**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| ý                                                                                                                                                                                                                      | **Quarterly  report under Section 13 or 15(d) of the Securities Exchange Act of 1934.** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                        |
| **For the  fiscal quarter ended March 31, 2005**                                                                                                                                                                            |
|                                                                                                                                                                                                                        |
| **OR**                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                        |
| **o**                                                                                                                                                                                                                       | **Transition  report under Section 13 or 15(d) of the Exchange Act.**                   |
|                                                                                                                                                                                                                        |
| **For the  transition period  from               to               .** |
|                                                                                                                                                                                                                        |
| **COMMISSION  FILE NUMBER 0001229899**                                                                                                                                                                                      |

 

**LITTLE SIOUX CORN PROCESSORS, L.L.C.**

(Exact name of registrant asspecified in its charter)

 
| **Iowa**                                                          | ** ** | **42-1510421**                        |
|-------------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of   incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**4808 FAvenue, Marcus, Iowa 51035**

(Address of principalexecutive offices)

 

**(712)376-2800**

(Issuer’s telephone number)

 

Indicateby check mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.
|   | ý   Yes          o  No |
|--------|-----------------------------------------------------------------------------------------|

 

Indicateby check mark whether the registrant is an accelerated filer (as defined inExchange Act Rule 12b-2).
|   | o   Yes          ý  No |
|--------|-----------------------------------------------------------------------------------------|

 

Indicatethe number of shares outstanding for each of the issuer’s classes of commonequity as of the latest practicable date:

 

Asof May 13, 2005, there were 10,941 units outstanding.

 

 

----

 

**INDEX**

 
| **PART  I.     FINANCIAL INFORMATION** | ** **                                                                                               | ** ** |
|-----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|------------|
| ** **                                                      | ** **                                                                                               | ** ** | ** ** |
| ** **                                                      | **Item 1. Financial Statements.**                                                                        | ** ** | ** ** |
| ** **                                                      | **Item 2. Management’s Discussion and  Analysis of Financial Condition and Results of Operations.** | ** ** | ** ** |
| ** **                                                      | **Item 3. Quantitative and Qualitative  Disclosures About Market Risk.**                                 | ** ** | ** ** |
| ** **                                                      | **Item 4.  Controls and Procedures.**                                                               | ** ** | ** ** |
| ** **                                                      | ** **                                                                                               | ** ** | ** ** |
| **PART II.     OTHER INFORMATION**     | ** **                                                                                               | ** ** |
| ** **                                                      | ** **                                                                                               | ** ** | ** ** |
| ** **                                                      | **Item 1. Legal Proceedings.**                                                                           | ** ** | ** ** |
| ** **                                                      | **Item 2. Unregistered Sales of Equity  Securities and Use of Proceeds.**                                | ** ** | ** ** |
| ** **                                                      | **Item 3. Defaults Upon Senior Securities.**                                                             | ** ** | ** ** |
| ** **                                                      | **Item 4. Submission of Matters to a Vote of  Security Holders.**                                        | ** ** | ** ** |
| ** **                                                      | **Item 5. Other Information.**                                                                           | ** ** | ** ** |
| ** **                                                      | **Item 6. Exhibits.**                                                                                    | ** ** | ** ** |
| ** **                                                      | ** **                                                                                               | ** ** | ** ** |
| **SIGNATURES**                                                  | ** **                                                                                               | ** ** |

 

----

 

**PART I.     FINANCIAL INFORMATION**

 

**Item 1.  FinancialStatements.**

 

**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

Condensed Consolidated Balance Sheet

 
| ** **                    | ** ** | **March 31**    | ** ** | **September 30** | ** ** |
|-------------------------------|------------|-----------------|------------|------------------|------------|
| **ASSETS**                    | ** ** | **2005**        | ** ** | **2004**         | ** ** |
| ** **                    | ** ** | **(Unaudited)** | ** ** | **(Audited)**    | ** ** |
| **Current Assets**            | ** ** | ** **      | ** ** | ** **       | ** ** |
| Cash                          |       | $               | 10,140,028 |             | $          | 3,907,380 |   |
| Restricted cash               |       | 645,974         |       | 2,730,481        |       |
| Trade accounts receivable     |       | 1,527,202       |       | 2,335,023        |       |
| Other receivables             |       | 118,514         |       | 400,553          |       |
| Inventory                     |       | 1,545,466       |       | 2,084,604        |       |
| Derivative instruments        |       | 604,069         |       | —           |       |
| Prepaid expenses              |       | 457,314         |       | 488,885          |       |
| Total current assets          |       | 15,038,567      |       | 11,946,926       |       |
|                          |       |            |       |             |       |
| **Property and Equipment**    |       |            |       |             |       |
| Land and improvements         |       | 2,757,709       |       | 2,753,225        |       |
| Buildings                     |       | 15,061,750      |       | 15,061,750       |       |
| Processing equipment          |       | 28,338,256      |       | 28,226,013       |       |
| Grain handling equipment      |       | 5,174,948       |       | 5,172,406        |       |
| Rail and other equipment      |       | 1,234,781       |       | 1,214,322        |       |
| Furniture and fixtures        |       | 181,168         |       | 160,042          |       |
| Construction in progress      |       | 1,460,000       |       |             |       |
|                          |       | 54,208,612      |       | 52,587,758       |       |
| Less accumulated depreciation |       | 6,813,494       |       | 5,051,631        |       |
| Net property and equipment    |       | 47,395,118      |       | 47,536,127       |       |
|                          |       |            |       |             |       |
| **Other Assets**              |       |            |       |             |       |
| Deferred loan costs, net      |       | 291,396         |       | 345,151          |       |
| Total other assets            |       | 291,396         |       | 345,151          |       |
|                          |       |            |       |             |       |
| **Total Assets**              |       | $               | 62,725,081 |             | $          | 59,828,204 |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

2

----

 

**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

Condensed Consolidated Balance Sheet

 
| ** **                                      | ** ** | **March 31**    | ** ** | **September 30** | ** ** |
|-------------------------------------------------|------------|-----------------|------------|------------------|------------|
| **LIABILITIES AND MEMBERS’ EQUITY**        | ** ** | **2005**        | ** ** | **2004**         | ** ** |
| ** **                                      | ** ** | **(Unaudited)** | ** ** | **(Audited)**    | ** ** |
| **Current Liabilities**                         | ** ** | ** **      | ** ** | ** **       | ** ** |
| Revolving promissory note                       |       | $               | 1,128,009  |             | $          | 38,829 |   |
| Current maturities of long-term debt            |       | 3,348,685       |       | 3,109,676        |       |
| Trade accounts payable                          |       | 780,231         |       | 1,337,513        |       |
| Derivative instruments                          |       |            |       | 181,579          |       |
| Accrued liabilities                             |       | 736,073         |       | 298,851          |       |
| Distributions payable                           |       | 2,945,493       |       |             |       |
| Total current liabilities                       |       | 8,938,491       |       | 4,966,448        |       |
|                                            |       |            |       |             |       |
| **Long-Term Debt,**net  of current maturities   |       | 13,074,524      |       | 19,572,989       |       |
|                                            |       |            |       |             |       |
| **Commitments and Contingencies**               |       |            |       |             |       |
|                                            |       |            |       |             |       |
| **Minority Interest**                           |       | 16,375,455      |       | 14,207,003       |       |
|                                            |       |            |       |             |       |
| **Members’ Equity**                        |       |            |       |             |       |
| Member contributions, 10,941 units  outstanding |       | 10,842,237      |       | 10,842,237       |       |
| Retained earnings and earnings  distributions   |       | 13,494,374      |       | 10,239,527       |       |
| Total members’ equity                      |       | 24,336,611      |       | 21,081,764       |       |
|                                            |       |            |       |             |       |
| **Total Liabilities and Members’ Equity**  |       | $               | 62,725,081 |             | $          | 59,828,204 |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

3

----

 

**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

** **

Condensed Consolidated Statements ofOperations

 
| ** **                                 | ** ** | **Three Months Ended** | ** ** | **Three Months Ended** | ** ** |
|--------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                 | ** ** | **March 31**           | ** ** | **March 31**           | ** ** |
| ** **                                 | ** ** | **2005**               | ** ** | **2004**               | ** ** |
| ** **                                 | ** ** | **(Unaudited)**        | ** ** | **(Unaudited)**        | ** ** |
|                                       |       |                   |       |                   |       |
| **Revenues**                               |       | $                      | 23,835,684 |                   | $          | 20,203,296 |   |
|                                       |       |                   |       |                   |       |
| **Cost of Goods Sold**                     |       | 14,952,851             |       | 11,311,892             |       |
|                                       |       |                   |       |                   |       |
| **Gross Profit**                           |       | 8,882,833              |       | 8,891,404              |       |
|                                       |       |                   |       |                   |       |
| **Operating Expenses**                     |       | 1,412,791              |       | 1,504,058              |       |
|                                       |       |                   |       |                   |       |
| **Operating Income**                       |       | 7,470,042              |       | 7,387,346              |       |
|                                       |       |                   |       |                   |       |
| **Other Income (Loss)**                    |       |                   |       |                   |       |
| Interest income                            |       | 30,293                 |       | 163                    |       |
| Interest expense                           |       | (235,144               | )          | (415,492               | )          |
| CCC Bio-Energy income                      |       | 28,617                 |       | 4,262,613              |       |
| Grants and other income                    |       | 81,420                 |       | 60,465                 |       |
| Total other income (loss)                  |       | (94,814                | )          | 3,907,749              |       |
|                                       |       |                   |       |                   |       |
| **Net Income Before Minority Interest**    |       | 7,375,228              |       | 11,295,095             |       |
|                                       |       |                   |       |                   |       |
| **Minority Interest in Subsidiary Income** |       | 2,965,331              |       | 4,715,589              |       |
|                                       |       |                   |       |                   |       |
| **Net Income**                             |       | $                      | 4,409,897  |                   | $          | 6,579,506 |   |
|                                       |       |                   |       |                   |       |
| **Weighted Average Units Outstanding**     |       | 10,941                 |       | 10,941                 |       |
|                                       |       |                   |       |                   |       |
| **Net Income Per Unit**                    |       | $                      | 403.06     |                   | $          | 601.36 |   |
|                                       |       |                   |       |                   |       |
| **Distributions per unit**                 |       | $                      | 379.88     |                   | $          | 51.29 |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

4

----

 
| ** **                                 | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                 | ** ** | **March 31**         | ** ** | **March 31**         | ** ** |
| ** **                                 | ** ** | **2005**             | ** ** | **2004**             | ** ** |
| ** **                                 | ** ** | **(Unaudited)**      | ** ** | **(Unaudited)**      | ** ** |
|                                       |       |                 |       |                 |       |
| **Revenues**                               |       | $                    | 46,811,419 |                 | $          | 39,470,204 |   |
|                                       |       |                 |       |                 |       |
| **Cost of Goods Sold**                     |       | 31,253,083           |       | 26,714,380           |       |
|                                       |       |                 |       |                 |       |
| **Gross Profit**                           |       | 15,558,336           |       | 12,755,824           |       |
|                                       |       |                 |       |                 |       |
| **Operating Expenses**                     |       | 2,876,755            |       | 3,072,779            |       |
|                                       |       |                 |       |                 |       |
| **Operating Income**                       |       | 12,681,581           |       | 9,683,045            |       |
|                                       |       |                 |       |                 |       |
| **Other Income (Loss)**                    |       |                 |       |                 |       |
| Interest income                            |       | 42,277               |       | 163                  |       |
| Interest expense                           |       | (505,719             | )          | (818,458             | )          |
| CCC Bio-Energy income                      |       | 45,917               |       | 6,880,239            |       |
| Grants and other income                    |       | 104,736              |       | 79,229               |       |
| Total other income (loss)                  |       | (312,789             | )          | 6,141,173            |       |
|                                       |       |                 |       |                 |       |
| **Net Income Before Minority Interest**    |       | 12,368,792           |       | 15,824,218           |       |
|                                       |       |                 |       |                 |       |
| **Minority Interest in Subsidiary Income** |       | 4,957,679            |       | 6,596,137            |       |
|                                       |       |                 |       |                 |       |
| **Net Income**                             |       | $                    | 7,411,113  |                 | $          | 9,228,081 |   |
|                                       |       |                 |       |                 |       |
| **Weighted Average Units Outstanding**     |       | 10,941               |       | 10,941               |       |
|                                       |       |                 |       |                 |       |
| **Net Income Per Unit**                    |       | $                    | 677.37     |                 | $          | 843.44 |   |
|                                       |       |                 |       |                 |       |
| **Distributions per unit**                 |       | $                    | 379.88     |                 | $          | 51.29 |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

5

----

 

**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

Condensed Consolidated Statements of CashFlows

 
| ** **                                                        | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                                        | ** ** | **March 31**         | ** ** | **March 31**         | ** ** |
| ** **                                                        | ** ** | **2005**             | ** ** | **2004**             | ** ** |
| ** **                                                        | ** ** | **(Unaudited)**      | ** ** | **(Unaudited)**      | ** ** |
| **Cash Flows from Operating Activities**                          | ** ** | ** **           | ** ** | ** **           | ** ** |
| Net income                                                        |       | $                    | 7,411,113  |                 | $          | 9,228,081 |   |
| Adjustments to reconcile net income to net cash  from operations: |       |                 |       |                 |       |
| Depreciation and amortization                                     |       | 1,815,618            |       | 1,734,352            |       |
| Provision for losses on trade accounts  receivable                |       |                 |       | 20,000               |       |
| Minority interest in subsidiary’s income                     |       | 4,957,679            |       | 6,596,137            |       |
| Gain on hedging activity                                          |       | —               |       | 312,777              |       |
| Change in assets and liabilities:                                 |       |                 |       |                 |       |
| Receivables                                                       |       | 1,089,860            |       | (6,218               | )          |
| Restricted cash                                                   |       | 2,084,507            |       | 12,902               |       |
| Inventory                                                         |       | 539,138              |       | (329,750             | )          |
| Derivative instruments                                            |       | (785,648             | )          | (5,980,865           | )          |
| Prepaid expenses                                                  |       | 31,571               |       | (133,685             | )          |
| Accounts payable                                                  |       | (557,282             | )          | 598,940              |       |
| Accrued liabilities                                               |       | 437,222              |       | (300,119             | )          |
| Net cash provided by operating activities                         |       | 17,023,778           |       | 11,752,552           |       |
|                                                              |       |                 |       |                 |       |
| **Cash Flows from Investing Activities**                          |       |                 |       |                 |       |
| Capital expenditures                                              |       | (1,620,854           | )          | (481,010             | )          |
| Net cash used in investing activities                             |       | (1,620,854           | )          | (481,010             | )          |
|                                                              |       |                 |       |                 |       |
| **Cash Flows from Financing Activities**                          |       |                 |       |                 |       |
| Proceeds (payments) from short-term debt                          |       | 1,089,180            |       | (762,662             | )          |
| Payments of long-term debt                                        |       | (6,259,456           | )          | (8,092,756           | )          |
| Distribution to minority interest                                 |       | (1,593,844           | )          | (435,276             | )          |
| Distribution to members                                           |       | (2,406,156           | )          | (561,164             | )          |
| Net cash used in financing activities                             |       | (9,170,276           | )          | (9,851,858           | )          |
|                                                              |       |                 |       |                 |       |
| **Net increase in cash**                                          |       | 6,232,648            |       | 1,419,684            |       |
|                                                              |       |                 |       |                 |       |
| **Cash****–**Beginning of Period                             |       | 3,907,380            |       | 536,483              |       |
|                                                              |       |                 |       |                 |       |
| **Cash****–**End of Period                                   |       | $                    | 10,140,028 |                 | $          | 1,956,167 |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

6

----

 
| ** **                                                                 | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|----------------------------------------------------------------------------|------------|----------------------|------------|----------------------|------------|
| ** **                                                                 | ** ** | **March 31**         | ** ** | **March 31**         | ** ** |
| ** **                                                                 | ** ** | **2005**             | ** ** | **2004**             | ** ** |
| ** **                                                                 | ** ** | **(Unaudited)**      | ** ** | **(Unaudited)**      | ** ** |
| **Supplemental Cash Flow Information**                                     | ** ** | ** **           | ** ** | ** **           | ** ** |
| Cash paid during the year for:                                             | ** ** | ** **           | ** ** | ** **           | ** ** |
| Interest                                                                   |       | $                    | 554,938    |                 | $          | 898,085 |   |
|                                                                       |       |                 |       |                 |       |
| **Supplemental Disclosure of Noncash  Investing and Financing Activities** |       |                 |       |                 |       |
| Reduction in property and equipment due to  debt forgiveness               |       |                 |       | $                    | 90,000     |   |
| Distributions payable                                                      |       | $                    | 2,945,493  |                 |       |   |

 

Notes to Condensed Consolidated FinancialStatements are an integral part of this Statement.

 

7

----

 

**LITTLE SIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

March 31, 2005

 

**1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

Theaccompanying condensed quarterly consolidated financial statements representLittle Sioux Corn Processors, LLC and Subsidiary.  See Note 1 to theconsolidated financial statements included in the Form 10-KSB for the fiscalyear ended September 30, 2004.  That note discusses theconsolidation.  As used in this report in Form 10-Q, the “Company”represents Little Sioux Corn Processors, LLC (LLC) and its subsidiary LSCP,LLLP (LSCP).

 

Thecondensed consolidated quarterly financial statements are unaudited. These statements include all adjustments (consisting of normal recurringaccruals) that we considered necessary to present a fair statement of theresults of operations, financial position, and cash flows.  The resultsreported in these condensed, consolidated financial statements should not beregarded as necessarily indicative of results that may be expected for theentire year.

 

*Nature of Business*

 

TheCompany operates a 40 million gallon ethanol plant, located near Marcus,Iowa.  The plant commenced operations in April 2003.  TheCompany sells its production of ethanol, distillers grains and solubles, andmodified wet distillers grains with solubles in the Continental United States.

 

*Commodity Credit Corporation Bioenergy Program*

 

The Company is enrolled in the Commodity Credit Corporation BioenergyProgram (CCC), a department of the United States Department ofAgriculture.  This program enables theCompany to receive payments based on increases in production of ethanol overthe previous year of up to $7,500,000 per year. New production is eligible and is considered increased production.  Payments under the program are subject to prorata reduction if aggregate payments to all producers in any fiscal year exceedthe maximum annual funding of the program. For the three months and six months ended March 31, 2005, the Companyrecorded $28,617 and $45,917, respectively, as other income from the CCC.  For the three months and six months endedMarch 31, 2004, the Company had recorded $4,262,613 and $6,880,239,respectively, as other income from the CCC. At March 31, 2005, $26,000remained in other receivables.

 

*Derivative Instruments*

 

AtMarch 31, 2005, the Company had recorded an asset for derivative instrumentsrelated to corn and natural gas options and futures positions of $526,026 forforecasted purchases during fiscal 2005 and 2006.  None of the positions open at March 31, 2005are designated as cash flow hedges.  The Company has recorded a gain of$130,854 in cost of goods sold related to its derivative instruments for thethree months ended March 31, 2005, and a loss of $1,227,994 in cost of goodssold for the six months ended March 31, 2005. The Company had recorded a gain of $5,128,799 and $4,811,670,respectively, in cost of goods sold related to its derivative instruments forthe three months and six months ended March 31, 2004.

 

AtMarch 31, 2005, the Company had an interest rate cap as described in Note 4with a fair value of $78,043 recorded as an asset with derivativeinstruments.  The interest rate cap was not designated as a cash flowhedge.  The Company offset interest expense with the gain on the interestrate cap of $39,140 and $47,304, respectively, for the three months and sixmonths ending March 31, 2005.  TheCompany charged 

 

8

----

 

interestexpense with the loss on the interest rate cap of $54,073 and $49,721,respectively, for the three months and six months ending March 31, 2004.

 

**2.  INVENTORY**

 

Inventoriesconsist of the following:

 
| ** **      | ** ** | **March 31, 2005** | ** ** | **September 30, 2004 *** | ** ** |
|-----------------|------------|--------------------|------------|--------------------------|------------|
|            |       |               |       |                     |       |
| Raw materials   |       | $                  | 859,961    |                     | $          | 1,279,912 |   |
| Work in process |       | 322,562            |       | 346,749                  |       |
| Finished goods  |       | 362,943            |       | 457,943                  |       |
|            |       |               |       |                     |       |
| Totals          |       | $                  | 1,545,466  |                     | $          | 2,084,604 |   |

 

----

*Derived from audited consolidated financial statements.

 

**3.  REVOLVING PROMISSORY NOTE**

 

Under the terms of the financing agreement with the lendinginstitution, the Company has a revolving promissory note of up to $3,500,000maturing in July 2005; interest is due monthly at the one month LondonInterbank Offered Rate (LIBOR) plus 280 basis points which totaled 5.49% atMarch 31, 2005.  The Company pays acommitment fee of .125% on the unused portion of the revolving promissorynote.  The outstanding balance at March31, 2005 was $1,128,009.  The revolvingpromissory note as well as the term notes described in Note 4 are subject toprotective covenants under a common financing agreement requiring the Companyto maintain various financial ratios, including debt service coverage andminimum net worth and working capital requirements, secured by all businessassets, and require additional loan payments based on excess cash flow.

 

9

----

 

**4.  LONG–TERM DEBT**

 

Long-termdebt consists of the following at March 31, 2005:

 
| ** **                                                                                                                                                                                                          | ** ** | **March 31 2005** | ** **     | **September 30 2004*** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|----------------|------------------------|------------|
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Term note #2 payable to lending  institution, see terms below.                                                                                                                                                      | ** ** | **$**             | **13,420,525** |                   | $          | 14,099,113 |   |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Term note #3 payable to lending  institution, see terms below.                                                                                                                                                      | ** ** | **2,246,275**     |           | 3,177,819              |       |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Term note #4 payable to lending  institution, see terms below.                                                                                                                                                      |       |              |           | 4,564,175              |       |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Note payable to Iowa Energy Center, due in  monthly payments of $3,472 without interest, maturing on January 29,  2009, secured by real estate, subordinated to term notes.                                    | ** ** | **159,722**       |           | 180,555                |       |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Note payable to bank due in monthly  payments of $5,921 including interest at 6% maturing on January 29, 2009, secured  by real estate, subordinated to term notes.                                                 | ** ** | **169,991**       |           | 189,406                |       |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Note payable to Iowa Department of Economic  Development, due in sixty monthly installments beginning August 1, 2004 of  $1,167 without interest, payable in full on July 1, 2009, secured by all  equipment.       | ** ** | **199,500**       |           | 206,500                |       |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Capital lease obligations, due in monthly  installments initially totaling $6,768 commencing April 1, 2003 including  implicit interest between 7.4% and 17.4% through March 1, 2008, secured by  leased equipment. | ** ** | **227,196**       |           | 265,097                |       |
|                                                                                                                                                                                                                | ** ** | ** **        |           |                   |       |
| Totals                                                                                                                                                                                                              | ** ** | **$**             | **16,423,209** |                   | $          | 22,682,665 |   |
|                                                                                                                                                                                                                |       |              |           |                   |       |
| Less amounts due within one year                                                                                                                                                                                    | ** ** | **3,348,685**     |           | 3,109,676              |       |
|                                                                                                                                                                                                                | ** ** | ** **        |           |                   |       |
| Totals                                                                                                                                                                                                              | ** ** | **$**             | **13,074,524** |                   | $          | 19,572,989 |   |

 

----

*Derived from audited consolidated financial statements.

 

10

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TheCompany obtained debt financing from a lending institution in the form of arevolving promissory note and term notes, referred to by the lendinginstitution as term notes #2, #3, and #4.  Term note #2 has fixedprincipal payments due quarterly with interest at the three month LIBOR plus280 basis points, which totaled 5.71% at March 31, 2005, payable in full onJune 1, 2008.  As part of the financing agreement, the Companyaccepted a fixed rate option on term note #2 by entering into an interest rateswap which effectively fixes the interest rate on this term note at 5.79% untilthis term note is repaid on June 1, 2008.

 

Termnote #3 bears interest at the three month LIBOR plus 280 basis points which totaled5.71% at March 31, 2005.  Term note #4 bears interest at the one monthLIBOR plus 280 basis points which totaled 5.49% at March 31, 2005.  Termnotes #3 and #4 are payable in full on June 1, 2008.  The Company isrequired to make quarterly payments of $506,588 applied first to accruedinterest on term note #4.  The remaining amount is applied to accruedinterest on the term note #3 and then to principal until this note is repaid infull or until maturity.  After term note #3 is repaid, payments are appliedfirst to accrued interest and then to principal on the term note #4 until paidin full or until maturity.  Term note #4 had no outstanding balance as ofMarch 31, 2005.  Term note #4 allowssubsequent borrowings up to the original $5,000,000 to the extent of principalpayments made until maturity and requires a commitment fee of .375% on any usedportion.

 

Aspart of the financing agreement, the premium above the LIBOR on the term notesand revolving promissory note has been reduced based on a financial ratio fromthe original 380 basis points.  The financing agreement requires an annualservicing fee of $50,000 for five years.  As described in Note 1, theCompany entered into an interest rate cap agreement to reduce the risk ofincreases in interest rates.  The interest rate cap agreement is based ona notional amount of $10,000,000 and caps increases in interest rates at 6.8%on this amount until June 1, 2006.

 

Inaddition to the terms notes, the subordinated notes payable to the bank requireadditional cash flow anticipated to be received from the CCC to be split prorata between the subordinated debtors as additional payments on the notes.

 

AtMarch 31, 2005 and September 30, 2004, LSCP was in violation of the debtservice covenant.  The lender has waivedcompliance with this violation at March 31, 2005 and September 30, 2004 and forthe following year as it relates to this violation at March 31, 2005 andSeptember 30, 2004.

 

Theestimated maturities of long-term debt at March 31, 2005 are as follows:

 
| 2006                 |   | $         | 3,348,685  |   |
|----------------------|--------|-----------|------------|--------|
| 2007                 |   | 3,854,247 |       |
| 2008                 |   | 3,719,570 |       |
| 2009                 |   | 5,357,209 |       |
| 2010                 |   | 143,498   |       |
| Total long-term debt |   | $         | 16,423,209 |   |

 

11

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**5. MEMBERS’ EQUITY**

 

On January 18, 2005 the Board of Directors declared a distribution of$4,000,000 from LSCP, LLLP to the partners, which was paid in February2005.  Little Sioux Corn Processors LLCreceived $2,406,156 of this distribution that was paid to its members inFebruary 2005.  On March 15, 2005, theBoard of Directors, declared a distribution of $3,000,000 from LSCP, LLLP tothe partners.  The cash distribution was made in April 2005.  LittleSioux Corn Processors LLC received $1,804,617 of this distribution.  Afterpaying expenses of approximately $54,500, Little Sioux Corn Processors LLCdistributed approximately $1,750,000 to its members in April 2005.

 

**6.  RELATED PARTY TRANSACTIONS**

 

Forthe three months and six months ending March 31, 2005, revenues from the saleof ethanol to Archer Daniels Midland (ADM) were approximately $20,477,000 and$40,069,000, respectively.  For the threemonths and six months ending March 31, 2004, revenues from the sale of ethanolto ADM were approximately $17,035,000 and $33,365,000, respectively.  ADM markets all of the ethanol sold by LSCPand receives a marketing fee.  TheCompany incurred marketing expenses of approximately $125,000 and $244,000,respectively, to ADM for the three months and six months ended March 31, 2005.  The Company incurred marketing expenses ofapproximately $120,000 and $243,000, respectively, to ADM for the three monthsand six months ended March 31, 2004.  AtMarch 31, 2005 and 2004, amounts due from ADM approximated 91% and 72%,respectively, of trade accounts receivable.

 

Inthe three months and six months ended March 31, 2005, LSCP purchasedapproximately $806,300 and $2,087,000, respectively, in corn from members ofthe LLC.  In the three months and sixmonths ended March 31, 2004, LSCP purchased approximately $1,216,000 and$1,769,000, respectively, in corn from members of the LLC.

 

**7.  COMMITMENTS AND CONTINGENCIES**

 

Natural Gas and Corn Contracts

 

AtMarch 31, 2005, the Company has forward contracts to purchase approximately630,000 million British thermo units (MMBTU) of natural gas during the April2005 through October 2005 time period at $5.03.

 

AtMarch 31, 2005, the Company has forward contracts to purchase approximately3,623,000 bushels of corn at prices ranging from $1.83 to $2.65 per bushelthrough March 2006.

 

Construction in Progress

 

TheCompany estimates its costs to complete the construction of assets not yetplaced in service to be approximately $3,940,000 as of March 31, 2005.

 

**8. SUBSEQUENT EVENTS**

 

InApril 2005, the Company established a deferred compensation plan for certainemployees providing supplemental benefits. Costs of the plan are recognized during the employee’s service periodfor the Company so that the benefits are accrued when payments begin.

 

12

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**Item 2.  Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.**

 

**Forward-Looking Statements**

 

This report contains forward-looking statements thatinvolve future events, our future performance and our expected futureoperations and actions.  In some cases you can identify forward-lookingstatements by the use of words such as “may,” “will,” “should,” “anticipate,” “believe,”“expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,”“continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerousassumptions, risks and uncertainties, including, but not limited to thoselisted below and those business risks and factors described elsewhere in thisreport and our other Securities and Exchange Commission filings.

 
| **•** | Changes  in the availability and price of corn;                                                                                                               |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** |                                                                                                                                                          |
| **•** | Changes  in the environmental regulations that apply to our plant operations;                                                                                 |
| ** ** |                                                                                                                                                          |
| **•** | Increased  competition in the ethanol and oil industries;                                                                                                     |
| ** ** |                                                                                                                                                          |
| **•** | Changes  in interest rates or the availability of credit;                                                                                                     |
|       |                                                                                                                                                          |
| **•** | Changes  in our business strategy, capital improvements or development plans;                                                                                 |
|       |                                                                                                                                                          |
| **•** | Changes  in plant production capacity or technical difficulties in operating the plant;                                                                       |
|       |                                                                                                                                                          |
| **•** | Changes  in general economic conditions or the occurrence of certain events causing an  economic impact in the agriculture, oil or automobile industries; and |
|       |                                                                                                                                                          |
| **•** | Changes  in the availability and price of natural gas and the market for distillers  grains.                                                                  |
|       |                                                                                                                                                          |
| **•** | Changes  in federal and/or state laws (including the elimination of any federal and/or  state ethanol tax incentives).                                        |

 

Our actual results or actions could and likely willdiffer materially from those anticipated in the forward-looking statements formany reasons, including the reasons described in this report.  We are notunder any duty to update the forward-looking statements contained in thisreport.  We cannot guarantee future results, levels of activity,performance or achievements.  We caution you not to put undue reliance onany forward-looking statements, which speak only as of the date of thisreport.  You should read this report and the documents that we referencein this report and have filed as exhibits, completely and with the understandingthat our actual future results may be materially different from what wecurrently expect.  We qualify all of our forward-looking statements bythese cautionary statements.

 

**Overview**

 

As general partner of LSCP, LLLP, an Iowa limitedliability limited partnership (the “Partnership”), we manage the business andday-to-day operations of the Partnership’s 40 million gallon per year ethanolplant in northwest Iowa.  We currently own a 60.15% ownership interest inLSCP, LLLP.  Little Sioux Corn Processors, L.L.C. (the “LLC”) and itssubsidiary, LSCP, LLLP, are collectively referred to in this report as the “Company,”“we,” or “us.”

 

13

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Since April 2003, we have been engaged in theproduction of ethanol and distillers grains at our ethanol plant near Marcus,Iowa.  From the date of the commencement of plant operations, the plant’sproduction capacity has consistently exceeded the 40 million gallon per yearproduction guarantee provided by the general contractor.  Our revenues arederived from the sale and distribution of our ethanol and distillers grainsthroughout the continental United States.

 

 On August 17, 2004 the board of directorsdetermined that it was in the best interests of the Company to expand the plant’sethanol production capacity from 40 million gallons per year to 52 milliongallons per year.  We have begun construction of the expansion andanticipate completion by May 2005.

 

We are subject to industry-wide factors thatdirectly affect our revenues and profits.  These factors include, but arenot limited to, the available supply and cost of corn from which our ethanoland distillers grains are made; the cost of natural gas, which we use in theproduction of ethanol and distillers grains; dependence on one or a few majorcustomers who market and distribute our products; the intensely competitivenature of our industry; possible legislation at the federal, state, and/orlocal level; changes in federal ethanol tax incentives; and the cost of complyingwith the extensive environmental laws that regulate our industry.

 

**Results of Operations for the Three Months Ended March31, 2005 and 2004**

 

The following table shows the results of ouroperations and the percentage of revenues, cost of goods sold, operatingexpenses and other items to total revenues in our consolidated statements ofoperations for the three months ended March 31, 2005 and March 31, 2004:

 
| ** **                          | ** ** | **March 31, 2005** | ** ** | **March 31, 2004** | ** ** |
|-------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                          | ** ** | **Amount**         | ** ** | **%**              | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                            |       | $                  | 23,835,684 |               | 100.0      |   | $ | 20,203,296 |   | 100.0 |   |
| Cost of Goods Sold                  |       | 14,952,851         |       | 62.7               |       | 11,311,892 |   | 56.0 |   |
| Gross Profit                        |       | 8,882,833          |       | 37.3               |       | 8,891,404 |   | 44.0 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Operating Expenses                  |       | 1,412,791          |       | 5.9                |       | 1,504,058 |   | 7.4 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Operating Income (Loss)             |       | 7,470,042          |       | 31.3               |       | 7,387,346 |   | 36.6 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Other Income (Expense)              |       | (94,814            | )          | 0.4                |       | 3,907,749 |   | 19.3 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Net Income Before Minority Interest |       | 7,375,228          |       | 30.9               |       | 11,295,095 |   | 55.9 |   |
|                                     |            |                    |            |                    |            |  |  |  |  |  |  |

 

***Revenues***

 

The increase in revenues from the three months endedMarch 31, 2005 compared to the three months ended March 31, 2004 is dueprimarily to an increase in the price we received for our ethanol.  Theper gallon price we received for our ethanol sold in the three months endedMarch 31, 2005 increased approximately 15% over the prices we received in thethree months ended March 31, 2004.

 

While we anticipate continued strong demand forethanol, we are uncertain as to the sustainability of current ethanol pricesgiven the increasing ethanol supply as new plants begin production and existingplants continue to expand.  The totalproduction of ethanol is at an all time high. In 2004, 81 ethanol plants located in 20 states produced 3.41 billiongallons.  The recent downward price trendin ethanol may be a reflection of excess supply in the market.  A greater supply of ethanol on the marketfrom other plants could reduce the price we are able to charge for ourethanol.  This would have a negativeimpact on our revenues.

 

If legislation is passed requiring the use ofrenewable fuels, however, the demand for ethanol may increase.  On March 17, 2005, a bipartisan billcontaining a proposed Renewable Fuels Standard was introduced in the U.S.Senate by Senators Dick Lugar of Indiana and Tom Harkin of Iowa.  The Lugar/Harkin bill creates a RenewableFuels Standard that would require the use of 4 billion gallons of renewablefuels in 2006 increasing to 8 billion gallons by 2012.  The bill is a national flexible program thatdoes not require that any renewable fuels be used in any 

 

14

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particulararea or state, allowing refiners to use renewable fuel blends in those areaswhere it is most cost-effective.  Inaddition, the bill eliminates the reformulated gasoline (“RFG”) oxygenatestandard, enhances RFG air quality requirements and improves the credit andwaiver provisions of the RFS package.  There is no assurance or guaranteethat Congress will pass RFS legislation or that any RFS legislation approved byCongress will contain provisions sufficiently favorable to the ethanol industryto increase demand.

 

On March 15, 2005, the board of directors approved a$1,850,000 capital expenditure to install a corn oil segregation unit.  Corn oil is a co-product of the ethanolindustry and until recently has been sold as an energy component of ourdistillers grains.  Corn oil in its rawform can be used as livestock feed, as a fuel under certain operatingconditions, refined into bio-diesel fuel, or refined for humanconsumption.  We project this investmentwill increase our revenues by approximately $1,200,000 million annually, butthe actual impact on our revenues could vary. The equipment is not scheduled for installation until mid-summer2005. We intend to initially market the unrefined corn oil to the animalfeed and bio-diesel markets for a 6 month period after startup to assure thatquality specifications can be maintained. In the long term, corn oil could work its way into the human foodchain.  Specific details regarding marketpenetration into the human food chain are unknown at this time since corn oilextraction in a dry mill situation such as ours has not yet been proven.

 

***Cost of Goods Sold***

 

Our cost of goods sold as a percentage of revenueswere 62.7% and 56.0% for the three months ended March 31, 2005 and 2004,respectively.  The increase in our costof goods sold from period to period is primarily due to changes in the fairvalue of derivative instruments.  Ourcost of goods sold includes a gain of $130,854 in the second quarter of fiscal2005 related to our corn and natural gas derivative instruments, down from again of $5,128,799 in the second quarter of fiscal 2004.  We recognize the gains or losses that resultfrom the changes in the value of our derivative instruments in cost of goodssold as the changes occur.  As corn and natural gas prices fluctuate, thevalue of our derivative instruments are impacted, which affects our financialperformance.  We partially offset these losses with the cash price we paidfor corn.  We anticipate continued volatility in our cost of goods solddue to the timing of the changes in value of the derivative instrumentsrelative to the cost and use of the commodity being hedged.

 

The 2004 corn crop was the largest corn crop onrecord with national production at approximately 11.8 billion bushels and Iowaproduction at approximately 2.4 billion bushels. Corn supplies during the2004-2005 marketing year are expected to outpace demand by approximately 2.2billion bushels. As a result, we expect corn prices to remain at relatively lowlevels throughout the next quarter and into the 2005 spring planting season.However, as we near the spring corn planting season, we expect the grain marketto begin focusing on prospects for the 2005 corn crop. Variables such asrainfall, planting dates, and temperatures will likely cause market uncertaintyand create corn price volatility as the growing season begins.

 

Natural gas has recently been available only atprices exceeding historical averages.  These prices are increasing ourcosts of production.  We expect natural gas prices to remain high orincrease at least through the 2005 summer months.

 

***Operating Expenses***

 

Our operating expenses as a percentage of revenueswere 5.9% and 7.4% for the three months ended March 31, 2005 and 2004,respectively.  Our operating expenseshave remained fairly level from period to period.  Although we can give no assurances, the plantexpansion may increase our operating efficiency which would maintain or lowerour operating expenses as a percentage of our revenues.

 

***Operating Income***

 

Our income from operations for the three monthsended March 31, 2005 was similar to the income from operations reported for thethree months ended March 31, 2004.  Theincrease in sales revenue for the three months ended March 31, 2005 was offsetby the increase in Cost of Goods Sold for the same period.  We expect the expansion of our plant from itscurrent 40 million gallon annual production to 52 million gallon annualproduction to increase annual operating income by approximately $3,200,000 as aresult of increasing revenue and operating 

 

15

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efficiency.  There isno assurance that the expansion will reduce our operating costs or increase ouroperating income.  Our expansion projections are based upon our historicaloperating costs and historical revenues and there is no guarantee or assurancethat our past financial performance can accurately predict future resultsespecially in connection with expansion.  In addition, the expansion maycost more and may present additional challenges and risks that negativelyimpact our future financial performance.  There is no guarantee that theexpansion will be completed on its anticipated completion date.

 

***Other Income (Expense)***

 

Our other income (expense) as a percentage ofrevenues was (0.4%) and 19.3% for the three months ended March 31, 2005 and2004, respectively.  We have seen a largefluctuation in other income due in large part to a reduction in the payments fromthe USDA Commodity Credit Corporation Bioenergy Program.   These payments are based upon increases inethanol production relative to previous years. Accordingly, we received the bulk of the payments we are eligible toreceive in the first years of operation and future payments will be muchlower.  While we continue to receivepayments under the USDA’s Commodity Credit Corporation Bioenergy Program, we donot expect future program payments to have the same impact on cash flow as thehave in the past.  We also do not anticipate receiving unpaid amounts forpast pro rata reductions.

 

In the second quarter of fiscal 2005, accrued incomefrom the Bioenergy Program totaled $26,000.  This represents a 66%reduction from the maximum program payment for the second quarter.  Thisreduction resulted from us receiving close to all of the funds we are currentlyeligible for under the terms of the program. A portion of this reduction mayalso be attributed to an increase in the number of eligible participants in theprogram, which reduces our share of the payments.

 

Since we are increasing our production capacitythrough our plant expansion, we will be eligible to receive additionalBioenergy payments.  Due to the size of the expansion, any programpayments we receive in the future will be significantly less than our originalpayments.  The receipt of these additional program payments is subject tothe continued availability of program funds, which may be reduced based uponincreased participation in the program by new and expanding plants as well asdecreased federal funding.  The Bioenergyprogram is scheduled to expire at the end of the 2006 fiscal year.

 

**Results of Operations for the Six Months Ended March31, 2005 and 2004**

 

The following table shows the results of ouroperations and the percentage of revenues, cost of goods sold, operatingexpenses and other items to total revenues in our consolidated statements ofoperations for the six months ended March 31, 2005 and March 31, 2004:

 
| ** **                          | ** ** | **March 31, 2005** | ** ** | **March 31, 2004** | ** ** |
|-------------------------------------|------------|--------------------|------------|--------------------|------------|
| ** **                          | ** ** | **Amount**         | ** ** | **%**              | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                            |       | $                  | 46,811,419 |               | 100.0      |   | $ | 39,470,204 |   | 100.0 |   |
| Cost of Goods Sold                  |       | 31,253,083         |       | 66.8               |       | 26,714,380 |   | 67.7 |   |
| Gross Profit                        |       | 15,558,336         |       | 33.2               |       | 12,755,824 |   | 32.3 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Operating Expenses                  |       | 2,876,755          |       | 6.1                |       | 3,072,779 |   | 7.8 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Operating Income (Loss)             |       | 12,681,581         |       | 27.1               |       | 9,683,045 |   | 24.5 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Other Income (Expense)              |       | (312,789           | )          | 0.7                |       | 6,141,173 |   | 15.6 |   |
|                                |       |               |       |               |       |   |   |   |   |
| Net Income Before Minority Interest |       | 12,368,792         |       | 26.4               |       | 15,824,218 |   | 40.1 |   |
|                                     |            |                    |            |                    |            |  |  |  |  |  |  |

 

***Revenues***

 

The increase in revenues from the six months endedMarch 31, 2005 compared to the six months ended March 31, 2004 was againprimarily due to the increase in the sales price per gallon of our ethanol.

 

16

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***Cost of Goods Sold***

 

Our cost of goods sold as a percentage of revenueswere 66.8% and 67.7% for the six months ended March 31, 2005 and 2004,respectively.  Although our cost of goodssold increased from the six months ended March 2004 to the six months endedMarch 2005, our cost of goods sold as a percentage of our total revenuesdecreased slightly.  Our cost of goodssold fluctuate largely based on the market prices of corn and natural gas andour derivative instruments are intended to minimize such fluctuations.

 

***Operating Expenses***

 

Our operating expenses as a percentage of revenueswere 6.1% and 7.8% for the six months ended March 31, 2005 and 2004,respectively.  Our operating expenseshave remained fairly level from period to period.  We expect this trend to continue or possiblyimprove once the plant expansion is complete.

 

***Operating Income***

 

Our income from operations increased from period toperiod due primarily to the increase in our revenues.  As discussed, we expect the expansion topositively affect this upward trend, however, we can give no assurance that theexpansion will result in an increase in our operating income.

 

***Other Income (Expense)***

 

Our other income (expense) as a percentage ofrevenues were 0.7% and 15.6% for the six months ended March 31, 2005 and 2004,respectively.  As previously stated,these fluctuations are due to a reduction in the payments coming from the USDACommodity Credit Corporation Bioenergy Program.

 

**Changes in Financial Condition for the Six Months EndedMarch 31, 2005**

 

Consolidated assets totaled $62,725,081 at March 31,2005 compared to $59,828,204 at September 30, 2004.  Current assetstotaled $15,038,567 at March 31, 2005 up from $11,946,926 at September 30,2004.  The change resulted from increased cash, which was $10,140,028 atMarch 31, 2005 compared to $3,907,380 at September 30, 2004.  We wereaccumulating cash in anticipation of a distribution of earnings to the partnersand our members and in anticipation of an increase in expenditures resultingfrom the plant expansion.

 

Consolidated current liabilities totaled $8,938,489at March 31, 2005 up from $4,966,488 at September 30, 2004.  The increaseresulted mainly from a declared earnings distribution to owners of $2,945,493which was unpaid as of March 31, 2005, and an increase in our revolving line ofcredit which totaled $1,128,009 as of March 31, 2005 compared to $38,829 onSeptember 30, 2004.  We used the fundsderived from the line of credit for normal operating expenses.

 

Long-term debt, net of current maturities, totaled$13,074,524 at December 31, 2004 down from $19,572,989 at September 30,2004.  This reduction resulted from a payment on our revolving Term Note#4 and our regularly scheduled loan payments on December 1, 2004 and March 1,2005.

 

**Liquidity and Capital Resources**

 

Cash provided by operating activities was$17,023,778 from the first six months of fiscal 2005 up from $11,752,552 forthe first six months of fiscal 2004.  This increase resulted in continuedprofitable operations due to a favorable spread between the price of corn andthe price of ethanol.  Our capital needsare being adequately met through cash from our operating activities and ourcurrent credit facilities.  Other thanthe capital needed to fund our expansion, we do not foresee a need to accessany additional capital.

 

We used cash provided by operating activities forcapital expenditures relating to plant expansion which totaled $1,620,854 forthe first six months of fiscal 2005 compared to $481,010 for the first sixmonths of fiscal 2004.  This increase reflects expenditures for the plantexpansion.  We used cash to pay down our debt by 

 

17

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$6,259,456 in the first sixmonths of fiscal 2005 compared to $8,092,756 in the first six months of fiscal2004.  Additionally, the total amount ofcash we distributed to partners and members totaled $4,000,000 in the first sixmonths of fiscal 2005 compared to $996,440 in the first six months of fiscal2004.

 

We are in the process of expanding our plant toincrease our ethanol production to 52 million gallon per year.   We entered into an agreement with ICM, Incin which we have agreed to pay $4,600,000 to ICM, Inc. for the design andconstruction of the expansion.  We alsoentered into a Sixth Amendment to Construction Loan Agreement with FirstNational Bank of Omaha in which they agreed to loan us up to $5,400,000 tofinance the construction of the expansion.  During the constructionperiod, we have agreed to pay First National Bank of Omaha interest only on aquarterly basis on the outstanding principal amount at a rate equal to the onemonth LIBOR rate plus 330 basis points.  Upon completion of theconstruction, the outstanding balance of this new expansion loan will be addedto the principal balance of our Term Note #3 with First National Bank of Omaharelating to the original construction of our ethanol plant.  The maturitydate of Term Note #3 is currently June 1, 2008.

 

We have paid approximately $1,620,854 in connectionwith the expansion and anticipate construction to be complete by May 2005.  In addition to our capital expenditures forthe plant construction, we also expect to purchase a corn oil segregation unitat an installed cost of $1,850,000. Therefore, we anticipate that capital expenditures for the remainder offiscal 2005 will be approximately $5,600,000, including the costs to completethe plant expansion and purchase the corn oil segregation unit.

 

### ***Short-TermDebt Sources***

### ** **

We have a revolving promissory note of up to$3,500,000 with First National Bank of Omaha through July 2005.  Theinterest payable on the revolving promissory note is due monthly at the onemonth LIBOR plus 2.80%, which totaled 5.49% at March 31, 2005.  Therevolving promissory note is our operating line of credit.  We pay acommitment fee of 0.125% on the unused portion of the line.  Theoutstanding balance as of March 31, 2005, was $1,128,009.  The maximumavailable credit under this note is based on receivable and inventory balances. Our current receivable and inventory balances are not sufficient to allow us touse the maximum amount of the operating line of credit.  As of March 31,2005, the maximum amount available from the operating line of credit wasapproximately $1,672,000.  As the balances in these accounts fluctuate,the amount of available credit on this note may be reduced or increased subjectto the maximum of $3,500,000.  The operating line of credit is subject toprotective covenants requiring us to maintain various financial ratios. The operating line of credit is secured by all business assets.

 

#### ***Long-Term Debt Sources***

#### ** **

We have long-term debt financing consisting of threeterm notes held by First National Bank of Omaha and referred to as Term Notes#2, #3 and #4.  At March 31, 2005, the principal balance on Term Note #2is $13,420,526.  Term Note #2 is payable in quarterly installments. Interest on Term Note #2 is at the three month LIBOR plus 2.80%, which totaled5.71% as of March 31, 2005.  Term Note #2 is payable in full on June 1,2008.  In order to achieve a fixed interest rate on Term Note #2, weentered into an interest rate swap which helps protect our exposure toincreases in interest rates and the swap effectively fixes the interest rate onTerm Note #2 at 5.79% until June 1, 2008.

 

At March 31, 2005, the principal balance on TermNote #3 is $2,246,275.  Term Note #3 is payable in quarterlyinstallments.  Interest on Term Note #3 is at the three month LIBOR plus2.80%, which totaled 5.71% as of March 31, 2005.  Term Note #3 is payablein full on June 1, 2008.  In order to protect our interest rateexposure on Term Note #3, we entered into an interest rate cap agreement basedon a principal amount of $10,000,000.  The financing agreement caps ourinterest rate at 6.80% for Term Note #3 until June 1, 2006.  As part of the financing agreement, we haveagreed to an annual servicing fee of $50,000 for five years.

 

At March 31, 2005, there was no principal balance onTerm Note #4.  Term Note #4 is payable in quarterly installments. Interest on Term Note #4 is at the one month LIBOR plus 2.80%.  Term Note#4 is payable in full on June 1, 2008.  Term Note #4 allowsborrowings up to the original principal of $5,000,000 to the extent ofprincipal payments made until maturity and requires a commitment fee of 0.375%on any unused portion.  At March 31, 2005, the aggregate indebtednessrepresented by Term Notes #2, #3 and #4 was $15,666,801.

 

18

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We have capital lease obligations in the amount of$227,197, due in monthly installments initially totaling $6,850, and includingimplicit interest between 3.7% and 6.6% through March 1, 2008.  Thecapital lease obligations are secured by leased equipment.

 

We have a note in the amount of $159,721 payable tothe Iowa Energy Center due in monthly installments of $3,472 without interest,maturing on January 29, 2009.  The note is secured by real estate andsubordinated to the Term Notes.  We have a note with Farmers State Bank ofMarcus, Iowa in the amount of $169,991 payable in monthly payments of $5,921,including interest at 6%, maturing on January 29, 2009.  The note issecured by real estate and subordinated to the Term Notes.  We have anote totaling $199,500 payable to the Iowa Department of Economic Developmentdue in  monthly installments $1,667 without interest.  The notematures on July 1, 2009.  The note is secured by all equipment.

 

The notes payable to First National Bank at Omaharequire additional loan payments based on excess cash flow generated bypayments received from the USDA’s Commodity Credit Corporation, as discussedbelow.  This additional loan payment has a maximum annual payment of$3,000,000.

 

*Covenants*

 

The revolving promissory note and Term Notes #2, #3and #4 are subject to numerous protective covenants requiring us to maintainvarious financial ratios.  Our failure to comply with the protective loancovenants or maintain the required financial ratios may cause acceleration ofthe outstanding principal balances on the revolving promissory note and termsnotes and/or the imposition of fees, charges or penalties.  As ofMarch 31, 2005, we were not in compliance with the debt service covenantresulting from additional payments.  First National Bank of Omaha has waivedthis violation through March 31, 2006.  For Term Notes #3 and #4, thepremium above the LIBOR may be reduced based upon our achievement andmaintenance of certain financial ratios.

 

**Off-Balance Sheet Arrangements.**

 

We currently have no off-balance sheet arrangements.

 

**Item 3.  Quantitative and Qualitative Disclosures AboutMarket Risk.**

 

**Interest Rate Risk**

 

We are exposed to market risk from changes ininterest rates. Exposure to interest rate risk results from holding a revolvingpromissory note and three term notes.  The specifics of each note arediscussed in greater detail in Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.  We entered into interestrate swap and interest rate cap agreements for the purpose of reducing our exposureto possible future changes in interest rates.  While our exposure is nowgreatly reduced, it is not eliminated.  A hypothetical 1% increase ininterest rates applied to exposed liabilities as of March 31, 2005 would resultin additional interest expense of approximately $20,000 for the remainder offiscal 2005.

 

**Commodity Price Risk**

 

We are also exposed to market risk from changes incommodity prices.  Exposure to commodity price risk results from ourdependence on corn and natural gas in the ethanol production process.  Weseek to minimize the risks from fluctuations in the prices of corn and naturalgas 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 againstour future purchases, they are not designated as such for hedge accountingpurposes, which would match the gain or loss on our hedge positions to thespecific commodity purchase being hedged.  We are marking to market ourhedge positions, which means as the current market price of our hedge positionschanges, the gains and losses are immediately recognized in our cost of goodssold.  For example, it is likely and we would generally expect that a 10%increase in the cash price of corn would produce an increase in the fair valueof our derivative instruments equal to approximately $52,600 based on ourpositions at 

 

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March 31, 2005.  Whereasa 10% decrease in the cash price of corn would produce a corresponding decreasein the fair value of our derivative instruments equal to approximately $52,600based on our positions at March 31, 2005.

 

The immediate recognition of hedging gains and lossescan cause net income to be volatile from quarter to quarter due to the timingof the change in value of the derivative instruments relative to the cost anduse of the commodity being hedged.  As of March 31, 2005, the fair valueof our derivative instruments for corn and natural gas is an asset in theamount of $526,026.  There are several variables that could affect theextent to which our derivative instruments are impacted by price fluctuationsin the cost of corn or natural gas.  However, it is likely that commoditycash prices will have the greatest impact on the derivatives instruments withdelivery dates nearest the current cash price.

 

To manage our corn price risk, our hedging strategyis designed to establish a price ceiling and floor for our cornpurchases.  We have taken a net long position on our exchange tradedfutures and options contracts, which allows us to offset increases or decreasesin the market price of corn.  The upper limit of loss on our futurescontracts is the difference between the contract price and the cash marketprice of corn at the time of the execution of the contract. The upper limit ofloss on our exchange traded and over-the-counter option contracts is limited tothe amount of the premium we paid for the option.

 

We estimate that our expected corn usage isapproximately 17 million bushels per year for the production of 48 milliongallons of ethanol.  As of March 31, 2005, we have cash, futures, andoption contract price protection in place for 100% of our expected corn usagethrough September 2005.   We have approximately 74% of ourexpected corn usage for fiscal year ended September 30, 2006 using CBOT futuresand options and Over the Counter option contracts.  As we move forward, additional protection maybe necessary.  As corn prices move in reaction to market trends andinformation, our income statement will be affected depending on the impact suchmarket movements have on the value of our derivative instruments.  As wemove forward into spring, additional price protection may be required tosolidify our margins into fiscal year 2006.  Depending on marketmovements, crop prospects and weather, these price protection positions maycause immediate adverse effects but are expected to produce long-term positivegrowth for us.

 

To manage our natural gas price risk, we enteredinto a natural gas purchase agreement with our supplier to supply us withnatural gas, fixing the price at which we purchase natural gas.  We have purchased approximately 90% of oursummer and fall 2005 natural gas requirements.  We may also purchasenatural gas requirements for the 2006 and 2007 calendar years as we attempt tofurther reduce our susceptibility to price increases.

 

At the time we purchased price protection fornatural gas, the market was experiencing a great deal of priceuncertainty.  Due to this uncertainty, we purchased amounts of natural gasto fulfill most of the plant’s needs and implemented derivative instruments toallow us to benefit in the event natural gas prices declined.  Energysector prices have increased and natural gas, as a portion of the total energymarket, has responded with higher prices to be cost competitive with itsalternatives.  The timing of the contracts is contingent upon marketvolatility and our ability to purchase natural gas to protect processingmargins.  In the future, we may not be able to secure natural gas forprices less than current market price and we may not recover high costs ofproduction resulting from high natural gas prices, which may raise our costs ofproduction.

 

**Item 4.  Controls and Procedures.**

 

Our President/Chief Executive Officer, Stephen Roe,along with our Chief Financial Officer, Gary Grotjohn, have reviewed andevaluated the effectiveness of our disclosure controls and procedures as ofMarch 31, 2005.  Based upon this review and evaluation, these officersbelieve that our disclosure controls and procedures are effective in ensuringthat the material information related to us is recorded, processed, summarized,and reported within the time periods required by the forms and rules of theSecurities and Exchange Commission.

 

Ourmanagement, consisting of our President/Chief Executive Officer and ChiefFinancial Officer have also reviewed and evaluated any changes in our internalcontrol over financial reporting that occurred as of March 31, 2005 and therehas been no change that has materially affected or is reasonably likely tomaterially affect our internal control over financial reporting.

 

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**PARTII.     OTHER INFORMATION**

 

**Item 1. Legal Proceedings.**

 

None.

 

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

 

None.

 

**Item 3. Defaults Upon Senior Securities.**

 

None.

 

**Item 4. Submission of Matters to a Vote of Security Holders.**

 

(a)                                  We held our 2005 annual members meeting onThursday, March 24, 2005.  The meetingwas reconvened and finally adjourned on Friday, March 25, 2005.

 

(b)                                 At the annual members meeting, the memberselected Daryl Haack, Dale Arends and Ron Wetherell to our board of directors inan uncontested election to serve until the 2008 annual members meeting anduntil their successors are duly elected and qualified.  The other directors whose terms of officecontinued after the meeting are Vince Davis, Darrell Downs, Doug Lansink,Verdell Johnson, Timothy Ohlson, and Myron Pingel.

 

(c)                                In addition to electing directors, themembers voted on the following three proposals:

 

(1)                                  To approve an amendment to the our operatingagreement to allow a majority of the membership units present at an annual orspecial meeting of the members to take action on certain matters;

 

(2)                                  To approve an amendment to our operatingagreement to recognize a transfer of units as taking place on the first day ofthe month following the transfer for purposes of allocating profit or loss ordistributions to the units; and

 

(3)                                  To approve an amendment to our operatingagreement to provide for the election of Class A Directors through the use ofstraight (plurality) voting whereby the nominee receiving the greatest numberof votes relative to the votes cast for their competitors shall be elected as aClass A Director.

 

Themembers elected all directors nominees in an uncontested election and approvedall proposed amendments to the Company’s operating, by the following votes,respectively. There were no broker nonvotes on any of the matters voted on atthe annual members meeting.

 

**Proposals 1 – 3:  Amendments to the Company’s OperatingAgreement****:**

 
| ** **   | ** ** | **For** | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|--------------|------------|---------|------------|-------------|------------|-------------|------------|
| Proposal  #1 |       | 5,560   |       | 264         |       | 38          |       |
| Proposal  #2 |       | 5,802   |       | 20          |       | 40          |       |
| Proposal  #3 |       | 5,635   |       | 178         |       | 49          |       |

 

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**Proposal 4—Election of Directors****:**

 
| ** **     | ** ** | **For** | ** ** | **Withheld** | ** ** | **Abstain** | ** ** |
|----------------|------------|---------|------------|--------------|------------|-------------|------------|
| Daryl  Haack   |       | 5,545   |       | 197          |       | 120         |       |
| Dale  Arends   |       | 5,652   |       | 190          |       | 20          |       |
| Ron  Wetherell |       | 5,662   |       | 190          |       | 10          |       |

 

**Item 5.**  **OtherInformation.**

 

None.

 

**Item6.  Exhibits.**

 

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

 

31.1                           Certificate pursuant to 17CFR 240.13a-14(a).

 

31.2                           Certificate pursuant to 17CFR 240.13a-14(a).

 

32.1                           Certificate pursuant to 18U.S.C. § 1350.

 

32.2                           Certificate pursuant to 18U.S.C. § 1350.

 

 

**SIGNATURES**

 

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|   |          |   |   | LITTLE  SIOUX CORN PROCESSORS, L.L.C.  |
|--------|---------------|--------|--------|----------------------------------------|
|   |          |   |   |                                   |
|   |          |   |   |                                   |
| Date:  | May  13, 2005 |   |   | /s/  Stephen Roe                       |   |
|   |          |   |   | Stephen  Roe                           |
|   |          |   |   | President  and Chief Executive Officer |
|   |          |   |   |                                   |
|   |          |   |   |                                   |
| Date:  | May  13, 2005 |   |   | /s/  Gary Grotjohn                     |   |
|   |          |   |   | Gary  Grotjohn                         |
|   |          |   |   | Chief  Financial Officer               |

 

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