~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

Investments

The Company has an investment interest in a company in a related industry. The investment is accounted for by the equity method, under which the Company’s share of the net income of the investee is recognized as income in the Company’s Condensed Consolidated ~~unaudited~~ Statements of Operations and added to the investment account, and distributions received from the affiliates are treated as a reduction of the investment.

On June 29, 2018, we subscribed to purchase 20 preferred membership units of Harvestone Group, LLC (“Harvestone”) at a price of $100,000 per unit for a total of $2,000,000. We paid the $2,000,000 in connection with our subscription, which is reflected in our investing cash flows. Harvestone is a Delaware limited liability company that provides ethanol marketing, logistics, and trading services. Harvestone’s headquarters are located in Franklin, Tennessee. Harvestone is owned by several other ethanol producers and other private investors.

On November 15, 2021, Harvestone redeemed GFE’s 20 units for $3,000,000. As a result of the Harvestone redemption, GFE no longer owns any Harvestone units and has ceased to be a member of Harvestone. The Company received and recorded the $3,000,000 redemption in November 2021. ~~NaN~~No gain or loss was recognized upon redemption during the ~~three~~nine months ended ~~January~~July 31, 2022.

In August 2004, GFE entered an electric service agreement with Minnesota Valley Cooperative Light and Power Association (“MVCLPA”) to supply electricity to the GFE plant. The MVCLPA electric service agreement entitles GFE to receive patronage dividends in the form of a special allocation of capital credits. The capital credits are recognized as a component of other income on the consolidated statement of operations. Through the fiscal year 2021, GFE ~~has~~ recognized approximately $3.2 million of investment income related to the MVCLPA capital credits. Approximately $273,000 of GFE’s capital credits were redeemed in March 2021, and as a result the investment balance was approximately $2.9 million as of October 31, 2021. Approximately $261,000 of GFE’s capital credits were redeemed in March 2022, and approximately $421,000 of investment income recognized in May 2022, and as a result the investment balance was approximately $3.1 million as of July 31, 2022. MVCLPA generally redeems its capital credits on a first-in, first-out basis on a 13-year rotation, and therefore if MVCLPA continues to be successful, managements expects the MVCLPA capital credits will continue to be redeemed for cash payments to GFE.

Grants

The Company received an award from the United States Department of Agriculture (USDA) Biofuels Producer Program of approximately $14,200,000 to provide economic relief to biofuels producers who faced unexpected market losses due to the COVID-19 pandemic. The award was recorded in the third quarter of fiscal 2022 in other income.

2. RISKS AND UNCERTAINTIES

The Company has certain risks and uncertainties that it experiences during volatile market conditions. These volatilities can have a severe impact on operations. The ~~Company's~~Company’s revenues are derived from the sale and distribution of ethanol, ~~distillers'~~distillers’ grains, corn oil, and natural gas to customers primarily located in the United States. Corn for the production process is supplied to our plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales typically average 75% - 90% of total revenues and corn costs typically average 65% - 85% of cost of goods sold.

The ~~Company's~~Company’s operating and financial performance is largely driven by the prices at which they sell ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, the weather, government policies and programs, and unleaded gasoline prices and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company’s largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and a risk management program used to protect against the price volatility of these commodities. Market fluctuations in the price of and demand for these products may have further significant adverse effects on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements. The Company’s risk management program is used to protect against the price volatility of these commodities.

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

3. REVENUE

Revenue by Source

All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following table disaggregates revenue by major source for the three and nine months ended ~~January~~July 31, 2022 and 2021:


			Three Months Ended July 31, 2022 (unaudited)
			Total
Ethanol			$	80,259,309
Distillers’ Grains				15,694,482
Corn Oil				7,115,585
Other				494,887
Natural Gas Pipeline				187,709
Total Revenues			$	103,751,972

			Three Months Ended July 31, 2021 (unaudited)
			Total
Ethanol			$	69,910,835
Distillers’ Grains				14,001,314
Corn Oil				4,816,842
Other				410,734
Natural Gas Pipeline				119,087
Total Revenues			$	89,258,812

	Three Months Ended January 31, 2022		Nine Months Ended July 31, 2022
	(unaudited)		(unaudited)
	Total		Total
Ethanol	$	88,267,198	$	243,219,264
Distillers’ Grains		14,783,149		48,005,312
Corn Oil		5,655,922		18,868,116
Other		272,854		1,305,204
Natural Gas Pipeline		799,554		1,637,429
Total Revenues	$	109,778,677	$	313,035,325

	Three Months Ended January 31, 2021		Nine Months Ended July 31, 2021
	(unaudited)		(unaudited)
	Total		Total
Ethanol	$	36,138,491	$	163,826,073
Distillers’ Grains		9,777,090		35,737,294
Corn Oil		2,850,199		11,344,245
Other		225,746		939,993
Natural Gas Pipeline		406,860		849,954
Total Revenues	$	49,398,386	$	212,697,559

Payment Terms

The Company has contractual payment terms with each respective marketer that sells ethanol, distillers’ grains and corn oil. These terms are 10 calendar days after the transfer of control date. The Company has contractual payment terms with natural gas customers of 20 days.

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Shipping and Handling Costs

Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue.

4. INVENTORY

Inventories consist of the following:


	January 31,		October 31,		July 31,		October 31,
		2022	2021		2022		2021
	(unaudited)				(unaudited)
Raw materials	$	12,310,830	$	10,742,480	$	12,712,358	$	10,742,480
Supplies		3,198,555		3,322,639		3,675,572		3,322,639
Work in process		2,112,829		2,023,966		2,763,801		2,023,966
Finished goods		4,126,471		4,660,746		5,763,738		4,660,746
Totals	$	21,748,685	$	20,749,831	$	24,915,469	$	20,749,831

The Company performs a lower of cost or net realizable value analysis on inventory to determine if the net realizable values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. Based on the lower of cost or net realizable value analysis, as a component of cost of

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

goods sold, the Company recorded a loss on ethanol inventories of approximately ~~$37,000~~$451,000 and ~~$325,000~~$720,000 for the ~~three~~nine months ended ~~January~~July 31, 2022 and 2021, respectively. Based on the lower of cost or net realizable value analysis, as a component of cost of goods sold, the Company recorded no loss on corn inventories for the nine months ended July 31, 2022 and 2021, respectively.

5. DERIVATIVE INSTRUMENTS

As of ~~January~~July 31, 2022, the total notional amount of the Company’s outstanding corn derivative instruments was approximately ~~5,295,000~~4,230,000 bushels, comprised of ~~short~~long corn futures positions on 820,000 bushels that were entered into to hedge forecasted ethanol sales through ~~March~~December 2022 and short corn futures positions on 3,410,000 bushels that were entered into to hedge corn purchases through July 2023. ~~Additionally, there are corn options positions of 350,000 bushels through May 2022.~~ There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of ~~January~~July 31, 2022, the Company had approximately ~~$3,170,000~~$2,186,000 of cash collateral (restricted cash) related to derivatives held by a broker.

The following tables provide details regarding the ~~Company's~~Company’s derivative instruments at ~~January~~July 31, 2022, none of which were designated as hedging instruments:


	Consolidated Balance Sheet Location	Assets		Liabilities		Consolidated Balance Sheet Location	Assets		Liabilities
Corn contracts	Commodity derivative instruments	$	—	$	1,475,563	Commodity derivative instruments	$	231,863	$	479,325
Ethanol contracts	Commodity derivative instruments		—		2,875
Totals		$	—	$	1,478,438		$	231,863	$	479,325

As of October 31, 2021, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 9,175,000 bushels, comprised of long corn futures positions on 3,180,000 bushels that were entered into to hedge forecasted ethanol sales through March 2022, and short corn futures positions on 5,995,000 bushels that were entered into to hedge its forward corn purchase contracts through December 2022. Additionally, there are corn options positions of 140,000 bushels through May 2022. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of October 31, 2021, the Company had approximately $1,641,000 of cash collateral (restricted cash) related to derivatives held by a broker.

~~The following tables provide details regarding the Company’s derivative instruments at October 31, 2021, none of which were designated as hedging instruments:~~

Consolidated Balance Sheet Location

Assets

Liabilities

Corn contracts

Commodity derivative instruments

$
—

$
732,801

Ethanol contracts

Commodity derivative instruments

39,076

—

Totals

$
39,076

$
732,801

The following tables provide details regarding the gains (losses) from Company's derivative instruments in the condensed consolidated statements of operations, none of which are designated as hedging instruments:

Consolidated Statement

Three Months Ended January 31,


of Operations Location

2022

2021

Corn contracts

Cost of Goods Sold

$
(1,586,235)

$
(5,893,858)

Ethanol contracts

Revenues

38,873

113,938

Total loss

$
(1,547,362)

$
(5,779,920)

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

The following tables provide details regarding the Company’s derivative instruments at October 31, 2021, none of which were designated as hedging instruments:


	Consolidated Balance Sheet Location	Assets		Liabilities
Corn contracts	Commodity derivative instruments	$	—	$	732,801
Ethanol contracts	Commodity derivative instruments		39,076		—
Totals		$	39,076	$	732,801

The following tables provide details regarding the gains (losses) from Company’s derivative instruments in the condensed consolidated statements of operations, none of which are designated as hedging instruments:


	Consolidated Statement	Three Months Ended July 31,
	of Operations Location	2022		2021
Corn contracts	Cost of Goods Sold	$	2,054,205	$	(892,416)
Ethanol contracts	Revenues		(4,336)		—
Total gain (loss)		$	2,049,869	$	(892,416)

	Consolidated Statement	Nine Months Ended July 31,
	of Operations Location	2022		2021
Corn contracts	Cost of Goods Sold	$	(4,937,533)	$	(7,857,428)
Ethanol contracts	Revenues		56,698		171,012
Total loss		$	(4,880,835)	$	(7,686,416)

6. FAIR VALUE

The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at ~~January~~July 31, 2022:


					Fair Value Measurement Using										Fair Value Measurement Using
					Quoted Prices		Significant Other		Significant						Quoted Prices		Significant Other		Significant
	Carrying Amount in				in Active Markets		Observable Inputs		Unobservable Inputs		Carrying Amount in				in Active Markets		Observable Inputs		Unobservable Inputs
	Consolidated Balance Sheet		Fair Value		(Level 1)		(Level 2)		(Level 3)		Consolidated Balance Sheet		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Commodity Derivative Instruments - Corn											$	231,863	$	231,863	$	231,863	$	—	$	—

Financial Liabilities:
Commodity Derivative instruments - Ethanol	$	2,875	$	2,875	$	2,875	$	—	$	—
Commodity Derivative Instruments - Corn	$	1,475,563	$	1,475,563	$	1,475,563	$	—	$	—	$	479,325	$	479,325	$	479,325	$	—	$	—
Accounts Payable (1)	$	308,136	$	308,136	$	—	$	308,136	$	—	$	241,386	$	241,386	$	—	$	241,386	$	—

(1)

Accounts payable is generally stated at historical amounts with the exception of amounts in this table related to certain delivered inventory for which the payable fluctuates based on the changes in commodity prices. These payables are hybrid financial instruments for which the company has elected the fair value option.

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The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at October 31, 2021:


					Fair Value Measurement Using
					Quoted Prices		Significant Other		Significant
	Carrying Amount in				in Active Markets		Observable Inputs		Unobservable Inputs
	Consolidated Balance Sheet		Fair Value		(Level 1)		(Level 2)		(Level 3)
Financial Assets:
Commodity Derivative Instruments - ethanol	$	39,076	$	39,076	$	39,076	$	—	$	—

Financial Liabilities:
Commodity Derivative Instruments - Corn	$	732,801	$	732,801	$	732,801	$	—	$	—
Accounts Payable (1)	$	923,550	$	923,550	$	—	$	923,550	$	—

(1)

~~The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at October 31, 2021:~~

Fair Value Measurement Using

Quoted Prices

Significant Other

Significant

Carrying Amount in

in Active Markets

Observable Inputs

Unobservable Inputs

Financial Assets:

Consolidated Balance Sheet

Fair Value

(Level 1)

(Level 2)

(Level 3)

Commodity Derivative Instruments - Corn

$
39,067

$
39,067

$
39,067

$
—

$
—

Financial Liabilities:

Commodity Derivative Instruments - Corn

$
732,801

$
732,801

$
732,801

$
—

$
—

Accounts Payable (1)

$
923,550

$
923,550

$
—

$
923,550

$
—

~~(1)~~

The Company determines the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. We determine the fair value Level 2 accounts payable based on nearby futures values, plus or minus nearby basis.

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

7. DEBT FACILITIES

Long-term debt consists of the following:


	January 31, 2022		October 31, 2021		July 31, 2022		October 31, 2021
	(unaudited)				(unaudited)
$20 million Revolving Credit Promissory Note, see terms below	$	—	$	—	$	—	$	—
$20 million Revolving term loan, see terms below		—		—		—		—
$25 million Single Advance Term Promissory Note, see terms below		25,000,000		25,000,000		12,750,000		25,000,000
$2.4 million Single Advance Term Promissory Note, see terms below		2,100,000		2,400,000		180,000		2,400,000
Term note payable to Project Hawkeye, see terms below		5,000,000		5,267,857		—		5,267,857
Totals		32,100,000		32,667,857		14,550,000		32,667,857
Less: amounts due within one year		6,171,429		5,046,429		5,100,000		5,046,429
Net long-term debt	$	25,928,571	$	27,621,428	$	9,450,000	$	27,621,428

Based on the most recent debt agreements, ~~estimated~~contractual maturities of long-term debt at ~~January~~July 31, 2022 are as follows:


2023	$	6,171,429	$	5,100,000
2024		6,171,429		5,100,000
2025		6,171,429		4,350,000
2026		5,871,429
2027		7,714,284
Total debt	$	32,100,000	$	14,550,000

On September 27, 2021, GFE finalized loan documents for an amended credit facility (the “2021 Credit Facility”) with AgCountry Farm Credit Services, PCA, AgCountry Farm Credit Services, FLCA (“AgCountry”). CoBank FCB (“CoBank”) serves as AgCountry’s administrative agent for the 2021 Credit Facility. The 2021 Credit Facility is intended to finance GFE’s acquisition of HLBE and consolidate certain existing debts of GFE and HLBE. The loan documents include an Amended and Restated Credit Agreement (the “Credit Agreement”), which amends and replaces the Company’s credit agreement with AgCountry dated September 27, 2018.

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The 2021 Credit Facility contains customary financial and affirmative covenants and negative covenants for loans of this type and size to ethanol companies. Each loan from AgCountry to GFE is subject to the terms of the Credit Agreement. Pursuant to the Credit Agreement, all agreements between GFE and AgCountry and/or CoBank are secured by a first lien on all equity or personal property owned or acquired by GFE. Financial covenants under the Amended Credit Facility include (i) maintenance of working capital of at least $20.0 million, and (ii) maintenance of a debt service coverage ratio of not less than 1.75 to 1.00 at the end of each fiscal year, beginning October 31, 2022.

The 2021 Credit Facility provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, the following: nonpayment of principal or interest; breach of covenants or other agreements in the Amended Credit Facility; defaults in failure to pay certain other indebtedness; and certain events of bankruptcy or insolvency. If any event of default occurs, the remaining principal balance and accrued interest on all loans subject to the Amended Credit Facility will become immediately due and payable.

The 2021 Credit Facility includes the following agreements:

$20 million Revolving Credit Promissory Note:

Under the terms of the Revolving Credit Promissory Note, GFE may borrow, repay, and reborrow up to the aggregate principal commitment amount of $20.0 million. Final payment of amounts borrowed under revolving credit promissory note is due October 1, 2022. Interest on the amended revolving term promissory note accrues at a variable weekly rate equal to the One-Month London Interbank Offered Rate (“LIBOR”) Index rate plus 3.25% and is payable monthly in arrears, which equated to ~~3.36%~~5.61% at ~~January~~July 31, 2022. The revolving credit promissory note is also subject to a 0.30% fee on the unused commitment. The purpose of the revolving credit promissory note is to provide for the operating needs of

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

GFE and consolidate a $5 million revolving credit promissory note dated February 4, 2021, between AgCountry and HLBE.

$20 million Amended and Restated Revolving Term Promissory Note:

Under the terms of the Amended and Restated Revolving Term Promissory Note, GFE may borrow, repay, and reborrow up to the aggregate principal commitment amount of $20.0 million. Final payment of amounts borrowed under the note is due October 1, 2026. Subject to GFE’s selection, interest on the note accrues at either a variable weekly rate of the LIBOR Index rate plus 3.50%, which equated to ~~3.61%~~5.86% at ~~January~~July 31, 2022, or an annual fixed rate determined by CoBank. The note is subject to an overadvance fee, an amendment fee, and a 0.50% unused commitment fee. The purposes of the note are to providing working capital to GFE, to finance GFE’s acquisition of the non-controlling interest of HLBE, and to terminate and transfer to GFE the existing indebtedness on a $13 million amended and restated revolving term promissory note dated June 11, 2020, between HLBE and AgCountry.

$25 million Single Advance Term Promissory Note:

Under the terms of the $25.0 million Single Advance Term Promissory Note, AgCountry agrees to make a single advance loan to GFE in the amount of $25.0 million for the purpose of financing GFE’s acquisition of the non-controlling interest of HLBE and refinancing existing indebtedness. GFE agrees to repay the note in 18eighteen quarterly installments of $1.125 million, beginning March 2022, plus a final installment of any unpaid balance. Subject to GFE’s selection, the amounts borrowed bear interest at either a variable weekly rate equal to the LIBOR Index Rate plus 3.50%, which equated to ~~3.61%~~5.86% at ~~January~~July 31, 2022, or an annual fixed rate set by CoBank, with a minimum period of one year and minimum amount of $100,000.

$2.4 million Single Advance Term Promissory Note:

Under the terms of the $2.4 million Single Advance Term Promissory Note, AgCountry made a single advance loan to GFE in the amount of $2.4 million loan for the purpose of financing GFE’s acquisition of the non-controlling interest of HLBE and to terminate and transfer GFE’s existing indebtedness pursuant to a HLBE’s single advance term promissory note dated June 19, 2020. Amounts borrowed under the note bear interest at a fixed rate of 3.80%. The note is to be repaid in 7seven semi-annual installments of $300,000, beginning December 2021 and the final installment of the unpaid balance in June 2025. HLBE’s single advance term promissory note dated June 19, 2020 provided a commitment of $3.0 million to HLBE for the purpose of constructing a new grain bin and reducing a revolving term promissory note.

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Project Hawkeye Loan

On August 2, 2017, GFE entered into a replacement credit facility with Project Hawkeye. The terms of the replacement credit facility allow GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Project Hawkeye using the GFE’s $7.5 million investment in Ringneck Energy & Feed, LLC (“Ringneck”), as collateral. The Project Hawkeye loan bears interest from date funds are first advanced on the loan through maturity, at a rate per annum equal to the sum of the One Month LIBOR Index Rate plus 3.05% per annum, with an interest rate floor of ~~3.55%, which equated to 3.55% at January 31, 2022.~~

3.55

The Project Hawkeye loan requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years three through nine based on a seven-year amortization period. The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on August 2, 2026. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.

Pursuant to a pledge agreement entered into in connection with the Project Hawkeye loan, GFE’s obligations are secured by all of its right, title, and interest in its investment in Ringneck, including the 1,500 units subscribed for by GFE. The loan is non-recourse to all of GFE’s other assets, meaning that in the event of default, the only remedy available to Project Hawkeye will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck. This loan was paid in full in May 2022.

Subsequent to July 31, 2022, we amended our 2021 Credit Facility to transition from a variable interest rate based on the LIBOR Index rate to a rate based on the daily SOFR rate. We also renewed our $20 million revolving credit promissory note from October 1, 2022 to October 1, 2023.

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

8. LEASES

The Company leases rail cars for its facility to transport ethanol and dried distillers’ grains to its end customers. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease payments. For the ~~twelve~~nine months ended ~~January~~July 31, 2022, the Company’s weighted average discount rate was 4.87%. Operating lease expense is recognized on a straight-line basis over the lease term.

The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining terms of approximately two to ~~six~~five years. ~~For the twelve months ended January~~As of July 31, 2022, the weighted average remaining lease term was three years.

The Company elected to use a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For railcar leases, the Company elected to combine the railcars within each rider and account for each rider as an individual lease.

The following table summarizes the remaining annual maturities of the Company’s operating lease liabilities as of ~~January~~July 31, 2022:



2023	$	4,315,800	$	4,153,800
2024		3,917,400		3,633,000
2025		3,261,000		3,066,600
2026		2,870,100		2,577,600
2027		1,983,000		1,058,200
Thereafter		100,000
Totals		16,447,300		14,489,200
Less: Amount representing interest		1,589,338		1,288,020
Lease liabilities	$	14,857,962	$	13,201,180

For the three and nine months ended ~~January~~July 31, 2022, ~~and 2021,~~ the Company recorded operating lease costs for these leases of approximately ~~$1,611,000~~$1,694,000 and ~~$1,444,000~~$4,948,000, respectively, in cost of goods sold in the ~~condensed consolidated unaudited~~Company’s statement of operations, which

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approximates the cash paid for the periods. For the three and nine months ended July 31, 2021, GFE recorded operating lease costs for these leases of approximately $800,000 and $2,451,000, respectively, in cost of goods sold in the Company’s statement of operations, which approximates the cash paid for the ~~period.~~periods.

9. ~~MEMBERS'~~MEMBERS’ EQUITY

The Company has 1one class of membership units. The units have 0no par value and have identical rights, obligations and privileges. Income and losses are allocated to all members based upon their respective percentage of units held. As of ~~January~~July 31, 2022 and October 31, 2021, the Company had 30,606 membership units authorized, issued, and outstanding.

On June 16, 2022, the Board of Governors of the Company declared a cash distribution of $600.00 per membership unit to the holders of record of the Company’s units at the close of business on June 16, 2022, for a total distribution of $18,363,600. The Company paid the distribution in July 2022.

On December 22, 2021, the Board of Governors of the Company declared a cash distribution of $330.00 per membership unit to the holders of record of the Company’s units at the close of business on December 22, 2021, for a total distribution of $10,099,980. The Company paid the distribution in January 2022.

10. RELATED PARTY TRANSACTIONS

Corn Purchases - Members

The Company purchased corn from board members of approximately ~~$2,998,000~~$1,188,000 and ~~$4,719,000~~$9,578,000 for the three months ended ~~January~~July 31, 2022 and 2021, respectively, of which approximately $767,000 is included in accounts payable. The Company purchased corn from board members of approximately $6,138,000 and $20,877,000 for the nine months ended July 31, 2022 and 2021, respectively.

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~~Granite Falls Energy, LLC and Subsidiaries~~

~~Notes to Condensed Consolidated Unaudited Financial Statements~~

~~January 31, 2022~~

11. COMMITMENTS AND CONTINGENCIES

Corn Forward Contracts

At ~~January~~July 31, 2022, the Company had cash and basis contracts for forward corn purchase commitments for approximately ~~9,012,000~~10,483,000 bushels for deliveries through ~~October~~December 2023.

Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts and its inventories using the lower of cost or net realizable value evaluation, similar to the method used on its inventory, and has determined that no impairment existed for the forward corn purchase commitments at ~~January~~July 31, 2022 and October 31, 2021.

Ethanol Forward Contracts

At ~~January~~July 31, 2022, the Company had fixed and basis contracts to sell approximately ~~$40,094,000~~$51,516,000 of ethanol for various delivery periods through ~~March~~December 2022, which approximates ~~95%~~40% of its anticipated ethanol sales for this that period.

~~Distillers'~~Distillers’ Grain Forward Contracts

At ~~January~~July 31, 2022, the Company had forward contracts to sell approximately ~~$4,708,000~~$4,050,000 of distillers’ grain for deliveries through ~~March~~December 2022, which approximates ~~60%~~9% of its anticipated distillers’ grain sales during that period.

Corn Oil Forward Contracts

At ~~January~~July 31, 2022, the Company had forward contracts to sell approximately ~~$2,439,000~~$2,175,000 of corn oil for delivery through ~~February~~August 2022, which approximates ~~70%~~75% of its anticipated corn oil sales for that period.

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Rail Car Rehabilitation Costs

~~GFE~~The Company leases 75125 hopper rail cars under a multi-year ~~agreement,~~agreements, which ends ~~November 2025. HLBE leases 50 hopper rail cars under a multi-year agreement which ends in~~at various periods through May 2027. Under the agreements, the Company is required to pay to rehabilitate each car for ~~"damage"~~“damage” that is considered to be other than normal wear and tear upon turn in of the car(s) at the termination of the lease. ~~During the three months ended January 31, 2022 and 2021, GFE has recorded a corresponding estimated long-term liability totaling $825,000. During the three months ended January 31, 2022 and 2021, HLBE~~The Company has recorded a corresponding estimated long-term liability totaling approximately ~~$654,000.~~$1,502,000 and $1,468,000, at July 31, 2022 and October 31, 2021, respectively. The Company accrues the estimated cost of rail car damages over the term of the leases as the damages are incurred as a component of cost of goods sold. During the three and nine months ended ~~January~~July 31, 2022, the Company recorded an expense in cost of goods of approximately $102,000 and $180,000 respectively. During the three and nine months ended July 31, 2021, the Company recorded an expense in cost of goods of approximately ~~$11,000~~$50,000 and ~~$12,000,~~$190,000 respectively.

Letter of Credit Promissory Note

The 2021 Credit Facility includes an amended and restated letter of credit promissory note. Under the terms of the note, the Company may borrow, repay, and reborrow up to the aggregate principal commitment of $500,000 until its maturity on December 1, 2023. Amounts borrowed under the note bear interest at a variable weekly rate equal to 3.25% above the rate quoted by LIBOR Index rate, which was ~~3.36%~~5.61% at ~~January~~July 31, ~~2022~~2022. The aggregate principal amount available under the letter of credit promissory note was $500,000 at ~~January~~July 31, 2022 and October 31, 2021.

12. SUBSEQUENT EVENTS

Subsequent to July 31, 2022 the Company amended this letter of credit promissory note, which extended the maturity date to December 1, 2024.

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

We prepared the following discussion and analysis to help readers better understand our financial condition, changes in our financial condition, and results of operations for the three and nine months ended ~~January~~July 31, 2022, and 2021. This section should be read in conjunction with the condensed consolidated unaudited financial statements and related notes in PART I - Item 1 of this report and the information contained in the Company’s annual report on Form 10-K for the fiscal year ended October 31, 2021.

When we use the terms “Granite Falls Energy” or “GFE” or similar words in this Quarterly Report on Form 10-Q, unless the context otherwise requires, we are referring to Granite Falls Energy, LLC and our operations at our ethanol production facility located in Granite Falls, Minnesota. When we use the terms “Heron Lake BioEnergy”, “Heron Lake”, or “HLBE” or similar words, unless the context otherwise requires, we are referring to Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company, LLC, through which, HLBE holds a 100% interest in Agrinatural Gas, LLC. When we use the terms the “Company,” “we,” “us,” “our” or similar words in this quarterly report on Form 10-Q, unless the context otherwise requires, we are referring to Granite Falls Energy, LLC and our consolidated wholly- ~~and majority-owned~~owned subsidiaries.

Disclosure Regarding Forward-Looking Statements

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so investors can better understand future prospects and make informed investment decisions. As such, we have historical information, as well as forward-looking statements regarding our business, financial condition, results of operations, performance and prospects in this report. All statements that are not historical or current facts are forward-looking statements. In some cases, 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.

Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which may be beyond our control, and may cause actual results, performance or achievements to differ materially from those projected in, expressed or implied by forward-looking statements. These risks and uncertainties include, but are not limited to, the following:

●

The possibility of a railroad strike which would cause significant disruption to our ability to receive feedstock and ship our products;

●

Fluctuations in the price of ethanol as a result of a number of factors, including: the price and availability of competing fuels; the overall supply and demand for ethanol and corn; the price of gasoline, crude oil and corn; and government ~~policies;~~policies, including the recent passage of the Inflation Reduction Act of 2022;

●

Fluctuations in the price of crude oil and gasoline and the impact of lower oil and gasoline prices on ethanol prices and demand;

●

Fluctuations in the availability and price of corn, resulting from factors such as domestic stocks, demand from corn-consuming industries, such as the ethanol industry, prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets orincluding the impact of Russia’s invasion of Ukraine and the potential loss of Ukrainian exports; damaging growing conditions, such as plant disease or adverse weather, including drought;

●

Fluctuations in the availability and price of natural gas, which may be affected by factors such as weather, drilling economics, overall economic conditions, and government regulations;

●

Negative operating margins which may result from lower ethanol and/or high corn prices;

●

Changes in general economic conditions including recent increases in interest rates or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;

●

Overcapacity and oversupply in the ethanol industry;

●

Ethanol trading at a premium to gasoline at times, which may act as a disincentive for discretionary blending of ethanol beyond Renewable Fuel Standard requirements and consequently negatively impacting ethanol prices and demand;

●

Changes in federal and/or state laws and environmental regulations including elimination, waiver or reduction of corn-based ethanol volume obligations under the Renewable Fuel Standard and legislative acts taken by state governments such as California related to low-carbon fuels, may have an adverse effect on our business;

●

Any impairment of the transportation, storage and blending infrastructure that prevents ethanol from reaching markets;

●

Any effect on prices and demand for our products resulting from actions in international markets, particularly imposition of tariffs;

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●

Changes in our business strategy, capital improvements or development plans;

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●

Effect of our risk mitigation strategies and hedging activities on our financial performance and cash flows;

●

Competition from alternative fuels and alternative fuel additives;

●

Changes or advances in plant production capacity or technical difficulties in operating the plant;

●

Our reliance on key management personnel;

●

A slowdown in global and regional economic activity, demand for our products and the potential for labor shortages and shipping disruptions resulting from COVID-19; and

●

Inflation and supply chain bottlenecks may lead to increases in the costs of corn, natural gas, labor and other expenses critical to the operation of our ethanol plans.

We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated and do not intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report. We qualify all of our forward-looking statements by these cautionary statements.

Available Information

Our website address is www.granitefallsenergy.com. Our annual report on Form 10-K, periodic reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available, free of charge, on our website under the link “SEC Compliance,” as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission. The contents of our website are not incorporated by reference in this report on Form 10-Q.

Industry and Market Data

Much of the information in this report regarding the ethanol industry, including government regulation relevant to the industry is from information published by the Renewable Fuels Association (“RFA”), a national trade association for the United States (“U.S.”) ethanol industry, and information about the market for our products and competition is derived from publicly available information from governmental agencies or publications and other published independent sources. Although we believe our third-party sources are reliable, we have not independently verified the ~~information.~~

information and the information provided is only as of the date of this report unless otherwise stated.

Overview

Granite Falls Energy, LLC is a Minnesota limited liability company formed on December 29, 2000 for the purpose of constructing, owning and operating a fuel-grade ethanol plant located in Granite Falls, Minnesota. Our business consists primarily of the production and sale of ethanol and its co-products (wet, modified wet and dried distillers’ grains, corn oil and corn syrup) locally, and throughout the continental U.S. However, as markets allow, our products can be, and have been, sold in the export markets. Our revenues from operations come from three primary sources: sales of fuel ethanol, sales of distillers’ grains and sales of corn oil at GFE’s ethanol plant and HLBE’s ethanol plant.

Heron Lake BioEnergy, LLC (“Heron Lake BioEnergy” or “HLBE”), which owns an ethanol plant located near Heron Lake, Minnesota, is a wholly owned subsidiary of GFE. In July 2013, we acquired a controlling interest in HLBE through our wholly owned subsidiary Project Viking, L.L.C (“Project Viking”). Prior to September 29, 2021, GFE held a 50.7% ownership interest in HLBE. On September 29, 2021, we completed a merger in which we acquired the remaining non-controlling interest of HLBE for $14,000,000. As a result of the merger, GFE and Project Viking own 100% of HLBE’s issued and outstanding membership units.

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The Company experienced ~~a significant~~an increase in its ~~revenue and net income~~revenues during the three and nine month ~~period~~periods ended ~~January~~July 31, 2022, as compared to the same three month ~~period~~and nine month periods a year earlier, due primarily to a substantial increase in the price received per gallon of ethanol, as well as increases in the price received for our other principal products, distillers grain and corn oil. The Company experienced an increase in net income for the three-month period ended July 31, 2022 as compared to the same three month period a year earlier, which was primarily due to an increase in other income generated by the USDA Biofuel Producer Program payment of approximately $14.2 million. The Company experienced an increase in its net income for the nine-month period ended July 31, 2022, as compared to the same nine-month period a year earlier, due primarily to a substantial increase in the prices it receives for its ethanol, distillers grains and corn oil in addition to the increase in other income. The increase in the price of ethanol is attributable, in part, to the economic rebound from the effects of the COVID-19 pandemic, which has led to increased demand for transportation fuel, including the ethanol we produce. Management expects demand for ethanol to remain strong in the near term; however, it is possible that additional

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factors including inflation-related economic factors, the conflict in Ukraine, inflation, and the possibility of additional COVID-19 outbreaks could lead to volatility in the economy generally and in the ethanol industry specifically.

Ethanol Production

Our business consists primarily of the production and sale of ethanol and its co-products (wet, modified wet and dried distillers’ grains, corn oil and corn syrup) locally, and throughout the continental U.S. Our production operations are carried out at GFE’s ethanol plant located in Granite Falls, Minnesota and at HLBE’s ethanol plant near Heron Lake, Minnesota.

The GFE plant has an annual nameplate production capacity of approximately 63 million gallons of denatured ethanol, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve-month rolling sum basis. The HLBE plant has an approximate annual nameplate production capacity of approximately 65 million gallons of denatured ethanol, but is currently permitted to produce up to approximately 72.3 million gallons of undenatured fuel-grade ethanol on a twelve-month rolling sum basis. We intend to continue working toward increasing production at both the GFE and HLBE plants to take advantage of the additional production allowed pursuant to our permits as long as we believe it is profitable to do so.

We market and sell the products produced at our plants primarily using third party marketers. The markets in which our products are sold may be local, regional, national, and international and depend primarily upon the efforts of ~~third party~~third-party marketers. We have contracted with Eco-Energy, Inc. to market all of the ethanol produced at our ethanol plants. GFE also independently markets a small portion of the ethanol production at its plant as E-85 to local retailers.

We do not have any long-term, fixed price exclusive supply contracts for the purchase of corn for either the GFE or HLBE plants. Both GFE and HLBE purchase the corn necessary for operating directly from grain elevators, farmers, and local dealers within approximately 80 miles of their respective plants. GFE’s members are not obligated to deliver corn to our plants.

Plan of Operations for the Next Twelve Months

Over the next twelve months, we will continue our focus on operational improvements at our plants. These operational improvements include exploring methods to improve ethanol yield per bushel and increasing production output at our plants to take full advantage of our permitted production capacities, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies. Additionally, we expect to continue to conduct routine maintenance and repair activities at our ethanol plants to maintain current plant infrastructure, as well as small capital projects to improve operating efficiency. We anticipate using cash from our revolving term loans to finance these plant upgrade projects.

Trends and Uncertainties Impacting Our Operations

The principal factors affecting our results of operations and financial conditions are the market prices for corn, ethanol, distillers’ grains and natural gas, as well as governmental programs designed to create incentives for the use of corn-based ethanol. Other factors that may affect our future results of operation include those risks discussed below in PART II - Item 1A. Risk Factorsand in “PART I - Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended October 31, 2021, which are incorporated herein by reference.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers’ grains and natural gas. As a result, our operating results can fluctuate substantially due to volatility in these commodity markets. The price and availability of

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corn is subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, yields, domestic and global stocks, weather, federal policy and foreign trade. Natural gas prices are influenced by severe weather in the summer and winter and hurricanes in the spring, summer and fall. Other factors include North American exploration and production, and the amount of natural gas in underground storage during injection and withdrawal seasons. Ethanol prices are sensitive to world crude oil supply and demand, domestic gasoline supply and demand, the price of crude oil, gasoline and corn, the price of substitute fuels and octane enhancers, refining capacity and utilization, government regulation and incentives and consumer demand for alternative fuels. Distillers’ grains prices are impacted by livestock numbers on feed, prices for feed alternatives and supply, which is associated with ethanol plant production.

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Given the inherent volatility in ethanol, distillers’ grains, non-food grade corn oil, grain and natural gas prices, we cannot predict the likelihood that the spread between ethanol, distillers’ grains, non-food grade corn oil, and grain prices in future periods will be consistent compared to historical periods.

Corn Prices

Corn prices ~~increased significantly~~continue an upward trend in ~~fiscal year 2021,~~2022, due in part to the improved domestic economy as well as increased demand from China and drought in South America’s corn-growing regions. In addition, Russia’s invasion of Ukraine is also causing upward price pressure on corn since corn is viewed as a substitute food item for wheat. Ukraine is a major exporter of wheat and other items, such as sunflower oil, while Russia is a key producer of wheat and many of the chemicals used in fertilizer. That is leading to an increased demand for corn as a substitute food item and causing prices to increase. Average corn prices remained above ~~$5.00~~$6.60 per bushel for the ~~three~~nine months ended ~~January~~July 31, ~~2022.~~2022, which is a significant increase over the average corn price of $5.15 for the nine months ended July 31, 2021.

Because the market price of ethanol is not always directly related to corn, at times ethanol prices may lag price movements in corn prices and corn-ethanol price spread may be tightly compressed or negative. If the corn-ethanol spread is compressed or negative for sustained period, it is possible that our operating margins will decline or become negative and our plants may not generate adequate cash flow for operations. In such cases, we may reduce or cease production at our plants to minimize our variable costs and optimize cash flow.

U.S. Ethanol Supply and Demand

During the ~~three months ended January 31,~~first half of 2022, domestic ethanol production increased between approximately ~~10%~~6% to 7% compared to the ~~same three month period a year earlier,~~first half of 2021, with U.S. ethanol plants producing more than 1 million barrels of fuel ethanol per day on average, according to the U.S. Energy Information Administration (“EIA”).

~~Ethanol production is projected to increase slightly in 2022.~~ The EIA ~~projects~~maintained its forecasts for 2022 and 2023 fuel ethanol production ~~will average 1.03 million barrels per day~~ in its latest Short-Term Energy Outlook, released Aug. 9. The agency also maintained its forecast for 2022 ~~up from approximately 980,000 barrels per day produced in 2021. Further,~~and 2023 ethanol consumption.

The EIA ~~projects~~currently predicts U.S. fuel ethanol production will average 1.02 million barrels per day this year, falling to 1 million barrels per day next year. Production averaged 980,000 barrels per day in ~~2023.~~2021.

On a quarterly basis, ethanol production is expected to average 1.01 million barrels per day during the third quarter of this year, expanding to 1.02 million barrels per day during the fourth quarter. Moving into 2023, ethanol production is expected to average 990,000 barrels per day in the first quarter, 1 million barrels per day in the second quarter, 990,000 barrels per day in the third quarter, and 1.02 million barrels per day in the fourth quarter. Continued ethanol production capacity increases could also have a negative impact on the market price of ethanol, which could negatively affect our profitability.

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Total U.S. ethanol exports for the first five months of 2022 were 725.9 million gallons, up 24% from the same period in 2021 and remaining on a record pace. The Renewable Fuels Association says May U.S. ethanol exports moderated from April’s four-year high, declining 21% to 147.1 million gallons (mg). However, Canada increased its imports by 4% to 41.8 mg in May, maintaining its status as the top customer for U.S. ethanol exports for 14 consecutive months and logging its largest monthly volume in eight years (also its second largest on record). South Korea saw weaker sales in May, importing 19.3 mg (down 18%). Exports to the Netherlands climbed 12% to a 19-month high of 15.4 mg. Shipments to these three countries represented half of total U.S. exports in May. Other substantial importers of U.S. ethanol included India (10.9 mg, -9%), the United Kingdom (8.1 mg, -37%), Brazil (7.7 mg, -74%), and Peru (5.6 mg, -38%).

~~Exports of ethanol decreased slightly in our fiscal year 2021, after increasing slightly each of the previous two fiscal years.~~ Export demand for ethanol is less consistent compared to domestic demand which can lead to ethanol price volatility. The decrease in ethanol exports is due to various factors, including a decrease in trading with Brazil, which had been one of the two largest importers of U.S. ethanol, due to the expiration of a Brazilian import quota. The USDA projects that U.S. ethanol exports will increase slightly in 2022 due to both volume and price gains due, in part, to increased renewable fuel blending requirements in the United Kingdom, India, and other nations. Any decrease in U.S. ethanol exports could adversely impact the market price of ethanol unless domestic demand increases or additional foreign markets are developed.

U.S. ethanol exports to China increased during the 2021 fiscal year, following the execution of a “phase one” trade agreement with China. The agreement, signed by former President Donald Trump on January 15, 2020, includes a commitment by China to purchase agricultural products, including ethanol, over the course of two years. There is, however, no guarantee that exports of ethanol to China will continue or increase. Additionally, the imposition of tariffs and duties on ethanol imported from the U.S., as well as increased production of ethanol and similar fuels in other countries, can also negatively impact domestic export demand.

Further, reductions in renewable fuel blending requirements or waivers of small refiner renewable volume obligations by the U.S. Environmental Protection Agency (“EPA”) may also reduce demand for ethanol and thereby adversely affect our profitability.

~~Changes in~~In its August “Short-Term Energy Outlook” (“STEO”), the ~~price for crude oil and unleaded gasoline affect the demand for gasoline and may impact the market price of ethanol. According to the EIA projections published in January 2021,~~ U.S. ~~gasoline consumption is forecast to average 9.1~~Energy Information Administration estimated that 98.8 million barrels per day of petroleum and liquid fuels was consumed globally in July 2022, ~~up from 8.8~~an increase of 0.9 million barrels per day from July 2021. The EIA forecasted global consumption of petroleum and liquid fuels will average 99.4 million b/d for all of 2022, which is a 2.1 million b/d increase from 2021. The EIA further forecasted that global consumption of petroleum and liquid fuels will increase by another 2.1 million b/d in ~~2021. Further,~~2023 to average 101.5 million b/d.

According to the August STEO, the U.S. retail price for regular grade gasoline averaged $4.56 per gallon (gal) in July, and the average retail diesel price was $5.49/gal. The EIA expects retail gasoline prices to average $4.29/gal in the third quarter of 2022 and fall to an average of $3.78/gal in the fourth quarter of 2022. Retail diesel prices in its August STEO forecast average $5.02/gal in the third quarter of 2022 and $4.39/gal in the fourth quarter of 2022.

The Biden administration’s plan to temporarily allow higher ethanol blends in gasoline may increase ethanol demand in 2022. The Biden administration’s move allowed gasoline with 15% ethanol to be sold between June 1 and Sept. 15. Typically, the federal government limits ethanol blends to 10% during summer months, to curb smog caused by the 15% blend’s higher volatility. Following the Biden administration’s move, E15 consumption is expected to increase by about 300 million gallons in 2022 from the 814 million gallons of E15 sold in 2021, according to ~~EIA’s January projections, regular gasoline retail prices in~~ the ~~U.S. were expected to average $3.06 in 2022, up from $3.00 in 2021. However, more recent events, including the conflict in Ukraine, have contributed to increased volatility in global fuel markets.~~

~~Management believes that the ethanol outlook in the fiscal year 2022 will remain relatively consistent with the three months ended January 31, 2022.~~Renewable Fuels Association. However, it is possible that increased volatility will occur due to the conflict in Ukraine, the COVID-19 pandemic, inflation, or other unforeseen factors.

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Conflict in Ukraine

Russia’s invasion of Ukraine in February 2022 has contributed to significant economic volatility, which could have adverse effects on our business. Since the beginning of the conflict in Ukraine, fuel prices, including retail gasoline, have increased significantly due, in part, to the United States and other nations imposing economic sanctions on Russia, a major producer and exporter of oil and other fuels. It is possible that increased gasoline prices will result in increased demand for alternative fuels, including the ethanol we produce. It is, however, also possible that the Ukrainian conflict will cause increased economic volatility or other unforeseen conditions that adversely affect the domestic economy generally and our business specifically.

Further, it is possible that the conflict in Ukraine could result in increased grain prices, including the price of corn we use to produce ethanol. If the Ukrainian conflict causes an increase in corn prices, or other volatility in agriculture markets, it could adversely affect the profitability of our business.

Additionally, while neither Russia nor Ukraine have historically imported U.S. ethanol, it is possible that economic turmoil caused by the Ukrainian conflict could affect the U.S. exports of ethanol, which could affect our business.

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COVID-19 Pandemic

After experiencing volatile and adverse conditions for much of ~~the~~ fiscal year 2020 and a portion of fiscal year 2021 due to the COVID-19 pandemic and its ramifications, the Company and the ethanol industry as a whole benefited from more favorable market conditions during our ~~2021~~2022 fiscal year, as vehicle travel and demand for transportation fuel, including the ethanol we produce, rebounded. The prices we received for a gallon of ethanol increased significantly during the three months and nine months ended ~~January~~July 31, 2022, as compared to the same period the prior year. As a result, we experienced positive operating margins, increased cash flow from operations, and increased ~~net income~~revenues during the three months and nine months ended ~~January~~July 31, 2022, compared to the three months and nine months ended ~~January~~July 31, 2021.

During the ~~three~~nine months ended ~~January~~July 31, 2022, the outbreak of ~~the~~additional COVID-19 ~~Omicron variant~~variants led to increased COVID-19 infections and hospitalizations and renewed government restrictions in ~~some~~a few regions. However, demand for transportation fuel, including the ethanol we produce, remained strong during the recent three-month period. ~~Further, the Omicron variant began to subside in early 2022, and many~~Many local governments have eased COVID-19 related restrictions. As restrictions related to the pandemic subside, management expects favorable market conditions for the ethanol industry to continue.

However, the pandemic is ongoing and various dynamic factors, including the possible outbreak of new coronavirus variants, make it difficult to forecast the long-term effects of the pandemic on our industry as a whole and our Company specifically. Further, tangential effects of the COVID-19 pandemic, including inflation, supply chain bottlenecks, labor market volatility, and raw material shortages may continue affect our operations and profitability.

It is possible that even after the pandemic subsides, there will be permanent changes to business and transportation norms that will reduce demand for ~~ethanol.~~ethanol especially if higher gasoline prices cause consumers to reduce or restrict gasoline purchases. For example, increased adoption of “work from home” policies or tele-commuting, and the use of virtual meetings, may permanently reduce business travel and thereby reduce the demand for transportation fuel, including the ethanol we produce.

The Renewable Fuels Standard

The ethanol industry is dependent on several economic incentives to produce ethanol, the most significant of which is the federal Renewable Fuels Standard (the “RFS”). 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 has been, and we expect will continue to be, a significant factor impacting ethanol usage.

Under the RFS, the EPA is required to pass an annual rule that establishes the number of gallons of different types of renewable fuels that must be used in the U.S. by refineries, blenders, distributors and importers which is called the renewable volume obligations (“RVOs”). The EPA has the authority to waive the mandates in whole or in part if one of

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two conditions is met: 1) there is inadequate domestic renewable fuel supply, or 2) implementation of the mandate requirement severely harms the economy or environment of a state, region or the United States.

The RFS sets the statutory RVO for corn-based ethanol at 15 billion gallons beginning in 2016 and each year thereafter through 2022. Under RFS statute, the EPA is required to finalize RVOs for a particular compliance year by November 30 of the preceding year. According to 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 year through which the statutorily prescribed volumes run. While conventional ethanol maintained 15 billion gallons, 2019 was the second consecutive year that the total RVO was more than 20% below the statutory volume levels. Thus, the EPA was expected to initiate a reset rulemaking, and modify statutory volumes through 2022, and do so based on the same factors they are to use in setting the RVOs 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. However, in late 2019, the EPA announced it would not be moving forward with a reset rulemaking in 2020. It is unclear when or if the current EPA will propose a reset rulemaking, though they have stated an intention to propose a post 2022 set rulemaking as required by law.

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On December 7, 2021, the EPA announced long-delayed blending requirement under the RFS. The EPA proposed RVOs of 17.13 billion gallons for 2020, 18.52 billion gallons for 2021, and 20.77 billion gallons for 2022. Ethanol industry advocates have denounced the proposal for significantly cutting the 2020 RVO, which was set in a 2019 final rule. The proposal reduces the 2020 blending requirement from 20.09 billion gallons to 17.13 billion gallons, an approximately 15 percent decrease. For 2021, the EPA proposed to set the RVO for total renewable fuel at 18.52 billion gallons. For 2022, the proposed RVO is 20.77 billion gallons, which the EPA said is the highest level in the history of the RFS program.

The EPA, as part of a consent decree, has agreed to propose 2023 renewable volume obligations (“RVOs”) by November 16, 2022 and final RVOs by June 14, 2023. The consent decree would settle litigation brought by Growth Energy, which sued the EPA for repeatedly missing deadlines on issuing annual RVO mandates. The consent decree was submitted to the U.S. District Court for the District of Columbia on July 22, 2022, and the court is expected to sign off on the decree in the coming weeks.

In a separate action also on December 7, 2021, the EPA proposed an action to deny 65 pending applications for small refinery exemptions. Concurrently, the USDA announced $800 million to support biofuel producers and infrastructure. ~~This includes up~~In June of 2021, USDA announced a $700.0 million Biofuel Producer Program to ~~$700~~distribute these funds to impacted producers of ethanol, biodiesel and other renewable fuels, and they provided the specifics for the application process in December of 2021. Applications were due in February 2022, and the USDA has indicated they will calculate and distribute payments in the first half of 2022. We applied to the USDA for these funds and in June 2022, we received approximately $14.2 million in USDA support related to ~~provide~~COVID-19 economic ~~relief to biofuel producers and restore renewable fuel markets affected by the pandemic.~~

relief.

Beyond the federal mandates, there are limited domestic markets for ethanol. Further, opponents of ethanol such as large oil companies will likely continue their efforts to repeal or reduce the RFS through lawsuits or lobbying of Congress. If such efforts are successful in further reducing or repealing the blending requirements of the RFS, a significant decrease in ethanol demand may result and could have a material adverse effect on our results of operations, cash flows and financial condition, unless additional demand from exports or discretionary E85 blending develops.

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Results of Operations for the Three Months Ended ~~January~~July 31, 2022, and 2021

The following table shows summary information from the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our unaudited condensed consolidated statements of operations for the three months ended ~~January~~July 31, 2022, and 2021 (amounts in thousands).


	Three Months Ended January 31,								Three Months Ended July 31,
	2022				2021				2022				2021
	(unaudited)				(unaudited)				(unaudited)				(unaudited)
Statement of Operations Data	Amount		%		Amount		%		Amount		%		Amount		%
Revenues	$	109,779	100.0	%	$	49,398	100.0	%	$	103,752	100.0	%	$	89,259	100.0	%
Cost of Goods Sold		82,622	75.3	%		52,788	106.9	%		95,994	92.5	%		79,352	88.9	%
Gross Profit (Loss)		27,157	24.7	%		(3,390)	(6.9)	%
Gross Profit										7,758	7.5	%		9,907	11.1	%
Operating Expenses		2,371	2.2	%		1,994	4.0	%		1,905	1.8	%		1,941	2.2	%
Operating Income (Loss)		24,786	22.5	%		(5,384)	(10.9)	%
Operating Income										5,853	5.7	%		7,966	8.9	%
Other Income, net		247	0.2	%		93	0.2	%		14,736	14.2	%		906	1.1	%
Net Income (Loss)		25,032	22.7	%		(5,291)	(10.7)	%
Less: Net Loss Attributable to Non-controlling Interest		—	—	%		2,040	4.1	%
Net Income (Loss) Attributable to Granite Falls Energy, LLC	$	25,032	22.7	%	$	(3,251)	(6.6)	%
Net Income										20,589	19.9	%		8,872	9.9	%
Less: Net Income Attributable to Non-controlling Interest										—	—			(2,289)	(2.6)	%
Net Income Attributable to Granite Falls Energy, LLC										20,589	19.9	%		6,583	7.3	%

Revenues

Our consolidated revenue is derived principally from sales of our three primary products: ethanol, distillers’ grains and corn oil. Revenues from these products represented approximately ~~99.1%~~99.3% and 99.4% of our total revenues for the three months ended ~~January~~July 31, 2022, and ~~approximately 98.8% of our total revenues for the three months ended January~~July 31, ~~2021.~~2021, respectively. The remaining approximately ~~0.9%~~0.7% and ~~1.2%~~0.6% is attributable to miscellaneous other revenue for the three months ended ~~January~~July 31, 2022, and 2021, respectively, and is made up of incidental sales of corn syrup at HLBE’s plant and revenues from natural gas pipeline operations at Agrinatural, net of intercompany eliminations for distribution fees paid by HLBE to Agrinatural for natural gas transportation services.

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The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our condensed consolidated unaudited statements of operations for the three months ended ~~January~~July 31, 2022:


	Three Months Ended January 31, 2022				Three Months Ended July 31, 2022
	Sales Revenue		% of Total Revenues		Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)				(in thousands)
Ethanol sales	$	88,267	80.4	%	$	80,259	77.4	%
Distillers' grains sales		14,783	13.5	%		15,694	15.1	%
Corn oil sales		5,656	5.2	%		7,116	6.8	%
Miscellaneous other		1,073	0.9	%		683	0.7	%
Total Revenues	$	109,779	100.0	%	$	103,752	100.0	%


	Three Months Ended July 31, 2021
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	69,911	78.3	%
Distillers' grains sales		14,001	15.7	%
Corn oil sales		4,817	5.4	%
Miscellaneous other		530	0.6	%
Total Revenues	$	89,259	100.0	%

Three Months Ended January 31, 2021


Sales Revenue

% of Total Revenues
Revenue Sources

(in thousands)

Ethanol sales

$
36,138

73.2
%
Distillers' grains sales

9,777

19.8
%
Corn oil sales

2,850

5.8
%
Miscellaneous other

633

1.2
%
Total Revenues

$
49,398

100.0
%

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Our total consolidated revenues increased by approximately ~~122.2%~~16.2% for the three months ended ~~January~~July 31, 2022, as compared to the three months ended ~~January~~July 31, 2021. This increase in revenue was due to increases in the average price received for our three primary products ~~coupled with increases in the quantities sold of ethanol and corn oil,~~ which ~~were~~was partially offset by a slight decrease in the quantity ~~sold~~ of distillers’ ~~grains.~~grains sold. In the three months ended ~~January~~July 31, 2022, the quantities of ethanol and corn oil we sold increased approximately ~~24.7%~~5.6% and ~~6.7%~~1.6% respectively, while the quantity sold of distillers’ ~~grain~~grains decreased approximately ~~1.3%, and the~~11.5%. The average net price we received for ethanol, distillers’ grains, and corn oil increased approximately ~~95.5%~~8.7%, ~~53.6%~~26.6%, and ~~84.4%~~45.4% respectively, compared to the three months ended ~~January~~July 31, 2021. The following table reflects quantities of our three primary products sold and the average net prices received for the three months ended ~~January~~July 31, 2022, and 2021:

Three Months Ended January 31, 2022

Three Months Ended January 31, 2021

Quantity Sold

Avg. Net Price

Quantity Sold

Avg. Net Price
Product

(in thousands)

(in thousands)

Ethanol (gallons)

34,211

$
2.58

27,436

$
1.32
Distillers' grains (tons)

74

$
199.21

75

$
129.71
Corn oil (pounds)

9,613

$
0.59

9,011

$
0.32


	Three Months Ended July 31, 2022			Three Months Ended July 31, 2021
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	31,402	$	2.56	29,741	$	2.35
Distillers' grains (tons)	64	$	245.97	72	$	194.30
Corn oil (pounds)	9,272	$	0.77	9,126	$	0.53

Ethanol

Total revenues from sales of ethanol increased by approximately ~~144.2%~~14.8% for the three months ended ~~January~~July 31, 2022, compared to the same period a year earlier due to an approximately ~~24.7%~~8.7% increase in the price received for ethanol coupled with an approximately 5.6% increase in the number of gallons of ethanol sold and an approximately 95.5% increase in the price received for ethanol. The increase in volume sold was attributable to increased production at both plants during the three months ended January 31, 2022, compared to the same period in 2021, during part of which the HLBE plant was idled for the replacement of its boiler.sold. The increase in the price of ethanol was due primarily to the rebound in the overall economy and the increase in demand for transportation fuel as compared to the ~~three month~~three-month period ended ~~January~~July 31, 2021.

Our ethanol derivative instruments resulted in a ~~gain~~loss of approximately ~~$39,000 and $114,000~~$4,000 during the three months ended ~~January~~July 31, 2022 and ~~2021, respectively.~~

no gain or loss for the three months ended July 31, 2021.

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~~Distillers'~~Distillers’ Grains

Total revenues from sales of distillers’ grains increased by approximately ~~51.2%~~12.1% for the three months ended ~~January~~July 31, 2022, compared to the same period a year earlier, due to an approximately ~~53.6%~~26.6% increase in the average price received per ton of distillers’ grain sold ~~which was partially~~ offset by an approximately ~~1.3%~~11.5% decrease in the quantities sold. The increase in the price received was due to the improvement of the overall economy and an increase in demand for livestock feed.

The decrease in quantities sold was attributable to an increase in conversion of feedstock to ethanol.

At ~~January~~July 31, 2022, ~~The~~the Company had forward contracts to sell approximately ~~$4,708,000~~$4,050,000 of distillers’ grain for deliveries through ~~March~~December 2022, which approximates ~~60%~~9% of its anticipated distillers’ grain sales during that period.

Corn Oil

Total revenues from sales of corn oil increased by approximately ~~98.5%~~47.4% for the three months ended ~~January~~July 31, 2022 compared to the same period a year earlier due primarily to an approximately ~~84.4%~~45.4% increase in the average price per pound we received for our corn oil from period to period coupled with an approximately ~~6.7%~~1.6% increase in pounds sold from period to period. The increase in pounds of corn oil sold was primarily attributable to an increase in production. The increase in the price received for corn oil was primarily attributable to increased demand for biodiesel.

Although management believes that corn oil prices will remain relatively steady, prices may decrease if there is an oversupply of corn oil production resulting from increased production rates at ethanol plants or if biodiesel producers begin to utilize lower-priced alternatives such as soybean oil or if the biodiesel blenders’ tax credit is not renewed and biodiesel production declines.

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Cost of Goods Sold

Our cost of goods sold increased by approximately ~~56.5%~~21% for the three months ended ~~January~~July 31, 2022, as compared to the three months ended ~~January~~July 31, 2021. The increase in costs of goods sold was primarily attributable to an increase in corn costs, due to the increase the average net price we paid per bushel of corn ~~coupled with an~~as well as a significant increase in ~~production, which was primarily attributable~~ the ~~installation~~cost of ~~a new boiler at the HLBE plant.~~natural gas. Our cost of goods sold totaled approximately ~~75.3%~~92.5% of our revenue for the three months ended ~~January~~July 31, 2022, which was ~~a decrease~~an increase from ~~106.9%~~88.9% for the same period a year earlier. Approximately ~~90%~~88% of our total costs of goods sold is attributable to our ethanol production. Thus, the cost of goods sold per gallon of ethanol sold for the three months ended ~~January~~July 31, 2022 and 2021 was approximately ~~$2.17~~$2.72 and ~~$1.73~~$2.40 per gallon, respectively.

The following table shows the costs of corn and natural gas (our two largest single components of costs of goods sold), as well as all other components of cost of goods sold, which includes processing ingredients, electricity, and wages, salaries and benefits of production personnel, and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the three months ended ~~January~~July 31, 2022:


	Three Months Ended July 31, 2022
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	78,314	81.6	%
Natural gas costs		6,173	6.4	%
All other components of costs of goods sold		11,506	12.0	%
Total Cost of Goods Sold	$	95,994	100.0	%

Three Months Ended January 31, 2022

Cost

% of Cost of Goods Sold


(in thousands)


Corn costs

$
64,870

78.5
%
Natural gas costs

5,993

7.3
%
All other components of costs of goods sold

11,759

14.2
%
Total Cost of Goods Sold

$
82,622

100.0
%

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The following table shows the costs of corn, natural gas and all other components of cost of goods sold and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the three months ended ~~January~~July 31, 2021:


	Three Months Ended January 31, 2021				Three Months Ended July 31, 2021
	Cost		% of Cost of Goods Sold		Cost		% of Cost of Goods Sold
	(in thousands)				(in thousands)
Corn costs	$	45,193	85.6	%	$	66,374	83.6	%
Natural gas costs		3,163	6.0	%		2,907	3.7	%
All other components of costs of goods sold		4,432	8.4	%		10,071	12.7	%
Total Cost of Goods Sold	$	52,788	100.0	%	$	79,352	100.0	%

Corn

Our aggregate cost of corn was approximately ~~43.5%~~18.0% more for the three months ended ~~January~~July 31, 2022 compared to the same period of a year earlier due to an approximately ~~28.8%~~19.4% increase in the average price per bushel paid for corn, ~~coupled with~~offset by an ~~approximately 11.4% increase~~approximate 1.2% decrease in the number of bushels processed from period to period. The corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) for the three months ended ~~January~~July 31, 2022 was approximately ~~$0.53, which was an improvement of approximately $0.80 from~~$0.22 less than the corn-ethanol price spread we experienced for the same period ~~a year earlier.~~

ended July 31, 2021.

At ~~January~~July 31, 2022, ~~The~~the Company had cash and basis contracts for forward corn purchase commitments for approximately ~~9,012,000~~10,483,000 bushels for deliveries through ~~October~~December 2023.

Our corn derivative positions resulted in a gain of approximately $2.1 million and a loss of approximately ~~$1.6 million~~$892,000 for the three months ended ~~January~~July 31, 2022, and ~~a loss of approximately $5.9 million for the three months ended January 31, 2021.~~2021, respectively. We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments is impacted, which affects our financial

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performance. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

Natural Gas

Our cost of goods sold related to natural gas costs increased approximately ~~89.5%~~112.4% for the three months ended ~~January~~July 31, 2022, as compared to the three months ended ~~January~~July 30, 2021, which was primarily attributable to increased prices for natural gas caused by increased global demand and limited production and inventory, coupled with an increase in natural gas usage due to increased production at our plants.

Other Components of Costs of Goods Sold

Our costs of goods sold related to all other components increased approximately 14.3% for the three months ended July 31, 2022, compared to the same period ending July 31, 2021. Management attributes the increase to a general increase in prices for processing ingredients during the three-month period ended July 31, 2022.

Operating Expenses

Operating expenses include wages, salaries, and benefits of administrative employees at the plant, insurance, professional fees, property taxes, and similar costs. Our operating expenses decreased by approximately 1.8% for the three months ended July 31, 2022, compared to the same period ended July 31, 2021, due primarily to a slight reduction in professional fees relating to legal, accounting and other fees in connection with GFE’s merger with HLBE for the comparable period.

Operating Income

We recorded operating income of approximately $5.9 million in the three months ended July 31, 2022, a decrease of approximately $2.1 million from the same period ended July 31, 2021, when we recorded operating income of approximately $8.0 million. This decrease in operating income is primarily attributable to the increase in our cost of goods sold.

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Other Income, Net

We had net other income of approximately $14.7 million and approximately $0.906 million for the three months ended July 31, 2022, and 2021, respectively. This significant increase in net other income was primarily attributable to our receipt of approximately $14.2 million from the USDA Biofuel Producer Program during May 2022 as support related to COVID-19 economic relief.

Results of Operations for the Nine Months Ended July 31, 2022, and 2021

The following table shows summary information from the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2022, and 2021 (amounts in thousands).


	Nine Months Ended July 31,
	2022				2021
	(unaudited)				(unaudited)
Statement of Operations Data	Amount		%		Amount		%
Revenues	$	313,035	100.0	%	$	212,698	100.0	%
Cost of Goods Sold		268,696	85.8	%		197,208	92.7	%
Gross Profit		44,339	14.2	%		15,490	7.3	%
Operating Expenses		6,173	2.0	%		5,938	2.8	%
Operating Income		38,166	12.2	%		9,552	4.5	%
Other Income, net		15,379	4.9	%		3,488	1.6	%
Net Income		53,545	17.1	%		13,040	6.1	%
Less: Net Income Attributable to Non-controlling Interest		—	—			(1,572)	(0.7)	%
Net Income Attributable to Granite Falls Energy, LLC		53,545	17.1	%		11,468	5.4	%

Revenues

Our consolidated revenue is derived principally from sales of our three primary products: ethanol, distillers’ grains and corn oil. Revenues from these products represented approximately 99.0% and 99.2% of our total revenues for the nine months ended July 31, 2022, and July 31, 2021, respectively. The remaining approximately 1.0% and 0.8% is attributable to miscellaneous other revenue for the nine months ended July 31, 2022, and 2021, respectively, and is made up of incidental sales of corn syrup at HLBE’s plant and revenues from natural gas pipeline operations at Agrinatural, net of intercompany eliminations for distribution fees paid by HLBE to Agrinatural for natural gas transportation services.


	Nine Months Ended July 31, 2022
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	243,219	77.7	%
Distillers' grains sales		48,005	15.3	%
Corn oil sales		18,868	6.0	%
Miscellaneous other		2,943	1.0	%
Total Revenues	$	313,035	100.0	%

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	Nine Months Ended July 31, 2021
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	163,826	77.0	%
Distillers' grains sales		35,738	16.8	%
Corn oil sales		11,344	5.4	%
Miscellaneous other		1,790	0.8	%
Total Revenues	$	212,698	100.0	%

Our total consolidated revenues increased by approximately 47.2% for the nine months ended July 31, 2022, as compared to the nine months ended July 31, 2021. This increase in revenue was due to increases in the average price received for our three primary products. In the nine months ended July 31, 2022, the quantities of ethanol and corn oil we sold increased approximately 7.9% and 4.9% respectively, while the quantity sold of distillers’ grains decreased approximately 4.2%. The average net price we received for ethanol, distillers’ grains, and corn oil increased approximately 37.6%, 40.2, and 58.5%, respectively, compared to the nine months ended July 31, 2021. The following table reflects quantities of our three primary products sold and the average net prices received for the nine months ended July 31, 2022, and 2021:


	Nine Months Ended July 31, 2022			Nine Months Ended July 31, 2021
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	98,376	$	2.47	91,211	$	1.80
Distillers' grains (tons)	208	$	231.28	217	$	164.97
Corn oil (pounds)	27,583	$	0.68	26,283	$	0.43

Ethanol

Total revenues from sales of ethanol increased by approximately 48.5% for the nine months ended July 31, 2022 compared to the same period a year earlier due to an approximately 37.6% increase in the price received for ethanol and an increase of 7.9% in the number of gallons of ethanol sold. The increase in the price of ethanol was due primarily to the rebound in the overall economy and the increase in demand for transportation fuel as compared to the nine-month period ended July 31, 2021.

Our ethanol derivative instruments resulted in a gain of approximately $57,000 during the nine months ended July 31, 2022, compared to a gain of approximately $171,000 for the same nine-month period ended July 31, 2021. Based on the lower of cost or net realizable value analysis, as a component of cost of goods sold, the Company recorded a loss on ethanol inventories of approximately $451,000 and $720,000 for the nine months ended July 31, 2022 and 2021, respectively.

At July 31, 2022, the Company had fixed and basis contracts to sell approximately $51,516,000 of ethanol for various delivery periods through December 2022, which approximates 40% of its anticipated ethanol sales for this period.

Distillers’ Grains

Total revenues from sales of distillers’ grains increased by approximately 34.3% for the nine months ended July 31, 2022, compared to the same period a year earlier, due to an approximately 40.2% increase in the average price received per ton of distillers’ grain sold, offset by an approximately 4.2% decrease in the quantities sold. The increase in the price received was due to the improvement of the overall economy and an increase in demand for livestock feed.

At July 31, 2022, the Company had forward contracts to sell approximately $4,050,000 of distillers’ grain for deliveries through December 2022, which approximates 9% of its anticipated distillers’ grain sales during that period.

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Corn Oil

Total revenues from sales of corn oil increased by approximately 66.3% for the nine months ended July 31, 2022, compared to the same period a year earlier due primarily to an approximately 58.5% increase in the average price per pound we received for our corn oil from period to period coupled with an approximately 4.9% increase in pounds sold from period to period. The increase in pounds of corn oil sold was primarily attributable to an increase in production. The increase in the price received for corn oil was primarily attributable to increased demand for biodiesel.

At July 31, 2022, the Company had forward contracts to sell approximately $2,175,000 of corn oil for delivery through August 2022, which approximates 75% of its anticipated corn oil sales for that period.

Cost of Goods Sold

Our cost of goods sold increased by approximately 36.3% for the nine months ended July 31, 2022, as compared to the nine months ended July 31, 2021. The increase in costs of goods sold was primarily attributable to an increase in corn costs, due to the increase the average net price we paid per bushel of corn as well as an increase in the cost of natural gas. Our cost of goods sold totaled approximately 85.8% of our revenue for the nine months ended July 31, 2022, which was a decrease from 92.7% for the same period a year earlier. Approximately 90% of our total costs of goods sold is attributable to our ethanol production. Thus, the cost of goods sold per gallon of ethanol sold for the six months ended July 31, 2022, and 2021 was approximately $2.46 and $1.95 per gallon, respectively.


	Nine Months Ended July 31, 2022
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	217,473	80.9	%
Natural gas costs		17,177	6.4	%
All other components of costs of goods sold		34,046	12.7	%
Total Cost of Goods Sold	$	268,696	100.0	%


	Nine Months Ended July 31, 2021
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	162,018	82.2	%
Natural gas costs		8,840	4.5	%
All other components of costs of goods sold		26,350	13.3	%
Total Cost of Goods Sold	$	197,208	100.0	%

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Corn

Our aggregate cost of corn was approximately 34.2% more for the nine months ended July 31, 2022, compared to the same period of a year earlier due to an approximately 28.7% increase in the average price per bushel paid for corn, coupled with an approximately 4.3% increase in the number of bushels processed from period to period. The corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) for the nine months ended July 31, 2022, was approximately $0.15 more than the corn-ethanol price spread we experienced for the same period ended July 31, 2021.

At July 31, 2022, the Company had cash and basis contracts for forward corn purchase commitments for approximately 10,483,000 bushels for deliveries through December 2023.

Our corn derivative positions resulted in a loss of approximately $4.9 million and $7.9 million for the nine months ended July 31, 2022, and 2021, respectively. We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments is impacted, which affects our financial performance. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

Natural Gas

Our cost of goods sold related to natural gas costs increased approximately 94.3% for the nine months ended July 31, 2022, as compared to the nine months ended July 31, 2021, which was primarily attributable to increased prices for natural gas caused by increased global demand and limited production and inventory, coupled with an increase in natural gas usage due to increased production at our plants.

Other Components of Costs of Goods Sold

Our costs of goods sold related to all other components increased approximately ~~165.3%~~29.2% for the ~~three~~nine months ended ~~January~~July 31, 2022, compared to the same period ending ~~January~~July 31, 2021. Management attributes the increase to ~~increased~~overall inflationary pressure on certain components of cost of goods sold, including processing ingredients, electricity, and wages, salaries and benefits of production ~~and increased production-related wages~~personnel during the ~~three month~~nine-month period ended ~~January~~July 31, 2022. Production and production-related wages were greater during the recent period because production was temporarily stopped at the HLBE plant during the three months ended January 31, 2021 to allow for the replacement of the plant’s boiler.

Operating Expenses

Operating expenses include wages, salaries, and benefits of administrative employees at the plant, insurance, professional fees, property taxes, and similar costs. Our operating expenses increased by approximately ~~18.9%~~4% for the ~~three~~nine months ended ~~January~~July 31, 2022, compared to the same period ended ~~January~~July 31, 2021, due primarily to increased wages, salaries, property taxes and ~~professional fees. The increase in professional fees was partially due to legal, accounting, and other fees related to GFE’s merger with HLBE.~~

similar costs.

Operating Income ~~(Loss)~~

We recorded operating income of approximately ~~$24.8~~$38.2 million in the ~~three~~nine months ended ~~January~~July 31, 2022, an increase of approximately ~~$30.2~~$28.6 million from the same period ended ~~January~~July 31, 2021, when we recorded an operating ~~loss~~income of approximately ~~$5.4~~$9.6 million. This increase in operating income was attributable to ~~an increase in production and an increase~~increases in the ~~price~~prices received for our three principal products.

Other Income, Net

We had net other income of approximately ~~$247,000~~$15.4 million and approximately ~~$93,000~~$3.5 million for the ~~three~~nine months ended ~~January~~July 31, 2022, and 2021, respectively. This increase in net other income was primarily attributable to our receipt of approximately $14.2 million in USDA Biofuel Producer Payments in May 2022, which was coupled with an increase in other investment income ~~which was partially~~and offset by ana slight increase in interest expense.

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Changes in Financial Condition at ~~January~~July 31, 2022 and October 31, 2021

The following table highlights our financial condition at ~~January~~July 31, 2022 and October 31, 2021 (amounts in thousands):


	January 31, 2022		October 31, 2021		July 31, 2022		October 31, 2021
Current Assets	$	72,374	$	64,814	$	78,157	$	64,814
Total Assets	$	148,538	$	145,137	$	155,988	$	145,137
Current Liabilities	$	21,109	$	30,024	$	36,437	$	30,024
Long-Term Debt, less current portion	$	25,929	$	27,621	$	9,450	$	27,621
Operating lease, long-term liabilities	$	11,162	$	12,102	$	9,590	$	12,102
Other Long-Term Liabilities	$	1,479	$	1,468	$	1,502	$	1,468
Members' Equity attributable to Granite Falls Energy, LLC	$	88,860	$	73,922	$	99,009	$	73,922

Our total assets increased approximately ~~2.3%~~7.4% during the ~~three~~nine months ended ~~January~~July 31, 2022. The increase was primarily attributable to increases in cash and cash equivalents, restricted cash, inventory, and prepaid expenses and other current

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assets, which were partially offset by decreases in accounts receivable, ~~commodity derivative instruments, property and equipment,~~ investments, and operating lease right of use asset.

Our current liabilities ~~decreased~~increased approximately ~~$8.9 million, or 29.7%~~21.4%, at ~~January~~July 31, 2022, compared to October 31, 2021, due primarily to ~~decreases~~increases in accounts payable and member distribution payable, which was partially offset by ~~increases~~decreases in commodity derivative instruments and ~~current maturities of long-term debt.~~ accrued expenses.

Our long-term debt, less current portion, decreased approximately ~~$1.7 million, or about 6.1%~~65.8%, at ~~January~~July 31, 2022, compared to October 31, 2021, due to repayments on long-term debt.

Members’ equity attributable to Granite Falls Energy, LLC at ~~January~~July 31, 2022, compared to October 31, 2021 increased by approximately ~~$15.0 million, or approximately 20.2%~~33.9%. The increase was primarily attributable to net income attributable to GFE for the ~~three~~nine months ended ~~January~~July 31, 2022, less distributions of approximately ~~$10~~$28.5 million.

Liquidity and Capital Resources

Our principal sources of liquidity consist of cash provided by operations, cash on hand, and available borrowings under our credit facility with AgCountry. Our principal uses of cash are to purchase raw materials necessary to operate the ethanol plants, capital expenditures to maintain and upgrade our plants, to make debt service payments, and to make distribution payments to our members.

We do not currently anticipate any significant purchases of property and equipment that would require us to secure additional capital in the next twelve months. For our 2022 fiscal year, we anticipate completion of several small capital projects to maintain current plant infrastructure and improve operating efficiency. We expect to have sufficient cash generated by continuing operations and availability on our credit facilities and other loans to fund our operations and complete our capital expenditures during our 2022 fiscal year. However, should unfavorable operating conditions occur in the ethanol industry that prevent us from profitably operating our plants, we may need to seek additional debt or equity funding or idle ethanol production.

Management continues to evaluate conditions in the ethanol industry and explore opportunities to improve the efficiency and profitability of our operations which may require additional capital to supplement cash generated from operations and our current debt.

Cash Flows

The following table shows our cash flows for the ~~three~~nine months ended ~~January~~July 31, 2022, and 2021 (amounts in thousands):

2022

2021

(unaudited)

(unaudited)

Net cash provided by (used in) operating activities

$
18,170

$
(12,446)

Net cash provided by (used in) investing activities

$
2,539

$
(2,185)

Net cash provided by (used in) financing activities

$
(10,662)

$
8,070

Net increase (decrease) in cash and restricted cash

$
10,047

$
(6,561)


	2022		2021
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	60,314	$	4,827
Net cash used in investing activities	$	(2,692)	$	(4,116)
Net cash used in financing activities	$	(44,986)	$	(7,924)
Net increase in cash and restricted cash	$	12,636	$	(7,213)

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Operating Cash Flows

During the ~~three~~nine months ended ~~January~~July 31, 2022, we generated approximately ~~$30.6~~$55.5 million more cash from operating activities compared to the same period ending ~~January~~July 31, 2021, due primarily to increases in net income and accounts receivable generated from operating activities.

Investing Cash Flows

~~Cash provided by~~We had approximately $2.7 million of net cash used in investing activities ~~was approximately $4.7 million more~~ for the ~~three~~nine months ended ~~January~~July 31, 2022, compared to $4.1 million in the ~~same period a year earlier,~~prior year. This change was due primarily to the redemption of the Harvestone units, which was recorded in November ~~2021. Additionally, our cash provided~~2021, offset by ~~investing activities was less during the prior period~~

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~~because we incurred~~additional payments for capital expenditures ~~related primarily to~~and proceeds received from the ~~replacement of HLBE’s boiler during the three months ended January 31, 2021.~~ patronage investment.

Financing Cash Flows

During the ~~three~~nine months ended ~~January~~July 31, 2022, we experienced a decrease of approximately ~~$18.7~~$37.1 million in cash ~~provided by~~used in financing activities, compared to the ~~three month~~nine-month period ended ~~January~~July 31, 2021, which was attributable primarily to an increase in cash used for member distributions ~~and a decrease in cash provided by proceeds from long-term debt.~~during 2022.

Indebtedness

On September 27, 2021, GFE finalized loan documents for an amended credit facility (the “2021 Credit Facility”) with AgCountry. CoBank serves as AgCountry’s administrative agent for the 2021 Credit Facility. We entered into the 2021 Credit Facility to finance the acquisition of HLBE’s non-controlling interest and consolidate certain debts of GFE and HLBE. The loan documents include an Amended and Restated Credit Agreement (the “Credit Agreement”), which amends and replaces the Company’s credit agreement with AgCountry dated September 27, 2018.

As of ~~January~~July 31, 2022, GFE had indebtedness consisting of the following loans and agreements: the Credit Agreement, a $20 million revolving credit promissory note, a $20 million amended and restated revolving term promissory note, a $25 million single advance term promissory note, and a $2.4 million single advance term promissory ~~note, and~~note. In May 2022, the Company repaid the Project Hawkeye credit ~~facility.~~facility in full.

Subsequent to July 31, 2022, we amended our 2021 Credit Facility to transition from variable interest rate based on the LIBOR Index rate to a rate based on the daily SOFR rate. We also renewed our $20 million revolving credit promissory note from October 1, 2022 to October 1, 2023.

Additional information regarding our credit arrangements is available in Part 1. Financial Information - Item 1. Financial Statements - Note 7. DEBT FACILITIES, which is incorporated herein by reference.

Critical Accounting Policies and Estimates

Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. We believe that of our significant accounting policies summarized in Note 1 to our condensed consolidated unaudited financial statements included with this Form 10-Q.

At ~~January~~July 31, 2022, our critical accounting estimates continue to include those described in our annual report on Form 10-K for the fiscal year ended October 31, 2021. Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles in the United States of America.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

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Item 3. Quantitative and Qualitative Disclosures About Market

Not Applicable.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange ~~Commission's~~Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

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Effectiveness of Disclosure Controls and Procedures

AsWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange Act of ~~January 31, 2022,~~1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, ~~carried out an evaluation of~~as appropriate, to allow for timely decisions regarding required disclosures.

Our management, including our Chief Executive Officer, Jeff Oestmann (the principal executive officer), and our Chief Financial Officer, Stacie Schuler (the principal financial officer), have reviewed and evaluated the effectiveness of our disclosure controls and procedures ~~as such term is~~(as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities ~~and~~ Exchange Act of ~~1934.~~1934, as amended) as of July 31, 2022. Based on ~~that~~this review and evaluation, ~~our Chief Executive Officer and Chief Financial Officer~~these officers have concluded that our disclosure controls and procedures ~~were not~~are effective ~~because~~to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the ~~identification of a material weakness in our internal control over financial reporting which was initially identified during~~Securities and Exchange Commission; and to ensure that the year ended October 31, 2021. Remediation efforts have already been implemented which primarily consists of new policies and procedures to assist management to better understand contractual terms with suppliers and vendors, including an assessment of any potential accounting implications. We will consider this material weaknessinformation required to be ~~fully remediated once~~disclosed by an issuer in the ~~applicable controls operate for a sufficient period of time~~reports that it files or submits under the Exchange Act is accumulated and communicated to our management ~~has concluded, through testing, that these controls are operating effectively, which management expects~~including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to ~~be completed during the second quarter of fiscal 2022.~~

allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Except as noted above, there were no changes in our internal control over financial reporting that occurred during the ~~three~~nine months ended ~~January~~July 31, 2022, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~From time to time~~We are currently involved in litigation that has arisen during the ordinary course of ~~business, Granite Falls Energy, LLC, Heron Lake BioEnergy, LLC, and Agrinatural Gas, LLC, may be named as~~business. We do not believe this litigation will have a ~~defendant in legal proceedings related to various issues, including workers’ compensation claims, tort claims,~~material adverse effect on our financial position, results of operations or ~~contractual disputes. We are not currently involved in any material legal proceedings.~~cash flows.

Item 1A. Risk Factors

~~Not applicable.~~U.S. Federal Reserve Bank monetary policy actions could increase our costs of borrowing money and negatively impact our financial condition and future operations.

The recent 75 basis point increase by the Federal Reserve of the Federal Funds rate follows a series of rate hikes over the past several months. In June, the Fed’s policymakers signaled that they expected their key rate to end 2022 in a range of 3.25% to 3.5% and then to rise further next year to between 3.75% and 4%. If rates reached their projected level at the end of this year, they would be at the highest point since 2008. Together with any reduction of securities held on the Federal Reserve’s balance sheet (“quantitative tightening”), domestic market interest rates are expected to rise across the yield curve. Depending on future inflation rates, the rise of

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nominal interest rates may produce a rise in real interest rates (nominal rates minus the inflation rate) which is associated with lower asset prices due to higher carrying costs and higher discount rates of future earnings.

Higher interest rates resulting from tightening domestic monetary policy are expected to increase credit costs and decrease credit availability. Increases in interest rates would increase our costs of borrowing money under any of our debt facilities with variable interest rates, which would negatively impact our financial condition and future operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

Unit Reclassification Proposal

On March 8, 2022, the Board of Governors of the Company announced its intent to engage in a reclassification and reorganization of the Company’s membership units. The purpose of the reclassification and reorganization is to enable the Company to voluntarily terminate the registration of its units under the Exchange Act.

~~The~~On September 9, 2022, the Company ~~is conducting a survey of~~filed its ~~members regarding each member’s status as an “accredited investor,” as defined by Rule 501 of Regulation D of the Securities Act of 1933. The Company intends to structure~~definitive proxy statement on Schedule 14A and transaction statement on Schedule 13E-3 concerning the reclassification ~~to result in two unit classes. However, depending on the results of the accredited investor survey, it is possible the Company will structure the reclassification to result in three unit classes.~~

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~~The reclassification~~ proposal ~~including any~~and associated amendments to the Company’s operating and member control agreement, ~~will be~~which are both subject to approval by the members. ~~We intend~~In addition, the proposal to amend the Company’s operating and member control agreement is conditioned on the proposal to reclassify the Company’s units such that both proposals must be approved for ~~members~~to them to be implemented. Members of record as of September 9, 2022, will be eligible to vote on the reclassification ~~proposal~~and reorganization proposals at a special meeting of the ~~company’s 2022 annual meeting. The Company intends~~members, which is scheduled for November 3, 2022. If the reclassification ~~proposal to result in~~and reorganization proposals are approved, the Company ~~having fewer than 300 unitholders in its existing unit class and fewer than 500 unitholders who are not accredited investors in each additional unit class, which would enable the Company~~intends to voluntarily terminate the registration of its units under the Exchange Act.

Members will receive a detailed description of the reclassification and reorganization proposal in a proxy statement delivered prior to the annual meeting. The Company expects to hold the annual meeting in May or June of 2022. Additional information regarding the annual meeting is provided below.~~Additional information regarding the reclassification and reorganization proposal is available in the Form 8-K filed by the Company on March 8, 2022, which is incorporated herein by reference.~~

~~Annual Meeting Date and Member Proposals~~

We currently intend to hold our 2022 annual meeting in May or June of 2022. The specific date, time, and location of the annual meeting will be disclosed in a proxy statement delivered to members prior to the meeting.

The Company typically holds its annual meeting in March and held the 2021 annual meeting on March 25, 2021. The Company has decided to delay the 2022 annual meeting to allow the unit reclassification and reorganization proposal discussed above to be developed and included in the annual meeting agenda.

Because the 2022 annual meeting will be held more than 30 days after the date of the 2021 annual meeting, the Company is required to provide amended deadlines for submitting proposals for the annual meeting. We have determined that members must submit proposals related to the 2022 annual meeting of members to the Company by April 1, 2022. To be considered by us for inclusion in the proxy material for the 2022 annual meeting, a member proposal must be received by the Secretary of the Company at our principal office, 15045 Highway 23 S.E., Granite Falls, MN 56241-0216 by April 1, 2022.

The submission of a proposal does not guarantee its inclusion in the proxy statement or presentation at the annual meeting unless certain securities laws requirements are met. Proposals submitted for presentation at the annual meeting will be considered untimely if received after April 1, 2022, and will not be included on the agenda or in the proxy statement for the 2022 annual meeting. We suggest that any proposal be submitted by certified mail - return receipt requested.

3136

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Item 6. Exhibits.

(a)

The following exhibits are included in this report.


Exhibit No.			Exhibit

31.1			Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)**

31.2			Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)***

32.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350***

32.2			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350***
~~99.1~~			Letter to members of Granite Falls Energy, LLC, regarding unit reclassification proposal, dated March 8, 2022*
101			The following financial information from Granite Falls Ethanol, ~~LLC's~~LLC’s Quarterly Report on Form 10-Q for the three and nine months ended ~~January~~July 31, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at ~~January~~July 31, 2022 and October 31, 2021; (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended ~~January~~July 31, 2022 and 2021; (iii) the Condensed Consolidated Statements of Changes in Members’ Equity for the three and nine months ended ~~January~~July 31, 2022 and 2021; (iv) the Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~January~~July 31, 2022 and 2021; and (iv) Notes to Condensed Consolidated Unaudited Financial Statements.**

104			Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101).**

*~~Incorporated by reference to the Company’s Form 8-K filed with the SEC March 8, 2022.~~

** Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		GRANITE FALLS ENERGY, LLC

Date: ~~March 17,~~September 14, 2022		/s/ Jeffrey Oestmann
		Jeffrey Oestmann
		Chief Executive Officer

		/s/ Stacie Schuler
Date: ~~March 17,~~September 14, 2022		Stacie Schuler
		Chief Financial Officer

3238


Minnesota		41-1997390
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15045 Highway 23 SE, Granite Falls, MN 56241-0216
(Address of principal executive offices)

(320) 564-3100
(~~Registrant's~~Registrant’s telephone number, including area code)



Title of each class:	Trading Symbol	Name of each exchange on which registered:
None	N/A	N/A


Large Accelerated Filer	☐	Non-Accelerated Filer	☒
Accelerated Filer	☐	Smaller Reporting Company	☒
		Emerging Growth Company	☐


	Page Number
PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements	3

Item 2. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819

Item 3. Quantitative and Qualitative Disclosures about Market Risk	2935

Item 4. Controls and Procedures	2935

PART II. OTHER INFORMATION	3035

Item 1. Legal Proceedings	3035

Item 1A. Risk Factors	3035

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3036

Item 3. Defaults Upon Senior Securities	3036

Item 4. Mine Safety Disclosures	3036

Item 5. Other Information	3036

Item 6. Exhibits	3237

SIGNATURES	3238


	January 31, 2022		October 31, 2021
ASSETS	(unaudited)
Current Assets
Cash and cash equivalents	$	37,813,663	$	29,295,657
Restricted cash		3,170,349		1,641,123
Accounts receivable		7,963,806		12,028,397
Inventory		21,748,685		20,749,831
Commodity derivative instruments		—		39,076
Prepaid expenses and other current assets		1,677,822		1,059,604
Total current assets		72,374,325		64,813,688

Property and Equipment, net		48,840,320		49,716,246

Investments		12,133,737		14,518,331

Operating lease right of use asset		14,857,962		15,755,395

Other Assets		332,254		333,254

Total Assets	$	148,538,598	$	145,136,914

LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt	$	6,171,429	$	5,046,429
Accounts payable		8,666,625		19,445,954
Commodity derivative instruments		1,478,438		732,801
Accrued expenses		1,096,651		1,145,326
Operating lease, current liabilities		3,695,812		3,653,131
Total current liabilities		21,108,955		30,023,641

Long-Term Debt, less current portion		25,928,571		27,621,428

Operating lease, long-term liabilities		11,162,150		12,102,264

Other Long-Term Liabilities		1,479,329		1,467,848

Commitments and Contingencies

Members' Equity
Members' equity attributable to Granite Falls Energy, LLC consists of 30,606 units authorized, issued and outstanding at January 31, 2022 and October 31, 2021		88,859,593		73,921,733

Total Liabilities and Members' Equity	$	148,538,598	$	145,136,914


	Three Months Ended
	January 31, 2022		January 31, 2021
	(Unaudited)		(Unaudited)

Revenues	$	109,778,677	$	49,398,386

Cost of Goods Sold		82,622,134		52,788,296

Gross Profit (Loss)		27,156,543		(3,389,910)

Operating Expenses		2,371,272		1,994,237

Operating Income (Loss)		24,785,271		(5,384,147)

Other Income (Expense)
Other income (expense), net		(4,582)		143,457
Interest income		2,583		1,311
Interest expense		(366,514)		(166,455)
Investment income		615,406		114,455
Total other income, net		246,893		92,768

Net Income (Loss)	$	25,032,164	$	(5,291,379)

Less: Net Loss Attributable to Non-controlling Interest	$	—	$	2,040,525

Net Income (Loss) Attributable to Granite Falls Energy, LLC	$	25,032,164	$	(3,250,854)

Weighted Average Units Outstanding - Basic and Diluted		30,606		30,606

Amounts attributable to Granite Falls Energy, LLC:

Net Income (Loss) Per Unit - Basic and Diluted	$	817.88	$	(106.22)

Distributions Per Unit	$	330.00	$	—


	Members' Equity attributable to
	Granite Falls Energy, LLC	Non-controlling Interest	Total Members' Equity
Balance - October 31, 2021	$ 73,921,733	—	$ 73,921,733

Member distributions	(10,094,304)	—	(10,094,304)
Net income attributable to Granite Falls Energy, LLC	25,032,164	—	25,032,164

Balance - January 31, 2022	$ 88,859,593	—	$ 88,859,593


Balance - October 31, 2020	$ 52,111,525	$ 9,780,302	$ 61,891,827

Net loss attributable to non-controlling interest	—	(2,040,525)	(2,040,525)
Net loss attributable to Granite Falls Energy, LLC	(3,250,854)	—	(3,250,854)

Balance - January 31, 2021	$ 48,860,671	$ 7,739,777	$ 56,600,448


	Members' Equity
	attributable to		Non-controlling		Total Members'
	Granite Falls Energy, LLC		Interest		Equity
Balance - October 31, 2021	$	73,921,733	$	—	$	73,921,733

Member distributions		(10,094,304)		—		(10,094,304)
Net income attributable to Granite Falls Energy, LLC		25,032,164		—		25,032,164

Balance - January 31, 2022 (unaudited)	$	88,859,593	$	—	$	88,859,593

Net income attributable to Granite Falls Energy, LLC		7,923,797		—		7,923,797

Balance - April 30, 2022 (unaudited)	$	96,783,390	$	—	$	96,783,390
			��
Member distributions		(18,363,600)		—		(18,363,600)
Net income attributable to Granite Falls Energy, LLC		20,589,440		—		20,589,440

Balance – July 31, 2022 (unaudited)	$	99,009,230	$	—	$	99,009,230

Balance - October 31, 2020	$	52,111,525	$	9,780,302	$	61,891,827

Net loss attributable to non-controlling interest		—		(2,040,525)		(2,040,525)
Net loss attributable to Granite Falls Energy, LLC		(3,250,854)		—		(3,250,854)

Balance - January 31, 2021 (unaudited)	$	48,860,671	$	7,739,777	$	56,600,448

Net income attributable to non-controlling interest		—		1,323,603		1,323,603
Net income attributable to Granite Falls Energy, LLC		8,135,984		—		8,135,984

Balance - April 30, 2021 (unaudited)	$	56,996,655	$	9,063,380	$	66,060,035

Net income attributable to non-controlling interest		—		2,288,814		2,288,814
Net income attributable to Granite Falls Energy, LLC		6,583,354		—		6,583,354

Balance – July 31, 2021 (unaudited)	$	63,580,009	$	11,352,194	$	74,932,203


	Nine Months Ended		Nine Months Ended
	July 31, 2022		July 31, 2021
	(Unaudited)		(Unaudited)
Cash Flows from Operating Activities
Net income	$	53,545,401	$	13,040,376
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		3,936,888		5,964,030
Paycheck Protection Program loan forgiveness		—		(2,003,493)
Change in fair value of derivative instruments		4,880,835		7,686,416
Gain on equity method investments		(1,326,086)		(1,527,100)
(Gain) loss on disposal of assets		(63,602)		21,728
Return on investment		480,000		282,902
Patronage investment income		(421,330)		—
Changes in operating assets and liabilities:
Commodity derivative instruments		(5,327,098)		(7,854,582)
Accounts receivable		3,863,872		(3,198,202)
Inventory		(4,165,638)		(8,875,322)
Prepaid expenses and other assets		(211,727)		(330,093)
Accounts payable		5,271,224		1,424,428
Accrued expenses		(182,239)		161,661
Accrued railcar rehabilitation costs		34,443		34,443
Net Cash Provided By Operating Activities		60,314,943		4,827,192

Cash Flows from Investing Activities
Proceeds from redemption of equity method investment		3,000,000		—
Proceeds from redemption of patronage investment		261,329		—
Payments for capital expenditures		(5,953,820)		(4,116,332)
Net Cash Used In Investing Activities		(2,692,491)		(4,116,332)

Cash Flows from Financing Activities
Checks drawn in excess of bank balance		—		123,616
Proceeds from Paycheck Protection Program loans		—		1,299,593
Proceeds from long-term debt		—		8,752,196
Payments on long-term debt		(18,117,857)		(18,099,089)
Member distributions		(26,868,504)		—
Net Cash Used In Financing Activities		(44,986,361)		(7,923,684)

Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash		12,636,091		(7,212,824)

Cash, Cash Equivalents and Restricted Cash - Beginning of Period		30,936,780		13,580,121

Cash, Cash Equivalents and Restricted Cash - End of Period	$	43,572,871	$	6,367,297

Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and Cash Equivalents - Balance Sheet	$	41,386,772	$	4,491,334
Restricted Cash - Balance Sheet		2,186,099		1,875,963
Cash, Cash Equivalents and Restricted Cash	$	43,572,871	$	6,367,297

Supplemental Cash Flow Information
Cash paid during the period for:
Interest expense	$	1,042,484	$	593,651

Supplemental Disclosure of Non-Cash Investing and Financing Activities
Capital expenditures and construction in process included in accounts payable	$	27,561	$	51,047
Purchase of equipment with trade-in value	$	79,500	$	—
Member distributions payable	$	1,589,400	$	—