UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

(Mark One)

For the quarterly period ended June 30,December 31, 2015

or

For the transition period from                    to                    

Commission file number: 000-52421

ADVANCED BIOENERGY, LLC

(Exact name of Registrant as Specified in its Charter)

8000 Norman Center Drive, Suite 610

Bloomington, Minnesota 55437

(763) 226-2701

(Address, including zip code, and telephone number,

including area code, of Registrant’s Principal Executive Offices)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)    Yes  x    No  ¨

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

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

As of AugustFebruary 1, 2015,2016, the number of outstanding units was 25,410,851.

ADVANCED BIOENERGY, LLC

FORM 10-Q

Index

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Balance Sheets

(Dollars in thousands)

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Operations

(Dollars in thousands, except per unit data)

(Unaudited)

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statement of Changes in Members’ Equity

For the NineThree Months Ended June 30,December 31, 2015

(Dollars in thousands)

(Unaudited)

See notes to consolidated financial statementsstatements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

See notes to consolidated financial statements.

ADVANCED BIOENERGY, LLC & SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2015 and 2014

(Unaudited)

1. Organization and Significant Accounting Policies

The consolidated financial statements include the accounts of Advanced BioEnergy, LLC (“ABE” or the “Company”) and its wholly owned operating subsidiaries, ABE Fairmont, LLC (“ABE Fairmont”) and ABE South Dakota, LLC (“ABE South Dakota”). Substantially all of the assets of ABE Fairmont were sold in December 2012 and the subsidiary is now inactive. All intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP, for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The interim financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended September 30, 2014.2015. The financial information as of June 30,December 31, 2015 and the results of operations for the three and nine months ended June 30,December 31, 2015 are not necessarily indicative of the results for the fiscal year ending September 30, 2015.2016. In the opinion of management, the interim financial statements reflect all normal recurring adjustments necessary for fair presentation.

The Company currently operates three ethanol production facilities in the U.S. with a combined production capacity of 85 million gallons per year. The Company acquired existing facilities in Aberdeen, South Dakota (9 million gallons) and Huron, South Dakota (32 million gallons) in November 2006 and began operations at the 44 million gallon Aberdeen expansion facility in January 2008.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Company’s cash balances are maintained in bank depositories and periodically exceed federally insured limits. The Company has not experienced losses in these accounts. The Company segregates cash restricted for debt service and has classified these funds according to the future anticipated use of the funds. Restricted cash includesincluded cash held for debt service under the terms of the Company’sits former debt agreements and a deposit for a rail car sublease.

Receivables

Credit sales are made to a relatively small numbers of customers with no collateral required. Trade receivables are carried at original invoice amount 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 receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off if deemed uncollectible. Recoveries of receivables previously written off are recorded when received. There was no allowance for doubtful accounts recorded at June 30, 2015December 31 or September 30, 2014.2015.

Inventories

ChemicalsEthanol inventory, raw materials, work-in-process and supplies, work in process, ethanolparts inventory are valued using methods that approximate the lower of cost (first-in, first-out) or net realizable value (NRV). Distillers grains and distillers’ grains inventoriesrelated products are stated at net realizable value. In the lowervaluation of weighted average cost or market.inventories and purchase and sale commitments, NRV is determined as estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

Property and Equipment

Property and equipment is carried at cost less accumulated depreciation computed using the straight-line method over the estimated useful lives:

Maintenance and repairs are charged to expense as incurred; major improvements and betterments are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount ofon the asset group may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the estimated fair value on that date.

Commodity Sales and Purchase Contracts, Derivative Instruments

The Company currently does not enter into commodity futures andor exchange-traded commodity options contracts for the sale of its products or purchases of its inputs. However, the Company does enter into forward sales contracts for ethanol, distillers grains and corn oil, and purchase contracts for corn and natural gas. The Company classifies these sales and purchase contracts as normal sales and purchase contracts and accordingly, these contracts are not marked to market. These contracts provide for the sale or purchase of an item other than a financial instrument or derivative instrument that will be delivered in quantities expected to be sold or used over a reasonable period in the normal course of business.

Revenue Recognition

Ethanol revenue is recognized when product title and all risk of ownership is transferred to the customer as specified in the contractual agreements with the marketers. Under the terms of thethese marketing agreements, revenue is recognized when product is loaded into rail cars or trucks for shipment. Revenue from the sale of co-products is recorded when title and all risk of ownership transfers to customers. Co-products are normally shipped free on board (“FOB”) shipping point. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, commissions due to the marketers are deducted from the gross sale price at the time of payment. Interest income is recognized as earned.

Income per(Loss) Per Unit

Basic and diluted income per unit is computed using the weighted-average number of units outstanding during each period presented.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles, or GAAP.principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Income Taxes

The Company has elected to be treated as a partnership for 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. The Company files income tax returns in the U.S. federal and various state jurisdictions.

Risks and Uncertainties

The supply and demand for ethanol are affected by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”); any. Any changes in legislation or regulation that could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and theour ability to operate at a profit.

On November 30, 2015, the EPA announced final Renewable Volume Obligation (“RVO”) requirements for the RFS for calendar years 2014, 2015 and 2016. Although the new RVO requirements set are above the reduction that earlier had been proposed, they are lower than the original requirements set by the RFS. Ethanol opponents such as large oil companies will likely continue their efforts to repeal or reduce the RFS through lawsuits or lobbying of Congress. Successful reduction or repeal of the blending requirements of the RFS could result in a significant decrease in ethanol demand.

Current ethanol production capacity is approximately 15.115.0 billion gallons peraccording to the RFA. On April 10, 2015,Renewable Fuels Association (“RFA”). Reduction of blending requirements could reduce the EPA entered into a consent decree agreeing to a court-enforced timelinedemand for establishing the RFS Renewable Volume Obligation “RVO” numbersand price of ethanol. If demand for 2014ethanol decreases, it could materially adversely affect our business, results of operations and 2015. The EPA announced the proposed RVO numbers for 2014, 2015 and 2016 in June 2015 and the proposal was subsequently open for public comment. The comment period for the proposed RVO numbers ended on July 27, 2015, and the final RVO’s are expected to be announced by November 30, 2015. The proposed RVO numbers exceed historical production, but are well below the current ethanol supply and production capacity. It is uncertain whether the EPA will adjust any of the proposed numbers based on public comment.financial condition.

Ethanol has historically traded at a discount to gasoline;gasoline, however with the recent decline in gasolineoil prices at times ethanol may tradeis currently trading at a premium to gasoline causing a disincentive for discretionary blending of ethanol beyond the rates required to comply with the RFS.blend rate. Consequently, there may be a negative impact on ethanol pricing and demand, which could result in a material adverse effect on our business, results of operations and financial condition.

2. Inventories

A summary of inventories is as follows (in thousands):

3. Property and Equipment

A summary of property and equipment is as follows (in thousands):

		December 31, 2015				September 30, 2015
Land		$	1,811			$	1,811
Buildings			10,204				10,157
Process equipment			107,007				106,919
Office equipment			1,551				1,551
Construction in process			70				35
			120,643				120,473
Accumulated depreciation			(82,151	)			(79,318	)
Property and equipment, net		$	38,492			$	41,155

4. Long-term Debt

A summary of long-term debt is as follows (in thousands, except percentages):

The estimated maturities of debt at December 31 are as follows (in thousands):

2010 Senior Credit Agreement for the South Dakota Plants

ABE South Dakota entered into an Amended and Restated Senior Credit Agreement (the “Senior“2010 Senior Credit Agreement”), effective as of June 18, 2010, and amended on December 9, 2011, which was accounted for under troubled debt restructuring rules. The 2010 Senior Credit Agreement was executed among ABE South Dakota, the lenders from time to time party thereto, and an Administrative Agent and Collateral Agent. The 2010 Senior Credit Agreement converted the outstanding principal amount of the loans and certain other amounts under interest rate protection agreements to a senior term loan. The interest accrued on outstanding term and working capital loans under the previous credit agreement were reduced to zero. ABE South Dakota agreed to pay a $3.0 million restructuring fee to the lender due at the earlier of March 31, 2016 and the date on which the loans arewere repaid in full. ABE South Dakota recorded the restructuring fee as non-interest bearing debt on its consolidated balance sheets. See “Additional Carrying Value of Restructured Debt” below.

The principal amount of the term loan facility is payable in quarterly payments of $750,000, with the remaining principal amount fully due and payable on March 31, 2016. DuringAs discussed below, during the quarter ended June 30, 2015, ABE South Dakota made debt sweep payments totaling $4,250,000 in addition to its scheduled principal payment of $750,000. During the quarter ended MarchDecember 31, 2015, ABE South Dakota made debt sweep payments totaling $250,000 in addition to its scheduled principal payment of $750,000. Duringrefinanced the quarter ended December 31, 2014,2010 Senior Credit Agreement. In connection with closing, ABE South Dakota made debt sweep payments totaling $3.25 millionpaid in addition to its scheduled principal payments of $750,000.

ABE South Dakota hasfull all amounts outstanding under the option to select the interest rate on the senior term loan between base rate and euro-dollar rates for maturities of one to six months. Base rate loans bear interest at the administrative agent’s base rate plus an applicable margin of 3.0%. Euro-dollar loans bear interest at LIBOR plus the applicable margin of 4.0%. As of June 30, 2015, ABE South Dakota had selected the LIBOR plus 4.0% rate for a period of one month, for a total rate of 4.29%.

ABE South Dakota’s obligations under the2010 Senior Credit Agreement, are secured by a first-priority security interest in the equity and assets of ABE South Dakota.

ABE South Dakota is allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there is no more than $25including $29.0 million of principal, outstanding onaccrued interest, the senior term loan. Loans outstanding under the Senior Credit Agreement are subject to mandatory prepayment in certain circumstances, including, but not limited to, mandatory prepayments based upon receipt of certain proceeds of asset sales, casualty proceeds, termination payments, and cash flows.

The Senior Credit Agreement$3.0 restructuring fee, and the related loan documentation include, among other termswaiver fee of $68,750, and conditions, limitations (subject to specified exclusions) on ABE South Dakota’s ability to make asset dispositions; merge or consolidate with or into another person or entity; create, incur, assume or be liable for indebtedness; create, incur or allow liens on any property or assets; make investments; declare or make specified restricted payments or dividends; enter into new material agreements; modify or terminate material agreements; enter into transactions with affiliates; change its line of business; and establish bank accounts. Substantially all cash of ABE South Dakota is required to be deposited into special, segregated project accounts subject to security interests to secure obligations in connection withof the Senior Credit Agreement. The Senior Credit Agreement contains customary events of default and also includes an event of default for defaults on other indebtedness by ABE South Dakota and certain changes of control.

The Company believes that ABE South Dakota will be able to refinance its debt, or extend the maturity of that debt with its seniorprior lenders or another lender, when the debt becomes due in March 2016. The Company is currently in discussions with outside lenders regarding refinancing the debt.were extinguished.

Additional Carrying Value of Restructured Debt

BecauseSince the future maximum undiscounted cash payments on the amended and restated senior credit facility2010 Senior Credit Agreement (including principal, interest and the restructuring fee) exceeded the adjusted carrying value at the time of the June 2010 restructuring, in 2010, no gain for the forgiven interest was recorded, the carrying value was not adjusted and the modification of terms was accounted for on a prospective basis, as a troubled debt restructuring, via a new effective interest calculation, amortized over the life of the note, offsetting interest expense.

As a result of the debt sweep paymentspre-payments made during fiscal 2014the quarter ended December 31, 2015 and during the nine monthsyear ended JuneSeptember 30, 2015, the carrying value of the debt exceeded the scheduled principal and interest payments remaining over the term of the loan. Therefore, asAs a result, of the prepayments made during the three and nine months ended June 30, 2015,Company recognized gains of approximately $137,000$0.3 million and $319,000 were recognized$0.2 million in the quarters ended December 31, 2015 and 2014, respectively.

2015 Senior Credit Agreement for the South Dakota Plants

On December 29, 2015, ABE South Dakota entered into a Master Credit Agreement (“2015 Credit Agreement”) with AgCountry Farm Credit Services, PCA as other income duringlender, (“AgCountry”) to refinance its existing 2010 Senior Credit Agreement. On December 29, 2015, the threeCompany also entered into (i) a First Supplement to the 2015 Credit Agreement covering a $10.0 million Revolving Term Facility and nine months ended June(ii) a Second Supplemental covering a $20.0 million Term Loan. The transaction funded on December 30, 2015, respectively. Because the remaining scheduled principal and2015.

The $20.0 million Term Loan has a variable interest payments arerate (“Variable Rate”) equal to the carrying amount, all remainingone-month LIBOR rate plus a “Margin” of 350 basis points. The applicable LIBOR interest rate at December 29, 2015 was 0.42%. Beginning April 1, 2016, the Company must make quarterly principal payments of $1.0 million, plus accrued interest, on the Term Loan. The Term Loan will be fully amortized over five years with the final payment on January 1, 2021. The Company may elect one or more fixed or

adjustable interest rates, rather than the Variable Rate, based on currentAgCountry’s cost of funds at the time of the election, plus the Margin. Any election must apply to $1.0 million or more owing on the Term Loan. At December 31, 2015, the balance of the Term Loan was $20.0 million.

The $10.0 Revolving Term Facility also has a Variable Rate equal to the one-month LIBOR rate plus an initial Margin of 350 basis points. Borrowings under the Revolving Term Facility may be advanced, repaid and re-borrowed during the term. The Company will make quarterly interest ratespayments on the Revolving Term Facility, with the full principal amount outstanding due on January 1, 2021. Under the Revolving Term Facility, the Company is required to pay unused commitment fees of 50 basis points. At December 31, 2015, the balance of the Revolving Term Facility was $10.0 million.

The Margin will be treated as(i) decrease to 3.25% when the aggregate principal balance of all outstanding loans and the unfunded commitment level is $20.0 million or less, and (ii) decrease to 3.00% when this amount is $15.0 million or less.

ABE South Dakota, LLC also entered into a reductionSecurity Agreement with AgCountry under which borrowings under the 2015 Credit Agreement are secured by substantially all of ABE South Dakota’s assets. AgCountry holds a first priority security interest and mortgage in the carrying value of debt. Accordingly, any additional prepayments will create additional gain recognition.all inventory, accounts receivable, intangibles, equipment, fixtures, buildings, and a first mortgage in land owned or leased by ABE South Dakota.

The 2015 Credit Agreement also includes customary financial and non-financial covenants that limit capital expenditures, distributions and debt and require minimum working capital, owner’s equity, debt to EBITDA, and fixed charge coverage ratios.

ABE Letter of Credit

The Company has a $1.5 million irrevocable and non-transferable standby letter of credit related to a rail car sublease. This letter of credit is collateralized by $1.5 million of cash in a restricted account; the cash in this account, which has been classified as restricted cash.

5. One-time Termination Benefit

Subsequent to the sale of its Fairmont facility, the Company implemented a cost reduction program reducing its headquarters staff to align its staffing with the remaining on-going operations. The Company also accrued benefits due to the Chief Executive Officer in June 2014 under his amended employment agreement signed in January 2013. The unpaid amounts as of December 31, 2015 are expected to be paid at the time of various employee terminations.

In connection with this cost reduction program, the Company had an accrual balance of $0.2 million at December 31, 2015 and September 30, 2015.

6. Major Customers

ABE South Dakota has ethanol marketing agreements with NGL Energy Partners, LP (“NGL”), a diversified energy business. These ethanol marketing agreements require that we sell to NGL all of the denatured fuel-grade ethanol produced at the South Dakota plants. The term of these ethanol marketing agreements expires on June 30, 2016.

ABE South Dakota is party to a co-product marketing agreement with Dakotaland Feeds, LLC (“Dakotaland Feeds”), whereby Dakotaland Feeds markets the local sale of distillers’ grains produced at the ABE South Dakota Huron plant to third parties for an agreed-uponagreed upon commission. ABE South Dakota has a marketing agreement with Gavilon (as defined below) to market the dried distillers’ grains from the Aberdeen plant, througheffective July 1, 2013 until July 31, 2016. ABE South Dakota self-markets the wet distillers’ grains produced at the Aberdeen plant.

Sales and receivables from the ABE South Dakota’s major customers were as follows (in thousands):

6.7. Risk Management

The Company is exposed to a variety of market risks, including the effects of changes in commodity prices and interest rates. 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 seeks to reduce the potentially adverse effects that the volatility of these markets may have on its current and future operating results. To reduce these effects, the Company generally attempts to fix corn purchase prices and related sale prices of ethanol, distillers’ grains and corn oil, with forward purchase and sale contracts to lock in future operating margins. TheIn addition to entering into contracts to purchase 462 thousand bushels of corn in which the basis or futures price was not locked, the Company had entered into the following fixed price forward contracts at June 30, 2015:December 31, 2015 (in thousands):

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 financial statements.

7.

8. Parent Financial Statements

The following financial information represents the unconsolidated financial statements of Advanced BioEnergy, LLC (“ABE”) as of June 30,December 31, 2015 and September 30, 2014,2015, and for the three and nine months ended June 30,December 31, 2015 and 2014. ABE’s ability to receive distributions from ABE South Dakota is based on the terms and conditions in ABE South Dakota’s credit agreements. Under the 2010 Credit Agreement, ABE South Dakota iswas allowed to make equity distributions (other than certain tax distributions) to ABE only upon ABE South Dakota meeting certain financial conditions and if there iswas no more than $25 million of principal outstanding on the senior term loan. Under the 2015 Credit Agreement, ABE South Dakota is allowed to distribute up to 40% of pre-tax net income in a given year, but must meet all loan covenants before and after any distribution. There were no distributions from ABE South Dakota during the last three fiscal years.

Advanced BioEnergy, LLC (Unconsolidated)

Balance Sheets

(Dollars in thousands)(Unaudited)

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Operations

(Dollars in thousands)

(Unaudited)

Advanced BioEnergy, LLC (Unconsolidated)

Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

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

Information Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements regarding our business, financial condition, results of operations, performance and prospects. All statements that are not historical or current facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors, many of which may be beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Certain of these risks and uncertainties are described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended September 30, 20142015 and in thisForm 10-Q. These risks and uncertainties include, but are not limited to, the following:

You can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,”

and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future. Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed from time to time with the U.S. Securities and Exchange Commissions, which we refer to as the SEC, that advise interested parties of the risks and factors that may affect our business.

General

The following discussion and analysis provides information that management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto.

Overview

Advanced BioEnergy, LLC (“Company,” “we,” “our,” “Advanced BioEnergy” or “ABE”) was formed in 2005 as a Delaware limited liability company. Our business consists of producing ethanol and co-products, including wet, modified and dried distillers’ grains, as well as corn oil. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. The ethanol industry in the U.S. has grown significantly becauseas the use of ethanol reduces harmful auto emissions, enhances octane ratings of the gasoline with which it is blended, offers consumers a cost-effective choice, and decreases the amount of crude oil in the U.S. needs to import from foreign sources.

To execute our business plan, in November 2006, we acquired ABE South Dakota, LLC (f/k/a/ Heartland Grain Fuels, LP), in November 2006, which owned existing ethanol production facilities in Aberdeen and Huron, South Dakota. We commenced construction of our expansion facility in Aberdeen, South Dakota began in April 2007, and commenced operations in January 2008. Our production operations are carried out primarily through our operating subsidiarysubsidiary: ABE South Dakota, which owns and operates facilities in Aberdeen and Huron, South Dakota.

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results, the Company’s plants are aggregated into one reporting segment.

DRY MILL PROCESS

Dry mill ethanol plants produce ethanol primarily by processing corn. Other possible feeds are grain sorghum, or other cellulosic materials. The corn is conveyed directly from South Dakota Wheat Growers to the plant where it is weighed and transferred to a scalper to remove rocks, cobs, and other debris. The corn is then fed to a hammer mill where it is ground into flour and conveyed into a slurry tank. Water, heat and enzymes are added to the flour in the slurry tank to start the process of converting starch from the corn into sugar. The slurry is pumped to a liquefaction tank where additional enzymes are added. These enzymes continue thestarch-to-sugar conversion. The grain slurry is pumped into fermenters, where yeast is added to begin the batch-fermentation process. Fermentation is the process of the yeast converting the sugar into alcohol and carbon dioxide. After the fermentation is complete, a vacuum distillation system removes the alcohol from the corn mash. The 95% (190-proof) alcohol from the distillation process is then transported to a molecular sieve system,

where it is dehydrated to 100% alcohol (200 proof). The 200-proof alcohol is then pumped to storage tanks and blended with a denaturant, usually natural gasoline. The 200-proof alcohol and 2.0-2.5% denaturant constitute denatured fuel ethanol.

Corn mash left over from distillation is pumped into a centrifuge for dewatering. The liquid from the centrifuge, known as thin stillage, is then pumped from the centrifuges to an evaporator, where it is concentrated into a syrup. The solids that exit the centrifuge, known as the wet cake, are conveyed to the dryer system. Syrup is added to the wet cake as it enters the dryer, where moisture is removed. The process produces distillers’ grains with solubles, which is used as a high-protein/fat animal-feed supplement. Dry-mill ethanol processing creates three forms of distillers’ grains: wet distillers’ grains with solubles, known as wet distillers’ grains; modified wet distillers’ grains with solubles, known as modified distillers’ grains; and dry distillers’ grains with solubles, known as dry distillers’ grains. Wet and modified distillers’ grains have been dried to approximately 65% and 50% moisture levels, respectively, and are predominately sold to nearby markets. Dried distillers’ grains have been dried to 11% moisture, have an almost indefinite shelf life and may be sold and shipped to more distant markets.

Corn oil is produced by processing evaporated thin stillage through a disk stack style centrifuge. Corn oil has a lower density than water or solids that make up the syrup. The centrifuges separate the relatively light oil from the heavier components of the syrup, eliminating the need for significant retention time. De-oiled syrup is returned to the process for blending into wet, modified, or dry distillers’ grains. The corn oil is then pumped into storage tanks before being loaded onto trucks for sale.sale.

FACILITIES

The table below provides a summary of our ethanol plants in operation as of June 30,December 31, 2015:

We have entered into aIn October 2015, we amended the existing lease agreement for our corporate headquarters as of February 2011. Our corporate headquarters, located in Bloomington, Minnesota, isheadquarters. Under the amended lease, we agreed to lease approximately 4,400 square feet and is under lease until June 2016. This building provides offices for our corporate and administrative staff.staff in Bloomington, Minnesota, through September 2021. The base rent is $19.00 per square foot, or approximately $7,000 per month for the twelve month period beginning July 1, 2016, with annual increases of $.50 per square foot. We believe this space will be sufficient for our needs until the end of the lease period.

We believe that each of theour operating facilities is in adequate condition to meet our current and future production goals. We believe that these plants are adequately insured for replacement cost plus related disruption expenditures.

We pledged a first-priority security interest in and first lien on substantially all of the assets of the ABE South Dakota plants to the collateral agent for the senior creditors of these plants.our lender.

Plan of Operations through June 30,December 31, 2016

Over the next twelve months, we will continue our focus on operational improvements at our South Dakota operating facilities. These operational improvements include exploring methods to improve ethanol yield per bushel and increasing production output at each of our plants, continued emphasis on safety and environmental regulation, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies.

Results of Operations for the Quarter Ended June 30,December 31, 2015 Compared to Quarter Ended June 30,December 31, 2014

The following table reflects net sales fromquantities of our products in total dollars and as a percentage of totalsold at average net sales,prices as well as costsbushels of corn ground and therms of natural gas in total dollars and as a percentage of total net sales and total cost of goods sold (“COGS”)burned at average costs for the three monthsquarters ended June 30,December 31, 2015 and 2014:2014 for our South Dakota plants only:

Net Sales

Net sales for the quarter ended June 30,December 31, 2015 were $40.1$37.3 million, compared to $53.7$37.7 million for the quarter ending June 30,December 31, 2014, a decrease of $13.6$0.4 million or 25%1%. The decrease was a result of lower average net sellingEthanol gallons sold increased by 14%, while ethanol prices of 39% and 23%decreased 16% for ethanol and distillers’ grain prices, respectively. The decline in ethanol and distillers grain prices is the result of various factors including but not limitedquarter ended December 31, 2015, compared to market demand for and an increased supply of these products, and overall gasoline prices and demand.the prior quarter ended December 31, 2014. As a percentage of net sales, ethanol sales were 77% and 81% and 84% and distillers’ grain sales were 23%17% and 18%15%, for the quarters ending June 30,December 31, 2015 and June 30,December 31, 2014, respectively. Ethanol gallons sold increased by 17% forin the quarter ended June 30, 2015, compared to the prior quarter ended June 30, 2014. Ethanol gallons soldDecember 31, 2014 were affected by overall rail service issues, in the prior year quarter, which directly affected our ability to maintain production rates at various times. The addition of the one million gallons of ethanol storage at the Aberdeen plant in January 2015 mitigated any rail service issues in the quarter ended June 30, 2015.

Cost of Goods Sold

Cost of goods sold for the quarter ended June 30,December 31, 2015 was $38.8$37.9 million, compared to $40.9$34.5 million for the quarter ended June 30,December 31, 2014, a decreasean increase of $2.1$3.4 million. Our primary costs in the production of ethanol and related co-products are corn and natural gas. NaturalA $5.3 million increase in corn costs offset by a $1.1 decrease in natural gas costs represented 4% and 5%a majority of net sales and 5% and 7% of totalthe increase in cost of goods sold forin the quarters ending June 30, 2015 and 2014, respectively. The cost of natural gas per mmbtu was $2.92 and $5.05 for the quarters ending June 30, 2015 and 2014, respectively, a decrease of 42% or $2.13 per mmbtu.

quarter ended December 31, 2015. Corn costs represented 66%70% and 52% of net sales and 68% and 69%62% of cost of goods soldsales for the quarters ended June 30,December 31, 2015 and 2014, respectively. Corn prices declined 19%increased 11% during the 2015 three-month period ending June 30,December 31, 2015 compared to the prior year quarter. The decreaseincrease in corn prices in the three months ended December 31, 2015 was primarily due to low market prices in the three months ended December 31, 2014. The low fiscal 2015 first quarter prices were driven by the

strong corn harvest in the fall of 2014 which resultedresulting in a significant increase in the supply of corn available to the market as compared to the harvest in the fall of 2013.market. We used 17%12% more corn in the three monththree-month period ending June 30,December 31, 2015, compared to the prior year quarter asthree months ended December 31, 2014. The increase in corn bushels used was the result of higher production in the current period.

Natural gas costs represented 4% and 8% of total cost of sales for the quarters ending December 31, 2015 and 2014, respectively. The cost of natural gas per mmbtu decreased by 45% to $2.52 for the quarter ended December 31, 2015 compared to the previous year quarter. Prices were lower in the current quarter due to record natural gas storage levels in November and warmer than average fall temperatures that limited demand. Our natural gas consumption increased by 7% due to increased production in the current year quarter versus the quarter ending December 31, 2014.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses are comprised primarily of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Overall selling, general and administrative costs decreased by approximately $0.7 million to $0.8 millionremained flat for the quarter ending June 30,December 31, 2015, versus the prior year quarter. The decrease primarily comprised the following: non-recurring severance and related expenses of $173,000 incurred in the three months ending June 30, 2014, and decreases in dues and subscriptions, legal and consulting fees, salaries and wages, travel and related expense, and employee relations expenses totaling $405,000. As a percentage of net sales, selling, general and administrative expenses were 1.9% and 2.6% of net sales, for the quartersquarter ending June 30,December 31, 2015 and 2014 respectively. Excludingwas 2.0%, the non-recurring costs incurred insame as the three monthsquarter ending June 30, 2014, selling, general and administrative costs were 2.3% of net sales.December 31, 2014.

Interest Expense

Interest expense for the quarter ending June 30,December 31, 2015 was $32,000, which was the same as interest expense$64,000, compared to $34,000 for the prior year quarter. The interest expense for the quarter ending June 30,December 31, 2015 related to our long-term debt was $379,000$327,000 plus $44,000 of amortization of deferred waiver fees, which was offset by $307,000 of amortization of additional carrying value of long-term debt. Interest expense for the quarter ending December 31, 2014 related to our long-term debt was $433,000 plus $22,000 of amortization of deferred waiver fees, which was offset by $369,000$421,000 of amortization of additional carrying value of long-term debt. The amortization of additional carrying value iswas netted against interest expense on our income statement, thereby significantly reducing the interest expense reported on our income statement.statement for both periods.

As a result of the debt sweep paymentspre-payments made during fiscal 20142015 and the nine monthsquarter ended June 30,December 31, 2015, the carrying value of the debt exceeded the scheduled principal and interest payments remaining over the term of the loan. AsDue to the prepayment made as a result of the prepayments madedebt refinancing during the quarter ended June 30,December 31, 2015, a gain of approximately $137,000$323,000 was recognized as other incomeOther Income during the three months ended June 30,December 31, 2015. Since the remaining scheduled principal and interest payments are equalBecause we paid off our prior debt in connection with our December 2015 refinancing, we will not recognize any future gains related to the carrying amount, the amortization of the additional carrying value will offset the majority of the interest expense on our long-term debt, and the amount of interest expense reported on our income statement from currently outstanding debt will be minimal through the term of the existing debt, or March 31, 2016. Additionally, all remaining payments based on current interest rates will be treated as a reduction in the carrying value of this debt. Accordingly, any additional prepayments will create additional gain recognition.

Results of Operations for the Nine Months Ended June 30, 2015 Compared to the Nine Months Ended June 30, 2014

The following table reflects net sales from our products in total dollars and as a percentage of total net sales, as well as costs of corn and natural gas in total dollars and as a percentage of total net sales and total cost of goods sold (“COGS”) for the nine months ended June 30, 2015 and 2014:

Net Sales

Net sales for the nine months ended June 30, 2015 were $115.1 million, compared to $153.9 million for the nine months ending June 30, 2014, a decrease of $38.8 million or 25%. The decrease was a result of lower net selling prices of 33% and 31% for ethanol and distillers’ grain, respectively. The decline in ethanol and distillers’ grain prices is the result of various factors including but not limited to market demand for these products and overall gasoline prices and demand. As a percentage of net sales, ethanol sales were 78% and 79% and distillers’ grain sales were 21% and 20%, for the nine months ending June 30, 2015 and June 30, 2014, respectively. Ethanol gallons sold increased by 9% for the nine months ended June 30, 2015, compared to the prior nine months ended June 30, 2014. Ethanol gallons sold were affected by an improvement in the overall rail service issues as compared to the prior year nine months, which directly affected our ability to maintain production rates at various times. The addition of ethanol storage at the Aberdeen plant in January 2015 mitigated the rail service issue in the nine months ended June 30, 2015.

Cost of Goods Sold

Cost of goods sold for the nine months ended June 30, 2015 was $112.7 million, compared to $126.6 million for the nine months ended June 30, 2014, a decrease of $13.9 million. Our primary costs in the production of ethanol and related co-products are corn and natural gas. A decrease in corn costs represented a majority of the decline in cost of goods sold in the nine months ended June 30, 2015. Corn costs represented 65% and 55% of net sales for the nine months ended June 30, 2015 and 2014, respectively, and 66% of cost of goods sold for both periods. Corn prices declined 18.5% during the nine-month period ending June 30, 2015 compared to the prior year nine months. The decrease in corn prices was primarily driven by the strong corn harvest in the fall of 2014, which resulted in a significant increase in the supply of corn available to the market as compared to the harvest in the fall of 2013. We used 9% more corn in the nine month period ending June 30, 2015, compared to the prior year nine month period as a result of higher production in the current period.

Natural gas costs represented 6% and 8% of net sales and 6% and 10% of total cost of goods sold for the quarters ending June 30, 2015 and 2014, respectively. The cost of natural gas per mmbtu decreased by $3.57 per mmbtu, or 47% for the nine months ending June 30, 2015 compared to the prior year nine months. The higher natural gas cost per mmbtu for the nine months ending June 30, 2014 was the result of significantly higher natural gas prices due to historically cold temperatures and resulting supply issues. Natural gas consumption increased 3.1% for the nine months ending June 30, 2015 compared to the prior year period as a result of higher production in the current period.

Selling, General, and Administrative Expenses

Selling, general and administrative expenses are comprised primarily of recurring administrative personnel compensation, legal, technology, consulting, insurance and accounting fees.

Overall selling, general and administrative costs decreased by approximately $1.3 million to $2.4 million for the nine months ending June 30, 2015, versus the prior year nine months. As a percentage of net sales, selling, general and administrative expenses for the nine months ending June 30, 2015 decreased to 2.1%, compared to 2.4% for the prior year nine months. The decrease primarily comprised the following: non-recurring severance and related expenses of $479,000 incurred in the three months ending June 30, 2014, a decrease in legal and consulting fees of $277,000, and decreases in dues and subscriptions, salaries and wages, travel and related expense, and employee relations expenses totaling $474,000. Excluding the non-recurring costs incurred in the nine months ending June 30, 2014, selling, general and administrative costs were 2.1% of net sales.

Interest Expense

Interest expense for the nine months ending June 30, 2015 was $100,000, compared to $688,000 for the prior year nine months. The decrease was a result of default interest recorded in the prior year nine months and debt prepayments described in the following paragraph. The interest expense for the nine months ending June 30, 2015 related to our long-term debt was $1,195,000 plus $67,000 of amortization of deferred waiver fees, which was offset by $1,162,000 of amortization of additional carrying value of long-term debt. The amortization of additional carrying value is netted against interest expense on our income statement, thereby significantly reducing the interest expense reported on our income statement.

As a result of the debt sweep payments made during fiscal 2014 and the nine months ended June 30, 2015, the carrying value of the debt exceeded the scheduled principal and interest payments remaining over the term of the loan. As a result of the prepayments made during the nine months ending June 30, 2015, a gain of approximately $319,000 was recognized as other income during the nine months ending June 30, 2015. Since the remaining scheduled principal and interest payments are equal to the carrying amount, the amortization of the additional carrying value will offset the majority of the interest expense on our long-term debt; as a result, the amount of interest expense reported on our income statement related to currently outstanding debt will be minimal through the term of the existing debt, or March 31, 2016. Additionally, all remaining payments based on current interest rates will be treated as a reduction in the carrying value of debt. Accordingly, any additional prepayments will create additional gain recognition.

Changes in Financial Position for the NineThree Months ended June 30,December 31, 2015

Current Assets

The $4.0$3.4 million decrease in current assets at June 30,December 31, 2015 compared to September 30, 20142015 was primarily due to principal, interesta $4.7 million decrease in cash resulting from our payment of $3.1 million for the restructuring and otherwaiver fee as part of the debt payments of $11.4 million, offset by cash generated from operations of $7.6 million.refinancing, and lower operating margins in the current quarter.

Property, Plant and Equipment

The $5.9$2.6 million decrease in property, plant and equipment at June 30,December 31, 2015 compared to September 30, 2014,2015, was primarily due to recognizing $8.3$2.8 million of depreciation expense in the current quarter, offset by $2.4$0.2 million of capital expenditures.

Current Liabilities

Accounts payable and accrued expenses increaseddecreased by $1.3$1.9 million at June 30,December 31, 2015 compared to September 30, 20142015 primarily due to timing of payments to vendors.

Current Portion of Long-Term Debt and Long-term Debt

The current portion of long-term debt increased by $29.2 million at June 30, 2015 compared to September 30, 2014. The increase was due to the reclassification of long-term debt to current debt at March 31, 2015 based on the March 2016 maturity date of the existing debt agreement.

Long-term debt decreased by $40.8$3.0 million at June 30, 2015 compared to September 30, 2014. This decrease wasin the current quarter. Interest bearing debt increased by $1.0 million during the current quarter due to the reclassification$30.0 million in new loans from AgCountry and a $29.0 million payment of the debt to current as described above, and the debt payments described below. Total interest bearing debt decreased by $10.0 million duringfrom the nine months ended June 30, 2015.prior credit agreement. The decreaseincrease in interest bearing debt was comprised of $2.25offset by a $3.1 million of required principal paymentsrestructuring and $7.75 million of long-term debt sweep payments as a result of excess cash flow. The remaining reduction in long-term debt was due to $1.2waiver fee payment, $0.3 million of amortization of additional carrying value of long-term debt, and $319,000$0.3 million of gain recognition related to the carrying value of long-term debt, and $0.4 million in deferred financing costs, offset by $67,000 of$44,000 deferred waiver fee amortization.amortization and a $42,000 decrease in accrued interest.

TRENDS AND UNCERTAINTIES AFFECTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

Overview

Ethanol is currently blended with gasoline to meet regulatory standards as a clean air additive, an octane enhancer, a fuel extender and a gasoline alternative. According to the Renewable Fuels Association (“RFA”), as of JulyNovember 2015, the estimated ethanol production capacity in the United States was 15.515.0 billion gallons per year, with approximately 0.40.5 billion gallons currently idle. The demand for ethanol is affected by what is commonly referred to as the “blending wall,” which is a regulatory cap on the amount of ethanol that can be blended into gasoline. The blend wall affects the demand for ethanol, and as industry production capacity reaches the blend wall, the supply of ethanol in the market may surpass the demand. Assuming current gasoline usage in the U.S. at 134 billion gallons per year and a blend rate of 10% ethanol and 90% gasoline, the current blend wall is approximately 13.4 billion gallons of ethanol per year.

Ethanol is most commonly sold as E10, the 10 percent blend of ethanol for use in all American automobiles. Increasingly, ethanol is also available as E85, a higher percentage ethanol blend for use in flexible fuel vehicles. To further drive growth in ethanol usage, Growth Energy, an ethanol industry trade association, requested a waiver from the Environmental Protection Agency (“EPA”) to increase the allowable amount of ethanol blended into gasoline from the current 10% level to a 15% level. In June 2012, the EPA approved E15 for use in vehicles with model years 2001 and later. Although regulatory and infrastructure issues remain in many states, E15 is now available in limited locations in at least twelve states per the RFA.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers’ grains and natural gas. As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and compress the overall margin structure at the plants. As a result, operating margins may become negative and we may be forced to shut down our plants.

We focus on locking in margins based on a cash flows model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example minimize the cost of corn consumed, but rather to lock in favorable margins whenever possible. In the quarter ended June 30,December 31, 2015, the average Chicago OPISOpis Spot Ethanol Assessment was $1.57$1.50 per gallon and the average NYMEX RBOB spot gasoline price was $1.99$1.31 per gallon, or approximately $0.42$0.19 per gallon abovebelow ethanol prices.

Federal policy has a significant impact on ethanol market demand. Ethanol blenders previously benefited from incentives that encouraged usage and a tariff on imported ethanol that supported the domestic industry, both of which have now expired. Additionally, the Environmental Protection Agency’s Renewable Fuels Standard (“RFS”) mandates increased level of usage of both corn-based and cellulosic ethanol. Any adverse ruling on, or legislation affecting, RFS mandates in the future could have an adverse impact on short-term ethanol prices and our financial performance in the future.

The ethanol industry and our business depend upon continuation of the federal and state ethanol supports such as the RFS. We believe the ethanol industry expanded due to these federal mandates, policies, and incentives. These government mandates have supported a market for ethanol that might disappear without these programs. Alternatively, the government mandates may be continued at lower levels than those at which they currently exist. In addition, state regulatory activity may also negatively affect the consumption of corn-based ethanol in certain domestic markets such as California, due to low-carbon fuel standards that take into consideration the effects caused by indirect land use.

The Renewable Fuels Standard

The Renewable Fuels Standard (“RFS”) is a national program that imposes requirements with respect to the amount of renewable fuel produced and used in the United States. The RFS was revised by the EPA in July 2010 (“RFS2”) and applies to refineries, blenders, distributors and importers. We believe the RFS2 program has and will continue to increase the market for renewable fuels, such as ethanol, as a substitute for petroleum-based fuels. The RFS2 required that 16.55 billion gallons be sold or dispensed in 2013, increasing to 36.0 billion gallons by 2022, representing 7% of the anticipated gasoline and diesel consumption in 2022. In 2013, RFS2 required refiners and importers to blend renewable fuels totaling at least 9.74% of total fuel volume, of which 8.12% of total fuel volume, or 13.8 billion gallons, could be derived from corn-based ethanol. The remainder of the requirement is to be met by non-corn related advanced renewable fuels such as cellulosic ethanol and biomass-based biodiesel.

On November 30, 2015, the EPA announced final Renewable Volume Obligations (“RVO’s”) for calendar years 2014, 2015 and 2016. The RFS requirementfinal RVO’s for corn-based ethanol blending exceeded the RVO reductions proposed in June 2015, but remained below the original blending requirements set by the RFS. The reductions to the RVO numbers proposed in June 2015 were above historical production levels, but well below current ethanol supply and production capacity. The industry heavily advocated for increased RVO numbers in order to break through the “blend wall” that is capped at 15.0 billion gallons starting in 2015.

In November 2013,established when the EPA proposed a 9.7% reductionproduction capacity of the original 2014 statutoryindustry exceeds the mandated blending of corn-based ethanol blending volume requirements to approximately 13.0 billion gallons per year. This would have been a reduction from the 2013 requirement of 13.8 billion gallonsethanol. The final RVO numbers for corn-based ethanol andwere closer to current production capacity, but still below the original 2014 volume per the statute of 14.4 billion gallons.statutory requirements. Current ethanol production capacity is approximately 15.514.8 billion gallons per the RFA. The proposal was originally subject to a 60-day comment period and the EPA planned to increase the final version of the 2014 Renewable Volume Obligations (“RVOs”) in June 2014, then extended the planned release date. On April 10, 2015, the EPA entered into a consent decree agreeing to a court-enforced timelineFinal RVO requirements for establishing the RFS RVO numbers for 2014 and 2015. The proposed RVO numbers for 2014, 2015 and 2016 were announced in June 2015that can be met with corn-based ethanol are 14.05 and were subsequently open for public comment. The comment period on the proposed numbers ended on July 27, 2015, and the final RVO’s will be announced by November 30, 2015. The proposed RVO numbers exceed historical production, but are well below the current ethanol supply and production capacity. It is unknown whether the EPA will adjust any of the proposed numbers based on public comment.14.51 billion gallons, respectively.

The following chart illustrates the potential United States ethanol demand based on the schedule of minimum usage established by the program through the year 2022 (in billions of gallons).