** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,DC  20549**

 

**FORM 10-KSB**

 

**(MarkOne)**

 
| **ý** | **Annual Report Pursuant to Section 13 or 15(d) of The  Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                                          |
|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       | **for  the Fiscal Year Ended November 30, 2003.**                                                                                                                                                                                                                                                                                                                                                  |
|       |                                                                                                                                                                                                                                                                                                                                                                                                    |
| **o**      | **Transition Report Pursuant to Section 13 or 15(d) of  The Securities Exchange Act of 1934**                                                                                                                                                                                                                                                                                                      |
|       | **for  the Transition Period From                                to                               .** |

 

**CommissionFile Number:  333-100672**

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

(Name of small businessissuer in its charter)

 
| **Indiana**                                                      |   | **32-0008858**                     |
|------------------------------------------------------------------|--------|------------------------------------|
| (State or other  jurisdiction  of incorporation or organization) |   | (IRS Employer  Identification No.) |

 

**6317East 181st Avenue**

**Hebron,Indiana 43341-9302**

(Address ofprincipal executive offices and zip code)

 

**(219)866-5990**

(Issuer’stelephone number, including area code)

 

Securitiesregistered pursuant to Section 12(b) of the Act:

 

**None**

 

Securitiesregistered pursuant to Section 12(g) of the Act:

 

**None**

 

----

 

Check whether the issuer:(1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

Yes  ý      No  o

 

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.ý

 

Registrant’s revenues forthe year ended November 30, 2003 were $0.00.

 

The aggregate value ofthe units held by non-affiliates computed according to book value was $488,560as of November 30, 2003.  There isno established trading market for the units.

 

As of****February 27,****2004, the Company had outstanding1,875,000 units.

 

DOCUMENTSINCORPORATED BY REFERENCE:

 

None

 

Transitional SmallBusiness Disclosure Format (check one):

 

o  Yes     ý  No

 

 

----

 

INDEX

 
| PART I     |     |                                                                                                                              |
|------------|----------|-----------------------------------------------------------------------------------------------------------------------------------|
|       |     |                                                                                                                              |   |
|       | Item 1.  | Description of Business                                                                                                           |   |
|       |     |                                                                                                                              |   |
|       | Item 2.  | Description of Property                                                                                                           |   |
|       |     |                                                                                                                              |   |
|       | Item 3.  | Legal Proceedings                                                                                                                 |   |
|       |     |                                                                                                                              |   |
|       | Item 4.  | Submission of Matters to a Vote of Security  Holders                                                                              |   |
|       |     |                                                                                                                              |   |
| PART II    |     |                                                                                                                              |
|       |     |                                                                                                                              |   |
|       | Item 5.  | Market for Registrant’s Common Equity, Related  Stockholder Matters and Small Business Issuer Purchases of Equity Securities |   |
|       |     |                                                                                                                              |   |
|       | Item 6.  | Management’s Plan of Operation                                                                                               |   |
|       |     |                                                                                                                              |   |
|       | Item 7.  | Financial Statements                                                                                                              |   |
|       |     |                                                                                                                              |   |
|       | Item 8.  | Changes in and Disagreements with Accountants  on Accounting and Financial Disclosure                                             |   |
|       |     |                                                                                                                              |   |
|       | Item 8A. | Controls and Procedures                                                                                                           |   |
|       |     |                                                                                                                              |   |
| PART III   |     |                                                                                                                              |
|       |     |                                                                                                                              |   |
|       | Item 9.  | Directors and Executive Officers of the  Registrant                                                                               |   |
|       |     |                                                                                                                              |   |
|       | Item 10. | Executive Compensation                                                                                                            |   |
|       |     |                                                                                                                              |   |
|       | Item 11. | Security Ownership of Certain Beneficial  Owners and Management                                                                   |   |
|       |     |                                                                                                                              |   |
|       | Item 12. | Certain Relationships and Related Party  Transactions                                                                             |   |
|       |     |                                                                                                                              |   |
|       | Item 13. | Exhibits, Financial Statement Schedules and  Reports on Form 8-K                                                                  |   |
|       |     |                                                                                                                              |   |
|       | Item 14. | Principal Accountant Fees and Services                                                                                            |   |
|       |     |                                                                                                                              |   |
| SIGNATURES |     |
|            |          |                                                                                                                                   |  |  |

 

i

----

 

### **PARTI**

### ** **

**Item 1.****        Descriptionof Business**

 

***Our actual business operation may differmaterially from those anticipated in any forward-looking statements included inthis discussion as a result of various factors, including those set forth inthe “Risk Factors” section that follows the discussion on Management’sPlan of Operation.***

 

We arean Indiana limited liability company formed on April 2, 2002. We wereorganized as a wholly owned subsidiary of Iroquois Bio-Energy Cooperative.Iroquois Bio-Energy Cooperative was organized on September 8, 1995 toexplore the possibility of developing a value added enterprise that makes highquality paper from corn stalks. In 1996, the cooperative concluded that such aproject was not feasible. The cooperative engaged in no activities until early2001, when it decided to pursue the development of a corn-based ethanol plantin northwest Indiana. In 2001 and 2002, the cooperative spent a total ofapproximately $69,000 for consulting fees, including the preparation of afeasibility study, legal and accounting fees, and general and administrativeexpenses relating to the development of the ethanol plant. The cooperativenever generated any revenue from operations.

 

OnApril 30, 2002, all project assets and cash of Iroquois Bio-EnergyCooperative were transferred to us as part of the reorganization of thecooperative into a limited liability company. The cooperative had no otherassets or operations other than project assets relating to the proposed ethanolplant and cash. As part of this reorganization, each of the members of thecooperative became a member of our limited liability company and each received1,000 units in exchange for the member’s cooperative membership interests. Thecooperative was dissolved on April 30, 2002.

 

Sinceour formation, all of our activities have related to the development of theethanol plant. These include engaging legal counsel and an accountant to assistus with our organization and development, and hiring consultants and anAssistant Vice President—Chief Operating Officer to help us develop the ethanolplant. We have never generated any revenue from operations. Our objective is toraise capital to develop, construct, own, and operate a 40,000,000 gallon peryear dry mill ethanol plant and ethanol business near Rensselaer, Indiana. Weare planning to build an ethanol plant that will have an annual capacity to processapproximately 14,300,000 bushels of corn into approximately 40,000,000 gallonsof ethanol. We expect that the ethanol plant will also annually produceapproximately 120,000 tons of distillers grains and 109,000 tons of raw carbondioxide.

 

**Description of DryMill Process**

 

Ourproposed ethanol plant will produce ethanol, distillers grains and carbondioxide by processing corn. We plan to receive corn by rail and semi-trailertruck. The corn will be weighed and stored in receiving facilities. It will thenbe transported to a scalper to remove rocks and debris before it is conveyed toprocessing bins. Thereafter, the corn will be transported to a hammer-mill orgrinder where it is ground into a mash and conveyed into a tank for processing.We will add water, heat and enzymes to break the ground corn into a fineliquid. This liquid will be heat sterilized and pumped to a tank where otherenzymes are added to convert the starches into glucose sugars. Next, the liquidis pumped into fermenters, where yeast is added, to begin the fermentationprocess, which generally takes about 40 to 50 hours. Thereafter, theresulting “beer” is pumped to distillation columns, which divides the alcoholfrom the corn mash. The alcohol is concentrated to 190 proof in the distillationcolumns and is then partially dehydrated in a molecular sieve system. Theresulting 200 proof alcohol is then blended with a five percent denaturant(such as gasoline) as it is pumped into storage tanks.

 

Meanwhile,corn mash from the distillation process is pumped into a centrifuge thatseparates the coarse grain from the solubles. The solubles are then dried intoa thick syrup. The coarse grain that exits the centrifuge is then conveyed todryers. Syrup is added to the coarse grain as it enters the dryer, wheremoisture is removed. This process produces distillers dried grains withsolubles, which can be used as animal feed.

 

Thefermentation process will also produce carbon dioxide, which we plan to captureand pipe “over the fence” to a third party processor who intends to build aprocessing facility next to our ethanol plant.

 

**Principal Productsand Related Markets**

 

Theprincipal products that we intend to produce are ethanol, distillers grains andcarbon dioxide.

 

1

----

 

***Ethanol***

 

Ethanolis ethyl alcohol, a fuel component made primarily from corn and various othergrains, and can be used as:

 

•      Anoctane enhancer in fuels;

 

•      Anoxygenated fuel additive that can reduce ozone and carbon monoxide vehicleemissions; and

 

•      Anon-petroleum based gasoline substitute.

 

Mostethanol is used in its primary form for blending with unleaded gasoline andother fuel products. The implementation of the Federal Clean Air Act has madeethanol an important domestic renewable fuel additive. The principal purchasersof ethanol are generally wholesale gasoline distributors or blenders.

 

***Distillers Grains***

 

Aprincipal by-product of the ethanol production process is distillers grains, ahigh protein, high-energy animal feed. Dry mill ethanol processing createsthree primary forms of distillers grains: distillers wet grains, distillersmodified wet grains and distillers dried grains with solubles. Distillers wetgrains is processed corn mash that contains a substantial amount of moisture.It has a shelf life of approximately three to five days and can be sold only tofarms within the immediate vicinity of the ethanol plant. Distillers modifiedgrains is similar to distillers wet grains except that it has been dried andcontains less moisture. Distillers modified grains has a slightly longer shelflife and can be sold to regional markets. Distillers dried grains is corn mashthat has been dried to approximately 10% moisture. It has an almost indefiniteshelf life and may be sold and shipped to any market regardless of its vicinityto the ethanol plant. We anticipate that most of the distillers grains that wesell will be in the form of distillers dried grains with solubles.

 

***Carbon Dioxide***

 

Anotherby-product of the ethanol production process is raw carbon dioxide. Raw carbondioxide can be processed and used in various food and non-food relatedapplications, such as beverage and dry ice production, pharmaceuticalmanufacturing, shrink-fitting and cryogenic blasting. Carbon dioxide isprincipally used as expendable refrigerants and is commonly used in foodprocessing facilities such as slaughterhouse operations, frozen food storage,and as supplemental cooling for refrigerated products.

 

**Ethanol Industry**

 

***Federal and State Regulations***

 

Mostethanol is used in its primary form for blending with unleaded gasoline andother fuel products. Recently, the demand for ethanol has increased,particularly in the upper Midwest, because of two major programs established bythe Clean Air Act Amendments of 1990. The first program, the OxygenatedGasoline Program, is a recurring wintertime program designed to reduce carbonmonoxide levels during the winter months. The Clean Air Amendments originallyrequired the use of oxygenated fuels, at a minimum rate of 2.7% oxygen byweight (unless otherwise specified), during the winter months in approximately43 metropolitan areas (including Chicago and Milwaukee) that were not incompliance with carbon monoxide standards. According to the EPA, as of October 2001,18 of these areas must continue to implement the program.

 

Thesecond program created by the Clean Air Amendments is the Reformulated GasolineProgram. This program, which began on January 1, 1995, is intended toreduce ground level ozone or smog. The program initially required theyear-round use of oxygenated fuel in nine metropolitan areas with severe ozonepollution. Other less severely troubled areas have been or are to be phasedinto the program over time. According to the EPA, as of January 2002, tenmajor U.S. metropolitan areas must comply with the program. Although notrequired, according to the EPA, as of January 2002, all or a portion of 12states and the District of Columbia have also voluntarily opted into theprogram.

 

2

----

 

Althoughthe Reformulated Gasoline Program has been in place for several years, wecannot determine its future impact on the demand for ethanol. Prior to theprogram’s inception, the Environmental Protection Agency or “EPA,” mandatedthat 30% of the oxygen required in oxygenated fuel be derived from renewableoxygenates such as ethanol. In April 1995, however, a federal appellatecourt struck down the rule on the basis that it exceeded the EPA’s authority.While the ethanol industry has generally discounted the effect of the courtcase on the basis that ethanol has and can compete in the marketplace withother oxygenates (primarily methyl tertiary butyl ether, or MTBE) on its ownmerits there is resistance to the reformulated fuel program in certain regionsin the country. Consumers have resisted higher oxygenated fuel prices and anumber of regions that had opted into the program have now opted out. Moreover,Congress has indicated a willingness to reexamine the program. In addition,opposition to ethanol is present from non-corn producing states. These statescontend that gasoline prices in the state may increase significantly due toshipping costs, because most ethanol is currently produced in corn producingstates.

 

The mostcommon competing oxygenate to ethanol is MTBE, which is cheaper than ethanol.MTBE is a petroleum-based product produced from methanol and natural gas.However, since the introduction and widespread use of MTBE as an oxygenate, ithas been discovered in ground water, lakes and streams. While MTBE has not beenclassified as a carcinogen, it has been shown to cause cancer in animals andits continued use has raised serious environmental concerns. The U.S. GeneralAccounting Office recently noted that MTBE contamination across the UnitedStates is widespread because, among others, many storage tanks holding MTBEcontinue to have problems with leakage, pipelines used to transport gasolineare also used to transport MTBE, and MTBE dissolves more easily in water thanother gasoline components, which allows it to travel faster and farther thangasoline components. In April 2002, Royal Dutch Shell and PhillipsPetroleum Company were ordered by a San Francisco jury to pay for the clean-upof public wells near Lake Tahoe that were contaminated with MTBE.

 

OnMarch 26, 1999, the Governor of California issued an order requiring thephase out of MTBE in gasoline sold in California by January 1, 2003. OnMarch 15, 2002, this order was extended to January 1, 2004, in part becauseof concern that a fuel shortage may cause a surge in gasoline prices. Prior toissuing the order to extend the MTBE phase out date, California requested awaiver from the EPA from the oxygenate requirements of the Clean AirAmendments. In June 2001, the EPA announced the denial of California’srequest for a waiver from the oxygenate requirement. In response to the denial,the California Environmental Protection Agency’s Air Resources Board filed alawsuit against the EPA in the Ninth Circuit Court of Appeals. As a result ofthe lawsuit, in July 2003 the Ninth Circuit Court of Appeals vacated thedenial on the grounds that the EPA did not consider the effects of such awaiver on both the ozone and particulate matter pollution. The court remandedthe matter to the Environmental Protection Agency for further review. If anystate were to receive such a waiver, the use and demand for ethanol may declinesignificantly.

 

Inaddition to California, many states have enacted, or have similar legislationpending that prohibits the sale of gasoline containing certain levels of MTBEor are phasing out the use of MTBE.

 

At thefederal level, on March 20, 2000, the EPA called for a ban of MTBE or tohave its use significantly reduced because of environmental problems associatedwith its use as a fuel oxygenate. The EPA recommended the following legislativeframework to reduce or eliminate the use of MTBE:

 

•      First,Congress should amend the Clean Air Act to provide authority to significantlyreduce or eliminate the use of MTBE;

 

•      Second,as MTBE use is reduced or eliminated, Congress must ensure that air qualitygains are not diminished; and

 

•      Third,Congress should replace the existing oxygenate requirement in the Clean Air Actwith a renewable fuel standard for all gasoline.

 

The EPAalso announced that it formally began regulatory action and issued an AdvanceNotice of Proposed Rulemaking to eliminate or phase down the use of MTBE.

 

Thus, inpart due to the environmental concerns associated with MTBE, the use of ethanolas both an oxygenate and as an octane extender has grown and continues to growrapidly.  In addition, ethanol is alsoused as a gasoline extender when gasoline stocks become short.  According to the Renewable Fuels Association2004 Ethanol 

 

3

----

 

Industry Outlook, ethanol productionin 2003 reached 2.81 billion gallons. This represents a 32% increase over 2002 production and a 91% increasefrom 1999 when California first announced its impending MTBE ban.

 

Inaddition to the actions taken by the EPA, the United States Senate and House ofRepresentatives in 2003 passed energy bills containing various provisionsrelating to ethanol production and use. The energy legislation moved to aHouse/Senate conference committee, where the Senate’s energy bill had to bereconciled with energy legislation passed in April 2003 by the House ofRepresentatives.  The resultingconference report to H.R.6, the Energy Policy Act of 2003, included a RenewableFuels Standard that would double the use of ethanol in gasoline to 5.0 billiongallons by 2012.  The sweeping energybill provided tax credits and incentives to expand production of oil, naturalgas, coal, nuclear power and electricity. The bill also would have protected makers of MTBE from product liabilitylawsuits arising from groundwater pollution claims.  Although the House of Representatives approved the energy bill bya vote of 246 to 180, the bill failed in the Senate on a motion to close debateon the bill by a vote of 58-39 (50 votes were needed).  As a result, the energy bill was not enactedinto law.  In early February, aslimmed-down energy bill was introduced to the floor of the Senate, where avote is expected soon.  The revisedenergy bill still mandates the doubling of annual ethanol to 5 billion gallonsby 2012, but drops the controversial liability waiver for makers of MTBE.  House Republican leaders have warned thatthe bill will be a nonstarter in the House if the MTBE provisions aredropped.  If any form of such billsbecomes law, it may have a material effect on our business.

 

***Ethanol Market Overview***

 

Theregional and national markets for ethanol appear to be strong. Based on itsFebruary 2004 Ethanol Industry Outlook, the Renewable Fuels Association,an ethanol trade association, estimates that in 2003, approximately 1,350,000,000 gallons of ethanol were utilized as an oxygenate in the FederalReformulated Gasoline Program, 250,000,000 gallons in the federal winterOxygenated Gasoline Program, 260,000,000 gallons in Minnesota to satisfy thestate’s oxygenated fuels program, and 950,000,000 gallons in conventionalgasoline markets as an octane enhancer and gasoline extender. Illinois, Ohioand Minnesota are currently the largest consumers of ethanol.

 

In addition,based on the California Energy Commission’s “Quarterly Report Concerning MTBEUse In California Gasoline, October 1 through December 31, 2003,” asof December 31, 2003 California refiners have successfully phased out theuse of MTBE.  Ethanol is now used as theprimary oxygenate in those areas requiring an oxygenate additive under Federallaw.  Further, according to theRenewable Fuels Association February 2004 Ethanol Industry Outlook, in2004 ethanol use is expected to reach 950,000 gallons in California.

 

***Industry Growth***

 

Due inpart to federal and state policies promoting cleaner air and federal and statetax and production incentives, the ethanol industry has grown substantially inrecent years. Based on the Renewable Fuels Association’s February 2004Industry Outlook, seven new ethanol facilities opened in 2003. These newplants, combined with expansions to existing facilities, added more than300,000,000 gallons of production capacity to the ethanol industry in 2003.According to the Renewable Fuels Association, as of February 2004 U.S.ethanol plants have the capacity to produce approximately 3.0 billiongallons of ethanol annually, with approximately 550,000,000 gallons underconstruction or expansion. A majority of the ethanol plants are located in theMidwest, in the corn-producing states of Illinois, Iowa, Nebraska, Minnesotaand South Dakota.

 

Automobilecompanies have responded to the increasing demand to improve the environment bydeveloping ethanol-friendly vehicles. Gasoline blends containing up to 10%ethanol are approved under the warranties of most major domestic and foreignautomobile manufacturers marketing vehicles in the United States, and manyrecommend the use of cleaner burning fuel, such as those containing ethanol, intheir vehicle owner’s manuals. Similarly, most major manufacturers of powerequipment, motorcycles, snowmobiles and outboard motors endorse the use ofethanol blends in their products. In the last several years, automobilecompanies such as Daimler Chrysler, General Motors and Ford have introduced agrowing number of flexible fuel vehicles that operate on fuel mixtures of up to85% ethanol. In addition, ethanol industry advocates have developed new dieselfuels that are a blend of diesel fuel and ethanol.

 

Ultimately,whether the use and demand for ethanol will continue to increase depends, inlarge part, upon the outcome of the debates surrounding the use of MTBE,continuation of the clean air standards, and the creation of 

 

4

----

 

a national renewable fuels standard.While we cannot predict the final provisions of the energy legislation orwhether such legislation will be enacted into law this year or in the future,the passage of federal energy legislation may materially affect the use of anddemand for ethanol and our business. Although we cannot assure you that thedemand for ethanol will continue to grow, we believe that if the use of MTBE isphased out on a national level in the next few years and a national renewablefuels standard is adopted, the demand for ethanol will likely increase.

 

TheEnergy Information Administration estimates that ethanol demand fortransportation purposes will increase to over 4.4 billion gallons annuallyby the year 2025. However, this estimate may be materially affected by pendingfederal and state energy legislation.

 

***Government Incentives***

 

Recognizingthe need for a cleaner source of energy, and appreciating that ethanol is alsorenewable and can be produced in the United States, the federal government andvarious state governments, including Indiana, have created incentive programsto encourage ethanol production and to enable ethanol-blended fuel to bettercompete in domestic fuel markets with gasoline blended with MTBE. The federal incentiveprograms include excise tax credits to gasoline distributors, direct paymentsto eligible producers for increased ethanol production and federal income taxcredits which may be earned by eligible producers. State incentive programsinclude production payments and income tax credits. However, these programs arenot without controversy, due in part to the cost of such programs. Increases inthe use of ethanol as a fuel additive will increase the amount of excise taxcredits available to gasoline distributors, which translates into lower federaltax revenues. The direct payment program is a significant expenditure andCongress may choose not to fully fund the program in any given fiscal year.These federal programs may be affected by the passage of pending energylegislation.

 

*Federal Excise Tax Exemption. *The most important incentive for theethanol industry and its customers is the partial exemption from the federalmotor fuels excise tax (the “excise tax exemption”). The excise tax exemptionis provided to gasoline distributors as an incentive to blend their gasolinewith ethanol.  This exemption will bereduced for the years 2005, 2006 and 2007, when the current legislation isscheduled to expire. Legislation has been introduced that would extend theexcise tax exemption beyond 2007, but there can be no assurance that thelegislation will pass. If the excise tax exemption is not extended, thenethanol blended gasoline will be taxed at the standard excise tax rate, whichmay make ethanol blended gasoline more expensive and less attractive to use.

 

*Commodity Credit Corporation Bioenergy Program. *The Commodity Credit CorporationBioenergy Program makes payments to producers of biofuels for increases intheir production (including new production) of ethanol, biodiesel or otherbiofuels over their prior year’s production. These payments are scheduled tocontinue through September 30, 2006. The maximum annual funding authorized under the program is $150,000,000.However, payments under the program in any one fiscal year may be less ifCongress does not fully fund the program for that fiscal year (funding for theprogram is subject to an annual appropriation).  Payments under the program are subject to pro rata reduction ifaggregate payments to all producers in any one fiscal year would otherwiseexceed the annual available funding.  Noproducer may receive more than 5% of the available funding for the program inany fiscal year.

 

Based onthe program’s formula for calculating payments and assuming the price of cornwas $2.38 per bushel, we estimate that we would reach the $7,500,000 maximumper fiscal year cap (assuming the program is fully funded and not subject topro rata reduction) with approximately 19,700,000 gallons of increasedproduction. We arrived at this number by dividing 19,700,000 gallons by 2.5 todetermine the number of bushels of corn assumed to be used to generate theincreased production. We then divided the number of bushels of corn (7,880,000bushels) by 2.5 to arrive at the qualified number of bushels subject toreimbursement. This means that a ramp-up of production that straddles overseveral of the programs’ fiscal years could result in higher aggregate paymentsunder the program as compared to having all increased production occurringwithin a single fiscal year.

 

*Federal Small Producer Credit. *The Federal Small Producer Creditprovides an eligible ethanol producer a 10¢ per gallon tax credit for the first15,000,000 gallons of ethanol produced annually. Under the program, ethanol producersthat qualify or their owners (for pass-through tax entities) can deduct thecredit from their federal income tax annually. The credit is considered taxableincome and taxes must be paid on the amount credited. The tax credit iscurrently available only to producers with an annual capacity of 30,000,000gallons or less and is scheduled to expire on December 31, 2007.Therefore, under current legislation, our proposed ethanol plant would not beeligible for the tax credit. Legislation has been introduced which would extendbenefits to ethanol plants with up to 

 

5

----

 

60,000,000 gallons of annualcapacity. However, we cannot assure you that the legislation will be enactedinto law this year or in the future.

 

*Indiana Ethanol Production Credit. *The Ethanol Production Tax Credit isavailable to any facility located in the State of Indiana that increases itsethanol production capacity by at least 40,000,000 gallons a year afterDecember 31, 2003. Based on the expected capacity of our proposed ethanolplant, we expect that we would be eligible to participate in this program. Inthe case of pass-through tax entities such as a limited liability company, thelegislation provides for the credit to pass through to the owners in the sameproportion as the distributive income to which the member is entitled. In ourcase, the credit would pass through to our members in proportion to their unitsheld. The credit may be applied against a member’s Indiana state tax liability,including the state gross retail and use tax, the adjusted gross income tax,the financial institutions tax, or the insurance premiums tax. Any credit notused in a particular year may be carried forward to subsequent taxable years.The maximum credit allowed to a single producer under the program is $5,000,000and to all producers under the program is $10,000,000. This means that if thefirst two producers to increase annual capacity by at least 40,000,000 gallonsof ethanol after December 31, 2003 each proceed to produce at least40,000,000 gallons of ethanol, then these two producers will be entitled toclaim all of the available credit and no additional credits would be availableto any other producer.

 

***Ethanol Pricing***

 

Ethanolprices have tended to correlate with wholesale gasoline prices. At the sametime, 10-year price charts for ethanol and corn prices show that ethanol pricesdo not track corn prices. Although the price of ethanol increased dramaticallyin 1996, it was due to lower ethanol supply because many ethanol plants wereforced to curtail operations or shutdown due to high corn prices. According tothe industry guide published by the State of Minnesota, this price increase wasdue primarily to limited ethanol supply and not the increased cost of corn. Amaterial risk to our business is the lack of correlation between the price ofcorn (the primary cost of revenue) and the price of ethanol (the primary sourceof revenue). Ethanol prices have historically been volatile. If ethanol pricesremain constant or decrease for a significant period of time and corn pricesincrease, our business and profitability may be materially and adverselyaffected.

 

**Distillers GrainsIndustry**

 

Distillersgrains is a co-product that is produced when corn is processed into ethanol. Weexpect that our ethanol plant will produce approximately 120,000 tons ofdistillers grains per year. We intend to sell the distillers grains as animalfeed for beef and dairy cattle, poultry and hogs.

 

***Distillers Grains Market Overview***

 

Accordingto the University of Minnesota’s Distillers Grains—General Information website(August 20, 2003) approximately 3,200,000 to 3,500,000 tons of distillersgrains are produced annually in North America, approximately 98% of which areproduced by ethanol plants. Ethanol plants in South Dakota and Minnesotaproduce about 25% of this amount. The amount of distillers grains produced mayincrease significantly as the number of ethanol plants increase. The market fordistillers grains is generally confined to locations where freight costs allowit to be competitively priced against other feed ingredients. Distillers grainscompetes with three other feed formulations: corn gluten feed, dry brewersgrain and mill feeds. The primary value of these products as animal feed istheir protein content.

 

Distillersgrains contains nutrients that have important growth promoting properties fordairy and beef cattle, poultry and swine. According to the Indiana AgriculturalStatistics Service 2002-2003, in 2002, there were approximately 860,000 head ofcattle in the State of Indiana, of which 145,000 were dairy cattle. In thedistrict where the ethanol plant will be located, there were approximately81,000 head of cattle, of which 32,000 were dairy cattle. In 2002, Indianaswine and chicken operations had approximately 3,200,000 hogs and pigs andapproximately 29,100,000 chickens, excluding broilers, of which 23,000,000 wereof laying age. According to the U.S. Department of Agriculture—NationalAgricultural Statistics Service, in 2002, there were approximately 6,860,000head of cattle in the five state region where the ethanol plant will belocated, of which 940,000 were dairy cattle. There were approximately 9,870,000hogs and pigs and 68,785,000 chickens in the five state region where theethanol plant will be located. We believe that the abundant number of cattle,swine and chickens surrounding the ethanol plant creates an opportunity tomarket our distillers grains.

 

6

----

 

***Distillers Grains Pricing***

 

Recently,there has been a downturn in the distillers grains market, which has causedprices to decline. Various factors affect the price of distillers grains,including, among others, the price of corn, soybean meal and other alternativefeed products, and the general supply and demand of domestic and internationalmarkets for distillers grains. We believe that unless demand increases, theprice of distillers grains may be subject to future downward pressure as thesupply of distillers grains increases because of increased ethanol production.The price of distillers grains may be subject to downward pressure.

 

**Location of EthanolPlant; Proximity to Markets**

 

Weintend to build the ethanol plant near Rensselaer, Indiana. We selected theRensselaer, Indiana area based upon a number of factors, including theavailability and cost of corn, natural gas, water supply and electric service,transportation costs, permitting requirements, and proximity to certain ethanolmarkets. We believe that the Rensselaer, Indiana area in general, and ourproposed site in particular, have several favorable attributes for locating alarge scale ethanol plant, including:

 

•      Anabundant corn supply, because according to the Indiana Agricultural StatisticsService 2002-2003, in the year 2002, over 120,000,000 bushels of corn weregrown within the district in which the proposed site is located;

 

•      Favorabletransportation logistics to one of the largest ethanol markets in the UnitedStates, Chicago and Milwaukee, and also to developing markets east andsoutheast of the site, including Baltimore, Cincinnati, Indianapolis,Louisville and New York City;

 

•      Goodaccess to roads and rail service, including the existence of a CSX rail lineadjacent to the proposed site;

 

•      Theavailability of utilities that provides readily usable natural gas andelectricity; and

 

•      Theexistence of two primary natural gas pipelines (26” and 30”) originating inLouisiana that run through the proposed site.

 

We maymodify or change the location of the ethanol plant if we are unable to close onour site, if we find another site that better suits our needs, or if we cannotobtain the necessary permits and approvals or utilities and other services, orcannot obtain them at a reasonable cost.

 

**Construction of theEthanol Plant**

 

We haveentered into a letter of intent with Shiel Sexton relating to the design andconstruction of the ethanol plant, under which they agreed to provide us ascope document, conceptual budget, construction timeline and certainpreliminary engineering work for a fee of $60,000. However, Dilling MechanicalContractors, Inc. will act as general contractor and Shiel Sexton willprovide construction services as a subcontractor. The $60,000 fee and theletter of intent we entered into with Shiel Sexton will transfer to DillingMechanical. The $60,000 fee will be applied against the guaranteed maximumprice of the design-build agreement that we intend to enter into with DillingMechanical. We have received the scope document and a guaranteed maximum priceproposal for the construction of the ethanol plant, including certain sitepreparation and improvements, of approximately $47,994,000, and are proceedingwith the ethanol project based on its construction schedule and scope ofwork. We intend to enter into a design-build agreement with Dilling Mechanicalfor the design and construction of our proposed ethanol plant on a cost plusfee basis, with a guaranteed maximum price, before we close the offering. Theproposal provides for a fee to Dilling Mechanical equal to 10% of the costsnecessarily incurred by Dilling Mechanical to construct the ethanol plant. Ifthe cost of construction plus the 10% fee is less than the guarantee maximumprice, any savings would accrue 70% to us and 30% to Dilling Mechanical. Actualconstruction costs could be significantly higher than the guaranteed maximumprice because we expect to be responsible for certain site infrastructuredevelopment costs, such as bringing natural gas and electricity to the ethanolplant. In addition, we expect that certain events and conditions, includingamong others, delays, change orders that we may submit, and site conditionsthat may differ from what we expect, may not be covered under the guaranteedmaximum price. We expect that our detailed agreement with Dilling Mechanicalwill provide that if we encounter differing site conditions, then Dilling 

 

7

----

 

Mechanical will be entitled to anadjustment in price and time of performance. Delays and change orders are notuncommon in large scale construction projects such as the one we intend toengage in.

 

We anticipate that it will take approximately 14 monthsfrom the date we close on our debt financing to construct the ethanol plant.However, construction may be delayed for various reasons, including, amongothers, permit delays, weather, material and labor shortages, and differingsite conditions.

 

**Transportation andDelivery**

 

Weexpect that our proposed ethanol plant will have facilities to receive corn bytruck and rail, and to load ethanol and distillers grains onto trucks and railcars. Our proposed site has good road access to a state highway and is sixmiles from I-65, and is adjacent to a CSX rail line that connects to the CSXmain line rail system for the area. We currently have no agreement with anyservice provider to provide us with the transportation and delivery servicesthat we need. We intend to negotiate with rail and truck service providers toprovide us these services before we begin construction of the ethanol plant.

 

**Sales and Marketing**

 

Weintend to sell and market our ethanol through normal and established local,regional and national markets. We hope to sell a significant amount of ourethanol into the Chicago and Milwaukee market, which is one of the largestethanol markets in the United States, as well as developing markets east andsoutheast of the site, including Cincinnati, Indianapolis and Louisville. Wealso plan to sell our ethanol to other local and regional markets within thestates of Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Nebraska, Ohioand Wisconsin. However, with the continued pressure to phase out the use ofMTBE, we believe that the east coast, including Baltimore and New York City,may also become a potential market for our ethanol.

 

Weanticipate that most of the distillers grains that we sell will be in the formof distillers dried grains with solubles. We intend to sell the distillersdried grains to local, regional and national markets. We also hope to sell aportion of our distillers grains to local markets in the form of distillers wetgrains.

 

We donot intend to hire a sales staff to market our ethanol and distillers grains.We have entered into an agreement with Ethanol Products, LLC to market ourethanol. Under the agreement, the distributor has exclusive rights to marketall of the ethanol we produce at our ethanol plant and agrees to effect thesale of our ethanol at available market prices. See “Management’s Plan of Operation”for additional information. We have entered into discussions with prospectivethird party distributors for our distillers grains, but have not contractedwith any distributor. We anticipate entering into an agreement for ourdistillers grains before the ethanol plant is completed.

 

We havealso entered into an agreement to sell our raw carbon dioxide to an unrelatedthird party processor who intends to build a carbon dioxide processing facilitynext to our ethanol plant. However, this agreement is subject to certainconditions and requirements that may enable the third party processor toterminate the agreement. Further, the processor is not required to process allof the carbon dioxide that we produce and we may have to emit a significantamount of carbon dioxide into the air. This may subject us to environmentalrepercussions in the future.

 

**Competition**

 

Weexpect to be in direct competition with producers of ethanol and otheralternative fuel additives. Many of these producers have significantly greaterresources than we do. We also expect the number of competitors to increase ifthe demand for ethanol increases. The development of other ethanol plants,particularly those in close proximity to our ethanol plant, will increase thesupply of ethanol and may result in lower local ethanol prices.

 

***Ethanol Producers***

 

We willbe in direct competition with numerous other ethanol plants that produce thesame products that we do. We plan to compete with other ethanol producers onthe basis of price and delivery service. We believe that we will be able, ifnecessary, to sell some or all of our products at lower prices because ofefficiencies arising from the ethanol plant and our anticipated productionvolume, and the close proximity of the plant to existing corn supplies andethanol and distillers grains markets.

 

8

----

 

Ourproposed ethanol plant will produce approximately 40,000,000 gallons of ethanolannually. We believe that this volume will give us certain procurement andproduction efficiencies over smaller competitors. Our proposed ethanol plantwill be close to the Chicago/Milwaukee area, significant consumers of ethanol.We believe that this, along with the CSX rail line that is adjacent to oursite, will give us a favorable freight advantage over ethanol producers thatare located farther away and also allow us relatively easy access to the eastcoast, which we anticipate will develop into a significant ethanol market. Inaddition, because there are a significant number of beef and dairy cows nearthe ethanol plant, we plan to sell a substantial amount of our distillersgrains to local markets. This may also give us a favorable freight advantageover other ethanol plants that may need to ship their products to more distantmarkets. We believe that all of these factors combined will allow us to sellour products at a competitive price.

 

Accordingto the Renewable Fuels Association, as of June 2003, U.S. ethanol plantshave the capacity to produce approximately 3.1 billion gallons of ethanolannually, with approximately 598,000,000 gallons under construction orexpansion. The largest ethanol producers include Archer Daniels Midland,Cargill, MGP Ingredients, Inc., Aventine Renewable Energy, Inc., NewEnergy Corporation and Abengoa Bioenergy Corporation, all of which are capableof producing more ethanol than we expect to produce. With the completion of itsacquisition of Minnesota Corn Processors in September 2002, Archer DanielsMidland continues to be the largest ethanol producer in the United States withan annual capacity of approximately 1.07 billion gallons. In addition,there are a number of other entities that are of a similar size and withsimilar resources to us.

 

***Ethanol Plants in Illinois, Indiana and Wisconsin***

 

Weexpect to be in direct competition with other ethanol producers in closeproximity to our proposed ethanol plant. These competitors will compete with usfor, among other things, corn and personnel. Because of their close proximity,these competitors may also sell to the same markets that we intend to targetfor our ethanol and distillers grains. According to the Renewable FuelsAssociation, there are eleven corn processing ethanol plants operating or underconstruction in Illinois, Indiana and Wisconsin that are or are expected to beable to each produce at least 15,000,000 gallons of ethanol annually.

 

*Canton, Illinois. *CentralIllinois Energy Cooperative, LLC has begun construction on a30,000,000 million gallon per year ethanol plant in Canton, Illinois thatwill process approximately 11,000,000 bushels of corn annually into ethanol.

 

*Lena, Illinois. *AdkinsEnergy, LLC operates a 40,000,000 gallon per year ethanol plant in Lena,Illinois. This plant is expected to use approximately 15,000,000 bushels ofcorn annually.

 

*Decatur, Illinois. *ArcherDaniels Midland operates an ethanol plant in Decatur, Illinois that processesapproximately 113,000,000 bushels of corn annually. The Decatur plant is a wetmill plant capable of producing approximately 250,000,000 to 300,000,000gallons of ethanol per year.

 

*Peoria, Illinois. *ArcherDaniels Midland also operates an ethanol plant in Peoria, Illinois thatprocesses approximately 85,000,000 bushels of corn annually. The plant producesapproximately 200,000,000 to 240,000,000 gallons of ethanol per year.

 

*Pekin, Illinois. *There aretwo ethanol plants operating in Pekin, Illinois. The first is a 70,000,000gallon per year ethanol plant operated by MGP Ingredients, Inc. using cornand wheat starch as its feedstock. The second is a 100,000,000 gallon per yearethanol plant operated by Aventine Renewable Energy using corn as itsfeedstock. The two facilities use an estimated 60,000,000 bushels of cornannually.

 

*Robinson, Illinois. *LincolnLandAgri-Energy, LLC is currently constructing a 40,000,000 gallon per year ethanolplant in Robinson, Illinois. This plant is expected to use approximately15,000,000 bushels of corn annually.

 

*South Bend, Indiana. *New Energy Corporation operates a 95,000,000 gallon per yearethanol plant in South Bend, Indiana.

 

*Stanley, Wisconsin. *ACE Ethanoloperates a 15,000,000 gallon per year ethanol plant in Stanley, Wisconsin. Thisplant is expected to use approximately 5,500,000 bushels of corn annually.

 

9

----

 

*Monroe, Wisconsin. *Badger StateEthanol, LLC operates a 40,000,000 gallon per year dry-mill ethanol plant inMonroe, Wisconsin. That plant is expected to use approximately 15,000,000bushels of corn annually.

 

*Oshkosh, Wisconsin. *UticaEthanol, LLC is currently constructing a 20,000,000 gallon per year ethanolplant in Oshkosh, Wisconsin. The plant is expected to use approximately8,000,000 bushels of corn annually.

 

*Friesland, WI*. United WI Grain Producers, LLC is currently constructing a 40,000,000gallon per year ethanol plant in Friesland, Wisconsin. The plant is expected touse approximately 15,000,000 bushels of corn annually.

 

Theseplants are expected to produce over 900,000,000 gallons of ethanolannually.  In addition, we believe thereadditional ethanol projects organizing or under development in thesestates.  We believe that ethanolproduction capacity will continue to increase as the development of new ethanolplants continues, which may cause competition in the ethanol industry tointensify.

 

***Alternative Fuel Additives***

 

Alternativefuels, gasoline oxygenates and ethanol production methods are continually underdevelopment by various ethanol and oil companies that have far greaterresources than we do. New products or methods of ethanol production developedby larger and better-financed competitors could provide them competitiveadvantages over us and harm our business.

 

Thedevelopment of ethers intended for use as oxygenates is also continuing. Ethersare composed of isobutylene (a product of the refining industry) and ethanol ormethanol. The products are MTBE or ethyl tertiary butyl ether, which is alsoknown as “ethyl ether.” We expect to compete with producers of MTBE, apetrochemical derived from methanol, which costs less to produce than ethanol.MTBE is an oxygenate commonly used in fuels for compliance with the FederalClean Air Act, and is a major competitor of ethanol. Many major oil companiesproduce MTBE, and strongly favor its use because it is petroleum based. Thesecompanies have significant resources to market MTBE and to influencelegislation and public perception of MTBE. These companies also have sufficientresources to begin production of ethanol should they choose to do so.  However, MTBE has recently been linked togroundwater contamination at various locations in the United States. Manystates have enacted legislation prohibiting the sale of gasoline containingcertain levels of MTBE or are phasing out the use of MTBE.

 

Ethylether’s advantages over ethanol as a fuel blend include its low affinity forwater and low vapor pressure. Because petroleum pipelines and storage tankscontain water in various amounts, ethyl ether’s low affinity for water allowsit to be distributed through existing pipeline systems. This is not possiblefor ethanol, which must be shipped via transport trucks or rail cars. Inaddition, blending ethyl ether with gasoline reduces the overall vapor pressureof the blend, thereby reducing normal volatile organic emissions. Ethyl etheris not widely commercially available yet, and it may suffer from the samenegative environmental effects as MTBE. Scientific research to better definethe properties of ethyl ether as it relates to the environment is underway.

 

**Regulatory Permits**

 

Beforewe can begin construction and operation of the ethanol plant, we will need toobtain various construction and operating permits, as discussed below. ** **Wehave engaged R.B. Jacko & Associates, an unaffiliated environmentalengineering firm, to assist us with certain air permitting requirements. Wehave also engaged Commonwealth Engineers, Inc., an unaffiliatedengineering firm, to assist us with certain water permitting requirements.Under the design-build agreement that we are currently negotiating with DillingMechanical, we expect that Dilling Mechanical will be responsible for obtainingcertain construction -related permits, approvals and licenses required toconstruct the ethanol plant. Because the ethanol plant is not built, we cannotassure you that we will be able to obtain and maintain all necessary permits.If permitting delays occur, construction of the ethanol plant may be delayed,which may delay our commencement of operations. In addition, permitting andenvironmental and other regulatory requirements may change in the future.Changes in permitting and regulatory requirements could make compliance moredifficult and costly. Our inability to obtain necessary permits or to complywith various environmental or other governmental regulations may have amaterial adverse effect on our business and may prevent the construction oroperation of our proposed ethanol plant.

 

10

----

 

***Air Pollution Control Permits***

 

We havebeen issued a Federally Enforceable State Operating Permit by the IndianaDepartment of Environmental Management. Once the ethanol plant nears completion, we must submit an affidavit ofconstruction to the Indiana Department of Environmental Management. We must,within one year after commencing start-up operations, apply for a permanentoperating permit. This requires that we disclose information regarding, amongothers, our emission units and air control devices, the types and quantities ofemissions, and operating procedures. If our actual emissions are not consistentwith that set forth in our Federally Enforceable State Operating Permit, wewill need to correct any deficiency and may have to halt operations. Althoughwe do not anticipate any significant problems, we cannot assure you that wewill receive all necessary permits to construct and operate the ethanol plantwithout delay, or at all.

 

***Water Pollution Control Permits***

 

We mustalso secure a National Pollutant Discharge Elimination System permit before wecan commence operation of the ethanol plant. There are two types of dischargesfrom the ethanol plant that are regulated by the National Pollutant DischargeElimination System permits—non-contact cooling water and storm water. To obtaina storm water permit, we will need to develop and implement a storm waterrunoff plan. This plan entails procedures that we plan to implement to containstorm water that comes into contact with our processing and storage equipment.We expect that our ethanol plant will produce no process wastewater. We anticipatethat our water discharges will be primarily from sanitary use and from ourcooling tower and boiler blowdown, which we plan to discharge into a drainageditch. We plan to apply for these permits before we commence construction.

 

***Other Permits***

 

Thereare also various other regulatory permits that are required to construct andoperate the ethanol plant. These include, among others, a permit from theBureau of Alcohol, Tobacco and Firearms to operate an alcohol processingfacility, various construction permits and emergency response plans. We willrely on the environmental engineering firms that we hire and Dilling Mechanicalto help ensure timely issuance and compliance with all necessary permits andrequirements.

 

***EPA; Nuisance***

 

Even ifwe receive all necessary permits for construction and operation of the ethanolplant, we may in the future be subject to the regulations on emissions of theEnvironmental Protection Agency. Current EPA rules do not require us to obtainany permits or approvals in connection with the construction and operation ofthe ethanol plant, but these rules can and do change. Our ethanol productionwill require us to emit a significant amount of carbon dioxide into the air ifwe do not secure a third party processor to build a carbon dioxide processingplant next to our plant. Current law regulating emissions does not restrict orprevent us from emitting carbon dioxide gas into the air, but this could changein the future and subject us to future environmental claims. We could also besubject to environmental or nuisance claims from adjacent property owners orresidents in the area arising from foul smells or other air or water dischargesfrom the plant.

 

**Employees**

 

We currently have onefull-time employee, our Assistant Vice President–Chief Operating Officer.  We also have four other officers who provideservices in-kind.  Upon completion ofthe ethanol plant, we expect to have approximately 32 employees to operate theethanol plant and manage our business.

 

**Item 2.****    Descriptionof Property**

 

Otherthan our temporary office space located at 2530 North McKinley Avenue,Rensselaer, Indiana, which we are currently leasing under a month-to-month orallease for $150 per month, we presently have no property.

 

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

 

From time to time in theordinary course of our business, we may be subject to legal proceedingsrelating to various issues, including without limitation, worker’s compensationclaims, tort claims or contractual disputes. We are not currently involved inany legal proceedings and are not aware of any pending claims.

 

11

----

 

**Item 4****.****        Submission of Matters to a Vote of SecurityHolders**

 

Not Applicable

 

### **PARTII**

### ** **

**Item 5****.****        Market for Registrant’s Common Equity, RelatedStockholder Matters and Small Business Issuer Purchases of Equity Securities**

 

**Market Information**

 

There isno public trading market for the units and we do not expect one to develop inthe foreseeable future. To maintain our partnership tax status, we do not intendto list the units on any stock exchange or automatic quotation system such asthe Nasdaq Stock Market.

 

**Holders**

 

As ofFebruary 27,****2004, we have1,875,000 units issued and outstanding, which are currently held by 278members.

 

**Distributions**

 

No distributionshave ever been declared or paid on our units. We do not intend to declare anydistributions until we begin generating revenue and satisfy our loan covenants.After we begin generating revenue, subject to Indiana law, our OperatingAgreement and applicable loan covenants and restrictions from our lenders, weplan to distribute our net cash flow to our unit holders ratably in proportionto their units held.  However, cash distributions are not assured, and wemay never make distributions. Whether we will be able to generate sufficientcash flow from our business to make distributions depends upon numerousfactors, including, among others:

 

•      Successfuland timely completion of our proposed ethanol plant;

 

•      Requiredprincipal and interest payments on outstanding debt and compliance withapplicable loan covenants;

 

•      Ourability to operate our plant at full capacity and generate revenue;

 

•      Ourability to control operating costs;

 

•      Adjustmentsand the amount of cash set aside for reserves, capital expenditures andunforeseen expenses;

 

•      Stateand federal regulations and subsidies, and support for ethanol generally, whichcan impact our financial performance and the cash available for distributions;and

 

•      Generaldemand for ethanol and distillers grains.

 

UnderIndiana law and our Operating Agreement, we cannot make distributions tomembers if after the distribution, we become unable to pay our debts when theybecome due or our liabilities, excluding liabilities to our members on accountof their capital contributions, would exceed our assets. See Section 4 ofour Operating Agreement, “Distributions,” for additional information.

 

**Securities Authorized For Issuance Under Equity CompensationPlans**

 

The Company had no had noequity compensation plan as of November 30, 2003.

 

12

----

 

**Recent Sales of Unregistered Securities; Use of Proceeds FromRegistered Securities**

 

The Company had nounregistered sales of equity securities during the fiscal year endedNovember 30, 2003.

 

TheSecurities and Exchange Commission originally declared our RegistrationStatement on Form SB-2 (SEC Registration No. 333-100672), as amended (the“Registration Statement”), effective on February 27, 2003.  Wecommenced our initial public offering of our units on February 28,2003.  We subsequently amended the Registration Statement to reflectcertain changes from and additions to the Registration Statement as it wasoriginally declared effective, and ceased our selling efforts pending effectivenessof the subsequently amended Registration Statement.  The Securities andExchange Commission declared the subsequently amended Registration Statementeffective on September 23, 2003, and we thereupon resumed our sellingefforts.  We have not closed the Offering and are continuing to offer theunits.  Our officers and managers are offering and selling the units on abest efforts basis without the assistance of an underwriter.  We do notpay our officers or managers any compensation for services based on the offeror sale of the units.  We also intend to hire one or more broker-dealersto serve as underwriter and offer and sell the units on a best efforts basis.

 

Weregistered a total of 25,000,000 units with an aggregate gross offering priceof $25,000,000, or $1.00 per unit.  We intend to close the Offering onMarch 31, 2004, subject to one or more extensions to no later thanJune 30, 2004.  As of February 27, 2004, we have receivedsubscriptions for approximately 4,302,000 units($4,302,000.00), which are subject to certain withdrawalrights as described in the Registration Statement.  We are depositing allsubscription payments from the Offering in an escrow account.  We have notyet met the conditions to breaking escrow and therefore have not completed thesale of any of the units subscribed.  We will not break escrow andcomplete the sale of any of the units subscribed until we raise at least theminimum amount offered.  If we do not raise the minimum amount offered bythe close of the Offering, we will promptly return all subscription payments,together with any related interest earned after September 30, 2003. If wereceive and accept subscriptions for the minimum amount offered by the close ofthe Offering, 10% of each investor’s total subscription price may be releasedto us from escrow. We will not break escrow and complete the sale of theremaining 90% of each investor’s subscription until we satisfy the followingconditions:

 

•      We close on $28,575,000 to$33,450,000 of debt financing, less any additional grants we may receive;

 

•      We execute a design-build agreementfor the construction and operation of our proposed ethanol plant; and

 

•      We are not subject to any legalorders prohibiting the Offering or our project, or orders from the Securitiesand Exchange Commission revoking the effectiveness of the RegistrationStatement.

 

If we donot close on our debt financing and execute a design-build agreement bySeptember 30, 2004, we will promptly return all subscription paymentsremaining in the escrow account, together with any related interest earnedafter September 30, 2003.

 

FromFebruary 27, 2003 (the original effective date of the RegistrationStatement) to November 30, 2003, we incurred no expenses for our accountin connection with the issuance and distribution of the units registered forunderwriting discounts and commissions, finders’ fees, or expenses paid to orfor underwriters.  Other (and total) expenses incurred for this period forour account in connection with the issuance and distribution of the units were$47,580.  None of these payments were direct or indirect payments to ourmanagers, officers or their associates, persons owning 10% or more of any classof our equity securities or our affiliates.  From February 27, 2003to November 30, 2003, we did not receive or use any net offering proceeds.

 

**Small Business Issuer Purchases of Equity Securities**

 

The Company did notpurchase any equity securities during the fiscal year ended November 30,2003.

 

**Item 6****.****        Management’s Plan of Operation**

 

***Our actual results may differ materiallyfrom those anticipated in any forward-looking statements included in thisdiscussion as a result of various factors, including those set forth in the“Risk Factors” section that follows this discussion.***

 

13

----

 

**Overview**

 

We are astart-up company in development stage. We plan to build a corn-based ethanolprocessing facility that will produce ethanol, distillers grains and carbondioxide. We plan to build our ethanol plant near Rensselaer, Indiana. Theethanol plant is expected to process approximately 14,300,000 bushels of cornper year into 40,000,000 gallons of denatured fuel grade ethanol, which weintend to sell primarily within 200 miles of the plant. We may also sell ourethanol in other markets throughout the nation. We also intend to produceapproximately 109,000 tons of carbon dioxide and approximately 120,000 tons ofdistillers grains annually.

 

Dependingon the results of our public offering, we expect that the project will costapproximately $60,106,000 to $60,231,000. We have raised approximately $947,060million in seed capital, and plan to raise a minimum of $20,000,000 and amaximum of $25,000,000 in our public offering and secure the balance throughfederal, state and local grants and debt financing.  As of February 27, 2004, we have received subscriptions forapproximately 4,302,000 units($4,302,000.00).  We will require a significant amount of debtfinancing to complete our project. The amount of debt financing that we needdepends in part on the amount of equity we raise in the offering and whether wereceive all of our anticipated grant proceeds. We have contacted and have hadlimited discussions with prospective lenders, but have no agreement with any lenderfor the debt financing that we need. If we do not secure the debt financingthat we need, we will not be able to construct our proposed ethanol plant andmay have to abandon our business.

 

Weexpect that it will take approximately 14 months from the date we close onour debt financing to construct the ethanol plant and commence start-upoperations. We do not intend to hire a sales staff to market our ethanol anddistillers grains. We intend to hire staff only to operate our ethanol plantand manage our business. We have entered into discussions with prospectivethird party distributors for our distillers grains, but have not contractedwith any distributor. We have entered into an agreement with Ethanol Products,LLC to market our ethanol. Under the agreement, Ethanol Products has exclusiverights to market all of the ethanol we produce at our proposed ethanol plantand agrees to effect the sale of our ethanol at available market prices.Ethanol Products will, among other things, market our ethanol, handle freightand shipping arrangements, review customer creditworthiness and provide uscertain administrative services, such as transaction processing and inventorymanagement. In exchange for the above services, we will pay Ethanol Products afee equal to 1% of the net-back sales price per gallon of denatured ethanolproduced at the ethanol plant. Each party has agreed to provide variousindemnifications to the other party. The agreement is for a period of fiveyears from the date we start ethanol production at the plant and will renew foradditional five-year terms unless either party elects not to renew.

 

We havealso entered into an agreement to sell our raw carbon dioxide to an unrelatedthird party processor who intends to build a carbon dioxide processing facilitynext to our ethanol plant. Under the agreement, we have agreed to sell, atcost, at least five acres of land on our site to the processor for itsconstruction of the processing facility. The agreement contains minimumpurchase and sale requirements that subject each party to certain penalties ifthe party’s obligations are not satisfied. If we begin operations butsubsequently stop operating the ethanol plant within the first 10 contractyears, then we must pay the processor up to $1,000,000 for the construction ofthe carbon dioxide facility, reduced by 10% per each previously completedcontract year. If the processor stops processing raw carbon dioxide at theprocessing facility, we have the right to purchase the land and buildings at anagreed upon amount.

 

**Site Selection**

 

Weintend to build the ethanol plant near Rensselaer, Indiana. We had previouslyentered into a purchase agreement giving us the option to purchase a 346 acresite for the ethanol plant, but have since terminated that agreement pursuantto our termination rights under that agreement. We have since entered into anoption agreement that allows us to purchase an approximately 69 acre sitelocated a few miles outside of Rensselaer near the prior site. This 69 acresite is owned by one of our managers, Mr. Mark D. Wuethrich, and othermembers of his family. Mr. Wuethrich’s family has owned this site sincethe early 1970’s. Subsequent to our entering into the option agreement, thesite was rezoned for industrial use.

 

Underthe option agreement, we have until March 31, 2004 to elect to purchasethe site. We have paid $5,000 in earnest money towards the $413,400 purchaseprice.  When considering the 69 acresite, our board of managers considered, among others things, the following:

 

14

----

 

•      Theapproximate per acre purchase price of that portion of the prior site that waszoned for industrial use ($5,500 per acre) and the approximate per acrepurchase price for that portion that constituted farmland ($3,000-$3,200 peracre);

 

•      Thefavorable location of the site with respect to existing gas lines,transportation infrastructure, and grain handling and storage capabilities;

 

•      Thefact that the site consists of agricultural land with no known prior industrialactivity;

 

•      Theneed to only purchase 69 acres of land rather than 346 acres; and

 

•      Theneed to drill wells for process water and install and maintain chillers and awater tank, which would not have been required at the prior site.

 

In addition,there are two primary natural gas pipelines (26” and 30”) running through thesite that connects us to a Louisiana-sourced natural gas supply. There is alsoa CSX rail line adjacent to the site that connects to the CSX main line railsystem for the area. We believe that the existing natural gas and railinfrastructure provides our project with competitive strengths in energy andtransportation costs.

 

We maymodify or change the location of the ethanol plant if we are unable to close onthis site, if we find another site that better suits our needs, or if we cannotobtain the necessary permits and approvals or utilities and other services atthis site, or cannot obtain them at a reasonable cost. Changing the location ofthe ethanol plant may increase the cost of the project and delay constructionand start-up operation of the ethanol plant. Further, changing the location ofthe ethanol plant may result in our losing the tax abatements from JasperCounty described below.

 

***Site Investigation and Preparation***

 

Underthe option agreement, we will be responsible for any environmental, septic orother liabilities related to the site. We have completed a site survey and aPhase I Environmental Site Assessment.  The Phase I EnvironmentalSite Assessment revealed the following:

 

•      Approximately10 acres of the eastern portion of the site was used for land application ofgrease trap/septic system wastes and a composite soil sample indicated thedetection of several metals (cadmium, chromium, copper, lead, mercury andzinc), although the level of the metals detected are below the cleanup levelsfor such metals in residential and industrial areas; and

 

•      Awater well may be present on the site and may need to be properly sealed.

 

The Phase I EnvironmentalSite Assessment examined evidence of certain environmental concerns relating tothe site. However, it does not purport to reveal all possible environmentalissues and we may later encounter other environmental deficiencies that couldincrease the cost of the project.

 

We arecurrently negotiating with Dilling Mechanical Contractors, Inc. on adesign-build contract to construct our ethanol plant. Based on DillingMechanical’s scope document and a guaranteed maximum price proposal, we expectthat Dilling Mechanical will be responsible for certain site preparations,including, among other things, drilling water wells and installing railswitches and up to 3,500 feet of rail track connecting the ethanol plant to theCSX main line rail system. However, we will be responsible for, among otherthings, running electrical lines to the site and obtaining access to anadequate supply of natural gas.

 

***Tax Abatements***

 

JasperCounty has granted us a 10-year real estate improvements tax abatement and a5-year new manufacturing equipment property tax abatement. However, these taxabatements may terminate if we fail to do any of the following:

 

•      Makeat least $4,852,858 of real estate improvements or install at least $28,970,385of new manufacturing equipment;

 

15

----

 

•      Retainat least 27 full-time permanent employees with average wages of $17.81 per hour(excluding benefits and overtime); and

 

•      Timelypay our property taxes.

 

**Plan of Operation toClose of the Offering**

 

Underthe terms of the offering, if we receive and accept subscriptions for theminimum amount offered, 10% of each investor’s total subscription price may bereleased to us from escrow, even if we have not closed on the debt financingthat we need. In an effort to meet our target development schedule, we intendto use any such proceeds to accomplish some or all of the following prior tobreaking escrow and completing the sale of the remaining 90% of each investor’ssubscription:

 

•      Purchasea site;

 

•      Completecertain site and project specific pre-construction design and engineering work,such as general arrangement drawing, piping, instrumentation, manufacturingspecifications and control equipment, and engineering drawings necessary tosecure the regulatory permits that we need to begin construction;

 

•      Completecertain site improvements, including, but not limited to, soil boring, sitegrading, and installation of a rough grade road; and

 

•      Completepermitting for our proposed ethanol plant.

 

We mayalso pay other expenses or costs related to project development. If we do nothave sufficient cash on hand or if we decide to complete the purchase of oursite and begin certain site work prior to our closing on 10% of each investor’ssubscription, it may be necessary for us to secure interim bridge financingfrom one or more unaffiliated lenders or from our selected design-buildcontractor, Dilling Mechanical. We currently have no commitment for thisfinancing.

 

**Plan of Operation toStart-up of Ethanol Plant**

 

If weraise the minimum amount offered and close on the debt financing that we need,we plan to spend the following 14 months designing, developing andconstructing the ethanol plant. We expect to have sufficient funds to cover ourcosts through start-up operations, including approximately $4,835,000 inworking capital (cash, inventory and spare parts) at plant start-up and$330,000 for corn hedging activities prior to plant start-up. We anticipateusing our cash to cover, among other things, development costs, such as installationof utilities, construction, equipment acquisition, and other expenses. Weexpect to also use our cash to cover our operating and administrative costs,such as personnel, general and administrative expenses, and legal andaccounting fees.

 

We havebeen awarded a grant for up to $2,820,000 from the United States Department ofEnergy for the federal government’s fiscal year 2002, which endsSeptember 30, 2003. In addition, funding for an additional grant for usfor up to $2,889,000 has been appropriated in the fiscal year 2003Congressional appropriation conference report. We combined these two grants andare currently negotiating the terms of the combined grant. These are matchingfunds, which means that the Department of Energy will match each dollar that wespend on qualified expenditures related to the ethanol plant project, up to themaximum amount awarded. We expect that under the terms of the combined grant, aportion of the funds will be available for pre-construction expenditures,including, among other things, personnel, travel, engineering and financingcosts. We expect that the remainder of the funds will be available forconstruction-related expenditures and equipment. We expect that the Departmentof Energy will reimburse us for qualified expenditures as they are incurred.Assuming the Department of Energy awards us the combined grant under theseterms and we are eligible to receive a total of $5,709,000, assuming we spendat least $11,418,000 on qualified expenditures and comply with the other termsand conditions of the combined grant.

 

Thefollowing is an estimate of our sources and uses of funds until the ethanolplant is built and we begin operations. The following schedule assumesthat we receive the entire $5,709,000 from the Department of Energy. 

 

16

----

 

The amounts set forth below are onlyestimates and actual sources and uses of funds could be much higher due to avariety of factors.

 

**Sources of Funds:**

 
|                             |   | **Minimum** |           | **Maximum** |   |
|----------------------------------|--------|-------------|----------------|-------------|--------|
| Equity                           |   | $           | 20,000,000     |        | $      | 25,000,000 |   |
| Seed  Capital(1)                 |   | 947,000     |           | 947,000     |   |
| Debt  Financing                  |   | 33,450,000  |           | 28,575,000  |   |
| U.S.  Department of Energy Grant |   | 5,709,000   |           | 5,709,000   |   |
| **Total Sources of Funds**       |   | **$**       | **60,106,000** | ** **  | **$**  | **60,231,000** | ** ** |

 

**Uses of Funds:**

 
|                                                        |   | **Minimum** |           | **Maximum** |   |
|-------------------------------------------------------------|--------|-------------|----------------|-------------|--------|
| Plant  Construction and Site Infrastructure and Development |   | $           | 47,994,000     |        | $      | 47,994,000 |   |
| Construction  Contingency                                   |   | 732,000     |           | 732,000     |   |
| Site  Acquisition                                           |   | 413,000     |           | 413,000     |   |
| Utilities  Access                                           |   | 957,000     |           | 957,000     |   |
| Construction  Performance Bond                              |   | 720,000     |           | 720,000     |   |
| Construction  Insurance Cost                                |   | 100,000     |           | 100,000     |   |
| Organizational  Costs                                       |   | 100,000     |           | 100,000     |   |
| Financial  Consulting Fees                                  |   | 160,000     |           | 160,000     |   |
| Permits                                                     |   | 150,000     |           | 150,000     |   |
| Offering  Expenses(2)                                       |   | 455,000     |           | 455,000     |   |
| Underwriters’  Commissions(3)                          |   | 960,000     |           | 1,260,000   |   |
| Capitalized  Interest(4)                                    |   | 800,000     |           | 700,000     |   |
| ***Financing Costs:***                                      |   |        |           |        |   |
| Lender  Fee                                                 |   | 555,000     |           | 480,000     |   |
| Legal  Fees                                                 |   | 45,000      |           | 45,000      |   |
| Commitment  Fees                                            |   | 25,000      |           | 25,000      |   |
| Miscellaneous  Expenses                                     |   | 25,000      |           | 25,000      |   |
| ***Start Up Costs:***                                       |   |        |           |        |   |
| Preproduction  Period Costs(5)                              |   | 725,000     |           | 725,000     |   |
| Insurance  Costs                                            |   | 25,000      |           | 25,000      |   |
| Inventory—Corn                                         |   | 900,000     |           | 900,000     |   |
| Inventory—Hedged  Corn                                 |   | 330,000     |           | 330,000     |   |
| Inventory—Chemicals,  Yeast, Denaturant                |   | 350,000     |           | 350,000     |   |
| Inventory—Ethanol                                      |   | 750,000     |           | 750,000     |   |
| Inventory—Distillers  Grains                           |   | 250,000     |           | 250,000     |   |
| Spare  Parts                                                |   | 500,000     |           | 500,000     |   |
| Other  Working Capital                                      |   | 2,085,000   |           | 2,085,000   |   |
| **Total Uses of Funds**                                     |   | **$**       | **60,106,000** | ** **  | **$**  | **60,231,000** | ** ** |

 

----

(1)  Includes approximately $160,000 ofmembership fees and approximately $798,000 of seed capital previously raised,less the cost of raising capital of approximately $11,000.

 

(2)  Does not include any reasonable andcustomary expenses incurred by one or more broker-dealers in the offering forwhich we may agree to reimburse them.

 

17

----

 

(3) Assumes that weengage one or more broker-dealers in the offering to act as underwriters tosell 16,000,000 units if the minimum amount is sold, or 21,000,000 units if themaximum is sold, and we pay them a fee equal to 6% of the offering price perunit.

 

(4) Net of interestincome earned on offering proceeds.

 

(5) Includes officers’salary and compensation and managers’ per diem fees of $163,350 as ofNovember 30, 2003, plus estimated salary and compensation and managers’per diem fees from December 1, 2003 to start up of the ethanol plant ofapproximately $123,750.

 

Weestimate that our offering expenses will total approximately $455,000,allocated as follow:

 
| SEC  registration fee         |   | $       | 2,300   |   |
|-------------------------------|--------|---------|---------|--------|
| Printing  expenses            |   | 75,000  |    |
| Legal  fees and expenses      |   | 250,000 |    |
| Cost  of sales meeting        |   | 20,000  |    |
| Accounting  fees and expenses |   | 50,000  |    |
| Consulting  fees              |   | 5,000   |    |
| Blue  sky fees and expenses   |   | 25,000  |    |
| Escrow  agent fees            |   | 5,000   |    |
| Miscellaneous  expenses       |   | 22,700  |    |
| Total                         |   | $       | 455,000 |   |

 

Weestimate that our financing cost for our debt financing will totalapproximately $650,000 if the minimum number of units offered is sold, andapproximately $575,000 if the maximum is sold. Financing costs includes lendercommitment fees, as well as out-of-pocket expenses such as title insurance,legal fees, appraisal costs and filing fees. Because we intend to capitalizeall of our interest expenses and not make any payments on our debt financinguntil we begin start-up operations, we estimate that by the time we beginstart-up operations, capitalized interest, net of interest income earned onoffering proceeds, will total approximately $800,000 if the minimum number ofunits offered is sold and $700,000 if the maximum is sold. We also expect tospend approximately $150,000 to procure necessary permits and approximately$160,000 for financial consulting services. We have spent approximately$100,000 to organize our limited liability company, including legal, accountingand related expenses. If we engage the services of one or more broker-dealersto help us offer and sell the units, we anticipate paying them commissions ofup to 6% of the offering price per unit for sales effected through thebroker-dealers.

 

Weexpect to spend the majority of our funds, approximately $50,916,000, on siteacquisition, site preparation and development, design, engineering andconstruction of the ethanol plant, infrastructure, equipment andconstruction-related insurance and performance bond. These costs includeleveling and grading the site, general site work to prepare for construction ofthe ethanol plant, preparing and pouring foundations, and material and labor toconstruct the plant and ancillary facilities. We will also be purchasing andinstalling ethanol production equipment, such as pumps, grinders, processingequipment, storage tanks and conveyors. Based upon the scope document andguaranteed maximum price proposal we received from Dilling Mechanical, weexpect that Dilling Mechanical will handle certain site preparation andinfrastructure, construction, equipment purchases and installation. We plan tomake monthly progress payments based on the work completed and invoiced to usby Dilling Mechanical. We estimate that managers’ and officers’ insurance,general commercial liability insurance, and workers’ compensation insurance forour business will be approximately $25,000. We estimate that we will need tospend approximately $330,000 for corn hedging activities and approximately$725,000 on preproduction costs, such as administrative and other expenses. Weanticipate having working capital of approximately $4,835,000 at plantstart-up, consisting of approximately $2,750,000 of spare parts and corn,chemicals, yeast, denaturant, ethanol and distillers grains inventory, and$2,085,000 of cash.

 

**Administration**

 

Wecurrently do not have a full-time office staff and do not expect to hire afull-time office staff until the ethanol plant is near completion. Until then,we are dependent entirely on our Assistant Vice President—Chief 

 

18

----

 

Operating Officer, our part-timeofficers and the board of managers to act as our on-site construction managerand to maintain our books and records. These individuals are responsible forcomplying with the rules and regulations promulgated under the Securities andExchange Act of 1934 concerning the maintenance of accurate books and records,and the timely submission of periodic reports and other requirements with theSecurities and Exchange Commission.

 

**Operating Expenses**

 

When theethanol plant nears completion, we expect to incur various operating expenses,such as supplies, utilities and salaries for administration and productionpersonnel. Along with operating expenses, we anticipate that we will havesignificant expenses relating to financing and interest. We have allocatedfunds in our capital structure for these expenses, but cannot assure you thatthe funds allocated will be sufficient to cover these expenses. We may needadditional funding to cover these costs if sufficient funds are not availableor if costs are higher than expected.

 

**Liquidity andCapital Resources**

 

As ofNovember 30, 2003, we had cash and cash equivalents of $162,847 and totalassets of $623,658. Our total assets include $389,094 of deferred offeringcosts relating to the Offering. At the time we issue units in the offering,these costs will be netted against the proceeds received, or if we do notcomplete the sale of any units in the offering, they will be expensed. To date,we have raised a net total of $947,060****inseed capital, which we have used to fund our organization and operation todate. As of November 30, 2003, we had current liabilities of $58,544,which consist primarily of our accounts payable. Since our inception throughNovember 30, 2003, we have an accumulated deficit of $381,946. Totalmembers’ equity as of November 30, 2003 was $565,114. Since our inception,we have generated no revenue from operations.

 

We areseeking to raise a minimum of $20,000,000 and a maximum of $25,000,000 in ourpublic offering. Depending on the results of the offering, we believe that theproject will cost approximately $60,106,000 to $60,231,000. We plan to financethe project with seed capital, proceeds from the offering, grant proceeds anddebt financing. The amount of debt financing that we need depends in part onthe results of the offering and whether we receive all of our anticipated grantproceeds. If we receive $5,709,000 in grant proceeds, we anticipate that wewill need approximately $33,450,000 in debt financing if we raise the minimumamount offered in the offering, and approximately $28,575,000 if we raise themaximum amount offered. We have commenced discussions with prospective lendersfor the debt financing that we need, but have no commitments for the debtfinancing. Completion of the proposed ethanol plant depends, in part, on ourability to close on our debt financing and satisfy all other conditions tobreaking escrow and close on at least the minimum amount offered.

 

Weexpect that our debt financing will be in the form of a construction loan thatwill convert to a permanent loan when we begin operations. We also expect thatthe loan will be secured by all of our real property and substantially all ofour other assets, including receivables and inventories. In addition torepaying the principal, we plan to pay interest on the loan at market rate forloans to start-up ethanol projects, plus annual fees for maintenance andobservation of the loan by the lender. We intend to capitalize all of ourinterest until we commence start-up operation, which means that we will notmake any payment on the loan until we construct the ethanol plant and beginproducing ethanol. If the project suffers delays, we may not be able to timelyrepay the loan. If interest rates increase, we will have higher interestpayments, which could adversely affect our business.

 

We maysecure up to $20,000,000 of the debt financing that we need through tax exemptrevenue bonds, which would need to be supported by bank letters of credit. Wecurrently have no commitments for these letters of credit. Tax exempt revenuebonds may be available if issued pursuant to the Internal Revenue Code and tothe extent that proceeds are used to fund eligible expenditures (such as solidwaste equipment and processes). If any bonds are issued, we would need to repaythe principal, along with accrued interest, over a yet to be determined periodto be set forth in the bond. We believe that interest on the bonds may be at arate that is less than market rate because the bonds are tax exempt. However,if the bonds lose their exempt status, then the applicable interest mayincrease to market rate. We have no commitments for the issuance of tax exemptrevenue bonds and cannot assure you that we will be able to secure any debtfinancing through tax exempt revenue bonds.

 

If wedecide to complete the purchase of our site and begin certain site work priorto our closing on at least the minimum amount offered, it may be necessary forus to secure interim bridge financing from one or more 

 

19

----

 

unaffiliated lenders or from ourselected design-build contractor, Dilling Mechanical. We currently have nocommitment for this financing.

 

**WARNING REGARDING FORWARD-LOOKING STATEMENTS**

 

Thisannual report contains forward-looking statements that involve future events,our future performance and our expected future operations and actions. In some casesyou can identify forward-looking statements by the use of words such as “may,”“should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,”“could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or thenegative of these terms or other similar expressions. These forward-lookingstatements are only our predictions and involve numerous assumptions, risks anduncertainties. Our actual results or actions may differ materially from theseforward-looking statements for many reasons, including the risks describedabove and appearing elsewhere in this prospectus, and events that are beyondour control. We are not under any duty to update the forward-looking statementscontained in this prospectus. We cannot guarantee future results, levels ofactivity, performance or achievements. We caution you not to put undue relianceon any forward-looking statements, which speak only as of the date of thisprospectus.

 

Youshould read this annual report and the documents that we reference herein,completely and with the understanding that our actual future results may bematerially different from what we currently expect. We qualify all of ourforward-looking statements by these cautionary statements.

 

Youshould also consider the following factors that could cause our actual resultsto differ from our expectations.

 

# **Formation and Debt Risks**

# ** **

•      Weare a start-up entity that will initially allocate all of our resources towardsthe development of our proposed ethanol plant, will initially be engaged in designand construction, and will not begin generating revenue until we completeconstruction of the proposed ethanol plant;

 

•      We do notbelieve that we can build the ethanol plant without our public offering provingto be a success and without debt financing. The minimum amountof this offering will be met if we receive and accept subscriptions for atleast $20,000,000, even if we have not actually received cash in that amount.We cannot assure you that subscribers will not default on their paymentobligations. If investors default and do not pay the amount due under thepromissory notes, we could experience a shortage in capital and may not be ableto construct the ethanol plant or fund start-up operations. Additionally, if we do not close on the debt financing thatwe need for any reason, we will not be able to complete the project which couldimpact your investment; and

 

•      Becausewe are recently formed and have virtually no operating history or experienceoperating an ethanol plant, we may have difficulties successfully completingand operating the ethanol plant. If we do not successfully complete and operatethe ethanol plant, the value of your units will decline.

 

# **Construction and DevelopmentRisks**

# ** **

•      Significantincreases in the cost of constructing the ethanol plant because of, amongothers, change orders we may submit or differing site conditions, may requireus to obtain additional debt financing, which may be difficult and expensive toobtain, or may not be available at all; and

 

•      Compliancewith new and existing environmental laws and rules could significantly increaseour construction and start-up costs, and force us to delay or halt constructionor operation of the ethanol plant.

 

# **Operations and Market Risks**

# ** **

•      Ouroperating costs could be higher than we expect, and this could reduce anydistributions we may make.  In additionto general market fluctuations and economic conditions, we could experiencesignificant operating cost increases from numerous factors, many of which arebeyond our control.  In addition,operating the ethanol plant subjects us to ongoing compliance with applicablegovernmental regulations, such as those governing pollution 

 

20

----

 

control, occupationalsafety, and other matters. We may have difficulty complying with theseregulations and our compliance costs could increase significantly;

 

•      Theprice of distillers grains is affected by the price of other commodityproducts, such as soybeans and corn, and decreases in the price of thesecommodities could decrease the price of distillers grains, which will decreasethe amount of revenue we may generate;

 

•      Asmore and more ethanol plants are built, ethanol production will increase and,if demand does not sufficiently increase, this could result in lower prices forethanol and distillers grains, which will decrease the amount of revenue we maygenerate;

 

•      Cornprices will fluctuate and could increase significantly in the future, whichwill increase our operating costs and adversely affect our operating resultsbecause we may not be able to pass any of the increased costs on to ourcustomers.  Increases in corn priceswill generally produce lower profit margins, because there is littlecorrelation between the price of corn and the price of ethanol to supportincreases in ethanol prices if corn prices increase.  If corn prices increase, our production costs will increase andour profit margins will decrease because we may not be able to pass any of theincreased costs on to our customers;

 

•      Theethanol and fuel additives industry is very competitive, we face competitionfrom entities that are larger and have significantly more resources than we do,and we may not have sufficient resources to compete with these entities;

 

•      Technologicaladvances could significantly decrease the cost of producing ethanol or resultin the production of higher quality ethanol, and if we are unable to adopt orincorporate technological advances into our operations, our proposed ethanolplant could become uncompetitive or obsolete; and

 

•      Ourbusiness will not be diversified, because we will be primarily dependent uponone product, and this means that we may not be able to adapt to changing marketconditions or endure any decline in the ethanol industry.

 

**Governmentand Regulatory Risks**

 

•      Oursuccess depends upon federal and state environmental regulations and governmentincentives that support the ethanol industry. Because such regulations and incentive programs are constantly changing,there is no guarantee that they will continue to support the ethanol industry.

 

**Item 7****.****        Financial Statements**

 

21

----

 

### **REPORT OF INDEPENDENTAUDITORS**

### ** **

Board of Managers

Iroquois Bio-EnergyCompany, LLC

Hebron, IN 46341-9302

 

We have auditedthe accompanying balance sheets of Iroquois Bio-Energy Company, LLC (adevelopment stage Indiana company known as Iroquois Bio-Energy Cooperativeuntil April 2, 2002), as of November 30, 2003 and 2002, the relatedcombined statements of operations, combined changes in members’ equity andcombined cash flows for the years ended November 30, 2003 and 2002 andfrom inception to November 30, 2003. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

We conducted ouraudits in accordance with auditing standards generally accepted in the UnitedStates of America.  Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement.  An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements.  An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion,the financial statements referred to above present fairly, in all materialrespects, the financial position of Iroquois Bio-Energy Company, LLC, (adevelopment stage company) as of November 30, 2003 and 2002 and theresults of its combined operations and cash flows for the years ended November 30,2003 and 2002 and from inception to November 30, 2003 in conformity withaccounting principles generally accepted in the United States of America.

 

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

 

Minneapolis, Minnesota

January 5, 2004

 

22

----

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

**(ADevelopment Stage Company)**

 

**BalanceSheets**

 

**November 30,2003 and 2002**

 
|                                                                                                               |   | **November 30,****2003** |       | **November 30,****2002** |       |
|--------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|-------------------------------|------------|
|                                                                                                               |   |                          |       |                          |       |
| **ASSETS**                                                                                                         |   |                          |       |                          |       |
|                                                                                                               |   |                          |       |                          |       |
| **Current Assets**                                                                                                 |   |                          |       |                          |       |
| Cash and cash equivalents                                                                                          |   | $                             | 162,847    |                          | $          | 587,139 |   |
| Grants receivable                                                                                                  |   | 59,479                        |       | 18,875                        |       |
| Prepaid expenses                                                                                                   |   | 1,009                         |       | 222                           |       |
| Total current assets                                                                                               |   | 223,335                       |       | 606,236                       |       |
|                                                                                                               |   |                          |       |                          |       |
| **Equipment**                                                                                                      |   |                          |       |                          |       |
| Office equipment                                                                                                   |   | 7,973                         |       | 4,740                         |       |
| Less accumulated depreciation                                                                                      |   | 1,744                         |       | 316                           |       |
| Net equipment                                                                                                      |   | 6,229                         |       | 4,424                         |       |
|                                                                                                               |   |                          |       |                          |       |
| **Other Assets**                                                                                                   |   |                          |       |                          |       |
| Deferred offering costs                                                                                            |   | 389,094                       |       | 105,385                       |       |
| Land option                                                                                                        |   | 5,000                         |       | 50,000                        |       |
| Total other assets                                                                                                 |   | 394,094                       |       | 155,385                       |       |
|                                                                                                               |   |                          |       |                          |       |
| **Total Assets**                                                                                                   |   | $                             | 623,658    |                          | $          | 766,045 |   |
|                                                                                                               |   |                          |       |                          |       |
| **LIABILITIES AND MEMBERS’ EQUITY**                                                                           |   |                          | ** ** |                          | ** ** |
|                                                                                                               |   |                          |       |                          |       |
| **Current Liabilities**                                                                                            |   |                          |       |                          |       |
| Accounts payable                                                                                                   |   | $                             | 53,396     |                          | $          | 52,398 |   |
| Payroll taxes payable                                                                                              |   | 3,093                         |       | 2,803                         |       |
| Other accrued liabilities                                                                                          |   | 2,055                         |       | 773                           |       |
| Total current liabilities                                                                                          |   | 58,544                        |       | 55,974                        |       |
|                                                                                                               |   |                          |       |                          |       |
| **Commitments and Contingencies**                                                                                  |   |                          |       |                          |       |
|                                                                                                               |   |                          |       |                          |       |
| **Members’ Equity**                                                                                           |   |                          |       |                          |       |
| Member contributions, net of costs related to  capital contributions, 1,875,000 units outstanding for both periods |   | 947,060                       |       | 947,060                       |       |
| Deficit accumulated during development stage                                                                       |   | (381,946                      | )          | (236,989                      | )          |
| Total members’ equity                                                                                         |   | 565,114                       |       | 710,071                       |       |
|                                                                                                               |   |                          |       |                          |       |
| **Total Liabilities and Members’  Equity**                                                                    |   | $                             | 623,658    |                          | $          | 766,045 |   |

 

Notes to Combined Financial Statements are an integral part of thisStatement.

 

23

----

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

**(ADevelopment Stage Company)**

 

**CombinedStatement of Operations**

 
|                                                                                                       |   | **Year Ended  November 30,  2003** |       | **Year Ended  November 30,  2002** |       | **Date of  Inception to  November 30, 2003** |       |
|------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|------------|---------------------------------------------------|------------|
|                                                                                                       |   |                                    | ** ** |                                    | ** ** |                                              | ** ** |
| **Revenues**                                                                                               |   | $                                       | —     |                                    | $          | —                                            |       | $ | — |   |
|                                                                                                       |   |                                    |       |                                    |       |                                              |       |
| **Operating Expenses**                                                                                     |   |                                    |       |                                    |       |                                              |       |
| Professional and consulting fees                                                                           |   | 150,934                                 |       | 100,841                                 |       | 290,675                                           |       |
| Project coordination and development                                                                       |   | 109,045                                 |       | 54,400                                  |       | 163,445                                           |       |
| General and administrative                                                                                 |   | 185,822                                 |       | 74,346                                  |       | 280,443                                           |       |
| Total operating expenses                                                                                   |   | 445,801                                 |       | 229,587                                 |       | 734,563                                           |       |
|                                                                                                       |   |                                    |       |                                    |       |                                              |       |
| **Operating Loss**                                                                                         |   | (445,801                                | )          | (229,587                                | )          | (734,563                                          | )          |
|                                                                                                       |   |                                    |       |                                    |       |                                              |       |
| **Other Income**                                                                                           |   |                                    |       |                                    |       |                                              |       |
| Grant income                                                                                               |   | 296,391                                 |       | 18,875                                  |       | 315,266                                           |       |
| Miscellaneous income                                                                                       |   | —                                  |       | —                                  |       | 24,265                                            |       |
| Interest                                                                                                   |   | 4,453                                   |       | 8,006                                   |       | 13,086                                            |       |
| Total other income                                                                                         |   | 300,844                                 |       | 26,881                                  |       | 352,617                                           |       |
|                                                                                                       |   |                                    |       |                                    |       |                                              |       |
| **Net Loss**                                                                                               |   | $                                       | (144,957   | )                                       | $          | (202,706                                          | )          | $ | (381,946 | ) |
|                                                                                                       |   |                                    |       |                                    |       |                                              |       |
| **Net Loss Per Unit**(1,875,000, 1,030,074 and 390,102 weighted  average units outstanding, respectively.) |   | $                                       | (0.08      | )                                       | $          | (0.20                                             | )          | $ | (0.98 | ) |

 

Notes to Combined Financial Statements are an integral part of thisStatement.

 

24

----

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

**(ADevelopment Stage Company)**

 

**CombinedStatement of Member’s Equity**

 
|                                                                                                                                 |   | **Contributed  Capital  (Redeemed)** |    | **Accumulated  Loss** |    | **Total** |    |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|---------|-----------------------|---------|-----------|---------|
| **Balance - September 8, 1995  (inception)**                                                                                    |   |                                 |    |                  |    |      |    |
| Contributed Capital for 72 units of the  Cooperative, August through November 1995                                         |   | $                                    | 18,250  |                  |    |      | $       | 18,250 |   |
| Net loss for period ending November 30, 1995  for the Cooperative                                                               |   |                                 |    | $                     | (10,199 | )         | (10,199 | ) |
| **Balance - November 30, 1995**                                                                                                 |   | 18,250                               |    | (10,199               | )       | 8,051     |    |
| Contributed Capital for 22 units of the  Cooperative, January through May 1996                                                  |   | 5,500                                |    |                  |    | 5,500     |    |
| Net loss for year ending November 30, 1996 for  the Cooperative                                                                 |   |                                 |    | (6,641                | )       | (6,641    | )       |
| **Balance - November 30, 1996**                                                                                                 |   | 23,750                               |    | (16,840               | )       | 6,910     |    |
| Net loss for year ending November 30, 1997  for the Cooperative                                                                 |   |                                 |    | (511                  | )       | (511      | )       |
| **Balance - November 30, 1997**                                                                                                 |   | 23,750                               |    | (17,351               | )       | 6,399     |    |
| Net income for year ending November 30, 1998  for the Cooperative                                                               |   |                                 |    | 15                    |    | 15        |    |
| **Balance - November 30, 1998**                                                                                                 |   | 23,750                               |    | (17,336               | )       | 6,414     |    |
| Net loss for year ending November 30, 1999  for the Cooperative                                                                 |   |                                 |    | (26                   | )       | (26       | )       |
| **Balance - November 30, 1999**                                                                                                 |   | 23,750                               |    | (17,362               | )       | 6,388     |    |
| Net loss for year ending November 30, 2000  for the Cooperative                                                                 |   |                                 |    | (60                   | )       | (60       | )       |
| **Balance - November 30, 2000**                                                                                                 |   | 23,750                               |    | (17,422               | )       | 6,328     |    |
| Contributed Capital for 189 units of the  Cooperative, May through October 2001                                                 |   | 93,800                               |    |                  |    | 93,800    |    |
| Additional Capital for by 40 members of the  Cooperative, May through October 2001                                              |   | 17,500                               |    |                  |    | 17,500    |    |
| Cancellation of 54 units of the Cooperative                                                                                          |   | —                               |    |                  |    | —    |    |
| Net loss for year ending November 30, 2001  for Cooperative                                                                     |   |                                 |    | (16,861               | )       | (16,861   | )       |
| **Balance - November 30, 2001**                                                                                                 |   | 135,050                              |    | (34,283               | )       | 100,767   |    |
| Contributed Capital for 63 units of the  Cooperative, January through March 2002                                           |   | 31,500                               |    |                  |    | 31,500    |    |
| Redemption of 14 units of the Cooperative,  April 2002                                                                          |   | (7,000                               | )       |                  |    | (7,000    | )       |
| Net loss from December 1, 2001 to  April 2, 2002 for Cooperative                                                           |   |                                 |    | (33,997               | )       | (33,997   | )       |
| Balance of net equity contributed to Limited  Liability Company for 278,000 units of the Limited Liability Company,  April 2002 |   | 159,550                              |    | (68,280               | )       | 91,270    |    |
| Contributed capital for 1,597,000 units to Limited  Liability Company, June 10, 2002                                            |   | 798,500                              |    |                  |    | 798,500   |    |
| Cost related to capital contributions to the  Limited Liability Company                                                              |   | (10,990                              | )       |                  |    | (10,990   | )       |
| Net loss from April 2, 2002 to  November 30, 2002 for the Limited Liability Company                                        |   |                                 |    | (168,709              | )       | (168,709  | )       |
| **Balance - November 30, 2002**                                                                                                 |   | 947,060                              |    | (236,989              | )       | 710,071   |    |
| Net loss for the year ended November 30, 2003  for the Limited Liability Company                                                |   |                                 |    | (144,957              | )       | (144,957  | )       |
| **Balance - November 30, 2003**                                                                                                 |   | $                                    | 947,060 |                  | $       | (381,946  | )       | $ | 565,114 |   |

 

Notes to Combined Financial Statements are an integral part of thisStatement.

 

25

----

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

**(ADevelopment Stage Company)**

 

**CombinedStatement of Cash Flows**

 
|                                                                                  |   | **Year Ended  November 30,  2003** |       | **Year Ended  November 30,  2002** |       | **Date of  Inception to  November 30,  2003** |       |
|---------------------------------------------------------------------------------------|--------|-----------------------------------------|------------|-----------------------------------------|------------|----------------------------------------------------|------------|
|                                                                                  |   |                                    | ** ** |                                    | ** ** |                                               | ** ** |
| **Cash Flows from Operating  Activities**                                             |   |                                    |       |                                    |       |                                               |       |
| Net loss                                                                              |   | $                                       | (144,957   | )                                       | $          | (202,706                                           | )          | $ | (381,946 | ) |
| Adjustments to reconcile net loss to net cash from  operations                        |   |                                    |       |                                    |       |                                               |       |
| Depreciation                                                                          |   | 1,428                                   |       | 316                                     |       | 1,744                                              |       |
| Grant income                                                                          |   | (296,391                                | )          | (18,875                                 | )          | (315,266                                           | )          |
| Change in assets and liabilities                                                      |   |                                    |       |                                    |       |                                               |       |
| Prepaid expenses                                                                      |   | (787                                    | )          | (222                                    | )          | (1,009                                             | )          |
| Accounts payable                                                                      |   | 4,083                                   |       | 24,014                                  |       | 28,097                                             |       |
| Accrued liabilities                                                                   |   | 1,572                                   |       | 3,576                                   |       | 5,148                                              |       |
| Net cash used in operating activities                                                 |   | (435,052                                | )          | (193,897                                | )          | (663,232                                           | )          |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Cash Flows from Investing  Activities**                                             |   |                                    |       |                                    |       |                                               |       |
| Purchase of office equipment                                                          |   | (3,233                                  | )          | (4,740                                  | )          | (7,973                                             | )          |
| Payment of land earnest money                                                         |   | —                                  |       | (50,000                                 | )          | (50,000                                            | )          |
| Refund of land earnest money                                                          |   | 50,000                                  |       | —                                  |       | 50,000                                             |       |
| Purchase of land option                                                               |   | (5,000                                  | )          | —                                  |       | (5,000                                             | )          |
| Net cash provided by (used in) investing  activities                                  |   | 41,767                                  |       | (54,740                                 | )          | (12,973                                            | )          |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Cash Flows from Financing  Activities**                                             |   |                                    |       |                                    |       |                                               |       |
| Proceeds from grant                                                                   |   | 255,787                                 |       | —                                  |       | 255,787                                            |       |
| Contributed capital                                                                   |   | —                                  |       | 830,000                                 |       | 965,050                                            |       |
| Redemption of capital                                                                 |   | —                                  |       | (7,000                                  | )          | (7,000                                             | )          |
| Payments for deferred offering costs                                                  |   | (286,794                                | )          | (87,991                                 | )          | (363,795                                           | )          |
| Cost of raising capital                                                               |   | —                                  |       | —                                  |       | (10,990                                            | )          |
| Net cash provided by (used in) financing  activities                                  |   | (31,007                                 | )          | 735,009                                 |       | 839,052                                            |       |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Net Increase (Decrease) in Cash  and Cash Equivalents**                             |   | (424,292                                | )          | 486,372                                 |       | 162,847                                            |       |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Cash and Cash Equivalents -  Beginning of Period**                                  |   | 587,139                                 |       | 100,767                                 |       | —                                             |       |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Cash and Cash Equivalents - End  of Period**                                        |   | $                                       | 162,847    |                                    | $          | 587,139                                            |       | $ | 162,847 |   |
|                                                                                  |   |                                    |       |                                    |       |                                               |       |
| **Supplemental Disclosure of  Noncash Investing Activities and Financing Activities** |   |                                    |       |                                    |       |                                               |       |
| Deferred offering costs in accounts payable                                           |   | $                                       | 25,299     |                                    | $          | 28,384                                             |       | $ | 25,299 |   |

 

Notes to Combined Financial Statements are an integral part of thisStatement.

 

26

----

 

**IROQUOISBIO-ENERGY COMPANY, LLC**

**(ADevelopment Stage Company)**

**Notes toCombined Financial Statements**

**November 30,2003 and 2002**

 

# **1.  SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**

# ** **

*Nature of Business*

 

 Iroquois Bio-Energy Company, LLC (an IndianaLimited Liability Company) was organized to pool investors to build a 40million gallon annual production ethanol plant near Rensselaer, Indiana.  As of November 30, 2003 and 2002, theCompany is in the development stage with its efforts being  principally devoted to organizational andequity raising activities.  Constructionis projected to begin in the year 2004.

 

*Fiscal Reporting Period*

 

TheCompany has adopted a fiscal year ending November 30 for reportingfinancial operations.

 

*Accounting Estimates*

 

Managementuses estimates and assumptions in preparing these financial statements inaccordance with generally accepted accounting principles.  Those estimates and assumptions affect thereported amounts of assets and liabilities, the disclosure of contingent assetsand liabilities, and the reported revenues and expenses.  Actual results could differ from thoseestimates.

 

*Cash and Cash Equivalents*

 

TheCompany considers all highly liquid debt instruments purchased with a maturityof three months or less to be cash equivalents.

 

TheCompany maintains its accounts primarily at one financial institution.  At times throughout the year, the Company’scash and cash equivalents balance may exceed amounts insured by the FederalDeposit Insurance Corporation.

 

TheCompany’s financial instruments consist primarily of cash and cash equivalents,whose fair value equals their carrying amount.

 

*Equipment*

 

Equipment is stated at the lower of cost or fairmarket value.  Maintenance and repairsare expensed as incurred; major improvements and betterments arecapitalized.  Depreciation is computedusing the straight-line method over the following estimated useful lives:

 

| Office equipment |   | 5 years |
|------------------|--------|---------|

 

*Deferred Offering Costs*

 

The Company defers the cost incurred to raise equityfinancing until that financing occurs. At such time that the issuance of new equity occurs, these costs will benetted against the proceeds received; or if the financing 

 

27

----

 

does not occur, they will be expensed.  At November 30, 2003 and 2002, theCompany had****$389,094****and $105,385, respectively, of costs deferredrelated to the registered offering discussed in Note 3.

 

*Non-Member Contributions andGrants*

 

The Company received certain non-recurringcontributions from various local businesses and individuals in the surroundingcommunity to assist the Company in paying for its costs during the developmentstage.  These contributions representunconditional transfers from non-members and do not obligate the Company in anymanner or give the contributors any future investment rights.  Accordingly, such non-member contributionsare recognized as miscellaneous income.

 

The Company recognizes grant income as other incomefor reimbursement of expenses incurred upon complying with the conditions ofthe grant.  For reimbursements ofcapital expenditures, the grants are recognized as a reduction of the basis of thedepreciable asset upon complying with the conditions of the grant.

 

*Income Taxes*

 

Iroquois Bio-Energy Company, LLC is treated as apartnership for Federal and state income tax purposes and is generally notsubject to either federal or state income taxes.  Instead, its earnings and losses are included in the income taxreturns of its members.  Therefore, noprovision or liability for Federal or state income taxes has been included inthese financial statements

 

*Organizational Costs and Start UpCosts*

 

TheCompany expenses all organizational and start up costs as incurred.

 

*Cost ofRaising Capital*

 

Thecost of raising capital are the costs directly associated with successfullyraising capital and these costs totaled $10,990 at November 30, 2003 and2002.

 

*Reclassification*

 

Certain amounts inthe Balance Sheets for 2002 have been reclassified to conform to 2003classifications.  Thesereclassifications had no effect on total liabilities, members’ equity ordeficit accumulated during development stage as previously reported.

 

*Recent Accounting Pronouncements*

 

TheFinancial Accounting Standards Board (FASB) has issued Statement No. 149“Amendment of Statement 133 on Derivative Instruments and HedgingActivities.”  The Statement amends and clarifies accountingfor derivative instruments, including certain derivative instruments embeddedin other contracts, and for hedging activities under Statement 133.  The Financial Accounting Standards Board(FASB) has issued Statement No. 150 “Accounting for Certain FinancialInstruments with Characteristics of both Liabilities and Equity.”  The Statement establishes standards for howan issuer classifies and measures certain financial instruments.

 

Managementdoes not expect the implementation of these pronouncements to have asignificant effect on the Company’s combined financial statements.

 

28

----

 

**2.  DEVELOPMENT STAGE ENTERPRISE**

 

The Company was formed on April 2, 2002 to haveperpetual life.  The Company wasinitially capitalized in April 2002 through the dissolution of IroquoisBio-Energy Cooperative.  Immediatelyprior to its dissolution, the Cooperative, consisting of 278 members,contributed its net assets consisting of approximately $87,000 of cash and$5,000 of equipment in exchange for 278,000 units of the Company, which wastreated in a manner similar to pooling of interest.  The Company is the successor of the Cooperative.

 

The Company was furthercapitalized by 110 members, contributing an aggregate of $798,500 for 1,597,000units.  The Company offered, through aprivate placement memorandum, a maximum of 1,600,000 units of securities at acost of $.50 per unit for a maximum of $800,000.  Each investor was required to purchase a minimum of 5,000 unitsfor a minimum investment of $2,500, and each investor was limited to a maximuminvestment of 50,000 units at a cost of $25,000.  This offering was closed and the units were issued inJune 2002.  The weighted averageunits and loss per unit computations have been adjusted retroactively toaccount for this activity.

 

The combined statementsof operations, changes in members’ equity, and cash flows include theCooperative’s activity from September 8, 1995 (Cooperative date ofinception) to the dissolution and contribution of the Cooperative’s assets tothe Company.

 

Incomeand losses are allocated to all members based upon their respective percentageunits held.  See Note 3 for furtherdiscussion of member’s equity.

 

**3. MEMBERS’ EQUITY**

 

As specified in the Company’s operating agreement,the Company will have one class of membership units.  The Company is authorized to issue up to 50,000,000 membershipunits, including the units discussed in Note 2.  No additional units may be issued for less than $1 per unitwithout the consent of a Majority in Interest of the Members.

 

The Company has filed a Registration Statement onForm SB-2 (“Registration Statement”) with the Securities and ExchangeCommission (“SEC”).  The RegistrationStatement was originally declared effective on February 27, 2003 for thesale of up to 25,000,000 membership units at $1 per unit.  The Company subsequently amended theRegistration Statement to reflect certain changes to the RegistrationStatement.  The SEC declared thesubsequently amended Registration Statement effective on September 23,2003.  The amendment extends theoffering to December 31, 2003, subject to one or more extensions to nolater than June 30, 2004.  The Board votedto extend the Offering to March 31, 2004. Additionally the amendment includes aprovision for potential investors to purchase units by either submitting 100%of the total subscription price or 20% of the subscription price and executinga promissory note for the balance.  Thepayments of subscriptions will be held in escrow until the Company receives andaccepts subscriptions for the minimum amount of $20,000,000 through theoffering.  Should the Company not raisethe minimum amount by the close of the offering, all subscriptions payments willbe promptly returned with any related interest earned after September 30,2003.  If the Company receives andaccepts subscriptions for the minimum amount offered by the close of theoffering, 10% of the total subscription price may be released from escrow.  Should the Company subsequently not obtainsufficient debt financing from a lender and execute a design-build agreementfor the construction and operation of the ethanol plant by September 30,2004, the Company will return all subscription payments remaining in the escrowaccount, together with any related interest earned after September 30,2003.

 

TheCompany has also revised its estimate of total costs of the project fromapproximately $57.9 million to approximately $60.1 million.  The Company anticipates funding thedevelopment of the ethanol plant by using 

 

29

----

 

approximately $0.9 million of seed capital currently raised, raisingequity of at least $20 million, securing debt financing of $28.575 - $33.450million, and utilizing up to approximately $5.7 million in matching grants fromthe United States Department of Energy. In addition, the Company incorporated the intended use of a broker tosell up to 16 – 21 million units and other changes outlined in the amendedRegistration Statement.

 

Asof November 30, 2003, the Company has received subscriptions for the saleof 3,667,000 units and has escrowed the****$3,279,800collected and has obtained the $387,200 in promissory notes relating to thesubscriptions.

 

**4.  RELATED PARTY TRANSACTIONS**

 

Effective May 1, 2002,the Company began compensating the treasurer and secretary****who are also members of the Board ofManagers and members, at the rate of $15 per hour for their time spent onCompany business.  Additionally, Boardmembers will receive $50 per meeting with a maximum of $100 per month for Boardmeetings attended.  For each of theyears ended November 30, 2003 and 2002, the Company paid $9,650 and$3,200, respectively, to the Board Members for attending Board meetings.

 

**5.  INCOME TAXES**

 

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

 
|                                               |   | **November  2003** |       | **November  2002** |       |
|----------------------------------------------------|--------|--------------------|------------|--------------------|------------|
|                                               |   |               | ** ** |               | ** ** |
| Combined financial statement basis of assets       |   | $                  | 623,658    |               | $          | 766,045 |   |
| Plus organization and start-up costs capitalized   |   | 217,286            |       | 146,994            |       |
|                                               |   |               |       |               |       |
| Syndication  costs not deductible for tax purposes |   | (389,094           | )          | (105,385           | )          |
| Accumulated  depreciation and amortization         |   | (2,969             | )          | (711               | )          |
|                                               |   |               |       |               |       |
| Total                                              |   | **$**              | 448,881    |               | $          | 806,943 |   |

 

There were no differencesbetween the combined financial statement basis and tax basis of the Company’sliabilities.

 

**6.  COMMITMENTS ANDCONTINGENCIES AND SUBSEQUENT EVENTS**

 

The Company was awardedan approximately $2.8 million matching grant for preconstruction activitiesfiscal year 2002 by letter on September 27, 2002 from the United StatesDepartment of Energy for the federal government’s fiscal year beginning 2002,which ends September 20, 2003 and accepted the terms and conditions of thegrant by receipting letter on October 3, 2002.  For the years ending November 30, 2003 and 2002, the Companyrecognized $296,391 and $18,875, respectively, of this grant as income.  The Department of Energy has extended theoriginal grant and combined it with an additional grant of $2,889,000 forconstruction costs.  The grant periodwill end September 30, 2005.

 

The Company has signed aletter of intent with an unrelated entity to provide a scope document,conceptual budget, construction timeline and certain preliminary engineeringwork for approximately $60,000.  Thisfee will be applied to the total construction cost of the ethanol plant if theCompany enters into a formal design-build agreement with this unrelatedentity.  As of November 30, 2003, aformal design-build agreement has not been reached, and is currently beingnegotiated.

 

In March 2002, theCompany hired a project manager at a contracted price of $1,800 per month forthe term of six months.  The Companypaid the project manager approximately $7,400 under this contract.  The Company entered into an employmentcontract with this project manager, from June 1, 2002 throughJune 2004, which provides for a base salary, certain employee benefits,and a provision for incentive pay.

 

30

----

 

TheCompany had entered into a contract to purchase approximately 346 acres of landfor approximately $1,370,000.  TheCompany deposited $50,000 of earnest money with an unrelated party.  This contract gave the Company untilMarch 25, 2003, in which to inspect the land and, if unsatisfied with theland for any reason or if other conditions were not satisfied, to terminate thecontract by written notice without obligation and receive a full refund of theearnest money deposit.  On March 20,2003, the Company terminated the contract and received the full amount of thedeposit with interest.

 

On March 31, 2003,the Company entered into a contract with a member, who is a manager, and hisfamily to purchase approximately 68.9 acres of land for approximately$413,400.  The Company deposited $5,000of earnest money with an unrelated party. The parties have signed a first amendment to the option to purchase realestate extending the date to March 31, 2004, at which time the offer willexpire.  In the event the Company failsto close on the property the seller may retain one half of the down payment,$2,500.

 

An environmentalassessment of the aforementioned land has revealed approximately ten acres ofthe eastern portion of the site was used for land application of greasetrap/septic system wastes and a composite soil sample indicates the detectionof several metals, although the level of metals detected were below the cleanuplevels for such metals in residential and industrial areas.  In addition, a water well may be present onthe site and may need to be properly sealed. Management does not believe the costs associated with these issues willbe material but is unable to ascertain its ultimate impact.

 

The Company entered intoan agreement to sell its raw carbon dioxide to an unrelated third partyprocessor who intends to build a carbon dioxide processing facility next to theethanol plant.  Under the agreement, theCompany has agreed to sell, at cost, at least five acres of land on the site tothe processor for its construction of the processing facility.  The agreement contains minimum purchase andsale requirements that subject each party to certain penalties if the party’sobligations are not satisfied.  If theCompany begins operations, but subsequently stop operating the ethanol plant withinthe first 10 contract years, then the Company must pay the processor up to$1,000,000 for the construction of the carbon dioxide facility, reduced by 10%per each previously completed contract year. If the processor stops processing raw carbon dioxide at the processingfacility, the Company has the right to purchase the land and buildings at thegreater of the highest price offered by a non-affiliated third party or thefair market value of such assets as determined by an appraisal.

 

In July 2003, theCompany executed an ethanol marketing and services agreement with anorganization.  The agreement contains anexclusive right by the marketer to market all of the plant’s ethanol atavailable market prices. The marketer is responsible for all scheduled shipmentsand will review the credit worthiness of all customers and make reasonableefforts to collect customer balances. The fees for these services will be a percentage of the net-back salesprice per gallon of denatured ethanol.

 

In August 2003, theCompany entered into a consulting agreement with an unrelated party.  The Company has paid the consultant anonrefundable retainer of $20,000, and has agreed to pay if the Company retainsone or more suitable underwriter(s), payments of $10,000 per month commencingwith the effectiveness of a post-effective amendment to the Company’sregistration statement naming the underwriter(s), as well as a $60,000 fee ifthe Company retains one or more suitable underwriter(s).  The $60,000 fee is due and payable on March 31,2004.  The Company is also responsiblefor pre-approved, reasonable expenses not to exceed $2,000 per month.  The Company may terminate this agreementupon a ten day written notice within ten days of a sixty or one hundred andtwenty day right to review period.

 

31

----

 

The county of Jasper inIndiana has granted the Company abatement of taxes for new manufacturingequipment and new research and development equipment.  The period of the abatement will be ten years for buildings andimprovements, commencing on March 1, 2004, up to a cost of $6,066,073 andfive years for new manufacturing equipment, commencing March 1, 2004 up toa cost of $36,212,981.  The abatement iscontingent on the Company meeting certain requirements as provided in theagreement including retaining employment of a certain number of individuals ata stipulated average salary within the estimated completion date.  If the county council terminates theeconomic revitalization area designation and associated tax abatementdeductions, it may require the applicant to repay the county all or a portionof the tax savings received through the date of such termination.

 

**Item 8.****        Changesin and Disagreements with Accountants on Accounting and Financial Disclosure**

 

None

 

**Item 8A.****     Controls and Procedures**

 

(a)           Evaluation ofDisclosure Controls and Procedures.

 

OurPresident (the principal executive officer), Michael J. Aylesworth, and ourTreasurer (the principal financial officer), Kenneth L. Torbet, have evaluatedour disclosure controls and procedures as of the end of the period covered bythis report.  Disclosure controls and procedures are designed to provide areasonable level of assurance that information required to be disclosed in theCompany’s reports under the Securities and Exchange Act of 1934 is recorded andreported within the appropriate time periods. Based upon that review, they haveconcluded that these controls and procedures are effective.

 

(b)           Changes in InternalControls.

 

Therehave been no changes in our internal control over financial reporting thatoccurred during the fiscal quarter ended November 30, 2003 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

 

**PART III**

 

**Item 9.****        Directorsand Executive Officers of the Registrant**

 

Ourbusiness and affairs will be managed by the board of managers and not ourmembers. Currently, our initial board of managers consists of ten managers.Nine of these managers were designated by our organizer, Iroquois Bio-EnergyCooperative, pursuant to our Articles of Organization and one was appointed bythose designated managers. Beginning in 2004, our members will elect themembers of the board of managers. Except for matters that require the approvalof our members, the board of managers has full authority to act on our behalf.The board of managers shall act collectively through meetings, committees itestablishes and our officers. Our officers consist of the officers of the boardof managers, our Assistant Vice President—Chief Operating Officer (who is not amember of our board of managers) and such other officers appointed by the boardof managers. The President of the board of managers serves as our principalexecutive officer and the treasurer serves as the principal accounting officer.

 

**Officers and Initial Members and Officers of the Board ofManagers**

 
| **Name**              |   | **Age** |   | **Position**                                           |   | **Term  Expires** |
|-----------------------|--------|---------|--------|--------------------------------------------------------|--------|-------------------|
| Michael J. Aylesworth |   | 60      |   | Manager, President                                     |   | 2004              |
| Ronald J. Gick        |   | 37      |   | Manager, Vice President                                |   | 2005              |
| John H. Bryant, Jr.   |   | 62      |   | Manager, Secretary                                     |   | 2006              |
| Kenneth L. Torbet     |   | 65      |   | Manager, Treasurer                                     |   | 2006              |
| Leroy C. Cosgray      |   | 76      |   | Manager                                                |   | 2006              |
| Kenneth Culp, Jr.     |   | 67      |   | Manager                                                |   | 2004              |
| Harold O. Fritz       |   | 68      |   | Manager                                                |   | 2004              |
| Sherman A. Gumz       |   | 58      |   | Manager                                                |   | 2004              |
| Wallace Laird         |   | 70      |   | Manager                                                |   | 2005              |
| Mark D. Wuethrich     |   | 41      |   | Manager                                                |   | 2005              |
| Keith A. Gibson       |   | 51      |   | Assistant Vice  President—Chief Operating Officer |   |              |

 

32

----

 

***Michael J. Aylesworth, President andManager***

 

Mr. MichaelJ. Aylesworth has served on the board of managers and as our President sinceour formation. He was a farmer from April 1969 to 2003 and operated a2,100-acre farm in South Porter County, Indiana.  Currently, Mr. Aylesworth is the Executive Director of the PorterCounty Builders Association. Mr. Aylesworth also served as President of the Indiana Corn GrowersAssociation, a position he held from October 1997 to October 2002 andfrom June 1998 to October 2002 as an Indiana member of the PublicPolicy Action Team of the National Corn Growers Association. He also served asPresident of the Indiana Corn Marketing Council, a position he held fromDecember 2001 to June 2003. Mr. Aylesworth also served as PorterCounty Republican Party Chairman, a position he held from March 1997 toMay of 2002, and previously held from May 1982 to November 1991. FromJuly 1979 to June 1987, he was a member of the Kankakee River BasinCommission, serving as Chairman from July 1981 through June of 1983.He served as Porter County Commissioner from January 1977 toDecember 1984. He also served as a member of the Porter County Councilfrom January 1988 through December 1992. Mr. Aylesworth holds aBachelor of Science degree in Secondary Education from Indiana University and aMaster of Arts in Liberal Studies with a concentration in History fromValparaiso University in Valparaiso, Indiana.

 

***Ronald J. Gick, Vice President and Manager***

 

Mr. RonaldJ. Gick has served on the board of managers and as our Vice President since ourformation. Mr. Gick has been a farmer since March 1995, and currentlyoperates a 1,050 acre family farm raising corn and soybeans. He also serves asthe District Sales Manager for Beck’s Superior Hybrids, a position he has heldsince March 1999. Beck’s Superior Hybrids develops, grows and sells cornand soybean seeds for agricultural production. Mr. Gick is also a formerdirector with the Benton County Soil & Water Conservation. FromJanuary 1996 to March 1999, he worked as a sales representative at aJohn Deere dealership selling farm equipment. From February 1993 toMarch 1995, he worked as a sales representative for AmericanSterilizer, Inc., a distributor of sterilization related products. FromJanuary 1990 to February 1993, he worked as a sales representativefor Baxter International, a distributor of medical products. Mr. Gick is agraduate of Purdue University, where he obtained his Bachelor of Science Degreein Management and Agricultural Economics.

 

***John H. Bryant, Jr., Secretary and Manager***

 

Mr. JohnH. Bryant, Jr. has served on the board of managers and as our Secretary sinceour formation. He is currently the President of Bryant Farm, Inc., whichowns the family farm that he has operated since July 1967. He also worksas a Transportation Salvage Auctioneer for insurance automobile auctions in theChicago, Illinois area, a position he has held since February 1991. He hasalso served on the Tri-Creek School Board since July 1973. Mr. Bryanthas also served as an officer with the U.S. Army Corps of Engineers from July 1963to July 1965. During that time he attended the Army Airborne School,Nuclear Demolitions School and Construction Management School. After leavingthe U.S. Army, he served with the Indiana National Guard and commanded a CombatEngineer Company from September 1965 to September 1967.Mr. Bryant is a graduate of Purdue University, where he received hisBachelor of Science degree in Agricultural Business Management.

 

***Kenneth L. Torbet, Treasurer and Manager***

 

Mr. KennethL. Torbet has served on the board of managers and as our Treasurer since ourformation. He currently farms a 500 acre farm. He has been a farmer sinceJanuary 1957. He is currently a member of the Brushwood United MethodistChurch and has served as Trustee since January 1962, as a farm committeemember since June 1988, and as the building fund treasurer sinceJanuary 1992. Mr. Torbet has also been a member of Farm Bureau sinceFebruary 1956. From January 1979 to August 1994 he served on theJasper County Fair Board and on the Jasper County No Till Committee fromJanuary 1983 to January 1992.

 

33

----

 

***Leroy C. Cosgray, Manager***

 

Mr. LeroyC. Cosgray has served on the board of managers since our formation. He iscurrently a farmer and operates a 1300-acre farm in Pulaski and White County.He has been a farmer since April 1947. He is also a Trustee with LibertyTownship, a position he has held since January 1994. From 1945 to 1947, heserved with the Air Force, 862nd Aviation Engineers, in Munich, Germany.

 

***Kenneth Culp, Jr., Manager***

 

Mr. KennethCulp, Jr. has served on the board of managers since our formation. He is afarmer and currently operates a 1,800-acre family farm. He has been a farmersince May 1954. Mr. Culp also works as an auctioneer and appraiserfor Culp Auction and Appraisal Services, a business that he wholly owns andstarted in August 1965. Culp Auction and Appraisal Services providesauctioneer and residential property appraisal services. He also serves on theIndiana Farm Service Agency Board, a position he has held sinceSeptember 2001. Mr. Culp has also served as the Republican CountyChairman since May 1977. From January 1955 to February 1955, heattended and completed the Purdue University Agricultural Short Course.

 

***Harold O. Fritz, Manager***

 

Mr. HaroldO. Fritz has served on the board of managers since March 2003. Hecurrently serves as an advisor and consultant to a farming and grain elevatorbusiness in Rensselaer, Indiana. Prior to retiring in 1999, he served as ageneral manager for Cargill, Inc. and was responsible for supplyingproducts to the aluminum recycling industry. Prior to that, fromApril 1985 to August 1995, he served as Eastern Regional MarketingManager for Cargill’s fertilizer distribution business. From June 1979 toApril 1985, he served as an Area Manager for Cargill and was responsiblefor merchandizing grain from various facilities. Mr. Fritz’s businessexperiences also includes serving on the Board of Directors of the NationalGrain and Feed Association from January 1975 to December 1976 andserving on the Board of Directors of the Indiana Grain and Feed DealersAssociation in 1964, 1965, 1967, 1969 and 1972.

 

***Sherman A. Gumz, Manager***

 

Mr. ShermanA. Gumz has served on the board of managers since our formation. He is a farmerand operates a 600-acre farm in Pulaski County, raising cattle. He has been afarmer since April 1973. From September 1970 to May 1999,Mr. Gumz worked as a educator, teaching junior and senior high schoolstudents. From 1965 to 1967, he served with the U.S. Army in the 591stTransportation Company in Illisheim, Germany. Mr. Gumz holds a Bachelor ofScience degree in English and Spanish, and a Masters degree in Administrationand English from Ball State University.

 

***Wallace Laird, Manager***

 

Mr. WallaceLaird has served on the board of managers since our formation. He has worked asa farmer since March 1956 and owns a family farming business.Mr. Laird is also a radio farm broadcaster with WRIN and WLQI inRensselaer, Indiana, a position he has held since September 1963. He holdsa Bachelor of Science and a Masters degree from Purdue University’s School ofAgriculture.

 

***Mark D. Wuethrich, Manager***

 

Mr. MarkD. Wuethrich has served on the board of managers since May 2002. He hasbeen a farmer since January 1982. He is a principal shareholder andSecretary of Wuethrich Pork & Grain, Inc., which, until recently,operated a 2,400-acre family farm.  Healso serves as Treasurer on the Apostolic Christian Church National HailAssistance Board, a position he has held since February 1993. FromJanuary 1982 to February 1982, Mr. Wuethrich attended andcompleted the Purdue University Agricultural Short Course.

 

***Keith A. Gibson, Assistant VicePresident—Chief Operating Officer***

 

Mr. Keith A. Gibsonhas served as our Assistant Vice President—Chief Operating Officer sinceJune 2002. From May 2001 to May 2002, Mr. Gibson served asa Project Engineering Manager with Kemiron, Inc., a 

 

34

----

 

manufacturer of watertreatment chemicals. From July 1998 to March 2001, he served as VicePresident and Plant Manager at Coronet Industries, Inc., a manufacturer ofanimal feed supplements and metal additives. From November 1988 toJuly 1998, he served as Operations Superintendent for Olin Corporation, amanufacturer of diversified propellant products. From October 1986 toNovember 1988, Mr. Gibson served as plant manager with GSXCorporation, a transporter and disposer of hazardous waste chemicals.

 

**Code ofEthics**

 

The Company has notadopted a Code of Ethics because it remains a development stage company with noactive operations at this time.

 

**Item 10****.****Executive Compensation**

 

**Compensation ofManagers**

 

Ourmanagers currently receive a per diem fee of $50 per meeting, up to a maximumof $100 per month. However, no manager will receive a per diem fee foractivities relating to the offer or sale of the units. From the time of ourformation to November 30, 2003, we have made per diem payments to ourmanagers totaling $12,850. The board of managers may establish othercompensation for each manager for attending meetings and for providing otherservices. We also reimburse our managers for reasonable out-of-pocket expensesincurred in carrying out their duties as managers as such expenses areincurred.

 

**Executive Officer’sCompensation**

 

We haveagreed to compensate our treasurer and secretary who are also members of theboard of managers at a rate of $15 per hour for their services as officers.This is a fee for service arrangement, which means that we compensate theseindividuals only when they render services to us as officers. However, theseindividuals will not receive any compensation for activities relating to theoffer or sale of the units.  We alsoreimburse our officers for out-of-pocket expenses incurred in carrying outtheir duties as officers.

 

InJune 2002, the board of managers appointed Mr. Keith A. Gibson toserve as our Assistant Vice President—Chief Operating Officer. In early 2002,we engaged Mr. Gibson, on a part-time basis, as an independent contractor,to provide certain project manager services for a fee of $1,800 per month. Wehave paid Mr. Gibson a total of $7,400 under this contract. However,because we needed him to manage our day-to-day operations, we hired Mr. Gibsonas a full-time employee. On September 30, 2002, we entered into anemployment agreement with Mr. Gibson, which was effective as ofJune 2002, to serve as our Assistant Vice President—Chief OperatingOfficer on a full-time basis. Under the employment agreement, we payMr. Gibson an annual base salary of $94,000 per year. Mr. Gibson’ssalary was increased to $97,000 per year effective September 1, 2003. Asof November 30, 2003, we have paid Mr. Gibson a total of $141,750****for his services under the employmentagreement. Mr. Gibson also receives typical employee benefits such as paidvacation and insurance. We have also agreed to pay Mr. Gibson an annualincentive compensation that is equal to the bonus percent of base salary equalto our fiscal year net income, divided by two times Mr. Gibson’s basesalary. The incentive compensation is limited to an annual maximum of 25% ofMr. Gibson’s annual base salary. As of November 30, 2003 we have not paid Mr. Gibson any incentivecompensation.

 

Theagreement with Mr. Gibson is for a period of two years and provides for asalary review after one year. Either party may terminate this agreement upon30 days prior notice. However, unless we terminate this agreement forcause, such as a breach of this agreement or fraud, we must pay Mr. Gibsona severance payment equal to four months of his annual base salary plusbenefits.

 

Followingthe close of our public offering, the board of managers will appoint a ChiefExecutive Officer and a Chief Financial Officer, to serve as the principalexecutive officer and the principal accounting officer, respectively. Wecurrently have no equity compensation plan, but may establish such plans whenwe begin operations.

 

The following table showsthe compensation that we paid Mr. Gibson, our only full-time executiveofficer, for the fiscal year ended November 30, 2003.

 

35

----

 

**Summary Compensation Table**

 
|                               |   | **Annual Compensation** |   | **Long Term Compensation** |   |      |   |
|------------------------------------|--------|-------------------------|--------|----------------------------|--------|-----------|--------|
|                               |   |                    |   |                       |   |      |   |   |   | **Awards** |   | **Payouts** |   |   |   |
| **Name and   Principal  Position** |   | **Fiscal  Year**        |   | **Salary**                 |   | **Bonus** |   | **Other Annual  Compensation** |   | **Restricted  Stock  Awards** |   | **Securities  Underlying  Options/SARs  (#)** |   | **LTIP  Payouts** |   | **All Other  Compensation** |   |
|                               |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Keith A.                           |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| Gibson                             |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| *Assistant*                        |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| *Vice*                             |   | 2002               |   | $                          | 47,000 | (1)       |   |   | $ | 7,400 | (2)  |   |   |   |   |   |   |   |   |
| *President—*                  |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| *Chief*                            |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| *Operating*                        |   |                    |   |                       |   |      |   |   |   |   |   |   |   |   |   |   |   |
| *Officer*                          |   | 2003                    |   | $                          | 94,750 | (1)       | $      | 0 |   |   |   | $ | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
|                                    |        |                         |        |                            |        |           |        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

----

(1)           Mr. Gibsonbegan employment with us effective June 2002. His annual base salary was$94,000, which was increased to $97,000 effective September 1, 2003.

 

(2)           Representscompensation received by Mr. Gibson as an independent contractor prior tohis becoming employed with us.

 

**Item 11.****     Security Ownership of Certain Beneficial Ownersand Management**

 

Thefollowing table sets forth certain information concerning the beneficialownership of our units as of February 27, 2004, and as adjusted to reflectthe sale of the units in our public offering for each person who ownsbeneficially more than 5% of our units prior to the offering, each of ourmanagers, each of our officers, and all managers and officers as a group.

 
|                                            |   | **Number of Units Beneficially Owned**** ** |   | **Percentage Beneficially Owned**** ** |   |
|-------------------------------------------------|--------|--------------------------------------------------|--------|---------------------------------------------|--------|
|                                            |   |                                             |   | **After Offering**** **                |   |   |   | **After Offering**** ** |   |
|                                            |   | **Before**                                       |   |                                        |   |   |   | **Before** |   |   |   |   |   |
| **Name**                                        |   | **Offering**                                     |   | **Minimum(1)**                              |   | **Maximum(2)** |   | **Offering** |   | **Minimum(1)** |   | **Maximum(2****)** | ** ** |
| Michael  J. Aylesworth(3)                       |   | 6,000                                            |   | 6,000                                       |   | 6,000 |   | 0.32 | % | 0.03 | % | 0.02 | % |
| Ronald  J. Gick(4)                              |   | 21,000                                           |   | 21,000                                      |   | 21,000 |   | 1.12 | % | 0.10 | % | 0.08 | % |
| John  H. Bryant, Jr.(5)                         |   | 40,000                                           |   | 40,000                                      |   | 40,000 |   | 2.13 | % | 0.18 | % | 0.15 | % |
| Kenneth  L. Torbet(6)                           |   | 40,000                                           |   | 40,000                                      |   | 40,000 |   | 2.13 | % | 0.18 | % | 0.15 | % |
| Leroy  C. Cosgray(7)                            |   | 40,000                                           |   | 40,000                                      |   | 40,000 |   | 2.13 | % | 0.18 | % | 0.15 | % |
| Kenneth  Culp, Jr.(8)                           |   | 10,000                                           |   | 10,000                                      |   | 10,000 |   | 0.53 | % | 0.05 | % | 0.04 | % |
| Harold  O. Fritz(9)                             |   | —                                           |   | —                                      |   | — |   | 0.00 | % | 0.00 | % | 0.00 | % |
| Sherman  A. Gumz(10)                            |   | 40,000                                           |   | 40,000                                      |   | 40,000 |   | 2.13 | % | 0.18 | % | 0.15 | % |
| Wallace  Laird(11)                              |   | 17,000                                           |   | 17,000                                      |   | 17,000 |   | 0.91 | % | 0.08 | % | 0.06 | % |
| Mark  D. Wuethrich(12)                          |   | 40,000                                           |   | 40,000                                      |   | 40,000 |   | 2.13 | % | 0.18 | % | 0.15 | % |
| Keith  A. Gibson(13)                            |   | —                                           |   | —                                      |   | — |   | 0.00 | % | 0.00 | % | 0.00 | % |
| All  executive officers and managers as a group |   | 254,000                                          |   | 254,000                                     |   | 254,000 |   | 13.55 | % | 1.16 | % | 0.95 | % |

 

----

(1)           Assumes the sale of20,000,000 units, none of which are sold to persons listed in the table.

 

36

----

 

(2)           Assumes the sale of25,000,000 units, none of which are sold to persons listed in the table.

 

(3)           Mr. Michael J.Aylesworth’s address is 171 West State Road 8, Hebron, IN 46341.

 

(4)           Mr. Ronald J.Gick’s address is 4519 North 100 East, Fowler, IN 47944.

 

(5)           Mr. John H.Bryant, Jr.’s address is 6317 East 181st Avenue, Hebron, IN 46341.Mr. Bryant is a principal shareholder of Bryant Farm, Inc.Mr. Bryant’s units include 40,000 units that he beneficially owns throughBryant Farm, Inc, the record owner.

 

(6)           Mr. Kenneth L.Torbet’s address is 2339 North 350 West, Rensselaer, IN 47978.

 

(7)           Mr. Leroy C.Cosgray’s address is 300 South East Street, Box 15, Buffalo, IN 47950.

 

(8)           Mr. Kenneth Culp,Jr.’s address is 3496 South 150 West, Rensselaer, IN 47978.

 

(9)           Mr. Harold O.Fritz’s address is 4241 East Penrod Drive, Monticello, IN 46347.

 

(10)         Mr. Sherman A.Gumz’s address is 9631 South Base Road, Star City, IN 46985.

 

(11)         Mr. Wallace Laird’saddress is 7832 West 850 South, Rensselaer, IN 47978.

 

(12)         Mr. Mark D.Wuethrich’s address is 5547 East 200 South, Rensselaer, IN 47978.Mr. Wuethrich is a principal shareholder of Wuethrich Pork & Grain, Inc.Mr. Wuethrich’s units include 40,000 units that he beneficially ownsthrough Wuethrich Pork & Grain, Inc, the record owner.

 

(13)         Mr. Keith A.Gibson’s address is 302 West Grace Street, Rensselaer, IN 47978.

 

**Item 12.****     Certain Relationships and Related Transactions**

 

We haveengaged in transactions with related parties. Although we believe that thesetransactions were in our best interests, we cannot assure you that thesetransactions were entered into on terms as favorable to us as those that couldhave been obtained in an arms-length transaction. We may also engage intransactions with related parties in the future. Conflicts of interests arisewhen we transact business with related parties. Our managers have notindividually entered into, and do not anticipate entering into, any contractualor other transactions between themselves and us, except for the transactions orpotential transactions described below.

 

**Start-up Capital**

 

Pursuantto our April 30, 2002 reorganization from a cooperative to a limitedliability company, each member of the cooperative, including each of ourmanagers, received 1,000 units in exchange for all of their membership interestin the cooperative. The promoters of the cooperative, Mr. Michael J.Aylesworth, Mr. Ronald P. McIlwain, Mr. Kenneth Culp, Jr. andMr. Joseph M. Little, contributed $675 each for their cooperativemembership interests. Our other managers, with the exception ofMessrs. Ronald Gick, Sherman Gumz, and Mark Wuethrich, who contributed$500 each for their cooperative membership interests, all contributed $675 eachfor their cooperative membership interests. The following managers alsoacquired units on June 10, 2002, at a price of $.50 per unit, pursuant toour offering of units to our existing members:

 
| **Name**               |   | **Number  of Units  Purchased** |       | **Consideration  Paid** |        |
|------------------------|--------|---------------------------------|------------|-------------------------|-------------|
| Michael  J. Aylesworth |   | 5,000                           |       | $                       | 2,500       |   |
| John  H. Bryant, Jr.   |   | 39,000                          |       | 19,500                  |        |
| Leroy  C. Cosgray      |   | 39,000                          |       | 19,500                  |        |
| Kenneth  Culp, Jr.     |   | 9,000                           |       | 4,500                   |        |
| Ronald  J. Gick        |   | 20,000                          |       | 10,000                  |        |
| Sherman  A. Gumz       |   | 39,000                          |       | 19,500                  |        |
| Wallace  Laird         |   | 16,000                          |       | 8,000                   |        |
| Kenneth  L. Torbet     |   | 39,000                          |       | 19,500                  |        |
| Mark  D. Wuethrich     |   | 39,000                          |       | 19,500                  |        |
| Total                  |   | **245,000**                     | ** ** | **$**                   | **122,500** | ** ** |

 

37

----

 

OnJune 10, 2002, Mr. Ronald P. McIlwain also acquired 13,000 units for$6,500, or $.50 per unit, and Mr. Joseph M. Little acquired 5,000 unitsfor $2,500, or $.50 per unit.

 

**EmploymentAgreements**

 

We haveentered into an employment agreement with Mr. Keith A. Gibson to serve asour Assistant Vice President—Chief Operating Officer for a base salary of$97,000 per year plus typical employee benefits. The agreement expires inMay 2004. As of November 30, 2003, we have paid Mr. Gibson atotal of $141,750 for his services under the employment agreement.  We have also agreed to pay Mr. Gibson anannual incentive compensation that is equal to the bonus percent of base salaryequal to our fiscal year net income, divided by two times Mr. Gibson’sbase salary. The incentive compensation is limited to an annual maximum of 25%of Mr. Gibson’s annual base salary. As of November 30, 2003 we have not paid Mr. Gibson any incentivecompensation.

 

**Purchase of Units**

 

Ourofficers, managers and affiliates may purchase the units offered in our publicoffering. They may purchase units subject to the terms and conditions thatapply to all other prospective investors acquiring units pursuant to our publicoffering. Units acquired by our officers, managers and affiliates will counttowards our achieving the minimum number of units offered. Accordingly, if wereach the minimum amount offered, you should not assume that all sales are tounaffiliated third parties.

 

**Per Diem Fees toManagers and Compensation for Services as an Officer**

 

Ourmanagers currently receive a per diem fee of $50 per meeting, up to a maximumof $100 per month. From the time of our formation to November 30, 2003, wehave made per diem payments to our managers totaling $12,850.  We have also agreed to compensate ourtreasurer and secretary who are also members of the board of managers at a rateof $15 per hour for their services as officers.**** Please see the“Executive Compensation” section for additional information.

 

**Site Purchase OptionAgreement**

 

We haveentered into an option agreement to purchase a site that is approximately 69acres in size and that is located a few miles outside of Rensselaer, Indianafrom one of our managers, Mr. Mark D. Wuethrich, and other members of hisfamily. Under the option agreement, we have until March 31, 2004, to electto purchase the site for a total of $413,400. Please see the “Management’s Planof Operation—Site Selection” section for additional information.

 

**Conflicts ofInterest**

 

Conflictsof interest exist and may arise in the future because of the relationshipsbetween and among our officers, managers, affiliates and us, and the fact thatwe may from time to time enter into transactions with our officers, managersand affiliates. Conflicts of interest could cause our officers and managers toput their own personal interests ahead of ours. We cannot assure you thattransactions we enter into with related parties will be on terms as favorableto us as those that could have been obtained in an arms-length transaction.Disputes may arise concerning transactions we enter into with related parties,and it is possible that our officers and managers may receive a more favorableresolution than an unaffiliated third party would receive.

 

38

----

 

Althoughwe intend to examine all conflicts that may arise from time to time, we cannotassure you that conflicts of interest will not harm our business or reduce thevalue of your units. We currently have not established any formal procedures toevaluate or resolve any conflicts of interest.

 

Conflictsof interest could arise, among others, in the situations described below:

 

•      Wemay engage in transactions with our officers, managers and affiliates for thepurchase of corn and sale of distillers grains on terms similar to thosecontained in contracts entered into by us with unaffiliated third parties.

 

•      Wewill reimburse our managers and officers for out-of-pocket expenses relating toour business. We do not have a reimbursement policy or guideline fordetermining what expenses will be reimbursed. We will review and reimburse allreasonable expenses that our managers and officers submit to us.

 

•      Ourmanagers’ decisions regarding various matters, including expenditures that wemake for our business, reserves for accrued expenses, including compensation ofofficers, compensation of managers and reimbursement of out-of-pocket expenses,loan covenants, capital improvements and contingencies will affect the amountof cash available for distribution to themselves and our members by virtue oftheir owning our units.

 

•      Anymember or his or her affiliate, including members who are also managers, may,with the consent of the board of managers, lend or advance money to us, whichwe may pay interest up to a rate of prime plus 4%. We currently have no outstandingloans or cash advances from any member or manager.

 

•      Ourmanagers must devote sufficient time to our business and affairs, but are freeto serve, in any capacity the manager deems appropriate, any other person orentity, including another ethanol project. If this occurs, our managers mayexperience conflicts of interest in allocating their time and attention betweenus and other businesses. Our managers may also acquire financial or otherincentives in other businesses. As of the date of this prospectus, none of ourofficers or managers are currently involved, or have plans to become involved,with another ethanol project.

 

**Item 13.****     Exhibits, Financial Statement Schedules andReports on Form 8-K**

 

(a)        Thefollowing exhibits are included herein:

 

3.1           Articles ofOrganization of Iroquois Bio-Energy Company, LLC (Incorporated herein byreference to Exhibit 3.1 to Post-Effective Amendment No. 1 to theCompany’s Registration Statement on Form SB-2 filed on September 9,2003 (SEC Registration No. 333-100672))

 

3.2           Amended andRestated Operating Agreement of Iroquois Bio-Energy Company, LLC, (Incorporatedherein by reference to Exhibit 3.2 to Post-Effective Amendment No. 1to the Company’s Registration Statement on Form SB-2 filed onSeptember 9, 2003 (SEC Registration No. 333-100672))

 

4.1           Form of UnitCertification (Incorporated herein by reference to Exhibit 4.1 to theCompany’s Registration Statement on Form SB-2 filed on October 22,2002 (SEC Registration No. 333-100672))

 

10.1         Site OptionAgreement with Wuethrich Pork N’ Grain, Inc. (Incorporated herein byreference to Exhibit 10.1 to the Company’s quarterly report onForm 10-QSB filed on April 14, 2003 (SEC RegistrationNo. 333-100672))

 

10.2         Amendment toSite Option Agreement with Wuethrich Pork N’ Grain, Inc.(Incorporated herein by reference to Exhibit 10.3.1 to Post-EffectiveAmendment No. 1 to the Company’s Registration Statement on Form SB-2filed on September 9, 2003 (SEC Registration No. 333-100672))

 

39

----

 

10.3         EthanolMarking and Services Agreement with Ethanol Products, LLC (Incorporated hereinby reference to Exhibit 10.4 to Post-Effective Amendment No. 1 to theCompany’s Registration Statement on Form SB-2 filed on September 9,2003 (SEC Registration No. 333-100672))

 

10.4         ConsultingAgreement with Acala Partners, LLC (Incorporated herein by reference toExhibit 10.5 to Post-Effective Amendment No. 1 to the Company’sRegistration Statement on Form SB-2 filed on September 9, 2003 (SECRegistration No. 333-100672))

 

31            Certificationspursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14and 15d-14 of the Exchange Act)

 

32            Certificationspursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.§1350)

 

(b)        Reports onForm 8-K.

 

None.

 

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

 

Not yet applicable.

 

40

----

 

**SIGNATURES**

 

In accordance withSection 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                                | IROQUOIS BIO-ENERGY  COMPANY, LLC |
|-------------------------------------|-----------------------------------|
|                                |                              |   |
| Dated:  February 27, 2004 | By                                | /s/ Michael J.  Aylesworth |   |
|                                |                              | Michael J. Aylesworth |
|                                |                              | President |

 
| **Name**                      |   | **Title**                                              |   | **Date**               |
|-------------------------------|--------|--------------------------------------------------------|--------|------------------------|
|                          |   |                                                   |   |                   |
| /s/ Michael J. Aylesworth     |   |                                                   |   |                   |
| Michael J. Aylesworth         |   | President and Manager                                  |   | February 27, 2004 |
|                          |   | (*Principal Executive Officer)*                        |   |                   |
|                          |   |                                                   |   |                   |
| /s/ Ronald J. Gick            |   |                                                   |   |                   |
| Ronald J. Gick                |   | Vice President and  Manager                            |   | February 27, 2004 |
|                          |   |                                                   |   |                   |
| /s/ John H.  Bryant, Jr. |   |                                                   |   |                   |
| John H. Bryant, Jr.      |   | Secretary and Manager                                  |   | February 27, 2004 |
|                          |   |                                                   |   |                   |
| /s/ Kenneth L. Torbet         |   |                                                   |   |                   |
| Kenneth L. Torbet             |   | Treasurer and Manager                                  |   | February 27, 2004 |
|                          |   | *(Principal  Financial and Accounting Officer)*        |   |                   |
|                          |   |                                                   |   |                   |
|                          |   |                                                   |   |                   |
| Leroy C. Cosgray              |   | Manager                                                |   |                   |
|                          |   |                                                   |   |                   |
| /s/ Kenneth Culp, Jr.    |   |                                                   |   |                   |
| Kenneth Culp, Jr.        |   | Manager                                                |   | February 27, 2004 |
|                          |   |                                                   |   |                   |
|                          |   |                                                   |   |                   |
| Harold O. Fritz               |   | Manager                                                |   |                   |
|                          |   |                                                   |   |                   |
|                          |   |                                                   |   |                   |
| Sherman A. Gumz               |   | Manager                                                |   |                   |
|                          |   |                                                   |   |                   |
| /s/ Wallace Laird             |   |                                                   |   |                   |
| Wallace Laird                 |   | Manager                                                |   | February 27, 2004 |
|                          |   |                                                   |   |                   |
| /s/ Mark D. Wuethrich         |   |                                                   |   |                   |
| Mark D. Wuethrich             |   | Manager                                                |   | February 27, 2004 |
|                          |   |                                                   |   |                   |
| /s/ Keith A. Gibson           |   |                                                   |   |                   |
| Keith A. Gibson               |   | Assistant Vice  President—Chief Operating Officer |   | February 27, 2004 |

 

41

----