##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the fiscal quarter ended March 31, 2006
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from                      to                    .
 Commission file number 333-125335
 ADVANCED BIOENERGY, LLC
  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    20-2281511
(I.R.S. Employer Identification No.)
 137
N. 8 th Street, Geneva, Nebraska 68361
 (402) 759-3773
  days
þ Yes

o No
  o Yes

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

þ No




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis and Plan of Operation
    
    
    13Item 3. Controls and Procedures
    
    
    23PART II. OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to a Vote of Security Holders
    
    
    24Item 5. Other Information
    
    
    24Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Promissory Note and Loan AgreementMaster Loan AgreementAmendment to Master Loan AgreementStatused Revolving Credit SupplementConstruction and Revolving Term Loan SupplementLoan and Trust AgreementPromissory NoteDeed of TrustLump Sum Design Build AgreementICM License AgreementContract for Electric ServiceEmployment Agreement - StephensonEmployment Agreement - GalesTrack Material Purchase AgreementReal Estate Purchase Agreement302 Certification302 Certification906 Certification906 Certification
  2




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##### Table of Contents



PART
I. FINANCIAL INFORMATION.
 
 Item 1. Financial Statements
 
 March 31,
    
    
    September 30,2006
    
    
    2005ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    15,781,655
    
    
    $
    893,587Subscription receivable
    
    
    121,000
    
    
    
    Prepaid expenses and other current assets
    
    
    31,213
    
    
    
    60,588TOTAL CURRENT ASSETS
    
    
    15,933,868
    
    
    
    954,175PROPERTY AND EQUIPMENTLand
    
    
    1,413,631
    
    
    
    Office equipment
    
    
    43,724
    
    
    
    38,685Leasehold improvement
    
    
    8,513
    
    
    
    8,513Construction in process
    
    
    528,967
    
    
    
    1,994,835
    
    
    
    47,198Less accumulated depreciation
    
    
    (8,729
    )
    
    
    (2,275
    )1,986,106
    
    
    
    44,923OTHER ASSETSCash, for plant construction
    
    
    43,000,000
    
    
    
    Land option deposits
    
    
    10,000
    
    
    
    30,000Deposits
    
    
    71,400
    
    
    
    26,400Other
    
    
    7,000
    
    
    
    Financing costs and deferred offering costs
    
    
    461,452
    
    
    
    354,01343,549,852
    
    
    
    410,413TOTAL ASSETS
    
    $
    61,469,826
    
    
    $
    1,409,511LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable
    
    $
    717,228
    
    
    $
    193,673Accrued expenses
    
    
    55,828
    
    
    
    5,972TOTAL CURRENT LIABILITIES
    
    
    773,056
    
    
    
    199,645COMMITMENTS AND CONTINGENCIESMEMBERS EQUITYMembers capital, no par value, authorized 20,000,000
units, issued 6,673,400 and 625,000 units, respectively
    
    
    62,589,932
    
    
    
    3,174,098Deficit accumulated during development stage
    
    
    (1,536,019
    )
    
    
    (914,232
    )Unearned compensation, 41,667 and 105,000 units,
respectively
    
    
    (357,143
    )
    
    
    (1,050,000
    )60,696,770
    
    
    
    1,209,866TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    61,469,826
    
    
    $
    1,409,511
  3




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Period From
    
    
    Period FromThree Months
    
    
    Six Months
    
    
    Inception
    
    
    InceptionEnded
    
    
    Ended
    
    
    (January 4, 2005) to
    
    
    (January 4, 2005) toMarch 31, 2006
    
    
    March 31, 2006
    
    
    March 31, 2005
    
    
    March 31, 2006REVENUES
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    OPERATING EXPENSESStart up expenses
    
    
    59,524
    
    
    
    285,792
    
    
    
    72,480
    
    
    
    1,009,542Accounting
    
    
    52,953
    
    
    
    60,069
    
    
    
    1,680
    
    
    
    63,834Consulting fees
    
    
    54,022
    
    
    
    66,194
    
    
    
    10,683
    
    
    
    139,860Legal
    
    
    88,169
    
    
    
    98,346
    
    
    
    19,519
    
    
    
    133,137Directors meetings and expenses
    
    
    39,024
    
    
    
    63,392
    
    
    
    12,221
    
    
    
    103,621Office expenses
    
    
    4,276
    
    
    
    16,171
    
    
    
    1,806
    
    
    
    23,134Office labor
    
    
    60,198
    
    
    
    85,361
    
    
    
    
    
    
    
    95,742Payroll tax expense
    
    
    1,949
    
    
    
    4,816
    
    
    
    
    
    
    
    5,537Insurance
    
    
    15,518
    
    
    
    31,540
    
    
    
    
    
    
    
    38,881Utilities
    
    
    3,199
    
    
    
    6,815
    
    
    
    1,181
    
    
    
    11,005Rent
    
    
    2,100
    
    
    
    4,200
    
    
    
    
    
    
    
    6,300Advertising and promotion
    
    
    
    
    
    
    1,028
    
    
    
    
    
    
    
    4,220Licenses and fees
    
    
    6,650
    
    
    
    6,650
    
    
    
    
    
    
    
    7,312Depreciation
    
    
    3,192
    
    
    
    6,454
    
    
    
    
    
    
    
    8,729Bank charges
    
    
    15,131
    
    
    
    15,233
    
    
    
    
    
    
    
    15,274Miscellaneous
    
    
    4,818
    
    
    
    5,622
    
    
    
    22
    
    
    
    5,787410,723
    
    
    
    757,683
    
    
    
    119,592
    
    
    
    1,671,915LOSS FROM OPERATIONS
    
    
    (410,723
    )
    
    
    (757,683
    )
    
    
    (119,592
    )
    
    
    (1,671,915
    )OTHER INCOME (EXPENSE)Other income
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    12,000Rent income
    
    
    750
    
    
    
    1,250
    
    
    
    
    
    
    
    1,250Interest income
    
    
    171,797
    
    
    
    171,797
    
    
    
    
    
    
    
    171,797Interest expense
    
    
    (29,668
    )
    
    
    (49,151
    )
    
    
    
    
    
    
    (49,151
    )LOSS ACCUMULATED DURING
DEVELOPMENT STAGE
    
    $
    (267,844
    )
    
    $
    (621,787
    )
    
    $
    (119,592
    )
    
    $
    (1,536,019
    )Weighted Average Units Outstanding
    
    
    586,288
    
    
    
    542,727
    
    
    
    108,102
    
    
    
    435,212Net Loss Per Unit  Basic and Diluted
    
    $
    (0.46
    )
    
    $
    (1.15
    )
    
    $
    (1.11
    )
    
    $
    (3.53
    )
  4




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##### Table of Contents



DeficitAccumulatedDuringMembers
    
    
    Development
    
    
    UnearnedCapital
    
    
    Stage
    
    
    Compensation
    
    
    TotalMEMBERS EQUITY  January 4, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of 450,000 membership units
    
    
    1,500,000
    
    
    
    
    
    
    
    
    
    
    
    1,500,000Issuance of 7,500 membership units
    
    
    25,000
    
    
    
    
    
    
    
    
    
    
    
    25,000Issuance of 125,000 restricted
membership units
    
    
    1,250,000
    
    
    
    
    
    
    
    (1,250,000
    )
    
    
    Issuance of 42,500 restricted
membership units
    
    
    425,000
    
    
    
    
    
    
    
    (425,000
    )
    
    
    Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    625,000
    
    
    
    625,000Costs of raising capital incurred in
connection with private placement
memorandum
    
    
    (25,902
    )
    
    
    
    
    
    
    
    
    
    
    (25,902
    )Net loss
    
    
    
    
    
    
    (914,232
    )
    
    
    
    
    
    
    (914,232
    )MEMBERS
EQUITY 
September 30, 2005
    
    $
    3,174,098
    
    
    $
    (914,232
    )
    
    $
    (1,050,000
    )
    
    $
    1,209,866Issuance of 6,048,400 membership units
    
    
    60,484,000
    
    
    
    
    
    
    
    
    
    
    
    60,484,000Amortization of unearned compensation
    
    
    
    
    
    
    
    
    
    
    692,857
    
    
    
    692,857Cost of raising capital  public offering
    
    
    (1,068,166
    )
    
    
    
    
    
    
    
    
    
    
    (1,068,166
    )Net loss
    
    
    
    
    
    
    (621,787
    )
    
    
    
    
    
    
    (621,787
    )MEMBERS
EQUITY 
March 31, 2006
    
    $
    62,589,932
    
    
    $
    (1,536,019
    )
    
    $
    (357,143
    )
    
    $
    60,696,770
  5




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##### Table of Contents



Period From
    
    
    Period FromSix
    
    
    Inception
    
    
    InceptionMonths Ended
    
    
    (Jan 4, 2005) to
    
    
    (Jan 4, 2005) toMarch 31, 2006
    
    
    March 31, 2005
    
    
    March 31, 2006OPERATING ACTIVITIESNet loss
    
    $
    (621,787
    )
    
    $
    (119,592
    )
    
    $
    (1,536,019
    )Adjustments to reconcile net loss to net cash (used in) operating
activitiesDepreciation
    
    
    6,454
    
    
    
    
    
    
    
    8,729Consulting services exchanged for membership units
    
    
    267,857
    
    
    
    
    
    
    
    892,857Changes in assets and liabilitiesPrepaid expenses and other current assets
    
    
    29,375
    
    
    
    
    
    
    
    (31,213
    )Accounts payable
    
    
    (33,806
    )
    
    
    49,331
    
    
    
    159,867Accrued expenses
    
    
    49,856
    
    
    
    
    
    
    
    55,828NET CASH USED IN OPERATING ACTIVITIES
    
    
    (302,051
    )
    
    
    (70,261
    )
    
    
    (449,951
    )INVESTING ACTIVITIESPayment of deposit
    
    
    (70,000
    )
    
    
    
    
    
    
    (96,400
    )Purchase of other assets
    
    
    (7,000
    )
    
    
    
    
    
    
    (7,000
    )Purchase of property and equipment
    
    
    (530,497
    )
    
    
    
    
    
    
    (577,695
    )Increase in cash, for plant construction
    
    
    (43,000,000
    )
    
    
    
    
    
    
    (43,000,000
    )Payment of land option deposits
    
    
    
    
    
    
    (15,000
    )
    
    
    (30,000
    )NET CASH USED IN INVESTING ACTIVITIES
    
    
    (43,607,497
    )
    
    
    (15,000
    )
    
    
    (43,711,095
    )FINANCING ACTIVITIESProceeds from sale of membership units
    
    
    60,363,000
    
    
    
    1,000,000
    
    
    
    61,863,000Payments on short term debt
    
    
    (1,270,800
    )
    
    
    
    
    
    
    (1,270,800
    )Payment of deferred offering and financing costs
    
    
    (294,584
    )
    
    
    (20,121
    )
    
    
    (649,499
    )NET CASH PROVIDED BY FINANCING ACTIVITIES
    
    
    58,797,616
    
    
    
    979,879
    
    
    
    59,942,701NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    14,888,068
    
    
    
    894,618
    
    
    
    15,781,655CASH AND CASH EQUIVALENTS  beginning of period
    
    
    893,587
    
    
    
    
    
    
    
    CASH AND CASH EQUIVALENTS  end of period
    
    $
    15,781,655
    
    
    $
    894,618
    
    
    $
    15,781,655SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIESAccounts payable incurred for cost of raising capital
    
    $
    19,537
    
    
    $
    
    
    
    $
    19,537Accounts payable incurred for financing costs
    
    $
    411,484
    
    
    $
    23,394
    
    
    $
    411,484Accounts payable incurred for construction in process
and office equipment
    
    $
    126,340
    
    
    $
    
    
    
    $
    126,340Offering consulting services received in exchange for
membership units
    
    $
    
    
    
    $
    25,000
    
    
    $
    25,000Consulting services received in exchange for membership units
    
    $
    
    
    
    $
    
    
    
    $
    892,857Land option applied to land purchase
    
    $
    20,000
    
    
    $
    
    
    
    $
    20,000Land acquired through issuance of note payable
    
    $
    1,270,800
    
    
    $
    
    
    
    $
    1,270,800Deposit transferred to financing costs
    
    $
    25,000
    
    
    $
    
    
    
    $
    25,000Unearned compensation provided as
cost of raising capital
    
    $
    425,000
    
    
    $
    
    
    
    $
    425,000Deferred offering cost transferred to cost of
raising capital
    
    $
    623,629
    
    
    $
    
    
    
    $
    
  6




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##### Table of Contents



NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  PRINCIPAL BUSINESS ACTIVITY 
 UNEARNED UNIT COMPENSATION 
 CASH AND CASH EQUIVALENTS 
 FAIR VALUE OF FINANCIAL INSTRUMENTS 
 DEFERRED OFFERING AND FINANCING COSTS 
  LOSS PER UNIT 
 RESTRICTED STOCK 
 7




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CASH HELD IN ESCROW BY THIRD PARTIES 
 DEPOSITS 
 PROPERTY AND EQUIPMENT 
   NOTE B: MEMBERS EQUITY
     8




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NOTE C: RELATED PARTY TRANSACTIONS
   NOTE D: FINANCING
    th
 th
 NOTE E: COMMITMENTS AND CONTINGENCIES
 Construction contracts
  9




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##### Table of Contents



Land
   Consulting
     NOTE F: SUBSEQUENT EVENTS
 Financing
  10




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##### Table of Contents



Employment agreements
   Construction contracts
    11




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##### Table of Contents



Acquisition
  12




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##### Table of Contents



Item 2. Managements Discussion and Analysis and Plan of Operation
 Forward Looking Statements
  
    
    Our ability to obtain the debt and equity financing necessary to construct and operate our plant;
    
    Changes in our business strategy, capital improvements or development plans;
    
    Construction delays and technical difficulties in constructing the plant;
    
    Changes in the environmental regulations that apply to our plant site and operations;
    
    Ability to secure marketing services for the ethanol and distillers grains we expect to produce;
    
    Changes in general economic conditions or the occurrence of certain events causing an economic
impact in the agriculture, oil or automobile industries;
    
    Changes in the availability and price of natural gas and corn, and the market for distillers
grains;
    
    Changes in federal and/or state laws (including the elimination of any federal and/or state
ethanol tax incentives);
    
    Overcapacity within the ethanol industry;
    
    Changes and advances in ethanol production technology; and
    
    Competition from alternative fuel additives.
  Overview
   13




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Plan of Operation for the Next 12 Months
  Project Capitalization
 Seed Capital Offering
  Registered Offering
  Bridge Loan
  Senior Credit Facility
  14




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##### Table of Contents



Subordinate Debt
     15




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##### Table of Contents



Tax Increment Financing
  Community Development Block Grant
  Plant construction activities
  Site Preparation
  Construction .
   License of Technology
  16




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##### Table of Contents



Utilities
   Real Estate
    Rail
   17




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##### Table of Contents



Employment Agreements with Mr. Stephenson and Mr. Gales
   Permitting and Regulatory Activities
  18




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Trends and Uncertainties Impacting the Ethanol Industry and Our Future Operations
      19




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##### Table of Contents



Technology Developments
  Trends and Uncertainties Impacting the Corn and Natural Gas Markets and Our Future Cost of Goods
Sold
   20




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##### Table of Contents



Acquisition of Indiana Renewable Fuels, LLC
   Liquidity and Capital Resources
 Sources of Funds
  Sources of Funds
    
    
    
    
    
    PercentUnit
Proceeds of Registered Offering
    
    $
    60,484,000
    
    
    
    38.91
    %Seed Capital
    
    $
    1,500,000
    
    
    
    .96
    %Senior Debt Financing
    
    $
    79,500,000
    
    
    
    51.13
    %Bond Financing
    
    $
    7,000,000
    
    
    
    4.50
    %Tax Increment Financing
    
    $
    7,000,000
    
    
    
    4.50
    %Total Sources of Funds
    
    $
    155,484,000
    (1)
    
    
    100.00
    %
 
 (1)
    
    We intend to use funds in excess of those needed to build the Fairmont Plant
for investment in and development of additional ethanol plants and for general
corporate uses, including, but not limited to upgrading plant technology and exploring
the use of alternative fuel sources. Estimated Uses of Proceeds
  Use of Proceeds
    
    Amount
    
    
    PercentPlant construction
    
    $
    98,000,000
    
    
    
    73.962
    %Land
    
    
    1,700,000
    
    
    
    1.283
    %Site Development Costs
    
    
    4,230,000
    
    
    
    3.193
    %Railroad Infrastructure
    
    
    3,110,000
    
    
    
    2.347
    %Fire Protection / Water Supply
    
    
    950,000
    
    
    
    0.717
    %Water treatment system
    
    
    580,000
    
    
    
    0.438
    %Administrative Building
    
    
    350,000
    
    
    
    0.264
    %
 21




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Use of Proceeds
    
    Amount
    
    
    PercentOffice Equipment
    
    
    100,000
    
    
    
    0.076
    %Computers, Software, Network
    
    
    180,000
    
    
    
    0.136
    %Construction performance bond
    
    
    550,000
    
    
    
    0.415
    %Construction insurance costs
    
    
    200,000
    
    
    
    0.151
    %Construction contingency
    
    
    1,740,000
    
    
    
    1.313
    %Capitalized interest
    
    
    2,000,000
    
    
    
    1.509
    %Rolling stock
    
    
    400,000
    
    
    
    0.302
    %Start up costs:Financing costs
    
    
    800,000
    
    
    
    0.604
    %Organization costs
    
    
    1,660,000
    
    
    
    1.253
    %Pre Production period costs
    
    
    950,000
    
    
    
    0.717
    %InventorySpare parts
    
    
    600,000
    
    
    
    0.453
    %InventoryWorking capital
    
    
    6,000,000
    
    
    
    4.528
    %Inventorycorn
    
    
    4,000,000
    
    
    
    3.02
    %Inventorychemicals and ingredients
    
    
    650,000
    
    
    
    0.491
    %InventoryEthanol
    
    
    2,950,000
    
    
    
    2.226
    %InventoryDistillers Grains
    
    
    800,000
    
    
    
    0.604
    %Total
    
    $
    132,500,000
    
    
    
    100
    %
 Quarterly Financial Results
  Critical Accounting Estimates
  Employees
   Position
    
    # Full-Time PersonnelGeneral Manager
    
    
    1Plant Manager
    
    
    1Bookkeeper
    
    
    1Secretary
    
    
    1Commodity Specialist
    
    
    1Lab Manager
    
    
    1Lab Assistant
    
    
    2
 22




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Position
    
    # Full-Time PersonnelUtilities, Maintenance and
Safety Manager
    
    
    1Licensed Boiler Operator
    
    
    2Welder
    
    
    1Electrician
    
    
    1Electrician Technician
    
    
    1Maintenance Worker
    
    
    4Production Team Leaders
    
    
    6Team Production I
    
    
    6Team Production II
    
    
    6Rail Attendant
    
    
    2Truck Attendant
    
    
    4Grain Sampling & Records
    
    
    1Entry Level Floater
    
    
    2TOTAL
    
    
    45
 Off Balance Sheet Arrangements.
  
 Item 3. Controls and Procedures
   
 PART
II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
 None.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Aggregate price ofAmount
    
    the amount
    
    
    
    
    
    
    Aggregate price ofRegistered
    
    registered
    
    
    Amount Sold
    
    
    the amount sold6,732,500
    
    
    $67,325,000
    
    
    6,048,400
    
    
    
    $60,484,000
 23




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##### Table of Contents



Net offering
    
    $
    60,768,932Interest on Escrow Funds
    
    $
    169,625Land and Site Development
    
    $
    (1,310,038
    )Operating Costs
    
    $
    (14,986
    )Loan Repayment
    
    $
    (500,000
    )Balance
    
    $
    59,113,533
  
 Item 3. Defaults Upon Senior Securities
 None.
 
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
 None.
 
 Item 6. Exhibits
  Exhibit No.
    
    Exhibit3.2
    
    Third Amended and Restated Operating Agreement of the registrant filed
as part of Post Effective Amendment No. 1 to registrants registration
statement filed on form SB-2 and incorporated by reference herein.10.1
    
    Promissory Note (Operating Loan) and Loan Agreement dated February 13,
2006 with Farm Credit Services of America PCA.10.2
    
    Master Loan Agreement dated February 17, 2006.10.3
    
    Amendment to Master Loan Agreement dated April 11, 2006.10.4
    
    Statused Revolving Credit Supplement dated February 17, 2006.10.5
    
    Construction and Revolving Term Loan Supplement dated February 17, 2006.10.6
    
    Loan and Trust Agreement with the County of Fillmore, State of Nebraska
and Wells Fargo N.A. dated April 27, 2006.
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##### Table of Contents



Exhibit No.
    
    Exhibit10.7
    
    Promissory Note dated April 27, 2006.10.8
    
    Deed of Trust and Security Agreement dated April 27, 2006.10.9
    
    Lump Sum Design Build Agreement
with Fagen, Inc. dated March 16, 2006.*10.10
    
    License Agreement with ICM, Inc. dated March 16, 2006.10.11
    
    Contract for Electrical Service with Perennial Public Power District
dated April 25, 2006.10.12
    
    Employment Agreement with Revis L. Stephenson, III dated April 7, 2006.10.13
    
    Employment Agreement with Don Gales dated April 7, 2006.10.16
    
    Track Material Purchase Agreement with the Tie Yard of Omaha dated May
5, 2006.10.17
    
    Real Estate Purchase Agreement with Fillmore Western Railway Company
dated May 5, 2006.31.1
    
    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. § 1350.32.2
    
    Certificate Pursuant to 18 U.S.C. § 1350.
 *
    
    Material has been omitted pursuant to a request for confidential treatment and such materials have been filed separately with the SEC.
 
 SIGNATURES
  ADVANCED BIOENERGY, LLCDate: May 15, 2006
    
    /s/ Revis L. Stephenson, IIIRevis L. Stephenson, IIIChairman and Chief Executive Officer(Principal Executive Officer)Date: May 15, 2006
    
    /s/ Robert W. HolmesRobert W. HolmesTreasurer(Principal Financial and Accounting Officer)
 25