UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended
~~September 30, 2021~~March 31, 2022
or
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to

	Commission file number:	000-50254


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

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

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


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

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


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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes o No

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company

Emerging Growth Company

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.

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 12, 2021,~~May 16, 2022, there are 29,620,000 membership units of the registrant outstanding.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LAKE AREA CORN PROCESSORS, LLC

Consolidated Balance Sheets


		September 30, 2021		December 31, 2020*			March 31, 2022		December 31, 2021*
ASSETS	ASSETS	(unaudited)				ASSETS	(unaudited)

CURRENT ASSETS	CURRENT ASSETS					CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	3,335,442	$	18,637,811	Cash and cash equivalents	$	192,320	$	37,995,310
Accounts receivable	Accounts receivable	669,006		585,054		Accounts receivable	1,006,716		876,949
Accounts receivable (related party)	Accounts receivable (related party)	4,180,526		1,633,760		Accounts receivable (related party)	2,583,679		1,032,541

Inventory	Inventory	12,605,828		9,768,916		Inventory	19,589,089		16,410,437
Derivative financial instruments	Derivative financial instruments	3,609,825		2,074,010		Derivative financial instruments	5,669,859		2,886,831
Prepaid expenses	Prepaid expenses	231,764		677,471		Prepaid expenses	583,402		733,189
Total current assets	Total current assets	24,632,391		33,377,022		Total current assets	29,625,065		59,935,257

PROPERTY AND EQUIPMENT	PROPERTY AND EQUIPMENT					PROPERTY AND EQUIPMENT
Land	Land	874,473		874,473		Land	874,473		874,473
Land improvements	Land improvements	8,701,233		8,631,224		Land improvements	8,738,063		8,738,063
Buildings	Buildings	9,316,576		9,316,576		Buildings	9,316,576		9,316,576
Equipment	Equipment	96,032,169		95,867,639		Equipment	96,425,915		96,159,927
Construction in progress	Construction in progress	112,305		6,303		Construction in progress	3,909,289		1,669,148
		115,036,756		114,696,215			119,264,316		116,758,187
Less accumulated depreciation	Less accumulated depreciation	(57,483,677)		(53,328,718)		Less accumulated depreciation	(59,919,035)		(58,706,491)
Net property and equipment	Net property and equipment	57,553,079		61,367,497		Net property and equipment	59,345,281		58,051,696

OTHER ASSETS	OTHER ASSETS					OTHER ASSETS
Goodwill	Goodwill	10,395,766		10,395,766		Goodwill	10,395,766		10,395,766
Investments	Investments	17,009,064		16,636,367		Investments	18,003,298		20,504,842
Other	Other	69,300		81,295		Other	61,304		65,302
Total other assets	Total other assets	27,474,130		27,113,428		Total other assets	28,460,368		30,965,910

TOTAL ASSETS	TOTAL ASSETS	$	109,659,600	$	121,857,947	TOTAL ASSETS	$	117,430,714	$	148,952,863

* Derived from audited financial statements.

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

Consolidated Balance Sheets


		September 30, 2021		December 31, 2020*			March 31, 2022		December 31, 2021*
LIABILITIES AND MEMBERS’ EQUITY	LIABILITIES AND MEMBERS’ EQUITY	(unaudited)				LIABILITIES AND MEMBERS’ EQUITY	(unaudited)

CURRENT LIABILITIES	CURRENT LIABILITIES					CURRENT LIABILITIES
Outstanding checks in excess of bank balance	Outstanding checks in excess of bank balance	$	3,357,424	$	319,608	Outstanding checks in excess of bank balance	$	1,921,969	$	2,228,284
Accounts payable	Accounts payable	12,172,603		18,526,170		Accounts payable	6,540,525		25,855,071
Accrued liabilities	Accrued liabilities	808,941		732,544		Accrued liabilities	514,518		914,994
Derivative financial instruments	Derivative financial instruments	612,758		244,181		Derivative financial instruments	1,380,083		1,490,510

Current portion of notes payable	Current portion of notes payable	1,000,000		1,201,628		Current portion of notes payable	1,000,000		1,000,000
Other		—		4,000

Total current liabilities	Total current liabilities	17,951,726		21,028,131		Total current liabilities	11,357,095		31,488,859

LONG-TERM LIABILITIES	LONG-TERM LIABILITIES					LONG-TERM LIABILITIES
Notes payable	Notes payable	3,994,556		35,561,237		Notes payable	5,995,722		3,995,139

Total long-term liabilities	Total long-term liabilities	3,994,556		35,561,237		Total long-term liabilities	5,995,722		3,995,139

MEMBERS' EQUITY (29,620,000 units issued and outstanding)	MEMBERS' EQUITY (29,620,000 units issued and outstanding)	87,713,318		65,268,579		MEMBERS' EQUITY (29,620,000 units issued and outstanding)	100,077,897		113,468,865

TOTAL LIABILITIES AND MEMBERS' EQUITY	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	109,659,600	$	121,857,947	TOTAL LIABILITIES AND MEMBERS' EQUITY	$	117,430,714	$	148,952,863

* 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 September 30, 2021		Three Months Ended September 30, 2020		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020			Three Months Ended March 31, 2022		Three Months Ended March 31, 2021

REVENUES	REVENUES	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857	REVENUES	$	64,450,894	$	48,615,653

COSTS OF REVENUES	COSTS OF REVENUES	54,753,379		27,871,295		151,181,885		87,990,082		COSTS OF REVENUES	61,758,095		41,658,434

GROSS PROFIT	GROSS PROFIT	9,041,115		6,046,492		25,466,388		3,808,775		GROSS PROFIT	2,692,799		6,957,219

OPERATING EXPENSES	OPERATING EXPENSES	1,249,243		992,023		3,776,472		3,277,570		OPERATING EXPENSES	1,247,879		1,251,134

INCOME FROM OPERATIONS	INCOME FROM OPERATIONS	7,791,872		5,054,469		21,689,916		531,205		INCOME FROM OPERATIONS	1,444,920		5,706,085

OTHER INCOME (EXPENSE)	OTHER INCOME (EXPENSE)									OTHER INCOME (EXPENSE)
Interest and other income	Interest and other income	21,723		42,419		1,328,326		388,449		Interest and other income	254,548		362,179

Equity in net income (loss) of investments	Equity in net income (loss) of investments	1,135,138		1,019,662		3,072,697		(206,140)		Equity in net income (loss) of investments	(1,543)		753,429
Interest expense	Interest expense	(136,176)		(306,124)		(684,200)		(1,164,756)		Interest expense	(32,726)		(286,163)
Total other income (expense)		1,020,685		755,957		3,716,823		(982,447)
Total other income										Total other income	220,279		829,445

NET INCOME (LOSS)		$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)
NET INCOME										NET INCOME	$	1,665,199	$	6,535,530

BASIC AND DILUTED EARNINGS (LOSS) PER UNIT		$	0.30	$	0.20	$	0.86	$	(0.02)
BASIC AND DILUTED EARNINGS PER UNIT										BASIC AND DILUTED EARNINGS PER UNIT	$	0.06	$	0.22

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

DISTRIBUTIONS DECLARED PER UNIT	DISTRIBUTIONS DECLARED PER UNIT	$	0.10	$	—	$	0.10	$	—	DISTRIBUTIONS DECLARED PER UNIT	$	0.51	$	—

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Changes in Members' Equity (Unaudited)


	~~Members' Equity~~

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

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



~~Balance - March 31, 2020~~	~~53,737,897~~

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



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

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

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


	Members' Equity

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

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



Balance - March 31, 2021	$	71,804,109


	Members' Equity

Balance - December 31, 2021	$	113,468,865

Net income for the three-month period ended ~~June 30, 2021~~March 31, 2022	~~10,058,652~~1,665,199

Member distributions	(15,056,167)

Balance - March 31, 2022	$	100,077,897



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

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

~~Distributions paid~~	~~(2,962,000)~~

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

See Notes to Unaudited Consolidated Financial Statements.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

Consolidated Statements of Cash Flows (Unaudited)


		Nine Months Ended September 30, 2021		Nine Months Ended September 30, 2020			Three Months Ended March 31, 2022		Three Months Ended March 31, 2021

OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income (loss)		$	25,406,739	$	(451,242)
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities
Net income						Net income	$	1,665,199	$	6,535,530
Adjustments to reconcile net income to cash (used in) operating activities						Adjustments to reconcile net income to cash (used in) operating activities
Depreciation and amortization	Depreciation and amortization	4,169,044		4,295,699		Depreciation and amortization	1,222,429		1,422,959
Distributions in excess of earnings (earnings in excess of distributions) from investments	Distributions in excess of earnings (earnings in excess of distributions) from investments	(372,697)		469,510		Distributions in excess of earnings (earnings in excess of distributions) from investments	2,501,543		(103,429)

(Gain) on disposal of property and equipment						(Gain) on disposal of property and equipment	(125,400)		—

(Increase) decrease in	(Increase) decrease in					(Increase) decrease in
Accounts receivable	Accounts receivable	(2,630,718)		(343,878)		Accounts receivable	819,094		(1,617,758)
Inventory	Inventory	(2,836,912)		5,045,657		Inventory	(3,178,651)		(4,468,766)
Prepaid expenses	Prepaid expenses	445,707		281,337		Prepaid expenses	149,788		131,451
Derivative financial instruments	Derivative financial instruments	(1,167,238)		(636,276)		Derivative financial instruments	(2,893,456)		(2,404,240)

Increase (decrease) in	Increase (decrease) in					Increase (decrease) in
Accounts payable	Accounts payable	(6,353,567)		(10,174,421)		Accounts payable	(21,814,546)		(13,295,337)
Accrued and other liabilities	Accrued and other liabilities	72,397		(80,577)		Accrued and other liabilities	(400,476)		40,471
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		16,732,755		(1,594,191)
NET CASH (USED IN) OPERATING ACTIVITIES						NET CASH (USED IN) OPERATING ACTIVITIES	(22,054,476)		(13,759,119)

INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES

Purchase of property and equipment	Purchase of property and equipment	(340,540)		(334,571)		Purchase of property and equipment	(2,386,032)		(14,544)

NET CASH USED IN INVESTING ACTIVITIES	NET CASH USED IN INVESTING ACTIVITIES	(340,540)		(334,571)		NET CASH USED IN INVESTING ACTIVITIES	(2,386,032)		(14,544)

FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Increase in outstanding checks in excess of bank balance		3,037,816		448,862
Increase (decrease) in outstanding checks in excess of bank balance						Increase (decrease) in outstanding checks in excess of bank balance	(306,315)		1,998,867
Borrowings on notes payable	Borrowings on notes payable	20,229,600		43,770,400		Borrowings on notes payable	3,000,000		8,000,000
Payments on notes payable	Payments on notes payable	(52,000,000)		(53,000,000)		Payments on notes payable	(1,000,000)		(13,000,000)

Distributions paid to members	Distributions paid to members	(2,962,000)		—		Distributions paid to members	(15,056,167)		—
NET CASH USED IN FINANCING ACTIVITIES	NET CASH USED IN FINANCING ACTIVITIES	(31,694,584)		(8,780,738)		NET CASH USED IN FINANCING ACTIVITIES	(13,362,482)		(3,001,133)

NET DECREASE IN CASH AND CASH EQUIVALENTS	NET DECREASE IN CASH AND CASH EQUIVALENTS	(15,302,369)		(10,709,500)		NET DECREASE IN CASH AND CASH EQUIVALENTS	(37,802,990)		(16,774,796)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	18,637,811		12,823,653		CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	37,995,310		18,637,811

CASH AND CASH EQUIVALENTS AT END OF PERIOD	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,335,442	$	2,114,153	CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	192,320	$	1,863,015

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 $1,291 and $128 in 2021 and 2020, respectively.		$	753,728	$	1,245,296

Cash paid during the period for interest, net of capitalized interest of $26,844 and $586 in 2022 and 2021, respectively.						Cash paid during the period for interest, net of capitalized interest of $26,844 and $586 in 2022 and 2021, respectively.	$	50,316	$	237,064
Capital expenditures in accounts payable						Capital expenditures in accounts payable	37,561		23,815

See Notes to Unaudited Consolidated Financial Statements

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

NOTE 1 . NATURE OF OPERATIONS

Principal Business Activity

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

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

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

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying financial statements. All adjustments are of a normal and recurring nature. The results of operations for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 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 thereto included in the Company’s audited financial statements for the year ended December 31, ~~2020,~~2021, contained in the Company's annual report on Form 10-K for ~~2020.~~2021 filed with the SEC on March 3, 2022.

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~~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~~The performance obligation that we utilize to allow us to recognize revenue is when control of the promised goods or services under our contracts with our customers are transferred to our customers in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. Generally, ethanol and related products are shipped free on board ("FOB") ~~shipping point,~~ and the control of the goods ~~transfers~~is transferred to our 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

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

Disaggregation of revenue:

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


		Three Months Ended September 30				Nine Months Ended September 30,					Three Months Ended March 31
		2021		2020		2021		2020			2022		2021

Revenues ethanol	Revenues ethanol	$	49,995,030	$	26,424,724	$	136,992,923	$	69,910,876	Revenues ethanol	$	48,205,895	$	37,043,659
Revenues distillers grains	Revenues distillers grains	9,731,338		6,131,560		29,806,883		17,866,954		Revenues distillers grains	12,124,702		9,091,251
Revenues distillers corn oil	Revenues distillers corn oil	4,068,126		1,361,503		9,848,467		4,021,027		Revenues distillers corn oil	4,120,297		2,480,743
		$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857		$	64,450,894	$	48,615,653

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.

The Company has no significant contract assets or contract liabilities from contracts with customers at March 31, 2022 and December 31, 2021.

Shipping costs

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

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

Reporting Segment

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

Costs of Revenues

The primary ~~components of costs of revenues from the production of~~raw materials we use to produce ethanol, distillers grains and ~~related co-products~~corn oil are corn ~~energy (natural gas~~ and ~~electricity),~~natural gas.

Electricity, raw materials expense (chemicals and denaturant), ~~and~~ direct labor ~~costs.~~

~~Shipping~~costs and shipping costs on modified and wet distiller's grains are included in ~~costs~~cost 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.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

Receivables and Credit Policies

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

The carrying amount of trade receivables is reduced by ~~a valuation~~an allowance for doubtful accounts 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 ~~zero~~$0 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020.~~2021.

Investment in commodities contracts, derivative instruments and hedging activities

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

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

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

The Company does not apply the normal purchase and sales exemption for forward corn purchase contracts. As of ~~September 30, 2021,~~March 31, 2022, the Company was committed to purchasing approximately ~~6.0~~7.5 million bushels of corn on a forward contract basis with an average price of ~~$5.23~~$6.62 per bushel. The total corn purchase contracts represent ~~20%~~approximately 25% 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, 2021,~~March 31, 2022, the Company is committed to purchasing approximately ~~820,000~~1,556,000 MMBtus of natural gas with an average price of ~~$3.03~~$3.57 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 ~~40%~~approximately 77% 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, 2021,~~March 31, 2022, the Company was committed to selling approximately ~~35,000~~26,000 dry equivalent tons of distillers grains with an average price of ~~$201~~$224 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 ~~16%~~12% of the projected annual plant production.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2022 AND 2021

The Company enters into firm-price sales commitments with distillers corn oil customers under which the Company agrees to sell distillers corn oil at a price set in advance of the actual delivery. Under these arrangements, the Company assumes the risk of a price increase in the market price of distillers corn oil between the time the price is fixed and the time the distillers corn oil

~~Table of Contents~~

~~LAKE AREA CORN PROCESSORS, LLC~~

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

~~SEPTEMBER 30, 2021 AND 2020~~

is delivered. At ~~September 30, 2021,~~March 31, 2022, the Company was committed to selling approximately 2.8 million pounds of distillers corn oil with an average price of ~~$0.58~~$0.75 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 ~~13%~~12% of the projected annual plant production.

The Company did not have any firm-priced sales commitments for ethanol as of ~~September 30, 2021.~~March 31, 2022.

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

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

Derivatives not designated as hedging instruments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were as follows:


		Balance Sheet Classification	September 30, 2021		December 31, 2020*			Balance Sheet Classification	March 31, 2022		December 31, 2021*

Forward contracts in gain position	Forward contracts in gain position		$	1,886,379	$	1,742,054	Forward contracts in gain position		$	3,036,215	$	892,509
Futures contracts in gain position	Futures contracts in gain position		28,975		—		Futures contracts in gain position		13,713		140,863
Futures contracts in loss position	Futures contracts in loss position		(127,513)		(1,799,688)		Futures contracts in loss position		(2,926,638)		(1,238,560)
Total			1,787,841		(57,634)
Total forward, futures and options contracts							Total forward, futures and options contracts		123,290		(205,188)
Cash held by broker	Cash held by broker		1,821,984		2,131,644		Cash held by broker		5,546,569		3,092,019
		Current Assets	$	3,609,825	$	2,074,010		Current Assets	$	5,669,859	$	2,886,831

Forward contracts in loss position	Forward contracts in loss position	(Current Liabilities)	$	(612,758)	$	(244,181)	Forward contracts in loss position	Current Liabilities	$	(1,380,083)	$	(1,490,510)

*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 and natural gas are included as a component of costs of revenues.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~


		Statement of Operations	Three Months Ended September 30,					Statement of Operations	Three Months Ended March 31,
		Classification	2021		2020			Classification	2022		2021
Net realized and unrealized gains (losses) related to purchase contracts:	Net realized and unrealized gains (losses) related to purchase contracts:						Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts	Futures contracts	Cost of Revenues	$	2,017,814	$	(258,881)	Futures contracts	Cost of Revenues	$	(8,560,524)	$	(3,018,618)
Forward contracts	Forward contracts	Cost of Revenues	(1,774,753)		(57,419)		Forward contracts	Cost of Revenues	4,207,196		3,453,945

		Statement of Operations	Nine Months Ended September 30,
		Classification	2021		2020
Net realized and unrealized gains (losses) related to purchase contracts:
Futures contracts		Cost of Revenues	$	(9,208,060)	$	1,177,383
Forward contracts		Cost of Revenues	8,329,573		(2,427,909)

Investments

The Company has investment interests in 5 companies in related industries. All of these interests are at ownership shares less than 20%. These investments are ~~all~~ flow-through ~~entities. Per ASC 323-30-S99-1, they~~entities and are being accounted for by the equity method of accounting under which the ~~Company’s~~Company's share of net income is recognized as income in the ~~Company’s~~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. The Company determined that there was no impairment of goodwill at December 31, 2021 or through March 31, 2022 on the basis that no triggering events were noted.

Use of Estimates

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

Risks and Uncertainties

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol and distiller grains to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the three months ended ~~September 30, 2021,~~March 31, 2022, ethanol sales averaged approximately ~~78%~~75% of total revenues, while approximately ~~15%~~19% of revenues were generated from the sale of ~~distiller~~distillers grains and 7%6% of revenues were generated from the sale of corn oil. For the ~~nine~~three months ended ~~September 30, 2021, ethanol sales~~March 31, 2022, corn costs averaged approximately ~~78%~~86% of ~~total revenues, while approximately 17%~~cost of ~~revenues were generated from the sale of distiller grains and 5% of revenues were generated from the sale of corn oil.~~

~~Table of Contents~~

~~LAKE AREA CORN PROCESSORS, LLC~~

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

~~SEPTEMBER 30, 2021 AND 2020~~

goods sold.

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.~~markets, government programs, global political or economic issues, including but not limited to the war in Ukraine including sanctions associated therewith, shortages, export prices, crude oil prices, currency valuations and government policies in the United States and around the world, over which we have no control. 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.~~programs, global political or economic issues, including but not limited to the war in Ukraine including sanctions associated therewith, or global damaging growing

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2022 AND 2021

conditions, such as plant disease or adverse weather, including drought, increased fertilizer costs as well as global conflicts. The Company's risk management program is used to protect against the price volatility of these commodities.

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

NOTE 3. SEGMENT REPORTING

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

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

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

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

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


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020			March 31, 2022		March 31, 2021
		unaudited		unaudited		unaudited		unaudited			unaudited		unaudited
Net Sales	Net Sales									Net Sales
Production	Production	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857	Production	$	64,450,894	$	48,615,653
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	146,800,703		91,336,937		439,148,984		225,992,813		Ethanol Producing Equity Method Investments	170,128,327		128,321,129
All Other	All Other	4,140,757		2,635,201		12,356,312		10,142,174		All Other	4,409,009		3,988,973
Total	Total	214,735,954		127,889,925		628,153,569		327,933,844		Total	238,988,230		180,925,755
Reconciliation	Reconciliation	(150,941,460)		(93,972,138)		(451,505,296)		(236,134,987)		Reconciliation	(174,537,336)		(132,310,102)
Consolidated	Consolidated	$	63,794,494	$	33,917,787	$	176,648,273	$	91,798,857	Consolidated	$	64,450,894	$	48,615,653

Gross Profit (Loss):	Gross Profit (Loss):									Gross Profit (Loss):
Production	Production	$	9,041,115	$	6,046,492	$	25,466,388	$	3,808,775	Production	$	2,692,799	$	6,957,219
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	15,674,893		13,930,396		42,997,910		11,333,880		Ethanol Producing Equity Method Investments	4,158,879		12,800,241
All Other	All Other	2,537,782		1,397,413		7,790,640		6,317,093		All Other	2,935,856		2,625,075
Total	Total	27,253,790		21,374,301		76,254,938		21,459,748		Total	9,787,534		22,382,535
Reconciliation	Reconciliation	(18,212,675)		(15,327,809)		(50,788,550)		(17,650,973)		Reconciliation	(7,094,735)		(15,425,316)
Consolidated	Consolidated	$	9,041,115	$	6,046,492	$	25,466,388	$	3,808,775	Consolidated	$	2,692,799	$	6,957,219

Net Income (Loss):	Net Income (Loss):									Net Income (Loss):
Production	Production	$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)	Production	$	1,665,199	$	6,535,530
Ethanol Producing Equity Method Investments	Ethanol Producing Equity Method Investments	10,584,904		9,576,312		27,888,935		(3,347,453)		Ethanol Producing Equity Method Investments	(1,472,217)		7,128,994
All Other	All Other	747,045		(208,976)		3,407,283		1,241,416		All Other	1,131,978		853,458
Total	Total	20,144,506		15,177,762		56,702,957		(2,557,279)		Total	1,324,960		14,517,982
Reconciliation	Reconciliation	(11,331,949)		(9,367,336)		(31,296,218)		2,106,037		Reconciliation	340,239		(7,982,452)
Consolidated	Consolidated	$	8,812,557	$	5,810,426	$	25,406,739	$	(451,242)	Consolidated	$	1,665,199	$	6,535,530

September 30, 2021 December 31, 2020
unaudited audited
Total Assets
Production $ 109,659,600 $ 121,857,947
Ethanol Producing Equity Method Investments 236,635,269 244,353,900
All Other 284,706,426 175,909,073
Total 631,001,295 542,120,920
Reconciliation (521,341,695) (420,262,973)
Consolidated $ 109,659,600 $ 121,857,947


	March 31, 2022		December 31, 2021
	unaudited		audited
Total Assets
Production	$	117,430,714	$	148,952,863
Ethanol Producing Equity Method Investments	250,748,259		261,642,408
All Other	311,758,950		283,835,871
Total	679,937,923		694,431,142
Reconciliation	(562,507,209)		(545,478,279)
Consolidated	$	117,430,714	$	148,952,863

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

NOTE 4. INVENTORY

Inventory consisted of the following as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020:~~2021:


		September 30, 2021		December 31, 2020*			March 31, 2022		December 31, 2021*
Raw materials	Raw materials	$	5,107,905	$	5,096,067	Raw materials	$	9,809,315	$	7,278,381
Finished goods	Finished goods	4,861,049		2,474,638		Finished goods	6,576,086		6,195,222
Work in process	Work in process	1,465,598		1,090,893		Work in process	1,412,532		1,779,170
Parts inventory	Parts inventory	1,171,276		1,107,318		Parts inventory	1,791,156		1,157,664
		$	12,605,828	$	9,768,916		$	19,589,089	$	16,410,437

*Derived from audited financial statements.

As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company ~~recorded~~evaluated inventory for a lower of cost or net realizable value write-down on ~~distillers grains inventory of approximately $0 and $13,000, respectively.~~inventory. The Company determined no write-down was necessary.

NOTE 5. INVESTMENTS

Dakota Ethanol has a 5% investment interest in the Company’s ethanol marketer, Renewable Products Marketing Group, LLC (RPMG). The net income, which is reported in the Company’s income statement for RPMG, is based on RPMG’s ~~June 30,~~December 31, 2021 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$1,313,000~~$1,685,000 and ~~$1,208,000~~$1,709,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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, 2021~~March 31, 2022 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$226,000~~$286,000 and ~~$194,000~~$215,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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, 2021~~March 31, 2022 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$4,197,000~~$3,169,000 and ~~$5,012,000~~$5,714,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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, 2021~~March 31, 2022 unaudited interim results. The carrying amount of the Company’s investment was approximately $90,000 and $90,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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, 2021~~March 31, 2022 unaudited interim results. The carrying amount of the Company’s investment was approximately ~~$11,184,000~~$12,773,000 and ~~$10,134,000~~$12,778,000 as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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 ~~$1,014,000.~~$985,000. The excess is comprised of a basis adjustment of approximately ~~$416,000~~$404,000 and capitalized interest of ~~$598,000.~~$581,000. 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 $43,247 for both the nine months ended September 30, 2021 and 2020, respectively. Amortization was $14,416 for both the three months ended September 30, 2021 and 2020, respectively.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

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


Balance Sheet	Balance Sheet	September 30, 2021		December 31, 2020		Balance Sheet	March 31, 2022		December 31, 2021
Current Assets	Current Assets	$	336,976,818	$	218,336,920	Current Assets	$	389,554,690	$	370,470,221
Other Assets	Other Assets	184,364,877		201,926,053		Other Assets	172,952,519		179,230,853
Current Liabilities	Current Liabilities	290,490,769		209,538,950		Current Liabilities	303,175,878		308,504,144
Long-term Liabilities	Long-term Liabilities	64,591,304		48,854,217		Long-term Liabilities	81,900,443		44,248,272
Members' Equity	Members' Equity	166,259,622		161,869,806		Members' Equity	177,430,889		196,948,658

		Three Months Ended					Three Months Ended
Income Statement	Income Statement	September 30, 2021		September 30, 2020		Income Statement	March 31, 2022		March 31, 2021
Revenue	Revenue	$	150,941,460	$	93,946,470	Revenue	$	174,537,336	$	132,310,102
Gross Profit	Gross Profit	18,212,675		15,327,809		Gross Profit	7,094,735		15,425,316
Net Income	Net Income	11,331,949		9,367,336		Net Income	(340,239)		7,982,452

		Nine Months Ended
Income Statement		September 30, 2021		September 30, 2020
Revenue		$	451,505,296	$	236,109,319
Gross Profit		50,788,550		17,650,973
Net Income (Loss)		31,296,218		(2,106,037)

The following table shows the condensed financial information of Guardian Energy Hankinson; the investment in which represents greater than 10% of the Company's income as of March 31, 2022.


Balance Sheet	March 31, 2022		December 31, 2021
Current Assets	$	52,850,158	$	43,793,006
Other Assets	50,320,381		54,451,233
Current Liabilities	20,480,219		34,990,527
Long-term Liabilities	51,002,692		6,115,092
Members' Equity	31,687,628		57,138,620

	Three Months Ended
Income Statement	March 31, 2022		March 31, 2021
Revenue	$	109,398,742	$	89,540,898
Gross Profit	370,244		5,879,483
Net Income	(450,990)		4,908,868

The following table shows the condensed financial information of Ring-neck Energy & Feed; the investment in which represents greater than 10% of the Company's assets as of March 31, 2022.


Balance Sheet	March 31, 2022		December 31, 2021
Current Assets	$	26,752,296	$	44,893,050
Other Assets	120,825,424		122,727,914
Current Liabilities	11,939,582		23,595,688
Long-term Liabilities	30,897,751		38,133,180
Members' Equity	104,740,388		105,892,096

	Three Months Ended
Income Statement	March 31, 2022		March 31, 2021
Revenue	$	60,729,585	$	38,780,231
Gross Profit	3,788,635		6,920,758
Net Income	(1,021,227)		2,220,126

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

MARCH 31, 2022 AND 2021

The Company recorded equity in net income (loss) of approximately ~~$3,073,000~~$(1,500) and ~~$(206,000) from our investments for the nine months ended September 30, 2021, and 2020, respectively. The Company recorded equity in net income of approximately $1,135,000 and $1,020,000~~$753,000 from our investments for the three months ended ~~September 30,~~March 31, 2022, and 2021, ~~and 2020,~~ respectively.

NOTE 6. REVOLVING ~~OPERATING~~PROMISSORY NOTE

On February 6, 2018, Dakota Ethanol executed a revolving promissory note with Farm Credit Services of America (FCSA) in the amount up to $10,000,000 or the amount available in accordance with the borrowing base calculation, whichever is less. Dakota Ethanol amended the note agreement with FCSA in June of ~~2020. The amendment reduced~~2020 and October of 2021. Under the amendments, the available credit under the revolving operating note was reduced to $2,000,000. ~~Interest on the outstanding principal balance will accrue at 305 basis points above the SOFR 30-day average rate and is not subject to a floor. The rate was 3.10% at September 30, 2021.~~ There is a non-use fee of 0.25% on the unused portion of the $2,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, 2023. Interest on the outstanding principal balance will accrue at 305 basis points above the SOFR 30-day average rate. The ~~loan~~interest rate is not subject to a floor. The rate was amended with FCSA on October 11, 2021. Under the amendment, the expiration of the note was extended to November 1, 2023 and interest accrual will be measured using the Secured Overnight Financing Rate (SOFR) 30-Day Average Rate.3.10% at March 31, 2022. On ~~September 30, 2021,~~March 31, 2022, Dakota Ethanol had no balance outstanding and approximately $2,000,000 available to be drawn on the revolving promissory ~~note under the borrowing base.~~note.

NOTE 7. LONG-TERM NOTES PAYABLE

On August 1, 2017, Dakota Ethanol executed a term note from FCSA in the amount of $8,000,000. Dakota Ethanol agreed to make monthly interest payments starting September 1, 2017 and annual principal payments of $1,000,000 starting on August 1, 2018. The payment on August 1, 2020 was deferred after the note was amended with FCSA and is now due on August 1, 2025. The note matures on August 1, 2025. Interest on the outstanding principal balance will accrue at 330 basis points above the SOFR 30-day average rate. The interest rate is not subject to a floor. The rate was 3.35% at ~~September 30, 2021.~~March 31, 2022. On ~~September 30, 2021,~~March 31, 2022, Dakota Ethanol had $5,000,000 outstanding on the note.

On February 6, 2018, Dakota Ethanol executed a reducing revolving promissory note from FCSA in the amount up to $40,000,000 or the amount available in accordance with the borrowing availability under the credit agreement. Dakota Ethanol

~~Table of Contents~~

~~LAKE AREA CORN PROCESSORS, LLC~~

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

~~SEPTEMBER 30, 2021 AND 2020~~

amended the note agreement with FCSA in June of 2020. The amendment increased the available credit on the reducing revolving note to $48,000,000. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on July 1, 2021 until the maximum balance reaches $32,250,000 on July 1, 2025. The note matures on January 1, 2026. Interest on the outstanding principal balance will accrue at 330 basis points above the SOFR 30-day average rate. The interest rate is not subject to a floor. The rate was 3.35% at ~~September 30, 2021.~~March 31, 2022. The note contains a non-use fee of 0.50% on the unused portion of the note. The loan was amended with FCSA on October 11, 2021. Under the amendment, the interest accrual will be measured using the Secured Overnight Financing Rate (SOFR) 30-Day Average Rate. On ~~September 30, 2021,~~March 31, 2022, Dakota Ethanol had $0$2,000,000 outstanding and ~~$46,250,000~~$42,500,000 available to be drawn on the note.

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

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

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

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


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
Notes Payable - FCSA	Notes Payable - FCSA	$	5,000,000	$	36,000,000	Notes Payable - FCSA	$	7,000,000	$	5,000,000

Notes Payable - Other		—		770,400

Less unamortized debt issuance costs	Less unamortized debt issuance costs	(5,444)		(7,535)		Less unamortized debt issuance costs	(4,278)		(4,861)
		4,994,556		36,762,865			6,995,722		4,995,139
Less current portion	Less current portion	(1,000,000)		(1,201,628)		Less current portion	(1,000,000)		(1,000,000)
		$	3,994,556	$	35,561,237		$	5,995,722	$	3,995,139
*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.~~

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

Periods Ending September 30, Principal
2022 $ 1,000,000
2023 1,000,000
2024 1,000,000
2025 2,000,000
2026 —
thereafter —
$ 5,000,000
Principal maturities for the next five years are estimated as follows.



Periods Ending March 31,	Principal
2023	$	1,000,000
2024	1,000,000
2025	1,000,000
2026	4,000,000


	$	7,000,000

NOTE 8. FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

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

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 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
September 30, 2021
Assets:
Derivative financial instruments,
  futures contracts $ 28,975 $ 28,975 $ — $ —
  forward contracts $ 1,886,379 $ — $ 1,886,379 $ —
Liabilities:
Derivative financial instruments,
  futures contracts $ 127,513 $ 127,513 $ — $ —
  forward contracts $ 612,758 $ — $ 612,758 $ —
December 31, 2020*
Assets:
Derivative financial instruments,
  futures contracts $ — $ — $ — $ —
  forward contracts $ 1,742,054 $ — $ 1,742,054 $ —
Liabilities:
Derivative financial instruments,
  futures contracts $ 1,799,688 $ 1,799,688 $ — $ —
  forward contracts $ 244,181 $ — $ 244,181 $ —


	Total		Level 1		Level 2		Level 3
March 31, 2022

Assets:
Derivative financial instruments, futures and options contracts	$	13,713	$	13,713	$	—	$	—
Forward contracts	$	3,036,215	$	—	$	3,036,215	$	—

Liabilities:
Derivative financial instruments, futures and options contracts	$	2,926,638	$	2,926,638	$	—	$	—
Forward contracts	$	1,380,083	$	—	$	1,380,083	$	—

December 31, 2021*

Assets:
Derivative financial instruments, futures and options contracts	$	140,863	$	140,863	$	—	$	—
Forward contracts	$	892,509	$	—	$	892,509	$	—

Liabilities:
Derivative financial instruments, futures and options contracts	$	1,238,560	$	1,238,560	$	—	$	—
Forward contracts	$	1,490,510	$	—	$	1,490,510	$	—

*Derived from audited financial statements.

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, the Company did not make any changes between Level 1 and Level 2 assets and liabilities. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, 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,~~March 31, 2022 and December 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, 2021~~March 31, 2022 of ~~$5,000,000~~$7,000,000 had an estimated fair value of approximately ~~$5,000,000~~$7,000,000 based on estimated interest rates for comparable debt. The carrying amount of long-term obligations at December 31, ~~2020~~2021 of ~~$36,770,400~~$5,000,000 had an estimated fair value of approximately ~~$36,770,400.~~$5,000,000.

Table of Contents

LAKE AREA CORN PROCESSORS, LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

NOTE 9. RELATED PARTY TRANSACTIONS

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

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,
		2021		2020		2021		2020			2022		2021

Revenues ethanol	Revenues ethanol	$	50,058,768	$	26,484,451	$	137,184,137	$	70,050,239	Revenues ethanol	$	48,282,029	$	37,107,397
Revenues distillers dried grains	Revenues distillers dried grains	3,422,681		2,938,941		9,758,249		6,617,691		Revenues distillers dried grains	3,361,155		2,384,468
Revenues corn oil	Revenues corn oil	4,082,593		1,374,468		9,889,836		4,051,885		Revenues corn oil	4,134,608		2,493,906
Marketing fees ethanol	Marketing fees ethanol	63,738		59,727		191,214		139,363		Marketing fees ethanol	(76,134)		(63,738)
Marketing fees distillers dried grains	Marketing fees distillers dried grains	15,848		25,010		47,558		48,929		Marketing fees distillers dried grains	(16,919)		(13,272)
Marketing fees corn oil	Marketing fees corn oil	14,468		12,965		41,369		30,858		Marketing fees corn oil	(14,311)		(13,163)
Denaturant purchases	Denaturant purchases	914,355		216,345		2,547,836		908,238		Denaturant purchases	686,120		795,340

		September 30, 2021		December 31, 2020*							March 31, 2022		December 31, 2021*
Amounts due to RPMG	Amounts due to RPMG	$	66,490	$	47,073					Amounts due to RPMG	$	39,062	$	79,909

*Derived from audited financial statements.

The Company purchased corn and services from members of its Board of Managers that farm and operate local businesses. Corn purchases from these related parties during the ~~nine months ended September 30, 2021 and 2020 totaled approximately $1,506,000 and $801,000, respectively. Corn purchases from these related parties during the~~ three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ totaled approximately ~~$500,000~~$159,000 and ~~$425,000,~~$248,000, respectively. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the Company had no outstanding obligations to these related parties.

NOTE ~~10. SUBSEQUENT EVENTS~~10 - COMMITMENTS, CONTINGENCIES AND AGREEMENTS

~~During November 2021,~~Capital Expenditures - Dakota Ethanol has committed to a contract for the ~~Company declared~~design and construction of a ~~distribution to its members~~new 2 million gallon ethanol storage tank. The value of ~~$5,924,000, or $0.20 per capital unit, to unit holders~~the construction is approximately $2.2 million, of ~~record~~which approximately $1.0 million is outstanding as of ~~October 1, 2021.~~March 31, 2022. The project is expected to be completed during the fourth quarter of 2022. The Company has committed to a contract for the design and construction of an eighth fermentor. The value of the construction is approximately $3.1 million, of which approximately $1.4 million is outstanding as of March 31, 2022. The project is expected to be completed during the third quarter of 2022. The Company has also committed to a contract for the design and construction of an additional grain storage bin. The value of the contracted construction is approximately $5.6 million, of which approximately $3.3 million is outstanding as of March 31, 2022. The project is expected to be completed during the fourth quarter of 2022.

Table of Contents

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, 2021,~~March 31, 2022, 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, ~~2020,~~2021, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

Disclosure Regarding Forward-Looking Statements

This report contains historical information, as well as forward-looking statements that involve known and unknown risks, including the growing crisiss in Ukraine, and relate to future events, our future financial performance, or our expected future operations and actions. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "future," "intend," "could," "hope," "predict," "target," "potential," "continue" or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions based on current information and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report and our annual report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.

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

Overview

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

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

Table of Contents

Results of Operations

Comparison of the Three Months Ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and 2020~~

The following table shows the results of our operations and the percentage of revenues, cost of revenues, operating expenses and other items to total revenues in our consolidated statements of income for the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~March 31, 2021:


		2021			2020				2022			2021
Income Statement Data	Income Statement Data	Amount		%	Amount		%	Income Statement Data	Amount		%	Amount		%
Revenues	Revenues	$	63,794,494	100.0	$	33,917,787	100.0	Revenues	$	64,450,894	100.0	$	48,615,653	100.0

Cost of Revenues	Cost of Revenues	54,753,379		85.8	27,871,295		82.2	Cost of Revenues	61,758,095		95.8	41,658,434		85.7

Gross Profit	Gross Profit	9,041,115		14.2	6,046,492		17.8	Gross Profit	2,692,799		4.2	6,957,219		14.3

Operating Expense	Operating Expense	1,249,243		2.1	992,023		2.9	Operating Expense	1,247,879		2.0	1,251,134		2.6

Income from Operations	Income from Operations	7,791,872		12.1	5,054,469		14.9	Income from Operations	1,444,920		2.2	5,706,085		11.7

Other Income (Expense)	Other Income (Expense)	1,020,685		1.6	755,957		2.2	Other Income (Expense)	220,279		0.3	829,445		1.7

Net Income	Net Income	$	8,812,557	13.7	$	5,810,426	17.1	Net Income	$	1,665,199	2.5	$	6,535,530	13.4

Revenues

Revenue from ethanol sales increased by approximately ~~89.2%~~30.1% during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due to increased average prices that we received for our ethanol during the ~~2021~~2022 period. Revenue from distillers grains sales increased by approximately ~~58.7%~~33.4% during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to increased average prices that we received for our distillers grains ~~partially offset by fewer~~and increased tons of distillers grains sold. Revenue from corn oil sales increased by approximately ~~198.8%~~66.1% during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to increased average prices that we received for corn oil sold ~~and increased pounds of corn oil sold~~ during the ~~2021~~2022 period.

Ethanol

Our ethanol revenue was approximately ~~$23.6~~$11.2 million higher during our three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of approximately ~~89.2%~~30.1%. This increase in ethanol revenue was due primarily to an increase in the average price that we received per gallon of ethanol sold during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021. We sold approximately ~~2.1%~~3.3% more gallons of ethanol during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, an increase of approximately ~~444,000~~725,000 gallons. The increase is due primarily to increased ~~inventory~~ sales of ethanol inventory during the three months ended ~~September 30, 2020.~~March 31, 2022.

The average price we received for our ethanol was approximately ~~$1.05~~$0.44 higher per gallon during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020,~~March 31, 2021, an increase of approximately ~~85.4%~~26.0%. Management attributes this increase in ethanol prices during the three months ended ~~September 30,~~March 31, 2021 to higher gasoline prices along with increasing gasoline demand. Since ethanol is blended with gasoline, when gasoline price and demand are higher it has a corresponding impact on ethanol price and demand. Management also believes that higher corn prices during the ~~2021~~2022 period had an impact on ethanol prices.

~~Table of Contents~~

Distillers Grains

Our total distillers grains revenue was approximately ~~58.7%~~33.4% higher during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to increased average prices received for our distillers grains. We sold

Table of Contents

approximately ~~12.9% less~~11.6% more total tons of distillers grains during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 primarily due to ~~reduced~~increased dried distillers grains production caused by ~~higher natural gas prices~~increased market demand during the ~~2021~~2022 period.

The average price we received for our dried distillers grains was approximately ~~82.5%~~15.2% higher during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, an increase of approximately ~~$92.28~~$26.13 per ton. Management attributes the increase in dried distillers grains prices during the three months ended ~~September 30, 2021~~March 31, 2022 to increases in the domestic price of corn and ~~decreased market supply of corn.~~natural gas. The average price we received for our modified/wet distillers grains, on a dry-equivalent basis, was approximately ~~79.3%~~21.5% higher for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, an increase of approximately ~~$95.40~~$39.16 per ton. Management attributes this increase in modified/wet distillers grains prices with higher corn prices in the market and ~~decreased corn supply.~~increased natural gas prices.

Corn Oil

Our total corn oil revenue was approximately ~~198.8%~~66.1% higher during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to increased prices received for our corn ~~oil and more pounds of corn oil sold.~~oil. Our total pounds of corn oil sold increased by approximately ~~11.6%~~5.9% during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, an increase of approximately ~~716,000~~368,000 pounds. We produced more corn oil due to increased oil extraction proficiency during the ~~2021~~2022 period compared to the three months ended ~~September 30, 2020.~~March 31, 2021.

The average price per pound we received for our corn oil was higher by approximately ~~167.8%~~56.9% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to demand from the ~~biodiesel~~renewable diesel industry for corn oil along with higher soybean oil prices.

Cost of Revenues

Corn

Our cost of revenues relating to corn was approximately ~~118.3%~~45.6% higher for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due to significantly increased corn prices during the ~~2021~~2022 period.

Our average cost per bushel of corn increased by approximately ~~113.7%~~43.2% for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021. We consumed approximately ~~2.2%~~1.7% more bushels of corn during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 that resulted in slightly less production at the ethanol plant. Management attributes the increased corn cost per bushel to significantly higher market corn prices and decreased corn availability during our ~~2021~~2022 fiscal period. Management anticipates corn prices to remain higher until the harvest of ~~2021~~2022 begins. After harvest, corn prices are expected to remain stable for the remainder of our ~~2021~~2022 fiscal year.

Natural Gas

Our cost of revenues related to natural gas increased by approximately ~~$1,070,000,~~$414,000, an increase of approximately ~~101.6%~~20.8%, for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021. This increase was due to higher natural gas costs per MMBtu offset partially by less natural gas usage during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020.~~2021.

Our average cost per MMBtu of natural gas during the three months ended ~~September 30, 2021~~March 31, 2022 was approximately ~~109.0%~~22.8% more compared to the cost per MMbtu for the three months ended ~~September 30, 2020.~~March 31, 2021. Management attributes this increase in our average natural gas costs to higher market natural gas prices due to high demand and supply shortages.

The volume of natural gas we used decreased by approximately 1.6% during the three months ended March 31, 2022 compared to the same period of 2021.

Table of Contents

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

Operating Expenses

Our operating expenses were ~~higher~~comparable for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due primarily to ~~increased insurance expense and increased~~decreased wages and ~~benefits.~~benefits offset by increased professional fees.

Other Income and Expense

~~We had greater~~Our other income decreased during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due to ~~a gain~~lower income on investments during the three months ended ~~September 30, 2021.~~March 31, 2022. We had ~~more~~less income from our investments during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020~~2021 due to ~~improved~~lower profitability in the ethanol sector. We had less interest expense during the three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020 due to lower carrying balances on outstanding debt.~~

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

2021 2020
Income Statement Data Amount % Amount %
Revenues $ 176,648,273 100.0 $ 91,798,857 100.0
Cost of Revenues 151,181,885 85.6 87,990,082 95.9
Gross Profit 25,466,388 14.4 3,808,775 4.1
Operating Expense 3,776,472 2.0 3,277,570 3.5
Income from Operations 21,689,916 12.4 531,205 0.6
Other Income (Expense) 3,716,823 2.1 (982,447) (1.1)
Net Income (Loss) $ 25,406,739 14.5 $ (451,242) (0.5)

~~Revenues~~

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

~~Ethanol~~

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

~~Table of Contents~~

sold approximately 9.7% more gallons of ethanol during the nine months ended September 30, 2021 compared to the same period of 2020, an increase of approximately 6 million gallons. The increased production is due to not having the pandemic related downtime we experienced during the 2020 period.

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

~~Distillers Grains~~

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

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

~~Corn Oil~~

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

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

~~Cost of Revenues~~

~~Corn~~

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

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

~~Table of Contents~~

~~Natural Gas~~

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

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

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

~~Operating Expenses~~

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

~~Other Income and Expense~~

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

Changes in Financial Condition for the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Current Assets

Our cash on hand at ~~September 30, 2021~~March 31, 2022 was less compared to December 31, ~~2020~~2021 due to deferred corn payments and member distribution payments which we made in January ~~2021.~~2022. We had greater accounts receivable at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to the timing of our quarter end and the payments received related to the shipments of our products. The value of our inventory was greater at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to more ~~ethanol~~corn inventory on hand as well as higher corn and ethanol prices which increase the value of our inventory. The asset value of our derivative instruments was greater at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020 due~~2021, primarily because we had more cash in our margin account as of March 31, 2022 compared to ~~recent corn price changes which impacted our derivative instruments.~~December 31, 2021. We had less prepaid expenses at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to amortization of our insurance premiums.

Property and Equipment

The value of our property and equipment was ~~less~~more at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 primarily as a result of ~~regular depreciation of our assets.~~new construction currently in progress for an additional grain bin, ethanol storage tank, and additional fermentor.

Other Assets

The value of our investments was ~~greater~~lower at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to ~~increased profitability~~distributions in ~~the ethanol industry, in which the majority~~excess of earnings from our investments ~~are related.~~during the three months ended March 31, 2022.

~~Table of Contents~~

Current Liabilities

We had ~~more~~less outstanding checks in excess of bank balances at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020.~~2021. We use our revolving loan to pay any checks that are presented for payment which exceed the cash we have available in our accounts. Our accounts payable were lower at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due primarily to decreased corn payables at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 as the deferred payments were paid during the first quarter of ~~2021.~~2022. Our derivative instrument liability was ~~higher~~lower at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to corn price changes, which impacted our derivative instruments. The current portion of our notes payable was ~~less~~unchanged at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020 due to forgiveness of our PPP and EIDL loans which reduced the amount of long-term loan payments we need to make in the next twelve months.~~2021.

Long-Term Liabilities

Our long-term liabilities were ~~lower~~higher at ~~September 30, 2021~~March 31, 2022 compared to December 31, ~~2020~~2021 due to ~~decreased~~increased borrowing ~~and reductions in notes payable resulting from increased profitability.~~on our available credit.

Table of Contents

Liquidity and Capital Resources

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

Currently, we have two revolving loans, which allow us to borrow funds for working capital. These loans are described in greater detail below in the section entitled "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Indebtedness." As of ~~September 30, 2021,~~March 31, 2022, we had $0$2,000,000 outstanding and ~~$48,250,000~~$44,500,000 available to be drawn on our revolving loans, after taking into account the borrowing base calculation. Management anticipates that this is sufficient to maintain our liquidity and continue our operations for the next twelve months.

The following table shows cash flows for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
Net cash provided by (used in) operating activities		$	16,732,755	$	(1,594,191)
Net cash (used in) operating activities						Net cash (used in) operating activities	$	(22,054,476)	$	(13,759,119)
Net cash (used in) investing activities	Net cash (used in) investing activities	(340,540)		(334,571)		Net cash (used in) investing activities	(2,386,032)		(14,544)
Net cash (used in) financing activities	Net cash (used in) financing activities	(31,694,584)		(8,780,738)		Net cash (used in) financing activities	(13,362,482)		(3,001,133)

Cash Flow From Operations. Our operating activities ~~provided~~used more cash during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~using cash in~~ the same period of ~~2020,~~2021, due primarily to ~~increased~~decreased net income and ~~less~~more cash used by accounts payable partially offset by an ~~increase~~decrease in accounts receivable ~~and inventory~~ during the ~~2021~~2022 period.

Cash Flow From Investing Activities. Our investing activities used more cash during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, due to ~~more capital expenditures.~~the construction of an additional grain bin, ethanol storage tank, and additional fermentor.

Cash Flow From Financing Activities. Our financing activities used more cash during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the same period of ~~2020,~~2021, due primarily to ~~the reduction of balances outstanding on our loans~~distributions paid to members during the ~~2021~~2022 period.

Plans for Cash in the Short Term and in the Long Term

27In the next 12 months, the Company plans to reinvest its cash into current business operations and to use cash for the design and construction of an eighth fermentor and the design and construction of an additional grain storage bin. The Company will also use its cash for Dakota Ethanol's design and construction of a 2 million gallon ethanol storage tank. In the long term, the Company plans to reinvest its cash into current business operations and may provide further distributions to its members.

~~Table of Contents~~

Indebtedness

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

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

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

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

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

On October 11, 2021, we entered into a Fourth Amendment to the credit agreement (the "Fourth Amendment"). Under the Fourth Amendment, the operating lines's maturity date was extended to November 1, 2023. Interest on the outstanding principal balance of the operating line will accrue at the Secured Overnight Financing Rate ("SOFR") 30-Day Average Rate plus 305 basis points. The available credit on the reducing revolving note is ~~$46,250,000.~~$44,500,000. Interest on the outstanding principal balance of the revolving loan and term loan will accrue at the SOFR 30-Day Average Rate plus 330 basis points. The working

Table of Contents

capital covenant was increased to $13,500,000, and the net worth covenant was increased to $28,000,0000. Dakota Ethanol may make distributions in an amount up to 75% of prior year's net income, so long as the Company's working capital stays above $18,000,000 post distribution. The combined distributions for 2021 and 2022 shall also be limited to 75% of the combined net income of 2020 and 2021.

Operating Line

Dakota Ethanol has a revolving promissory note from ~~Farm Credit Services of America (FCSA)~~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 305 basis points above the SOFR 30-Day Average Rate and is not subject to a floor. The rate was 3.1% at ~~September 30, 2021.~~March 31, 2022. There is a non-use fee of 0.25% on the unused portion of the $2,000,000 availability. The note is collateralized by substantially all assets of the Company. The note expires on November 1, 2023. On ~~September 30, 2021,~~March 31, 2022, 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 $46,250,000 or the amount available in accordance with the borrowing availability under the credit agreement. The amount Dakota Ethanol can borrow on the note decreases by $1,750,000 semi-annually starting on July 1, 2021 until the maximum balance reaches $32,250,000 on July 1, 2025. The note matures on January 1, 2026. Interest on the outstanding principal balance will accrue at the SOFR 30-Day Average Rate plus 330 basis points. The interest rate is not subject to a floor. The rate was 3.35% at ~~September 30, 2021.~~

~~Table of Contents~~

March 31, 2022. The note contains a non-use fee of 0.5% on the unused portion of the note. On ~~September 30, 2021,~~March 31, 2022, Dakota Ethanol had $0$2,000,000 outstanding and ~~$46,250,000~~$44,500,000 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 330 basis points above the SOFR 30-Day Average Rate and is not subject to a floor. The rate was 3.35% at ~~September 30, 2021.~~March 31, 2022. On ~~September 30, 2021,~~March 31, 2022, Dakota Ethanol had $5,000,000 outstanding on the note.

~~2020 Loans~~

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

Covenants

Our credit facilities with FCSA are subject to various loan covenants. If we fail to comply with these loan covenants, FCSA can declare us to be in default of our loans. The material loan covenants applicable to our credit facilities are our working capital covenant, local net worth covenant and our debt service coverage ratio. We are required to maintain working capital (current assets minus current liabilities plus availability on our revolving loan) of at least ~~$13,500,000.~~$13.5 million. We are required to maintain local net worth (total assets minus total liabilities minus the value of certain investments) of at least $28 million. We are required to maintain a debt service coverage ratio of at least 1.25:1.00. ~~The~~Dakota Ethanol may make distributions in an amount up to 75% of prior year's net income, so long as the Company's working capital stays above $18,000,000 post distribution. The combined distributions for 2021 and ~~local~~2022 shall also be limited to 75% of the combined 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,income of 2020 and 2021.

As of ~~September 30, 2021,~~March 31, 2022, we were in compliance with our financial covenants under the ~~working capital and local net worth loan covenants.~~FCSA loans. 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. Management does not believe that it is reasonably likely that we will fall out of compliance with our material loan covenants in the next 12 months. 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.

Table of Contents

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

~~Table of Contents~~

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.

Inventory Valuation

Revenue Recognition

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

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

~~Off-Balance Sheet Arrangements~~

~~We do not have any off-balance sheet arrangements.~~

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of market fluctuations associated with commodity prices and interest rates as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative

Table of Contents

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.

~~Table of Contents~~

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, 2021,~~March 31, 2022, we had ~~$5,000,000~~$7,000,000 outstanding on our variable interest rate loans with interest accruing at a rate of 3.35%. Our variable interest rates are calculated by adding a set basis to the SOFR 30-Day Average Rate. If we were to experience a 10% increase in the SOFR 30-Day Average Rate, the annual effect such change would have on our income statement, based on the amount we had outstanding on our variable interest rate loans as of ~~September 30, 2021,~~March 31, 2022, would be approximately ~~$2,500.~~$350.

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. Our exposure to commodity price risk may be heightened due to the crisis in Ukraine.

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 to our cost of revenues of approximately $4,389,000 related to derivative instruments for the quarter ended March 31, 2022. We recorded a combined decrease to our cost of revenues of approximately ~~$243,000~~$435,000 related to derivative instruments for the quarter ended ~~September 30,~~March 31, 2021. ~~We recorded a combined increase to our cost of revenues of approximately $316,000 related to derivative instruments for the quarter ended September 30, 2020.~~ There are several variables that could affect the extent to which our derivative instruments are impacted by price fluctuations in the cost of corn or natural gas. However, it is likely that commodity cash prices will have the greatest impact on the derivatives instruments with delivery dates nearest the current cash price.

As of ~~September 30, 2021,~~March 31, 2022, we were committed to purchasing approximately ~~6.0~~7.5 million bushels of corn with an average price of ~~$5.23~~$6.62 per bushel. These corn purchases represent approximately ~~20%~~25% of our projected plant corn usage for the next 12 months.

As of ~~September 30, 2021,~~March 31, 2022, we were committed to purchasing approximately ~~820,000~~1,556,000 MMBtus of natural gas with an average price of ~~$3.03~~$3.57 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 ~~40%~~77% of the projected annual plant requirements.

As of ~~September 30, 2021,~~March 31, 2022, we were committed to selling approximately ~~35,000~~26,000 dry equivalent tons of distillers grains with an average price of ~~$201~~$224 per ton. The distillers grains sales represent approximately ~~16%~~12% of the projected annual plant production.

As of ~~September 30, 2021,~~March 31, 2022, we were committed to selling approximately 2.8 million pounds of distillers corn oil with an average price of ~~$0.58~~$0.75 per pound. The distillers corn oil sales represent approximately ~~13%~~12% of the projected annual plant production.

We did not have any firm-priced sales commitments for ethanol as of ~~September 30, 2021.~~March 31, 2022.

Table of Contents

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, 2021,~~March 31, 2022, 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

~~Table of Contents~~

expected use and sale of these commodities for a one year period from ~~September 30, 2021.~~March 31, 2022. 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	%	$	22,080,000	Ethanol	92,000,000	Gallons	10	%	$	20,976,000
Corn	Corn	30,666,667	Bushels	10	%	$	14,741,103	Corn	27,171,197	Bushels	10	%	$	19,264,378
Natural Gas	Natural Gas	2,070,000	MMBTU	10	%	$	730,014	Natural Gas	514,000	MMBTU	10	%	$	290,410

For comparison purposes, our sensitivity analysis for our quarter ended ~~September 30, 2020~~March 31, 2021 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	%	$	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

ITEM 4. CONTROLS AND PROCEDURES

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

Our management, including our Chief Executive Officer (the principal executive officer), Scott Mundt, along with our Chief Financial Officer (the principal financial officer), Rob Buchholtz, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2021.~~March 31, 2022. 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, 2021,~~March 31, 2022, 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.

Table of Contents

ITEM 1A. RISK FACTORS

~~There have been no~~The following risk factors are provided due to material changes tofrom the risk factors ~~that were~~ previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. 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, 2021.

The Company faces risks related to international conflicts, such as the ongoing conflict between Russia and Ukraine, that may adversely impact the Company's financial condition or results of operations.

In late February of 2022, Russia initiated a military operation in Ukraine. The Black Sea region is a key international grain and fertilizer export market and the conflict between Russia and Ukraine could continue to disrupt supply and logistics, cause volatility in prices, and impact global margins due to increased commodity, energy, and input costs. The Company currently does not purchase products directly from this region, however, the impact to the global supply could put the Company’s ability to secure product at risk over time.

To the extent the conflict between Russia and Ukraine adversely affects our business, it may also have the effect of heightening other risks disclosed in Part I, “Item 1A. Risk Factors” in the Company's 2021 Annual Report on Form 10-K, any of which could materially and adversely affect the Company's financial condition and results of operations. However, due to the continually evolving nature of the conflict, the potential impact that the conflict could have on such risk factors, and others that cannot yet be identified, remains uncertain. The Company continues to monitor the conflict and assess alternatives to mitigate these risks.

Inflation, including as a result of commodity price inflation or supply chain constraints due to the war in Ukraine, may adversely impact our results of operations.

We have experienced inflationary impacts on business expenses. Commodity prices in particular have risen significantly over the past year. Inflation and its negative impacts could escalate in future periods.

Ukraine is the third largest exporter of grain in the world. Russia is one of the largest producers of natural gas and oil and is the largest exporter of fertilizers. The commodity price impact of the war in Ukraine has been a sharp and sustained rise in grain and energy prices, including corn and natural gas. In addition, the war in Ukraine has adversely affected and may continue to adversely affect global supply chains resulting in further commodity price inflation for our production inputs. Lower fertilizer supplies may also impact future growing seasons, further impacting grain supplies and prices. Also, given high global grain prices, U.S. farmers may prefer to lock in prices and export additional volumes, reducing domestic grain supplies and resulting in further inflationary pressures.

We may not be able to include these additional costs in the prices of the products we sell. As a result, inflation may have a material adverse effect on our results of operations and financial condition.

The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels and/or the impact of sanctions on Russia related to the war in Ukraine may have a significant impact on natural gas commodity prices.

The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market. Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing. For example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices. In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful. As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts expired on April 1, 2020. These actions led to an immediate and steep decrease in oil prices. Conversely, sanctions imposed on Russia in the last few months have increased prices. There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can there be any assurance that sanctions or other global conflicts will not further impact oil prices. Uncertainty regarding future sanctions or actions to be taken by OPEC+ members or other oil exporting countries could lead to increased volatility in the price of oil and natural gas, which could adversely affect our business, future financial condition and results of operations.

3230

Table of Contents

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are filed as part of this report.


Exhibit No.			Exhibit
~~10.1~~			Fourth Amendment to Amended and Restated Credit Agreement dated October 11, 2021*
31.1			Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2			Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1			Certificate Pursuant to 18 U.S.C. Section 1350*
32.2			Certificate Pursuant to 18 U.S.C. Section 1350*
101.INS*			XBRL Instance Document
101.SCH*			XBRL Schema Document
101.CAL*			XBRL Calculation Document
101.LAB*			XBRL Labels Linkbase Document
101.PRE*			XBRL Presentation Linkbase Document
101.DEF*			XBRL Definition Linkbase Document

* Filed herewith.

** Furnished herewith.

3331

Table of Contents

SIGNATURES

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


		LAKE AREA CORN PROCESSORS, LLC

Date:	~~November 12, 2021~~May 16, 2022	/s/ Scott Mundt
		Scott Mundt
		President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 12, 2021~~May 16, 2022	/s/ Robbi Buchholtz
		Robbi Buchholtz
		Chief Financial Officer (Principal Financial and Accounting Officer)

3432


			Page No.
Part I FINANCIAL INFORMATION			3
Item 1. Financial Statements (Unaudited)			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3027
Item 4. Controls and Procedures			3229

Part II OTHER INFORMATION			3229
Item 1. Legal Proceedings			3229
Item 1A. Risk Factors			3230
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			3231
Item 3. Defaults Upon Senior Securities			3331
Item 4. Mine Safety Disclosures			3331
Item 5. Other Information			3331
Item 6. Exhibits			3331
Signatures			3432



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