower, all as more fully described in the Loan Agreement;

WHEREAS, pursuant to that certain that certain First Amendment of Construction Loan Agreement dated August 22, 2007, a revised Total Project Cost Statement was attached to the Loan Agreement as Exhibit G and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Second Amendment of Construction Loan Agreement dated December 18, 2007, the Loan Termination Date applicable to the Revolving Note was extended to December 17, 2008 and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Third Amendment of Construction Loan Agreement dated July 31, 2008 (the "Third Amendment"), Bank extended to Borrower the Corn Oil Extraction Loan in the principal amount of $3,600,000.00 and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Fourth Amendment of Construction Loan Agreement dated December 17, 2008, the Loan Termination Date of the Revolving Loan was extended to December 16, 2009, the Borrowing Base was modified, the interest rate on certain Loans was modified and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Fifth Amendment of Construction Loan Agreement dated October 30, 2009, the limitations on Borrower's capital expenditures for Borrower's 2010 fiscal year was increased, the Excess Cash Flow payment application was modified, the financial covenants were modified and the Loan Agreement was otherwise amended as provided for therein; and

WHEREAS, pursuant to that certain Sixth Amendment of Construction Loan Agreement dated December 16, 2009, the Loan Termination Date of the Revolving Loan was extended to February 16, 2010 and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Seventh Amendment of Construction Loan Agreement dated February 14, 2010, the Loan Termination Date applicable to the Revolving Note was extended from February 16, 2010 to February 15, 2011, the interest rate charged on the Revolving Loan was modified, the capital expenditures covenant was modified and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Eighth Amendment of Construction Loan Agreement dated February 15, 2011, the Loan Termination Date applicable to the Revolving Note was extended to February 14, 2012, the interest rate and definitions relating to the interest rate on the Loans were modified, the Borrowing Base was modified and the Loan Agreement was otherwise amended as provided for therein; and

WHEREAS, pursuant to that certain Ninth Amendment of Construction Loan Agreement dated May

25, 2011, the maximum principal amount of the Revolving Loan was increased from $10,000,000.00 to $15,000,000.00 and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, pursuant to that certain Tenth Amendment of Construction Loan Agreement dated February 14, 2012, the Loan Termination Date applicable to the Revolving Note was extended to February 12, 2013, certain interest rate definitions and provisions were modified, the FIXED CHARGE COVERAGE RATIO covenant was modified, the NET WORTH covenant was eliminated, the capital expenditures covenant was modified, the distributions covenant was modified and the Loan Agreement was otherwise amended as provided for therein;

WHEREAS, for the reporting period ending September 30, 2012, the Borrower violated the FIXED CHARGE COVERAGE RATIO covenant of the Loan Agreement and has requested that Bank waive such violation and modify the measurement of the FIXED CHARGE COVERAGE RATIO, and under the terms of this Amendment Bank has agreed, to waive such violation and modify the measurement of the FIXED CHARGE COVERAGE RATIO as provided for in this Amendment.

NOW, THEREFORE, in consideration of the mutual covenants herein and other good and valuable consideration, the sufficiency and receipt of which is hereby acknowledged, the parties agree to amend the Loan Agreement as follows:

1. Capitalized terms used herein shall have the meaning given to such terms in the Loan Agreement, unless specifically defined herein.

2. For Borrower's fiscal quarters ending December 31, 2012, March 31, 2013 and June 30, 2013 only, Bank hereby agrees the measure the Borrower's FIXED CHARGE COVERAGE RATIO on an individual quarter basis and not on a rolling four quarter basis as required in the Loan Agreement. Thereafter, the Borrower shall again be required to maintain a FIXED CHARGE COVERAGE RATIO of not less than 1.15:1.0, measured on a rolling four quarter trailing basis, with the first such measurement being Borrower's fiscal quarter ending September 30, 2013, as required in Section 6.2.1 of the Loan Agreement.

3. Pursuant to Section 6.2.1 of the Loan Agreement, Borrower is required to maintain a FIXED CHARGE COVERAGE RATIO of not less than 1.15:1.0. For Borrower's fiscal quarter ending September 30, 2012, Borrower failed to maintain the required FIXED CHARGE COVERAGE RATIO required in Section 6.2.1 of the Loan Agreement. Borrower has requesied that Bank waive Borrower's violation of the foregoing FIXED CHARGE COVERAGE RATIO covenant for Borrower's fiscal quarter ending September 30, 2012. Bank hereby waive Borrower's violation of the FIXED CHARGE COVERAGE RATIO covenant required under Section 6.2.1 of the Loan Agreement solely for Borrower's fiscal quarter ending September 30, 2012. The foregoing waiver is strictly limited to Borrower's violation of the FIXED CHARGE COVERAGE RATIO solely for Borrower's fiscal quarter ending September 30, 2012. This waiver shall not obligate Bank to waive any future violations with respect to the same or different covenants, terms and conditions of the Loan Agreement and the other Loan Documents.

4. In consideration of the foregoing waiver and modification of the Fixed Charge Coverage Ratio, Borrower will Bank a modification fee equal to $5,000, with such fee due and payable upon the Borrower's execution of this Amendment.

5. Except as modified herein, all other terms, provisions, conditions and obligations imposed under the terms of the Loan Agreement and the other Loan Documents shall remain in full

force and effect and are hereby ratified, affirmed and certified by Borrower. Borrower hereby ratifies and affirms the accuracy and completeness of all representations and warranties contained in the Loan Documents. Borrower represents and warrants to the Bank that the representations and warranties set forth in the Loan Agreement, and each of the other Loan Documents, are true and complete on the date hereof as if made on and as of,the date hereof (or, if any such representation or warranty is expressly stated to have been. made as of a specific date, such representation or warranty shall be true and correct as of such specific date), and as if each reference in "this Agreement" included references to this Amendment. Borrower represents, warrants and confirms to the Bank that no Events of Default is now existing under the Loan Documents and that no event or condition exists which would constitute an Event of Default with the giving of notice and/or the passage of time Nothing contained in this Amendment either before or after giving effect thereto, will cause or trigger an Event of Default under any Loan Document. To the extent necessary, the Loan Documents are hereby amended consistent with the amendments provided for in this Amendment.

6. This Amendment may be executed in any number of counterparts, each of which when so executed, and delivered shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same instrument.

7. This Amendment will be governed by and construed in accordance with the laws of the State of Nebraska, exclusive of its choice of laws rules.

IN WITNESS WHEREOF, the parties have executed and delivered this Amendment on the date first written above.



	FIRST NATIONAL BANK OF
	OMAHA, a national banking association

	By: /s/ Fallon Savage
	Title: Vice President


	CARDINAL ETHANOL, LLC, an
	Indiana limited liability company

	By: /s/ Jeffrey L. Painter
	Jeff Painter, President

	By: /s/ Dale Schwieterman
	Title: Director

Cardinal Ethanol, LLC

Employee Bonus Plan

Fiscal Year 2012-2013

(Issued 10-1-12)

The purpose in developing and continuing an Employee Bonus Plan is to reward the employees for their contributions that directly impact the financial results of the Company, reflect a positive safety culture, and to promote teamwork needed to complete desired goals. This year's Plan is again made up of financial and team goals relating to the Company's financial success, safety, and production efficiency.

For the purpose of the Plan, wages are defined as the amount paid during the defined period and limited to regular pay , overtime , holiday , and paid time off (PTO) .

Rules of the Plan:


a)	All plan payouts must be approved by the Board of Directors.


b)	Employee must be employed on the day that the Board approves the payout to be eligible for any bonus payout.


c)	Employee must be working from October 1, 2012 to September 30, 2013 to be eligible for the full bonus.

Financial Goal:


a)	Eligibility for the Financial Goal payout portion of the plan begins at $7,500,000 net income. There will be NO payout under the financial goal section if the Company does not meet this minimum income threshold.


b)	The Financial Goal section is eligible to all employees that meet the eligibility requirements.


c)	Payout for the Financial Goal will be made prior to December 31, 2013 once the fiscal year end results are calculated and approved.

Team Goals:


a)	Team Goals are not subject to a minimum net income requirement.


b)	Payout for the Team Goals will be made quarterly and based on company “Operational Statistics”, Christianson Benchmarking Results and Individual Safety Participation.


c)	Employee must be employed on the last day of the quarter to receive any payout from the Team Goals.


d)	Employee does not need to have worked the full quarter to be eligible. Payout will be made once final results are known and have been approved by the Board of Directors.


e)	Team Goal payout is applicable to all employees that meet the eligibility requirements.

FY 2011-12 Employee Incentive Plan

Financial Goal - Max Payout 10% of eligible wage.



Minimum required net profit needed for payout $7.5M (Annual Payout)
- Payout Level 1............................................................................	$7,500,000 - $11,999,999 = 5% payout
- Payout Level 2............................................................................	$12,000,000 - $19,999,999 = 7.5% payout
- Payout Level 3............................................................................	$20,000,000 and above = 10% payout

Team Goals - Max Payout 10% of eligible wage.

Team Goal #1 - Improved efficiency and production through increased ethanol yield per bushel ground as compared to industry; based on rankings through Benchmarking surveys (Quarterly Payout)

Team Goal #2 - Optimize natural gas usage by reducing BTU/gallon. Achieved Natural Gas Usage number will be based on "Operation Statistics" work papers. (Quarterly Payout)

Team Goal #3 - Improve Safety performance. Increase awareness and maintain safety performance. Near misses will be based on individual reports submitted on time to the EHS Manager. Other Safety criteria are based on individual participation. (Quarterly Payout)



Goal #1 Lead Rankings for Ethanol Yield (Christianson Benchmarking; Geo-East, undenatured, moisture adjusted gallons per bushel ground based on corn at 15%) (4% max payout)
1) Ranking outside of the top 42%........................................................	0% payout
2) Ranking in the top 42.00%................................................................	1% payout
3) Ranking in the top 33.33%................................................................	2% payout
4) Ranking in the top 25.00%................................................................	3% payout
5) Ranking in the top 17.00%...............................................................	4% payout

Goal #2 Optimize Natural Gas Usage (BTU per Anhydrous Ethanol gallon) (3% max payout)
1) Greater than 28,215......................................................	0% payout
2) 28,215 - 28,001.............................................................	1% payout
3) 28,000 - 27,501.............................................................	2% payout
4) 27,500 or less................................................................	3% payout

Goal #3 Improve Safety Record - Individual Safety Participation; subject to verification and approval by management. (3% max payout)
- Near Miss Reporting (Required)
1) 2 Near Miss Reports completed................................	.5% payout
2) 3 Near Miss Reports completed (required 1 per month)	1% payout

Employee Participation (Any combination of 2 - limit of 1% per selection)
1) Safety Committee Attendance/Participation (member of guest)	1% payout
2) Safety Program Area Audit Complete	1% payout
3) Non-Routine Task Pre-work Audit Completed	1% payout
4) Lead a Toolbox Talk	1% payout
5) LOTO/Confined Space Program Review	1% payout
6) Contractor Observation, Review and Evaluation	1% payout

Personal Incentive (10% additional opportunity available)

Available to the following positions: Production Manager, ESH MAnager, Maintenance Manager, and Controller.

These positions will be eligible for an additional 10% payout if they meet certain personal goals. These individual goals will be ones the positioned employee will have a direct impact in achieving the best return to the business.

Personal Incentive (10% additional opportunity available)



Production Manager: Personal Goals (annual payout)
Safety - Improve ERI Safety Audit Score (based on last audit score prior to yearend) (2%)
Ÿ Final Results "Improvement Required"	0% payout
Ÿ Final Results "Acceptable Area"	1% payout
Ÿ Final Results "Exceptional"	2% payout
Production - Improve Ranking of Ethanol Yield (Christianson Benchmarking; Geo-East, undenatured, moisture adjusted gallons per bushel ground based on corn at 15% (3% max payout)
Ÿ Ranking outside of the top 42%	0% payout
Ÿ Ranking in the top 42.00%	1% payout
Ÿ Ranking in the top 33.33%	1.5%payout
Ÿ Ranking in the top 25.00%	2% payout
Ÿ Ranking in the top 17.00%	3% payout
Production - Maximize Corn Oil Production (3%)
Ÿ Less than 0.56 pounds per bushel ground	0% payout
Ÿ 0.560 - 0.635 pounds per bushel ground	1% payout
Ÿ 0.636 - 0.699 pounds per bushel ground	2% payout
Ÿ Greater than 0.699 pounds per bushel ground.	3% payout
Production - Ethanol Throughput, anhydrous gallons (2%)
Ÿ Less than 111.5 M gallons	0% payout
Ÿ 111.5M to 113.4 M gallons	1% payout
Ÿ 113.5M to 115.4 M gallons	1.5%payout
Ÿ Greater than 115.5 M gallons	2% payout

EHS Manager: Personal Goals (annual payout)
Safety - Improve ERI Safety Audit Scores (based on last audit score prior to yearend) (6%)
Ÿ Final Results "Improvement Required"	0% payout
Ÿ Final Results "Acceptable Area"	3% payout
Ÿ Final Results "Exceptional"	6% payout
Environmental Compliance - Maintain Permit Parameters (4%)
Ÿ 100% Completion of EHS Compliance Calendar	1% payout
- Including additions and updates.
Ÿ No ESH violations resulting in fines	1% payout
- EPA, IDEM, OSHA, etc.
Ÿ Training and PSM in Compliance	1% payout
Ÿ Written Monthly EHS Review	1% payout
- To include Company policy violations, observation summary, recommended actions, etc.



Maintenance Manager: Personal Goals (annual payout)
Safety - Improve ERI Safety Audit Score (based on last audit score prior to yearend) (2%)
Ÿ Final Results "Improvement Required"	0% payout
Ÿ Final Results "Acceptable Area"	1% payout
Ÿ Final Results "Exceptional"	2% payout
Maintenance - Reduction of supply cost (Based on Christianson Benchmarking for "All Plants - Plant Supplies/Repair/Maintenance") (3%)
Ÿ Ranking outside of the top 20 plants	0% payout
Ÿ Top 20 Benchmarking rank for all plants	1% payout
Ÿ Leader (top 25% ranking for all plants)	3% payout
Maintenance - Uptime (lincludes all downtime) (3%)
Ÿ Greater than 336 hours downtime	0% payout
Ÿ 336 to 313 hours downtime	1% payout
Ÿ 312 to 288 hours downtime	2% payout
Ÿ Less than 288 hours downtime	3% payout
Maintenance - Inventory Accuracy and Count Frequency, Spare Parts (Accuracy based on adjustments per count/inventory units per count with total inventory counted quarterly) (2%)
Ÿ Greater than a 2% accuracy error	0% payout
Ÿ 1% to 2% accuracy error (min. of 6 counts/quarter)	1% payout
Ÿ Less than 1% accuracy error (min. of 9 counts/quarter)	2% payout

Controller: Personal Goals (annual payout)
Accounting - Close out monthly financials. Close EOM, including CFO's review and correction of any notes made by CFO, within 5 business days after the last day of the month (3%)
Ÿ Less than 6 successful closes	0% payout
Ÿ 6 - 8 successful closes	1% payout
Ÿ 9 - 10 successful closes	2% payout
Ÿ Over 10 successful closes	3% payout
Tax/K-1 - Completed K-1s by 5:00 p.m. the date of the annual meeting (2%)
Ÿ Completion after February 1, 2013	0% payout
Ÿ Completion by February 1, 2013	1% payout
Ÿ Completion by January 25, 2013	2% payout
FY 10-K close for timely SEC filing and bank/Investor Obligations (2%)
Ÿ Completion after December 7, 2012	0% payout
Ÿ Completion on or before December 7, 2012	2% payout
Develop and Implement Accounting Roles and Descriptions/Processes. Write-up the primary accounting department roles and responsibilities with complete descriptions and processes (3%)
Ÿ Outline of all identified roles not completed	0% payout
Ÿ 10 - 12 Written descriptions and processes completed	1% payout
Ÿ 13 - 18 Written descriptions and processes completed	2% payout
Ÿ 19 - 24 Written descriptions and processes completed	3% payout

Personal Incentive (10% additional opportunity available)

Available to the following positions: CEO, CFO, Commodity Manager, and Plant Manager.

These positions will be eligible for an additional 10% payout. 60% of this payout will be tied to the Managers mentioned under item #1 meeting their goals. 40% of this payout will be based on COGS as a percentage of Sales.

"Senior Management" : Goals (annual payout) (CEO, CFO, Commodity Manager, Plant Manager)

Leadership/Management/Coaching - Develop and Support Mid-management (6%)

• Average completion score of mid management incentive award times 60% award value.

Financial - Target COGS as a % of Sales (COGS + unrealized losses = unrealized gains/Revenues) (4%)



ž > 96.3%	0% payout
ž 96.29% - 95.0%	1% payout
ž 94.99% - 93.00%	2% payout
ž < 92.99%	4% payout

CARDINAL ETHANOL, LLC

Code of Ethics for Chief Executive and Senior Financial Officers

Cardinal Ethanol, LLC (the “Company”) is honest and ethical in all of its business dealings and the Code of Ethics for Chief Executive and Senior Financial Officers (the "Code of Ethics") embodies principles to which the Company's representatives are expected to adhere and advocate. The Company has adopted the following Code of Ethics specifically for its Chief Executive and Senior Financial Officers. Any violations of the Code of Ethics may result in disciplinary action, up to and including termination of employment.

1. You are responsible for full, fair, accurate, timely and understandable financial disclosure in reports and documents filed by the Company with the Securities and Exchange Commission and in other public communications made by the Company. The Company's accounting records must be maintained in accordance with all applicable laws, must be proper, supported, and classified, and must not contain any false or misleading entries.

2. You are responsible for the Company's system of internal financial controls. You shall promptly bring to the attention of Mandy Hughes at Brown, Winick, Graves, Gross, Baskerville, and Schoenebaum, P.L.C. (the "Company's Legal Counsel") and the Audit Committee any information you may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data, or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures, or internal controls.

3. You must act honestly and ethically. You may not compete with the Company and may never let business dealings on behalf of the Company be influenced by personal or family interests. You shall promptly bring to the attention of the Company's Legal Counsel and the Audit Committee any information you may have concerning any actual or apparent conflicts of interest between personal and professional relationships, involving any management or other employees who have a significant role in the Company's financial reporting, disclosures, or internal controls.

4. The Company is committed to complying with both the letter and the spirit of all applicable laws, rules, and regulations. You shall promptly bring to the attention of the Company's Legal Counsel and the Audit Committee any information you may have concerning evidence of a material violation of the securities or other laws, rules, or regulations applicable to the Company or its employees or agents. You shall promptly bring to the attention of the Company's Legal Counsel and Audit Committee any information you may have concerning any violation of this Code of Ethics. The Board of Directors may determine, or designate appropriate persons to determine, appropriate additional disciplinary or other actions to be taken in the event of violations of this Code of Ethics by the Company's Chief Executive or Senior Financial Officers and a procedure for granting any waivers of this Code of Ethics.

5. The Company will not retaliate against a director, officer or employee who provides information to the federal government or a supervisor or testifies about any matter than an employee reasonably believes constitutes a violation of federal securities law or any provision of federal law relating to fraud against shareholders.

By my signature below, I acknowledge receipt of the above Cardinal Ethanol, LLC Code of Ethics for Chief Executive and Senior Financial Officers.




/s/ Troy Prescott
Troy Prescott, Chairman (Principal Executive Officer)

/s/ Dale Schwieterman
Dale Schwieterman, Treasurer (Principal Financial Officer)

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

I, Jeff Painter, certify that:


1.	I have reviewed this annual report on Form 10-K of Cardinal Ethanol, LLC;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date:	December 11, 2012	/s/ Jeff Painter
		Jeff Painter, Chief Executive Officer (President and Principal Executive Officer)

CERTIFICATION PURSUANT TO 17 CFR 240.13(a)-14(a)

(SECTION 302 CERTIFICATION)

I, William Dartt, certify that:


1.	I have reviewed this annual report on Form 10-K of Cardinal Ethanol, LLC;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



Date:	December 11, 2012	/s/ William Dartt
		William Dartt, Chief Financial Officer (Principal Financial and Accounting Officer)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K in accordance with Rule 15(d)-2 of the Securities Exchange Act of 1934 of Cardinal Ethanol, LLC (the “Company”) for the fiscal year ended September 30, 2012 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jeff Painter, President and Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ Jeff Painter
	Jeff Painter, President and
	Principal Executive Officer

	Dated:	December 11, 2012

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the annual report on Form 10-K in accordance with Rule 15(d)-2 of the Securities Exchange Act of 1934 of Cardinal Ethanol, LLC (the “Company”) for the fiscal year ended September 30, 2012 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Dartt, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.



	/s/ William Dartt
	William Dartt,
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

	Dated:	December 11, 2012