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.~~1934

For the ~~fiscal quarter~~quarterly period ended
~~September 30, 2020~~March 31, 2021
or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of ~~1934.~~1934
For the transition period from to
~~000-50254~~
	(Commission file ~~number)~~number:	000-50254


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

SDSouth 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)		~~(Zip Code)~~


(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
~~(Do not check if a smaller reporting company)~~		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 ~~November 13, 2020,~~May 14, 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


		September 30, 2020		December 31, 2019*			March 31, 2021		December 31, 2020*
ASSETS	ASSETS	(unaudited)				ASSETS	(unaudited)

CURRENT ASSETS	CURRENT ASSETS					CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	2,114,153	$	12,823,653	Cash and cash equivalents	$	1,863,015	$	18,637,811
Accounts receivable	Accounts receivable	1,919,969		1,576,093		Accounts receivable	903,324		585,054
Accounts receivable (related party)						Accounts receivable (related party)	2,933,248		1,633,760

Inventory	Inventory	5,497,765		10,543,422		Inventory	14,237,682		9,768,916

Derivative financial instruments	Derivative financial instruments	445,901		505,025		Derivative financial instruments	4,236,414		2,074,010
Prepaid expenses	Prepaid expenses	198,085		479,422		Prepaid expenses	546,020		677,471
Total current assets	Total current assets	10,175,873		25,927,615		Total current assets	24,719,703		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	8,631,224		8,631,224
Buildings	Buildings	9,316,576		9,316,576		Buildings	9,316,576		9,316,576
Equipment	Equipment	95,849,293		95,395,121		Equipment	95,867,639		95,867,639
Construction in progress	Construction in progress	0		150,925		Construction in progress	44,662		6,303
		114,671,566		114,368,319			114,734,574		114,696,215
Less accumulated depreciation	Less accumulated depreciation	(51,910,690)		(47,660,838)		Less accumulated depreciation	(54,746,949)		(53,328,718)
Net property and equipment	Net property and equipment	62,760,876		66,707,481		Net property and equipment	59,987,625		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	16,212,660		16,682,169		Investments	16,739,796		16,636,367
Other	Other	85,293		97,287		Other	77,296		81,295
Total other assets	Total other assets	26,693,719		27,175,222		Total other assets	27,212,858		27,113,428

TOTAL ASSETS	TOTAL ASSETS	$	99,630,468	$	119,810,318	TOTAL ASSETS	$	111,920,186	$	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


		September 30, 2020		December 31, 2019*			March 31, 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	$	1,604,126	$	1,155,264	Outstanding checks in excess of bank balance	$	2,318,475	$	319,608
Accounts payable	Accounts payable	3,637,967		13,812,388		Accounts payable	5,254,648		18,526,170
Accrued liabilities	Accrued liabilities	857,091		933,668		Accrued liabilities	777,014		732,544
Derivative financial instruments	Derivative financial instruments	3,450		698,850		Derivative financial instruments	2,345		244,181

Current portion of notes payable	Current portion of notes payable	1,074,853		1,000,000		Current portion of notes payable	1,328,735		1,201,628
Other	Other	4,000		4,000		Other	0		4,000
Total current liabilities	Total current liabilities	7,181,487		17,604,170		Total current liabilities	9,681,217		21,028,131

LONG-TERM LIABILITIES	LONG-TERM LIABILITIES					LONG-TERM LIABILITIES
Notes payable	Notes payable	28,687,283		37,989,208		Notes payable	30,434,860		35,561,237

Other		0		4,000

Total long-term liabilities	Total long-term liabilities	28,687,283		37,993,208		Total long-term liabilities	30,434,860		35,561,237

MEMBERS' EQUITY (29,620,000 units issued and outstanding)	MEMBERS' EQUITY (29,620,000 units issued and outstanding)	63,761,698		64,212,940		MEMBERS' EQUITY (29,620,000 units issued and outstanding)	71,804,109		65,268,579

TOTAL LIABILITIES AND MEMBERS' EQUITY	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	99,630,468	$	119,810,318	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	111,920,186	$	121,857,947

* Derived from audited financial statements.

~~See Notes to Unaudited Consolidated Financial Statements.~~

~~Table of Contents~~

~~LAKE AREA CORN PROCESSORS, LLC~~

~~Consolidated Statements of Operations (Unaudited)~~

Three Months Ended Septemer 30, 2020 Three Months Ended September 30, 2019 Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
REVENUES $ 33,917,787 $ 32,441,510 $ 91,798,857 $ 80,151,796
COSTS OF REVENUES 27,871,295 34,256,712 87,990,082 78,218,717
GROSS PROFIT (LOSS) 6,046,492 (1,815,202) 3,808,775 1,933,079
OPERATING EXPENSES 992,023 971,662 3,277,570 2,906,424
INCOME (LOSS) FROM OPERATIONS 5,054,469 (2,786,864) 531,205 (973,345)
OTHER INCOME (EXPENSE)
Interest and other income 42,419 12,320 388,449 163,385
Equity in net income (loss) of investments 1,019,662 (349,123) (206,140) (425,776)
Interest expense (306,124) (476,122) (1,164,756) (766,746)
Total other (expense) 755,957 (812,925) (982,447) (1,029,137)
NET INCOME (LOSS) $ 5,810,426 $ (3,599,789) $ (451,242) $ (2,002,482)
BASIC AND DILUTED EARNINGS (LOSS) PER UNIT $ 0.20 $ (0.12) $ (0.02) $ (0.07)
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 $ 0 $ 0 $ 0 $ 0

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Operations (Unaudited)


	Three Months Ended March 31, 2021		Three Months Ended March 31, 2020

REVENUES	$	48,615,653	$	32,456,238

COSTS OF REVENUES	41,658,434		40,305,880

GROSS PROFIT (LOSS)	6,957,219		(7,849,642)

OPERATING EXPENSES	1,251,134		1,339,838

INCOME (LOSS) FROM OPERATIONS	5,706,085		(9,189,480)

OTHER INCOME (EXPENSE)
Interest and other income	362,179		314,370

Equity in net income (loss) of investments	753,429		(1,159,304)
Interest expense	(286,163)		(440,629)
Total other income (expense)	829,445		(1,285,563)

NET INCOME (LOSS)	$	6,535,530	$	(10,475,043)

BASIC AND DILUTED EARNINGS (LOSS) PER UNIT	$	0.22	$	(0.35)

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

DISTRIBUTIONS DECLARED PER UNIT	$	0	$	0

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, 2018~~	$	~~68,037,124~~

~~Net income for the three-month period ended March 31, 2019~~	~~1,790,204~~



~~Balance - March 31, 2019~~	~~69,827,328~~

~~Net (loss) for the three-month period ended June 30, 2019~~	~~(192,897)~~



~~Balance - June 30, 2019~~	$	~~69,634,431~~

~~Net (loss) for the three-month period ended September 30, 2019~~	$	~~(3,599,789)~~

~~Balance - September 30, 2019~~	$	~~66,034,642~~


	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


	Members' Equity

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

Net income for the three-month period ended ~~June 30, 2020~~March 31, 2021	~~4,213,375~~6,535,530



Balance - ~~June 30, 2020~~March 31, 2021	$	~~57,951,272~~

~~Net income for the three-month period ended September 30, 2020~~	$	~~5,810,426~~71,804,109



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

See Notes to Unaudited Consolidated Financial Statements.

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LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Cash Flows (Unaudited)


		Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019			Three Months Ended March 31, 2021		Three Months Ended March 31, 2020

OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net (loss)		$	(451,242)	$	(2,002,482)
Adjustments to reconcile net (loss) to cash used in operating activities
Net income (loss)						Net income (loss)	$	6,535,530	$	(10,475,043)
Adjustments to reconcile net income (loss) to cash used in operating activities						Adjustments to reconcile net income (loss) to cash used in operating activities
Depreciation and amortization	Depreciation and amortization	4,295,699		3,529,356		Depreciation and amortization	1,422,959		1,437,606
Distributions in excess of earnings from investments		469,510		617,091
Distributions in excess of earnings (earnings in excess of distributions) from investments						Distributions in excess of earnings (earnings in excess of distributions) from investments	(103,429)		1,322,674

(Increase) decrease in	(Increase) decrease in					(Increase) decrease in
Accounts receivable	Accounts receivable	(343,878)		(2,956,690)		Accounts receivable	(1,617,758)		1,230,679
Inventory	Inventory	5,045,657		(1,176,060)		Inventory	(4,468,766)		2,055,922
Prepaid expenses	Prepaid expenses	281,337		161,541		Prepaid expenses	131,451		69,193
Derivative financial instruments	Derivative financial instruments	(636,276)		(226,499)		Derivative financial instruments	(2,404,240)		1,030,972

Increase (decrease) in	Increase (decrease) in					Increase (decrease) in
Accounts payable	Accounts payable	(10,174,421)		(14,951)		Accounts payable	(13,295,337)		(9,993,912)
Accrued and other liabilities	Accrued and other liabilities	(80,577)		80,778		Accrued and other liabilities	40,471		(182,085)
NET CASH USED IN OPERATING ACTIVITIES	NET CASH USED IN OPERATING ACTIVITIES	(1,594,191)		(1,987,916)		NET CASH USED IN OPERATING ACTIVITIES	(13,759,119)		(13,503,994)

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES

Purchase of property and equipment	Purchase of property and equipment	(334,571)		(8,868,064)		Purchase of property and equipment	(14,544)		(74,026)
Purchase of investments		0		(633,924)

NET CASH USED IN INVESTING ACTIVITIES	NET CASH USED IN INVESTING ACTIVITIES	(334,571)		(9,501,988)		NET CASH USED IN INVESTING ACTIVITIES	(14,544)		(74,026)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Increase in outstanding checks in excess of bank balance	Increase in outstanding checks in excess of bank balance	448,862		873,922		Increase in outstanding checks in excess of bank balance	1,998,867		919,479
Borrowings on notes payable	Borrowings on notes payable	43,770,400		47,500,000		Borrowings on notes payable	8,000,000		26,000,000
Payments on notes payable	Payments on notes payable	(53,000,000)		(33,099,076)		Payments on notes payable	(13,000,000)		(26,000,000)

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(8,780,738)		15,274,846		NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES	(3,001,133)		919,479

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(10,709,500)		3,784,942
NET DECREASE IN CASH AND CASH EQUIVALENTS						NET DECREASE IN CASH AND CASH EQUIVALENTS	(16,774,796)		(12,658,541)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	12,823,653		1,697,937		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	$	2,114,153	$	5,482,879	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,863,015	$	165,112

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 $128 and $830,432 in 2020 and 2019, respectively.		$	1,245,296	$	356,215
Cash paid during the period for interest, net of capitalized interest of $586 and $9 in 2021 and 2020, respectively.						Cash paid during the period for interest, net of capitalized interest of $586 and $9 in 2021 and 2020, respectively.	$	237,064	$	411,433
Capital expenditures in accounts payable	Capital expenditures in accounts payable	0		81,387		Capital expenditures in accounts payable	23,815		58,373

See Notes to Unaudited Consolidated Financial Statements

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

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 45 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 three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 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, ~~2019,~~2020, contained in the annual report on Form 10-K for ~~2019.~~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 ~~FOB~~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)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

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 September 30,				Nine Months Ended September 30,					Three Months Ended March 31
		2020		2019		2020		2019			2021		2020

Revenues ethanol	Revenues ethanol	$	26,424,724	$	25,563,757	$	69,910,876	$	62,573,333	Revenues ethanol	$	37,043,659	$	23,181,779
Revenues distillers grains	Revenues distillers grains	6,131,560		5,634,315		17,866,954		14,539,232		Revenues distillers grains	9,091,251		7,725,010
Revenues distillers corn oil	Revenues distillers corn oil	1,361,503		1,243,438		4,021,027		3,039,231		Revenues distillers corn oil	2,480,743		1,549,449
		$	33,917,787	$	32,441,510	$	91,798,857	$	80,151,796		$	48,615,653	$	32,456,238

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.

~~Operating~~Reporting Segment

~~The Company uses the "management approach"~~Operating segments are defined as components of an enterprise for ~~reporting~~which separate financial information ~~about segments in annual and interim financial statements. The management approach~~ is ~~based on the way~~available that is evaluated regularly by the chief operating ~~decision-maker organizes segments within a company for~~decision maker or decision making ~~operating decisions~~group in deciding how to allocate resources and in assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure and any other manner in which management disaggregates a company. Based on the "management approach" model, theThe Company has determined that ~~its business is comprised of a single~~it has six operating ~~segment.~~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)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

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 0 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~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 isare 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 ~~literally~~ 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 ~~September 30, 2020,~~March 31, 2021, the Company iswas committed to purchasing approximately ~~1.5~~6.0 million bushels of corn on a forward contract basis with an average price of ~~$3.22~~$4.89 per bushel. The total corn purchase contracts represent 5%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 ~~September 30, 2020,~~March 31, 2021, the Company is committed to purchasing approximately ~~336,000~~90,000 MMBtus of natural gas with an average price of ~~$2.12~~$2.50 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 ~~17%~~4% 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 ~~September 30, 2020,~~March 31, 2021, the Company iswas committed to selling approximately ~~49,000~~30,000 dry equivalent tons of distillers grains with an average price of ~~$117~~$194 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 ~~23%~~14% 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

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

~~SEPTEMBER 30, 2020 AND 2019~~

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 ~~September 30, 2020,~~March 31, 2021, the Company iswas committed to selling approximately ~~3.1~~3.0 million pounds of distillers corn oil

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2021 AND 2020

with an average price of ~~$0.28~~$0.50 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 ~~14%~~13% of the projected annual plant production.

The Company ~~does~~did not have any firm-priced sales commitments for ethanol as of ~~September 30, 2020.~~March 31, 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. ~~To reduce that risk, the Company generally takes positions using forward and futures contracts and options.~~

Derivatives not designated as hedging instruments at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:


		Balance Sheet Classification	September 30, 2020		December 31, 2019*			Balance Sheet Classification	March 31, 2021		December 31, 2020*

Forward contracts in gain position	Forward contracts in gain position		$	224,549	$	160,687	Forward contracts in gain position		$	2,723,226	$	1,742,054
Futures contracts in gain position	Futures contracts in gain position		63		33,338		Futures contracts in gain position		687		0
Futures contracts in loss position	Futures contracts in loss position		(471,725)		(1,500)		Futures contracts in loss position		(1,769,475)		(1,799,688)
Total	Total		(247,113)		192,525		Total		954,438		(57,634)
Cash held by broker	Cash held by broker		693,014		312,500		Cash held by broker		3,281,976		2,131,644
		Current Assets	$	445,901	$	505,025		Current Assets	$	4,236,414	$	2,074,010

Forward contracts in loss position	Forward contracts in loss position	(Current Liabilities)	$	(3,450)	$	(698,850)	Forward contracts in loss position	(Current Liabilities)	$	(2,345)	$	(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.


	Statement of Operations	Three Months Ended March 31,
	Classification	2021		2020
Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts	Cost of Revenues	$	(3,018,618)	$	1,102,878
Forward contracts	Cost of Revenues	3,453,945		(3,113,033)

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

Statement of Operations Three Months Ended September 30,
Classification 2020 2019
Net realized and unrealized (losses) related to purchase contracts:
Futures contracts Cost of Revenues $ (258,881) $ (788,253)
Forward contracts Cost of Revenues (57,419) (424,895)
Statement of Operations Nine Months Ended September 30,
Classification 2020 2019
Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts Cost of Revenues $ 1,177,383 $ (113,672)
Forward contracts Cost of Revenues (2,427,909) 53,655

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. ~~A triggering event was determined to have occurred during the first quarter of 2020 and an impairment test was performed as of March 31, 2020. The Company determined there was no impairment.~~

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.

~~Recently Issued Accounting Pronouncements~~

In January 2017, FASB issued ASU No. 2017-04, "Intangibles-Goodwill and Other (Topic 350)" (ASU 2017-04). ASU 2017-04 simplifies the test for goodwill impairment. It eliminates the two-step process of assessing goodwill impairment and replaces it with one step which compares the fair value of the reporting unit with its carrying amount. An impairment charge is recognized for the amount by which the carrying value exceeds the fair value up to the amount of the goodwill attributed to the reporting unit. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. Dakota Ethanol found it preferable to adopt ASU 2017-04 because the benefits of this standard to users of the

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

~~SEPTEMBER 30, 2020 AND 2019~~

~~financial statements will outweigh the costs of following the pre-existing guidance. The standard has not had a material impact on the Company's consolidated financial statements.~~

In August 2018, FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" (ASU 2018-13). ASU 2018-13 improves the effectiveness of the fair value disclosures in the financial statements. It adds, removes and modifies various disclosure requirements relating to the fair value hierarchy. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The standard has not had a material impact on the Company's consolidated financial statements.

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 ~~September 30, 2020,~~March 31, 2021, ethanol sales averaged approximately ~~78%~~76% of total revenues, while approximately ~~18%~~19% of revenues were generated from the sale of distiller grains and 4% of revenues were generated from the sale of corn oil. For the nine months ended September 30, 2020, ethanol sales averaged approximately 76% of total revenues, while approximately 20% of revenues were generated from the sale of distiller grains and 4%5% of revenues were generated from the sale of corn oil.

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. The impact of COVID-19 has negatively impacted the Company’s operations, suppliers or other vendors, and customer base. Gasoline demand has been reduced in the United States which has forced the Company to reduce ethanol production accordingly. ~~Any quarantines,~~Quarantines, labor shortages, orand other disruptions to the Company’s operations, orand those of ~~their~~its customers, ~~may~~ adversely ~~impact~~impacted the Company’s revenues, ability to provide its services and operating results. ~~In addition, a~~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 ~~the coronavirus impacts~~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 information which may emerge concerning the severity of the coronavirus and actions taken to contain the coronavirus or its impact, among others.

~~NOTE 3. INVENTORY~~

~~Inventory consisted of the following as of September 30, 2020 and December 31, 2019:~~

September 30, 2020 December 31, 2019*
Raw materials $ 1,649,869 $ 4,968,731
Finished goods 1,946,490 3,505,224
Work in process 784,258 952,319
Parts inventory 1,117,148 1,117,148
$ 5,497,765 $ 10,543,422

*Derived from audited financial statements.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

Aswill depend on future developments, which are highly uncertain and cannot be predicted, including new developments regarding continued distribution of ~~September 30,~~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 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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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2021 AND 2020

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


	Three Months Ended
	March 31, 2021		March 31, 2020
Net Sales	unaudited		unaudited
Production	$	48,615,653	$	32,456,238
Ethanol Producing Equity Method Investments	128,321,129		88,700,903
All Other	3,988,973		3,927,076
Total	180,925,755		125,084,217
Reconciliation	(132,310,102)		(92,627,979)
Consolidated	$	48,615,653	$	32,456,238

Gross Profit (Loss):
Production	$	6,957,219	$	(7,849,642)
Ethanol Producing Equity Method Investments	12,800,241		(7,471,315)
All Other	2,625,075		2,520,619
Total	22,382,535		(12,800,338)
Reconciliation	(15,425,316)		4,950,696
Consolidated	$	6,957,219	$	(7,849,642)

Net Income (Loss):
Production	$	6,535,530	$	(10,475,043)
Ethanol Producing Equity Method Investments	7,128,994		(11,929,660)
All Other	853,458		811,176
Total	14,517,982		(21,593,527)
Reconciliation	(7,982,452)		11,118,484
Consolidated	$	6,535,530	$	(10,475,043)


	March 31, 2021		December 31, 2020
Total Assets	unaudited		audited
Production	$	111,920,186	$	121,857,947
Ethanol Producing Equity Method Investments	256,102,117		244,353,900
All Other	187,537,233		175,909,073
Total	555,559,536		542,120,920
Reconciliation	(443,639,350)		(420,262,973)
Consolidated	$	111,920,186	$	121,857,947

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2021 AND 2020

NOTE 4. INVENTORY

Inventory consisted of the following as of March 31, 2021 and December 31, ~~2019,~~2020:


	March 31, 2021		December 31, 2020*
Raw materials	$	6,243,074	$	5,096,067
Finished goods	5,358,008		2,474,638
Work in process	1,465,827		1,090,893
Parts inventory	1,170,773		1,107,318
	$	14,237,682	$	9,768,916

*Derived from audited financial statements.

As of March 31, 2021 and December 31, 2020, the Company recorded a lower of cost or net realizable value write-down on ~~corn inventory of approximately $0 and $424,000, ethanol inventory of approximately $0 and $167,000,~~ distillers grains inventory of approximately $0 and ~~$72,000, and corn oil inventory of approximately $0 and $0,~~$13,000, respectively.

NOTE 4.5. 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 ~~June 30,~~December 31, 2020 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$1,197,000~~$1,229,000 and ~~$1,295,000~~$1,208,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~September 30, 2020~~March 31, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$194,000~~$229,000 and ~~$251,000~~$194,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~September 30, 2020~~March 31, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$4,874,000~~$4,823,000 and ~~$4,991,000~~$5,012,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~September 30, 2020~~March 31, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$88,000~~$90,000 and ~~$53,000~~$90,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~September 30, 2020~~March 31, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$9,860,000~~$10,368,000 and ~~$10,093,000~~$10,134,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~$1,072,000.~~$1,043,000. The excess is comprised of a basis adjustment of approximately ~~$440,000~~$428,000 and capitalized interest of ~~$632,000.~~$615,000. 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 $14,416 for both the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, and $43,247 and $24,026 for the nine months ended September 30, 2020 and 2019,~~ respectively.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

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


Balance Sheet	Balance Sheet	September 30, 2020		December 31, 2019		Balance Sheet	March 31, 2021		December 31, 2020
Current Assets	Current Assets	$	226,285,312	$	219,618,012	Current Assets	$	248,035,668	$	218,336,920
Other Assets	Other Assets	207,847,399		226,475,383		Other Assets	195,603,681		201,926,053
Current Liabilities	Current Liabilities	210,208,306		187,381,453		Current Liabilities	196,222,823		209,538,950
Long-term Liabilities	Long-term Liabilities	66,284,372		95,219,540		Long-term Liabilities	84,895,669		48,854,217
Members' Equity	Members' Equity	157,640,033		163,492,402		Members' Equity	162,520,857		161,869,806

		Three Months Ended					Three Months Ended
Income Statement	Income Statement	September 30, 2020		September 30, 2019		Income Statement	March 31, 2021		March 31, 2020
Revenue	Revenue	$	93,946,470	$	94,474,407	Revenue	$	132,310,102	$	92,627,979
Gross Profit		15,327,809		5,266,631
Gross Profit (Loss)						Gross Profit (Loss)	15,425,316		(4,950,696)
Net Income (Loss)	Net Income (Loss)	9,367,336		(2,645,668)		Net Income (Loss)	7,982,452		(11,118,484)

		Nine Months Ended
Income Statement		September 30, 2020		September 30, 2019
Revenue		$	236,109,319	$	230,715,486
Gross Profit		17,650,973		14,095,945
Net (Loss)		(2,106,037)		(2,933,142)

The Company recorded equity in net income (loss) of approximately ~~$1,020,000~~$753,000 and ~~$(206,000)~~$(1,159,000) from our investments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021, and 2020, respectively.

NOTE 5.6. 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. ~~Under the~~The amendment reduced the available credit under the revolving operating note ~~was reduced~~ to $2,000,000. Interest on the outstanding principal balance will accrue at 300 basis points above the one-month LIBOR rate and is not subject to a floor. The rate was ~~3.15%~~3.10% at ~~September 30, 2020.~~March 31, 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. On ~~September 30, 2020,~~March 31, 2021, Dakota Ethanol had 0 balance outstanding and approximately $2,000,000 available to be drawn on the revolving promissory note under the borrowing base.

NOTE 6.7. 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 ~~is no longer due~~was deferred after the note was amended with FCSA and is now due on August 1, 2025. The notes matures on August 1, 2025. Interest on the outstanding principal balance will accrue at 325 basis points above the one-month LIBOR rate until February 1, 2023 and increases to 350 basis points thereafter until maturity. The interest rate is not subject to a floor. The rate was ~~3.40%~~3.35% at ~~September 30, 2020.~~March 31, 2021. On ~~September 30, 2020,~~March 31, 2021, Dakota Ethanol had $6,000,000 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. ~~Under the~~The amendment increased the available credit on the reducing revolving note ~~was increased~~ to $48,000,000. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 ~~semi-~~

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~~LAKE AREA CORN PROCESSORS, LLC~~

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

~~SEPTEMBER 30, 2020 AND 2019~~

~~annually~~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 basis points above the one-month LIBOR rate until February 1, 2023, and the basis increases to 350 points thereafter until maturity. The interest rate is not subject to a floor. The rate was ~~3.40%~~3.35% at ~~September 30, 2020.~~March 31, 2021. The note contains a non-use fee of 0.50% on the unused portion of the note. On ~~September 30, 2020,~~March 31, 2021, Dakota Ethanol had ~~$23,000,000~~$25,000,000 outstanding and ~~$25,000,000~~$23,000,000 available to be drawn on the note.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2021 AND 2020

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 with modifications to the requirements. The working capital covenant was reduced to $11,000,000 and the net worth covenant was reduced to $18,000,000. The next measurement date for the debt service coverage ratio was deferred until December 31, 2021. ~~Management's current financial projections indicate that we will be in compliance with our revised financial covenants for the next 12 months and we expect to remain in compliance thereafter.~~

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). The loan matures in January 2023 and has an interest rate of 1%. Proceeds of the loan are restricted for use towards payroll costs and other allowable uses such as covered utilities for incurred before December 31, 2020 under the Paycheck Protection Program Rules. Provisions of the agreement allow for a portion of the loan to be forgiven if certain qualifications are met. The Company has applied for forgiveness of this loan. The Paycheck Protection Program Flexibility Act, which was put into effect on June 5, 2020, may ~~effect~~affect the terms of our loan.

The Company also received an Economic Injury Disaster Loan (EIDL) in the amount of $10,000 in June 2020. Repayment of the loan will begin in June 2021 and has a 30 year term at 3.75% interest.

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


		September 30, 2020		December 31, 2019*			March 31, 2021		December 31, 2020
Notes Payable - FCSA	Notes Payable - FCSA	$	29,000,000	$	39,000,000	Notes Payable - FCSA	$	31,000,000	$	36,000,000

Notes Payable - Other	Notes Payable - Other	770,400		0		Notes Payable - Other	770,400		770,400
Less unamortized debt issuance costs	Less unamortized debt issuance costs	(8,264)		(10,792)		Less unamortized debt issuance costs	(6,805)		(7,535)
		29,762,136		38,989,208			31,763,595		36,762,865
Less current portion	Less current portion	(1,074,853)		(1,000,000)		Less current portion	(1,328,735)		(1,201,628)
		$	28,687,283	$	37,989,208		$	30,434,860	$	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.


Years Ending September 30,		Principal
2021		$	1,074,853
Periods Ending March 31,				Periods Ending March 31,	Principal
2022	2022	1,509,216		2022	$	1,328,735
2023	2023	1,176,910		2023	1,432,044
2024	2024	1,000,208		2024	1,000,200
2025	2025	2,000,215		2025	1,000,208
2026				2026	27,000,215
thereafter	thereafter	23,008,998		thereafter	8,998
		$	29,770,400		$	31,770,400

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

~~SEPTEMBER 30, 2020 AND 2019~~

NOTE 7.8. 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.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2021 AND 2020

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 ~~CBOT~~Chicago Board of Trade ("CBOT") and ~~NYMEX~~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.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~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		Total		Level 1		Level 2		Level 3
September 30, 2020
March 31, 2021									March 31, 2021

Assets:	Assets:								Assets:
Derivative financial instruments,	Derivative financial instruments,								Derivative financial instruments,
futures contracts	futures contracts	$	63	$	63	$	0		futures contracts	$	687	$	687	$	0	$	0
forward contracts	forward contracts	$	224,549	$	0	$	224,549		forward contracts	$	2,723,226	$	0	$	2,723,226	$	0
Liabilities:	Liabilities:								Liabilities:
Derivative financial instruments,	Derivative financial instruments,								Derivative financial instruments,
futures contracts	futures contracts	$	471,725	$	471,725	$	0		futures contracts	$	1,769,475	$	1,769,475	$	0	$	0
forward contracts	forward contracts	$	3,450	$	0	$	3,450		forward contracts	$	2,345	$	0	$	2,345	$	0

December 31, 2020*									December 31, 2020*

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

*Derived from audited financial statements.

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LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2021 AND 2020 ~~AND 2019~~

December 31, 2019*
Assets:
Derivative financial instruments,
  futures contracts $ 33,338 $ 33,338 $ 0 $ 0
  forward contracts $ 160,687 $ 0 $ 160,687 $ 0
Liabilities:
Derivative financial instruments,
  futures contracts $ 1,500 $ 1,500 $ 0 $ 0
  forward contracts $ 698,850 $ 0 $ 698,850 $ 0

*Derived from audited financial statements.

During the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020~~March 31, 2021 of ~~$29,770,400~~$31,770,400 had an estimated fair value of approximately ~~$29,770,400~~$31,770,400 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, ~~2019~~2020 of ~~$39,000,000~~$36,770,400 had an estimated fair value of approximately ~~$39,000,000.~~$36,770,400.

NOTE 8.9. 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.

~~Table of Contents~~

~~LAKE AREA CORN PROCESSORS, LLC~~

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

~~SEPTEMBER 30, 2020 AND 2019~~

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


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020

Revenues ethanol	Revenues ethanol	$	26,484,451	$	25,602,911	$	70,050,239	$	62,706,692	Revenues ethanol	$	37,107,397	$	23,241,506
Revenues distillers dried grains	Revenues distillers dried grains	2,938,941		2,158,001		6,617,691		3,333,325		Revenues distillers dried grains	2,384,468		2,538,316
Revenues corn oil	Revenues corn oil	1,374,468		1,253,882		4,051,885		3,064,398		Revenues corn oil	2,493,906		1,562,833
Marketing fees ethanol	Marketing fees ethanol	59,727		60,960		139,363		182,880		Marketing fees ethanol	(63,738)		(59,727)
Marketing fees distillers dried grains	Marketing fees distillers dried grains	25,010		16,338		48,929		25,278		Marketing fees distillers dried grains	(13,272)		(17,842)
Marketing fees corn oil	Marketing fees corn oil	12,965		10,431		30,858		25,007		Marketing fees corn oil	(13,163)		(13,384)
Denaturant purchases	Denaturant purchases	216,345		243,052		908,238		579,137		Denaturant purchases	795,340		568,642

		September 30, 2020		December 31, 2019*							March 31, 2021		December 31, 2020*
Amounts due from RPMG		$	1,405,719	$	891,227
Amounts due to RPMG	Amounts due to RPMG	$	30,057	$	46,234					Amounts due to RPMG	$	52,976	$	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. ~~Purchases~~Corn purchases from these related parties during the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 totaled approximately ~~$425,000~~$248,000 and ~~$801,000, respectively. Purchases during the three and nine months ended September 30, 2019 totaled approximately $166,804 and $830,478,~~$21,000, respectively. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the ~~amount we owed~~Company had 0 outstanding obligations to ~~other~~these related ~~parties was approximately $0 and $0, respectively.~~parties.

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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 nine~~ month ~~periods~~period ended ~~September 30, 2020,~~March 31, 2021, compared to the same ~~periods~~period 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, ~~2019,~~2020, included in the Company's Annual Report on Form 10-K for ~~2019.~~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, ~~2019.~~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" ~~"we" "us"~~ or the "ethanol plant."

Our revenue is derived from the sale and distribution of our ethanol, distillers grains and corn oil. The ethanol plant increased its nameplate capacity in May of 2019 from 50 million gallons per year to 90 million gallons per year. 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 ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

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 ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		2020			2019				2021			2020
Income Statement Data	Income Statement Data	Amount		%	Amount		%	Income Statement Data	Amount		%	Amount		%
Revenues	Revenues	$	33,917,787	100.0	$	32,441,510	100.0	Revenues	$	48,615,653	100.0	$	32,456,238	100.0

Cost of Revenues	Cost of Revenues	27,871,295		82.2	34,256,712		105.6	Cost of Revenues	41,658,434		85.7	40,305,880		124.2

Gross Profit (Loss)	Gross Profit (Loss)	6,046,492		17.8	(1,815,202)		(5.6)	Gross Profit (Loss)	6,957,219		14.3	(7,849,642)		(24.2)

Operating Expense	Operating Expense	992,023		2.9	971,662		3.0	Operating Expense	1,251,134		2.6	1,339,838		4.1

Income (Loss) from Operations	Income (Loss) from Operations	5,054,469		14.9	(2,786,864)		(8.6)	Income (Loss) from Operations	5,706,085		11.7	(9,189,480)		(28.3)

Other Income (Expense)	Other Income (Expense)	755,957		2.2	(812,925)		(2.5)	Other Income (Expense)	829,445		1.7	(1,285,563)		(4.0)

Net Income (Loss)	Net Income (Loss)	$	5,810,426	17.1	$	(3,599,789)	(11.1)	Net Income (Loss)	$	6,535,530	13.4	$	(10,475,043)	(32.3)

Revenues

Revenue from ethanol sales increased by approximately ~~3.4%~~59.8% during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due to increased gallons of ethanol sold ~~partially offset by lower~~and increased average prices that we received for our ethanol during the ~~2020~~2021 period. Revenue from distillers grains sales increased by approximately ~~8.8%~~17.7% during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due primarily to increased average prices that we received for our distillers grains during the 2021 period, partially offset by a decrease in the tons of distillers grains sold during the ~~2020~~2021 period. The decrease in tons of distillers grains sold was primarily due to increased inventory on hand for the three months ended March 31, 2021 compared to three months ended March 31, 2020. Revenue from corn oil sales increased by approximately ~~9.5%~~60.1% during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due primarily to increased ~~pounds of~~average prices that we received for corn oil sold during the ~~2020~~2021 period.

Ethanol

Our ethanol revenue was approximately ~~$0.9~~$13.9 million higher during our three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019,~~March 31, 2020, an increase of approximately ~~3.4%~~59.8%. This increase in ethanol revenue was due primarily to an increase in the volume of ethanol we sold ~~partially offset by a lower~~and increased average price that we received per gallon of ethanol sold during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. We sold approximately ~~12.0%~~1.0% more gallons of ethanol during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019,~~2020, an increase of approximately ~~2.3 million~~211,000 gallons, due primarily to ~~reduced production~~timing differences in ~~September of 2019.~~ethanol shipments.

The average price we received for our ethanol was approximately ~~$0.10 less~~$0.62 more per gallon during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019, a decrease~~March 31, 2020, an increase of approximately ~~7.7%~~58.3%. Management attributes this ~~decrease~~increase in ethanol prices during the three months ended ~~September 30, 2020~~March 31, 2021 to lower ethanol stocks along with ~~decreased~~increasing gasoline ~~demand from travel restrictions and social distancing measures related to the COVID-19 pandemic.~~demand. Since ethanol is blended with gasoline, when gasoline demand is ~~lower~~higher it has a corresponding impact on ethanol demand. The most significant reductions in ethanol demand occurred at the end of our first quarter of 2020, however, the impact of this reduced gasoline demand has continued to impact us throughout our 2020 fiscal year.

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Table of ~~Contents~~Conten t s

Distillers Grains

Our total distillers grains revenue was approximately ~~8.8%~~17.7% higher during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due primarily to increased ~~total production.~~prices received for our distillers grains. We sold approximately ~~20.0% more~~9.5% less total tons of distillers grains during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 primarily due to increased ~~overall production at~~inventory on hand for the ~~ethanol plant~~three months ended March 31, 2021 compared to ~~the same period of 2019.~~three months ended March 31, 2020.

The average price we received for our dried distillers grains was approximately ~~10.2% lower~~26.6% higher during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019, a decrease~~2020, an increase of approximately ~~$12.70~~$36.05 per ton. Management attributes the ~~decrease~~increase in dried distillers grains prices during the three months ended ~~September 30, 2020~~March 31, 2021 to ~~lower commodity prices and more available supply.~~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 ~~7.7% lower~~31.1% higher for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019, a decrease~~2020, an increase of approximately ~~$10.06~~$43.29 per ton. Management attributes this ~~decrease~~increase in modified/wet distillers grains prices with ~~lower commodity~~higher corn prices in the ~~market and more available supply.~~market.

Corn Oil

Our total ~~pounds of~~ corn oil ~~sold increased by~~revenue was approximately ~~18.4%~~60.1% higher during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019, an increase~~2020 due primarily to increased prices received for our corn oil. Our total pounds of ~~approximately 1.0 million pounds, primarily due to improved~~ corn oil ~~extraction efficiency and higher production~~sold decreased by approximately 1.6% during the three months ended March 31, 2021 compared to the same period of 2020, a decrease of approximately 105,000 pounds, primarily due to increased downtime in ~~2019.~~the corn oil extraction process.

The average price per pound we received for our corn oil was ~~lower~~higher by ~~7.5%~~approximately 62.8% for the three months ended ~~September 30, 2020~~March 31, 2021 and the same period of ~~2019~~2020 due primarily to ~~lower commodity prices.~~increased bio-diesel demand.

Cost of Revenues

Corn

Our cost of revenues relating to corn was approximately ~~21.7% lower~~16.5% higher for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due to significantly ~~decreased~~increased corn prices during the ~~2020~~2021 period.

Our average cost per bushel of corn ~~decreased~~increased by approximately ~~30.0%~~17.8% for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the three months ended ~~September 30, 2019.~~March 31, 2020. We consumed approximately ~~11.7% more~~1.1% less bushels of corn during the three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019.~~2020. Management attributes the ~~decreased~~increased corn cost per bushel to significantly ~~lower~~higher corn prices during our ~~2020~~2021 fiscal period due to ~~favorable planting and growing conditions as well as decreased market prices related to COVID-19.~~lower corn production in South America which has resulted in increased export demand for United States corn. Management expects corn prices to increase for the rest of our ~~2020~~2021 fiscal year.

~~Natural Gas~~

~~Our cost of revenues related to natural gas decreased by approximately $80,000, a decrease of approximately 7.0%, for~~ Recent higher corn prices could increase significantly depending on the three months ended September 30, 2020 compared to the three months ended September 30, 2019. This decrease was due to slightly higher natural gas consumption, offset by lower natural gas costs per MMBtuweather during the ~~three months ended September 30, 2020 compared to the same period of 2019.~~

Our average cost per MMBtu of natural gas during the three months ended September 30, 2020 was approximately 14.6% less compared to the cost per MMbtu for the three months ended September 30, 2019. Management attributes this decrease in our average natural gas costs with generally lower natural gas prices and energy prices generally along with steady supply in 2020.

The volume of natural gas we used increased by approximately 8.7% during the three months ended September 30, 2020 compared to the same period of 2019 due primarily to more distillers produced in the dried form and increased production compared to the same period in 2019.

~~Table of Contents~~

~~Operating Expenses~~

Our operating expenses were higher for the three months ended September 30, 2020 compared to the same period of 2019 due primarily to increased insurance expenses offset slightly by decreased professional fees.

~~Other Income and Expense~~

We had more other income during the three months ended September 30, 2020 compared to the same period of 2019 due to increased investment income during the 2020 period. We had more income from our investments during the three months ended September 30, 2020 compared to the same period of 2019 due to improved profitability in the ethanol sector. We had less interest expense during the three months ended September 30, 2020 compared to the same period of 2019 due to lower carrying balances on outstanding debt in addition to lower interest rates.

~~Comparison of the Nine Months Ended September 30, 2020 and 2019~~

2020 2019
Income Statement Data Amount % Amount %
Revenues $ 91,798,857 100.0 $ 80,151,796 100.0
Cost of Revenues 87,990,082 95.9 78,218,717 97.6
Gross Profit 3,808,775 4.1 1,933,079 2.4
Operating Expense 3,277,570 3.5 2,906,424 3.6
Income (Loss) from Operations 531,205 0.6 (973,345) (1.2)
Other (Expense) (982,447) (1.1) (1,029,137) (1.3)
Net (Loss) $ (451,242) (0.5) $ (2,002,482) (2.5)

~~Revenues~~

Revenue from ethanol sales increased by approximately 11.7% during the nine months ended September 30, 2020 compared to the same period of 2019 due to increased gallons of ethanol sold, partially offset by lower average prices that we received for our ethanol during the 2020 period. Revenue from distillers grains sales increased by approximately 22.9% during the nine months ended September 30, 2020 compared to the same period of 2019 due primarily to increased tons of dried distillers grains sold during the 2020 period. Revenue from corn oil sales increased by approximately 32.3% during the nine months ended September 30, 2020 compared to the same period of 2019 due to increased pounds of corn oil sold during the 2020 period.

~~Ethanol~~

Our ethanol revenue was approximately $7.34 million greater during our nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, an increase of approximately 11.7%. This increase in ethanol revenue was due primarily to an increase in the volume of ethanol we sold partially offset by a lower average price we received per gallon of ethanol sold during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. We sold approximately 24.6% more gallons of ethanol during the nine months ended September 30, 2020 compared to the same period of 2019, an increase of approximately 12 million gallons, due to increased production at the plant following

~~Table of Contents~~

~~completion of our plant expansion project during 2019 offset partially by the slowdown in production caused by COVID-19 in the second fiscal quarter of 2020.~~

The average price we received for our ethanol was approximately $0.14 less per gallon during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, a decrease of approximately 10.4%. Management attributes this decrease in ethanol prices during the nine months ended September 30, 2020 with decreased ethanol demand due to decreased gasoline demand from the COVID-19 pandemic.

~~Distillers Grains~~

Our total distillers grains revenue was approximately 22.9% greater during the nine months ended September 30, 2020 compared to the same period of 2019 due primarily to increased total production. Following our expansion project, we are selling a greater percentage of our distillers grains in the dried form than in the past when we primarily produced modified distillers grains. We sold approximately 27.0% more total tons of distillers grains during the nine months ended September 30, 2020 compared to the same period of 2019 due to increased overall production at the ethanol plant due to our plant expansion project.

The average price we received for our dried distillers grains was approximately 1.6% lower during the nine months ended September 30, 2020 compared to the same period of 2019, a decrease of approximately $2.03 per ton. Management attributes the slight decrease in dried distillers grains prices during the nine months ended September 30, 2020 to lower prices in the commodity markets. The average price we received for our modified/wet distillers grains, on a dry-equivalent basis, was approximately 2.4% less for the nine months ended September 30, 2020 compared to the same period of 2019. Management attributes this decrease in modified/wet distillers grains prices with lower prices in the commodity markets.

~~Corn Oil~~

Our total pounds of corn oil sold increased by approximately 34.9% during the nine months ended September 30, 2020 compared to the same period of 2019, an increase of approximately 4.4 million pounds, primarily due to increased overall production and improved corn oil extraction efficiency.

~~The average price per pound we received for our corn oil was comparable for the nine months ended September 30, 2020 and the same period of 2019.~~

~~Cost of Revenues~~

~~Corn~~

Our cost of revenues relating to corn was approximately 10.7% greater for the nine months ended September 30, 2020 compared to the same period of 2019 due to increased corn bushels used due to the plant expansion project, partially offset by lower corn costs per bushel during the 2020 period.

Our average cost per bushel of corn decreased by approximately 12.0% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. We consumed approximately 26.0% more bushels of corn during the nine months ended September 30, 2020 compared to the same period of 2019. Management attributes the decreased corn cost per bushel to favorable planting and2021 growing ~~conditions as well as the COVID-19 pandemic experienced during our 2020 fiscal period. Management expects corn prices to increase for the rest of our 2020 fiscal year.~~season.

Natural Gas

Our cost of revenues related to natural gas increased by approximately ~~$560,000,~~$95,000, an increase of approximately ~~16.8%~~5.2%, for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. This increase was ~~primarily~~ due to ~~increased~~higher natural gas ~~consumption~~costs per MMBtu during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019.~~2020.

~~Table of Contents~~

Our average cost per MMBtu of natural gas during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was approximately ~~5.2% lower~~11.6% more compared to the cost per MMbtu for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. Management attributes this ~~decrease~~increase in our average natural gas costs ~~with generally lower~~to higher natural gas prices ~~in 2020~~ due to ~~the COVID-19 pandemic.~~a deep freeze that occurred in February of 2021.

The volume of natural gas we used ~~increased~~decreased by approximately ~~23.1%~~5.7% during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due primarily to ~~increased production from~~more distillers produced in the wet form to reduce our ~~plant expansion project offset by the plant slowdown during the second quarter~~energy consumption.

Table of ~~2020 due to the COVID-19 pandemic.~~Conten t s

Operating Expenses

Our operating expenses were ~~greater~~lower for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due primarily to ~~increased expenses related to~~decreased professional ~~fees~~ and ~~insurance expense.~~environmental compliance fees.

Other Income and Expense

We had ~~more dividend~~greater other income ~~from our lender~~ during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due to ~~having more debt drawn~~a gain on investments during the ~~2020~~2021 period. We had ~~smaller losses on~~more income from our investments during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019~~2020 due to ~~increased~~improved profitability in the ethanol ~~industry.~~sector. We had ~~more~~less interest expense during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019 because we had more~~2020 due to lower carrying balances on outstanding debt ~~outstanding that was partially offset by~~in addition to lower interest rates.

Changes in Financial Condition for the ~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021

Current Assets

Our cash on hand at ~~September 30, 2020~~March 31, 2021 was less compared to December 31, ~~2019~~2020 due to ~~the reduction~~deferred corn payments which we made in ~~corn payables and payments to reduce notes payable.~~January 2021. We had greater accounts receivable at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~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 ~~less~~greater at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due to ~~less~~more corn and ethanol inventory on hand as well as ~~lower input costs.~~higher corn and ethanol prices which increase the value of our inventory. The asset value of our derivative instruments was ~~less~~greater at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due to recent corn price changes, which impacted our derivative instruments. We had less prepaid expenses at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due to amortization of our insurance premiums.

Property and Equipment

The value of our property and equipment was less at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 as a result of regular depreciation of our assets.

Other Assets

The value of our investments was ~~less~~greater at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due to ~~decreased~~increased profitability in the ethanol industry, ~~during the first and second quarter of 2020,~~ which the majority of our investments are related to.

Current Liabilities

We had more outstanding checks in excess of bank balances at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019 due to the fewer checks outstanding at December 31, 2019 as farmers choose to defer payments for corn until the new year.~~2020. We use our revolving loan to pay any checks ~~which~~that are presented for payment, which exceed the cash we have available in our accounts. Our accounts payable were lower at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due primarily to decreased corn payables at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 as the deferred payments were paid during the first quarter. Our derivative instrument liability was lower at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~2020 due to corn price changes, which impacted our derivative instruments.

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Long-Term Liabilities

Our long-term liabilities were lower at ~~September 30, 2020~~March 31, 2021 compared to December 31, ~~2019~~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

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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 ~~September 30, 2020,~~March 31, 2021, we had ~~$23,000,000~~$25,000,000 outstanding and ~~$27,000,000~~$25,000,000 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.~~operations for the next twelve months.

The following table shows cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2020		2019			2021		2020
Net cash (used in) operating activities	Net cash (used in) operating activities	$	(1,594,191)	$	(1,987,916)	Net cash (used in) operating activities	$	(13,759,119)	$	(13,503,994)
Net cash (used in) investing activities	Net cash (used in) investing activities	(334,571)		(9,501,988)		Net cash (used in) investing activities	(14,544)		(74,026)
Net cash provided by (used in) by financing activities	Net cash provided by (used in) by financing activities	(8,780,738)		15,274,846		Net cash provided by (used in) by financing activities	(3,001,133)		919,479

Cash Flow From Operations. Our operating activities used ~~less~~more cash during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019,~~2020, due primarily to ~~decreased losses~~a buildup of inventory with higher values and cash we used to pay for our deferred corn purchases during the ~~2020 period along with a decrease in inventory~~2021 period. Increased net income for the three months ended March 31, 2021 partially offset ~~by a decrease in accounts payable during~~ the ~~2020 period.~~increased cash use compared to the same period of 2020.

Cash Flow From Investing Activities. Our investing activities used less cash during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019,~~2020, due to fewer capital expenditures.

Cash Flow From Financing Activities. Our financing activities used more cash during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to the same period of ~~2019,~~2020, due primarily to cash being used to reduce the ~~principle~~principal outstanding on our loans during the ~~2020~~2021 period.

Indebtedness

We ~~entered into~~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 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.

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

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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,~~2021; we also extended the date when the available balance of our $40 million revolving loan ~~starts~~started to decrease from January 1, 2020 to January 1, 2021.

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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.

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 basis points above the 1 month LIBOR rate and is not subject to a floor. The rate was ~~3.2%~~3.1% at ~~September 30, 2020.~~March 31, 2021. There is a non-use fee of ~~0.3%~~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. On ~~September 30, 2020,~~March 31, 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 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 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. The rate was ~~3.4%~~3.35% at ~~September 30, 2020.~~March 31, 2021. The note contains a non-use fee of 0.5% on the unused portion of the note. On ~~September 30, 2020,~~March 31, 2021, Dakota Ethanol had ~~$23,000,000~~$25,000,000 outstanding and ~~$25,000,000~~$23,000,000 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 basis points above the 1 month LIBOR rate and is not subject to a floor. The rate was ~~3.4%~~3.35% at ~~September 30, 2020.~~March 31, 2021. On ~~September 30, 2020,~~March 31, 2021, Dakota Ethanol had $6,000,000 outstanding on the note.

2020 Loans

~~The Company~~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). The loan matures in January 2023 and has an interest rate of 1.0%. Proceeds of the loan are restricted for use towards payroll costs and other allowable uses such as covered utilities for an eight-week period following the loan under the Paycheck Protection Program Rules. Provisions of the agreement allow for a portion of the loan to be forgiven if certain qualifications are met. ~~The Company~~We applied for the loan to be forgiven during June

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of 2020. We are currently awaiting approval of the application. The Paycheck Protection Program Flexibility Act, which was put into effect on June 5, 2020, may effect the terms of our loan.

The Company also received an Economic Injury Disaster Loan (EIDL) in the amount of $10,000 in June 2020. Repayment of the loan will begin in June 2021 and has a 30 year term at 3.75% interest.

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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 ~~$11.0~~$11 million. We are required to maintain local net worth (total assets minus total liabilities minus the value of certain investments) of at least $18 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 ~~September 30, 2020,~~March 31, 2021, we ~~are~~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 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 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. ~~A triggering~~

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~~event was determined to have occurred during the first quarter of 2020 and an impairment test was performed as of March 31, 2020. The Company determined there was no impairment.~~

Inventory Valuation

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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.

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 ~~September 30, 2020,~~March 31, 2021, we had ~~$29,000,000~~$31,000,000 outstanding on our variable interest rate loans with interest accruing at a rate of ~~3.40%~~3.35%. Our variable interest rates are calculated by adding a set basis to LIBOR. If we were to experience a 10% increase in LIBOR, 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 ~~September 30, 2020,~~March 31, 2021, would be approximately ~~$8,000.~~$3,100.

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 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.

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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 ~~increase~~decrease to our cost of revenues of approximately ~~$316,000~~$435,000 related to derivative instruments for the quarter ended ~~September 30, 2020.~~March 31, 2021. We recorded a combined increase to our cost of revenues of approximately ~~$1,213,000~~$2,010,000 related to derivative instruments for the quarter ended ~~September 30, 2019.~~March 31, 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.

Table of Conten t s

As of ~~September 30, 2020,~~March 31, 2021, we were committed to purchasing approximately ~~1.5~~6 million bushels of corn with an average price of ~~$3.22~~$4.89 per bushel. These corn purchases represent approximately 5%20% of our project plant corn usage for the next 12 months.

As of ~~September 30, 2020,~~March 31, 2021, we were committed to purchasing approximately ~~336,000~~90,000 MMBtus of natural gas with an average price of ~~$2.12~~$2.50 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 ~~17%~~4% of the projected annual plant requirements.

As of ~~September 30, 2020,~~March 31, 2021, we were committed to selling approximately ~~49,000~~30,000 dry equivalent tons of distillers grains with an average price of ~~$117~~$194 per ton. The distillers grains ~~sales represent approximately 23% of the projected annual plant production.~~

~~As of September 30, 2020, we were committed to selling approximately 3.1 million pounds of distillers corn oil with an average price of $0.28 per pound. The distillers corn oil~~ sales represent approximately 14% of the projected annual plant production.

As of March 31, 2021, we were committed to selling approximately 3.0 million pounds of distillers corn oil with an average price of $0.50 per pound. The distillers corn oil sales represent approximately 13% of the projected annual plant production.

We dodid not have any firm-priced sales commitments for ethanol as of ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020,~~March 31, 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 expected use and sale of these commodities for a one year period from ~~September 30, 2020.~~March 31, 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	%	$	12,003,842	Ethanol	92,000,000	Gallons	10	%	$	16,560,000
Corn	Corn	30,666,667	Bushels	10	%	$	10,369,021	Corn	28,610,522	Bushels	10	%	$	15,712,898
Natural Gas	Natural Gas	2,070,000	MMBTU	10	%	$	312,124	Natural Gas	1,980,000	MMBTU	10	%	$	516,384

For comparison purposes, our sensitivity analysis for our quarter ended ~~September 30, 2019~~March 31, 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	%	$	13,800,000	Ethanol	92,000,000	Gallons	10	%	$	6,716,000
Corn	Corn	28,671,665	Bushels	10	%	$	11,411,323	Corn	28,337,822	Bushels	10	%	$	7,934,590
Natural Gas	Natural Gas	1,418,234	MMBTU	10	%	$	300,666	Natural Gas	1,158,375	MMBTU	10	%	$	211,824

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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.

Table of Conten t s

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 ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020,~~March 31, 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

~~The following~~There have been no material changes to the risk factors ~~are provided due to material changes from the risk factors~~that were previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2019. The risk factors set forth below should be read in conjunction with the risk factors section and the Management's Discussion and Analysis section included in our annual report on Form 10-K for the fiscal year ended December 31, 2019.2020.

~~We are subject to global and regional economic downturns and related risks~~. The level of demand for our products is affected by global and regional demographic and macroeconomic conditions. A significant downturn in global economic growth, or recessionary conditions in major geographic regions for prolonged periods, may lead to reduced demand for our products, which could have a negative effect on the market price of our products in the United States. For example, in December 2019, a novel strain of coronavirus surfaced in Wuhan, China (“COVID-19”). In just a few months, the spread of COVID-19 has resulted in businesses suspending or terminating global operations and travel, self-imposed or government-mandated quarantines, and an overall slowdown of economic activity in some areas. Cases have been confirmed worldwide. To the extent that such economic conditions negatively impact consumer and business confidence, travel and consumption patterns or volumes for our products, our business and results of operations could be significantly and adversely affected.

~~COVID-19 may negatively impact our ability to operate our business which could decrease or eliminate the value of our units~~. COVID-19 has resulted in significant uncertainty in many areas of our business. We do not know how long these conditions will last. This uncertainty is expected to negatively impact our operations. We may experience labor shortages if our employees are unable or unwilling to come to work. In addition, if our suppliers cannot deliver the supplies we need to operate our business, including corn and chemicals for our operations, we may be forced to shutdown operations or reduce production. If we are unable to ship our products because of trucking or rail shipping disruptions, it could also result in a forced shutdown or reduction of production. If we are unable to operate the ethanol plant at capacity, it may result in unfavorable operating results, especially since we will continue to pay our fixed costs of maintaining the facility. Any shutdown or reduction of production, especially for an extended period of time, could reduce or eliminate the value of our units.

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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.

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
~~31.1~~		31.1	Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2
~~31.2~~		Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1
~~32.1~~		Certificate Pursuant to 18 U.S.C. Section 1350*
32.2
~~32.2~~		Certificate Pursuant to 18 U.S.C. Section 1350*
~~101~~ 101.INS*	XBRL Instance Document
101.SCH*	~~The following financial information from Lake Area Corn Processors, LLC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020 formatted in~~ XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019, (ii) Consolidated Statements of Income for the three and nine months ended September 30, 2020 and 2019, (iii) Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2020 and 2019, and (iv) the Notes to Unaudited Consolidated Financial Statements.**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.

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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:	~~November 13, 2020~~May 14, 2021	/s/ Scott Mundt
		Scott Mundt
		President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 13, 2020~~May 14, 2021	/s/ Robbi Buchholtz
		Robbi Buchholtz
		Chief Financial Officer (Principal Financial and Accounting Officer)

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			Page No.
Part I FINANCIAL INFORMATION			23
Item 1. Financial Statements (Unaudited)			23
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1920
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2827
Item 4. Controls and Procedures			3028

Part II OTHER INFORMATION			3029
Item 1. Legal Proceedings			3029
Item 1A. Risk Factors			3029
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3129
Item 3. Defaults Upon Senior Securities			3129
Item 4. Mine Safety Disclosures			3129
Item 5. Other Information			3129
Item 6. Exhibits			3130
Signatures			3231


	Three Months Ended Septemer 30, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2020		Nine Months Ended September 30, 2019

REVENUES	$	33,917,787	$	32,441,510	$	91,798,857	$	80,151,796

COSTS OF REVENUES	27,871,295		34,256,712		87,990,082		78,218,717

GROSS PROFIT (LOSS)	6,046,492		(1,815,202)		3,808,775		1,933,079

OPERATING EXPENSES	992,023		971,662		3,277,570		2,906,424

INCOME (LOSS) FROM OPERATIONS	5,054,469		(2,786,864)		531,205		(973,345)

OTHER INCOME (EXPENSE)
Interest and other income	42,419		12,320		388,449		163,385

Equity in net income (loss) of investments	1,019,662		(349,123)		(206,140)		(425,776)
Interest expense	(306,124)		(476,122)		(1,164,756)		(766,746)
Total other (expense)	755,957		(812,925)		(982,447)		(1,029,137)

NET INCOME (LOSS)	$	5,810,426	$	(3,599,789)	$	(451,242)	$	(2,002,482)

BASIC AND DILUTED EARNINGS (LOSS) PER UNIT	$	0.20	$	(0.12)	$	(0.02)	$	(0.07)

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	$	0	$	0	$	0	$	0