**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB**

 

**ý****             ****Annual report under Section 13 or15(d) of the Securities Exchange Act of 1934.**

 

**For the fiscal year ended September 30, 2004**

 

**OR**

 

o        **Transition report under Section 13 or 15(d) of the Exchange Act.**

 

**COMMISSIONFILE NUMBER 0001229899**

 

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

(Exact name of small businessissuer 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)                                    |

 

Check whether the issuer:  (1)filed all reports required to be filed by Section 13 or 15(d) of the ExchangeAct during the past 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.            ý  Yes            o  No

 

Check if there is no disclosure of delinquent filers in response toItem 405 of Regulation S-B is not contained in this form, and no disclosurewill be contained, to the best of registrant’s knowledge, in definitive proxyor information statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. ý

 

State issuer’s revenues for its most recentfiscal year.  $85,540,934 

 

As of September 30, 2004, the aggregatemarket value of the membership units held by non-affiliates (computed byreference to the book value of such member units) was $21,081,764.

 

As of December 21, 2004, there were 10,941membership units outstanding.

 

DOCUMENTS INCORPORATED BYREFERENCE    None.

 

Transitional Small Business Disclosure Format (Check one):             o  Yes            ý  No

 

 

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**INDEX**

 
| **PART I**     | ** **                                             | ** **                                                          |
|----------------|--------------------------------------------------------|---------------------------------------------------------------------|
| ** **     | **ITEM 1.**                                            | **DESCRIPTION OF  BUSINESS**                                        | ** ** |
| ** **     | **ITEM 2.**                                            | **DESCRIPTION OF  PROPERTY**                                        | ** ** |
| ** **     | **ITEM 3.**                                            | **LEGAL PROCEEDINGS**                                               | ** ** |
| ** **     | **ITEM  4.**                                           | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS**            | ** ** |
| ** **     | ** **                                             | ** **                                                          | ** ** |
| **PART II**    | ** **                                             | ** **                                                          |
| ** **     | **ITEM  5.**                                           | **MARKET  FOR MEMBERSHIP UNITS AND RELATED MEMBER MATTERS**         | ** ** |
| ** **     | **ITEM 6.**                                            | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION** | ** ** |
| ** **     | **ITEM 7.**                                            | **FINANCIAL STATEMENTS**                                            | ** ** |
| ** **     | **ITEM  8.**                                           | **CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING**    | ** ** |
| ** **     | **AND  FINANCIAL DISCLOSURES**                         | ** **                                                          |
| ** **     | **ITEM 8A.**                                           | **CONTROLS AND  PROCEDURES**                                        | ** ** |
| ** **     | ** **                                             | ** **                                                          | ** ** |
| **PART III**   | ** **                                             | ** **                                                          |
| ** **     | **ITEM  9.**                                           | **DIRECTORS,  EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES;**       | ** ** |
| ** **     | **COMPLIANCE  WITH SECTION 16(a) OF THE EXCHANGE ACT** | ** **                                                          |
| ** **     | **ITEM 10.**                                           | **EXECUTIVE COMPENSATION**                                          | ** ** |
| ** **     | **ITEM  11.**                                          | **SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT** | ** ** |
| ** **     | **AND  RELATED STOCKHOLDER MATTERS**                   | ** **                                                          |
| ** **     | **ITEM  12.**                                          | **CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS**                 | ** ** |
| ** **     | **ITEM 13.**                                           | **EXHIBITS AND REPORTS ON FORM 8-K**                                | ** ** |
| ** **     | ** **                                             | ** **                                                          | ** ** |
| **SIGNATURES** | ** **                                             | ** **                                                          |
|                |                                                        |                                                                     |  |  |

 

2

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**PART I.**

 

**ITEM 1.****                                                     DESCRIPTIONOF BUSINESS.**

 

Little Sioux Corn Processors, L.L.C., wasformed as an Iowa limited liability company on September 28, 2000.  References to “we,” “us,” “our,” and the “Company”refer to Little Sioux Corn Processors, L.L.C.

 

On March 6, 2002, the Company purchased thesole generalpartnership interest in an Iowa limited partnership, LSCP, LP.  On June 26, 2003, LSCP, LP elected to becomea limited liability limited partnership and is referred to as “LSCP, LLLP” orthe “limited partnership.”  During 2002,we raised $10,226,000 by issuing 10,002 of our units to investors.  We purchased our general partnership interestin the limited partnership by contributing these proceeds and our net assets tothe limited partnership.  As of December31, 2002, we had assets exceeding $10 million and more than 500 unit holders.  On April 30, 2003, we registered our unitswith the U.S. Securities and Exchange Commission on Form 10-SB RegistrationStatement pursuant to Section 12(g) of the Securities Exchange Act of 1934.

 

Ourgeneral partnership interest in the limited partnership representssubstantially all of our assets.  Thelimited partnership owns and operates a 40 million-gallon per year (“MGY”)ethanol plant near Marcus, Iowa.  Thefollowing diagram illustrates the relationship between Little Sioux CornProcessors, L.L.C. and LSCP, LLLP:

 

**DIAGRAM OF THEREGISTRANT’S RELATIONSHIP TO LSCP, LLLP**

 

****

 

LSCP,LLLP consists of the Company, which is the sole general partner, and variouslimited partners, which own the limited partnership interests.  There are six classes of limited partnershipinterests.  Until July 2004, there werefour classes of limited partnership interests outstanding and owned by variouslimited partners.  In July 2004 weredeemed one class of limited partnership interests from one limited partnerresulting in three classes of limited partnership interests currently outstanding.  The other two classes of limited partnershipinterests have not been issued and may not be issued.  Limited partnership interests are designatedin units.

 

Thefinancial statements of the limited partnership have been consolidated with theCompany since the limited partnership was formed on October 16, 2001.  The limited partnership did not have anyassets until the partners of the limited partnership contributed assets.  The net assets contributed by the Companywere less than the proportional limited partnership interest received in returnas compared to the net assets contributed by the other partners in the limitedpartnership.  The other limited partnerscontributed a total of $7,750,000 in return for 1,550 units in the limitedpartnership ($5,000 per unit).  TheCompany contributed all of its net assets, approximately $10,198,000, in returnfor 2,189 units in the limited partnership ($4,658 per unit).  Due to the Company’s previous efforts tobegin the ethanol plant, the Company was given credit for value in addition tothe net assets transferred.

 

3

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Asgeneral partner of LSCP, LLLP, we have the complete and exclusive power tomanage and control the affairs of the limited partnership including theday-to-day business and operations of the ethanol plant.  As general partner of a limited liabilitylimited partnership, we have limited liability for the payment of debts andliabilities of LSCP, LLLP.  Under thelimited partnership agreement, we can only be removed as general partner if acourt has determined that we have been grossly negligent in performing ourduties as general partner and the holders of at least 66 2/3% of theoutstanding limited partnership units vote to remove us.

 

The limitedpartnership agreement allows each class of limited partnership interests theright to appoint one director to our board of directors.  This means that the three classes of limitedpartnership interests can elect three of the thirteen directors on ourboard.  Our board of directors is dividedinto two classes known as Class A and Class B. Class A directors are elected by the Company’s members.  Class B directors are elected by the limitedpartners of the limited partnership. Both Class A and Class B directors can take action with respect to anymatters relating to the ownership and operation of the ethanol plant.  However, only Class A directors can takeaction with respect to any matters relating to the Company and not alsodirectly relating to the ethanol plant. For example, Class B directors may not vote on a motion regarding anydistributions we may make to our members. No limited partner or class of limited partnership interests has theright to appoint a majority of the Company’s directors or control the businessof the limited partnership.

 

Our power tomanage LSCP, LLLP is restricted in three cases. First, we cannot dispose of or encumber substantially all of the assetsof the limited partnership without first obtaining the consent of the holdersof a majority of the limited partnership interests.  Second, we cannot remove or appoint a generalmanager responsible for managing the limited partnership’s business withoutfirst obtaining the consent of the holders of a majority of the limitedpartnership interests and our primary lending institution.  Finally, we cannot admit additional generalor limited partners without first obtaining the approval of the holders of atleast 75% of the limited partnership units.

 

Under thelimited partnership agreement, distributions of the limited partnership’srevenues (as defined below) are made to the general and limited partners inproportion to the units held, however, distributions are also limited by loancovenants contained in our loan agreements executed with our lenders.  For example, our loan agreements require usto maintain various financial ratios and make additional loan payments based onexcess cash flow, including payments received from the USDA’s Commodity CreditCorporation, as discussed below in “MANAGEMENT’S DISCUSSION AND ANALYSIS -Liquidity and Capital Resources.”

 

The limitedpartnership’s revenues are defined by the limited partnership agreement as “netcash flow” meaning the gross cash proceeds of the limited partnership less theamount of proceeds used for expenses, debt payments, capital improvements,replacements, contingencies and reserves, all as reasonably determined by theCompany, as general partner. Distributions are made in proportion to the units held by the generaland limited partners, which means that a partner’s distribution is calculatedbased on the number of units such partner owns in proportion to the number oftotal units outstanding.  For example,the Company currently owns 2,189 limited partnership units of the 3,639 limitedpartnership units outstanding. Therefore, the Company is entitled to distributions equaling 60.15% ofthe limited partnership’s net cash flow (2,189 units divided by 3,639units).  No partner is entitled to aminimum distribution amount.  However,the limited partnership agreement provides that the Company, as generalpartner, will endeavor to provide for cash distributions at the times andamounts necessary to allow the partners to make timely payment of incometaxes.  Distributions are not prioritizedamong the partners.

 

After givingeffect to certain special allocations, such as adjustments for partners whobear the risk of economic loss for certain partnership debts, profits andlosses are generally allocated in the same manner as distributions of the limitedpartnership’s net cash flow.  Therefore,the Company, as general partner, is generally allocated 60.15% of the limitedpartnership’s profits and losses and the limited partners are generallyallocated 39.85% of the limited partnership’s profits and losses.

 

The limited partnership agreement can only be amended if theamendment is approved by our board of directors and is approved by holders of amajority of the limited partnership interests.

 

4

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**Principal Productsand Markets**

 

Our ethanolplant is located near Marcus, Iowa in Cherokee County, in the northwesternsection of Iowa.  We selected the Marcussite because of its location to existing grain production, accessibility toroad and rail transportation and its proximity to major populationcenters.  It is also served by theCanadian National Railroad Company.  Itis in close proximity to major highways that connect to major populationcenters such as Minneapolis, Minnesota; Omaha, Nebraska; and Chicago, Illinois.

 

Theprincipal products we produce at the ethanol plant are ethanol and distillergrains.  Ethanol is ethyl alcohol, a fuelcomponent made primarily from corn and various other grains, and can be usedas: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for thepurpose of reducing ozone and carbon monoxide vehicle emissions; and (iii) anon-petroleum-based gasoline substitute. Approximately 95% of all ethanol is used in its primary form forblending with unleaded gasoline and other fuel products.  The implementation of the Federal Clean Airact has made ethanol fuels an important domestic renewable fuel additive.  Used as a fuel oxygenate, ethanol provides ameans to control carbon monoxide emissions in large metropolitan areas.  The principal purchasers of ethanol aregenerally the wholesale gasoline marketer or blender.  The principal markets for our ethanol arepetroleum terminals in the continental United States.

 

A principalby-product of the ethanol production process is distillers grains, a highprotein, high-energy animal feed supplement primarily marketed to the dairy andbeef industry.  Distillers grains containby-pass protein that is superior to other protein supplements such as cottonseedmeal and soybean meal.  By-pass proteinsare more digestible to the animal, thus generating greater lactation in milkcows and greater weight gain in beef cattle. Dry mill ethanol processing creates three forms of distiller grains:Distillers Wet Grains (“DWS”), Distillers Modified Wet Grains (“DMWS”) andDistillers Dried Grains with Solubles (“DDGS”). DWS is processed corn mash that contains approximately 70%moisture.  DWS has a shelf life ofapproximately three days and can be sold only to farms within the immediatevicinity of an ethanol plant.  DMWS isDWS that has been dried to approximately 50% moisture.  DMWS have a slightly longer shelf life ofapproximately ten days and are often sold to nearby markets.  DDGS is DWS that has been dried to 10% to 12%moisture.  It has  an almost indefinite shelf life and may besold and shipped to any market regardless of its vicinity to an ethanolplant.  Approximately 15% of thedistillers grains we produce at the plant are DDGS shipped all over the continentalUnited States.  The balance of ourdistillers grains are locally marketed primarily to nearby livestockproducers.  As additional ethanol plantsbegin production, the markets for our distillers grains could shift.

 

**Distribution Methods**

 

As generalpartner of the limited partnership, we entered into a marketing agreement withMinnesota Corn Processors, L.L.C., (“MCP”) in 2003 for the purposes ofmarketing and distributing our ethanol. This marketing agreement was subsequently assigned by MCP to ArcherDaniels Midland Company (“ADM”) following ADM’s acquisition of MCP.  In exchange for ADM’s marketing, sales,storage and transportation services, we pay ADM a fixed price per gallon ofethanol sold.  The initial term of themarketing agreement with ADM expires in 2007 but the agreement is automaticallyrenewed for successive one-year periods at the end of the initial term unlessthe parties agree otherwise.

 

As generalpartner of the limited partnership, we entered into a marketing agreement withCommodity Specialist Company (“CSC”), a Delaware corporation, in 2003 for thepurpose of marketing and selling all the distillers grains we produce, exceptdistillers grains we produce and sell directly to local farmers.  Approximately, 15% of the distillers grainsproduced at the plant are marketed and sold by CSC.   For our distillers grains, we receive apercentage of the selling price actually received by CSC in marketing thedistillers grains to its customers.

 

**Competition**

 

We are indirect competition with other ethanol producers, many of whom have greaterresources than we do.  We expect thatadditional ethanol producers will enter the market as the demand for ethanolincreases.

 

Our ethanolplant competes with other ethanol producers on the basis of price and, to alesser extent, delivery service.  Webelieve we compete favorably with other ethanol producers due to our proximityto ample

 

5

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grain supplies andmultiple modes of transportation.  Webelieve our plant’s location offers an advantage over other ethanol producersin that it has ready access by rail to growing ethanol markets, which reducesour cost of sales.

 

Excludingour facility, Iowa currently has 20 ethanol plants in various stages ofdevelopment or operation.  Plants nearGalva and Sioux Center produce or will produce approximately 25 MGY perfacility.  A planned plant near SteamboatRock will produce 20 MGY per year. Plants near Fort Dodge, Fairbank and Albert City will each produce 100MGY when they become operational.  Aplant near Lakota currently produces approximately 50 MGY and has begunconstruction on a 50 MGY expansion for total capacity of 100 MGY.  The remaining 13 plants will produce or areproducing approximately 40 MGY.  Totalannual ethanol production capacity in Iowa is currently expected to reach 1billion gallons.  In addition, a nearbyplant in Hudson, South Dakota, produces approximately 45 MGY and a 40 MGY plantis being developed near South Sioux City, Nebraska.  If organizational efforts are successful,this plant would add an additional 40 MGY production in close proximity to ourfacility.  There are also numerous otherproducer and privately owned ethanol plants planned and operating throughoutthe Midwest and elsewhere in the United States.

 

The ethanol industry has grown to over 90production facilities in the United States. The largest ethanol producers include Abengoa Bioenergy Corp., ArcherDaniels Midland, Aventine Renewable Energy, Inc., Cargill, Inc., New Energy Corp.,and VeraSun Energy Corporation, all of which are capable of producing moreethanol than we expect to produce.  Inaddition, there are several regional entities recently formed, or in theprocess of formation, of similar size and with similar resources to ours.

 

The following table identifiesmost of the producers in the United States along with their productioncapacities.

 

**U.S. FUEL ETHANOL PRODUCTION CAPACITY**

million gallons per year (mmgy)
| **COMPANY**                      | ** ** | **LOCATION**        | ** ** | **FEEDSTOCK** | ** ** | **Current  Capacity  (MGY)** | ** ** | **Under  Construction/  Expansions  (MGY)** |
|----------------------------------|------------|---------------------|------------|---------------|------------|------------------------------|------------|---------------------------------------------|
| Abengoa Bioenergy Corp.          |       | York, NE            |       | Corn/milo     |       | 50                           |       |                                        |
|                             |       | Colwich, KS         |       |          |       | 20                           |       |                                        |
|                             |       | Portales, NM        |       |          |       | 15                           |       |                                        |
| ACE Ethanol, LLC                 |       | Stanley, WI         |       | Corn          |       | 30                           |       |                                        |
| Adkins Energy, LLC*              |       | Lena, IL            |       | Corn          |       | 40                           |       |                                        |
| AGP*                             |       | Hastings, NE        |       | Corn          |       | 52                           |       |                                        |
| Agra Resources Coop. d.b.a EXOL* |       | Albert Lea, MN      |       | Corn          |       | 38                           |       |                                        |
| Agri-Energy, LLC*                |       | Luverne, MN         |       | Corn          |       | 21                           |       |                                        |
| Alchem Ltd. LLLP                 |       | Grafton, ND         |       | Corn          |       | 10.5                         |       |                                        |
| Al-Corn Clean Fuel*              |       | Claremont, MN       |       | Corn          |       | 30                           |       |                                        |
| Amaizing Energy, LLC*^           |       | Denison, IA         |       | Corn          |       |                         |       | 40                                          |
| Archer Daniels Midland           |       | Decatur, IL         |       | Corn          |       | 1070                         |       |                                        |
|                             |       | Cedar Rapids, IA    |       | Corn          |       |                         |       |                                        |
|                             |       | Clinton, IA         |       | Corn          |       |                         |       |                                        |
|                             |       | Columbus, NE        |       | Corn          |       |                         |       |                                        |
|                             |       | Marshall, MN        |       | Corn          |       |                         |       |                                        |
|                             |       | Peoria, IL          |       | Corn          |       |                         |       |                                        |
|                             |       | Wallhalla, ND       |       | Corn/barley   |       |                         |       |                                        |
| Aventine Renewable Energy, Inc.  |       | Pekin, IL           |       | Corn          |       | 100                          |       |                                        |
|                             |       | Aurora, NE          |       | Corn          |       | 40                           |       |                                        |
| Badger State Ethanol, LLC*       |       | Monroe, WI          |       | Corn          |       | 48                           |       |                                        |
| Big River Resources, LLC *       |       | West Burlington, IA |       | Corn          |       | 40                           |       |                                        |
| Broin Enterprises, Inc.          |       | Scotland, SD        |       | Corn          |       | 9                            |       |                                        |
| Bushmills Ethanol*^              |       | Atwater, MN         |       | Corn          |       |                         |       | 40                                          |
| Cargill, Inc.                    |       | Blair, NE           |       | Corn          |       | 83                           |       |                                        |

 

6

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|                                 |   | Eddyville, IA      |   | Corn                 |   | 35     |   |   |
|--------------------------------------|--------|--------------------|--------|----------------------|--------|--------|--------|--------|
| Central Iowa Renewable Energy, LLC*^ |   | Goldfield, IA      |   | Corn                 |   |   |   | 50     |
| Central MN Ethanol Coop*             |   | Little Falls, MN   |   | Corn                 |   | 20     |   |   |
| Central Wisconsin Alcohol            |   | Plover, WI         |   | Seed corn            |   | 4      |   |   |
| Chief Ethanol                        |   | Hastings, NE       |   | Corn                 |   | 62     |   |   |
| Chippewa Valley Ethanol Co.*         |   | Benson, MN         |   | Corn                 |   | 42     |   |   |
| Commonwealth Agri-Energy, LLC*       |   | Hopkinsville, KY   |   | Corn                 |   | 20     |   |   |
| Corn Plus, LLP*                      |   | Winnebago, MN      |   | Corn                 |   | 44     |   |   |
| Dakota Ethanol, LLC*                 |   | Wentworth, SD      |   | Corn                 |   | 48     |   |   |
| DENCO, LLC*                          |   | Morris, MN         |   | Corn                 |   | 21.5   |   |   |
| East Kansas Agri-Energy, LLC*^       |   | Garnett, KS        |   | Corn                 |   |   |   | 35     |
| ESE Alcohol Inc.                     |   | Leoti, KS          |   | Seed corn            |   | 1.5    |   |   |
| Ethanol2000, LLP*                    |   | Bingham Lake, MN   |   | Corn                 |   | 30     |   |   |
| Glacial Lakes Energy, LLC*           |   | Watertown, SD      |   | Corn                 |   | 48     |   |   |
| Golden Cheese Company of California* |   | Corona, CA         |   | Cheese whey          |   | 5      |   |   |
| Golden Grain Energy L.L.C.*^         |   | Mason City, IA     |   | Corn                 |   |   |   | 40     |
| Golden Triangle Energy, LLC*         |   | Craig, MO          |   | Corn                 |   | 20     |   |   |
| Gopher State Ethanol                 |   | St. Paul, MN       |   | Corn/Beverage  Waste |   | 15     |   |   |
| Grain Processing Corp.               |   | Muscatine, IA      |   | Corn                 |   | 10     |   |   |
| Granite Falls Energy, LLC^           |   | Granite Falls, MN  |   | Corn                 |   |   |   | 45     |
| Great Plains Ethanol, LLC*           |   | Chancellor, SD     |   | Corn                 |   | 42     |   |   |
| Hawkeye Renewables, LLC              |   | Iowa Falls, IA     |   | Corn                 |   | 45     |   |   |
| Heartland Corn Products*             |   | Winthrop, MN       |   | Corn                 |   | 36     |   |   |
| Heartland Grain Fuels, LP*           |   | Aberdeen, SD       |   | Corn                 |   | 8      |   |   |
|                                 |   | Huron, SD          |   | Corn                 |   | 14     |   |   |
| Husker Ag, LLC*                      |   | Plainview, NE      |   | Corn                 |   | 23     |   |   |
| Iowa Ethanol, LLC*                   |   | Hanlontown, IA     |   | Corn                 |   | 45     |   |   |
| Illinois River Enrgy, LLC^           |   | Rochelle, IL       |   | Corn                 |   |   |   | 50     |
| James Valley Ethanol, LLC            |   | Groton, SD         |   | Corn                 |   | 45     |   |   |
| J.R. Simplot                         |   | Caldwell, ID       |   | Potato waste         |   | 4      |   |   |
| KAAPA Ethanol, LLC*                  |   | Minden, NE         |   | Corn                 |   | 40     |   |   |
| Land O’ Lakes*                  |   | Melrose, MN        |   | Cheese whey          |   | 2.6    |   |   |
| Lincolnland Agri-Energy, LLC*        |   | Palestine, IL      |   | Corn                 |   | 40     |   |   |
| Liquid Resources of Ohio^            |   | Medina, OH         |   | Waste  beverage      |   |   |   | 4      |
| Little Sioux Corn Processors, LP*    |   | Marcus, IA         |   | Corn                 |   | 46     |   |   |
| Merrick/Coors                        |   | Golden, CO         |   | Waste beer           |   | 1.5    |   |   |
| Michigan Ethanol, LLC                |   | Caro, MI           |   | Corn                 |   | 45     |   |   |
| MGP Ingredients, Inc.                |   | Pekin, IL          |   | Corn/wheat  starch   |   | 78     |   |   |
|                                 |   | Atchison, KS       |   |                 |   |   |   |   |
| Mid-Missouri Energy, Inc.*^          |   | Malta Bend, MO     |   | Corn                 |   |   |   | 40     |
| Midwest Grain Processors*            |   | Lakota, IA         |   | Corn                 |   | 50     |   | 45     |
| Midwest Renewable Energy, LLC        |   | Sutherland, NE     |   | Corn                 |   | 15     |   |   |
| Miller Brewing Co.                   |   | Olympia, WA        |   | Brewery  waste       |   | 0.7    |   |   |
| Minnesota Energy*                    |   | Buffalo Lake, MN   |   | Corn                 |   | 18     |   |   |
| New Energy Corp.                     |   | South Bend, IN     |   | Corn                 |   | 95     |   |   |
| Northeast Missouri Grain, LLC*       |   | Macon, MO          |   | Corn                 |   | 40     |   |   |
| Northern Lights Ethanol, LLC*        |   | Big Stone City, SD |   | Corn                 |   | 45     |   |   |
| Northstar Ethanol, LLC^              |   | Lake Crystal, MN   |   | Corn                 |   |   |   | 50     |

 

7

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| Otter Creek Ethanol, LLC*                 |   | Ashton, IA         |   | Corn                   |   | 45         |       |       |
|-------------------------------------------|--------|--------------------|--------|------------------------|--------|------------|------------|------------|
| Panhandle Energies of Dumas, LP^          |   | Dumas, TX          |   | Corn/Grain  Sorghum    |   |       |       | 30         |
| Parallel Products                         |   | Louisville, KY     |   | Beverage  Waste        |   | 5.4        |       |       |
|                                      |   | R. Cucamonga, CA   |   |                   |   |       |       |       |
| Permeate Refining                         |   | Hopkinton, IA      |   | Sugars &  starches |   | 1.5        |       |       |
| Pine Lake Corn Processors, LLC*^          |   | Steamboat Rock, IA |   | Corn                   |   |       |       | 20         |
| Platte Valley Fuel Ethanol, L.L.C.        |   | Central City, NE   |   | Corn                   |   | 40         |       |       |
| Pro-Corn, LLC*                            |   | Preston, MN        |   | Corn                   |   | 40         |       |       |
| Quad-County Corn Processors*              |   | Galva, IA          |   | Corn                   |   | 23         |       |       |
| Reeve Agri-Energy                         |   | Garden City, KS    |   | Corn/milo              |   | 12         |       |       |
| Siouxland Energy & Livestock Coop*    |   | Sioux Center, IA   |   | Corn                   |   | 18         |       |       |
| Sioux River Ethanol, LLC*                 |   | Hudson, SD         |   | Corn                   |   | 45         |       |       |
| Tall Corn Ethanol, LLC*                   |   | Coon Rapids, IA    |   | Corn                   |   | 45         |       |       |
| Tate & Lyle                           |   | Loudon, TN         |   | Corn                   |   | 65         |       |       |
| Trenton Agri Products, LLC                |   | Trenton, NE        |   | Corn                   |   | 30         |       |       |
| Tri-State Ethanol Co., LLC*               |   | Rosholt, SD        |   | Corn                   |   | 18         |       |       |
| United WI Grain Producers, L.L.C.*^       |   | Friesland, WI      |   | Corn                   |   |       |       | 40         |
| U.S. Energy Partners, LLC                 |   | Russell, KS        |   | Milo/wheat  starch     |   | 40         |       |       |
| Utica Energy, LLC                         |   | Oshkosh, WI        |   | Corn                   |   | 24         |       | 26         |
| VeraSun Energy Corporation                |   | Aurora, SD         |   | Corn                   |   | 100        |       |       |
| VeraSun Fort Dodge, LLC^                  |   | Ft. Dodge, IA      |   | Corn                   |   |       |       | 110        |
| Voyager Ethanol, LLC*^                    |   | Emmetsburg, IA     |   | Corn                   |   |       |       | 50         |
| Western Plains Energy, LLC*               |   | Campus, KS         |   | Corn                   |   | 30         |       |       |
| Western Wisconsin Renewable Energy, LLC*^ |   | Boyceville, WI     |   | Corn                   |   |       |       | 40         |
| Wyoming Ethanol                           |   | Torrington, WY     |   | Corn                   |   | 5          |       |       |
| **Total Existing Capacity**               |   |               |   |                   |   | **3488.2** | ** ** | ** ** |
| **Total Under Construction/ Expansions**  |   |               |   |                   |   | ** ** |       | **755.0**  |
| **Total Capacity**                        |   |               |   |                   |   | **4243.2** |       | ** ** |

 

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| * farmer-owned       |   |   |   | Renewable  Fuels Association |
|----------------------|--------|--------|--------|------------------------------|
| ^ under construction |   |   |   | Last  Updated: December 2004 |

 

The ethanolindustry is very competitive.  While theethanol industry has been growing, there is significant competition amongethanol producers.  Our ethanol plant isin direct competition with other ethanol producers, many of which have greaterresources than we currently have or will have in the future and can produce awider range of products than our plant. Nationally, ethanol production is concentrated in a few large companies,such as Archer Daniels Midland and Cargill, among others, that are capable ofproducing significantly greater quantities than the amount of ethanol weproduce.  In addition, there are severalother Midwestern regional ethanol producers, as well as producers located invarious parts of the U.S., that have recently formed, are in the process offorming, or are under consideration, which are or would be of a similar sizeand have similar resources to us.

 

Ethanol production is also expandinginternationally.  Ethanol produced orprocessed in certain countries in Central American and the Caribbean region iseligible for tariff reduction or elimination upon importation to the UnitedStates under a program known as the Caribbean Basin Initiative.  Large ethanol producers, such as Cargill, haveexpressed interest in building dehydration plants in participating CaribbeanBasin countries, such as El Salvador, which would convert ethanol intofuel-grade ethanol for shipment to the United States.  Ethanol imported

 

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from Caribbean Basin countries may be a less expensive alternative todomestically produced ethanol and may affect our ability to sell our ethanolprofitably.

 

Our ethanolplant also competes with producers of other gasoline additives having similaroctane and oxygenate values as ethanol, such as producers of MTBE, apetrochemical derived from methanol that costs less to produce thanethanol.  Although currently the subjectof a federal ban, many major oil companies can produce MTBE and because it ispetroleum-based, its use is strongly supported by major oil companies.  Alternative fuels, gasoline oxygenates andalternative ethanol production methods are also continually under development.  The major oil companies have significantlygreater resources than we have to market MTBE and other additives, to developalternative products, and to influence legislation and public perception ofMTBE and ethanol.  These companies alsohave sufficient resources to begin production of ethanol should they choose todo so.

 

Alternativefuels, gasoline oxygenates and ethanol production methods are continually underdevelopment by ethanol and oil companies with far greater resources that wehave.  New products or methods of ethanolproduction developed by larger better-financed competitors could provide themcompetitive advantages over us and harm our business.

 

**Sources of RawMaterials - Corn Feedstock Supply**

 

We haveobtained a grain dealers license and have established our own grain sourcingstaff to acquire the corn we need.  Wehave also identified a number of grain dealers as potential sources of grain innorthwestern Iowa for additional corn delivery. The grain required for operation of the ethanol plant is readilyavailable through our own grain sourcing staff, which purchases the corndirectly from local producers or from secondary markets.

 

**Dependence on One ora Few Major Customers**

 

As discussedabove, we have entered into marketing agreements with ADM and CSC for thepurposes of marketing and distributing our principal products, ethanol anddistillers grains.  We rely on ADM andCSC for the sale and distribution of almost all of our products, except forthose distillers grains that we market locally. Therefore, we are highly dependent on ADM and CSC for the successfulmarketing of our products.  As a largeethanol producer, ADM is also a source of competition.

 

**Effect ofGovernmental Regulation**

 

Ethanol hasimportant applications, primarily as a high quality octane enhancer and anoxygenate capable of reducing air pollution and improving automobileperformance.  Ethanolcontains 35% oxygen by weight.  Whencombined with gasoline, ethanol acts as an oxygenate.  As a result, the gasoline burns cleaner, andreleases less carbon monoxide and other exhaust emissions into theatmosphere.  The federal governmentencourages the use of oxygenated gasoline as a measure to protect theenvironment.  Oxygenated gasoline iscommonly referred to as reformulated gasoline.

 

The ethanolindustry is heavily dependent on several economic incentives to produceethanol, including federal ethanol supports. Ethanol sales have been favorably affected by the Clean Air Actamendments of 1990, particularly the Federal Oxygen Program which becameeffective November 1, 1992.  The FederalOxygen Program requires the sale of oxygenated motor fuels during the wintermonths in certain major metropolitan areas to reduce carbon monoxidepollution.  Ethanol use has increased dueto a second Clean Air Act program, the Reformulated Gasoline Program.  This program became effective January 1,1995, and requires the sale of reformulated gasoline in nine major urban areasto reduce pollutants, including those that contribute to ground level ozone,better known as smog.  Increasinglystricter EPA regulations are expected to increase the number of metropolitanareas deemed in non-compliance with Clean Air Standards, which could increasethe demand for ethanol.

 

Abill (S. 791, 108th Cong.) including provisions known as theRenewable Fuels Standard (“RFS”) was introduced in the United States Senateduring the 108th Session, which ended in 2004. If passed, it would have served as a catalyst for investment inrenewable fuel processing fuels and new technologies.  The proposed legislation would determine thespecific baseline volume of ethanol to be used in gasoline on a nationwidebasis.  The bill anticipated that volumeswould begin in the year 2003 at 2.3 billion gallons and grow at a rate of

 

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approximately300 million gallons per year to a volume of 5 billion gallons in 2012.  The production capacity of currentlyoperating ethanol plants exceeds 3.4 billion gallons.**** Additional plants are under construction thatwill bring total domestic ethanol production capacity to approximately 4.1billion gallons by 2005.  Accordingly,fuel ethanol production may exceed required volumes under the proposedlegislation in its early stages.  If theRenewable Fuels Standard bill or similar legislation is adopted, it mayinitially yield a lesser demand for our ethanol, but would provide for asubstantial long-term market for our ethanol. This legislation was alsounder deliberation as a component in the Senate Energy Bill (S. 2095) and theHouse Energy Bill (H.R. 4503).

 

Under both S. 2095 and H.R. 4503, MTBE would be banned for 4 years afterenactment of the RFS, provided that individual states could choose to continueto allow the use of MTBE by notifying the administrator of the EPA.  The RFS would eliminate a requirement undercurrent law for motor fuel to contain oxygenates and would require that allmotor fuels sold by a refiner, blender, or importer contain a minimum volume ofrenewable fuels.  The required volume ofrenewable fuel would start at 3.1 billion gallons in 2005 and increase to 5billion gallons by 2012.  This renewablefuels standard would largely be met by adding ethanol to gasoline.  Although, both S. 2095 and H.R. 4503 expiredin 2004 with the close of the 108th Congress, similar legislation isexpected to be introduced in the 109th Congress.

 

The government’sregulation of the environment changes constantly.  It is possible that more stringent federal orstate environmental rules or regulations could be adopted, which could increaseour operating costs and expenses.  Italso is possible that federal or state environmental rules or regulations couldbe adopted that could have an adverse effect on the use of ethanol.  For example, changes in the environmentalregulations regarding the required oxygen content of automobile emissions couldhave an adverse effect on the ethanol industry. Furthermore, plant operations likely will be governed by theOccupational Safety and Health Administration (“OSHA”).  OSHA regulations may change such that thecosts of the operation of the plant may increase.  Any of these regulatory factors may result inhigher costs or other materially adverse conditions effecting our operations,cash flows and financial performance.

 

The use ofethanol as an oxygenate to blend with fuel to comply with federal mandates alsohas been aided by federal tax policy. The Energy Tax Act of 1978 exempted ethanol blended gasoline from thefederal gas tax as a means of stimulating the development of a domestic ethanolindustry and mitigating the country’s dependence on foreign oil.  As amended, the federal tax exemptioncurrently allows the market price of ethanol to compete with the price ofdomestic gasoline.  The exemption for a10% ethanol blend is the equivalent of providing a per gallon “equalization”payment that allows blenders to pay more for ethanol than the wholesale priceof gasoline and still retain profit margins equal to those received upon thesale of gasoline that is not blended with ethanol.  Under current legislation, the federalgasoline tax exemption for a 10% ethanol blend is 5.2 cents per gallon.  This exemption was to gradually drop to 5.1cents per gallon in 2005, however, as of January 1, 2005, this federal taxincentive will be replaced by a new volumetric ethanol excise tax creditdiscussed below.

 

On October 22, 2004, President Bush signedH.R. 4520, which contained the Volumetric Ethanol Excise Tax Credit (“VEETC”)and amended the federal excise tax structure effective as of January 1,2005.  Currently, ethanol-blended fuel istaxed at a lower rate than regular gasoline (13.2 cents on a 10% blend).  Under VEETC, the existing ethanol excise taxexemption is eliminated, thereby allowing the full federal excise tax of 18.4cents per gallon of gasoline to be collected on all gasoline and allocated tothe highway trust fund.  This would addapproximately $1.4 billion to the highway trust fund revenue annually.  In place of the current exemption, the billcreates a new volumetric ethanol excise tax credit of 5.1 cents per gallon ofethanol blended at 10%.  Refiners andgasoline blenders would apply for this credit on the same tax form as beforeonly it would be a credit from general revenue, not the highway trust fund.  Based on volume, the VEETC is expected toallow much greater refinery flexibility in blending ethanol.

 

The ethanolindustry and our business depend upon continuation of the federal ethanolsupports discussed above.  Theseincentives have supported a market for ethanol that might disappear without theincentives.  Alternatively, theincentives may be continued at lower levels than at which they currentlyexist.  The elimination or reduction ofsuch federal ethanol supports would make it more costly for us to sell ourethanol.

 

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**Costs and Effects ofCompliance with Environmental Laws**

 

We aresubject to extensive air, water and other environmental regulations and we havebeen required to obtain a number of environmental permits to construct andoperate the plant.  We have obtained allof the necessary permits to operate the plant including, air pollutionconstruction permits, a pollutant discharge elimination system general permit,storm water discharge permits, a water withdrawal permit, and an alcohol fuelproducer’s permit.  In addition, we havecompleted a spill prevention control and countermeasures plan.  Although we have been successful in obtainingall of the permits currently required, any retroactive change in environmentalregulations, either at the federal or state level, could require us to obtainadditional or new permits or spend considerable resources on complying withsuch regulations.

 

During the third fiscalquarter of 2004, we installed various items of equipment to allow the plant tocontinue to continue producing in excess of 40 million gallons of ethanol peryear while continuing to satisfy certain emission standards and maintainefficiencies.  We paid approximately $1,953,000 to purchase and installthe additional equipment.  We mayimplement certain design improvements as they are developed.  The plantmay be shut down from time to time over the next 12 months to incorporate thesedesign improvements.

 

We are subject to ongoingenvironmental regulations and testing.  The plant passed emissions testingin December 2003 and we received renewed operating permits in April2004.  The operating permits allow us tooperate in excess of 40 million gallons per year.  After we installed theregenerative thermal oxidizer, we retested critical emissions points inNovember 2004 to determine our ability to operate at peak efficiencies withoutviolating emissions standards.  We arepleased with the results of these retests and final permitting is expectedsoon.  Our capacity to operate at lowertemperatures while maintaining compliance is expected to increase efficiencyand may reduce our costs of operations. We are required by federal regulations to conduct a Relative AccuracyTest Audit (RATA) once per 12-month period.  We passed the RATA test inFebruary 2004.

 

We aresubject to oversight activities by the EPA. There is always a risk that the EPA may enforce certain rules andregulations differently than Iowa’s environmental administrators.  Iowa or EPA rules are subject to change, andany such changes could result in greater regulatory burdens on plantoperations.  We could also be subject toenvironmental or nuisance claims from adjacent property owners or residents inthe area arising from possible foul smells or other air or water dischargesfrom the plant.  Such claims may resultin an adverse result in court if we are deemed to engage in a nuisance thatsubstantially impairs the fair use and enjoyment of real estate.

 

**Employees**

 

As of September 30, 2004, we had a total of 31full-time employees.  We have 25 full-timeemployees in ethanol production operations and 6 full-time employees in generalmanagement and administration.  We do notexpect to hire a significant number of additional employees during the next 12months.

 

**ITEM2.****                                                     DESCRIPTIONOF PROPERTY.**

 

We own thegeneral partnership interest in the limited partnership that owns the ethanolplant.  The ethanol plant is located onan approximately 80-acre rural site that is located approximately two mileseast of the City of Marcus, Iowa and approximately one mile north of Iowa StateHighway 3.  The plant’s address is 4808 FAvenue, Marcus, Iowa 51035.  The plantgrinds approximately 15 million bushels of corn per year to produceapproximately 40 million gallons of ethanol. Construction of the plant was completed in 2003.  The ethanol plant consists of the followingbuildings:

 

•                  A processing building, which contains processing equipment,laboratories, control room and offices;

•                  A grain receiving and shipping building, which contains a controlroom and 1st and 2nd level mezzanine;

•                  A mechanical building, which contains maintenance offices, storageand a welding shop; and

•                  An administrative building, along with furniture and fixtures,office equipment and computer and telephone systems.

 

In addition,the plant includes a fermenter walkway, gas dryer, evaporator and storagefacilities for ethanol and distiller grains. The site also contains improvements such as rail tracks and a rail spur,landscaping, drainage systems and paved access roads.

 

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On July 25,2002, we executed a mortgage in favor of First National Bank of Omaha, N.A. ofOmaha, Nebraska, creating a first lien on our real estate and ethanol plant anda security interest in all personal property located on our property.  The mortgage and security interest secure theconstruction loan, which was converted on June 23, 2003, into three term notesin the aggregate amount of $31,465,000. Subsequent to the end of our fiscal year, we secured additional debtfinancing of up to $5,400,000 to fund a plant expansion.  Upon completion of the expansion, this loanwill be added to the principal balance of one of our term notes and the debtwill be secured by our real estate, ethanol plant and a security interest inall personal property located on our property.

 

**ITEM 3.****                                                     LEGALPROCEEDINGS.**

 

None.

 

**ITEM 4.****                                                     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None.

 

**PART II**

 

**ITEM5.****                                                     MARKETFOR MEMBERSHIP UNITS AND RELATED MEMBER MATTERS.**

 

*Recent Sales of UnregisteredSecurities*

 

In 2002, we sold exclusively to residents ofthe State of Iowa, a total of 10,002 Class A membership units, which wereexempt from federal registration but were registered and offered in the Stateof Iowa.  We sold these membership unitswithout the use of an underwriter.  Wesold 7,812 Class A membership units at a price of $1,000 per unit and we sold2,190 Class A membership units for a price of $1,100 per unit.  From our 2002 Class A membership unit saleswe received total aggregate proceeds of approximately $10,226,000.

 

We claimed exemption from federalregistration with respect to our Class A membership unit sales due to theapplication of Section 3(a)(11) of the Securities Act of 1933 (regardingintra-state offerings).  The recipientsof securities in each such transaction represented their domicile as the Stateof Iowa, their intention to acquire the securities for investment only and notwith a view to, or for sale in connection with, any distribution thereof, andappropriate legends were affixed to unit certificates and instruments issued insuch transactions.  All recipients hadadequate access through their relationships with us, to information aboutus.  We have no Class B membership unitsoutstanding.  On April 30, 2003, we registered ourunits with the U.S. Securities and Exchange Commission on Form 10-SBRegistration Statement pursuant to Section 12(g) of the Securities Exchange Actof 1934.

 

*Market Information*

 

There is nopublic trading market for our units.  Wehave created a private qualified online matching service in order to facilitatetrading among our members.  Our onlinematching service consists of an electronic bulletin board that providesinformation to prospective sellers and buyers of our units.  We do not receive any compensation forcreating or maintaining the matching service. We do not become involved in any purchase or sale negotiations arisingfrom our qualified matching service.  Inadvertising our qualified matching service, we do not characterize the Companyas being a broker or dealer or an exchange. We do not give advice regarding the merits or shortcomings of anyparticular transaction.  We do notreceive, transfer or hold funds or securities as an incident of operating theonline matching service.  We do not usethe bulletin board to offer to buy or sell securities other than in compliancewith the securities laws, including any applicable registrationrequirements.  We have no role ineffecting the transactions beyond approval, as required under our operatingagreement and the issuance of new certificates. So long as we remain a Section 12 registrant and a publicly reportingcompany, information about the Company will be publicly available through theSEC’s filing system.  However, if at anytime we cease to be a Section 12 registrant or publicly reporting company, wewill continue to make information about the Company publicly available on ourwebsite.

 

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*Holders*

 

As ofSeptember 30, 2004, the Company had 10,941 Class A Units issued and outstandingand a total of 684 Class A unit holders.

 

*Distributions*

 

On January 20,2004, our Board of Directors, as general partner of the limited partnership,approved a total cash distribution of $1,050,000 from the limited partnershipto all limited partners of record as of January 20, 2004.  At January 20, 2004, we owned 58.5% of thelimited partnership units in the limited partnership.  Accordingly, the Company received a cashdistribution of $614,724.  Thedistribution was made in February 2004. Of the $614,724, we distributed approximately $561,000 to our unitholders and used the remaining amount to reduce accounts payable forprofessional fees incurred on behalf of the Company by the limited partnership.

 

On August 17, 2004, ourBoard of Directors, acting as general partner of the limited partnership,approved a total cash distribution of $1,200,000 to all limited partners ofrecord as of August 17, 2004.  Due to ourredemption of limited partnership units, our ownership interest in the limitedpartnership increased from 58.5% to 60.15%. As a holder of 60.15% of the limited partnership units on August 17,2004, we received a cash distribution of $721,847 from the limited partnership.  On the same day, we approved a cashdistribution of $52.57 per membership unit or a total of $575,210 to theCompany’s unit holders of record as of August 17, 2004.

 

Distributionsto our unit holders are subject to certain loan covenants and restrictions thatrequire us to make additional loan payments based on excess cash flow.  These loan covenants and restrictions aredescribed in greater detail under “MANAGEMENT’S DISCUSSION AND ANALYSIS –Liquidity and Capital Resources.” Revenues generated from plant operations are distributed by the limitedpartnership to us in proportion to our equity ownership in the limitedpartnership.  We distribute the revenuesreceived from the limited partnership to our unit holders in proportion to thenumber of units held by each unit holder. A unit holder’s distribution is determined by dividing the number ofunits owned by such unit holder by the total number of units outstanding.  Our Class A directors have completediscretion over the timing and amount of distributions to our unit holders,however, our operating agreement requires the Class A directors to endeavor tomake cash distributions at such times and in such amounts as will permit ourunit holders to satisfy their income tax liability in a timely fashion.  Our expectations with respect to our abilityto make future distributions are discussed in greater detail in “MANAGEMENT’SDISCUSSION AND ANALYSIS.”

 

**ITEM6.****                                                     MANAGEMENT’SDISCUSSION AND ANALYSIS.**

 

This report contains forward-lookingstatements that involve future events, our future performance and our expectedfuture operations and actions.  In somecases you can identify forward-looking statements by the use of words such as “may,”“will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,”“could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or thenegative of these terms or other similar expressions.  These forward-looking statements are only ourpredictions and involve numerous assumptions, risks and uncertainties.  Our actual results or actions may differ materiallyfrom these forward-looking statements for many reasons, including the reasonsdescribed in this report.  We are notunder any duty to update the forward-looking statements contained in thisreport.  We cannot guarantee futureresults, levels of activity, performance or achievements.  We caution you not to put undue reliance onany forward-looking statements, which speak only as of the date of thisreport.  You should read this report andthe documents 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 our forward-lookingstatements by these cautionary statements.

 

**Overview**

 

As general partner of the limitedpartnership, “LSCP, LLLP”, we manage the business and day-to-day operations ofthe 40 MGY ethanol plant in northwest Iowa. Little Sioux Corn Processors, L.L.C. (the “LLC”) and its subsidiary,LSCP, LLLP, are collectively referred to in this report as the “Company,” “we,”or “us.”

 

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Since April 2003, we have been engaged in theproduction of ethanol and distillers grains at our ethanol plant near Marcus,Iowa.  Since commencement of plant operations,the plant’s production capacity has consistently exceeded the 40 MGY productionguarantee provided by the general contractor as measured on a pro ratabasis.  Our revenues are derived from thesale and distribution of our ethanol and distillers grains throughout thecontinental United States.

 

Our board ofdirectors has determined that it is in the best interests of the Company toexpand the plant’s ethanol production capacity from 40 MGY to 52 MGY.  The cost of the expansion is expected to beapproximately $5,400,000, which will be debt-financed through an amendment toour current senior credit facility.  Weexpect the expansion to increase operating income by approximately $3,200,000as a result of increasing revenue and operating efficiency.  There is no assurance that the expansion willreduce our operating costs or increase our operating income.  Our expansion projections are based upon ourhistorical operating costs and historical revenues and there is no guarantee orassurance that our past financial performance can accurately predict futureresults especially in connection with expansion.  In addition, the expansion may cost more andmay present additional challenges and risks that negatively impact our futurefinancial performance.  We have begunconstruction of the expansion and anticipate completion by May 2005.  The expansion may be delayed for a number ofreasons and there is no assurance that the expansion will not be delayed beyondthe anticipated completion date.

 

We are subjectto industry-wide factors that affect the Company’s revenues and profits.  These factors include, but are not limitedto, the available supply and cost of corn from which our ethanol and distillersgrains are made; the cost of natural gas, which we use in the production ofethanol and distillers grains; dependence on one or a few major customers whomarket and distribute our products; the intensely competitive nature of ourindustry; possible legislation at the federal, state, and/or local level;changes in federal ethanol tax incentives; and the cost of complying with theextensive environmental laws that regulate our industry.

 

**Plan of Operations for the Next 12 Months**

 

*Financial Summaryand Analysis of Fiscal Year Ended September 30 ,2004*

 

Net incomebefore minority interest, which is the limited partnership’s income, totaled$13,517,512 for fiscal year 2004, up from $6,991,879 reported for the ninemonth fiscal year ended September 30, 2003. The increase primarily results from fiscal 2003 containing only 6 monthsof operations since the plant began operations in April 2003 and the fiscalyear ended on September 30, 2003. Offsetting our short fiscal year was our receipt of program paymentsunder the USDA Commodity Credit Corporation Bioenergy Program.  Since the Bioenergy Program payments arebased on increases in production, the income obtained from this program infiscal 2004 was reduced as compared to the new production generated in fiscal2003.

 

Revenues fromoperations in fiscal 2004 totaled $85,540,934, up from $31,814,299 in fiscal2003.  Net gallons of denatured ethanolsold totaled 48,883,842 in fiscal 2004 compared to 20,673,634 gallons in fiscal2003.  Increased revenues in fiscal 2004resulted from an increase in the total number of gallons of ethanol sold andhigher ethanol prices.  While weanticipate continued strong demand for ethanol, we are uncertain as to thesustainability of current ethanol prices given the increasing ethanol supply asnew plants begin production and existing plants continue to expand.

 

Other incomeand expense consisted of a gain of $5,360,140 in fiscal 2004 compared to incomeof $5,300,526 reported in fiscal 2003. Payments under the USDA Commodity Credit Corporation Bioenergy Programmake up a majority of this category. Fiscal 2004 payments totaled $6,645,512 compared to $5,535,733 in fiscal2003.  Since the Bioenergy Program isbased on increases in production, fiscal 2004 program payments were calculatedbased upon these increases.  The plannedplant expansion is expected to earn additional program payments since theprogram is based upon incremental increases of production relative to previousyears.

 

Our cost ofgoods sold for fiscal 2004 totaled $71,244,909, up from $27,462,227 in fiscal2003.  In addition to the short fiscalyear in 2003, the average per bushel cost of corn increased from $2.24 infiscal 2003 to $2.56 in fiscal 2004. Cost of good sold includes losses of $3,851,340 in fiscal 2004 relatedto our corn and natural gas derivative instruments, up from $648,714 in fiscal2003.  We recognize the gains or lossesthat result from the changes in the value of our derivative instruments in costof goods sold as the changes occur.  Ascorn prices

 

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fluctuate, the value of our derivative instruments are impacted, whichaffects our financial performance.  Inearly calendar year 2004, the corn market indicated decreased production basedupon drought conditions existing in the western corn-belt.  Projected demand for the 2004 corn crop wasestimated at about 10.5 billion bushels. Forecasted domestic and foreign demand for corn was nearing theprojected supply, which caused corn prices to rise.  As the growing season progressed, the cropbecame more secure and market prices declined. As the market declined, the value of our derivative instruments fell,which was reflected in our cost of goods sold. As of September 30, 2004, we recorded a loss of approximately $3,800,000on our derivative instruments.  This losswas partially offset by the cash price paid for corn.  We anticipate continued volatility in ourcost of goods sold due to the timing of the changes in value of the derivativeinstruments relative to the cost and use of the commodity being hedged.

 

Operatingexpenses for fiscal 2004 totaled $6,138,653, up from $2,660,909 reported infiscal 2003, due to the short operating year in 2003.

 

*FinancialSummary and Analysis of Fourth Fiscal Quarter 2004*

 

For the fourth fiscalquarter, net income before minority interest, which is the limited partnership’sincome, totaled $1,593,466, up from a loss of $3,900,172 reported in the thirdquarter of fiscal year 2004.  This increase primarily resulted from asignificant decrease in our cost of goods sold, resulting from a reduction in thelosses on the value of our derivative instruments.  In the fourth quarter of 2004 we recorded aloss on the value of our derivatives of $2,527,032 compared to a loss of$6,135,977 in the third quarter of fiscal 2004. This $3,608,945 improvement resulted from a more stable corn market inthe fourth quarter, compared to the third quarter of 2004.  In addition, a fourth quarter decrease of 11cents per bushel in the average cost of corn and a fourth quarter increase of 7cents per gallon of ethanol contributed to a reduction in losses for the fourthquarter.

 

Revenues from operations inthe fourth quarter of fiscal 2004 totaled $24,573,643, up from $21,497,087 inthe third quarter of fiscal 2004.  Net gallons of denatured ethanol soldtotaled 13,024,202 in the fourth quarter of fiscal 2004 compared to 11,667,032gallons in the third quarter of fiscal 2004.  Increased revenues in thefourth quarter resulted from higher ethanol prices.  While we anticipatecontinued strong demand for ethanol, we are uncertain as to the sustainabilityof current ethanol prices given the increasing ethanol supply as new plantsbegin production and existing plants continue to expand.

 

Other income and expenseconsisted of a loss of $104,001 in the fourth quarter of fiscal 2004, comparedto a loss of $677,032 reported in the third quarter of fiscal 2004.  Inthe third quarter, the Bioenergy program income accrual was reduced becauseactual income was less than expected.

 

Our cost of goods sold forthe fourth quarter of fiscal 2004 totaled $21,293,304, down from $23,237,225 inthe third quarter of fiscal 2004.  We recognize the gains or losses thatresult from the changes in the value of our derivative instruments in cost ofgoods sold as the changes occur.  In the third quarter, we recorded a lossof $6,135,977 in cost of goods sold related to our derivativeinstruments.  The fourth quarter’s loss from derivatives was$2,527,032.  We anticipate continued volatility in our cost of goods solddue to the timing of the changes in value of the derivative instrumentsrelative to the cost and use of the commodity being hedged.

 

Operating expenses for thefourth quarter of fiscal 2004 totaled $1,560,875, which is similar to the$1,483,002 we reported in the third quarter of fiscal 2004.

 

*Plant Expansion*

 

We plan to continue tooperate the ethanol plant for the next 12 months.  Currently, the plant is operatingin excess of design capacity, and is producing more than 40 million gallons peryear as measured on a pro rata basis. Certain inefficiencies result from operating the plant at levels inexcess of the 40 million gallon per year guarantee.  These inefficiencies increase our per galloncost of production.  In order to producemore ethanol, the production process must be shortened.  The effect of a shortened process is thatethanol content per unit is lost. However, even with the increased cost per gallon of production, theadditional income that we earn on the sale of additional gallons of ethanolcurrently covers the additional costs.

 

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One way that we may be ableto operate the plant at a more efficient rate is to expand the plant.  Our board of directors formed a committee onDecember 16, 2003 to research the feasibility and economic benefits of anexpansion.  The committee also evaluatedavailable financing alternatives to fund an expansion.  Based upon the results of the feasibilitystudy and the proposed terms of available debt financing to fund plantexpansion, on August 18, 2004, the board of directors passed a resolutionapproving expansion of the plant from 40 MGY to 52 MGY.  We selected 52 MGY as our first targeted ratefor increased expansion because our feasibility study demonstrated that an expansionto 52 MGY would maximize our existing distillation and evaporation systemwithout requiring more costly modifications.

 

On December 6, 2004, weentered into an agreement with ICM, Inc., to expand our existing ethanolplant.  The performance criteria in theagreement guarantee that the expansion will increase our plant’s annual ethanolproduction capacity from 40 MGY to 52 MGY. The agreement anticipates that the expansion will be completed by May2005.  We have agreed to pay ICM, Inc.$4,600,000 for the design and construction of this expansion.  The expansion includes an additionalfermenter, slurry tank, additional water treatment equipment, liquefactiontank, molecular sieves and additions to the process building, which willaccommodate the additional fermenter and shop area.  We expect a 4-day plant shutdown will benecessary to calibrate the plant to accommodate the new equipment andfacilities.  ICM, Inc. has agreed toprovide a one year warranty period for correction of defective construction.  The amount of damages that we can recoveragainst ICM, Inc. for any breach of its obligations under the agreement,including, without limitation, damages related to ICM Inc.’s correction ofdefective construction is limited to $1,000,000.

 

In order to finance plant expansion, onDecember 2, 2004, we entered into a Sixth Amendment to our Construction LoanAgreement with First National Bank of Omaha. Under this amendment, First National Bank of Omaha has agreed toloan us up to $5,400,000 to finance the construction of the expansion of ourexisting ethanol plant.  During theconstruction period, we have agreed to pay interest only on a quarterly basison the outstanding principal amount at a rate equal to the one month LIBOR rateplus 330 basis points.  Upon completionof the construction, the outstanding balance of this new expansion loan will beadded to the principal balance of our Term Note #3 with First National Bank ofOmaha relating to the original construction of our ethanol plant.  The maturity date of Term Note #3 iscurrently June 1, 2008.

 

In connection with this new loan, we paid FirstNational Bank of Omaha an origination fee of $40,500.  Our new loan is subject to all of the termsand conditions of our existing Construction Loan Agreement with First NationalBank of Omaha, including the specific provisions regarding events of defaultand the granting of liens to secure our performance.  In the event of default, First National Bankof Omaha may accelerate the due date of the new loan and declare allobligations immediately due and payable. All loan proceeds will be disbursed pursuant to a ConstructionDisbursement Agreement between us, First National Bank of Omaha, ICM, AgStarFinancial Services ACA (the disbursing agent) and Old Republic National TitleInsurance Company (the title company).

 

We expect tohave sufficient cash from cash flow generated by continuing operations,additional debt financing secured to fund plant expansion, current lines ofcredit through our revolving promissory note, and cash reserves to cover thecosts of expansion as well as our usual operating costs over the next 12months, which consist primarily of corn supply, natural gas supply, staffing,office, audit, legal, compliance, and working capital costs.

 

The followingis our estimate of our costs for the next 12 months for the plant as itcurrently operates (40 MGY production capacity):

 
| Corn Costs                        |   | $      | 43,008,000 |   |
|-----------------------------------|--------|--------|------------|--------|
| General and  Administrative Costs |   | $      | 6,803,000  |   |
| Natural Gas  Costs                |   | $      | 7,289,000  |   |
| Chemical  Costs                   |   | $      | 4,803,000  |   |
| Other  Production Costs           |   | $      | 3,900,000  |   |
|                              |   |   |       |
| Total  Operating Costs:           |   | $      | 67,217,000 |   |

 

16

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After completion of theexpansion, our total operating costs will increase because of the increase inour production capacity.  We expect tooffset the increase in operating costs by increased ethanol revenues, however,a variety of market factors can affect both operating costs and revenues.  These factors include:

 

•                  Changes in the availability and price ofcorn;

•                  Changes in the environmental regulations thatapply to our plant operations;

•                  Increased competition in the ethanol and oilindustries;

•                  Changes in interest rates or the availabilityof credit;

•                  Changes in our business strategy, capitalimprovements or development plans;

•                  Changes in plant production capacity ortechnical difficulties in operating the plant;

•                  Changes in general economic conditions or theoccurrence of certain events causing an economic impact in the agriculture, oilor automobile industries;

•                  Changes in the availability and price ofnatural gas and the market for distillers grains; and

•                  Changes in federal and/or state laws(including the elimination of any federal and/or state ethanol tax incentives).

 

*Corn Supplies and Market Trends*

 

Iowa’s calendar year 2003final corn for grain production was estimated in January 2004 at 1.88billion bushels.  The final 2003 national production of corn was estimatedat 10.1 billion bushels.  Although the 2003 corn crop was estimated atrecord levels, demand for corn in both the foreign and domestic sectors reducedthe overall estimates of adequate corn supply. These estimates of reduced supply caused the market price to increase inthe fourth quarter of calendar year 2003 and the first six months of2004.  The 2004 corn crop was initially vulnerable to adverse weatherconditions.  As the season progressed,weather conditions throughout the Midwest production region stabilized andbecame favorable.  Extremely cooltemperatures in August caused concerns regarding the yield potential of the2004 crop.  These concerns quicklydisappeared when favorable weather conditions returned in September, allowingthe corn crop to mature.  In addition,cool conditions in August 2004 allowed the corn crop to escape with minimalstress related to reduced available moisture and temperatures.  As the 2004 harvest approached, it becameapparent the corn crop would exceed most expectations.  Currently the 2004 corn crop is estimated at11.75 billion bushels nationally.  Iowa’scorn crop is estimated at 2.55 billion bushels. The corn crop exceeded previous records on a national and statewidebasis by a substantial margin.

 

As we near the spring cornplanting season, we expect the grain market to begin focusing on prospects forthe 2005 crop.  Risk factors such asrainfall, planting dates, and temperatures will likely cause market uncertaintyand create price volatility as the growing season begins.

 

*Natural Gas Supplies and MarketTrends*

 

Natural gas is also animportant input to our manufacturing process.  We estimate that ournatural gas usage is approximately 110,000 million British thermal units (“MMBTU”)per month.  We use natural gas to dry ourdistillers grains products to moisture contents at which they can be stored forlong periods and transported greater distances, so that we can market them tobroader livestock markets, including poultry and swine markets in thecontinental United States.  Natural gas has recently been available onlyat prices exceeding historical averages.  These prices are increasing ourcosts of production.  We expect natural gas prices to remain high orincrease at least through the 2004-2005 winter months.

 

*RisksRelated to Price Protection for Corn and Natural Gas*

 

We have policies governing the hedging instruments we may use to offsetthe price of corn or natural gas.  Inpractice, as markets move, we actively manage our risk and adjust hedgingstrategies as appropriate.  Althoughwe believe our hedge positions accomplish an economic hedge against our futurepurchases, they do not qualify for hedge accounting, which would match the gainor loss on our hedge positions to the specific commodity purchase beinghedged.  We are using fair valueaccounting for our hedge positions, which means as the current market price ofour hedge positions changes, the gains and losses are immediately recognized inour cost of goods sold.  For

 

17

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example, it is likely and we would generally expect that a positive 10%increase in the cash price of corn would produce a positive increase of 10% or$21,232 in the fair value of our derivative instruments and vice versa based onour positions at September 30, 2004. The immediate recognition of hedging gains and losses under fair valueaccounting can cause net income to be volatile from quarter to quarter due tothe timing of the change in value of the derivative instruments relative to thecost and use of the commodity being hedged. As of September 30, 2004, the fair value of our derivativeinstruments for corn and natural gas is reflected as a liability in the amountof $212,319.  There are several variablesthat could affect the extent to which our derivative instruments are impactedby price fluctuations in the cost of corn or natural gas.  However, it is likely that commodity cashprices will have the greatest impact on the derivatives instruments withdelivery dates nearest the current cash price.

 

To manage our corn price risk, our hedgingstrategy is designed to establish a price ceiling and floor for our cornpurchases.  We have taken a net longposition on our exchange traded futures contracts, which allows us to offsetincreases or decreases in the market price of corn.  The upper limit of loss on our futurescontracts is the difference between the contract price and the cash marketprice of corn at the time of the execution of the contract.  The upper limit of loss on our exchangetraded and over-the-counter option contracts is limited to the amount of thepremium we paid for the option.

 

As of September 30, 2004, wehave forward contracts, futures and option contract price protection in placefor approximately 100% of our expected corn usage through September 2005.  As we move forward, additional protection maybe necessary.  These positions are broughtto market on a daily basis.  As cornprices move in reaction to market trends and information, our income statementwill be affected depending on the impact such market movements have on thevalue of our derivative instruments.  Aswe move forward into spring, additional price protection may be required tosolidify our margins into fiscal year 2006. 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 the Company.

 

To manage our natural gas price risk, we entered into a natural gasdelivery agreement with our supplier to supply us with natural gas, fixing theprice at which we purchase natural gas. However, in order to reduce ourprice-risk exposure and benefit from any decreases in the price ofnatural gas, we havetaken a net short position onderivative instruments including forward contracts and over-the-counter and NewYork Mercantile Exchange option contracts .  The upper limit of loss on this position isthe premium price we paid for the option.

 

We estimate that we haveforward contracts in place for approximately 100% of our natural gas needsthrough March 2005.  The forward contracts provide for approximately20% higher gas prices for the 2004-2005 winter months than for the 2003-2004winter months.  In addition to procuringnatural gas requirements for winter 2004-2005, we have purchased approximately90% of our summer and fall 2005 natural gas requirements.  We may alsopurchase natural gas requirements for the 2006 and 2007 calendar years as weattempt to further reduce our susceptibility to price increases.

 

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

 

*Purchases of Equipment, Design Improvements,Environmental Testing Results and Other Operational Issues*

 

During fiscal year 2004, weinstalled a regenerative thermal oxidizer, water treatment equipment, a cornscreener, an additional centrifuge, centrifuge components, hard surface on theplant roads, and an additional heat exchanger.  We believe that installingthis equipment has allowed the plant to continue producing in excess of 40million gallons of ethanol per year while continuing to satisfy certainemission standards and maintain efficiencies.  We may implement additionaldesign improvements as they are developed.  The plant may be shut downfrom time to time over the next 12 months to incorporate any designimprovements.

 

18

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We are subject to ongoingenvironmental regulations and testing.  The plant passed emissions testingin December 2003 and we received renewed operating permits inApril 2004.  The operating permits allow us to operate in excess of40 million gallons per year.  Subsequent to installation of theregenerative thermal oxidizer, we retested critical emissions points inNovember 2004 to further enhance our ability to operate at peakefficiencies.  We are pleased with the results of these tests, and finalpermitting is expected soon.  Ourcapacity to operate at lower temperatures while maintaining compliance isexpected to increase efficiency and may reduce costs of operations.  We are required by federal regulations toconduct a Relative Accuracy Test Audit (RATA) once per 12-month period. We passed the RATA testing in February 2004.  By installing hardsurfacing on the plant road, we expect to reduce our dust emissions, whichshould aid our continued compliance with environmental standards.

 

We now employ 31 full-timeemployees to operate the ethanol facility, of which 6 are in general managementand administration.  At the current plant size, we do not expect to hire asignificant number of employees in the next 12 months.  However,significant expansion of the plant may require us to hire several newemployees.

 

*Impact ofFederal Legislation on Ethanol Industry*

 

We currentlybenefit from federal ethanol supports and federal tax incentives.  Changes to these supports or incentives couldsignificantly impact demand for our ethanol. If a Renewable Fuels Standard bill or similar legislation is adopted, wemay experience a short-term decline in demand for ethanol because nationalethanol production may exceed the production volumes required in earlyyears.  However, we would expect thelegislation to provide a substantial long-term market for our ethanol asrequired volumes increase over time.  Thecurrent Renewable Fuels Standard bill will expire in 2004 but we expect similarlegislation to be introduced next year.

 

Ethanol productioncontinues to grow as additional plants become operational.  Demand for ethanol has been supported byhigher oil prices and its refined components. Clean air standards mandated by federal agencies have required highlypopulated areas to blend ethanol into their gasoline supplies as anoxygenate.  The intent of the airstandards is to reduce harmful emissions into the atmosphere.  These mandates have been challenged in severalmetropolitan areas, and are currently being reviewed by the courts.  In the future, the combination of additionalsupply, successful challenges to the clean air standards and stagnant orreduced demand may adversely affect our profit margin and our ability tomaintain positive cash flows.

 

Federal taxlaw provides for an exemption from the federal gas tax for 10% ethanol blendedgasoline.  This exemption is theequivalent of providing a per gallon “equalization” payment that allowsblenders to pay more for ethanol than the wholesale price of gasoline and stillretain profit margins equal to those received on non-ethanol blendedgasoline.  The exemption is currently 5.2cents per gallon and was scheduled to drop to 5.1 cents per gallon in2005.  However, in October 2004, theVolumetric Ethanol Excise Tax Credit (“VEETC”) bill was signed into law.  The VEETC replaces the 5.2 cents per gallonfederal gas tax exemption for ethanol-blended gasoline with a new volumetricethanol excise tax credit equal to 5.1 cents per gallon.  Based on volume, the VEETC is expected toallow much greater refinery flexibility in blending ethanol.  The VEETC is effective as of January 1, 2005.

 

**Application of Critical Accounting Policies**

 

Managementuses estimates and assumptions in preparing our consolidated financialstatements in accordance with generally accepted accounting principles.  These estimates and assumptions affect thereported amounts of assets and liabilities, the disclosure of contingent assetsand liabilities, and the reported revenues and expenses.  Of the significant accounting policiesdescribed in the notes to our consolidated financial statements, we believethat the following are the most critical:

 

*Derivative Instruments*

 

We enter into derivative instruments to hedgethe variability of expected future cash flows related to forecasted corn andnatural gas purchases, forward purchase contracts, and interest rates.  We do not typically enter into derivativeinstruments other than for hedging purposes. All derivative instruments are recognized on our September 30, 2004 andSeptember 30, 2003 balance sheet at their fair market value.  Currently, none of our

 

19

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derivative instruments are classified as cash-flow hedges foraccounting purposes.  On the date thederivative instrument is entered into, we will designate the derivative aseither a hedge of the variability of cash flows of a forecasted transaction orwill not designate the derivative as a hedge. Changes in the fair value of a derivative that is designated as, andmeets all of the required criteria for, a cash flow hedge are recorded inaccumulated other comprehensive income and reclassified into earnings as thehedged items affect earnings.  Changes inthe fair value of a derivative that is not designated as a hedge are recordedin current period earnings.  Althoughcertain derivative instruments may not be designated as, and accounted for, asa cash flow hedge, they are effective economic hedges of specified risks.

 

At September 30, 2004, we had recorded aliability for our derivative instruments related to corn and natural gas optionand future positions of $212,319.  Wehave recorded in cost of goods sold $3,851,340 related to its loss onderivative instruments for the fiscal year ended September 30, 2004.

 

During the nine month fiscal year ended September 30, 2003, wededesignated as cash flow hedges our option contract positions, although theycontinue to be effective economic hedges of specified risks.  At September 30, 2003, we had recorded anasset for derivative instruments related to corn and natural gas long calloption positions with a fair value of $316,726 for forecasted futurepurchases.  At September 30, 2003,accumulated other comprehensive income included $371,440 in realized losses onexited option contracts, which were reclassified into earnings as theunderlying hedged items affected earnings. The loss of $648,714 in the nine month fiscal year ended September 30,2003, includes the reclassification from accumulated other comprehensive incomeof $456,788 recorded at December 31, 2002 and the related gain in fiscal 2003of $77,724 on these positions.  Inaddition, as a result of the dedesignation of our derivative instruments, werecognized a gain in the nine month fiscal year ended September 30, 2003, onthese remaining positions of $104,222 and a loss of $373,872 on positions notdesignated as cash flow hedges, but acting as economic hedges in the thirdquarter.

 

At September 30, 2004 and September 30, 2003, we had an interest ratecap, as described in note 6 in the notes to our financial statements, with afair value of $30,740 and $81,224, respectively recorded as an asset withderivative instruments.  The interestrate cap was not designated as a cash flow hedge.  We charged interest expense with the $50,484loss in the fair value of the interest rate cap for the fiscal year endedSeptember 30, 2004.  We offset interestexpense with the gain of $81,224 on the interest rate cap for the nine monthfiscal year ending September 30, 2003.

 

**Liquidity and Capital Resources**

 

As of September 30, 2004, wehad the following consolidated assets: cash of $3,907,380, current assets of$11,946,926 and total assets of $59,828,204.  As of September 30, 2004, wehad consolidated current liabilities of $4,966,448 and consolidated long termliabilities of $19,572,989.

 

The LLC members’contributions, net of costs related to capital contributions for the LLC, is$10,842,237.  The LLC’s members’ equity is $21,081,764 including retainedearnings of $10,239,527.  The minority interest in the limited partnershipheld by the limited partners is $14,207,003.

 

For the fiscal year endingSeptember 30, 2004, cash provided by operating activities was$17,479,109.  Cash provided by operating activities was used for$2,230,069 of capital expenditures, $1,136,332 was distributed to LLC members,$913,430 was distributed to the minority interest held by our limited partners,$750,000 was used to redeem limited partnership units (minority interest) and anet $9,078,381 was used to pay down our debt.

 

### **Short-Term Debt Sources**

### ** **

We have a revolvingpromissory note of up to $3,500,000 with First National Bank of Omaha throughJuly 2005.  The interest payable onthe revolving promissory note is due monthly at the one month LIBOR plus 2.80%,which totaled 4.45% at September 30, 2004. The revolving promissory note is our operating line of credit.  Wepay a commitment fee of 0.125% on the unused portion of the line.  Theoutstanding balance as of September 30, 2004, was $38,829.  The maximumavailable credit under this note is based on receivable and inventorybalances.  Our current receivable and inventory balances are notsufficient to allow us to use the maximum amount

 

20

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of the operating line of credit. As of September 30, 2004, the maximum amount available from theoperating line of credit was approximately $2,400,000.  As the balances inthese accounts fluctuate, the amount of available credit on this note may bereduced or increased subject to the maximum of $3,500,000.  The operating line of credit is subject toprotective covenants requiring us to maintain various financial ratios. The operating line of credit is secured by all business assets.

 

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

 

We have long-term debtfinancing consisting of three term notes held by First National Bank of Omahaand referred to as Term Notes #2, #3 and #4.  At September 30, 2004,the principal balance on Term Note #2 is $14,099,113.  Term Note #2 ispayable in quarterly installments, which began on September 1, 2003. Interest on Term Note #2 is at the three month LIBOR plus 2.80%, which totaled4.59% as of September 30, 2004.  Term Note #2 is payable in full on June 1,2008.  In order to achieve a fixed interest rate on Term Note #2, weentered into an interest rate swap which helps protect our exposure toincreases in interest rates and the swap effectively fixes the interest rate onTerm Note #2 at 5.79% until June 1, 2008.

 

At September 30, 2004,the principal balance on Term Note #3 is $3,177,819.  Term Note #3 ispayable in quarterly installments which began on September 1, 2003. Interest on Term Note #3 is at the three month LIBOR plus 2.80%, which totaled4.59% as of September 30, 2004.  Term Note #3 is payable in full on June 1,2008.  In order to protect our interest rate exposure on Term Note #3, weentered into an interest rate cap agreement based on a principal amount of$10,000,000.  The financing agreement caps our interest rate at 6.80% forTerm Note #3 until June 1, 2006.  Aspart of the financing agreement, we have agreed to an annual servicing fee of$50,000 for five years.

 

At September 30, 2004,the principal balance on Term Note #4 is $4,564,175.  Term Note #4 ispayable in quarterly installments which began on September 1, 2003. Interest on Term Note #4 is at the one month LIBOR plus 2.80%, which totaled4.45% as of September 30, 2004.  Term Note #4 is payable in full on June 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 and requiresa commitment fee of 0.375% on any unused portion.  At September 30,2004, the aggregate indebtedness represented by Term Notes #2, #3 and #4 was$21,841,107.

 

The notes payable to FirstNational Bank at Omaha require additional loan payments based on excess cashflow generated by payments received from the USDA’s Commodity CreditCorporation, as discussed below.  Basedon the USDA Commodity Credit Corporation Bioenergy Program payments we havereceived in fiscal 2004 operations, the annual payment would be required afterour fiscal year end.  For the fiscal yearended September 30, 2004, we made excess payments totaling $5,560,000.

 

We expect our interest rateswap and cap agreement to adequately protect us in the event of changes ininterest rates.  However, we may not be fully protected in the event oflarge movements in interest rates.

 

At September 30, 2004,we have capital lease obligations in the amount of $265,097, due in monthlyinstallments initially totaling $6,768, and including implicit interest between7.4% and 17.4% through March 1, 2008.  The capital lease obligationsare secured by leased equipment.

 

We have a note in the amountof $180,555 payable to the Iowa Energy Center due in monthly installments of$3,472 without interest, maturing on January 29, 2009.  The note issecured by real estate and subordinated to the Term Notes.  We have a notewith Farmers State Bank of Marcus, Iowa in the amount of $189,406 payable inmonthly payments of $5,921, including interest at 6%, maturing on January 29,2009.  The note is secured by real estate and subordinated to theTerm Notes.  We have a note totaling $206,500 payable to the IowaDepartment of Economic Development due in 60 monthly installments of $1,667without interest.  The note matures on July 1, 2009.  Thenote is secured by all equipment.

 

Subsequent to fiscal year-end on September 30,2004, we executed an amendment to our senior credit facility for additional debtfinancing to fund expansion of the plant. This debt financing is in the form of a construction note in theprincipal balance of $5,400,000.  Duringthe construction period, we have agreed to pay interest only on a quarterlybasis on the outstanding principal amount at a rate equal to the one monthLIBOR rate

 

21

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plus 330 basis points.  Uponcompletion of the construction, the outstanding balance of this new expansionloan will be added to the principal balance of our Term Note #3.  The maturity date of Term Note #3 iscurrently June 1, 2008.

 

**Notes Paid Off In Fiscal Year2004**

 

During the fiscal year endedSeptember 30, 2004, we paid off a note payable to the Iowa Corn PromotionBoard in the amount of $50,000.  Underthe terms of the note, no interest was charged because we repaid the loan priorto June 30, 2004.  We alsopaid off our note payable to Fagen, Inc., in the amount of $1,250,000, alongwith accrued interest of approximately $98,000, in January 2004.

 

The original notes payableto the Iowa Department of Economic Development totaled $300,000 and included a$90,000 note subject to forgiveness if the Company met certainqualifications.  In March 2004, these qualifications were met, andthe $90,000 loan was forgiven on March 9, 2004.  The Company recordedthe debt forgiveness as a grant and reduced the cost of property and equipment.

 

**Bioenergy Program Payments**

 

We are continuing to receivepayments under the USDA’s Commodity Credit Corporation Bioenergy Program. If we increase our production capacity during the life of the grant program, wemay become eligible to receive additional Bioenergy payments.

 

As of September 30,2004, we have received approximately 76% of the eligible payments for the firstthree quarters of fiscal year 2004.  In the fourth quarter ended September 30,2004, accrued income from the Bioenergy Program totaled $262,546.  This represents a 43.3% reduction from themaximum program payment for the fourth quarter. The reduction in the amount of the payments received is due to a prorata reduction in the payments.  Asnational ethanol production increases due to an increase in the number ofoperational facilities and expansion of current facilities, grant payments arespread among more recipients, which reduces our share of the payments.  During the fiscal year ended September 30,2004, the Company recorded a gain of $6,645,512 in other income from theCommodity Credit Corporation Bioenergy Program. The fourth quarter 2004 Bioenergy payment of $262,546 was received in December 2004.

 

The 2004 payments that wehave received have significantly impacted our cash flow.  Accordingly, ourcurrent cash flow statement is not indicative of future performance.  Wedo not anticipate receiving unpaid amounts for past pro rata reductions.

 

**Distribution to Unit Holders**

 

In fiscal 2004, our board ofdirectors, acting on behalf of the Company, as general partner of the limitedpartnership, approved distributions totaling $2,250,000 from the limitedpartnership to the partners.  These distributions were made in February andAugust 2004.  Because of our ownership interest in the limitedpartnership, our Company received total distributions of $1,336,570.  Ofthis amount, we distributed approximately $1,136,332 to our unit holders andused the remaining amount to reduce our accounts payable.

 

**Covenants**

 

The revolving promissorynote and Term Notes #2, #3 and #4 are subject to numerous protective covenantsrequiring us to maintain various financial ratios.  Our failure to complywith the protective loan covenants or maintain the required financial ratiosmay cause acceleration of the outstanding principal balances on the revolvingpromissory note and terms notes and/or the imposition of fees, charges orpenalties.  As of September 30, 2003, we were not in compliance withthe net worth covenant.  First National Bank of Omaha waived thisviolation for one year and on July 20, 2004 we entered into the FifthAmendment to Construction Loan Agreement.  Due to the waiver, theviolation of the net worth covenant did not result in any fees, charges,penalties, acceleration of principal, or increase in interest rate for thedescribed violation.  We are currently in compliance with the net worthcovenant as set forth in the Fifth Amendment. As of September 30, 2004, we were not in compliance with the debt

 

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service covenant resulting from additional payments.  First National Bank of Omaha has waived thisviolation through September 30, 2005. For Term Notes #3 and #4, the premium above the LIBOR may be reducedbased upon our achievement and maintenance of certain financial ratios. The premium above LIBOR was reduced 100 basis points for the revolvingpromissory note and Term Notes #3 and #4 during the fourth quarter ended September 30,2004.

 

**Off-Balance Sheet Arrangements.**

 

We do not have anyoff-balance sheet arrangements.

 

**ITEM7.****                                                     FINANCIALSTATEMENTS.**

 

**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

 

Consolidated FinancialStatements

 

September 30, 2004 and2003

 

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

 

C O N T E N T S

 
| **Report of Independent Registered Public  Accounting Firm**                                    |   |
|-------------------------------------------------------------------------------------------------|--------|
|                                                                                            |   |
| **Consolidated  Financial Statements**                                                          |   |
|                                                                                            |   |
| Consolidated Balance Sheet                                                                      |   |
|                                                                                            |   |
| Consolidated Statement of Operations                                                            |   |
|                                                                                            |   |
| Consolidated Statement of Members’ Equity  and Accumulated Other Comprehensive Income      |   |
|                                                                                            |   |
| Consolidated Statement of Cash Flows                                                            |   |
|                                                                                            |   |
| Notes to Consolidated Financial Statements                                                      |   |
|                                                                                            |   |
| **Report of Independent Registered Public  Accounting Firm on Supplementary  Information** |   |
|                                                                                            |   |
| Consolidating Balance Sheet                                                                     |   |
|                                                                                            |   |
| Consolidating Statement of Operations                                                           |   |
|                                                                                            |   |
| Consolidated Schedule of Grain  Purchases                                                  |   |

 

24

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REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

 

Board of Directors

Little Sioux Corn Processors, LLC and Subsidiary

Marcus, Iowa

 

We have audited the accompanying consolidated balance sheet of LittleSioux Corn Processors, LLC and Subsidiary as of September 30, 2004 and2003, and the related consolidated statements of operations, changes in members’equity and accumulated other comprehensive income, and cash flows for thefiscal year ended September 30, 2004 and the nine month fiscal year ended September 30,2003.  These consolidated financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these consolidated financialstatements based on our audits.

 

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States).  Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whetherthe consolidated financial statements are free of material misstatement.  An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the consolidated financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position of LittleSioux Corn Processors, LLC and Subsidiary as of September 30, 2004 and2003, and the results of their operations and their cash flows for the fiscalyear ended September 30, 2004 and the nine month fiscal year ended September 30,2003, in conformity with U.S. generally accepted accounting principles.

 
|                                                                                                                           | /s/ Boulay, Heutmaker, Zibell & Co.  P.L.L.P. |   |
|--------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|--------|
|                                                                                                                           |                                              |
|                                                                                                                           | Certified  Public Accountants                     |
|                                                                                                                           |                                              |
| Minneapolis, Minnesota  October 28, 2004, except for Note 11 for which   the date is December 2, 2004 |                                              |

 

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**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

ConsolidatedBalance Sheet

 
| **ASSETS**                                                                  | ** ** | **September 30  2004** | ** **     | **September 30  2003** | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------|----------------|-----------------------------|------------|
| ** **                                                                  | ** ** | ** **                  | ** **     | ** **                  | ** ** |
| **Current  Assets**                                                         | ** ** | ** **                  | ** **     | ** **                  | ** ** |
| Cash                                                                        | ** ** | **$**                       | **3,907,380**  |                        | $          | 536,483 |   |
| Restricted  cash                                                            | ** ** | **2,730,481**               |           | 12,902                      |       |
| Trade  accounts receivable, less allowance for doubtful accounts of $20,000 | ** ** | **2,335,023**               |           | 1,753,362                   |       |
| Other  receivables                                                          | ** ** | **400,553**                 |           | 3,362,970                   |       |
| Inventory                                                                   | ** ** | **2,084,604**               |           | 1,420,244                   |       |
| Derivative instruments                                                      |       |                        |           | 397,950                     |       |
| Prepaid  expenses                                                           | ** ** | **488,885**                 |           | 564,429                     |       |
| Total  current assets                                                       | ** ** | **11,946,926**              |           | 8,048,340                   |       |
|                                                                        |       |                        |           |                        |       |
| **Property  and Equipment**                                                 |       |                        |           |                        |       |
| Land and  improvements                                                      | ** ** | **2,753,225**               |           | 2,377,832                   |       |
| Buildings                                                                   | ** ** | **15,061,750**              |           | 15,147,828                  |       |
| Processing  equipment                                                       | ** ** | **28,226,013**              |           | 26,476,854                  |       |
| Grain  handling equipment                                                   | ** ** | **5,172,406**               |           | 5,084,206                   |       |
| Rail and  other equipment                                                   | ** ** | **1,214,322**               |           | 1,204,791                   |       |
| Furniture  and fixtures                                                     | ** ** | **160,042**                 |           | 156,178                     |       |
| ** **                                                                  |       | **52,587,758**              |           | 50,447,689                  |       |
| Less  accumulated depreciation                                              | ** ** | **5,051,631**               |           | 1,650,348                   |       |
| Net property  and equipment                                                 | ** ** | **47,536,127**              |           | 48,797,341                  |       |
|                                                                        |       |                        |           |                        |       |
| **Other  Assets**                                                           |       |                        |           |                        |       |
| Deferred  loan costs, net                                                   | ** ** | **345,151**                 |           | 463,191                     |       |
| Total other  assets                                                         | ** ** | **345,151**                 |           | 463,191                     |       |
|                                                                        |       |                        |           |                        |       |
| **Total  Assets**                                                           | ** ** | **$**                       | **59,828,204** |                        | $          | 57,308,872 |   |

 

Notes toConsolidated Financial Statements are an integral part of this Statement.

 

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| **LIABILITIES AND MEMBERS’ EQUITY**                                             | ** ** | **September 30  2004** | ** **     | **September 30  2003** | ** ** |
|--------------------------------------------------------------------------------------|------------|-----------------------------|----------------|-----------------------------|------------|
| ** **                                                                           | ** ** | ** **                  | ** **     | ** **                  | ** ** |
| **Current  Liabilities**                                                             | ** ** | ** **                  | ** **     | ** **                  | ** ** |
| Revolving  promissory note                                                           | ** ** | **$**                       | **38,829**     |                        | $          | 775,165 |   |
| Current  maturities of long-term debt                                                | ** ** | **3,109,676**               |           | 2,957,267                   |       |
| Accounts  payable                                                                    |       |                        |           |                        |       |
| Trade                                                                                | ** ** | **1,337,513**               |           | 509,241                     |       |
| Construction                                                                         |       |                        |           | 250,000                     |       |
| Derivative  instruments                                                              | ** ** | **181,579**                 |           |                        |       |
| Accrued  liabilities                                                                 | ** ** | **298,851**                 |           | 460,179                     |       |
| Total current  liabilities                                                           | ** ** | **4,966,448**               |           | 4,951,852                   |       |
|                                                                                 |       |                        |           |                        |       |
| **Long-Term Debt,**net of current maturities                                         | ** ** | **19,572,989**              |           | 28,157,443                  |       |
|                                                                                 |       |                        |           |                        |       |
| **Commitments  and Contingencies**                                                   |       |                        |           |                        |       |
|                                                                                 |       |                        |           |                        |       |
| **Minority  Interest**                                                               | ** ** | **14,207,003**              |           | 10,052,753                  |       |
|                                                                                 |       |                        |           |                        |       |
| **Members’  Equity**                                                            |       |                        |           |                        |       |
| Member  contributions 10,941 units outstanding at September 30, 2004 and 2003   | ** ** | **10,842,237**              |           | 10,842,237                  |       |
| Accumulated  other comprehensive loss; net unrealized loss on derivative instruments | ** ** | **—**                  |           | (217,441                    | )          |
| Retained  earnings                                                                   | ** ** | **10,239,527**              |           | 3,522,028                   |       |
| Total  members’ equity                                                          | ** ** | **21,081,764**              |           | 14,146,824                  |       |
|                                                                                 |       |                        |           |                        |       |
| **Total  Liabilities and Members’ Equity**                                      | ** ** | **$**                       | **59,828,204** |                        | $          | 57,308,872 |   |

 

Notes toConsolidated Financial Statements are an integral part of this Statement.

 

27

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**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

ConsolidatedStatements of Operations

 
| ** **                                  | ** ** | **Twelve Months Ended  September 30  2004** | ** **     | **Nine Months Ended  September 30  2003** | ** ** |
|---------------------------------------------|------------|--------------------------------------------------|----------------|------------------------------------------------|------------|
|                                        |       |                                             |           |                                           |       |
| **Revenues**                                | ** ** | **$**                                            | **85,540,934** |                                           | $          | 31,814,299 |   |
|                                        |       |                                             |           |                                           |       |
| **Cost of  Goods Sold**                     | ** ** | **71,244,909**                                   |           | 27,462,227                                     |       |
|                                        |       |                                             |           |                                           |       |
| **Gross  Profit**                           | ** ** | **14,296,025**                                   |           | 4,352,072                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Operating  Expenses**                     | ** ** | **6,138,653**                                    |           | 2,660,909                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Operating  Income**                       | ** ** | **8,157,372**                                    |           | 1,691,163                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Other  Income (Expense)**                 |       |                                             |           |                                           |       |
| Interest  income                            | ** ** | **7,557**                                        |           |                                           |       |
| Interest expense                            | ** ** | **(1,439,020**                                   | )              | (847,223                                       | )          |
| CCC  Bio-Energy income                      | ** ** | **6,645,512**                                    |           | 5,535,733                                      |       |
| Grants and  other income                    | ** ** | **146,091**                                      |           | 612,206                                        |       |
| Total other  income, net                    | ** ** | **5,360,140**                                    |           | 5,300,716                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Net  Income Before Minority Interest**    | ** ** | **13,517,512**                                   |           | 6,991,879                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Minority  Interest in Sudsidiary Income** | ** ** | **5,663,681**                                    |           | 2,920,676                                      |       |
|                                        |       |                                             |           |                                           |       |
| **Net  Income**                             | ** ** | **$**                                            | **7,853,831**  |                                           | $          | 4,071,203 |   |
|                                        |       |                                             |           |                                           |       |
| **Weighted  Average Units Outstanding**     | ** ** | **10,941**                                       |           | 10,941                                         |       |
|                                        |       |                                             |           |                                           |       |
| **Net  Income Per Unit**                    | ** ** | **$**                                            | **717.83**     |                                           | $          | 372.11 |   |

 

Notes toConsolidated Financial Statements are an integral part of this Statement.

 

28

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**LITTLE SIOUX CORN PROCESSORS, LLC ANDSUBSIDIARY**

 

ConsolidatedStatement of Changes in Members’ Equity and Accumulated Other Comprehensive Loss

 
| ** **                                                           | ** ** | **Member  Contributions** | ** ** | **Retained  Earnings** | ** ** | **Comprehensive  Income (Loss)** | ** ** | **Accumulated  Other  Comprehensive  Loss** | ** ** |
|----------------------------------------------------------------------|------------|---------------------------|------------|------------------------|------------|----------------------------------|------------|---------------------------------------------|------------|
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| **Balance  - December 31, 2002**                                |       | $                         | 10,842,237 |                   | $          | (549,175                         | )          |                                        |       | $ | (438,257 | ) |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Net Income                                                           |       |                      |       | 4,071,203              |       | 4,071,203                        |       |                                        |       |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Other  comprehensive loss:                                           |       |                      |       |                   |       |                             |       |                                        |       |
| Unrealized  loss on derivative instruments                           |       |                      |       |                   |       | (46,629                          | )          |                                        |       |
| Less:  reclassification adjustment for losses included in net income |       |                      |       |                   |       | 267,445                          |       |                                        |       |
|                                                                 |       |                      |       |                   |       | 220,816                          |       | 220,816                                     |       |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Comprehensive  income                                                |       |                      |       |                   |       | $                                | 4,292,019  |                                        |       |   |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| **Balance  - September 30, 2003**                               |       | 10,842,237                |       | 3,522,028              |       |                             |       | (217,441                                    | )          |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Distributions                                                        |       |                      |       | (1,136,332             | )          |                             |       |                                        |       |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Net income                                                           |       |                      |       | 7,853,831              |       | 7,853,831                        |       |                                        |       |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Other  comprehensive loss:                                           |       |                      |       |                   |       |                             |       |                                        |       |
| Reclassification  adjustement for losses included in net income      |       |                      |       |                   |       | 217,441                          |       | 217,441                                     |       |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| Comprehensive  income                                                |       |                      |       |                   |       | $                                | 8,071,272  |                                        |       |   |
|                                                                 |       |                      |       |                   |       |                             |       |                                        |       |
| **Balance  - September 30, 2004**                               |       | $                         | 10,842,237 |                   | $          | 10,239,527                       |       |                                        |       | $ | — |   |

 

Notes to Consolidated Financial Statementsare an integral part of this Statement.

 

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

 

ConsolidatedStatements of Cash Flows

 
| ** **                                                        | ** ** | **Twelve Months Ended  September 30  2004** | ** **    | **Nine Months Ended  September 30  2003** | ** ** |
|-------------------------------------------------------------------|------------|--------------------------------------------------|---------------|------------------------------------------------|------------|
|                                                              |       |                                             |          |                                           |       |
| **Cash  Flows from Operating Activities**                         | ** ** | ** **                                       | ** **    | ** **                                     | ** ** |
| Net income                                                        | ** ** | **$**                                            | **7,853,831** |                                           | $          | 4,071,203 |   |
| Adjustments  to reconcile net income to net cash from operations: |       |                                             |          |                                           |       |
| Depreciation  and amortization                                    | ** ** | **3,519,323**                                    |          | 1,669,610                                      |       |
| Minority  interest in subsidiary’s income                    | ** ** | **5,663,681**                                    |          | 2,920,676                                      |       |
| Provision  for losses on receivables                              | ** ** | **20,000**                                       |          |                                           |       |
| Loss on  hedging activity                                         | ** ** | **312,777**                                      |          | 567,490                                        |       |
| Change in  assets and liabilities:                                |       |                                             |          |                                           |       |
| Restricted  cash                                                  | ** ** | **(2,717,579**                                   | )             | 255,293                                        |       |
| Receivables                                                       | ** ** | **2,360,756**                                    |          | (5,107,878                                     | )          |
| Inventory                                                         | ** ** | **(664,360**                                     | )             | (1,420,244                                     | )          |
| Derivative  instruments                                           | ** ** | **638,192**                                      |          | (1,117,860                                     | )          |
| Prepaid  expenses                                                 | ** ** | **75,544**                                       |          | (546,942                                       | )          |
| Accounts  payable                                                 | ** ** | **578,272**                                      |          | 496,972                                        |       |
| Accrued  liabilities                                              | ** ** | **(161,328**                                     | )             | 409,263                                        |       |
| Net cash  provided by operating activities                        | ** ** | **17,479,109**                                   |          | 2,197,583                                      |       |
|                                                              |       |                                             |          |                                           |       |
| **Cash  Flows from Investing Activities**                         |       |                                             |          |                                           |       |
| Capital  expenditures                                             | ** ** | **(2,230,069**                                   | )             | (293,274                                       | )          |
| Net cash  used in investing activities                            | ** ** | **(2,230,069**                                   | )             | (293,274                                       | )          |
|                                                              |       |                                             |          |                                           |       |
| **Cash  Flows from Financing Activities**                         |       |                                             |          |                                           |       |
| Bank  overdraft                                                   |       |                                             |          | (220,354                                       | )          |
| Proceeds  (payments) from short-term debt                         | ** ** | **(736,336**                                     | )             | 775,165                                        |       |
| Payments of  long-term debt, net                                  | ** ** | **(8,342,045**                                   | )             | (2,182,613                                     | )          |
| Loan costs                                                        |       |                                             |          | (9,186                                         | )          |
| Redemption  of minority interest                                  | ** ** | **(750,000**                                     | )             |                                           |       |
| Distribution  to minority interest                                | ** ** | **(913,430**                                     | )             |                                           |       |
| Distribution  to members                                          | ** ** | **(1,136,332**                                   | )             |                                           |       |
| Net cash  used in financing activities                            | ** ** | **(11,878,143**                                  | )             | (1,636,988                                     | )          |
|                                                              |       |                                             |          |                                           |       |
| **Net  increase in cash**                                         | ** ** | **3,370,897**                                    |          | 267,321                                        |       |
|                                                              |       |                                             |          |                                           |       |
| **Cash –**** **Beginning of  Period                     | ** ** | **536,483**                                      |          | 269,162                                        |       |
|                                                              |       |                                             |          |                                           |       |
| **Cash –**** **End of  Period                           | ** ** | **$**                                            | **3,907,380** |                                           | $          | 536,483 |   |

 

Notes toConsolidated Financial Statements are an integral part of this Statement.

 

30

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| ** **                                                                 | ** ** | **Twelve Months Ended  September 30  2004** | ** **    | **Nine Months Ended  September 30  2003** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------------|---------------|------------------------------------------------|------------|
|                                                                       |       |                                             |          |                                           |       |
| **Supplemental  Cash Flow Information**                                    |       |                                             |          |                                           |       |
| Cash paid  during the year for:                                            |       |                                             |          |                                           |       |
| Interest                                                                   | ** ** | **$**                                            | **1,527,937** |                                           | $          | 1,022,668 |   |
|                                                                       |       |                                             |          |                                           |       |
| **Supplemental  Disclosure of Noncash Investing and Financing Activities** |       |                                             |          |                                           |       |
| Reduction in  property and equipment due to debt forgiveness               | ** ** | **$**                                            | **90,000**    |                                           |       |   |
| Construction  in progress included in accounts payable                     |       |                                             |          | $                                              | 250,000    |   |
| Capital  lease obligations incurred                                        |       |                                             |          | $                                              | 4,337      |   |
| Property and  equipment financed with note payable                         |       |                                             |          | $                                              | 6,490,568  |   |

 

Notes toConsolidated Financial Statements are an integral part of this Statement.

 

31

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Notes toConsolidated Financial Statements

 

September 30, 2004 and2003

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

*Principles of Consolidation*

 

The consolidated financial statements include the accounts of LittleSioux Corn Processors, LLC (the “LLC”) and its 60.15% owned subsidiary, LSCP,LLLP (the “LSCP”), collectively, the “Company.” All significant intercompanybalances and transactions are eliminated in consolidation.  At September 30, 2003, the LLC owned58.55% of LSCP.

 

*MinorityInterest*

 

Amounts recorded as minority interest on the balance sheet relate tothe net investment by limited partners in lscp plus or minus any allocation ofincome or loss of lscp.  After givingeffect to certain special allocations, income and losses of lscp will beallocated to the partners based upon their respective percentage of partnershipunits held.  The minority interest shareof the comprehensive income for the fiscal year ending september 30, 2004is $5,817,680.  The minority interestshare of the comprehensive income for the nine month fiscal year ending september 30,2003 is $3,077,001.

 

Minority interest has been reclassified on the accompanying balancesheet to reflect it as a separate line item rather than including it as part ofequity.  This reclassification has noimpact on net income or earnings per unit as previously reported.

 

*Nature of Business*

 

The Company was organized topool investors, some of whom provide a corn supply, for a 40 million gallonethanol plant, located near Marcus, Iowa, with distribution to upper Midweststates. In addition, the Company produces and sells distillers dried grainswith solubles (DDGS) and modified wet distillers grains with solubles (MWDGS)as a co-products of ethanol production.

 

On October 16, 2001, theLLC formed LSCP, LP, a limited partnership of which the LLC is the generalpartner.  LSCP owns the plant on whichconstruction began in 2001 and all of the LLC’s operations are conductedthrough LSCP.  Prior to commencingoperations in April 2003, the Company was a development stagecompany.  On June 26, 2003, themembers of the LLC approved an election by LSCP, LP to convert to an Iowalimited liability limited partnership, LSCP, LLLP.

 

*Fiscal Reporting Period*

 

On June 26, 2003, the Company adopted a fiscal year ending September 30for reporting financial operations. Prior to that, the Company had a fiscal year ending December 31 forreporting financial operations.

 

32

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*Accounting Estimates*

 

Management uses estimates and assumptions in preparing theseconsolidated financial statements in accordance with generally acceptedaccounting principles.  Those estimatesand assumptions affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities, and the reported revenues andexpenses.  Commodity Credit CorporationBio-Energy Program incentives include significant estimates.  Actual results could differ from thoseestimates.

 

*Revenue Recognition*

 

Revenue from the sale of the Company’s products is recognized at thetime title to the goods and all risks of ownership transfer to the customers.  This generally occurs upon shipment to thecustomer or when the customer picks up the goods.

 

The Company records revenue from federal and state incentive programsrelated to the production of ethanol when the Company has sold the ethanol andcompleted all the requirements of the applicable incentive program.

 

*Grants*

 

The Company recognizes grant income as other income for reimbursementof expenses incurred upon complying with the conditions of the grant.  For reimbursements of capital expenditures,the grants are recognized as a reduction of the basis of the asset uponcomplying with the conditions of the grant. During fiscal 2004, the Companyreceived a grant totaling approximately $7,400 for employee training.  In addition, a $90,000 note payable with theIowa Department of Economic Development was forgiven in March 2004.  The Company reduced the cost of property andequipment by $90,000.  During fiscal2003, the Company received two grants totaling approximately $605,000 forbeginning working capital and employee training.  The Company recognized the grants in otherincome as all of the conditions for these grants have been met.

 

*Commodity Credit Corporation BioenergyProgram*

 

During fiscal 2004 and fiscal 2003, the Company enrolled in the CommodityCredit Corporation Bioenergy Program (CCC), a department of the United StatesDepartment of Agriculture.  This programenables the Company to receive payments based on increases in production ofethanol over the previous year of up to $7,500,000 per year.  New production is eligible and is consideredincreased production.  Payments under theprogram are subject to pro rata reduction if aggregate payments to allproducers in any fiscal year exceed the maximum annual funding of theprogram.  During the fiscal year ended September 30,2004, and for the nine month fiscal year ended September 30, 2003, theCompany recorded $6,645,512 and $5,535,733 respectively as other income fromthe CCC.  At September 30, 2004 and September 30,2003, the Company had $262,246 and $3,331,425 respectively,

 

33

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recorded in other receivables. As required by provisions of the term notes described in Note 5, allpayments collected from the CCC totaling $9,714,691 and $2,204,308 wereremitted to the lending institution during the fiscal years ended September 30,2004 and September 30, 2003, respectively.

 

*Cash*

 

The Company maintains itsaccounts primarily at two financial institutions.  At times throughout the year, the Company’scash balances may exceed amounts insured by the Federal Deposit InsuranceCorporation.

 

*Restricted Cash*

 

The Company is required to maintain cash balances at its broker relatedto derivative instrument positions.

 

*Trade Accounts Receivable*

 

Credit terms are extended to customers in the normal course ofbusiness.  The Company performs ongoingcredit evaluations of its customers’ financial condition and, generally,requires no collateral.

 

Trade accounts receivable are recorded at their estimated netrealizable value.  The Company follows apolicy of providing an allowance for doubtful accounts.  The Company’s estimate of the allowance fordoubtful accounts is based upon historical experience, its evaluation of thecurrent status of receivables, and unusual circumstances, if any.  Accounts are considered past due if paymentis not made on a timely basis in accordance with the Company’s credit terms.Accounts considered uncollectible are written off.

 

*Inventory*

 

Inventory consists of raw materials, work in process, and finishedgoods.  Corn is the primary raw materialand, along with other raw materials, is stated at the lower of average cost ormarket.  Finished goods consist ofethanol produced and DDGS and MWDGS, and are stated at the lower of first-in,first-out, (FIFO method) cost or market.

 

34

----

 

*Property and Equipment*

 

Property and equipment are stated at the lower of cost or estimatedfair value. Depreciation is computed over estimated useful lives by use of the straight-linemethod.  Maintenance and repairs areexpensed as incurred; major improvements and betterments are capitalized.  The present value of capital leaseobligations are classified as long-term debt and the related assets areincluded in equipment.  Amortization ofequipment under capital lease is included in depreciation expense.

##  

The Company reviews its property and equipment for impairment wheneverevents indicate that the carrying amount of the asset may not berecoverable.  An impairment loss isrecorded when the sum of the future cash flows is less than the carrying amountof the asset.  An impairment loss ismeasured as the amount by which the carrying amount of the asset exceeds itsfair value.

 

During fiscal 2003, the Company capitalized interest of $356,071 duringthe construction period prior to commencing operations.

 

*Deferred loan costs*

 

Costs associated with the issuance of the construction loan discussedin Note 5 are recorded as deferred loan costs, net of accumulatedamortization.  Loan costs are amortizedto operations over the life of term note #2 using the effective interestmethod.  The construction loan wasconverted to term notes on June 23, 2003, at which point the Company beganamortizing the related loan costs using the effective interest method.

 

*Derivative Instruments*

 

The Company enters into derivative instruments to hedge the variabilityof expected future cash flows related to forecasted corn and natural gaspurchases, forward purchase contracts, and interest rates.  The Company does not typically enter intoderivative instruments other than for hedging purposes.  All derivative instruments are recognized onthe September 30, 2004 and September 30, 2003 balance sheet at theirfair market value.  On the date thederivative instrument is entered into, the Company will designate thederivative as either a hedge of the variability of cash flows of a forecastedtransaction or will not designate the derivative as a hedge.  Changes in the fair value of a derivativethat is designated as, and meets all of the required criteria, for a cash flowhedge are recorded in accumulated other comprehensive income and reclassifiedinto earnings as the hedged items affect earnings. Changes in the fair value ofa derivative that is not designated as a hedge are recorded in current periodearnings.  Although certain derivativeinstruments may not be designated as, and accounted for, as a cash flow hedge,they are effective economic hedges of specified risks.

 

35

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At September 30, 2004, the Company had recorded a liability forderivative instruments related to corn and natural gas option and futurepositions of $212,319.  The Company hasrecorded in cost of goods sold $3,851,340 related to its loss on derivativeinstruments for the fiscal year ended September 30, 2004.

 

During the nine month fiscal year ended September 30, 2003, theCompany dedesignated as cash flow hedges its option contract positions,although they continue to be effective economic hedges of specified risks.  At September 30, 2003, the Company hadrecorded an asset for derivative instruments related to corn and natural gaslong call option positions with a fair value of $316,726 for forecasted futurepurchases.  At September 30, 2003,accumulated other comprehensive income included $371,440 in realized losses onexited option contracts, which were reclassified into earnings as theunderlying hedged items affect earnings. The loss of $648,714 in nine month fiscal year ended September 30, 2003includes the reclassification from accumulated other comprehensive income of$456,788 recorded at December 31, 2002 and the related gain in fiscal 2003of $77,724 on these positions.  Inaddition, as a result of the dedesignation of the Company’s derivativeinstruments, the Company recognized a gain in the nine month fiscal ended September 30,2003 on these remaining positions of $104,222 and a loss of $373,872 onpositions not designated as cash flow hedges, but acting as economic hedges inthe third quarter.

 

At September 30, 2004 and September 30, 2003, the Company hadan interest rate cap, as described in Note 5, with a fair value of $30,740 and$81,224, respectively, recorded as an asset with derivative instruments.  The interest rate cap was not designated as acash flow hedge.  The Company chargedinterest expense with the $50,484 loss in the fair value of the interest ratecap for the fiscal year ended September 30, 2004.  The Company offset interest expense with thegain of $81,224 on the interest rate cap for the nine month fiscal year ending September 30,2003.

 

*Income Taxes*

 

Little Sioux Corn Processors,LLC and LSCP, LLLP are treated as partnerships for federal and state income taxpurposes and generally do not incur income taxes.  Instead, their earnings and losses areincluded in the income tax returns of the members/partners. Therefore, noprovision or liability for federal or state income taxes has been included inthese financial statements.  Differencesbetween consolidated financial statement basis of assets and tax basis ofassets is related to capitalization and amortization of organization andstart-up costs for tax purposes, whereas these costs are expensed for financialstatement purposes.  In addition, theCompany uses the modified accelerated cost recovery system method (MACRS) fortax depreciation instead of the straight line method that is used for bookdepreciation, which also causes temporary differences.

 

36

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*Fair Value of Financial Instruments*

 

The carrying value of cash and restricted cash approximates their fairvalue.

 

The Company believes the carrying amount of derivative instrumentsapproximates fair value based on current market prices.

 

It is not currently practicable to estimate fair value of the line ofcredit and notes payable to the lending institution. Because these agreementscontain certain unique terms, conditions, covenants, and restrictions, asdiscussed in Note 4 and 5, there are no readily determinable similar instrumentson which to base an estimate of fair value.

 

*Recently Issued Accounting Pronouncements*

 

In December 2003, the Financial Accounting Standards Board (FASB)issued FASB Interpretation No. 46 (R), *Consolidation of VariableInterest Entities*.  The Companyhas reviewed its consolidation policy under this interpretation.  It was determined that continuedconsolidation under previously issued accounting standards is still applicable.

 

FASB has issued Statement No. 149, *Amendment of Statement 133on Derivative Instruments and Hedging Activities*.  The Statement amends and clarifies accountingfor derivative instruments, including certain derivative instruments embeddedin other contracts, and for hedging activities under Statement No. 133.

 

FASB has issued Statement No. 150, *Accounting for CertainFinancial Instruments with Characteristics of both Liabilities and Equity*.  The Statement establishes standards for howan issuer classifies and measures certain financial instruments withcharacteristics of both liabilities and equity.

 

FASB has issued Statement No. 151, *Inventory Costs*.  The Statement amends and clarifies accountingfor certain abnormal costs related to inventory.

 

Management does not expect the implementation of these pronouncementsto have a significant effect on the Company’s consolidated financialstatements.

 

*Reclassifications*

 

The presentation of certain amounts in the consolidated balance sheetand statement of cash flows for 2003 have been changed to conform to theclassifications used in 2004.  Thesereclassifications had no effect on net income as previously reported.

 

37

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**2. INVENTORY**

 

Inventory consists of the following at September 30:

 
| ** **       | ** ** | **2004**    | ** **    | **2003** | ** ** |
|------------------|------------|-------------|---------------|----------|------------|
|             |       |        |          |     |       |
| Raw  materials   | ** ** | **$**       | **1,279,912** |     | $          | 595,054 |   |
| Work in  process | ** ** | **346,749** |          | 335,501  |       |
| Finished  goods  | ** ** | **457,943** |          | 489,689  |       |
|             |       |        |          |     |       |
| Total            | ** ** | **$**       | **2,084,604** |     | $          | 1,420,244 |   |

 

During the fiscal year ended September 30, 2004, the Company wrotedown inventory by approximately $348,000 as the cost exceeded the market value.

 

**3. DEFERRED LOAN COSTS**

 

The Company has deferred loan costs of $487,060 with accumulatedamortization of $141,909 at September 30, 2004. At September 30, 2003the Company had deferred loan costs of $487,060 with accumulated amortizationof $23,869.  The amortization expenserelated to the deferred loan costs for the fiscal year ended September 30,2004 and the nine month fiscal year ended September 30, 2003 was $118,040and $23,869, respectively.

 

**4. REVOLVING PROMISSORY NOTE**

 

Under the terms of thefinancing agreement with the lending institution, the Company has a revolvingpromissory note of up to $3,500,000 maturing in July 2005.  The revolving promissory note chargesinterest on borrowings monthly at the one month London Interbank Offered Rate(LIBOR) plus 280 basis points which totaled 4.45% at September 30,2004.  The premium above LIBOR has beenreduced during fiscal 2004 from the one month LIBOR plus 380 basis pointstotaling 4.92% at September 30, 2003 based on a financial ratio asdescribed in Note 5.  The Company pays acommitment fee of .125% on the unused portion of the revolving promissorynote.  The outstanding balance at September 30,2004 and 2003 was $38,829 and $775,165, respectively.  The revolving promissory note as well as theterm notes described in Note 5 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, are secured by all business assets, and requireadditional loan payments based on excess cash flow.  In addition, the Company has a standby letterof credit for $272,400 related to rail car leases through February 2005requiring a commitment fee of .0125%.

 

38

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**5. LONG–TERM DEBT**

 

Long-term debt consists of the following:

 
| ** **                                                                                                                                                                                                              | ** ** | **September 30  2004** | ** **     | **September 30  2003** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|----------------|-----------------------------|------------|
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Term note #2  payable to lending institution, see terms below.                                                                                                                                                          | ** ** | **$**                       | **14,099,113** |                        | $          | 15,409,002 |   |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Term note #3  payable to lending institution, see terms below.                                                                                                                                                          | ** ** | **3,177,819**               |           | 10,374,165                  |       |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Term note #4  payable to lending institution, see terms below.                                                                                                                                                          | ** ** | **4,564,175**               |           | 2,795,692                   |       |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| 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.                                       | ** ** | **180,555**                 |           | 222,222                     |       |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Note payable  to bank due in monthly payments of $5,921 including interest at 6% maturing on  January 29, 2009, secured by real estate, subordinated to term notes.                                                | ** ** | **189,406**                 |           | 226,535                     |       |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Note payable  to Iowa Department of Economic Development, due in sixty monthly installments  beginning August 1, 2004 of $1,167 without interest, payable in full on July 1,  2009, secured by all equipment. | ** ** | **206,500**                 |           | 210,000                     |       |
|                                                                                                                                                                                                                    |       |                        |           |                        |       |
| Totals  carried forward                                                                                                                                                                                                 | ** ** | **$**                       | **22,417,568** | ** **                  | $          | 29,237,616 | ** ** |

 

39

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| ** **                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **September   30 2004** | ** **     | **September 30  2003** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|----------------|-----------------------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Totals  brought forward                                                                                                                                                                                                                                                                                                                                                                              | ** ** | **$**                        | **22,417,568** |                        | $          | 29,237,616 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Note payable  to Iowa Department of Economic Development, forgivable upon completion of the  ethanol plant and the sale of 40 million gallons of ethanol, otherwise due  with interest from July 1, 2006 through 2009, secured by all equipment.  In March 2004, the note was forgiven.                                                                                                    |       |                         |           | 90,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Note payable  to bank, principal and interest are due and payable on demand or March 4,  2004, interest is charged at 7.00%, secured by real estate, subordinate to  the term notes, repaid in December 2003.                                                                                                                                                                              |       |                         |           | 150,000                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Note payable  to Iowa Corn Promotion Board, principal and interest are due and payable on July 30,  2004, no interest rate is charged as long as the note is repaid by June 30,  2004. Thereafter, interest will retroactively accrue at the prime rate,  secured by a general security agreement covering substantially all assets,  subordinate to term notes, repaid in June 2004. |       |                         |           | 50,000                      |       |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Note payable  to limited partner and general contractor, principal and interest are due and  payable on July 25, 2007, interest is charged at 7.00%, secured by real  estate, subordinate to term notes, repaid in January 2004.                                                                                                                                                           |       |                         |           | 1,250,000                   |       |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Capital  lease obligations, due in monthly installments initially totaling $6,768  commencing April 1, 2003 including implicit interest between 7.4% and  17.4% through March 1, 2008, secured by leased equipment (see Note 6).                                                                                                                                                           | ** ** | **265,097**                  |           | 337,094                     |       |
|                                                                                                                                                                                                                                                                                                                                                                                                 |       |                         |           |                        |       |
| Totals  carried forward                                                                                                                                                                                                                                                                                                                                                                              | ** ** | **$**                        | **22,682,665** |                        | $          | 31,114,710 |   |

 

40

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| ** **                        | ** ** | **September 30  2003** | ** **     | **December 31  2002** | ** ** |
|-----------------------------------|------------|-----------------------------|----------------|----------------------------|------------|
|                              |       |                        |           |                       |       |
| Totals  brought forward           | ** ** | **$**                       | **22,682,665** |                       | $          | 31,114,710 |   |
|                              |       |                        |           |                       |       |
| Less amounts  due within one year | ** ** | **3,109,676**               |           | 2,957,267                  |       |
|                              |       |                        |           |                       |       |
| Totals                            | ** ** | **$**                       | **19,572,989** |                       | $          | 28,157,443 |   |

 

The Company obtained debt financing from a lending institution in theform of a construction and term loan and a revolving promissory note.  The construction loan provided the lesser of60% of the total cost of the project or $31,465,000 with a variable rate duringthe construction period of 1.0% plus the prime rate.  The construction loan was converted to threeterm notes on June 23, 2003, referred to by the lending institution as termnotes #2, #3, and #4.  Term note #2totaled $15,732,500 at conversion, has fixed principal payments due quarterly,which began September 1, 2003, and with interest at the three month LIBORplus 280 basis points, which totaled 4.59% at September 30, 2004, payablein full on June 1, 2008.  As part ofthe financing agreement, the Company accepted a fixed rate option on term note#2 by entering into an interest rate swap which effectively fixes the interestrate on this term note at 5.79% until this term note is repaid on June 1,2008.

 

Term note #3 bears interest at the three month LIBORplus 280 basis points which totaled 4.59% at September 30, 2004. Term note #4 bears interest at the one month LIBOR plus 280 basis points whichtotaled 4.45% at September 30, 2004.  Term notes #3 and #4 arepayable in full on June 1, 2008.  The Company is required to makequarterly payments of $506,588 applied first to accrued interest on term note#4.  The remaining amount is applied to accrued interest on the term note#3 and then to principal until this note is repaid in full or untilmaturity.  After term note #3 is repaid, payments are applied first toaccrued interest and then to principal on the term note #4 until paid in fullor until maturity.  Term note #4 allows subsequent borrowings up to theoriginal $5,000,000 to the extent of principal payments made until maturity andrequires a commitment fee of .375% on any used portion.

 

As part of the financing agreement, the premium above the LIBOR on theterm notes has been reduced based on a financial ratio.  The financing agreement requires an annualservicing fee of $50,000 for five years. As described in Note 1, the Company entered into an interest rate capagreement to reduce the risk of increases in interest rates.  The interest rate cap agreement is based on anotional amount of $10,000,000 and caps increases in interest rates at 6.8% onthis amount until June 1, 2006.

 

In addition to the term notes, the subordinated notes payable to thebank and related party require additional cash flow anticipated to be receivedfrom the CCC to be split pro rata between the subordinated debtors asadditional payments on the notes.

 

At September 30, 2004, LSCP was in violation of the debt servicecovenant.  The lender has waived compliancewith this violation at September 30, 2004 and for the following year as itrelates to this

 

41

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violation at September 30, 2004. At September 30, 2003, LSCP was in violation of the net worthcovenant.  The lender has waivedcompliance with this violation at September 30, 2003 and for the followingyear as it relates to this violation at September 30, 2003.

 

The estimated maturities of long-term debt at September 30, 2004,by fiscal year, are as follows:

 
| 2005                  |   | $          | 3,109,676  |   |
|-----------------------|--------|------------|------------|--------|
| 2006                  |   | 3,213,570  |       |
| 2007                  |   | 3,354,071  |       |
| 2008                  |   | 12,824,429 |       |
| 2009                  |   | 180,919    |       |
|                  |   |       |       |
| Total  long-term debt |   | $          | 22,682,665 |   |

 

**6. LEASES**

 

The Company leases equipment under operating and capital leases through2008.  The Company is generallyresponsible for maintenance, taxes, and utilities for leased equipment.  Equipment under operating leases includesrail cars and various loading and moving vehicles.  Rent expense for operating leases wasapproximately $312,000 for the fiscal year ended September 30, 2004 and$172,000 for the nine month fiscal year ended September 30, 2003.  During fiscal 2004, the Company sublet railcars on a month-to-month basis and recognized approximately $134,000 in otherincome.

 

Equipment under capital leases, including installation costs expendedoutside of the capital lease are as follows at September 30:

 
| ** **                | ** ** | **2004** | ** ** | **2003** | ** ** |
|---------------------------|------------|----------|------------|----------|------------|
|                      |       |     |       |     |       |
| Equipment                 |       | $        | 460,275    |     | $          | 460,275 |   |
| Accumulated  amortization |       | 47,371   |       | 15,844   |       |
|                      |       |     |       |     |       |
| Total                     |       | $        | 412,904    |     | $          | 444,431 |   |

 

42

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At September 30, 2004, the Company had the following minimumcommitments, which at inception had non-cancelable terms of more than one year:

 
| ** **                                                                            | ** ** | **Operating  Lease** | ** ** | **Capital  Leases** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------|------------|---------------------|------------|
|                                                                                  |       |                 |       |                |       |
| 2005                                                                                  |       | $                    | 351,345    |                | $          | 82,939 |   |
| 2006                                                                                  |       | 351,345              |       | 80,112              |       |
| 2007                                                                                  |       | 351,345              |       | 79,893              |       |
| 2008                                                                                  |       | 197,473              |       | 39,946              |       |
| Total  minimum lease commitments                                                      |       | $                    | 1,251,508  |                | 282,890    |   |
| Less amount  representing interest                                                    |       |                 |       | 17,793              |       |
|                                                                                  |       |                 |       |                |       |
| Present  value of minimum lease commitments; included in the preceding long-term debt |       |                 |       | $                   | 265,097    |   |

 

**7. RELATED PARTY TRANSACTIONS**

 

In addition to the related party transactions described previously, theCompany also had the following related party transactions:

 

The minority investors in LSCP include Archer Daniels Midland, Inc.(ADM), formerly MCP Holdings Co., LLC, which owns 800 units of LSCP, Fagen, Inc(Fagen), the general contractor of the plant, which owns 350 units, and IndeckEnergy Services, LLC, which owns 300 units. In July 2004 LSCP repurchased 100 units held by David VanderGriend, the owner of ICM, the engineering firm for LSCP, for $750,000.  As a result, LSCP had 3,639 units outstandingat September 30, 2004, versus the 3,739 units that were outstanding at September 30,2003.  The LLC owns 2,189 LSCP units.

 

For the fiscal year ending September 30, 2004, and for the ninemonth fiscal year ended September 30, 2003, revenues from the sale ofethanol to the marketing agent as described in Note 10 were approximately$73,309,000 or 86% and $26,518,000 or 83%, respectively, of total revenue.  ADM markets all of the ethanol sold by LSCPas described in Note 10 and receives a marketing fee.  The Company incurred marketing expenses ofapproximately $489,000 and $205,000 to ADM for the fiscal year ended September 30,2004 and the nine month fiscal year ended September 30, 2003,respectively.  At September 30, 2004and 2003, amounts due from ADM approximated 90% and 83% of trade accountsreceivable, respectively.

 

43

----

 

At September 30, 2003 the Company had construction costs payableto the general contractor of $250,000 which was repaid during fiscal 2004.  Total fees to the engineer and generalcontractor related to the construction of the plant were approximately$9,795,000 during the nine month fiscal year ended September 30,2003.  During the fiscal year ended September 30,2004, the note payable to Fagen, totaling $1,250,000, was repaid along withaccrued interest of approximately $98,000. At September 30, 2003 the Company had accrued interest related tothe note payable to Fagen as described in Note 5 of approximately $82,000.

 

During fiscal 2004, LSCP purchased approximately $8,781,000 in cornfrom members of the LLC.   During fiscal2003, LSCP purchased approximately $2,504,000 in corn from members of the LLC.

 

**8. EMPLOYEE BENEFIT PLAN**

 

During 2003, the Company began a 401(k) retirement plan for alleligible employees.  Participation in theplan is based on attaining certain age and service requirements.  The Company makes a matching contribution of3% of the participants’ eligible wages. The employees vest in the Company match evenly over four years.  The retirement plan expense was $27,729 forthe fiscal year ended September 30, 2004, and $569 for the nine monthfiscal year ended September 30, 2003.

 

**9. INCOME TAXES**

 

The differences between consolidated financial statement basis and taxbasis of assets are as follows:

 
| ** **                                                                                   | ** ** | **September 30  2004** | ** **     | **September 30  2003** | ** ** |
|----------------------------------------------------------------------------------------------|------------|-----------------------------|----------------|-----------------------------|------------|
| Consolidated  financial statement basis of assets                                            | ** ** | **$**                       | **59,828,204** |                        | $          | 57,308,872 |   |
| Plus:  organization and start-up costs capitalized, net                                      | ** ** | **556,116**                 |           | 714,384                     |       |
| Less:  accumulated tax depreciation and amortization greater than financial  statement basis | ** ** | **(15,359,862**             | )              | (12,287,693                 | )          |
|                                                                                         |       |                        |           |                        |       |
| Income tax basis  of assets                                                                  | ** ** | **$**                       | **45,024,458** |                        | $          | 45,735,563 |   |

 

There were no differences between the consolidated financial statementbasis and tax basis of the Company’s liabilities.

 

44

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**10. COMMITMENTS AND CONTINGENCIES**

 

As discussed in Note 7, the Company has entered into an ethanolmarketing agreement with ADM.  TheCompany agrees to pay ADM a fixed price per gallon for every gallon of ethanolproduced by the Company and sold to ADM. The initial term is until April 2007 with renewal optionsthereafter in one year increments.

 

The Company has entered into a marketing agreement whereby the Companyagrees to sell certain grains and solubles. In return, the buyer agrees to pay the Company a percentage of theselling price for grains and a fixed dollar amount per ton of solubles.  The agreement commences when the Companybegins selling certain grains and solubles and continues for a year initiallyand terminable thereafter by either party. Sales under this agreement approximated $1,865,000 and $2,798,000 duringthe fiscal year ended September 30, 2004 and the nine month fiscal yearended September 30, 2003, respectively.

 

At September 30, 2004, the Company has forwardcontracts to purchase approximately 121,000 million British thermal units(MMBTU) of natural gas during October 2004 at an average price of$5.18.  The Company has forward contractsto purchase approximately 550,000 MMBTU of natural gas during the November 2004through March 2005 time period at an average price of $6.52 perMMBTU.  The Company has forward contractsto purchase approximately 630,000 MMBTU of natural gas during the April 2005through October 2005 time period at $5.03. The unused value of these contracts at September 30, 2004 totalapproximately $7,382,000 less a deposit of $184,000.

 

At September 30, 2004, the Company has forwardcontracts to purchase approximately 1,580,000 bushels of corn at prices rangingfrom $2.05 to $3.40 per bushel through October 2005.

 

**11. SUBSEQUENT EVENTS**

 

On December 2, 2004, the Company has entered into an agreement toexpand the plant for approximately $4.6 million.  The total cost of the expansion is estimatedat $5.4 million.  In connection with theplant expansion, the Company secured a loan for approximately $5.4million.  Interest is due quarterlyduring the construction period at the one month LIBOR plus 330 basispoints.  Upon completion of theexpansion, this loan will be added to term note #3, which is currently due June 1,2008.

 

45

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REPORT OFINDEPENDENT AUDITORS ON SUPPLEMENTARY INFORMATION

 

Board of Directors

Little Sioux Corn Processors, LLC and Subsidiary

Marcus, Iowa

 

Our report on our audits of the consolidated financial statements ofLittle Sioux Corn Processors, LLC and Subsidiary for the fiscal years ended September 30,2004 and the nine month fiscal year ended September 30, 2003 appears onpage one.  Those audits were conductedfor the purpose of forming an opinion on the consolidated financial statementstaken as a whole.  The supplementaryinformation on pages 47 through 50 is presented for the purposes of additionalanalysis and is not a required part of the basic consolidated financialstatements.  Such information has notbeen subjected to the auditing procedures applied in the audits of theconsolidated financial statements and, accordingly, we express no opinion onit.

 
|                                                                                                              | /s/ Boulay, Heutmaker, Zibell & Co.  P.L.L.P. |   |
|-------------------------------------------------------------------------------------------------------------------|---------------------------------------------------|--------|
|                                                                                                              |                                              |
|                                                                                                              | Certified  Public Accountants                     |
|                                                                                                              |                                              |
| Minneapolis,  Minnesota

October 28,  2004,

except for Note 11 for which

the date is December 2, 2004 |                                              |

 

46

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

 

ConsolidatingBalance Sheet

 
| ** **                                                                             | ** ** | **Years  ended September 30** | ** ** |
|----------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                             | ** ** | **2004**                           | ** ** | **2003** | ** ** |
| **ASSETS**                                                                             | ** ** | **LSCP, LLLP**                     | ** ** | **Little  Sioux Corn  Processors, LLC** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** | **Consolidated** | ** ** |
|                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| **Current Assets**                                                                     |       |                               |       |   |   |   |   |   |   |   |   |
| Cash                                                                                   |       | $                                  | 3,903,878  |   | $ | 3,502 | ** ** | ** ** |   | **$** | **3,907,380** |   | $ | 536,483 |   |
| Restricted  cash                                                                       |       | 2,730,481                          | ** ** | ** ** |   |   |   | **2,730,481** |   | 12,902 |   |
| Trade  accounts receivable, net of allowance for doubtful accounts of $20,000 in  2004 |       | 2,335,023                          | ** ** | ** ** |   |   |   | **2,335,023** |   | 1,753,362 |   |
| Other  receivables                                                                     |       | 448,503                            |       |   |   | (47,950 | ) | **400,553** |   | 3,362,970 |   |
| Inventory                                                                              |       | 2,084,604                          | ** ** | ** ** |   |   |   | **2,084,604** |   | 1,420,244 |   |
| Derivative  instruments                                                                |       | —                             |       |   |   |   |   |   |   | 397,950 |   |
| Prepaid  expenses                                                                      |       | 488,885                            | ** ** | ** ** |   |   |   | **488,885** |   | 564,429 |   |
| Total  current assets                                                                  |       | 11,991,374                         |       | 3,502 |   | (47,950 | ) | **11,946,926** |   | 8,048,340 |   |
|                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| **Property and equipment**                                                             |       |                               |       |   |   |   |   |   |   |   |   |
| Land                                                                                   |       | 2,753,225                          |       |   | ** ** | ** ** |   | **2,753,225** |   | 2,377,832 |   |
| Building                                                                               |       | 15,061,750                         |       |   | ** ** | ** ** |   | **15,061,750** |   | 15,147,828 |   |
| Processing  equipment                                                                  |       | 28,226,013                         |       |   | ** ** | ** ** |   | **28,226,013** |   | 26,476,854 |   |
| Grain  handling equipment                                                              |       | 5,172,406                          |       |   | ** ** | ** ** |   | **5,172,406** |   | 5,084,206 |   |
| Rail and  other equipment                                                              |       | 1,214,322                          |       | ** ** |   |   |   | **1,214,322** |   | 1,204,791 |   |
| Furniture  and fixtures                                                                |       | 160,042                            |       |   | ** ** | ** ** |   | **160,042** |   | 156,178 |   |
|                                                                                   |       | 52,587,758                         |       | — | ** ** | — |   | **52,587,758** |   | 50,447,689 |   |
| Less  accumulated depreciation                                                         |       | 5,051,631                          | ** ** |   |   |   |   | **5,051,631** |   | 1,650,348 |   |
| Net property  and equipment                                                            |       | 47,536,127                         |       | — |   | — | ** ** | **47,536,127** |   | 48,797,341 |   |
|                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| **Other assets**                                                                       |       |                               |       |   |   |   |   |   |   |   |   |
| Investment  in LP                                                                      |       | —                             |       | 21,126,212 |   | (21,126,212 | ) | **—** |   | — |   |
| Loan costs                                                                             |       | 345,151                            | ** ** | ** ** |   |   |   | **345,151** |   | 463,191 |   |
| Total other  assets                                                                    |       | 345,151                            |       | 21,126,212 |   | (21,126,212 | ) | **345,151** |   | 463,191 |   |
|                                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| **Total assets**                                                                       |       | $                                  | 59,872,652 |   | $ | 21,129,714 |   | $ | (21,174,162 | ) | **$** | **59,828,204** |   | $ | 57,308,872 |   |
|                                                                                        |            |                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

See Report of Independent Registered PublicAccounting Firm on Supplementary Information.

 

47

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| ** **                                                                                      | ** ** | **Years ended  September 30** | ** ** |
|-------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                                                      | ** ** | **2004**                           | ** ** | **2003** | ** ** |
| **LIABILITIES AND EQUITY**                                                                      | ** ** | **LSCP, LLLP**                     | ** ** | **Little  Sioux Corn  Processors, LLC** |   | **Eliminations** |   | **Consolidated** | ** ** | **Consolidated** | ** ** |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| **Current Liabilities**                                                                         |       |                               |       |   |   |   |   |   |   |   |   |
| Revolving  promissory note                                                                      |       | $                                  | 38,829     | ** ** | ** ** |   |   |   | **$** | **38,829** |   | $ | 775,165 |   |
| Current  maturities of long-term debt                                                           |       | 3,109,676                          | ** ** | ** ** |   |   |   | **3,109,676** |   | 2,957,267 |   |
| Accounts  payable                                                                               |       |                               |       |   |   |   |   |   |   |   |   |
| Trade                                                                                           |       | 1,337,513                          | ** ** | ** ** |   |   |   | **1,337,513** |   | 509,241 |   |
| Construction                                                                                    |       | —                             | ** ** | ** ** |   |   |   | **—** |   | 250,000 |   |
| Other                                                                                           |       | —                             |       | $ | 47,950 |   | $ | (47,950 | ) | **—** |   |   |   |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| Derivative  instruments                                                                         |       | 181,579                            | ** ** | ** ** |   |   |   | **181,579** |   |   |   |
| Accrued  liabilities                                                                            |       | 298,851                            | ** ** | ** ** |   |   |   | **298,851** |   | 460,179 |   |
| Total  current liabilities                                                                      |       | 4,966,448                          |       | 47,950 |   | (47,950 | ) | **4,966,448** |   | 4,951,852 |   |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| **Long-Term Debt,**net of current maturities                                                    |       | 19,572,989                         |       | — |   | — |   | **19,572,989** |   | 28,157,443 |   |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| **Minority Interest**                                                                           |       |                               | ** ** | ** ** |   | 14,207,003 |   | **14,207,003** |   | 10,052,753 |   |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| **Stockholders’ Equity**                                                                   |       |                               |       |   |   |   |   |   |   |   |   |
| Member  contributions, net of costs related to capital contributions, 10,941 units  outstanding |       | —                             |       | 10,842,237 |   | ** ** |   | **10,842,237** |   | 10,842,237 |   |
| Member  contributions, LLLP                                                                     |       | 23,871,280                         |       |   |   | $ | (23,871,280 | ) | **—** |   |   |   |
| Distributions                                                                                   |       | (2,250,000                         | )          |   |   | 2,250,000 |   | **—** |   |   |   |
| Accumulated  other comprehensive loss; net loss on derivatives                                  |       | —                             | ** ** | ** ** |   |   |   | **—** |   | (217,441 | ) |
| Retained  earnings                                                                              |       | 13,711,935                         |       | 10,239,527 |   | (13,711,935 | ) | **10,239,527** |   | 3,522,028 |   |
|                                                                                            |       | 35,333,215                         |       | 21,081,764 |   | (35,333,215 | ) | **21,081,764** |   | 14,146,824 |   |
|                                                                                            |       |                               |       |   |   |   |   |   |   |   |   |
| **Total liabilities and stockholders’ equity**                                             |       | $                                  | 59,872,652 |   | $ | 21,129,714 |   | $ | (21,174,162 | ) | **$** | **59,828,204** |   | $ | 57,308,872 |   |

 

See Report of Independent Registered Public Accounting Firm onSupplementary Information.

 

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

 

ConsolidatingStatement of Operations

 
| ** **                                 | ** ** | **Years  ended September 30** | ** ** |
|--------------------------------------------|------------|------------------------------------|------------|
| ** **                                 | ** ** | **2004**                           | ** ** | ** ** | ** ** |
| ** **                                 | ** ** | **LSCP, LLLP**                     | ** ** | **Little  Sioux Corn  Processors, LLC** |   | **Eliminations** |   | **Consolidated** | ** ** | **2003** | ** ** |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Revenue**                                |       | $                                  | 85,540,934 |   | $ | — |   | $ | — |   | **$** | **85,540,934** |   | $ | 31,814,299 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Cost of Goods Sold**                     |       | 71,244,909                         | ** ** | ** ** |   |   |   | **71,244,909** |   | 27,462,227 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
|                                       |       | 14,296,025                         |       | — |   | — |   | **14,296,025** |   | 4,352,072 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Operating Expenses**                     |       | 5,944,066                          |       | 194,587 |   | ** ** |   | **6,138,653** |   | 2,660,909 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Operating Income**                       |       | 8,351,959                          |       | (194,587 | ) | — |   | **8,157,372** |   | 1,691,163 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Other Income (Expense)**                 |       |                               |       |   |   |   |   |   |   |   |   |
| Income from  subsidiary                    |       |                               |       | 8,029,694 |   | (8,029,694 | ) | **—** |   |   |   |
| Interest  income and other                 |       | 7,557                              | ** ** | ** ** |   |   |   | **7,557** |   | — |   |
| Interest  expense                          |       | (1,439,020                         | )          | ** ** | ** ** |   |   | **(1,439,020** | **)** | (847,223 | ) |
| CCC  Bio-Energy income                     |       | 6,645,512                          | ** ** | ** ** |   |   |   | **6,645,512** |   | 5,535,733 |   |
| Grants and  other income                   |       | 145,927                            |       | 164 |   | ** ** |   | **146,091** |   | 612,016 |   |
| Total other  expense, net                  |       | 5,359,976                          |       | 8,029,858 |   | (8,029,694 | ) | **5,360,140** |   | 5,300,526 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Net Income Before Minority Interest**    |       | 13,711,935                         |       | 7,835,271 |   | (8,029,694 | ) | **13,517,512** |   | 6,991,689 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Minority Interest in Sudsidiary Income** |       |                               | ** ** | ** ** |   | 5,663,681 | ** ** | **5,663,681** |   | 2,920,676 |   |
|                                       |       |                               |       |   |   |   |   |   |   |   |   |
| **Net Income**                             |       | $                                  | 13,711,935 |   | $ | 7,835,271 |   | $ | (13,693,375 | ) | **$** | **7,853,831** |   | $ | 4,071,013 |   |

 

See Report of Independent Registered PublicAccounting Firm on Supplementary Information.

 

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**LITTLESIOUX CORN PROCESSORS, LLC AND SUBSIDIARY**

 

Consolidated Schedule ofGrain Purchases

 

License No.GD-5050

 
| ** **                    | ** ** | **Twelve  Months Ended  September 30  2004** | ** ** | **Nine  Months Ended  September 30  2003** | ** ** |
|-------------------------------|------------|---------------------------------------------------|------------|-------------------------------------------------|------------|
|                          |       |                                              |       |                                            |       |
| Grain  purchases (in bushels) |       | 17,294,817                                        |       | 7,900,261                                       |       |

 

See Report of Independent Registered Public Accounting Firm onSupplementary Information.

 

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**ITEM8.****                                                     CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.**

 

Boulay,Heutmaker, Zibell & Co., P.L.L.P. has been our independent auditor sincethe Company’s inception and is the Company’s independent auditor at the presenttime.  The Company has had nodisagreements with its auditors.

 

**ITEM8A.****                                            CONTROLSAND PROCEDURES.**

 

Our management, including our President andChief Executive Officer (the principal executive officer), Stephen Roe, and ourChief Financial Officer (the principal financial officer), Gary Grotjohn, havereviewed and evaluated the effectiveness of our disclosure controls andprocedures as of the end of the period covered by this report.  Based upon this review and evaluation, theseofficers believe that our disclosure controls and procedures are effective inensuring that material information related to us is recorded, processed,summarized and reported within the time periods required by the forms and rulesof the Securities and Exchange Commission.

 

Our management, including our principalexecutive officer and principal financial officer, have reviewed and evaluatedany changes in our internal control over financial reporting that occurred asof the end of the period covered by this report and there has been no changethat has materially affected or is reasonably likely to materially affect ourinternal control over financial reporting.

 

**PART III**

 

**ITEM9.****                                                     DIRECTORS,EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES; COMPLIANCE WITH****SECTION 16(a) OF THE EXCHANGE ACT.**

 

**Identificationof Directors, Executive Officers and Significant Employees**

 

*Ron Wetherell, Chairman and Class A Director– Age 59*

 

Mr. Wetherell has served on the board of theCompany since its inception.  For thepast five years, Mr. Wetherell has owned and operated a number of CherokeeCounty businesses including a repair shop that has grown into Wetherell ManufacturingCo., a designer and manufacturer of farm implements, hydraulic cylinders, andtruck utility bodies, and Wetherell Cable TV which services seven separatecommunities in northwest Iowa.  In 1992,he was elected to the Cherokee County Board of Supervisors and was recentlyelected to his third term.

 

On July 20, 2004, the board of directorselected Mr. Wetherell as Chairman.  Atour annual meeting of members held in March 2004, Mr. Wetherell wasre-elected to our board for a one-year term. Pursuant to our operating agreement, Mr. Wetherell will serve as a ClassA Director of the Company until the annual meeting of members in 2005, anduntil a successor is elected and qualified, or until the earlier death,resignation, removal or disqualification of such director.  Mr. Wetherell previously held the offices ofVice Chairman and Vice President of the Company.

 

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*Myron Pingel, Vice Chairman and Class ADirector – Age 64*

 

Mr. Pingel has served on the board of theCompany since its inception.  For thepast five years, Mr. Pingel has farmed north of Aurelia and operated a grainand livestock farm.  He currently servesas chairman of the Maple Valley Mutual Insurance Company, and chairman of TwinValley Producers Network farrowing group. Neither entity is a public reporting company.

 

On July 20, 2004, our board elected Mr.Pingel as Vice Chairman for the Company. At our annual meeting of members in March 2004, Mr. Pingel wasre-elected to our board for a three-year term. Pursuant to our operating agreement, Mr. Pingel will serve as a Class ADirector of the Company until the annual meeting of members in 2007, and untila successor is elected and qualified, or until the earlier death, resignation,removal or disqualification of such director.

 

*Tim Ohlson, Secretary and Class A Director –Age 53*

 

Mr. Ohlson has served on the board of theCompany since its inception.  For thepast five years, Mr. Ohlson has operated a grain and livestock farm north ofMeriden.  He currently is active in theCherokee County Farm Bureau.  He has beena board member of CML Telephone board for twelve years and currently serves asits secretary.

 

On July 20, 2004, our board re-electedMr. Ohlson as Secretary for the Company. At our annual meeting of members in March 2004, Mr. Ohlson wasre-elected to our board for a three-year term. Pursuant to our operating agreement, Mr. Ohlson will serve as a Class ADirector of the Company until the annual meeting of members in 2007, and untila successor is elected and qualified, or until the earlier death, resignation,removal or disqualification of such director.

 

*Daryl Haack, Class A Director – Age 60*

 

Mr. Haack has served on the board of theCompany since its inception.  For thepast five years, Mr. Haack has farmed approximately nine hundred crop acres inO’Brien County generally dedicated to corn and soybeans.  In addition, Mr. Haack is one of eighteenshareholders in a swine-finishing corporation and serves as the corporation’sboard chairman.  The swine-finishingcorporation is not a publicly reporting company.  Mr. Haack is serving his ninth year as amember of the Iowa Corn Promotion Board, currently serves as its chairman, wasa delegate to the National Corn Grower Association’s Corn Congress, and ismember of the U.S. Feed Grains Council.

 

At our annual meeting of members in March 2004,Mr. Haack was re-elected to our board for a one-year term.  Pursuant to our operating agreement, Mr.Haack will serve as a Class A Director of the Company until the annual meetingof members in 2005, and until a successor is elected and qualified, or untilthe earlier death, resignation, removal or disqualification of suchdirector.  Mr. Haack previously held theoffices of president, vice-president, chairman and vice-chairman of theCompany.

 

*Doug Lansink, Class A Director – Age 46*

 

Mr. Lansink has served on the board of theCompany since its inception.  For thepast five years, Mr. Lansink has operated a livestock and grain farm in IdaCounty.

 

At our annual meeting of members in March 2004,Mr. Lansink was re-elected to our board for a two-year term.  Pursuant to our operating agreement, Mr.Lansink will serve as a Class A Director of the Company until the annualmeeting of members in 2006, and until a successor is elected and qualified, oruntil the earlier death, resignation, removal or disqualification of suchdirector.  Mr. Lansink previously heldthe office of treasurer of the Company.

 

52

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*Verdell Johnson, Class A Director – Age 67*

 

Mr. Johnson has served on the board of theCompany since its inception.  Hepreviously served as secretary of the Company. For the past five years, Mr. Johnson has owned and operated a livestockand grain farm in Cherokee County.  Hecurrently serves as president of the Cherokee County Farm Bureau.

 

At our annual meeting of members in March 2004,Mr. Johnson was re-elected to our board for a three-year term.  Pursuant to our operating agreement, Mr.Johnson will serve as a Class A Director of the Company until the annualmeeting of members in 2007, and until a successor is elected and qualified, oruntil the earlier death, resignation, removal or disqualification of suchdirector.

 

*Darrell Downs, Class A Director – Age 66*

 

Mr. Downs has served on the board of the Companysince its inception.  For the past fiveyears Mr. Downs has been employed as a marketing manager by a regional seedcompany.  He currently serves as themayor of Marcus, Iowa.

 

At our annual meeting of members in March 2004,Mr. Downs was re-elected to our board for a three-year term.  Pursuant to our operating agreement, Mr.Downs will serve as a Class A Director of the Company until the annual meetingof members in 2007, and until a successor is elected and qualified, or untilthe earlier death, resignation, removal or disqualification of such director.

 

*Roland Schmidt, Class A Director – Age 54*

 

Mr. Schmidt has served on the board of theCompany since its inception.  For thepast five years he has operated a grain and livestock farm in Sac County, andowned an interest in a partnership that finish feeds 5,000 to 6,000 head ofhogs annually.  He is currently servinghis second term as Sac County Farm Bureau president, having previously servedas vice president and chairman of several county committees.

 

At our annual meeting of members in March 2004,Mr. Schmidt was re-elected to our board for a one-year term.  Pursuant to our operating agreement, Mr.Schmidt will serve as a Class A Director of the Company until the annualmeeting of members in 2005, and until a successor is elected and qualified, oruntil the earlier death, resignation, removal or disqualification of suchdirector.

 

*Vincent Davis, Class A Director – Age 52*

 

Mr. Davis has served on the board since itsinception and served on its predecessor steering committee.  He currently serves as Iowa Farm BureauFederation (“IFBF”) regional manager in region 10, which encompasses fivecounties in west central Iowa.   Prior toserving as the IFBF regional manager, he served as Iowa Soybean Association fieldrepresentative for over 10 years.

 

At our annual meeting of members in March 2004,Mr. Davis was re-elected to our board for a two-year term.  Pursuant to our operating agreement, Mr.Davis will serve as a Class A Director of the Company until the annual meetingof members in 2006, and until a successor is elected and qualified, or untilthe earlier death, resignation, removal or disqualification of such director.

 

*Jeff Coale, Class B Director -  Age 39*

 

Mr. Coale was appointed to the board inMarch, 2002 by Indeck Energy Services, Inc., as a limited partner in thepartnership.  For the past five years,Mr. Coale has been employed by Indeck Power Equipment Company as vice-presidentof sales where he has been responsible for business development efforts onsteam generation related projects.

 

Pursuant to our operating agreement, Mr.Coale will serve as a Class B Director of the Company at the discretion of theappointing class of limited partners of the limited partnership until the nextannual meeting of partners, or until his successors is elected and qualified.

 

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*Steve Core, Class B Director – Age 54*

 

Mr. Core wasappointed to the board in March 2002 by Fagen, Inc., as a limited partnerin the limited partnership.  From 1994through 2002, Mr. Core served as general manager of Corn Plus, a Winnebago,Minnesota ethanol producer, where he supervised a staff of 34 employees thatoperated a plant producing 44 million gallons of ethanol annually.  Since 2002, Mr. Core has served as aconsultant to Fagen, Inc., with respect to new ethanol plant construction.  He is a member of the Minnesota EthanolCoalition, a director of the Renewable Fuels Association and Corn Growers Association.

 

Pursuant to our operating agreement, Mr. Corewill serve as a Class B Director of the Company at the discretion of theappointing class of limited partners of the limited partnership until the nextannual meeting of partners, or until his successor is elected and qualified.

 

*Marty Lyons, Class BDirector – Age 46*

 

Mr. Lyonswas appointed to the board in March, 2002, by MCP Holding Company, LLC, as alimited partner in the limited partnership. For the past five years, Mr. Lyons has been employed by Archer DanielsMidland Company and is currently the vice-president and director of ADM’sEthanol Sales group, which includes management of ADM’s domestic andinternational fuel, beverage and industrial ethanol marketing and salesefforts.

 

Pursuant to our operating agreement, Mr. Lyonswill serve as a Class B Director of the Company at the discretion of theappointing class of limited partners of the limited partnership until the nextannual meeting of partners, or until his successor is elected and qualified.

 

*Steve Roe, President and Chief Executive Officer – Age 51*

 

Mr. Roe washired as general manager of our ethanol plant on May 20, 2002.  Pursuant to our operating agreement, theoffice of president of the Company is responsible for day-to-day plantmanagement.  Until the appointment of apresident, the Chairman of our board held this office.  Effective May 18, 2004, and in accordancewith our operating agreement, the board of directors appointed our generalmanager, Stephen Roe, to the positions of President and Chief ExecutiveOfficer.  Mr. Roe will serve in suchcapacity until he resigns or is removed by the board of directors with theconsent of a majority of the holders of limited partnership units of thelimited partnership and the approval of our primary lender.

 

*Gary Grotjohn, Chief Financial Officer – Age 54*

 

Mr. Grotjohnwas hired as Controller for the Company on February 24, 2003.  In accordance with our operating agreement,the treasurer of the Company performed the duties of the Chief FinancialOfficer until the creation of a separate office for this purpose.  Effective May 18, 2004, and in accordancewith our operating agreement, the board of directors eliminated the office oftreasurer and appointed our controller, Gary Grotjohn, to the position of ChiefFinancial Officer.   Mr. Grotjohn willserve as Chief Financial Officer of the Company until he resigns or is removedby the board of directors.

 

**Adoptionof Code of Ethics**

 

On December 18,2003, our board of directors adopted a code of ethics that applies to ourPresident and Chief Executive Officer, Stephen Roe, and our Chief FinancialOfficer, Gary Grotjohn.  Each of theseindividuals signed an acknowledgment of his receipt of our code of ethics.  We are filing a copy of our code of ethicswith the Securities and Exchange Commission by including the code of ethics asExhibit 14.1 to this report.

 

**Identificationof Audit Committee**

 

The board of directors appointed an audit committee consisting of DougLansink, Ron Wetherell, Daryl Haack and Vince Davis.  The chairperson of the audit committee isDoug Lansink.  The audit committee isexempt from the independence listing standards because the Company’s securitiesare not listed on a national securities exchange or listed in an automatedinter-dealer quotation system of a national securities association or toissuers of such securities. Nevertheless, each member of our audit committee is independent withinthe definition of 

 

54

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independence provided by NASDAQ rules 4200 and 4350.  Our board of directors has determined that wedo not currently have an audit committee financial expert serving on our auditcommittee.  We do not have an auditcommittee financial expert serving on our audit committee because no member ofour board of directors has the requisite experience and education to qualify asan audit committee financial expert as defined in Item 401 of Regulation S-Band the board has not yet created a new director position expressly for thispurpose.  Our board of directors intendsto consider such qualifications in future nominations to our board andappointments to the audit committee.

 

**ITEM10.****                                              EXECUTIVECOMPENSATION.**

 

**SummaryCompensation Table**

 

The following table set forth all compensationpaid or payable by the Company during the last three fiscal years to ourChairman, President and Chief Executive Officer.  We donot have any compensatory security option plan for our executive officers anddirectors.  None of our directors orofficers has any options, warrants, or other similar rights to purchasesecurities of the Company.

 

 
| **Name and Principal  Position**                                                                          | ** ** | **Year**         | ** ** | **Salary** | ** ** | **All Other Compensation** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|------------------|------------|------------|------------|----------------------------|------------|
| Stephen Roe, President and Chief  Executive Officer                                                       |       | Fiscal Year 2004 |       | $          | 100,962    |                       | $          | 0 |   |
| Daryl Haack, Chairman of the Board and  President (offices held October 2003 through July 2004) |       | Fiscal Year 2004 |       | $          | 0          |                       | $          | 1,745 |   |
|                                                                                                      |       | Fiscal Year 2003 |       | $          | 0          |                       | $          | 2,725 |   |
|                                                                                                      |       | Fiscal Year 2002 |       | $          | 0          |                       | $          | 0 |   |
| Ron Wetherell, Chairman of the Board  (office held July 2004 to present)                             |       | Fiscal Year 2004 |       | $          | 0          |                       | $          | 1,638 |   |
|                                                                                                      |       | Fiscal Year 2003 |       | $          | 0          |                       | $          | 0 |   |
|                                                                                                      |       | Fiscal Year 2002 |       | $          | 0          |                       | $          | 0 |   |

 

**ITEM11.****                                              SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND****RELATED STOCKHOLDER MATTERS.**

 

None of ourofficers, directors or unit holders, directly or beneficially, owns more than fivepercent of our issued and outstanding units.

 

As of September 30,2004, members of our board of directors own units as follows:

 
| **(1) Title of Class**   | ** ** | **(2) Name and Address  of Beneficial Owner** | ** ** | **(3) Amount and  Nature of Beneficial  Ownership** | ** ** | **(4) Percent of Class** | ** ** |
|--------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------|------------|
| Class A Membership Units |       | Vince Davis, Class A Director                 |       | 24 Units(1)                                         |       | 0.21                     | %          |
| Class A Membership Units |       | Darrell Downs, Class A Director               |       | 32 Units(2)                                         |       | 0.29                     | %          |
| Class A Membership Units |       | Daryl Haack, Class A Director                 |       | 20 Units(2)                                         |       | 0.18                     | %          |
| Class A Membership Units |       | Verdell Johnson, Class A Director             |       | 100 Units(3)                                        |       | 0.91                     | %          |

 

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| Class A Membership Units                                                           |       | Doug Lansink, Class A Director                    |       | 28 Units(2)   |       | 0.26     | %     |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|---------------|------------|----------|-------|
| Class A Membership Units                                                           |       | Tim Ohlson, Secretary and Class A  Director       |       | 52 Units      |       | 0.47     | %     |
| Class A Membership Units                                                           |       | Myron Pingel, Vice Chairman and Class A  Director |       | 84 Units(4)   |       | 0.77     | %     |
| Class A Membership Units                                                           |       | Roland Schmidt, Class A Director                  |       | 20 Units(2)   |       | 0.18     | %     |
| Class A Membership Units                                                           |       | Ron Wetherell, Chairman and Class A  Director     |       | 100 Units     |       | 0.91     | %     |
| **Total Membership  Units Held by Current Directors and Officers of the Company:** | ** ** | ** **                                        | ** ** | **460 Units** | ** ** | **4.20** | **%** |

 

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(1)          Includes 4 Class A Membership Units heldin joint tenancy with spouse.

(2)          All Class A Membership Units held in jointtenancy with spouse.

(3)          Includes 80 Class A Membership Units heldin joint tenancy with spouse.

(4)          Includes 60 Class A Membership Units heldin joint tenancy with spouse.

 

Thefollowing table sets forth the ownership of the limited partners in LSCP, LLLP,as of September 30, 2004:

 
| **(1) Title of Class**                           | ** ** | **(2) Name and Address  of Beneficial Owner**                                               | ** ** | **(3) Amount and  Nature of Beneficial  Ownership** | ** ** | **(4) Percent of Class** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|--------------------------|------------|
| Class B Limited Partnership Units of  LSCP, LLLP |       | Fagen, Inc.  501 W. Hwy. 212  P.O. Box 159  Granite Falls, MN 56241                         |       | 350 Units                                           |       | 100.0                    | %          |
| Class D Limited Partnership Units in  LSCP, LLLP |       | Indeck Energy Services, Inc.  600 N. Buffalo Grove Rd.,  Suite 300  Buffalo Grove, IL 60089 |       | 300 Units                                           |       | 100.0                    | %          |
| Class E Limited Partnership Units in LSCP,  LLLP |       | Archer Daniels Midland Company*   4666 Faries Parkway  Decatur, IL 62526                    |       | 800 Units                                           |       | 100.0                    | %          |
| **TOTAL:**                                       | ** ** |                                                                                        |       | **1,450 Units**                                     |       |                     |       |

 

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*ArcherDaniels Midland Company owns the 800 Class E Limited Partnership Units in LSCP,LLLP through its wholly-owned subsidiary, MCP Holding Company, L.L.C.

 

The limitedpartners collectively own 1,450 of the 3,639 total outstanding limitedpartnership units in LSCP, LLLP, for a total ownership of 39.85%.

 

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**ITEM 12.****                                              CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS.**

 

Since ourinception, we have engaged in several transactions with related parties.

 

*Fagen, Inc.*

 

  Fagen, Inc., owns 350 of the 3,639 totaloutstanding limited partnership units in LSCP, LLLP.  This means that Fagen, Inc., owns a 9.6%limited partnership interest in the limited partnership.  Of the 1,450 limited partnership unitsrepresenting the limited partners, Fagen, Inc.’s ownership of 350 units meansthat it owns 24.1% of the total number of units held by the limited partners.  Fagen, Inc.,’s ownership of its limitedpartnership interest entitles it to join with its class of limited partnershipinterests in electing one director to our board.  Fagen, Inc., has elected Steve Core to ourboard.

 

We enteredinto a design-build contract with Fagen, Inc., for the purpose of providingdesign, development and construction services to us in connection with ourethanol plant.  Pursuant to thedesign-build contract, Fagen, Inc., agreed to design, develop and construct a40 million gallon per year ethanol plant for an amount not to exceedapproximately $45,500,000, subject to change orders approved by us.  Fagen, Inc., has provided design, developmentand construction services for our ethanol plant in accordance with the design/buildcontract and construction was substantially completed in April, 2003.  The amount we paid Fagen, Inc., forconstruction of the ethanol plant is comparable to that of an arms-lengthtransaction.  In addition, Fagen, Inc.,purchased approximately $1,250,000 of the limited partnership’s subordinateddebt.  In January 2004 we repaidthis debt along with approximately $98,000 in interest.

 

*Indeck EnergyServices, Inc.*

 

IndeckEnergy Services, Inc., owns 300 of the 3,639 total outstanding limitedpartnership units in LSCP, LLLP.  Thismeans that Indeck Energy Services, Inc., owns an 8.2% limited partnershipinterest in the limited partnership.  Ofthe 1,450 limited partnership units representing the limited partners, IndeckEnergy Services, Inc.’s ownership of 300 units means that it owns 20.7% of thetotal number of units held by the limited partners.    Indeck Energy Services, Inc.’s ownership ofits limited partnership interest entitles it to join with its class of limitedpartnership interests in electing one director to our board.

 

IndeckEnergy Services, Inc., has elected Jeff Coale to our board.  Indeck Energy Services, Inc., as asubcontractor under the design-build contract, has provided a thermal oxidizerto us in connection with the development and construction of our ethanolplant.  In addition, we purchased aregenerative thermal oxidizer in 2004 in order to further decrease our emissionof any volatile organic compounds and ease our regulatory compliance.  The cost of the thermal oxidizer was $1,825,000and was included in the design-build contract price of $45,500,000.  The amount we paid Indeck Energy Services,Inc., for this equipment is comparable to that of an arms-length transaction.

 

*MCP Holding Company,L.L.C.*

 

MCP HoldingCompany, L.L.C., purchased 800 of the 3,639 total outstanding limitedpartnership units in LSCP, LLLP.  ADMacquired MCP Holding Company, L.L.C. This means that ADM now owns 800 of the 3,639 total outstanding limitedpartnership units in LSCP, LLLP or a 21.98% limited partnership interest in thelimited partnership.  Of the 1,450limited partnership units representing the limited partners, ADM’s ownership of800 units means that it owns 55.2% of the total number of units held by thelimited partners.  ADM’s ownership of itslimited partnership interest entitles it to join with its class of limitedpartnership interests in electing one director to our board.  ADM has elected Marty Lyons to our board.

 

ADM providesmarketing services to our ethanol plant pursuant to the marketing agreementassigned by MCP to ADM.  In 2004 we paidADM approximately $489,000 as a marketing fee. The amount we pay ADM for marketing services is comparable to that of anarms-length transaction.

 

*Dave Vander Griend*

 

Until July 30,2004, Dave Vander Griend owned 100 limited partnership units in LSCP,LLLP.  On July 20, 2004, the limitedpartnership paid $750,000 in exchange for the redemption of all 100 limitedpartnership units from

 

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Mr. Vander Griend.  Dave Vander Griend’s ownership of his limitedpartnership interest entitled him to join with his class of limited partnershipinterests in electing one director to our board.   Mr. Vander Griend elected himself to serveon our board.  After our redemption ofhis limited partnership interest on July 20, 2004 and in accordance withour limited partnership agreement, Mr. Vander Griend resigned from our boardand is no longer entitled to any director appointment rights.

 

Mr. VanderGriend owns and controls ICM, Inc.  ICM,Inc., as a subcontractor under the design-build contract, provided the processdesign engineering for the development and construction of our ethanolplant.  The cost of the process designengineering provided by ICM, Inc. was included in the design-build contractprice of $45,500,000.

 

**ITEM 13.****                                             ****EXHIBITS.**

 

The followingexhibits are filed as part of this report. Exhibits previously filed are incorporated by reference, as noted.

 
| **Exhibit  No.** | ** ** | **Exhibit**                                                                                                                                                                                                                                                                                                             |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1              |       | Articles of  Organization of the registrant. Filed as Exhibit 2.1 to the registrant’s  registration statement on Form 10-SB (Commission File 0001229899) and  incorporated by reference herein.                                                                                                                    |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 3.2              |       | Second  Amended and Restated Operating Agreement of the registrant. Filed as Exhibit  2.2 to the registrant’s registrations statement on Form 10-SB (Commission  File 0001229899) and incorporated by reference herein.                                                                                            |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 3.3              |       | Certificate  of Limited Partnership. Filed as Exhibit 2.3 to the registrant’s registration  statement on Form 10-SB (Commission File 0001229899) and incorporated by  reference herein.                                                                                                                            |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 3.4              |       | Limited  Partnership Agreement. Filed as Exhibit 2.4 to the registrant’s registration  statement on Form 10-SB (Commission File 0001229899) and incorporated by  reference herein.                                                                                                                                 |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.1             |       | Ethanol  Marketing Agreement between Little Sioux Corn Processors, L.P. and Minnesota  Corn Processors, L.L.C.* Filed as Exhibit 6.1 to the registrant’s  registration statement on Form 10-SB (Commission File 0001229899) and  incorporated by reference herein.                                                 |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.2             |       | Assignment  of Ethanol Marketing Agreement between Little Sioux Corn Processors, L.P. and  Minnesota Corn Processors, L.L.C. to Archer Daniels Midland Company. Filed as  Exhibit 6.2 to the registrant’s registration statement on Form 10-SB  (Commission File 0001229899) and incorporated by reference herein. |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.3             |       | Distillers  Grain Marketing Agreement between Little Sioux Corn Processors, L.P. and  Commodity Specialist Company*. Filed as Exhibit 6.3 to the registrant’s  registration statement on Form 10-SB (Commission File 0001229899) and  incorporated by reference herein.                                            |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.4             |       | Design/Build  Contract between Little Sioux Corn Processors, L.P. and Fagen, Inc.* Filed as  Exhibit 6.4 to the registrant’s registration statement on Form 10-SB  (Commission File 0001229899) and incorporated by reference herein.                                                                              |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.5             |       | Construction  Loan Agreement dated July 25, 2002 by and between LSCP, L.P. and First  National Bank of Omaha. Filed as Exhibit 10.5 to the registrant’s Form 10-KSB  filed on December 29, 2003 and incorporated by reference herein.                                                                    |
|             |       |                                                                                                                                                                                                                                                                                                                    |
| 10.6             |       | First  Amendment to Construction Loan Agreement dated April 29, 2003 by and  between                                                                                                                                                                                                                               |

 

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|   |   | LSCP, L.P.  and First National Bank of Omaha. Filed as Exhibit 10.6 to the registrant’s  Form 10-KSB filed on December 29, 2003 and incorporated by reference  herein.                                                                                         |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                     |
| 10.7   |   | Second  Amendment to Construction Loan Agreement dated June 1, 2003 by and  between LCSP, L.P. and First National Bank of Omaha. Filed as Exhibit 10.7 to  the registrant’s Form 10-KSB filed on December 29, 2003 and incorporated  by reference herein. |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.8   |   | Third  Amendment to Construction Loan Agreement dated June 23, 2003 by and  between LCSP, L.P. and First National Bank of Omaha. Filed as Exhibit 10.9 to  the registrant’s Form 10-KSB filed on December 29, 2003 and incorporated  by reference herein. |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.9   |   | Revolving  Promissory Note dated June 23, 2003 between LSCP, L.P. and First  National Bank of Omaha. Filed as Exhibit 10.9 to the registrant’s Form 10-KSB  filed on December 29, 2003 and incorporated by reference herein.                              |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.10  |   | Term Note #2  dated June 23, 2003 between LSCP, L.P. and First National Bank of Omaha.  Filed as Exhibit 10.10 to the registrant’s Form 10-KSB filed on December 29,  2003 and incorporated by reference herein.                                          |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.11  |   | Term Note #3  dated June 23, 2003 between LSCP, L.P. and First National Bank of Omaha.  Filed as Exhibit 10.11 to the registrant’s Form 10-KSB filed on December 29,  2003 and incorporated by reference herein.                                          |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.12  |   | Term Note #4  dated June 23, 2003 between LSCP, L.P. and First National Bank of Omaha.  Filed as Exhibit 10.12 to the registrant’s Form 10-KSB filed on December 29,  2003 and incorporated by reference herein.                                          |
|   |   |                                                                                                                                                                                                                                                                     |
| 14.1   |   | Code of  Ethics of Little Sioux Corn Processors, L.L.C. adopted December 18,  2003. Filed as Exhibit 14.1 to the registrant’s Form 10-KSB filed on December 29,  2003 and incorporated by reference herein.                                               |
|   |   |                                                                                                                                                                                                                                                                     |
| 31.1   |   | Certificate  Pursuant to 17 CFR 240.13a-14(a)                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                     |
| 31.2   |   | Certificate  Pursuant to 17 CFR 240.13a-14(a)                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                     |
| 32.1   |   | Certificate  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                     |
|   |   |                                                                                                                                                                                                                                                                     |
| 32.2   |   | Certificate  Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                                                                     |

 

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*Material has been omittedpursuant to a request for confidential treatment and such materials have beenfiled separately with the Securities and Exchange Commission.

 

**ITEM 14.****                                              PRINCIPALACCOUNTANT FEES AND SERVICES.**

 

The aggregate fees billed by the principal independent public accountants(Boulay, Heutmaker, Zibell & Co. P.L.L.P.) to the Company for the fiscalyear ended September 30, 2004, and the fiscal year ended September 30,2003 are as follows:

 

 
| **Category**           | ** ** | **Year** | ** ** | **Fees** | ** ** |
|------------------------|------------|----------|------------|----------|------------|
| Audit Fees             |       | 2004     | ** ** | $        | 117,656    |   |
|                   | ** ** | 2003     | ** ** | $        | 65,083     |   |
| Audit-Related  Fees(1) |       | 2004     |       | $        | 8,507      |   |
|                   |       | 2003     |       | $        | 10,465     |   |
| Tax Fees(2)            |       | 2004     |       | $        | 48,000     |   |
|                   |       | 2003     |       | $        | 0          |   |
| All Other  Fees        |       | 2004     |       | $        | 0          |   |
|                   |       | 2003     |       | $        | 0          |   |

 

59

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(1) Audit-related fees include consultation on First National Bank ofOmaha loan covenant compliance and waiver of violation, and consultation on Iowagrain dealers’ license.

(2) Tax Fees include consultation on cost segregation.

 

Prior toengagement of the principal accountant to perform audit services for theCompany, the principal accountant was pre-approved by our Audit Committeepursuant to Company policy requiring such approval.

 

100% ofall audit, audit-related and tax services were pre-approved by our AuditCommittee.

 

**SIGNATURES**

 

In accordancewith Section 13 or 15(d) of the Exchange Act, the registrant caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|   | LITTLE SIOUX CORN PROCESSORS, L.L.C.                                  |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |
|   |                                                                  |
| Date:  | December 22, 2004                                                |   | /s/ Stephen  Roe |
|   | Stephen Roe                                                           |
|   | President and Chief Executive Officer  (Principal Executive Officer)  |
|   |                                                                  |
|   |                                                                  |
| Date:  | December 22, 2004                                                |   | /s/ Gary  Grotjohn |
|   | Gary Grotjohn                                                         |
|   | Chief Financial Officer  (Principal Financial and Accounting Officer) |

 

In accordancewith the Exchange Act, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

 
| Date: December 22, 2004 | /s/ Vince  Davis                     |
|------------------------------|--------------------------------------|
|                         | Vince Davis, Director                |
|                         |                                 |
| Date: December 22, 2004 | /s/ Daryl  Haack                     |
|                         | Daryl Haack, Director                |
|                         |                                 |
| Date: December 22, 2004 | /s/ Doug  Lansink                    |
|                         | Doug Lansink, Director               |
|                         |                                 |
| Date: December 22, 2004 | /s/ Ron  Wetherell                   |
|                         | Ron Wetherell, Chairman and Director |
|                         |                                 |
| Date: December 22, 2004 | /s/ Darrell  Downs                   |
|                         | Darrell Downs, Director              |

 

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