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
~~June~~September 30, 2021
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:	000-50254


LAKE AREA CORN PROCESSORS, LLC
(Exact name of registrant as specified in its charter)

South Dakota		46-0460790
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

46269 SD Highway 34		Wentworth,	SD
P.O. Box 100		57075
		(Zip Code)
(Address of principal executive offices)


(605)	483-2676
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes o No

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


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller Reporting Company	o
		Emerging Growth Company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of ~~August~~November 12, 2021, there are 29,620,000 membership units of the registrant outstanding.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LAKE AREA CORN PROCESSORS, LLC

Consolidated Balance Sheets


		June 30, 2021		December 31, 2020*			September 30, 2021		December 31, 2020*
ASSETS	ASSETS	(unaudited)				ASSETS	(unaudited)

CURRENT ASSETS	CURRENT ASSETS					CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,440,759	$	18,637,811	Cash and cash equivalents	$	3,335,442	$	18,637,811
Accounts receivable	Accounts receivable	941,932		585,054		Accounts receivable	669,006		585,054
Accounts receivable (related party)	Accounts receivable (related party)	3,634,737		1,633,760		Accounts receivable (related party)	4,180,526		1,633,760

Inventory	Inventory	19,587,122		9,768,916		Inventory	12,605,828		9,768,916
Derivative financial instruments	Derivative financial instruments	4,530,232		2,074,010		Derivative financial instruments	3,609,825		2,074,010
Prepaid expenses	Prepaid expenses	432,764		677,471		Prepaid expenses	231,764		677,471
Total current assets	Total current assets	30,567,546		33,377,022		Total current assets	24,632,391		33,377,022

PROPERTY AND EQUIPMENT	PROPERTY AND EQUIPMENT					PROPERTY AND EQUIPMENT
Land	Land	874,473		874,473		Land	874,473		874,473
Land improvements	Land improvements	8,631,224		8,631,224		Land improvements	8,701,233		8,631,224
Buildings	Buildings	9,316,576		9,316,576		Buildings	9,316,576		9,316,576
Equipment	Equipment	96,003,379		95,867,639		Equipment	96,032,169		95,867,639
Construction in progress	Construction in progress	28,827		6,303		Construction in progress	112,305		6,303
		114,854,479		114,696,215			115,036,756		114,696,215
Less accumulated depreciation	Less accumulated depreciation	(56,168,747)		(53,328,718)		Less accumulated depreciation	(57,483,677)		(53,328,718)
Net property and equipment	Net property and equipment	58,685,732		61,367,497		Net property and equipment	57,553,079		61,367,497

OTHER ASSETS	OTHER ASSETS					OTHER ASSETS
Goodwill	Goodwill	10,395,766		10,395,766		Goodwill	10,395,766		10,395,766
Investments	Investments	17,923,926		16,636,367		Investments	17,009,064		16,636,367
Other	Other	73,298		81,295		Other	69,300		81,295
Total other assets	Total other assets	28,392,990		27,113,428		Total other assets	27,474,130		27,113,428

TOTAL ASSETS	TOTAL ASSETS	$	117,646,268	$	121,857,947	TOTAL ASSETS	$	109,659,600	$	121,857,947

* Derived from audited financial statements.

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Balance Sheets


		June 30, 2021		December 31, 2020*			September 30, 2021		December 31, 2020*
LIABILITIES AND MEMBERS’ EQUITY	LIABILITIES AND MEMBERS’ EQUITY	(unaudited)				LIABILITIES AND MEMBERS’ EQUITY	(unaudited)

CURRENT LIABILITIES	CURRENT LIABILITIES					CURRENT LIABILITIES
Outstanding checks in excess of bank balance	Outstanding checks in excess of bank balance	$	3,048,247	$	319,608	Outstanding checks in excess of bank balance	$	3,357,424	$	319,608
Accounts payable	Accounts payable	6,381,427		18,526,170		Accounts payable	12,172,603		18,526,170
Accrued liabilities	Accrued liabilities	945,577		732,544		Accrued liabilities	808,941		732,544
Derivative financial instruments	Derivative financial instruments	414,332		244,181		Derivative financial instruments	612,758		244,181

Current portion of notes payable	Current portion of notes payable	1,000,000		1,201,628		Current portion of notes payable	1,000,000		1,201,628
Other	Other	0		4,000		Other	—		4,000
Total current liabilities	Total current liabilities	11,789,583		21,028,131		Total current liabilities	17,951,726		21,028,131

LONG-TERM LIABILITIES	LONG-TERM LIABILITIES					LONG-TERM LIABILITIES
Notes payable	Notes payable	23,993,924		35,561,237		Notes payable	3,994,556		35,561,237

Total long-term liabilities	Total long-term liabilities	23,993,924		35,561,237		Total long-term liabilities	3,994,556		35,561,237

MEMBERS' EQUITY (29,620,000 units issued and outstanding)	MEMBERS' EQUITY (29,620,000 units issued and outstanding)	81,862,761		65,268,579		MEMBERS' EQUITY (29,620,000 units issued and outstanding)	87,713,318		65,268,579

TOTAL LIABILITIES AND MEMBERS' EQUITY	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	117,646,268	$	121,857,947	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	109,659,600	$	121,857,947

* Derived from audited financial statements.

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Operations (Unaudited)


		Three Months Ended June 30, 2021		Three Months Ended June 30, 2020		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020			Three Months Ended September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020

REVENUES	REVENUES	$	64,238,127	$	25,424,832	$	112,853,779	$	57,881,070	REVENUES	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857

COSTS OF REVENUES	COSTS OF REVENUES	54,770,073		19,812,907		96,428,506		60,118,787		COSTS OF REVENUES	54,753,379		27,871,295		151,181,885		87,990,082

GROSS PROFIT (LOSS)		9,468,054		5,611,925		16,425,273		(2,237,717)
GROSS PROFIT										GROSS PROFIT	9,041,115		6,046,492		25,466,388		3,808,775

OPERATING EXPENSES	OPERATING EXPENSES	1,276,095		945,709		2,527,229		2,285,547		OPERATING EXPENSES	1,249,243		992,023		3,776,472		3,277,570

INCOME (LOSS) FROM OPERATIONS		8,191,959		4,666,216		13,898,044		(4,523,264)
INCOME FROM OPERATIONS										INCOME FROM OPERATIONS	7,791,872		5,054,469		21,689,916		531,205

OTHER INCOME (EXPENSE)	OTHER INCOME (EXPENSE)									OTHER INCOME (EXPENSE)
Interest and other income	Interest and other income	944,424		31,660		1,306,603		346,030		Interest and other income	21,723		42,419		1,328,326		388,449

Equity in net income (loss) of investments	Equity in net income (loss) of investments	1,184,130		(66,498)		1,937,559		(1,225,802)		Equity in net income (loss) of investments	1,135,138		1,019,662		3,072,697		(206,140)
Interest expense	Interest expense	(261,861)		(418,003)		(548,024)		(858,632)		Interest expense	(136,176)		(306,124)		(684,200)		(1,164,756)
Total other income (expense)	Total other income (expense)	1,866,693		(452,841)		2,696,138		(1,738,404)		Total other income (expense)	1,020,685		755,957		3,716,823		(982,447)

NET INCOME (LOSS)	NET INCOME (LOSS)	$	10,058,652	$	4,213,375	$	16,594,182	$	(6,261,668)	NET INCOME (LOSS)	$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)

BASIC AND DILUTED EARNINGS (LOSS) PER UNIT	BASIC AND DILUTED EARNINGS (LOSS) PER UNIT	$	0.34	$	0.14	$	0.56	$	(0.21)	BASIC AND DILUTED EARNINGS (LOSS) PER UNIT	$	0.30	$	0.20	$	0.86	$	(0.02)

WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR THE CALCULATION OF BASIC & DILUTED EARNINGS (LOSS) PER UNIT	WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR THE CALCULATION OF BASIC & DILUTED EARNINGS (LOSS) PER UNIT	29,620,000		29,620,000		29,620,000		29,620,000		WEIGHTED AVERAGE NUMBER OF UNITS OUTSTANDING FOR THE CALCULATION OF BASIC & DILUTED EARNINGS (LOSS) PER UNIT	29,620,000		29,620,000		29,620,000		29,620,000

DISTRIBUTIONS DECLARED PER UNIT	DISTRIBUTIONS DECLARED PER UNIT	$	0	$	0	$	0	$	0	DISTRIBUTIONS DECLARED PER UNIT	$	0.10	$	—	$	0.10	$	—

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Changes in Members' Equity (Unaudited)


	Members' Equity

Balance - December 31, 2019	$	64,212,940

Net (loss) for the three-month period ended March 31, 2020	(10,475,043)



Balance - March 31, 2020	53,737,897

Net income for the three-month period ended June 30, 2020	4,213,375



Balance - June 30, 2020	$		57,951,272

Net income for the three-month period ended September 30, 2020	5,810,426

Balance - September 30, 2020	$	63,761,698


	Members' Equity

Balance - December 31, 2020	$	65,268,579

Net income for the three-month period ended March 31, 2021	6,535,530



Balance - March 31, 2021	71,804,109

Net income for the three-month period ended June 30, 2021	10,058,652



Balance - June 30, 2021	$		81,862,761

Net income for the three-month period ended September 30, 2021	8,812,557

Distributions paid	(2,962,000)

Balance - September 30, 2021	$	87,713,318

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Cash Flows (Unaudited)


		Six Months Ended June 30, 2021		Six Months Ended June 30, 2020			Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020

OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income (loss)	Net income (loss)	$	16,594,182	$	(6,261,668)	Net income (loss)	$	25,406,739	$	(451,242)
Adjustments to reconcile net income (loss) to cash used in operating activities
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities						Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities
Depreciation and amortization	Depreciation and amortization	2,849,484		2,869,845		Depreciation and amortization	4,169,044		4,295,699
Distributions in excess of earnings (earnings in excess of distributions) from investments	Distributions in excess of earnings (earnings in excess of distributions) from investments	(1,287,559)		1,389,172		Distributions in excess of earnings (earnings in excess of distributions) from investments	(372,697)		469,510

(Gain) on forgiveness of notes payable		(778,400)		0

(Increase) decrease in	(Increase) decrease in					(Increase) decrease in
Accounts receivable	Accounts receivable	(2,357,855)		(6,350,541)		Accounts receivable	(2,630,718)		(343,878)
Inventory	Inventory	(9,818,206)		2,840,857		Inventory	(2,836,912)		5,045,657
Prepaid expenses	Prepaid expenses	244,705		132,892		Prepaid expenses	445,707		281,337
Derivative financial instruments	Derivative financial instruments	(2,286,070)		(568,514)		Derivative financial instruments	(1,167,238)		(636,276)

Increase (decrease) in	Increase (decrease) in					Increase (decrease) in
Accounts payable	Accounts payable	(12,144,744)		(9,447,821)		Accounts payable	(6,353,567)		(10,174,421)
Accrued and other liabilities	Accrued and other liabilities	209,034		(18,722)		Accrued and other liabilities	72,397		(80,577)
NET CASH USED IN OPERATING ACTIVITIES		(8,775,429)		(15,414,500)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES						NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	16,732,755		(1,594,191)

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES

Purchase of property and equipment	Purchase of property and equipment	(158,262)		(264,884)		Purchase of property and equipment	(340,540)		(334,571)

NET CASH USED IN INVESTING ACTIVITIES	NET CASH USED IN INVESTING ACTIVITIES	(158,262)		(264,884)		NET CASH USED IN INVESTING ACTIVITIES	(340,540)		(334,571)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Increase in outstanding checks in excess of bank balance	Increase in outstanding checks in excess of bank balance	2,728,639		907,979		Increase in outstanding checks in excess of bank balance	3,037,816		448,862
Borrowings on notes payable	Borrowings on notes payable	18,008,000		43,770,400		Borrowings on notes payable	20,229,600		43,770,400
Payments on notes payable	Payments on notes payable	(29,000,000)		(39,000,000)		Payments on notes payable	(52,000,000)		(53,000,000)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(8,263,361)		5,678,379
Distributions paid to members						Distributions paid to members	(2,962,000)		—
NET CASH USED IN FINANCING ACTIVITIES						NET CASH USED IN FINANCING ACTIVITIES	(31,694,584)		(8,780,738)

NET DECREASE IN CASH AND CASH EQUIVALENTS	NET DECREASE IN CASH AND CASH EQUIVALENTS	(17,197,052)		(10,001,005)		NET DECREASE IN CASH AND CASH EQUIVALENTS	(15,302,369)		(10,709,500)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	18,637,811		12,823,653		CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	18,637,811		12,823,653

CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,440,759	$	2,822,648	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,335,442	$	2,114,153

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION	SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION					SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for interest, net of capitalized interest of $525 and $128 in 2021 and 2020, respectively.		$	526,701	$	854,213
Capital expenditures in accounts payable		0		3,229
Cash paid during the period for interest, net of capitalized interest of $1,291 and $128 in 2021 and 2020, respectively.						Cash paid during the period for interest, net of capitalized interest of $1,291 and $128 in 2021 and 2020, respectively.	$	753,728	$	1,245,296

See Notes to Unaudited Consolidated Financial Statements

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020

NOTE 1 . NATURE OF OPERATIONS

Principal Business Activity

Lake Area Corn Processors, LLC and subsidiary (the "Company") is a South Dakota limited liability company.

The Company owns and manages Dakota Ethanol, LLC ("Dakota Ethanol"), a 90 million-gallon (annual nameplate capacity) ethanol plant, located near Wentworth, South Dakota. Dakota Ethanol sells ethanol and related products to customers located in North America.

In addition, the Company has investment interests in 5 companies in related industries. See note 5 for further details.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America although the Company believes that the disclosures are adequate to make the information not misleading.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying financial statements. All adjustments are of a normal and recurring nature. The results of operations for the ~~six~~nine months ended ~~June~~September 30, 2021 are not necessarily indicative of the results to be expected for a full year.

These financial statements should be read in conjunction with the financial statements and notes included in the Company’s audited financial statements for the year ended December 31, 2020, contained in the annual report on Form 10-K for 2020.

Principles of Consolidation

The consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Dakota Ethanol. All significant inter-company transactions and balances have been eliminated in consolidation.

Revenue Recognition

The Company has adopted the guidance of ASC Topic 606, Revenue from Contracts with Customers (Topic 606). Topic 606 requires the Company to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires the Company to apply the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the Company satisfies a performance obligation. The Company generally recognizes revenue at a point in time. The Company’s contracts with customers have one performance obligation and a contract duration of one year or less.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Generally, ethanol and related products are shipped free on board ("FOB") shipping point, and the control of the goods transfers to customers when the goods are loaded into trucks or rail cars are released to the railroad. Consideration is based on predetermined contractual prices or on current market prices.

•sales of ethanol

•sales of distillers grains

•sales of distillers corn oil

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020

Disaggregation of revenue:

All revenue recognized in the income statement is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line:


		Three Months Ended June 30				Six Months Ended June 30,					Three Months Ended September 30				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020

Revenues ethanol	Revenues ethanol	$	49,954,234	$	20,304,373	$	86,997,893	$	43,486,152	Revenues ethanol	$	49,995,030	$	26,424,724	$	136,992,923	$	69,910,876
Revenues distillers grains	Revenues distillers grains	10,984,294		4,010,385		20,075,545		11,735,394		Revenues distillers grains	9,731,338		6,131,560		29,806,883		17,866,954
Revenues distillers corn oil	Revenues distillers corn oil	3,299,599		1,110,074		5,780,341		2,659,524		Revenues distillers corn oil	4,068,126		1,361,503		9,848,467		4,021,027
		$	64,238,127	$	25,424,832	$	112,853,779	$	57,881,070		$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857

Contract assets and contract liabilities:

The Company has no significant contract assets or contract liabilities from contracts with customers.

The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract.

Shipping costs

Shipping costs incurred by the Company in the sale of ethanol, dried distiller's grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer.

When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized.

Reporting Segment

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company has determined that it has six operating segments that give rise to two reportable segments. See "Note 3 - Segments" in our Notes to Consolidated Financial Statements included elsewhere in this report for financial information about our segment reporting.

Costs of Revenues

The primary components of costs of revenues from the production of ethanol and related co-products are corn, energy (natural gas and electricity), raw materials (chemicals and denaturant), and direct labor costs.

Shipping costs on modified and wet distiller's grains are included in costs of revenues.

Inventory Valuation

Inventories are generally valued using methods which approximate the lower of cost (first-in, first-out) or net realizable value. In the valuation of inventories and purchase commitments, net realizable value is based on estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020

Receivables and Credit Policies

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within fifteen days from the invoice date. Unpaid accounts receivable with invoice dates over thirty days old bear interest at 1.5% per month. Accounts receivable are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The carrying amount of trade receivables is reduced by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected. Management regularly reviews trade receivable balances and, based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. The valuation allowance was 0zero as of ~~June~~September 30, 2021 and December 31, 2020.

Investment in commodities contracts, derivative instruments and hedging activities

The Company is exposed to certain risks related to its ongoing business operations. The primary risks that the Company manages by using forward or derivative instruments are price risks on anticipated purchases of corn and natural gas and the sale of ethanol, distillers grains and distillers corn oil.

The Company is subject to market risk with respect to the price and availability of corn, the principal raw material the Company uses to produce ethanol and ethanol by-products. In general, rising corn prices result in lower profit margins and, therefore, represent unfavorable market conditions. This is especially true when market conditions do not allow us to pass along increased corn costs to our customers. The availability and price of corn are subject to wide fluctuations due to unpredictable factors such as weather conditions, farmer planting decisions, governmental policies with respect to agriculture and international trade and global demand and supply.

Certain contracts that meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from the accounting and reporting requirements of derivative accounting.

The Company does not apply the normal purchase and sales exemption for forward corn purchase contracts. As of ~~June~~September 30, 2021, the Company was committed to purchasing approximately ~~4.9~~6.0 million bushels of corn on a forward contract basis with an average price of ~~$5.69~~$5.23 per bushel. The total corn purchase contracts represent ~~16%~~20% of the annual projected plant corn usage.

The Company enters into firm-price purchase commitments with natural gas suppliers under which the Company agrees to buy natural gas at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price decrease in the market price of natural gas between the time the price is fixed and the time the natural gas is delivered. At ~~June~~September 30, 2021, the Company is committed to purchasing approximately ~~730,000~~820,000 MMBtus of natural gas with an average price of ~~$2.78~~$3.03 per MMBtu. The Company accounts for these transactions as normal purchases, and accordingly, does not mark these transactions to market. The natural gas purchase contracts represent ~~36%~~40% of the annual plant requirements.

The Company enters into firm-price sales commitments with distillers grains customers under which the Company agrees to sell distillers grains at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price increase in the market price of distillers grain between the time the price is fixed and the time the distillers grains are delivered. At ~~June~~September 30, 2021, the Company was committed to selling approximately ~~20,000~~35,000 dry equivalent tons of distillers grains with an average price of ~~$210~~$201 per ton. The Company accounts for these transactions as normal sales, and accordingly, does not mark these transactions to market. The distillers grains sales represent approximately 9%16% of the projected annual plant production.

The Company enters into firm-price sales commitments with distillers corn oil customers under which the Company agrees to sell distillers corn oil at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price increase in the market price of distillers corn oil between the time the price is fixed and the time the distillers corn oil ~~is delivered. At June 30, 2021, the Company was committed to selling approximately 2.1 million pounds of distillers corn oil~~

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is delivered. At September 30, 2021, the Company was committed to selling approximately 2.8 million pounds of distillers corn oil with an average price of ~~$0.59~~$0.58 per pound. The Company accounts for these transactions as normal sales, and accordingly, does not mark these transactions to market. The distillers corn oil sales represent approximately 9%13% of the projected annual plant production.

The Company did not have any firm-priced sales commitments for ethanol as of ~~June~~September 30, 2021.

The Company enters into short-term forward, option and futures contracts for ethanol, corn and natural gas as a means of managing exposure to changes in commodity and energy prices. All of the Company's derivatives are designated as non-hedge derivatives, and accordingly are recorded at fair value with changes in fair value recognized in net income. Although the contracts are considered economic hedges of specified risks, they are not designated as and accounted for as hedging instruments.

As part of our trading activity, the Company uses futures and option contracts offered through regulated commodity exchanges to reduce risk of loss in the market value of inventories and purchase commitments.

Derivatives not designated as hedging instruments at ~~June~~September 30, 2021 and December 31, 2020 were as follows:


		Balance Sheet Classification	June 30, 2021		December 31, 2020*			Balance Sheet Classification	September 30, 2021		December 31, 2020*

Forward contracts in gain position	Forward contracts in gain position		$	2,724,449	$	1,742,054	Forward contracts in gain position		$	1,886,379	$	1,742,054
Futures contracts in gain position	Futures contracts in gain position		118,925		0		Futures contracts in gain position		28,975		—
Futures contracts in loss position	Futures contracts in loss position		(2,200,625)		(1,799,688)		Futures contracts in loss position		(127,513)		(1,799,688)
Total	Total		642,749		(57,634)		Total		1,787,841		(57,634)
Cash held by broker	Cash held by broker		3,887,483		2,131,644		Cash held by broker		1,821,984		2,131,644
		Current Assets	$	4,530,232	$	2,074,010		Current Assets	$	3,609,825	$	2,074,010

Forward contracts in loss position	Forward contracts in loss position	(Current Liabilities)	$	(414,332)	$	(244,181)	Forward contracts in loss position	(Current Liabilities)	$	(612,758)	$	(244,181)

*Derived from audited financial statements

Futures contracts and cash held by broker are all with one party, and the right of offset exists. Therefore, on the balance sheet, these items are netted in one balance regardless of position.

Forward contracts are with multiple parties, and the right of offset does not exist. Therefore, these contracts are reported at the gross amounts on the balance sheet.

Gains and losses related to derivative contracts related to corn are included as a component of costs of revenues.

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~~JUNE~~SEPTEMBER 30, 2021 AND 2020


		Statement of Operations	Three Months Ended June 30,					Statement of Operations	Three Months Ended September 30,
		Classification	2021		2020			Classification	2021		2020
Net realized and unrealized gains (losses) related to purchase contracts:	Net realized and unrealized gains (losses) related to purchase contracts:						Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts	Futures contracts	Cost of Revenues	$	(8,207,255)	$	333,387	Futures contracts	Cost of Revenues	$	2,017,814	$	(258,881)
Forward contracts	Forward contracts	Cost of Revenues	6,650,381		742,543		Forward contracts	Cost of Revenues	(1,774,753)		(57,419)

		Statement of Operations	Six Months Ended June 30,					Statement of Operations	Nine Months Ended September 30,
		Classification	2021		2020			Classification	2021		2020
Net realized and unrealized gains (losses) related to purchase contracts:	Net realized and unrealized gains (losses) related to purchase contracts:						Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts	Futures contracts	Cost of Revenues	$	(11,225,875)	$	1,436,264	Futures contracts	Cost of Revenues	$	(9,208,060)	$	1,177,383
Forward contracts	Forward contracts	Cost of Revenues	10,104,326		(2,370,490)		Forward contracts	Cost of Revenues	8,329,573		(2,427,909)

Investments

The Company has investment interests in 5 companies in related industries. All of these interests are at ownership shares less than 20%. These investments are all flow-through entities. Per ASC 323-30-S99-1, they are 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 statements of operations and added to the investment account. Distributions or dividends received from the investments are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income based on the most recent reliable data.

Goodwill

Annually, as well as when an event triggering impairment may have occurred, the Company performs an impairment test on goodwill, which compares the fair value of the reporting unit with its carrying amount. An impairment charge is recognized, if necessary, for the amount by which the carrying value exceeds the fair value up to the amount of the goodwill attributed to the reporting unit. The Company performs the annual analysis as of December 31 of each fiscal year.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the fair value of derivative financial instruments, lower of cost or net realizable value accounting for inventory and forward purchase contracts and goodwill impairment evaluation.

Risks and Uncertainties

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol and distiller grains to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the three months ended ~~June~~September 30, 2021, ethanol sales averaged approximately 78% of total revenues, while approximately ~~17%~~15% of revenues were generated from the sale of distiller grains and 5%7% of revenues were generated from the sale of corn oil. For the ~~six~~nine months ended ~~June~~September 30, 2021, ethanol sales averaged approximately ~~77%~~78% of total revenues, while approximately ~~18%~~17% of revenues were generated from the sale of distiller grains and 5% of revenues were generated from the sale of corn oil.

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The Company's operating and financial performance is largely driven by the prices at which it sells ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and unleaded gasoline and the petroleum markets. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, and government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.

On January 30, 2020, the World Health Organization declared the coronavirus outbreak (COVID-19) a “Public Health Emergency of International Concern” and on March 11, 2020, declared COVID-19 a pandemic. Quarantines, labor shortages, and other disruptions to the Company’s operations, and those of its customers, adversely impacted the Company’s revenues, ability to provide its services and operating results. Any future quarantines, labor shortages, or other disruptions to the Company's operations, or those of its customers may adversely impact the Company's revenues, ability to provide its services and operating results. Like the COVID-19 pandemic, any significant outbreak of epidemic, pandemic or contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, including the geographical area in which the Company operates, resulting in an economic downturn that could affect demand for its goods and services. The extent to which COVID-19 will impact the Company’s long-term results will depend on future developments, which are highly uncertain and cannot be predicted, including new developments regarding continued distribution of the COVID-19 vaccine, new information which may emerge concerning the severity of the coronavirus, prevalence of new COVID-19 cases and actions taken to contain the coronavirus or its impact, among others.

NOTE 3. SEGMENT REPORTING

The Company reports its financial and operating performance in 2 segments: (1) production, which includes the manufacturing and marketing of fuel-grade ethanol and co-products of the ethanol production process and (2) ethanol producing equity method investments, which consists of the aggregation of the Company's two equity method operating segments of investment in Guardian Hankinson, LLC and investment in Ring-neck Energy & Feed, LLC. The Company discloses its other identified operating segments in an all other category, which consists of the Company's investments in RPMG, LLC, Lawrenceville Tank, LLC, and Guardian Energy Management, LLC.

The Company’s ~~two~~2 reportable segments have been identified based on their unique characteristics. Our production segment is the Company’s ethanol plant that is operated in a manner chosen by our chief decision making team. The ethanol producing equity method segment consists of aggregated operating segments investments that have exceeded the quantitative thresholds for reportable segments which have similar economic characteristics but our chief decision making team does not have input into the daily operations of those entities. The all other category is comprised of investments that fall below the quantitative thresholds for reporting segments and the Company's chief decision making team has no input into their daily operations. Production includes the core operating drivers of the Company’s consolidated financial statements which consist of the production and sale of ethanol and its co-products. Ethanol producing equity method investments derive their revenues from the production and sale of ethanol and its co-products. The all other category receives its revenues from marketing fees, management fees, and storage fees. The reconciliation item is necessary due to reportable segments not being consolidated in the financial statements, but rather are reflected as equity method investments.

The segments were identified using standards under ASC 280-10-50. They each engage in business activities, the operating results are reviewed by the Company’s chief operating decision maker, and discrete financial information is available for each segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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The following tables set forth certain financial data for the Company's operating segments:


											Three Months Ended				Nine Months Ended
		Three Months Ended				Six Months Ended					September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020			unaudited		unaudited		unaudited		unaudited
Net Sales	Net Sales	unaudited		unaudited		unaudited		unaudited		Net Sales
Production	Production	$	64,238,127	$	25,424,832	$	112,853,779	$	57,881,070	Production	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	164,027,153		45,954,973		292,348,281		134,655,876		Ethanol Producing Equity Method Investments	146,800,703		91,336,937		439,148,984		225,992,813
All Other	All Other	4,226,582		3,579,897		8,215,555		7,506,973		All Other	4,140,757		2,635,201		12,356,312		10,142,174
Total	Total	232,491,862		74,959,702		413,417,615		200,043,919		Total	214,735,954		127,889,925		628,153,569		327,933,844
Reconciliation	Reconciliation	(168,253,735)		(49,534,870)		(300,563,836)		(142,162,849)		Reconciliation	(150,941,460)		(93,972,138)		(451,505,296)		(236,134,987)
Consolidated	Consolidated	$	64,238,127	$	25,424,832	$	112,853,779	$	57,881,070	Consolidated	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857

Gross Profit (Loss):	Gross Profit (Loss):									Gross Profit (Loss):
Production	Production	$	9,468,054	$	5,611,925	$	16,425,273	$	(2,237,717)	Production	$	9,041,115	$	6,046,492	$	25,466,388	$	3,808,775
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	14,522,776		4,874,799		27,323,018		(2,596,516)		Ethanol Producing Equity Method Investments	15,674,893		13,930,396		42,997,910		11,333,880
All Other	All Other	2,627,783		2,399,060		5,252,858		4,919,679		All Other	2,537,782		1,397,413		7,790,640		6,317,093
Total	Total	26,618,613		12,885,784		49,001,149		85,446		Total	27,253,790		21,374,301		76,254,938		21,459,748
Reconciliation	Reconciliation	(17,150,559)		(7,273,859)		(32,575,876)		(2,323,163)		Reconciliation	(18,212,675)		(15,327,809)		(50,788,550)		(17,650,973)
Consolidated	Consolidated	$	9,468,054	$	5,611,925	$	16,425,273	$	(2,237,717)	Consolidated	$	9,041,115	$	6,046,492	$	25,466,388	$	3,808,775

Net Income (Loss):	Net Income (Loss):									Net Income (Loss):
Production	Production	$	10,058,652	$	4,213,375	$	16,594,182	$	(6,261,668)	Production	$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	10,175,037		(994,105)		17,304,031		(12,923,765)		Ethanol Producing Equity Method Investments	10,584,904		9,576,312		27,888,935		(3,347,453)
All Other	All Other	1,806,780		639,216		2,660,238		1,450,392		All Other	747,045		(208,976)		3,407,283		1,241,416
Total	Total	22,040,469		3,858,486		36,558,451		(17,735,041)		Total	20,144,506		15,177,762		56,702,957		(2,557,279)
Reconciliation	Reconciliation	(11,981,817)		354,889		(19,964,269)		11,473,373		Reconciliation	(11,331,949)		(9,367,336)		(31,296,218)		2,106,037
Consolidated	Consolidated	$	10,058,652	$	4,213,375	$	16,594,182	$	(6,261,668)	Consolidated	$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)


							September 30, 2021		December 31, 2020
		June 30, 2021		December 31, 2020			unaudited		audited
Total Assets	Total Assets	unaudited		audited		Total Assets
Production	Production	$	117,646,268	$	121,857,947	Production	$	109,659,600	$	121,857,947
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	259,625,353		244,353,900		Ethanol Producing Equity Method Investments	236,635,269		244,353,900
All Other	All Other	243,072,614		175,909,073		All Other	284,706,426		175,909,073
Total	Total	620,344,235		542,120,920		Total	631,001,295		542,120,920
Reconciliation	Reconciliation	(502,697,967)		(420,262,973)		Reconciliation	(521,341,695)		(420,262,973)
Consolidated	Consolidated	$	117,646,268	$	121,857,947	Consolidated	$	109,659,600	$	121,857,947

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NOTE 4. INVENTORY

Inventory consisted of the following as of ~~June~~September 30, 2021 and December 31, 2020:


		June 30, 2021		December 31, 2020*			September 30, 2021		December 31, 2020*
Raw materials	Raw materials	$	10,514,715	$	5,096,067	Raw materials	$	5,107,905	$	5,096,067
Finished goods	Finished goods	6,179,689		2,474,638		Finished goods	4,861,049		2,474,638
Work in process	Work in process	1,688,884		1,090,893		Work in process	1,465,598		1,090,893
Parts inventory	Parts inventory	1,203,834		1,107,318		Parts inventory	1,171,276		1,107,318
		$	19,587,122	$	9,768,916		$	12,605,828	$	9,768,916

*Derived from audited financial statements.

As of ~~June~~September 30, 2021 and December 31, 2020, the Company recorded a lower of cost or net realizable value write-down on distillers grains inventory of approximately $0 and $13,000, respectively.

NOTE 5. INVESTMENTS

Dakota Ethanol has a 5% investment interest in the Company’s ethanol marketer, Renewable Products Marketing Group, LLC (RPMG). The net income, which is reported in the Company’s income statement for RPMG, is based on RPMG’s ~~March 31,~~June 30, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$1,299,000~~$1,313,000 and $1,208,000 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Dakota Ethanol has a 10% investment interest in Lawrenceville Tanks, LLC (LT), a partnership to operate an ethanol storage terminal in Georgia. The net income, which is reported in the Company’s income statement for LT, is based on LT’s ~~June~~September 30, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$275,000~~$226,000 and $194,000 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Lake Area Corn Processors has a 10% investment interest in Guardian Hankinson, LLC (GH), a partnership to operate an ethanol plant in North Dakota. The net income, which is reported in the Company’s income statement for GH, is based on GH’s ~~June~~September 30, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$5,301,000~~$4,197,000 and $5,012,000 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Lake Area Corn Processors has a 17% investment interest in Guardian Energy Management, LLC (GEM), a partnership to provide management services to ethanol plants. The net income, which is reported in the Company’s income statement for GEM, is based on GEM’s ~~June~~September 30, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately $90,000 and $90,000 as of ~~June~~September 30, 2021 and December 31, 2020, respectively.

Lake Area Corn Processors has an 11% investment interest in Ring-neck Energy and Feeds, LLC (REF), a partnership to operate an ethanol plant in South Dakota. The net income, which is reported in the Company’s income statement for REF, is based on REF’s ~~June~~September 30, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$10,959,000~~$11,184,000 and $10,134,000 as of ~~June~~September 30, 2021 and December 31, 2020, respectively. REF commenced operations during the second quarter of 2019. Prior to then, the ethanol plant was under construction. The carrying amount of the investment exceeds the underlying equity in net assets by approximately ~~$1,028,000.~~$1,014,000. The excess is comprised of a basis adjustment of approximately ~~$422,000~~$416,000 and capitalized interest of ~~$606,000.~~$598,000. The excess is amortized over 20 years from May 2019, the time the plant became operational. The amortization is recorded in equity in net income of investments. Amortization was ~~$28,831~~$43,247 for both the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020, respectively. Amortization was $14,416 for both the three months ended ~~June~~September 30, 2021 and 2020, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020

Condensed, combined unaudited financial information of the Company’s investments in RPMG, LT, GH, GEM and REF are as follows:


Balance Sheet	Balance Sheet	June 30, 2021		December 31, 2020		Balance Sheet	September 30, 2021		December 31, 2020
Current Assets	Current Assets	$	312,128,360	$	218,336,920	Current Assets	$	336,976,818	$	218,336,920
Other Assets	Other Assets	190,569,606		201,926,053		Other Assets	184,364,877		201,926,053
Current Liabilities	Current Liabilities	246,513,217		209,538,950		Current Liabilities	290,490,769		209,538,950
Long-term Liabilities	Long-term Liabilities	81,682,073		48,854,217		Long-term Liabilities	64,591,304		48,854,217
Members' Equity	Members' Equity	174,502,676		161,869,806		Members' Equity	166,259,622		161,869,806

		Three Months Ended					Three Months Ended
Income Statement	Income Statement	June 30, 2021		June 30, 2020		Income Statement	September 30, 2021		September 30, 2020
Revenue	Revenue	$	168,253,735	$	49,534,870	Revenue	$	150,941,460	$	93,946,470
Gross Profit	Gross Profit	17,150,559		7,273,860		Gross Profit	18,212,675		15,327,809
Net Income (Loss)		11,981,817		(354,889)
Net Income						Net Income	11,331,949		9,367,336

		Six Months Ended					Nine Months Ended
Income Statement	Income Statement	June 30, 2021		June 30, 2020		Income Statement	September 30, 2021		September 30, 2020
Revenue	Revenue	$	300,563,836	$	142,162,849	Revenue	$	451,505,296	$	236,109,319
Gross Profit	Gross Profit	32,575,876		2,323,164		Gross Profit	50,788,550		17,650,973
Net Income (Loss)	Net Income (Loss)	19,964,269		(11,473,373)		Net Income (Loss)	31,296,218		(2,106,037)

The Company recorded equity in net income (loss) of approximately ~~$1,938,000~~$3,073,000 and ~~$(1,226,000)~~$(206,000) from our investments for the ~~six~~nine months ended ~~June~~September 30, 2021, and 2020, respectively. The Company recorded equity in net income ~~(loss)~~ of approximately ~~$1,184,000~~$1,135,000 and ~~$(66,000)~~$1,020,000 from our investments for the three months ended ~~June~~September 30, 2021, and 2020, respectively.

NOTE 6. REVOLVING OPERATING NOTE

On February 6, 2018, Dakota Ethanol executed a revolving promissory note with Farm Credit Services of America (FCSA) in the amount up to $10,000,000 or the amount available in accordance with the borrowing base calculation, whichever is less. Dakota Ethanol amended the note agreement with FCSA in June of 2020. The amendment reduced the available credit under the revolving operating note to $2,000,000. Interest on the outstanding principal balance will accrue at ~~300~~305 basis points above the ~~one-month LIBOR~~SOFR 30-day average rate and is not subject to a floor. The rate was 3.10% at ~~June~~September 30, 2021. There is a non-use fee of 0.25% on the unused portion of the $2,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, 2023. The loan was amended with FCSA on October 11, 2021. Under the amendment, the expiration of the note was extended to November 1, 2023 and interest accrual will be measured using the Secured Overnight Financing Rate (SOFR) 30-Day Average Rate. On ~~June~~September 30, 2021, Dakota Ethanol had 0no balance outstanding and approximately $2,000,000 available to be drawn on the revolving promissory note under the borrowing base.

NOTE 7. LONG-TERM NOTES PAYABLE

On August 1, 2017, Dakota Ethanol executed a term note from FCSA in the amount of $8,000,000. Dakota Ethanol agreed to make monthly interest payments starting September 1, 2017 and annual principal payments of $1,000,000 starting on August 1, 2018. The payment on August 1, 2020 was deferred after the note was amended with FCSA and is now due on August 1, 2025. The ~~notes~~note matures on August 1, 2025. Interest on the outstanding principal balance will accrue at ~~325~~330 basis points above the ~~one-month LIBOR rate until February 1, 2023 and increases to 350 basis points thereafter until maturity.~~SOFR 30-day average rate. The interest rate is not subject to a floor. The rate was 3.35% at ~~June~~September 30, 2021. On ~~June~~September 30, 2021, Dakota Ethanol had ~~$6,000,000~~$5,000,000 outstanding on the note.

On February 6, 2018, Dakota Ethanol executed a reducing revolving promissory note from FCSA in the amount up to $40,000,000 or the amount available in accordance with the borrowing availability under the credit agreement. Dakota Ethanol ~~amended the note agreement with FCSA in June of 2020. The amendment increased the available credit on the reducing~~

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020

amended the note agreement with FCSA in June of 2020. The amendment increased the available credit on the reducing revolving note to $48,000,000. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on July 1, 2021 until the maximum balance reaches $32,250,000 on July 1, 2025. The note matures on January 1, 2026. Interest on the outstanding principal balance will accrue at ~~325~~330 basis points above the ~~one-month LIBOR rate until February 1, 2023, and the basis increases to 350 points thereafter until maturity.~~SOFR 30-day average rate. The interest rate is not subject to a floor. The rate was 3.35% at ~~June~~September 30, 2021. The note contains a non-use fee of 0.50% on the unused portion of the note. The loan was amended with FCSA on October 11, 2021. Under the amendment, the interest accrual will be measured using the Secured Overnight Financing Rate (SOFR) 30-Day Average Rate. On ~~June~~September 30, 2021, Dakota Ethanol had ~~$19,000,000~~$0 outstanding and ~~$29,000,000~~$46,250,000 available to be drawn on the note.

As part of the note payable agreement, Dakota Ethanol is subject to certain restrictive covenants establishing financial reporting requirements, distribution and capital expenditure limits, minimum debt service coverage ratios, net worth and working capital requirements. The note is collateralized by substantially all assets of the Company. The note payable agreement was amended in ~~June 2020~~October 2021 with modifications to the requirements. The working capital covenant was ~~reduced~~increased to ~~$11,000,000~~$13,500,000 and the net worth covenant was ~~reduced~~increased to ~~$18,000,000.~~$28,000,000. The next measurement date for the debt service coverage ratio was deferred until December 31, 2021.

The Company entered into a loan agreement with the Small Business Association through First State Bank, Gothenburg, NE on April 4, 2020 for $760,400 as part of the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). In June 2021, the Company received notification from the Small Business Administration that all loan proceeds and accrued interest received and recorded by the Company were forgiven. Due to forgiveness of the loan, the Company recorded a gain on debt extinguishment in other income in the statement of operations for $768,400 for the ~~six~~nine months ended ~~June~~September 30, 2021.

The Company also received an Economic Injury Disaster Loan (EIDL) in the amount of $10,000 in June 2020. The Company was notified by the Small Business Association in June 2021 that all EIDL proceeds received by the Company had been forgiven. Due to forgiveness of the loan, the Company recorded a gain on debt extinguishment in other income in the statement of operations for $10,000 for the ~~six~~nine months ended ~~June~~September 30, 2021.

The balances of the notes payable are as follows. The balances reflect the updated agreement:


		June 30, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Notes Payable - FCSA	Notes Payable - FCSA	$	25,000,000	$	36,000,000	Notes Payable - FCSA	$	5,000,000	$	36,000,000

Notes Payable - Other	Notes Payable - Other	0		770,400		Notes Payable - Other	—		770,400
Less unamortized debt issuance costs	Less unamortized debt issuance costs	(6,076)		(7,535)		Less unamortized debt issuance costs	(5,444)		(7,535)
		24,993,924		36,762,865			4,994,556		36,762,865
Less current portion	Less current portion	(1,000,000)		(1,201,628)		Less current portion	(1,000,000)		(1,201,628)
		$	23,993,924	$	35,561,237		$	3,994,556	$	35,561,237
*Derived from audited financial statements	*Derived from audited financial statements					*Derived from audited financial statements

Principal maturities for the next five years are estimated as follows.

Periods Ending June 30, Principal
2022 $ 1,000,000
2023 1,000,000
2024 1,000,000
2025 1,000,000
2026 21,000,000
thereafter 0
$ 25,000,000

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~JUNE~~SEPTEMBER 30, 2021 AND 2020



Periods Ending September 30,	Principal
2022	$	1,000,000
2023	1,000,000
2024	1,000,000
2025	2,000,000
2026	—
thereafter	—
	$	5,000,000

NOTE 8. FAIR VALUE MEASUREMENTS

The Company complies with the fair value measurements and disclosures standard, which defines fair value, establishes a framework for measuring fair value, and expands disclosure for those assets and liabilities carried on the balance sheet on a fair value basis.

The Company’s balance sheet contains derivative financial instruments that are recorded at fair value on a recurring basis. Fair value measurements and disclosures require that assets and liabilities carried at fair value be classified and disclosed according to the process for determining fair value. There are three levels of determining fair value.

Level 1 uses quoted market prices in active markets for identical assets or liabilities.

Level 2 uses observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3 uses unobservable inputs that are not corroborated by market data.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below.

Derivative financial instruments. Commodity futures contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade ("CBOT") and New York Mercantile Exchange ("NYMEX") markets. Over-the-counter commodity options contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the over-the-counter markets. Forward purchase contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from local grain terminal bid values. The fair value measurements consider observable data that may include live trading bids from local elevators and processing plants which are based off the CBOT markets.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021 AND 2020

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~June~~September 30, 2021 and December 31, 2020 segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

Total Level 1 Level 2 Level 3
June 30, 2021
Assets:
Derivative financial instruments,
  futures contracts $ 118,925 $ 118,925 $ 0 $ 0
  forward contracts $ 2,724,449 $ 0 $ 2,724,449 $ 0
Liabilities:
Derivative financial instruments,
  futures contracts $ 2,200,625 $ 2,200,625 $ 0 $ 0
  forward contracts $ 414,332 $ 0 $ 414,332 $ 0

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~~LAKE AREA CORN PROCESSORS, LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~JUNE 30, 2021 AND 2020~~


											Total		Level 1		Level 2		Level 3
September 30, 2021										September 30, 2021

Assets:										Assets:
Derivative financial instruments,										Derivative financial instruments,
futures contracts										futures contracts	$	28,975	$	28,975	$	—	$	—
forward contracts										forward contracts	$	1,886,379	$	—	$	1,886,379	$	—
Liabilities:										Liabilities:
Derivative financial instruments,										Derivative financial instruments,
futures contracts										futures contracts	$	127,513	$	127,513	$	—	$	—
forward contracts										forward contracts	$	612,758	$	—	$	612,758	$	—

December 31, 2020*	December 31, 2020*									December 31, 2020*

Assets:	Assets:									Assets:
Derivative financial instruments,	Derivative financial instruments,									Derivative financial instruments,
futures contracts	futures contracts	$	0	$	0	$	0	$	0	futures contracts	$	—	$	—	$	—	$	—
forward contracts	forward contracts	$	1,742,054	$	0	$	1,742,054	$	0	forward contracts	$	1,742,054	$	—	$	1,742,054	$	—
Liabilities:	Liabilities:									Liabilities:
Derivative financial instruments,	Derivative financial instruments,									Derivative financial instruments,
futures contracts	futures contracts	$	1,799,688	$	1,799,688	$	0	$	0	futures contracts	$	1,799,688	$	1,799,688	$	—	$	—
forward contracts	forward contracts	$	244,181	$	0	$	244,181	$	0	forward contracts	$	244,181	$	—	$	244,181	$	—

*Derived from audited financial statements.

During the ~~six~~nine months ended ~~June~~September 30, 2021, the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of ~~June~~September 30, 2021 and December 31, 2020, the Company did not have any Level 3 assets or liabilities.

Certain financial assets and financial liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets and financial liabilities measured at fair value on a non-recurring basis were not significant at ~~June~~September 30, 2021.

Disclosure requirements for fair value of financial instruments require disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or nonrecurring basis. The methodologies for estimating the fair value of financial assets and financial liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.

The Company believes the carrying amount of cash and cash equivalents (level 1), accounts receivable (level 2), other receivables (level 2), accounts payable and accruals (level 2) and short-term debt (level 3) approximates fair value.

The carrying amount of long-term obligations (level 3) at ~~June~~September 30, 2021 of ~~$25,000,000~~$5,000,000 had an estimated fair value of approximately ~~$25,000,000~~$5,000,000 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, 2020 of $36,770,400 had an estimated fair value of approximately $36,770,400.

~~ggeNOTE~~

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

SEPTEMBER 30, 2021 AND 2020

NOTE 9. RELATED PARTY TRANSACTIONS

Dakota Ethanol has a 5% interest in RPMG, and Dakota Ethanol has entered into marketing agreements for the exclusive rights to market, sell and distribute the entire ethanol, dried distiller's grains and corn oil inventories produced by Dakota Ethanol. The marketing fees are included in net revenues. The Company also purchases denaturant from RPMG.

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~~LAKE AREA CORN PROCESSORS, LLC~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)~~

~~JUNE 30, 2021 AND 2020~~

Revenues and marketing fees related to the agreements as well as denaturant purchases are as follows:


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2021		2020		2021		2020

Revenues ethanol	Revenues ethanol	$	50,017,972	$	20,324,281	$	87,125,369	$	43,565,787	Revenues ethanol	$	50,058,768	$	26,484,451	$	137,184,137	$	70,050,239
Revenues distillers dried grains	Revenues distillers dried grains	3,951,100		1,140,435		6,335,568		3,678,750		Revenues distillers dried grains	3,422,681		2,938,941		9,758,249		6,617,691
Revenues corn oil	Revenues corn oil	3,313,337		1,114,584		5,807,243		2,677,418		Revenues corn oil	4,082,593		1,374,468		9,889,836		4,051,885
Marketing fees ethanol	Marketing fees ethanol	63,738		19,909		127,476		79,636		Marketing fees ethanol	63,738		59,727		191,214		139,363
Marketing fees distillers dried grains	Marketing fees distillers dried grains	18,438		6,078		31,709		23,919		Marketing fees distillers dried grains	15,848		25,010		47,558		48,929
Marketing fees corn oil	Marketing fees corn oil	13,738		4,510		26,901		17,894		Marketing fees corn oil	14,468		12,965		41,369		30,858
Denaturant purchases	Denaturant purchases	838,142		123,329		1,633,482		691,893		Denaturant purchases	914,355		216,345		2,547,836		908,238

		June 30, 2021		December 31, 2020*							September 30, 2021		December 31, 2020*
Amounts due to RPMG	Amounts due to RPMG	$	54,309	$	47,073					Amounts due to RPMG	$	66,490	$	47,073

*Derived from audited financial statements.

The Company purchased corn and services from members of its Board of Managers that farm and operate local businesses. Corn purchases from these related parties during the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020 totaled approximately ~~$1,006,000~~$1,506,000 and ~~$376,000,~~$801,000, respectively. Corn purchases from these related parties during the three months ended ~~June~~September 30, 2021 and 2020 totaled approximately ~~$758,000~~$500,000 and ~~$355,000,~~$425,000, respectively. As of ~~June~~September 30, 2021 and December 31, 2020, the Company had 0no outstanding obligations to these related parties.

NOTE 10. SUBSEQUENT EVENTS

During ~~August~~November 2021, the Company declared a distribution to its members of ~~$2,962,000,~~$5,924,000, or ~~$0.10~~$0.20 per capital unit, to unit holders of record as of ~~July~~October 1, 2021.

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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 ~~six~~nine month periods ended ~~June~~September 30, 2021, compared to the same periods of the prior year. This discussion should be read in conjunction with the consolidated financial statements and the Management's Discussion and Analysis section for the fiscal year ended December 31, 2020, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Disclosure Regarding Forward-Looking Statements

This report contains historical information, as well as forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance, or our expected future operations and actions. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "future," "intend," "could," "hope," "predict," "target," "potential," "continue" or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions based on current information and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report and our annual report on Form 10-K for the fiscal year ended December 31, 2020.

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

Overview

Lake Area Corn Processors, LLC is a South Dakota limited liability company that owns and manages its wholly-owned subsidiary, Dakota Ethanol, LLC. Dakota Ethanol, LLC owns and operates an ethanol plant located near Wentworth, South Dakota that has a nameplate production capacity of 90 million gallons of ethanol per year. Lake Area Corn Processors, LLC is referred to in this report as "LACP," the "company," "we," or "us." Dakota Ethanol, LLC is referred to in this report as "Dakota Ethanol" or the "ethanol plant."

Our revenue is derived from the sale and distribution of our ethanol, distillers grains and corn oil. Corn is supplied to us primarily from our members who are local agricultural producers and from purchases of corn on the open market. We have engaged Renewable Products Marketing Group, Inc. ("RPMG, Inc.") to market all of the ethanol and corn oil that we produce at the ethanol plant. Further, RPMG, Inc. markets all of the distillers grains that we produce that we do not market internally to local customers.

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Results of Operations

Comparison of the Three Months Ended ~~June~~September 30, 2021 and 2020

The following table shows the results of our operations and the percentage of revenues, cost of revenues, operating expenses and other items to total revenues in our consolidated statements of income for the three months ended ~~June~~September 30, 2021 and 2020:


		2021			2020				2021			2020
Income Statement Data	Income Statement Data	Amount		%	Amount		%	Income Statement Data	Amount		%	Amount		%
Revenues	Revenues	$	64,238,127	100.0	$	25,424,832	100.0	Revenues	$	63,794,494	100.0	$	33,917,787	100.0

Cost of Revenues	Cost of Revenues	54,770,073		85.3	19,812,907		77.9	Cost of Revenues	54,753,379		85.8	27,871,295		82.2

Gross Profit	Gross Profit	9,468,054		14.7	5,611,925		22.1	Gross Profit	9,041,115		14.2	6,046,492		17.8

Operating Expense	Operating Expense	1,276,095		2.0	945,709		3.7	Operating Expense	1,249,243		2.1	992,023		2.9

Income from Operations	Income from Operations	8,191,959		12.7	4,666,216		18.4	Income from Operations	7,791,872		12.1	5,054,469		14.9

Other Income (Expense)	Other Income (Expense)	1,866,693		2.9	(452,841)		(1.8)	Other Income (Expense)	1,020,685		1.6	755,957		2.2

Net Income	Net Income	$	10,058,652	15.6	$	4,213,375	16.6	Net Income	$	8,812,557	13.7	$	5,810,426	17.1

Revenues

Revenue from ethanol sales increased by approximately ~~146.0%~~89.2% during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to ~~increased gallons of ethanol sold and~~ increased average prices that we received for our ethanol during the 2021 period. Revenue from distillers grains sales increased by approximately ~~173.9%~~58.7% during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased average prices that we received for our distillers grains ~~along with increased~~partially offset by fewer tons of distillers grains ~~sold during the 2021 period.~~sold. Revenue from corn oil sales increased by approximately ~~197.2%~~198.8% during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased average prices that we received for corn oil sold and increased pounds of corn oil sold during the 2021 period.

Ethanol

Our ethanol revenue was approximately ~~$29.6~~$23.6 million higher during our three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020, an increase of approximately ~~146.0%~~89.2%. This increase in ethanol revenue was due primarily to an increase in the ~~volume of ethanol sold and increased~~ average price that we received per gallon of ethanol sold during the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020. We sold approximately ~~31.3%~~2.1% more gallons of ethanol during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~5,165,000~~444,000 gallons. The increase is due primarily to ~~not having~~increased inventory sales of ethanol during the ~~COVID-19 pandemic related shutdown we experienced during~~ three months ended ~~June~~September 30, 2020.

The average price we received for our ethanol was approximately ~~$1.07~~$1.05 higher per gallon during the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020, an increase of approximately ~~87.4%~~85.4%. Management attributes this increase in ethanol prices during the three months ended ~~June~~September 30, 2021 to ~~lower ethanol stocks~~higher gasoline prices along with increasing gasoline demand. Since ethanol is blended with gasoline, when gasoline price and demand isare higher it has a corresponding impact on ethanol price and demand. Management also believes that higher corn prices during the 2021 period had an impact on ethanol prices.

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Distillers Grains

Our total distillers grains revenue was approximately ~~173.9%~~58.7% higher during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased average prices received for our distillers ~~grains and increased tons of distillers grains sold.~~grains. We sold approximately ~~70.9% more~~12.9% less total tons of distillers grains during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 primarily due to ~~increased ethanol~~reduced dried distillers grains production caused by higher natural gas prices during the 2021 period.

The average price we received for our dried distillers grains was approximately ~~64.0%~~82.5% higher during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~$79.89~~$92.28 per ton. Management attributes the increase in dried distillers grains prices during the three months ended ~~June~~September 30, 2021 to increases in the domestic price of corn and decreased market supply of corn. The average price we received for our modified/wet distillers grains, on a dry-equivalent basis, was approximately ~~59.6%~~79.3% higher for the three months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~$80.78~~$95.40 per ton. Management attributes this increase in modified/wet distillers grains prices with higher corn prices in the market and decreased corn supply.

Corn Oil

Our total corn oil revenue was approximately ~~197.2%~~198.8% higher during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased prices received for our corn oil and more pounds of corn oil sold. Our total pounds of corn oil sold increased by approximately ~~51.3%~~11.6% during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~2,217,000~~716,000 pounds. We produced more corn oil due to ~~our~~ increased ~~overall production~~oil extraction proficiency during the 2021 period ~~since we did not have a pandemic related shutdown like we did during~~compared to the three months ended ~~June~~September 30, 2020.

The average price per pound we received for our corn oil was higher by approximately ~~96.5%~~167.8% for the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to demand from the biodiesel industry for corn oil along with higher soybean oil prices.

Cost of Revenues

Corn

Our cost of revenues relating to corn was approximately ~~225.9%~~118.3% higher for the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to significantly increased corn prices during the 2021 period.

Our average cost per bushel of corn increased by approximately ~~154.4%~~113.7% for the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020. We consumed approximately ~~27.9%~~2.2% more bushels of corn during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 ~~due to increased~~that resulted in slightly less production at the ethanol plant. Management attributes the increased corn cost per bushel to significantly higher market corn prices and decreased corn availability during our 2021 fiscal period. ~~Corn production was lower in South America which has resulted in increased export demand for United States corn.~~ Management anticipates corn prices to remain higher until the harvest of 2021 begins. After harvest, corn prices are expected to ~~decrease~~remain stable for the remainder of our 2021 fiscal year.

Natural Gas

Our cost of revenues related to natural gas increased by approximately ~~$472,000,~~$1,070,000, an increase of approximately ~~46.9%~~101.6%, for the three months ended ~~June~~September 30, 2021 compared to the three months ended ~~June~~September 30, 2020. This increase was due to higher natural gas costs per MMBtu ~~along with increased~~offset partially by less natural gas usage during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020.

Our average cost per MMBtu of natural gas during the three months ended ~~June~~September 30, 2021 was approximately ~~23.3%~~109.0% more compared to the cost per MMbtu for the three months ended ~~June~~September 30, 2020. Management attributes this increase in our average natural gas costs to higher market natural gas prices due to ~~increased~~high demand ~~along with higher energy prices generally.~~and supply shortages.

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The volume of natural gas we used ~~increased~~decreased by approximately ~~19.1%~~3.6% during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to ~~increased~~decreased overall production ~~at the ethanol plant.~~of dried distillers grains.

Operating Expenses

Our operating expenses were higher for the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased ~~professional fees,~~ insurance expense and increased wages and benefits.

Other Income and Expense

We had greater other income during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to a gain on investments during the ~~2021 period and forgiveness of our Paycheck Protection Program ("PPP") loan which was included in other income during the~~ three months ended ~~June~~September 30, 2021. We had more income from our investments during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to improved profitability in the ethanol sector. We had less interest expense during the three months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to lower carrying balances on outstanding ~~debt in addition to lower interest rates.~~debt.

Comparison of the ~~Six~~Nine Months Ended ~~June~~September 30, 2021 and 2020

The following table shows the results of our operations and the percentage of revenues, cost of revenues, operating expenses and other items to total revenues in our consolidated statements of income for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:


		2021			2020				2021			2020
Income Statement Data	Income Statement Data	Amount		%	Amount		%	Income Statement Data	Amount		%	Amount		%
Revenues	Revenues	$	112,853,779	100.0	$	57,881,070	100.0	Revenues	$	176,648,273	100.0	$	91,798,857	100.0

Cost of Revenues	Cost of Revenues	96,428,506		85.4	60,118,787		103.9	Cost of Revenues	151,181,885		85.6	87,990,082		95.9

Gross Profit (Loss)		16,425,273		14.6	(2,237,717)		(3.9)
Gross Profit								Gross Profit	25,466,388		14.4	3,808,775		4.1

Operating Expense	Operating Expense	2,527,229		2.2	2,285,547		3.9	Operating Expense	3,776,472		2.0	3,277,570		3.5

Income (Loss) from Operations		13,898,044		12.4	(4,523,264)		(7.8)
Income from Operations								Income from Operations	21,689,916		12.4	531,205		0.6

Other Income (Expense)	Other Income (Expense)	2,696,138		2.4	(1,738,404)		(3.0)	Other Income (Expense)	3,716,823		2.1	(982,447)		(1.1)

Net Income (Loss)	Net Income (Loss)	$	16,594,182	14.8	$	(6,261,668)	(10.8)	Net Income (Loss)	$	25,406,739	14.5	$	(451,242)	(0.5)

Revenues

Revenue from ethanol sales increased by approximately ~~100.1%~~96.0% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to increased gallons of ethanol sold and increased average prices that we received for our ethanol during the 2021 period. Revenue from distillers grains sales increased by approximately ~~71.1%~~66.8% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased average prices that we received for our distillers grains during the 2021 period along with increased tons of distillers grains sold. Revenue from corn oil sales increased by approximately ~~117.3%~~144.9% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased average prices and increased pounds of corn oil sold during the 2021 period.

Ethanol

Our ethanol revenue was approximately ~~$43.5~~$67.1 million higher during our ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of approximately ~~100.1%~~96.0%. This increase in ethanol revenue was due primarily to an increase in the volume of ethanol sold and increased average price that we received per gallon of ethanol sold during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. We

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~~six months ended June 30, 2021 compared to the six months ended June 30, 2020. We~~ sold approximately ~~14.0%~~9.7% more gallons of ethanol during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately 56 million gallons. The increased production is due to not having the pandemic related downtime we experienced during the 2020 period.

The average price we received for our ethanol was approximately ~~$0.86~~$0.92 more per gallon during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020, an increase of approximately ~~75.5%~~78.6%. Management attributes this increase in ethanol prices during the ~~six~~nine months ended ~~June~~September 30, 2021 to ~~lower ethanol stocks along with increasing~~higher gasoline prices and increased gasoline demand. Since ethanol is blended with gasoline, when gasoline price and demand isare higher it has a corresponding impact on ethanol price and demand.

Distillers Grains

Our total distillers grains revenue was approximately ~~71.1%~~66.8% higher during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased prices received for our distillers grains and increased tons of distillers grains sold. We sold approximately ~~18.7%~~6.7% more total tons of distillers grains during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 primarily due to increased production at the ethanol plant for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to ~~six~~nine months ended ~~June~~September 30, 2020.

The average price we received for our dried distillers grains was approximately ~~44.6%~~59.8% higher during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~$59~~$73 per ton. Management attributes the increase in dried distillers grains prices during the ~~six~~nine months ended ~~June~~September 30, 2021 to increases in the domestic price of corn. The average price we received for our modified/wet distillers grains, on a dry-equivalent basis, was approximately ~~43.9%~~53.7% higher for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~$60~~$71 per ton. Management attributes this increase in modified/wet distillers grains prices with higher corn prices in the market.

Corn Oil

Our total corn oil revenue was approximately ~~117.3%~~144.9% higher during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased prices received for our corn oil and increased pounds of corn oil ~~sales.~~sold. Our total pounds of corn oil sold increased by approximately ~~19.7%~~16.8% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, an increase of approximately ~~2.1~~2.8 million pounds, primarily due to increased overall production at the ethanol plant during the 2021 period.

The average price per pound we received for our corn oil was higher by approximately ~~81.5%~~109.8% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to demand from the biodiesel industry for corn oil and higher soybean oil prices.

Cost of Revenues

Corn

Our cost of revenues relating to corn was approximately ~~81.4%~~93.0% higher for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to significantly increased corn prices during the 2021 period along with increased corn usage.

Our average cost per bushel of corn increased by approximately ~~62.5%~~78.3% for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020. We consumed approximately ~~11.5%~~8.3% more bushels of corn during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020. Management attributes the increased corn cost per bushel to significantly higher corn prices during our 2021 fiscal period due to ~~lower~~tight corn ~~production in South America which has resulted in~~supplies and increased ~~export~~ demand for United States corn. We used more corn during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020 due to increased overall production at the ethanol plant.

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Natural Gas

Our cost of revenues related to natural gas increased by approximately ~~$532,000,~~$1,606,000, an increase of approximately ~~18.6%~~41.2%, for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the ~~six~~nine months ended ~~June~~September 30, 2020. This increase was due to higher natural gas costs per MMBtu along with slightly increased usage during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020.

Our average cost per MMBtu of natural gas during the ~~six~~nine months ended ~~June~~September 30, 2021 was approximately ~~12.4%~~38.1% more compared to the cost per MMbtu for the ~~six~~nine months ended ~~June~~September 30, 2020. Management attributes this increase in our average natural gas costs to higher natural gas prices due to increased demand as well as ~~a deep freeze that occurred in February of 2021.~~lower inventories.

The volume of natural gas we used increased by approximately ~~5.5%~~2.2% during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased overall production at the ethanol ~~plant.~~plant offset some by lower dried distillers production.

Operating Expenses

Our operating expenses were higher for the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due primarily to increased insurance expense, bank charges, and ~~increased~~ wages and benefits.

Other Income and Expense

We had greater other income during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to a gain on investments during the 2021 period along with forgiveness of our PPP loan. We had more income from our investments during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to improved profitability in the ethanol sector. We had less interest expense during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020 due to lower carrying balances on outstanding ~~debt in addition to lower interest rates.~~debt.

Changes in Financial Condition for the ~~Six~~Nine Months Ended ~~June~~September 30, 2021

Current Assets

Our cash on hand at ~~June~~September 30, 2021 was less compared to December 31, 2020 due to deferred corn payments which we made in January 2021. We had greater accounts receivable at ~~June~~September 30, 2021 compared to December 31, 2020 due to the timing of our quarter end and the payments related to the shipments of our products. The value of our inventory was greater at ~~June~~September 30, 2021 compared to December 31, 2020 due to more ~~corn and~~ ethanol inventory on hand as well as higher corn and ethanol prices which increase the value of our inventory. The asset value of our derivative instruments was greater at ~~June~~September 30, 2021 compared to December 31, 2020 due to recent corn price changes which impacted our derivative instruments. We had less prepaid expenses at ~~June~~September 30, 2021 compared to December 31, 2020 due to amortization of our insurance premiums.

Property and Equipment

The value of our property and equipment was less at ~~June~~September 30, 2021 compared to December 31, 2020 primarily as a result of regular depreciation of our assets.

Other Assets

The value of our investments was greater at ~~June~~September 30, 2021 compared to December 31, 2020 due to increased profitability in the ethanol industry, in which the majority of our investments are related.

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Current Liabilities

We had more outstanding checks in excess of bank balances at ~~June~~September 30, 2021 compared to December 31, 2020. We use our revolving loan to pay any checks that are presented for payment which exceed the cash we have available in our

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accounts. Our accounts payable were lower at ~~June~~September 30, 2021 compared to December 31, 2020 due primarily to decreased corn payables at ~~June~~September 30, 2021 compared to December 31, 2020 as the deferred payments were paid during the first ~~quarter.~~quarter of 2021. Our derivative instrument liability was ~~lower~~higher at ~~June~~September 30, 2021 compared to December 31, 2020 due to corn price changes, which impacted our derivative instruments. The current portion of our notes payable was less at ~~June~~September 30, 2021 compared to December 31, 2020 due to forgiveness of our PPP ~~loan~~and EIDL loans which reduced the amount of long-term loan payments we need to make in the next twelve months.

Long-Term Liabilities

Our long-term liabilities were lower at ~~June~~September 30, 2021 compared to December 31, 2020 due to decreased borrowing and reductions in notes payable resulting from increased profitability.

Liquidity and Capital Resources

Our main sources of liquidity are cash from our continuing operations, distributions we receive from our investments and amounts we have available to draw on our revolving credit facilities. Management does not anticipate that we will need to raise additional debt or equity financing in the next twelve months and management believes that our current sources of liquidity will be sufficient to continue our operations during that time period. We anticipate that any capital expenditures we undertake will be paid out of cash from operations and existing loans, and will not require any additional debt or equity financing.

Currently, we have two revolving loans, which allow us to borrow funds for working capital. These loans are described in greater detail below in the section entitled "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Indebtedness." As of ~~June~~September 30, 2021, we had ~~$19,000,000~~$0 outstanding and ~~$31,000,000~~$48,250,000 available to be drawn on our revolving loans, after taking into account the borrowing base calculation. Management anticipates that this is sufficient to maintain our liquidity and continue our operations for the next twelve months.

The following table shows cash flows for the ~~six~~nine months ended ~~June~~September 30, 2021 and 2020:

Six Months Ended June 30,
2021 2020
Net cash (used in) operating activities $ (8,775,429) $ (15,414,500)
Net cash (used in) investing activities (158,262) (264,884)
Net cash provided by (used in) by financing activities (8,263,361) 5,678,379


	Nine Months Ended September 30,
	2021		2020
Net cash provided by (used in) operating activities	$	16,732,755	$	(1,594,191)
Net cash (used in) investing activities	(340,540)		(334,571)
Net cash (used in) financing activities	(31,694,584)		(8,780,738)

Cash Flow From Operations. Our operating activities ~~used less~~provided cash during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to using cash in the same period of 2020, due primarily to increased net income and less cash used by accounts payable partially offset by an increase in ~~inventory with higher values~~accounts receivable and ~~a reduction in corn payables~~inventory during the 2021 period.

Cash Flow From Investing Activities. Our investing activities used ~~less~~more cash during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, due to ~~fewer~~more capital expenditures.

Cash Flow From Financing Activities. Our financing activities used more cash during the ~~six~~nine months ended ~~June~~September 30, 2021 compared to the same period of 2020, due primarily to the reduction of balances outstanding on our loans during the 2021 period.

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Indebtedness

We maintain a comprehensive credit facility with Farm Credit Services of America, PCA and Farm Credit Services of America, FLCA (collectively "FCSA"). We have a $2 million revolving operating line of credit (the "Operating Line") and a ~~$48~~$46 million reducing revolving loan (the "Reducing Revolving Loan"). All of our assets, including the ethanol plant and equipment, its accounts receivable and inventory, serve as collateral for our loans with FCSA.

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On August 1, 2017, we executed an amendment to our credit agreement to create an $8 million term loan, which we used to finance a portion of our investment in Ring-neck Energy & Feed, LLC.

On February 6, 2018, we executed an Amended and Restated Credit Agreement (the "Credit Agreement") with FCSA. Pursuant to the Credit Agreement, our total credit availability is $40 million to support our expansion project. The credit availability matures on January 1, 2026. Interest on the outstanding principal balance will accrue at the one month London Interbank Offered Rate ("LIBOR") plus 325 basis points until February 1, 2023 and the basis increases to 350 points thereafter until maturity. The interest rate is not subject to a floor. We agreed to pay a fee of 0.50% on the unused portion of the increased credit availability.

On October 21, 2019, we entered into a Second Amendment to Amended and Restated Credit Agreement (the "Loan Amendment") with FCSA. In the Loan Amendment, we extended the maturity date of our $10 million revolving loan to November 1, 2021; we also extended the date when the available balance of our $40 million revolving loan started to decrease from January 1, 2020 to January 1, 2021.

On June 5, 2020, we entered into a Third Amendment to the credit agreement (the "Third Amendment"). Under the Third Amendment, the available credit under the revolving operating note was reduced to $2,000,000 and the available credit on the reducing revolving note was increased to $48,000,000. The working capital covenant was reduced to $11,000,000, and the net worth covenant was reduced to $18,000,0000. The next measurement date for the debt service coverage ratio was deferred until December 31, 2021. The annual installment on the term note for 2020 was deferred until maturity in 2025. The interest rates were unchanged.

On October 11, 2021, we entered into a Fourth Amendment to the credit agreement (the "Fourth Amendment"). Under the Fourth Amendment, the operating lines's maturity date was extended to November 1, 2023. Interest on the outstanding principal balance of the operating line will accrue at the Secured Overnight Financing Rate ("SOFR") 30-Day Average Rate plus 305 basis points. The available credit on the reducing revolving note is $46,250,000. Interest on the outstanding principal balance of the revolving loan and term loan will accrue at the SOFR 30-Day Average Rate plus 330 basis points. The working capital covenant was increased to $13,500,000, and the net worth covenant was increased to $28,000,0000.

Operating Line

Dakota Ethanol has a revolving promissory note from Farm Credit Services of America (FCSA) in an amount up to $2,000,000 or the amount available in accordance with the borrowing base calculation, whichever is less. Interest on the outstanding principal balance will accrue at ~~300~~305 basis points above the ~~1 month LIBOR rate~~SOFR 30-Day Average Rate and is not subject to a floor. The rate was 3.1% at ~~June~~September 30, 2021. There is a non-use fee of 0.25% on the unused portion of the $2,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, ~~2021.~~2023. On ~~June~~September 30, 2021, Dakota Ethanol had $0 outstanding and $2,000,000 available to be drawn on the revolving promissory note under the borrowing base.

Reducing Revolving Loan

Dakota Ethanol has a reducing revolving promissory note from FCSA in the amount up to ~~$48,000,000~~$46,250,000 or the amount available in accordance with the borrowing availability under the credit agreement. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on July 1, 2021 until the maximum balance reaches $32,250,000 on July 1, 2025. The note matures on January 1, 2026. Interest on the outstanding principal balance will accrue at the ~~one month London Interbank Offered~~SOFR 30-Day Average Rate ~~("LIBOR")~~ plus ~~325~~330 basis ~~points until February 1, 2023 and the basis increases to 350 points thereafter until maturity.~~points. The interest rate is not subject to a floor. The rate was 3.35% at ~~June~~September 30, 2021.

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The note contains a non-use fee of 0.5% on the unused portion of the note. On ~~June~~September 30, 2021, Dakota Ethanol had ~~$19,000,000~~$0 outstanding and ~~$29,000,000~~$46,250,000 available to be drawn on the note.

2017 Term Loan

On August 1, 2017, Dakota Ethanol executed a term note with FCSA in the amount of $8 million. Dakota Ethanol agreed to make monthly interest payments starting September 1, 2017 and annual principal payments of $1,000,000 starting on August 1, 2018. The payment that was due in August 2020 was deferred to August 2025. The notes matures on August 1, 2025. Interest on the outstanding principal balance will accrue at ~~325~~330 basis points above the ~~1 month LIBOR rate~~SOFR 30-Day Average Rate and is not subject to a floor. The rate was 3.35% at ~~June~~September 30, 2021. On ~~June~~September 30, 2021, Dakota Ethanol had ~~$6,000,000~~$5,000,000 outstanding on the note.

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2020 Loans

We entered into a loan agreement with the Small Business Association through First State Bank, Gothenburg, NE on April 4, 2020 for $760,400 as part of the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). In June 2021, the Company received notification from the Small Business Administration that all loan proceeds and accrued interest received and recorded by the Company were forgiven. Due to forgiveness of the loan, the Company recorded a gain on debt extinguishment in other income in the statement of operations for $768,400 for the ~~six~~nine months ended ~~June~~September 30, 2021.

Covenants

Our credit facilities with FCSA are subject to various loan covenants. If we fail to comply with these loan covenants, FCSA can declare us to be in default of our loans. The material loan covenants applicable to our credit facilities are our working capital covenant, local net worth covenant and our debt service coverage ratio. We are required to maintain working capital (current assets minus current liabilities plus availability on our revolving loan) of at least ~~$11 million.~~$13,500,000. We are required to maintain local net worth (total assets minus total liabilities minus the value of certain investments) of at least ~~$18~~$28 million. We are required to maintain a debt service coverage ratio of at least 1.25:1.00. The working capital and local net worth capital covenants are measured monthly while the debt service coverage covenant is measured annually at year-end. The debt service coverage covenant measurement will be measured again starting on December 31, 2021.

As of ~~June~~September 30, 2021, we were in compliance with the working capital and local net worth loan covenants. Management's current financial projections indicate that we will be in compliance with our financial covenants for the next 12 months and we expect to remain in compliance thereafter. If we fail to comply with the terms of our credit agreements with FCSA, and FCSA refuses to waive the non-compliance, FCSA may require us to immediately repay all amounts outstanding on our loans.

Application of Critical Accounting Policies

Management uses estimates and assumptions in preparing our consolidated 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. Of the significant accounting policies described in the notes to our consolidated financial statements, we believe that the following are the most critical:

Derivative Instruments

We enter into short-term forward option and futures contracts as a means of securing corn for the ethanol plant and managing exposure to changes in commodity prices. We enter into short-term forward, option and futures contracts for sales of

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ethanol to manage exposure to changes in commodity prices. All of our derivatives are designated as non-hedge derivatives, and accordingly are recorded at fair value with changes in fair value recognized in net income or treated as normal purchases and sales contracts and analyzed for inherent losses. Although the contracts are considered economic hedges of specified risks, they are not designated as nor accounted for as hedging instruments.

As part of our trading activity, we use futures and option contracts offered through regulated commodity exchanges to reduce our risk and we are exposed to risk of loss in the market value of inventories. To reduce that risk, we generally take positions using cash and futures contracts and options.

Unrealized gains and losses related to derivative contracts for corn and natural gas purchases are included as a component of cost of revenues and derivative contracts related to ethanol sales are included as a component of revenues in the

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accompanying financial statements. The fair values of derivative contracts are presented on the accompanying balance sheets as derivative financial instruments.

Goodwill

Annually, as well as when an event triggering impairment may have occurred, the Company performs an impairment test on goodwill which compares the fair value of the reporting unit with its carrying amount. An impairment charge is recognized, if necessary, for the amount by which the carrying value exceeds the fair value up to the amount of the goodwill attributed to the reporting unit. The Company performs the annual analysis as of December 31 of each fiscal year.

Inventory Valuation

Revenue Recognition

The Company generally recognizes revenue at a point in time when performance obligations are satisfied. Revenue from the production of ethanol and related products is recorded when control transfers to customers. Generally, ethanol and related products are shipped FOB shipping point, based on written contract terms between Dakota Ethanol and its customers. Collectability of revenue is reasonably assured based on historical evidence of collectability between Dakota Ethanol and its customers. Interest income is recognized as earned.

Shipping costs incurred by the Company in the sale of ethanol, dried distillers grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer.

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 commodity prices and interest rates as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the commodity prices of corn and natural gas. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes.

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Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from holding loans which bear variable interest rates. As of ~~June~~September 30, 2021, we had ~~$25,000,000~~$5,000,000 outstanding on our variable interest rate loans with interest accruing at a rate of 3.35%. Our variable interest rates are calculated by adding a set basis to ~~LIBOR.~~the SOFR 30-Day Average Rate. If we were to experience a 10% increase in ~~LIBOR,~~the SOFR 30-Day Average Rate, the annual effect such change would have on our income statement, based on the amount we had outstanding on our variable interest rate loans as of ~~June~~September 30, 2021, would be approximately $2,500.

Commodity Price Risk

We are exposed to market risk from changes in commodity prices. Exposure to commodity price risk results from our dependence on corn and natural gas in the ethanol production process. We seek to minimize the risks from fluctuations in the prices of corn and natural gas through the use of hedging instruments. In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. Although we believe our hedge positions accomplish an economic hedge

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against our future purchases, they are not designated as such for hedge accounting purposes, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We are marking to market our hedge positions, which means as the current market price of our hedge positions changes, the gains and losses are immediately recognized in our cost of revenues.

The immediate recognition of hedging gains and losses can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged. We recorded a combined decrease to our cost of revenues of approximately $243,000 related to derivative instruments for the quarter ended September 30, 2021. We recorded a combined increase to our cost of revenues of approximately ~~$1,557,000~~$316,000 related to derivative instruments for the quarter ended ~~June 30, 2021. We recorded a combined decrease to our cost of revenues of approximately $1,076,000 related to derivative instruments for the quarter ended June~~September 30, 2020. There are several variables that could affect the extent to which our derivative instruments are impacted by price fluctuations in the cost of corn or natural gas. However, it is likely that commodity cash prices will have the greatest impact on the derivatives instruments with delivery dates nearest the current cash price.

As of ~~June~~September 30, 2021, we were committed to purchasing approximately ~~4.9~~6.0 million bushels of corn with an average price of ~~$5.69~~$5.23 per bushel. These corn purchases represent approximately ~~16%~~20% of our projected plant corn usage for the next 12 months.

As of ~~June~~September 30, 2021, we were committed to purchasing approximately ~~730,000~~820,000 MMBtus of natural gas with an average price of ~~$2.78~~$3.03 per MMBtu. Under these arrangements, the Company assumes the risk of a price decrease in the market price of natural gas between the time the price is fixed and the time the natural gas is delivered. The Company accounts for these transactions as normal purchases, and accordingly, does not mark these transactions to market. The natural gas purchases represent approximately ~~36%~~40% of the projected annual plant requirements.

As of ~~June~~September 30, 2021, we were committed to selling approximately ~~20,000~~35,000 dry equivalent tons of distillers grains with an average price of ~~$210~~$201 per ton. The distillers grains sales represent approximately 9%16% of the projected annual plant production.

As of ~~June~~September 30, 2021, we were committed to selling approximately ~~2.1~~2.8 million pounds of distillers corn oil with an average price of ~~$0.59~~$0.58 per pound. The distillers corn oil sales represent approximately 9%13% of the projected annual plant production.

We did not have any firm-priced sales commitments for ethanol as of ~~June~~September 30, 2021.

A sensitivity analysis has been prepared to estimate our exposure to corn, natural gas and ethanol price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas prices and average ethanol price as of ~~June~~September 30, 2021, 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

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expected use and sale of these commodities for a one year period from ~~June~~September 30, 2021. The results of this analysis, which may differ from actual results, are as follows:


		Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income			Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income
Ethanol	Ethanol	92,000,000	Gallons	10	%	$	21,068,000	Ethanol	92,000,000	Gallons	10	%	$	22,080,000
Corn	Corn	28,270,599	Bushels	10	%	$	19,201,391	Corn	30,666,667	Bushels	10	%	$	14,741,103
Natural Gas	Natural Gas	1,340,000	MMBTU	10	%	$	501,026	Natural Gas	2,070,000	MMBTU	10	%	$	730,014

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For comparison purposes, our sensitivity analysis for our quarter ended ~~June~~September 30, 2020 is set forth below.


		Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income			Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income
Ethanol	Ethanol	92,000,000	Gallons	10	%	$	13,156,000	Ethanol	92,000,000	Gallons	10	%	$	12,003,842
Corn	Corn	28,768,915	Bushels	10	%	$	8,630,674	Corn	30,666,667	Bushels	10	%	$	10,369,021
Natural Gas	Natural Gas	1,460,040	MMBTU	10	%	$	237,987	Natural Gas	2,070,000	MMBTU	10	%	$	312,124

ITEM 4. CONTROLS AND PROCEDURES

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

Our management, including our Chief Executive Officer (the principal executive officer), Scott Mundt, along with our Chief Financial Officer (the principal financial officer), Rob Buchholtz, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of ~~June~~September 30, 2021. Based on this review and evaluation, these officers believe that our disclosure controls and procedures are effective in ensuring that material information related to us is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission.

For the fiscal quarter ended ~~June~~September 30, 2021, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time in the ordinary course of business, Dakota Ethanol or Lake Area Corn Processors may be named as a defendant in legal proceedings related to various issues, including, worker's compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings, directly or indirectly, and we are not aware of any claims pending or threatened against us or any of the managers that could result in the commencement of material legal proceedings.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors that were previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2020.

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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.

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ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed as part of this report.


Exhibit No.			Exhibit
10.1			Fourth Amendment to Amended and Restated Credit Agreement dated October 11, 2021*
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.INS*			XBRL Instance Document
101.SCH*			XBRL Schema Document
101.CAL*			XBRL Calculation Document
101.LAB*			XBRL Labels Linkbase Document
101.PRE*			XBRL Presentation Linkbase Document
101.DEF*			XBRL Definition Linkbase Document

* Filed herewith.

** Furnished herewith.

3433

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		LAKE AREA CORN PROCESSORS, LLC

Date:	~~August~~November 12, 2021	/s/ Scott Mundt
		Scott Mundt
		President and Chief Executive Officer (Principal Executive Officer)

Date:	~~August~~November 12, 2021	/s/ Robbi Buchholtz
		Robbi Buchholtz
		Chief Financial Officer (Principal Financial and Accounting Officer)

3534


			Page No.
Part I FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			30
Item 4. Controls and Procedures			32

Part II OTHER INFORMATION			32
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 3. Defaults Upon Senior Securities			3233
Item 4. Mine Safety Disclosures			3233
Item 5. Other Information			33
Item 6. Exhibits			3433
Signatures			3534



Periods Ending June 30,	Principal
2022	$	1,000,000
2023	1,000,000
2024	1,000,000
2025	1,000,000
2026	21,000,000
thereafter	0
	$	25,000,000