HIGHWATER ETHANOL LLC - Quarter Report: 2015 July (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

	For the quarterly period ended July 31, 2015

	OR

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

	For the transition period from to .

	COMMISSION FILE NUMBER 000-53588

HIGHWATER ETHANOL, LLC

(Exact name of registrant as specified in its charter)



Minnesota				20-4798531
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

24500 US Highway 14, Lamberton, MN 56152
(Address of principal executive offices)

(507) 752-6160
(Registrant's telephone number, including area code)

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

x Yes o No

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

x Yes o No

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



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

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

o Yes x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of September 10, 2015 there were 4,953 membership units outstanding.

INDEX



	Page Number
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3. Quantitative and Qualitative Disclosures about Market Risk	24
Item 4. Controls and Procedures	25
PART II. OTHER INFORMATION	26
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	27
SIGNATURES	27

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

HIGHWATER ETHANOL, LLC

Condensed Balance Sheets



ASSETS	July 31, 2015			October 31, 2014
	(Unaudited)
Current Assets
Cash and cash equivalents	$	12,870,517		$	15,511,589
Derivative instruments	271,240			257,934
Accounts receivable	3,485,315			4,382,371
Inventories	4,667,416			4,295,191
Prepaids and other	90,746			55,650
Total current assets	21,385,234			24,502,735

Property and Equipment
Land and land improvements	6,881,124			6,881,124
Buildings	38,516,347			38,489,826
Office equipment	624,094			589,727
Equipment	64,864,783			64,015,750
Vehicles	52,994			52,994
Construction in progress	2,399,342			317,477
	113,338,684			110,346,898
Less accumulated depreciation	(37,994,199		)	(32,862,880		)
Net property and equipment	75,344,485			77,484,018

Other Assets
Investments	2,523,115			2,403,452
Debt issuance costs, net	184,848			231,347
Deposits	191,457			191,457
Total other assets	2,899,420			2,826,256

Total Assets	$	99,629,139		$	104,813,009



LIABILITIES AND MEMBERS' EQUITY	July 31, 2015		October 31, 2014
	(Unaudited)
Current Liabilities
Accounts payable	$	1,498,632	$	1,897,610
Accrued expenses	1,013,377		1,034,907
Customer deposits	55,072		—
Current maturities of long-term debt	4,321,965		4,298,766
Total current liabilities	6,889,046		7,231,283

Long-Term Debt	20,829,530		24,315,010

Commitments and Contingencies

Members' Equity
Members' equity, 4,953 units outstanding	71,910,563		73,266,716

Total Liabilities and Members’ Equity	$	99,629,139	$	104,813,009

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

HIGHWATER ETHANOL, LLC

Condensed Unaudited Statements of Operations



	Three Months Ended						Nine Months Ended
	July 31, 2015			July 31, 2014			July 31, 2015			July 31, 2014

Revenues	$	28,641,415		$	37,172,560		$	84,547,370		$	107,802,687

Cost of Goods Sold	25,857,236			31,927,445			78,226,325			86,312,425
										.
Gross Profit	2,784,179			5,245,115			6,321,045			21,490,262

Operating Expenses	528,875			468,920			1,855,268			1,668,270

Operating Profit	2,255,304			4,776,195			4,465,777			19,821,992

Other Income (Expense)
Interest income	3,255			6,968			10,637			16,715
Other income	263,219			8,758			345,452			258,148
Interest expense	(253,166		)	(576,588		)	(817,582		)	(2,561,392		)
Gain on interest rate swap	—			—			—			427,091
Income from equity method investments	72,424			73,983			211,688			65,654
Total other income (expense), net	85,732			(486,879		)	(249,805		)	(1,793,784		)

Net Income	$	2,341,036		$	4,289,316		$	4,215,972		$	18,028,208

Weighted Average Units Outstanding	4,953			4,953			4,953			4,953
Net Income Per Unit	$	472.65		$	866.00		$	851.20		$	3,639.86
Distributions Per Unit	$	—		$	—		$	1,125		$	—

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

HIGHWATER ETHANOL, LLC

Condensed Unaudited Statements of Comprehensive Income



	Three Months Ended					Nine Months Ended
	July 31, 2015		July 31, 2014			July 31, 2015		July 31, 2014

Net Income	$	2,341,036	$	4,289,316		$	4,215,972	$	18,028,208
Other Comprehensive Income (Loss)
Unrealized loss on restricted marketable securities	—		(764		)	—		(4,440		)
Comprehensive Income	$	2,341,036	$	4,288,552		$	4,215,972	$	18,023,768

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

HIGHWATER ETHANOL, LLC

Condensed Unaudited Statements of Cash Flows



	Nine Months Ended
	July 31, 2015			July 31, 2014
	(Unaudited)			(Unaudited)
Cash Flows from Operating Activities
Net income	$	4,215,972		$	18,028,208
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	5,177,819			4,961,950
Income from equity method investments	(211,688		)	(65,654		)
Non-cash patronage income	(255,375		)	(197,494		)
Change in assets and liabilities
Restricted marketable securities	—			28,484
Accounts receivable	897,056			(2,077,273		)
Inventories	(372,225		)	(1,350,805		)
Derivative instruments	(13,307		)	114,048
Prepaids and other	(35,097		)	86,691
Customer deposits	55,072			7,379
Accounts payable	(430,243		)	1,257,495
Accrued expenses	(21,530		)	474,161
Net cash provided by operating activities	9,006,454			21,267,190

Cash Flows from Investing Activities
Capital expenditures	(2,960,520		)	(797,724		)
Dividends received from (investment in) equity method investments	347,400			(234,000		)
Net cash used in investing activities	(2,613,120		)	(1,031,724		)

Cash Flows from Financing Activities
Payments on long-term debt	(3,462,281		)	(34,459,766		)
Advances on long-term debt	—			20,000,000
Payment of debt issuance costs	—			(222,650		)
Member distributions	(5,572,125		)	—
Net cash used in financing activities	(9,034,406		)	(14,682,416		)

Net Increase (Decrease) in Cash and Cash Equivalents	(2,641,072		)	5,553,050

Cash and Cash equivalents – Beginning of Period	15,511,589			7,869,188

Cash and Cash equivalents – End of Period	$	12,870,517		$	13,422,238

Supplemental Cash Flow Information
Cash paid for interest expense	$	704,127		$	2,282,251

Supplemental Disclosure of Noncash Financing and Investing Activities
Unrealized loss on restricted marketable securities	$	—		$	(4,440	)
Capital lease financing	$	—		$	2,352,137
Capital expenditures included in accounts payable	$	31,265		$	—

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

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. The accompanying balance sheet and related notes as of October 31, 2014 are derived from the audited financial statements as of that date. These condensed financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended October 31, 2014, contained in the Company’s Form 10-K.

In the opinion of management, the interim condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation of the Company's financial position as of July 31, 2015 and the results of operations and cash flows for all periods presented.

Nature of Business

Highwater Ethanol, LLC, (a Minnesota Limited Liability Company) operates a 50 million gallon per year ethanol plant in Lamberton, Minnesota. The Company produces and sells fuel ethanol and co-products of the fuel ethanol production process, in the continental United States, Mexico and Canada.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made.

Revenue Recognition

The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility.

In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products.

Derivative Instruments

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

Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015

quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting as derivatives, therefore, are not marked to market in our financial statements.

The Company entered into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, and other working capital items approximate fair value at July 31, 2015 due to the short maturity nature of these instruments.

The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs.

The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that this rate is a market interest rate for these borrowings.

Equity Method Investments

The Company has an investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. This investment is a flow-through entity and is being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s income statement and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company has a 7% interest in RPMG.

The Company is one of eight member owner-investors in Lawrenceville Tank, LLC. The Company has a 7% ownership in Lawrenceville Tank, LLC which owns and operates a trans load/tank facility in Atlanta, Georgia area. This provides another area of opportunity for the Company’s ethanol production to be marketed by RPMG

The Company consistently follows the practice of recognizing the net income based on the most recent reliable data. Therefore, the net income which is reported in the Company's income statement for the quarter ended July 31, 2015 is based on the investee’s results of operations for the three month period ended June 30, 2015.

Railcar Damages Accrual

In accordance with the Company's railcar lease agreements, the Company is required to pay for damages considered to be in excess of normal wear and tear at the termination of the lease. The Company accrues the estimated cost for railcar damages over the term of the lease.

2. UNCERTAINTIES

The Company derives substantially all of its revenues from the sale of ethanol and distillers grains. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement.

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015

3. FAIR VALUE MEASUREMENTS

The following table provides information on those assets (liabilities) measured at fair value on a recurring basis.



	Fair Value as of			Fair Value Measurement Using
	July 31, 2015			Level 1			Level 2		Level 3
Derivative instruments - commodities	$	(512,718	)	$	(512,718	)	$	—	$	—



	Fair Value as of			Fair Value Measurement Using
	October 31, 2014			Level 1			Level 2		Level 3
Derivative instruments - commodities	$	(339,011	)	$	(339,011	)	$	—	$	—

The Company determines the fair values of commodities by obtaining the fair value measurements from an independent pricing service based on dealer quotes and live trading levels from the Chicago Board of Trade.

4. INVENTORIES

Inventories consisted of the following at:



	July 31, 2015		October 31, 2014

Raw materials	$	1,641,110	$	1,653,015
Spare parts and supplies	1,858,896		1,603,984
Work in process	766,350		710,583
Finished goods	401,060		327,609
Total	$	4,667,416	$	4,295,191

5. DERIVATIVE INSTRUMENTS

As of July 31, 2015, the Company had entered into corn derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. The Company uses these instruments to manage risks from changes in market rates and prices. They are not used for speculative purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company may designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The derivative instruments outstanding at July 31, 2015 are not designated as effective hedges for accounting purposes.

Commodity Contracts

As of July 31, 2015, the Company has open positions for 175,000 bushels of corn. Management expects all open positions outstanding as of July 31, 2015 to be realized within the next twelve months.

The following tables provide details regarding the Company's derivative instruments at July 31, 2015 and October 31, 2014:

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015



Instrument	Balance Sheet location	July 31, 2015			October 31, 2014

Corn, natural gas and ethanol contracts
In gain position		$	—		$	—
In loss position		(512,718		)	(339,011		)
Deposits with broker		783,958			596,945
	Current assets	$	271,240		$	257,934

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



	Statement of	Three Months Ended July 31,
	Operations location	2015			2014
Ethanol contracts	Revenues	$	223		$	46,357
Corn contracts	Cost of goods sold	(54,866		)	(1,911,954		)
Natural gas contracts	Cost of goods sold	9,010			(52,340		)



	Statement of	Nine Months Ended July 31,
	Operations location	2015			2014
Interest rate swap	Other income (expense)	$	—		$	427,091
Ethanol contracts	Revenues	(32,235		)	(477,785		)
Corn contracts	Cost of goods sold	337,180			(611,140		)
Natural gas contracts	Cost of goods sold	(26,562		)	(144,546		)

6. DEBT FINANCING

Long-term debt consists of the following at:



	July 31, 2015		October 31, 2014
Variable Rate Term Loan (AgStar)	$	23,616,419	$	26,509,288

Capital lease	1,535,076		2,104,488

Total	25,151,495		28,613,776

Less amounts due within one year	4,321,965		4,298,766

Net long-term debt	$	20,829,530	$	24,315,010

Bank Financing

On September 22, 2014, the Company entered into an Amended and Restated Credit Agreement with Ag Star Financial Services, PCA ("AgStar") which amended the Credit Agreement originally dated February 27, 2014. The Amended and Restated Credit provides for a $27,000,000 Term Loan, a $5,000,000 Term Revolving Loan and a $5,000,000 Revolving Line of Credit subject to terms described in the Amended and Restated Credit Agreement and summarized below. The Company pays an annual facility fee of $10,000 to AgStar. Effective February 26, 2015, the Company entered into a First Amendment to Amended and Restated Credit Agreement with Ag Star extending the maturity date on its Revolving Line of Credit until March 1, 2016.

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015

Term Loan

The Term Loan is for $27,000,000 with a variable interest rate that is the greater of the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. Monthly principal payments are due on the Term Loan of approximately $321,000 plus accrued interest. Payments are based upon a seven year amortization and the Term Loan is fully amortized. The outstanding balance on this note was $23,616,419 at July 31, 2015. The Company may convert the Term Loan to a fixed rate loan, subject to certain conditions as described in the Amended and Restated Credit Agreement and with the consent of AgStar.

Term Revolving Loan

The Term Revolving Loan is for up to $5,000,000 with a variable interest rate that is the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan. Payment of all amounts outstanding is due on September 22, 2021. The outstanding balance was $0 at July 31, 2015 and October 31, 2014. As of July 31, 2015, the Company has $2,000,000 in letters of credit outstanding which reduce the amount available under the Term Revolving Loan. The Company pays interest at a rate of 1.5% on amounts outstanding for the letters of credit.

Revolving Line of Credit

The Company has a Revolving Line of Credit available equal to the amount of the Borrowing Base, with a maximum limit of $5,000,000. The Borrowing Base will vary and may at times be less than $5,000,000. Effective February 26, 2015, the Company extended the expiration date on the Revolving Line of Credit to March 1, 2016. The Revolving Line of Credit accrues interest at the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. Monthly interest payments are due on the Revolving Line of Credit. The outstanding balance was $0 at July 31, 2015 and October 31, 2014.

Covenants and other Miscellaneous Terms

The loan facility with AgStar is secured by substantially all business assets. The Company executed a mortgage creating a first lien on its real estate and plant and a security interest in all personal property located on the premises and assigned all rents and leases to property, marketing contracts, risk management services contract, and natural gas, electricity, water service and grain procurement agreements.

The Company is also subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage, tangible net worth, and working capital requirements. The fixed charge coverage ratio is no less than 1.15:1.00 and is measured annually by comparing adjusted EBITDA to scheduled payments of principal and interest plus capital expenditures and distributions. The minimum net worth is no less than $42,000,000, which is calculated as the excess of total assets excluding various disallowed assets per the Amended and Restated Credit Agreement over total liabilities, and is measured quarterly. The minimum working capital is $8,250,000, which is calculated as current assets plus the amount available for drawing under our Term Revolving Loan, and undrawn amounts on outstanding letters of credit less current liabilities, and is measured quarterly.

The Company is limited to annual capital expenditures of $2,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Amended and Restated Credit Agreement, and is also prohibited from making distributions to members in excess of 50% of net income in a given year without prior approval.

The Company is also required to pay unused commitment fees for the Term Revolving Loan and the Revolving Line of Credit as defined in the Amended and Restated Credit Agreement.

Capital Lease

The Company entered into a series of related definitive agreements, dated September 26, 2013, with Butamax which include an Easement for Construction and Process Demonstration Agreement, an Equipment Lease Agreement, a Technology License Agreement, a Technology Demonstration Risk Reduction Agreement and a Security Agreement (collectively, the "Agreements") pursuant to which Butamax has agreed to construct, install and lease its corn oil separation system and license to the Company its proprietary, patent-protected corn oil separation technology. Pursuant to the Agreements, the Company agreed to give Butamax access to the plant in order to construct, install, operate, test and commercially validate a corn oil separation system.

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

July 31, 2015

Butamax retains ownership of the corn oil separation system and technology but agrees to lease it to the Company for a term of 120 months subject to Butamax's right to remove the system if the Company is in breach of the Agreements. The term of the lease may also be extended or terminated pursuant to the terms of the Agreements. The Company is responsible for repairs and maintenance of the system and bear the risk of loss. In return, the Company agrees to payment of certain license fees which are subject to being reduced under the terms of the Agreements if the corn oil separation system does not meet certain performance goals. The Agreements provide that the corn oil separation system shall be conveyed to the Company at the end of the term so long as the Company is not in breach of the Agreements. The Company granted a security interest to Butamax in the corn oil separation system to secure its obligations under the Agreements. Pursuant to the Agreements, the Company agreed, subject to certain obligations of confidentiality, to provide Butamax with Company information on a monthly basis including business and financial information and have granted Butamax the option to have a representative present in board and committee meetings as an observer. The Company also agreed to give Butamax notice in the event of an issuance or sale of membership interests or convertible debt instruments. The Company recorded this as a capital lease in April 2014, and the balance as of July 31, 2015 was $1,535,076.

The estimated maturities of the long-term debt at July 31, 2015 are as follows:



2015	$	4,321,965
2016	4,606,001
2017	3,857,160
2018	3,857,160
2019	3,857,160
2020 and thereafter	4,652,049
Long-term debt	$	25,151,495

7. COMMITMENTS AND CONTINGENCIES

Regulatory Agencies

The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business.

Forward Contracts

At July 31, 2015, the Company has approximately 1,025,000 MMBTUs of forward fixed price natural gas purchase contracts for various delivery periods through March 2017. The Company also has approximately 749,000 gallons of forward fixed price denaturant purchase contracts for various delivery periods through April 2016. In addition, the Company has forward dried distiller grains sales contracts of approximately 24,000 tons at various fixed prices for various delivery periods through December 2015.

Construction

The Company has commenced a project to install a water pipeline to capture water currently discharged by the Red Rock Quarry into the Little Cottonwood River. The project would add a third water resource and is expected to cost approximately $4,500,000. In connection with the installation of the pipeline, the Company has contracted with DGR Engineering to provide engineering and oversight for the construction of this water pipeline and have executed construction agreements with three contractors to construct the project.

The Company has approved a project to add additional grain storage which is expected to add 600,000 bushels of storage and cost approximately $1,900,000. In connection therewith, the Company has entered into a construction agreement with a contractor to construct the grain bin. The project is expected to begin during the fourth quarter of fiscal year 2015.

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

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and nine month periods ended July 31, 2015, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2014.

Forward-Looking Statements

This report contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases you can identify forward-looking statements by the use of words such as “will,” “may,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking statements. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to:



Ÿ	Changes in the availability and price of corn and natural gas;
Ÿ	Reduction or elimination of the Renewable Fuel Standard;
Ÿ	Volatile commodity and financial markets;
Ÿ	Changes in legislation benefiting renewable fuels;
Ÿ	Our ability to comply with the financial covenants contained in our credit agreements with our lenders;
Ÿ	Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs;
Ÿ	Results of our hedging activities and other risk management strategies;
Ÿ	Ethanol and distillers grains supply exceeding demand and corresponding price reductions;
Ÿ	Our ability to generate cash flow to invest in our business and service our debt;
Ÿ	Changes in the environmental regulations that apply to our plant operations and changes in our ability to comply with such regulations;
Ÿ	Changes in our business strategy, capital improvements or development plans;
Ÿ	Changes in plant production capacity or technical difficulties in operating the plant;
Ÿ	Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;
Ÿ	Lack of transportation, storage and blending infrastructure preventing ethanol from reaching high demand markets;
Ÿ	Changes in federal and/or state laws or policies impacting the ethanol industry;
Ÿ	Changes and advances in ethanol production technology and the development of alternative fuels and energy sources and advanced biofuels;
Ÿ	Competition from alternative fuel additives;
Ÿ	Changes in interest rates and lending conditions;
Ÿ	Decreases in the price we receive for our ethanol and distillers grains;
Ÿ	Our inability to secure credit or obtain additional equity financing we may require in the future;
Ÿ	Our ability to retain key employees and maintain labor relations; and
Ÿ	Changes in the price of oil and gasoline.

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We are not under any duty to update the forward-looking statements contained in this report. Furthermore, we cannot guarantee future results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

Available Information

Our website address is www.highwaterethanol.com. Our annual report on Form 10-K, quarterly 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 (the “Exchange Act”), are available, free of charge, on our website at www.highwaterethanol.com 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 Quarterly Report on Form 10-Q.

Overview

Highwater Ethanol, LLC (“we,” “our,” “Highwater Ethanol” or the “Company”) was formed as a Minnesota limited liability company organized on May 2, 2006, for the purpose of constructing, owning, and operating a 50 million gallon per year ethanol plant near Lamberton, Minnesota. Since August 2009, we have been engaged in the production of ethanol and distillers grains at the plant. We have been operating in excess of our nameplate capacity of 50 million gallons per year and anticipate we will continue to do so in the future.

Our operating results are largely driven by the prices at which we sell our ethanol and distillers grains as well as the costs related to production. The price of ethanol has historically fluctuated with the price of corn. The price of distillers grains has also historically been influenced by the price of corn as a substitute livestock feed. We expect these price relationships to continue for the foreseeable future, although recent volatility in the commodities markets makes historical pricing relationships less reliable. Our largest costs of production are corn, natural gas, depreciation and manufacturing chemicals. The cost of corn is largely impacted by geopolitical supply and demand factors and the outcome of our risk management strategies. Prices for natural gas, manufacturing chemicals and denaturant are tied directly to the overall energy sector, crude oil and unleaded gasoline. We market and sell our products primarily in the continental United States using third party marketers. RPMG, Inc. markets our ethanol. CHS, Inc. markets our dried distillers grains and corn oil. Meadowland Farmers Co-op supplies our corn.

We have commenced a project to install a water pipeline to add a third water resource for our plant. The project is expected to cost approximately $4,500,000. In connection with the installation of the pipeline, we have contracted with DGR Engineering to provide engineering and oversight for the construction of this water pipeline and have executed construction agreements with three contractors, including Rice Lake Construction Group, to construct the project. The project is expected to be completed during the first quarter of our 2016 fiscal year.

We have approved a project to add additional grain storage which is expected to add 600,000 bushels of storage and cost approximately $1,900,000. The project is expected to commence during the fourth quarter of our 2015 fiscal year and be completed during the second quarter of our 2016 fiscal year.

The ethanol industry is dependent on several economic incentives which if reduced or eliminated could significantly impact ethanol demand. One of these is the Renewable Fuels Standard (“RFS”) program which requires that, in each year, a certain amount of renewable fuels be used in the United States. However, the United States Environmental Protection Agency ("EPA") has the authority to waive the RFS statutory volume requirement, in whole or in part, provided one of the following two conditions have been met: (1) there is inadequate domestic renewable fuel supply; or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. However, the EPA decided to delay finalizing the rule on the 2014 and 2015 RFS standards until after the end of 2014. On May 29, 2015, the EPA released proposed rules for the 2014, 2015 and 2016 renewable volume obligations. The statutory volumes and the EPA proposed volumes for 2014, 2015 and 2016 (in billion gallons) are as follows:



		Total Renewable Fuel Volume Requirement	Portion of Volume Requirement That Can Be Met By Corn-based Ethanol
2014	Statutory	18.15	14.40
2014	EPA Proposal 5/29/2015	15.93	13.25
2015	Statutory	20.50	15.00
2015	EPA Proposal 5/29/2015	16.30	13.40
2016	Statutory	22.25	15.00
2016	EPA Proposal 5/29/2015	17.40	14.00

The public comment period on the proposed rules was open through July 27, 2015. If the volume requirements under the RFS are reduced of if the RFS were to be otherwise reduced or eliminated by the exercise of the EPA waiver authority or by Congress, the market price and demand for ethanol could decrease which will negatively impact our financial performance.

We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities. However, should we experience unfavorable operating conditions in the ethanol industry that prevent us

from profitably operating the ethanol plant, we may need to seek additional funding.

Results of Operations for the Three Months Ended July 31, 2015 and 2014

The following table shows the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our unaudited statements of operations for the three months ended July 31, 2015 and 2014:



	2015				2014
Statement of Operations Data	Amount (unaudited)		%		Amount (unaudited)			%

Revenue	$	28,641,415	100.00	%	$	37,172,560		100.00	%
Cost of Goods Sold	25,857,236		90.28	%	31,927,445			85.89	%
Gross Profit	2,784,179		9.72	%	5,245,115			14.11	%
Operating Expenses	528,875		1.85	%	468,920			1.26	%
Operating Profit	2,255,304		7.87	%	4,776,195			12.85	%
Other Income (Expense)	85,732		0.30	%	(486,879		)	(1.31	)%
Net Income	$	2,341,036	8.17	%	$	4,289,316		11.54	%

The following table shows the sources of our revenue for the three months ended July 31, 2015 and 2014.



	2015				2014
Revenue Sources	Amount (Unaudited)		%		Amount (Unaudited)		%

Ethanol Sales	$	21,703,955	75.78	%	$	29,825,474	80.23	%
Modified Distillers Grains Sales	467,450		1.63	%	732,732		1.97	%
Dried Distillers Grains Sales	5,724,835		19.99	%	5,731,212		15.42	%
Corn Oil Sales	745,175		2.60	%	883,142		2.38	%
Total Revenues	$	28,641,415	100.00	%	$	37,172,560	100.00	%

Revenue

Ethanol

Our total revenues were lower for the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. Revenue from ethanol sales decreased by approximately 27.2% during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014, due to lower ethanol prices. The average ethanol sales price per gallon we received for the three months ended July 31, 2015 was approximately 28.1% lower than the average price we received for the three months ended July 31, 2014. Management attributes the decrease in the average price we received for our ethanol for the three months ended July 31, 2015 as compared to the three months ended July 31, 2014, to lower corn and gasoline prices in the three months ended July 31, 2015 as compared to the three months ended July 31, 2014, along with uncertainty regarding the EPA's proposed rules on renewable volume obligations set forth in the RFS followed by the announcement by the EPA in late May 2015 of the proposed rules.

Ethanol prices will likely continue to generally be directionally consistent with changes in corn prices and also could face downward pressure if demand decreases. Ethanol prices could also be negatively impacted if the renewable volume obligations set forth in the RFS were to be reduced as proposed by the EPA or if gasoline and oil prices remain low which could result in

decreased demand for ethanol. Ethanol prices may stabilize somewhat during the next fiscal quarter if ethanol exports increase as currently expected. However, a decline in ethanol exports due to the imposition of a new import tax by Brazil could have a negative effect on exports unless additional demand can be created from other foreign markets. In addition, if we were to experience difficulty in transporting ethanol due to rail delays we may have to decrease production at the plant which would impact our ability to operate the ethanol plant profitably.

The gallons of ethanol we sold during the three months ended July 31, 2015 increased by approximately 1.3% as compared to the number of gallons of ethanol we sold for the three months ended July 31, 2014 due to increased production. Management anticipates that the amount of ethanol produced for the three months ended July 31, 2015, will remain relatively consistent in the future.

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. However, at July 31, 2015, we have no forward ethanol sales contracts. We had gains related to ethanol based derivative instruments of approximately $200 for the three months ended July 31, 2015. We had gains related to ethanol based derivative instruments of approximately $46,000 for the three months ended July 31, 2014.

Distillers Grains

Revenue from distillers grains sales decreased by approximately 4.2% during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. This is primarily a result of the lower distillers grains prices we received during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. For the three months ended July 31, 2015, the average price per ton of modified distillers grains we received was approximately 30% lower than during the three months ended July 31, 2014. For the three months ended July 31, 2015, the average price per ton of dried distillers grains we received was approximately 4.7% lower than the average price we received during the three months ended July 31, 2014. Management attributes the decrease in the average price we received for dried distillers grains and modified distillers grains in part to lower corn prices and increased corn supplies during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014, as market prices for distillers grains change directionally in relation to the price and availability of other animal feeds, such as corn and also soybean meal. However, although distillers grains prices for the three months ended July 31, 2015 are lower as compared to the three months ended July 31, 2014, distillers grains prices trended up during our third fiscal quarter in response to an increase in domestic and export demand.

Management anticipates that distillers grains prices will continue to follow corn prices and change in relation to the availability of corn throughout our fiscal year. In addition, distillers grains prices are expected to be affected by changes in foreign demand. China has been a significant consumer of exported distillers grains following the resolution of a dispute last year related to the presence of a genetically modified trait not approved by China for import. If demand from China were to decline or if China were to reinstate the ban on, or and place additional restrictions on, imports of U.S. distillers grains, export demand of distillers grains may be significantly reduced which would negatively affect the price of distillers grains in the U.S. unless additional demand can be created from other foreign markets or domestically.

The tons of modified distillers grains we sold during the three months ended July 31, 2015, decreased by approximately 8.7% as compared to the three months ended July 31, 2014 due to an increase in the availability of corn locally which reduced the demand for our product in our area. However, the tons of dried distillers grains during the three months ended July 31, 2015, increased by approximately 4.8% as compared to the tons of dried distillers grains we sold for the three months ended July 31, 2014. However, our overall production of distillers grains increased slightly during the nine months ended July 31, 2015 as compared to the three months ended July 31, 2014 due to increased ethanol production which was offset partially by our commencement of production of corn oil in April 2014. Management anticipates that the amount of distillers grains produced for the three months ended July 31, 2015 will remain relatively consistent in the future.

At July 31, 2015, we have approximately 24,000 tons of forward dried distiller grains sales contracts at various fixed prices for various delivery periods through December 2015.

Corn Oil

Revenue from corn oil sales decreased by approximately 15.6% during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. This is primarily a result of the lower corn oil prices we received during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014 due primarily to lower corn oil demand and lower corn prices. For the three months ended July 31, 2015, the average price per pound of corn oil we received was approximately 32.4% lower than during the three months ended July 31, 2014. Management anticipates that corn oil prices will continue to be affected

by biodiesel demand since biodiesel production is a major source of corn oil demand. In addition, corn oil prices will likely be impacted by corn prices and could decline due to increased corn oil supply entering the market.

The pounds of corn oil we sold during the three months ended July 31, 2015, increased by approximately 21.6% as compared to the the three months ended July 31, 2014. Management anticipates that our corn oil production for the three months ended July 31, 2015, will remain relatively consistent in the future. However, we are still working to gain the best efficiency from the corn oil equipment which could positively affect corn oil production.

At July 31, 2015, we have no forward corn oil sales contracts.

Cost of Goods Sold

Corn

Our two largest costs of production are corn (73.0% of cost of goods sold for the three months ended July 31, 2015) and natural gas (5.4% of cost of goods sold for the three months ended July 31, 2015). Our total cost of goods sold was approximately 19.0% less during the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. Our average price per bushel of corn for the three months ended July 31, 2015 decreased by approximately 22.0% per bushel, compared to the same period in 2014, due to favorable projections as to the fall corn crop in our local area. Management expects there to be an adequate corn supply available in our area to operate the ethanol plant and that prices during our 2015 fiscal year may continue to be lower due to a plentiful supply in our area. However, corn prices and availability will likely remain volatile in the future and may be impacted by weather conditions, supply and demand, stocks and other factors and could significantly impact our costs of production.

We used approximately 3.2% more bushels of corn in the three months ended July 31, 2015 as compared to the three months ended July 31, 2014 due to increased production.

At July 31, 2015, we have no forward corn purchase contracts. For the three months ended July 31, 2015, we had losses related to corn derivative instruments of approximately $55,000 which increased cost of sales. For the three months ended July 31, 2014, we had losses related to corn derivative instruments of approximately $1,912,000.

Natural Gas

Our average price per MMBTU of natural gas was 26.1% lower for the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. Natural gas prices were lower on average due to lower demand resulting primarily from a relatively mild winter as compared to the harsh winter and colder temperatures experienced during the three months ended July 31, 2014 resulting in plentiful supply. Management anticipates that higher natural gas prices could return if there is an increase in demand which depletes natural gas supplies. In addition, production problems in the natural gas industry could affect supply and lead to higher prices.

For the three months ended July 31, 2015, we purchased approximately 1.7% more natural gas as compared to the three months ended July 31, 2014. This increase in natural gas usage is primarily due to increased production.

At July 31, 2015, we have approximately 1,025,000 MMBTUs of forward natural gas sales contracts for various delivery periods through March 2017. For the three months ended July 31, 2015, we had gains related to natural gas derivative instruments of approximately $9,000. For the three months ended July 31, 2014, we had losses related to natural gas derivative instruments of approximately $52,000.

Operating Expense

We had operating expenses for the three months ended July 31, 2015 of $528,875 as compared to operating expenses of $468,920 for the three months ended July 31, 2014. Management attributes this increase in operating expenses primarily to an increase in membership dues and licenses and permits for the three months ended July 31, 2015 as compared to the three months ended July 31, 2014. Management continues to pursue strategies to optimize efficiencies and maximize production. These efforts may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady.

Operating Profit

We had profit from operations for the three months ended July 31, 2015 of $2,255,304 which is approximately 7.87% of our revenues compared to a profit of $4,776,195 which was approximately 12.85% of our revenues for the three months ended July 31, 2014. This decrease in our operating income is primarily due to a decrease in the price we received for our ethanol relative to the price we paid for corn.

Other Income (Expense)

We had total other income for the three months ended July 31, 2015 of $85,732 as compared to other expense of $486,879 for the three months ended July 31, 2014. Our other income, for the three months ended July 31, 2015, consisted primarily of patronage income and income from investments offset in part by interest expense. This decrease in other expense is primarily due to a reduction in interest expense resulting from a decrease in our long-term debt.

Results of Operations for the Nine Months Ended July 31, 2015 and 2014



	2015					2014
Statement of Operations Data	Amount (unaudited)			%		Amount (unaudited)			%

Revenue	$	84,547,370		100.00	%	$	107,802,687		100.00	%
Cost of Goods Sold	78,226,325			92.52	%	86,312,425			80.07	%
Gross Profit	6,321,045			7.48	%	21,490,262			19.93	%
Operating Expenses	1,855,268			2.19	%	1,668,270			1.55	%
Operating Profit	4,465,777			5.28	%	19,821,992			18.39	%
Other Expense	(249,805		)	(0.30	)%	(1,793,784		)	(1.66	)%
Net Income	$	4,215,972		4.99	%	$	18,028,208		16.72	%

The following table shows the sources of our revenue for the nine months ended July 31, 2015 and 2014.



	2015				2014
Revenue Sources	Amount (Unaudited)		%		Amount (Unaudited)		%

Ethanol Sales	$	66,113,021	78.20	%	$	85,615,910	79.42	%
Modified Distillers Grains Sales	1,556,883		1.84	%	2,974,760		2.76	%
Dried Distillers Grains Sales	14,701,228		17.39	%	18,182,694		16.87	%
Corn Oil Sales	2,176,238		2.57	%	1,029,323		0.95	%
Total Revenues	$	84,547,370	100.00	%	$	107,802,687	100.00	%

Revenue

Ethanol

Our total revenues were lower for the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014. Revenue from ethanol sales decreased by approximately 22.8% during the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014 due to lower ethanol prices resulting primarily from lower corn and gasoline prices in the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014, along with uncertainty regarding the EPA's proposed rules on renewable volume obligations set forth in the RFS followed by the announcement by the EPA of the proposed rules. The average ethanol sales price per gallon we received for the nine months ended July 31, 2015 was approximately 27.9% lower than the average price we received for the nine months ended July 31, 2014.

The gallons of ethanol we sold during the nine months ended July 31, 2015 increased by approximately 7.2% as compared to the number of gallons of ethanol we sold for the nine months ended July 31, 2014 due primarily to rail delays which resulted in lower ethanol production for the nine months ended July 31, 2014.

We had losses related to ethanol based derivative instruments of approximately $32,000 for the nine months ended July 31, 2015. We had losses related to ethanol based derivative instruments of approximately $478,000 for the nine months ended July 31, 2014.

Distillers Grains

Revenue from distillers grains decreased by approximately 19.1% during the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014. This is primarily a result of lower distillers grains prices during the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014. For the nine months ended July 31, 2015, the average price per ton that we received for our modified distillers grains was approximately 36.4% lower and the average price per ton that we received for our dried distillers grains was approximately 23.4% lower than during the nine months ended July 31, 2014 due to lower corn prices and increased corn supplies.

The tons of modified distillers grains we sold during the nine months ended July 31, 2015, decreased by approximately 17.7% as compared to the nine months ended July 31, 2014 due to an increase in the availability of corn locally which reduced the demand for our product in our area. The tons of dried distillers grains we sold during the nine months ended July 31, 2015, increased by approximately 5.6% as compared to the tons of dried distillers grains we sold for the nine months ended July 31, 2014. However, our overall production of distillers grains decreased during the nine months ended July 31, 2015 due to our commencement of production of corn oil in April 2014.

Corn Oil

In April 2014, we completed installation of our corn oil extraction equipment and began producing corn oil at our plant. Management anticipates that our corn oil production will be comparable in the future to our production for the nine months ended July 31, 2015. However, we are still working to gain the best efficiency from the corn oil equipment which could positively affect corn oil production.

Cost of Goods Sold

Corn

Our two largest costs of production are corn (71.4% of cost of goods sold for the nine months ended July 31, 2015) and natural gas (6.7% of cost of goods sold for the nine months ended July 31, 2015). Our total cost of goods sold was approximately 3.7% less during the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014.

Our average price per bushel of corn for the nine months ended July 31, 2015 decreased by approximately 17.2% per bushel as compared to the same period in 2014, due to lower corn prices in response to a record corn crop harvested in the fall of 2014 and favorable projections as to the 2015 corn crop in our local area. We used approximately 5.6% more bushels of corn in the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014, due to increased production.

For the nine months ended July 31, 2015, we had gains related to corn derivative instruments of approximately $337,000, which decreased cost of sales. For the nine months ended July 31, 2014, we had losses related to corn derivative instruments of approximately $611,000.

Natural Gas

For the nine months ended July 31, 2015, we purchased approximately 6.0% more natural gas as compared to the nine months ended July 31, 2014. This increase in natural gas usage is primarily due to increased production. Our average price per MMBTU of natural gas was 26.3% lower for the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014. Natural gas prices were lower on average due to lower demand resulting primarily from a relatively mild winter as compared to the harsh winter and colder temperatures experienced during the nine months ended July 31, 2014.

For the nine months ended July 31, 2015, we had losses related to natural gas based derivative instruments of approximately $27,000. For the nine months ended July 31, 2014, we had losses related to natural gas based derivative instruments of approximately $145,000.

Operating Expense

We had operating expenses for the nine months ended July 31, 2015 of $1,855,268 as compared to operating expenses of $1,668,270 for the nine months ended July 31, 2014. Management attributes this increase in operating expenses primarily to an increase in membership dues and training for the nine months ended July 31, 2015 as compared to the nine months ended July 31, 2014. Management continues to pursue strategies to optimize efficiencies and maximize production. These efforts may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady.

Operating Profit

We had profit from operations for the nine months ended July 31, 2015 of $4,465,777 which is approximately 5.28% of our revenues compared to a profit of $19,821,992 which was approximately 18.39% of our revenues for the nine months ended July 31, 2014. This decrease in our operating income is primarily due to a decrease in the price we received for our ethanol relative to the price we paid for corn.

Other Expense

We had total other expense for the nine months ended July 31, 2015 of $249,805 compared to other expense of $1,793,784 for the nine months ended July 31, 2014. Our other expense for the nine months ended July 31, 2015 consisted primarily of interest expense offset in part by income from our investments and patronage income. This decrease in other expense is primarily due to a reduction in interest expense resulting from a decrease in our long-term debt.

Changes in Financial Condition for the Nine Months Ended July 31, 2015

The following table highlights the changes in our financial condition for the nine months ended July 31, 2015 from our previous fiscal year ended October 31, 2014:



	April 30, 2015 (unaudited)		October 31, 2014
Current Assets	$	21,385,234	$	24,502,735
Current Liabilities	6,889,046		7,231,283
Long-Term Debt	20,829,530		24,315,010

Current Assets

The decrease in current assets is primarily the result of decreases in cash and cash equivalents and accounts receivable, which were offset partially by an increase in inventories at July 31, 2015 as compared to October 31, 2014. We used cash to pay a distribution to our members in December 2014.

Current Liabilities

The decrease in current liabilities is due primarily to a decreases in accounts payable which was offset partially by increases in customer deposits and current maturities of long-term debt at July 31, 2015 as compared to October 31, 2014.

Long-Term Debt

Long-term debt decreased at July 31, 2015 as compared to October 31, 2014 primarily due to scheduled principal repayments on our loans.

Liquidity and Capital Resources

Our primary sources of liquidity are our line of credit and cash generated from operations. Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash on hand, cash from our current credit facilities, and cash from our operations to continue to operate the ethanol plant at capacity for the next 12 months. We do not currently anticipate seeking additional equity or debt financing in the near term. However, high corn prices significantly increase our cost of goods sold. If increases in cost of goods sold are not offset by corresponding increases in the prices we receive from the sale of our products, these increases in cost of goods sold can have a significant negative impact on our financial performance. If we experience

unfavorable operating conditions in the ethanol industry that prevent us from profitably operating the ethanol plant, we could have difficulty maintaining our liquidity and we may have to secure additional debt or equity financing for working capital or other purposes.

We entered into agreements with Butamax Advanced Biofuels, L.L.C. ("Butamax") for Butamax to install, lease and license to us a corn oil separation system and corn oil separation technology. We began producing corn oil in April 2014. We do not currently anticipate that we will need to secure additional capital resources for any other significant purchases of property and equipment in the next 12 months.

The following table shows cash flows for the nine months ended July 31, 2015 and 2014:



	Nine Months Ended April 30
	2015			2014
	(unaudited)			(unaudited)
Net cash provided by operating activities	$	9,006,454		$	21,267,190
Net cash used in investing activities	(2,613,120		)	(1,031,724		)
Net cash used in financing activities	(9,034,406		)	(14,682,416		)

Cash Flow From Operations

We experienced a decrease in our cash provided by operating activities for the nine months ended July 31, 2015 as compared to the same period in 2014. This decrease was primarily due to a decrease in our net income for the nine months ended July 31, 2015 as compared to the same period in 2014. During the nine months ended July 31, 2015, our capital needs were being adequately met through cash from our operating activities and our credit facilities.

Cash Flow From Investing Activities

We used more cash in investing activities for the nine month period ended July 31, 2015 as compared to the same period in 2014. This change was primarily due to an increase in capital expenditures which was partially offset by a cash distribution from an investment received during the nine months ended July 31, 2015.

Cash Flow From Financing Activities

We used less cash for financing activities during the nine months ended July 31, 2015 as compared to the same period in 2014. This was primarily a result of a decrease in amounts paid on long term debt during the nine months ended July 31, 2015 which was partially offset by a distribution to our members in December 2014.

Short-Term and Long-Term Debt Sources

On September 22, 2014, we entered into an Amended and Restated Credit Agreement with Ag Star which amended the Credit Agreement originally dated February 27, 2014. In connection therewith, as of the same date, we executed Amended and Restated Term Notes, Amended and Restated Term Revolving Notes, Amended and Restated Revolving Line of Credit Notes and an Amended and Restated Mortgage, Security Agreement, Assignment of Leases and Fixture Financing Statement.

The Amended and Restated Credit Agreement provides for a $27,000,000 Term Loan, a $5,000,000 Term Revolving Loan and a $5,000,000 Revolving Line of Credit subject to terms described in the Amended and Restated Credit Agreement and summarized below. We agreed to pay an annual facility fee of $10,000 to AgStar. Effective February 26, 2015, we entered into a First Amendment to Amended and Restated Credit Agreement with Ag Star extending the maturity date on our Revolving Line of Credit until March 1, 2016.

Term Loan

The Term Loan is for $27,000,000 with a variable interest rate that is equal to 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at July 31, 2015 was 3.44%. We make monthly principal payments on the Term Loan of approximately $321,000 plus accrued interest. Payments are based upon a seven year amortization and the Term Loan is fully amortized. The outstanding balance on this note was $23,616,419 at July 31, 2015. We may convert the Term Loan to a fixed rate loan, subject to certain conditions as described in the Amended and Restated Credit Agreement and with the consent of AgStar.

Term Revolving Loan

The Term Revolving Loan is for up to $5,000,000 with a variable interest rate that is the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. We make monthly interest payments on the Term Revolving Loan. The outstanding balance on this note was $0 at July 31, 2015. Payment of all amounts outstanding is due on September 22, 2021. We also have $2,000,000 in letters of credit outstanding at July 31, 2015 which reduce the amount available under the Term Revolving Loan. We pay interest at a rate of 1.50% on amounts outstanding for the letters of credit.

Revolving Line of Credit

We have a Revolving Line of Credit available equal to the amount of the Borrowing Base, with a maximum limit of $5,000,000. The Borrowing Base will vary and may at times be less than $5,000,000. Effective February 26, 2015, our Revolving Line of Credit was extended until March 1, 2016. Our Revolving Line of Credit accrues interest at the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. We will make monthly interest payments on the Revolving Line of Credit. The outstanding balance on this note was $0 at July 31, 2015.

Covenants and other Miscellaneous Financing Agreement Terms

The loan facility with AgStar is secured by substantially all business assets. We executed a mortgage in favor of AgStar creating a first lien on our real estate and plant and a security interest in all personal property located on the premises and assigned in favor of AgStar, all rents and leases to our property, our marketing contracts, our risk management services contract, and our natural gas, electricity, water service and grain procurement agreements.

We are also subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage, tangible net worth, and working capital requirements. Our fixed charge coverage ratio is no less than 1.15:1.00 and is measured annually by comparing our adjusted EBITDA to our scheduled payments of principal and interest plus capital expenditures and distributions. Our minimum net worth is no less than $42,000,000, which is calculated as the excess of total assets excluding various disallowed assets per the Amended and Restated Credit Agreement over total liabilities, and is measured quarterly. Our minimum working capital is $8,250,000, which is calculated as current assets plus the amount available for drawing under our Term Revolving Loan and undrawn amounts on outstanding letters of credit, less current liabilities, and is measured quarterly.

Additionally, we are limited to annual capital expenditures of $2,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Amended and Restated Credit Agreement without prior approval of AgStar. We are also prohibited from making distributions to our members in excess of 50% of net income in a given year without the prior approval of AgStar. We are also required to pay unused commitment fees for the Term Revolving Loan and the Revolving Line of Credit as defined in the Amended and Restated Credit Agreement.

Presently, we are meeting our liquidity needs and complying with our financial covenants and the other terms of our loan agreements with AgStar. We will continue to work with AgStar to try to ensure that the terms of our loan agreements are met going forward. However, we cannot provide any assurance that our actions will result in sustained profitable operations or that we will not be in violation of our loan covenants or in default on our principal payments in the future. Should unfavorable market conditions result in our violation of the terms or covenants of our loan and we fail to obtain a waiver of any such term or covenant, AgStar could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans. In the event of a default, AgStar could also elect to proceed with a foreclosure action on our plant.

Capital Lease

We entered into a series of related definitive agreements dated September 26, 2013 with Butamax which include an Easement for Construction and Process Demonstration Agreement, an Equipment Lease Agreement, a Technology License Agreement, a Technology Demonstration Risk Reduction Agreement and a Security Agreement (collectively, the "Agreements") pursuant to which Butamax constructed, installed and leases its corn oil separation system and licenses to the Company its proprietary, patent-protected corn oil separation technology. Pursuant to the Agreements, we agreed to give Butamax access to our plant in order to construct, install, operate, test and commercially validate its corn oil separation system. Butamax retains ownership of the corn oil separation system and technology but leases it to the Company for a term of 120 months subject to Butamax's right to remove the system if we are in breach of the Agreements. The term of the lease may also be extended or

terminated pursuant to the terms of the Agreements and we are responsible for repairs and maintenance of the system and bear the risk of loss. In return, we agree to payment of certain license fees which are subject to being reduced under the terms of the Agreements if the corn oil separation system does not meet certain performance goals. The Agreements provide that the corn oil separation system shall be conveyed to the Company at the end of the term so long as we are not in breach of the Agreements. We have granted a security interest to Butamax in the corn oil separation system to secure our obligations under the Agreements. Pursuant to the Agreements, we agreed, subject to certain obligations of confidentiality, to provide Butamax with Company information on a monthly basis including business and financial information and have granted Butamax the option to have a representative present in board and committee meetings as an observer. We also agreed to give Butamax notice in the event of an issuance or sale of membership interests or convertible debt instruments. If definitive agreements for biobutanol production are not executed, either the Company or Butamax may request that the corn oil separation system be removed and the license for the technology terminated. We recorded this as a capital lease in April, 2014. The total outstanding commitment under the lease as of July 31, 2015 is $1,535,076, not including imputed interest payments.

Butamax Letter of Intent

In November 2011, we signed a non-binding letter of intent with Butamax for the purpose of exploring the possible implementation of biobutanol technology and commercial-scale production of biobutanol at our facility. We subsequently completed Phase 1 of the project in April 2014 with the installation of a corn oil separation system at our plant by Butamax as described above. However, Phase 2 of the project, the implementation of biobutanol technology, is dependent upon completion and execution of separate definitive agreements related to biobutanol production. We may never enter into those definitive agreements with Butamax and, therefore, may never convert our ethanol facility to a biobutanol facility.

Capital Expenditures

We have commenced a project to install a water pipeline to capture water currently discharged by the Red Rock Quarry into the Little Cottonwood River. The project would add a third water resource for our plant and is expected to cost approximately $4,500,000. In connection with the installation of the pipeline, we have contracted with DGR Engineering to provide engineering and oversight for the construction of this water pipeline and have executed construction agreements with three contractors to construct the project. The project is expected to be completed during the first quarter of our 2016 fiscal year. We expect to fund the project with our existing credit facilities and cash generated from operations.

We have executed a construction agreement with a contractor for the construction of a grain storage bin which is expected to add 600,000 bushels of storage and cost approximately $1,900,000. The project is expected to commence during the fourth quarter of our 2015 fiscal year and be completed during the second quarter of our 2016 fiscal year. We expect to fund the project with our existing credit facilities and cash generated from operations.

Critical Accounting Estimates

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

Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment testing for assets requires various estimates and assumptions, including an allocation of cash flows to those assets and, if required, an estimate of the fair value of those assets. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions, which do not reflect unanticipated events and circumstances that may occur. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the assessment of carrying value of property and equipment to be a critical accounting estimate.

Inventory Valuation

We value our inventory at lower of cost or market. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions which do not reflect unanticipated events and circumstances that may occur. In our analysis, we consider corn costs and ethanol prices,

break-even points for our plant and our risk management strategies in place through our derivative instruments. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuation of the lower of cost or market on inventory to be a critical accounting estimate.

Derivatives

We are exposed to market risks from changes in interest rates, corn, natural gas, and ethanol prices. We may seek to minimize these commodity price fluctuation risks through the use of derivative instruments. In the event we utilize derivative instruments, we will attempt to link these instruments to financing plans, sales plans, market developments, and pricing activities. Such instruments in and of themselves can result in additional costs due to unexpected directional price movements.

We have entered into corn commodity-based derivatives, natural gas derivatives and ethanol derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices. In practice, as markets move, we actively attempt to manage our risk and adjust hedging strategies as appropriate. We do not use hedge accounting which would match the gain or loss on our hedge positions to the specific commodity contracts being hedged. Instead, we use fair value accounting for our hedge positions, which means that as the current market price of our hedge position changes, the gains and losses are immediately recognized in our cost of goods sold. The immediate recognition of hedging gains and losses under fair value accounting can cause net income (loss) to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged.

As of July 31, 2015, the fair values of our corn, natural gas and ethanol derivative instruments are a net liability of approximately $513,000. As the prices of the hedged commodity moves in reaction to market trends and information, our statement of operations will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to protect the Company over the term of the contracts for the hedged amounts.

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. At July 31, 2015, we have approximately 24,000 tons of forward dried distillers grains sales contracts for delivery periods through December 2015. At July 31, 2015, we also have approximately 1,025,600 MMBTUs of natural gas purchase contracts for delivery periods through March 2017. In addition, at July 31, 2015, we have approximately 749,000 gallons of forward fixed price denaturant purchase contracts for various delivery periods through April 2016.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the impact of market fluctuations associated with interest rates and commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. We may use cash, futures and option contracts to hedge changes to the commodity prices of corn and natural gas. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes. We previously used derivative financial instruments to alter our exposure to interest rate risk. The interest rate swap was terminated in February 2014.

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our Term Loan, our Term Revolving Loan and our Revolving Line of Credit, each bearing a variable interest rate. As of July 31, 2015, we had $23,616,419 outstanding on the Term Loan. Interest will accrue at the greater of the 30-day LIBOR rate plus 325 basis points. The applicable interest rate at July 31, 2015 was 3.44%. If we were to experience a 10% adverse change in LIBOR, the annual effect such change would have on our income statement, based on the amount we had outstanding on our Term Loan at July 31, 2015, would be approximately $81,200. At July 31, 2015, we had $0 outstanding on our Term Revolving Loan and our Revolving Line of Credit.

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

Commodity Price Risk

We expect to be exposed to market risk from changes in commodity prices. Exposure to commodity price risk results from our dependence on corn and natural gas in the ethanol production process and the sale of ethanol and distillers grains. We may seek to minimize the risks from fluctuations in the prices of raw material inputs through the use of corn commodity-based and natural gas derivatives. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Corn and natural gas derivative changes in fair market value are included in costs of goods sold.

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. At July 31, 2015, we have approximately 24,000 tons of forward dried distillers grains sales contracts for delivery periods through December 2015. At July 31, 2015, we also have approximately 1,025,000 MMBTUs of natural gas purchase contracts for delivery periods through March 2017. In addition, at July 31, 2015, we have approximately 749,000 gallons of forward fixed price denaturant purchase contracts for various delivery periods through April 2016.

At July 31, 2015, we have open positions for 175,000 bushels of corn. These derivatives have not been designated as an effective hedge for accounting purposes. Corn derivatives are forecasted to settle within the next twelve months. We recorded losses due to changes in the fair value of our outstanding corn derivative positions for the three months ended July 31, 2015 of approximately $55,000. For the nine months ended July 31, 2015, we recorded gains due to changes in the fair value of our outstanding corn derivative positions of approximately $337,000. For the three months ended July 31, 2015, we recorded gains due to changes in the fair value of our outstanding ethanol derivative positions of approximately $200. For the nine months ended July 31, 2015, we recorded losses due to changes in the fair value of our outstanding ethanol derivative positions of approximately $32,000. For the three months ended July 31, 2015, we recorded gains due to the change in fair value of our outstanding natural gas derivative positions of approximately $9,000. For the nine months ended July 31, 2015, we recorded losses due to the change in fair value of our outstanding natural gas derivative positions of approximately $27,000.

As commodity prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas prices and average ethanol and distillers grains prices as of July 31, 2015 net of the forward and future contracts used to hedge our market risk for corn and natural gas usage requirements. The volumes are based on our expected use and sale of these commodities for a one year period from July 31, 2015. The results of this analysis, which may differ from actual results, are approximately as follows:



	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of July 31, 2015		Approximate Adverse Change to Income
Natural Gas	1,480,256	MMBTU	10	%		$	694,240
Ethanol	59,500,000	Gallons	10	%		$	8,746,500
Corn	20,659,722	Bushels	10	%		$	7,354,861
DDGs	138,500	Tons	10	%		$	1,955,066

Item 4. Controls and Procedures

Disclosure Controls and Procedures

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

Our management, including our Chief Executive Officer (the principal executive officer), Brian Kletscher, along with our Chief Financial Officer (the principal financial officer), Lucas Schneider, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of July 31, 2015. Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the nine months ended July 31, 2015, which were identified in connection with management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The following risk factors are provided due to material changes from the risk factors previously disclosed in our annual report on Form 10-K. The risk factors set forth below should be read in conjunction with the risk factors section and the Management's Discussion and Analysis section for the fiscal year ended October 31, 2014, included in our annual report on Form 10-K.

Decreasing gasoline prices could negatively impact our ability to operate profitably. Discretionary blending is an important secondary market which is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. In recent years, the price of ethanol has been less than the price of gasoline which increased demand for ethanol from fuel blenders. However, recently, low oil prices have driven down the price of gasoline which has reduced the spread between the price of gasoline and the price of ethanol which could discourage discretionary blending, dampen the export market and result in a downwards market adjustment in the price of ethanol. If oil and gasoline prices remain lower for a significant period of time, it could hurt our ability to profitably operate the ethanol plant which could decrease the value of our units.

Although we have signed a letter of intent with Butamax Advanced Biofuels, LLC for the purpose of exploring the implementation of biobutanol technology at our facility, we may never execute definitive agreements for the implementation of biobutanol technology and, in the event we do, there are no assurances that the technology will be effective or that there will be a market for biobutanol. We entered into a letter of intent with Butamax for the purpose of discussing the conversion of our ethanol facility to a biobutanol facility. We subsequently completed Phase 1 of the project in April 2014 when Butamax installed and began leasing to us a corn oil separation system at our plant and licensing to us the related technology. However, Phase 2 of the project is dependent upon completion and execution of separate definitive agreements for biobutanol production. We may never enter into those definitive agreements with Butamax and, therefore, may never convert our ethanol facility to a biobutanol facility. In the event we do convert our facility to a biobutanol facility, there are no assurances that the biobutanol technology as developed by Butamax will be effective. Even if the technology were to be effective, there is no assurance that we would be able to profitably market the biobutanol. If the definitive agreements for biobutanol production are not executed, either the Company or Butamax may request that the corn oil separation system be removed and the license for the technology terminated.

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

None.

Item 6. Exhibits.


(a)	The following exhibits are filed as part of this report.



Exhibit No.			Exhibit
31.1			Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2			Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1			Certificate Pursuant to 18 U.S.C. Section 1350*
32.2			Certificate Pursuant to 18 U.S.C. Section 1350*
101			The following financial information from Highwater Ethanol, LLC's Quarterly Report on Form 10-Q for the quarter ended July 31, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of July 31, 2015 and October 31, 2014, (ii) Condensed Statements of Operations for the three and nine months ended July 31, 2015 and 2014, (iii) Condensed Statements of Comprehensive Income (Loss) for the three and six months ended July 31, 2015 and 2014, (iv) Statements of Cash Flows for the six months ended July 31, 2015 and 2014, and (v) the Notes to Condensed Financial Statements.**

* Filed herewith.

** Furnished herewith.

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.



		HIGHWATER ETHANOL, LLC

Date:	September 10, 2015	/s/ Brian Kletscher
		Brian Kletscher
		Chief Executive Officer
		(Principal Executive Officer)

Date:	September 10, 2015	/s/ Lucas Schneider
		Lucas Schneider
		Chief Financial Officer
		(Principal Financial and Accounting Officer)