UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)


þ			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, ~~2020~~2021


¨			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: 000-51764

LINCOLNWAY ENERGY, LLC

(Exact name of registrant as specified in its charter)


Iowa						20-1118105
(State or other jurisdiction of						(IRS Employer
incorporation or organization)						Identification No.)

59511 W. Lincoln Highway, Nevada, Iowa 50201

(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code: (515) 232-1010

Securities registered pursuant to Section 12(b) of the Act: None


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

Securities registered pursuant to Section 12(g) of the Act: Limited Liability Company Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

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

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


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☑	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~mark ofwhether the ~~units held by non-affiliates of the~~ registrant ~~was~~is ~~approximately~~a ~~$29,854,648~~shell company (as ofdefined ~~September~~in ~~30,~~Rule ~~2020. The units are not listed on an exchange or otherwise publicly traded. The value of the units for this purpose has been based upon the $310 book value per~~12b-~~unit~~2 as of ~~September 30, 2020. In determining this value,~~ the ~~registrant~~Exchange ~~has assumed that all of its directors and its president are affiliates, but this assumption shall not apply to or be conclusive for any other purpose~~Act). Yes ¨ No þ

The ~~number~~aggregate market value of the units ~~outstanding~~held asby non-affiliates of ~~December~~the 1registrant was approximately $14,789,544 ~~2020~~as ~~was~~of ~~105~~March 31,~~122~~ 2021. The units ~~consisting~~are not listed on an exchange or otherwise publicly traded. The value of ~~42,049~~the ~~Common~~units ~~Units~~for this purpose has been based upon the $318 book value per-unit as of March 31, 562021. In determining this value,~~086~~ ~~Class~~the Aregistrant ~~Units~~has assumed that all of its directors and 6its president are affiliates,~~987~~ ~~Class~~but Bthis ~~Units~~assumption shall not apply to or be conclusive for any other purpose.

~~DOCUMENTS~~The ~~INCORPORATED~~number ~~BY REFERENCE: Portions~~ of ~~the~~units ~~registrant's~~outstanding ~~definitive~~as ~~proxy~~of ~~statement~~December 22, ~~to be filed with the Securities and Exchange Commission with respect to the~~ 2021 ~~annual~~was ~~meeting~~105,122 ofunits ~~the~~consisting ~~members~~ of ~~the~~42,049 ~~registrant~~Common ~~are~~Units, ~~incorporated~~56,086 byClass ~~reference~~A ~~into~~Units ~~Part~~and ~~III~~6,987 ofClass ~~this~~B ~~Form 10-K~~Units.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission with respect to the 2022 annual meeting of the members of the registrant are incorporated by reference into Part III of this Form 10-K.

LINCOLNWAY ENERGY, LLC

FORM 10-K

For the Fiscal Year Ended September 30, ~~2020~~2021

INDEX

Part I.
	Item 1.	Business.	ii2
	Item 1A.	Risk Factors.	1710
	Item 2.	Properties.	1219
	Item 3.	Legal Proceedings.	1320
	Item 4.	Mine Safety Disclosures	1320
Part II.
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	1320
	Item 6.	~~Selected Financial Data~~Reserved.	1521
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	1621
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	2729
	Item 8.	Financial Statements and Supplementary Data.	2932
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	4749
	Item 9A.	Controls and Procedures.	4749
	Item 9B.	Other Information.	4849
	Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	49
Part III.
	Item 10.	Directors, Executive Officers and Corporate Governance.	4950
	Item 11.	Executive Compensation.	4950
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	4950
	Item 13.	Certain Relationships and Related Transactions, and Director Independence.	4950
	Item 14.	Principal Accountant Fees and Services.	4950
Part IV.
	Item 15.	Exhibits and Financial Statement Schedules.	50
SIGNATURES
	Item 16.	Form 10-K Summary	54
SIGNATURES			55


Certification of President and Chief Executive Officer.			E-1
Certification of Interim Chief Financial Officer.			E-2
Section 1350 Certification of President and Chief Executive Officer.			E-3
Section 1350 Certification of Interim Chief Financial Officer.			E-4

CAUTIONARY STATEMENTS ON FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K of Lincolnway Energy, LLC (the “Company,” or “Lincolnway Energy”) contains historical information as well as forward looking statements that involve known and unknown risks and relate to Lincolnway Energy’s beliefs, future events and expectations relating to the Company’s future, including, without limitation the Company’s future performance, operations, financial results and condition, anticipated trends in business, revenues, net income, net profits or net losses; projections concerning ethanol prices, corn prices, gas prices, capital needs and cash flow, investment, business, growth, expansion, acquisition and divestiture opportunities and strategies, management's plans or intentions for the future, competitive position or circumstances, and other forecasts, projections, predictions and statements of expectation. Words such as "expects," "anticipates," "estimates," "plans," "may," "will," "contemplates," "forecasts," "strategy," "future," "potential," "predicts," "projects," "prospects," "possible," "continue," "hopes," "intends," "believes," "seeks," "should," "could," "thinks," "objectives" and other similar expressions or variations of those words or those types of words help identify forward looking statements.

Actual future performance, outcomes and results may differ materially from those suggested by or expressed in forward looking statements as a result of numerous and varied factors, risks and uncertainties, some that are known and some that are not known, and many of which are beyond the control of ~~Lincolnway~~the ~~Energy~~Company and its management. Lincolnway Energy cannot guarantee its future results, performance or business conditions, and strong or undue reliance must not be placed on any forward looking statements, which speak only as of the date of this report or the date of the document incorporated by reference 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 the Company include:

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

•Negative impacts resulting from the reduction in the renewable fuel volume requirements under the Renewable Fuel Standard issued by the Environmental Protection Agency;

•Changes in federal mandates relating to the blending of ethanol with gasoline, including, without limitation reductions to, or the elimination of, the Renewable Fuel Standard volume obligations;

•The inability to comply with the covenants and other requirements of Lincolnway Energy’s various loan agreements;

•Additional competition from electric vehicles;

•Negative impacts that hedging activities may have on Lincolnway Energy’s operations or financial condition;

•Decreases in the market prices of ethanol and distillers grains;

•Ethanol supply exceeding demand and corresponding ethanol price reductions;

•Changes in the environmental regulations that apply to the ~~Lincolnway~~Company's ~~Energy~~ plant operations;

•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;

•Changes in other federal or state laws and regulations relating to the production and use of ethanol;

•Changes and advances in ethanol production technology;

•Competition from larger ~~producers~~ethanol ~~as well as completion from alternative fuel additives~~producers;

•Changes in interest rates and lending conditions of the loan covenants in the Company's loan agreements;

•Volatile commodity and financial markets;

•Decreases in export demand due to the imposition of duties and tariffs by foreign governments on ethanol and distillers grains produced in the United States; and

•Trade actions by the Trump Administration, particularly those affecting the agriculture sector and related industries; and

•Disruption caused by health epidemics, such as the novel strain of the coronavirus (COVID-19), and the adverse impact of such epidemics on global economic and business conditions, including reduced demand for our products, transport disruptions, labor shortages and disruptions in our workforce.

These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include various assumptions that underlie such statements. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed below and in the section titled “Risk Factors.” Other risks and uncertainties are disclosed in the Company’s prior Securities and Exchange Commission (“SEC”) filings. These and many other factors could affect the Company’s future financial condition and operating results and could cause actual results to differ materially from expectations set forth in the forward-looking statements made in this document or elsewhere by Company or on its behalf. Lincolnway Energy is not under any obligation, and the Company expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this Form 10-K are included in the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

PART I

Item 1. Business.

General Overview

Lincolnway Energy, LLC (“Lincolnway Energy,” the “Company,” “we,” or “us) is an Iowa limited liability company that operates a dry mill ethanol plant located in Nevada, Iowa. Lincolnway Energy has been processing corn into fuel grade ethanol and distillers grains at the ethanol plant since May 2006.

The ethanol plant has a nameplate production capacity of 50,000,000 gallons of ethanol per year, which, at that capacity, would also generate approximately 136,000 tons of distillers grains per year. Lincolnway Energy operated its plant atin ~~approximately~~excess ~~32%~~of ~~over~~its nameplate capacity during the fiscal year ended September 30, ~~2020~~2021 (“Fiscal ~~2020~~2021”). Lincolnway Energy anticipates that it will be able to continue to operate the plant substantially in excess of nameplate production capacity during the fiscal year ending September 30, ~~2021~~2022 (“Fiscal ~~2021~~2022”). As of the date of this filing, the plant was operating at approximately 60% above nameplate production capacity which rate would result in the generation of about 80,000,000 gallons per year.

Lincolnway Energy extracts corn oil from the syrup that is generated in the production of ethanol. Lincolnway Energy estimates that it will produce approximately 1012,~~900~~400 tons of corn oil per year at the plant.

Air Products and Chemicals, Inc., formerly known as EPCO Carbon Dioxide Products, Inc. ("Air Products"), has a plant on Lincolnway Energy's site that collects the carbon dioxide that is produced as part of the ethanol production process and converts that raw carbon dioxide into liquid carbon dioxide. Air Products markets and sells the liquid carbon dioxide. Lincolnway Energy estimates that it will sell approximately 8390,000 tons of carbon dioxide per year.

Impact of COVID-19 on the Business

A novel strain of coronavirus (“COVID-19”) was first identified in Wuhan, China in December 2019 and on March 11, 2020, the World Health Organization characterized the spread of COVID-19 as a pandemic. Since then, several world governments, including the United States and many individual states and municipalities, have imposed lock downs, self-quarantine requirements, and travel restrictions on their citizens. These actions have dramatically decreased the demand for and price of blended gasoline across the globe and in the United States. Because the United States requires ethanol to be blended into the nation’s fuel supplies, gasoline consumption and demand plays a key role in the demand for and price of ethanol.

Operations

The ethanol industry experienced industry-wide record low ethanol prices throughout most of 2018 and 2019 due to reduced demand and high industry inventory levels. This continued into 2020 and the situation has been compounded by the crisis associated with the COVID-19 pandemic. In response to these unfavorable operating conditions and a slowdown in global and regional economic activity and a disruption in transportation fuel demand resulting from the COVID-19 pandemic, in March 2020, we elected to reduce ethanol production at our plant by approximately forty percent (40%). Management believes that this reduction was warranted due to negative margins and decreased ethanol demand due to the COVID-19 pandemic. Limiting ethanol production resulted in a corresponding decrease in distillers grains and corn oil production.

We also extended our annual maintenance shutdown for an additional five days in April 2020. As a result of health concerns associated with bringing vendors and service providers to the plant, our maintenance and plant staff performed the maintenance. Upon completion of our annual maintenance, plant production levels increased, energy consumption was reduced and plant operational performance showed increased efficiencies. At the beginning of the fourth quarter of the Fiscal 2020 , the plant was operating at an annualized production rate of 80 million gallons a year, the plant’s natural gas consumption rate decreased to an estimated 23,000 BTUs per gallon and the plant’s electricity usage dropped to a half a kilowatt per gallon. Increased production levels continued through the fourth quarter of Fiscal 2020 and into the first quarter of Fiscal 2021. The plant exceeded nameplate production capacity during Fiscal 2020 by approximately 32% and management anticipates that

during Fiscal 2021 the plant will produce ethanol at an increased rate of 18% to 22% over Fiscal 2020. There is no guarantee that we will achieve such increased rate of production and various factors, including, without limitation. the continued impact of the COVID-19 pandemic on the global economy and the ethanol market could result in production rates closer to the Fiscal 2020 rates or even closer to the plant’s nameplate production capacity.

During Fiscal 2020, we also focused on the continued improvement of our dry distiller grains product which has resulted in the improvement of the weight of the product shipped in a single rail car from a 92-tons of product to 105-tons of product in each single rail car. In addition, during the COVID-19 pandemic, We also continued to produce carbon dioxide ("CO2") which was needed by municipalities and food processing plants.

The global COVID-19 pandemic has resulted in a materially increased demand for hand sanitizer and a shortage in inventory. As a result, pursuant to temporary regulatory relief issued by the U.S. Food and Drug Administration (“FDA”) in light of the COVID-19 pandemic inventory shortage, several ethanol plants and industrial chemical companies implemented a process to turn ethanol into hand sanitizer for medical and consumer applications. However, in June 2020, the FDA prohibited certain ethanol plants without specialized purification processes in place from producing and distributing hand sanitizer by limiting chemicals permitted in the finished product and as a result forced such ethanol plants to halt production and cancel supply agreements. We will continue to monitor the demand for hand sanitizer and both the applicable FDA and Environmental Protection Agency ("EPA") regulations that could potentially create opportunities for the Company in the future.

Employee Health and Safety

From the earliest signs of the outbreak, Lincolnway Energy has taken proactive, aggressive action to protect the health and safety of its employees, customers, partners and suppliers. We enacted appropriate safety measures based on guidance from the Iowa governor’s office, including implementing social distancing protocols, requiring working from home for those employees that do not need to be physically present at the plant, staggering schedules and shifts for those that must be on-site to perform their work, extensively and frequently disinfecting our workspaces. The Company expects to continue to implement these measures until management determines that the COVID-19 pandemic is adequately contained with respect to the plant and the ethanol industry, and we may take further actions as government authorities require or recommend or as management determines is in the best interests of our employees, customers, partners and suppliers.

Supply and Demand Impact

Lincolnway Energy continues to regularly monitor the financial health of companies in its supply chain given that financial hardship on its suppliers or sub-suppliers caused by the COVID-19 pandemic could cause a disruption in its ability to obtain raw materials or components required to produce its products, adversely affecting operations, even when operating at reduced production levels. Additionally, restrictions or disruptions of transportation, such as reduced availability of truck, rail or air transport, port closures and increased border controls or closures, may result in higher costs and delays, both on obtaining raw materials and shipping finished products to customers, which could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers.

The COVID-19 outbreak has significantly increased economic and demand uncertainty. Management anticipates that the current outbreak or continued spread of COVID-19 will cause a global economic slowdown, and it is possible that it could cause a global recession. In the event of a recession, demand for the Company’s products would decline and its business would be adversely affected.

Financial Information

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

Principal Products and Their Distribution Markets

Lincolnway Energy's principal products are fuel grade ethanol and distillers grains. In addition, Lincolnway Energy is extracting corn oil for sale and capturing a portion of the raw carbon dioxide produced by the plant for sale. The table below shows the approximate percentage of Lincolnway Energy’s total revenue which is attributed to each of its products during the last three fiscal years.


Product	Fiscal Year 2021	Fiscal Year 2020	Fiscal Year 2019
Ethanol	76%	77%	77%
Distillers Grain	19%	18%	16%
Corn Oil	5%	4%	5%
Carbon Dioxide/Other	—%	1%	2%
	100%	100%	100%

Product	Fiscal Year 2020	Fiscal Year 2019	Fiscal Year 2018
Ethanol	77%	77%	80%
Distillers Grain	18%	16%	13%
Corn Oil	4%	5%	5%
Carbon Dioxide/Other	1%	2%	2%
	100%	100%	100%

Ethanol

Lincolnway Energy’s primary product is fuel grade ethanol which it produces from corn. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains, which can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide vehicle emissions; and (iii) a non-petroleum-based gasoline substitute. ~~More~~Most ~~than 99% of all~~ ethanol produced in the United States is used in its primary form for blending with unleaded gasoline and other fuel products.

Lincolnway Energy and Eco-Energy, Inc. ("Eco-Energy") are parties to an Ethanol Marketing Agreement which the parties amended effective October 1, 2020. Under the agreement, Eco-Energy has the exclusive right to purchase all of the ethanol that is produced by Lincolnway Energy (with the exception of specific E85 sales sold directly by Lincolnway Energy). Eco-Energy is required to use commercially reasonable and diligent efforts to market all of Lincolnway Energy’s output of ethanol and to obtain the best price for the ethanol. The purchase price payable to Lincolnway Energy under the agreement is the purchase price set forth in the applicable purchase order, less a marketing fee payable to Eco- Energy. The term of the agreement runs until September 30, 2021 and then renews for successive renewal terms of two years each unless either Lincolnway Energy or Eco-Energy give the other written notice at least 90 days prior to the end of the then current term. Lincolnway Energy also has the right to terminate the agreement, at any time and for any reason, upon 90 days advance notice to Eco-Energy. Lincolnway Energy is dependent upon its agreement with Eco-Energy for the marketing and sale of Lincolnway Energy’s ethanol, and Lincolnway Energy’s loss of the agreement, or Lincolnway Energy’s inability to negotiate a new agreement with Eco-Energy or another ethanol marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

ethanol that is produced by Lincolnway Energy (with the exception of specific E85 sales sold directly by Lincolnway Energy). Eco-Energy is required to use commercially reasonable and diligent efforts to market all of Lincolnway Energy’s output of ethanol and to obtain the best price for the ethanol. The purchase price payable to Lincolnway Energy under the agreement is the purchase price set forth in the applicable purchase order, less a marketing fee payable to Eco- Energy. The initial term of the agreement expired on September 30, 2021 and then renews for successive renewal terms of two years each unless either Lincolnway Energy or Eco-Energy give the other written notice at least 90 days prior to the end of the then current term. Lincolnway Energy also has the right to terminate the agreement, at any time and for any reason, upon 90 days advance notice to Eco-Energy. The agreement with Eco-Energy automatically renewed after the initial term expired on September 30, 2021. Lincolnway Energy is dependent upon its agreement with Eco-Energy for the marketing and sale of Lincolnway Energy’s ethanol, and Lincolnway Energy’s loss of the agreement, or Lincolnway Energy’s inability to negotiate a new agreement with Eco-Energy or another ethanol marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

The primary purchasers of ethanol are refiners, blenders or wholesale marketers of gasoline. Lincolnway Energy anticipates that its ethanol production will be sold in various regional markets given the availability of rail service at Lincolnway Energy's ethanol plant and local markets that will be shipped by truck, but Eco-Energy controls the marketing of all of Lincolnway Energy's ethanol output.

Lincolnway Energy’s primary means of shipping and distributing ethanol is by rail and truck. Lincolnway Energy leases 220 tank rail cars that are used for transporting ethanol. The scheduled terms of the leases vary with the leases expiring between ~~June~~October 2021 and ~~September~~June 2026.

The nameplate production capacity of Lincolnway Energy's ethanol plant is 50,000,000 gallons of ethanol per year, or approximately 4,200,000 gallons per month. The ethanol plant exceeded the nameplate production capacity for Fiscal 2020 by approximately 32%, with about 66 million gallons of ethanol produced during that period and an average daily production of 186,000 gallons. This is a 8% increase from the prior fiscal year due to general production improvements made to the operating plant. We anticipate that during Fiscal 2021, the ethanol plant will produce ethanol at an increased rate of 18% to 22% over Fiscal 2020; however, there is no guarantee that the Company will achieve such increased rate of production.

Lincolnway Energy's revenues from the sale of ethanol during the fiscal years ended September 30, 2020, 2019, and 2018 accounted for approximately 77%, 77%, and 80%, respectively, of Lincolnway Energy's total revenues during those periods.

Distillers Grains

Lincolnway Energy's other primary product is distillers grains, which is a byproduct of the ethanol production process. Distillers grains are the solids that are left after the processing and fermentation of corn into ethanol. Distillers grains are a high protein feed supplement that are marketed primarily in the swine, dairy and beef industries. Distillers grains can also be used in poultry and other livestock feed.

A dry mill ethanol process such as that utilized by Lincolnway Energy can produce wet distillers grains and dried distillers grains. Wet distillers grains contains approximately 60% moisture and has a shelf life of approximately ten days. Wet distillers grains can therefore only be sold to users located within relatively close proximity to the ethanol plant. Dried distillers grains are wet distillers grain that have been dried to 10% to 12% moisture. Dried distillers grains have an extended shelf life and may be sold and shipped to any market.

The Company has developed a new high quality species specific animal feed which it has branded as PureStream™ protein. The product is intended to be marketed to the growing swine and poultry markets in Iowa. When compared to traditional distillers grains, the new PureStream™ protein animal feed products are expected to be higher in crude protein and richer in the essential amino acids that drive growth in swine and poultry. However, the Company has not been able to successfully commence commercial production of this product, largely due to the lack of availability of a dryer system compatible with our technology. As a result, management has elected to forgo commercialization of this product and instead focus on continued increases to plant production efficiencies and other strategic opportunities.

Lincolnway Energy is a party to a Distillers Grain Off-Take Agreement with Gavilon Ingredients, LLC effective October 1, 2020. Under the amended and restated agreement, Gavilon is required to purchase all of the distillers grains produced at Lincolnway Energy's ethanol plant. Gavilon will market the distillers grains on a global basis. Gavilon will receive a marketing fee less certain logistics costs. The initial term of the amended and restated agreement ~~expires~~expired on September 30, 2021 but automatically renews for successive one-year renewal terms unless either Lincolnway Energy or Gavilon give the other written notice at least 90 days prior to the end of the then current term. This agreement automatically renewed according to its terms on September 30, 2021.

Lincolnway Energy is dependent upon its marketing agreement with Gavilon for the marketing and sale of Lincolnway Energy's distillers grains, and Lincolnway Energy's loss of the agreement, or Lincolnway Energy's inability to negotiate a new agreement with Gavilon or another marketer before the expiration or termination of the agreement, could have material adverse effects on Lincolnway Energy.

The primary purchasers of distillers grains are individuals or companies involved in dairy, beef or other livestock production. Lincolnway Energy anticipates that approximately 7% of its distillers grains will be locally marketed to nearby ~~livestock producers, but Lincolnway Energy’s distillers grains marketer controls the marketing of all of Lincolnway Energy's distillers grains.~~

livestock producers, but Lincolnway Energy’s distillers grains marketer controls the marketing of all of Lincolnway Energy's distillers grains.

Lincolnway Energy's primary means of shipping and distributing distillers grain protein products is by rail and truck. Local livestock producers are also able to pick up distillers grains directly from the ethanol plant. Lincolnway Energy leases 100 hopper rail cars which are used for transporting distillers grains. Lincolnway Energy's leases for the hopper rail cars expire between December 2021 and June 2025.

Lincolnway Energy produced approximately 152,500 tons of distillers grains during the fiscal year ended September 30, 2020, or approximately 12,700 tons of distillers grains per month. The composition of the distillers grains was approximately 6% wet distiller’s grains and 94% dried distillers grains. During the end of the fiscal year ended September 30, 2019 (“Fiscal 2019”), the Company installed a new regenerative thermal oxidizer (“RTO”) which increased production of distillers grains in both Fiscal 2019 and Fiscal 2020. Lincolnway Energy anticipates distillers grains production to remain similar to production levels achieved during Fiscal 2020.

Lincolnway Energy's revenues from the sale of distillers grains during the fiscal years ended September 30, 2020, 2019, and 2018 accounted for approximately 18%, 16%, and 13%, respectively, of Lincolnway Energy's total revenues during those periods.

Corn Oil

Lincolnway Energy has a corn oil extraction system that extracts corn oil from thin stillage that is generated in the production of ethanol. Lincolnway Energy markets and distributes all of the corn oil it produces directly to end users and third party brokers within the domestic market. Lincolnway Energy's primary means of shipping and distributing corn oil is by truck. The corn oil that Lincolnway Energy is capable of producing is not food grade corn-oil and it cannot be used for human consumption. The primary uses of the corn oil that Lincolnway Energy produces are for animal feed, industrial uses and biodiesel production.

Lincolnway Energy estimates that it will produce and sell approximately 912,~~500~~400 tons of corn oil per year at the plant. Lincolnway Energy’s corn oil sales were approximately $4,616,000, $5,487,000, and $5,545,000 respectively, for the fiscal years ended September 30, 2020, 2019, and 2018, which represented approximately 4%, 5%, and 5% of Lincolnway Energy's total revenues for those respective fiscal years. Lincolnway Energy's corn oil production decreased approximately 2% during the fiscal year ended September 30, 2020 when compared to the prior fiscal year. Corn Oil is available from each bushel of corn and varies each year based on the quality of corn produced.

Carbon Dioxide

Lincolnway Energy has a Carbon Dioxide Purchase and Sale Agreement and a related Non-Exclusive CO2 Facility Site Lease Agreement with Air Products. Under those agreements, Air Products maintains a plant on Lincolnway Energy's site to collect the carbon dioxide which is produced as part of the ethanol production process and to convert that raw carbon dioxide into liquid carbon dioxide.

Air Products also markets and sells the liquid carbon dioxide gas under those agreements. The purchase price payable by Air Products for the raw carbon dioxide provided by Lincolnway Energy is a specified per ton price based on the number of shipped tons of liquid carbon dioxide. The agreement also includes a "take or pay" term which requires Air Products to purchase, during each contract year, a minimum average of shipped tons. The annual liquid carbon dioxide production capacity of the Air Products plant will be determined based upon the capacity run procedures as set out in the agreement. The take or pay obligation is trued up at the end of each contract year, and the purchase price for any "take or pay" tons will be the average per shipped ton purchase price paid by Air Products during the contract year. The current term of the marketing agreement with Air Products expires on July 31, 2025 and thereafter continues for additional one year renewal periods unless the agreement is earlier terminated in accordance with its terms. Air Products is required to remove the plant and related equipment following any termination of the agreement.

Air Products is responsible for the shipment of all liquid carbon dioxide, which Lincolnway Energy expects will continue to be shipped by truck.

Lincolnway Energy estimates it will sell approximately 8391,000 tons of carbon dioxide per year to Air Products. Lincolnway Energy does not, however, anticipate that revenues from the sale of carbon dioxide to Air Products will be a material product of Lincolnway Energy, given that Lincolnway Energy estimates that those revenues will constitute less than 1% of Lincolnway Energy's total revenues during any fiscal year.

Principal Product Markets

~~According~~Lincolnway ~~to the U.S.~~ Energy's ~~Information~~products ~~Administration~~are ~~(the~~primarily ~~"EIA"),~~sold in the ~~first~~domestic ~~eight~~market; ~~months of 2020~~however, ~~ethanol exports decreased 10%~~ as ~~compared~~domestic toproduction ~~the first eight months~~ of ~~2019.~~ethanol, ~~Through~~distillers ~~the~~grains ~~first~~and ~~eight~~corn ~~months~~oil ofcontinue ~~2020~~to ~~Canada~~expand, ~~was~~Lincolnway ~~the~~Energy ~~largest~~anticipates ~~export~~increased ~~market~~international ~~representing~~sales ~~22%~~ of ~~export~~our ~~sales Brazil continues to import U~~products.S. For ~~ethanol~~Fiscal ~~but~~Year ~~dropped~~2021, to the ~~2nd~~United ~~largest~~States ~~export~~exports ~~market~~of ~~representing~~distillers ~~20%~~grains ofwere ~~ethanol~~primarily ~~produced~~to inVietnam, the ~~United~~European ~~States.~~Union, ~~Tariffs~~South ~~implemented~~Korea, byMexico ~~Brazil~~and ~~on U~~Turkey.S. China ~~ethanol~~was ~~imports~~not ~~have~~a ~~significantly~~significant ~~reduced~~source ~~Brazilian~~of export demand ~~since~~due ~~2018~~to ~~when~~increased ittariffs ~~represented 29%~~which ofmake ~~export~~United ~~sales. During~~States ~~the~~distillers ~~first~~grains ~~eight~~not ~~months~~feasible offor ~~2020,~~export ~~India~~to ~~was~~China. In addition, the ~~third~~United ~~largest~~States ~~importer~~exported ofsignificant ~~U.S.~~amounts ~~ethanol. Exports~~ of ~~U.S.~~ ethanol to Canada, ~~Brazil and~~ India, ~~represented~~Columbia, ~~almost~~Switzerland, ~~58% of all U.S. ethanol exports during the first eight months of 2020. South Korea~~Philippines, ~~Colombia~~Peru and the ~~Philippines~~European ~~represent~~Union ~~the~~during ~~remaining~~Fiscal ~~countries~~Year ~~in the top 6 destinations for U~~2021.S. ~~ethanol exports in the first eight months of 2020.~~

~~Ethanol~~ Lincolnway ~~exports~~Energy toexpects ~~Brazil~~our ~~continue~~product marketers to beexplore ~~impacted~~all bymarkets ~~the~~for ~~20%~~our ~~tariff on U.S. ethanol imports in excess of 150 million liters~~products, orincluding ~~39.6~~export ~~million gallons per quarter, imposed in September 2017 by Brazil’s Chamber of Foreign Trade (CAMEX)~~markets. AHowever, ~~rise~~due into ~~crude~~high ~~oil~~transportation ~~prices~~costs, and the ~~domestic~~fact ~~price~~that ofLincolnway ~~high~~Energy ~~gasoline~~is ~~blends~~not inlocated ~~Brazil~~near ~~has~~a ~~made~~major ~~ethanol~~international ~~importation~~shipping ~~economic~~port, ~~even~~Lincolnway ~~after~~Energy ~~paying~~expects ~~the~~a ~~tariff. It~~majority ~~remains~~of tothe ~~be seen if Brazil’~~Company's ~~CAMEX~~products ~~will~~to ~~raise~~continue ~~tariffs~~to ~~further~~be inmarketed ~~response,~~and ~~especially~~sold ~~as new corn ethanol plants come on line in Brazil~~domestically.

Similar to Brazil, tariffs implemented by China on U.S. ethanol has essentially eliminated China as an export market for U.S. ethanol. Historically China was included in the top export markets for U.S. ethanol since 2018, U.S. ethanol exports to China have been reduced to zero due to increased tariffs. On December 13, 2019, the U.S. and China announced an agreement to the first phase of a trade deal (the "Phase One Agreement") pursuant to which China agreed to purchase billions of dollars in agricultural products in exchange for the U.S. agreeing not to pursue a new round of tariffs starting January 2020. The impact of the Phase One Agreement on the ethanol market cannot be determined at this time; however, according to the Peterson Institute for International Economics, through October 2020 China has only purchased approximately 56% of its year-to-date purchase commitments under the Phase One Agreement, and there can be no certainty at this time of whether its purchasing will improve.

Ethanol export demand is more unpredictable than domestic demand and tends to fluctuate over time as it is subject to monetary and political forces in other nations. For instance, a strong U.S. Dollar is an example of a force that may negatively impact ethanol exports from the United States. In addition, Chinese and Brazil ethanol tariffs have had, and likely will continue to have, a negative impact on the export market demand and prices for ethanol produced in the United States. There is also potential for the imposition of tariffs by other countries in addition to Brazil and China due to trade disputes with the United States which could reduce the overall export demand and therefore could have a negative impact on ethanol prices.

Over the past several years, distillers grains exports have increased and may continue to increase as worldwide acceptance grows. However, reduced production from U.S. ethanol plants in spring and summer 2020 adversely impacted the availability and prices of U.S. distillers grains. As a result overall exports of distillers grains have decreased due to shortages in exportable supply caused by the COVID-19 pandemic. Although Mexico remained the top destination for U.S. distillers grains, exports to Mexico decreased 11% over the same period in 2019. By contrast, several countries increased imports of U.S. distillers grains over the prior year, including South Korea, Thailand, Turkey, Japan, the Philippines and New Zealand. Management anticipates that continued slower ethanol plant production time resulting from the pandemic and strong demand for protein will keep the market volatile and, in turn, could cause an increase in prices for domestic and export distillers grains.

Historically, the United States ethanol industry exported a significant amount of distillers grains to China; however, exports to China have significantly decreased as a result of the Chinese antidumping and countervailing investigations and the implementation of significant duties on importing into China distillers grains produced in the United States. The imposition of these duties resulted in materially decreased demand from China requiring U.S. producers to seek out alternative export markets, including the European Union, Mexico, Canada, Vietnam and other global markets. On December 13, 2019, the U.S. and China announced the Phase One Agreement pursuant to which China agreed to purchase billions of dollars in agricultural products in exchange for the U.S. agreeing not to pursue a new round of tariffs starting January 2020. The impact of this trade deal on the distillers grain market cannot be determined at this time. however, as noted above, through October 2020 China has only purchased approximately 56% of its year-to-date purchase commitments under the Phase One Agreement, and there can be no certainty at this time of whether its purchasing will improve.

Recent trade disputes with other countries have also created additional uncertainty as to future export demand for U.S. distillers grains.

Lincolnway Energy expects its third party marketing agents to explore all markets for its products, including export markets, and believes that there is some potential for increased international sales of its products. However, due to high transportation costs, and the fact that Lincolnway Energy is not located near a major international shipping port, Lincolnway Energy expects the majority of its ethanol and distillers grains to continue to be marketed and sold domestically.

As described above in the section entitled “Principal Products and Their Distribution Methods,” Lincolnway Energy sells carbon dioxide to Air Products and Lincolnway Energy markets and distributes all of the corn oil it produces directly to end users and third party brokers in the domestic market.

Sources and Availability of Raw Materials

Corn

The principal raw material necessary to produce ethanol, distillers grain and corn oil is corn. Lincolnway Energy is significantly dependent on the availability and price of corn which are affected by supply and demand factors such as crop production, carryout, exports, government policies and programs, risk management and weather. With the volatility of the weather and commodity markets, Lincolnway Energy cannot predict the future price of corn. The market price of ethanol is not correlated to corn prices. Lincolnway Energy, like most ethanol producers, is not able to compensate for increases in the cost of corn through adjustments in its prices for its ethanol. Lincolnway Energy does typically see increases in the prices of its distillers grain during times of higher corn prices. However, given that ethanol sales comprise the majority of Lincolnway Energy’s revenues, the inability of the Company to adjust its ethanol prices can result in a negative impact on its profitability during periods of high corn prices.

~~Since~~Lincolnway ~~March~~Energy's ~~2020~~ethanol ~~the~~ plant ~~has~~is ~~increased~~located ~~ethanol~~in ~~production to approximately 80~~Nevada,~~000,000~~ ~~gallons per year. In order to produce approximately 80~~Iowa,~~000,000~~ ~~gallons~~which ofis ~~ethanol~~located ~~per~~in ~~year,~~Story County. Although Lincolnway Energy ~~needs~~anticipates ~~approximately~~purchasing ~~27,100,000 bushels of~~ corn ~~per~~from ~~year~~various atsources ~~its~~and ~~ethanol~~areas, ~~plant.~~ Lincolnway Energy ~~purchased~~believes ~~22,304,656~~that ~~bushels~~Story ofCounty ~~corn~~will ~~during~~produce ~~fiscal~~a ~~year~~sufficient ~~ended~~supply ~~September~~of 30corn, ~~2020~~assuming ~~and~~normal ~~20,457,899,~~growing ~~and 21~~conditions,~~010,865~~ ~~bushels~~to ~~during~~generate the ~~fiscal~~necessary ~~years~~annual ~~ended~~requirements ~~September~~of ~~30,~~corn ~~2019~~for ~~and~~the ~~2018,~~ethanol ~~respectively~~plant.

~~Lincolnway~~ During ~~Energy's~~Fiscal ~~ethanol~~Year ~~plant~~2021, iscorn ~~located~~prices inwere ~~Nevada,~~higher ~~Iowa~~than prior years, mainly due to increased demand which ishas ~~located~~been inhigher ~~Story~~that ~~County~~worldwide corn supply. ~~Although~~On ~~Lincolnway~~November ~~Energy~~9, ~~anticipates~~2021, ~~purchasing~~the USDA released a report estimating the 2021 corn crop in the United States at approximately 15.1 billion bushels, up 7% from ~~various~~last ~~sources~~year's ~~and~~production, ~~areas~~with yields averaging 177.0 bushels per acre. The USDA forecasted area harvested for grain at 85.1 million acres, up 3% from 2020. Lincolnway Energy ~~believes~~has not had difficulty securing the corn the Company requires for its operations and Lincolnway Energy anticipates that ~~Story~~the ~~County~~Company will be able to secure the corn it needs to operate the ethanol plant during Fiscal Year 2022, although potentially at a higher price. While the Company does not anticipate encountering problems sourcing corn, a shortage of corn could develop, particularly if the local area experiences an extended drought or other production problem during Fiscal Year 2022. Poor weather can be a major factor in increasing corn prices. If the United States were to endure an entire growing season with poor weather conditions, it could result in a prolonged period of higher than normal corn prices.

will produce a sufficient supply of corn, assuming normal growing conditions, to generate the necessary annual requirements of corn for the ethanol plant. There is not, however, any assurance that Lincolnway Energy will be able to purchase sufficient corn supplies from Story County or regarding the supply or availability of corn given the numerous factors that affect the supply and price for corn.

On August 10, 2020 our plant was in the center of a severe storm labeled as a derecho, a severe windstorm associated with fast-moving severe thunderstorms creating a weather system potentially rivaling the force of a hurricane or tornado. Although our plant did not sustain any material damage, surrounding businesses had substantial damage and this storm caused major damage to an estimated one-third of Iowa's corn production. Management cannot determine the economic impact at this time since harvest is nearing completion; however, industry estimates suggest a potential 50% corn yield reduction. On November 10, 2020, the United States Department of Agriculture (the “USDA”) reported the 2020/2021 corn production forecast at 14.5 billion bushels or a 7% increase from the 2019/2020 crop production forecast. This same report for November was down approximately 1.0% from the October 2020 forecast. Based on November 10, 2020 conditions, the USDA forecasts average corn yields at 175.8 bushels per acre which is down 2.6 bushels per acre from the October 2020 forecast.

Corn prices decreased during the fiscal year ended September 30, 2020 compared to the same period in 2019 at an average of $0.23 a bushel. Lincolnway Energy’s management expects that corn prices will remain volatile throughout Fiscal 2021 as a result of the decreased regional production caused by the derecho storm along with a possible increase of corn exports to China and other global countries as forecasted by the USDA. Despite the recent decrease in corn prices, if corn prices increase for any reason, unless Lincolnway Energy can increase the price it receives for its ethanol and distillers grains so that such revenues outpace the rising corn prices, there will be an adverse impact on Lincolnway Energy’s operating margins and profitability. Management continually monitors corn prices and the availability of corn near its plant and also attempts to minimize the effects of the volatility of corn costs on profitability through its risk management strategies, including hedging positions taken in the corn market.

There is also uncertainty regarding climate change, and any climate changes could adversely affect corn production in Lincolnway Energy's primary market area or other corn production areas in the United States and elsewhere, and thereby also adversely impact both the supply and price of corn.

Lincolnway Energy originates its corn needs in house and through a third party that procures corn from various sources which is delivered to the plant by truck. Lincolnway Energy has corn storage capabilities for approximately 20 days of continuous ethanol production.

Natural Gas

The Company has natural gas pipeline transportation contracts with two entities, Northern Natural Gas Pipeline and Alliant Energy. The Northern Natural Gas Pipeline contract provides for the transport of natural gas from Canada and the Dakotas to a hub in Story City, Iowa. The contract is for 5 years and expires in March ~~2021~~2026. The Alliant Energy contract provides for the transport of natural gas from Story City, Iowa directly into the plant and expires in 2024. Natural gas is purchased through a broker that contracts on behalf of Lincolnway Energy. ~~Lincolnway~~ Energy consumes approximately 5,000 MMBTUs per day or 1.8 million MMBTUs per year. Lincolnway Energy purchased approximately 1.76 million MMBTUs of natural gas for $4.8 million during the fiscal year ended September 30, 2020.

Electricity and Water

Lincolnway Energy's ethanol plant also requires a significant amount of electricity and water. Lincolnway Energy's electricity needs are currently met by Alliant Energy. Lincolnway Energy pays the general service rates for its electricity. ~~Approximately 136,500 kWh of electricity are used per day of production.~~

Lincolnway Energy utilizes approximately two gallons of water to produce a gallon of ethanol, which results in the use of approximately 525,000 gallons of water per day. Lincolnway Energy discharges 100,000 gallons of water per day. The drop from previous levels is a direct result of operating more efficiently. Lincolnway Energy's water needs are currently met by the City of Nevada.

Rail Access

Rail access is critical to the operation of Lincolnway Energy's ethanol plant because rail is used for the shipment and distribution of ethanol and distillers grains. Lincolnway Energy utilizes ~~rail~~tracks ~~track~~ owned by Lincolnway Energy and tracks owned by the Union Pacific Railroad. Lincolnway Energy has agreements with the Union Pacific Railroad regarding the use of its tracks.

owned by the Union Pacific Railroad. Lincolnway Energy has agreements with the Union Pacific Railroad regarding the use of its railroad tracks.

Technology Changes

Lincolnway Energy continues to monitor and evaluate any opportunities that may arise with respect to possible technological improvements and alternative energy sources for its ethanol plant. For example, Lincolnway Energy previously used coal as the source for process heat energy. This put Lincolnway Energy at a cost disadvantage to other dry grind ethanol producers. Through collaboration between two entities and a natural gas line provider, Lincolnway Energy brought natural gas supply to Lincolnway Energy's plant. In addition to the cost benefits of running natural gas, Lincolnway Energy has realized other potential benefits such as reduced energy usage, reduced environmental compliance cost, and reduced fly ash disposal cost.

In April 2014, Lincolnway Energy installed a Selective Milling Technology ("SMT") machine. The SMT allows a more uniform and consistent feedstock giving the Company more consistent production. In the spring of 2015, Lincolnway Energy implemented a series of technology improvements focused on increased oil production including centrifuge capacity. These improvements allow the Company to maximize corn oil production. In October 2015, the Company installed some additional technology that separates fermentable starches and sugars. These efficiencies increase yields and the reliability of the plant.

In the fiscal year ended September 30, 2017 ("Fiscal 2017"), several technology improvements were made in the distillation area increasing efficiencies in ethanol production and energy usage. .

Lincolnway Energy continues to monitor technological developments in the industry, especially those aimed at increasing operating or production efficiencies. Research is currently being conducted on various processes.

Competition

~~Domestic~~ Ethanol ~~Competitors~~Competition

~~Ethanol~~Lincolnway Energy is ain ~~commodity~~direct ~~product~~competition ~~and~~with ~~therefore,~~numerous ~~competition~~ethanol inproducers, ~~the~~many ~~industry~~of iswhich ~~predominately~~have ~~based~~greater onresources ~~price.~~than Lincolnway Energy's ~~competitors in the U~~has.S. Larger ~~include~~ethanol ~~regional~~producers ~~farmer-owned~~may ~~entities,~~be ~~the~~able ~~major~~to ~~oil~~take ~~companies~~advantage ~~and~~of ~~other~~economies ~~large~~of ~~companies. Competition~~scale indue ~~the~~to ~~ethanol~~their ~~industry~~larger ~~has~~size and increased ~~during~~bargaining ~~the~~power ~~past five years,~~ with ~~sustained~~both ~~periods~~customers ~~of declining ethanol prices, excess supplies of ethanol~~ and ~~volatile~~raw ~~corn~~material ~~prices~~suppliers. As of November ~~2020~~21, 2021, the Renewable Fuels Association ("RFA") ~~estimated~~estimates that there ~~were~~are ~~209~~210 ~~installed~~ ethanol production facilities in the United States with acapacity ~~total~~to ~~capacity~~produce ofapproximately 17.65 billion gallons ~~based~~of onethanol ~~nameplate~~annually. In ~~capacity~~the ~~and~~past, ~~one~~the ~~additional~~ethanol ~~cellulose~~industry ~~plant~~experienced ~~under~~consolidation ~~construction~~where ~~with~~a ~~capacity~~few tolarger ~~produce~~ethanol anproducers ~~additional~~emerged 16who ~~million~~control ~~gallons.~~a large portion of United States ethanol production. The ~~RFA~~largest ~~has~~ethanol ~~also~~producers ~~estimated~~include ~~that~~Archer Daniels Midland, Green Plains Renewable Energy, POET Biorefining, and Valero Renewable Fuels, each of which is capable of producing significantly more ethanol than we produce. Collectively this group controls approximately 1340.1% of the ethanol production capacity in the United States ~~is idled or below name plate operating capacity~~.

The ~~top~~following ~~five~~table ~~producers~~identifies ~~account~~the ~~for~~largest ~~approximately~~ethanol ~~40%~~producers ~~of production. Lincolnway Energy is~~ in direct competition with many of these top five producers as well as other national producers, many of whom have greater resources and experience than Lincolnway Energy and each of which is producing significantly more ethanol than Lincolnway Energy produces. In addition, Lincolnway Energy believes that the ~~ethanol~~United ~~industry~~States ~~will~~along ~~continue to consolidate leading to a market where a small number of large ethanol producers~~ with ~~substantial~~their production capacities ~~will control an even larger portion of the U~~.~~S. ethanol production.~~

~~Many ethanol plants significantly reduced ethanol production or even ceased operations altogether in the spring of 2020 in response to the disruption in demand from the COVID-19 pandemic~~U.S. ~~Some~~FUEL ofETHANOL ~~these~~PRODUCTION ~~plants~~CAPACITY ~~have~~BY ~~gradually~~TOP ~~increased production as fuel demand partially recovered but some have not returned to historic levels or restarted operations.~~PRODUCERS

InProducers ~~recent~~of ~~years,~~Approximately ~~the~~900 ~~ethanol~~million ~~industry~~gallons ~~has~~per ~~also seen increased competition from oil companies who have purchased ethanol production facilities. These oil companies are required to blend a certain amount of ethanol each~~ year~~. Lincolnway~~ Energy is at a competitive disadvantage compared to the oil companies and its larger competitors who have greater production capacity, greater access to capital and other financial resources, multiple ethanol plants that may help them achieve certain efficiencies and other benefits that Lincolnway Energy cannot achieve with one ethanol plant or ~~may enable them to operate at times when it is unprofitable for Lincolnway Energy to operate. For instance, ethanol producers that own multiple plants may be able to compete in the marketplace~~ more effectively, especially during periods when operating margins are unfavorable, because they have the flexibility to run certain production facilities while reducing production or shutting down production at other facilities. These large producers may also be able to realize economies of scale which Lincolnway Energy is unable to realize or they may have better negotiating positions with purchasers. Further, new products or methods of ethanol production


Company	Current Capacity (MMgy)	Percent of Total Industry Capacity
Archer Daniels Midland	1,674	9.6	%
POET Biorefining	2,648	15.2	%
Green Plains Renewable Energy	1,740	10.0	%
Valero Renewable Fuels	934	5.3	%
TOTAL	6,996	40.1	%

Updated: November 21, 2021

Ethanol is a commodity product where competition in the industry is predominantly based on price and consistent fuel quality. Larger ethanol producers may be able to realize economies of scale in their operations that Lincolnway Energy is unable to realize. Further, Lincolnway Energy has experienced increased competition from oil companies who have purchased ethanol production facilities, including Valero Renewable Fuels, which is a subsidiary of a larger energy company. These competitors 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 the Company to operate our ethanol plant. 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 operating margins are unfavorable in the ethanol industry. Finally some ethanol producers who own ethanol plants in geographically diverse areas of the United States may spread the risk they encounter related to feedstock prices due to localized decreased corn production and supplies.

Lincolnway Energy anticipates 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 that is being explored 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. Many corn-based ethanol producers have altered their plants to be able to produce cellulosic ethanol. 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.

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 grown in popularity, especially in urban areas. While in the past there were 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 have made electric car technology more widely available. Additional competition from these other sources of alternative energy, particularly in the automobile market, could reduce the demand for ethanol, which would negatively impact our profitability.

In addition to domestic producers of ethanol, we face competition from ethanol produced in foreign countries, particularly Brazil. Ethanol imports have been lower in recent years and ethanol exports have been higher which was one of the reasons for improved operating margins in the ethanol industry. As of May 1, 2013, Brazil increased its domestic ethanol use requirement from 20% to 25% which decreased the amount of ethanol available in Brazil for export. In addition, recently Brazil instituted a tariff on ethanol produced in the United States which has resulted in less ethanol exports to Brazil. In the future, we may experience increased ethanol imports from Brazil which could put negative pressure on domestic ethanol prices and result in excess ethanol supply in the United States. We continue to look for opportunities to export ethanol to other countries and open new markets for ethanol produced in the United States.

Competition among ethanol producers may continue to increase as gasoline demand decreases due to more fuel efficient vehicles being produced. If the concentration of ethanol used in most gasoline does not increase and gasoline demand is lower due to increased fuel efficiency by the vehicles operated in the United States, competition may increase among ethanol producers to supply the ethanol market.

Finally, many ethanol producers increased their production capacities through expansion projects which started becoming operational during our 2018 fiscal year. These expansion projects have increased the supply of ethanol in the market which negatively impacted market ethanol prices and may continue to result in excess ethanol supply in the future. During 2019, many ethanol producers reduced production or ceased production altogether due to unfavorable operating margins which somewhat offset the additional ethanol production from these expansion projects. During 2020, the ethanol industry was impacted by decreased gasoline and ethanol demand because of social distancing restrictions implemented because of the COVID-19 pandemic. During Fiscal Year 2021, ethanol demand increased and the Company experienced much more favorable financial margins.

Distillers Grains Competition

Lincolnway Energy's ethanol plant competes with other ethanol producers in the production and sales of distillers grains. Distillers grains are primarily used as an animal feed which replaces corn and soybean meal. As a result, Lincolnway Energy believes that distillers grains prices are positively impacted by increases in corn and soybean prices. In addition, in recent years the United States ethanol industry has increased exports of distillers grains which management believes has positively impacted demand and prices for distillers grains in the United States. In the event these distillers grains exports decrease, it could lead to an oversupply of distillers grains in the United States which could result in increased competition among ethanol producers for sales of distillers grains and could negatively impact distillers grains prices in the United States.

Corn Oil Competition

Lincolnway Energy competes with many ethanol producers for the sale of corn oil. Many ethanol producers have installed the equipment necessary to separate corn oil from the distillers grains they produce which has increased competition for corn oil sales and has resulted in lower market corn oil prices.

Governmental Regulation and Federal Ethanol Supports

Federal Ethanol Supports

The ethanol industry is dependent on the ethanol use requirement in 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 statutory volume 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.

~~developed~~The byEPA ~~larger~~has ~~and~~the ~~better-financed~~authority ~~competitors~~to ~~could~~waive ~~provide~~the ~~them~~RFS ~~competitive~~statutory ~~advantages~~volume ~~over~~requirement, ~~Lincolnway~~in ~~Energy. All~~whole or in part, provided one of ~~these~~the ~~factors~~following ~~could~~two ~~put~~conditions ~~Lincolnway~~have ~~Energy~~been atmet: (1) there is inadequate domestic renewable fuel supply; or (2) implementation of the requirement would severely harm the economy or environment of a ~~competitive~~state, ~~disadvantage~~region or the United States. Annually, the EPA is required to pass a rule that establishes the ~~oil~~number ~~companies~~of ~~and~~gallons ~~larger~~of ~~competitors~~different types of renewable fuels that must be used in the United States which is called the renewable volume obligations ("RVO").

~~Foreign~~The ~~Competition~~statutory RVO for all renewable fuels for 2018 was 19.29 billion gallons, of which corn-based ethanol could meet 15 billion gallons of the RVO. On November 30, 2018, the final RVO for 2019 was set at 19.92 billion gallons and the corn-based ethanol RVO was set at 15 billion gallons. On December 19, 2019, the final RVO for 2020 was set at 20.09 billion gallons and the corn-based ethanol RVO was set at 15 billion gallons. However, on December 7, 2021, the EPA issued a proposed RVO rule which set the 2022 RVO at 15 billion gallons for corn-based ethanol, set the 2021 RVO for corn-based ethanol at 13.3 billion gallons, less than the statutory requirement in the RFS of 15 billion gallons. The December 7, 2021 proposed rule also proposes to reopen the 2020 RVO which was previously set at 15 billion gallons for corn-based ethanol and retroactively reduce that amount to 12.5 billion gallons.

InDuring ~~recent~~2019 ~~years,~~it came to light that the ~~ethanol~~EPA ~~industry~~was ~~has~~issuing ~~experienced~~waivers ~~increased~~of ~~competition~~the ~~from~~RVO ~~international~~obligations ~~suppliers~~for ofcertain small refineries. These small refinery waivers resulted in significant decreases in ethanol demand during 2018 and ~~although~~2019 which are below the RVO requirements. Many in the ethanol ~~imports~~industry ~~have~~believe ~~decreased~~these ~~during~~waivers did not meet the ~~past~~standards ~~few~~set ~~years~~out in the RFS. In January 2020, ifthe ~~competition~~Tenth ~~from~~Circuit ~~ethanol~~Court ~~imports~~of ~~were~~Appeals ruled that small refinery exemptions may only be granted to ~~increase~~refineries ~~again~~that had secured them continuously each year since 2010. Consistent with this ruling, ~~such~~in ~~increased~~September ~~imports~~2020, ~~could~~the ~~negatively~~EPA ~~impact~~denied ~~demand~~certain ~~for~~small ~~domestic~~refinery exemption petitions filed by oil refineries in 2020 seeking retroactive relief from their ethanol use requirements for prior years. This ruling was partially overturned in 2021 which ~~could~~may ~~adversely~~result ~~impact~~in ~~the~~additional ~~Company's~~small ~~financial~~refinery ~~results~~exemptions in the future.

~~Many~~ Most ~~international~~ethanol ~~suppliers~~that ~~produce~~is ~~ethanol~~used ~~primarily~~in ~~from~~the ~~inputs~~United ~~other~~States ~~than~~is ~~corn,~~sold ~~such~~in asa ~~sugarcane,~~blend called E10. E10 is a blend of 10% ethanol and ~~have~~90% ~~cost~~gasoline. ~~structures~~E10 is approved for use in all standard vehicles. Estimates indicate that ~~may~~gasoline bedemand ~~substantially~~in the United States in most years is approximately 143 billion gallons per year. Gasoline demand was lower ~~than~~in ~~Lincolnway~~2020 ~~Energy's~~due to the COVID-19 pandemic. Assuming that all gasoline in the United States is blended at a rate of 10% ethanol and ~~other~~90% Ugasoline, the maximum domestic demand for ethanol is approximately 14.S3 billion gallons per year. ~~based~~This is commonly referred to as the "blend wall," which represents a theoretical limit where more ethanol ~~producers~~cannot be blended into the national gasoline pool. ~~Many~~ This is a theoretical limit because it would not be possible to blend ethanol into every gallon of ~~these~~gasoline ~~international~~that ~~suppliers~~is ~~are~~being ~~companies~~used ~~with~~in ~~much~~the ~~greater~~United ~~resources~~States ~~than~~and ~~Lincolnway~~it ~~Energy~~discounts ~~with~~the ~~greater~~use ~~production~~of ~~capacities~~higher percentage blends such as E15 or E85. These higher percentage blends may lead to additional ethanol demand if they become more widely available and accepted by the market.

~~Brazil~~ Many isin the ~~world’s second largest~~ ethanol ~~producer.~~industry ~~Brazil~~believe ~~makes~~that ~~ethanol~~it ~~primarily~~will ~~from sugarcane as opposed to corn, and depending on feedstock prices, may~~ be ~~less~~impossible ~~expensive~~ to ~~produce.~~meet ~~Under~~ the ~~Renewable Fuel Standard (the "~~RFS~~"),~~ 15requirement ~~billion~~in ~~gallons~~future ofyears ~~corn-based~~without ~~ethanol~~an ~~was~~increase ~~mandated during 2020 when U.S. ethanol production was estimated to exceed 17 billion gallons. Many~~ in the ~~ethanol~~percentage ~~industry are concerned that certain provisions~~ of ~~the RFS may disproportionately benefit~~ ethanol ~~produced~~that ~~from~~can ~~sugarcane.~~be ~~This~~blended ~~could~~with ~~make~~gasoline ~~sugarcane-based~~for ~~ethanol,~~use ~~which is primarily produced~~ in ~~Brazil,~~standard ~~more~~(non-flex ~~competitive~~fuel) ~~in the United States ethanol market~~vehicles. IfThe ~~this~~EPA ~~were~~has toapproved ~~occur, it could reduce demand for~~ the ~~ethanol~~use ~~produced~~of ~~by Lincolnway Energy. In recent years~~E15, ~~sugarcane~~gasoline ~~ethanol~~which ~~imported~~is ~~from~~blended ~~Brazil~~at ~~has~~a ~~been~~rate ~~one~~ of ~~the~~15% ~~most~~ethanol ~~economical~~and ~~means~~85% ~~for~~gasoline, ~~certain~~in ~~obligated~~vehicles ~~parties~~manufactured toin ~~comply with~~ the ~~RFS~~model ~~requirement~~year to2001 ~~blend~~and ~~advanced biofuels~~later. In ~~March 2015~~However, ~~the~~there ~~Brazilian~~are ~~government~~still ~~increased~~state ~~the~~hurdles ~~required~~that ~~percentage~~need ofto ~~ethanol~~be inaddressed ~~vehicle fuel sold~~ in ~~Brazil~~some tostates ~~27%~~before ~~from~~E15 ~~25%~~will ~~which,~~become ~~along with~~ more ~~competitively~~widely ~~priced ethanol produced from corn, significantly reduced U~~available.S. ~~imports~~Many ofstates ~~ethanol~~still ~~produced~~have inregulatory ~~Brazil~~issues asthat ~~compared~~prevent tothe ~~prior~~sale ~~years. As~~of ~~a result, U~~E15.S. ~~imports~~Sales of ~~Brazilian~~E15 ~~ethanol~~may ~~have~~be ~~significantly~~limited ~~decreased~~because ~~and~~it ~~represent~~is ~~less~~not ~~than~~approved 1%for ofuse ~~U.S.~~in ~~ethanol~~all ~~consumption. However~~vehicles, ifthe ~~U.S.~~EPA ~~imports~~requires ofa ~~ethanol~~label ~~from~~that ~~Brazil~~management ~~continue~~believes tomay ~~increase,~~discourage ~~this~~consumers ~~could~~from ~~reduce~~using ~~demand~~E15, ~~for~~and ~~domestic~~retailers ~~ethanol~~may ~~and~~choose ~~adversely~~not ~~impact~~to ~~ethanol~~sell ~~prices~~E15 indue ~~the~~to Uconcerns regarding liability.S.

~~Increases~~In inMay ~~imports~~2020, ~~from~~the ~~Brazil~~United ~~may~~States ~~occur~~Department ~~due~~of toAgriculture ("USDA") announced the ~~stronger~~Higher ~~United~~Blends ~~States~~Infrastructure ~~Dollar~~Incentive ~~compared~~Program towhich ~~the~~consists ~~Brazilian~~of ~~Real~~up ~~along~~to ~~with~~$100 ~~favorable~~million ~~prices~~in funding for ~~sugarcane~~grants ~~based~~to be used to increase the availability of higher blends of ethanol and biodiesel fuels. Funds may be awarded to retailers such as fueling stations and convenience stores to assist in the ~~United~~cost ~~States~~of installation or upgrading of fuel pumps and other infrastructure. In October 2020, ~~specifically~~the inUSDA ~~California~~announced the first round of awards to recipients of $22 million worth of grants. ~~Any~~A ~~increase~~second inround ~~ethanol~~of ~~imports~~grants ~~from~~was ~~Brazil~~awarded inequal ~~Fiscal~~to $18.4 million. In August 2021, ~~will~~the ~~further~~USDA ~~increase~~announced ~~domestic~~an ~~ethanol~~additional ~~supplies~~$26 million in infrastructure grants, bringing the ~~United~~total ~~States~~grants ~~and~~under ~~may~~the ~~result~~program into ~~ethanol~~a ~~price~~total ~~decreases~~of $66.4 million.

~~Although~~Effect ~~ethanol~~of ~~imported~~Governmental ~~from~~Regulation foreign countries, including Brazil, may be less expensive than domestically-produced ethanol, foreign demand, transportation costs and infrastructure constraints may temper the market impact on the United States.

~~Local~~The ~~Competition~~government's regulation of the environment changes constantly. Lincolnway Energy is subject to extensive air, water and ~~Smaller~~other ~~Competitors~~environmental regulations and Lincolnway Energy has been required to obtain a number of environmental permits to construct and operate the ethanol 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. Plant operations are governed by the Occupational Safety and Health Administration ("OSHA"). OSHA regulations may change such that the

Because the Lincolnway Energy ethanol plant is located in the center of Iowa, and because ethanol producers generally compete primarily with local and regional producers, the ethanol producers located in Iowa presently constitute the Company’s primary competition. According to the Iowa Renewable Fuels Association (IRFA) estimates, as of November 10, 2020, Iowa had 34 ethanol refineries in production, with a combined nameplate capacity to produce 4.5 billion gallons of ethanol.

In addition, smaller competitors also pose a threat. Farmer-owned cooperatives and independent companies consisting of groups of individual farmers and investors have been able to compete successfully in the ethanol industry; although Lincolnway Energy believes that smaller ethanol plants may have increasing difficulty in competing with larger plants over the longer term especially if the volatile market conditions of the last few years continue. These smaller competitors operate smaller facilities which do not affect the local price of corn grown in the proximity to the facility as much as larger facilities do, and some of the smaller competitors are farmer-owned and the farmer-owners either commit, or are incented by their ownership in the facility, to sell corn to the facility.

Competition from Alternative Renewable Fuels

Lincolnway Energy anticipates increased competition from renewable fuels that do not use corn as feedstock. Many of the current ethanol production incentives are designed to encourage the production of renewable fuels using raw materials other than corn, including 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

iscosts ~~ethanol produced from cellulose. Research continues regarding cellulosic ethanol, and various companies are in various stages~~ of ~~developing~~operating ~~and constructing some of~~ the ~~first~~ethanol ~~generation~~plant ~~cellulosic~~may ~~plants~~increase. Any ~~Several companies have commenced pilot projects to study the feasibility~~ of ~~commercially~~these ~~producing~~regulatory ~~cellulosic~~factors ~~ethanol~~may ~~and~~result ~~are producing cellulosic ethanol on a small scale and a few companies~~ in ~~the~~higher ~~United~~costs ~~States~~or ~~have~~other ~~begun~~adverse ~~producing~~conditions oneffecting aour commercial scale. Additional commercial scale cellulosic ethanol plants could be completed in the near future. Although these cellulosic ethanol plants have faced some financial and technological issuesoperations, ifcash ~~this~~flows 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. Cellulosic ethanol may also capture more government subsidies and ~~assistance~~financial ~~than corn based ethanol~~performance. ~~This could decrease demand for the Company's product or result in competitive disadvantages for the Company's ethanol production process.~~

ALincolnway ~~number~~Energy ofhas ~~automotive,~~obtained ~~industrial~~all ~~and~~of ~~power~~the ~~generation~~necessary ~~manufacturers~~permits ~~are~~to ~~developing~~operate ~~alternative~~the ~~clean~~ethanol ~~power~~plant. During ~~systems~~Fiscal ~~using~~Year ~~fuel cells~~2021, ~~plug-in~~Lincolnway ~~hybrids,~~Energy ~~electric~~incurred ~~cars~~costs orand ~~clean~~expenses ~~burning~~of ~~gaseous~~approximately ~~fuels. Like ethanol~~$32,500 ~~the~~complying ~~emerging~~with ~~fuel~~environmental ~~cell and electric-powered vehicle industries offer technological options to address worldwide energy costs~~laws, including the ~~long-term~~cost ~~availability~~ of ~~petroleum~~obtaining ~~reserves and environmental concerns~~permits. Although ~~Fuel~~Lincolnway ~~cells~~Energy ~~have~~has ~~emerged~~been assuccessful ain ~~potential~~obtaining ~~alternative~~all ~~to certain existing power sources because~~ of ~~their~~the ~~higher~~permits ~~efficiency, reduced noise and lower emissions. Fuel cell industry participants are~~ currently ~~targeting the transportation~~required, ~~stationary~~any ~~power~~retroactive ~~and~~change ~~portable power markets~~ in ~~order~~environmental ~~to decrease fuel costs~~regulations, ~~lessen~~either ~~dependence~~at ~~on crude oil and reduce harmful emissions;~~ the ~~same~~federal ~~can~~or bestate ~~said~~level, ofcould ~~electric-powered~~require ~~vehicles which have no direct reliance on fossil fuels. If~~ the ~~fuel~~Company ~~cell industry continues~~ to ~~expand~~obtain ~~and~~additional ~~gain~~or ~~broad~~new ~~acceptance~~permits ~~and~~or ~~becomes~~spend ~~readily~~considerable ~~available~~resources ~~to consumers for motor vehicle use, the Company may not be able to compete effectively. Likewise, participants~~ in ~~the~~complying ~~emerging~~with ~~electric-powered~~such ~~vehicle industry are currently targeting the transportation market to decrease dependence on crude oil and reduce harmful emissions~~regulations. IfManagement ~~the~~believes ~~electric-powered~~converting ~~vehicle~~the ~~industry~~plant ~~continues~~ to ~~expand~~use ~~and~~natural ~~gain~~gas ~~broad~~as ~~acceptance,~~ the ~~ethanol~~fuel ~~and~~source ~~larger~~instead ~~gasoline~~of ~~industry~~coal ~~may~~has ~~not~~reduced beour ~~able~~environmental tocompliance ~~compete effectively~~costs. ~~This additional competition could reduce the demand for ethanol, which would negatively impact Lincolnway Energy’s profitability.~~

~~Some~~ In ~~competitors~~late ~~operate~~2009, ~~their~~California ~~ethanol~~passed ~~plant~~a ~~and~~Low ~~produce~~Carbon ~~ethanol~~Fuels ~~using~~Standard ~~different~~("LCFS"). ~~sources~~The ofCalifornia ~~energy~~LCFS ~~than~~requires ~~coal~~that orrenewable ~~gas~~fuels orused ~~using~~in ~~various~~California ~~other~~must ~~sources~~accomplish ofcertain ~~energy. The~~reductions ~~other~~in ~~sources~~greenhouse ofgases ~~energy~~which ~~include~~is ~~biomass~~measured ~~and~~using ~~various~~a ~~forms~~lifecycle ~~of waste type products~~analysis, ~~such~~similar asto ~~wood~~the ~~waste,~~RFS. ~~tires,~~The ~~construction~~LCFS ~~waste~~could ~~and~~have ~~other~~a ~~waste~~negative ~~products. Those~~impact ~~competitors~~on ~~may~~demand ~~have~~for ~~lower~~corn-based ~~production~~ethanol and ~~input~~result ~~costs~~in ~~and/or~~decreased ~~higher~~ethanol ~~operating~~prices ~~efficiencies~~affecting ~~than~~our ~~Lincolnway~~ability ~~Energy, which would allow them~~ to ~~produce~~operate ~~and market their ethanol at lower prices than Lincolnway Energy~~profitably.

~~Since~~ In ~~ethanol~~August is2017, aBrazil ~~commodity,~~instituted ~~competition~~an inimport ~~the~~quota ~~industry~~for isethanol ~~predominately~~produced ~~based~~in onthe ~~price~~United States and ~~therefore~~exported to Brazil, ~~Lincolnway~~along ~~Energy's~~with ~~ability~~a to20% ~~compete~~tariff ~~successfully~~on ethanol imports in excess of the ~~ethanol~~quota. In ~~industry~~September ~~will~~2019, ~~depend~~the ~~upon~~Brazilians ~~its~~increased ~~ability~~the tariff free import quota from 600 million liters to ~~price~~750 ~~its~~million ~~ethanol~~liters. In ~~competitively~~December 2020, ~~which~~the intariff ~~turn~~free ~~will~~quota ~~depend~~was onrevoked ~~many~~and ~~factors,~~all ~~many~~U.S. ofethanol ~~which~~now ~~are~~faces ~~beyond~~a ~~the~~20% ~~control~~tariff when imported into Brazil. This tariff and quota have reduced exports of ~~Lincolnway~~ethanol ~~Energy~~to Brazil and ~~its~~may ~~management~~continue to negatively impact ethanol exports from the United States. AsAny ~~indicated~~reduction ~~above~~in ethanol exports could negatively impact market ethanol prices in the United States. In addition, ~~one~~the ofChinese ~~those~~government ~~factors~~increased isthe ~~that~~tariff ~~Lincolnway~~on ~~Energy~~United isStates ~~subject~~ethanol imports into China from 30% to ~~material~~45% and ~~substantial~~subsequently ~~competition~~to 70%. Due to other recent tariff activity between the United States and China, ~~including~~management ~~from~~does ~~competitors~~not ~~who~~expect ~~will~~these beChinese ~~able~~tariffs to ~~produce~~be orremoved ~~market~~in ~~significantly~~the ~~higher~~near ~~volumes~~term, despite recent positive discussions. Both China and Brazil have been major sources of import demand for United States ethanol and atdistillers ~~lower~~grains. ~~prices~~These trade actions may result in negative operating margins for United States ethanol producers.

Distillers Grain 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 RFA's 2020 Ethanol Industry Outlook (the “RFA 2020 Outlook”), ethanol plants produced more than 40 million metric tons of distillers grains and other animal feed. We compete with other producers of distillers grains products both locally and nationally.

The primary customers of distillers grains are dairy and beef cattle, according to the RFA 2020 Outlook. 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, Lincolnway Energy expects these markets to expand and create additional demand for distillers grains.

The market for distillers grains and animal feeds 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. Distillers grains contain nutrients, fat content, and fiber that Lincolnway Energy believes will differentiate its distillers grains products from other feed formulations. However, producers of other forms of animal feed may also have greater experience and resources than Lincolnway Energy does, and their products may have greater acceptance among producers of beef and dairy cattle, poultry and swine.

Principal Supply & Demand Factors

Lincolnway Energy's gross margin will depend significantly on the spread between ethanol and corn prices, and in particular the spread (sometimes referred to as the crush spread) between the price of a gallon of ethanol and the price for the amount of corn required to produce a gallon of ethanol. The price of ethanol and corn fluctuates frequently and widely, however, so any favorable spread between ethanol and corn prices which may exist from time to time cannot be relied upon as indicative of the future. It is possible for the circumstance to arise where corn costs increase and ethanol prices decrease to the point where Lincolnway Energy could be required to suspend operations. Any suspension of operations could have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

The supply and cost of other inputs needed by Lincolnway Energy can also vary greatly, such as natural gas, electric and other energy costs. Lincolnway Energy's ethanol plant currently utilizes natural gas as its primary energy source, and Lincolnway Energy estimates that natural gas costs will, on average, make up approximately 6% of Lincolnway Energy's annual total operating costs. The prices for and availability of natural gas are subject to numerous market conditions and factors which are beyond Lincolnway Energy's control. Significant disruptions in the supply of natural gas would impair Lincolnway Energy's ability to produce ethanol, and increases in natural gas prices or changes in Lincolnway Energy's natural gas costs relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.

Lincolnway Energy may attempt to offset a portion of the effects of such fluctuations by entering into forward contracts to supply ethanol and to purchase corn by engaging in hedging and other futures related activities, but those activities also involve substantial risks and may be ineffective to mitigate price fluctuations and may in fact lead to substantial losses.

Transportation issues and costs can also be a factor in the price for ethanol because ethanol is currently shipped by truck or by rail, and not by pipeline, and because ethanol generally needs to be shipped relatively long distances to a terminal where the ethanol can be blended with gasoline.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or of corn, natural gas and other inputs could adversely affect Lincolnway Energy's business, results of operation and financial position. Also, as a result of the volatility of the prices for these commodities, Lincolnway Energy's results will likely fluctuate substantially over time. Lincolnway Energy may experience periods during which the prices for ethanol and distillers grains decline and the costs of Lincolnway Energy's raw materials increase, which would result in lower profits or operating losses, which could be material at times, and which will adversely affect Lincolnway Energy's financial condition.

Federal Ethanol Support and Governmental Regulations

RFS and Related Federal Legislation

The ethanol industry is dependent on, and receives significant federal support from, the Federal Renewable Fuels Standard (the “RFS”) which has been and will continue to be a driving factor in the growth of ethanol usage. 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 U.S. Environmental Protection Agency (the “EPA”) is responsible for revising and implementing regulations to ensure that transportation fuel sold in the United States contains a minimum volume of renewable fuel.

The RFS original statutory volume requirements increases incrementally each year through 2022 when the mandate requires that the United States use 36 billion gallons of renewable fuels. 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.

Annually, the EPA is required to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligation. On November 30, 2018, the EPA issued the final rule for 2019 which set the 2019 annual volume requirements for renewable fuel at 19.92 billion gallons of renewable fuels per year (the "Final 2019 Rule"). On July 5, 2019, the EPA issued a proposed rule for 2020 which set the annual volume requirements for renewable fuel at 19.92 billion gallons (the "Proposed 2020 Rule"). Both the Final 2019 Rule and the Proposed 2020 Rule maintained the number of gallons that may be met by conventional renewable fuels such as corn based ethanol at 15.0 billion gallons. A public hearing on the Proposed 2020 Rule was held in July 2019 and the public comment period expired on August 30, 2019. The final rule was originally expected to be issued in November 2019.

However, on October 15, 2019, the EPA released a supplemental notice seeking additional comments on a proposed rule on adjustments to the way that annual renewable fuel percentages are calculated. The supplemental notice was issued in response to an announcement on October 4, 2019, by President Trump of a proposed plan to require refiners not exempt from the rules to blend additional gallons of ethanol to make up for the gallons exempted by the EPA's expanded use of waivers to small refineries. The effect of these waivers is that the refinery is no longer required to earn or purchase blending credits, known as Renewable Identification Numbers or "RINs", negatively affecting ethanol demand and resulting in lower ethanol prices. The proposed plan was expected to calculate the volume that refiners were required to blend by using a three-year average of exempted gallons. However, the EPA proposed to use a three-year average to account for the reduction in demand resulting from the waivers using the number of gallons of relief recommended by the United States Department of Energy. A public hearing on the proposed rule was held October 30 and the public comment period expired on November 30, 2019. On December 19, 2019, the EPA issued the final rule that set out the 2020 annual volume requirements (the "Final 2020 Rule") at 20.09 billion gallons up from the 19.92 billion gallons for 2019. Similar to the Final 2019 Rule, the Final 2020 Rule included 15.0 billion gallons of conventional corn-based ethanol.

The EPA has not yet released the proposed rule to set the renewable volume obligation for 2021.

Although the volume requirements set forth in the Final 2019 Rule are slightly higher than the final 2018 volume requirements (the "Final 2018 Rule") and the Final 2020 Rule volume requirements are slightly higher than those set forth in the Final 2019 Rule, the volume requirements under the Final 2018 Rule, the Final 2019 Rule and the Final 2020 Rule are all still significantly below the 26 billion gallons, 28 billion gallons and 30 billion gallons, respectively, statutory mandates, with significant reductions in the volume requirements for advanced biofuels as well.

Under the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. The Final 2018 Rule represented the first year the total proposed volume requirements were more than 20% below statutory levels. In response, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. The Final 2019 Rule is approximately 29% below the statutory levels representing the second consecutive year of reductions of more than 20% below the statutory mandates therefore triggering the mandatory reset under the RFS. The Final 2020 Rule is approximately 34% below the statutory targets, which represents the third consecutive year of reductions of more than 20% below the statutory mandates. After the issuance of the Final 2019 Rule, the EPA became statutorily required to modify the statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the volume requirements post-2022. These factors include environmental impact, domestic energy security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food prices, and rural economic development.

Federal mandates supporting the use of renewable fuels like the RFS are a significant driver of ethanol demand in the U.S. Ethanol policies are influenced by environmental concerns, diversifying our fuel supply, and an interest in reducing the country’s dependence on foreign oil. Consumer acceptance of flex-fuel vehicles and higher ethanol blends of ethanol in non-flex-fuel vehicles may be necessary before ethanol can achieve significant growth in U.S. market share. Another important factor is a waiver in the Clean Air Act, known as the "One-Pound Waiver", which allows E10 to be sold year-round, even though it exceeds the RVP limitation of nine pounds per square inch. At the end of May 2019, the EPA finalized a rule which extended the One-Pound Waiver to E15, so its sale can expand beyond flex-fuel vehicles during the June 1 to September 15 summer driving season. Although this rule is being challenged in court; the One-Pound Waiver is in effect, and E15 can be sold year round. However, with respect to the 2019 summer driving season, because the rule was not finalized until the end of May, the ethanol industry was unable to fully capitalize on increased E15 sales during the 2019 peak summer driving season. On March 11, 2020, the EIA reported gasoline consumption for 2020 flat with 2019 consumption with gasoline prices 18% lower than in 2019; however, this forecast did not take into account the impact of the COVID-19 pandemic on the U.S. economy. The COVID-19 virus has had, and will likely continue to have, a significant impact on the U.S. and worldwide economy over the next few months, making accurate forecasting near impossible.

Despite the recent actions by the Trump administration relating to E15, there continues to be uncertainty regarding the future of the RFS as a result of the significant number of small refinery waivers granted by the EPA exempting certain small refiners from the volume purchase requirements of the RFS. Under the RFS, the EPA assigns individual refiners, blenders, and importers the volume of renewable fuels they are obligated to use based on their percentage of total domestic transportation fuel sales. The mechanism that provides accountability in RFS compliance is the Renewable Identification Number (RIN). RINs are a tradeable commodity given that if refiners (obligated parties) need additional RINs to be compliant, they have to purchase them from those that have excess. Thus, there is an economic incentive to use renewable fuels like ethanol, or in the alternative, buy RINs. Obligated parties use RINs to show compliance with RFS-mandated volumes. RINs are attached to renewable fuels by ethanol producers and detached when the renewable fuel is blended with transportation fuel or traded in the open market.

The market price of detached RINs affects the price of ethanol in certain markets and influences the purchasing decisions by obligated parties.

On April 15, 2020, five Governors sent a letter to the EPA requesting a general waiver from the RFS due to the drop in demand caused by COVID-19 travel restrictions. They contend that the compliance costs (i.e. cost to purchase RINs) is onerous and could put some refineries out of business. In June 2020, the Attorneys General of seven sates joined in the request made to waive the 2020 RFS compliance mandate. The EPA had 90 days to respond, and as of this filing had yet to respond other than indicated that the EPA is “watching the situation closely and reviewing the governors’ letter.”

Although the Final 2018 Rule, the Final 2019 Rule and the Final 2020 Rule all maintain the number of gallons which may be met by conventional renewable fuels such as corn-based ethanol at 15.0 billion gallons this number does not take into account waivers granted by the EPA to small refiners for "hardship." The EPA can, in consultation with the Department of Energy (the "DOE"), waive the obligation for individual smaller refineries that are suffering “disproportionate economic hardship” due to compliance with the RFS. To qualify, for this “small refinery waiver,” the refineries must be under total throughput of 75,000 barrels per day and state their case for an exemption in an application to the EPA each year. These waivers allowed the recipient to no longer comply with the requirements of the RFS.

As of June 2020, the EPA has approved 85 exemptions for compliance years 2016 to 2018, freeing refineries from using 4 billion gallons of renewable fuel. This effectively reduces the annual renewable volume obligation for each year by that amount as the waivers exempt the obligating parties from meeting the RFS blending targets and the waived gallons are not reallocated to other obligated parties at this time. As discussed above, the mechanism that provides accountability in RFS compliance is the Renewable Identification Number or RIN. RINs are a tradeable commodity given that if refiners (obligated parties) need additional RINs to be compliant, they have to purchase them from those that have excess. Thus, there is an economic incentive to use renewable fuels like ethanol, or in the alternative, buy RINs. Granting these small refinery waivers effectively reduces the annual renewable volume obligation for each year by that amount as the waivers exempt the obligating parties from meeting the RFS blending targets and the waived gallons are not reallocated to other obligated parties at this time. The resulting surplus of RINs in the market has brought values down significantly In recent years, surplus of RINs in the market has brought values down significantly to under $0.20. In late 2017 D6 RIN prices were about $0.75 per gallon, averaged $0.30 in 2018, and less than $0.15 in 2019. However, recently RIN values have increased to near $0.60 based on lower ethanol production due to the COVID-19 pandemic.

Since higher RIN values help to make higher blends of ethanol more cost competitive, lower RIN values could hinder or at least slow retailer and consumer adoption of E15 and higher blends. As discussed further below, the Tenth Circuit Court of Appeals ruled that multiple small refinery exemptions were improperly extended by the EPA which caused D6 RIN trading prices to increase to approximately $0.24 per gallon in January 2020. As of June 30, 2020, the EPA has received 52 requests for small refinery waivers that will be up for consideration during 2020. If the EPA approves all 52 of the pending applications, the ethanol market would suffer another loss of 2 billion gallons of biofuel blending requirements which will adversely impact RIN prices and the ethanol market. These waiver requests represent an effort by refineries to bypass the ruling of the Tenth Circuit and establish a continuous chain of exemptions. Despite the recent increase in RIN values resulting from decreased ethanol production in response to the COVID-19 pandemic, if the EPA continues to grant discretionary waivers and RIN prices continue to fall, it could negatively affect ethanol prices,

The Trump Administration has not announced a plan to reallocate ethanol gallons lost to exemptions in the current year and therefore, the continued granting of waivers and the failure of the Trump Administration to take any action to reallocate the lost exemptions will continue to negatively impact ethanol demand and RIN and ethanol prices.

Biofuels groups have filed a lawsuit in the U.S. Federal District Court for the D.C. Circuit, challenging the Final 2019 Rule over the EPA’s failure to address small refinery exemptions in the rulemaking. This is the first RFS rulemaking since the expanded use of the exemptions came to light, however the EPA has refused to cap the number of waivers it grants or how it accounts for the retroactive waivers in its percentage standard calculations. The EPA has a statutory mandate to ensure the volume requirements are met, which are achieved by setting the percentage standards for obligated parties. The EPA’s current approach runs counter to this statutory mandate and undermines Congressional intent. Biofuels groups argue the EPA must therefore adjust its percentage standard calculations to make up for past retroactive waivers and adjust the standards to account for any waivers it reasonably expects to grant in the future.

In a supplemental rulemaking to the Proposed 2020 Rule, the EPA changed their approach, and for the first time accounted for the gallons that they anticipate they will be waiving from the blending requirements due to small refinery exemptions. To accomplish this, they are adding in the trailing three year average of gallons the Department of Energy (the "DOE") recommended be waived, in effect raising the blending volumes across the board in anticipation of waiving the

obligations in whole or in part for certain refineries that qualify for the exemptions. Although in past years the EPA has disregarded recommendations from the Department of Energy in the rule the DOE stated its intent to adhere to these recommendations going forward, including granting partial waivers rather than an all or nothing approach. The EPA will be adjudicating the 2020 compliance year small refinery exemption applications in early 2021, but have indicated they will adhere to Department of Energy recommendations for the 2019 compliance year applications as well, which should be adjudicated in 2020.

If the EPA’s decisions to reduce the volume requirements under the RFS statutory mandates are allowed to stand, if the volume requirements are further reduced or if the EPA continues to grant waivers to small refineries, the market price and demand for ethanol would be adversely affected which would negatively impact our financial performance. The EPA's based the projected volume of gasoline and diesel that was exempt in 2020 on utilizing the three-year rolling average of relief recommended by the Department of Energy, rather than the three year rolling level of actual exemptions advocated by agricultural interests.

On May 29, 2018, the National Corn Growers Association, National Farmers Union and the Renewable Fuels Association filed a petition challenging the EPA’s grant of waivers to three specific refineries seeking that the court reject the waivers granted to the three as an abuse of EPA authority. These waived gallons are not redistributed to obligated parties, and in effect, reduce the aggregate Renewable Volume Obligations or "RVOs" under the RFS. If the specific waivers granted by the EPA and/or its lower criteria for granting small refinery waivers under the RFS are allowed to stand, or if the volume requirements are further reduced, it could have an adverse effect on the market price and demand for ethanol which would negatively impact the Company’s financial performance.

On January 24, 2020, the U.S. Court of Appeals for the Tenth Circuit announced that the three exemptions were improperly issued by the EPA. The Court held that the EPA cannot "extend" exemptions to any small refineries whose earlier, temporary exemptions had lapsed; rather, that small refinery exemptions may only be granted to refineries that had secured them continuously each year since 2010. The Court concluded that the EPA exceeded its statutory authority in granting these petitions because there was nothing for the agency to "extend". Utilizing this criteria, there would have been a maximum of seven small refineries that could have received continuous extensions, yet the EPA has granted thirty five exemptions in a single year. The Court also found the EPA had abused their discretion in failing to explain how the EPA could maintain that such refineries would incur an economic hardship while continuing to claim that the costs of RIN compliance are passed through and recovered by those same refineries. Consistent with this ruling, in September 2020, the EPA denied certain small refinery exemption petitions filed by oil refineries in 2020 seeking retroactive relief from their ethanol use requirements for prior years. There are currently still some petitions for waivers pending before the EPA for 2019 and 2020 compliance years.

Related to the recent lawsuits, the Renewable Fuels Association, American Coalition for Ethanol, Growth Energy, National Biodiesel Board, National Corn Growers Association, Biotechnology Industry Organization, and National Farmers Union petitioned the EPA on June 4, 2018 to change its regulations to account for lost volumes of renewable fuel resulting from the retroactive small refinery exemptions. This petition to the EPA seeks a broader, forward-looking remedy to account for the collective lost volumes caused by the recent increase in retroactive small refinery RVO exemptions. The EPA has not reallocated volume exemptions in prior years and continued to approve 31 new requests in 2019. On October 29, 2019, the U.S. House of Representatives Committee on Energy and Commerce met to examine the effects of the small refinery exemptions on biofuels and agriculture since 2016. Companies were seeking the EPA to make available more information on refinery exemptions.

On February 4, 2019, Growth Energy filed a lawsuit in the Court of Appeals for the District of Columbia against the EPA challenging the EPA’s failure to address small refinery exemptions in the Final 2019 Rule. An administrative stay has been granted to research the contents of the lawsuit.

In September 2020, The Next Generation Fuels Act was introduced into Congress which mandates greater fuel octane to reduce carbon emissions from transportation, improve air quality and increase the demand for biofuels. The legislation establishes a minimum octane standard for gasoline and requires sources of the added octane value to reduce carbon emissions by at least 30 percent compared to baseline gasoline. In addition, the bill also includes several additional provisions which would benefit the ethanol industry if adopted as drafted.

Although the maintenance of the 15 billion gallon threshold for volume requirements that may be met with corn-based ethanol in the Final 2018 Rule, Final 2019 Rule and Final 2020 Rule, together with the application of the One-Pound Waiver to E15 permitting the year round sale of E15 reflects continuing federal support for domestic ethanol production, if the

RFS is materially modified, repealed or otherwise invalidated, such reform could adversely affect the demand and price for ethanol and the Company's profitability.

COVID-19 Legislation

In response to the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") in late March 2020 in an attempt to offset the subsequent economic damage. The CARES Act created and funded multiple programs that have impacted or could impact our industry. The United States Department of Agriculture ("USDA") was given additional resources for the Commodity Credit Corporation ("CCC") and they are using those funds to provide direct payments to farmers, including corn farmers from whom we purchase most of our feedstock for ethanol production. Similar to the trade aid payments made by the USDA over the past two years, this cash injection for farmers could cause them to delay marketing decisions and increase the price we have to pay to purchase the corn. The USDA did not include any CCC funds for ethanol plants ~~as of this filing~~.

The CARES Act also provided for the Small Business Administration (the "SBA") to assist companies that constitute small business and keep them from laying off workers. The Paycheck Protection Program (the "PPP") was created and quickly paid out all of the funds appropriated, including some to farmers and to ethanol plants. Although we received our PPP Loan under the CARES Act, as discussed above, the receipt of PPP funds by farmers could, like the CCC funds, incentivize them to delay marketing corn which could increase the price of corn.

Ethanol is the primary ingredient in hand sanitizer. The CARES Act provided a tax exclusion on the shipment of undenatured ethanol for use in manufacturing hand sanitizer. The FDA originally provided expanded guidance to allow for more denaturants to be used in ethanol intended for hand sanitizer production, and expanded the grades of ethanol allowed for the duration of the public health crisis. However, in June 2020, the FDA prohibited certain ethanol plants without specialized purification processes in place from producing and distributing hand sanitizer by limiting chemicals permitted in the finished product and as a result forced such ethanol plants to halt production and cancel supply agreements.

Additional COVID-19 economic relief packages are under consideration in Congress which include may provisions aimed at benefiting the renewable fuels industry; however there is no guarantee that any such relief will be enacted or if enacted, will include such provisions.

State Initiatives and Mandates

In 2006, Iowa passed legislation promoting the use of renewable fuels in the state. One of the most significant provisions of the Iowa renewable fuels legislation was a renewable fuels targeted set of tax credits encouraging an escalating percentage of the gasoline sold in Iowa to consist of, be blended with, or be replaced by, renewable fuels. To receive the tax credit, retailers of gasoline are required to reach escalating annual targets of the percentage of their gasoline sales that consist of, are blended with, or are replaced by, renewable fuels. This renewable fuel tax credit originally required 10% of the gasoline that retailers sold to fall within the renewable fuels definitions to receive the credit and has increased incrementally to 25% as of January 1, 2020. This tax credit will automatically repeal itself for tax years beginning on or after January 1, 2021 unless legislative action is taken.

Higher Ethanol Blends

Demand for ethanol has been affected by moderately increased consumption of E85 fuel, a blend of 85% ethanol and 15% gasoline, which is available for use in flex fuel vehicles. There are more than 24 million flex fuel vehicles on the road today, or approximately 8% of all vehicles, representing more vehicles than require premium gasoline today. In addition to use as a fuel in flexible fuel vehicles, E85 can be used as an aviation fuel, as reported by the National Corn Growers Association, and as a hydrogen source for fuel cells. According to the RFA, there are currently more than 24 million flexible fuel vehicles capable of operating on fuel blends up to 85% ethanol in the United States and nearly all of the major automakers have available flexible fuel mode and have indicated plans to produce several million more flexible fuel vehicles per year. The Renewable Fuels Association reports that there are more than 4,700 retail gasoline stations supplying E85 or other ethanol flex fuel blends. While the number of retail E85 suppliers has increased each year, this remains a relatively small percentage of the total number of U.S. retail gasoline stations, which is approximately 170,000. In order for E85 fuel to increase demand for ethanol, it must be available for consumers to purchase it. As public awareness of ethanol and E85 increases along with E85’s increased availability, management anticipates some growth in demand for ethanol associated with increased E85 consumption. The USDA 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.

Changes in Corporate Average Fuel Economy (“CAFE”) standards have also benefited the ethanol industry by encouraging use of E85 fuel products. CAFE provides an effective 54% efficiency bonus to flexible-fuel vehicles running on E85. This variance encourages auto manufacturers to build more flexible-fuel models, particularly in trucks and sport utility vehicles that are otherwise unlikely to meet CAFE standards.

E15 is a blend of higher octane gasoline and up to 15% ethanol. E15 was approved for use in model year 2001 and newer cars, light-duty trucks, medium-duty passenger vehicles (SUVs) and all flex-fuel vehicles by the U.S. Environmental Protection Agency in 2012, This approved group of vehicles includes 90% of the cars, trucks and SUVs on the road today According to the Renewable Fuel Association, this higher octane fuel is available in 30 states at retail fueling stations. Sheetz, Kum & Go, Murphy USA, MAPCO Express, Protec Fuel, Minnoco, Thornton's, Hy-Vee, Growmark and Casey's all offer E15 to 2001 and newer vehicles today at several stations. One of the historic challenges with the growth of the E15 market is the fact that, the waiver in the Clean Air Act, known as the One-Pound Waiver, which allows E10 to be sold year-round, does not apply to E15 or higher blends, even though it has similar physical properties to E10. On March 12, 2019, the EPA proposed regulatory changes to allow E15 to take advantage of the One-Pound Waiver and authorized the sale of E15 during the summer months even though it exceeds the Reid Vapor Pressure limitation. At the end of May 2019, the EPA finalized the rule extending the One-Pound Waiver to E15 so its sale can expand beyond flex-fuel vehicles during the June 1 to September 15 summer driving season. This rule is being challenged in an action filed in Federal District Court for the D.C. Circuit.

In May 2020, the USDA announced the Higher Blends Infrastructure Incentive Program which consists of up to $100 million in funding for grants to be used to increase the availability of higher blends of ethanol and biodiesel fuels and to help increase the implementation of “blender pumps” in the United States. Funds may be awarded to retailers such as fueling stations and convenience stores to assist in the cost of installation or upgrading of fuel pumps and other infrastructure which helps offset the cost of introducing higher level 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 including E10, E15, E20, E30, E40, E50 and E85. 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, the expense of blender pumps has delayed their availability in the retail gasoline market. In October 2020, the USDA announced the first round of awards to recipients of $22 million worth of grants.

The program’s predecessor, the Biofuel Infrastructure Partnership, was implemented by the USDA in May of 2015 to increase the availability of higher blends to fund the installation of new ethanol infrastructure. The USDA reports that to date, 20 states have received Biofuel Infrastructure Partnership federal funding in the aggregate amount of almost $100 million covering nearly 1,500 stations with almost 5,000 pumps.

Cellulosic Ethanol

The Energy Independence and Security Act provided numerous funding opportunities in support of cellulosic ethanol. In addition, the RFS mandates an increasing level of production of biofuels which are not derived from corn. These policies suggest an increasing policy preference away from corn ethanol and toward cellulosic ethanol.

Environmental and Other Regulations

Ethanol production involves the emission of various airborne pollutants, including particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide. Ethanol production also requires the use of significant volumes of water, a portion of which is treated and discharged into the environment. Lincolnway Energy is required to maintain various environmental and operating permits. Even though it has successfully acquired the permits necessary for operations, any retroactive change in environmental regulations, either at the federal or state level, could require Lincolnway Energy to obtain additional or new permits or spend considerable resources on complying with such regulations. In addition, if Lincolnway Energy sought to expand the plant’s capacity in the future, above its current 50 million gallons nameplate capacity

or such higher amount allowed under its existing permits, it would likely be required to acquire additional regulatory permits and could also be required to install additional pollution control equipment. The failure of Lincolnway Energy to obtain and maintain any environmental and/or operating permits currently required or which may be required in the future could force the Company to make material changes to its plant or to shut down altogether.

The U.S. Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. As stated above, the Company believes the final RFS regulations grandfather the plant at its current operating capacity, though expansion of the plant will need to meet a threshold of a 20% reduction in greenhouse gas emissions from a baseline measurement to produce ethanol eligible for the RFS mandate.

Separately, the California Air Resources Board (“CARB”) has adopted a Low Carbon Fuel Standard (the “LCFS”) requiring a 10% reduction in greenhouse gas emissions from transportation fuels by 2020 using a lifecycle greenhouse gas emissions calculation. On December 29, 2011, a federal district court in California ruled that the California LCFS was unconstitutional which halted implementation of the California LCFS. CARB appealed this court ruling and on September 18, 2013, the federal appellate court reversed the federal district court finding the LCFS constitutional and remanding the case back to federal district court to determine whether the LCFS imposes a burden on interstate commerce that is excessive in light of the local benefits. On June 30, 2014, the United States Supreme Court declined to hear the appeal of the federal appellate court ruling and CARB recently re-adopted the LCFS with some slight modifications. The LCFS could have a negative impact on the overall market demand for corn-based ethanol and result in decreased ethanol prices.

Part of Lincolnway Energy’s business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge and disposal of hazardous materials. Other examples of government policies that can have an impact on the Company’s business include tariffs, duties, subsidies, import and export restrictions and outright embargoes.

The Company also employs maintenance and operations personnel at its plant. In addition to the attention that the Company places on the health and safety of its employees, the operations at the plant are governed by the regulations of the Occupational Safety and Health Administration.

The Company has obtained all of the necessary permits to operate the plant. Although Lincolnway Energy has been successful in obtaining all of the permits currently required, any retroactive change in environmental or other applicable regulations, either at the federal or state level, could require the Company to obtain additional or new permits or spend considerable resources in complying with such regulations.

Dependence on One or a Few Major Customers

As discussed above, Lincolnway Energy has marketing agreements with certain third parties for the purpose of marketing and distributing its principal products, ethanol and distillers grain. Currently, Lincolnway Energy does not have the ability to market its ethanol and distillers grains internally should its third party marketers be unable or refuse to market these ~~products at acceptable prices. However, Lincolnway Energy anticipates that it would be able to secure competitive marketers should it need to replace any of its current marketers for any reason.~~

products at acceptable prices. However, Lincolnway Energy anticipates that it would be able to secure competitive marketers should it need to replace any of its current marketers for any reason.

Working Capital

Lincolnway Energy primarily uses its working capital for purchases of raw materials necessary to operate the ethanol plant, for payments on its credit facilities, for distributions to its members and for capital expenditures to maintain and upgrade the ethanol plant. Lincolnway Energy’s primary sources of working capital are income from operations as well as various loan arrangements, including a revolving term loan and a revolving line of credit with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA.

Seasonality of Sales

Lincolnway Energy experiences some seasonality of demand for its ethanol and distillers grains. 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, Lincolnway Energy experiences some seasonality of demand for ethanol in the summer months and during holiday seasons related to increased driving.

Patents, Trademarks, Licenses, Franchises and Concessions

Lincolnway, Lincolnway Energy and PureStream are common law trademarks and/or service marks of the Company. Other parties’ marks referred to in this report are the property of their respective owners. Lincolnway Energy was granted a perpetual license by ICM, Inc. (“ICM”) to use certain ethanol production technology necessary to operate its plant. There is no ongoing fee or definitive calendar term for this license.

Human Capital

Our employees are the cornerstone of Lincolnway Energy and its operations. As of December 1 22, ~~2020~~2021, Lincolnway Energy had 3438 employees, with 20 open positions. Employee safety remains Lincolnway Energy's top priority. The Company develops and administers company-wide policies to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (OSHA) standards. This includes routine safety training and assessments as well as annual safety audits.

Financial Information about Geographic Areas

All of Lincolnway Energy’s operations are domiciled in the United States. All of the products sold to Lincolnway Energy’s customers for fiscal years 2020, 2019, and 2018 were produced in the United States and all of its long-lived assets are domiciled in the United States.

As discussed above, Lincolnway Energy has engaged third-party marketers who decide where to market Lincolnway Energy’s ethanol and distillers grains and the Company has no control over the marketing decisions made by its third-party marketers. These third-party marketers may decide to sell Lincolnway Energy’s products in countries other than the United States. Although exports of ethanol and distillers grains produced in the United States have increased in the past several years, despite such increase and the potential for the sale of Lincolnway Energy’s products in the international market by its marketers, the Company anticipates that its products will still be marketed and sold principally in the domestic market.

Lincolnway Energy sells its corn oil directly to end users and third party brokers in the domestic market and its carbon dioxide is sold to Air Products which operates a carbon dioxide liquefaction plant on the Lincolnway Energy property.

Available Information

Information about the Company is available on its website at www.lincolnwayenergy.com under the “Investors” tab which includes links to the reports the Company has filed with the SEC. The information found on the Company’s website is not part of this or any other report the Company files with or furnishes to the SEC.

The public may read and copy any materials Lincolnway Energy files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.

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 Lincolnway Energy may face. The following risks, together with additional risks and uncertainties not currently known to the Company or that the Company currently deems immaterial, could impair the Company’s financial condition and results of operation.

Risks Relating to Lincolnway Energy and Its Business

17The COVID-19 Pandemic May Negatively Affect Our Operations, Financial Condition, And Demand For Our Products Depending On The Severity And Longevity Of The Pandemic And Its Effects. The COVID-19 pandemic has in the past and continues to impact countries, communities, supply chains and commodities markets, in addition to the global financial markets. This pandemic has resulted in social distancing, travel bans, governmental stay-at-home orders, and quarantines, and these may limit access to our facilities, customers, suppliers, management, support staff and professional advisors. At this time it is not possible to fully assess the impact of the COVID-19 pandemic on the Company’s operations and capital requirements, but the aforementioned factors, among other things, may impact our operations, financial condition and demand for our products, as well as our overall ability to react timely and mitigate the impact of this event. Furthermore, the aforementioned factors may hamper efforts to comply with our filing obligations with the Securities and Exchange Commission. Depending on its severity and longevity, the COVID-19 pandemic may have a material adverse effect on our business, customers, and members.

~~The~~Declines ~~COVID-19~~In ~~Pandemic May Negatively Affect Our Operations, Financial Condition, And Demand For Our Products Depending On~~ The ~~Severity~~Price ~~And Longevity~~ Of ~~The~~Ethanol ~~Pandemic~~Would ~~And~~Significantly ~~Its~~Reduce ~~Effects.~~ The ~~COVID-19~~Company’s ~~pandemic is currently impacting countries, communities, supply chains and commodities markets, in addition to the global financial markets~~Revenues. ~~This~~Although ~~pandemic~~Lincolnway ~~has~~Energy's ~~resulted~~ethanol inplant ~~social~~produces ~~distancing,~~distillers ~~travel bans~~grains, ~~governmental~~corn ~~stay-at-home~~oil ~~orders,~~ and ~~quarantines,~~carbon ~~and these may limit access to our facilities~~dioxide, ~~customers,~~ethanol ~~suppliers,~~is ~~management,~~the ~~support~~primary ~~staff~~ and ~~professional~~material ~~advisors.~~source ~~At this time it is not possible to fully assess the impact~~ of ~~the~~revenue ~~COVID-19~~for ~~pandemic~~Lincolnway ~~on the Company’s operations and capital requirements~~Energy, ~~but~~having ~~the~~generated ~~aforementioned~~approximately ~~factors~~76%, ~~among other things~~77%, ~~may impact our operations, financial condition~~ and ~~demand for our products~~77%, ~~as well as our overall ability to react timely and mitigate the impact~~ of ~~this~~Lincolnway ~~event.~~Energy's ~~Furthermore,~~total ~~the~~revenues aforementioned factors may hamper efforts to comply with our filing obligations with the Securities and Exchange Commission. Depending on its severity and longevity, the COVID-19 pandemic may have a material adverse effect on our business, customers, and members.

Declines In The Price Of Ethanol Would Significantly Reduce The Company’s Revenues. Although Lincolnway Energy's ethanol plant produces distillers grains, corn oil and carbon dioxide, ethanol is the primary and material source of revenue for Lincolnway Energy, having generated approximately 77%, 77%, and 80%, of Lincolnway Energy's total revenues for the fiscal years ended September 30, 2020, 2019, and 2018, respectively. The sales prices of ethanol 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. The Company is dependent on a favorable spread between the price the Company receives for its ethanol and the price it pays for corn and natural gas. Any lowering of ethanol prices, especially if it is associated with increases in corn and natural gas prices, may affect the Company’s ability to operate profitably. 10

~~One~~for of the ~~most~~fiscal ~~significant factors influencing the price of ethanol has been the substantial increase in ethanol production in recent~~ years. ~~According~~ended toSeptember ~~the~~30, ~~RFA~~2021, ~~domestic~~2020, ~~ethanol~~and ~~production capacity increased from an annualized rate of 1.5 billion gallons per year in 1999 to 16.9 billion gallons in~~ 2019~~. In addition~~, ifrespectively. ~~ethanol~~The ~~production~~sales ~~margins~~prices ~~improve, owners~~ of ethanol ~~production~~can ~~facilities~~be ~~may~~volatile ~~increase~~as ~~production~~a ~~levels,~~result ~~thereby~~of ~~resulting~~a innumber ~~further~~of ~~increases~~factors insuch ~~domestic~~as ~~ethanol~~overall ~~inventories. Any~~supply ~~increase~~and indemand, the ~~supply~~price of ~~ethanol~~gasoline ~~may~~and ~~not~~corn, belevels ~~commensurate~~of ~~with~~government ~~increases~~support, inand the ~~demand~~availability ~~for~~and ~~ethanol,~~price ~~thus~~of ~~leading~~competing ~~to lower ethanol prices~~products. ~~Also,~~The ~~demand~~Company ~~for~~is ~~ethanol~~dependent ~~could~~on ~~be impaired due to~~ a ~~number~~favorable ofspread ~~factors,~~between ~~including regulatory developments, direct and indirect effects of~~ the ~~COVID-19~~price ~~pandemic, increases in, or~~ the ~~imposition~~Company ofreceives ~~new,~~for ~~foreign~~its ~~tariffs~~ethanol and ~~reduced~~the ~~United~~price ~~States~~it ~~gasoline~~pays ~~consumption.~~for ~~Reduced~~corn ~~gasoline consumption has occurred in the past~~ and ~~could~~natural ~~occur~~gas. Any inlowering ~~the future as a result~~ of ~~increased~~ethanol ~~gasoline or oil~~ prices, orespecially ~~other~~if ~~factors~~it ~~such~~is asassociated ~~increased~~with ~~automobile~~increases ~~fuel~~in ~~efficiency.~~corn ~~Any~~and ofnatural ~~these~~gas ~~outcomes~~prices, ~~could~~may ~~have~~affect ~~a material adverse effect on~~ the Company'’s ~~results~~ability ofto ~~operations,~~operate ~~cash flows and financial condition~~profitably.

Lincolnway Energy anticipates the price of ethanol to continue to be volatile during Fiscal 2021 as a result of the net effect of changes in the price of gasoline and corn and increased ethanol supply which may be offset by increased ethanol demand. Declines in the prices the Company receives for its ethanol will lead to decreased revenues and may result in our inability to operate the ethanol plant profitably for an extended period of time.

If ethanol prices decline to the point where it is unprofitable to produce ethanol and remain at that level, Lincolnway Energy could be required to suspend operations until the price increases to a level where it is once again economical or profitable to produce and market the ethanol. Any suspension of operations would have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

Decreasing Oil And Gasoline Prices Resulting In Ethanol Trading At A Premium To Gasoline Could Negatively Impact The Ability To Operate Profitably. Ethanol has historically traded at a discount to gasoline; however, with the recent decline in gasoline prices, at times ethanol ~~may~~has ~~trade~~traded at a premium to gasoline, causing a financial disincentive for discretionary blending of ethanol beyond the rates required to comply with the Renewable Fuel Standard. Discretionary blending is an important secondary market which is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. In past years, the price of ethanol has generally been less than the price of gasoline which increased demand for ethanol from fuel blenders. Lower oil prices drive down the price of gasoline which reduces the spread between the price of gasoline and the price of ethanol which could discourage discretionary blending, dampen the export market and result in a downward market adjustment in the price of ethanol. ~~Any~~If ~~extended period where~~ oil and gasoline prices were to remain lower than ethanol prices for a significant period of time it could have a material adverse effect on the Company’s business, results of operation and financial condition which could decrease the value of its units.

The Impact Of Adverse Economic Conditions On Gasoline Could Have A Material Adverse Impact On The Price And Demand For Ethanol And Our Financial Performance. The demand for gasoline correlates closely with general economic growth rates. The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on gasoline prices. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, pandemics (e.g.COVID-19), government austerity programs, or currency exchange rate fluctuations, can also impact the demand for gasoline. Sovereign debt downgrades, defaults, inability to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, and other events or conditions (e.g. pandemics such as COVID-19), that impair the functioning of financial markets and institutions also may adversely impact the demand for gasoline. Reduced demand for gasoline may impair demand for ethanol, harm our operations and negatively impact our financial condition.

1Demand 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. 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 become a contentious issue with automobile manufacturers and environmental groups having fought against higher percentage ethanol blends. E15 is a blend which is 15% ethanol and 85% conventional gasoline. Although there have been significant developments towards the availability of E15 in the marketplace, there are still obstacles to meaningful market penetration by E15.

orA ~~currency~~Reduction ~~exchange~~In ~~rate~~Ethanol ~~fluctuations,~~Exports ~~can~~To ~~also~~Brazil ~~impact~~Due ~~the~~To ~~demand~~The ~~for~~Imposition ~~gasoline.~~By ~~Sovereign~~The ~~debt~~Brazilian ~~downgrades,~~Government ~~defaults,~~Of ~~inability~~A toTariff ~~access~~On ~~debt~~U.S. ~~markets~~Ethanol ~~due~~Could toHave ~~credit~~A orNegative ~~legal~~Impact ~~constraints,~~On ~~liquidity~~Ethanol ~~crises,~~Prices. ~~the~~Brazil ~~breakup~~has orhistorically ~~restructuring~~been ofa ~~fiscal,~~top ~~monetary,~~destination orfor ~~political~~ethanol ~~systems~~produced ~~such~~in as the ~~European~~United ~~Union~~States. However, ~~and~~in ~~other~~2017 ~~events~~Brazil orimposed ~~conditions~~a ~~(e.g.~~tariff ~~pandemics~~on ~~such~~ethanol aswhich ~~COVID-19),~~is ~~that~~produced ~~impair~~in the ~~functioning~~United ofStates ~~financial~~and ~~markets~~exported ~~and~~to ~~institutions~~Brazil. ~~also~~This ~~may~~tariff ~~adversely~~has ~~impact~~resulted ~~the~~in ~~demand~~no ~~for~~ethanol ~~gasoline.~~being ~~Reduced~~exported ~~demand~~to ~~for~~Brazil ~~gasoline~~in ~~may~~recent ~~impair~~years ~~demand~~and ~~for~~could negatively impact the market price of ethanol, ~~harm~~in ~~our~~the ~~operations~~United States and ~~negatively~~the ~~impact~~Company’s ~~our~~ability ~~financial~~to ~~condition~~operate profitably.

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. 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 become a contentious issue with automobile manufacturers and environmental groups having fought against higher percentage ethanol blends. E15 is a blend which is 15% ethanol and 85% conventional gasoline. Although there have been significant developments towards the availability of E15 in the marketplace and the EPA issued a final rule allowing the year round sale of E15, there are still obstacles to meaningful market penetration by E15.

A Reduction In Ethanol Exports To Brazil Due To The Imposition By The Brazilian Government Of A Tariff On U.S. Ethanol Could Have A Negative Impact On Ethanol Prices. Brazil has historically been a top destination for ethanol produced in the United States. However, in 2017 Brazil imposed a tariff on ethanol which is produced in the United States and exported to Brazil. This tariff has resulted in a decline in demand for ethanol from Brazil and could negatively impact the market price of ethanol in the United States and the Company’s ability to operate profitably.

Decreased Prices For Distillers Grains Could Adversely Affect The Company’s Results Of Operations And Its Ability To Operate At A Profit. Distillers grains compete with other protein-based animal feed products. The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which these products are derived. Downward pressure on commodity prices, such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains.

Historically, sales prices for distillers grains have correlated with prices of corn. However, there have been occasions when the price increase for this co-product has lagged behind increases in corn prices. In addition, the Company’s distillers grains co-product competes with products made from other feedstocks, the cost of which may not have risen as corn prices have risen. Consequently, the price the Company may receive for distillers grains may not rise as corn prices rise, thereby lowering its cost recovery percentage relative to corn.

Due to industry increases in U.S. dry mill ethanol production, the production of distillers grains in the United States has increased dramatically, and this trend may continue. This may cause distillers grains prices to fall in the United States, unless demand increases or other market sources are found. To date, demand for distillers grains in the United States has increased roughly in proportion to supply. Lincolnway Energy believes this is because U.S. farmers use distillers grains as a feedstock, and distillers grains are slightly less expensive than corn, for which it is a substitute. However, if prices for distillers grains in the United States fall, it may have an adverse effect on the Company’s business and financial condition.11

~~The~~grains ~~Chinese Antidumping and Countervailing Duty Investigation and Anti~~co-~~Subsidy~~product ~~Duty~~competes ~~May~~with ~~Have~~products amade ~~Negative~~from ~~Effect~~other ~~on the Price of and Demand for Distillers Grains in the U.S. and Negatively Affect Lincolnway Energy’s Profitability Historically~~feedstocks, the ~~United~~cost ~~States ethanol industry exported a significant amount~~ of distillers grains to China. However, the Chinese government began an antidumping and countervailing duty investigation related to distillers grains imported from the United States and announced a final ruling in 2017 which ~~imposed~~may ~~substantial~~not duties on U.S. distillers grains. The imposition of these duties resulted in plummeting demand from this top importer requiring United States producers to seek out alternatives markets, most notably in Mexico and Canada. The imposition of these duties created significant trade barriers and have ~~significantly~~risen ~~decreased~~as ~~demand~~corn ~~from China and the~~ prices ~~for~~have ~~distillers grains produced in the United States~~risen. ~~Although~~ ~~the~~Consequently, ~~market has substantially adjusted to~~ the ~~loss~~price ~~of this key market, if alternative markets are not found and maintained,~~ the ~~failure~~Company ofmay ~~China~~receive ~~to return as a significant export market~~ for ~~U.S.~~ distillers grains ~~combined~~may ~~with~~not ~~lower~~rise ~~domestic~~as corn prices ~~could negatively impact the price of distillers grains and the profitability of the Company. On December 13~~rise, ~~2019,~~thereby ~~the~~lowering ~~U.S.~~its ~~and~~cost ~~China~~recovery ~~announced~~percentage anrelative ~~agreement~~ to ~~the first phase of a trade deal (the "Phase One Agreement") pursuant to which China agreed to purchase billions of dollars in agricultural products in exchange for the U~~corn.S. agreeing not to pursue a new round of tariffs starting January 2020. No further agreements have been reached on this trade deal front, and the impact of the Phase One Agreement and any forthcoming trade deal on the distillers grain market cannot be determined at this time. According to the Peterson Institute for International Economics, through October 2020 China has only purchased approximately 56% of its year-

2 Due to industry increases in U.S. dry mill ethanol production, the production of distillers grains in the United States has increased dramatically, and this trend may continue. This may cause distillers grains prices to fall in the United States, unless demand increases or other markets are developed. If prices for distillers grains in the United States fall, it may have an adverse effect on the Company’s business and financial condition.

toThe Chinese Antidumping and Countervailing Duty Investigation and Anti-~~date~~Subsidy ~~purchase~~Duty ~~commitments~~May ~~under~~Have a Negative Effect on the ~~Phase~~Price ~~One~~of ~~Agreement~~and Demand for Distillers Grains in the U.S. and Negatively Affect Lincolnway Energy’s Profitability Historically, the United States ethanol industry exported a significant amount of distillers grains to China. However, the Chinese government began an antidumping and ~~there~~countervailing ~~can~~duty beinvestigation norelated ~~certainty~~to atdistillers grains imported from the United States and announced a final ruling in 2017 which imposed substantial duties on U.S. distillers grains. The imposition of these duties resulted in plummeting demand from this ~~time~~top importer requiring United States producers to seek out alternatives markets, most notably in Mexico and Canada. The imposition of ~~whether~~these ~~its~~duties ~~purchasing~~created ~~will~~significant ~~improve~~trade barriers and have significantly decreased demand from China and the prices for distillers grains produced in the United States. If alternative markets are not found and maintained, the failure of China to return as a significant export market for U.S. distillers grains combined with lower domestic corn prices could negatively impact the price of distillers grains and the profitability of the Company.

The Lincolnway Energy Business Is Not Diversified. The success of the Company depends largely on its ability to profitably operate its ethanol plant. Lincolnway Energy does not have any other lines of business or other sources of revenue if it is unable to operate its ethanol plant and manufacture ethanol, distillers grains, corn oil and carbon dioxide. If economic or political factors adversely affect the market for ethanol, distillers grain, corn oil or carbon dioxide, the Company has no other line of business to fall back on. Lincolnway Energy’s business would also be significantly harmed if the ethanol plant could not operate at full capacity for any extended period of time.

If The Company’s Marketers Fail To Sell All Of The Ethanol And Distillers Grain Produced By The Plant It Could Negatively Impact Profitability. Lincolnway Energy relies on its ethanol and distillers grain marketers to sell all of its principal products. Currently the Company has an agreement with Eco-Energy which markets all of the Company’s ethanol and an agreement with Gavilon to market all of the Company’s distillers grain. Nearly all of the Company’s revenue is from the sale of its ethanol and distillers grains; representing 9395% of the Company’s revenues in Fiscal ~~2020~~2021. The inability of the Company’s marketers to sell all of the ethanol and distillers grains produced by the Company, or their inability to sell such products at prices that allow the Company to operate profitability, could have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition. Although management believes that the Company could secure alternative marketers, if either of the current marketers fails to or elects not to renew the marketing agreement with the Company, switching marketers may negatively impact cash flow and the ability of the Company to operate profitably which could decrease the value of the Company’s units.

Lincolnway Energy May At Times Be Leveraged And Have Debt And Debt Service Requirements. Lincolnway Energy will have loans outstanding from time to time, and may at times be highly leveraged. The use of leverage creates risks. For example, if Lincolnway Energy ever became unable to generate profits and cash flow to service its debt and its ongoing operations and working capital needs, Lincolnway Energy could be forced to reduce or delay capital expenditures or any expansion plans, sell assets or operations, obtain additional loans or capital or attempt to restructure its loans and other debt. Lincolnway Energy also may not be able to renew, extend or replace any existing loans or financing arrangements it may have in place from time to time. If any of those events occur, Lincolnway Energy will need to attempt to obtain additional financing through the sale of additional units or debt in Lincolnway Energy or through additional loans from other lenders, but there is no assurance that any of those steps would be successful.

Lincolnway Energy must also comply with the various restrictions and covenants included as part of Lincolnway Energy's credit and loan agreements. The restrictions and covenants include prohibitions or limitations on incurring additional debt, granting additional security interests or liens, acquiring additional assets, mergers, the issuance of additional units, and making distributions to Lincolnway Energy's members. The credit and loan agreements also require Lincolnway Energy to maintain various financial ratios and other similar financial covenants. The Company’s also limits the ability of the Company to declare or pay any dividends or purchase, redeem, retire or otherwise acquire for value any of its capital stock, or allocate or otherwise set apart any sum for any of the foregoing.

If we violate these covenants, or any of the other terms of our credit and loan agreements and we are unable to secure a waiver from our lenders, our lenders could deem us in default and require us to immediately repay any outstanding balances. These restrictions and requirements may also limit Lincolnway Energy's flexibility in planning for, or reacting to, competition or changes in the ethanol industry and Lincolnway Energy's ability to pursue other perceived business opportunities.

Lincolnway Energy's loans are secured by liens on all of Lincolnway Energy's assets, and if Lincolnway Energy breaches any of its agreements with its lenders, the lenders will be able to foreclose on Lincolnway Energy's assets.

Continued Growth In The Ethanol Industry Depends On Use Of Increased Ethanol Blends And Related Expansion Of Infrastructure, Change In Public Views And Regulatory Support, Which May Not Occur On A Timely Basis, If At All. Most experts believe that for ethanol use to grow significantly over both the near and longer term, there must be increased use of ethanol blends in excess of 10%, such as E15, E20, E30 and, ~~in particular,~~ E85. Although the EPA approved the use of E15 in June 2012, the approval was limited to vehicles manufactured in 2001 or newer and all flex fuel vehicles and prohibited year round sales of E15. There was also resistance to increasing the percentage from 10% to 15%, and there is strong resistance from some groups to increasing the percentage above 15%. There are also various areas that need development and expansion in order for there to be any material increase in the use of higher ethanol blends, including E15, such as expanded production of flex fuel vehicles and the expanded use of pumps that can utilize higher ethanol blends, such as blender pumps. A blender pump allows a driver to fill his or her vehicle with any blend of ethanol from 0% to 85% depending on the type of vehicle they drive. Despite the increases in infrastructure for E15 in recent years, there will likely need to be further government subsidies and support in order to cause service stations to install those types of pumps on a larger scale. In addition there will also need to be changes in the public's views and perceptions of ethanol in order for there to be increased use of higher blends of ethanol, as well as regulatory developments at both the federal and state level which allow the use of, and promote the use of, higher ethanol blends and the use of blender pumps and flex fuel vehicles.

on the type of vehicle they drive. Despite the increases in infrastructure for E15 in recent years and EPA’s issuance of the final rule allowing the year-round sale of E15, there will likely need to be further government subsidies and support, however, in order to cause service stations to install those types of pumps on a larger scale. In addition there will also need to be changes in the public's views and perceptions of ethanol in order for there to be increased use of higher blends of ethanol, as well as regulatory developments at both the federal and state level which allow the use of, and promote the use of, higher ethanol blends and the use of blender pumps and flex fuel vehicles.

Reports continue to be issued by various groups, however, such as the American Petroleum Institute, the American Fuel & Petrochemical Manufacturers and the National Research Council, that question the use of ethanol and other biofuels, both from an economic and environmental perspective. Ethanol organizations disagree with, and respond to, most of those types of reports, but the reports continue to cause governmental, regulatory and public perception concerns and issues for the ethanol industry.

Lincolnway Energy's Results Of Operations, Financial Position And Business Outlook Will Likely Fluctuate Substantially Because Lincolnway Energy's Business Is Highly Dependent On Commodity Prices, Which Are Subject To Significant Volatility And Uncertainty, And On The Availability Of Raw Materials Supplies. Lincolnway Energy's results of operations are substantially dependent on commodity prices, especially prices for corn, natural gas, ethanol and unleaded gasoline. The prices of these commodities are volatile and beyond Lincolnway Energy's control.

Lincolnway Energy estimates that corn costs will, on the average, make up approximately 7684% of Lincolnway Energy's total annual operating costs, but the percentage could be higher or lower dependent on the price of corn, the production level of the plant and other operating costs from time to time. Accordingly, rising corn prices could lower profit margins, and, at certain levels, corn prices could make ethanol uneconomical to produce. The supply and price of corn are influenced by many factors, including drought, hail and other adverse weather conditions; insects or disease; farmer planting decisions; imports; government policies and subsidies with respect to agriculture and international trade; and global and local demand and supply. The price for corn in the market area encompassing Lincolnway Energy's ethanol plant could be higher than the corn price payable in other markets. Lincolnway Energy also competes for corn with the livestock producers and elevators located within Lincolnway Energy's market area.

Lincolnway Energy's gross margin depends significantly on the spread between ethanol and corn prices, and in particular the spread (sometimes referred to as the crush spread) between the price of a gallon of ethanol and the price for the amount of corn required to produce a gallon of ethanol. The price of ethanol and corn fluctuates frequently and widely, ~~however,~~ so any favorable spread between ethanol and corn prices which may exist from time to time cannot be relied upon as indicative of the future. It is possible for ~~the circumstance to arise where~~ corn costs to increase and ethanol prices decrease to the point where Lincolnway Energy could be required to suspend operations. Any suspension of operations would have a material adverse effect on Lincolnway Energy's business, results of operations and financial condition.

The supply and cost of other inputs needed by Lincolnway Energy can also vary greatly, such as natural gas, electric and other energy costs. Lincolnway Energy's ethanol plant currently utilizes natural gas as its primary energy source, and Lincolnway Energy estimates that natural gas costs will, on average, make up approximately 64% of Lincolnway Energy's annual total operating costs. The prices for and availability of natural gas are subject to numerous market conditions and factors which are beyond Lincolnway Energy's control. Significant disruptions in the supply of natural gas would impair Lincolnway Energy's ability to produce ethanol, and increases in natural gas prices or changes in Lincolnway Energy's natural gas costs ~~relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.~~

relative to the costs paid by Lincolnway Energy's competitors would adversely affect Lincolnway Energy's competitiveness and results of operation and financial position.

Lincolnway Energy's inability to foresee or accurately predict changes in the supply or prices of ethanol or of corn, natural gas and other inputs will adversely affect Lincolnway Energy's business, results of operation and financial position. Also, as a result of the volatility of the prices for these commodities, Lincolnway Energy's results fluctuate substantially over time. Lincolnway Energy may experience periods during which the prices for ethanol and distiller’s grains decline and the costs of Lincolnway Energy's raw materials increase, which will result in lower profits or operating losses, which could be material at times, and could adversely affect Lincolnway Energy's financial condition.

costs of Lincolnway Energy's raw materials increase, which will result in lower profits or operating losses, which could be material at times, and could adversely affect Lincolnway Energy's financial condition.

The Use Of The Futures Markets By Lincolnway Energy Could Be Unsuccessful And Result In Substantial Losses. Lincolnway Energy seeks to minimize the effects of the volatility of natural gas, corn, ethanol, distillers grains and other prices by entering into forward pricing contracts and taking positions in the futures markets. The primary intent of those positions is to attempt to protect the supply of, and the price at which Lincolnway Energy can buy natural gas and corn and the price at which Lincolnway Energy can sell its ethanol or distillers grains, but not all of the positions may be able to be properly categorized as being for hedging purposes. Any attempt by Lincolnway Energy to use forward pricing contracts or the futures markets, whether in the form of hedging strategies or for more speculative trading purposes, may be unsuccessful, and in fact could result in substantial losses because commodity price movements and price movements in futures contracts and options are highly volatile and speculative, and are influenced by many factors that are beyond the control of the Company.

Lincolnway Energy will likely vary the amount of forward pricing, hedging and other risk mitigation strategies Lincolnway Energy may undertake from time to time, and Lincolnway Energy may at times choose not to engage in hedging transactions in the future. As a result, Lincolnway Energy's results of operations and financial position may be adversely affected by increases in the price of natural gas or corn or decreases in the price of ethanol or unleaded gasoline.

Futures markets will also sometimes be illiquid, and Lincolnway Energy may not be able to execute a buy or sell order at the desired price, or to close out an open position in a timely manner. The inability to close out an open position in a timely manner may result in substantial losses to Lincolnway Energy. Lincolnway Energy's potential losses and liabilities for any futures or options positions are not limited to margin amounts or to the amount held in or the value of Lincolnway Energy's trading account. In the event of a deficiency in Lincolnway Energy's trading account due to a margin call made to the trading account, a loss exceeding the value of the trading account, or otherwise, Lincolnway Energy will be responsible for the full amount of the deficiency. Given the volatility of futures trading, margin calls can occur frequently and the amount of a margin call can be significant.

Lincolnway Energy Competes With Larger, Better Financed Entities, Which Could Negatively Impact The Ability To Operate Profitably. There is significant competition among ethanol producers with numerous producers and privately-owned ethanol plants throughout the Midwest and elsewhere in the United States. The Company’s business faces a competitive challenge from larger plants, from plants that can produce a wider range of products than the Company, and from other plants similar to the Lincolnway Energy plant. Large ethanol producers such as Archer Daniels Midland, ~~Flint Hills Resources LP,~~ Green Plains Inc., Valero Renewable Fuels and POET Biorefining, among others, are capable of producing a significantly greater amount of ethanol than the Company produces. Further, many believe that there will be further 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. The Company may not be able to compete with these larger entities.

Changes And Advances In Ethanol Production Technology Could Require The Company To Incur Costs To Update The Company’s Plant Or Could Otherwise Hinder The Ability To Compete In The Ethanol Industry Or Operate Profitably. Technological advances in the processes and procedures for producing ethanol and in the efficiency of ethanol plants are continually occurring, and further ongoing advances should be expected. Such advances and changes may make the technology installed in the Lincolnway Energy plant less desirable or obsolete. These advances could also allow competitors to produce ethanol at a lower cost than the Company. If the Company is unable to adopt or incorporate technological advances, its ethanol production methods and processes could be less efficient than those of its competitors, which could cause the Lincolnway Energy plant to become uncompetitive or completely obsolete. If competitors develop, obtain or license technology that is superior to the Company’s or that makes the Company’s technology obsolete, the Company may be required to incur significant costs to enhance or acquire new technology so that its ethanol production remains competitive. Alternatively, Lincolnway Energy may be required to seek third-party licenses, which could also result in significant expenditures. The Company cannot guarantee that third-party licenses will be available or, once obtained, will continue to be available on commercially reasonable terms, if at all. These costs could negatively impact the Company’s financial performance by increasing its operating costs and reducing the Company’s net income.

Competition From The Advancement Of Alternative Fuels May Decrease The Demand For Ethanol And Negatively Impact Profitability. 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, hydrogen, electric or solar powered vehicles or clean burning gaseous fuels. Like ethanol, the emerging fuel cell and electric-powered vehicle industries offer technological options to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions, the same 14

5 Competition From The Advancement Of Alternative Fuels May Decrease The Demand For Ethanol And Negatively Impact Profitability. 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, hydrogen, electric or solar powered vehicles or clean burning gaseous fuels. Like ethanol, the emerging fuel cell and electric-powered vehicle industries offer technological options to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions, the same can largely be said of electric-powered vehicles which have no direct reliance on fossil fuels. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to lower fuel costs, decrease dependence on crude oil and reduce harmful emissions. If the fuel cell and hydrogen industries continue to expand and gain broad acceptance, and hydrogen becomes readily available to consumers for motor vehicle use, the Company may not be able to compete effectively. Likewise, participants in the emerging electric-powered vehicle industry are currently targeting the transportation market to decrease dependence on crude oil and reduce harmful emissions. If the electric-powered vehicle industry continues to expand and gain broad acceptance, the ethanol and larger gasoline industry may not be able to compete effectively. This additional competition could reduce the demand for ethanol, which would negatively impact the Company’s profitability.

~~can~~ Corn-Based ~~largely~~Ethanol beMay ~~said~~Compete ofWith ~~electric~~Cellulose-~~powered vehicles~~Based ~~which~~Ethanol ~~have~~In noThe ~~direct~~Future, ~~reliance~~Which onCould ~~fossil~~Make ~~fuels. Fuel~~It ~~cell~~More ~~industry~~Difficult ~~participants~~For ~~are~~The ~~currently~~Company ~~targeting~~To ~~the~~Produce ~~transportation,~~Ethanol ~~stationary~~On ~~power~~A ~~and~~Cost-Effective ~~portable~~Basis. Most ~~power~~ethanol ~~markets~~produced in ~~order~~the toU.S. ~~lower~~is ~~fuel~~currently ~~costs,~~produced ~~decrease~~from ~~dependence~~corn. The oncurrent ~~crude~~trend ~~oil~~in ~~and~~ethanol ~~reduce~~production ~~harmful~~research ~~emissions. If~~is ~~the~~to ~~fuel~~develop ~~cell~~an ~~and~~efficient ~~hydrogen~~method ~~industries~~of ~~continue~~producing toethanol ~~expand~~from ~~and~~cellulose-based ~~gain~~biomass, ~~broad~~such ~~acceptance~~as agricultural waste, ~~and~~forest ~~hydrogen~~residue, ~~becomes~~municipal ~~readily~~solid ~~available~~waste toand ~~consumers~~energy ~~for~~crops. This ~~motor~~trend ~~vehicle~~is ~~use,~~driven by the ~~Company~~fact ~~may~~that ~~not~~cellulose-based bebiomass ~~able~~is togenerally ~~compete~~cheaper ~~effectively. Likewise~~than corn, ~~participants~~and inproducing ~~the~~ethanol ~~emerging~~from ~~electric~~cellulose-~~powered~~based ~~vehicle~~biomass ~~industry~~would ~~are~~create ~~currently~~opportunities ~~targeting the transportation market~~ to ~~decrease~~produce ~~dependence~~ethanol onin ~~crude~~areas ~~oil~~which ~~and~~are ~~reduce~~unable ~~harmful~~to ~~emissions~~grow corn. If ~~the~~an ~~electric-powered~~efficient ~~vehicle~~method ~~industry~~of ~~continues~~producing toethanol ~~expand~~from ~~and~~cellulose-based ~~gain~~biomass ~~broad~~is ~~acceptance~~developed, the ~~ethanol~~Company ~~and larger gasoline industry~~ may not be able to compete effectively. It ~~This~~may ~~additional~~not ~~competition~~be ~~could~~practical ~~reduce~~or cost-effective to convert the ~~demand~~Lincolnway ~~for~~Energy ~~ethanol,~~plant into a plant which ~~would~~will ~~negatively~~use ~~impact~~cellulose-based biomass to produce ethanol. If the Company is unable to produce ethanol as cost-effectively as cellulose-based producers, the Company’s ~~profitability~~ability to generate revenue will be negatively impacted.

Corn-Based Ethanol May Compete With Cellulose-Based Ethanol In The Future, Which Could Make It More Difficult For The Company To Produce Ethanol On A Cost-Effective Basis. Most ethanol produced in the U.S. is currently produced from corn and other raw grains, such as milo or sorghum - especially in the Midwest. 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 RFS offers a strong incentive to develop commercial scale cellulosic ethanol as the statutory volume requirement in the RFS requires that 16 billion gallons per year of advanced bio-fuels be consumed in the United States by 2022 (although recent actions by the EPA have reduced the statutorily required volume requirements for years 2014 through 2020). Additionally, state and federal grants have been awarded to several companies who are seeking to develop commercial-scale cellulosic ethanol plants. As a result, a few companies have reportedly already begun producing on a commercial scale and a few companies have begun construction on commercial scale cellulosic ethanol plants some of which may be completed in the near future. If an efficient method of producing ethanol from cellulose-based biomass is developed, the Company may not be able to compete effectively. It may not be practical or cost-effective to convert the Lincolnway Energy plant into a plant which will use cellulose-based biomass to produce ethanol. If the Company is unable to produce ethanol as cost-effectively as cellulose-based producers, the Company’s ability to generate revenue will be negatively impacted.

Although Lincolnway Energy believes there will continue to be a place for corn based ethanol production within the ethanol industry, it is possible that at some point in the future governmental and public support of the ethanol industry may be focused primarily upon, and provide significant advantages or benefits to, cellulosic and other developing ethanol technologies, which could have adverse effects on Lincolnway Energy and corn based ethanol production in general. The requirements for the use of cellulosic and other advanced biofuels in the Energy Independence and Security Act of 2007 are evidence of the government's support of, and trending to, those types of biofuels. The public may also eventually support cellulosic and other advanced biofuels because of the perception that those types of biofuels do not have some of the perceived negative effects of corn based ethanol, such as the food versus fuel debate, given that cellulosic and other advanced biofuels are not made from products otherwise used in the food chain and are in some cases produced from waste type products.

Depending On Commodity Prices, Foreign Producers May Produce Ethanol At A Lower Cost Which May Result In Lower Ethanol Prices Which Would Adversely Affect Financial Results. The Company faces competition from foreign ethanol producers with Brazil currently the second largest ethanol producer in the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and, depending on feedstock prices, may be less expensive to produce. Under the RFS, certain parties are obligated to meet an advanced biofuel standard and sugarcane ethanol imported from Brazil has historically been one of the most economical means for obligated parties to meet this standard. Other foreign producers may be able to produce ethanol at lower input costs, including costs of feedstock, facilities and personnel, than the Company. While foreign demand, transportation costs and infrastructure constraints may temper the market impact throughout the United States, competition from imported ethanol may affect the Company’s ability to sell its ethanol profitably, which may have an adverse effect on its operations, cash flows and financial position.

If significant additional foreign ethanol production capacity is created, such facilities could create excess supplies of ethanol on world markets, which may result in lower prices of ethanol throughout the world, including the United States. Such foreign competition is a risk to the Lincolnway Energy business. Any penetration of ethanol imports into the domestic market may have a material adverse effect on the Company’s operations, cash flows and financial position.

Interruptions In The Supply Of Water, Electricity, Natural Gas Or Other Energy Sources Or Other Interruptions In Production Would Have An Adverse Effect On Lincolnway Energy's Ethanol Plant. Interruptions in the supply of water, electricity, natural gas or other energy sources at Lincolnway Energy's ethanol plant would have a material adverse impact on operations, and could require Lincolnway Energy to halt production at the ethanol plant. Interruptions in or the loss of the supply of water, electricity, natural gas or other energy sources could occur as a result of cybersecurity threats or other information technology issues at the ethanol plant or at the plants of the suppliers of the water, electricity, natural gas or other energy. Lincolnway Energy's and any suppliers' use of software and other technology systems will be subject to cybersecurity threats, and to failure or interruption through equipment failures, viruses, acts of God and other events beyond the control of Lincolnway Energy or a supplier.

6 Lincolnway Energy's operations are also subject to significant interruption if its ethanol plant experiences a major accident or is damaged by severe weather or other natural disasters. Lincolnway Energy's operations are also subject to labor disruptions and unscheduled down time, and other operational hazards inherent in the ethanol industry, such as equipment failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and natural disasters. Some of these operational hazards may cause personal injury or loss of life, severe damage to or destruction of property and

energy. Lincolnway Energy's and any suppliers' use of software and other technology systems will be subject to cybersecurity threats, and to failure or interruption through equipment failures, viruses, acts of God and other events beyond the control of Lincolnway Energy or a supplier.15

Lincolnway Energy's operations are also subject to significant interruption if its ethanol plant experiences a major accident or is damaged by severe weather or other natural disasters. Lincolnway Energy's operations are also subject to labor disruptions and unscheduled down time, and other operational hazards inherent in the ethanol industry, such as equipment ~~failures, fires, explosions, abnormal pressures, blowouts, pipeline ruptures, transportation accidents and natural disasters. Some of these operational hazards may cause personal injury~~ or ~~loss of life, severe damage to or destruction of property and equipment or~~ environmental damage, and may result in suspension of operations and the imposition of civil or criminal penalties against Lincolnway Energy.

Lincolnway Energy's business is dependent upon the continuing availability of railroads, railcars, truck fleets and other infrastructure necessary for the production, transportation and use of ethanol. Any disruptions or interruptions in that infrastructure could have a material adverse effect on Lincolnway Energy.

Lincolnway Energy may not have insurance covering any of these types of matters or occurrences. Any insurance Lincolnway Energy may have in place may not be adequate to fully cover the potential losses and hazards, and Lincolnway Energy may not be able to renew the insurance on commercially reasonable terms or at all.

There Are Potential Conflicts Of Interest In The Structure And Operation Of Lincolnway Energy. Although Lincolnway Energy does not believe any conflict of interest exists which in practice will be detrimental to Lincolnway Energy, potential conflicts of interest are inherent in the structure and operation of Lincolnway Energy and its business. For example, the organization is managed by directors and officers of Lincolnway Energy that do not devote their full time attention to Lincolnway Energy, and they are all involved in other full time businesses and may provide services to others. Some of the directors or officers might be owners or otherwise interested in other ethanol plants. The directors and the officers will experience conflicts of interest in allocating their time and services between Lincolnway Energy and their other businesses and interests.

The various companies that provide marketing and other services to Lincolnway Energy are also not required to devote their full time attention to those services, and they will very likely be involved in other ethanol plants and ethanol related businesses and possibly other businesses or ventures, including having ownership or other interests in other ethanol plants. The companies will therefore experience conflicts of interest in allocating their time and services between Lincolnway Energy and their various other ethanol plants or business ventures. The companies providing ethanol and distiller’s grains marketing services to Lincolnway Energy will be providing those same services to other ethanol plants, and may experience conflicts of interest in allocating favorable sales and sales when the supply of ethanol or distiller’s grains exceeds the demand.

We Depend To A Significant Degree Upon HALE And The Management Personnel It Provides For The Management Of Our Plant. The Loss Of One Or More Of These Personnel, Any Failure Of HALE Or These Personnel To Perform Their Obligations To Us, Or The Termination Of The Management Services Agreement Could Have An Adverse Effect On Our Ability To Manage Our Business And Operate Successfully And Competitively. We have contracted the management of our plant, including staffing, operations, and maintenance services, to persons provided by HALE, a related party pursuant to the Management Services Agreement. The failure of these managers to perform their obligations could materially and adversely affect our business, results of operations, cash flows, financial condition and ability to make distributions. We cannot provide any assurances that the managers will manage our plant in a manner that is consistent with their respective obligations under the Management Services Agreement. We could be materially and adversely affected if any of these managers fail to effectively manage revenues and expenses, provide quality services, or otherwise fail to manage our plant in our best interests, and we may be financially responsible for the actions and inaction of the managers. In certain situations, we may terminate the Management Services Agreement. We cannot, however, provide any assurance that we could identify replacement managers or that the replacement manager will manage our plant successfully. Moreover, the departure of current or future management personnel could have an adverse effect on our business and our ability to operate successfully and competitively, and it could be difficult to find replacements for these persons, as competition for management personnel is intense.

Lincolnway Energy Is Increasingly Dependent On Information Technology; Disruptions, Failures Or Security Breaches Of Its Information Technology Infrastructure Could Have A Material Adverse Effect On Operations. Lincolnway Energy utilizes various software applications in connection with its ethanol operation and the Company’s software and other information technology is critically important to the Company’s business operations. The Company relies on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information, to manage a variety of business processes and activities, including production, manufacturing, financial, logistics, sales, marketing and administrative functions. Lincolnway Energy depends on its information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. The Company also uses information technology networks and systems to comply with regulatory, legal and tax requirements. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events. If any of the Company’s significant information technology systems suffer severe damage, disruption or shutdown, and the Company’s

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sales, marketing and administrative functions. Lincolnway Energy depends on its information technology infrastructure to communicate internally and externally with employees, customers, suppliers and others. The Company also uses information technology networks and systems to comply with regulatory, legal and tax requirements. These information technology systems, many of which are managed by third parties or used in connection with shared service centers, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, computer viruses, attacks by computer hackers or other cybersecurity risks, telecommunication failures, user errors, natural disasters, terrorist attacks or other catastrophic events. If any of the Company’s significant information technology systems suffer severe damage, disruption or shutdown, and the Company’s disaster recovery and business continuity plans do not effectively resolve the issues in a timely manner, the Company’s product sales, financial condition and results of operations may be materially and adversely affected.

In addition, if the Company is unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, the Company may encounter significant disruptions in the Company’s operations including its production and manufacturing processes, which can cause it to suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties. Any such disruption could materially and adversely impact the Company’s reputation, business, financial condition and results of operations.

Such breaches may also result in the unauthorized disclosure of confidential information belonging to the Company or to its partners, customers, suppliers or employees which could further harm the Company’s reputation or cause it to suffer financial losses or be subject to litigation or other costs or penalties. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage its reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a negative impact on the Company’s reputation, business, financial condition and results of operations.

Trade Actions By The Trump Administration, Particularly Those Affecting The Agriculture Sector And Related Industries, Could Adversely Affect Our Operations And Profitability. Government policies and regulations significantly impact domestic agricultural commodity production and trade flows and governmental policies affecting the agricultural industry, such as taxes, trade tariffs, duties, subsidies, import and export restrictions on commodities and commodity products, can influence industry profitability, the planting of certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports. International trade disputes can also adversely affect trade flows by limiting or disrupting trade between countries or regions. Future governmental policies, regulations or actions affecting our industry may adversely affect the supply of, demand for and prices of our products, restrict our ability to do business and cause our financial results to suffer. As a result of trade actions announced by the Trump administration and responsive actions announced by our trading partners, including by China, we may experience negative impacts of higher ethanol tariffs and other disruptions to international agricultural trade. In 2018, the Chinese government increased the tariffs on U.S. ethanol imports into China to 70% which tariffs were lowered in 2020 to 45% as a result of the Phase One Agreement. The tariffs are expected to reduce overall U.S. ethanol export demand, which could have a negative effect on U.S. domestic ethanol prices, especially given the current oversupply in domestic ethanol inventories. Despite the recent announcement of the Phase One Agreement, there is no guarantee that such trade deal will increase U.S. exports of ethanol or distillers grains to China or have a positive impact on the ethanol market or the distillers grain market. According to the Peterson Institute for International Economics, through October 2020 China has only purchased approximately 56% of its year-to-date purchase commitments under the Phase One Agreement, and there can be no certainty at this time of whether its purchasing will improve.

Risks Associated With Government Regulation and Subsidization

~~The~~ Government ~~Ethanol~~incentives ~~Industry~~for Isethanol ~~Highly~~production ~~Dependent~~may Onbe ~~Government~~eliminated ~~Mandates~~in ~~Relating~~the Tofuture, ~~The~~which ~~Production~~could ~~And~~hinder ~~Use~~our Ofability ~~Ethanol~~to ~~And~~operate ~~Changes~~at Toa ~~Such~~profit. ~~Mandates~~The ~~And~~ethanol ~~Related~~industry ~~Regulations~~is ~~Could~~assisted ~~Adversely~~by ~~Affect~~various ~~The~~federal ~~Market~~ethanol ~~For~~production ~~Ethanol~~and ~~And~~tax ~~The~~incentives, ~~Company’s Results~~including Ofthe ~~Operations~~RFS set forth in the Energy Policy Act of 2005. The ~~domestic~~RFS helps support a market for ethanol isthat ~~largely~~might ~~dictated~~disappear bywithout ~~federal~~this ~~mandates~~incentive. ~~for~~The ~~blending~~United ~~ethanol~~States ~~with~~Environmental ~~gasoline.~~Protection ~~Future~~Agency ~~demand~~("EPA") ~~for~~has ~~ethanol~~the ~~will~~authority beto ~~largely~~waive ~~dependent~~the ~~upon~~RFS statutory volume requirement, in whole or in part, provided certain conditions have been met. Annually, the ~~economic~~EPA ~~incentives~~passes toa ~~blend~~rule ~~based~~that ~~upon~~establishes the ~~relative~~number ~~value~~of gallons of ~~gasoline~~different ~~versus~~types ~~ethanol~~of renewable fuels that must be used in the United States which is called the renewable volume obligations. In the past, ~~taking~~the ~~into~~EPA ~~consideration~~has set the ~~relative~~renewable ~~octane~~volume ~~value~~obligations below the statutory volume requirements. In addition, the EPA has recently expanded its use of ~~ethanol~~waivers to small refineries. The effect of these waivers is that the refinery is no longer required to earn or purchase blending credits, ~~environmental~~known ~~requirements~~as RINs, negatively affecting ethanol demand and resulting in lower ethanol prices. If the EPA were to significantly reduce the volume requirements under the RFS ~~mandate.~~or ~~The~~if the RFS ~~mandate~~were ~~helps~~to ~~support~~be aotherwise reduced or eliminated by the exercise of the EPA waiver authority or by Congress, the market price and demand for ethanol ~~that~~could ~~might~~decrease ~~disappear~~which ~~without~~will ~~this~~negatively ~~incentive.~~impact our financial performance.

~~Annually~~ Changes in environmental regulations or violations of these regulations could be expensive and reduce our profitability. We are subject to extensive air, ~~the~~water ~~EPA~~and isother ~~supposed~~environmental laws and regulations. In addition, some of these laws require our plant to ~~pass~~operate under a ~~rule~~number ~~that~~of ~~establishes~~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 ~~number~~environment. ofA ~~gallons~~violation of ~~different~~these ~~types~~laws ofand ~~renewable~~regulations ~~fuels~~or ~~that~~permit ~~must~~conditions becan ~~used~~result in ~~the~~substantial ~~United~~fines, ~~States~~damages, ~~which~~criminal issanctions, ~~called~~permit ~~the~~revocations ~~renewable~~and/or ~~volume~~plant ~~obligations~~shutdowns. In the ~~past~~future, ~~the~~we ~~EPA~~may ~~has~~be ~~set~~subject ~~the~~to ~~renewable~~legal ~~volume~~actions ~~obligations~~brought ~~below~~by ~~the~~environmental ~~statutory~~advocacy ~~volume~~groups ~~requirements. On~~and ~~December~~other 19parties for actual or alleged violations of environmental laws or our permits. Additionally, ~~2019~~any changes in environmental laws and regulations, both at the ~~EPA~~federal ~~issued~~and ~~the~~state ~~final~~level, ~~rule~~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.

8 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") which 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 the ethanol industry is unable to supply corn-based ethanol to California, it could significantly reduce demand for the ethanol we produce which could result in a reduction of our revenues and negatively impact our ability to profitably operate the ethanol plant.

~~that~~ Government ~~set~~policies and regulations, particularly those affecting the ~~2020~~agricultural ~~annual~~sector ~~volume~~and ~~requirements~~related ~~for~~industries, ~~renewable~~could ~~fuel~~adversely ataffect 20our operations and profitability.09 Agricultural ~~billion~~commodity ~~gallons~~production ofand ~~renewable~~trade ~~fuels~~flows ~~per~~are ~~year~~significantly ~~(the~~affected ~~"Final~~by ~~2020~~government ~~Rule"). The~~policies ~~EPA~~and ~~has~~regulations. Governmental ~~not~~policies ~~issued~~affecting ~~proposed~~the ~~2021~~agricultural ~~volume~~industry, ~~requirements~~such as taxes, trade tariffs, duties, subsidies, import and export restrictions on commodities and commodity products, can influence industry profitability, the planting of certain crops, the ~~date~~location and size of ~~this~~crop ~~filing~~production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports. In addition, international trade disputes can adversely affect trade flows by limiting or disrupting trade between countries or regions. Future governmental policies, regulations or actions affecting our industry may adversely affect the supply of, demand for and prices of our products, restrict

The EPA issued the final rule for 2020 which set the annual volume requirements renewable fuel at 20.09 billion gallons of renewable fuel (the "Final 2020 Rule"). Both the Final 2019 Rule and the Final 2020 Rule maintained the number of gallons that may be met by conventional renewable fuels such as corn based ethanol at 15.0 billion gallons. Although the volume requirements set forth in the Final 2019 Rule are slightly higher than the final 2018 volume requirements (the "Final 2018 Rule") and the Final 2020 Rule volume requirements are slightly higher than those set forth in the Final 2019 Rule, the volume requirements under the Final 2018 Rule, the Final 2019 Rule and the Final 2020 Rule are all still significantly below the 26 billion gallons, 28 billion gallons and 30 billion gallons, respectively, statutory mandates, with significant reductions in the volume requirements for advanced biofuels as well.17

~~Under~~our ~~the~~ability ~~RFS,~~to ifdo ~~mandatory~~business ~~renewable~~and ~~fuel~~cause ~~volumes~~our ~~are~~financial ~~reduced~~results byto atsuffer. ~~least~~In ~~20%~~April ~~for~~of ~~two consecutive years~~2018, the ~~EPA~~Chinese isgovernment ~~required~~increased tothe ~~modify,~~tariff oron ~~reset, statutory volumes through 2022~~U.S. ~~The~~ethanol ~~Final~~imports ~~2018~~into ~~Rule~~China ~~represented~~from ~~the first year the total proposed volume requirements were more than 20~~30% ~~below~~to ~~statutory levels and the Final 2019 Rule is approximately 29~~45% ~~below the statutory levels representing the second consecutive year of reductions of more than 20% below the statutory mandates~~ and ~~therefore,~~ultimately ~~triggering~~to ~~the mandatory reset under the RFS~~70%. ~~The~~This ~~Final~~tariff ~~2020~~increase ~~Rule~~has ishad ~~approximately~~a ~~23%~~negative ~~below~~impact ~~which~~on ~~makes~~overall ~~this~~U.S. ~~the~~ethanol ~~third~~export ~~year~~demand, ~~in a row~~ which could ~~cause~~have a ~~reset.~~negative ~~The~~effect ~~EPA is now statutorily required to modify the statutory volumes through 2022 within one year of the trigger event, based~~ on ~~the same factors used to set the volume requirements post-2022~~U. ~~These~~S. ~~factors include environmental impact,~~ domestic ~~energy~~ethanol ~~security, expected production, infrastructure impact, consumer costs, job creation, price of agricultural commodities, food~~ prices~~, and rural economic development~~. If the EPA were to significantly reduce the statutory volume requirements under the RFS or if the RFS were to be otherwise reduced or eliminated by the exercise of the EPA waiver authority or by Congress, the market price and demand for ethanol could decrease which will negatively impact the Company’s financial performance.

The EPA has recently expanded its use of waivers to small refineries. The effect of these waivers is that the refinery is no longer required to earn or purchase blending credits, known as RINs, negatively affecting ethanol demand and resulting in lower ethanol prices. On October 15, 2019, the EPA released a supplemental notice seeking additional comment on a proposed rule on adjustments to the way that annual renewable fuel percentages are calculated. The supplemental notice was issued in response to an announcement by President Trump of a proposed plan to require refiners not exempt from the rules to blend additional gallons of ethanol to make up for the gallons exempted by the EPA's expanded use of waivers to small refineries. The proposed plan was expected to calculate the volume that refiners were required to blend by using a three-year average of exempted gallons. However, the EPA proposed to use a three-year average to account for the reduction in demand resulting from the waivers using the number of gallons of relief recommended by the United States Department of Energy. If the EPA continues to grant waivers to smaller refineries and the Trump Administration fails to take any action to reallocate ethanol gallons lost to such waivers, the market price and demand for ethanol would be adversely effective which would negatively impact the Company’s financial performance.

The compliance mechanism for RFS is the generation of renewable identification numbers, or RINs, which are generated and attached to renewable fuels such as the ethanol the Company produces and detached when the renewable fuel is blended into the transportation fuel supply. Detached RINs may be retired by obligated parties to demonstrate compliance with RFS or may be separately traded in the market. The market price of detached RINs may affect the price of ethanol in certain U.S. markets as obligated parties may factor these costs into their purchasing decisions. Moreover, at certain price levels for various types of RINs, it becomes more economical to import foreign sugarcane ethanol. If changes to RFS result in significant changes in the price of various types of RINs, it could negatively affect the price of ethanol, and the Company’s operations could be adversely impacted.

Federal law mandates the use of oxygenated gasoline in the winter in areas that do not meet Clean Air Act standards for carbon monoxide. If these mandates are repealed, the market for domestic ethanol could be significantly reduced. Additionally, flexible-fuel vehicles receive preferential treatment in meeting corporate average fuel economy, or CAFE, standards. However, high blend ethanol fuels such as E85 result in lower fuel efficiencies. Absent the CAFE preferences, it may be unlikely that auto manufacturers would build flexible-fuel vehicles. Any change in these CAFE preferences could reduce the growth of E85 markets and result in lower ethanol prices, which could adversely impact the Company’s operating results.

To the extent that such federal or state laws or regulations are modified, the demand for ethanol may be reduced, which could negatively and materially affect the Company’s ability to operate profitably.

The Company Is Subject To Extensive Environmental Regulation And Operational Safety Regulations That Impact Expenses And Could Reduce Profitability. Ethanol production involves the emission of various airborne pollutants, including

particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide. The Company is subject to regulations on emissions from the EPA and the IDNR (Iowa Department of Natural Resources). The EPA’s and IDNR’s environmental regulations are subject to change and often such changes are not favorable to industry. Consequently, even if the Company has the proper permits now, it may be required to invest or spend considerable resources to comply with future environmental regulations.

The Company’s failure to comply or the need to respond to threatened actions involving environmental laws and regulations may adversely affect the Company’s business, operating results or financial condition. The Company must follow procedures for the proper handling, storage, and transportation of finished products and materials used in the production process and for the disposal of waste products. In addition, state or local requirements also restrict the Company’s production and distribution operations. The Company could incur significant costs to comply with applicable laws and regulations. Changes to current environmental rules for the protection of the environment may require the Company to incur additional expenditures for equipment or processes.

Lincolnway Energy is subject to federal and state laws regarding operational safety. Risks of substantial compliance costs and liabilities are inherent in ethanol production. Costs and liabilities related to worker safety may be incurred. Possible future developments-including stricter safety laws for workers or others, regulations and enforcement policies and claims for personal or property damages resulting from the Company’s operation could result in substantial costs and liabilities that could reduce the amount of cash that the Company would otherwise have to distribute to members or use to further enhance the Company’s business.

Lincolnway Energy May Become Subject To Various Environmental And Health And Safety And Property Damage Type Claims And Liabilities. The nature of Lincolnway Energy's operations will expose it to the risk of environmental and health claims, safety claims and property damage claims. For example, if any of Lincolnway Energy's operations are found to have polluted the air or surface water or ground water, such as through an ethanol spill, Lincolnway Energy could become liable for substantial investigation, clean-up and remediation costs, both for its own property and for the property of others that may have been affected by the pollution or spill. Those types of claims could also be made against Lincolnway Energy based upon the acts or omissions of other persons, including persons transporting or handling ethanol. Environmental and property damages claims and issues can also arise due to spills, losses or other occurrences arising from events outside of Lincolnway Energy's control and which are possible in Lincolnway Energy's business, such as fire, explosions or blowouts.

A serious environmental violation or repeated environmental violations could result in Lincolnway Energy being unable to construct or operate any additional ethanol plants and the loss of defenses to nuisance suits. Lincolnway Energy may also be unable to obtain financing or additional necessary permits if Lincolnway Energy is subject to any pending administrative or legal action regarding environmental matters.

Any environmental, health, safety or property damage claim could have a material adverse effect on Lincolnway Energy's financial condition and future prospects.

Carbon Dioxide May Be Regulated By The EPA In The Future As An Air Pollutant, Requiring The Company To Obtain Additional Permits And Install Additional Environmental Mitigation Equipment, Which May Adversely Affect Financial Performance. The Company’s plant emits carbon dioxide as a by-product of the ethanol production process and the Company sells a portion of its carbon dioxide by-product to Air Products pursuant to a Carbon Dioxide Purchase and Sale Agreement. The United States Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as the Company’s ethanol plant under the Clean Air Act. While there are currently no regulations applicable to the Company concerning carbon dioxide, if Iowa or the federal government, or any appropriate agency, decides to regulate carbon dioxide emissions by plants similar to the Company’s ethanol plant, the Company may have to apply for additional permits or may be required to install carbon dioxide mitigation equipment or take other steps unknown to the Company at this time in order to comply with such law or regulation. Compliance with future regulation of carbon dioxide, if it occurs, could be costly and may prevent the Company from operating the plant profitably.

The California Low Carbon Fuel Standard May Decrease Demand For Corn Based Ethanol Which Could Negatively Impact Profitability. California passed a Low Carbon Fuels Standard ("LCFS") which 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 the California LCFS and other state regulations aimed at reducing greenhouse gas emissions could impact the price of corn-based ethanol which could have an adverse impact on the market for corn-based

ethanol produced in the Midwest. This could result in a reduction of the Company’s revenues and negatively impact the Company’s ability to profitably operate the ethanol plant.

There Is Continuing And Growing Negative Press And Public Sentiment Against The Ethanol Industry Which Could Lead To Reduced Governmental And Public Support For The Use Of Ethanol. There continues to be negative press and public sentiment against the ethanol industry. The negative press and claims include that the use of corn to produce ethanol drives up grain prices, which hurts livestock farmers and also consumers due to increased food prices. The claims also include environmental based allegations, including that increased corn acreage and ethanol production strain water supplies and worsen pollution in rivers and streams. The criticisms also include that ethanol production is leading to land use changes, including the clearing of rain forests, prairies and other native lands for purposes of growing corn or other crops to be used for the production of ethanol or to replace land which is now used to produce crops for ethanol, which also in turn releases carbon into the atmosphere that has been stored in the soil and otherwise has negative environmental impacts, such as erosion and other land stewardship issues. Critics also claim that ethanol, in particular at levels of 15% of higher, damages or is otherwise harmful to engines.

Negative press and public sentiment are also developing towards the "next generation" biofuels that are a significant component of achieving the use mandates in the RFS. Next generation biofuels are those made from non-feed stocks/cellulose, such as corn stalks, wheat straw, grasses and trees. Some organizations, including the National Resource Council, have issued reports critical of those biofuels, including that such biofuels are not economical without heavy government subsidies and will not have any positive overall environmental effect, and may have negative environmental results.

Risks Relating To Lincolnway Energy's Units

Lincolnway Energy's Units Are Not A Liquid Investment. No market exists for Lincolnway Energy's units. A market will not develop for the units because the units are not freely transferable and can only be sold, assigned or otherwise transferred in compliance with the federal and applicable state securities laws and the terms and conditions of the current operating agreement, as amended (the "Operating Agreement"), and unit assignment policy of Lincolnway Energy, which require the prior approval of the board for all sales and assignments of any units. The restrictions set out in the securities laws, the Operating Agreement and the unit assignment policy may at times preclude the transfer of a unit. The units are therefore not a liquid investment.

There Is No Guarantee Of Any Distributions From Lincolnway Energy. Lincolnway Energy is not required to make any distributions to its members. Lincolnway Energy could also be prohibited, or at least limited or restricted, from making any distributions under the terms of Lincolnway Energy's credit and loan agreements. Lincolnway Energy's financial situation may also not allow it to make any distributions to its members. The payment of distributions is at the discretion of the board of Lincolnway Energy and will depend on, among other things, the board's analysis of Lincolnway Energy's earnings, financial condition, capital requirements, level of indebtedness, statutory and contractual restrictions regarding the payment of distributions and any other considerations that the board deems relevant. There is therefore no assurance of regular distributions, or any distributions at all, to Lincolnway Energy's members.

We May Have Conflicting Financial Interests With HALE That Could Cause HALE To Put Its Financial Interests Ahead Of Ours. HALE appoints four of our seven directors and has been, and is expected to be, involved in substantially all material aspects of our financing and operations and we have entered into a number of material commercial arrangements with HALE, as described elsewhere in this report. HALE and its respective affiliates may have conflicts of interest because HALE and its respective employees or agents are involved as owners, creditors and in other capacities with HALE’s parent company’s other ethanol plants in the United States. We cannot require HALE to devote its full time or attention to our activities. As a result, HALE may have, or come to have, a conflict of interest in allocating personnel, materials and other resources to our Facility. Such conflicts of interest may reduce our profitability and the value of the units and could result in reduced distributions to investors.

The Three-Class Structure Of Our Units And The Existing Ownership Of Class A Units By HALE Have The Effect Of Concentrating Voting Control With HALE For The Foreseeable Future, Which Will Limit Or Preclude The Ability Of Our Other Members To Influence Corporate Matters. Our Class A Units have special approval and voting rights not shared by other classes of units. Given these specific and special approval rights attributed to our Class A Units and its number of such units, HALE, who is our only Class A Member, holds controlling voting power of our outstanding units. As a result of our three class ownership structure and the Management Services Agreement between HALE and the Company, HALE is able to exert a significant degree of influence or actual control over our management and affairs and over matters requiring member approval, ~~including the election of directors, mergers or acquisitions, asset sales and other significant corporate transactions. Further,~~

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including the election of directors, mergers or acquisitions, asset sales and other significant corporate transactions. Further, HALE owns ~~shares~~units representing approximately 53% of the economic interest of our outstanding units. This concentrated control will limit the ability of our other members to influence corporate matters for the foreseeable future. For example, HALE will be able to control elections of a majority of the board of directors, amendments of our Operating Agreement, increases to the number of ~~shares~~units available for issuance under our equity incentive plans, or adoption of new equity incentive plans and approval of any merger or sale of assets for the foreseeable future. This control may materially adversely affect the market price of our Common Units and Class B Units.

Additionally, HALE may cause us to make strategic decisions that could involve risks to our other members or may not be aligned with their interests. HALE and the Class B Members will also be entitled to separate votes in the event we seek to amend our Certificate of Organization or Operating Agreement if it would adversely alter the rights, preferences, privileges or powers of or restrictions on the Class A Units or Class B Units without the majority vote of the outstanding units affected thereby.

Certain Provisions In Our Governing Documents Could Limit Attempts By Our Members To Replace Or Remove Members Of Our Board Of Directors Or Current Management And May Adversely Affect The Market Price Of Our Units. Provisions in our Operating Agreement may have the effect of delaying or preventing a change of control or changes in our board of directors or management. These provisions include the following:

• Our board of directors is composed of three elected directors (elected by the Common and Class B Units) (the "Elected Directors") and four "Class A Directors" (appointed by the Class A Units, currently held solely by HALE). Therefore, the members holding Common Units and Class B Units cannot appoint a majority of the board of directors.

• The Class A Members have the right to appoint all Class A Directors and fill all vacancies upon the resignation, death or removal of any Class A Director, which prevents members holding Common Units and Class B Units from being able to fill Class A Director vacancies.

• The Class A Directors may only be removed by the Class A Members, which prohibits the replacement of a majority of our board of directors by our members holding Common Units and Class B Units.

• Our Class A Members must approve certain transactions of the Company including any merger, sale of assets, or other reorganization or acquisition or any material change to the Company’s business.

• Our Class A Members also have preemptive rights to acquire a pro-rata portion of future issuances of units, which may discourage, deter, or prevent future changes in control of our company.

These provisions, alone or together, could deter, delay or prevent hostile takeovers and changes in control of our company or changes in our management, could limit the opportunity for our members to receive a premium for their Units, and could also affect the price that some investors are willing to pay for our units.

Members Will Owe Taxes On Lincolnway Energy's Profits But May Never Receive Any Distributions From Lincolnway Energy. Lincolnway Energy is not required to make any distributions, and it is possible that no distributions will be made by Lincolnway Energy, even if Lincolnway Energy has profits. Any Lincolnway Energy profits will be taxable to its members in accordance with the members' respective percentage ownership of the units, whether or not the profits have been distributed. Even if distributions are made, the distributions may not equal the taxes payable by a member on the member's share of Lincolnway Energy's profits. Lincolnway Energy could also sustain losses offsetting the profits of a prior tax period, so a member might never receive a distribution or be able to sell the member's units for an amount equal to the taxes which have already been paid by the member.

Item 2. Properties.

Lincolnway Energy's office and its ethanol plant are located on approximately 64 acres in Nevada, Iowa. Lincolnway Energy owns the real estate and its office and ethanol plant, but all of those properties are subject to mortgages and security interests held by Lincolnway Energy's lenders.

Lincolnway Energy's office building has approximately 1,400 square feet. Lincolnway Energy utilizes the office building for office space for Lincolnway Energy's management and other staff. Lincolnway Energy was utilizing approximately 95% of the available office space as of the date of this annual report, with the remaining 5% available to accommodate any expansion of Lincolnway Energy's staff. The office building also includes grain receiving facilities.

1219

Lincolnway Energy also owns approximately 147 acres of real estate which is adjacent to the 64 acre parcel noted above. Approximately 54 acres of this real estate was used to construct additional railroad spur tracks. The remaining 93 acres are available for future development, but Lincolnway Energy does not, currently, have any definite plans for the use of that real estate in Lincolnway Energy's ethanol operations, and most of the real estate will likely be rented for farming during ~~Fiscal~~fiscal ~~2021~~year 2022.

Item 3. Legal Proceedings.

On May 3, 2010, GS CleanTech Corporation ("CleanTech"), a wholly owned subsidiary of GS (Green Shift) CleanTech Corporation filed a complaint against the Company alleging that the Company’s operation of a corn oil extraction process infringes proprietary rights owned by CleanTech related to methods for the separation of corn oil from the by-product stream of the dry mill ethanol manufacturing process, and post-oil removal processing methods.

The lawsuit was initially filed in the United States District Court for the Northern District of Iowa but was moved with numerous similar cases to the United States District Court for the Southern District of Indiana. The Company, together with multiple other defendants in a consolidated multi-district litigation proceeding collectively filed Motions for Summary Judgment asserting that each did not infringe the patents-at-issue and, further, that said patents are invalid. On November 13, 2014, the U.S. District Court released its Ruling & Order on Summary Judgment. The Court held that Lincolnway Energy did not infringe the patents-at-issue and further ruled that said patents are invalid and, thus, unenforceable against Lincolnway Energy. The Court also denied CleanTech's Motion for Summary Judgment of Infringement and Enforceability against Lincolnway Energy.

In September 2016, the Court issued an opinion rendering the CleanTech patents unenforceable due to inequitable conduct. This ruling is in addition to the prior favorable court decisions on non-infringement. CleanTech and its attorneys filed a Notice of Appeal appealing the rulings of the September 2016 summary judgment decision. On March 2, 2020, the rulings were affirmed on appeal by the Court of Appeals for the Federal Circuit and a petition for a rehearing of the appeal en banc was subsequently denied. The official deadline to seek further appeal of the rulings has expired; however, on November 27, 2020, in alleged reliance on an extension of the filing window for writs of certiorari to the Supreme Court of the United States ("SCOTUS") granted in light of the COVID-19 pandemic, CleanTech filed a writ of certiorari seeking review of the rulings by SCOTUS which ~~has~~was ~~yet~~recently todenied ~~be ruled upon~~ by the Court. A motion for an award of attorney fees against the plaintiffs is currently pending and defendants in the case may receive some reimbursement from the plaintiffs for their legal fees in defending this matter. Lincolnway Energy does not expect any potential award of attorneys’ fees in the matter to be material, if received at all.

From time to time, the Company may be subject to legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters, if any, are currently not determinable, we do not expect that the ultimate costs to resolve these matters, if any, would have a material adverse effect on the Company financial position, results of operations, or cash flows.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market for Lincolnway Energy Units

13Lincolnway Energy is authorized to issue an unlimited number of units. As of December 22, 2021, Lincolnway Energy had 105,122 outstanding units with (i) 42,049 Common Units issued and outstanding held by 921 persons, (ii) 56,086 Class A Units held by HALE, LLC and (iii) 6,987 Class B Units held by 61 persons.

Lincolnway Energy is authorized to issue an unlimited number of units. As of December 1, 2020, Lincolnway Energy had 105,122 outstanding units with (i) 42,049 Common Units issued and outstanding held by 940 persons, (ii) 56,086 Class A Units held by HALE, LLC and (iii) 6,987 Class B Units held by 61 persons.

Lincolnway Energy's units are not listed on any exchange, and there is no public trading market for Lincolnway Energy's units. However, the Company does provide access to a qualified matching service for its members, which provides a system for limited transfers of the Company’s units.

There have been some sales of units pursuant to Lincolnway Energy's qualified matching service. The purchase price and other terms of any transactions pursuant to Lincolnway Energy's qualified matching service are negotiated and established solely by the seller and the buyer. Lincolnway Energy does not endorse or recommend any sale of units and is not responsible for the fairness of the purchase price paid in any transactions made pursuant to the qualified matching service, or for the payment or other terms of any transaction. Lincolnway Energy therefore does not represent or guarantee in any way that any of the prices paid pursuant to the qualified matching service are fair or accurately reflect the value of Lincolnway Energy's units, and Lincolnway Energy does not endorse or recommend any sales of units at any of the prices listed by a member in the qualified matching service or on the same or similar terms.

Distributions

The payment of distributions to members by Lincolnway Energy is within the discretion of the Board of Lincolnway Energy, and there is no assurance of any distributions from Lincolnway Energy. The Company cannot be certain if or when it will be able to make additional distributions.

The payment of distributions is also subject to Lincolnway Energy's compliance with various covenants and requirements of Lincolnway Energy's credit and loan agreements, and it is possible that those covenants and requirements will at times prevent Lincolnway Energy from paying a distribution to its members if Lincolnway Energy fails to meet certain financial metrics or is in default under the provisions of the credit and loan agreements

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

We did not repurchase any equity securities between July 1, 2021 and September 30, 2021.

Performance Graph

The following graph shows a comparison of cumulative total member return since September 30, ~~2014~~2016, 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, ~~2015~~2016. Data points on the graph are annual, and the Company’s return is based on change in book value. Note that historic unit price performance is not necessarily indicative of future unit price performance.

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.

Item 6. ~~Selected Financial Data~~[Reserved].

The following information is summary selected financial data for Lincolnway Energy for the fiscal years ended September 30, 2020, 2019, 2018, 2017, and 2016, with respect to statements of operations data and balance sheet data. The data is qualified by, and must be read in conjunction with, Item 1A of this annual report, "Risk Factors", Item 7 of this annual report, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and with the financial statements and supplementary data included in Item 8 of this annual report.

Statement of Operations Data:	2020		2019		2018		2017		2016
Revenue	$105,156,552		$97,386,340		$102,050,976		$110,845,184		$101,141,768
Cost of goods sold	101,072,011		105,075,962		102,333,910		103,151,272		99,340,675
Gross profit (loss)	4,084,541		(7,689,622)		(282,934)		7,693,912		1,801,093
General and administrative expenses	3,333,321		3,484,570		3,236,616		3,136,379		3,379,164
Bad debt expense	—		4,385,009		—		—		—
Operating income (loss)	751,220		(15,559,201)		(3,519,550)		4,557,533		(1,578,071)
Other income (expense)	(431,244)		2,310,395		572,335		(53,685)		(62,325)
Net income (loss)	$	319,976	$	(13,248,806)	$	(2,947,215)	$	4,503,848	$	(1,640,396)
Weighted average units outstanding	70,082		42,049		42,049		42,049		42,049
Net income (loss) per unit - basic and diluted	$	4.57	$	(315.08)	$	(70.09)	$	107.11	$	(39.01)
Cash distributions per unit	$	—	$	—	$	25.00	$	—	$	45.00

Balance Sheet Data:	2020		2019		2018		2017		2016
Working Capital (Deficit)	$	13,916,316	$	(17,855,581)	$	4,483,431	$	5,176,444	$	5,265,892
Net Property Plant & Equipment	37,874,838		42,391,690		48,715,820		39,945,183		34,929,124
Total Assets	65,810,902		53,713,992		58,403,472		51,173,323		46,085,438
Long-Term Obligations	27,558,769		649,799		16,029,885		3,942,960		3,542,593
Members' Equity	32,570,368		24,750,392		37,999,198		41,997,638		37,493,790
Book Value per Member Unit	$	310	$	589	$	904	$	999	$	892

During the 2019 fiscal year, Lincolnway Energy was in violation of its financial covenants and was not expected to meet covenants of the loan agreement for the next 12 month period. Therefore, Lincolnway Energy was required to classify debt with their primary lender as a current liability during 2019. In May 2020, the Company was no longer in violation of its covenants with their primary lender, was expected to meet the financial covenants set out in the loan agreement for the next 12 month period and therefore the debt was classified as a long-term obligation for the 2020 fiscal year end. These classifications are reflected in the Working Capital (Deficit) calculation above.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

~~Except~~Comparison ~~for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties, and which speak only as~~ of ~~the~~Fiscal ~~date~~Years ofEnded ~~this~~September annual report. No one should place strong or undue reliance on any forward looking statements. Lincolnway Energy's actual results or actions may differ materially from these forward-looking statements for many reasons30, ~~including~~2021 ~~the risks described in Item 1A~~ and elsewhere in this annual report. This Item should be read in conjunction with the financial statements and related notes and with the understanding that Lincolnway Energy's actual future results may be materially different from what is currently expected or projected by Lincolnway Energy.2020

~~Overview~~21

Lincolnway Energy is an Iowa limited liability company that operates as a dry mill ethanol plant located in Nevada, Iowa. Lincolnway Energy has been processing corn into fuel grade ethanol and distillers grains since May 22, 2006. Lincolnway Energy's plant also produces corn oil and carbon dioxide.


Statements of Operations Data:	2021				2020
	Amount		%		Amount		%
Revenues	$	171,986,079	100.0	%	$	105,156,552	100.0	%
Cost of goods sold	162,605,266		94.5	%	101,072,011		96.1	%
Gross profit	9,380,813		5.5	%	4,084,541		3.9	%
General and administrative expense	2,899,154		1.7	%	3,333,321		3.2	%

Operating income	6,481,659		3.8	%	751,220		0.7	%
Interest expense	(782,113)		(0.5)	%	(1,125,048)		(1.1)	%
Interest income	2,595		—	%	13,290		—	%
Other income	947,080		0.6	%	680,514		0.6	%
Net income	6,649,221		3.9	%	319,976		0.2	%

Net income was approximately $6.6 million in Fiscal 2021, which was $6.3 million increase as compared to net income in Fiscal 2020. The ~~ethanol~~increase ~~plant~~in ~~has~~net income for Fiscal 2021 can be attributed in part to a ~~nameplate~~7% increase in ethanol production ~~capacity~~along ofwith ~~50,000,000~~a ~~gallons,~~64% ~~which,~~increase atin ~~that~~total ~~capacity,~~ethanol ~~would~~revenue. Additionally ~~also~~total ~~generate~~cost ~~approximately~~of ~~136,000~~production ~~tons~~increased 61% because of ~~distillers~~a ~~grains~~93% ~~per~~increase ~~year~~in corn cost over Fiscal 2020. ~~The~~Distillers ~~ethanol~~grains ~~plant~~revenue ~~produced~~increased ~~65,934,651~~approximately ~~gallons~~$12.7 million as a result of ~~ethanol~~an ~~and~~increase ~~152,454~~as ~~tons~~a result of ~~distillers~~an ~~grains~~increase ~~during~~in ~~the~~in ~~fiscal~~ethanol ~~year~~production ~~ended~~which ~~September 30,~~creates ~~2020~~additional ~~("Fiscal~~distillers ~~2020")~~grain production.

~~Industry~~Revenues ~~Overview~~from operations for the fiscal year ended September 30, 2021 were approximately $172 million, consisting of an estimated $131.4 million of ethanol sales (net of hedging activity), or 76% of revenues, $31.9 million in distillers grains sales, or 19% of revenues, and ~~Recent~~$9.3 ~~Actions~~million of corn oil, syrup, CO2 and other sales, or 5% of revenues. Revenues increased in Fiscal 2021 by approximately 64%, when compared to Fiscal 2020. The increase in revenues for Fiscal 2021 resulted from an increase in ethanol and distiller grains production along with an increase in ethanol and distillers prices received from our marketers.

16For Fiscal 2021, the average price we received for our ethanol was approximately 51% higher compared to Fiscal 2020. Management attributes this increase in the average price we received for our ethanol with increased ethanol demand and relatively lower ethanol stocks during Fiscal 2021 compared to Fiscal 2020. In addition, higher energy prices generally, including higher gasoline prices, have positively impacted ethanol prices and demand during Fiscal 2021 compared to Fiscal 2020. Management anticipates that ethanol prices will remain higher during our 2022 fiscal year unless ethanol production outpaces ethanol demand. While the ethanol industry continues to build ethanol stocks, current demand kept pace with the building stocks which has resulted in higher ethanol prices.

~~Throughout~~In ~~most~~addition ofto ~~2018 and 2019,~~ the ~~Company,~~increase ~~and~~in ~~the~~ ethanol ~~industry as a whole~~revenue, ~~experienced~~distillers ~~significant~~grains ~~adverse~~revenue ~~conditions~~increased asby a$12.7 ~~result~~million ofduring ~~industry-wide~~Fiscal ~~record~~2021 ~~low~~as ~~ethanol~~compared ~~prices due~~ to ~~reduced~~Fiscal ~~demand and high industry inventory levels~~2020. ~~These~~The ~~adverse~~average ~~conditions~~price ~~continued~~per inton ~~2020~~increased ~~and~~46% ~~have~~for ~~been~~Fiscal ~~compounded~~2021 byas ~~the~~compared ~~impact~~to ofFiscal ~~novel~~2020. The ~~coronavirus~~increase ~~disease~~in ~~(“COVID-19”),~~revenues ~~resulted,~~was ~~and~~due ~~continue to result,~~ in ~~negative~~part ~~operating~~to ~~margins,~~a ~~significantly~~strategic ~~lower~~focus ~~cash~~on ~~flow~~improvements ~~from~~in ~~operations~~the volume and ~~substantial~~quality ~~net~~of ~~losses.~~the Indistillers ~~response~~grains toproduct ~~these adverse market conditions~~sold. Also, ~~commencing in~~ the ~~middle~~price of ~~March~~distillers ~~2020,~~grains weincreased ~~elected~~as toa ~~reduce~~result ~~ethanol~~of ~~production~~higher atcorn ~~our~~prices ~~plant by approximately forty percent (40%)~~too. ~~Management~~This ~~believed~~effort ~~that~~resulted ~~this reduction was warranted due to current negative margins~~ in ~~the~~a ~~ethanol~~14% ~~industry~~increase ~~resulting~~ in ~~part~~distiller ~~from~~grains atons ~~slowdown~~produced in ~~global~~Fiscal ~~and~~2021 ~~regional~~as ~~economic~~compared ~~activity and decreased ethanol demand due~~ to ~~the~~Fiscal ~~COVID-19 pandemic~~2020. ~~Limiting~~ ~~ethanol production also resulted in a corresponding decrease in distillers grains and corn oil production.~~

~~The~~Corn ~~Company~~oil ~~also~~revenue ~~consummated~~increased ~~certain~~86% ~~strategic transactions which resulted~~ in aFiscal ~~change~~2021 ofor ~~control~~$3.96 ofmillion ~~the~~dollars ~~Company,~~when ~~including,~~compared ~~without limitation, those transactions summarized below, all designed~~ to ~~inject~~Fiscal ~~capital into the Company and strengthen its balance sheet as well as provide the Company with a new operational management and governance structure~~2020. ~~Additional~~The ~~details~~increase ~~regarding~~is due ~~these~~to ~~strategic~~a ~~transactions~~89% ~~can~~increase ~~be found~~ in the ~~Company’s~~sales ~~Current~~price ~~Report~~per onpound ~~Form~~while ~~8-K filed with~~ the ~~SEC~~production ondecreased ~~April~~357 3,thousand ~~2020,~~pounds ~~the~~or ~~Company’s~~2% ~~Current~~in ~~Report~~Fiscal on2021 ~~Form~~compared ~~8-K~~to ~~filed~~Fiscal ~~with the SEC on June 3,~~ 2020~~, the Company’s Quarterly Report on Form 10-Q filed with the SEC on June 19, 2020 and the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2020~~.

~~•The~~Lincolnway ~~sale~~Energy's cost of 42goods sold for Fiscal 2021 totaled approximately $163 million,~~049~~ ~~new~~which ~~Class~~was Aa ~~Units~~increase of ~~the~~61% ~~Company~~when compared to ~~HALE,~~Fiscal ~~LLC~~2020. The ~~(“HALE”),~~increase anin ~~affiliate~~cost of ~~Husker~~goods ~~Ag,~~sold ~~LLC~~for ~~(“Husker~~Fiscal ~~Ag”),~~2021 onis ~~March~~primarily ~~31,~~due ~~2020~~to ~~for~~general anincrease ~~aggregate~~in ~~price~~cost of ~~$5,000,000,~~overall orproduction ~~$118.91~~as ~~per~~discussed ~~Class~~in Athe ~~Unit~~upcoming ~~pursuant~~paragraph. Cost toof ~~the~~goods ~~terms~~sold major components consists of ~~Preferred~~corn ~~Membership~~costs, ~~Unit~~energy ~~Purchase~~costs, ~~Agreement~~ingredient ~~(the~~costs, ~~“MUPA”)~~production ~~with~~labor, ~~HALE. HALE~~repairs ~~obtained~~and ~~control~~maintenance, ofprocess ~~the~~equipment ~~Company~~depreciation, ~~upon~~and ~~consummation~~ethanol ofand ~~this~~distillers ~~transaction~~grain onfreight ~~March~~expense ~~31,~~and ~~2020~~marketing fees.

•The ~~conduct~~average cost of acorn ~~private~~increased ~~offering~~by of$54.8 ~~new~~million ~~Class~~for BFiscal ~~Units~~2021 ~~(the~~as ~~“Class~~compared Bto ~~Offering”)~~Fiscal to2020. Corn ~~the~~hedging ~~Company’s~~activity ~~existing~~for ~~members~~Fiscal ~~who~~2021 ~~are~~included ~~“accredited~~a ~~investors”~~combined asunrealized ~~defined~~and ~~under~~realized Unet loss of approximately $2.S.3 ~~securities~~million ~~laws~~from ~~which~~derivative ~~offering~~instruments ~~closed~~compared onto ~~May~~a ~~28,~~gain ~~2020~~$709 ~~(the~~thousand ~~“Closing~~combined ~~Date”). In~~unrealized ~~connection~~and ~~with~~realized ~~this~~net ~~offering,~~loss onfor ~~the~~Fiscal ~~Closing~~2020. Corn ~~Date~~costs, including the ~~Company~~combined ~~sold~~unrealized 6and realized net gain from derivative instruments,~~822~~ ~~new~~represented ~~Class~~82% Bof ~~Units~~cost of goods sold for anFiscal ~~aggregate~~2021, ~~price~~compared to 75% of ~~$811,204,~~costs orof ~~$118.91~~goods ~~per~~sold ~~unit~~for Fiscal 2020.

•Also effective on the Closing Date and pursuant to the terms of the MUPA, the Company sold an additional 14,037 Class A Units to HALE for $1,669,176, or $118.91 per unit, and (b) pursuant to a separate subscription agreement between the Company and LKPK Holdings, LLC, a Nebraska limited liability company (“LKPK”), the Company agreed to sell and subsequently sold 165 Class B Units to LKPK for $19,620, or $118.91 per unit.22

~~•The~~Energy ~~Company~~costs ~~restructured~~for ~~its~~Fiscal ~~Board~~2021 totaled approximately $10 million, or 6% of ~~Directors~~cost of goods sold, compared to ~~provide~~$8.2 ~~for~~million ~~four~~or ~~directors~~8.2% toof becost ~~appointed~~of bygoods ~~HALE,~~sold ~~the~~for ~~sole~~Fiscal ~~holder~~2020. Energy costs consist of ~~Class~~natural Agas ~~Units~~and ~~(the~~electricity ~~“Class~~costs. For AFiscal ~~Directors”)~~2021, ~~and~~Lincolnway ~~three~~Energy ~~directors~~purchased toapproximately be1,850,000 MMBTUs ~~elected~~of bynatural ~~the~~gas ~~holders~~at an average price of ~~Common~~$3.59. In ~~Units~~comparison, ~~and~~in ~~Class~~Fiscal B2020 ~~Units~~the ~~voting~~Company ~~together~~used asapproximately a1,769,000 ~~single~~MMBTUs ~~class~~of ~~(the~~natural ~~‘Elected~~gas ~~Directors”). The~~at ~~Elected~~an ~~Directors~~average ~~will~~price ~~generally~~of be2.73. ~~arranged~~Electricity ~~into~~costs ~~three~~amounted ~~classes~~to ~~with~~approximately ~~one~~$3.4 ~~director~~million in ~~each~~Fiscal ~~class~~2021 ~~and~~as ~~each~~compared ~~elected~~to ~~for~~$3.5 ~~staggered~~million ~~three-year~~in ~~terms~~Fiscal 2020.

~~•The~~ ~~Company~~Ingredient ~~amended~~costs ~~and~~for ~~restated~~Fiscal ~~its~~2021 ~~operating agreement to create the new Class A Units~~ and ~~Class~~Fiscal B2020 ~~Units~~totaled ~~and~~approximately to$6.2 ~~re-title~~million, ~~the~~or ~~pre-existing~~3.8% ~~units~~of ascost ~~“Common~~of ~~Units”~~goods ~~and~~sold, ~~provide the Class A Units~~ and ~~Class~~$5.4 Bmillion, ~~Units~~or ~~with~~5.3% ~~certain~~of ~~rights~~cost ~~and~~of ~~preferences~~goods assold, ~~set~~respectively. ~~forth~~Ingredient incosts ~~the~~consist ~~Fourth Amended and Restated Operating Agreement (the “Operating Agreement”) as well to effect the restructuring~~ of ~~the~~denaturant, ~~board~~enzymes, offermentation ~~directors~~ and ~~make~~process ~~certain other modifications~~chemicals.

~~•The~~Production ~~Company~~labor, ~~entered~~repairs ~~into~~and anmaintenance ~~Amended~~ and ~~Restated~~other ~~Management~~plant ~~Services~~costs ~~Agreement~~totaled ~~effective~~approximately ~~April~~$5.9 1million, ~~2020~~or ~~which~~3.6% ~~replaced~~of ~~and~~cost ~~superseded~~of ~~the~~goods ~~Management~~sold, ~~Services~~for ~~Agreement~~Fiscal ~~dated~~2021 ~~January~~compared 15to $4.3 million, ~~2020~~or ~~with~~4.3% ~~Husker~~of Agcost of goods sold, for Fiscal 2020. The increase is due to increased ethanol production, increasing wages and implementing a maintenance program.

~~•The~~Deprecation ~~Company~~totaled ~~received~~approximately a$4.0 ~~loan~~million, inor ~~the~~2.5% ~~amount~~of cost of goods sold, for Fiscal 2021 compared to $~~505~~4.1 million,~~700~~ ~~under~~or ~~the~~4.0% ~~new~~of ~~Paycheck~~cost ~~Protection~~of ~~Program~~goods ~~("PPP~~sold, ~~Loan")~~for ~~legislation~~Fiscal ~~passed~~2020. inThe ~~response~~depreciation toexpense ~~the~~is ~~economic~~unchanged ~~downturn~~as ~~triggered~~a byresult ~~COVID-19~~of ~~and~~minimal ~~administered~~capital byimprovement ~~the~~took ~~U.S.~~place ~~Small~~in ~~Business~~fiscal ~~Administration~~2021.

~~•Effective~~Ethanol, ~~May~~distillers ~~29,~~grain ~~2020,~~and ~~the~~corn ~~Company~~oil ~~entered~~freight ~~into~~expense ~~certain~~and ~~amendments~~marketing tofees ~~its~~totaled ~~credit~~approximately ~~and~~$3.9 ~~loan~~million, ~~agreements~~or ~~with~~2.3% ~~its~~of ~~primary~~cost ~~lender~~goods ~~which~~sold, ~~combined~~for ~~with~~Fiscal ~~the~~2021 ~~strategic~~compared ~~transactions~~to ~~referenced~~$3.2 ~~above~~million, ~~resulted~~or in3.2% ~~the~~of ~~waiver~~cost of ~~past~~goods ~~instances~~sold, ofduring ~~non-compliance~~Fiscal ~~with~~2020. ~~certain~~The ~~financial~~increase ~~covenants~~is ~~from~~due ~~June~~to ~~30,~~incurring ~~2019~~ethanol ~~through~~and ~~April~~distiller ~~30,~~grains ~~2020~~new railcar leases and expenses related to handle the ~~mitigation~~increased production of ~~certain~~ethanol ~~prior~~and ~~going~~distiller ~~concern~~grains ~~uncertainties~~production.

~~Outlook~~General and administrative expenses totaled approximately $2.9 million during Fiscal 2021 compared to $3.3 million during Fiscal 2020. The decrease in general and administrative expenses is due to the implementation of cost control measures aimed at maintaining or reducing our general and administrative expenses.

17Other income increased approximately $599,000 for Fiscal 2021 as compared to Fiscal 2020. The increase is due primary to the net effect of less interest expense as we used cash to repay our debt instruments along with more other income related to the forgiveness of the Federal COVID PPP Loan forgiveness for Fiscal 2021 compared to Fiscal 2020.

Although there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on Lincolnway Energy’s future results, management believes our current cash reserves, cash generated from our operations, cash generated from the issuance of new Class A Units and new Class B Units, our PPP Loan and the available cash under our amended revolving credit loan and our amended revolving term loan leave us well-positioned to manage our business through this crisis as it continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and the financial impacts associated with the COVID-19 pandemic include, but are not limited to, reduced production levels, lower net sales and potential incremental costs associated with mitigating the effects of the pandemic, including storage and logistics costs and other expenses. As a result, although the Company was in compliance with the financial covenants set forth in the amended master credit agreement (the "Credit Agreement") with Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and CoBank, ACB as of September 30, 2020, the impact the COVID-19 pandemic could have an adverse impact on the Company’s operating results which could result in an inability of the Company to comply with certain of these financial covenants and require its lenders to waive compliance with, or agree to amend, any such covenant to avoid a default. However, based on management’s current forecast of market conditions and the Company’s financial performance together with the amended financial covenants set forth in our Credit Agreement, management expects that the Company will be in a position to satisfy all of the financial covenants in the Credit Agreement for the next twelve months.

The COVID-19 pandemic is ongoing, and its dynamic nature, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the pandemic, and actions that would be taken by governmental authorities to contain the pandemic or to treat its impact, makes it difficult to forecast any effects on the Company’s results for the fiscal year ending September 30, 2021 (“Fiscal 2021”). Despite the strategic transactions taken by the Company and the positive financial performance achieved by the Company during Fiscal 2020, the challenges posed by the COVID-19 pandemic on the ethanol industry and the global economy are continuing, and may accelerate, during the first quarter of Fiscal 2021. As of the date of this filing, management does not anticipate material improvement in the macroeconomic environment and, as a result our results for the first quarter of Fiscal 2021 may be significantly affected.

Despite the economic uncertainty resulting from the COVID-19 pandemic, management intends to continue to focus on strategic initiatives designed to improve on the plant’s operational efficiencies and diversify the Company’s products which is critical in order to drive positive results in a negative margin environment. Management believes that consolidation within the ethanol industry, coupled with the plant’s location, good operating efficiencies and the Company’s solid management and operational team may provide new opportunities for the Company.

Management continues to monitor the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside the Company’s control requiring management to adjust the Company’s operating plan. As such, given the dynamic nature of this situation, management cannot reasonably estimate the impacts of COVID-19 on the Company’s financial condition, results of operations or cash flows in the future.

Comparison of Fiscal Years Ended September 30, 2020 and 2019

Statements of Operations Data:	2020				2019
	Amount		%		Amount		%
Revenues	$	105,156,552	100.0	%	$	97,386,340	100.0	%
Cost of goods sold	101,072,011		96.1	%	105,075,962		107.9	%
Gross profit (loss)	4,084,541		3.9	%	(7,689,622)		(7.9)	%
General and administrative expense	3,333,321		3.2	%	3,484,570		3.6	%
Bad debt expense	—		—	%	4,385,009		4.5	%
Bad Debt Expense	—		—	%	4,385,009		4.5	%
Operating income (loss)	751,220		0.7	%	(15,559,201)		(1116.50)	%
Interest expense	(1,125,048)		(1.1)	%	(800,867)		(0.8)	%
Interest income	13,290		—	%	10,579		—	%
Other income	680,514		0.6	%	3,100,683		3.2	%
Net income (loss)	$	319,976	0.2	%	$	(13,248,806)	(913.16)	%

Net income was approximately $320 thousand in Fiscal 2020, which was a $13.6 million increase as compared to net income in Fiscal 2019. The increase in net income for Fiscal 2020 can be attributed in part to a 7% increase in ethanol production and a decrease in the total cost of production of $0.18 a production gallon. Additionally, ethanol revenue increased $4.9 million as a result of the increase in the gallons produced which was partially offset by a $1.4 million increase in the cash corn expense. The cost of production decreased by $4 million due to changes in operating procedures and a strategic focus on producing ethanol gallons more efficiently. Additionally, distillers grains revenue increased $3.9 million as a result of a 14% increase in production, or production of an additional 14,875 tons of distillers grains.

Net income was approximately $320 thousand in Fiscal 2020, which was a $13.6 million increase as compared to net income in Fiscal 2019. The increase in net income for Fiscal 2020 can be attributed in part to an 7% increase in ethanol production and a decrease in the total cost of production of $0.18 a production gallon. Additionally, ethanol revenue increased $4.9 million as a result of the increase in the gallons produced which was partially offset by a $1.4 million increase in the cash corn expense. The cost of production decreased by $4 million due to changes in operating procedures and a strategic focus on producing ethanol gallons more efficiently. Additionally, distillers grains revenue increased $3.9 million as a result of a 14% increase in production, or production of an additional 14,875 tons of distillers grains.23

Revenues from operations for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2020 were approximately $105.2 million, consisting of $80.0 million of ethanol sales (net of hedging activity), or 76% of revenues, $19.2 million in distillers grains sales, or 18.3% of revenues, and $5.8 million of corn oil, syrup, CO2 and other sales, or 5.5% of revenues. Revenues increased in ~~fiscal~~Fiscal ~~year~~ 2020 by approximately 8.0%, when compared to ~~fiscal~~Fiscal ~~year~~ 2019. The increase in revenues for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2020 resulted from an increase in ethanol and distiller grains production. Ethanol average price per gallon decreased 1% from ~~fiscal~~Fiscal ~~year~~ 2019.

In addition to the increase in ethanol revenue, distillers grains revenue increased by $3.9 million during ~~fiscal~~Fiscal ~~year~~ 2020 as compared to ~~fiscal~~Fiscal ~~year~~ 2019. The average price per ton increased 5% ~~when~~for ~~compared~~Fiscal to2020 ~~the~~as ~~prior~~compared ~~fiscal~~to ~~year~~Fiscal 2019. The increase in revenues was due in part to a strategic focus on improvements in the volume and quality of the distillers grains product sold. This effort resulted in a 24% increase in distiller grains tons produced ~~over~~for ~~the~~Fiscal ~~prior~~2020 ~~fiscal~~as ~~year~~compared to Fiscal 2019.

Corn oil revenue decreased 19% in ~~fiscal~~Fiscal ~~year~~ 2020 or $871 thousand dollars when compared to ~~fiscal~~Fiscal ~~year~~ 2019. The decrease is due to a 13.5% decrease in production as a result of the strategic focus on improving distiller grains production and improved ethanol production.

Lincolnway Energy's cost of goods sold for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2020 totaled approximately $101 million, which was a decrease of 3.9% when compared to ~~fiscal~~Fiscal ~~year~~ 2019. The decrease in cost of goods sold ~~for~~Fiscal ~~the~~ 2020 ~~fiscal year~~ is primarily due to an overall focus on production efficiencies and improvements to operations. Cost of goods sold major components consists of corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process equipment depreciation, and ethanol and distillers grain freight expense and marketing fees.

The average cost of corn increased by $1.4 million for Fiscal 2020 as compared to ~~fiscal~~Fiscal ~~year 2020~~2019. Corn hedging activity for ~~fiscal~~Fiscal ~~year~~ 2020 included a combined unrealized and realized net gain of $55 thousand from derivative instruments compared to a $.672 million combined unrealized and realized net gain for ~~fiscal~~Fiscal ~~year~~ 2019. Corn costs, including the combined unrealized and realized net gain from derivative instruments, represented 75% of cost of goods sold for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2020, as compared to 70.5% of costs of goods sold for ~~fiscal~~Fiscal ~~year~~ 2019.

Energy costs for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2020 totaled approximately $8.2 million, or 8.2% of cost of goods sold, compared to $9.3 million or 8.87% of cost of goods sold for ~~the~~Fiscal 2019 ~~fiscal year~~. Energy costs consist of natural gas and electricity costs. For ~~fiscal~~Fiscal ~~year~~ 2020, Lincolnway Energy purchased 1,768,901 MMBTUs of natural gas at an average price of $2.73. In comparison, in ~~fiscal~~Fiscal ~~year~~ 2019 the Company used 1,764,330 MMBTUs of natural gas at an average price of $3.29. Electricity costs amounted to approximately $3.5 million in ~~fiscal~~Fiscal ~~year~~ 2020 which is unchanged compared to $3.5 million in ~~fiscal~~Fiscal ~~year~~ 2019.

Ingredient costs for the ~~fiscal~~Fiscal ~~years ended September 30,~~ 2020 and Fiscal 2019 totaled approximately $5.4 million, or 5.3% of cost of goods sold, and $6.7 million, or 6.4% of cost of goods sold, respectively. Ingredient costs consist of denaturant, enzymes, fermentation and process chemicals.

Production labor, repairs and maintenance and other plant costs totaled approximately $4.3 million, or 4.3% of cost of goods sold, for ~~fiscal~~Fiscal ~~year~~ 2020 compared to $7.5 million, or 7.1% of cost of goods sold, for ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2019. The decrease is due to lower maintenance and repair costs on the plant. The Company has also increased its focus on preventative maintenance to reduce downtime and maintain higher production rates.

Deprecation totaled approximately $4.1 million, or 4.0% of cost of goods sold, for ~~fiscal~~Fiscal ~~year~~ 2020 compared to $4.6 million, or 4.5% of cost of goods sold, for ~~the~~Fiscal ~~fiscal year~~ 2019. The increase in depreciation resulted from the addition of several capitalized assets to the plant.

19Ethanol, distillers grain and corn oil freight expense and marketing fees totaled approximately $3.2 million, or 3.2% of cost goods sold, for Fiscal 2020. This compared to $2.7 million, or 2.7% of cost of goods sold, during Fiscal 2019. The increase is due to incurring ethanol and distiller grains railcar leases to handle the increased production of ethanol and distiller grains production.

~~Ethanol,~~General ~~distillers grain~~ and ~~corn~~administrative ~~oil~~expenses ~~freight expense and marketing fees~~ totaled approximately $3.23 million, orduring ~~3.2%~~Fiscal ~~of cost goods sold, for fiscal year ending September 30,~~ 2020~~. This~~ compared to $23.73 million, ~~or 2.7% of cost of goods sold,~~ during ~~the~~Fiscal ~~fiscal year ended September 30,~~ 2019. The ~~increase~~unchanged expenses is due to ~~incurring~~the ~~ethanol~~implementation ~~and~~of ~~distiller~~cost ~~grains~~control ~~railcar~~measures ~~leases~~aimed toat ~~handle~~maintaining ~~the~~or ~~increased~~reducing ~~production~~our ofgeneral ~~ethanol~~ and ~~distiller~~administrative ~~grains production~~expenses.

~~General~~Other ~~and~~income ~~administrative~~decreased ~~expenses totaled approximately~~ $32.37 million ~~during~~in ~~the~~Fiscal ~~fiscal year ending September 30,~~ 2020 ~~compared~~from toFiscal ~~$3.3 million during the fiscal year ended September 30,~~ 2019. The ~~unchanged~~decrease ~~expenses~~ is due to the ~~implementation~~early termination of ~~cost~~the ~~control~~load ~~measures~~out ~~aimed~~service atagreement ~~maintaining~~which orresulted ~~reducing~~in ~~our~~income ~~general~~of ~~and~~approximately ~~administrative~~$3.4 ~~expenses~~million in Fiscal 2019.

Other income decreased $2.7 million in fiscal year 2020 from fiscal year 2019. The decrease is due to the early termination of the load out service agreement which resulted in income of approximately $3.4 million in fiscal year 2019.

Comparison of Fiscal Years Ended September 30, 2019 and 2018

Statements of Operations Data:	2019				2018
	Amount		%		Amount		%
Revenues	$	97,386,340	100.0	%	$	102,050,976	100.0	%
Cost of goods sold	105,075,962		107.9	%	102,333,910		100.3	%
Gross profit	(7,689,622)		(7.9)	%	(282,934)		(0.3)	%
General and administrative expense	3,484,570		3.6	%	3,236,616		3.2	%
Bad Debt Expense	4,385,009		4.5	%	—		—	%
Operating income (loss)	(15,559,201)		(16.0)	%	(3,519,550)		(3.4)	%
Interest expense	(800,867)		(0.8)	%	(19,390)		—	%
Interest income	10,579		—	%	8,403		—	%
Other income	3,100,683		3.2	%	583,322		0.6	%
Net income (loss)	$	(13,248,806)	(13.6)	%	$	(2,947,215)	(2.9)	%

Net loss was approximately $13.2 million in the fiscal year ended September 30, 2019, which was a $10.3 million decrease when compared to the net income for the 2018 fiscal year. The decrease in net income for fiscal year 2019 can be attributed in part to a one-time bad debt expense of $4,385,009 as further described in Note 1. In addition, during the 2019 fiscal year, the Company had a 1.2% decrease in production levels for ethanol including a $2.5 million decrease in ethanol revenues, increased corn cost of $3.6 million on 872 thousand less bushel ground and lower market price for distiller grains that equated to $1.1 million less revenue.

Revenues from operations for the fiscal year ended September 30, 2019 were approximately $97.4 million, consisting of $75.2 million of ethanol sales (net of hedging activity), or 77.2% of revenues, $15.4 million in distillers grains sales, or 15.9% of revenues, and $6.7 million of corn oil, syrup, CO2 and other sales, or 6.9% of revenues. Revenues decreased in fiscal year 2019 by approximately 4.6%, when compared to fiscal year 2018. The decrease in revenues for the fiscal year ended September 30, 2019 resulted principally from lower ethanol prices, lower ethanol production and higher corn costs. Ethanol prices decreased due to the oversupply in the domestic market which was not met by increased demand as well as continued concern within the market relating to recent international trade disputes and the small refiner waivers granted by the EPA which negatively impacted prices. Ethanol average price per gallon decreased 1.6% from fiscal year 2018. Production decreased due to equipment issues with our regenerative thermal oxidizer, forcing the plant to run at slower rates during the first quarter. The regenerative thermal oxidizer came on line at the end of December 2018 operating at planned performance.

In addition to the decrease in ethanol revenue, distillers grains revenue decreased by $1.5 million compared to fiscal year 2018. The average price per ton increased 7.3% when compared to the prior fiscal year. The decrease in revenues was due in part to a 2.6% decrease in the price per ton we received for our dried distillers grains during fiscal year 2019 which decrease was partially offset by an increase in our dried distillers grain production as well as a 22% increase in the per ton price we received for our wet distillers grains as compared to fiscal year 2018. In addition, we also experienced a substantial decrease in production of our wet distillers grains which further reduced the benefits of the per ton price increase we received for wet distillers grains and contributed to the decreased distillers grain revenues in fiscal year 2019.

Corn oil revenue decreased 1% in fiscal year 2019 or $57 thousand dollars when compared to fiscal year 2018. The decrease is due to a decrease in production.

Lincolnway Energy's cost of goods sold for the fiscal year ended September 30, 2019 totaled approximately $105.1 million, which was an increase of 2.7% when compared to fiscal year 2018. The increase in cost of goods sold for the 2019 fiscal year is primarily due to increases in corn costs. Cost of goods sold major components consists of corn costs, energy costs, ingredient costs, production labor, repairs and maintenance, process equipment depreciation, and ethanol and distillers grain freight expense and marketing fees.

Corn costs including hedging activity for the fiscal year ended September 30, 2019 totaled approximately $74.1 million compared to $70.1 million for fiscal year 2018. There were .87 million less bushels ground due to improved production yields and a slight decrease in production levels during fiscal year 2019 while the average cost of corn increased by $0.32 compared to fiscal year 2018. Corn hedging activity for fiscal year 2019 included a combined unrealized and realized net gain of $.672 million from derivative instruments compared to a $1.7 million combined unrealized and realized net gain for fiscal year 2018. Corn costs, including the combined unrealized and realized net gain from derivative instruments, represented 70.5% of cost of goods sold for the fiscal year ended September 30, 2019, compared to 68.5% of costs of goods sold for fiscal year 2018.

Energy costs for the fiscal year ended September 30, 2019 totaled approximately $9.3 million, or 8.87% of cost of goods sold, compared to $9.3 million or 8.97% of cost of goods sold, for the 2018 fiscal year. Energy costs consist of natural gas and electricity costs. For fiscal year 2019, Lincolnway Energy purchased 1,764,330 MMBTUs of natural gas at an average price of $3.29. In comparison, in fiscal year 20187 the Company used 1,725,266 MMBTUs of natural gas at an average price of $3.49. Electricity costs amounted to approximately $3.5 million in fiscal year 2019 and $3.3 million in fiscal year 2018.

Ingredient costs for the fiscal years ended September 30, 2019 and 2018 each totaled approximately $6.6 million, or 6.4% of cost of goods sold. Ingredient costs consist of denaturant, enzymes, fermentation and process chemicals.

Production labor, repairs and maintenance and other plant costs totaled approximately $7.5 million, or 7.1% of cost of goods sold, for the fiscal year ended September 30, 2019, compared to $8.5 million, or 8.3% of cost of goods sold, for fiscal year 2018. The decrease is due to lower maintenance and repair costs on the plant. The Company has also increased its focus on preventative maintenance to reduce downtime and maintain higher production rates.

Depreciation totaled approximately $4.6 million, or 4.5% of cost of goods sold, for the fiscal year ended September 30, 2019, compared to $3.9 million, or 3.8% of cost of goods sold, for fiscal year 2018. The increase in depreciation resulted from the addition of several capitalized assets to the plant.

Ethanol, distillers grain and corn oil freight expense and marketing fees totaled approximately $2.7 million, or 2.7% of cost of goods sold, during the fiscal year ended September 30, 2019, compared to $3.2 million, or 3.2% of cost of goods sold, for fiscal year 2018. The decrease is due to the expiration of several ethanol railcar leases that were not renewed in fiscal year 2018.

General and administrative expenses totaled approximately $3.5 million during the fiscal year ended September 30, 2019, compared to $3.2 million for fiscal year 2018. The $.3 million increase is due to higher legal fees and professional fees.

Other income increased $2.5 million in fiscal year 2019 from fiscal year 2018. The increase is due to the early termination of the load out service agreement which resulted in income of approximately $3.4 million.

Industry Factors that May Affect Future Operating Results

The operations and profitability of Lincolnway Energy are highly dependent on the prices of the key commodities utilized and sold as part of the ethanol production process. These include corn, ethanol, distillers grain and corn oil. Since the correlation of prices between these commodities is not perfect, and is in fact often very volatile, Lincolnway Energy is at risk of diminishing returns in periods of rising corn prices and decreasing ethanol prices. The prices of these commodities are determined by a variety of factors, including growing season weather, governmental policies, political change, international trade, and macroeconomic trends. Lincolnway Energy attempts to mitigate or hedge some of these risks through the use of various pricing mechanisms including cash contracts, futures contracts, options on futures, and derivative instruments.

Ethanol

As the 2020 calendar year ends, the Company continues to grapple with significant margin weakness in the ethanol industry which has been compounded by the impact of the COVID-19 pandemic. Despite reduced production levels implemented by U.S. plants in response to COVID-19, domestic ethanol stocks continue to remain at record high levels. Lower corn supplies are expected and the industry, particularly on a regional level, will be fighting to manage raw material availability as a result of a potentially materially reduced corn yield due to the damaging impact of the derecho storm in May 2020.

Although the average price per gallon of ethanol remained relatively steady in Fiscal 2020 as compared to Fiscal 2019, there has been a significant decrease in the overall demand for ethanol which ties closely to decreased consumption of gasoline. There has been decreased prices for crude oil and gasoline in Fiscal 2020 compared to Fiscal 2019 due to reduced economic activity and stay-at-home orders aimed at slowing the spread of COVID-19. This has also had a big impact on consumption, as gasoline consumption has declined 12% in 2020 as compared to 2019.

Management anticipates that ethanol prices will be negatively affected as ethanol plants return to higher production levels due to improving operating conditions. Ethanol prices may also decrease if certain areas of the United States reinstate restrictions in response to the COVID-19 pandemic resulting in a decrease in fuel demand. Continued declines in ethanol exports due to decreased global fuel consumption in response to the COVID-19 pandemic or trade disputes with foreign governments would also likely contribute to lower ethanol prices and potentially negative operating margins. Finally, the granting of additional EPA waivers to small refiners could have a negative effect on ethanol prices.

Corn

High corn prices have a negative effect on the Company’s operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Corn prices were lower during Fiscal 2020 compared to Fiscal 2019 due primarily to concerns related to the COVID-19 pandemic. On October 9, 2020, the USDA released a report estimating the 2020 corn crop in the United States at approximately 14.7 billion bushels, up 8% from last year's production, with yields averaging 178.4 bushels per acre. The USDA forecasted area harvested for grain at 82.5 million acres, up 1% from 2019. Demand for corn also remained lower in Fiscal 2020 and with a worldwide pandemic, exports of corn were also reduced as countries deferred material purchase commitments. Management anticipates that prices for corn will remain flat or decrease slightly in 2020/21 as production builds back up from COVID-19 levels. Regional corn prices may be slightly higher depending on the impact of the May 2020 derecho storm on local corn yields. Weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. If corn prices should rise, it will have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Management will continue to monitor the availability of corn.

Critical Accounting Estimates and Accounting Policies

Lincolnway Energy's financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and follow general practices within the industries in which Lincolnway Energy operates. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain policies inherently have a greater reliance on the use of estimates, assumptions, and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes the following policies are both important to the portrayal of Lincolnway Energy's financial condition and results of operations and require subjective or complex judgments; therefore, management considers the following to be critical accounting policies.

Revenue Recognition

Revenue from the sale of Lincolnway Energy's ethanol and distillers grains is recognized at the time title, control and all risks of ownership transfer to the marketing company. This generally occurs upon the loading of the product. For ethanol, title and control passes from Lincolnway Energy at the time the product crosses the loading flange in either a railcar or truck. For distillers grains, title and control passes upon the loading of distillers grains into trucks or railcars. Shipping and handling costs incurred by Lincolnway Energy for the sale of ethanol and distillers grain are included in costs of goods sold.

Derivative Instruments

Lincolnway Energy periodically enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales. Lincolnway Energy does not typically enter into derivative instruments other than for hedging purposes. All the derivative contracts are recognized on the September 30, ~~2020~~2021 and ~~2019~~2020 balance sheets at fair value. Although Lincolnway Energy believes Lincolnway Energy's derivative positions are economic hedges, none has been designated as a hedge for accounting purposes. Accordingly, any realized or unrealized gain or loss related to these derivative instruments is recorded in the statement of operations as a component of cost of goods sold in the case of corn and natural gas contracts and as a component of revenue in the case of ethanol sales.

Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed "normal purchases and normal sales", and therefore are not marked to market in Lincolnway Energy's financial statements, but are subject to a lower of cost or net realizable value assessment.

Property and Equipment

Property and equipment is stated at cost. Construction in progress is comprised of costs related to the projects that are not completed. Depreciation is computed using the straight-line method over the following estimated useful lives. Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. When circumstances or events arise that questions an asset's usefulness, the asset is evaluated for future use and appropriate carrying value.

The Company evaluates the carrying value of long-lived tangible assets when events or changes in circumstances indicate that the carrying value may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases in the market value of the asset, adverse changes in the extent or manner in which the asset is being used, significant changes in business climate, or current or projected cash flow losses associated with the use of the assets. The carrying value of a long-lived asset is considered impaired when the total projected undiscounted cash flows from such assets are separately identifiable and are less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. For long-lived assets to be held for use in future operations and for fixed (tangible) assets, fair value is determined primarily using either the projected cash flows discounted at a rate commensurate with the risk involved or an appraisal. For long-lived assets to be disposed of by sale or other than sale, fair value is determined in a similar manner, except that fair values are reduced for disposal costs.

Inventories at Lower of Cost or Net Realizable Value

Inventories are generally valued at the lower of net realizable value or actual costs using the first-in, first-out method. In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation.

For the years ended September 30, ~~2020~~2021, and ~~2019~~2020, Lincolnway Energy had a lower of cost or net realizable value inventory adjustment of $0, and $750,~~810,~~ respectively.

Off-Balance Sheet Arrangements

Lincolnway Energy currently does not have any off-balance sheet arrangements.

Liquidity and Capital Resources

On September 30, ~~2020~~2021 Lincolnway Energy had approximately $712.2 million in cash and cash equivalents and approximately $7.35 million available under committed loan agreements. Lincolnway Energy’s business is highly impacted by commodity prices, including prices for corn, ethanol and distiller's grains. There are times that Lincolnway Energy may operate at negative operating margins.

~~The following table shows cash flows for the fiscal years ended September 30, 2020 and 2019:~~26

23The following table shows cash flows for the fiscal years ended September 30, 2021 and 2020:

	Year ended September 30,
	2020		2019
	2021		2020
Net cash provided by (used in) operating activities	$	2,794,270	$	(6,866,937)
Net cash provided by operating activities	$	9,429,818	$	2,794,270
Net cash (used in) investing activities	(~~259~~2,~~456~~756,434)		(3259,~~640,661~~456)
Net cash provided by financing activities	4,405,700		10,100,000
Net cash provided by (used in) financing activities	(1,700,000)		4,405,700

For ~~the~~Fiscal ~~fiscal year ended September 30~~2021, ~~2020,~~ cash provided inby operating activities was $29.84 million, compared to cash ~~used~~provided inby operating activities of $62.98 million for ~~the~~Fiscal ~~fiscal year ended 2019~~2020. The ~~$9.7 million~~ increase is due primarily to the Company's increase in net income ~~(loss)~~ due to improved operating efficiencies and the management of working capital components.

Cash flows from investing activities reflect the impact of property and equipment acquired for the ethanol plant. Net cash used in investing activities was $2.258 million for ~~the~~Fiscal ~~fiscal year ended September 30~~2021, ~~2020, when~~ compared to ~~$3.6~~approximately million in fiscal year ended 2019. Cash flows from financing activities include transactions and events whereby cash is obtained or paid back to or from creditors or investors. Net cash provided by financing activities decreased by $~~5.7 million for the fiscal year ended September 30~~260,000 ~~2020, when compared to the fiscal year ended September 30, 2019. The decrease is due to less borrowing on our revolving credit line~~ in ~~fiscal~~Fiscal ~~year~~ 2020. ~~Lincolnway~~ The ~~Energy~~change ~~anticipates~~was ~~keeping~~mainly ~~cash~~due ~~balances at an acceptable level. If Lincolnway Energy should get in a negative cash position, Lincolnway Energy will have access~~ to ~~the~~increased ~~$7.3~~purchases ~~million available on its revolving line~~ of credit loan agreement. Based on the financial projections prepared by management, we plan to closely monitor existing cash, our current credit facilities, and cash from operations to continue to operate the ethanol plant for the next 3 to 6 months. Management is waiting to see how the corn crop develops with the 2020 harvest regarding the future corn supply. Corn prices may continue to increase in price with the uncertain corn production. Working capital ~~was~~assets ~~approximately~~during ~~$13.97~~Fiscal ~~million~~2021. However, management currently projects that working capital will be sufficient based on current cash balances and credit facilities available for the remainder of the fiscal year, but management will continue to monitor our liquidity position on a weekly basis.

~~Recent~~Financing ~~Cash~~activities ~~Injections~~used cash in Fiscal 2021 as compared to providing cash during Fiscal 2020. In Fiscal 2021, we made payments on our long-term debt and did not receive any proceeds from our debt instruments. In Fiscal 2020, we received equity payments from investors which provided cash along with the net effect of payments and proceeds received from out debt instruments which provided cash. If Lincolnway Energy should get in a negative cash position, Lincolnway Energy will have access to the $7.5 million available on its revolving line of credit loan agreement. Based on the financial projections prepared by management, we anticipate we will have sufficient cash and borrowing capacity to continue our operations for the next 12 months and beyond. Working capital as of September 30, 2021 was approximately $16.3 million. Management currently projects that working capital will be sufficient based on current cash balances and credit facilities available for Fiscal 2022 and beyond provide operating margins remain favorable in the ethanol industry.

The Company has recently completed several transactions that resulted in the Company’s receipt of the following injections of cash:

•On March 31, 2020, the Company received $5,000,000 in cash in connection with the issuance of 42,049 new Class A Units.

•On April 13, 2020, the Company received $505,700 under the Paycheck Protection Program administered by the U.S. Small Business Administration (the “PPP Loan”).

•On May 28, 2020, the Company received an additional $2,500,000 in cash in connection with the issuance of an additional 14,037 Class A Units and 6,987 new Class B Units.

Although there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on our future results, we believe our current cash reserves, the cash received from our recent equity issuances, our PPP Loan, and the available cash under our revolving term loan and our revolving credit loan leave us well-positioned to manage our business through this crisis as it continues to unfold. However, the impacts of the COVID-19 pandemic are broad-reaching and the financial impacts associated with the COVID-19 pandemic include, but are not limited to, reduced production levels, lower net sales and potential incremental costs associated with mitigating the effects of the pandemic, including storage and logistics costs and other expenses. As a result, although as of September 30, 2020 the Company was in compliance with our financial covenants set forth in its credit agreement, the impact the COVID-19 pandemic could adversely impact our operating results which could result in our inability to comply with certain of these financial covenants and require our lenders to waive compliance with, or agree to amend, any such covenant to avoid a default. However, based on our current forecast of market conditions and our financial performance, we expect that we will be in a position to satisfy all of the financial covenants in the credit agreement for the next twelve months.

Our financial position and liquidity are, and will continue to be, influenced by a variety of factors, including, without limitation:

•our ability to generate cash flows from operations;

•the level of our outstanding indebtedness and the interest we are obligated to pay;

•our capital expenditure requirements, which consists primarily of plant improvements to improve efficiencies; and

•our margin maintenance requirements on all commodity trading accounts.

~~Despite~~Management ~~the uncertainty related to the impact of the COVID-19 pandemic on our future results, management~~ expects to have sufficient cash available to fund operations for the next twelve months generated by cash from our continuing operations, available cash reserves and available cash under our revolving term loan and our revolving credit loan.

Loans and Agreements

Credit Agreement

Lincolnway Energy is a party to a Credit Agreement with Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA (collectively, the “Lender”) dated July 3, 2017 as amended (the “Credit Agreement”). CoBank, ACB (“CoBank”) has a participation interest in the underlying loans issued under the Credit Agreement and serves as administrative agent for the Credit Agreement.. The Credit Agreement amended, restated and superseded the Master Loan Agreement between the Company and the Lender dated August 21, 2012, as amended (the “Prior Agreement”). The terms of the Credit Agreement apply to all supplements and promissory notes entered into between the parties pursuant to the Prior Agreement and to any new supplements and promissory notes that may be issued under the Credit Agreement in the future.

The Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that are customarily required for similar financings, including in connection with the disbursement of the loan. Under the Credit Agreement as amended effective ~~May~~July 29, ~~2020,~~2021 the Company is subject to the following working capital, net worth and debt service coverage ratio financial covenants:

•Working Capital. The Company must have an excess of current assets over current liabilities of not less than $108,000,000 (“Working Capital Amount”); except that in determining (a) current assets, any amount available under any revolving term promissory note with Lender under the Credit Agreement may be included, and (b) current liabilities, any amount of revolving promissory note with Lender under the Credit Agreement considered a non-current liability and any amount of previous operating lease(s) now reflected as a current liability may be excluded (all as determined in accordance with the Accounting Standards (as defined in the Credit Agreement).

any revolving term promissory note with Lender under the Credit Agreement may be included, and (b) current liabilities, any amount of revolving promissory note with Lender under the Credit Agreement considered a non-current liability and any amount of previous operating lease(s) now reflected as a current liability may be excluded (all as determined in accordance with the Accounting Standards (as defined in the Credit Agreement).

•Net Worth. The Company must have an excess of total assets over total liabilities of not less than $24,000,000 (all as determined in accordance with the Accounting Standards) (the “Net Worth Amount”).

•Debt Service Coverage Ratio. The ~~Credit Agreement provides that the application of this covenant to the~~ Company ~~does~~must ~~not commence until the fiscal year ending September 30, 2021. Commencing with the fiscal year ending September 30, 2021, the Company shall not~~ have a Debt Service Coverage Ratio of less than 1.50 to 1.00. Under the Credit Agreement, the definition of Debt Service Coverage Ratio means: (a) net income (after taxes), plus depreciation and amortization, minus non-cash income from patronage/investments, minus extraordinary gains (plus losses), minus gains (plus losses) on asset sale; divided by (b) $5,000,000 (all as determined in accordance with the Accounting Standards).

As of September 30, ~~2020~~2021, the Company was in compliance with each of these financial covenants.

The Company and Lender are also parties to an Amended and Restated Revolving Term Promissory Note dated May 29, 2020 (the “Restated Revolving Term Note”). The term of the Restated Revolving Term Note expires on October 1, 2024. The Restated Revolving Term Note provides that the aggregate principal amount that the Lender may loan to the Company under the Restated Revolving Term Note shall not exceed $25,000,000 which maximum commitment amount will reduce during the term of the Restated Revolving Term Note as follows:


Maximum Commitment Amount	From	Up to and Including
$20,000,000	October 20, 2021	October 19, 2022
$15,000,000	October 20, 2022	October 19, 2023
$10,000,000	October 20, 2023	October 1, 2024

25Interest accrues on the Restated Revolving Term Note at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3.50%.

On June 29, 2021, the Company entered into a revolving credit line (the “Revolving Credit Note”). The term of the Revolving Credit Note expires on July 1, 2022. The Revolving Credit Note provides that the aggregate principal amount that the Lender may loan to the Company under the Revolving Credit Note shall not exceed $7,500,000. Interest accrues on the Restated Revolving ~~Term~~Credit Note at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3.7525%.

InThe ~~connection~~loans ~~with~~we ~~the~~have ~~execution~~are ofsecured ~~the~~by ~~Amendment,~~first ~~the~~priority ~~Company~~liens ~~and~~covering ~~the~~all ~~Lender~~of ~~entered into an Amended and Restated Revolving Credit Promissory Note dated May 29, 2020 (~~the ~~“Restated~~Company’s ~~Revolving~~assets ~~Credit Note”) which amended, restated~~ and ~~superseded the Revolving Credit Promissory Note dated June 28~~properties, ~~2019.~~including ~~The term of~~ the ~~Restated~~Company's ~~Revolving Term Note expires on January 1~~inventory, ~~2021~~receivables, subject to an annual renewal. The Restated Revolving Credit Note provides that the aggregate principal amount that the Lender may loan to the Company under the Restated Revolving Credit Note shall not exceed $4plant,~~000,000. Interest~~ ~~accrues~~real onestate ~~the~~and ~~Restated~~commodity ~~Revolving~~trading ~~Credit Note at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3~~accounts.~~75%.~~

The Company and the Lender are also parties to that certain Amended and Restated Letter of Credit Promissory Note dated May 29, 2020 (the “Restated Letter of Credit Note”) which amended, restated and superseded the Revolving Letter of Credit Promissory Note dated June 28, 2019. The maximum amount of the letter of credit commitment available under the Restated Letter of Credit is $1,307,525.

The Amended Credit Agreement and all loans made thereunder, including the Amended Revolving Term Note, the Amended Revolving Letter of Credit Note and the New Revolving Note, are secured by first priority liens covering all of the Company’s assets and properties, including the Company's inventory, receivables, plant, real estate and commodity trading accounts.

The Restated Revolving Term Note and the Restated Revolving Letter of Credit are discussed further in Note 5 to the financial statements and the New Revolving Note is discussed further in Note 4 to the financial statements.

Paycheck Protection Program Loan

On April 14, 2020, the Company received a loan in the amount of $505,700 under the new Paycheck Protection Program ("PPP Loan") legislation passed in response to the economic downturn triggered by COVID-19 and administered by the U.S. Small Business Administration. Our PPP Loan ~~will~~was beeligible ~~forgiven~~for forgiveness based upon our payroll cost and certain other expenses over an eight week period starting upon our receipt of the funds. Expenses for payroll costs, lease payments on agreements before February 15, 2020 and utility payments under agreements before February 1, 2020 ~~can~~could be utilized from these funds and eligible for payment forgiveness by the federal government. At least 75% of the proceeds must be used for payroll costs, and no more than 25% on non-payroll expenses. ~~Our~~On ~~use~~May of5, ~~our~~2021, ~~PPP~~we ~~Loan~~received ~~proceeds~~notice ~~for~~that the ~~approved~~PPP ~~expense~~Loan ~~categories~~was ~~will generally be~~ fully forgiven ~~if we satisfy certain employee headcount and compensation conditions~~.

Railcar Leases

Lincolnway Energy leases 100 hopper rail cars which are used for transporting distillers grains. Lincolnway Energy's leases for the hopper rail cars begin expiring in ~~December~~October 2021 and expiration dates continue through June ~~2025~~2026. Lincolnway Energy also leases 220 tank rail cars that are used for transporting ethanol. The scheduled terms of the leases vary with the leases expiring between ~~June~~October 2021 and ~~September~~June 2026.

Contractual Obligations Table

In addition to long-term debt obligations, Lincolnway Energy has certain other contractual cash obligations and commitments. The following table provides information regarding Lincolnway Energy's contractual obligations and commitments as of September 30, ~~2020~~2021:

			Payment Due By Period
		Less than	One to	Three to	More than
Contractual Obligations	Total	One Year	Two Years	Five Years	Five Years
Long Term Debt	$2120,~~700~~000,000	$05,000,000	$105,000,000	$5,000,000	65,~~700~~000,000
Interest on Long Term Debt	~~846~~585,~~300~~000	—	~~390~~195,000	195,000	~~261~~195,~~300~~000
Operating Lease Obligations	87,~~257~~132,~~643~~925	2,~~272~~195,~~104~~700	1,~~999~~952,~~704~~700	1,~~704~~655,~~210~~475	21,~~281~~329,~~625~~050
Purchase Obligations	1,429,982	1,429,982	—	—	—
Total	$27,717,925	$7,195,700	$7,147,700	$6,850,475	$6,524,050
Total	$32,233,925	$3,702,086	$12,389,704	$6,899,210	$9,242,925

26The long-term debt obligations in the table above include both estimated principal and interest payments applicable to the borrowings against the Term Loan. The operating lease obligations in the table above include our railcars and small office equipment lease obligations as of September 30, 2021. Purchase obligations consist of forward contracted corn contracts and natural gas purchases and monthly demand charge.

The long-term debt obligations in the table above include both estimated principal and interest payments applicable to the borrowings against the Term Loan. The operating lease obligations in the table above include our railcars and small office equipment lease obligations as of September 30, 2020. Purchase obligations consist of forward contracted corn contracts and natural gas purchases and monthly demand charge.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

In addition to the risks inherent in the ethanol industry and Lincolnway Energy's operation, Lincolnway Energy is exposed to various market risks. The primary market risks arise as a result of possible changes in interest rates and certain commodity prices.

Interest Rate Risk

Lincolnway Energy has outstanding loan agreements that expose Lincolnway Energy to market risk related to changes in the interest rate imposed under those loan agreements. Lincolnway Energy has a loan agreement and an irrevocable letter of credit, with the following entities, and with the principal balance and interest rates indicated as of September 30, ~~2020~~2021:

Lender	Principal Balance		Interest Rate		Interest Rate Type
Farm Credit - revolving term loan	$	~~21,700,000~~—	~~3.9~~—	%	Variable
Farm Credit - revolving letter of credit	—1,307,525		~~3.15~~—	%	Variable
Small Business Administration	505,700		1.00	%	Fixed
	$	1,307,525
	$	22,205,700

Lincolnway Energy has an irrevocable, revolving letter of credit of $1,307,525 issued. The interest rate on the Farm Credit revolving term loan and revolving letter of credit is a variable interest rate based on the one-month LIBOR index plus ~~3.9~~0% adjusted weekly. For more information on the payments see Item 7 - Loans and Agreements. Lincolnway Energy does not anticipate any material increase in interest rates during ~~2020~~2022.

Commodity Price Risk

We are exposed to market risk with respect to the price of ethanol, which is our principal product, and the price and availability of corn and natural gas, which are the principal commodities we use to produce ethanol. Our other primary product is distillers grains, and we are also subject to market risk with respect to the price for distillers grains. The prices for ethanol, distillers grains, corn and natural gas are volatile, and we may experience market conditions where the prices we receive for our ethanol and distillers grains are declining, but the price we pay for our corn, natural gas and other inputs is increasing. Our results will therefore vary substantially over time, and include the possibility of losses, which could be substantial.

In general, rising ethanol and distillers grains prices result in higher profit margins, and therefore represent favorable market conditions. We are, however, subject to various material risks related to our production of ethanol and distillers grains and the price for ethanol and distillers grains. For example, ethanol and distillers grains prices are influenced by various factors beyond the control of our management, including the supply and demand for gasoline, the availability of substitutes, international trade and the effects of domestic and foreign laws, regulations and government policies.

In general, rising corn prices result in lower profit margins and, accordingly, represent unfavorable market conditions. We will generally not be able to pass along increased corn costs to our ethanol customers. We are subject to various material risks related to the availability and price of corn, many of which are beyond our control. For example, the availability and price of corn is subject to wide fluctuations due to various unpredictable factors, including weather conditions, crop yields, farmer planting decisions, governmental policies with respect to agriculture, and local, regional, national and international trade, demand and supply. If our corn costs were to increase $.10 per bushel from one year to the next, the impact on costs of goods sold would be approximately $2.1 million for the year, assuming corn use of 21 million bushels during the year.29

~~Falling~~In ~~ethanol~~general, rising corn prices ~~indicate~~result ~~weak~~in ~~market~~lower ~~conditions~~profit margins and, ~~will~~accordingly, ~~usually~~represent ~~negatively~~unfavorable ~~impact~~market ~~profit margins~~conditions. ~~Lincolnway~~We ~~Energy~~ will ~~typically~~generally not be ~~unable~~able to pass ~~through~~along ~~the~~increased ~~impact~~corn ofcosts ~~decreased ethanol revenues~~ to ~~its~~our ~~corn~~ethanol ~~suppliers~~customers. ~~Lincolnway~~We ~~Energy~~are is subject to various material risks related to the ~~demand~~availability ~~for~~ and price of ~~ethanol~~corn, many of which are beyond ~~the~~our control ~~of the Company~~. For example, the ~~demand~~availability ~~for~~ and price of ~~ethanol~~corn is subject to ~~significant~~wide fluctuations due to various unpredictable factors, ~~which~~including ~~are~~weather ~~beyond~~conditions, crop yields, farmer planting decisions, governmental policies with respect to agriculture, and local, regional, national and international trade, demand and supply. If our corn costs were to increase $0.10 per bushel from one year to the ~~control~~next, the impact on costs of ~~Lincolnway~~goods ~~Energy's~~sold ~~management,~~would ~~including~~be ~~driving~~approximately ~~habits~~$2.3 million for the year, ~~consumer~~assuming corn use of 23 million bushels during the year.

27Falling ethanol prices indicate weak market conditions and will usually negatively impact profit margins. Lincolnway Energy will typically be unable to pass through the impact of decreased ethanol revenues to its corn suppliers. Lincolnway Energy is subject to various material risks related to the demand for and price of ethanol, many of which are beyond the control of the Company. For example, the demand for and price of ethanol is subject to significant fluctuations due to various unpredictable factors which are beyond the control of Lincolnway Energy's management, including driving habits, consumer vehicle buying decisions, petroleum price movement, plant capacity utilization, and government policies with respect to biofuel use, railroad transportation requirements, national and international trade and supply and demand. If Lincolnway Energy's ethanol revenue were to decrease $0.05 per gallon from one year to the next, the impact on gross revenues would be approximately $3.5 million for the year.

~~vehicle~~During ~~buying~~Fiscal ~~decisions~~2021, ~~petroleum~~corn ~~price~~prices ~~movement,~~based ~~plant~~on ~~capacity~~the ~~utilization,~~Chicago ~~and~~Mercantile ~~government~~Exchange ~~policies~~daily ~~with~~futures ~~respect~~data toranged ~~biofuel~~from ~~use,~~a ~~railroad~~low ~~transportation~~of ~~requirements,~~$3.80 ~~national~~per ~~and~~bushel ~~international~~in ~~trade~~October ~~and~~2020 ~~supply~~to ~~and~~a ~~demand~~high of $7. If73 ~~Lincolnway~~per ~~Energy's~~bushel ~~ethanol~~in ~~revenue~~May ~~were~~2021. toDuring ~~decrease~~Fiscal ~~$.05~~2020, ~~per~~corn ~~gallon~~prices based on the Chicago Mercantile Exchange daily futures data ranged from ~~one~~a ~~year~~low toof ~~the~~$3.03 ~~next,~~per ~~the~~bushel ~~impact~~in onApril ~~gross~~2020 ~~revenues~~to ~~would~~a behigh ~~approximately~~of $3.198 ~~million~~per ~~for~~bushel ~~the~~in ~~year~~October 2020.

During ~~the~~Fiscal ~~fiscal year ended September 30~~2021, ~~2020,~~ethanol ~~corn~~ prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $31.0327 per ~~bushel~~gallon in ~~April~~December 2020 to a high of $32.9868 per ~~bushel~~gallon in ~~October~~May ~~2020~~2021. During the ~~fiscal~~Fiscal ~~year ended September 30~~2020, ~~2019,~~ethanol ~~corn~~ prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $30.4182 per ~~bushel~~gallon in ~~September~~April ~~2019~~2020 to a high of $41.5552 per ~~bushel~~gallon in ~~June~~November 2019.

During the fiscal year ended September 30, 2020, ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $0.82 per gallon in April 2020 to a high of $1.52 per gallon in November 2019. During the fiscal year ended September 30, 2019, ethanol prices based on the Chicago Mercantile Exchange daily futures data ranged from a low of $1.20 per gallon in November 2018 to a high of $1.61 per gallon in June 2019.

We may from time to time take various cash, futures, options or other positions in an attempt to minimize or reduce our price risks related to corn and ethanol. The extent to which we enter into such positions may vary substantially from time to time and based on various factors, including seasonal factors and our views as to future market trends. Those activities are, however, also subject to various material risks, including that price movements in the cash and futures corn and ethanol markets are highly volatile and are influenced by many factors and occurrences that are beyond our control. We could incur substantial losses on our cash, futures, options or other positions.

Although we intend our futures and option positions to accomplish an economic hedge against our future purchases of corn or futures sales of ethanol, we have chosen not to use hedge accounting for those positions, which would match the gain or loss on the positions to the specific commodity purchase being hedged. To avoid the higher costs associated with hedge accounting, we are instead using fair value accounting for the positions. Generally that means as the current market price of the positions changes, the realized or unrealized gains and losses are immediately recognized in our costs of goods sold in the statement of operations for corn positions or as a component of revenue in the statement of operations for ethanol positions. The immediate recognition of gains and losses on those positions can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the positions relative to the cost and use of the commodity being hedged. For example, our net ~~gain~~loss on corn derivative financial instruments that was included in our cost of goods sold for ~~the~~Fiscal ~~fiscal~~2021 ~~year ended September 30, 2020~~ was $12.59 million as opposed to a net gain of $1.06 million ~~fiscal~~for ~~year~~Fiscal ~~ended September 30, 2019~~2020. Our corn position gain and (loss) that was included in its earnings for ~~the~~Fiscal ~~fiscal~~2021 ~~year ended September 30, 2020~~ was a ~~gain~~loss of approximately $~~709,258~~2.3 million as compared to ~~year~~Fiscal ~~ended~~2020 ~~September 30, 2019~~ with a gain of approximately $~~654~~719,~~583~~000. Lincolnway Energy's ethanol position gain and (loss) that was included in its earnings for ~~the~~Fiscal ~~fiscal~~2021 ~~year~~was ~~ended~~a ~~September~~loss ~~30,~~of ~~2020~~approximately ~~was~~ $9621,~~396~~000 compared to ~~year~~a ~~ended~~gain ~~September~~of 30approximately $9,000 ~~2019~~for ofFiscal ~~$21,525~~2020.

We attempt to offset or hedge some of the risk involved with changing corn prices through the trading of futures and options on the Chicago Mercantile Exchange, as well as through purchase and physical delivery contracts from suppliers. We continue to stay at a near neutral corn position due to an uptrend in ethanol sales margins. We continue to monitor and attempt to ensure adequate corn supply and protection against rapid price increases. As noted above those activities are, however, subject to various material risks, including that price movements in the cash corn and corn futures markets are highly volatile and are influenced by many factors and occurrences which are beyond our control.

Another important raw material for our production of ethanol is natural gas. Our cost per MMBTU is subject to various factors that are outside of the control of our management. The factors include changes in weather, increase in transportation costs and the overall economic activity. Our natural gas costs will therefore vary, and the variations could be material. Our natural gas costs for the fiscal year ended September 30, 2020 represented approximately 6% of our total cost of goods sold for that period.

transportation costs and the overall economic activity. Our natural gas costs will therefore vary, and the variations could be material. Our natural gas costs for Fiscal 2021 represented approximately 8.2% of our total cost of goods sold for that period.

The extent to which Lincolnway Energy may enter into arrangements with respect to its ethanol or corn during the year may vary substantially from time to time based upon a number of factors, including supply and demand factors affecting the needs of customers to purchase ethanol or suppliers to sell Lincolnway Energy raw materials on a fixed price basis, and Lincolnway Energy's views as to future market trends, seasonal factors and the cost of future contracts.

2831

Item 8. Financial Statements and Supplementary Data.

Contents

Report of Independent Registered Public Accounting Firm			3033
Financial Statements
Balance Sheets			3134
Statements of Operations			3336
Statements of Members’ Equity			3437
Statements of Cash Flows			3538
Notes to Financial Statements			3740

2932

Report of Independent Registered Public Accounting Firm

To the Members and the Board of Directors

of Lincolnway Energy, LLC

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Lincolnway Energy, LLC (the Company) as of September 30, ~~2020~~2021 and ~~2019~~2020, the related statements of operations, members’ equity and cash flows for each of the three years in the period ended September 30, ~~2020~~2021, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, ~~2020~~2021 and ~~2019~~2020, and the results of its operations and its cash flows for each of the three years in the period ended September 30, ~~2020~~2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the 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, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ RSM US LLP

We have served as the Company’s auditor since ~~2006~~2005.

Des Moines, Iowa

December 2322, ~~2020~~2021

3033

Lincolnway Energy, LLC

Balance Sheets

September 30, ~~2020~~2021 and ~~2019~~2020

	2020		2019
	2021		2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	712,~~201~~174,~~372~~756	$	~~260~~7,~~858~~201,372
Derivative financial instruments (Notes 8 and 9)	~~300~~1,~~476~~457,349		~~188~~300,~~694~~476
Trade and other accounts receivable (Note 7)	46,~~602~~560,~~150~~607		34,~~259~~602,~~768~~150
Inventories (Note 3)	78,~~245~~863,~~700~~559		67,~~440~~245,~~716~~700
Prepaid expenses and other	~~304~~376,~~244~~250		~~308~~304,~~184~~244
Total current assets	1929,~~653~~432,~~942~~521		1019,~~458~~653,~~220~~942
PROPERTY AND EQUIPMENT
Land and land improvements	7,156,465		7,156,465
Buildings and improvements	7,558,860		7,~~548~~558,~~308~~860
Plant and process equipment	8687,~~274~~332,~~048~~590		86,~~110~~274,~~958~~048
Construction in progress	68,~~796~~405,~~507~~166		6,~~806~~796,~~549~~507
Office furniture and equipment	~~441~~380,~~332~~585		~~455~~441,~~129~~332
	108,227,212		108,077,409
	110,833,666		108,227,212
Accumulated depreciation	(7074,~~352~~862,~~374~~270)		(6570,~~685~~352,~~719~~374)
	37,874,838		42,391,690
	35,971,396		37,874,838
OTHER ASSETS
Right of use asset operating lease, net of accumulated amortization (Note 7)	76,~~179~~392,~~272~~611		—7,179,272
Other assets, net	1,~~102~~062,~~850~~808		~~864~~1,~~082~~102,850
	8,282,122		864,082
	7,455,419		8,282,122
	$	6572,~~810~~859,~~902~~336	$	5365,~~713~~810,~~992~~902

See Notes to Financial Statements.

3134

Lincolnway Energy, LLC

Balance Sheets (Continued)

September 30, ~~2020~~2021 and ~~2019~~2020

	2020		2019
	2021		2020
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	13,~~858~~726,~~459~~825	$	1,~~794~~858,~~431~~459
Accounts payable, related party (Note 6)	~~439~~1,~~424~~470,139		~~375~~439,~~394~~424
Accrued loss on firm purchase commitments	—		67,591
Accrued expenses	748,005		713,462
Accrued expenses	713,462		776,385
Current maturities of long-term debt (Note 5)	$	5,000,000	505,700
Current maturities of long-term debt (Note 5)	505,700		25,000,000
Current portion of operating lease liability (Note 7)	2,181,951		2,164,720
Revolving credit loan (Note 4)	—		300,000
Total current liabilities	13,126,920		5,681,765
Current portion of operating lease liability (Note 7)	2,164,720		—
Total current liabilities	5,681,765		28,313,801
NONCURRENT LIABILITIES
Long-term debt, less current maturities (Note 5)	2115,~~700~~000,000		—21,700,000
Operating lease liability (Note 7)	54,~~014~~210,~~552~~660		—5,014,552
Other	~~844~~1,~~217~~302,167		~~649~~844,~~799~~217
Total noncurrent liabilities	2720,~~558~~512,~~769~~827		~~649~~27,~~799~~558,769
COMMITMENTS AND CONTINGENCY (Notes 5 and 7)	—		—
COMMITMENTS AND CONTINGENCIES (Notes 5 and 7)	—		—
MEMBERS’ EQUITY (Note 2)
Member contributions, 105,122 and 42,049 units issued and outstanding as of September 30, 2020 and 2019, respectively	46,490,105		38,990,105
Member contributions, 105,122 units issued and outstanding as of September 30, 2021 and 2020	46,490,105		46,490,105
Retained (deficit)	(13,919,737)		(14,239,713)
Accumulated deficit	(7,270,516)		(13,919,737)
	32,570,368		24,750,392
	39,219,589		32,570,368
	$	6572,~~810~~859,~~902~~336	$	5365,~~713~~810,~~992~~902

3235

Lincolnway Energy, LLC

Statements of Operations

Years Ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019

2020

2019

2018

2021

2020

2019

Revenues (Notes 1 and 7)

~~105~~171,~~156~~986,~~552~~079

97105,~~386~~156,~~340~~552

~~102~~97,~~050~~386,~~976~~340

Cost of goods sold (Notes 6 and 7)

~~101~~162,~~072~~605,~~011~~266

~~105~~101,~~075~~072,~~962~~011

~~102~~105,~~333~~075,~~910~~962

Gross profit (loss)

49,~~084~~380,~~541~~813

(74,~~689~~084,~~622)~~541

(~~282~~7,~~934~~689,622)

General and administrative expenses

32,~~333~~899,~~321~~154

3,~~484~~333,~~570~~321

3,~~236~~484,~~616~~570

Bad debt expense

—

~~4,385,009~~—

—4,385,009

Operating income (loss)

~~751~~6,~~220~~481,659

~~(15~~751,~~559,201)~~220

(315,~~519~~559,~~550~~201)

Other income (expense):

Interest income

132,~~290~~595

1013,~~579~~290

810,~~403~~579

Interest expense

(1782,~~125,048~~113)

(~~800~~1,~~867~~125,048)

(19800,~~390~~867)

Other income

~~680~~947,~~514~~080

3680,~~100,683~~514

~~583~~3,~~322~~100,683

Total other income (expense)

~~(431~~167,~~244)~~562

2(431,~~310,395~~244)

~~572~~2,~~335~~310,395

Net income (loss)

~~319~~6,~~976~~649,221

~~(13~~319,~~248,806)~~976

(213,~~947~~248,~~215~~806)

Weighted average units outstanding

70105,~~082~~122

4270,~~049~~082

42,049

Net income (loss) per unit - basic and diluted

463.5725

~~(315~~4.~~08)~~57

(70315.0908)

See Notes to Financial Statements.

3336

Lincolnway Energy, LLC

Statements of Members' Equity

Years Ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019

	Member Contributions		~~Retained~~Accumlated ~~Earnings (~~Deficit)		Total
Balance, September 30, 2017	$	38,990,105	$	3,007,533	$	41,997,638
Balance, September 30, 2018	$	38,990,105	$	(990,907)	$	37,999,198
Net income (loss)	—		(2,947,215)		(2,947,215)
Net loss	—		(13,248,806)		(13,248,806)
Distributions ($25 per unit)	—		(1,051,225)		(1,051,225)
Balance, September 30, 2018	38,990,105		(990,907)		37,999,198
Net (loss)	—		(13,248,806)		(13,248,806)
Balance, September 30, 2019	38,990,105		(14,239,713)		24,750,392
Issuance of 63,073 membership units	7,500,000		—		7,500,000
Net income	—		319,976		319,976
Balance, September 30, 2020	$	46,490,105	$	(13,919,737)	$	32,570,368
Issuance of 63,073 membership units	7,500,000		—		7,500,000
Balance, September 30, 2020	46,490,105		(13,919,737)		32,570,368
Net income	—		6,649,221		6,649,221
Balance, September 30, 2021	$	46,490,105	$	(7,270,516)	$	39,219,589

See Notes to Financial Statements.

3437

Lincolnway Energy, LLC

Statements of Cash Flows

Years Ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019

	2020		2019		2018
	2021		2020		2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	~~319~~6,~~976~~649,221	$	~~(13~~319,~~248,806)~~976	$	(213,~~947~~248,~~215~~806)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,~~776~~650,~~308~~491		54,~~320~~776,~~846~~308		45,~~477~~320,~~811~~846
Loss on sale or disposal of property and equipment	—9,385		~~232,981~~—		43232,~~693~~981
Bad dept expense	—		~~4,385,009~~—		—4,385,009
Accrued loss on firm purchase commitments	(67,591)		(298,577)		366,168
Gain on extinguishment of debt	(505,700)		—		—
Accrued loss on firm purchase commitments	—		(67,591)		(298,577)
Changes in working capital components:
Trade and other accounts receivable	(1,~~342~~958,~~382~~457)		(~~473~~1,~~270~~342,382)		~~442~~(473,~~976~~270)
Inventories	(~~804~~1,~~984~~617,859)		(1804,~~884,013~~984)		(1,~~128~~884,~~026~~013)
Prepaid expenses and other	~~(40~~425,~~410)~~986		64(40,~~812~~410)		~~108~~64,~~963~~812
Accounts payable	511,~~528~~868,366		~~(558~~51,~~535)~~528		(~~801~~558,~~762~~535)
Accounts payable, related party	641,030,715		~~(281~~64,~~739)~~030		14(281,~~407~~739)
Accrued expenses	~~(50~~34,~~423)~~543		(~~195~~50,~~782~~423)		(~~118~~195,~~268~~782)
Deferred revenue	—		~~(296,296)~~—		(~~148~~296,~~148~~296)
Derivative financial instruments	(~~111~~1,~~782~~156,873)		~~366~~(111,~~433~~782)		~~(126~~366,~~461)~~433
Net cash provided by operating (used in) activities	2,794,270		(6,866,937)		2,440,190
Net cash provided by (used in) operating activities	9,429,818		2,794,270		(6,866,937)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	(~~270~~2,~~023~~756,434)		(3270,~~667,661~~023)		(133,~~611~~667,~~022~~661)
Proceeds from sale of property and equipment	~~10,567~~—		2710,~~000~~567		—27,000
Net cash (used in) investing activities	(~~259~~2,~~456~~756,434)		(3259,~~640,661~~456)		(133,~~611~~640,~~022~~661)
CASH FLOWS FROM FINANCING ACTIVITIES
Member distributions	—		—		(1,051,225)
Proceeds from issuance of membership units	—		7,500,000		—
Proceeds from issuance of membership units	7,500,000		—		—
Net proceeds from (payments to) revolving credit loan	—		(300,000)		300,000
Net proceeds/(payments) from/(to) revolving credit loan	(300,000)		300,000		—
Proceeds from short-term borrowings	—		505,700		—
Proceeds from short-term borrowings	505,700		—		—
Payments on short-term borrowings	—		(25,000,000)		—
Payments on short-term borrowings	(25,000,000)		—		—
Proceeds from long-term borrowings	—		27,000,000		68,250,000
Proceeds from long-term borrowings	27,000,000		68,250,000		69,550,000
Payments on long-term borrowings	(1,700,000)		(5,300,000)		(58,450,000)
Payments on long-term borrowings	(5,300,000)		(58,450,000)		(57,350,000)
Net cash provided by (used in) financing activities	(1,700,000)		4,405,700		10,100,000
Net cash provided by financing activities	4,405,700		10,100,000		11,148,775
Net increase (decrease) in cash and cash equivalents	4,973,384		6,940,514		(407,598)
Net increase (decrease) in cash and cash equivalents	6,940,514		(407,598)		(22,057)
CASH AND CASH EQUIVALENTS
Beginning	~~260~~7,~~858~~201,372		~~668~~260,~~456~~858		~~690~~668,~~513~~456
Ending	$	712,~~201~~174,~~372~~756	$	~~260~~7,~~858~~201,372	$	~~668~~260,~~456~~858
(Continued)

3538

Lincolnway Energy, LLC

Statements of Cash Flows (Continued)

Years Ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019

	2020		2019		2018
	2021		2020		2019
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest, including capitalized interest of none, $304,947 and $515,242	$	1,169,512	$	1,190,553	$	535,402
Cash paid for interest, including capitalized interest of $0, $0 and $304,947	$	794,029	$	1,169,512	$	1,190,553
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES
Construction in progress included in accounts payable	$	—	$	~~60,973~~—	$	8660,~~928~~973
Establishment of lease liability and right of use asset	~~6,691,675~~—		—6,691,675		—

See Notes to Financial Statements.

3639

Lincolnway Energy, LLC

Notes to Financial Statements

Note 1. Nature of Business and Significant Accounting Policies

Principal business activity: Lincolnway Energy, LLC (the "Company"), located in Nevada, Iowa, was formed in May 2004 to pool investors to build a 50 million gallon annual production dry mill corn-based ethanol plant. The Company began ~~making~~ sales on May 30, 2006 and became operational during the quarter ended June 30, 2006. The Company is directly influenced by commodity markets and the agricultural and energy industries and, accordingly, its results of operations and financial condition may be significantly affected by cyclical market trends and the regulatory, political and economic conditions in these industries.

A summary of significant accounting policies follows:

Use of estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Risks and Uncertainties: The COVID-19 pandemic is currently impacting countries, communities, supply chains and commodities markets, in addition to the global financial markets. This pandemic has resulted in social distancing, travel bans, governmental stay-at-home orders, and quarantines, and these may limit access to our facilities, customers, suppliers, management, support staff and professional advisors. At this time it is not possible to fully assess the impact of the COVID-19 pandemic on the Company’s operations and capital requirements, but the aforementioned factors, among other things, may impact our operations, financial condition and demand for our products, as well as our overall ability to react timely and mitigate the impact of this event. Depending on its severity and longevity, the COVID-19 pandemic may have a material adverse effect on our business, customers, and members.

Cash and cash equivalents: The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Although the Company maintains its cash accounts in one bank, the Company believes it is not exposed to any significant credit risk on cash and cash equivalents.

Trade accounts receivable: Trade accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers financial condition, credit history and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables written off are recorded when received. A receivable is considered past due if any portion of the receivable is outstanding more than 90 days. There is no allowance for doubtful accounts as of ~~both~~ September 30, ~~2020~~2021 and September 30, ~~2019~~2020.

Note receivable: On March 28, 2019, the Company recorded a note receivable totaling $4,080,000 for a component of the construction in progress (the dryer) that failed to meet required specifications. The vendor issued a promissory note to the Company, which is personally guaranteed by principals of the vendor. The full amount of the note receivable plus interest is currently due and payable. During the year ended September 30, 2019, management determined based on communication from the vendor and lack of payment that the note receivable, including interest of $60,809, should be fully reserved at June 30, 2019. Bad debt expense of $0, $0 and $4,385,009, ~~and $0~~ was recorded during the years ended September 30, ~~2020~~2021, ~~2019~~2020, and ~~2018~~2019, respectively.

Deferred revenue: Deferred revenue represents fees received under a service agreement in advance of services being performed. The related revenue was deferred and recognized as the services were performed over the 10 year agreement. On December 17, 2018, the Company entered into a settlement agreement in connection with the early termination of the contract. The settlement totaled approximately $3,000,000 and was included in other income and the remaining deferred revenue of approximately $420,000 was recognized during the year ended September 30, 2019.

Inventories: Inventories are generally valued at the lower of net realizable value or actual cost using the first-in, first-out method. In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. For the fiscal years ended September 30, ~~2020~~2021 and September 30, ~~2019~~2020 the Company ~~recognized~~did not recognize a reserve ~~and~~nor resulting loss ~~of approximately $0 and $76,000, respectively,~~ for a lower of net realizable value or cost inventory adjustment.

3740

Property and equipment: Property and equipment is stated at cost. Construction in progress is comprised of costs related to the projects that are not completed. Depreciation is computed using the straight-line method over the following estimated useful lives:


	Minimum Years	Maximum Years
Land improvements		20
Buildings and improvements		40
Plant and process equipment	5	20
Office furniture and equipment	3	7

Maintenance and repairs are expensed as incurred; major improvements and betterments are capitalized. When circumstances or events arise that questions an asset's usefulness, the asset is evaluated for future use and appropriate carrying value.

Derivative financial instruments: The Company periodically enters into derivative contracts to hedge the Company’s exposure to price risk related to forecasted corn needs, forward corn purchase contracts and ethanol sales. The Company does not typically enter into derivative instruments other than for hedging purposes. All the derivative contracts are recognized on the balance sheet at their fair market value. Although the Company believes its derivative positions are economic hedges, none have been designated as a hedge for accounting purposes. Accordingly, any realized or unrealized gain or loss related to corn and natural gas derivatives is recorded in the statement of operations as a component of cost of goods sold. Any realized or unrealized gain or loss related to ethanol derivative instruments is recorded in the statement of operations as a component of revenue. The Company reports all contracts with the same counter party on a net basis on the balance sheet. Unrealized gains and losses on forward contracts, in which delivery has not occurred, are deemed “normal purchases and normal sales”, and therefore are not marked to market in the Company’s financial statements. Forward contracts with delivery dates with 30 days that can be reasonably estimated are subject to a lower of cost or net realizable value assessment. The Company ~~recognized~~did not recognize a reserve ~~and~~nor had a resulting accrued loss on purchase commitments ~~of approximately $0 and $67,591~~ as of September 30, ~~2020~~2021 and ~~2019, respectively~~2020.

Revenue recognition: The Company ~~adopted~~records revenue following the guidance presented in Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606)~~, October 1, 2019, using the modified retrospective method~~. Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company generally recognized revenue at a point and time. The implementation of the new standard did not result in any changes to the measurement or recognition of revenue for prior periods, however, additional disclosures have been added in accordance with the ASU.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

•sales of ethanol

•sales of distillers grains

•sales of corn oil

Shipping costs incurred by the Company in the sale of ethanol, distillers grains and corn oil are not specifically identifiable and as a result, are recorded based on the net selling price. Railcar lease costs incurred by the Company in the sale of its products are included in the cost of goods sold.

38Revenue from the sale of the Company’s ethanol and distillers grains is recognized at the time title, control and all risks of ownership transfer to the marketing company. This generally occurs upon the loading of the product. For ethanol, title and control passes at the time the product crosses the loading flange in either a railcar or truck. For distillers grain, title and control passes upon the loading into trucks or railcars. Corn oil is marketed internally. Revenue is recognized when title and control

Revenue from the sale of the Company’s ethanol and distillers grains is recognized at the time title, control and all risks of ownership transfer to the marketing company. This generally occurs upon the loading of the product. For ethanol, title and control passes at the time the product crosses the loading flange in either a railcar or truck. For distillers grain, title and control passes upon the loading into trucks or railcars. Corn oil is marketed internally. Revenue is recognized when title and control of ownership transfers, upon loading. Shipping and handling costs incurred by the Company for the sale of distillers grain are included in costs of goods sold. Ethanol revenue is reported free on board (FOB) and all shipping and handling costs are incurred by the ethanol marketer. Commissions for the marketing and sale of ethanol and distiller grains are included in costs of goods sold. 41

of ownership transfers, upon loading. Shipping and handling costs incurred by the Company for the sale of distillers grain are included in costs of goods sold. Ethanol revenue is reported free on board (FOB) and all shipping and handling costs are incurred by the ethanol marketer. Commissions for the marketing and sale of ethanol and distiller grains are included in costs of goods sold.

Revenue by product is as follows:

(In thousands)

~~2020~~2021

~~2019~~2020

~~2018~~2019

Ethanol

80130,~~106~~774

7580,~~224~~106

7775,~~709~~224

Distillers Grain

1931,~~196~~924

1519,~~329~~196

1615,~~821~~329

Corn Oil

48,~~616~~579

54,~~487~~616

5,~~545~~487

Other

~~1,238~~709

1,~~346~~238

1,~~975~~346

Income taxes: The Company is organized as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, the Company’s earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Management has evaluated the Company's material tax positions and determined there were no uncertain tax positions that require adjustment to the financial statements. The Company does not currently anticipate significant changes in its uncertain tax positions over the next twelve months.

Earnings per unit: Basic and diluted net income (loss) per unit have been computed on the basis of the weighted average number of units outstanding during each period presented. On March 31, 2020, 42,049 new Class A Units were issued, which Class A Units are a separate class of unit than the units issued to existing members which have been renamed “Common Units”. On May 28, 2020, the Company issued an additional 14,037 Class A Units and 6,987 new Class B Units. The combined issuance of Class A Units is 56,086 units and the total issuance of Class B Units is 6,987 units. There are also 42,049 Common Units outstanding for an aggregate number of 105,122 units outstanding comprised of Class A Units, Class B Units and Common Units. The weighted average number of units is based on days outstanding for the reporting period. The Class A Units and Class B Units have a liquidation preference which provides that in the event of a liquidation or deemed liquidation, the Class A and Class B members will receive the return of their capital contributions, reduced by the amount of distributions received, prior to the holders of Common Units receiving any proceeds.

Fair value of financial instruments: The carrying amounts of cash and cash equivalents, derivative financial instruments, trade and other accounts receivable, accounts payable and accrued expenses approximate fair value. These instruments are considered Level 1 measurements under the fair value hierarchy. Long term debt approximates fair value and commensurate with the market as the agreement was recently amended in the current year. The inputs for long term debt are considered a Level 3.

Recently Issued Accounting Pronouncements: In February 2016, Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02 "Leases" (Topic 842) ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous Generally Accepted Accounting Principles ("GAAP"). ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases): (1) a lease liability, which is a lessee's obligation to make lease payments arising from the lease, measured on a discounted cash flow basis; and (2) a "right of use" asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. The Company adopted this accounting standard effective October 1, 2019. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. Additionally, the Company has elected to account for lease and related non-lease components as a single lease component. The Company elected the option to apply the transition provisions at adoption date instead of the earliest comparative period presented in the financial statements. Due to this election, the Company is not required to retrospectively apply the standard to the previous periods presented. See additional disclosure in Note 7.

Note 2. Members' Equity

39As of September 30, 2021, and 2020 there were 105,122 outstanding member units, respectively as indicated in the following table.

As of September 30, 2020 and 2019 there were 105,122 and 42,049 outstanding member units, respectively as indicated in the following table.


	2021	2020
Class A Units	56,086	56,086
Class B Units	6,987	6,987
Common Units	42,049	42,049
Total	105,122	105,122

	2020	2019	2018
Class A Units	56,086	—	—
Class B Units	6,987	—	—
Common Units	42,049	42,049	42,049
Total	105,122	42,049	42,049

Income and losses are allocated to all members based on their pro rata ownership interest. All unit transfers are effective the last day of the month. Units may be issued or transferred only to persons eligible to be members of the Company and only in compliance with the provisions of the Company's operating agreement and unit assignment policy.

The Company is organized as an Iowa limited liability company. Members' liability is limited as specified in the Company's operating agreement and pursuant to the Iowa Limited Liability Company Act. The duration of the Company shall be perpetual unless dissolved as provided in the operating agreement.

On November 3, 2021, the Company announced it intends to propose a reclassification of the Company's units in order to terminate the Company's Securities and Exchange Commission reporting obligations. The Company's board of directors intends to reclassify the Company's units into five distinct classes, including two newly-created classes of units, Class C Units and Class D Units.

Note 3. Inventories

Inventories consist of the following as of September 30:

	2020		2019
	2021		2020
Raw materials, including corn, chemicals, parts and supplies	$	5,~~292~~487,~~339~~085	$	45,~~902~~292,~~526~~339
Work in process	~~653~~1,~~680~~476,019		~~900~~653,~~459~~680
Ethanol and distillers grain	1,~~299~~900,~~681~~455		~~637~~1,~~731~~299,681
Total	$	78,~~245~~863,~~700~~559	$	67,~~440~~245,~~716~~700

Note 4. Revolving Credit Loan

The Company ~~entered~~has ~~into~~ a ~~Revolving~~revolving ~~Credit~~credit ~~Promissory~~line ~~Note~~amended ~~dated~~ June 2329, ~~2019~~2021 which provides for loans not to exceed $47,~~000~~500,000 at any time. The ~~loan~~revolving ~~originally~~credit ~~matured~~loan onaccrues ~~January~~interest 1,at ~~2020~~a ~~but~~variable ~~the~~interest ~~Company~~rate ~~received~~(adjusted ~~an extension~~ on ~~December~~a ~~24,~~weekly ~~2019~~basis) ~~extending~~based upon the ~~maturity~~one-month ~~date~~LIBOR toindex ~~June~~rate 1,plus ~~2020~~3.25%. Under ~~Effective~~the asterms of ~~May~~the ~~29,~~revolving ~~2020~~credit line, the Company ~~and~~also ~~the~~has ~~bank~~to ~~amended~~pay ~~the~~a ~~revolving~~commitment ~~credit~~fee ~~loan~~on tothe ~~extend~~average ~~the~~daily ~~maturity~~unused ~~date~~portion of the ~~revolving credit~~ loan ~~until~~at ~~January~~the 1,rate ~~2021~~of 0.25% ~~Interest~~per ~~accrues~~annum, atpayable amonthly. The ~~variable~~loan ~~interest~~is ~~rate~~secured ~~(adjusted~~by onsubstantially aall ~~weekly~~assets ~~basis) based~~of ~~upon~~ the ~~one-month~~Company ~~LIBOR~~and ~~index~~subject ~~rate~~to ~~plus~~certain ~~3.75%~~financial ~~(3.90%~~and nonfinancial covenants as ofdefined ~~September~~in ~~30,~~the ~~2020)~~master loan agreement.

~~The~~There ~~Company~~was ~~will~~no ~~also~~outstanding ~~pay~~balance ~~a commitment fee~~ on the ~~average~~revolving ~~daily~~credit ~~unused portion of the~~ loan aton ~~the~~September ~~rate of .25% per annum~~30, ~~payable~~2021 ~~monthly. The~~or ~~loan is secured by substantially all assets of the Company and subject to certain financial and nonfinancial covenants as defined in the master loan agreement~~2020. ~~There~~ ~~was~~The ~~an outstanding balance of $0 and $300,000 on the~~ revolving credit ~~loan~~line asmatures ofon ~~September~~July 301, ~~2020 and 2019, respectively~~2022.

Note 5. Long-Term Debt

The Company has a revolving term loan, with a bank, available ~~for~~ up to $25,000,000. ~~Effective~~The ~~May 29, 2020, the~~ Company's ~~and~~borrowing ~~the~~capacity ~~bank~~under ~~amended~~ the revolving term loan towill ~~modify~~begin ~~the~~a step-down reduction of ~~available borrowing capacity to defer the initial step-down reduction of~~ $5,000,000 ~~originally scheduled for October 20, 2020 to October 20, 2021. As amended, available borrowings will be reduced by $5,000,000~~ each year starting October 20, 2021 until October 1, 2024 when the term loan matures. The Company ~~will~~pays ~~pay~~ interest on the unpaid balance at a variable interest rate (adjusted on a weekly basis) based upon the one-month LIBOR index rate plus 3.7550% (3.9059% as of September 30, ~~2020~~2021). The Company ~~will~~ also ~~pay~~pays a commitment fee on the average daily unused portion of the loan at the rate of 0.50% per annum, payable monthly. The loan is secured by substantially all assets of the Company and subject to certain financial and nonfinancial covenants as defined in the master loan agreement. At September 30, ~~2020~~2021 and ~~2019~~September 30, 2020 the outstanding balance on the revolving term loan was $2120,~~700~~000,000 and $2520,~~000~~700,000~~, respectively~~.

40The Company and the bank, respectively amended the revolving term loan to defer the initial step-down reduction of available borrowing capacity so that the new maximum commitment amount reduction schedule is as follows:

As noted above, the Company and the bank amended the revolving term loan to defer the initial step-down reduction of available borrowing capacity so that the new maximum commitment amount reduction schedule is as follows:


Maximum Commitment Amount	From	Up to and Including
$20,000,000	October 20, 2021	October 19, 2022
$15,000,000	October 20, 2022	October 19, 2023
$10,000,000	October 20, 2023	October 1, 2024

In connection with the revolving term loan, the Company entered into an Amended and Restated Letter of Credit Promissory Note. The maximum amount of the letter of credit commitment is $1,307,525. As of September 30, ~~2020~~2021 and ~~2019~~2020, the outstanding amount available to the Company under the Restated Letter of Credit Note was $1,~~307~~051,525 and $1,~~518~~307,~~450,~~ 525 respectively.

The payment of distributions is also subject to the Company's compliance with the various covenants and requirements of the Company's credit and loan agreements, and it is possible that those covenants and requirements will at times prevent the Company from paying a distribution to its members if the Company fails to meet certain financial metrics or is in default under the provisions of the credit and loan agreements. During the 2019 fiscal year the Company was not in compliance with certain financial covenants under its master credit agreement and therefore the debt under this credit agreement was classified as current liability as of September 30, 2019. During the 2020 fiscal year the Company received cash for the issuance of additional units and amended master credit agreements with the bank. Due to this and improved operating margins, the Company is in compliance with financial covenants as of September 30, 2020 and is expected to stay in compliance for the next 12 months.

On April 13, 2020, the Company received a loan in the amount of $505,700 under the new Paycheck Protection Program (the “PPP Loan”) legislation administered by the U.S. Small Business Administration. The PPP Loan may be forgiven based upon various factors, including, without limitation, our payroll cost and certain other approved expenses over an eight to twenty-four week period starting upon our receipt of the funds. Expenses for payroll costs, lease payments on agreements before February 15, 2020, utility payments under agreements before February 1, 2020 and certain other specified costs can be utilized from these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% on non-payroll expenses. Management believes our use of our PPP Loan proceeds for the approved expense categories will generally be fully forgiven if we satisfy certain employee headcount and compensation conditions. The PPP loan has a maturity date of April 13, 2022 and management currently believes this loan will be forgiven before maturity. The stated interest rate on this loan is 1% if not forgiven.43

Company from paying a distribution to its members if the Company fails to meet certain financial metrics or is in default under the provisions of the credit and loan agreements.

On April 13, 2020, the Company received a loan in the amount of $505,700 under the Paycheck Protection Program (the “PPP Loan”) legislation administered by the U.S. Small Business Administration (SBA). The PPP Loan was entitled to forgiveness based upon various factors, including, without limitation, our payroll cost and certain other approved expenses over an eight to twenty-four week period starting upon our receipt of the funds. On May 5, 2021 the Company received notice that the PPP Loan was forgiven in whole and the entire amount of the PPP Loan was extinguished and recognized as other income on the statement of operations.

Note 6. Related-Party Transactions

The Company had the following related-party activity with members as of or during the year ending September 30:


		2021		2020		2019
Member A	Corn purchased for fiscal year	$	43,610,670	$	9,906,905	$	8,626,906
	Corn forward purchase commitment	$	152,783	$	140,348	$	—
	Basis corn commitment - bushels	200,000		800,000		80,000
	Miscellaneous purchases	$	5,894	$	—	$	1,617
	Amount due at fiscal year end	$	54,909	$	198,557	$	2,707

Member B	Corn purchased for fiscal year	$	34,556,547	$	21,712,272	$	12,527,197
	Corn forward purchase commitment	$	229,489	$	115,714	$	376,000
	Amount due at fiscal year end	$	130,202	$	162,225	$	52,486

Member C	Corn purchased for fiscal year	$	1,964,031	$	5,412,716	$	14,400,120
	Corn forward purchase commitment	$	—	$	69,200	$	22,080
	Amount due at fiscal year end	$	—	$	—	$	37,652

Other Members	Corn purchased for fiscal year	$	9,308,296	$	17,419,742	$	9,070,359
	Corn forward purchase commitment	$	1,175,242	$	122,748	$	1,822,111
	Amount due at fiscal year end	$	638,907	$	67,635	$	132,737

		2020		2019		2018
Member A	Corn purchased for fiscal year	$	9,906,905	$	8,626,906	$	17,960,954
	Corn forward purchase commitment	$	140,348	$	—	$	6,647
	Basis corn commitment - bushels	800,000		80,000		400,000
	Miscellaneous purchases	$	—	$	1,617	$	2,579
	Amount due at fiscal year end	$	198,557	$	2,707	$	65,387
Member B	Corn purchased for fiscal year	$	21,712,272	$	12,527,197	$	11,818,241
	Corn forward purchase commitment	$	115,714	$	376,000	$	14,103
	Basis corn commitment - bushels	—		—		150,000
	Amount due at fiscal year end	$	162,225	$	52,486	$	98,179
Member C	Corn purchased for fiscal year	$	5,412,716	$	14,400,120	$	5,146,781
	Corn forward purchase commitment	$	69,200	$	22,080	$	34,366
	Basis corn commitment - bushels	—		—		205,000
	Amount due at fiscal year end	$	—	$	37,652	$	234,238
Other Members	Corn purchased for fiscal year	$	17,419,742	$	9,070,359	$	7,614,288
	Corn forward purchase commitment	$	122,748	$	1,822,111	$	1,761,514
	Amount due at fiscal year end	$	67,635	$	132,737	$	259,329

On January 15, 2020, the Company entered into a Management Services Agreement with Husker Ag, LLC (“Husker Ag”) for management services pertaining to the Company’s ethanol facility. Effective April 1, 2020, the Company entered into an Amended and Restated Management Services Agreement (the “Management Agreement”) with HALE, LLC, an affiliate of Husker Ag (“HALE”), which replaced and superseded the original Management Services Agreement between the Company and Husker Ag. Pursuant to the terms of the Management Agreement, HALE now provides management services to the Company’s ethanol facility, including providing the Company with individuals to (a) serve as General Manager, Environmental and Safety Manager, Commodity Risk Manager, and to fill such other positions as may be necessary from time to time; and (b) perform the respective management services for each such position. For the year ended September 30, 2021, 2020, and 2019 Lincolnway Energy incurred expenses of $492,472, $432,717, and $0 respectively, due to Husker Ag LLC for services and out-of-pocket travel expenses. At September 30, 2021 and 2020, $2,739 and $2,096 was included in accrued expenses on the balance sheet, respectively.

On January 15, 2020, the Company entered into a Management Services Agreement with Husker Ag, LLC (“Husker Ag”) for management services pertaining to the Company’s ethanol facility. Effective April 1, 2020, the Company entered into an Amended and Restated Management Services Agreement (the “Management Agreement”) with HALE, LLC, an affiliate of Husker Ag (“HALE”), which replaced and superseded the original Management Services Agreement between the Company and Husker Ag. Pursuant to the terms of the Management Agreement, HALE now provides management services to the Company’s ethanol facility, including providing the Company with individuals to (a) serve as General Manager, Environmental and Safety Manager, Commodity Risk Manager, and to fill such other positions as may be necessary from time to time; and (b) perform the respective management services for each such position. For the year ended September 30, 2020, 2019 and 2018 Lincolnway Energy incurred expenses of $432,717, $0 and $0 respectively, due to Husker Ag LLC for services and out-of-pocket travel expenses. At September 30, 2020 and 2019 $2,096 and $0 was included in accrued expenses on the balance sheet, respectively.

Effective March 31, 2020, the Company and HALE entered into a Preferred Membership Unit Purchase Agreement (the “MUPA”) pursuant to which HALE purchased 42,049 new Class A Units of the Company for an aggregate price of $5,000,000. Effective on May 28, 2020, in accordance with the terms of the MUPA, HALE purchased an additional 14,037 Class A Units for an aggregate price of $1,669,176. As a result, HALE holds a total of 56,086 new Class A Units. In connection with the investment by HALE in the Company and pursuant to the terms of the MUPA and the Company’s current operating agreement, HALE has the right to appoint four of the Company’s seven directors (the “Class A Directors”). The Class A Directors serve until they resign or HALE removes them. The remaining three directors are elected by the members holding Common Units and Class B Units.

The Company entered into a management services agreement with Flag Leaf Financial Management, Inc. ("Flag Leaf") during July 2019. Pursuant to the agreement, the Company incurred expense of $175,338, $45,544 and $0, respectively for the years ending September 30, 2020, 2019 and 2018. At September 30, 2020 and 2019 there was $8,910 and $10,581 respectively, included as accrued expenses on the balance sheet. LKPK Holdings, LLC ("LKPK") purchased 165 Class B units during May 2020. LKPK is owned 100% by Flag Leaf.44

The Company entered into a management services agreement with Flag Leaf Financial Management, Inc. ("Flag Leaf") during July 2019. Pursuant to the agreement, the Company incurred expense of $124,529, $175,338, and $45,544, respectively for the years ending September 30, 2021, 2020, and 2019. At September 30, 2021 and 2020 there was $10,330 and $8,910 respectively, included as accrued expenses on the balance sheet. LKPK Holdings, LLC ("LKPK") purchased 165 Class B units during May 2020. LKPK is owned 100% by Flag Leaf.

Note 7. Commitments and Major Customers

42The Company has an agreement with an unrelated entity for marketing, selling and distributing all of the ethanol produced by the Company. Gross revenues with this customer were approximately $131,395,000, $80,097,000, and $75,203,000, for the years ended September 30, 2021, 2020, and 2019, respectively. Trade accounts receivable of approximately $5,371,000 and $3,255,000 was due from the customer as of September 30, 2021 and 2020, respectively. As of September 30, 2021, the Company has ethanol sales commitments with the unrelated entity of 13.9 million unpriced gallons through December 2021.

The Company also has an agreement with an unrelated entity for marketing, selling and distributing ~~all of~~ the ~~ethanol~~distillers ~~produced by the Company~~grains. Revenues with this customer, ~~were~~including ~~approximately~~both distillers grains and corn oil, were $8031,~~097~~924,000, $7519,~~203~~196,000, and $7715,~~736~~329,000 for the years ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019 , respectively. Trade accounts receivable of approximately $3589,~~255,~~000 and $2685,~~447,~~000 was due from the customer as of September 30, ~~2020~~2021 and ~~2019~~2020, respectively. The ~~As of September 30, 2020, the~~ Company has ~~ethanol~~distillers grain sales commitments with the unrelated entity of approximately ~~14.~~4,690 ~~million~~tons ~~unpriced~~for ~~gallons~~a total sales commitment of approximately $860,000 less marketing fees through December 2021.

~~The~~As ~~Company~~of September 30, ~~also~~2021, ~~has~~the anCompany ~~agreement~~had ~~with~~approximate anpurchase ~~unrelated~~commitments ~~entity~~ for ~~marketing,~~corn ~~selling~~cash ~~and~~forward ~~distributing~~contracts ~~the distillers grains. Revenues~~ with ~~this~~various ~~customer,~~unrelated ~~including both distillers grains and corn oil~~parties, ~~were~~totaling $197,~~196~~244,000, ~~$15,329,000~~representing ~~and $16~~1,~~933~~392,000 ~~for the years ended September 30, 2020, 2019 and 2018 , respectively~~bushels. These ~~Trade~~contracts ~~accounts~~mature ~~receivable~~at ofvarious ~~$685,000~~dates ~~and~~through ~~$541,000~~December ~~was due from the customer as of September 30, 2020 and 2019, respectively~~2022. The Company ~~has~~did ~~distillers~~not ~~grain~~have ~~sales~~any basis contract purchase commitments with ~~the~~ unrelated ~~entity~~parties ~~of approximately~~as ~~16,000 tons for a total sales commitment~~ of ~~approximately~~September $230, ~~million less marketing fees through December~~ 2021.

AsThe ~~of September 30,~~Company ~~2020,~~has ~~the~~an ~~Company~~agreement ~~had~~with ~~approximate~~an ~~purchase~~unrelated ~~commitments~~party for ~~corn~~the ~~cash~~transportation ~~forward~~of ~~contracts~~natural ~~with~~gas ~~various~~to ~~unrelated~~the ~~parties~~Company's ethanol plant. Under the agreement, the Company committed to future monthly purchases totaling approximately $~~1,292,000,~~3.6 ~~representing~~million ~~384~~over the 10 year term,~~000~~ ~~bushels~~commencing November 2014. ~~These~~On ~~contracts~~June ~~mature~~2, at2016, ~~various~~the ~~dates~~Company ~~through~~assigned ~~January~~an ~~2021~~irrevocable standby letter of credit to the counter-party to stand as security for the Company's obligation under the agreement. The letter of credit will be reduced over time as the Company ~~did~~makes ~~not~~payments ~~have~~under ~~any~~the ~~basis~~agreement. On ~~contract~~June ~~purchase~~29, ~~commitments~~2021, in conjunction with ~~unrelated~~the ~~parties~~amended asand restated letter of credit promissory note agreement, the Company amended the letter of credit and extended the maturity to May 2023. At September 30, ~~2020~~2021, the remaining commitment was approximately $1,000,000.

~~The~~As ~~Company has an agreement with an unrelated party for the transportation~~ of ~~natural~~September ~~gas~~30, ~~to the Company's ethanol plant. Under the agreement~~2021, the Company ~~committed~~had topurchase ~~future~~commitments ~~monthly~~for ~~fees~~natural ~~totaling~~gas ~~approximately~~forward ~~$3.6~~contracts ~~million~~with ~~over the 10 year term, commencing November 2014. On June 2, 2016, the Company assigned~~ an ~~irrevocable~~unrelated ~~standby letter of credit to the counter-~~party ~~to stand as security~~ for ~~the~~a ~~Company's~~total ~~obligation~~commitment ~~under~~of ~~the~~approximately ~~agreement~~$56,000. The ~~letter of credit will be reduced over time as the~~ Company ~~makes~~had ~~payments~~purchase ~~under~~commitments ~~the~~for ~~agreement. On~~natural ~~July~~gas 3,basis ~~2017,~~contracts ~~in conjunction~~ with ~~the~~an ~~amended~~unrelated ~~revolving~~party ~~credit~~totaling ~~loan~~approximately ~~agreement~~102,061 ~~the Company amended the letter of credit and extended the maturity to May 2021~~MMBtu's. AtThese ~~September~~contracts ~~30,~~mature ~~2020,~~at ~~the~~various ~~remaining~~dates ~~commitment~~through ~~was~~October ~~approximately $1~~2021.2 ~~million.~~

As of September 30, 2020, the Company had purchase commitments for natural gas forward contracts with an unrelated party for a total commitment of approximately $138,000. The Company had purchase commitments for natural gas basis contracts with an unrelated party totaling approximately 82,000 MMBtu's. These contracts mature at various dates through October 2020.

Effective October 1, 2019, the Company adopted ASU 2016-02 regarding Leases. The Company elected the short-term lease exception provided for in the standard and therefore only recognized right-of-use assets and lease liabilities for leases with a term greater than one year.

A lease exists when a contract conveys to a party the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. The Company recognized a lease liability equal to the present value of future lease payments based on an estimated interest rate commensurate with the rate the Company would pay to borrow equivalent funds. A lease asset was recognized based on the lease liability value and adjusted for any prepaid lease payments or lease incentives. The lease term at the commencement date includes any renewal options or termination options when it is reasonably certain that the Company will exercise or not exercise those options, respectively.

The Company leases railcars and is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. Rent expense for the operating leases during the ~~year~~years ended September 30, 2021, 2020, ~~2019~~ and ~~2018~~2019 was approximately $2,~~157~~393,~~528~~000, $2,~~102~~158,000 and $2,~~156~~102,000, respectively. The lease agreements have maturity dates ranging from ~~June~~October 2021 to ~~September~~June ~~2025~~2026.

The discount rate used in determining the lease liability ranged from 3.68% to 6.23% and was determined by incremental borrowing rates at the time the lease commenced. The right of use asset and liability at September 30, ~~2020~~2021 was approximately $76,~~179~~393,000.

~~At September 30, 2020, the Company had the following approximately future minimum rental commitments through September 30 of each year:~~ 45

43At September 30, 2021, the Company had the following future minimum rental commitments through September 30 of each year:

2021			$2,272,104
2022			$2,195,700
2022			1,999,704
2023			1,952,700
2023			1,704,210
2024			1,655,475
2024			1,399,875
2025			963,350
2025			707,750
2026			365,700
Thereafter			174,000
Total			$7,132,925
Total			$8,257,643

A reconciliation of undiscounted future payments in the schedule above and the lease liability recognized in the balance sheet as of September 30, ~~2020~~2021 is shown below:

Undiscounted future payments			$87,~~257~~132,~~643~~925
Discount effect			1740,~~078,371~~314
Total			$76,~~179~~392,~~272~~611

Note 8. Risk Management

The Company’s activities expose it to a variety of market risks, including the effects of changes in commodity prices. These financial exposures are monitored and managed by the Company as an integral part of its overall risk management program. The Company’s risk management program focuses on the unpredictability of commodity markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market fluctuations. The Company’s specific goal is to protect the Company from large moves in the commodity costs.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange-traded futures and options contracts to minimize its net position of merchandisable agricultural commodity inventories and forward purchases and sales contracts.

Exchange traded futures and options contracts are designated as non-hedge derivatives and are valued at market price with changes in market price recorded in operating income through cost of goods sold for corn and natural gas derivatives and through revenue for ethanol derivatives.

Derivatives not designated as hedging instruments as of September 30 are as follows:

	2020		2019
	2021		2020
Derivative assets - corn contracts	$	~~675~~524,500	$	~~531,875~~675
Derivative assets - ethanol contracts	33104,~~107~~160		—33,107
Derivative liabilities - corn contracts	(~~243~~68,~~825~~900)		(93243,~~650~~825)
Derivative liabilities - ethanol contracts	(93395,~~335~~640)		—(93,335)
Cash due from (due to) broker	603,854		(249,531)
Cash due from broker	1,293,229		603,854
Total	$	~~300~~1,~~476~~457,349	$	~~188~~300,~~694~~476

The effects on operating income from derivative activities for the years ending September 30, are as follows:

4446

	2020		2019		2018
	2021		2020		2019
Gains (losses) in revenue due to derivatives related to ethanol sales:
Realized gain (loss)	$	69(389,~~624~~316)	$	2169,~~525~~624	$	~~(26~~21,~~649)~~525
Unrealized (loss)	(60231,~~228~~252)		—(60,228)		—
Total effect on revenues	9(620,~~396~~568)		219,~~525~~396		~~(26~~21,~~649)~~525
Gains (losses) in cost of goods sold due to derivatives related to corn costs:
Realized gain	1,587,758		1,014,033		1,332,317
Realized gain (loss)	(2,989,095)		1,587,758		1,014,033
Unrealized gain (loss)	~~(878~~698,~~500)~~750		(~~359~~878,~~450~~500)		~~325~~(359,~~878~~450)
Total effect on corn costs	~~709~~(2,~~258~~290,345)		~~654~~709,~~583~~258		1654,~~658,195~~583
Gains (losses) in cost of goods sold due to derivatives related to natural gas costs:
Gains in cost of goods sold due to derivatives related to natural gas costs:
Realized gain	—		~~13,660~~—		6513,~~769~~660
Unrealized gain	—		~~3,460~~—		3,~~940~~460
Total effect on natural gas costs	—		~~17,120~~—		6917,~~709~~120
Total effect on cost of goods sold	$	~~709~~(2,~~258~~290,345)	$	~~671~~709,~~703~~258	$	1671,~~727,904~~703
Total gain to operating income due to derivative activities	$	718,654	$	693,228	$	1,701,255
Total gain (loss) to operating income due to derivative activities	$	(2,910,913)	$	718,654	$	693,228

Note 9. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. These valuation methodologies were applied to all of the Company’s financial assets and financial liabilities carried at fair value.

Derivative financial instruments: Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains 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 CME and NYMEX markets. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets.

4547

The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of September 30, ~~2020~~2021 and ~~2019~~2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	2021
	Total		Level 1		Level 2		Level 3
Assets, derivative financial instruments	$	628,660	$	628,660	$	—	$	—
Liabilities, derivative financial instruments	$	(464,540)	$	(464,540)	$	—	$	—
	2020
	Total		Level 1		Level 2		Level 3
Assets, derivative financial instruments	$	33,782	$	33,782	$	—	$	—
Liabilities, derivative financial instruments	$	(337,160)	$	(337,160)	$	—	$	—
	2019
	Total		Level 1		Level 2		Level 3
Assets, derivative financial instruments	$	531,875	$	531,875	$	—	$	—
Liabilities, derivative financial instruments	$	(93,650)	$	(93,650)	$	—	$	—

Note 10. Employee Benefit Plan

The Company adopted a 401(k) plan covering substantially all employees. The Company provides matching contributions of 50% for up to 6% of employee compensation. Company contributions and plan expenses for the years ended September 30, ~~2020~~2021, ~~2019~~2020 and ~~2018~~2019 totaled $55,461, $40,395, and $54,670 ~~and $58,112,~~ respectively.

Note 11. Quarterly Financial Data (Unaudited)

The following table presents summarized quarterly financial data for the years ended September 30, ~~2020~~2021 and ~~2019~~2020.

	12/31/2020	3/31/2021	6/30/2021	9/30/2021
Revenue	$29,338,746	$37,976,400	$52,581,551	$52,089,382
Gross profit (loss)	(179,370)	2,637,357	4,665,330	2,257,496
Operating income (loss)	(974,165)	1,994,739	3,977,999	1,483,086
Net income (loss)	(1,093,226)	1,960,778	4,295,821	1,485,848
Basic & diluted earnings (loss) per unit	(10.40)	18.65	40.87	14.13
	12/31/2019	3/31/2020	6/30/2020	9/30/2020
Revenue	$29,002,735	$24,376,894	$20,136,749	$31,640,174
Gross profit (loss)	1,109,377	(2,087,314)	1,320,605	3,741,873
Operating income (loss)	298,839	(3,041,935)	554,526	2,939,790
Net income (loss)	(24,218)	(3,129,698)	303,248	3,170,644
Net Income (loss)	(24,218)	(3,129,698)	303,248	3,170,644
Basic & diluted earnings (loss) per unit	(0.58)	(73.64)	3.30	30.16
	12/31/2018	3/31/2019	6/30/2019	9/30/2019
Revenue	$20,371,692	$24,333,321	$26,488,313	$26,193,014
Gross (loss)	(3,923,425)	(571,870)	(1,649,179)	(1,545,148)
Operating (loss)	(4,784,408)	(1,455,824)	(7,062,296)	(2,256,673)
Net (loss)	(1,836,126)	(1,430,642)	(7,394,842)	(2,587,196)
Basic & diluted (loss) per unit	(43.67)	(34.03)	(175.87)	(61.53)

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Lincolnway Energy has not had any change in its accountants or any disagreements with its accountants which are required to be disclosed under this Item.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Lincolnway Energy's management, with the participation of Lincolnway Energy's president and chief executive officer and interim chief financial officer, have evaluated the effectiveness of Lincolnway Energy's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this annual report. As a result of such evaluation, the president and chief executive officer and the interim chief financial officer have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that the information required to be disclosed in the reports Lincolnway Energy files or submits under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and (ii) accumulated and communicated to management, including Lincolnway Energy's principal executive and principal financial officers or persons performing such functions, as appropriate, to allow timely decisions regarding disclosure. Lincolnway Energy believes that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected

Management's Annual Report on Internal Control Over Financial Reporting

The management of Lincolnway Energy is responsible for establishing and maintaining adequate internal control over financial reporting for Lincolnway Energy. Lincolnway Energy's internal control system was designed to, in general, provide reasonable assurance to Lincolnway Energy's management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Lincolnway Energy's management assessed the effectiveness of Lincolnway Energy's internal control over financial reporting as of September 30, ~~2020~~2021. The framework used by management in making that assessment was the criteria set forth by the "Internal Control – Integrated Framework" (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, Lincolnway Energy's management has determined that as of September 30, ~~2020~~2021, Lincolnway Energy's internal control over financial reporting was effective for the purposes for which it is intended.

An attestation report from Lincolnway Energy's accounting firm on Lincolnway Energy's internal control over financial reporting is not included in this annual report because an attestation report is only required under the regulations of the Securities and Exchange Commission for accelerated filers or large accelerated filers.

Changes in Internal Control over Financial Reporting

No change in Lincolnway Energy's internal control over financial reporting occurred during the fourth quarter of the fiscal year ended September 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, Lincolnway Energy's internal control over financial reporting.

Item 9B. Other Information.

None.

48Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

PART III

The information required by this Item is incorporated by reference from the definitive proxy statement for the Lincolnway Energy ~~2021~~2022 Annual Meeting of Members (the “~~2021~~2022 Proxy Statement”) to be filed with the SEC within 120 days after the end of the Company’s fiscal year ended September 30, ~~2020~~2021.

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated herein by reference to the ~~2021~~2022 Proxy Statement.

Item 11. Executive Compensation.

The information required by this Item is incorporated herein by reference to the ~~2021~~2022 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item is incorporated herein by reference to the ~~2021~~2022 Proxy Statement.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated herein by reference to the ~~2021~~2022 Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The information required by this Item is incorporated herein by reference to the ~~2021~~2022 Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1) Financial Statements.

The financial statements are set forth in Item 8 of this annual report.

(a)(2) Financial Statement Schedules.

Financial statement schedules have been omitted because they are not required or are not applicable, or the information is otherwise included in this annual report.

(a)(3) Exhibits.

Incorporated by Reference

Exhibit

Filed Herewith

Period

Filing

Number

Exhibit Description

Form

Ending

~~Exhibit~~ExhibitNo.

Date

3.1

Restatement of the Certificate of Organization

10-K

9/30/2010

3.1

12/21/2010

3.2.1

Third Amended and Restated Operating Agreement and Unit Assignment Policy effective as of March 30, 2020

8-K

10.3

4/3/2020

3.2.2

Fourth Amended and Restated Operating Agreement and Unit Assignment Policy effective as of April 1, 2020

8-K

10.4

4/3/2020

4.1

Description of Limited Liability Company Units of Lincolnway Energy, LLC

Filed herewith

10.1

Distillers Grain Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC.

10-K

9/30/2007

10.7

12/21/2007

10.1.1

Amendment to Distillers Grains Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC

10-K

9/30/2012

10.7.1

12/21/2012

10.2

Industry Track Contract Between Lincolnway Energy, LLC and Union Pacific Railroad

10-Q

6/30/2006

10.13

8/14/2006

10.3

Master Loan Agreement and Amendment Among Farm Credit Services of America, FLCA; Farm Credit Services of America, PCA; and Lincolnway Energy, LLC.

10-K

9/30/2012

10.16

12/21/2012

*10.4

Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC

10-Q

12/30/2012

10.19

2/14/2013

*10.5

Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.

10-Q

12/30/2012

10.2

2/14/2013

10.6

Main Extension and Gas Transportation Agreement Between Lincolnway Energy, LLC and Interstate Power and Light Company

10-Q

3/31/2013

10.21

5/15/2013

**10.7

Employment Agreement Between Lincolnway Energy, LLC and Eric Hakmiller

10-Q

3/31/2013

10.22

5/15/2013

10.8

Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC

10-Q

3/31/2013

10.23

5/15/2013

*10.9

Distillers Grain Off-Take Agreement Between Lincolnway Energy, LLC and Gavilon Ingredients, LLC

10-K/A

9/30/2013

10.27

4/23/2014

10.10

Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC

10-Q

6/30/2014

10.28

8/13/2014

10.1.1

Amendment to Distillers Grains Marketing Agreement Between Lincolnway Energy, LLC and Hawkeye Gold, LLC

10-K

9/30/2012

10.7.1

12/21/2012

10.2

Industry Track Contract Between Lincolnway Energy, LLC and Union Pacific Railroad

10-Q

6/30/2006

10.13

8/14/2006

10.3

Master Loan Agreement and Amendment Among Farm Credit Services of America, FLCA; Farm Credit Services of America, PCA; and Lincolnway Energy, LLC.

10-K

9/30/2012

10.16

12/21/2012

*10.4

Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC

10-Q

12/30/2012

10.19

2/14/2013

*10.5

Coal Supply Agreement Between Lincolnway Energy, LLC and Williams Bulk Transfer, Inc.

10-Q

12/30/2012

10.2

2/14/2013

10.6

Main Extension and Gas Transportation Agreement Between Lincolnway Energy, LLC and Interstate Power and Light Company

10-Q

3/31/2013

10.21

5/15/2013

**10.7

Employment Agreement Between Lincolnway Energy, LLC and Eric Hakmiller

10-Q

3/31/2013

10.22

5/15/2013

10.8

Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC

10-Q

3/31/2013

10.23

5/15/2013

*10.9

Distillers Grain Off-Take Agreement Between Lincolnway Energy, LLC and Gavilon Ingredients, LLC

10-K/A

9/30/2013

10.27

4/23/2014

10.10

Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC

10-Q

6/30/2014

10.28

8/13/2014

10.11

Amendment to the Master Loan Agreement Among Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and Lincolnway Energy, LLC

10-Q

6/30/2016

10.1

8/12/2016

10.12

Revolving Term Loan Supplement Between Farm Credit Services of America, FLCA and Lincolnway Energy, LLC dated June 2, 2016

10-K/A

9/30/2016

10.12

1/4/2017

10.13

Revolving Credit Supplement (Letter of Credit) Between Farm Credit Services of America, PCA and Lincolnway Energy, LLC dated June 2, 2016

10-K/A

9/30/2016

10.13

1/4/2017

10.14

Revolving Credit Supplement Between Farm Credit Services of America, PCA and Lincolnway Energy, LLC dated June 2, 2016

10-K/A

9/30/2016

10.14

1/4/2017

*10.15

Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC

8-K

10.1

12/9/2016

10.16

Credit Agreement dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA.

8-K

10.1

7/18/2017

*10.17

Amended and Restated Revolving Term Promissory Note dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

7/18/2017

*10.18

Amended and Restated Distillers Grain Off-Take Agreement between the Company and Gavilon Ingredients, LLC effective October 1, 2017

8-K

10.1

9/28/2017

10.19

Amended and Restated Letter of Credit Promissory Note dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

7/18/2017

10.20

Amendment dated February 23, 2018 to the Credit Agreement dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

2/26/2018

10.21

Amended and Restated Revolving Term Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

2/26/2018

10.22

Amended and Restated Letter of Credit Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

2/26/2018

10.23

Amendment dated September 24, 2018 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

10/11/2018

*10.24

Amendment No. 1 Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC dated June 28, 2018

8-K

10.1

7/3/2018

10.25

Amendment No. 2 to Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC effective October 1, 2020

8-K

10.1

10/15/2020

10.26

8-K

10.1

10/11/2018

10.20

Amendment dated February 23, 2018 to the Credit Agreement dated July 3, 2017 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

2/26/2018

10.21

Amended and Restated Revolving Term Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

2/26/2018

10.22

Amended and Restated Letter of Credit Promissory Note dated February 23, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

2/26/2018

10.23

8-K

10.1

10/11/2018

*10.24

Amendment No. 1 Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC dated June 28, 2018

8-K

10.1

7/3/2018

10.25

Amendment No. 2 to Ethanol Marketing Agreement Between Lincolnway Energy, LLC and Eco-Energy, LLC effective October 1, 2020

8-K

10.1

10/15/2020

10.26

8-K

10.1

10/11/2018

10.27

Amended and Restated Revolving Term Promissory Note dated September 24, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

10/11/2018

10.28

Amendment dated December 28, 2019 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018 and September 24, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

1/3/2019

10.29

Amended and Restated Revolving Term Promissory Note dated December 28, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

1/3/2019

10.30

Amended and Restated Letter of Credit Promissory Note dated December 28, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

1/3/2019

10.31

Amendment dated May 29, 2020 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018, September 24, 2018, and December 28, 2019 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

6/4/2020

10.32

Amended and Restated Revolving Term Promissory Note dated May 29, 2020 between Lincolnway Energy, LLC and Farm Credit Services of America, FLCA

8-K

10.2

6/4/2020

10.33

Amended and Restated Revolving Credit Promissory Note dated May 29, 2020 between Lincolnway Energy, LLC and Farm Credit Services of America, PCA

8-K

10.3

6/4/2020

10.34

Amended and Restated Letter of Credit Promissory Note dated May 29, 2020 between Lincolnway Energy, LLC and Farm Credit Services of America, PCA

8-K

10.4

6/4/2020

**10.35

Employment Agreement between Lincolnway Energy, LLC and Mike Hollenberg effective March 4, 2019

8-K

10.1

3/7/2019

**10.36

Separation Agreement between Lincolnway Energy, LLC between Eric Hakmiller effective March 28, 2019

8-K

10.1

3/26/2019

10.37

Amendment dated June 23, 2019 to the Credit Agreement dated July 3, 2017, as amended February 23, 2018, September 24, 2018 and December 28, 2018 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.1

7/12/2019

10.38

Revolving Credit Promissory Note dated June 23, 2019 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

7/12/2019

10.39

Amended and Restated Letter of Credit Promissory Note dated June 23, 2019 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

7/12/2019

**10.40

Professional Services Agreement between Lincolnway Energy, LLC and Flag Leaf Financial Management Inc. effective July 31, 2019

10-K

9/30/2019

10.35

12/30/2019

10.33

Amended and Restated Revolving Credit Promissory Note dated May 29, 2020 between Lincolnway Energy, LLC and Farm Credit Services of America, PCA

8-K

10.3

6/4/2020

10.34

Amended and Restated Letter of Credit Promissory Note dated May 29, 2020 between Lincolnway Energy, LLC and Farm Credit Services of America, PCA

8-K

10.4

6/4/2020

**10.35

Employment Agreement between Lincolnway Energy, LLC and Mike Hollenberg effective March 4, 2019

8-K

10.1

3/7/2019

**10.36

Separation Agreement between Lincolnway Energy, LLC between Eric Hakmiller effective March 28, 2019

8-K

10.1

3/26/2019

10.37

8-K

10.1

7/12/2019

10.38

Revolving Credit Promissory Note dated June 23, 2019 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.2

7/12/2019

10.39

Amended and Restated Letter of Credit Promissory Note dated June 23, 2019 between the Company and Farm Credit Services of America, FLCA and Farm Credit Services of America, PCA

8-K

10.3

7/12/2019

**10.40

Professional Services Agreement between Lincolnway Energy, LLC and Flag Leaf Financial Management Inc. effective July 31, 2019

10-K

9/30/2019

10.35

12/30/2019

**10.41

Amendment dated December 13, 2019 to the Employment Agreement between Lincolnway Energy, LLC and Mike Hollenberg

8-K

10.1

12/16/2019

**10.42.1

Management Services Agreement between Lincolnway Energy, LLC and Husker Ag, LLC dated January 15, 2020

8-K

10.1

1/22/2020

**10.42.2

Amended and Restated Management Services Agreement between Lincolnway Energy, LLC and HALE, LLC effective as of April 1, 2020

8-K

10.2

4/3/2020

*10.43

Corn Procurement Agreement between Lincolnway Energy, LLC and Innovative Ag Services Co. effective January 24, 2020

8-K

10.2

1/22/2020

**10.44

Separation Agreement and General Release between Lincolnway Energy, LLC and Michael Hollenberg dated January 17, 2020

8-K

10.3

1/22/~~20200~~2020

10.45

Grain Procurement Agreement between Lincolnway Energy, LLC and Husker Trading, Inc. effective as of February 6, 2020

8-K

10.1

2/14/~~20200~~2020

10.46

Preferred Membership Unit Purchase Agreement between Lincolnway Energy, LLC and HALE, LLC dated March 31, 2020

8-K

10.1

4/3/2020

***10.47

Carbon Dioxide Purchase and Sale Agreement between Lincolnway Energy, LLC and EPCO Carbon Dioxide Products, Inc. dated April 16, 2010, as amended January 1, 2016, April 27, 2020, and July 29, 2020

~~Filed Herewith~~

10-K

9/30/2020

10.5

12/23/2020

***10.48

Distiller's Grain Off-Take Agreement between Lincolnway Energy, LLC and Gavilon Ingredients, LLC

8-K

10.1

12/9/2020

Code of Ethics

10-K

9/30/2009

14.0

12/22/2009

31.1

Rule 13a-14(a) Certification of President and Chief Executive Officer

Filed Herewith

31.2

Rule 13a-14(a) Certification of Chief Financial Officer

Filed Herewith

†32.1

Section 1350 Certification of President and Chief Executive Officer

Filed Herewith

†32.2

Section 1350 Certification of Chief Financial Officer

Filed Herewith

101

Interactive Data Files (furnished electronically herewith pursuant to Rule 405 of RegulationS-T)

Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

Management Contract or Compensatory Plan

***

Material has been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K (17 CFR § 229.601(b)(10)(iv)) because it is both not material and would likely cause competitive harm to the company if publicly disclosed.

†

This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference.

***10.48

Distiller's Grain Off-Take Agreement between Lincolnway Energy, LLC and Gavilon Ingredients, LLC

8-K

10.1

12/9/2020

10.49

Amendment to Credit Agreement between Lincolnway Energy, LLC and Farm Credit services of America, FLCA and Farm Credit Services of America, PCA dated July 6, 2021

10-Q

6/30/2021

10.1

8/16/2021

10.5 0

Revolving Credit Promissory Note between Lincolnway Energy, LLC and Farm Credit Services of America, PCA dated July 6, 2021

10-Q

6/30/2021

10.2

8/16/2021

10.51

Amended and Restated Letter of Credit Promissory Note between Lincolnway Energy, LLC and Farm Credit Services of America, PCA dated July 6, 2021

10-Q

6/30/2021

10.3

8/16/2021

Code of Ethics

10-K

9/30/2009

14.0

12/22/2009

31.1

Rule 13a-14(a) Certification of President and Chief Executive Officer

Filed Herewith

31.2

Rule 13a-14(a) Certification of Chief Financial Officer

Filed Herewith

†32.1

Section 1350 Certification of President and Chief Executive Officer

Filed Herewith

†32.2

Section 1350 Certification of Chief Financial Officer

Filed Herewith

101.INS

Inline XBRL Instance Document

Filed Herewith

101.SCH

Inline XBRL Schema Document

Filed Herewith

101.CAL

Inline XBRL Calculation Document

Filed Herewith

101.LAB

Inline XBRL Labels Linkbase Document

Filed Herewith

101.PRE

Inline XBRL Presentation Linkbase Document

Filed Herewith

101.DEF

Inline XBRL Definition Linkbase Document

Filed Herewith

104

The cover page from this Annual Report on Form 10-K formatted in Inline XBRL.

Material has been omitted pursuant to a request for confidential treatment and such material has been filed separately with the Securities and Exchange Commission.

Management Contract or Compensatory Plan

***

†

Item 16. Form 10-K Summary

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

December 23, 2020			/s/ Seth Harder
December 22, 2021			/s/ Seth Harder
			Seth Harder, President and Chief Executive Officer
December 23, 2020			/s/ Jeff Kistner
December 22, 2021			/s/ Jeff Kistner
			Jeff Kistner, Interim Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

December 23, 2020			/s/ Robert Brummels
December 22, 2021			/s/ Robert Brummels
			Robert Brummels, Director
December 23, 2020			/s/ William Couser
December 22, 2021			/s/ William Couser
			William Couser, Director
December 23, 2020			/s/ Dan Heard
December 22, 2021			/s/ Dan Heard
			Dan Heard, Director
December 23, 2020			/s/ James Krause
December 22, 2021			/s/ James Krause
			James Krause, Director
December 23, 2020			/s/ Marvin Stech
December 22, 2021			/s/ Marvin Stech
			Marvin Stech, Director

December 23, 2020			/s/ Jeff Taylor
December 22, 2021			/s/ Jeff Taylor
			Jeff Taylor, Director
December 23, 2020			/s/ Rick Vaughan
December 22, 2021			/s/ Rick Vaughan
			Rick Vaughan, Director
December 23, 2020			/s/ Seth Harder
December 22, 2021			/s/ Seth Harder
			Seth Harder, President and Chief Executive Officer
December 23, 2020			/s/ Jeff Kistner
December 22, 2021			/s/ Jeff Kistner
			Jeff Kistner, Interim Chief Financial Officer

5455

Filing Compare · Lincolnway Energy, LLC