**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-K**







**(Mark
      One)**


**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




**For
      the fiscal year ended December 31, 2007**




** ̈**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**




**For
      the transition period from ___________** **to ___________** ****




**Commission
      File Number: 333-140098**












**LIBERTY
      RENEWABLE FUELS LLC**


**(Exact
      name of registrant as specified in its charter)**









**Delaware**
              
              **20-5284919****State
                  or other jurisdiction
                  of**
                **incorporation
                    or organization**
              
              **I.R.S.
                  Employer**
                **Identification
                    Number**




**1266
      E. Washington Road, Ithaca, Michigan 48847**


**(Address
      of principal executive offices)**




**(989)
      743-1042**


**(Registrant’s
      telephone number, including Area Code)**


Securities
      registered under Section 12(b) of the Exchange Act:


**None**





Securities
      registered under Section 12(g) of the Exchange Act:


**None**





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes  ̈ No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act.


Yes  ̈ No x





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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
      be contained, to the best of registrant’s knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-K
      or any amendment to this Form 10-K.  ̈





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
      one):





Large
      accelerated filer  ̈ Accelerated
      filer  ̈ Non-accelerated
      filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes  ̈ No x





The
      registrant has no non-voting common equity.





As
      of
      March 31, 2008, there were 4,635 units of Liberty Renewable Fuels LLC
      outstanding.










**TABLE
      OF CONTENTS**





**Page****PART I**Item
                1.
            Description
                of Business
            
            1Item
                1A.
            Risk
                Factors
            
            13Item
                1B.
            Unresolved
                Staff Comments
            
            28Item
                2.
            Description
                of Property
            
            29Item
                3.
            Legal
                Proceedings
            
            30Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            30**PART
                II**Item
                5.
            Market
                For Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            
            30Item
                6.
            Selected
                Financial Data
            
            31Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            32Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            34Item
                8.
            Financial
                Statements and Supplementary Data
            
            36Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            
            37Item
                9A.
            Controls
                and Procedures
            
            37Item
                9B.
            Other
                Information
            
            37**PART
                III**Item
                10.
            Directors,
                Executive Officers and Corporate Governance
            
            37Item
                11.
            Executive
                Compensation
            
            43Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            
            47Item
                13.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            
            50Item
                14.
            Principal
                Accounting Fees and Services
            
            52**PART
                IV**Item
                15.
            Exhibits,
                Financial Statement Schedules
            
            F-1Index
                to Financial Statements
            
            F-1Index
                to Exhibits
            
            F-20Signatures
            
            53Exhibits
                Filed With This Report










**CAUTIONARY
      STATEMENT**




*All
      statements included or incorporated by reference in this Annual Report on Form
      10-K, other than statements or characterizations of historical fact, are
      forward-looking statements. Examples of forward-looking statements include,
      but
      are not limited to, statements concerning projected net sales, costs and
      expenses and gross margins; our accounting estimates, assumptions and judgments;
      our success in pending litigation, if any; the demand for ethanol and its
      co-products; the competitive nature of and anticipated growth in our industry;
      production capacity and goals; our ability to consummate acquisitions and
      integrate their operations successfully; and our prospective needs for
      additional capital. These forward-looking statements are based on our current
      expectations, estimates, approximations and projections about our industry
      and
      business, management’s beliefs, and certain assumptions made by us, all of which
      are subject to change. Forward-looking statements can often be identified by
      words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,”
“believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,”
“potential,” “continue,” “ongoing,” similar expressions, and variations or
      negatives of these words. These statements are not guarantees of future
      performance and are subject to risks, uncertainties and assumptions that are
      difficult to predict. Therefore, our actual results could differ materially
      and
      adversely from those expressed in any forward-looking statements as a result
      of
      various factors, some of which are listed under “Risk Factors” in Item 1A of
      this Report. These forward-looking statements speak only as of the date of
      this
      Report. We undertake no obligation to revise or update publicly any
      forward-looking statement for any reason, except as otherwise required by law.*





**PART
      I.**





**Item
      1. Description of Business**




**Business
      Overview**




We
      are a
      Delaware limited liability company organized on June 21, 2006. We are a
      development-stage company with no prior operating history. We do not expect
      to
      generate any revenue until we begin operating the proposed ethanol plant. Our
      ownership interests are represented by membership interests, which are
      designated as units. Our principal address and location is 1266 E. Washington
      Rd., Ithaca, MI 48847. Our mailing address is P.O. Box 335, Owosso, Michigan
      48867. Our telephone number is (989) 743-1042. Our website address is
      www.libertyrf.com.




**Company
      History**




On
      July 18, 2006, we purchased all of the assets and assumed substantially all
      of the liabilities of Liberty Renewable Fuels, LLC, a Michigan limited liability
      company. The Michigan limited liability company, which we refer to as Liberty
      Michigan, from whom we purchased our initial assets was originally formed at
      the
      beginning of 2006 in order to develop, construct, own and operate an ethanol
      plant in central Michigan. After Liberty Michigan was founded, a disagreement
      over the ownership of one of the founders of Liberty Michigan developed. As
      a
      result of such disagreement, Liberty Michigan, the founder and his affiliates
      entered into a settlement agreement that provided for payment of up to $500,000
      to the founder and his affiliates in exchange for a release of their claims
      to
      any ownership in Liberty Michigan. Due to the dispute, Liberty Michigan
      determined to wind down its existence and sell its assets to us. Liberty
      Michigan was dissolved following its sale of assets to us.




**Business
      and Growth Strategy**




If
      we are
      able to fully capitalize the project as described in our financing plan below,
      we will use the offering proceeds to build and operate a 110-million gallon
      per
      year dry mill corn-processing ethanol plant. We expect the ethanol plant will
      annually process approximately 40 million bushels of corn into approximately
      110-million gallons of fuel-grade ethanol, 354,000 tons of distillers grains
      for
      animal feed and 315,000 tons of carbon dioxide per year. Distillers grains
      and
      carbon dioxide are the principal co-products of the ethanol manufacturing
      process.




Construction
      of the project is expected to take 10-12 months from the date of
      financial close. Our anticipated completion date is scheduled for the first
      quarter of 2009. Once the plant is operational, we intend to sell all of the
      ethanol and distillers grains produced at the facility. We currently have no
      plans to capture and market the carbon dioxide; however, at some point in the
      future we may decide it is feasible to do so. We intend to market our ethanol
      through an experienced ethanol marketer and our distillers grains through an
      experienced distillers grains marketer, which we expect will have access to
      national markets.




**Industry
      Overview and Market Opportunity**




Ethanol
      is a clean-burning, high-octane fuel that is produced from renewable sources.
      In
      the United States, ethanol is produced primarily from corn and is used as a
      vehicle fuel and as a gasoline fuel additive to increase gasoline's octane
      rating and to comply with air emissions regulations by reducing emissions of
      carbon monoxide and nitrogen oxide. The Renewable Fuel Standards mandated that
      ethanol comprise a minimum of 2.8% or 9.0 billion gallons, of the U.S. fuel
      supply as of January 1, 2008. The RFA reports that ethanol is blended into
      one-third of the gasoline consumed in the United States. All automobiles in
      the
      United States can operate with a fuel mix that is 90% gasoline and 10% ethanol,
      also referred to as E10 fuel. E10 is approved for use under the warranties
      of
      all major motor vehicle manufacturers and often is recommended as a result
      of
      ethanol's clean-burning characteristics. Ethanol comprises up to 85% of E85
      fuel. Although E85 currently represents a relatively small portion of the U.S.
      gasoline supply, approximately five million vehicles in the United States today
      are Flexible Fuel Vehicles, or FFVs, capable of using E85 fuel.




The
      ethanol industry has grown significantly over the last few years, expanding
      production capacity at a compound annual growth rate of approximately 20% from
      2000 to 2005, according to the RFA. We believe the ethanol market will continue
      to grow as a result of its favorable production economics relative to gasoline,
      a shortage of domestic petroleum refining capacity, federally-mandated renewable
      fuel usage, favorable tax treatment, ethanol's clean-burning characteristics
      and
      geopolitical and environmental concerns with petroleum-based fuels.




**Competition**




We
      will
      be in direct competition with numerous other ethanol producers, many of whom
      have greater resources than we do. We also expect that additional ethanol
      producers will enter the market if the demand for ethanol continues to increase.
      Our plant will compete with other ethanol producers on the basis of price,
      and
      to a lesser extent, delivery service. However, we believe that we can compete
      favorably with other ethanol producers due to the following
      factors:




·
            Rail
                access facilitating use of unit trains with large volume carrying
                capacity;




·
            Anticipated
                grain supplies at favorable prices as compared to other Great Lakes
                States;




·
            Economies
                of scale of a 110-million gallon per year plant versus smaller
                plants;




·
            Access
                to a skilled workforce;




·
            The
                modern plant design will help us to operate more efficiently than
                older
                plants; and




·
            The
                use of a state-of-the-art process control system to provide product
                consistency.




**Description
      of Dry Mill Process**




Our
      plant
      will produce ethanol by processing corn. Changing corn to ethanol by
      fermentation takes many steps. The corn will be received by rail and by truck,
      then weighed and unloaded in a receiving building. It will then be transported
      to storage bins. Thereafter, it will be moved to a scalper to remove rocks
      and
      debris. Starch in the corn must be broken down into simple sugars before
      fermentation that produces alcohol (ethanol) can occur.




This
      is
      achieved by grinding the corn in a hammermill into a mash and conveying the
      mash
      into a slurry tank for enzymatic processing. Then, water, heat and enzymes
      are
      added to break the ground grain into a fine slurry. The slurry will be heated
      for sterilization and pumped to a liquefaction tank where additional enzymes
      are
      added. Next, the grain slurry is pumped into fermenters, where yeast is added,
      to begin a batch fermentation process. Yeast is a single-celled fungus that
      feeds on the sugar and causes the fermentation. As the fungus feeds on the
      sugar, it produces alcohol (ethanol) and carbon dioxide. A vacuum
      distillation system will divide the alcohol from the grain mash. Alcohol is
      then
      transported through a rectifier column, a side stripper and a molecular sieve
      system where it is dehydrated. The 200 proof alcohol is then pumped to farm
      shift tanks and blended with five percent denaturant, usually gasoline, as
      it is
      pumped into storage tanks. The 200 proof alcohol and five percent denaturant
      constitute ethanol.




-1-




Corn
      mash
      from the distillation stripper is pumped into one of several decanter-type
      centrifuges for dewatering. The water (“thin stillage”) is then pumped from the
      centrifuges to an evaporator where it is dried into thick syrup. The solids
      that
      exit the centrifuge or evaporators (the “wet cake”) are conveyed to the
      distillers dried grains dryer system. Syrup is added to the wet cake as it
      enters the dryer, where moisture is removed. The process will produce distillers
      grains, which is processed corn mash that can be used as animal feed.




The
      following chart provided by the Renewable Fuels Association, illustrates the
      dry
      mill process:









*Source:
      Renewable Fuels Association, report entitled “How Ethanol is Made,”*


*current
      as of November 17, 2006, available free of charge at www.ethanolrfa.org.*




We
      expect
      that the ethanol production technology we will use in our plant will be supplied
      by ICM and that they will either own the technology or have obtained any license
      to utilize the necessary technology.




**The
      Plant**




Our
      plant
      will have a design capacity to produce approximately 110-million gallons of
      ethanol per year. In addition, we expect the plant to produce approximately
      354,000 tons of distillers grains. We expect that when completed, the plant
      will
      operate utilizing the following facilities and processes:




·
            
            *Grain
                Receiving, Storage and Milling Equipment.*The
                plant will contain receiving facilities that will have the ability
                to
                receive corn by rail and truck. Upon delivery, the corn will be weighed
                and a weight ticket will be issued. The corn will then be moved through
                a
                scalper to remove rocks and debris before conveying the product to
                storage
                bins. A dust collection system will be installed in the grain receiving
                system to limit particulate emissions. We plan to build approximately
                4,000,000 bushels of corn storage as part of the plant construction.
                The
                corn will be removed from storage and processed through a hammer-mill
                or
                grinder. The result of this process is ground corn. We also plan
                to
                install a 6,000 bushels per hour grain dryer so that we can receive
                and
                dry wet corn from local growers at harvest
                time.




-2-




·
            
            *Conversion
                and Liquefaction System, Fermentation System and Evaporation
                System.*Ground
                corn will be mixed with recycled process condensate water, alpha
                amalyse
                and aqueous ammonia are added. The mash is cooked with a proprietary,
                indirect contact, steam cooker and then continues through liquefaction
                tanks and into fermenters. Simultaneously, yeast and a secondary
                enzyme
                will be added to the cooked mash as it is cooled and enters the
                fermenters. After fermentation is complete, the liquid produced by
                the
                fermentation process is pumped to a large tank called a beerwell
                and then
                sent to the distillation column to separate the alcohol from the
                mash.
                Enzymes are proteins produced by microorganisms grown in controlled
                fermentations. The proteins contain catalytic sites that allow specific
                chemical reactions to occur at more moderate temperatures and pHs
                than
                normal. A new generation of alpha amylases eliminates the need to
                add lime
                and also tolerates lower pH, allowing thinner stillage to be recycled
                to
                the slurry tank. Both of these help reduce environmental impact and
                ethanol production cost. Enzymes play a critical role in ethanol
                production with new developments improving ethanol production
                efficiencies.
              
              During
                fermentation, high performance liquid chromatography measures the
                concentration of ethanol in the mash and provides crucial information
                on
                the quality of fermentation for a wide genetic base of corn. This
                aids the
                sourcing and utilization of corn that yields more ethanol.




·
            
            *Distillation
                and Molecular Sieve.*The
                alcohol is distilled in three columns (the Beer Column, the Rectifier
                and
                the Side Stripper) and then dehydrated in the molecular sieve system.
                The
                alcohol is then blended with denaturant as it is pumped into storage
                tanks. The storage tanks will contain meters, filters, pumps and
                loading
                equipment for transfer to rail cars or trucks.




·
            
            *Liquid/Solid
                Separation System.*The
                ethanol plant will also produce distillers grains. The resulting
                corn mash
                from the Beer Column will be piped to centrifuges and then to dryers,
                where moisture is removed. The plant will utilize a dryer system
                with a
                thermal oxidizer and heat recovery steam generation. After it is
                dried,
                the distillers grains will be conveyed to the filter receiver and
                then to
                a storage building.




·
            
            *Product
                Storage Area.*We
                expect to have storage tanks on site to store the ethanol we produce.
                The
                plant will also contain a storage building to hold distillers grains
                until
                shipped.




·
            
            *Product
                Shipment Facilities.*We
                will have facilities for the shipment, by truck or rail, of our ethanol
                and distillers grains produced at our plant.




·
            
            *General
                Plant Infrastructure and Utilities.*The
                facility will also consist of administration facilities, chillers,
                cooling
                towers and other processing equipment, some of which require fresh
                water
                to operate. Boiler water is conditioned in regenerative softeners
                and/or
                other treatment equipment and pumped through a deaerator and into
                a
                deaerator tank. Appropriate boiler chemicals are added and the pre-heated
                water is pumped into the boiler. Steam energy will be provided by
                a heat
                recovery steam generator. Process cooling will be provided by circulating
                cooling water through heat exchangers, a chiller and a cooling tower.
                We
                expect the facility to also contain a compressed air system consisting
                of
                an air compressor, receiver tank, pre-filter and air dryer. We expect
                that
                the plant design will also incorporate the use of a clean-in-place
                system
                for cooking, fermentation, distillation, evaporation, centrifuges
                and
                other systems.




**Thermal
      Oxidizer**




Ethanol
      plants such as ours may produce odors in the production of ethanol and its
      primary by-product, distillers dried grains with solubles, which some people
      may
      find unpleasant. We intend to reduce odors by routing dryer emissions through
      thermal oxidizers. Based upon materials and information from ICM, we expect
      thermal oxidation to significantly reduce any unpleasant odors caused by the
      ethanol and distillers grains manufacturing process. We expect thermal
      oxidation, which burns emissions, will eliminate a significant amount of the
      volatile organic carbon compounds in emissions that cause odor in the drying
      process and allow us to meet the applicable permitting requirements. We also
      expect this addition to the ethanol plant to reduce the risk of possible
      nuisance claims and any related negative public reaction against us.




**Ethanol
      Markets**




Ethanol
      has important applications. Primarily, ethanol can be used as a high quality
      octane enhancer and an oxygenate capable of reducing air pollution and improving
      automobile performance.




The
      principal purchasers of ethanol are generally the wholesale gasoline marketer
      or
      blender. The principal markets for our ethanol are petroleum terminals in the
      continental United States. We have executed an agreement with the ethanol
      marketer C&N Companies to sell our ethanol in both the regional and national
      markets. We may also attempt to access local markets, but these will be limited
      and must be evaluated on a case-by-case basis. Although local markets will
      be
      the easiest to service, they may be oversold.




-3-




We
      intend
      to serve the regional and national markets by rail. Because ethanol use results
      in less air pollution than regular gasoline, regional and national markets
      typically include large cities that are subject to anti-smog measures in either
      carbon monoxide or ozone non-attainment areas. We expect to reach these markets
      by delivering ethanol to terminals that then blend the ethanol to E-10 and
      E85
      gasoline and transport the blended gasoline to retail outlets in these markets.




In
      addition to rail, we may try to service the regional markets by truck.
      Occasionally, there are opportunities to obtain backhaul rates from local
      trucking companies. These are rates that are reduced since the truck is loaded
      both ways. Normally, the trucks drive to the refined fuels terminals empty
      and
      load gasoline product for delivery. A backhaul is the opportunity to load the
      truck with ethanol to return to the terminal.




**Co-products**




The
      principal co-product of the ethanol production process is distillers grains,
      a
      high protein, high-energy animal feed supplement primarily marketed to the
      dairy
      and beef industry. Distillers grains contain bypass protein that is superior
      to
      other protein supplements such as cottonseed meal and soybean meal. According
      to
      a 1986 study by the University of Nebraska reported in “Nebraska Company
      Extension Study MP51—Distillers Grains,” bypass proteins are more digestible to
      the animal, thus generating greater lactation in milk cows and greater weight
      gain in beef cattle. Dry mill ethanol processing creates three forms of
      distillers grains: distillers wet grains with solubles (“distillers wet
      grains”), distillers modified wet grains with solubles (“distillers modified wet
      grains”) and distillers dry grains. Distillers wet grains are processed corn
      mash that contains approximately 70% moisture and has a shelf life of
      approximately three days. Therefore, it can be sold only to farms within the
      immediate vicinity of an ethanol plant. Distillers modified wet grains are
      distillers wet grains that have been dried to approximately 50% moisture. It
      has
      a slightly longer shelf life of approximately three weeks and is often sold
      to
      nearby markets. Distillers dried grains are distillers wet grains that have
      been
      dried to 10% moisture. Distillers dried grains has an almost indefinite shelf
      life and may be sold and shipped to any market regardless of its proximity
      to an
      ethanol plant.




The
      plant
      is expected to produce approximately 315,000 tons annually of raw carbon dioxide
      as another by-product of the ethanol production process according to our
      Feasibility Study. At this time, we do not intend to capture and market our
      carbon dioxide gas.




**Distillers
      Grains Markets**




In
      its
      Ethanol Industry Outlook for 2008, the Renewable Fuels Association reported
      that
      19.6 million metric tons of distiller’s grains were produced in 2007 by the
      ethanol industry. We expect the amount of distillers grains produced to increase
      significantly as the number of ethanol plants increase. The primary consumers
      of
      distillers grains are dairy and beef cattle, according to the Renewable Fuels
      Association’s Ethanol Industry Outlook 2008 (dated February 2008, publicly
      available free of charge at www.ethanolrfa.org). In recent years, an increasing
      amount of distillers grains have been used in the swine and poultry markets.
      Numerous feeding trials show advantages in milk production, growth, rumen
      health, and palatability over other dairy cattle feeds. With the advancement
      of
      research into the feeding rations of poultry and swine, these markets will
      continue to grow.




The
      market for distillers grains is generally confined to locations where freight
      costs allow it to be competitively priced against other feed ingredients.
      Distillers grains competes directly with three other feed formulations: corn
      gluten feed, dry brewers grain and mill feeds. The primary value of these
      products as animal feed is their protein content. Dry brewers grain and
      distillers grains have about the same protein content, and corn gluten feed
      and
      mill feeds have slightly lower protein contents.




-4-




As
      with
      ethanol, the distillers grains markets are both regional and national. These
      national markets are just emerging, primarily in the southeast and southwest
      United States where significant dairy and poultry operations are located. In
      addition, there is the possibility of some local marketing. Local markets are
      very limited and highly competitive for the use of distiller’s grains. The
      following chart shows distillers grains production comparative to the potential
      regional market for distillers grains:









*Source:
      University of Minnesota DDGS Web site, http://www.ddgs.umn.edu/ppt-pqd.htm;
      Pro
      Exporter Network*




Although
      local markets will be the easiest to service, they may be oversold, which would
      depress distillers grains prices. We plan to market some of our distillers
      grains to the local livestock markets surrounding the plant, to the livestock
      markets in the eastern United States and livestock markets overseas. We have
      executed an agreement with Zeeland Farm Services to market our distillers
      grains.




**Corn
      Feedstock Supply**




We
      anticipate that our plant will need approximately 40 million bushels of
      grain per year for our dry milling process. The corn supply for our plant will
      be obtained primarily from local markets. Traditionally, corn grown in the
      area
      has been fed locally to livestock or exported for feeding or processing. We
      believe, based on the Feasibility Study, that in the year 2005, the 14 county
      area surrounding the Ithaca location we are considering for our plant produced
      approximately 94.3 million bushels of corn. The chart below describes the
      amount of corn grown in Gratiot County, Michigan and surrounding Michigan
      counties for 2001 through 2005 which was contained in the Feasibility Study.




**County**
            
            **2005
                Corn**
              **Production**
            
            **2004
                Corn**
              **Production**
            
            **2003
                Corn**
              **Production**
            
            **2002
                Corn**
              **Production**
            
            **2001
                Corn**
              **Production****(million bushels)**
            
            **(million bushels)**
            
            **(million bushels)**
            
            **(million bushels)**
            
            **(million bushels)**Bay
            
            
            6.73
            
            
            5.75
            
            
            5.68
            
            
            6.10
            
            
            3.51Clinton
            
            
            8.68
            
            
            8.10
            
            
            7.65
            
            
            6.50
            
            
            5.68Eaton
            
            
            8.17
            
            
            8.15
            
            
            8.82
            
            
            7.90
            
            
            7.05Genesee
            
            
            3.78
            
            
            2.70
            
            
            3.11
            
            
            2.50
            
            
            1.92Gratiot
            
            
            11.15
            
            
            8.65
            
            
            9.27
            
            
            9.40
            
            
            8.37Ingham
            
            
            6.69
            
            
            7.15
            
            
            6.69
            
            
            5.20
            
            
            4.75Ionia
            
            
            9.42
            
            
            9.15
            
            
            9.43
            
            
            8.50
            
            
            8.15Isabella
            
            
            4.66
            
            
            3.03
            
            
            3.94
            
            
            3.55
            
            
            2.57Livingston
            
            
            2.57
            
            
            2.50
            
            
            2.66
            
            
            2.00
            
            
            2.08Mecosta
            
            
            2.37
            
            
            1.65
            
            
            1.75
            
            
            1.43
            
            
            1.27Midland
            
            
            3.35
            
            
            2.41
            
            
            3.00
            
            
            2.35
            
            
            2.06Montcalm
            
            
            7.07
            
            
            5.62
            
            
            5.33
            
            
            5.90
            
            
            4.25Saginaw
            
            
            12.35
            
            
            10.50
            
            
            11.30
            
            
            11.50
            
            
            8.29Shiawassee
            
            
            7.29
            
            
            6.10
            
            
            5.71
            
            
            4.90
            
            
            4.40**Total**
            
            
            **94.3**
            
            
            **81.5**
            
            
            **84.34**
            
            
            **77.7**
            
            
            **64.4**




-5-




We
      will
      be dependent upon the availability and price of corn. The price at which we
      will
      purchase corn will depend on prevailing market prices. According to the
      Feasibility Study, production of corn in the 14-county study area surrounding
      the proposed location of the ethanol plant was 94.3 million bushels in
      2005. In a short crop year, the potential exists that corn would need to be
      shipped into a 110-million gallon per year ethanol plant. Although the areas
      surrounding the locations we are considering for our plant produce a significant
      amount of corn and we do not anticipate problems sourcing corn, we cannot assure
      our members that a shortage will not develop, particularly if there are other
      ethanol plants competing for corn, an extended drought in the area, or other
      production problem. In addition, our financial projections assume that we can
      purchase grain for prices near the ten-year average for corn in the areas we
      are
      considering for the location of the plant.




Grain
      prices are primarily dependent on world feedstuffs supply and demand and on
      U.S.
      and global corn crop production, which can be volatile as a result of a number
      of factors, the most important of which are weather, current and anticipated
      stocks and prices, export prices and supports and the government’s current and
      anticipated agricultural policy. Historical grain pricing information indicates
      that the price of grain has fluctuated significantly in the past and may
      fluctuate significantly in the future. Because the market price of ethanol
      is
      not related to grain prices, ethanol producers are generally not able to
      compensate for increases in the cost of grain feedstock through adjustments
      in
      prices charged for their ethanol. We, therefore, anticipate that our plant’s
      profitability will be negatively impacted during periods of high corn prices.




**Grain
      origination and risk management**




We
      anticipate establishing ongoing business relationships with local farmers and
      grain elevators to acquire the corn needed for the project. We have no other
      contracts, agreements or understandings with any grain producer in the area.
      Although we anticipate procuring grains from these sources, there can be no
      assurance that such grains can be procured on acceptable terms, or if at
      all.




We
      expect
      to hire or contract with a commodities manager to ensure the consistent
      scheduling of corn deliveries and to establish and fill forward contracts
      through grain elevators and producers. The commodities manager will utilize
      forward contracting and hedging strategies, including certain futures contracts,
      forward contracts and/or certain derivative instruments to manage our commodity
      risk exposure and optimize finished product pricing on our behalf. We anticipate
      that most of our grain will be acquired in this manner. Forward contracts allow
      us to purchase corn for future delivery. The effectiveness of such hedging
      activities will depend upon, among other things, volatility in the market price
      for corn, our ability to sell enough ethanol and distillers grains to use all
      of
      the corn procured and the effectiveness of our hedging strategy. Although the
      hedging activities will be effected to limit our price risk, we may still be
      exposed to some price risk. Further, the hedging activities themselves result
      in
      costs that we may incur and that may be significant.




**Transportation
      and Delivery**




We
      anticipate our plant will have the facilities to receive grain by truck and
      rail
      and to load ethanol and distillers grains onto trucks and rail cars. We believe
      rail is considerably more cost effective than truck transportation to the more
      distant markets. The railways and highways we will use will be dependent on
      our
      choice of location to build our plant. At this time, we do not have any
      contracts in place with any railway.




**Utilities**




The
      production of ethanol is a very energy intensive process that uses significant
      amounts of electricity and natural gas. Water supply and quality are also
      important considerations. We plan to enter into agreements with local electric
      and natural gas suppliers to provide our needed energy. There can be no
      assurance that those utilities and companies will be able to reliably supply
      the
      natural gas and electricity that we need. If there is an interruption in the
      supply of energy for any reason, such as supply, delivery, or mechanical
      problems, we may be required to halt production. If production is halted for
      an
      extended period of time, it may have a material adverse effect on our
      operations, cash flows, and financial performance.




-6-




*Natural
      Gas*




In
      order
      to operate a 110-million gallon ethanol plant, we will require approximately
      3,400,000 MMBTU of natural gas per year. The plant will produce process steam
      from its own boiler system and dry the distillers dried grains by-product via
      a
      direct gas-fired dryer. The price we will pay for natural gas has not yet been
      determined. In 2005, natural gas prices increased sharply as Hurricane Katrina
      devastated operations and impacted infrastructure on the Gulf Coast. Natural
      gas
      prices rose from approximately $3.00—6.50/mcf mmbtu to nearly $5.00—12.00/mcf.
      mmbtu. More recently, natural gas prices have settled into approximately the
      $6.00/mcf mmbtu—8.00/mcf mmbtu range.




*Electricity*




Based
      on
      our Feasibility Study, we anticipate the proposed plant will require
      approximately 9 MW of electricity at peak demand. We have discussed and reviewed
      but not yet negotiated or executed any agreement with a power company to provide
      electricity to our site. The price at which we will be able to purchase electric
      services has not yet been determined.




****** Water




We
      will
      require a significant supply of water. We have assessed our water needs and
      available supply and we expect to drill several high-capacity wells to provide
      for our water needs. If we are unable to access sufficient well water supply
      or
      unable to drill the wells for any reason, we may utilize nearby surface water
      or
      municipal water to meet the plant’s water needs, which is within one quarter
      mile of our plant site.




Much
      of
      the water used in an ethanol plant is recycled back into the process. There
      are,
      however, certain areas of production where fresh water is needed. Those areas
      include boiler makeup water and cooling tower water. Boiler makeup water is
      treated on-site to minimize all elements that will harm the boiler and recycled
      water cannot be used for this process. Cooling tower water is deemed non-contact
      water because it does not come in contact with the mash, and, therefore, can
      be
      regenerated back into the cooling tower process. The makeup water requirements
      for the cooling tower are primarily a result of evaporation. Depending on the
      type of technology utilized in the plant design, much of the water can be
      recycled back into the process, which will minimize the discharge water. This
      will have the long-term effect of lowering wastewater treatment costs. Many
      new
      plants today are zero or near zero effluent facilities. We anticipate our plant
      design incorporating the ICM/Phoenix Bio-Methanator wastewater treatment process
      will result in zero discharge of plant process water.




**Employees**




We
      presently have one full-time employee, David Skjaerlund, our President and
      Chief
      Executive Officer. Prior to completion of the plant construction and
      commencement of operations, we intend to hire approximately 46 full-time
      employees. The following table represents some of the anticipated positions
      within the plant and the minimum number of individuals we expect will be
      full-time personnel:




**Position**
            
            **# Full-Time**
              **Personnel**General
                Manager
            
            
            1Plant
                Manager
            
            
            1Commodities
                Specialist
            
            
            1Controller
            
            
            1Bookkeeper
            
            
            1Secretary
            
            
            1Production
                Team Leaders
            
            
            4Team
                Production I
            
            
            4Team
                Production II
            
            
            8Utilities,
                Maintenance & Safety Manager
            
            
            1Licensed
                Boiler Operator
            
            
            2Maintenance
                Worker
            
            
            4Welder
            
            
            2Electrician
            
            
            1Electronic
                Technician
            
            
            1Laboratory
                Manager
            
            
            1Laboratory
                Assistant
            
            
            2Rail
                Attendant
            
            
            2Truck
                Attendant
            
            
            4Grain
                Sampling & Records
            
            
            2Entry
                Level Floater
            
            
            2**TOTAL**
            
            
            **46**




-7-




The
      positions, titles, job responsibilities and number allocated to each position
      may differ when we begin to employ individuals for each position.





**Government
      Regulation**





There
      are
      a number of government regulations that could impact the ethanol plant,
      including the regulation of air emissions, handling of any hazardous materials
      or discharge of cooling tower water. In addition, government policy regarding
      renewable fuels can change in the future and may negatively impact the industry.
      We anticipate the ability to compile fully with all governmental
      regulations.





We
      intend
      to enter into written confidentiality and assignment agreements with our
      officers and employees. Among other things, these agreements will require such
      officers and employees to keep all proprietary information developed or used
      by
      us in the course of our business strictly confidential.




Our
      success will depend in part on our ability to attract and retain qualified
      personnel at a competitive wage and benefit level. We must hire qualified
      managers, accounting, human resources and other personnel. We cannot assure
      our
      members that we will be successful in attracting and retaining qualified
      personnel at a wage and benefit structure at or below those we have assumed
      in
      our project. If we are unsuccessful in this regard, we may not be competitive
      with other ethanol plants which would have a material adverse affect on our
      operations, cash flows and financial performance.




**Sales
      and Marketing**




We
      intend
      to sell and market the ethanol and distillers grains produced at the plant
      through normal and established markets. We hope to market all of the ethanol
      produced with the assistance of an ethanol distributor. Similarly, we hope
      to
      sell all of our distillers grains through the use of an ethanol-byproducts
      marketing firm.




**Design-Build
      Team**




*ICM*




On
      April 18, 2007, we entered into an agreement with ICM setting forth the
      terms upon which ICM will provide certain services related to the design,
      construction and start-up of our ethanol plant. At that time, we paid ICM an
      additional payment of $750,000. Under the agreement, ICM had the binding
      obligation to begin construction of our ethanol plant no later than the third
      calendar quarter of 2007 provided that we satisfied certain requirements,
      including closing the financing. Construction began in mid-2007. Upon execution
      of the original letter of intent with ICM on August 22, 2006, we paid ICM
      $250,000. On January 13, 2007, we also paid ICM the first $2,000,000
      installment payment, which is refundable to the extent not spent by ICM in
      preparing for construction of the ethanol plant. We paid ICM the second
      installment of $2,000,000 on March 13, 2007, which is also refundable to
      the extent not spent by ICM in preparing for construction of the ethanol plant.
      ICM began construction of our ethanol plant in July of 2007. ICM will serve
      as
      the principal contractor for the plant and to provide the process engineering
      operations.




ICM
      is a
      full-service engineering, manufacturing and merchandising firm based in Colwich,
      Kansas and founded in 1995 by President and CEO, Dave Vander Griend. ICM is
      expected to provide the process engineering operations. ICM has been involved
      in
      the research, design and construction of ethanol plants for many years. The
      principals of ICM each have over 20 years of experience in the ethanol
      industry and have been involved in the design, fabrication and operations of
      many ethanol plants. ICM employs over 250 engineers, professional and industry
      experts, craftsmen, welders and painters and full-time field employees that
      oversee the process. IMC, Inc. has been involved in sixty ethanol plant
      projects. ICM could lack the capacity to serve our plant due to the increased
      number of plants that they are designing and building at any one time. In
      addition, due to the large number of plants that ICM is currently designing,
      ICM
      may not be able to devote as much time to the advancement of new technology
      as
      other firms that have more available personnel resources.




-8-




The
      plants that were using ICM design technology and were in production as of late
      December 2006 include with their respective sizes in millions of gallons per
      year:




**Plant
                Name**
            
            **Location**
            
            **Size****PLANT
                PROJECTS**Adkins
                Energy, LLC
            
            Lena,
                IL
            
            30Amaizing
                Energy, LLC
            
            Denison,
                IA
            
            40Badger
                State Ethanol, LLC
            
            Monroe,
                WI
            
            40Big
                River Resources, LLC
            
            West Burlington, IA
            
            40Bushmills
                Ethanol
            
            Atwater,
                MN
            
            40Commonwealth
                Agri-Energy, LLC
            
            Hopkinsville,
                KY
            
            20CORN,
                LP
            
            Goldfield,
                IA
            
            50East
                Kansas Agri Energy, LLC
            
            Garnett,
                KS
            
            35Front
                Range Energy LLC
            
            Windsor,
                CO
            
            40Glacial
                Lakes Energy, LLC
            
            Watertown,
                SD
            
            40Golden
                Grain Energy, LLC
            
            Mason
                City, IA
            
            40Granite
                Falls Energy, LLC
            
            Granite
                Falls, MN
            
            40Hawkeye
                Renewables, LLC
            
            Iowa
                Falls, IA
            
            40Hawkeye
                Renewables, LLC II
            
            Fairbank,
                IA
            
            100Heartland
                Grain Fuels, LP
            
            Huron,
                SD
            
            8Husker
                Ag, LLC
            
            Plainview,
                NE
            
            20KAAPA
                Ethanol, LLC
            
            Minden,
                NE
            
            40Lincolnland
                Agri Energy, LLC
            
            Robinson,
                IL
            
            40Lincolnway
                Energy, LLC
            
            Nevada,
                IA
            
            50Little
                Sioux Corn Processors, LLC
            
            Marcus,
                IA
            
            40Mid-Missouri
                Energy, Inc.
            
            Malta
                Bend, MO
            
            40Midwest
                Grain Processors Cooperative
            
            Lakota,
                IA
            
            40North
                Country Ethanol
            
            Rosholt,
                SD
            
            20Platte
                Valley Fuel Ethanol, LLC
            
            Central
                City, NE
            
            40Prairie
                Horizon Agri-Energy LLC
            
            Phillipsburg,
                KS
            
            40Sterling
                Ethanol, LLC
            
            Sterling,
                CO
            
            40Suncor
                Energy Products Inc.
            
            Sarnia,
                Ontario, CANADA
            
            55Trenton
                Agri-Products, LLC
            
            Trenton,
                NE
            
            30The
                Andersons Albion Ethanol LLC
            
            Albion,
                MI
            
            55United
                Wisconsin Grain Producers
            
            Friesland,
                WI
            
            40US
                Bio Woodbury
            
            Lake
                Odessa, MI
            
            40US
                Energy Partners, LLC
            
            Russell,
                KS
            
            30VeraSun
                Energy
            
            Aurora,
                SD
            
            100VeraSun
                Energy
            
            Fort
                Dodge, IA
            
            110Western
                Plains Energy, LLC
            
            Oakley,
                KS
            
            30**EXPANSIONS**Al-Corn
                Clean Fuels
            
            Claremont,
                MN
            
            20/35Commonwealth
                Agri-Energy, LLC Expansion
            
            Hopkinsville,
                KY
            
            20/40Hawkeye
                Renewables, LLC Expansion
            
            Iowa
                Falls, IA
            
            40/80Heartland
                Grain Fuels, LP Expansion
            
            Huron,
                SD
            
            14/30Trenton
                Agri-Products, LLC Expansion
            
            Trenton,
                NE
            
            30/40US
                Energy Partners, LLC Expansion
            
            Russell,
                KS
            
            30/40Western
                Plains Energy, LLC Expansion
            
            Oakley,
                KS
            
            30/40




-9-




*Source:
      ICM*




*Wilcox
      Design-Build, LLC*




We
      have
      entered into an agreement with Wilcox regarding the terms upon which we have
      retained Wilcox to provide certain services relating to the coordination,
      engineering, design and construction of the ethanol plant. Under the agreement,
      Wilcox will provide services relating to the following: site investigation
      services, planning and permitting, design and construction documents, design
      review meetings, construction and staking, and construction management. The
      scope of services includes the construction management of site excavation and
      grading, roads, utility installation, administration building, maintenance
      building and the grain handling complex. The agreement also contains a project
      milestone schedule which anticipates construction on the plant to continue
      through May 2008. Wilcox will supplement and complement the services provided
      by
      the ethanol plant design-build firm ICM as stated in the letter of intent
      previously signed by Liberty and ICM.




Wilcox
      was founded in 1968 and has grown to over 280 employees offering engineering,
      surveying, environmental services, planning, landscape architecture, and
      construction engineering services. Wilcox, with 11 offices located in Michigan,
      also performs turn-key and design-build projects including transportation,
      automotive proving grounds, large-scale developments/resorts and small to medium
      municipal client services. The Wilcox team includes over 75 licensed
      professionals which operate throughout the U.S. and abroad. Wilcox is
      prequalified by numerous state agencies, is an ISO 9001:2000 certified company,
      and is also listed among ENR’s “Top 500 Design Firms.”




*Construction
      and timetable for completion of the project*




Due
      to a
      lack of funding for work performed in November 2007, Wilcox has ordered their
      subcontractors to stop work on the project. ICM has also stopped work on the
      project until financing is closed. Assuming sufficient equity is raised, and
      we
      are able to complete the debt and follow-on equity portion of our financing,
      we
      estimate that the project will be completed approximately 10-12 months
      from the date of financial close.




We
      believe that the primary risks that might delay our anticipated completion
      date
      are that:




·
            
            We
                may not be able to raise the significant amount of equity and debt
                we need
                to complete our ethanol plant in the timeframe that we anticipate
                or at
                all; and




·
            
            Our
                contractors and consultants on whom we are highly dependent may not
                meet
                the construction schedule that we have agreed to due to labor constraints,
                constraints in obtaining required materials, weather delays, acts
                of God
                and other causes beyond their control. In addition, they may have
                interests that conflict with ours that could cause them to deploy
                their
                resources on other projects and thereby delay the construction of
                our
                plant.




The
      primary consequences of any delay in the completion of our plant are that:




·
            
            The
                cost of construction will increase as a result of increased debt
                carrying
                costs and increases in the cost of raw materials; and




·
            
            The
                time that we can begin generating revenue from the sale of ethanol
                and
                distillers grains will be delayed.




The
      consequence to our members is that their potential return on their investment
      would be materially and adversely affected. In the worst case, such delays
      could
      cause the failure of the project and our members could lose their entire
      investment in us. This schedule further assumes that two months of detailed
      design will occur prior to closing and the construction schedule will be
      followed by two months of commissioning. During the period of commissioning,
      we
      expect preliminary testing, training of personnel and start-up of operations
      at
      our plant to occur. This schedule also assumes that bad weather, and other
      factors beyond our control do not upset our timetable as there is no additional
      time built into our construction schedule for unplanned contingencies. There
      can
      be no assurance that the timetable that we have set will be followed, and
      factors or events beyond our control could hamper our efforts to complete the
      project in a timely fashion.




-10-





**Regulatory
      Permits and Compliance with Environmental Laws**




We
      will
      be subject to extensive air, water and other environmental regulations and
      we
      will need to obtain a number of environmental permits to construct and operate
      the plant. In addition, it is likely that our senior debt financing will be
      contingent on our ability to obtain the various required environmental permits.
      We anticipate industry experts will coordinate and assist us with obtaining
      certain environmental permits, and to advise us on general environmental
      compliance. In addition, we may retain consultants with specific expertise
      for
      the permit being pursued to ensure all permits are acquired in a cost efficient
      and timely manner.




Of
      the
      permits described below, we must obtain a minor source construction permit
      for
      air emissions prior to starting construction, which has been approved and issued
      by MDEQ. We have already received a construction storm water discharge permit.
      The remaining permits will be required shortly before or shortly after we begin
      to operate the plant. If for any reason any of these permits are not granted,
      construction costs for the plant may increase, or the plant may not be
      constructed at all. In addition to the state requirements, the United States
      Environmental Protection Agency (“EPA”) could impose conditions or other
      restrictions in the permits that are detrimental to us or which increase permit
      requirements or the testing protocols and methods necessary to obtain a permit
      either before, during or after the permitting process. The State of Michigan
      and
      the EPA could also modify the requirements for obtaining a permit. Any such
      event would likely have a material adverse impact on our operations, cash flows
      and financial performance.




Even
      if
      we receive all required permits from the State of Michigan, we may also be
      subject to regulatory oversight from the EPA. Currently, the EPA’s statutes and
      rules do not require us to obtain separate EPA approval in connection with
      the
      construction and operation of the proposed plant. Michigan is authorized to
      enforce the EPA’s federal emissions program. However, the EPA does retain
      authority to take action if it decides that Michigan is not correctly enforcing
      its emissions program. Additionally, environmental laws and regulations, both
      at
      the federal and state level, are subject to change, and changes can be made
      retroactively. Consequently, even if we have the proper permits at the present
      time, we may be required to invest or spend considerable resources to comply
      with future environmental regulations or new or modified interpretations of
      those regulations to the detriment of our financial performance.




*Minor
      source construction permit for air emissions*




Our
      estimates indicate that our facility will be considered a minor source of
      regulated air pollutants. There are a number of emission sources that are
      expected to require permitting as outlined in our permit application submitted
      to the Michigan Department of Environmental Quality on August 16, 2006 (PTI
      No. 241-06). These sources include the boiler, ethanol process equipment,
      storage tanks, scrubbers, and baghouses. On March 8, 2007, the Michigan
      Department of Environmental Quality approved our application for a minor source
      construction permit for air emissions. The air permit includes a 6,000 bushel
      per hour grain dryer and limits the production of ethanol on the site to 121
      million gallons per year. The types of regulated pollutants that are expected
      to
      be emitted from our plant include particulate matter, or PM10, carbon monoxide,
      or CO, nitrous oxides, or NOx and volatile organic compounds, or VOCs. The
      activities and emissions mean that we are expected to obtain a minor source
      construction permit for the facility emissions. Because of regulatory
      requirements, we anticipate that we will agree to limit production levels to
      a
      certain amount, which may be slightly higher than the production levels
      described in this document (currently projected at 110-million gallons per
      year
      at the nominal rate with the permit at a slightly higher rate of
      121 million gallons per year) in order to avoid having to obtain Title V
      air permits. If we exceed these production limitations, we could be subjected
      to
      very expensive fines, penalties, injunctive relief and civil or criminal law
      enforcement actions. Exceeding these production limitations could also require
      us to pursue a Title V air permit. There is also a risk that further analysis
      prior to construction, a change in design assumptions or a change in the
      interpretation of regulations may require us to file for a Title V air permit.
      If we must obtain a Title V air permit, then we will experience significantly
      increased expenses and a significant delay in obtaining a subsequently sought
      Title V air permit. There is also a risk that Michigan might reject a Title
      V
      air permit application and request additional information, further delaying
      startup and increasing expenses. The air quality standards may change at any
      time, thus forcing us to later apply for a Title V air permit. There is also
      a
      risk that the area in which the plant is situated may be determined to be a
      non-attainment area for a particular pollutant. In this event, the threshold
      standards that require a Title V permit may be changed, thus requiring us to
      file for and obtain a Title V air permit. The cost of complying and documenting
      compliance should a Title V air permit be required is also higher. It is also
      possible that in order to comply with applicable air regulations or to avoid
      having to obtain a Title V permit, we would have to install additional air
      pollution control equipment such as additional or different scrubbers.




-11-




*Air
      pollution standard*




There
      are
      a number of air pollution standards which may affect the construction and
      operation of the plant going forward. The Prevention of Significant
      Deterioration, or PSD regulation creates more stringent and complicated permit
      review procedures for construction permits. It is possible, but not expected,
      that the plant may exceed applicable PSD levels for NOx, CO, and VOCs.




*Waste
      Water National Pollutant Discharge Elimination System Permits (NPDES Permit)*




We
      expect
      that we will use water to cool our closed circuit systems in the proposed plant
      based upon engineering specifications. Although the water in the cooling system
      will be re-circulated to decrease facility water demands, a certain amount
      of
      water will be continuously replaced to make up for evaporation and to maintain
      a
      high quality of water in the cooling tower. In addition, there will be
      occasional blowdown water that will have to be discharged. The exact details
      regarding the source of water and the amount of non-process and other wastewater
      that needs to be discharged will not be known until tests confirm the water
      quality and quantity for the site. Although unknown at this time, the quality
      and quantity of the water source and the specific requirements imposed by
      Michigan for discharge will materially affect our financial performance.
      We have filed for a permit to allow the discharge of non-contact
      cooling and boiler blowdown water into Pine River. Liberty received notice
      from
      MDEQ on April 9, 2008 that the NPDES permit has been approved.




*New
      source performance standards*




The
      plant
      will be subject to new source performance standards for both the plant’s
      distillation processes and the storage of volatile organic compounds used in
      the
      denaturing process. These duties include initial notification, emissions limits,
      compliance, monitoring requirements, and record keeping requirements.




*Spill
      prevention, control, and countermeasures plan*




Before
      we
      can begin operations, we must prepare and implement a Spill Prevention Control
      and Countermeasure, or SPCC plan in accordance with the guidelines contained
      in
      40 CFR § 112. This plan will address oil pollution prevention regulations and
      must be reviewed and certified by a professional engineer. The SPCC must be
      reviewed and updated every three years.




*Alcohol
      and Tobacco Tax and Trade Bureau Requirements*




Before
      we
      can begin operations, we must comply with applicable Alcohol and Tobacco Tax
      and
      Trade Bureau (formerly the Bureau of Alcohol, Tobacco and Firearms) regulations.
      These regulations require that we first make application for and obtain an
      alcohol fuel producer’s permit. The application must include information
      identifying the principal persons involved in our venture and a statement as
      to
      whether any of them have ever been convicted of a felony or misdemeanor under
      federal or state law. The term of the permit is indefinite until terminated,
      revoked or suspended. The permit also requires that we maintain certain security
      measures. We must also secure an operations bond pursuant to 27 CFR § 19.957.
      There are other taxation requirements related to special occupational tax and
      a
      special stamp tax.





*Risk
      management plan*




Pursuant
      to § 112(r)(7) of the Clean Air Act, stationary sources with processes that
      contain more than a threshold quantity of a regulated substance are required
      to
      prepare and implement a Risk Management Plan. Since we plan to use anhydrous
      ammonia, we must establish a plan to prevent spills or leaks of the ammonia
      and
      an emergency response program in the event of spills, leaks, explosions or
      other
      events that may lead to the release of the ammonia into the surrounding area.
      The same requirement may also be true for denaturant. This determination will
      be
      made as soon as the exact chemical makeup of the denaturant is obtained. We
      will
      need to conduct a hazardous assessment and prepare models to assess the impact
      of an ammonia and/or denaturant release into the surrounding area. The program
      will be presented at one or more public meetings. In addition, it is likely
      that
      we will have to comply with the prevention requirements under OSHA’s Process
      Safety Management Standard. These requirements are similar to the Risk
      Management Plan requirements. The Risk Management Plan should be filed before
      use.




*Environmental
      Protection Agency Oversight; Changes in Environmental Regulation*




Even
      if
      we receive all Michigan environmental permits for construction and operation
      of
      the plant, we will also be subject to oversight activities by the EPA. There
      is
      always a risk that the EPA may enforce certain rules and regulations differently
      than Michigan’s environmental administrators.


-12-




In
      addition, the government’s regulation of the environment changes constantly.
      Michigan and EPA rules and regulations are subject to change, and it is possible
      that more stringent environmental rules or regulations could be adopted, which
      may result in greater regulatory burdens which could increase our operating
      costs and expenses. Furthermore, plant operations likely will be governed by
      the
      Occupational Safety and Health Administration, or OSHA. OSHA regulations may
      change such that the costs of the operation of the plant may increase. Any
      of
      these regulatory factors may result in higher costs or other materially adverse
      conditions effecting our operations, cash flows and financial performance.




**Nuisance**




Ethanol
      production has been known to produce an odor to which surrounding residents
      could object. Ethanol production may also increase dust in the area due to
      operations and the transportation of grain to the plant and ethanol and
      distillers dried grains from the plant. Such activities may subject us to
      nuisance, trespass, or similar claims by employees or property owners or
      residents in the vicinity of the plant. To help minimize the risk of nuisance
      claims based on odors related to the production of ethanol and its by-products,
      we intend to install a thermal oxidizer in the plant. Nonetheless, any such
      claims or increased costs to address complaints may have a material adverse
      effect on us, our operations, cash flows, and financial performance. We are
      not
      currently involved in any litigation involving nuisance or any other claims.




**Legal
      Proceedings**




As
      part
      of the acquisition of assets from Liberty Michigan, we assumed the obligations
      of Liberty Michigan under a settlement agreement with a group of the founders
      of
      Liberty Michigan, including Renewable Energy Consultants, LLC, Mark and Terri
      Bateman, Rick and Susan Chesak and Cyndi Brearley, which we refer to as the
      REC
      Parties. The settlement agreement was entered into between Liberty Michigan
      and
      the REC Parties to settle conflicting claims to the ownership of Liberty
      Michigan. The founders of Liberty Michigan remaining after execution of the
      settlement agreement determined that the best course of action for Liberty
      Michigan’s owners was to liquidate its assets and dissolve. We agreed to
      purchase all of the assets of Liberty Michigan and assume Liberty Michigan’s
      obligations under the settlement agreement with the REC Parties. In addition,
      we
      paid Liberty Michigan $170,000 as part of the consideration for the transaction.




The
      settlement agreement required the payment to the REC Parties of $20,000 upon
      execution of the settlement agreement, which payment has already been made
      by
      Liberty Michigan, up to $150,000 upon the closing of our initial private
      offering, which payment has already been made, and up to $350,000 to the REC
      Parties upon closing of the written debt financing agreements providing for
      sufficient debt financing which, combined with the equity raised in the
      Company’s S-1 offering and the $16,368,250 we raised in previous private
      placement offerings, would equal at least our then estimated total project
      cost.




On
      February 27, 2007, the REC Parties delivered notice to our counsel that the
      REC Parties believe the third installment payment under the settlement agreement
      between the REC Parties and Liberty Michigan is now due. On April 25, 2007,
      the arbitrator for the REC Parties’ claim determined that payment of the third
      installment is not due until the closing of any financing package that allows
      for the start of construction on the ethanol plant. The parties are in
      discussions regarding when such closing takes place. Such installment payment
      is
      accrued for in our financial statements and the disagreement is only over the
      timing of such payment.




On
      April 11, 2008 the REC Parties delivered notice
      to our counsel that the REC Parties believe the third installment payment under
      the settlement agreement between the REC Parties and Liberty Michigan is now
      due. We believe the claim is wholly without merit.





**Item
      1A.** **** **Risk
      Factors**


**RISK
      FACTORS**




**Risks
      Related to Liberty Renewable Fuels as a Development-Stage Company**




*We
      are a start-up business venture with no operating history, which could result
      in
      errors in management and operations causing a reduction in the value of our
      units.*




We
      were
      recently formed and have no history of operations. Our ability to succeed may
      be
      hampered by the unforeseen expenses, difficulties, complications and delays
      frequently encountered with the formation and commencement of operations of
      a
      new business. We cannot assure our members that we can manage start-up
      effectively and properly staff operations. Any failure to manage our start-up
      effectively could delay the commencement of plant operations. A delay in
      start-up operations is likely to further delay our ability to generate revenue
      and satisfy our debt obligations. We anticipate a period of significant growth,
      involving the construction and start-up of operations of the plant. This period
      of growth and the start-up of the plant are likely to be a substantial challenge
      to us. If we fail to manage start-up effectively, our units could lose all
      or a
      substantial part of their value.




-13-




*Our
      management has very little to no experience in the ethanol industry and our
      managers have never managed an energy production plant and do not dedicate
      their
      efforts to our project on a full time basis, which may affect our ability to
      build and operate the ethanol plant.*




We
      are
      presently, and are likely for some time to continue to be, dependent upon our
      initial managers. Most of these individuals have little or no experience in
      running an ethanol plant, even though they have experience in corn merchandising
      and origination, petroleum distribution, bank financing and accounting,
      livestock feed marketing and sales, real estate development, and general
      business development and operation. ICM will be providing training and ongoing
      support to our employees running the ethanol plant to insure successful startup
      and continual operation of the plant. In addition, we are planning to hire
      marketing agents with experience in marketing ethanol and distillers grains
      that
      also have access to existing markets and customers. In addition, certain
      managers on our board are presently engaged in business and other activities
      which impose substantial demands on their time and attention. We have a
      full-time President, Dr. Skjaerlund; however we anticipate that our other
      executive officers will dedicate approximately 15 hours per week and that our
      managers will dedicate between 4 hours and 15 hours per week to our project
      depending upon which committees they serve. The fact that our executive officers
      and managers will not dedicate their efforts to our project on a full time
      basis
      may affect our ability to build and develop our ethanol plant. For more
      information, our members should read the information under “RISK FACTORS—Risks
      Related to Conflicts of Interest.”




*We
      will be highly dependent upon contractors and consultants such as ICM and Wilcox
      for expertise in beginning operations in the ethanol industry and any loss
      of
      either of these relationships could cause us delay and added expense, placing
      us
      at a competitive disadvantage.*




We
      will
      be dependent on our relationships with ICM, Wilcox and their respective
      employees. Any loss of either of these relationships, particularly during the
      construction and start-up period for the plant, may prevent us from commencing
      operations and result in the failure of our business. The time and expense
      of
      locating new consultants and contractors would result in unforeseen expenses
      and
      delays. Unforeseen expenses and delays may reduce our ability to generate
      revenue and profitability and significantly damage our competitive position
      in
      the ethanol industry such that our members could lose some or all of their
      investment.




*There
      are several agreements and relationships that remain to be negotiated, executed
      and implemented which will have a critical impact on our operations, expenses
      and profitability.*




We
      have
      several agreements, documents and relationships that remain to be negotiated,
      executed and implemented before we can develop and construct our plant and
      commence operations. Examples include agreements with debt financing sources,
      agreements to supply us with access to transportation facilities and utilities,
      agreements to supply us with corn and natural gas, contracts to sell our
      production and agreements with numerous consultants. Our expectations regarding
      the likely terms of these agreements and relationships could vary greatly from
      the terms of any agreement or relationship that may eventually be executed
      or
      established. If we are unable to enter into these agreements or relationships
      on
      satisfactory terms, or if revisions or amendments to existing terms become
      necessary, our plant and commencement of operations could be delayed, our
      expenses could be increased, our profitability and the likelihood of
      distributions to our unit holders could be adversely affected.




*We
      will be highly dependent on commodity prices and we may not be able to adapt
      to
      changing market conditions or endure any decline in the ethanol industry.*




We
      expect
      our revenues to be derived solely from the production and sale of ethanol and
      distillers grains and, therefore we will be highly dependent on market prices
      for these commodities as well as prices for corn and natural gas. Ethanol prices
      have recently been much higher than their 10-year average. Historically, ethanol
      prices have been seasonal, increasing in the late summer and fall as gasoline
      blenders and marketers increase inventory in anticipation of mandatory blending
      in the winter months, and decreasing in the spring and summer when mandatory
      blending ceases. However, ethanol prices began increasing during the latter
      part
      of 2005 and continued to increase through August 2006, despite a significant
      increase in the supply of ethanol resulting from many additional producers
      in
      the industry. After August 2006, ethanol prices decreased along with the fall
      in
      gasoline prices and have recently began increasing again along with rising
      gas
      prices. Increased demand, from crude oil and gas markets and public acceptance,
      has contributed to a strengthening of ethanol prices over historical levels.




Historically,
      the price of distillers’ grains has been relatively steady. Various factors
      affect the price of distillers’ grains, including, among others, the price of
      corn, soybean meal and other alternative feed products, and the general supply
      and demand of domestic and international markets for distillers’ grains. We
      believe that unless demand increases, the price of distillers grains may be
      subject to future downward pressure as the supply of distillers’ grains
      increases because of increased ethanol production.




-14-




For
      more
      information on the risks related to commodity prices for corn and natural gas,
      please see “RISK FACTORS—Risks Related to Ethanol Production.”




We
      do not
      have any other lines of business or other sources of revenue to rely upon if
      we
      are unable to produce and sell ethanol and distillers grains, or if the markets
      for those products decline. Our plant will not have the ability to produce
      any
      other products, other than carbon dioxide. Our lack of diversification means
      that we may not be able to adapt to changing market conditions or to withstand
      any significant decline in the ethanol industry and could cause our units to
      lose all or some of their value if we are unable to generate revenues from
      the
      production and sale of ethanol and distillers grains since we do not expect
      to
      have any other lines of business or alternative revenue sources.




*Our
      units may decline in value due to decisions made by our initial Board of
      Managers and until the plant is built, these managers may only be replaced
      through amendment to our company agreement.*




Our
      company agreement provides that the initial Board of Managers will serve until
      the first annual or special meeting of the members following commencement of
      substantial operations of the ethanol plant. If our project suffers delays
      due
      to financing or construction, our initial Board of Managers could serve for
      an
      extended period of time. In that event, our members’ only recourse to replace
      these managers would be through an amendment to our company agreement which
      could be difficult to accomplish.




*We
      may not be able to hire employees capable of effectively operating the ethanol
      plant, which may hinder our ability to operate profitably.*




We
      currently have one employee. If we are not able to hire employees who can
      effectively operate the plant, our ability to generate revenue will be
      significantly reduced or prevented altogether.




**Risks
      Related to the Our Registered Offering**




*Failure
      to sell the minimum number of units, which means our ability to build the
      ethanol plant, may be hindered.*




As
      of
      March 31, 2008, we have raised approximately $13,500,000 in our current
      registered offering. We may not be able to sell the minimum amount of units
      required to complete this offering. If we do not receive $50,000,000 or more
      in
      gross offering proceeds for fully-paid units and written debt financing
      commitments providing for sufficient debt financing which, combined with the
      offering proceeds and the $16,368,250 we raised in previous private placement
      offerings, would at least equal our then estimated total project cost by **June
      7, 2008,** we
      cannot
      close the offering and must promptly return members’ money plus the excess, if
      any, of nominal interest over the escrow fees. This means that from the date
      of
      a member’s investment, the member would earn a rate of return on the money
      deposited with us in escrow less offering expenses. We do not expect the
      termination date to be later than **June
      7, 2008.**




*Our
      managers and officers intend to sell our units without the use of an underwriter
      or placement agent. We are not experienced in selling securities and no one
      has
      agreed to assist us or purchase any units that we cannot sell ourselves, which
      may result in the failure of the offering.*




We
      intend
      to make this offering on a “best efforts” basis, which means that we do not
      currently intend to use an underwriter or placement agent, although we may
      engage one in the future. We have no firm commitment from any prospective buyer
      to purchase our units and we cannot assure our members that the offering will
      be
      successful. We currently plan to register the offering only with some or all
      of
      the States of Colorado, Georgia, Illinois, Indiana, Kansas, Maryland, Michigan,
      Ohio, South Dakota, Tennessee and Wisconsin. Our managers have significant
      responsibilities in their primary occupations in addition to trying to raise
      capital. These individuals have no broker-dealer experience and most of our
      managers have limited or no experience with public offerings of securities.
      There can be no assurance that our managers will be successful in securing
      members for the offering.




-15-




*Our
      initial public offering will be subject to merit review by various state
      securities commissions*




In
      connection with our proposed initial public offering, we intend to offer our
      membership interests in a number of states, including Michigan. Some of these
      states will conduct a “merit review” of the initial public offering in order to
      determine whether the initial public offering is “fair” to members. These state
      securities commissions will review a number of items in determining the fairness
      of the initial public offering including the price to be paid by public members,
      the ownership and commitment of management, the amount of any commissions paid
      to any brokers we utilize in selling membership interests as well as a number
      of
      subjective factors. While we are unable to predict all of the types of
      subjective factors that a commission may employ in evaluating the offering,
      we
      are aware that in the past at least one commission has evaluated the experience
      of another issuer in the business area of the issuer, the type, amount and
      terms
      of issuance of securities to the issuer’s promoters, and the existence of
      transactions between the issuer and its insiders. In the event that a state
      securities commission determines that our proposed initial public offering
      is
“unfair,” we will not be able to sell securities in that state.




**Risks
      Related to Our Financing Plan**




*Even
      if we raise the minimum amount of equity in the public offering, we may not
      obtain the debt financing necessary to construct and operate our ethanol plant,
      which would result in the failure of the project and Liberty Renewable Fuels.*




Our
      financing plan requires a significant amount of debt financing. We do not have
      contracts or commitments with any bank, lender or financial institution for
      debt
      financing, and we will not release funds from escrow until we have received
      $50,000,000 or more in gross offering proceeds for fully-paid units and written
      debt financing commitments providing for sufficient debt financing which,
      combined with the offering proceeds and the $16,368,250 we raised in previous
      private placement offerings, would at least equal our then estimated total
      project cost. We have been seeking the required debt financing since mid-2007
      and so far have been unsuccessful. If debt financing on acceptable terms is
      not
      available for any reason, we will be forced to abandon our business plan and
      return their investment from escrow plus the excess, if any, of nominal interest
      over the escrow agency fees. Including the $16,368,250 we raised in our previous
      private placement offerings and depending on the amount of equity raised in
      the
      offering, we expect to require approximately $116,916,750 to $166,916,750 (less
      any bond or tax increment financing, grants and other incentives we are awarded)
      in senior or subordinated long-term debt from one or more commercial banks
      or
      other lenders, incentives and government grants. Because the amounts of equity
      and grant funding are not yet known, the exact amount and nature of total debt
      is also unknown. Even though we must receive a debt financing commitment as
      a
      condition of releasing the proceeds of this offering from escrow, the agreements
      to obtain debt financing may not be fully negotiated at the time that the funds
      are released to us. Therefore, we cannot assure our members that such a
      commitment will be received, or if it is received, that it will be on terms
      acceptable to us. If agreements to obtain debt financing are arranged and
      executed, we expect that we will be required to use the funds raised from this
      offering prior to receiving the debt financing funds.




*Our
      cost projections may prove to be incorrect and we may require significantly
      more
      funding than anticipated in order to bring the ethanol plant into production.*




Our
      cost
      projections are based upon our Feasibility Study and subsequent negotiations
      with ICM and Wilcox and have not been reviewed or audited by an accounting
      or
      auditing firm and may prove to be inaccurate. Any such inaccuracies may mean
      that we will require more, potentially significantly more, funding in order
      to
      complete construction of our ethanol plant and bring it into production. Even
      if
      we raise the anticipated debt and equity financing, we may not be able to raise
      any additional required financing, whether through debt or equity. Our failure
      to raise any additional required financing could result in the failure of the
      project and the loss of their entire investment.




*We
      will be highly leveraged and future loan agreements with lenders may hinder
      our
      ability to operate the business by imposing restrictive loan covenants, which
      could delay or prohibit us from making cash distributions to our unit holders.*




We
      anticipate that we may incur up to sixty percent (60%) of our required capital
      in the form of debt. This level of debt necessary to implement our business
      plan
      will result in substantial debt service requirements. As a result, a substantial
      amount of our cash flow from operations will be required to service our
      indebtedness which will reduce the funds that would otherwise be available
      for
      operations, capital expenditures and distributions to holders of units. The
      level of our indebtedness and debt service requirements could have important
      consequences which could hinder our ability to operate, including our ability
      to:




·
            
            Incur
                additional indebtedness;




-16-




·
            
            Make
                capital expenditures or enter into lease arrangements in excess of
                prescribed thresholds;




·
            
            Make
                distributions to unit holders, or redeem or repurchase units;




·
            
            Make
                certain types of investments;




·
            
            Create
                liens on our assets;




·
            
            Utilize
                the proceeds of asset sales; and




·
            
            Merge
                or consolidate or dispose of all, or substantially all, of our assets.




In
      the
      event that we are unable to pay our debt service obligations, our creditors
      could force us to, among other things, reduce or eliminate distributions to
      unit
      holders (even for tax purposes) or reduce or eliminate needed capital
      expenditures. It is possible that we could be forced to sell assets, seek
      additional equity capital or refinance or restructure all or a portion of our
      debt. In the event that we would be unable to refinance our indebtedness or
      raise funds through asset sales, sales of equity or otherwise, our ability
      to
      operate our plant would be greatly affected and we may be forced to liquidate.




*If
      we
      decide to spend equity proceeds and begin preparation for plant construction
      before we have fulfilled all of the loan commitment conditions or signed binding
      loan agreements, we may be unable to close the loan and our members may lose
      all
      of their investment.*




If
      we
      sell the minimum number of units, we may decide to begin spending the equity
      proceeds to begin preparation for plant construction or for other
      project-related expenses. If, after we begin spending equity proceeds from
      this
      offering, we are unable to close the loan, we may have to seek another debt
      financing source or abandon the project. If that happens, our members could
      lose
      some or all of their investment.




**Risks
      Related to Construction of the Ethanol Plant**




*We
      will depend on ICM and Wilcox for certain services in connection with the
      design, development and construction of the plant and the failure of ICM and
      Wilcox to perform could force us to abandon business, hinder our ability to
      operate profitably or decrease the value of their investment.*




We
      will
      be highly dependent upon ICM and Wilcox to design, develop and build our plant.
      We have executed agreements with Wilcox and ICM.




We
      are
      currently unable to pay for additional construction at the plant and
      construction has stopped. If ICM terminates its relationship with us after
      initiating construction, we cannot assure our members that we would be able
      to
      obtain a replacement general contractor. Any such event may force us to abandon
      our business. ICM and its affiliates may have a conflict of interest with us
      because ICM and its employees or agents are involved as owners, creditors and
      in
      other capacities with other ethanol plants in the United States. We cannot
      require ICM to devote their full time and attention to our activities. As a
      result, ICM may have, or come to have, a conflict of interest in allocating
      personnel, materials and other resources to our plant.




*We
      may need to increase cost estimates for construction of the ethanol plant,
      and
      such increase could result in devaluation of our units if ethanol plant
      construction requires additional capital.*




We
      anticipate that ICM will construct the plant for the contract price set forth
      in
      the design-build agreement, based on the plans and specifications in the
      design-build agreement. We have based our capital needs on a design for the
      plant that will cost approximately $185,600,000 **,** with
      $27,685,000 for bank costs and our budgeted acquisition of Auburn
      Bean & Grain (We have previously entered into agreements with Auburn
      Bean & Grain Co. and Cooperative Elevator Co. relating to the acquisition of
      Auburn and the purchase of grain from Cooperative Elevator. Both of those
      agreements have been terminated pursuant to their terms.) and additional
      operating capital of approximately $20,000,000 for a total project completion
      cost of approximately $233,285,000. This price includes construction period
      interest. The estimated total cost of the project is based on current estimates,
      and we cannot assure our members that the final cost of the plant will not
      be
      higher. We cannot give any assurance that there will not be design changes
      or
      cost overruns associated with the construction of the plant. Therefore, the
      cost
      of our plant could be significantly higher than the $233,285,000 construction
      price we anticipate.




In
      addition, increases in the price of steel, cement and other construction
      materials, as well increases in the cost of labor, and could affect the final
      cost of construction of the ethanol plant. Further, shortages of steel, cement
      and other construction materials, as well as labor shortages, could affect
      the
      final completion date of the project. Advances and changes in technology may
      require changes to our current plans in order to remain competitive. Any
      significant increase in the estimated construction cost of the plant could
      delay
      our ability to generate revenues and reduce the value of our units because
      our
      revenue stream may not be able to adequately support the increased cost and
      expense attributable to increased construction costs.




-17-




*Construction
      of the ethanol plant requires access to resources such as water, rail lines,
      natural gas and corn, our inability to secure any of which could materially
      and
      adversely effect our profitability and could prevent the construction of the
      ethanol plant.*




We
      have
      acquired a location outside Ithaca, Michigan for development of our ethanol
      plant. That location, as any location likely would, will require us to acquire
      a
      number of resources, including rights to sufficient water to run the plant
      and
      establish access to natural gas supplies, rail lines and roads. The plant
      location has access to rail lines, we have drilled test wells to test the
      quantity and quality of the groundwater, and there are natural gas lines on
      site
      and electrical power lines within one quarter mile of the plant location.
      Despite these facts, it is possible that we will not be able to obtain access
      to
      some or all of the required resources on commercially reasonable terms or at
      all. Our inability to obtain any of the required resources on commercially
      reasonable terms would have a material and adverse effect on our profitability
      and might prevent the ethanol plant from being constructed.




*Construction
      delays could result in devaluation of our units if our production and sale
      of
      ethanol and its by-products are similarly delayed.*




We initially
      expected our plant to be operating by the third quarter of 2008; however,
      construction projects often involve delays in obtaining permits, delays due
      to
      weather conditions, or other events. In addition, changes in interest rates
      or
      the credit environment or changes in political administrations at the federal,
      state or local level that result in policy changes towards ethanol or this
      project, could cause construction delays. If it takes longer to construct the
      plant than we anticipate, it would delay our ability to generate revenue and
      make it difficult for us to meet our debt service obligations. This could reduce
      the value of our units. Currently the construction is halted due to a lack
      of
      funding.




*ICM
      may have current or future commitments to design and build other ethanol
      manufacturing facilities ahead of our plant and those commitments could delay
      construction of our plant and our ability to generate revenues.*




We
      do not
      know how many ethanol plants ICM has currently contracted to design and build.
      Based upon publicly available information sources, we estimate that more than
      20
      ethanol plants in the United States are being built with ICM’s proprietary
      technology. This number is only our estimate and it is very likely that the
      actual number varies from our estimate, possibly significantly. The actual
      number of ethanol plants being designed and built by ICM, is considered
      proprietary business information of ICM and is not available to us. It is
      possible that ICM has outstanding commitments to other facilities that may
      cause
      the construction of our plant to be delayed. It is also possible that ICM will
      continue to contract with new facilities for plant construction and with
      operating facilities for expansion construction. These current and future
      building commitments may reduce the resources of ICM to such an extent that
      construction of our plant is significantly delayed. If this occurs, our ability
      to generate revenue will also be delayed.




*Defects
      in plant construction could result in devaluation of our units if our plant
      does
      not produce ethanol and its by-products as anticipated.*




We
      cannot
      assure our members that defects in materials and/or workmanship in the plant
      will not occur. Under the terms of the design-build agreement with ICM, ICM
      warrants that the material and equipment furnished to build the plant will
      be
      new, of good quality, and free from improper workmanship and defective materials
      at the time of delivery. Though the design-build agreement requires ICM to
      correct all defects in material or workmanship for a period of two years after
      substantial completion of the plant, material defects in material or workmanship
      may still occur. Such defects could delay the commencement of operations of
      the
      plant, or, if such defects are discovered after operations have commenced,
      could
      cause us to halt or discontinue the plant’s operation. Halting or discontinuing
      plant operations could delay our ability to generate revenues and reduce the
      value of our units.




*The
      plant site may have unknown environmental problems that could be expensive
      and
      time consuming to correct, which may delay or halt plant construction and delay
      our ability to generate revenue.*




Our
      Board
      of Managers has identified a primary plant site near Ithaca, Michigan which
      has
      been in agricultural production for decades. There can be no assurance that
      we
      will not encounter hazardous environmental conditions that may delay the
      construction of the plant. We do not anticipate ICM to be responsible for any
      hazardous environmental conditions encountered at the plant site. Upon
      encountering a hazardous environmental condition, ICM may suspend work in the
      affected area. If we receive notice of a hazardous environmental condition,
      we
      may be required to correct the condition prior to continuing construction.
      The
      presence of a hazardous environmental condition will likely delay construction
      of the plant and may require significant expenditure of our resources to correct
      the condition. If we encounter any hazardous environmental conditions during
      construction that require time or money to correct, such event could delay
      our
      ability to generate revenues and reduce the value of our units.




-18-




**Risks
      Related to Ethanol Production**




*Changes
      in the prices of corn and natural gas can be volatile and these changes will
      significantly impact our financial performance and the value of their
      investment.*




Our
      results of operations and financial condition will be significantly affected
      by
      the cost and supply of corn and natural gas. Changes in the price and supply
      of
      corn and natural gas are subject to and determined by market forces over which
      we have no control. Generally, higher corn and natural gas prices will produce
      lower profit margins. This is especially true if market conditions do not allow
      us to pass through increased corn and natural gas costs to our customers. We
      cannot assure our members that we will be able to pass through such higher
      prices. If we experience a sustained period of high corn and/or natural gas
      prices, such pricing may reduce our ability to generate revenues and our profit
      margins may significantly decrease or be eliminated.




Ethanol
      production at our ethanol plant will require significant amounts of corn. In
      addition, other new ethanol plants may be developed in the state of Michigan.
      If
      these plants are successfully developed and constructed, we expect to compete
      with them for corn origination. Competition for corn origination may increase
      our cost of corn and harm our financial performance and the value of our
      investment.




We
      intend
      to use natural gas as the primary power source for our ethanol plant. Natural
      gas costs represent approximately 20-30% of our total cost of production.
      Natural gas prices are volatile and may lead to higher operating costs, which
      would lower the value of their investment. In late August and early
      September 2005, Hurricane Katrina and Hurricane Rita caused dramatic damage
      to areas of Louisiana and Texas, which are the location of two of the largest
      natural gas hubs in the United States. The damage became apparent and natural
      gas prices substantially increased. At this time it is unknown how this damage
      will affect intermediate and long-term prices of natural gas. Future hurricanes
      or other events could create additional uncertainty and volatility. We expect
      natural gas prices to remain high or increase given the unpredictable market
      situation.




*Declines
      in the prices of ethanol and its by-products will have a significant negative
      impact on our financial performance and the value of their investment.*




Our
      revenues will be greatly affected by the price at which we can sell our ethanol
      and its by-products, i.e., distillers’ grains. These prices can be and have been
      volatile as a result of a number of factors. These factors include the overall
      supply and demand, the price of gasoline, level of government support, and
      the
      availability and price of competing products. For instance, the price of ethanol
      tends to increase as the price of gasoline increases, and the price of ethanol
      tends to decrease as the price of gasoline decreases. Any decrease in gasoline
      prices will likely also lead to lower prices for ethanol, which may decrease
      our
      ethanol sales and reduce revenues.




We
      do not
      expect ethanol prices to be sustainable as supply from new and existing ethanol
      plants increases to meet increased demand. The total production of ethanol
      is at
      an all time high and continues to rapidly expand at this time. Increased
      production of ethanol may lead to lower prices. Any decrease in the price at
      which we can sell our ethanol will negatively impact our future revenues.




We
      believe that ethanol production is expanding rapidly at this time. Increased
      production of ethanol may lead to lower prices and other adverse effects. For
      example, the increased ethanol production could lead to increased supplies
      of
      by-products from the production of ethanol, such as distillers’ grains. Those
      increased supplies could outpace demand, which would lead to lower prices for
      those by-products. In addition, distillers grains compete with other protein
      based animal feed products. The price of distillers’ grains may decrease when
      the price of competing feed products decreases. The price of competing animal
      feed products is based in part on the price of the commodity from which it
      is
      derived. Downward pressure on commodity prices, such as soybeans, will generally
      cause the price of competing animal feed products to decline, resulting in
      downward pressure on the price of distillers’ grains. Any decrease in the prices
      at which we can sell our distillers grains will negatively affect our revenues.




-19-




*We
      have no current plans to sell the raw carbon dioxide we produce to a third
      party
      processor resulting in the loss of a potential source of revenue.*




At
      this
      time, we have no agreement to sell the raw carbon dioxide we produce. We cannot
      provide any assurances that we will sell our raw carbon dioxide at any time
      in
      the future. If we do not enter into an agreement to sell our raw carbon dioxide,
      we will have to emit it into the air. This will result in the loss of a
      potential source of revenue.




*Our
      ability to successfully operate is dependent on the availability of energy
      at
      anticipated prices.*




Adequate
      energy is critical to plant operations. We have not yet entered into any
      definitive agreements to obtain energy resources and we may have to pay more
      than we expect to access efficient energy resources. As a result, our ability
      to
      make a profit may decline.




*The
      expansion of domestic ethanol production in combination with state bans on
      MTBE
      and/or state renewable fuels standards may place strains on rail and terminal
      infrastructure such that our ethanol cannot be marketed and shipped to the
      blending terminals that would otherwise provide us the best cost advantages.*




If
      the
      volume of ethanol shipments continues to increase and blenders switch from
      MTBE
      to ethanol, there may be weaknesses in infrastructure such that our ethanol
      cannot reach its target markets. Many terminals may need to make infrastructure
      changes to blend ethanol instead of MTBE. If the blending terminals do not
      have
      sufficient capacity or the necessary infrastructure to make this switch, there
      may be an oversupply of ethanol on the market, which could depress ethanol
      prices and negatively impact our financial performance. In addition, rail
      infrastructure may be inadequate to meet the expanding volume of ethanol
      shipments, which could prevent us from shipping our ethanol to our target
      markets.




*We
      will depend on others for sales of our products, which may place us at a
      competitive disadvantage and reduce profitability.*




We
      expect
      to hire or contract with a third-party marketing firm to market all of the
      ethanol and distillers grains we plan to produce. As a result, we expect to
      be
      dependent on the ethanol broker and distillers’ grains broker we engage. We
      cannot assure our members that we will be able to enter into contracts with
      any
      ethanol broker or distillers’ grains broker on terms that are favorable to us.
      If the ethanol or distillers grains broker breaches the contract or does not
      have the ability, for financial or other reasons, to market all of the ethanol
      or distillers grains we produce, we will not have any readily available means
      to
      sell our products. Our lack of a sales force and reliance on third parties
      to
      sell and market our products may place us at a competitive disadvantage. Our
      failure to sell all of our ethanol and distillers dried grains feed products
      may
      result in less income from sales, reducing our revenue stream.




*Changes
      and advances in ethanol production technology could require us to incur costs
      to
      update our ethanol plant or could otherwise hinder our ability to compete in
      the
      ethanol industry or operate profitably.*




Advances
      and changes in the technology of ethanol production are expected to occur.
      Such
      advances and changes may make the ethanol production technology installed in
      our
      plant less desirable or obsolete. These advances could also allow our
      competitors to produce ethanol at a lower cost than us. If we are unable to
      adopt or incorporate technological advances, our ethanol production methods
      and
      processes could be less efficient than those of our competitors, which could
      cause our plant to become uncompetitive or completely obsolete. If our
      competitors develop, obtain or license technology that is superior to ours
      or
      that makes our technology obsolete, we may be required to incur significant
      costs to enhance or acquire new technology so that our ethanol production
      remains competitive. Alternatively, we may be required to seek third-party
      licenses, which could also result in significant expenditures. We cannot
      guarantee or assure our members that third-party licenses will be available
      or,
      once obtained, will continue to be available on commercially reasonable terms,
      if at all. These costs could negatively impact our financial performance by
      increasing our operating costs and reducing our net income, all of which could
      reduce the value of their investment.




-20-




**Risks
      Related to Ethanol Industry**




*New
      plants under construction or decreases in the demand for ethanol may result
      in
      excess production capacity in our industry.*




The
      supply of domestically produced ethanol is at an all-time high. According to
      the
      RFA, in 2006, 110 ethanol plants located in 21 states produced a record 4.86
      billion gallons of ethanol; a 24.4% increase from 2005 and nearly 3 times the
      ethanol produced in 2000. As of April 2007, the RFA reported that there were
      115
      ethanol plants with a combined annual production capacity of more than
      5.75 billion gallons and an additional 86 ethanol plants under construction
      or expanding expected to result in an increase of combined annual capacity
      of
      more than 6.3 billion gallons. Excess capacity in the ethanol industry
      would have an adverse impact on our results of operations, cash flows and
      general financial condition. Excess capacity may also result or intensify from
      increases in production capacity coupled with insufficient demand. If the demand
      for ethanol does not grow at the same pace as increases in supply, we would
      expect the price for ethanol to decline. If excess capacity in the ethanol
      industry occurs, the market price of ethanol may decline to a level that may
      adversely affect our ability to generate profits and, consequently, our
      financial condition.




*We
      operate in a competitive industry and compete with larger, better financed
      entities which could impact our ability to operate profitably.*




There
      is
      significant competition among ethanol producers with numerous producer and
      privately owned ethanol plants planned and operating throughout the Midwest
      and
      elsewhere in the United States. The number of ethanol plants being developed
      and
      constructed in the United States continues to increase at a rapid pace. The
      passage of the Energy Policy Act of 2005 included a renewable fuels mandate
      that
      we expect will further increase the number of domestic ethanol production
      facilities. The largest ethanol producers include Abengoa Bioenergy Corp.,
      Archer Daniels Midland, or ADM, Aventine Renewable Energy, Inc., Cargill, Inc.,
      New Energy Corp. and VeraSun Energy Corporation, all of which are each capable
      of producing more ethanol than we expect to produce. In 2005, ADM announced
      its
      plan to add approximately 500 million gallons per year of additional
      ethanol production capacity in the United States. ADM is currently the largest
      ethanol producer in the U.S. and controls a significant portion of the ethanol
      market. ADM’s plan to produce an additional 500 million gallons of ethanol
      per year will strengthen its position in the ethanol industry and cause a
      significant increase in domestic ethanol supply. If the demand for ethanol
      does
      not grow at the same pace as increases in supply, we expect that lower prices
      for ethanol will result which may adversely affect our ability to generate
      profits and our financial condition.




Our
      ethanol plant is also expected to compete with producers of other gasoline
      additives made from raw materials other than corn having similar octane and
      oxygenate values as ethanol, such as producers of methyl tertiary butyl ether
      (MTBE). MTBE is a petrochemical derived from methanol which generally costs
      less
      to produce than ethanol. Many major oil companies produce MTBE and strongly
      favor its use because it is petroleum-based. However, MTBE has caused
      groundwater contamination and many states have enacted MTBE bans. Alternative
      fuels, gasoline oxygenates and alternative ethanol production methods are also
      continually under development. The major oil companies have significantly
      greater resources than we have to market MTBE, to develop alternative products,
      and to influence legislation and public perception of MTBE and ethanol. These
      companies also have significant resources to begin production of ethanol should
      they choose to do so.




*Competition
      from the advancement of alternative fuels may lessen the demand for ethanol
      and
      negatively impact our profitability, which could reduce the value of their
      investment.*




Alternative
      fuels, gasoline oxygenates and ethanol production methods are continually under
      development. A number of automotive, industrial and power generation
      manufacturers are developing more efficient engines, hybrid engines and
      alternative clean power systems using fuel cells or clean burning gaseous fuels.
      Vehicle manufacturers are working to develop vehicles that are more fuel
      efficient and have reduced emissions using conventional gasoline. Vehicle
      manufacturers have developed and continue to work to improve hybrid technology,
      which powers vehicles by engines that utilize both electric and conventional
      gasoline fuel sources. In the future, the emerging fuel cell industry offers
      a
      technological option to address increasing worldwide energy costs, the long-term
      availability of petroleum reserves and environmental concerns. Fuel cells have
      emerged as a potential alternative to certain existing power sources because
      of
      their higher efficiency, reduced noise and lower emissions. Fuel cell industry
      participants are currently targeting the transportation, stationary power and
      portable power markets in order to decrease fuel costs, lessen dependence on
      crude oil and reduce harmful emissions. If the fuel cell and hydrogen industries
      continue to expand and gain broad acceptance, and hydrogen becomes readily
      available to consumers for motor vehicle use, we may not be able to compete
      effectively. This additional competition could reduce the demand for ethanol,
      which would negatively impact our profitability.




-21-




*Corn-based
      ethanol may compete with cellulose-based ethanol in the future, which could
      make
      it more difficult for us to produce ethanol on a cost-effective basis and could
      reduce the value of their investment.*




Most
      ethanol is currently produced from corn and other raw grains, such as milo
      or
      sorghum, especially in the Midwest. The current trend in ethanol production
      research is to develop an efficient method of producing ethanol from
      cellulose-based biomass, such as agricultural waste, forest residue, municipal
      solid waste, and energy crops. This trend is driven by the fact that
      cellulose-based biomass is generally cheaper than corn, and producing ethanol
      from cellulose-based biomass would create opportunities to produce ethanol
      in
      areas which are unable to grow corn. Although current technology is not
      sufficiently efficient to be competitive, a report by the U.S. Department of
      Energy entitled “Outlook for Biomass Ethanol Production and Demand” indicates
      that new conversion technologies may be developed in the future. If an efficient
      method of producing ethanol from cellulose-based biomass is developed, we may
      not be able to compete effectively. It may not be cost-effective to convert
      the
      ethanol plant we are proposing into a plant which will use cellulose-based
      biomass to produce ethanol. If we are unable to produce ethanol as
      cost-effectively as cellulose-based producers, our ability to generate revenue
      will be negatively impacted.




*As
      domestic ethanol production continues to grow, ethanol supply may exceed demand
      causing ethanol prices to decline and the value of their investment to be
      reduced.*




The
      number of ethanol plants being developed and constructed in the United States
      continues to increase at a rapid pace. As these plants begin operations, we
      expect domestic ethanol production to significantly increase. If the demand
      for
      ethanol does not grow at the same pace as increases in supply, we would expect
      the price for ethanol to decline. Declining ethanol prices will result in lower
      revenues and may reduce or eliminate profits.




*Competition
      from ethanol imported from Caribbean basin countries may be a less expensive
      alternative to our ethanol, which would cause us to lose market share and reduce
      the value of their investment.*




A
      portion
      of the ethanol produced or processed in certain countries in Central America
      and
      the Caribbean region is eligible for tariff reduction or elimination upon
      importation to the United States under a program known as the Caribbean Basin
      Initiative. Large ethanol producers, such as Cargill, have expressed interest
      in
      building dehydration plants in participating Caribbean Basin countries, such
      as
      El Salvador, which would convert ethanol into fuel-grade ethanol for shipment
      to
      the United States. Ethanol imported from Caribbean Basin countries may be a
      less
      expensive alternative to domestically produced ethanol. Competition from ethanol
      imported from Caribbean Basin countries may affect our ability to sell our
      ethanol profitably.




*Competition
      from ethanol imported from Brazil may be a less expensive alternative to our
      ethanol, which would cause us to lose market share and reduce the value of
      their
      investment.*




Brazil
      is
      currently the world’s largest producer and exporter of ethanol. In Brazil,
      ethanol is produced primarily from sugarcane, which is also used to produce
      food-grade sugar. The RFA estimates that Brazil produced approximately
      4.49 billion gallons of ethanol in 2006. Ethanol imported from Brazil may
      be a less expensive alternative to domestically produced ethanol, which is
      primarily made from corn. Tariffs presently protecting U.S. ethanol producers
      may be reduced or eliminated. Competition from ethanol imported from Brazil
      may
      affect our ability to sell our ethanol profitably.




**Risks
      Related to Regulation and Governmental Action**




*Compliance
      with new and existing environmental laws and regulations could significantly
      increase our construction and start-up costs, and force us to delay or halt
      construction or operation.*




To
      construct the plant, we will need to obtain and comply with a number of
      permitting requirements. As a condition of granting necessary permits,
      regulators could make additional demands that increase our costs of construction
      and operations, in which case we could be forced to obtain additional debt
      or
      equity capital. In addition, it is likely that our senior debt financing will
      be
      contingent on our ability to obtain the various environmental permits that
      we
      will require. Environmental issues, such as contamination and compliance with
      applicable environmental standards, could arise at any time during the
      construction and operation of the plant. If this occurs, it would require us
      to
      spend significant resources to remedy the issues and may delay or prevent
      construction or operation of the plant. This would significantly increase the
      cost of the plant. We cannot assure our members that we will be able to obtain
      and comply with all necessary permits to construct and operate the plant.




-22-




*Our
      business is subject to extensive and potentially costly environmental
      regulations that could change and significantly increase our operating costs.*




We
      are
      subject to environmental regulations of the United States Environmental
      Protection Agency, or EPA, and the State of Michigan. These regulations could
      result in significant compliance costs and may change in the future. For
      example, although carbon dioxide emissions are not currently regulated, some
      authorities support restrictions on carbon dioxide emissions that, if adopted,
      could have a significant impact on our operating costs. We expect to emit a
      significant amount of carbon dioxide into the air. Also, the State of Michigan
      or the EPA may seek to implement additional regulations or implement stricter
      interpretations of existing regulations. Recently, the EPA cautioned ethanol
      producers that it is prepared to sue companies whose plants do not comply with
      applicable laws and regulations. In a recent test of certain ethanol plants,
      the
      EPA expressed concerns over the discovery of certain “volatile organic
      compounds,” some of which may be carcinogenic. While the plant will use
      technology that includes thermal oxidation designed to limit the amount of
      emissions, there still may be risks that the environmental laws and regulations
      may change with respect to “volatile organic compounds.” Changes in
      environmental laws or regulations or stricter interpretation of existing
      regulations may require significant additional capital expenditures or increase
      our operating costs.




In
      addition, the plant could be subject to environmental nuisance or related claims
      by employees, property owners or residents near the plant arising from air
      or
      water discharges. These individuals and entities may object to the air emissions
      from our plant. Also, ethanol production has been known to produce an unpleasant
      odor to which surrounding residents and property owners could object.
      Environmental and public nuisance claims, or tort claims based on emissions,
      or
      increased environmental compliance costs could significantly increase our
      operating costs.




*The
      use and demand for ethanol is dependent on various environmental regulations
      and
      governmental programs that could change and cause the demand or governmental
      support for ethanol to decline.*




There
      are
      various federal and state laws, regulations and programs that have led to
      increased use of ethanol in fuel. These laws, regulations and programs are
      constantly changing. Federal and state legislators and environmental regulators
      could adopt or modify laws, regulations or programs that could adversely affect
      the use of ethanol. Certain states oppose the use of ethanol because they must
      ship ethanol in from other corn producing states, which could significantly
      increase gasoline prices in the state. Material changes in environmental
      regulations regarding the use of MTBE or the required oxygen content of
      automobile emissions or the enforcement of such regulations could decrease
      the
      need to use ethanol. For example, in April 1999, California requested a waiver
      from the Environmental Protection Agency from the oxygenated fuel requirement
      of
      the Clean Air Act Amendments of 1990. Although the Environmental Protection
      Agency initially denied this request, the Ninth Circuit Court of Appeals
      recently vacated the denial on the grounds that the Environmental Protection
      Agency did not consider the effects of such a waiver on both the ozone and
      particulate matter pollution. The court remanded the matter to the Environmental
      Protection Agency for further review. Georgia and New York have also submitted
      requests for waivers. In addition, future legislation may reduce or eliminate
      the reformulated gasoline requirements under the Clean Air Act amendments.
      If
      the oxygenated fuel requirements were eliminated or if any state were to receive
      a waiver, the use and demand for ethanol may decline significantly. Future
      changes in the law may further postpone or waive requirements to use ethanol.




Other
      laws, regulations and programs provide economic incentives to ethanol producers
      and users. For example, Congress recently adopted a Renewable Fuels Standard
      directing the Environmental Protection Agency to adopt rules requiring
      refineries, blenders, distributors and importers to introduce or sell volumes
      of
      ethanol and biodiesel into commerce in accordance with an annual renewable
      fuels
      schedule. The passage of pending federal or state energy legislation or any
      other revocation or amendment of any one or more of these laws, regulations
      or
      programs could have a significant adverse effect on the ethanol industry and
      our
      business. We cannot assure our members that any of these laws, regulations
      or
      programs will continue in the future or that these laws, regulations or programs
      will benefit us or benefit us more than our ethanol-producing competitors.
      Some
      of these laws, regulations and programs will expire under their terms unless
      extended, such as the federal partial excise tax exemption for gasoline blenders
      who use ethanol in their gasoline, which is scheduled to expire in December
      2010. Government support of the ethanol industry could change, and Congress
      and
      state legislatures could remove economic incentives that enable ethanol to
      compete with other fuel additives. The elimination or reduction of government
      subsidies and tax incentives could cause the cost of ethanol-blended fuel to
      increase. The increased price could cause consumers to avoid ethanol-blended
      fuel and cause the demand for ethanol to decline.




-23-




*A
      change in government policies favorable to ethanol may cause demand for ethanol
      to decline.*




Growth
      in
      demand for ethanol may be driven primarily by federal and state government
      policies, such as state laws banning MTBE and the national Renewable Fuels
      Standard. The continuation of these policies is uncertain, and demand for
      ethanol may decline if these policies change or are discontinued. A decline
      in
      the demand for ethanol is likely to cause lower ethanol prices which in turn
      will negatively affect our results of operations, financial condition and cash
      flows.




*Loss
      of or ineligibility for favorable tax benefits for ethanol production could
      hinder our ability to operate at a profit and reduce the value of their
      investment in us.*




The
      ethanol industry and our business are assisted by various federal ethanol tax
      incentives, including those included in the Energy Policy Act of 2005. The
      provision of the Energy Policy Act of 2005 likely to have the greatest impact
      on
      the ethanol industry is the creation of a 7.5 billion gallon Renewable
      Fuels Standard (RFS). The RFS began at 4 billion gallons in 2006,
      increasing to 7.5 billion gallons by 2012. The RFS helps support a market
      for ethanol that might disappear without this incentive. The elimination or
      reduction of tax incentives to the ethanol industry could reduce the market
      for
      ethanol, which could reduce prices and our revenues by making it more costly
      or
      difficult for us to produce and sell ethanol. If the federal tax incentives
      are
      eliminated or sharply curtailed, we believe that a decreased demand for ethanol
      will result, which could result in the failure of the business.




Another
      important provision involves an expansion in the definition of who qualifies
      as
      a small ethanol producer. Historically, small ethanol producers were allowed
      a
      10-cents-per-gallon production income tax credit on up to 15 million
      gallons of production annually. The size of the plant eligible for the tax
      credit was limited to 30 million gallons. Under the Energy Policy Act of
      2005, the size limitation on the production capacity for small ethanol producers
      increases from 30 million to 60 million gallons. Because we intend to
      build a plant with the capacity to annually produce 110-million gallons of
      ethanol, we do not expect to qualify for this tax credit which could hinder
      our
      ability to compete with other plants who will receive the tax credit.




*A
      change in environmental regulations or violations thereof could result in the
      devaluation of our units and a reduction in the value of their investment.*




We
      will
      be subject to extensive air, water and other environmental regulations and
      we
      will need to obtain a number of environmental permits to construct and operate
      the plant. In addition, it is likely that our senior debt financing will be
      contingent on our ability to obtain the various environmental permits that
      we
      will require.




Before
      we
      can begin construction of our plant, we must obtain numerous regulatory
      approvals and permits. While we anticipate receiving these approvals and
      permits, we cannot assure our members that these requirements can be satisfied
      in a timely manner or at all. If for any reason any of these permits are not
      granted, construction costs for the plant may increase, or the plant may not
      be
      constructed at all.




Additionally,
      environmental laws and regulations, both at the federal and state level, are
      subject to change and changes can be made retroactively. Consequently, even
      if
      we have the proper permits at the present time, we may be required to invest
      or
      spend considerable resources to comply with future environmental regulations
      or
      new or modified interpretations of those regulations, which may reduce our
      profitability.




**Risks
      Related to the Units**




*Members
      have limited voting rights and will rely heavily on our Board of Managers and
      officers.*




Under
      the
      terms of our company agreement, members have one vote for every membership
      unit
      that they own on all matters upon which the members vote. However, under no
      circumstances shall any member, and/or any related party or affiliate of a
      member, ever be entitled to vote more than five percent (5%) of our outstanding
      units entitled to vote on a matter even if such member is the registered owner
      of more than five percent (5%) of such outstanding units. As a result, our
      Board
      of Managers and officers will have a significant amount of control over the
      management of Liberty.




-24-




*We
      have placed significant restrictions on the transferability of our units,
      limiting a member’s ability to withdraw from Liberty Renewable Fuels.*




The
      units
      are subject to substantial transfer restrictions pursuant to our company
      agreement and tax and securities laws. This means that members will not be
      able
      to easily liquidate their investment and members may have to assume the risks
      of
      investments in us for an indefinite period of time.




To
      help
      ensure that a secondary market does not develop, our amended and restated
      company agreement prohibits transfers without the approval of our Board of
      Managers. The Board of Managers will not approve transfers unless they fall
      within “safe harbors” contained in the publicly-traded partnership rules under
      the tax code, which include, without limitation, the following:




·
            
            Transfers
                by gift to the member’s spouse or descendants;




·
            
            Transfer
                upon the death of a member;




·
            
            Transfers
                between family members; and




·
            
            Transfers
                that comply with the “qualifying matching services” requirements.




*We
      may never be able to pay cash distributions to our members which could result
      in
      a member receiving little or no return on their investment.*




Distributions
      are payable at the sole discretion of our Board of Managers, subject to the
      provisions of the Delaware Limited Liability Company Act, our company agreement
      and the requirements of our creditors. We do not know the amount of cash that
      we
      will generate, if any, once we begin operations. Cash distributions are not
      assured, and we may never be in a position to make distributions. Our Board
      of
      Managers may elect to retain future profits to establish reserves, pay operating
      expenses, make debt payments or pay for capital improvements, replacements
      and
      contingencies. This means that our members may receive little or no return
      on
      their investment and be unable to liquidate their investment due to transfer
      restrictions and lack of a public trading market. This could result in the
      loss
      of their entire investment.




*Our
      Board of Managers has no obligation to distribute profits, if any, to our
      members.*




Our
      company agreement gives our Board of Manages complete discretion with respect
      to
      the distribution of profits generated from our business. It is possible that
      our
      Board of Managers may determine that it is in the best interest of us and our
      members to retain all profits for future use in our business. This means that
      it
      is possible that our members may never receive a return on their investment
      even
      if we are profitable.




*All
      or a substantial portion of any cash distributions may be a return of capital,
      meaning it is a return of the member’s initial investment, and not a return on
      that investment.*




We
      may
      never pay any distributions of cash to our members and any distributions we
      do
      make may constitute a return of their initial investment rather than the payment
      of income on their investment. Therefore, our members may never receive a return
      on their investment in the Company.




*Our
      units will be subordinate to company debts and other liabilities, resulting
      in a
      greater risk of loss for members.*




Our
      units
      are unsecured equity interests and are subordinate in right of payment to all
      our current and future debt. In the event of our insolvency, liquidation,
      dissolution or other winding up of our affairs, all of our debts, including
      winding-up expenses, must be paid in full before any payment is made to the
      holders of the units. In the event of our bankruptcy or liquidation all units
      will be paid ratably based upon the capital accounts of each unit holder, and
      we
      cannot assure our members that there would be any remaining funds after the
      payment of all our debts for any distribution to the holders of the units.




*The
      presence of members holding 30% or more of the voting interests is required
      to
      take action at a meeting of our members.*




In
      order
      to take action at a meeting, a quorum of members holding at least 30% of the
      voting interests must be represented in person, by proxy or by mail ballot.
      Assuming a quorum is present, members take action by a vote of the majority
      of
      the units represented at the meeting and entitled to vote on the matter. The
      requirement of a 30% quorum protects Liberty Renewable Fuels from actions being
      taken when less than 30% of the voting interests have not considered the matter
      being voted upon. However, this also means that the unit holders of a minority
      of outstanding units could pass a vote and take an action which would then
      bind
      all unit holders. Conversely, the requirement of a 30% quorum also means that
      members will not be able to take actions which may be in the best interests
      of
      Liberty Renewable Fuels if we cannot secure the presence in person, by proxy,
      or
      by mail ballot of members holding 30% or more of the voting interests.




-25-




*After
      the plant is substantially operational, our company agreement provides for
      staggered terms for our managers.*




The
      terms
      of our initial managers expire at the first annual meeting following substantial
      completion of the ethanol plant. At that time, our members will elect managers
      for staggered three-year terms. Because our managers will serve on the board
      for
      staggered terms, it will be difficult for our members to completely replace
      our
      Board of Managers. Our members’ only recourse to replace a majority of the
      managers at one time would be through an amendment to our company agreement
      which could be difficult to accomplish.




*Our
      company agreement provides that upon our execution of loan agreements for our
      required debt financing each member who owns at least 1,000 units has a special
      power to appoint one manager.*




Commencing
      on a date within thirty (30) days following our entering into written debt
      financing commitments which, combined with the subscribed for offering proceeds
      and the $16,368,250 we raised in previous private placement offerings, would
      equal at least our then estimated total project cost, each member who holds
      1,000 or more units, all of which were purchased by such member prior to the
      consummation of ethanol production at the ethanol plant, is entitled to appoint
      one manager, so long as they hold at least 1,000 units. Units held by certain
      parties related to a member shall be included in the determination of whether
      the member holds the requisite number of units. Because certain managers may
      be
      appointed by specific members under this special power, it may be impossible
      to
      our members to replace all or even a majority of our Board of Managers.




**Risks
      Related to Tax Issues**




**EACH
      PROSPECTIVE MEMBER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE
      IMPACT THAT HIS OR HER PARTICIPATION IN LIBERTY RENEWABLE FUELS MAY HAVE ON
      HIS
      OR HER FEDERAL INCOME TAX LIABILITY AND THE APPLICATION OF STATE AND LOCAL
      INCOME AND OTHER TAX LAWS TO HIS OR HER PARTICIPATION IN THIS OFFERING.**




*IRS
      classification of Liberty Renewable Fuels as a corporation rather than as a
      partnership would result in higher taxation and reduced profits, which could
      reduce the value of their investment in us.*




We
      are a
      Delaware limited liability company that has elected to be taxed as a partnership
      for federal and state income tax purposes, with income, gain, loss, deduction
      and credit passed through to the holders of the units. However, if for any
      reason the IRS would successfully determine an audit that we should be taxed
      as
      a corporation rather than as a partnership, we would be taxed on our net income
      at rates of up to 35% for federal income tax purposes, and all items of our
      income, gain, loss, deduction and credit would be reflected only on our tax
      returns and would not be passed through to the holders of the units. A material
      risk of IRS classification of us as an entity taxable as a corporation may
      exist
      even though we are relying on an opinion of counsel as to our partnership status
      as such opinion is not binding on the IRS. If we were to be taxed as a
      corporation for any reason, distributions we make to members will be treated
      as
      ordinary dividend income to the extent of our earnings and profits, and the
      payment of dividends would not be deductible by us, thus resulting in double
      taxation of our earnings and profits. If we pay taxes as a corporation, we
      will
      have less cash to distribute as a distribution to our unit holders. If we
      contest an IRS determination that we should be taxed as a corporation, such
      contest may impose representation expense on our members. Each of these
      consequences will deprive our members of some of the tax benefits associated
      with this offering.




*The
      IRS may classify our members’ investment as passive activity income, resulting
      in their inability to deduct losses associated with their investment.*




If
      a
      member is not involved in our operations on a regular, continuing and
      substantial basis, it is likely that the Internal Revenue Service will classify
      their interest in us as a passive activity. If a member is either an individual
      or a closely held corporation, and if the member’s interest is deemed to be
“passive activity,” then the member’s allocated share of any loss we incur will
      be deductible only against income or gains the member has earned from other
      passive activities. Passive activity losses that are disallowed in any taxable
      year are suspended and may be carried forward and used as an offset against
      passive activity income in future years. These rules could restrict a member’s
      ability to currently deduct any of our losses that are passed through to such
      member.




-26-




*Income
      allocations assigned to a member’s units may result in taxable income in excess
      of cash distributions, which means our members may have to pay income tax on
      their investment with personal funds.*




Members
      will pay tax on their allocated shares of our taxable income. A member may
      receive allocations of taxable income that result in a tax liability that is
      in
      excess of any cash distributions we may make to the member. Among other things,
      this result might occur due to accounting methodology, lending covenants that
      restrict our ability to pay cash distributions, or our decision to retain the
      cash generated by the business to fund our operating activities and obligations.
      Accordingly, members may be required to pay some or all of the income tax on
      their allocated share of our taxable income with personal funds.




*Upon
      a sale or other disposition of units, the tax liabilities on such a disposition
      may exceed the cash received and such excess tax liabilities will be
      out-of-pocket expenses.*




Gain
      or
      loss will be recognized on a sale of our units equal to the difference between
      the amount realized and the unit holder’s basis in the units sold. The amount
      realized includes cash and the fair market value of any property received plus
      the member’s share of certain items of our debt. Since certain items of our debt
      are included in a member’s basis, it is possible that a member could have a tax
      liability upon the sale of the member’s units that exceeds the proceeds of sale.
      Such excess would result in an out-of-pocket liability for a member. The IRS
      has
      ruled that a partner acquiring multiple interests in a partnership in separate
      transactions at different prices must maintain an aggregate adjusted tax basis
      in a single partnership interest consisting of the partner’s combined interests.
      Possible adverse tax consequences could result from the application of this
      ruling upon a disposition of some but not all of a member’s units. Gain or loss
      recognized by a unit holder on the sale or exchange of a unit held for more
      than
      one year generally will be taxed as long-term capital gain or loss. A portion
      of
      this gain or loss, however, will be separately computed and taxed as ordinary
      income or loss to the extent attributable to depreciation recapture or other
      “unrealized receivables” or “substantially appreciated inventory” owned by us.




*An
      IRS audit could result in adjustments to our allocations of income, gain, loss
      and deduction causing an audit of their tax return and additional tax liability
      to our members.*




The
      IRS
      may audit our income tax returns and may challenge positions taken for tax
      purposes and allocations of income, gain, loss and deduction to members. If
      the
      IRS were successful in challenging our allocations in a manner that reduces
      losses or increases income allocable to members, our members may have additional
      tax liabilities. In addition, such an audit could lead to separate audits of
      a
      member’s tax returns, especially if adjustments are required, which could result
      in adjustments on their tax returns. Any of these events could result in
      additional tax liabilities, penalties and interest to our members, and the
      cost
      of filing amended tax returns.




**Risks
      Related to Conflicts of Interest**




*Our
      managers and officers are only required to dedicate between 4 and 15 hours per
      week to the completion of our project and may experience conflicts of interest
      in allocating their time and services between us and their other business
      responsibilities.*




Since
      our
      project is currently managed by the Board of Managers rather than a professional
      management group, the devotion of the managers’ time to the project is critical.
      However, our managers and officers have other management responsibilities and
      business interests apart from our project. Therefore, our managers and officers
      may experience conflicts of interest in allocating their time and services
      between us and their other business responsibilities. However, we anticipate
      that our executive officers will dedicate approximately 15 hours per week to
      our
      project and that our managers will dedicate between four hours and 20 hours
      per
      week to our project depending upon which committees they serve. In addition,
      conflicts of interest may arise if the managers and officers, either
      individually or collectively, hold a substantial percentage of the units because
      of their position to substantially influence our business and management.




-27-




*Our
      managers, officers and members may enter into agreements or other arrangements
      with us from time to time which may cause conflicts of interests if they put
      their financial interests ahead of ours.*




Our
      company agreement permits us to enter into agreements and other arrangements
      with our managers, officers, members and their affiliates; provided, however,
      that such arrangements are on terms no more favorable to the managers, officers
      or members than generally afforded to non-affiliate parties in a similar
      transaction. As of the date of this memorandum, the managers have not received
      any cash compensation for services as managers (i.e., managers’ or meeting fees)
      but will be eligible for grants of units for service as officers and services
      on
      the Steering Committee and Finance Committee. We have entered into a grain
      sourcing arrangement with Brown Milling, Inc. We have previously entered into
      agreements Auburn Bean & Grain Co. and Cooperative Elevator Co. relating to
      the acquisition of Auburn and the purchase of grain from Cooperative
      Elevator. Both of those agreements have been terminated pursuant to their
      terms. Several of our managers also have an interest in either Auburn Bean
& Grain or Brown Milling. Due to these managers and members interest in
      Auburn Bean & Grain and Brown Milling, they may have interests that conflict
      with the interests of our other members and managers.




*We
      may have conflicting financial interests with ICM, which could cause ICM to
      put
      its financial interests ahead of ours.*




ICM,
      and
      its affiliates, may have conflicts of interest because ICM and its employees
      or
      agents are involved as owners, creditors and in other capacities with other
      ethanol plants in the United States. We cannot require ICM to devote its full
      time or attention to our activities. As a result, ICM may have, or come to
      have,
      a conflict of interest in allocating personnel, materials and other resources
      to
      our plant.





**Item
      1B.** **** **Unresolved
      Staff Comments**


None




-28-





**Item
      2. Properties**







**The
      Project**




We
      are
      building our plant in North Star Township, near Ithaca, Michigan, in Gratiot
      County which is located in central Michigan. We have purchased 435 acres, which
      includes the real estate necessary for the construction of the proposed ethanol
      facility, and the property has been zoned by the City of Ithaca as a Planned
      Industrial Park.









The
      plant
      site is intended to be able to receive grain by truck or rail. We plan on
      building 4 million bushels of storage on site and installing a 6,000
      bushels per hour grain dryer to receive and dry wet corn on the site from
      farmers at harvest time, both of which have been included in our air permit.
      In
      addition, the plant site is designed to be able to ship ethanol by truck or
      rail. We plan on producing wet and dry distillers grains for shipment by truck
      and to also be able to ship dry distillers grains by rail. The railroad design
      is planned to allow us to load and unload 33 rail cars at a time without
      decoupling and will have enough rail storage on site for three 65-car unit
      trains at one time.


-29-





The
      site
      entrance is located within a quarter mile of U.S. Highway 127 via Washington
      Road interchange. There are two 20” main natural gas transmission lines owned by
      Consumers Energy that run through the site and a high voltage electrical
      transmission line is within one mile of the plant location. Consumers Energy
      has
      indicated to us that they anticipate constructing a natural gas and an
      electrical substation on site. The site has access to Great Lakes Central
      Railroad which runs along the length of the property and Great Lakes Central
      Railroad has presented to us a competitive proposal to move our products by
      rail, although that arrangement has not been executed.




We
      have
      drilled three test wells to test the quantity and quality of the groundwater
      and
      the analysis meets the Michigan Department of Environmental Quality and ICM
      requirements for an industrial on-site well system. We anticipate having an
      on-site disposal system for potable water and discharge of the cooling tower
      non-contact water into Pine River which runs through the site, subject to
      approval of a NPDES permit by the Michigan Department of Environmental Quality.
      There will be zero process water discharged as part of the production process.
      If needed, public water and sewer is available within one quarter mile of our
      plant site. Liberty received notice from the MDEQ on April 9, 2008 that the
      NPDES permit was approved.




On
      March
      8, 2007, the Michigan Department of Environmental Quality approved our
      application for a minor source construction permit for air emissions (PTI No.
      241-06). The air permit includes a 6,000 bushel per hour grain dryer and limits
      the production of ethanol on the site to 121 million gallons per year.




We
      have
      also entered into an agreement with Wilcox setting forth the terms upon which
      we
      have engaged Wilcox to provide certain planning and construction management
      services related to the coordination, engineering, design and construction
      of
      the plant site including earthwork, road construction, utility installation,
      sewage disposal system, administration building, maintenance building and
      coordination of facilities for grain receiving, grain storage and distiller
      grains shipment.




The
      City
      of Ithaca, which has zoning jurisdiction over the property, has approved the
      site plan and issued a special use permit for us to construct our ethanol plant.
      We have also secured approval of the soil erosion permits and storm water
      management plan necessary to begin earthwork.




The
      plant
      site is intended to be able to receive grain by truck or rail. We plan on
      building 4,000,000 bushels of storage on site and installing a 6,000 bushels
      per
      hour grain dryer to receive and dry wet corn on the site from farmers at harvest
      time. In addition, the plant site is designed to be able to ship our ethanol
      by
      truck or rail. We plan on producing wet and dry distillers grains for shipment
      by truck and to also be able to ship dry distillers grains by rail. The railroad
      design is planned to allow us to load and unload 33 rail cars at a time without
      decoupling and will have enough rail storage on site for three 65-car unit
      trains at one time.





**Item
      3.** **Legal Proceedings**





We
      are
      subject to legal proceedings, claims, and litigation arising in the ordinary
      course of business. Currently, management is not aware of any material pending
      legal proceedings.





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





None





**PART
      II.**





**Item
      5.** **** **Market
      For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases
      of Equity Securities**




There
      is
      no established public trading market for our units. As of March 31, 2008, there
      were approximately 4,635 holders of our Class A units and no holders of our
      Class B units.




We
      have
      not declared or paid any dividends on any of our units in the most recent two
      fiscal years. Under the terms of the Amended Loan and Security Agreement between
      us and ICM, Inc., dated August 13, 2007, as amended, we are prohibited from
      declaring or paying any dividends on our units without the prior written consent
      of ICM, Inc.




-30-




To
      protect our status as a partnership for tax purposes and to assure that no
      public trading market in our units develops, our units are subject to
      significant restrictions on transfer and transfers are subject to approval
      by
      our Board of Managers. All transfers of units must comply with the transfer
      provisions of our Operating Agreement and a unit transfer policy adopted by
      our
      Board of Managers. Our Board of Managers will not approve transfers which could
      cause us to lose our tax status or violate federal or state securities laws.





**Item
      6. Selected Financial Data**




The
      following table summarizes important financial information from our December
      31,
      2007 and 2006 audited financial statements.




In
      the
      opinion of management, this information contains all adjustments, consisting
      only of normal recurring accruals, necessary for a fair presentation of our
      results of operations and financial position for such periods.




This
      selected historical financial and operating data should be read in conjunction
      with the audited financial statements and notes to those statements beginning
      on
      page F-1 of this report, and the section entitled “MANAGEMENT’S DISCUSSION AND
      ANALYSIS AND PLAN OF OPERATION,” included elsewhere in this report.




**Year
                ended**
              **December 31,**
              **2007**
            
            **Year
                ended**
              **December
                31,**
              **2006**
            
            **From Inception**
              **(June
                21, 2006)**
              **to**
              **December
                31,**
              **2007)****STATEMENTS
                OF OPERATIONS DATA**Operating
                revenue
            
            
            —
            
            
            —
            
            
            —Other
                income (expense), net
            
            $
            186,198
            
            $
            55,027
            
            $
            241,225Net
                loss
            
            
            (2,134,032
            )
            
            (1,534,777
            )
            
            (3,668,809
            )Basic
                and diluted net loss per unit
            
            
            (468
            )
            
            (1,037
            )
            
            (1,048
            )Weighted
                average units outstanding
            
            
            4,564
            
            
            1,480
            
            
            3,501




**At**
              **December
                31,**
              **2007**
            
            **At**
              **December 31,**
              **2006****BALANCE
                SHEET DATA**Working
                capital
            
            $
            (58,710,007
            )
            $
            2,101,800Total
                assets
            
            
            73,117,151
            
            
            7,918,109Long-term
                debt, less current portion
            
            
            —
            
            
            —Unitholders’
                (deficit) equity
            
            
            13,971,842
            
            
            6,728,164





-31-




**Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations**




**The
      following discussion of the financial condition and results of our operations
      should be read in conjunction with our audited financial statements and related
      notes thereto included elsewhere in this section. This report and our financial
      statements and notes to the financial statements contain forward-looking
      statements, that generally include plans and objectives of management for future
      operations, including plans and objectives relating to our future economic
      performance and our current beliefs regarding revenues we might generate and
      profits we might earn if we are successful in implementing our business and
      growth strategies. Forward-looking statements can be identified by words such
      as
“anticipates,” “expects,” “believes,” “plans,” predicts,” and similar terms.
      Forward-looking statements are not guarantees of future performance and our
      actual results may differ significantly from the results discussed in the
      forward-looking statements. Factors that might cause such differences include,
      but are not limited to, those discussed in the subsection entitled “Quantitative
      and Qualitative Disclosures about Market Risk” below.**





**Overview**





Liberty
      Renewable Fuels, LLC, is a development-stage Delaware limited liability company.
      We were formed for the purpose of raising capital to develop, construct, own
      and
      operate a 110 million gallon per year ethanol plant in Ithaca, Michigan. We
      have not yet engaged in the production of ethanol and distillers
      grains.





On
      April
      18, 2007, we entered into an agreement with ICM setting forth the terms upon
      which ICM will provide certain services related to the design, construction
      and
      start-up of our ethanol plant. To date the majority of the site preparation
      is
      complete and construction of the plant has started. Due to a lack of funding
      for
      work performed in November 2007, work on the project has stopped. Several Wilcox
      subcontractors have filed liens on the project. In March 2008, we reached an
      agreement with ICM and the Wilcox subcontractors in which ICM agreed to pay
      us
      and we, in turn, have paid the Wilcox subcontractors approximately one-half
      of
      the amounts due and owing. In exchange for the payment, the Wilcox
      subcontractors have agreed that they will not terminate their subcontracts,
      file
      suit against us to collect additional amounts due, or foreclose on the liens
      for
      a period of 180 days.




**Liquidity
      and Capital Resources**




We
      expect
      to spend at least the next 12 months focused raising funds through debt
      and/or equity. We also expect to focus a considerable amount of time on plant
      construction and preparation for start-up operations.





During
      2007, we funded our operations primarily from cash proceeds received from loans
      from ICM, member notes, and membership units sold. As of December 31, 2007,
      we
      had total assets of $73,117,151 consisting primarily of land and construction
      in
      progress to be part of our proposed location outside of Ithaca, Michigan. Total
      current assets at December 31, 2007 amounted to $435,302 and consist primarily
      of restricted cash and cash equivalents. As of December 31, 2007, we had current
      liabilities of $59,145,309. $38,090,965 of the current liabilities at December
      31, 2007 represents accounts payable to ICM, a member of the Company. Total
      members’ equity as of December 31, 2007, was $13,971,842. Since our inception,
      we have generated no revenue from operations and are considered to be a
      developmental stage enterprise.




Our
      current available capital resources consist primarily of cash and cash
      equivalents in the amount of approximately $404,780. We expect that our future
      available capital resources will consist of additional equity and /or debt
      financing. We are continuing to work diligently to raise resources to complete
      the goal of finishing construction and commencing operations of our proposed
      ethanol plant in Ithaca, Michigan.





Cash
      has
      decreased during 2007 due to the funding requirements related to the plant
      construction.





Prepaid
      expenses have increased $21,975 during 2007 due primarily to a new officer
      life
      insurance policy taken in 2007.





Construction
      in progress has increased $61,203,786 during 2007 due to the construction of
      the
      proposed ethanol plant.




-32-





Other
      assets have increased $6,842,800 during 2007 primarily due to utility deposits
      paid to Consumers Energy and construction related deposits paid to ICM and
      to
      increases in deferred offering cost that are costs incurred to raise equity
      financing until that financing occurs.





Cash
      used
      in operating activities totaled $1,039,198 for 2007 as compared to $752,603
      for
      2006.





Cash
      used
      in investing activities totaled $18,221,608 in 2007 as compared to $3,103,016
      in
      2006. This increase in cash used relates primarily to the payments for deposits
      as well as construction of the plant.





Cash
      provided from financing activities totaled $16,382,388 in 2007 as compared
      to
      $7,138,818 in 2006. This is primarily due to approximately $9,960,000 of
      additional borrowings from our line-of-credit with ICM and approximately
      $400,000 of additional borrowings from our members.





Professional
      expenses during 2007 amounted to $978,668 compared to $414,204 in 2006. This
      increase reflected a full year of activity compared to six months of activity
      in
      2006 along with increased financial and compliance reporting
      requirements.





Organizational
      expenses decreased due to reduced start up activity costs in 2007.





General
      and administrative expenses amounted to $1,299,381 in 2007 as compared to
      $463,754 in 2006. This increase related primarily to travel, supplies, and
      other
      expenses related to educating and obtaining prospective members along with
      increased interest costs. Interest costs increased due to the increased debt
      the
      Company obtained in 2007.





Settlement
      expenses in 2006 related to the REC settlement that occurred in
      2006.





In
      order
      to meet the current obligations and continue as a going concern, the Company
      will need to raise additional debt and/or equity financing. The Company is
      working to raise additional funds; however, there is no assurance that the
      Company will be successful in raising the necessary funds to meet its liquidity
      requirements.




**Capitalization
      Plan**




Based
      on
      our business plan and current construction cost estimates, we believe the total
      project will cost approximately $233,285,000. Our capitalization plan consists
      of a combination of equity, including equity capital raised in our current
      Form
      S-1 registration statement offering, debt, government grants and tax increment
      financing. In the event that our total project cost exceeds $233,285,000 for
      any
      reason, we intend to seek additional debt and/or equity financing to offset
      the
      increase.





We
      raised
      $16,368,250 in our previous private placement offerings. In addition, we are
      seeking to raise a minimum of $50,000,000 and a maximum of $100,000,000 of
      equity in our current Form S-1 registration statement offering. As of March
      31,
      2008, we have received subscriptions for approximately $13,500,000, of which
      approximately 20% is held in escrow, but the offering has not yet been completed
      and these funds may be returned to members if the offering is not completed
      by
      June 7, 2008, unless extended. Including the $16,368,250 we raised in our seed
      capital offerings and depending on the level of equity raised in the Form S-1
      registration statement offering and the amount of grants and other incentives
      awarded to us, we expect to require debt financing ranging from a minimum of
      $116,916,750 to a maximum of $166,916,750.





As
      of
      July 13, 2007, Liberty received proceeds of $380,000 from the issuance of
      promissory notes to the following individuals on our Board of Managers - L.
      Donald Miller in the amount of $200,000, Matthew Dutcher in the amount of
      $150,000, Dennis C. Muchmore in the amount of $20,000 and Darryl K. Fowler
      in
      the amount of $10,000. These promissory notes will be paid at the earlier of
      the
      closing of (i) a bridge loan, (ii) the initial closing of the Form S-1
      registration statement offering or (iii) $200,000 in April 2008 and the balance
      of $180,000 in July 2008. The promissory notes bear interest at 20% per annum
      with a minimum fee of 5% through the first three months of the term. In December
      2007, the Company received proceeds from four managers totaling $17,500 that
      were used to fund the due diligence to explore a financing option.




-33-




On
      July
      20, 2007, the Company executed a promissory note payable to ICM in the principal
      amount of $1,200,000 to provide interim financing of the Company’s operations.
      The outstanding principal amount of the note and all accrued and unpaid interest
      was payable on October 15, 2007. The note carried an interest rate of 12% per
      annum and the Company could prepay the note without penalty. The note was
      personally guaranteed by the Company’s CEO, David Skjaerlund. As stated in the
      Form 8-K filed on September 24, 2007, on August 13, 2007, the Company entered
      into an amended loan and security agreement with ICM to establish a $10,000,000
      revolving line of credit, which included any remaining balance of the $1,200,000
      note. The line of credit carries an interest rate of 12% per annum and matured
      on November 1, 2007. All outstanding principal and interest was due and payable
      on November 1, 2007. The line of credit is secured by all of the Company’s
      assets and is personally guaranteed by the Company’s CEO, David
      Skjaerlund.  Effective
      November 1, 2007, an amendment to the Loan and Security Agreement and Promissory
      Note was executed to extend the maturity date of the note from November 1,
      2007
      to December 15, 2007. Pursuant to the amendment, ICM must approve and authorize
      all subcontractor work at the facility. As of December 31, 2007, the promissory
      note had not been paid or renewed. However, in March 2008, a second amendment
      to
      the amended loan and security agreement was executed that increased the
      borrowings on the revolving line of credit to $11,250,000 and extended the
      due
      date to May 1, 2008. We expect the senior loan will be a construction loan
      secured by all of our real property and other assets, including receivables
      and
      inventories. Based on our knowledge of similar loans made in the industry,
      we
      anticipate we will pay near prime rate on this loan, plus annual fees for
      maintenance and observation of the loan by the lender; however, we cannot assure
      our members that we will be able to obtain debt financing or that adequate
      debt
      financing will be available on the terms we currently anticipate. If we are
      unable to obtain senior debt in an amount necessary to fully capitalize the
      project, we may have to seek subordinated debt financing which could require
      us
      to issue warrants. The issuance of warrants could reduce the value of the
      currently issued and outstanding units.





We
      do not
      have contracts or commitments with any bank, lender, underwriter, placement
      agent, governmental entity or financial institution for debt financing. In
      2007,
      we started identifying and interviewing potential lenders, however, we have
      not
      signed any commitment or contract for debt financing. Completion of the project
      relies entirely on our ability to attract these loans and close on the Form
      S-1
      registration statement offering.




**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk**




We
      consider market risk to be the potential loss arising from adverse changes
      in
      market rates and prices. We are subject to significant market risk with respect
      to the price of ethanol, our principal product, and the price and availability
      of corn, the principal commodity used in our ethanol production process. In
      general, ethanol prices are influenced by the supply and demand for gasoline,
      the availability of substitutes and the effect of laws and regulations. Higher
      corn costs result in lower profit margins and, therefore, represent unfavorable
      market conditions. Traditionally, ethanol producers have not been able to pass
      along increased corn costs to their ethanol customers. We anticipate that
      ethanol will initially represent approximately 80% of our total revenue. On
      March 6, 2008, the CBOT price per gallon of ethanol on the March 2008 futures
      contract was $2.35. However, our ethanol markets would be marketing and selling
      to east coast customers based on the New York Harbor Barge rate which was $2.50
      on March 6, 2008.





The
      availability and price of corn are subject to wide fluctuations due to
      unpredictable factors such as weather conditions during the corn growing season,
      carry-over from the previous crop year and current crop year yield, governmental
      policies with respect to agriculture, and international supply and demand.
      We
      anticipate that corn costs will initially represent approximately 60% of our
      total cost of goods sold. Over the ten-year period from 1996 through 2005,
      corn
      prices (based on the CBOT daily futures data) have ranged from a low of $1.75
      per bushel in 2000 to a high of $5.48 per bushel in 1996, with prices averaging
      $2.47 per bushel during this period. At November 16, 2007, the CBOT price per
      bushel of corn on the December 2007 futures contract was $3.79. However,
      management notes that on March 6, 2008, the CBOT price per bushel of corn on
      the
      March 2008 futures had increased to $5.45.





We
      are
      also subject to market risk with respect to our supply of natural gas that
      is
      consumed in the ethanol production process and has been historically subject
      to
      volatile market conditions. Natural gas prices and availability are affected
      by
      weather conditions and overall economic conditions. We anticipate that natural
      gas costs will initially represent approximately 30% of our cost of goods sold.
      The price fluctuation in natural gas prices over the six-year period from
      December 31, 1999 through June 26, 2007, based on the NYMEX daily futures data,
      has ranged from a low of $1.83 per million BTU in 2001 to a high of $13.91
      per
      million BTU for 2005, averaging $5.11 per million BTU during this period. At
      November 16, 2007, the NYMEX price of natural gas on the January 2008 futures
      contract was $8.082 per million BTU.




-34-




We
      have
      prepared a sensitivity analysis to estimate our exposure to market risk with
      respect to our corn and natural gas requirements, ethanol contracts and the
      related exchange-traded contracts for 2005. Market risk is estimated as the
      potential loss in fair value, resulting from a hypothetical 10.0% adverse change
      in the fair value of our corn and natural gas requirements and ethanol contracts
      (based on average prices for 2005) net of the corn and natural gas forward
      and
      futures contracts used to hedge our market risk with respect to our corn and
      natural gas requirements. The results of this analysis, which are based on
      December 18, 2006 price information and may differ from actual results, are
      as
      follows:


**Commodity**
              
              **Volume**
                **Requirements**
              
              **Price
                  as of**
                **December
                  18,**
                **2006**
              
              **Total
                  Price**
                **as
                  of**
                **December
                  18,**
                **2006**
              
              **Hypothetical**
                **Adverse
                  Change**
                **in
                  Price**
              
              **Change
                  in**
                **Annual**
                **Pre-Tax**
                **Income****(in**
                **millions)**
              
              
              
              **(in**
                **millions)**
              
              
              
              **(in**
                **millions)**Ethanol
              
              
              110
                  gallons
              
              $
              2.35
              
              $
              258.5
              
              
              10.0%(-$.235
              )
              $
              25.85Corn
              
              
              40
                  bushels
              
              $
              3.65
              
              $
              146.0
              
              
              10.0%(+$.365
              )
              $
              14.60Natural
                  Gas
              
              
              3.4
                  MMBTU
              
              $
              7.07
              
              $
              24.1
              
              
              10.0%(+$.707
              )
              $
              2.41




The
      following price sensitivity analysis was prepared for us by the accounting
      firm
      Kennedy & Coe as part of a financial model report and the sole purpose is to
      illustrate the effect of volatile changes in ethanol and corn pricing on the
      profitability of the proposed ethanol plant and the potential exposure to market
      risk. The profitability of an ethanol plant is subject to significant market
      risk with respect to price of ethanol, the principal product marketed, and
      the
      price and availability of corn, the principal product used in the ethanol
      production process—and *any
      investment involves a significant degree of risk.*




The
      Kennedy & Coe report was completed to update the financial model included in
      the April 2006 feasibility study prepared by PRX for us. This model is based
      on
      the May 18, 2007 term sheet agreement for project financing that was executed
      by
      Grand Forks Farm Credit and us. The model uses typical industry cost projections
      which may not reflect our actual operating costs or expenditures. The price
      sensitivity analysis is based on year 3 of proposed operations.





*The
      price sensitivity matrix is not a guarantee of future results and should not
      be
      relied upon as such.* The
      following factors can impact the results of the financial model and price
      sensitivity analysis:





·
            There
                may be problems with plant production or operations causing the plant
                to
                produce less than 110 million gallons of ethanol per
                year.





·
            Actual
                costs of enzymes, supplies and natural gas may be higher than what
                is
                estimated.





·
            Payroll
                expenses may actually be higher than what is
                projected.





·
            Interest
                rates may actually be higher, increasing project financing
                costs.





·
            Project
                costs may be higher when construction is actually
                completed.





·
            Actual
                financing terms may be different at financial closing than the proposed
                term sheet.




-35-




The
      following assumptions were used in the financial model to generate the price
      sensitivity matrix:




DDGS
                price per ton*$100.00*
              Total
                tons of DDGS sold*381,000
                tons*
              Natural
                gas cost per MMBTU*$7.00*
              BTU’
                S used per ethanol gallon*34,000*
              Payroll
                Expense*$2,918,000*
            
            Ethanol
                gallons sold*118,680,000*
              Ethanol
                gallons per bushel corn*2.80*
              Electricity
                cost per kw*$0.
                043*
              KW’s
                used per ethanol gallon*0.75*
              Denaturant
                cost/gal ethanol*$0.
                0875*
            
            Total
                project cost*$215,360,000*
              Total
                equity*$96,
                760,000*
              Percent
                equity*45%*
              Interest
                rate on SR debt*8.82%*
              Interest
                rate on bond debt*7.30%*





Price
      Sensitivity Matrix—Return on Investment (Year 3)





**Ethanol
                Price****$1.50**
            
            **$1.60**
            
            **$1.70**
            
            **$1.80**
            
            **$1.90**
            
            **$2.00**
            
            **$2.10**
            
            **$2.20**
            
            **$2.30**
            
            **$2.40**
            
            **$2.50**Corn
                Price$5.00
            
            
            -79.8
            %
            
            -67.5
            %
            
            -55.3
            %
            
            -43.0
            %
            
            -30.7
            %
            
            -18.5
            %
            
            -6.2
            %
            
            6.1
            %
            
            18.3
            %
            
            30.6
            %
            
            42.9
            %$4.90
            
            
            -75
                4
            %
            
            -63
                2
            %
            
            -50
                9
            %
            
            -38.6
            %
            
            -26.4
            %
            
            -14
                1
            %
            
            -1
                8
            %
            
            10.4
            %
            
            22
                7
            %
            
            35
                0
            %
            
            47.2
            %$4.80
            
            
            -71.0
            %
            
            -58.8
            %
            
            -46.5
            %
            
            -34.2
            %
            
            -22.0
            %
            
            -9.7
            %
            
            2.6
            %
            
            14.8
            %
            
            27.1
            %
            
            39.4
            %
            
            51.6
            %$4.70
            
            
            -66.7
            %
            
            -54.4
            %
            
            -42
                1
            %
            
            -29
                9
            %
            
            -17
                6
            %
            
            -5
                3
            %
            
            6.9
            %
            
            19.2
            %
            
            31
                5
            %
            
            43
                7
            %
            
            56.0
            %$4.60
            
            
            -62.3
            %
            
            -50.0
            %
            
            -37.7
            %
            
            -25.5
            %
            
            -13.2
            %
            
            -0.9
            %
            
            11.3
            %
            
            23.6
            %
            
            35.8
            %
            
            48.1
            %
            
            60.4
            %$4.50
            
            
            -57.9
            %
            
            -45
                6
            %
            
            -33.4
            %
            
            -21
                1
            %
            
            -8
                8
            %
            
            3
                4
            %
            
            15
                7
            %
            
            28
                0
            %
            
            40.2
            %
            
            52
                5
            %
            
            64
                8
            %$4.40
            
            
            -53.5
            %
            
            -41.2
            %
            
            -29.0
            %
            
            -16.7
            %
            
            -4.5
            %
            
            7.8
            %
            
            20.1
            %
            
            32.3
            %
            
            44.6
            %
            
            56.9
            %
            
            69.1
            %$4.30
            
            
            -49
                1
            %
            
            -36.9
            %
            
            -24
                6
            %
            
            -12
                3
            %
            
            -0
                1
            %
            
            12.2
            %
            
            24
                5
            %
            
            36
                7
            %
            
            49.0
            %
            
            61
                3
            %
            
            73
                5
            %$4.20
            
            
            -44.8
            %
            
            -32.5
            %
            
            -20.2
            %
            
            -8.0
            %
            
            4.3
            %
            
            16.6
            %
            
            28.8
            %
            
            41.1
            %
            
            53.4
            %
            
            65.6
            %
            
            77.9
            %$4.10
            
            
            -40.4
            %
            
            -28
                1
            %
            
            -15
                8
            %
            
            -3
                6
            %
            
            8
                7
            %
            
            21
                0
            %
            
            33
                2
            %
            
            45
                5
            %
            
            57
                8
            %
            
            70.0
            %
            
            82
                3
            %$4.00
            
            
            -36.0
            %
            
            -23.7
            %
            
            -11.5
            %
            
            0.8
            %
            
            13.1
            %
            
            25.3
            %
            
            37.6
            %
            
            49.9
            %
            
            62.1
            %
            
            74.4
            %
            
            86.7
            %$3.90
            
            
            -31.6
            %
            
            -19.3
            %
            
            -7.1
            %
            
            5.2
            %
            
            17.5
            %
            
            29.7
            %
            
            42.0
            %
            
            54.2
            %
            
            66.5
            %
            
            78.8
            %
            
            91.0
            %$3.80
            
            
            -27.2
            %
            
            -15.0
            %
            
            -2.7
            %
            
            9.6
            %
            
            21.8
            %
            
            34.1
            %
            
            46.4
            %
            
            58.6
            %
            
            70.9
            %
            
            83.2
            %
            
            95.4
            %$3.70
            
            
            -22.9
            %
            
            -10
                6
            %
            
            1
                7
            %
            
            13
                9
            %
            
            26.2
            %
            
            38.5
            %
            
            50
                7
            %
            
            63
                0
            %
            
            75
                3
            %
            
            87
                5
            %
            
            99.8
            %$3.60
            
            
            -18.5
            %
            
            -6.2
            %
            
            6.1
            %
            
            18.3
            %
            
            30.6
            %
            
            42.9
            %
            
            55.1
            %
            
            67.4
            %
            
            79.7
            %
            
            91.9
            %
            
            104.2
            %$3.50
            
            
            -14.1
            %
            
            -1.8
            %
            
            10.4
            %
            
            22,7
            %
            
            35.0
            %
            
            47.2
            %
            
            59.5
            %
            
            71.8
            %
            
            84.0
            %
            
            96.3
            %
            
            108.6
            %$3.40
            
            
            -9.7
            %
            
            2.6
            %
            
            14.8
            %
            
            27.1
            %
            
            39.4
            %
            
            51.6
            %
            
            63.9
            %
            
            76.1
            %
            
            88.4
            %
            
            100.7
            %
            
            112.9
            %$3.30
            
            
            -5.3
            %
            
            6.9
            %
            
            19.2
            %
            
            31.5
            %
            
            43.7
            %
            
            56.0
            %
            
            68.3
            %
            
            80.5
            %
            
            92.8
            %
            
            105.1
            %
            
            117.3
            %$3.20
            
            
            -0.9
            %
            
            11.3
            %
            
            23.6
            %
            
            35.8
            %
            
            48.1
            %
            
            60.4
            %
            
            72.6
            %
            
            84.9
            %
            
            97.2
            %
            
            109.4
            %
            
            121.7
            %$3.10
            
            
            3.4
            %
            
            15.7
            %
            
            28.0
            %
            
            40.2
            %
            
            52.5
            %
            
            64.8
            %
            
            77.0
            %
            
            89.3
            %
            
            101.6
            %
            
            113
                8
            %
            
            126
                1
            %$3.00
            
            
            7.8
            %
            
            20.1
            %
            
            32.3
            %
            
            44.6
            %
            
            56.9
            %
            
            69.1
            %
            
            81.4
            %
            
            93.7
            %
            
            105.9
            %
            
            118.2
            %
            
            130.5
            %





We
      will
      also be subject to interest rate risk in connection with our anticipated
      borrowing arrangements. We anticipate that our borrowings will bear interest
      at
      either LIBOR or the prime interest rate plus a margin. In addition to paying
      interest on the outstanding principal under our borrowing agreements, we
      anticipate that we will also be required to pay a commitment fee to our lenders
      in respect of unused loan commitments. The interest rate and the commitment
      fee
      are likely to be subject to adjustment based on our financial ratios.





**Item
      8. Financial Statements and Supplementary Data**





Reference
      is made to the financial statements included in this report which begins at
      Page
      F-1





-36-




**Item
      9. Changes in and Disagreements with Accountants on Accounting and Financial
      Disclosure**





None.





**Item
      9A. Controls and Procedures**








**(a)
      Disclosure Controls and Procedures**




We
      maintain disclosure controls and procedures that are designed to provide
      reasonable assurance that information required to be disclosed in our filings
      with the SEC under the Securities Exchange Act of 1934 (the “Exchange Act”) is
      recorded, processed, summarized and reported within the time periods specified
      in the SEC’s rules and forms and that such information is accumulated and
      communicated to management, including our chief executive officer (“CEO”) and
      chief financial officer (“CFO”), as appropriate, to allow for timely decisions
      regarding required disclosure. In designing and evaluating the disclosure
      controls and procedures, management recognizes that any controls and procedures,
      no matter how well designed and operated, can provide only reasonable assurance
      of achieving the desired control objectives, and management is required to
      apply
      its judgment in evaluating the cost-benefit relationship of possible controls
      and procedures.





As
      required by SEC Rule 13a-15(b), in connection with filing this Annual Report
      on
      Form 10-K, management conducted an evaluation, with the participation of our
      CEO
      and CFO, of the effectiveness of the design and operation of our disclosure
      controls and procedures, as such term is defined under Rule 13a-15(e)
      promulgated under the Exchange Act, as of December 31, 2007, the end of the
      period covered by this report. Our CEO and CFO concluded that as of the end
      of
      the period covered by this report, our disclosure controls and procedures have
      been effective at a reasonable assurance level as a development stage
      enterprise. However, additional disclosure controls and procedures to improve
      the assurance level will be proposed, reviewed and implemented by
      management.





**(b)
      Management’s Report on Internal Control Over Financial
      Reporting**





This
      annual report does not include a report of management's assessment regarding
      internal control over financial reporting or an attestation report of the
      company's registered public accounting firm due to a transition period
      established by rules of the Securities and Exchange Commission for newly public
      companies.





There
      have been no changes in our internal control over financial reporting that
      occurred during the period covered by this report that have materially affected,
      or are reasonably likely to materially affect, such internal control over
      financial reporting.





**Item
      9B. Other Information**





None.





**PART
      III.**





**Item
      10. Directors, Executive Officers and Corporate Governance**




Our
      company agreement provides that our initial Board of Managers will be comprised
      of 31 members which may be expanded to 35 members. We have 31 managers on our
      initial Board of Managers. The initial Board of Managers will serve until the
      first annual or special meeting of the members following the date on which
      substantial operations of the ethanol plant commences. If our project suffers
      delays due to financing or construction, our initial Board of Managers could
      serve for an extended period of time.




Our
      company agreement further provides that at the first annual or special meeting
      of the members following the date on which substantial operations of the
      facilities commence, the number of elected managers shall be reduced to a
      minimum of 7 and a maximum of 11. In addition, each member who holds one
      thousand (1,000) or more units, all of which were purchased by such member
      prior to the consummation of ethanol production at the ethanol plant is entitled
      to appoint a manager to the board. Therefore, the total number of managers
      may
      exceed 11 depending on the number of appointed managers. However, our company
      agreement requires that a majority of the board be elected by the members.
      Accordingly, the number of elected managers will be increased if the number
      of
      managers appointed by members holding 1,000 units or more is greater than or
      equal to the number of elected managers on our board. Appointed managers serve
      until removed by the member appointing them, so long as such member owns 1,000
      or more units.




-37-




Our
      company agreement further provides for a staggered Board of Managers, where,
      upon the expiration of the initial board, the first group of managers shall
      serve for one year, the second group shall serve for two years, and the third
      group shall serve for three years. The successors for each group of managers
      shall be elected for a 3-year term and at that point, one-third of the total
      number of managers will be elected by the members each year. Prior to expiration
      of the initial managers’ terms, the initial managers shall conduct a lottery to
      separately identify the manager positions to be elected. Each manager position
      will be designated as either Group I (serving one year), Group II (serving
      two
      years) and Group III (serving three years).




**Identification
      of Managers, Executive Officers and Significant Employees.**





The
      following table shows the managers and officers of Liberty Renewable Fuels
      as of
      December 31, 2007:





**Manager/Officer**
            
            **Position**David
                Skjaerlund
            
            Manager,
                President and Chief Executive OfficerThomas
                Edward Pumford, Jr.
            
            Manager,
                Secretary, Treasurer and Chief Financial OfficerWilson
                C. Lauer
            
            Manager
                & Vice PresidentMatthew
                Allan Dutcher
            
            Manager
                & Vice PresidentRobert
                Joseph Kennedy
            
            Manager
                & Vice PresidentDennis
                C. Muchmore
            
            Manager
                & Vice PresidentJason
                Atkins
            
            ManagerRonald
                Melvin Balzer
            
            ManagerJohn
                David Blank
            
            ManagerTodd
                Alan Brink
            
            ManagerRonald
                Jay Brown
            
            ManagerScott
                Crumbaugh
            
            ManagerCullen
                Lanier Dubose, Sr.
            
            ManagerPaul
                Early
            
            ManagerScott
                Daniel Everett
            
            ManagerKathleen
                Rahm Fiscus
            
            ManagerDarryl
                Kent Fowler
            
            Manager
                - Financial ExpertKenneth
                Craig Fowler
            
            ManagerRobert
                James Guse, Jr.
            
            ManagerDonald
                August Haske
            
            ManagerSamuel
                Crawford Hawkins
            
            ManagerDennis
                Philip Heffron
            
            ManagerKeith
                Duane Kirkdorfer
            
            ManagerEldridge
                Leo Lawson, Jr.
            
            ManagerNorman
                Mihills
            
            ManagerLloyd
                Donald Miller
            
            ManagerGail
                Peterson
            
            ManagerChad
                Cameron Sowerby
            
            ManagerNick
                Totzke
            
            ManagerClifford
                Vennix
            
            ManagerBenjamin
                O. Yantis
            
            Manager




-38-




**Business
      Experience of Managers and Officers**




The
      following is a brief description of the business experience and background
      of
      our officers and managers.




*Officers*




**David
      Moeberg Skjaerlund/President & CEO** ,
      Age 44,
      3755 North M-52, Owosso, Michigan 48867. Since 2004 Dr. Skjaerlund has been
      the owner of Solomon Strategies, a business development and consulting company
      located in Owosso, Michigan. From 2002 through 2004 he was the President of
      Midwest Land Legacies, a community development and land use consulting company.
      From 1997 through 2002 he was the Executive Director of Rural Partners of
      Michigan, a public/private partnership responsible for rural development. Prior
      to 1997, Dr. Skjaerlund worked for the Michigan Department of Agriculture
      as Director of Policy Implementation. Dr. Skjaerlund received a B.A. in
      Biology from Kalamazoo College, and he received a PhD in Animal Science with
      research in the field of molecular biology from Michigan State University.
      Dr. Skjaerlund also owns and operates an 1,100 acre grain farm. We have
      executed an employment contract with Dr. Skjaerlund pursuant to which
      Dr. Skjaerlund accepted the position of the Company’s Chief Executive
      Officer. As compensation for his services Dr. Skjaerlund will be issued 3%
      of the Company’s Class A and Class B Units outstanding at the time the
      ethanol plant commences production with a beginning capital account of zero.
      In
      addition, if Dr. Skjaerlund’s services as CEO continue after 90 days
      following completion of the ethanol plant, Dr. Skjaerlund will be paid fair
      and reasonable compensation for such services to be negotiated between the
      parties at that time.




**Thomas
      Edward Pumford, Jr. /Secretary, Treasurer and CFO** ,
      Age 54,
      21900 W. Brady Rd., Bannister, MI 48807. Since 2001 Mr. Pumford has been
      self-employed as an investment properties manager. From June, 1995 through
      December, 2000 he served as an associate pastor at Amazing Grace Church in
      Wheeler, Michigan. From 1987 to 1995, Mr. Pumford was owner and CEO of
      Pumford Bros. Inc, a commercial concrete construction company. From August,
      1976
      through April, 1987 he worked in various executive and senior accounting
      positions within management at General Motors Foundry Division that included
      payroll, accounts payable and receivable, pricing, operational budget, analysis
      and forecasting. Mr. Pumford received an accounting degree with a B.B.A.
      from Western Michigan University.




**Wilson
      C. Lauer/Vice President** ,
      Age 58,
      1731 S. Blair Rd, Ithaca, MI 48847. Mr. Lauer has been the owner and
      operator of Lauer Farms LLC located in Ithaca, Michigan since April of 1970,
      which currently farms 3,500 acres of land. He received an associates degree
      in
      diesel and heavy equipment management from Ferris State University.
      Mr. Lauer serves on the Board of Directors for Farmers State Bank and is an
      elder at Resurrection Life Church.




**Matthew
      Allan Dutcher/Vice President** ,
      Age 42,
      5307 Morrice Rd., Owosso, Michigan 48867. Mr. Dutcher has been the co-owner
      of Shawnee Creek Farms in Owosso, Michigan since September, 1983.
      Mr. Dutcher received an associates degree in dairy production from Michigan
      State University. Mr. Dutcher has served as an officer of the Owosso Local
      of the Michigan Milk Producers Association since 2000 and has served on the
      Shiawassee Regional Chamber of Commerce Board of Directors since 2004.




**Robert
      Joseph Kennedy/Vice President** ,
      Age 40,
      7710 S. Chapin, St. Charles MI 48655. Since January of 1992 Mr. Kennedy has
      been the General Manager of Auburn Bean & Grain Company located in
      Auburn, Michigan. Mr. Kennedy studied general science and business at Delta
      Community College. Mr. Kennedy currently serves as the Second Vice-Chair
      for the Michigan Agribusiness Association Board of Directors.




**Dennis
      C. Muchmore/Vice President** ,
      Age 61,
      8822 W. Lakepointe Dr, Laingsburg, MI 48848. Since January of 2003
      Mr. Muchmore has been an Executive Vice President at DHR International
      located in Chicago, Illinois. Since 1988, he had been a counsel with the
      lobbying firm of Muchmore, Harrington Smalley and Associates, Inc. and is
      currently a principal with TomDen Enterprises, LLC, both located in Lansing,
      Michigan. Mr. Muchmore received a B.S. in Education from Eastern Illinois
      University, and he received a Masters in Public Administration from Michigan
      State University.




*Managers*




**Jason
      Atkins/Manager** ,
      Age 47,
      1525-B The Greens Way Jacksonville, FL 32250. Mr. Atkins has been a
      principal partner of Ergon Capital, LP for more than five years. Ergon Capital,
      LP actively manages a $300 million private investment
      portfolio. Mr. Atkins has extensive experience in investment analysis,
      financial planning and fund management.




**Ronald
      Melvin Balzer/Manager** ,
      Age 42,
      307 Tianna, Auburn, MI 48611. Mr. Balzer is currently employed as a Grain
      Merchandiser for Auburn Bean & Grain located in Auburn, Michigan where
      he has been employed since May of 1986. Mr. Balzer graduated with a B.S.
      from Central Michigan University. Ron is the current Chairman of the
      Transportation Committee of Michigan Agri-Business Association and a member
      of
      the local fire department.




-39-




**John
      David Blank/Manager** ,
      Age 36,
      1459 130th Avenue, Hopkins, MI 49328. Mr. Blank is currently employed as a
      paver operator for Michigan Paving and Materials located in Grand Rapids,
      Michigan. He has held this position since July of 1994.




**Todd
      Alan Brink/Manager** ,
      Age 38,
      115 N. Forrest St, Wayland, MI 49348. Mr. Brink currently works in the
      Sales & Parts division of Star Industrial Systems Inc. located in
      Wayland, Michigan. He has held that position since April of 2005. Mr. Brink
      is also currently the owner of Ron & Todd Brink Farms located in
      Wayland, Michigan. From April of 1996 through April of 2005 Mr. Brink
      worked as a salesman for Tailored Equipment in Jenison, Michigan.




**Ronald
      Jay Brown/Manager** ,
      Age 46,
      8731 E. Rosebush Rd., Mt. Pleasant, MI 48858. Mr. Brown has been President
      of Brown Milling, Inc. since April 2002, and employed by Brown Milling, Inc
      for
      the last 29 years. located in Mt. Pleasant, Michigan. Mr. Brown received a
      bachelors degree from Michigan State University.




**Scott
      W. Crumbaugh/Manager** ,
      Age 51,
      289 W. St. Charles Rd., Ithaca, MI 48847. Mr. Crumbaugh currently works as
      a political liaison for Spartan Insurance Agency, LLC located in Ithaca,
      Michigan. He has been employed in this position since January of 2006. From
      December, 1988 through December, 2005 Mr. Crumbaugh was owner and Agent for
      Spartan Insurance Agency. Prior to that he was a loan officer for Farm Credit
      Services and a business manager for B&W Coop in Breckenridge.
      Mr. Crumbaugh graduated from Michigan State University with a B.S. in
      Animal Science.




**Cullen
      Lanier Dubose, Sr. /Manager** ,
      Age 72,
      3792 Viceroy, Okemos, MI 48805. Mr. Dubose has been President of Painia
      Development Corporation located in Lansing, Michigan since October, 1979.
      Mr. Dubose is also a current member of the Michigan Economic Development
      Authority, which promotes economic growth and job creation within the state.
      Mr. Dubose received a B.S. in Civil Engineering from Tri-State University.




**Matthew
      Allan Dutcher/Manager** ,
      See
      description under “Officers.”




**Paul
      Early/Manager** ,
      Age 59,
      1100 Riverside Dr, Owosso, MI 48867. Mr. Early has been the Vice President
      of Commercial Loans at Fifth-Third Bank in Owosso since April, 2005. From
      July 2004 to April 2005, he served as loan originator for Republic Bank and
      also
      served as a loan originator for Grathom Mortgage from May, 2003 to June, 2004.
      Prior to May, 2003, Mr. Early had 25 years of experience with GreenStone
      Farm Credit Services, including serving as Senior Loan Officer and Branch
      Manager. Mr. Early is also the Chair of the Revolving Loan Fund for
      Economic Development for Shiawassee Regional Chamber of Commerce and is a member
      of the Shiawassee Valley Economic Development Board.




**Scott
      Daniel Everett/Manager** ,
      Age 41,
      318 W. Ottawa, Lansing, MI 48933. Mr. Everett has been the Michigan
      Regional Manager for American Farmland Trust since February, 2000. From
      September, 1989 through February, 2000 Mr. Everett was in various
      management positions with the Michigan Farm Bureau, including serving as
      legislative counsel. Mr. Everett received a B.S. in Agriculture and Natural
      Resources from Michigan State University.




**Kathleen
      Rahm Fiscus/Manager** ,
      Age 56,
      1200 Nicollet Ave #706, Minneapolis, MN 55403. Ms. Fiscus is currently the
      president of PlanScape Partners located in Minneapolis, Minnesota. She has
      been
      in this position since May, 2002. From November, 1999 through May, 2002 she
      was
      the Deputy Head of Planning for Yaggy Colby Associates in Rochester, Minnesota.
      From August, 1998 through November, 1999 she was the Manager of Economic
      Development for Northern Iowa Community College. Ms. Fiscus received a B.S.
      in Economics from Iowa State University and she received a Masters degree from
      Drake University.




**Darryl
      Kent Fowler/Manager** ,
      Age 44,
      2242 E. McGregor, St. Louis, MI 48880. Since January 2004, Mr. Fowler has
      worked as Manager of Accounting for Great Lakes Petroleum Corporation located
      in
      Alma, Michigan, which transports over 400 million gallons of petroleum
      products annually and services approximately 475 gas stations in Michigan.
      From
      November, 1995 through December, 2003 he was a staff accountant for Roslund,
      Prestage & Co. located in Alma, Michigan. He received a B.S. in
      Business Administration from Central Michigan University.




**Kenneth
      Craig Fowler/Manager** ,
      Age 62,
      3535 E. Stoll Rd., Lansing, MI 48906. Ken has been the owner of Management
      Resources Development (MRD), Inc. for more than 20 years and has extensive
      experience in real estate development, construction, housing projects and other
      business ventures. Ken also has an active interest in farming.




**Robert
      James Guse, Jr. /Manager** ,
      Age 70,
      25609 Beefon St., Cassopolis, MI 49031. Since May of 1996 Mr. Guse has been
      the owner and operator of Jim Guse Farms located in Cassopolis, Michigan. From
      May of 1996 through December of 2001 he was the County Commissioner for the
      County of Cass, Michigan.




-40-




**Donald
      August Haske/Manager** ,
      Age 56,
      2886 North Coleman Rd., Coleman, MI 48618. Since 1991 Mr. Haske has been
      the farm manager for Pleasant View Farms located in Coleman, Michigan.
      Mr. Haske has also managed grain and fertilizer operations for Mueller Bean
      Co. and serves on the Coleman Fire Department.




**Samuel
      Crawford Hawkins/Manager** ,
      Age 54,
      1213 Kilrush Dr, Franklin, TN 37069. Mr. Hawkins has been the World
      Missions Manager for Every Nations Ministries located in Brentwood, Tennessee
      since August of 2000. From August, 1982 through August, 2000 he was an associate
      pastor at Faith Church located in New Orleans, Louisiana. Mr. Hawkins
      received a B.A. in Religion and Greek from Union University in Jackson,
      Tennessee. Mr. Hawkins also received a Masters of Divinity from New Orleans
      Baptist Theological Seminary.




**Dennis
      Philip Heffron/Manager** ,
      Age 52,
      7724 Ashley Ave NE, Belding, MI 48809. Mr. Heffron has been the owner of
      Heffron Farms LLC located in Belding, Michigan since May of 1996, which
      currently includes 2,500 acres of crops, 400 feeder steers and the operation
      of
      four retail food stores.




**Robert
      Joseph Kennedy/Manager** .
      See
      description under “Officers.”




**Keith
      Duane Kirkdorfer/Manager** ,
      Age 59,
      67722 N. Shore Rd, Edwardsburg, MI 49112]. Mr. Kirkdorfer has been the
      owner and operator of Kirkdorfer Farms since June of 1968. Kirkdorfer Farms
      raises over 4,500 acres of crops, including seed corn and commercial corn.
      He
      received an A.A.S. from Southwestern Michigan College.




**Wilson
      C. Lauer/Manager** .
      See
      description under “Officers.”




**Eldridge
      Leo Lawson, Jr. /Manager** ,
      Age 52,
      648 Aylesford Ln., Franklin, TN 37069. Mr. Lawson has been a Minister at
      Every Nation Ministries located in Nashville, Tennessee since January, 1994.
      He
      also served as the founding Dean of the School of Campus Ministry to Every
      Nation Ministries. He received an B.A. in Education from the University of
      Kentucky.




**Norman
      Mihills/Manager** ,
      Age 68,
      60770 Patterson Hill Rd, Jones, MI 49061. Mr. Mihills has been the owner of
      Mihills farms located in James, Michigan since 1986.




**Lloyd
      Donald Miller/Manager** ,
      Age 63,
      160 N. Escott Rd, Owosso, MI 48867. Mr. Miller has been President of Lloyd
      Miller & Sons, Inc. located in Corunna, Michigan since January, 1961.
      Lloyd Miller & Sons, Inc. currently operates New Holland Dealerships in
      Corunna and Fowlerville. He is also currently a partner at Miller Bros. LLC.




**Dennis
      C. Muchmore.** See
      description under “Officers.”




**Gail
      Peterson/Manager** ,
      Age 56,
      2380 Reum St, Niles, MI 49120. Mr. Peterson has been a co-owner of Peterson
      Farms since 1980. Peterson Farms markets 60,000 bushels of corn annually and
      raises 300 beef cows, feeds 300 head of cattle. Mr. Peterson also is
      President of Cass County Fair Board.




**Thomas
      Edward Pumford, Jr.** See
      description under “Officers.”




**David
      Moeberg Skjaerlund** .
      See
      description under “Officers.”




**Chad
      Cameron Sowerby/Manager** ,
      Age 36,
      10352 Wabasis Ave, Greenville, MI 48838. Mr. Sowerby has been the Farm
      Manager of Sowerby Brothers, Inc. located in Greenville, Michigan since January
      of 1991. Sowerby Brothers, Inc. grows over 3,500 acres of corn, dry beans,
      potatoes and small grains and which is also a co-owner in a processing plant
      for
      dry beans. He attended Michigan State University.




**Nick
      Totzke/Manager** ,
      Age 54,
      6760 Totzke Rd, Baroda, MI 49101. Mr. Totzke and his brother Ned Totzke
      have been partners since 1981 of Totzke Farms and currently operate 10,000
      acres
      of grain, fruit and vegetables, in three southwestern Michigan counties. The
      Totzkes are third-generation farmers, who are continuing the tradition which
      began in 1928. In addition to farming, the Totzkes have been members of the
      National Grape Cooperative since 1981, of which Ned has been a Regional Delegate
      for the past six years. Ned Totzke is also serving his 7th
      year on the Lincoln Township Zoning Board of Appeals, and served six years
      as President and Treasurer for the Zion United Church of Christ, Baroda. Both
      Totzkes continue to volunteer with and have supported the Berrien County Our
      Youth Fair for over 30 years.




**Clifford
      Vennix/Manager** ,
      Age 71,
      418 Patricia, Auburn, MI 48611. Since 1970 Mr. Vennix has been president of
      Auburn Bean & Grain located in Auburn, Michigan. Mr. Vennix has
      over 51 years of experience in the grain handling business, is a past president
      of Michigan Agri-Business Association and currently serves on the Board of
      Directors for MM Mutual Insurance Company.




-41-




**Benjamin
      O. Yantis/Manager** ,
      Age 70,
      1440 Yantis Blvd, Logansport, IN 46947. Since 1962 Mr. Yantis has been the
      owner of Yantis Implement and Yantis Enterprises located in Logansport, Indiana.
      Mr. Yantis is also presently actively involved with Global Outreach
      International and World Missionary Press.




**Key
      Employee and Consultant**




The
      Company entered into an employment agreement with David Skjaerlund, who is
      currently serving as the Company’s President and Chief Executive Officer, under
      which Dr. Skjaerlund is entitled to three percent (3%) of the total
      membership units of the Company outstanding at the time the ethanol plant begins
      production of the ethanol plant. Mr. Skjaerlund is not entitled to any
      other compensation for his services other than the grant of our units. The
      term
      of the agreement runs through the date, which is 90 days after the commencement
      of ethanol production at the ethanol plant.




The
      Company also entered into a consulting agreement with Thomas Pumford, who
      served as the Treasurer and Chief Financial Officer in 2007, to provide the
      Company with internal accounting. Subsequent to year-end, the Board of Managers
      has decided to replace Mr. Pumford as Treasurer and Chief Financial Officer
      effective April 15, 2008.




**Code
      of Ethics**




The
      Board
      of Directors has not adopted a code of ethics at this time.




**Identification
      of Audit Committee**




The
      Board
      of Directors has appointed an Audit Committee consisting of Darryl K. Fowler,
      Scott W. Crumbaugh, Matthew A. Dutcher and Paul Early. Subsequent to year-end,
      Darryl Fowler has resigned as a member of the audit committee and the Company
      has not named a replacement committee member as of March 31, 2008.




**Audit
      Committee Financial Expert**




Our
      independent financial expert is Darryl Kent Fowler, who is Chairman of the
      Audit
      Committee. Subsequent to year-end, Darryl Fowler has resigned as the Chairman
      of
      the Audit Committee and the Company has not named a replacement Chairman as
      of
      March 31, 2008.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
      directors, executive officers and any persons who directly or indirectly hold
      more than 10 percent of the Company’s Units (“Reporting Persons”) to file
      reports of ownership and changes in ownership with the SEC. Reporting Persons
      are required by SEC regulations to furnish the Company with copies of all
      Section 16(a) forms they file. Based solely on its review of the copies of
      such
      forms, the Company believes that during fiscal 207, none of our Reporting
      Persons listed below have filed a Form 3 and, therefore, none of the Reporting
      Persons have complied with the applicable filing requirements on a timely basis.





**Name
                and Address of Beneficial Owner**
            
            **Title
                of Class**
            
            **Amount
                and Nature of Beneficial Owner**
            
            **Number
                of Units(1)**
            
            **Percent
                of Class Prior to Offering****10%
                Unit holders:**Eagle
                Energy, LLC
            
            
            Class
                A Units
            
            $
            4,000,000
            
            
            1,000
            
            
            21.57
            %ICM,
                Inc.
            
            
            Class
                A Units
            
            $
            4,000,000
            
            
            1,000
            
            
            21.57
            %





-42-




**Item
      11. Executive Compensation**




**Compensation**




This
      section discusses the principles underlying our executive compensation policies
      and decisions and the most important factors relevant to an analysis of these
      policies and decisions. It provides qualitative information regarding the manner
      and context in which compensation is awarded to and earned by our executive
      officers and places in perspective the data presented in the narrative that
      follow.




Our
      compensation program for executive officers is designed to attract, as needed,
      individuals with the skills necessary for us to achieve our business plan,
      to
      motivate those individuals, to reward those individuals fairly over time, and
      to
      retain those individuals who continue to perform at or above the levels that
      we
      expect. It is also designed to reinforce a sense of ownership, urgency and
      overall entrepreneurial spirit and to link rewards to measurable company and
      individual performance.




Our
      executive officers’ compensation currently has one component—unit awards granted
      pursuant to resolutions of our Board of Managers. We currently do not provide
      our executive officers any other benefits. We fix executive officer compensation
      at a level we believe enables us to hire and retain individuals in a competitive
      environment and to reward satisfactory individual performance and a satisfactory
      level of contribution to our overall business goals.




Our
      compensation committee has not adopted any formal or informal policies or
      guidelines for allocating compensation between long-term and currently paid
      out
      compensation, between cash and non-cash compensation, or among different forms
      of non-cash compensation as we do not currently compensate our executive
      officers in that manner. Our compensation committee’s current intent is to
      perform at least annually, beginning after completion of our ethanol plant,
      a
      strategic review of our executive officers’ compensation to determine whether
      they provide adequate incentives and motivation to our executive officers and
      whether they adequately compensate our executive officers relative to comparable
      officers in other companies with which we compete for executives. These
      companies may or may not be public companies or even in all cases ethanol
      production companies.




We
      account for equity compensation paid to our employees under the rules of
      Statement of Financial Accounting Standards No. 123 (revised 2004) Share-Based
      Payment, or SFAS No. 123R, which requires us to estimate and record an
      expense over the service period of the award. Accounting rules also require
      us
      to record cash compensation as an expense at the time the obligation is accrued.
      Unless and until we achieve sustained profitability, the availability to us
      of a
      tax deduction for compensation expense will not be material to our financial
      position. We currently intend that all cash compensation paid will be tax
      deductible for us.




We
      do not
      have any program, plan or obligation that requires us to grant equity
      compensation on specified dates and, because we have not been a public company,
      we have not made equity grants in connection with the release or withholding
      of
      material non-public information. It is possible that we will establish programs
      or policies of this sort in the future, but we do not expect to do so in the
      near future. Authority to make equity grants to executive officers rests with
      our compensation committee, although our compensation committee will consider
      the recommendations of our chief executive officer.




-43-




**Summary
      Compensation Table**




The
      following table sets forth certain information concerning compensation of
      (i) the person that served as the Chief Executive Officer of the Company
      during the fiscal years ended December 31, 2007 and 2006, (ii) the
      person that served as the Chief Financial Officer of the Company during the
      fiscal years ended December 31, 2007 and 2006, (iii) the four other
      most highly compensated executive officers of the Company during the fiscal
      years ended December 31, 2007 and 2006, and (iv) up to two persons who
      would have been disclosed above had such person been serving in one of the
      positions listed above at the end of the Company’s fiscal years ended
      December 31, 2007 and 2006 (collectively, the “Named Executive Officers”):




**Name
                and Principal**
              **Position**
            
            **Year**
            
            **Salary**
              **($)**
            
            **Bonus**
              **($)**
            
            **Unit**
              **Awards**
              **($)**
            
            **Option**
              **Awards**
              **($)**
            
            **Non-Equity**
              **Incentive Plan**
              **Compensation**
              **($)**
            
            **Change
                in**
              **Pension Value of**
              **Nonqualified**
              **Deferred**
              **Compensation**
              **Earnings**
              **($)**
            
            **All
                other**
              **Compensation**
              **($)**
            
            **Total**
              **($)**David
                Skjaerlund
            
            
            2007
            
            
            —
            
            
            —
            
            $
            826,800
            
            
            —
            
            
            —
            
            
            —
            
            
            4,000
            
            $
            830,800Chief
                Executive Officer and President
            
            
            2006
            
            
            
            
            
            
            
            $
            321,533
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            321,533Thomas
                Pumford
            
            
            2007
            
            
            —
            
            
            —
            
            $
            31,800
            
            
            —
            
            
            —
            
            
            —
            
            $
            54,878
            
            $
            86,678Treasurer
                & Secretary
            
            
            2006
            
            
            —
            
            
            —
            
            $
            16,516
            
            
            —
            
            
            —
            
            
            —
            
            $
            22,500
            
            $
            39,016Wilson
                Lauer
            
            
            2007
            
            
            —
            
            
            —
            
            $
            15,900
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            15,900Vice
                President
            
            
            2006
            
            
            —
            
            
            —
            
            $
            8,258
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            8,258Matthew
                Dutcher
            
            
            2007
            
            
            —
            
            
            —
            
            $
            15,900
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            15,900Vice
                President
            
            
            2006
            
            
            —
            
            
            —
            
            $
            8,258
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            8,258Robert
                Kennedy
            
            
            2007
            
            
            —
            
            
            —
            
            $
            15,900
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            15,900Vice
                President
            
            
            2006
            
            
            —
            
            
            —
            
            $
            8,258
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            8,258Dennis
                Muchmore
            
            
            2007
            
            
            —
            
            
            —
            
            $
            15,900
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            15,900Vice
                President
            
            
            2006
            
            
            —
            
            
            —
            
            $
            8,258
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            $
            8,258




The
      relative amounts of compensation awarded to the persons listed in the table
      above were determined based upon their relative contributions to the development
      of our business. In particular, Mr. Skjaerlund is currently dedicating all
      of
      his time and effort to the development of our business and is not receiving
      any
      cash compensation during our construction phase. Mr. Pumford was dedicating
      his
      full time to our development in 2007 and was paid cash compensation pursuant
      to
      a service contract with us. Subsequent to year-end, the cash compensation
      contract has been terminated, however Mr. Pumford continued to receive full
      unit
      compensation for his role of Treasurer/Secretary until March 20, 2008 when
      he
      was removed from the office of Secretary of the Company, effective immediately,
      pursuant to a vote of the Board of Managers of the Company. The Board of
      Managers appointed Scott Everett as the new Secretary of the Company, effective
      immediately. Also on March 20, 2008, Mr. Pumford was removed from the office
      of
      Treasurer of the Company, effective April 15, 2008, pursuant to a vote of the
      Board of Managers of the Company. The Board of Managers appointed Scott
      Crumbaugh as the new Treasurer of the Company, effective April 15, 2008. Mr.
      Pumford continues to serve as a Manager of the Company. The other listed
      officers each dedicate a portion of their time to the development of our
      business while maintaining other employment. Mr.
      Everett and Mr. Crumbaugh will not receive any additional compensation for
      their
      positions as Secretary and Treasurer of the Company.




-44-




**Option
                  Awards**
              
              **Stock
                  Awards****Name
                  and Principal**
                  **Position**
              
              **Number
                  of securities underlying unexer- cised options (#) exercis-
                  able**
              
              **Number
                  of securities underlying unexer- cised options (#) unexercis
                  -able**
              
              **Equity
                  incentive plan awards: Number of securities underlying unexer-
                  cised
                  unearned options (#)**
              
              **Option
                  exercised price ($)**
              
              **Option
                  expiration date**
              
              **Number
                  of shares or units of stock that have not vested
                  (#)**
              
              **Market
                  value of shares or units of stock that have not vested
                  ($)**
              
              **Equity
                  incentive plan awards: Number of unearned shares, units or other
                  rights
                  that have not vested (#)**
              
              **Equity
                  incentive plan awards: Market or payout value of unearned shares,
                  units or
                  other rights that have not vested ($)**David
                  Skjaerlund
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              520
              
              $
              3,180
              
              $
              —
              
              $
              1,653,600Chief
                  Executive Officer and PresidentThomas
                  Pumford
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              20
              
              $
              3,180
              
              $
              —
              
              $
              63,600Treasurer
                  & SecretaryWilson
                  Lauer
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10
              
              $
              3,180
              
              $
              —
              
              $
              31,800Vice
                  PresidentMatthew
                  Dutcher
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10
              
              $
              3,180
              
              $
              —
              
              $
              31,800Vice
                  PresidentRobert
                  Kennedy
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10
              
              $
              3,180
              
              $
              —
              
              $
              31,800Vice
                  PresidentDennis
                  Muchmore
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              10
              
              $
              3,180
              
              $
              —
              
              $
              31,800Vice
                  President




**Employment
      Agreements**




David
      Skjaerlund is currently serving as our Chief Executive Officer and President
      and
      Tom Pumford is currently serving as Secretary, Treasurer and Chief Financial
      Officer. Wilson Lauer, Matthew Dutcher, Robert Kennedy and Dennis Muchmore
      currently serve as Vice Presidents. Subsequent to year-end, Mr. Kennedy and
      Mr.
      Muchmore have resigned from their position of Vice President. We entered into
      an
      employment agreement with David Skjaerlund under which Dr. Skjaerlund is
      entitled to three percent (3%) of the total membership units of the Company
      outstanding at the time our ethanol plant begins production of the ethanol
      plant. Mr. Skjaerlund is not entitled to any other compensation for his
      services other than the grant of our units. The term of the agreement runs
      through the date which is 90 days after the commencement of ethanol production
      at our ethanol plant.




-45-




We
      have
      also entered into a consulting agreement with Mr. Pumford to provide us
      with internal accounting and management services, a consulting agreement with
      Muchmore Harrington Smalley & Associates, Inc., with whom Dennis
      Muchmore had been a counsel, to provide us advice regarding pending legislation
      that might affect Liberty, a consulting agreement with Earthscape Resource
      Management, which is partially owned by Mr. Everett, to provide us services
      as a Coordinating Manager with respect to the development of the ethanol plant
      and approval of permits from governmental agencies, and a consulting agreement
      with PlanScape Partners, for whom Ms. Fiscus is currently the President, to
      provide us services regarding financial grants related to the development of
      our
      ethanol plant. All of these consulting agreements have been completed and
      terminated. Except for the unit grants discussed below, we do not compensate
      Mr. Lauer, Mr. Dutcher, Mr. Kennedy or Mr. Muchmore for
      their service as officers. We have also approved issuance of units to our
      officers and to our managers who serve as Officers or a member of the Steering
      Committee and the Finance Committee. Each officer other than Mr. Skjaerlund
      will be granted 10 Class A units for each office that they hold (for a
      total of 60). Each Steering Committee member, who is not an officer, will be
      granted 6 Class A units (for a total of 48 units) and each member of the
      Finance Committee will be granted 2 Class A units (for a total of 8 units).
      Except for the compensation described in “EXECUTIVE COMPENSATION—Director
      Compensation,” we do not have any other compensation arrangements with our
      managers or officers.




Other
      than the employment agreement we entered into with David Skjaerlund and the
      consulting agreements we entered into with PlanScape Partners, for whom Kathleen
      Fiscus is currently the President, Tom Pumford, Earthscape Resource Management,
      which is partially owned by Mr. Everett, and Muchmore Harrington
      Smalley & Associates, Inc., with whom Dennis Muchmore had been a
      counsel, we have no employment agreements with any executive officer or manager.
      In the future, we may enter into employment agreements with our executive
      officers or other employees that we may hire.




**Reimbursement
      of Expenses**




We
      reimburse our officers and managers for expenses incurred in connection with
      their service.




**Director
      Compensation**




Pursuant
      to our manager compensation program, each manager will receive the following
      compensation for board services, as applicable:




·
            
            10
                Class A units for service as an officer;




·
            
            6
                Class A units for service as a member of the Steering Committee that
                is not an officer of the Company; and




·
            
            2
                Class A units for service on the Finance and Audit Committee.




-46-




**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters**




The
      following table sets forth information regarding beneficial ownership of the
      shares of our units as of December 31, 2007 by:




·
            
            each
                person known by us to be the beneficial owner of more than 5% of
                our
                units;




·
            
            each
                of our named executive officers;




·
            
            each
                of our managers; and




·
            
            all
                of our executive officers and directors as a group.




The
      number of shares beneficially owned by each member is determined under rules
      promulgated by the Securities and Exchange Commission. The information does
      not
      necessarily indicate beneficial ownership for any other purpose. Units subject
      to options and convertible securities currently exercisable or convertible,
      or
      exercisable or convertible within 60 days after the date of the initial
      offering, are deemed outstanding for purposes of computing the percentage
      beneficially owned by the person or entity holding such securities but are
      not
      deemed outstanding for purposes of computing the percentage beneficially owned
      by any other person or entity.




The
      percentages in the following table are based on a total of 4,635 units
      outstanding in February. Except as indicated in the footnotes below, we believe,
      based on information furnished to us and subject to community property laws
      where applicable, that the persons and entities named in the table below have
      sole voting and investment power with respect to all shares of common stock
      shown as beneficially owned by them.




Each
      individual or entity shown on the table has furnished information with respect
      to beneficial ownership. Except as otherwise indicated below, the address of
      each person or entity listed below is c/o Liberty Renewable Fuels LLC, P.O.
      Box
      335, Owosso, Michigan 48867.




-47-




**UNITS
      BENEFICIALLY OWNED BY MANAGERS, OFFICERS** **AND 5% HOLDERS**




**Percentage
                of Total**
              **After
                the Offering****Name
                and Address of Beneficial Owner**
            
            **Title
                of Class**
            
            **Amount
                and Nature of Beneficial Owner**
            
            **Number
                of Units(1)**
            
            **Percent
                of Class Prior to Offering**
            
            **Maximum
                units Sold in Offering**
            
            **Minimum
                units Sold in Offering****5%
                Unit holders:**Cooperative
                Elevator Co.
            
            
            Class
                A Units
            
            $
            1,000,000
            
            
            250
            
            
            5.39
            %
            
            1.01
            %
            
            1.71
            %Eagle
                Energy, LLC
            
            
            Class
                A Units
            
            $
            4,000,000
            
            
            1,000
            
            
            21.57
            %
            
            4.06
            %
            
            6.83
            %ICM,
                Inc.
            
            
            Class
                A Units
            
            $
            4,000,000
            
            
            1,000
            
            
            21.57
            %
            
            4.06
            %
            
            6.83
            %**Directors
                and Executive Officers:**David
                Skjaerlund
            
            
            Class
                A Units
            
            $
            135,000
            
            
            60
                (2
            )
            
            1.29
            %
            
            0.24
            %
            
            0.41
            %Thomas
                Edward Pumford, Jr.
            
            
            Class
                A Units
            
            $
            56,250
            
            
            45
                (3
            )
            
            0.97
            %
            
            0.18
            %
            
            0.31
            %Wilson
                C. Lauer
            
            
            Class
                A Units
            
            $
            217,250
            
            
            98
                (4
            )
            
            2.11
            %
            
            0.40
            %
            
            0.67
            %Matthew
                Allan Dutcher
            
            
            Class
                A Units
            
            $
            173,250
            
            
            89
                (5
            )
            
            1.92
            %
            
            0.36
            %
            
            0.61
            %Robert
                Joseph Kennedy
            
            
            Class
                A Units
            
            $
            80,250
            
            
            41
                (6
            )
            
            0.88
            %
            
            0.17
            %
            
            0.28
            %Dennis
                C. Muchmore
            
            
            Class
                A Units
            
            $
            85,500
            
            
            48
                (7
            )
            
            1.03
            %
            
            0.19
            %
            
            0.33
            %Ronald
                Melvin Balzer
            
            
            Class
                A Units
            
            $
            103,500
            
            
            52
                (8
            )
            
            1.12
            %
            
            0.21
            %
            
            0.36
            %John
                David Blank
            
            
            Class
                A Units
            
            $
            49,500
            
            
            22
                (9
            )
            
            0.47
            %
            
            0.09
            %
            
            0.15
            %Tom
                Alan Brink
            
            
            Class
                A Units
            
            $
            94,500
            
            
            42
                (10
            )
            
            0.91
            %
            
            0.17
            %
            
            0.29
            %Ronald
                Jay Brown
            
            
            Class
                A Units
            
            $
            166,500
            
            
            80
                (11
            )
            
            1.72
            %
            
            0.32
            %
            
            0.55
            %Scott
                Crumbaugh
            
            
            Class
                A Units
            
            $
            435,000
            
            
            143
                (12
            )
            
            3.08
            %
            
            0.58
            %
            
            0.98
            %Cullen
                Lanier Dubose, Sr.
            
            
            Class
                A Units
            
            $
            60,750
            
            
            20
            
            
            0.43
            %
            
            0.08
            %
            
            0.14
            %Paul
                Early
            
            
            Class
                A Units
            
            $
            24,750
            
            
            19
                (13
            )
            
            0.41
            %
            
            0.08
            %
            
            0.13
            %Scott
                Daniel Everett
            
            
            Class
                A Units
            
            $
            147,500
            
            
            70
                (14
            )
            
            1.51
            %
            
            0.28
            %
            
            0.48
            %Kathleen
                Rahm Fiscus
            
            
            Class
                A Units
            
            $
            31500
            
            
            14
            
            
            0.30
            %
            
            0.06
            %
            
            0.10
            %Darryl
                Kent Fowler
            
            
            Class
                A Units
            
            $
            94,500
            
            
            50
                (15
            )
            
            1.08
            %
            
            0.20
            %
            
            0.34
            %Kenneth
                Craig Fowler
            
            
            Class
                A Units
            
            $
            24,750
            
            
            17
                (16
            )
            
            0.37
            %
            
            0.07
            %
            
            0.12
            %Robert
                James Guse, Jr.
            
            
            Class
                A Units
            
            $
            157,500
            
            
            70
            
            
            1.51
            %
            
            0.28
            %
            
            0.48
            %Donald
                August Haske
            
            
            Class
                A Units
            
            $
            162,000
            
            
            72
                (17
            )
            
            1.55
            %
            
            0.29
            %
            
            0.49
            %Samuel
                Crawford Hawkins
            
            
            Class
                A Units
            
            $
            101,250
            
            
            45
                (18
            )
            
            0.97
            %
            
            0.18
            %
            
            0.31
            %Dennis
                Philip Heffron
            
            
            Class
                A Units
            
            $
            58,500
            
            
            26
                (19
            )
            
            0.56
            %
            
            0.11
            %
            
            0.18
            %Keith
                Duane Kirkdorfer
            
            
            Class
                A Units
            
            $
            29,250
            
            
            13
            
            
            0.28
            %
            
            0.05
            %
            
            0.09
            %Eldridge
                Leo Lawson, Jr.
            
            
            Class
                A Units
            
            $
            78,750
            
            
            35
                (20
            )
            
            0.76
            %
            
            0.14
            %
            
            0.24
            %Norman
                Mihills
            
            
            Class
                A Units
            
            $
            29,250
            
            
            13
            
            
            0.28
            %
            
            0.05
            %
            
            0.09
            %Lloyd
                Donald Miller
            
            
            Class
                A Units
            
            $
            173,250
            
            
            77
            
            
            1.66
            %
            
            0.31
            %
            
            0.53
            %Gail
                Peterson
            
            
            Class
                A Units
            
            $
            29,250
            
            
            13
            
            
            0.28
            %
            
            0.05
            %
            
            0.09
            %Chad
                Cameron Sowerby
            
            
            Class
                A Units
            
            $
            101,250
            
            
            45(21
            )
            
            0.97
            %
            
            0.18
            %
            
            0.31
            %Nick
                Totzke
            
            
            Class
                A Units
            
            $
            49,500
            
            
            22(22
            )
            
            0.47
            %
            
            0.09
            %
            
            0.15
            %Clifford
                Vennix
            
            
            Class
                A Units
            
            $
            173,250
            
            
            77
            
            
            1.66
            %
            
            0.31
            %
            
            0.53
            %Benajmin
                O. Yantis
            
            
            Class
                A Units
            
            $
            81,000
            
            
            36
            
            
            0.78
            %
            
            0.15
            %
            
            0.25
            %**Executive
                officers and managers as a group**
            
            
            Class
                A Units
            
            $
            3,200,250
            
            
            1,454
            
            
            30.64
            %
            
            5.87
            %
            
            9.85
            %





(1)
            Assumes
                no additional purchases in the S-1 offering being conducted by the
                Company.






-48-




(2)
            Includes
                60 units held by Solomon Investment Strategies. LLC. Dr. Skjaerlund,
                one
                of our managers, is a member of Solomon Investment Strategies. LLC.
                Dr.
                Skjaerlund disclaims beneficial ownership of the units held by Solomon
                Investment Strategies. LLC, except to the extent of his pecuniary
                interest
                therein. Mr. Skjaerlund, as compensation for service as CEO, is also
                entitled to 3% of the total Class A and Class B units at the commencement
                of ethanol production. The number of such units is currently
                indeterminable.


(3)
            Includes
                20 units Mr. Pumford will receive for service as Treasurer and
                Secretary.


(4)
            Includes
                88 units held by Lauer Farms, LLC. Mr. Lauer, one of our managers,
                is a
                member of Lauer Farms, LLC. Mr. Lauer disclaims beneficial ownership
                of
                the units held by Lauer Farms, LLC, except to the extent of his pecuniary
                interest therein. Units also include 10 units Mr. Lauer will receive
                for
                service as Vice President.


(5)
            Units
                include 10 units Mr. Dutcher will receive for service as Vice President
                and 2 units for service on the Financial Audit
                Committee.


(6)
            Includes
                10 units Mr. Kennedy will receive for service as Vice
                President.


(7)
            Includes
                10 units Mr. Muchmore will receive for service as Vice
                President.


(8)
            Includes
                6 units Mr. Balzer will receive for service as a member of the Steering
                Committee.


(9)
            Includes
                22 units held by Allegan County Renewable Energy II, LLC. Mr. Blank,
                one
                of our managers, is a member of Allegan County Renewable Energy II,
                LLC.
                Mr. Blank disclaims beneficial ownership of the units held by Allegan
                County Renewable Energy II, LLC, except to the extent of his pecuniary
                interest therein.


(10)
            Includes
                42 units held by Allegan County Renewable Energy, LLC. Mr. Brink,
                one of
                our managers, is a member of Allegan County Renewable Energy, LLC.
                Mr.
                Brink disclaims beneficial ownership of the units held by Allegan
                County
                Renewable Energy, LLC, except to the extent of his pecuniary interest
                therein.


(11)
            Includes
                74 units held by Energy Service, LLC. Mr. Brown, one of our managers,
                is a
                member of Energy Service, LLC. Mr. Brown disclaims beneficial ownership
                of
                the units held by Energy Service, LLC, except to the extent of his
                pecuniary interest therein. Also includes 6 units Mr. Brown will
                receive
                for service as a member of the Steering
                Committee.


(12)
            Includes
                135 units held by Apple Investing, LLC. Mr. Crumbaugh, one of our
                managers, is a member of Apple Investing, LLC. Mr. Crumbaugh disclaims
                beneficial ownership of the units held by Apple Investing, LLC, except
                to
                the extent of his pecuniary interest therein. Also include 6 units
                Mr.
                Crumbaugh will receive for service as a member of the Steering Committee
                and 2 units for service on the Financial Audit
                Committee.


(13)
            Include
                6 units Mr. Early will receive for service as a member of the Steering
                Committee and 2 units for service on the Financial Audit
                Committee.


(14)
            Includes
                63 units held by Pro-Farmer Financial Group, LLC. Mr. Everett, one
                of our
                managers, is a member of Pro-Farmer Financial Group, LLC. Mr. Everett
                disclaims beneficial ownership of the units held by Pro-Farmer Financial
                Group, LLC, except to the extent of his pecuniary interest therein.
                Also
                include 6 units Mr. Everett will receive for service as a member
                of the
                Steering Committee.


(15)
            Include
                6 units Mr. Fowler will receive for service as a member of the Steering
                Committee and 2 units for service on the Financial Audit
                Committee.


(16)
            Include
                6 units Mr. Fowler will receive for service as a member of the Steering
                Committee.


(17)
            Includes
                72 units held by Future Fuels. LLC. Mr. Haske, one of our managers,
                is a
                member of Future Fuels. LLC. Mr. Haske disclaims beneficial ownership
                of
                the units held by Future Fuels. LLC, except to the extent of his
                pecuniary
                interest therein.


(18)
            Includes
                45 units held by Global Energy Impact, LLC. Mr. Hawkins, one of our
                managers, is a member of Global Energy Impact, LLC. Mr. Hawkins disclaims
                beneficial ownership of the units held by Global Energy Impact, LLC,
                except to the extent of his pecuniary interest
                therein.


(19)
            Includes
                26 units held by Heffron Farms. Mr. Heffron, one of our managers,
                is a
                member of Heffron Farms. Mr. Heffron disclaims beneficial ownership
                of the
                units held by Heffron Farms, except to the extent of his pecuniary
                interest therein.


(20)
            Includes
                35 units held by Victory & Sons, LLC. Mr. Lawson, one of our managers,
                is a member of Victory & Sons, LLC. Mr. Lawson disclaims beneficial
                ownership of the units held by Victory & Sons, LLC, except to the
                extent of his pecuniary interest
                therein.


(21)
            Includes
                45 units held by Sowerby Farms. Mr. Sowerby, one of our managers,
                is a
                member of Sowerby Farms. Mr. Sowerby disclaims beneficial ownership
                of the
                units held by Sowerby Farms, except to the extent of his pecuniary
                interest therein  (22)
            Includes 22 units held by Totzke Farms. Mr. Totzke,
              one
              of our managers, is a member of Totzke Farms. Mr. Totzke disclaims
              beneficial ownership of the units held by Totzke Farms, except to the
              extent of his pecuniary interest therein.





-49-


**Item
      13. Certain Relationships and Related Transactions, and Director
      Independence**




**Grain
      Elevator Arrangements**




We
      have
      reached an agreement with one of Michigan’s grain elevators. The grain
      elevator is intended to help in providing us with corn for our ethanol
      plant. The agreement was signed as part of an October 27, 2006, dinner
      train event hosted by Great Lakes Central Railroad Company which included a
      brief dedication ceremony held at the site. The status of grain origination
      agreements has changed since October 2007 and those changes are noted below.




*Auburn
      Bean & Grain Co. and Cooperative Elevator Co.*




We
      have
      previously entered into agreements with Auburn Bean & Grain Co. and
      Cooperative Elevator Co. relating to the acquisition of Auburn and the purchase
      of grain from Cooperative Elevator. Both of these agreements have been
      terminated pursuant to their terms.




*Brown
      Milling, Inc.*




Brown
      Milling Inc., which has 2 million bushels of storage capacity at facilities
      it operates in Shepherd, Rosebush and Delwin, signed an agreement whereby we
      will be able to purchase all of the corn that Brown Milling markets. The
      agreement is effective as of January 1, 2008, for an initial term of 4
      years (which expiration date is subject to automatic one year extensions if
      not
      terminated 6 months prior to expiration). The agreement gives us a first right
      of purchase on any corn that Brown Milling proposes to sell. The agreement
      also
      gives us the right to purchase corn that any third party proposes to purchase
      from Brown Milling. We are obligated to pay Brown Milling an annual fee at
      the
      beginning of each year as well as a per bushel fee. The
      fee
      for 2008 in the amount of $35,000 has not been paid as of March 31, 2008.Ron Brown, President of Brown Milling, also serves on our Board of
      Managers. Because of this conflict, Mr. Brown has not participated in the
      voting to approve this transaction.


**Consulting
      Agreements**




We
          have
          entered into consulting agreements with Mr. Pumford, PlanScape Partners,
          for whom Ms. Fiscus is currently the President, Earthscape Resource
          Management, which is partially owned by Mr. Everett, and Muchmore
          Harrington Smalley & Associates, Inc., with whom Dennis Muchmore has
          been a counsel since 1998. The agreement with Mr. Pumford was entered into
          on
          August 1, 2006 and is for the provision of internal accounting functions
          and
          matters related to our financial transactions and reporting requirements.
          Mr.
          Pumford received $4,500 per month for such services. The agreement may
          be
          terminated by either party at anytime, for just cause, upon 10 days written
          notice. The agreement was terminated on February 19, 2008, effective February
          29, 2008.


-50-


Prior
      to
      December 31, 2007 the Earthscape Resource Management Contract has been
      terminated. Subsequent to December 31, 2007 all other contracts above have
      been
      terminated.




The
      agreement with PlanScape Partners is for consulting services related to our
      obtaining financial incentives from various governmental entities. Fees are
      billed on an hourly rate basis for services as requested by us. The agreement
      was terminated.




The
      agreement with Earthscape Resource Management is for services as a Coordinating
      Manager for developing relationships between us and the local and county
      governments, executing media relations and similar activities with additional
      people and entities as needed. Earthscape is paid $3,500 per month plus expenses
      for their services under the agreement. The agreement commences on August 1,
      2006 and has been terminated.




The
      agreement with Muchmore Harrington Smalley & Associates, Inc. is for
      services representing us before the Michigan legislature and updating us on
      the
      content and status pending legislation that could affect our project. Muchmore
      Harrington is paid $3,500 per month plus expenses for their services under
      the
      agreement. The agreement commences on July 10, 2006 and is terminable by either
      party at any time upon 30 days written notice and has been
      terminated.




**Office
      Lease**




We
      lease
      our headquarters office space from Mr. Pumford for a monthly rent of $500
      which we believe to be at or below the current market rate. Subsequent to year
      end, a 30 day notice was given to terminate the lease on February 19, 2008
      and
      the company office moved up to our plant site in Ithaca.




**Review,
      Approval or Ratification of Transactions with Related Persons**




Our
      company agreement permits us to enter into agreement and other arrangements
      with
      our managers, officers, members and their affiliates. However, other than the
      non-binding letter of intent with Auburn Bean and Grain, the letter of intent
      and definitive agreement with ICM, the agreement with Brown Milling and the
      consulting agreements with Mr. Pumford, PlanScape Partners, for whom
      Ms. Fiscus is currently the President, Earthscape Resource Management,
      which is partially owned by Mr. Everett, and Muchmore Harrington
      Smalley & Associates, Inc., with whom Dennis Muchmore has been a
      counsel since 1998, we have not engaged in any transactions with any other
      of
      our managers, officers or 5% unit holders. Should we engage in any such
      transactions in the future, all such arrangements will be approved by our
      managers on terms no more favorable to the managers, officers or members than
      generally afforded to non-affiliate parties in a similar transaction.




**Director
      Independence**




Our
      independent directors are Jason Atkins, Ronald Balzer, John Blank, Todd Brink,
      Scott Crumbaugh, Cullen Dubose, Sr., Paul Early, Darryl Fowler, Kenneth Fowler,
      Robert Guse, Jr., Donald Haske, Samuel Hawkins, Dennis Heffron, Keith
      Kirkdorfer, Eldridge Lawson, Jr., Norman Mihills, Lloyd Miller, Gail Peterson,
      Chad Sowerby, Nick Totzke, Clifford Vennix, and Benjamin Yantis. The
      determination of independence is made by reference to NASDAQ rule 4200 and
      4350.




David
      Skjaerlund, Thomas Pumford, Wilson Lauer, Matthew Dutcher, Robert Kennedy and
      Dennis Muchmore are not considered independent as they are serving as our
      executive officers. Subsequent to year-end, Mr. Kennedy and Mr. Muchmore
      resigned from their executive officer positions with the Company while Mr.
      Pumford was removed as Treasurer and Secretary. As of April 15, 2008 Scott
      Crumbaugh will not be considered independent as he will serve as one of our
      executive officers. Subsequent to year-end, Scott Everett is no longer
      independent as he is serving as an executive officer. Furthermore, Scott Everett
      is not considered independent because of his partial ownership of Earthscape
      Resource Management. Kathleen Fiscus is not considered independent because
      of
      her position at PlanScape Partners. Ronald Brown is not considered independent
      because of his position at Brown Milling.




**Audit
      Committee**




Our
      board
      of directors appointed an audit committee consisting of Darryl Fowler, Scott
      Crumbaugh, Matthew Dutcher and Paul Early. The audit committee is exempt from
      independence listing standards because our securities are not listed on a
      national securities exchange or listed in an automated inter-dealer quotation
      system of a national securities association or to issuers of such securities.
      Nevertheless, Mr. Fowler, Mr. Crumbaugh and Mr. Early are independent within
      the
      definition of independence provided by NASDAQ rules 4200 and 4350. Mr. Dutcher
      is not considered independent in that he is serving as an executive officer.
      Subsequent to year-end, Mr. Fowler has resigned as a member and chairman of
      the audit committee. As of March 31, 2008, the board of directors has not named
      his replacement.





-51-




**Steering
      Committee**




Our
      board
      of directors have appointed a Steering Committee consisting of David Skjaerlund,
      Wil Lauer, Bob Kennedy, Matt Dutcher, Dennis Muchmore, Tom Pumford, Ron Balzer,
      Ron Brown Scott Crumbaugh, Paul Early, Scott Everett, Darryl Fowler, Ken Fowler.
      David Skjaerlund, Thomas Pumford, Wilson Lauer, Matthew Dutcher, Robert Kennedy
      and Dennis Muchmore are not considered independent as they are serving as our
      executive officers. Subsequent to year-end, Mr. Kennedy and Mr. Muchmore
      resigned from their executive officer positions with the Company. Scott Everett
      is not considered independent because of his partial ownership of Earthscape
      Resource Management. Subsequent to year-end, Mr. Fowler has resigned as a member
      of the steering committee. Mr. Brown is not considered independent because
      of
      his position at Brown Milling.




**Item
      14. Principal Accounting Fees and Services**




The
      aggregate fees billed by the principal independent registered public accountants
      (Andrews Hooper &Pavlik, P.L.C.) to the Company for the year ended
      December 31, 2007, and the year ended December 31, 2006 are as
      follows:


Category
              
              Year
              
              FeesAudit
                  Fees(1)
              
              
              2007
              
              $
              109,1342006
              
              $
              116,997Audit
                  Related Fees (1)
              
              
              2007
              
              $
              -2006
              
              $
              -Tax
                  Fees
              
              
              2007
              
              $
              -2006
              
              $
              -All
                  Other Fees
              
              
              2007
              
              $
              -2006
              
              $
              -




(1)
            
            Audit
                fees consist of fees for services rendered related to the Company’s fiscal
                year end audits, quarterly reviews, registration statement and related
                amendments.




Prior
      to
      engagement of the principal independent registered public accountants to perform
      audit services for the Company, the principal accountant was pre-approved by
      our
      Audit Committee pursuant to Company policy requiring such approval.




100%
      of
      all audit services, audit-related services were pre-approved by our Audit
      Committee.





-52-




**Part
      IV**





**Item
      15. Exhibits, Financial Statement Schedules**





**INDEX
                TO FINANCIAL STATEMENTS AND
                SUPPLEMENTARY**




**Page**Report
                of Independent Registered Public Accounting Firm
            
            F-2Balance
                Sheets as of December 31, 2007 and 2006
            
            F-3Statements
                of Operations for the Years Ended December 31, 2007 and 2006 and
                Inception
                to December 31, 2007
            
            F-4Statements
                of Changes in Members’ Equity from Inception to December 31,
                2007
            
            F-5Statements
                of Cash Flows - Indirect Method for the Years Ended December 31,
                2007 and
                2006 and from Inception to December 31, 2007
            
            F-6Notes
                to Financial Statements
            
            F-7




F-1




report




F-2


**Liberty
          Renewable Fuels, LLC**
 **(A
          Development Stage Company)**
 **Balance
          Sheets**
 
 December
                    31,
                  2007
                
                December
                    31,
                  2006**ASSETS**Current
                    AssetsCash
                    in Bank and Savings, including $352,099restricted
                    at December 31, 2007
                
                $
                404,781
                
                $
                3,283,199Prepaid
                    Expenses
                
                
                30,521
                
                
                8,546Total
                    Current Assets
                
                
                435,302
                
                
                3,291,745Fixed
                    AssetsSoftware
                    and Office Equipment, net of accumulatedamortization
                    and deprecation of $2,442 at 12/31/07
                
                
                9,772
                
                
                2,935Construction
                    in Progress including capitalized interestof
                    $383,130 at 12/31/07
                
                
                62,470,765
                
                
                1,266,979Land
                    and Land Improvements
                
                
                3,061,862
                
                
                3,059,800Total
                    Fixed Assets
                
                
                65,542,399
                
                
                4,329,714Other
                    AssetsDeposits
                
                
                4,644,239
                
                
                37,000Deferred
                    Offering Costs
                
                
                2,495,211
                
                
                259,650Total
                    Other Assets
                
                
                7,139,450
                
                
                296,650Total
                    Assets
                
                $
                73,117,151
                
                $
                7,918,109**LIABILITIES
                    AND MEMBERS' EQUITY**Current
                    LiabilitiesAccounts
                    Payable
                
                
                9,425,997
                
                $
                216,715Accounts
                    Payable - ICM
                
                
                38,090,965
                
                
                -Land
                    Contracts Payable
                
                
                475,000
                
                
                623,230Settlement
                    Payable
                
                
                350,000
                
                
                350,000Line-of-Credit
                
                
                9,966,849
                
                
                -Notes
                    Payable - Members
                
                
                397,500
                
                
                -Accrued
                    Interest Payable
                
                
                438,998
                
                
                -Total
                    Current Liabilities
                
                
                59,145,309
                
                
                1,189,945MEMBERS'
                    EQUITYMembers'
                    EquityIssued
                    Membership Units 1,241 units @ $2,250
                
                
                2,792,250
                
                
                2,792,250Subscribed
                    Membership Units 1,300 @ $4,000, lessoffering
                    costs of $141,693
                
                
                -
                
                
                5,058,307Issued
                    Membership Units 3,394 @ $4,000, less offeringcosts
                    of $141,693
                
                
                13,434,307
                
                
                -Paid
                    in Capital
                
                
                1,414,094
                
                
                412,384Deficit
                    Accumulated during Development Stage
                
                
                (3,668,809
                )
                
                (1,534,777
                )Total
                    Members' Equity
                
                
                13,971,842
                
                
                6,728,164Commitments
                    and Contingencies - See NoteTotal
                    Liabilities and Members' Equity
                
                $
                73,117,151
                
                $
                7,918,109
 
 *
          Notes
          to the Financial Statements are an integral part of this
          Statement.*


F-3


**Liberty
        Renewable Fuels, LLC**
 **(A
        Development Stage Company)**
 **Statements
        of Operations**
 
 Year
                  Ended
              
              Year
                  Ended
              
              From
                  InceptionDecember
                  31,
              
              December
                  31,
              
              (June
                  21, 2006)2007
              
              2006
              
              to
                  December 31, 2007**Revenues**
              
              $
              -
              
              $
              -
              
              $
              -**Operating
                  Expenses**Professional
                  Fees
              
              
              978,668
              
              
              414,204
              
              
              1,392,872Organizational
              
              
              42,181
              
              
              191,846
              
              
              234,027General
                  and Administrative
              
              
              1,299,381
              
              
              463,754
              
              
              1,763,135Settlement
              
              
              -
              
              
              520,000
              
              
              520,000Total
              
              
              2,320,230
              
              
              1,589,804
              
              
              3,910,034**Operating
                  Loss**
              
              
              (2,320,230
              )
              
              (1,589,804
              )
              
              (3,910,034
              )**Other
                  Income (Expense)**Interest
                  Income
              
              
              168,097
              
              
              54,827
              
              
              222,924Rental
              
              
              18,000
              
              
              -
              
              
              18,000Other
              
              
              101
              
              
              200
              
              
              301Total
              
              
              186,198
              
              
              55,027
              
              
              241,225**Net
                  Loss**
              
              
              (2,134,032
              )
              
              (1,534,777
              )
              
              (3,668,809
              )**Net
                  Loss Per Weighted Average Unit - Basic and
                  Diluted****4,564
                  Units, 1,480 Units, and 3,501 Units, Respectively**
              
              $
              (468
              )
              $
              (1,037
              )
              $
              (1,048
              )
 
 *
        Notes
        to the Financial Statements are an integral part of this
        Statement.*




F-4


**Liberty
        Renewable Fuels,
        LLC**
  **(A
        Development Stage Company)**
 **Statements
        of Changes in Members' Equity**
 **From
        Inception (June 21, 2006) to December 31, 2007**
 
 **Deficit****Subscribed**
              
              
              
              **Accumulated****Membership**
                **Units**
              
              **Membership**
                **Units**
              
              **Paid-In**
              
              **During
                  Development****Units**
              
              **Amount**
              
              **Units**
              
              **Amount**
              
              **Capital**
              
              **Stage**
              
              **Total****Balance
                  - June 21, 2006 (Date of Inception)**
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Membership
                  Units Issued for Cash
              
              
              1,241
              
              
              2,792,250
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              2,792,250Membership
                  Units Subscribed for Cash (less offeringcosts
                  of $141,693)
              
              
              -
              
              
              -
              
              
              1,300
              
              
              5,058,307
              
              
              -
              
              
              -
              
              
              5,058,307Share
                  Based Compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              412,384
              
              
              -
              
              
              412,384Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,534,777
              )
              
              (1,534,777
              )**Balance
                  - December 31, 2006**
              
              $
              1,241
              
              $
              2,792,250
              
              $
              1,300
              
              $
              5,058,307
              
              $
              $
                  412,384
              
              $
              (1,534,777
              )
              $
              6,728,164Previous
                  Subscribed Now Issued (less offeringcosts
                  of $141,693)
              
              
              1,300
              
              
              5,058,307
              
              
              (1,300
              )
              
              (5,058,307
              )
              
              -
              
              
              -
              
              
              -Membership
                  Units Issued for Cash
              
              
              2,094
              
              
              8,376,000
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,376,000Share
                  Based Compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,001,710
              
              
              -
              
              
              1,001,710Net
                  Loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,134,032
              )
              
              (2,134,032
              )**Balance
                  - December 31, 2007**
              
              
              4,635
              
              $
              16,226,557
              
              
              -
              
              $
              -
              
              $
              1,414,094
              
              $
              (3,668,809
              )
              $
              13,971,842
 
 *
        Notes
        to the Financial Statements are an integral part of this
        Statement.*




F-5


**Liberty
        Renewable Fuels,
        LLC**
  **(A
        Development Stage Company)**
 **Statements
        of Cash Flows - Indirect Method**
 
 From
                  InceptionYear
                  Ended
              
              Year
                  Ended
              
              (June
                  21,2006)December
                  31, 2007
              
              December
                  31, 2006
              
              to
                  December 31, 2007CASH
                  FLOWS FROM OPERATING ACTIVITIESNet
                  Loss
              
              $
              (2,134,032
              )
              $
              (1,534,777
              )
              $
              (3,668,809
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Share
                  Based Compensation Expense
              
              
              1,001,710
              
              
              412,384
              
              
              1,414,094Amortization
                  and Depreciation
              
              
              2,442
              
              
              -
              
              
              2,442Write-off
                  of Deferred Acquisition Costs and Deposits
              
              
              132,964
              
              
              -
              
              
              132,964Change
                  in:Prepaid
                  Expenses
              
              
              (21,975
              )
              
              (8,546
              )
              
              (30,521
              )Accounts
                  Payable and Accrued Interest
              
              
              (20,307
              )
              
              28,336
              
              
              8,029Other
                  Payables
              
              
              -
              
              
              350,000
              
              
              350,000NET
                  CASH USEDIN
                  OPERATING ACTIVITIES
              
              
              (1,039,198
              )
              
              (752,603
              )
              
              (1,791,801
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPayments
                  for Construction in Progress
              
              
              (16,708,064
              )
              
              (1,091,979
              )
              
              (17,800,043
              )Payments
                  for Land Options
              
              
              -
              
              
              (2,686
              )
              
              (2,686
              )Purchase
                  of Office Equipment and Computer Software
              
              
              (9,279
              )
              
              (2,935
              )
              
              (12,214
              )Purchase
                  of Conservation Development Easement
              
              
              -
              
              
              (50,000
              )
              
              (50,000
              )Purchase
                  of Land and Land Improvements
              
              
              (2,062
              )
              
              (1,918,416
              )
              
              (1,920,478
              )Increase
                  in Deposit
              
              
              (1,406,239
              )
              
              (37,000
              )
              
              (1,443,239
              )Deferred
                  Acquistion Costs
              
              
              (95,964
              )
              
              -
              
              
              (95,964
              )NET
                  CASH USEDIN
                  INVESTING ACTIVITIES
              
              
              (18,221,608
              )
              
              (3,103,016
              )
              
              (21,324,624
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESProceeds
                  from Notes Payable - Members
              
              
              397,500
              
              
              -
              
              
              397,500Borrowings
                  on Line-of-Credit
              
              
              9,966,849
              
              
              -
              
              
              9,966,849Payments
                  on Land Contracts
              
              
              (148,230
              )
              
              (465,468
              )
              
              (613,698
              )Deferred
                  Offering Costs
              
              
              (2,209,731
              )
              
              (246,271
              )
              
              (2,456,002
              )Payments
                  for Offering Costs
              
              
              -
              
              
              (141,693
              )
              
              (141,693
              )Sales
                  and Subscriptions of Membership Units
              
              
              8,376,000
              
              
              7,992,250
              
              
              16,368,250NET
                  CASH PROVIDEDBY
                  FINANCING ACTIVITIES
              
              
              16,382,388
              
              
              7,138,818
              
              
              23,521,206NET
                  INCREASE (DECREASE) IN CASH
              
              
              (2,878,418
              )
              
              3,283,199
              
              
              404,781CASH
                  AT BEGINNING OF PERIOD
              
              
              3,283,199
              
              
              -
              
              
              -CASH
                  AT END OF PERIOD
              
              $
              404,781
              
              $
              3,283,199
              
              $
              404,781NON
                  CASH INVESTING ACTIVITIES AND FINANCING ACTIVITIESLand
                  Acquired by Land Contract
              
              $
              -
              
              $
              1,088,698
              
              $
              1,088,698Deferred
                  Offering Costs Included in Accounts Payable
              
              
              25,830
              
              
              13,379
              
              
              25,830Construction
                  in Progress Costs Included in Accounts Payable
              
              
              44,112,592
              
              
              175,000
              
              
              44,112,592Deposits
                  Included in Accounts Payable
              
              
              3,238,000
              
              
              -
              
              
              3,238,000Capitalized
                  Interest Included in Accrued Interest Payable
              
              
              383,130
              
              
              -
              
              
              383,130SUPPLEMENTAL
                  DISCLOSURE- Interest Paid Net of Capitalized Interest
              
              $
              5,942
              
              $
              14,532
              
              $
              20,474
 
 *
        Notes
        to the Financial Statements are an integral part of this
        Statement.*




F-6




**1.
      SUMMARY OF ORGANIZATION SIGNIFICANT ACCOUNTING POLICIES, AND RECENT ACCOUNTING
      PRONOUNCEMENTS**




*Basis
      of Presentation*




The
      financial statements and related notes have been prepared in accordance with
      accounting principles generally accepted in the United States of
      America.




*Securities
      and Exchange Commission Filing*




The
      Company has prepared and filed a Form S-1 Registration Statement with the
      Securities and Exchange Commission (SEC) for a minimum of 10,000 membership
      units up to a maximum of 20,000 membership units for sale at $5,000 per unit
      with a minimum of four units per member. The offering will be open for up to
      one
      year from its effective date (June 7, 2007) unless closed sooner by the Company.
      See note 2 for further discussion on Members’ Equity.




*Nature
      of Business*




Liberty
      Renewable Fuels, LLC (a development stage Delaware limited liability company)
      (the “Company”) to be located near Ithaca, Michigan was organized to pool
      members to build a 110 million gallon natural gas powered ethanol plant. As
      of
      December 31, 2007, the Company is in the development stage with its efforts
      being principally devoted to organizational and equity raising activities.
      The
      Company has closed on all the land necessary for the entire project. The
      Company’s builder, ICM of Colwich, Kansas (“ICM”), began construction of the
      ethanol plant in July 2007. The Company has signed an agreement with a design
      builder to design and build the balance of the project beyond the actual plant
      itself. The corn necessary to run the plant is expected to come primarily from
      on farm storage and other local elevators. However, there are many risks related
      to the project. The Company’s ability to construct the ethanol plant is
      dependent upon obtaining adequate equity and debt financing and many other
      factors including risks related to regulation and governmental action and
      construction risks. The Company also will be subject to risks related to ethanol
      production and the ethanol industry. These risks may impact whether or not
      the
      company will be able to begin ethanol production and continue as a going
      concern.




*Cash
      Held in Escrow*




Investments
      received from the Form S-1 registration statement offering will be held in
      escrow until the earliest of (1) the Company’s receipt of $50,000,000 or more in
      gross offering proceeds for fully-paid units and written debt financing
      commitments providing for sufficient debt financing, which combined with the
      offering proceeds and the $16,368,250 the Company raised in previous private
      placement offerings, would at least equal the estimated total project cost;
      (2)
      one year from the effective date of the registration statement, which was June
      7, 2007; or (3) the Company’s termination of the offering. Funds held in escrow
      will be promptly returned to the members if the Company does not receive written
      debt financing commitments sufficient to release funds from escrow by June
      7,
      2008. These funds held in escrow have not been reported on the accompanying
      balance sheet.




*Purchase
      of Assets*




The
      Company purchased all of the assets and assumed all of the liabilities of
      Liberty Renewable Fuels, L.L.C., a Michigan limited liability company (“Liberty
      Michigan”) in July 2006. Liberty Michigan was originally formed on February 13,
      2006 for the purpose of building an ethanol plant in Central Michigan. Liberty
      Michigan was dissolved by its Board of Managers effective October 1, 2006
      following the purchase of all of its assets by the Company. The cost of the
      purchase was $170,000 and was paid for with proceeds from prior equity
      financing. The operations of Liberty Michigan have been included in the December
      2006 financials of the Company since it was determined to be a predecessor
      entity.




F-7




*REC
      Settlement*




As
      part
      of the acquisition of assets from Liberty Michigan in July 2006, the Company
      assumed the obligations of Liberty Michigan
      under a settlement agreement with the Renewable Energy Consultants, LLC, Mark
      and Terri Bateman, Rick and Susan Chesak and Cyndi Brearley (the “REC Parties”).
      That settlement agreement required the payment to the REC Parties of an initial
      payment of (i) $20,000; (ii) $150,000 upon the closing of their initial private
      offering, which payment has already been made; and (iii) $350,000 third
      installment to the REC Parties from the gross proceeds received in the “Public
      Offering,” (Public Offering defined in the settlement agreement as a public
      offering or offerings and sale of equity securities and arrangement of a debt
      and/or equity package, which raises the money necessary to build the ethanol
      refinery).





On
      February 27, 2007, the REC Parties delivered notice to the Company’s counsel
      that the REC Parties believed the third installment payment under the settlement
      agreement between the REC Parties and Liberty Michigan was then due. On April
      25, 2007, the Company and the REC Parties entered into binding arbitration
      which
      resolved this matter in the Company’s favor. The third payment will be paid to
      the REC Parties when the Company has obtained financing (equity, debt or a
      combination) sufficient to complete construction of the ethanol plant. Such
      installment payment is recorded as a liability in the accompanying balance
      sheet
      and the disagreement is only over the timing of such payment.




*Development
      Stage Enterprise*




The
      Company was recently formed and has no history of operations. The Company
      anticipates a period of significant growth, involving the construction and
      start-up of operations of the plant. During this period of growth and the
      start-up of the plant, there will be no incoming revenues; therefore, the
      Company will continue to accumulate net losses until the start of production.
      The Company is presently, and is likely for some time to continue to be,
      dependent upon our initial managers. The Company’s Builder, ICM (whose
      proprietary technology is in approximately 70% of the ethanol plants built
      in
      the United States), will be providing training and ongoing support to Company
      employees running the ethanol plant to insure successful start-up and continual
      operation of the plant. However, as outlined above, many risks exist that may
      impact whether or not the Company will be able to begin ethanol production.




*Fiscal
      Reporting Period*




The
      Company has adopted a fiscal year ending December 31 for reporting
      financial operations.




*Accounting
      Estimates*




The
      preparation of financial statements in conformity with U.S. generally accepted
      accounting principles requires management to make estimates and assumptions
      that
      affect the reported amounts and disclosures of assets, liabilities, revenue,
      and
      expenses. Estimates used in the preparation of the financial statements include
      the deferral of expenditures for offering costs, which are dependent upon
      successful financing of the project. The Company defers the costs incurred
      to
      raise equity financing until that financing occurs. At the time the Company
      issues new equity, it will net these costs against the equity proceeds received.
      Alternatively, if the equity financing does not occur, the Company will expense
      the offering costs. Other estimates include the estimated fair value of
      share-based payments. Actual results and outcomes may differ from management’s
      estimates and assumptions.




*Cash*




The
      Company maintains its accounts primarily at one financial institution. At times
      throughout the year, the Company’s cash balances may exceed amounts insured by
      the Federal Deposit Insurance Corporation.




*Deferred
      Offering Costs*




The
      Company defers the costs incurred to raise equity financing until that financing
      occurs. At such time that the issuance of new equity occurs, these costs are
      netted against the proceeds received; or if the financing does not occur, they
      are expensed. As of December 31, 2007 and 2006, the Company had deferred
      offering costs of $ 2,495,211 and
      $259,650, respectively.




F-8


*Property
      and Equipment*




Property
      and equipment are stated at cost. Depreciation is provided over estimated useful
      lives (5-7 years for office equipment) by use of the straight line
      depreciation method. Maintenance and repairs are expensed as incurred; major
      improvements and betterments are capitalized. The Company will begin
      depreciating plant assets over their useful lives ranging from 7-39 years
      once the plant is operational.




*Land*




The
      Company records purchases of land at cost. The Company capitalizes amounts
      expended to secure land purchase options unless the options are not exercised
      at
      which time they are expensed.




*Construction
      in Progress*




The
      Company has included in Construction in Progress capitalized expenditures for
      site design and engineering costs, and other costs related to the construction
      project.




*Income
      Taxes*




Liberty
      Renewable Fuels, LLC is treated as a partnership for federal and state income
      tax purposes, and generally does not incur income taxes. Instead its earnings
      and losses are included in the income tax returns of its members. Therefore,
      no
      provision for liability of federal or state income taxes has been included
      in
      these financial statements. The Company has elected a fiscal year end of
      December 31 for income tax reporting purposes.




Effective
      January 1, 2008, the state of Michigan has replaced its Single Business Tax
      with
      the Michigan Business Tax (MBT). The MBT imposes a 4.95% business income tax
      and
      a modified gross receipts tax at the rate of 0.8% for most businesses.





*Life
      Insurance*




The
      Company has secured a $3,000,000 10 year level term life insurance policy on
      the
      life of the Company’s Chief Executive Officer as required by the agreement
      between the Company and the Chief Executive Officer. The yearly cost of the
      policy is $4,222. The beneficiary of the policy is the Company’s Chief Executive
      Officer’s estate. The Company will be responsible for the payment of the premium
      up to the start of ethanol production.




*Fair
      Value of Financial Instruments*




The
      carrying value of cash approximates its fair value.




*Recently
      Issued Accounting Pronouncements*




Management
      has reviewed recently issued, but not yet effective, accounting pronouncements
      and does not expect the implementation of these pronouncements to have a
      significant effect on the Company’s financial statements





*Deposits*


Deposits
      at December 31, 2007 consist primarily of utility deposits paid to Consumers
      Energy and construction related deposits paid to ICM.





*Going
      Concern*


The
      Company is currently a development stage enterprise. All losses accumulated
      since the inception of the business have been considered as part of the
      development stage activities.




The
      accompanying financial statements have been prepared on the basis that the
      Company will continue as a going concern, which assumes the realization of
      assets and the satisfaction of liabilities in the normal course of business.
      Since inception, the Company has been engaged in plant development and
      pre-operational activities. No revenue has been generated and the Company has
      incurred losses and negative operating cash flows of $3,668,809 and $1,791,801,
      respectively, as of December 31, 2007. Continuation of the Company’s existence
      is dependent on its ability to raise additional capital and achieve sustained
      profitable operations. Management is actively pursuing additional equity and
      project financing necessary to complete the project and begin operations. If
      the
      additional funds are not secured, the Company will not be able to begin
      operations. The accompanying financial statements do not include any adjustments
      that might result from the inability to secure necessary capital.




F-9




**2.**  **MEMBERS’
      EQUITY**





The
      Company was formed on June 21, 2006 to have a perpetual life. The Company was
      initially capitalized by 31 members who contributed an aggregate of $2,792,250
      for 1,241 units. The Company then raised $13,576,000, less offering costs,
      and
      accepted subscriptions for 3,394 units under a Private Placement Memorandum
      which was closed on January 18, 2007. This amount includes $4,000,000 from
      ICM,
      $120,000 from its employees and $4,000,000 from Eagle Energy, LLC, an unrelated
      farmer investment group. The balance of $5,456,000 is from various smaller
      members.





As
      specified in the Company’s operating agreement, the Company is authorized to
      issue two classes of membership units, Class A (voting) units and Class B
      (nonvoting) units. The Company has two classes of membership units, which
      include certain transfer restrictions as specified in the operating agreement
      and pursuant to applicable tax and securities laws. Additional classes of
      membership interests and units may be created and issued as the Board determines
      necessary. The units that have been issued to current members or subscribed
      are
      Class A voting units.




**3.**  **NOTE
      PAYABLE ON LAND CONTRACTS**





The
      Company entered into a land contract with an unrelated party on September 28,
      2006, secured by a mortgage on land of 124.07 acres. The principal amount of
      the
      note is for $955,000. The note is payable in two installments. The first
      installment was for $480,000, and was paid on December 16, 2006. This payment
      was discounted in the financial statements, imputed at a 6% interest rate.
      The
      second installment for the balance due is for $475,000 principal plus interest
      thereon at the rate of 6% per annum beginning January 1, 2007 and shall be
      due
      and payable on the earlier of June 1, 2007; or within 10 days after the Company
      obtains permanent financing for the Company’s intended use of the property as
      defined in the Buy and Sell Agreement dated August 21, 2006. Although the
      payment was not made by June 1, 2007 and an agreement for permanent financing
      was not entered into, the Company did receive a verbal extension for the second
      installment and this verbal agreement currently remains in force. The second
      installment will not be due until the permanent financing is obtained according
      to the verbal extension. Included in general and administrative expense is
      $14,532 of interest expense from inception through December 31, 2006 and $
      28,499 from inception through December 31, 2007.




The
      Company entered into a land contract with another unrelated party on November
      16, 2006, secured by a mortgage on land of 49.4 acres for a total of $296,460.
      On the date of execution a $148,230 principal payment was made. The agreement
      allows the Company to pay the outstanding balance of $148,230 on June 1, 2007.
      The outstanding principal and interest amounts were paid by the Company on
      June
      11, 2007 with no penalty from the lender. The agreement bore an interest rate
      of
      7% per annum.




**4.**  **INCOME
      TAXES**




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




Organizational
      costs and other items expensed for financial reporting purposes may be
      capitalized or non- deductible for tax reporting purposes.




The
      Company, as a LLC, pays no federal income tax. Instead, as unit holders, members
      will be required to report on their income tax return their allocable share
      of
      the income, gains, losses and deductions recognized without regard to whether
      they receive cash distributions. Therefore, the income, gains, and losses will
      pass through to the unit holders for income tax purposes.




However,
      if for any reason the Company were to be required to be taxed as a corporation
      rather than a partnership, federal income tax payments may be required.




F-10




**5.**  **SHARE-BASED
      PAYMENTS**




In
      December 2004, the Financial Accounting Standards Board (FASB) issued Statement
      of Financial Accounting Standards(SFAS)
      No. 123 (revised 2004), “Share-Based Payments,” (“SFAS No. 123R”). SFAS No. 123R
      replaces SFAS No. 123 “Accounting for Stock-Based Compensation” and supersedes
      Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock
      Issued to Employees”. SFAS No. 123R requires the measurement and recognition of
      compensation expense for all share-based payment awards to employees and
      directors based on estimated fair values, eliminating pro forma disclosure
      as an
      alternative. The cost is measured based on the grant-date fair value of the
      equity or liability instruments issued.




The
      Company adopted the provisions of SFAS 123R at its inception. The compensation
      expense recognized, as a result of SFAS 123R during the periods ended from
      inception to December 31, 2006 and December 31, 2007 equals $412,384 and
      $1,414,094, respectively and reflects compensation expense for all estimated
      share-based awards granted through December 31, 2006 and December 31, 2007
      based
      on the grant-date fair value.




On
      June
      23, 2006, the Company’s Officers, Steering Committee Members and Finance and
      Audit Committee members were granted an equity fee, as described below, to
      compensate them for the additional time and responsibility in fulfilling their
      roles. The compensation shall be for service during the time period commencing
      on June 23, 2006, and terminating on the earlier of (i) June 30, 2008 or (ii)
      the date of the first election following the commencement of ethanol production.
      The share-based compensation recognized for these officers and committee members
      from inception through December 31, 2006 and December 31, 2007 was $90,851
      and
      $265,761, respectively. These Class A units shall vest on the later of (i)
      June 30, 2008 or (ii) at financial close, the point at which the debt portion
      of
      the project has been secured from a financial institution and the funds are
      available to the Company.




·
            
            The
                Vice-Presidents, the Secretary and the Treasurer each received a
                grant of
                10 units.·
            
            The
                Managers who serve on the Steering Committee that are not officers
                each
                received a grant of 6 units.·
            
            The
                Managers who serve on the Finance and Audit Committee each additionally
                received a grant of 2 units.




Managers
      and Officers may by declaration forfeit their grant or may elect to take their
      equity component as deferred units at their election after the vesting date
      for
      a period of time not to exceed five years. Resignation or removal of an Officer
      or Manager shall result in the pro-ration of their entitlement to the previously
      mentioned grant from June 23, 2006 through the date of their resignation or
      removal and the balance granted to their replacement is subject to the same
      restrictions as intended in the original grant.




The
      share-based compensation for the President and Chief Executive Officer (“CEO”)
      is from the date of Board approval, August 10, 2006, through 90 days after
      the
      start of production. The number of Class A units to be issued to the CEO will
      be
      equal to 3% of the total number of Class A and Class B units outstanding at
      the
      time of commencement of ethanol production. The Company estimates that 520
      Class
      A units will be granted to the CEO. This is an estimated number since the
      calculation of 3% of the total number of units to be issued is undeterminable
      at
      this time. These units shall vest on the later of (i) the date on which the
      total number of issued units, at the time the ethanol plant commences ethanol
      production, are determinable; or (ii) 90 days after the commencement of ethanol
      production. The amount expensed from inception through December 31, 2006 and
      December 31, 2007 for the President and CEO share-based compensation was
      $321,533 and $1,148,333, respectively.




F-11





The
      following table summarizes information about combined stock awards at December
      31, 2006 and December 31, 2007:


**Number
                  Granted**
              
              **Fair
                  Value**
              
              **Total**President
                  & CEO (est.)
              
              
              520
              
              $
              3,180
              
              $
              1,653,600Officers
              
              
              60
              
              
              3,180
              
              
              190,800Steering
                  Committee
              
              
              42
              
              
              3,180
              
              
              133,560Finance
                  and Audit Committee
              
              
              8
              
              
              3,180
              
              
              25,440**Total**
              
              
              **630**
              
              
              
              
              **$**
              **2,003,400**




The
      Class
      A unit awards described above will be granted to the appropriate Members who
      will begin with an opening balance of zero in their capital account.
      Distributions will be made in accordance with each Member’s capital account
      balances upon liquidation. There are no other outstanding options, warrants
      or
      rights for the issuance of securities for any other party or individual.




The
      Company, with the assistance of Stout Risius Ross, Inc., an independent
      valuation firm, estimated the fair value of the unit awards at the date of
      grant
      utilizing the Black-Scholes Formula and the following assumptions:




·Effective term
            
            
            10
                years·Volatility factor
            
            
            75.0
            %·Risk Free Interest Rate
            
            
            4.5
            %·Dividend Yield
            
            
            0.0
            %




**6.
      LEASES**




The
      Company leases an office from its chief financial officer, under an operating
      lease on a month to month basis. The agreement requires monthly payments of
      $500
      plus utilities and services. From inception through December 31, 2006 and
      December 31, 2007, the Company recorded rent expense of $2,839 and $13,142,
      respectively.




**7.**  **COMMITMENTS
      AND CONTINGENCIES**




*Construction*




On
      April
      18, 2007, the Company executed a definitive agreement with ICM for the
      construction of the ethanol plant at a cost of $134,000,000, indexed to the
      price of stainless steel. The Company has made the following payments:




·
            $250,000
                was paid when the letter of intent was
                executed




·
            $2,000,000
                was paid on January 13, 2007




·
            $2,000,000
                was paid on March 14, 2007




·
            $750,000
                was paid on April 18, 2007




F-12




The
      remaining $8,400,000 of the initial 10% down payment has been deferred. During
      the year ended December 31, 2007, $4,232,162 of the $5,000,000 in down payments
      made by the Company was applied against invoices by ICM. The balance of down
      payments as of December 31, 2007 total $767,838.





*Letter
      of Credit and Subcontract Commitment*




On
      January 3, 2007 the Company executed a letter of credit agreement with Fifth
      Third Bank for work to be performed by a subcontractor under the Company’s
      contract with Wilcox Design—Build, LLC. Under this agreement, the Company placed
      cash of $1,634,000 into a restricted demand deposit account as cash collateral
      for the Company’s obligations to Fifth Third Bank, including, but not limited
      to, the letter of credit agreement. As of December 31, 2007 $352,099 remains
      as
      restricted cash collateral.





Due
      to a
      lack of funding for work performed in November 2007, Wilcox Design - Build,
      LLC
      has ordered their subcontractors to stop work on the project. Several of these
      subcontractors have filed liens on the project. Management expects to obtain
      financing in the near term, which will allow for the payment of waivers of
      $1,434,719 plus retainage of $300,836 to Wilcox Design Build, LLC and liens
      to
      be issued and the work to commence once again. In March 2008, an agreement
      was
      reached between the Company, ICM and the Wilcox subcontractors in which ICM
      agreed to pay the Company who, in turn, paid Wilcox $906,034 of the November
      2007 progress billing. This amount is approximately one-half of the amounts
      due
      and owing to the Wilcox subcontractors. In exchange for the payment, the Wilcox
      subcontractors have agreed that they will not terminate their subcontracts,
      file
      suit against the Company to collect additional amounts due, or foreclose on
      the
      liens for a period of 180 days.




*Consulting
      and Other Contracts: related parties*




In
      July
      2006, the Company entered into an agreement with a related party, a manager,
      Muchmore, Harrington, Smalley and Associates, for consulting services related
      to
      the Company’s permitting process. The agreement was terminated. The agreement
      required monthly payments of $3,500. From inception through December 31, 2006
      and December 31, 2007 the Company paid $21,000 and $59,500, respectively for
      these services.




In
      October 2006, the Company entered into an agreement with a related party, a
      manager, Wilson C. Lauer, to purchase conservation development rights for a
      one
      time payment of $50,000. The development rights purchase was required by the
      State of Michigan to release a parcel of land purchased by the Company from
      a
      farmland perseveration agreement. The cost of these development rights has
      been
      recorded as Land.




In
      July
      2006, the Company entered into an agreement with a related party, a manager,
      Kathleen Rahm Fiscus, for consulting services relating to the Company obtaining
      grants at the federal, state and local levels. The agreement requires monthly
      payments on a time and travel basis. The agreement is not active. From inception
      through December 31, 2006 and December 31, 2007 the Company paid $11,618 for
      these services.




In
      August
      2006, the Company entered into an agreement with a related party, Earthscape
      Resource Management which is partially owned by Scott Daniel Everett, a manager,
      for consulting services as a liaison between the Company and local
      municipalities and agencies. The agreement was terminated. The agreement
      required monthly payments on a time and travel basis. From inception through
      December 31, 2006 and December 31, 2007 the Company paid $18,189 and $48,689,
      respectively for these services.




In
      August
      2006, the Company entered into a management consulting agreement with a related
      party, Thomas Edward Pumford Jr., to perform internal accounting functions
      and
      matters related to our financial transactions and reporting requirements. During
      the term of this agreement, a consulting fee of $4,500 per month is to be paid
      upon presentation of invoices for services. This agreement may be terminated
      by
      either party at anytime, for just cause, during its duration upon 10 days
      written notice. The agreement was terminated on February 19, 2008, effective
      February 29, 2008. From inception through December 31, 2006 and December 31,
      2007, the Company paid $22,500 and $76,978, respectively for these services.




F-13




In
      October 2006, the Company entered into a management consulting agreement with
      a
      related party, David Moeberg Skjaerlund, to provide management services in
      the
      capacity of the CEO. The agreement requires the Company to issue a number of
      Class A units to the CEO equal to 3% of the total number of Class A and Class
      B
      units outstanding at the time of commencement of ethanol production. The
      agreement is for the period from the effective date of the agreement until
      90
      days after the commencement of ethanol production. The Company secured a
      $3,000,000 10- year level term life insurance policy on the life of the
      Company’s Chief Executive Officer. The beneficiary of the policy is the CEO’s
      estate. The yearly cost of the policy is $4,222. The Company will be responsible
      for the payment of the premium up to the start of ethanol production. If the
      CEO
      dies before the commencement of ethanol production, the CEO’s personal
      representative shall have the option to purchase the number of Class A units
      equal to 3% of the total number of Class A and Class B units issued by the
      Company. The unit price to be paid by the CEO’s personal representative shall be
      the unit price paid for the purchase units prior to or nearest in time to the
      CEO’s death. The Company may terminate the agreement only if the related party
      is in breach of the contract or becomes permanently incapacitated. The
      termination of the agreement by the Company must also be approved by majority
      of
      the Board of Managers.




In
      October 2006, the Company signed a non-binding Letter of Intent (LOI) with
      a
      related party, Clifford Vennix, a manager, to purchase Auburn Bean and Grain
      Company, a Michigan corporation, and its real estate owned by KMA Group, LLC.
      The LOI expired in 2007. The previously entered into agreements with Auburn
      Bean
& Grain and Cooperative Elevator have been terminated pursuant to their
      terms.





As
      of
      July 13, 2007, the Company received proceeds of $380,000 from the issuance
      of
      Promissory Notes to individuals on the Board of Managers. These Promissory
      Notes
      will be paid at the earlier of (i) the closing of a bridge loan; (ii) the
      financial close, or (iii) April 2008, at which time a payment of $200,000 will
      be made with the balance of $180,000 being paid in July 2008. These notes bear
      interest at the rate of 20% per annum. As of December 2007, the Company received
      proceeds from four managers totaling $17,500 that were used to fund the
      refundable due diligence fee to explore a financing option.




On
      July
      20, 2007, the Company executed a promissory note payable to ICM in the principal
      amount of $1,200,000 to provide interim financing of the Company’s operations.
      The outstanding principal amount of the note and all accrued and unpaid interest
      was payable on October 15, 2007. The note carried an interest rate of 12% per
      annum and the Company could prepay the note without penalty. The note was
      personally guaranteed by the Company’s CEO, David Skjaerlund. As stated in the
      Form 8-K filed on September 24, 2007, on August 13, 2007, the Company entered
      into an amended loan and security agreement with ICM to establish a $10,000,000
      revolving line of credit, which included any remaining balance of the $1,200,000
      note. The line of credit carries an interest rate of 12% per annum and matured
      on November 1, 2007 unless the Company closed on its offering in the minimum
      amount of $50,000,000 prior to the maturity date. In that case, the
      Company was to repay the loan from proceeds of such offering within 5
      business days of its receipt of such funds. Otherwise, all outstanding principal
      and interest was due and payable on November 1, 2007. The line of credit is
      secured by all of the Company’s assets and is personally guaranteed by the
      Company’s CEO, David Skjaerlund.  Effective
      November 1, 2007, an amendment to the Loan and Security Agreement and Promissory
      Note was executed to extend the maturity date of the note from November 1,
      2007
      to December 15, 2007. Pursuant to the amendment, ICM will approve and authorize
      all subcontractor work at the facility. As of December 31, 2007, the promissory
      note had not been paid, renewed, or extended. However, in March 2008, a second
      amendment to the amended loan and security agreement was executed that increased
      the borrowings on the revolving line of credit to $11,250,000 and extended
      the
      due date to May 1, 2008.





*Consulting
      and Other Contracts: unrelated parties*




During
      the course of the year, the Company entered into various agreements with
      unrelated parties for consulting services related to the Company’s marketing of
      ethanol and dry distillers grains, consulting services to outline the Company’s
      options in considering bio-diesel and the exploration of synergistic projects
      that would complement a bio-energy park concept, and consulting services to
      provide industry related and other professional services and administrative
      services These agreements vary in length and have been terminated based on
      the
      agreements. Monthly payments for services and for reasonable travel expenses
      are
      required. From inception through December 31, 2006 and December 31, 2007 the
      Company paid in total $24,563 and $175,283, respectively for these services.




In
      August
      2006, the Company entered into an agreement with an unrelated party for
      administrative consultant services. The agreement may be terminated by either
      party upon 10 days written notice and the agreement was not renewed on March
      1,
      2008. The agreement requires monthly payments of $3,000. From inception through
      December 31, 2006 and December 31, 2007 the Company paid $15,499 and $56,159,
      respectively for these services.




F-14




In
      December 2006, the Company entered into an agreement with an unrelated party
      for
      the design of the Company’s grain handling system. The agreement was for $24,200
      with a $3,500 retainer, which was paid on February 1, 2007. The scope of the
      work is currently in progress. As of December 31, 2007 the Company paid $19,852
      for these services.




In
      January 2007, the Company entered into an agreement with an unrelated party
      for
      the development of a financial forecast to assist in the procurement of the
      required bank financing for project completion. The amount of this agreement
      is
      for $22,500 and the scope of work has been completed. As of December 31, 2007
      the Company paid approximately $27,015 for the services.





In
      February 2007, the Company entered into an agreement with an unrelated utility
      company to provide for natural gas facilities for unusual facility requirements
      for the operations of the Company’s plant. The agreement may be terminated at
      any time by mutual agreement of both parties. The agreement calls for the
      Company to pay the utility company a total of $2,481,000. Of this total amount
      of $2,481,000, $2,480,300 is subject to refund while the remaining $700 is
      a
      non-refundable contribution. Upon execution of the agreement, the Company paid
      $343,000 to the utility company. The agreement provides for a second installment
      of $1,311,000 to be paid to the utility company by June 2007. The agreement
      also
      calls for the third and final installment of $827,000 to be paid to the utility
      company in October 2007. The second and third installments have been
      indefinitely deferred by the Company. The utility company shall refund all
      or a
      portion of the refundable portion of the deposit over a period of five (5)
      years
      based on gas consumption from the date the construction of the Company’s
      facilities is completed. The refunds shall not exceed the refundable deposit
      and
      the deposit shall not bear interest. Calculations of the revenue shall exclude
      gas cost recovery charges, surcharges, and sales tax. The utility company shall
      calculate estimates of revenues upon which refunds shall be issued. The utility
      company shall refund to the Company 100% of the incremental increase in the
      amount of actual revenue paid to the utility company over the base revenue
      within 45 days of the end of the first complete 12-month period following the
      date on which construction of the Company’s facilities was completed. The
      increase shall be calculated by reviewing the revenue received during the
      24-month period ending the month prior to the completion of construction of
      the
      Company’s facilities divided by two, which amount shall be defined as the “Base
      Revenue.” The utility company shall refund to the Company 100% of the
      incremental revenue increase over the Base Revenue for each of the following
      four successive 12-month periods following the date on which construction of
      the
      Company’s facilities was completed. The utility company shall also retain any
      portion of the refundable deposit remaining at the end of the fifth 12-month
      period following the date on which construction of the Company’s facilities was
      completed, and no further refund(s) will be paid.





In
      May
      2007, the Company entered into an agreement with an unrelated utility company
      to
      provide extraordinary facilities for the operation of the Company’s plant. The
      agreement may be terminated at any time by (i) mutual agreement of both parties
      or (ii) either party upon giving the other at least 90 days written notice.
      Upon
      execution of the agreement, the Company was supposed to pay $500,000 to the
      utility company. This down payment was deferred and subsequently paid on August
      14, 2007. The agreement calls for a payment of $1,100,000 due on or before
      August 1, 2007, which has been indefinitely deferred, and an additional payment
      of $925,000 due on or before January 15, 2008. Of the total $2,525,000 that
      is
      to be paid by the Company, $2,275,000 is subject to refund while the remaining
      $250,000 is a nonrefundable contribution. The nonrefundable portion of any
      amount covers the incremental costs of installing and maintaining the
      facilities. The utility company shall refund all or a portion of the deposit
      subject to refund over a period of five years from the month immediately
      following (i) the date that the utility company completes construction or (ii)
      the requested completion date, whichever date is later. The refund shall not
      exceed the deposit subject to refund and will bear no interest. The utility
      company shall refund to the customer the lesser of (i) 20% of the deposit
      subject to refund or (ii) 12.3% of the 12-month incremental revenue. The utility
      company shall retain any portion of the deposit subject to refund remaining
      at
      the end of the fifth 12-month period and no further refund(s) will be paid.
      The
      requested completion date of this project is July 1, 2008.




F-15




In
      June
      2007, the Company entered into an agreement with an unrelated party who will
      purchase the Company’s entire production of ethanol for resale to third-party
      customers. In addition, the unrelated party will provide marketing and risk
      management advice to the Company with respect to ethanol purchased and sold
      under this agreement. The initial term of this agreement will begin on the
      date
      of commencement of ethanol production at the Company’s facility and continue
      thereafter for five years. The agreement will then automatically renew for
      an
      additional five year term unless either party terminates the agreement no later
      than 90 days before the end of the initial term. Furthermore, either party
      may
      terminate the agreement for convenience any time after the expiration of the
      second year of the initial term upon 120 days prior written notice to the other
      party. In the event of a default by either party, the non-defaulting party
      may
      send notice of default to the defaulting party. If the breaching party does
      not
      cure the default within 30 days of receiving the notice (with the exception
      of
      non-payment or failure to deliver performance assurance, which must be cured
      within two business days of the notice), the non-defaulting party may terminate
      the agreement and all scheduled deliveries upon 30 days notice to the defaulting
      party. The unrelated party will pay the Company the price charged to a
      third-party customer for the ethanol less expenses and 0.75% of the remaining
      amount, which decreases to 0.60% after the first six months of the contract.




In
      June
      2007, the Company entered into an agreement with an unrelated party who will
      purchase the Company’s entire production of dry product for resale to
      third-party customers. In addition, the unrelated party will provide marketing
      and risk management advice to the Company with respect to dry product purchased
      and sold under this agreement. The initial term of this agreement will begin
      with commencement of ethanol production at the Company’s facility and continue
      thereafter for two years. The agreement will then automatically renew for
      additional two year terms unless either party terminates the agreement no later
      than 120 days before the end of the initial term or any renewal term, or the
      parties agree on other renewal terms. Furthermore, either party may terminate
      the agreement for convenience any time after the expiration of the initial
      term
      upon 120 days prior written notice to the other party. In the event of a default
      by either party, the non-defaulting party may send notice of default to the
      defaulting party. Upon the delivery of such notice, the non-defaulting party
      may
      exercise any remedy available under this agreement, at law or in equity,
      including the right to (i) immediately suspend performance hereunder until
      the
      curing of the default and/or (ii) terminate the agreement upon 30 days notice
      to
      the defaulting party. The unrelated party will pay the Company the price charged
      to a third-party customer less expenses and less $3.50 per ton of distiller’s
      dried grains and $2.50 per ton of wet distiller’s grains, modified wet
      distiller’s grains, and solubles.





In
      July
      2007, the Company entered into an agreement with an unrelated party to gain
      membership in the Ethanol Promotion and Information Council, a nonprofit
      corporation that promotes the ethanol industry. The agreement states that the
      Company agrees to pay the unrelated party $10,000 upon financial close. Upon
      receipt of the membership fee, membership is immediate and will be effective
      for
      12 months from the date production begins with an option for renewal. The dues
      will be waived for the first three months of production and a discounted rate
      of
      $0.0025 per gallon for non-denatured production gallons will be in effect for
      the remaining nine months of the first year of membership. A standard rate
      of
      $0.005 per gallon for non-denatured production gallons will become effective
      following the first 12 months of production with the continuation of membership.
      In the first 12 months, monthly membership fees will be credited to the Company
      up to the amount of the Company’s initial $10,000 fee. After this amount has
      been reached, the Company will begin to receive monthly invoices. Upon the
      Company’s membership becoming effective, the Company will be allowed one vote in
      the affairs of the unrelated party and will be eligible for the election of
      the
      board of directors and/or appointment to certain committees.





In
      August
      2007, the Company entered into an agreement with an unrelated party to provide
      consulting services. The agreement commenced on August 1, 2007 and ended on
      September 1, 2007. The agreement states that the unrelated party will be paid
      by
      the Company at a rate of $50,000 per month. The service provider was to be
      reimbursed for reasonable expenses. From inception through December 31, 2007,
      the Company paid $50,000 for these services.




In
      August
      2007, the Company entered into a letter of intent with an unrelated party for
      the detailed design and construction services of the grain handling package
      for
      the Company’s new ethanol plant currently under construction. Before a contract
      with the unrelated party can be executed, certain details of the project have
      to
      be developed and defined. The letter of intent authorizes the unrelated party
      to
      act on behalf of the Company and allows progress on the project to the extent
      desired and authorized by the Company. The unrelated party will proceed with
      such work on a cost plus 10% overhead and 6% commission fee basis plus
      professional service charge rates. The initial total limit of the letter of
      intent, without extension, is $1,000,000. If costs beyond the limit become
      warranted prior to the signing of the project contract, written authorization
      must be obtained to extend the letter of intent before proceeding with
      commitments beyond the initial total limit. An initial down payment of $200,000
      was made by the Company upon execution of the letter of intent. Thereafter,
      the
      Company will be billed by the unrelated party on a monthly basis. On October
      15,
      2007, the Company entered into a letter of intent extension with an unrelated
      party for the detailed design and construction services of the grain handling
      package for the Company’s new ethanol plant currently under construction. The
      extension increased the total limit of the original letter of intent to
      $4,000,000 from $1,000,000. The letter of intent extension also authorized
      the unrelated party to make additional procurement commitments on the Company’s
      behalf up to an additional $3,000,000 limit based on the Company’s review and
      approval of specific project items over $50,000 in value. As of December 31,
      2007 $ 358,550 was paid and $1,396,121 remains in accounts payable.




F-16




In
      September 2007, the Company entered into an agreement effective July 1, 2007,
      with an unrelated party to provide industry related and other professional
      services. The agreement commenced on July 1, 2007 and ended on September 30,
      2007. The agreement states that the unrelated party will be paid by the Company
      at a rate of $3,500 per month. The service provider will also be reimbursed
      for
      reasonable expenses including mileage for attending meetings at locations other
      than the Company’s office and meals, lodging and other travel expenses for
      overnight trips. From inception through December 31, 2007, the Company paid
      $16,513 for these services.




*Donations
      for Charitable Purposes*




The
      Board
      of Managers shall implement the governing principle of reinvestment back to
      the
      community-at-large through charitable giving. Prior to the distribution of
      Net
      Cash Flow (as defined in the Company Agreement) to the holders of our units
      and
      subject to the terms and conditions of any applicable loan covenants and
      restrictions or early debt retirement, the Board of Managers, in their sole
      discretion, shall endeavor to provide donations of Net Cash Flow for charitable,
      religious, educational, scientific, literary, or public safety purposes, with
      a
      priority given to supporting our youth leadership programs, college
      scholarships, county farmland preservation programs and global relief efforts.
      The Board of Managers may establish a foundation to receive the donations for
      the purpose of building a capital endowment fund for future charitable giving.
      The amount of donations for charitable purposes shall not exceed the following
      percentage of Net Cash Flow for the fiscal year in which the donation is made,
      determined as follows: the projected percentage of return on investment for
      the
      fiscal year to unit holders divided by 10.




Until
      the
      point in time when the cumulative distribution of profits to members that
      purchased units from the Company is equal to the initial capital contribution
      by
      such members, the amount of charitable donations shall not exceed 2% of the
      Net
      Cash Flow in any fiscal year.






F-17


*Grain
        Origination Agreements*




*Brown
      Milling, Inc.*




In
      October 2006, the Company entered into a grain origination agreement with Brown
      Milling Inc., a related party, which operates grain elevators in Shepherd,
      Rosebush and Delwin Michigan. The Company will be able to purchase all of the
      corn that Brown Milling markets. The agreement is effective as of
      January 1, 2008 for an initial term of four years (which expiration date is
      subject to automatic one year extensions if not terminated six months prior
      to
      expiration). The agreement gives the Company a first right of purchase on any
      corn that Brown Milling proposes to sell. The agreement also gives the Company
      the right to purchase corn that any third party proposes to purchase from Brown
      Milling. The Company is obligated to pay Brown Milling an annual fee of $35,000
      at the beginning of each year as well as a per bushel fee. The fee for 2008
      in
      the amount of $35,000 has not been paid as of March 31, 2008. Ron Brown,
      President of Brown Milling, also serves on the Company’s Board of
      Managers.




*Auburn
        Bean & Grain Co. and Cooperative Elevator Co.*
  We
        have previously entered into agreements with Auburn
        Bean & Grain Co. and Cooperative Elevator Co. relating to the acquisition of
        Auburn and the purchase of grain from Cooperative Elevator. Both of these
        agreements have been terminated pursuant to their terms.


F-18




**8.**  **SUBSEQUENT
      EVENTS**




*Status
      of Debt Financing*




As
      of
      January 21, 2008, the nonbinding term sheet with Farm Credit Services of Grand
      Forks was terminated. The Company continues to pursue other alternative methods
      of debt financing.





*Status
      of Cooperative Elevator & Auburn Bean & Grain Co.
      Agreements*





We
      have
      previously entered into agreements with Auburn Bean & Grain Co. and
      Cooperative Elevator Co. relating to the acquisition of Auburn and the purchase
      of grain from Cooperative Elevator. Both of these agreements have been
      terminated pursuant to their terms.





*Status
      of ICM Loan and Security Agreement and Promissory Note:*





As
      of
      March 31, 2008, these documents have been amended to increase the borrowings
      to
      $11,250,000 and extend the due date to May 1, 2008. Due to a lack of funding
      from the Public Offering, which has impeded the Company’s ability to pay
      outstanding invoices of $43,273,198, plus retainage of approximately $2,400,000,
      ICM has brought construction on the site to a natural stopping point. Management
      expects to obtain the necessary project financing in the near term to allow
      for
      their invoices to be paid and construction to resume.




*Status
        of Wilcox Subcontract Commitment*




Due
        to a lack of funding for work performed in November
        2007, Wilcox Design - Build, LLC has ordered their subcontractors to stop
        work
        on the project. Several of these subcontractors have filed liens on the project.
        Management expects to obtain financing in the near term, which will allow
        for
        the payment of waivers of $1,434,719 plus retainage of $300,836 to Wilcox
        Design
        Build, LLC and liens to be issued and the work to commence once again. In
        March
        2008, an agreement was reached between the Company, ICM and the Wilcox
        subcontractors in which ICM agreed to pay the Company who, in turn, paid
        Wilcox
        $906,034 of the November 2007 progress billing. This amount is approximately
        one-half of the amounts due and owing to the Wilcox subcontractors. In exchange
        for the payment, the Wilcox subcontractors have agreed that they will not
        terminate their subcontracts, file suit against the Company to collect
        additional amounts due, or foreclose on the liens for a period of 180
        days.


*Status
      of Lease Agreement:*





As
      of
      February 19, 2008, the Company has given 30 days notice to terminate its lease
      and has moved its administrative operations to the project site in Ithaca,
      Michigan.





*Member
      Note Payable*





On
      March
      22, 2008, the Company issued a note payable to its current Manager on the Board
      of Managers in the amount of $21,458. This note is to pay in full business
      expenses incurred on behalf of the Company by David Skjaerlund from March 2006
      to the 1stquarter of 2008. This note bears interest at twenty
      percent (20%) per annum and is due and payable on December 20,
      2008.





*Termination/Resignations*




On
      March
      20, 2008, Thomas Pumford was removed from the office of Secretary of the
      Company, effective immediately, pursuant to a vote of the Board of Managers
      of
      the Company. The Board of Managers appointed Scott Everett as the new Secretary
      of the Company, effective immediately. Also on March 20, 2008, Mr. Pumford
      was
      removed from the office of Treasurer of the Company, effective April 15, 2008,
      pursuant to a vote of the Board of Managers of the Company. The Board of
      Managers appointed Scott Crumbaugh as the new Treasurer of the Company,
      effective April 15, 2008. Mr. Pumford continues to serve as a Manager of the
      Company.




F-19





On
      March
      23, 2008, Mr. Dennis Muchmore resigned his office as a Vice President of the
      Company. Mr. Muchmore continues to serve as a Manager of the Company.





On
      March
      25, 2008, Mr. Robert Kennedy resigned his office as a Vice President of the
      Company. Mr. Kennedy continues to serve as a Manager of the
      Company.





On
      March
      25, 2008, Mr. Darryl Fowler resigned as a member of the Steering Committee
      of
      the Company and as chairman of and a member of the Finance and Audit Committee
      of the Company. Mr. Fowler continues to serve as a Manager of the Company.





**INDEX
      TO EXHIBITS**




10.1
            
            Letter
                of intent dated August 22, 2006 between Liberty Renewable Fuels LLC
                and
                ICM, Inc.10.2
            
            Standard
                Form of Agreement Between Owner and Design-Builder dated December
                19, 2006
                between Liberty Renewable Fuels LLC and Wilcox, LLC.10.3
            
            Standard
                Form of General Conditions of Contract Between Owner and Design-Builder
                dated December 19, 2006 between Liberty Renewable Fuels LLC and Wilcox
                LLC.10.4
            
            Corn
                Marketing Agreement dated October 27, 2006 between Liberty Renewable
                Fuels
                LLC and Cooperative Elevator Co.10.5
            
            Corn
                Purchase and Sale Agreement dated October 27, 2006 between Liberty
                Renewable Fuels LLC and BMI Milling, Inc.10.6
            
            Letter
                of intent dated October 27, 2006 among Liberty Renewable Fuels LLC,
                Auburn
                Bean and Grain Co. and the KMA Group, L.L.C.10.7
            
            Employment
                Agreement dated October 19, 2006 between Liberty Renewable Fuels
                LLC and
                David M. Skjaerlund10.8
            
            Retainer
                Agreement dated July 10, 2006 between Liberty Renewable Fuels LLC
                and
                Muchmore Harrington Smalley & Associates, Inc.10.9
            
            Service
                Contract dated August 1, 2006 between Liberty Renewable Fuels LLC
                and
                Thomas E. Pumford, Jr.10.10
            
            Service
                Contract dated August 15, 2006 between Liberty Renewable Fuels LLC
                and Sky
                Strategies10.11
            
            Client
                Contract dated August, 2006 between Liberty Renewable Fuels LLC and
                Earthscape Resource Management




F-20




10.12
            
            Service
                Contract dated October 30, 2006 between Liberty Renewable Fuels LLC
                and
                Peter Baker10.13
            
            Letter
                agreement dated July 14, 2006 between Liberty Renewable Fuels LLC
                and
                PlanScape Partners10.14
            
            Settlement
                Agreement dated June 23, 2006 between Liberty Renewable Fuels LLC
                and
                REC10.15
            
            Business
                Loan Agreement dated January 3, 2007 between Liberty Renewable Fuels
                LLC
                and Fifth Third Bank10.16
            
            Deposit
                Account Control Agreement dated January 3, 2007 between Liberty Renewable
                Fuels LLC and Fifth Third Bank10.17
            
            Form
                of Letter of Credit Form dated January 9, 2007 issued by Fifth Third
                Bank
                for the benefit of Wilcox Design-Build LLC10.18
            
            Service
                Contract dated February 5, 2007 between Liberty Renewable Fuels LLC
                and
                Jake Hirschman10.19
            
            Letter
                Agreement dated January 2, 2007 between Liberty Renewable Fuels LLC
                and
                Clifton Gunderson LLP10.20
            
            Agreement
                Between Owner and Design/Builder on the Basis of a Stipulated Price
                dated
                April 18, 2007 between ICM, Inc. and Liberty Renewable Fuels,
                LLC10.21
            
            General
                Conditions of the Contract between Owner and Design/Builder dated
                April 18, 200710.22
            
            Marketing
                Agreement dated June 25, 2007, by and between Liberty Renewable Fuels
                LLC and Zeeland Farm Services, Inc.10.23
            
            Ethanol
                Purchase and Marketing Agreement date June 25, 2007, by and between
                Liberty Renewable Fuels, LLC and C&N Ethanol Marketing
                Corporation10.24
            
            Form
                of Lock-In Agreement between Liberty Renewable Fuels LLC and certain
                members and significant equity holders of Liberty10.25
            
            Promissory
                Note dated July 20, 2007, in the principal amount of $1,200,000 by
                Liberty Renewable Fuels LLC, as Borrower, in favor of ICM, Inc.,
                as
                Lender.10.26
            
            Facilities
                Agreement Executed in May 2007, between Consumers Energy and Liberty
                Renewable Fuels, LLC for Provision of Extraordinary Facilities For
                High
                Voltage Distribution Service10.27
            
            Agreement
                Executed in February 2007, between Consumers Energy and Liberty Renewable
                Fuels, LLC for Provisions of Natural Gas Facilities for Unusual Facilities
                Requirements10.28
            
            Service
                Contract with Carolyn Pumford Dated July 15, 200710.29
            
            Service
                Contract with EnerJy Resources, L.L.C. Dated July 16,
                2007




F-21




10.30
            
            Membership
                Agreement with Ethanol Promotion and Information Council Dated July
                10,
                200710.31
            
            Service
                Contract with Jake Hirshman Dated July 1, 200710.32
            
            Independent
                Contractor Agreement with The John Truscott Group, L.L.C. Dated August
                1,
                200710.33
            
            Service
                Contract with Rod Davidson Dated August 6, 200710.34
            
            Service
                Contract with Greg Cochran Dated July 30, 200710.35
            
            Letter
                of Intent with Hogenson Construction Company Dated August 13,
                200710.36
            
            Letter
                of Intent Extension with Hogenson Construction Company Dated October
                15,
                200710.37
            
            First
                Amendment to ICM, Inc. Amended Loan and Security Agreement and Promissory
                Note10.38*
            
            Second
                Amendment to ICM, Inc. Amended Loan and Security Agreement and Promissory
                Note10.39*
            
            Service
                Contract Termination with Thomas E. Pumford, Jr., Dated November
                5,
                200710.40*
            
            Service
                Contract Termination with Jennifer Clark a/k/a EnerJy Resources,
                L.L.C.,
                Dated November 5, 200710.41*
            
            Service
                Contract Termination with Greg Cochran. Dated November 21,
                200710.42*
            
            Service
                Contract Termination with Earthscape Resource Management. Dated November
                5, 200710.43*
            
            Service
                Contract Termination with Liberty Renewable Fuels LLC and Muchmore
                Harrington Smalley & Associates, Inc. Dated November 5,
                200710.44*
            
            Service
                Contract Termination with Liberty Renewable Fuels LLC and Peter Baker,
                Dated November 5, 200710.45*
            
            Service
                Contract with Jennifer Clark, Dated December 6, 2007, Effective from
                December 10, 2007 to December 31, 200710.46*
            
            Service
                Contract with Jennifer Clark, Dated January 3, 2008, Effective from
                January 3, 2008 to January 31, 200810.47*
            
            Service
                Contract with Thomas E. Pumford, Jr., Dated December 12, 2007, Effective
                from December 10, 2007 to December 31, 200710.48*
            
            Service
                Contract with Thomas E. Pumford, Jr., Dated January 11, 2008, Effective
                from January 2, 2008 to February 29,
                2008




F-22




10.49*
            
            Consulting
                Agreement with Robert J. Kruckemeyer, Dated December 3, 2007, Effective
                from January 3, 2008 to January 31, 200810.50*
            
            Promissory
                Note dated March 22, 2008, in the principal amount of $21,475.85,
                by
                Liberty Renewable Fuels LLC, as Borrower, in favor of David Skjaerlund,
                as
                Lender.10.51*
            
            Promissory
                Note dated December 19, 2007, in the principal amount of $5,000,
                by
                Liberty Renewable Fuels LLC, as Borrower, in favor of Apple Investing,
                L.L.C., as Lender.10.52*
            
            Promissory
                Note dated December 17, 2007, in the principal amount of $5,000,
                by
                Liberty Renewable Fuels LLC, as Borrower, in favor of Matthew Dutcher,
                as
                Lender.10.53*
            
            Promissory
                Note dated December 20, 2007, in the principal amount of $5,000,
                by
                Liberty Renewable Fuels LLC, as Borrower, in favor of David Skjaerlund,
                as
                Lender.10.54*
            
            Promissory
                Note dated December 19, 2007, in the principal amount of $2,500,
                by
                Liberty Renewable Fuels LLC, as Borrower, in favor of Wilson C. Lauer,
                as
                Lender.10.55*
            
            Promissory

                Note dated July 3, 2007, in the principal amount of $150,000, by
                Liberty
                Renewable Fuels LLC, as Borrower, in favor of Matthew Dutcher, as
                Lender.10.56*
            
            Promissory
                Note dated July 6, 2007, in the principal amount of $200,000, by
                Liberty
                Renewable Fuels LLC, as Borrower, in favor of Donald Miller, as
                Lender.10.57*
            
            Promissory
                Note dated July 10, 2007, in the principal amount of $10,000, by
                Liberty
                Renewable Fuels LLC, as Borrower, in favor of Darryl Fowler, as
                Lender.10.58*
            
            Promissory
                Note dated July 25, 2007, in the principal amount of $20,000, by
                Liberty
                Renewable Fuels LLC, as Borrower, in favor of Dennis Muchmore, as
                Lender.10.59*
            
            Service
                Contract with Jennifer Clark, Dated January 31, 2008, Effective from
                February 1, 2008 to February 28, 2008.10.60*
            
            Service
                Contract termination letter for Thomas E. Pumford, Jr., dated February
                19,
                2008, effective February 29, 2008.23.1*
            
            Consent
                of Stout Risius Ross, Inc. dated March 26,
                200823.2*
            
            Consent
                of Kennedy & Coe, LLC dated March 26, 200831.1*
            
            Certification
                of Chief Executive Officer under Securities Exchange Act Rules 13a-14
                or 15d-1431.2*
            
            Certification
                of Chief Financial Officer under Securities Exchange Act Rules 13a-14
                or
                15d-14*
            Filed
                herewith





F-23


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized on this 31st day of March,
      2008.




LIBERTY
                RENEWABLE FUELS LLCDate:
                April 15,2008
            By:
            /s/ David SkjaerlundDavid
              SkjaerlundPresident
                and Chief Executive Officer (Principal Executive
                Officer)




Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated.





LIBERTY
                RENEWABLE FUELS LLCDate:April
                  15,2008
            By:
            /s/
                David SkjaerlundDavid
                Skjaerlund
              President
                and Chief Executive Officer (Principal Executive
                Officer)/ManagerDate:April
                  15,2008
            By:
            /s/
                Scott W. CrumbaughScott
                W. Crumbaugh
              Treasurer
                and Chief Financial Officer/ManagerDate:April
                  15,2008
            By:
            /s/
                Wilson C. LauerWilson
                C. Lauer
              Vice
                President/ManagerDate:April
                  14,2008
            By:
            /s/
                Matthew Allan DutcherMatthew
                Allan Dutcher
              Vice
                President/ManagerDate:April
                  15,2008
            By:
            /s/
                Scott Daniel EverettScott
                Daniel Everett
              Secretary/ManagerDate:April
                  14, 2008
            By:
            /s/
                John David BlankJohn
                David Blank
              ManagerDate:April
                  15,2008
            By:
            /s/
                Todd Alan BrinkTodd
                Alan Brink
              ManagerDate:April
                  14,2008
            By:
            /s/
                Ronald Jay BrownRonald
                Jay Brown
              Manager




-54-




Date:April
                  14,2008
            By:
            /s/
                Paul EarlyPaul
                Early
              ManagerDate:April
                  14,2008
            By:
            /s/
                Robert James Guse, Jr.Robert
                James Guse, Jr.
              ManagerDate:April
                  14,2008
            By:
            /s/
                Donald August HaskeDonald
                August Haske
              ManagerDate:April
                  15,2008
            By:
            /s/
                Samuel Crawford HawkinsSamuel
                Crawford Hawkins
              ManagerDate:April
                  15,2008
            By:
            /s/
                Dennis Philip HeffronDennis
                Philip Heffron
              ManagerDate:April
                  14,2008
            By:
            /s/
                Keith Duane KirkdorferKeith
                Duane Kirkdorfer
              ManagerDate:April
                  14,2008
            By:
            /s/
                Eldridge Leo Lawson, Jr.Eldridge
                Leo Lawson, Jr.
              ManagerDate:April
                  14,2008
            By:
            /s/
                Norman MihillsNorman
                Mihills
              ManagerDate:April
                  14,2008
            By:
            /s/
                Lloyd Donald MillerLloyd
                Donald Miller
              ManagerDate:April
                  14,2008
            By:
            /s/
                Gail PetersonGail
                Peterson
              ManagerDate:April
                  11,2008
            By:
            /s/
                Nick TotzkeNick
                Totzke
              Manager




-55-




Date:April
                  14,2008
            By:
            /s/
                Benjamin O. YantisBenjamin
                O. Yantis
              Manager




-56-