**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

**FORM 10-Q**
| x                                                                                                                                                                                                                           | ** ** | **Quarterly  report under Section 13 or 15(d) of the Securities Exchange Act of 1934.** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                        |
| **For the  fiscal quarter ended March 31, 2007**                                                                                                                                                                            |
|                                                                                                                                                                                                                        |
| **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 CORNPROCESSORS, L.L.C.**(Exact name of registrant as specified in its charter)

| **Iowa**                                                         |   | **42-1510421**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |
|                                                             |   |                                  |
| **4808 F  Avenue, Marcus, Iowa 51035**                           |
| (Address of  principal executive offices)                        |
|                                                             |   |                                  |
| **(712)  376-2800**                                              |
| (Issuer’s  telephone number)                                |

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 bycheck mark whether the registrant is a large accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer o |   | Accelerated Filer o |   | Non-Accelerated Filer x |
|--------------------------------|--------|--------------------------|--------|------------------------------|

 

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

 

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

As of May 15, 2007, there were 164,115 unitsoutstanding.

 

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**INDEX**
|                                                                 | ** **                                                                                              | **Page No.** |
|-----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|--------------|
|                                                            |                                                                                                    |         |
| **PART I.     FINANCIAL  INFORMATION** |                                                                                                    | 3            |
| ** **                                                      |                                                                                                    |         |
| ** **                                                      | **ITEM 1. FINANCIAL STATEMENTS.**                                                                       |         | 3 |
| ** **                                                      | **ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS** |         | 15 |
| ** **                                                      | **ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT  MARKET RISK**                                 |         | 24 |
| ** **                                                      | **ITEM 4.  CONTROLS AND PROCEDURES.**                                                              |         | 26 |
| ** **                                                      | ** **                                                                                              | ** **   |   |
| **PART  II.     OTHER INFORMATION**    |                                                                                                    | 26           |
| ** **                                                      |                                                                                                    |         |
| ** **                                                      | **ITEM  1. LEGAL PROCEEDINGS.**                                                                         |         | 26 |
| ** **                                                      | **ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND  USE OF PROCEEDS.**                               |         | 26 |
| ** **                                                      | **ITEM 3. DEFAULTS UPON SENIOR SECURITIES.**                                                            |         | 26 |
| ** **                                                      | **ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS.**                                       |         | 26 |
| ** **                                                      | **ITEM  5. OTHER INFORMATION.**                                                                         |         | 27 |
| ** **                                                      | **ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.**                                                           |         | 27 |
| ** **                                                      |                                                                                                    |         |
| **SIGNATURES**                                                  |                                                                                                    | 28           |

 

2

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**PARTI.     FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS.**

**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

Condensed Consolidated Balance Sheet
| ** **                                            | ** ** | **March 31** | ** **  | **September 30** | ** ** |
|-------------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                            | ** ** | **2007**          | ** **  | **2006**              | ** ** |
| ** **                                            | ** ** | **(Unaudited)**   | ** **  | **(Audited)**         | ** ** |
| **ASSETS**                                            | ** ** | ** **        | ** **  | ** **            | ** ** |
| **Current Assets**                                    | ** ** | ** **        | ** **  | ** **            | ** ** |
| Cash and  equivalents                                 |       | $                 | 13,792,884  |                  | $          | 10,133,691 |   |
| Restricted cash                                       |       | 1,826,393         |        | —                |       |
| Short-term  investments                               |       | —            |        | 18,726,834            |       |
| Accounts  receivable                                  |       | 4,265,998         |        | 2,655,454             |       |
| Inventory                                             |       | 3,974,595         |        | 2,200,290             |       |
| Derivative  instruments                               |       | 6,050,312         |        | 4,356,698             |       |
| Prepaid expenses                                      |       | 1,699,059         |        | 1,301,319             |       |
| Total current  assets                                 |       | 31,609,241        |        | 39,374,286            |       |
|                                                  |       |              |        |                  |       |
| **Property and Equipment**                            | ** ** | ** **        | ** **  | ** **            | ** ** |
| Land and  improvements                                |       | 2,826,839         |        | 2,826,839             |       |
| Plant buildings  and equipment                        |       | 58,027,604        |        | 57,971,654            |       |
| Office buildings  and equipment                       |       | 301,716           |        | 213,928               |       |
|                                                  |       | 61,156,159        |        | 61,012,421            |       |
| Less accumulated  depreciation                        |       | 16,156,405        |        | 13,649,392            |       |
|                                                  |       | 44,999,754        |        | 47,363,029            |       |
| Construction in  progress                             |       | 30,327,862        |        | 4,384,830             |       |
| Net property and  equipment                           |       | 75,327,616        |        | 51,747,859            |       |
|                                                  |       |              |        |                  |       |
| **Other Assets**                                      | ** ** | ** **        | ** **  | ** **            | ** ** |
| Long-term  investments                                |       | 103,742           |        | 103,742               |       |
| Land option and  other                                |       | 50,000            |        | 189,616               |       |
| Deferred  offering costs                              |       | 116,909           |        | —                |       |
| Construction  commitment cost                         |       | 500,000           |        | —                |       |
| Deferred loan  costs, net of accumulated amortization |       | 98,567            |        | 141,112               |       |
| Total other  assets                                   |       | 869,218           |        | 434,470               |       |
| ** **                                            | ** ** | ** **        | ** **  | ** **            | ** ** |
| **Total  Assets**                                     |       | $                 | 107,806,075 |                  | $          | 91,556,615 |   |

 

See Notes toCondensed Consolidated Financial Statements

3

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

CondensedConsolidated Balance Sheet
| ** **                                                     | ** ** | **March 31** | ** **  | **September 30** | ** ** |
|----------------------------------------------------------------|------------|-------------------|-------------|-----------------------|------------|
| ** **                                                     | ** ** | **2007**          | ** **  | **2006**              | ** ** |
| ** **                                                     | ** ** | **(Unaudited)**   | ** **  | **(Audited)**         | ** ** |
| **LIABILITIES AND MEMBERS’ EQUITY**                       | ** ** | ** **        | ** **  | ** **            | ** ** |
| **Current  Liabilities**                                       | ** ** | ** **        | ** **  | ** **            | ** ** |
| Current maturities of long-term liabilities                    |       | $                 | 3,455,398   |                  | $          | 3,394,196 |   |
| Accounts payable                                               |       | 2,844,593         |        | 2,053,554             |       |
| Accrued expenses                                               |       | 670,365           |        | 575,646               |       |
| Total current liabilities                                      |       | 6,970,356         |        | 6,023,396             |       |
|                                                           |       |              |        |                  |       |
| **Long-Term  Liabilities,****net of current  maturities**      |       | 11,807,531        |        | 13,504,582            |       |
|                                                           |       |              |        |                  |       |
| **Minority  Interest**                                         |       | 35,633,416        |        | 28,864,721            |       |
|                                                           |       |              |        |                  |       |
| **Members’  Equity, 10,941 units issued and outstanding** |       | 53,394,772        |        | 43,163,916            |       |
|                                                           |       |              |        |                  |       |
| **Total Liabilities and Members’ Equity**                 |       | $                 | 107,806,075 |                  | $          | 91,556,615 |   |

 

See Notes toCondensed Consolidated Financial Statements

4

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

CondensedConsolidated Statements of Operations
| ** **                                                  | ** ** | **Three Months Ended** | ** ** | **Three Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|----------------------------------|------------|
| ** **                                                  | ** ** | **March 31**                | ** ** | **March 31**                | ** ** |
| ** **                                                  | ** ** | **2007**                         | ** ** | **2006**                         | ** ** |
| ** **                                                  | ** ** | **(Unaudited)**                  | ** ** | **(Unaudited)**                  | ** ** |
|                                                        |       |                             |       |                             |       |
| **Revenues**                                                |       | $                                | 33,074,991 |                             | $          | 27,498,079 |   |
|                                                        |       |                             |       |                             |       |
| **Cost of  Goods Sold**                                     |       | 20,692,797                       |       | 19,935,906                       |       |
|                                                        |       |                             |       |                             |       |
| **Gross  Margin**                                           |       | 12,382,194                       |       | 7,562,173                        |       |
|                                                        |       |                             |       |                             |       |
| **Selling,  General, and Administrative Expenses**          |       | 1,746,902                        |       | 849,801                          |       |
| ** **                                                  | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| **Operating  Income**                                       |       | 10,635,292                       |       | 6,712,372                        |       |
|                                                        |       |                             |       |                             |       |
| **Other  Income (Expense)**                                 | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| Interest income                                             |       | 274,310                          |       | 246,916                          |       |
| Interest expense                                            |       | (4,999                           | )          | (328,971                         | )          |
| Other income                                                |       | (56,713                          | )          | 24,517                           |       |
| Total other income (expense)                                |       | 212,598                          |       | (57,538                          | )          |
|                                                        |       |                             |       |                             |       |
| **Net  Income Before Minority Interest**                    |       | 10,847,890                       |       | 6,654,834                        |       |
| ** **                                                  | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| **Minority  Interest in Sudsidiary Income**                 |       | 4,354,791                        |       | 2,659,079                        |       |
| ** **                                                  | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| **Net  Income**                                             |       | $                                | 6,493,099  |                             | $          | 3,995,755 |   |
| ** **                                                  | ** ** | ** **                       | ** ** | ** **                       | ** ** |
| **Net  Income Per Unit - Basic and Diluted**                |       | $                                | 593.46     |                             | $          | 365.21 |   |
|                                                        |       |                             |       |                             |       |
| **Distributions  Per Unit - Basic and Diluted**             |       | $                                | 800.00     |                             | $          | 842.34 |   |
|                                                        |       |                             |       |                             |       |
| **Weighted  Average Units Outstanding - Basic and Diluted** |       | 10,941                           |       | 10,941                           |       |

 

See Notes toCondensed Consolidated Financial Statements

5

----

 
| ** **                                                  | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **March 31**              | ** ** | **March 31**              | ** ** |
| ** **                                                  | ** ** | **2007**                       | ** ** | **2006**                       | ** ** |
| ** **                                                  | ** ** | **(Unaudited)**                | ** ** | **(Unaudited)**                | ** ** |
|                                                        |       |                           |       |                           |       |
| **Revenues**                                                |       | $                              | 66,680,040 |                           | $          | 50,640,010 |   |
|                                                        |       |                           |       |                           |       |
| **Cost of  Goods Sold**                                     |       | 32,736,488                     |       | 35,307,360                     |       |
|                                                        |       |                           |       |                           |       |
| **Gross  Margin**                                           |       | 33,943,552                     |       | 15,332,650                     |       |
|                                                        |       |                           |       |                           |       |
| **Selling,  General, and Administrative Expenses**          |       | 2,528,725                      |       | 1,524,565                      |       |
| ** **                                                  | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Operating  Income**                                       |       | 31,414,827                     |       | 13,808,085                     |       |
|                                                        |       |                           |       |                           |       |
| **Other  Income (Expense)**                                 | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Interest income                                             |       | 646,519                        |       | 391,698                        |       |
| Interest expense                                            |       | (317,368                       | )          | (629,858                       | )          |
| Other income                                                |       | (127,009                       | )          | 78,401                         |       |
| Total other income (expense)                                |       | 202,142                        |       | (159,759                       | )          |
|                                                        |       |                           |       |                           |       |
| **Net  Income Before Minority Interest**                    |       | 31,616,969                     |       | 13,648,326                     |       |
| ** **                                                  | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Minority  Interest in Sudsidiary Income**                 |       | 12,633,252                     |       | 5,446,091                      |       |
| ** **                                                  | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Net  Income**                                             |       | $                              | 18,983,717 |                           | $          | 8,202,235 |   |
| ** **                                                  | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Net  Income Per Unit - Basic and Diluted**                |       | $                              | 1,735.10   |                           | $          | 749.68 |   |
|                                                        |       |                           |       |                           |       |
| **Distributions  Per Unit - Basic and Diluted**             |       | $                              | 800.00     |                           | $          | 842.34 |   |
|                                                        |       |                           |       |                           |       |
| **Weighted  Average Units Outstanding - Basic and Diluted** |       | 10,941                         |       | 10,941                         |       |

 

See Notes toCondensed Consolidated Financial Statements

6

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

CondensedConsolidated Statements of Cash Flows
| ** **                                                                         | ** ** | **Six Months Ended** | ** ** | **Six Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------|------------|--------------------------------|------------|
| ** **                                                                         | ** ** | **March 31**              | ** ** | **March 31**              | ** ** |
| ** **                                                                         | ** ** | **2007**                       | ** ** | **2006**                       | ** ** |
| ** **                                                                         | ** ** | **(Unaudited)**                | ** ** | **(Unaudited)**                | ** ** |
| **Operating  Activities**                                                          | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Net income                                                                         |       | $                              | 18,983,717 |                           | $          | 8,202,235 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |                           |       |                           |       |
| Depreciation and amortization                                                      |       | 2,549,558                      |       | 2,402,996                      |       |
| Minority interest in subsidiary’s income                                      |       | 12,633,252                     |       | 5,446,091                      |       |
| Other                                                                              |       | 195,581                        |       |                           |       |
| Change in operating assets and liabilities:                                        |       |                           |       |                           |       |
| Restricted cash                                                                    |       | (1,826,393                     | )          | —                         |       |
| Accounts recievables                                                               |       | (1,610,544                     | )          | 502,456                        |       |
| Inventory                                                                          |       | (1,774,305                     | )          | (540,949                       | )          |
| Derivative instruments                                                             |       | (1,693,614                     | )          | (1,228,425                     | )          |
| Prepaid expenses                                                                   |       | (397,740                       | )          | (453,665                       | )          |
| Accounts payable                                                                   |       | (210,477                       | )          | 2,296,005                      |       |
| Accrued expenses                                                                   |       | 94,719                         |       | (4,668,260                     | )          |
| Net cash provided by operating activities                                          |       | 26,943,754                     |       | 11,958,484                     |       |
|                                                                               |       |                           |       |                           |       |
| **Investing  Activities**                                                          | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Proceeds from investments                                                          |       | 18,726,834                     |       | 3,986,111                      |       |
| Payments for investments                                                           |       | —                         |       | (52,172                        | )          |
| Capital expenditures                                                               |       | (25,085,254                    | )          | (1,177,949                     | )          |
| Payments for land options and other                                                |       | (55,965                        | )          | (15,316                        | )          |
| Construction commitment costs                                                      |       | (500,000                       | )          | —                         |       |
| Net cash provided by (used in) investing activities                                |       | (6,914,385                     | )          | 2,740,674                      |       |
| ** **                                                                         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Financing  Activities**                                                          | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Payments of long-term debt                                                         |       | (1,635,849                     | )          | (1,609,260                     | )          |
| Deferred offering costs                                                            |       | (116,909                       | )          | —                         |       |
| Distribution to minority interest                                                  |       | (5,864,557                     | )          | (6,120,759                     | )          |
| Distribution to members                                                            |       | (8,752,861                     | )          | (9,216,069                     | )          |
| Net cash used in financing activities                                              |       | (16,370,176                    | )          | (16,946,088                    | )          |
| ** **                                                                         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Net  increase (decrease) in cash and equivalents**                               |       | 3,659,193                      |       | (2,246,930                     | )          |
| ** **                                                                         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Cash  and Equivalents–**Beginning of Period                                 |       | 10,133,691                     |       | 14,135,954                     |       |
| ** **                                                                         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Cash  and Equivalents –**End of Period                                      |       | $                              | 13,792,884 |                           | $          | 11,889,024 |   |
|                                                                               | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| **Supplemental  Cash Flow Information**                                            | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Interest expense paid                                                              |       | $                              | 323,939    |                           | $          | 596,965 |   |
| Interest capitalized                                                               |       | 272,535                        |       | —                         |       |
| Total interest paid                                                                |       | $                              | 596,474    |                           | $          | 596,965 |   |
|                                                                               |       |                           |       |                           |       |
| **Supplemental  Disclosure of Noncash Investing and Financing Activities**         | ** ** | ** **                     | ** ** | ** **                     | ** ** |
| Capital  expenditures in accounts payable                                          |       | $                              | 1,001,516  |                           | $          | 849,933 |   |

 

See Notes toCondensed Consolidated Financial Statements

7

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**LITTLE SIOUX CORN PROCESSORS, LLCAND SUBSIDIARY**

Notes to CondensedConsolidated Financial Statements (Unaudited)

March 31, 2007

**Note 1:  Nature ofOperations**

The Company represents Little Sioux Corn Processors,LLC (LLC) and its subsidiary LSCP, LLLP (LLLP). The Company operates a 52 million gallon ethanol plant, located nearMarcus, Iowa.  The plant commenced operations inApril 2003.   The Company iscurrently in the process of expanding the plant from a 52 millions of gallonsper year (MMGY) plant to 92 MMGY plant. The Company sells its production of ethanol, distiller’s grains andsolubles, and modified wet distillers grains with solubles in the ContinentalUnited States.

**Note 2:  Summary of Significant Accounting Policies**

**Basis of Presentation**

These condensed consolidated financial statements andrelated notes should be read in conjunction with the consolidated financialstatements and notes included in the Company’s audited consolidated financialstatements for the year ended September 30, 2006, contained in the Company’sannual report of Form 10-K for 2006.

The condensed consolidated interim financialstatements are unaudited.  These statements include all adjustments(consisting of normal recurring accruals) that we considered necessary to presenta fair statement of the results of operations, financial position, and cashflows.  The results reported in these condensed consolidated financialstatements should not be regarded as necessarily indicative of results that maybe expected for the entire year.

**Principles of Consolidation**

The condensed consolidated financial statementsinclude the accounts of the LLC, its 60.15% owned subsidiary, LLLP and itswholly owned subsidiaries Akron Riverview Corn Processors, LLC and Twin RiversManagement Co., LLC.  All significantinter-company transactions and balances have been eliminated in consolidation.

**Use of Estimates**

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

**Revenue Recognition**

The Company sells ethanol and related productspursuant to marketing agreements. Revenues are recognized when the customer has taken title and hasassumed the risks and rewards of ownership, prices are fixed or determinableand collectibility is reasonably assured. The Company’s products are shipped FOB shipping point.

In accordance with the Company’s agreements for themarketing and sale of ethanol and related products, marketing fees andcommissions due to the marketers are deducted from the gross sales price at thetime payment is remitted to the Company. Because the Company is the primary obligor in the sales arrangement withthe customer, these sales and marketing fees and commissions are recorded grossin the accompanying statements of operations.

The Company records incentives received from federaland state programs related to the production of ethanol, as other income, whenthe Company has sold the ethanol and completed all the requirements of theapplicable incentive program.

In March 2007, the ethanol marketing agreement withADM was extended for four more years.

8

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TheCompany accounts for derivatives in accordance with Statement of FinancialAccounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments andHedging Activities”. SFAS No. 133 requires the recognition of derivatives inthe balance sheet and the measurement of these instruments at fair value.

In order for a derivative to qualify as a hedge,specific criteria must be met and appropriate documentation maintained. Gainsand losses from derivatives that are do not qualify as hedges, or areundesignated, must be recognized immediately in earnings. If the derivativedoes qualify as a hedge, depending on the nature of the hedge, changes in thefair value of the derivative will be either offset against the change in fairvalue of the hedged assets, liabilities, or firm commitments through earningsor recognized in other comprehensive income until the hedged item is recognizedin earnings.  Changes in the fair valueof undesignated derivatives are recorded in revenue or cost of goods sold basedon the commodity being hedged.

Additionally, SFAS No. 133 requires a company toevaluate its contracts to determine whether the contracts are derivatives.Certain contracts that literally meet the definition of a derivative may beexempted as “normal purchases or normal sales”. Normal purchases and normalsales are contracts that provide for the purchase or sale of something otherthan a financial instrument or derivative instrument that will be delivered inquantities expected to be used or sold over a reasonable period in the normalcourse of business. Contracts that meet the requirements of normal are documentedas normal and exempted from the accounting and reporting requirements of SFASNo. 133, and therefore, are not marked to market in our financialstatements.

Cash flows associated with derivative instruments arepresented in the same category on the Statements of Cash Flow as the item beinghedged

In order to reduce the risk caused by marketfluctuations, we hedge our anticipated corn and natural gas purchases andethanol sales by entering into options, futures contracts, and swap agreements.These contracts are used with the intention to fix the purchase price of ouranticipated requirements of corn and natural gas in production activities andthe sales price of ethanol. The fair value of these contracts is based onquoted prices in active exchange-traded or over-the-counter markets. The fairvalue of the derivatives is continually subject to change due to changingmarket conditions. We do not formally designate these instruments as hedgesand, therefore, record in earnings adjustments caused from marking theseinstruments to market on a monthly basis.

**DeferredOffering Costs**

The Company defers thecosts incurred to raise equity financing until that financing occurs.  Atsuch time that the issuance of new equity occurs, these costs will be nettedagainst the proceeds received; or if the financing does not occur, they will beexpensed.  The deferred offering costsrelate to Akron Riverview Corn Processors, LLC, currently a wholly ownedsubsidiary of the LLLP, and is currently a development stage company that plansto raise equity for the construction of a 100 MMGY ethanol plant near Akron,Iowa as described in Notes 10 and 11.

**Reclassifications**

The presentation of certain items in the condensed consolidatedbalance sheet, statements of operations and cash flows has been changed toconform to the classifications used at March 31, 2007.  These reclassifications had no effect onmembers’ equity, net income, or cash flows previously reported.

**Recent Accounting Pronouncements**

In September 2006, theFASB issued Statement of Financial Accounting Standards No. 157 (“SFAS 157”), *Fair Value Measurements*. SFAS 157 defines fair value,establishes a framework for measuring fair value, and expands disclosures aboutfair value measurements. The statement is effective for financial statementsissued for fiscal years beginning after November 15, 2007. The Company iscurrently evaluating the effect that the adoption of SFAS 157 will have, ifany, on its consolidated results of operations, financial position and relateddisclosures, but does not expect it to have a material impact on the financialstatements.

In February 2007, theFASB issued Statement of Financial Accounting Standards No. 159, (“SFAS 159”), *The Fair Value Option for Financial Assets and Financial Liabilities*”which included an amendment of FASB Statement 115. This statement providescompanies with an option to report selected financial assets and liabilities atfair value. This statement is effective for fiscal years beginning afterNovember 15, 2007 with early adoption permitted. The Company is in the processof evaluating the effect, if any, that the adoption of SFAS No. 159 will haveon its consolidated results of operations and financial position.

**Note 3:  Inventory**

Inventory is comprised of the following at:
|                 | ** ** | **March 31, 2007** | ** ** | **September 30, 2006*** | ** ** |
|-----------------|------------|------------------------------|------------|-----------------------------------|------------|
| Raw materials   |       | $                            | 1,490,162  |                              | $          | 1,001,783 |   |
| Supplies        |       | 667,280                      |       | 533,895                           |       |
| Work in process |       | 1,422,951                    |       | 364,036                           |       |
| Finished goods  |       | 395,202                      |       | 300,576                           |       |
| Totals          |       | $                            | 3,975,595  |                              | $          | 2,200,290 |   |

 

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* Derivedfrom audited consolidated financial statements.

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**Note 4: Derivative Instruments**

At March 31, 2007 and September 30, 2006, the Companyhad recorded an asset for derivative instruments related to corn, natural gas,and gasoline options and futures positions of approximately $7,877,000 and$4,357,000, respectively.  None of the positionsopen at March 31, 2007 and September 30, 2006 were designated as cash flow orfair value hedges.  The Company recorded a gain of approximately$3,935,000 in cost of goods sold related to its derivative instruments for thethree months ended March 31, 2007, and a gain of $15,027,000 in cost of goodssold for six months ended March 31, 2007. The Company recorded a gain of approximately $473,000 in cost of goodssold related to its derivative instruments for the three months ended March 31,2006, and a gain of approximately $1,119,000 in cost of goods sold for sixmonths ended March 31, 2006.  The Companyoffset revenues with a loss of approximately of $980,000 related to itsderivative instruments for the three months ended March 31, 2007, and offsetrevenues with a loss of $1,279,000 for the six months ended March 31,2007.  There were no corresponding gainsand losses related to revenue for the three months or six months ended March31, 2006.

Duringfiscal 2006, the Company had an interest rate cap, which expired on June 1,2006.  The interest rate cap was notdesignated as a cash flow or fair value hedge. The Company offset interest expense with a loss of approximately $25,000and $35,000, on the interest rate cap, for the three months and six monthsending March 31, 2006, respectively.

**Note 5:  Construction in Progress**

The Company continues to make payments for theexpansion to a 92 million gallon plant. The Company anticipates the expansion will cost approximately$73,000,000. The Company capitalized interest of approximately $273,000 in thesix months ended March 31, 2007.

**Note 6:  RevolvingPromissory Note**

Under the terms of thefinancing agreement with the lending institution, the Company has a revolvingpromissory note for up to $5,000,000, subject to borrowing base limitationsbased on the amended and restated debt agreement in April 2007. The revolvingpromissory note incurs interest monthly at the one month LIBOR plus 280 basispoints and is payable in full in March 2008. The Company pays a commitment fee of .125% on the unused portion of therevolving promissory note.  There were nobalances outstanding on the revolving promissory note at March 31, 2007.  The revolving promissory note as well as theterm notes described in Note 7 are subject to protective covenants under acommon financing agreement requiring the Company to maintain various financialratios, including debt service coverage and minimum net worth and workingcapital requirements and secured by all business assets.

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**Note 7: Long-Term Liabilities**

Long-termdebt consists of the following:
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **March 31,  2007** | ** ** | **September 30,  2006*** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | ** **               | ** ** | ** **                    | ** ** |
| Term note 2 has fixed  principal payments due quarterly with interest at the three month LIBOR plus  280 basis points, which totaled 8.17% at March 31, 2007, payable in full on  June 1, 2008.  As part of the financing agreement, the Company  accepted a fixed rate option on term note 2 by entering into an interest rate  swap which effectively fixes the interest rate on this term note at 5.79%  until this term note is repaid on June 1, 2008. The Company did not  designate the interest rate swap as a fair value or cash flow hedge. The  value of the interest rate swap is not significant. | ** ** | $                        | 10,572,234 |                          | $          | 11,308,363 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |            |                          |            |                               |            |  |  |

 

 

 
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|-----------|--------|
| Term note 3 bears  interest at the three month LIBOR plus 280 basis points, which totaled 8.17%  at March 31, 2007.  Term note 3 is payable in full on June 1,  2008.  The Company is required to make quarterly payments of $506,588  applied to accrued interest on term note 3 and then to principal until this  note is paid in full or until maturity. |       | 4,278,227 |       | 5,090,129 |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Term note 4 bears  interest at the one month LIBOR plus 280 basis points.  Term note 4 is  payable in full on June 1, 2008. Term note 4 allows subsequent  borrowings up to the original $5,000,000 to the extent of principal payments  made until maturity and requires a commitment fee of .25% on any used  portion.                                         |       | —    |       | —    |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| 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.                                                                                                                                                                                           |       | 76,389    |       | 97,222    |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Note payable to Farmers  State 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.                                                                                                                                                                                         |       | 86,252    |       | 108,136   |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Note payable to Iowa  Department of Economic Development, due in 60 monthly installments beginning  August 1, 2004 of $1,167 without interest, payable in full on July 1, 2009,  secured by all equipment.                                                                                                                                                                 |       | 171,500   |       | 178,500   |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Capital lease  obligation, due in monthly installments initially totaling $6,658 commencing  April 1, 2003 including implicit interest at 3.67% through March 1, 2008,  secured by leased equipment.                                                                                                                                                                       |       | 78,327    |       | 116,428   |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Totals                                                                                                                                                                                                                                                                                                                                                                     | ** ** | $         | 15,262,929 |      | $      | 16,898,778 |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Less amounts due within  one year                                                                                                                                                                                                                                                                                                                                          |       | 3,455,398 |       | 3,394,196 |   |
|                                                                                                                                                                                                                                                                                                                                                                       |       |      |       |      |   |
| Totals                                                                                                                                                                                                                                                                                                                                                                     | ** ** | $         | 11,807,531 |      | $      | 13,504,582 |   |

 

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*Derived from audited consolidated financial statements.

As part of the financing agreement, the premium abovethe LIBOR on the term notes and revolving promissory note has been reducedbased on a financial ratio from the original 380 basis points.  Thefinancing agreement requires an annual servicing fee of $50,000.

Theestimated maturities of long-term liabilities at March 31, 2007 are as follows:
| 2007                         |   | $          | 3,455,398  |   |
|------------------------------|--------|------------|------------|--------|
| 2008                         |   | 11,664,031 |       |
| 2009                         |   | 143,500    |       |
| Total long-term  liabilities |   | $          | 15,262,929 |   |

 

**Note 8:  Members’Equity**

On January 16, 2007, theBoard of Directors declared a distribution of $14,718,019 from LLLP to thepartners, which was paid in February 2007. The LLC received approximately $8,854,000 of this distribution.  In February 2007, the LLC paid $800.00 perunit to the LLC unit holders.  In April2007, the Company declared a unit distribution of 14 units per unit held bymembers.  After the unit distribution,there will be 164,115 units outstanding. Unit amounts in this statement havenot reflected the unit split.

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**Note 9:  Related Party Transactions**

The Company has balances and transactions in thenormal course of business with various related parties.  Significant related party transactionsaffecting financial statements as of and for the periods ended as follows:
|                     | ** ** | **March 31,  2007** | ** ** | **September 30,  2006*** | ** ** |
|---------------------|------------|--------------------------|------------|-------------------------------|------------|
| **Balance  Sheet**  | ** ** | ** **               | ** ** | ** **                    | ** ** |
| Accounts receivable |       | $                        | 3,644,000  |                          | $          | 2,236,000 |   |
| Accounts payable    |       | 90,000                   |       | 137,000                       |       |
|                     |            |                          |            |                               |            |  |  |

 
|                           | ** ** | **Three Months Ended  March 31, 2007** | ** ** | **Six Months Ended  March 31, 2007** | ** ** |
|---------------------------|------------|------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| **Statements  of Income** | ** ** | ** **                                                 | ** ** | ** **                                               | ** ** |
| Revenues                  |       | $                                                          | 29,914,000 |                                                     | $          | 60,121,000 |   |
| Expenses                  |       | 3,568,000                                                  |       | 7,471,000                                                |       |
|                           |            |                                                            |            |                                                          |            |  |  |

 
|                           | ** ** | **Three Months Ended  March 31, 2006** | ** ** | **Six Months Ended  March 31, 2006** | ** ** |
|---------------------------|------------|------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| **Statements  of Income** | ** ** | ** **                                                 | ** ** | ** **                                               | ** ** |
| Revenues                  |       | $                                                          | 24,050,000 |                                                     | $          | 44,357,000 |   |
| Expenses                  |       | 2,443,000                                                  |       | 6,542,000                                                |       |
|                           |            |                                                            |            |                                                          |            |  |  |

 

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*Derived from auditedconsolidated financial statements

The Company incurred approximately $23,100,000 relatedto the construction commitment cost and  construction in progress performed by arelated party during the six months ended March 31, 2007.

**Note 10: Akron Riverview Corn Processors,LLC**

**Project Information**

Akron Riverview Corn Processors, LLC (ARCP) was formedas an Iowa Limited Liability Company, November 27, 2006, for the purpose ofdeveloping a project to build a 100 million gallon dry mill corn-processingethanol plant expected to be located in Plymouth County, Iowa near Akron.  ARCP is a development stage company with noprior operating history.  ARCP does notexpect to generate any revenue until the plant operations begin.

**Project Funding**

On February 27, 2007, ARCP entered into a subscriptionagreement with LLLP, in which ARCP accepted a subscription agreement for$19,999,900 in exchange for 15,000 Class A units at $666.66 per unit and 12,500Class A units at $800 per unit, totaling 27,500 Class A units.   ARCPhas two classes of membership units, Class A and B, with each unit representinga pro rata ownership interest in the ARCP’s capital, profits and losses, anddistributions.  Class B unit holders will not be able to elect boardmembers of the ARCP unless the Class B unit holder holds at least 15,000 units.The ARCP’s Board is currently identical to the Boards of LSCP, LLLP and LittleSioux Corn Processors, LLC.

ARCP is in the process of filing a Form SB-2Registration Statement with the Securities and Exchange Commission (SEC). The offering will be for a minimum of 70,000 Class B units and up to100,000 Class B units for sale at $1,000 per unit.  Offering proceeds willbe held in escrow until the earliest of the receipt of $70,000,000 or more incash proceeds, one year from the effective date of the registration statement,or termination of the offering.  ARCP anticipates funding the developmentof the ethanol plant by raising total equity of at least approximately

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$90,000,000 and securing financing for up to approximately$112,500,000, less any grants received.  The amount of debt financingneeded depends on the amount of equity raised in the offering.

**Builder Commitment Fee**

The total cost of the project, including theconstruction of the ethanol plant and start-up expenses, is expected toapproximate $202,500,000.  ARCP signed a letter of intent in March 2007with a general contractor, a related party, to design and build the ethanolplant at a total contract price of approximately $129,505,000.  Thecontract price is subject to changes based on corresponding changes to theConstruction Cost Index (CCI), published by Engineering News-Record magazine,from January 2007 (7879.58).  The Company budgeted a reserve for potentialincreases in the CCI of approximately $7,800,000.  The contract price isalso subject to a 0.50% surcharge for each calendar month that has passedbetween January 2007 and the month in which a valid Notice to Proceed isgiven.  The total increase due to changes caused by the CCI and the 0.50%surcharge is limited to 6%.  The letter of intent terminates on November5, 2007, unless a valid Notice to Proceed has been accepted by theDesign-Builder.  The termination date may be extended upon mutual writtenagreement.  A non-refundable commitment fee of $500,000 has been paid withthe signing of the letter of intent which will be credited towards the contractprice should the Company choose to execute the design build agreement. The general contractor is an investor in LSCP, LLLP.

ARCP entered into a Phase I and Phase II engineeringservices agreement with an affiliate of the general contractor.  Inexchange for the performance of certain engineering and design services, ARCPhas agreed to pay $185,000, which will be credited against the totaldesign-build cost.  ARCP will also be required to pay certain reimbursableexpenses per the agreement.

**Land Options**

LSCP obtained two land options on the intended site ofthe ethanol plant in Plymouth County, Iowa to purchase approximately 300 acresof land.  The land options were contributed to ARCP as part of thesubscription agreement and valued at the cost of the options fees paid, whichwas $50,000.  The land options give the Company the right to purchase theland for approximately $4,500,000 until June 19, 2007 with the option feesbeing applied to the final purchase price.  If the options are notexercised, the land option agreements become null and void and the owner of theland retains the option fees.  The options must be exercisedtogether.  In addition, the Company paid rent for the two sites for the2007 crop year of approximately $56,000, which was expensed.

**Note 11:**  **Commitments,and Contingencies**

**Contractual Obligations**

The following table provides information regarding theconsolidated contractual obligations of the Company as of March 31, 2007:
|                                | ** ** | **Total** | ** ** | **Less than One Year** | ** ** | **One to Three Years** | ** ** |
|--------------------------------|------------|-----------|------------|---------------------------------------|------------|---------------------------------------|------------|
| Long-Term Debt  Obligations    |       | $         | 16,225,044 |                                  | $          | 4,245,391                             |       | $ | 11,979,653 |   |
| Operating Lease  Obligations   |       | $         | 316,220    |                                  | $          | 187,371                               |       | $ | 128,849 |   |
| Purchase  Obligations          |       | $         | 71,098,830 |                                  | $          | 69,463,561                            |       | $ | 1,635,269 |   |
| Total Contractual  Obligations |       | $         | 87,640,094 |                                  | $          | 73,896,323                            |       | $ | 13,743,771 |   |

 

Long-Term Debt Obligations include estimated interest.

**Akron Riverview Corn Processors, LLC**

The LLLP currently has a subscription agreements withAkron Riverview Corn Processors, LLC for approximately $20,000,000 andreceives, in exchange, 27,500 Class A shares.  See Note 10 for additional information.

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**Note 12: Subsequent Events**

On April 5, 2007, the LLLP amended and restated theloan agreement between the LLLP and First National Bank of Omaha, N.A. Theagreement provided for a construction loan for up to $73,000,000 for thepartial funding of the 40 MMGY expansion to the Marcus, Iowa, ethanolplant.  The construction loan requiresinterest at the one month LIBOR plus 310 loan points.  Upon completion of construction, theconstruction loan converts into term notes for up to $82,278,227 with interestat the three month LIBOR plus 260 to 300 basis points.  These term notes will be payable in full fiveyears from completion of the construction. The amended and restated loan agreement requires excess cash flow paymentsof up to $5,000,000 to be paid at the end of each year.

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

We prepared the followingdiscussion and analysis to help you better understand our financial condition,changes in our financial condition, and results of operations for the three-monthperiod ended March 31, 2007, compared to the same period of the priorfiscal year.  This discussion should beread in conjunction with the consolidated financial statements and notes andthe Management’s Discussion and Analysis section for the fiscal year endedSeptember 30, 2006, included in the Company’s Annual Report on Form 10-K.

**Disclosure Regarding Forward-Looking Statements**

Thisreport contains historical information, as well as forward-lookingstatements.  These forward-lookingstatements include any statements that involve known and unknown risks andrelate to future events and our expectations regarding future performance orconditions.  Words such as “may,” “will,”“should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “future,” “intend,”“could,” “hope,” “predict,” “target,” “potential,” or “continue” or thenegative of these terms or other similar expressions are intended to identifyforward-looking statements, but are not the exclusive means of identifying suchstatements.  These forward-lookingstatements, and others we make from time to time, are subject to a number ofrisks and uncertainties. Many factors could cause actual results to differmaterially from those projected in forward-looking statements. While it is impossibleto identify all such factors, factors that could cause actual results to differmaterially from those estimated by us include, but are not limited to:

·                  Projectedgrowth, overcapacity or increased competition in the ethanol market in which weoperate;

·                  Fluctuations inthe price and market for ethanol and distillers grains;

·                  Changes in plantproduction capacity, variations in actual ethanol and distillers grainsproduction from expectations or technical difficulties in operating the plant;

·                  Availability andcosts of products and raw materials, particularly corn and natural gas;

·                  Changes in ourdevelopment plans for expanding, maintaining or contracting our presence in themarket in which we operate;

·                  Costs ofconstruction and equipment;

·                  Changes ininterest rates and the availability of credit to support capital improvements,development, expansion and operations;

·                  Changes in orelimination of governmental laws, tariffs, trade or other controls orenforcement practices;

·                  Fluctuations inUS oil consumption and petroleum prices;

·                  Anticipatedtrends in our financial condition and results of operations;

·                  The availabilityand adequacy of our cash flow to meet our requirements; and

·                  Competition from alternative fuelsand alternative fuel additives.

The cautionary statements referred to in this sectionalso should be considered in connection with any subsequent written or oralforward-looking statements that may be issued by us or persons acting on ourbehalf.  We do not undertake any duty toupdate forward-looking statements after the date they are made or to conformthem to actual results or to changes in circumstances or expectations.Furthermore, we cannot guarantee future results, events, levels of activity,performance, or achievements.  We cautionyou not to put undue reliance on any forward-looking statements, which speakonly as of the date of this report.  You should read this report and thedocuments that we reference in this report and have filed as exhibits,completely and with the understanding that our actual future results may bematerially different from what we currently expect.  We qualify all of ourforward-looking statements by these cautionary statements.

**Overview**

Little Sioux Corn Processors, L.L.C. (the “Company”)is an Iowa limited liability company that owns the sole general partnershipinterest of LSCP, LLLP, (the “Partnership”) an Iowa limited liability limitedpartnership.  As general partner, we manage the business and day-to-dayoperations of the Partnership’s 52 million gallon per year (MMGY) ethanol plantlocated near Marcus, Iowa in northwest Iowa (the “Plant”).  We currentlyown a 60.15% ownership interest in the Partnership.  The Partnership has wholly owned subsidiaries:Akron Riverview Corn Processors, LLC

15

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(“Akron”) and Twin Rivers Management Co., LLC.  Akron is an Iowa limited liability companythat is developing a 100 million gallon per year ethanol plant in PlymouthCounty, near Akron, Iowa.  The Company, its subsidiaries, and itsPartnership, are collectively referred to in this report as “LSCP,” “we,” or “us.”

Our revenues are derived from the sale anddistribution of our ethanol, distillers grains and corn oil throughout thecontinental United States.  Corn is supplied to us primarily from localagricultural producers and from purchases of corn on the open market. Afterprocessing the corn, ethanol is sold to Archer Daniels Midland Co. (“ADM”),which subsequently markets and sells the ethanol to gasoline blenders and refinerieslocated throughout the continental United States.  The term of our ADMAgreement was set to expire in April 2007, and on March 29, 2007 we enteredinto an Amended and Restated Ethanol Marketing Agreement with ADM in order tocontinue our relationship.  The initialterm of the agreement is four years, and unless the contract is terminated itwill renew automatically for successive additional terms of one year each.  The price that we receive from the sale ofethanol to ADM is based upon the price that ADM receives from the sale to itscustomers, minus a marketing fee.  Some of our distillers grains are solddirectly to local farmers, and the remainder is sold through CommoditySpecialist Company (“CSC”) which markets and sells the product to livestock feeders. For our distillers grains, we receive a percentage of the selling priceactually received by CSC in marketing the distillers grains to itscustomers.  We market and sell our corn oil to regional wholesalers. Presently, the end use of our corn oil is in the livestock industry.

We are subject to industry-wide factors that affectour operating income and cost of production.  Our operating results arelargely driven by the prices at which we sell ethanol, distillers grain and cornoil and the costs related to their production.  Historically, the price ofethanol tends to fluctuate in the same direction as the price of unleadedgasoline and other petroleum products.  Surplus ethanol supplies also tendto put downward price pressure on ethanol.  In addition, the price ofethanol is generally influenced by factors such as general economic conditions,the weather, and government policies and programs.  The price ofdistillers grains is generally influenced by supply and demand, the price ofsubstitute livestock feed, such as corn and soybean meal, and other animal feedproteins.  Surplus grain supplies also tend to put downward price pressureon distillers grains.  In addition, our revenues are also impacted by suchfactors as our dependence on one or a few major customers who market anddistribute our products; the intensely competitive nature of our industry;possible legislation at the federal, state, and/or local level; and changes infederal ethanol tax incentives.

Our two largest costs of production are corn andnatural gas.  The cost of corn is affected primarily by supply and demandfactors such as crop production, carryout, exports, government policies andprograms, risk management and weather, over much of which we have no control. Natural gas prices fluctuate with the energy complex in general.  Over thelast few years, natural gas prices have trended higher than average and itappears prices will continue to trend higher due to the high price ofalternative fuels such as fuel oil.  Our costs of production are affectedby the cost of complying with the extensive environmental laws that regulateour industry.

**Results of Operations for the Three Months Ended March 31,2007 and 2006**

The following table shows the results of our operationsand the percentage of revenues, cost of goods sold, operating expenses andother items to total revenues in our consolidated statements of operations forthe three months ended March 31, 2007 and 2006:
|                                         | ** ** | **March 31, 2007** | ** ** | **March 31, 2006** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| **Income Statement Data**     | ** ** | **Amount**                   | ** ** | **%**                        | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                                |       | $                            | 33,074,991 |                         | 100.0      |   | $ | 27,498,079 |   | 100.0 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Cost of Goods  Sold                     |       | $                            | 20,692,797 |                         | 62.6       |   | $ | 19,935,906 |   | 72.5 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Gross Profit                            |       | $                            | 12,382,194 |                         | 37.4       |   | $ | 7,562,173 |   | 27.5 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Operating  Expenses                     |       | $                            | 1,746,902  |                         | 5.3        |   | $ | 849,801 |   | 3.1 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Operating Income                        |       | $                            | 10,635,292 |                         | 32.1       |   | $ | 6,712,372 |   | 24.4 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Other Income  (Expense)                 |       | $                            | 212,598    |                         | 0.6        |   | $ | (57,538 | ) | (0.2 | ) |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Net Income  Before Minority Interest    |       | $                            | 10,847,890 |                         | 32.7       |   | $ | 6,654,834 |   | 24.2 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Minority  Interest in Subsidiary Income |       | $                            | 4,354,791  |                         | 13.2       |   | $ | 2,659,079 |   | 9.7 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Net Income                              |       | $                            | 6,493,099  |                         | 19.5       |   | $ | 3,995,755 |   | 14.5 |   |

 

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*Revenues.*The increase in revenues from the three months ended March 31, 2007compared to the three months ended March 31, 2006 is due primarily to anincrease in the price per gallon we received for the ethanol sold. The priceper gallon we received for the three months ended March 31, 2007 was approximately30% higher than the price per gallon received for the three months ended March31, 2006 due to the strong ethanol market. Revenue from sales of our co-products also increased by approximately19% in the three months ended March 31, 2007 compared to the three months endedMarch 31, 2006 due to increases in the sales prices for these co-products.

Due to a number of factors, including the higher priceof petroleum gasoline and seasonal demand, ethanol prices remained high duringthe period covered by this report. We believe the favorable prices areprimarily due to high demand for ethanol, created by a number of factors,including the declining use of MTBE as an oxygenate, the high price ofgasoline, which encourages voluntary blending, and the growing recognition ofethanol as an alternative energy source. We believe this trend will continue throughpeak driving season in the summer of 2007. Ethanol prices are still higher thanthe 10-year average. However, we cannot guarantee that the price of ethanolwill not significantly decrease due to factors beyond our control.

Agreater supply of ethanol on the market from additional plants and plantexpansions could reduce the price we are able to charge for our ethanol,especially if supply outpaces demand. As of May 8, 2007, the Renewable FuelsAssociation reports that there were 118 ethanol plants in operation nationwidewith the capacity to produce 6.1 billion gallons annually, with approximately 79ethanol plants under construction and 8 planned expansions, expanding totalethanol production capacity by an additional 6.4 billion gallons. Accordingly,the price of ethanol may trend downward if supply exceeds demand, which wouldnegatively impact our earnings.

With respect to distillers grains, we believe thatprices will follow the same trend as corn prices, which are discussed belowunder “Cost of Goods Sold.” We expect revenues from the sale of distillersgrains should remain higher than fiscal 2006.

*Cost ofGoods Sold.*Our cost of goods sold as a percentage ofrevenues were 62.6% and 72.5% for the three months ended March 31, 2007 and2006, respectively. The 9.9% decrease in our cost of goods sold from period toperiod is primarily due to the increased values of our corn derivatives whichare used to offset corn costs. The cost reduction resulting from our cornderivatives was approximately 3 times greater for the three months ended March31, 2007, than the cost reductions recorded for the three months ended March31, 2006. These cost reductions were a result of higher corn prices whichincreased the values of our derivatives. As corn and natural gas pricesfluctuate, the value of our derivative instruments are impacted, which affectsour financial performance. We anticipate continued volatility in our cost ofgoods sold due to the timing of the changes in value of the derivativeinstruments relative to the cost and use of the commodity being hedged.

Corn costs significantly impact our cost of goodssold. The United States Department of Agriculture’s National AgriculturalStatistics Service reported the final 2006 national corn production atapproximately 10.5 billion bushels, which was the third largest corn crop onrecord. The National Agricultural Statistics Service measured Iowa’s productionat slightly over 2 billion bushels. However, despite the large 2006 corn crop,corn prices have continued to increase. Additionally, due to increased exposureof ethanol, corn is now being viewed as an “energy commodity” as opposed tostrictly a “grain commodity,” contributing to the upward pressure on corn

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prices.  For thefirst time, ethanol use of corn is projected to outpace the amount of corn thatis exported. A recent USDA report entitled “World Agricultural Supply andDemand Estimates” (May 11, 2007), projects the U.S. corn 2007 season-averagefarm prices at $3.10-3.70 per bushel. We expect corn prices to remain athistorically high price levels well into 2007, which could significantly impactour cost of goods sold. For the three months ended March 31, 2006, we paid aweighted average of $1.89 per bushel of corn. For the three months ended March 31, 2007, we paid a weighted average of$3.42 per bushel of corn.  Thistrajectory of increasing prices suggests that the USDA prediction that 2007corn prices could reach $3.70 per bushel or more is a reasonable expectation.

Our natural gas costs decreased by approximately 42%for the three months ended March 31, 2007 compared to the same period in 2006.This resulted from an approximate 45% reduction in the price per MMBTU that wepaid for natural gas for the three months ended March 31, 2007 compared to thesame period in 2006. This was partially offset by an increase in the number ofMMBTUs we consumed. For the three months ended March 31, 2007, the number ofMMBTUs we consumed was approximately 4% higher than the MMBTUs we consumed inthe same period in 2006.

*OperatingExpenses.*Our operating expenses as a percentage ofrevenues were 5.3% and 3.1% for the three months ended March 31, 2007 and 2006,respectively.  This increase resultedfrom (i) increased professional, consulting and legal fees associated withcompliance with Sarbanes-Oxley, organizational costs for possible new ventures,and (ii) increased payroll expenses.

*OperatingIncome.*Our income from operations for the three monthsended March 31, 2007 totaled $10,635,292 compared to $6,712,372 for the threemonths ended March 31, 2006 before minority interest. This was a result of thesubstantial increase in gross profit for the three months ended March 31, 2007,although it was partially offset by higher operating expenses for the sameperiod.

*Other Income (Expense*).  We had other income of $212,598 for the threemonths ended March 31, 2007 compared to other expense of $57,538 for the threemonths ended March 31, 2006.  This changeresulted from the company capitalizing interest for the expansion payments madefrom excess cash in the three months ended March 31, 2007.  This resulted in reducing the interest we expensedduring the period.

**Results of Operations for the Six Months Ended March 31, 2007and 2006**

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, 2007 and 2006:
|                                         | ** ** | **March 31, 2007** | ** ** | **March 31, 2006** | ** ** |
|-----------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| **Income Statement Data**     | ** ** | **Amount**                   | ** ** | **%**                        | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                                |       | $                            | 66,680,040 |                         | 100.0      |   | $ | 50,640,010 |   | 100.0 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Cost of Goods  Sold                     |       | $                            | 32,736,488 |                         | 49.1       |   | $ | 35,307,360 |   | 69.7 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Gross Profit                            |       | $                            | 33,943,552 |                         | 50.1       |   | $ | 15,332,650 |   | 30.3 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Operating  Expenses                     |       | $                            | 2,528,725  |                         | 3.8        |   | $ | 1,524,565 |   | 3.0 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Operating Income                        |       | $                            | 31,414,827 |                         | 47.1       |   | $ | 13,808,085 |   | 27.3 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Other Income  (Expense)                 |       | $                            | 202,142    |                         | 0.3        |   | $ | (159,759 | ) | (0.3 | ) |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Net Income  Before Minority Interest    |       | $                            | 31,616,969 |                         | 47.4       |   | $ | 13,648,326 |   | 27.0 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Minority  Interest in Subsidiary Income |       | $                            | 12,633,252 |                         | 18.9       |   | $ | 5,446,091 |   | 10.8 |   |
|                                    |       |                         |       |                         |       |   |   |   |   |
| Net Income                              |       | $                            | 18,983,717 |                         | 28.5       |   | $ | 8,202,235 |   | 16.2 |   |

 

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*Revenues.* The increase in revenues from the six months ended March 31, 2007 compared tothe six months ended March 31, 2006 was primarily due to a 29% increase inprice per gallon we received for the ethanol sold.

*Cost of Goods Sold*. The decrease in our cost of goods for the six months ended March 31, 2007compared to the six months ended March 31, 2007 was primarily due to theincreased values of our corn derivatives offset by higher prices paid for corn.

*Operating Expenses. *Our operating expenses as a percentage of revenues remained relativelyconstant for the six months ended March 31, 2007 and 2006.

*Operating Income. *Our income from operations as a percentage of revenues increased to 47.1%for the six months ended March 31, 2007 compared to 27.3% for the six monthsended March 31, 2006.   This increase in operating income resultedprimarily from increased revenues resulting from higher ethanol prices.

*Other Income (Expense). *Our other income (expense) as a percentage of revenues was 0.3% and (0.3%)for the six months ended March 31, 2007 and 2006, respectively.  Thisdecrease in other expense was due primarily to the increase in interest incomewe received during the period.

**Changes in Financial Condition for the Six Months Ended March31, 2007**

Consolidated assets totaled $107,806,075 at March 31,2007 compared to $91,556,615 at September 30, 2006. Current assets totaled$31,609,241 at March 31, 2007 down from $39,374,286 at September 30, 2006. Thechange resulted from a decrease in cash and short-term investments whichtotaled $13,792,844 at March 31, 2007 compared to $28,860,525 at September 30,2006 resulting from payments made for construction costs; offset by  (i) an increase in the value of accountsreceivable which totaled $4,265,998 at March 31, 2007 compared to $2,655,454 atSeptember 30, 2006; (ii) an increase in the value of inventories which totaled$3,974,595 at March 31, 2007 compared to $2,220,290 at September 30, 2006; (iii)an increase in the fair market value of our derivatives which totaled $6,050,312at March 31, 2007 compared to $4,356,698 at September 30, 2006;.

Consolidated current liabilities totaled $6,970,356 atMarch 31, 2007 compared to the $6,023,396 at September 30, 2006.  Long-term debt, net of current maturities,totaled $11,807,531 at March 31, 2007 down from $13,504,582 at September 30,2006. This reduction occurred as a result of our regularly scheduled loanpayments.

**Strategies: Expansion**

***Marcus Plant Expansion***

During fiscal year 2006, we commenced a plantexpansion which when completed, will increase the ethanol production capacityof our plant by 40 million gallons to 92 million gallons annually. We expectthe expansion to be substantially complete early in the 2008 calendar year andthat the total cost of the expansion project will be approximately $73,000,000.The completion date and cost of the expansion project is a preliminary estimateand we expect it will change as we continue to gather information relating tothe expansion.  The expansion project, asof the date of this report, was approximately 50% complete.

We expect to finance the 40 million per year expansionusing both a portion of our cash and additional debt to finance the requiredcapital expenditure.  We do not expect toseek additional equity from our members to fund this expansion.  On April 5, 2007, we entered into an Amendedand Restated Construction Loan Agreement (the “Amended Agreement”) with FirstNational Bank of Omaha, N.A. (“FNBO”).  Under the Amended Agreement, FNBOhas agreed to loan us up to $73,000,000 (the “Construction Loan”) for thepurpose of partially funding the construction of the 40 million gallon per yearexpansion of our facility and the subsequent replacement of the ConstructionLoan with an amount of up to $82,278,227 (the “Term Loan”), together with a$5,000,000

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operating line of credit and letter of credit facility(the “Operating Loan”) and swap contracts. For additional information regarding our expansion debt financingcommitment, see “**Item 2 – Management’s Discussion and Analysisof Financial Condition and Results of Operations – Indebtedness, *Expansion Debt Financing***.”

Management anticipates that the Plant will continue tooperate at or above name-plate capacity of 52 million gallons per year untilthe expansion is completed, at which time the name-plate capacity will increaseto 92 million gallons per year.  Weestimate that the Plant will start operating at 92 million gallons per year inSeptember 2007, although tangential work on the expansion project, such as railsiding, road work and landscaping, will continue until the project is fullycomplete early in the 2008 calendar year.  This current expansion will becompleted while the current facility remains in production.  However, the Plant may be shut down from timeto time over the next 12 months to incorporate expansion improvements.

We expect to have sufficient cash from cash flowgenerated by continuing operations, additional debt financing secured to fundplant expansion, current lines of credit through our revolving promissory note,and cash reserves to cover the costs of expansion as well as our usualoperating costs over the next 12 months, which consist primarily of cornsupply, natural gas supply, staffing, office, audit, legal, compliance, workingcapital costs and debt service obligations.

After completion of the second expansion, our totaloperating costs are expected to increase because of the increase in ourproduction capacity.  We expect to offset the increase in operating costsby increased ethanol revenues, however, a variety of market factors can affectboth operating costs and revenues.  These factors include:

·                  Changes in the availability and priceof corn;

·                  Changes in the environmentalregulations that apply to our plant operations;

·                  Increased competition in the ethanoland oil industries;

·                  Changes in interest rates or theavailability of credit;

·                  Changes in our business strategy,capital improvements or development plans;

·                  Changes in plant production capacityor technical difficulties in operating the plant;

·                  Changes in general economicconditions or the occurrence of certain events causing an economic impact inthe agriculture, oil or automobile industries;

·                  Changes in the availability and priceof natural gas and the market for distillers grains; and

·                  Changesin federal and/or state laws (including the elimination of any federal and/orstate ethanol tax incentives).

***Development of Akron Ethanol Plant***

In addition to expansion of the Plant, we executed asubscription agreement to purchase 27,500 Class A units in Akron, our whollyowned subsidiary.  Akron is an Iowalimited liability company organized for the purpose of developing andconstructing a 100 million gallon per year ethanol plant in Plymouth Countynear Akron, Iowa.  We have initiallycapitalized Akron by committing to contribute $9,999,900 in exchange for 15,000Class A units at the price of $666.66 per unit and $10,000,000 in exchange for12,500 Class A units at a price of $800 per unit.  In connection with our subscription, we paida down payment and signed a promissory note. We will pay Akron the entire amount due under the promissory note withintwenty (20) days of receiving notice from Akron that it is due. However,thereis no assurance that if we determine to pursue involvement with the Akron plantthat we will be successful.

In connection with our study of the opportunities inAkron, we obtained two options for the real estate in the area.  We entered into a real estate optionagreement with the Mary Frances Wohlenberg Trust, an unrelated party, grantingus an option to purchase approximately 156 acres of land (the “Wohlenberg Site”).We also entered into a real estate option agreement with Robert E. and MargaretLias, who are unrelated to us, granting us an option to purchase approximately140 acres of land adjacent to the Wohenberg site (the “Lias Site”).  The two options must be exercised together.On March 20, 2007 we assigned the options to the Lias and Wohlenberg sites toAkron Riverview Corn Processors, LLC.

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***Unit Split***

Subsequent to the end of the period covered by thisreport, our board of directors declared a fifteen-for-one membership unit splitto be effected in the form of a unit distribution of fourteen membership unitsfor each membership unit outstanding. The record date for the membership unit split was February 1, 2007.  We anticipate the additional unitcertificates will be distributed in late May or early June 2007. The unit splitresulted in a change of our issued and outstanding units from 10,941 to 164,115.

**Liquidity and Capital Resources**

The following table shows cash flows for the sixmonths ended March 31, 2007 and 2006:
|                                                       | ** ** | **2007** | ** **    | **2006**   | ** ** |
|-------------------------------------------------------|------------|----------|---------------|------------|------------|
| Net cash from  operating activities                   |       | $        | 26,943,754    |       | $          | 11,958,484 |   |
| Net cash (used  for) provided by investing activities |       | $        | (6,914,385    | )          | $          | 2,740,674 |   |
| Net cash used  for financing activities               |       | $        | (16,370,176   | )          | $          | (16,946,088 | ) |
| **Net increase (decrease) in cash  and equivalents**  | ** ** | **$**    | **3,659,193** | ** ** | **$**      | **(2,246,930** | **)** |

 

*CashFlow From Operations.*Cash provided by operatingactivities was $26,943,754 for the first six months of fiscal 2007, which wasup from $11,958,484 for the first six months of fiscal 2006. This increaseresulted primarily from the increase in net income in fiscal 2007. Our capitalneeds are being adequately met through cash from our operating activities andour current credit facilities.

*CashFlow From Investing Activities.*Cash used in investingactivities was $6,914,385 for the first six months of fiscal 2007, compared tocash provided of $2,740,674 for the first six months of fiscal 2006. Thisdecrease in cash used resulted from an increase in funds needed to be expendedfor our current expansion construction, less proceeds from the sale ofshort-term investments.

*CashFlow From Financing Activities*. We used cash to pay downour debt by $1,635,849 in the first six months of fiscal 2007 compared to$1,609,260 in the first six months of fiscal 2006. Additionally, the totalamount of cash we distributed to partners and members totaled $14,617,418 inthe first six months of fiscal 2007 compared to $15,336,828 in the first sixmonths of fiscal 2006.

**Indebtedness**

### *Short-Term Debt Sources*. We maintain aline of credit with First National Bank of Omaha through March 2008 to financeshort-term working capital requirements. Under the line of credit, we mayborrow up to $5,000,000 under a revolving promissory note. The interest payableon the revolving promissory note is due monthly at the one month LIBOR plus2.80%. We pay a commitment fee of 0.125% on the unused portion of the line.There was no outstanding balance as of March 31, 2007. The maximum availablecredit under this note is based on receivable and inventory balances. Ourcurrent receivable and inventory balances are not sufficient to allow us to usethe maximum amount of the operating line of credit. The operating line ofcredit is subject to protective covenants requiring us to maintain variousfinancial ratios and is secured by all of our business assets.

#### *Long-Term Debt Sources*. We havelong-term debt financing consisting of three term notes held by First NationalBank of Omaha and referred to as Term Notes 2, 3, and 4. At March 31, 2007, theprincipal balance on Term Note 2 was $10,572,234. Term Note 2 is payable inquarterly installments. Interest on Term Note 2 is at the three month LIBORplus 2.80%, which totaled 8.17% as of March 31, 2007. Term Note 2 is payable infull on June 1, 2008. In order to achieve a fixed interest rate on Term Note 2,we entered 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, 2007, the principal balance on Term Note3 was $4,278,227. Term Note 3 is payable in quarterly installments. Interest onTerm Note 3 is at the three month LIBOR plus 2.80%, which totaled 8.17% as ofMarch 31, 2007. Term Note 3 is payable in full on June 1, 2008. As part of thefinancing agreement, we have agreed to pay an annual servicing fee of $50,000.

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At March 31, 2007, there was no principal balance onTerm Note 4. Term Note 4 is payable in quarterly installments. Interest on TermNote 4 is at the one month LIBOR plus 2.80%. Term Note 4 is payable in full onJune 1, 2008. Term Note 4 allows borrowings up to the original principal of$5,000,000 to the extent of principal payments made until maturity.

We have a capital lease obligation in the amount of$78,328 on which we pay monthly installments totaling $6,658, with an implicitinterest rate of 3.67%. This obligation is secured by the leased equipment andruns through March 1, 2008.

We have a note in the amount of $76,389 payable to theIowa Energy Center on which we pay monthly installments of $3,472 withoutinterest. This note is secured by real estate, but is subordinated to the termnotes. It matures on January 29, 2009.

We have a note with Farmers State Bank of Marcus, Iowain the amount of $86,252 on which we pay monthly installments of $5,921,including interest at 6%. This note is secured by real estate, but issubordinated to the term notes. It matures on January 29, 2009.

We have a note totaling $171,500 payable to the IowaDepartment of Economic Development on which we pay monthly installments of$1,167 without interest. This note is secured by all equipment and matures onJuly 1, 2009.

*ExpansionDebt Financing.*

On April 5, 2007, we entered into an Amended andRestated Construction Loan Agreement (the “Amended Agreement”) with FirstNational Bank of Omaha, N.A. (“FNBO”).  Under the Amended Agreement, FNBOhas agreed to loan us up to $73,000,000 (the “Construction Loan”) for thepurpose of partially funding the construction of the 40 million gallon per yearexpansion of our facility and the subsequent replacement of the ConstructionLoan with an amount of up to $82,278,227 (the “Term Loan”), together with a$5,000,000 operating line of credit and letter of credit facility (the “OperatingLoan”) and swap contracts.

Our obligations currently include (i) a fixed rateterm loan with a principal balance of $10,572,234 (the “Existing Swap Note”);(ii) a variable interest loan with a principal balance of $4,278,227 (the “ExistingVariable Rate Note”); (iii) a long term revolving loan with an availablecommitment of $5,000,000 (the “Existing Long Term Revolving Note”); (iv) anoperating line and letter of credit facility which has an available commitmentof $3,500,000 (the “Existing Operating Note”); and (v) a business credit cardloan which has an available commitment of $100,000 (the “Business Credit CardLoan”).

Under the Amended Agreement, the Existing Swap Noteand Business Credit Card Loan are subject to the same terms and conditions,including interest rate, interest period, repayment terms, as our previouscredit facility with FNBO.  In addition, through the Construction LoanTermination Date, the Existing Variable Rate Note and the Existing Long TermRevolving Note will continue to be subject to the same terms and conditions,including interest rate, interest period, repayment terms, as our existingcredit facility; provided, however, interest shall accrue on the ExistingVariable Rate Note and the Existing Long Term Revolving Note at a variable rateequal to the applicable LIBOR Rate set forth in such Notes, plus (a) 280 basispoints prior to acceleration or maturity, and (b) an additional 600 basispoints after maturity, whether by acceleration or otherwise.  On theConstruction Loan Termination Date, the Existing Variable Rate Note and theExisting Long Term Revolving Note will be converted with the Construction Loaninto the Term Loan described below.

The Amended Agreement also provides for refinancing ofour Existing Operating Note.  Under the refinanced operating loan (the “OperatingLoan”) FNBO will loan us an amount up to $5,000,000 which shall provide bothoperating line of credit financing and FNBO will issue letters of credit at ourrequest.  The aggregate amount of any letter of credit at the time ofissuance shall not exceed $1,000,000 and unless otherwise agreed to by FNBO, noletter of credit shall have an expiration date more than one (1) year from thedate of issuance. We may borrow, repay and reborrow under the Operating Loan,without penalty or premium, either the full amount of the Long Term RevolvingLoan or any lesser sum.

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During the construction period interest on theConstruction Loan will be payable on a quarterly basis on the outstandingprincipal amount at a variable rate equal to the 1 month LIBOR Rate, in effectfrom time to time, plus (a) 310 basis points prior to acceleration or maturity,and (b) an additional 600 basis points after maturity, whether by accelerationor otherwise.  On the Construction Loan Termination Date, the ConstructionLoan will be converted into the Term Loan and replaced by the following termnotes:

(a)          The Swap Note. A loan in the maximum amount of $36,500,000. Interest on the Swap Note shall accrue at a variable rate equal to the three(3) month LIBOR Rate, in effect from time to time, plus (a) 260 basis pointsprior to acceleration or maturity, and (b) an additional 600 basis points aftermaturity, whether by acceleration or otherwise.  The Swap Note will matureand terminate on the fifth anniversary of the Construction Loan TerminationDate.

(b)          The Variable Rate Note.  A loan in the maximum amount of $35,778,227representing the principal balance of the Construction Note plus the entireprincipal amount and all accrued and unpaid interest under the ExistingVariable Rate Note, if any, less the Swap Note and less $5,000,000 of the LongTerm Revolving Loan.  Interest on the Variable Rate Note shall accrue at avariable rate equal to the three (3) month LIBOR Rate, in effect from time totime, plus (a) 300 basis points prior to acceleration or maturity, and (b) anadditional 600 basis points after maturity, whether by acceleration orotherwise. The Variable Rate Note will mature and terminate on the fifthanniversary of the Construction Loan Termination Date.

(c)          The Long Term Revolving Note.  A loan in the maximum amount of$10,000,000 representing the entire principal amount and all accrued and unpaidinterest under the Existing Long Term Revolving Note, if any, and $5,000,000converted from the Construction Loan on the Construction Loan TerminationDate.  Interest on the Long Term Revolving Note shall accrue at a variablerate equal to the 3 month LIBOR Rate, in effect from time to time, plus (a) 300basis points prior to acceleration or maturity, and (b) an additional 600 basispoints after maturity, whether by acceleration or otherwise.  We mayborrow, repay and reborrow under the Long Term Revolving Loan, without penaltyor premium, either the full amount of the Long Term Revolving Loan or anylesser sum until termination of the Long Term Revolving Note. The Long Term RevolvingNote will mature and terminate on the fifth anniversary of the ConstructionLoan Termination Date.

We are obligated to repay the Term Loan as follows:

(a)         Wewill make quarterly principal payments on the Swap Note ranging fromapproximately $612,000 to $859,000 plus accrued interest commencing on thefirst day of the first quarter immediately following the Construction LoanTermination Date. A final balloon payment of approximately $23,000,000 will bedue on the termination date of the Swap Note.

(b)         Wewill make quarterly payments of $1,362,429 beginning the first day of the firstquarter immediately following the Construction Loan Termination Date whichshall be allocated as follows:  (i) first to accrued and unpaid interest onthe Long Term Revolving Note, (ii) next to accrued and unpaid interest on theVariable Rate Note, and (iii) next to principal on the Variable Rate Note.

(c)          Afterthe Variable Rate Note has been fully paid, such quarterly payments shall beallocated first to accrued and unpaid interest on the Long Term Revolving Note,and then to principal on the Long Term Revolving Note, with reductions in theavailability thereof .

(d)          Atthe end of each fiscal year, we must apply an amount equal to 25% of our excesscash flow but not to exceed $5,000,000 to the term notes.  Excess cashflow is determined as EBITDA less capital expenditures, taxes and allowabledistributions, required payments to FNBO and subordinated debt.

(e)          Notwithstandingthe foregoing, all unpaid principal and accrued and unpaid interest for allTerm Notes shall be due and payable on their respective termination dates, ifnot sooner paid.

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In connection with the Amended Agreement, we executeda mortgage in favor of FNBO creating a first lien on our real estate and plantand a security interest in all personal property located on our property. In addition, we assigned, in favor of FNBO, all rents and leases to ourproperty, the design/build contract, our marketing contracts, risk managementservices contract and lease agreement.

As a condition to FNBO making loans under the AmendedAgreement, we were required to collaterally assign to FNBO all of our right,title and interest in and to any and all membership or other equity interest inAkron Riverview Corn Processors, LLC in exchange for its consent to our makingof an equity contribution in the aggregate amount of approximately $20,000,000to Akron Riverview Corn Processors, LLC.  In addition, we will also besubject to certain financial loan covenants consisting of minimum workingcapital, minimum debt coverage, and minimum tangible net worth.  After theconstruction phase, we will only be allowed to make annual capital expendituresup to $1,000,000 annually without prior approval.  We will also beprohibited from making distributions to our members of greater than 40% of thenet income for such fiscal year if our leverage ratio (combined totalliabilities to net worth) is greater than or equal to 1.0:1.0.  If ourleverage ratio is less than 1.0:1.0, we may make distributions up to 65% of ournet income.  We must be in compliance with all financial ratiorequirements and loan covenants before and after any distributions to ourmembers.  Our failure to comply with the protective loan covenants ormaintain the required financial ratios may cause acceleration of theoutstanding principal balances on the revolving promissory note and terms notesand/or the imposition of fees, charges or penalties.  Any acceleration ofthe debt financing or imposition of significant fees, charges or penalties mayrestrict or limit our access to the capital resources necessary to continueplant operations.

Upon an occurrence of an event of default or an eventwhich will lead to our default, FNBO may upon notice terminate its commitmentto loan funds and declare the entire unpaid principal balance of the loans,plus accrued interest, immediately due and payable.   An event ofdefault includes, but is not limited to, our failure to make payments when due,insolvency, any material adverse change in our financial condition or ourbreach of any of the covenants, representations or warranties we have given inconnection with the transaction.

*ContractualObligations and Commercial Commitments*. Except as disclosedin this report, there were no material changes in our contractual obligationsand commercial commitments during the three months ended March 31, 2007.

**CriticalAccounting Estimates**

Therewere no material changes in our accounting estimates during the three monthsended March 31, 2007.

**Off-Balance Sheet Arrangements.**

We currently have no off-balance sheet arrangements.

**ITEM 3. QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

We are exposed to the impact of market fluctuationsassociated with interest rates and commodity prices as discussed below. We haveno exposure to foreign currency risk as all of our business is conducted inU.S. Dollars. We use derivative financial instruments as part of an overallstrategy to manage market risk. We use cash, futures and option contracts tohedge changes to the commodity prices of corn and natural gas. We do not enterinto these derivative financial instruments for trading or speculativepurposes, nor do we designate these contracts as hedges for accounting purposespursuant to the requirements of SFAS 133, *Accountingfor Derivative Instruments and Hedging Activities*.

**Interest Rate Risk**

We are exposed to market risk from changes in interestrates. Exposure to interest rate risk results primarily from holding arevolving promissory note and three term notes which bear variable interestrates. Specifically, we have $15,262,929 outstanding in variable rate,long-term debt as of March 31, 2007. The specifics of each note are

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discussed in greater detail in “**Item 2 — Management’s Discussion and Analysis ofFinancial Condition and Results of Operations — Indebtedness**.”

In order to achieve a fixed interest rate on Term Note2, we entered 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. When the three-month LIBOR plus 2.80%exceeds 5.79%, we receive payments for the difference between the market rateand the swap rate. Conversely, when the three-month LIBOR plus 2.80% is below5.79%, we make payments for the difference between the market rate and the swaprate. While our exposure is now greatly reduced, there can be no assurance thatthe interest rate swap agreement will provide us with protection in allscenarios. For example, if interest rates were to fall below 5.79%, we wouldstill be obligated pay interest at 5.79% under the interest rate swapagreement.

**Commodity Price Risk**

We are also exposed to market risk from changes incommodity prices. Exposure to commodity price risk results from our dependenceon corn and natural gas in the ethanol production process. We seek to minimizethe risks from fluctuations in the prices of corn and natural gas through theuse of derivative instruments. In practice, as markets move, we actively manageour risk and adjust hedging strategies as appropriate. Although we believe ourhedge positions accomplish an economic hedge against our future purchases, theyare not designated as such for hedge accounting purposes, which would match thegain or loss on our hedge positions to the specific commodity purchase beinghedged. We are marking to market our hedge positions, which means as thecurrent market price of our hedge positions changes, the gains and losses areimmediately recognized in our cost of goods sold.

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. At March 31, 2007 and September 30, 2006,the fair value of our derivative instruments for corn, natural gas, andgasoline is an asset in the amount of $6,050,312 and $4,356,698 respectively.There are several variables that could affect the extent to which ourderivative instruments are impacted by price fluctuations in the cost of cornor natural gas. However, it is likely that commodity cash prices will have thegreatest impact on the derivatives instruments with delivery dates nearest thecurrent cash price.

To manage our corn price risk, our hedging strategy isdesigned to establish a price ceiling and floor for our corn purchases. We havetaken a net long position on our exchange traded futures and options contracts,which allows us to offset increases or decreases in the market price of corn.The upper limit of loss on our futures contracts is the difference between thecontract price and the cash market price of corn at the time of the executionof the contract. The upper limit of loss on our exchange traded andover-the-counter option contracts is limited to the amount of the premium wepaid for the option.

We estimate that our expected corn usage isapproximately 19 million bushels per year for the production of 52 milliongallons of ethanol. We have price protection in place for a portion of ourexpected corn usage for fiscal year 2007 and fiscal year 2008 using forwardcontracts, CBOT futures and options and Over-the-Counter option contracts. Aswe move forward, additional protection may be necessary. As corn prices move inreaction to market trends and information, our income statement will beaffected depending on the impact such market movements have on the value of ourderivative instruments. As we move forward, additional price protection may berequired to solidify our margins in the current and future fiscal years.Depending on market movements, crop prospects and weather, these priceprotection positions may cause immediate adverse effects, but are expected toproduce long-term positive growth for us.

To manage our natural gas price risk, we entered intoa natural gas purchase agreement with our supplier to supply us with naturalgas. This purchase agreement fixes the price at which we purchase natural gas.We have purchased a portion of our fiscal year 2007 and fiscal year 2008natural gas requirements utilizing both cash, futures and options contracts. Wemay also purchase additional natural gas requirements for the 2007 and 2008calendar years as we attempt to further reduce our susceptibility to priceincreases. We recently entered into gasoline derivative instruments to hedgethe variability of ethanol prices. While not perfectly correlated, we havefound that ethanol and gasoline prices tend to move in tandem. Therefore, thegasoline contracts we have entered into are intended to offset cash decreasesin the price of ethanol we receive.

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A sensitivity analysis has been prepared to estimateour exposure to corn, gasoline and natural gas price risk. The table presentsthe fair value of our derivative instruments as of March 31, 2007 and September30, 2006 and the potential loss in fair value resulting from a hypothetical 10%adverse change in such prices. The fair value of the positions is a summationof the fair values calculated by valuing each net position at quoted marketprices as of the applicable date. The results of this analysis, which maydiffer from actual results, are as follows:
|                    | ** ** | **Fair Value** | ** ** | **Effect of Hypothetical  Adverse Change —  Market Risk** | ** ** |
|--------------------|------------|---------------------|------------|-----------------------------------------------------------------------------------------|------------|
| March 31, 2007     |       | $                   | 6,050,312  |                                                                                    | $          | 605,031 |   |
| September 30, 2006 |       | $                   | 4,356,698  |                                                                                    | $          | 435,669 |   |

 

**ITEM4.  CONTROLS AND PROCEDURES.**

Our management, includingour President and Chief Executive Officer (the principal executive officer),Stephen Roe, along with our Chief Financial Officer (the principal financialofficer), Gary Grotjohn, have reviewed and evaluated the effectiveness of ourdisclosure controls and procedures (as defined inRule 13a-15(e) under the Securities Exchange Act of 1934, as amended)as of March 31, 2007.  Based upon this review and evaluation, theseofficers have concluded that our disclosure controls and procedures areeffective to ensure that information required to be disclosed in the reportsthat we file or submit under the Exchange Act is recorded, processed,summarized and reported within the time periods required by the forms andrules of the Securities and Exchange Commission; and to ensure that theinformation required to be disclosed by an issuer in the reports that it filesor submits under the Exchange Act is accumulated and communicated to ourmanagement including our principal executive and principal financial officers,or persons performing similar functions, as appropriate to allow timelydecisions regarding required disclosure.

Our management, including our principal executiveofficer and principal financial officer, have reviewed and evaluated anychanges in our internal control over financial reporting that occurred as ofMarch 31, 2007 and there has been no change that has materially affected or isreasonably likely to materially affect our internal control over financialreporting.

**PART II.     OTHER INFORMATION**

**ITEM1.  LEGAL PROCEEDINGS.**

None.

**ITEM2.  UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS.**

None.

**ITEM3.  DEFAULTS UPON SENIOR SECURITIES.**

None.

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS.**

We held our Annual Meeting on March 22, 2007.  Two matters were submitted to a vote of ourmembers.  The first was to elect the 3open Class A director seats on the board of directors available due to theexpiration of the terms of office of 3 incumbent Class A directors.  Verdell Johnson, Timothy Ohlson and MyronPingel were elected to serve another term as Class A directors.  The following Class A directors’ terms werenot expired at our Annual Meeting and, thus, they did not stand forelection:  Dale Arends, Daryl Haack, RonWetherell, Vince Davis, Darrell Downs and Doug Lansink.  Class B directors are appointed andserve at the discretion of the limited partners of LSCP, LLLP, an Iowa limitedliability limited partnership of which Little Sioux Corn Processors, L.L.C. isthe general partner.  Our Class Bdirectors, therefore, did not stand for election at our Annual Meeting.  The votes for the nominee directors were asfollows:

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| **Director Nominee** | ** ** | **For** | ** ** | **Against** | ** ** | **Abstain** | ** ** |
|---------------------------|------------|---------|------------|-------------|------------|-------------|------------|
| Verdell Johnson           |       | 6,800   |       | 83          |       | 23          |       |
| Tim Ohlson                |       | 6,841   |       | 50          |       | 13          |       |
| Myron Pingel              |       | 6,843   |       | 40          |       | 13          |       |

 

In addition, aproposal was presented to the members to make an amendment to our Third Amended& Restated Operating Agreement.  Thisamendment increased the units the directors could issue without a vote of the shareholdersfrom 15,000 units to 170,000 units.  Thevotes on the proposal were 6,584 votes in favor of the amendment, 119 votesagainst the amendment and 153 votes abstained.

**ITEM 5.**  **OTHERINFORMATION.**

None.

**ITEM6.  EXHIBITS AND REPORTS ON FORM 8-K.**

The following exhibits are filed as part of thisreport.

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**SIGNATURES**

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.
|        |         | LITTLE SIOUX CORN PROCESSORS, L.L.C.   |
|--------|--------------|----------------------------------------|
|   |         |                                   |
|   |         |                                   |
| Date:  | May 15, 2007 |                                   |   | /s/ Stephen Roe |
|   |         | Stephen Roe                            |
|   |         | President and  Chief Executive Officer |
|   |         |                                   |
|   |         |                                   |
| Date:  | May 15, 2007 |                                   |   | /s/ Gary  Grotjohn |
|   |         | Gary Grotjohn                          |
|   |         | Chief Financial  Officer               |
|        |              |                                        |  |  |  |

 

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