**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**Form 10-Q**

**(Mark one)**

**x**                              QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe quarterly period ended June 30, 2007**

**OR**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe transition period from***          *to *          *.

**Commissionfile number 000-52608**

**MILLENNIUM ETHANOL, LLC**

(Exact name of registrantas specified in its charter)

| **SOUTH DAKOTA**                                                |   | **20-3477343**                        |
|-----------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**300 North Broadway Avenue**

**PO Box 357**

**Marion, South Dakota  57403**

(Address of principalexecutive offices)

**(605) 648-3941**

Registrant’s telephonenumber, including area code

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months (orfor such shorter period that the registrant was required to file such reports),and (2) has been subject to such filing requirements for the past90 days. Yes oNo x

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

Large AcceleratedFiler o         AcceleratedFiler o         Non-accelerated Filer x

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes oNo x

The registrant’s units are not traded on an exchangeor in any public market.  As of June 30,2007, there were 40,250,000 Class A units and 1,000,000 Class B unitsoutstanding.

 

 

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**TABLE OF CONTENTS**
|                  | ** ** | ** **                                                                                  | ** ** | **Page No.** | ** ** |
|------------------|------------|---------------------------------------------------------------------------------------------|------------|-------------------|------------|
| **PART I.** | ** ** | **FINANCIAL INFORMATION**                                                              |       |              |       |
| ITEM  1.         |       | FINANCIAL  STATEMENTS                                                                       |       | 2                 |       |
| ITEM 2.          | ** ** | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS |       | 8                 |       |
| ITEM 3.          |       | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET  RISK                                 |       | 13                |       |
| ITEM 4.          |       | CONTROLS AND PROCEDURES                                                                     |       | 14                |       |
| ** **       | ** ** | ** **                                                                                  |       |              |       |
| **PART  II.**    | ** ** | **OTHER  INFORMATION**                                                                      |       |              |       |
| ITEM  1.         |       | LEGAL  PROCEEDINGS                                                                          |       | 15                |       |
| ITEM  1A.        |       | RISK  FACTORS                                                                               |       | 15                |       |
| ITEM 2.          |       | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF  PROCEEDS                                |       | 15                |       |
| ITEM 3.          |       | DEFAULTS UPON SENIOR SECURITIES                                                             |       | 15                |       |
| ITEM 4.          |       | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                         |       | 15                |       |
| ITEM  5.         |       | OTHER  INFORMATION                                                                          |       | 15                |       |
| ITEM 6.          |       | EXHIBITS                                                                                    |       | 15                |       |
| ** **       |       |                                                                                        |       |              |       |
| ** **       |       | SIGNATURES                                                                                  |       | 16                |       |

 

Unless the context indicates or otherwise requires,the terms “the Company”, “we”, “our” and “us” refer to Millennium Ethanol, LLC.

1

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**PART I —FINANCIAL INFORMATION**

**ITEM 1. FINANCIAL STATEMENTS**

**MILLENNIUM ETHANOL, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**CONDENSED BALANCE SHEETS**
| ** **                                                                                                                                 | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                 | ** ** | **2007**          | ** ** | **2006**              | ** ** |
| ** **                                                                                                                                 | ** ** | **(Unaudited)**   | ** ** | ** **            | ** ** |
| **ASSETS**                                                                                                                                 |       |              |       |                  |       |
|                                                                                                                                       |       |              |       |                  |       |
| **CURRENT ASSETS**                                                                                                                         | ** ** | ** **        |       |                  |       |
| Cash                                                                                                                                       |       | $                 | 157,001    |                  | $          | 24,966,719 |   |
| Interest  receivable                                                                                                                       |       | —            |       | 1,246                 |       |
| Excise tax  refund receivable                                                                                                              |       | 1,103,417         |       | —                |       |
| Prepaid expenses                                                                                                                           |       | 68,526            |       | 56,548                |       |
|                                                                                                                                       |       |              |       |                  |       |
| **TOTAL  CURRENT ASSETS**                                                                                                                  |       | 1,328,944         |       | 25,024,513            |       |
|                                                                                                                                       |       |              |       |                  |       |
| **PROPERTY AND EQUIPMENT**                                                                                                                 |       |              |       |                  |       |
| Building                                                                                                                                   |       | 297,258           |       | —                |       |
| Office equipment                                                                                                                           |       | 46,643            |       | 15,987                |       |
| Vehicle                                                                                                                                    |       | 24,659            |       | —                |       |
| Land                                                                                                                                       |       | 1,175,163         |       | 1,174,493             |       |
| Construction in  progress                                                                                                                  |       | 80,744,912        |       | 25,335,368            |       |
|                                                                                                                                       |       | 82,288,635        |       | 26,525,848            |       |
| Less accumulated  depreciation                                                                                                             |       | 9,477             |       | 909                   |       |
| ** **                                                                                                                                 |       | 82,279,158        |       | 26,524,939            |       |
|                                                                                                                                       |       |              |       |                  |       |
| **OTHER ASSETS**                                                                                                                           |       |              |       |                  |       |
| Construction  escrow account                                                                                                               |       | 31,365            |       | 10,000                |       |
| Deferred  financing costs, net of amortization                                                                                             |       | 4,042,179         |       | 3,798,162             |       |
| Water treatment  plant costs                                                                                                               |       | 2,928,000         |       | 2,928,000             |       |
| ** **                                                                                                                                 |       | 7,001,544         |       | 6,736,162             |       |
|                                                                                                                                       |       |              |       |                  |       |
| **TOTAL ASSETS**                                                                                                                           |       | $                 | 90,609,646 |                  | $          | 58,285,614 |   |
| ** **                                                                                                                                 |       |              |       |                  |       |
| **LIABILITIES AND MEMBERS’ EQUITY**                                                                                                   | ** ** | ** **        |       |                  |       |
|                                                                                                                                       |       |              |       |                  |       |
| **CURRENT LIABILITIES**                                                                                                                    |       |              |       |                  |       |
| Accounts payable                                                                                                                           |       | $                 | 821,859    |                  | $          | 66,901 |   |
| Accrued expenses                                                                                                                           |       | 73,104            |       | 21,039                |       |
| Construction  costs payable, including retained amounts of $5,738,559 and $2,112,876 at  June 30, 2007 and December 31, 2006, respectively |       | 17,782,450        |       | 2,173,808             |       |
|                                                                                                                                       |       |              |       |                  |       |
| **TOTAL  CURRENT LIABILITIES**                                                                                                             |       | 18,677,413        |       | 2,261,748             |       |
| ** **                                                                                                                                 |       |              |       |                  |       |
| **UNEARNED GRANT INCOME**                                                                                                                  |       | 1,939,063         |       | —                |       |
| ** **                                                                                                                                 |       |              |       |                  |       |
| **SUBORDINATED CONVERTIBLE NOTE  PAYABLE**                                                                                                 |       | 15,213,333        |       | 14,078,867            |       |
| **LONG-TERM DEBT**                                                                                                                         |       | 14,142,388        |       | —                |       |
|                                                                                                                                       |       |              |       |                  |       |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                          |       |              |       |                  |       |
|                                                                                                                                       |       |              |       |                  |       |
| **MEMBERS’ EQUITY**                                                                                                                   |       |              |       |                  |       |
| ** **                                                                                                                                 |       |              |       |                  |       |
| Class A member units,  40,250,000 units outstanding as of June 30, 2007 and December 31, 2006                                              |       | 40,221,677        |       | 40,221,677            |       |
| Class B member units,  1,000,000 units outstanding                                                                                         |       | 2,116,930         |       | 2,116,930             |       |
| Deficit accumulated  during development stage                                                                                              |       | (1,701,158        | )          | (393,608              | )          |
|                                                                                                                                       |       | 40,637,439        |       | 41,944,999            |       |
| ** **                                                                                                                                 |       |              |       |                  |       |
| **TOTAL LIABILITIES AND MEMBERS’ EQUITY**                                                                                             |       | $                 | 90,609,636 |                  | $          | 58,285,614 |   |

 

Seenotes to condensed financial statements.

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**MILLENNIUMETHANOL, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**CONDENSEDSTATEMENTS OF OPERATIONS**
| ** **                                               | ** ** | ** **            | ** ** | ** **          | ** ** | **Period from**              | ** ** |
|----------------------------------------------------------|------------|-----------------------|------------|---------------------|------------|-----------------------------------|------------|
| ** **                                               | ** ** | **Three Months** | ** ** | **Six Months** | ** ** | **Inception**                     | ** ** |
| ** **                                               | ** ** | **Ended**             | ** ** | **Ended**           | ** ** | **(September 6, 2005)** | ** ** |
| ** **                                               | ** ** | **June 30,**     | ** ** | **June 30,**   | ** ** | **to June 30,**         | ** ** |
| ** **                                               | ** ** | **2007**              | ** ** | **2007**            | ** ** | **2007**                          | ** ** |
| ** **                                               | ** ** | **(Unaudited)**       | ** ** | **(Unaudited)**     | ** ** | **(Unaudited)**                   | ** ** |
|                                                     |       |                  |       |                |       |                              |       |
| **REVENUES**                                             |       | $                     | —     |                | $          | —                            |       | $ | — |   |
| ** **                                               |       |                  |       |                |       |                              |       |
| **OPERATING  EXPENSES**                                  |       |                  |       |                |       |                              |       |
| Organizational expense                                   |       | —                |       | —              |       | 501,092                           |       |
| Management fees                                          |       | 105,000               |       | 210,000             |       | 520,000                           |       |
| Professional and consulting fees                         |       | 160,440               |       | 352,497             |       | 723,236                           |       |
| Merger expenses                                          |       | 724,402               |       | 724,402             |       | 724,402                           |       |
| General and administrative                               |       | 109,735               |       | 291,060             |       | 468,520                           |       |
|                                                     |       |                  |       |                |       |                              |       |
| **OPERATING  LOSS**                                      |       | (1,099,577            | )          | (1,577,959          | )          | (2,937,250                        | )          |
|                                                     |       |                  |       |                |       |                              |       |
| **NON  OPERATING INCOME**                                |       |                  |       |                |       |                              |       |
| Interest income                                          |       | 54,247                |       | 270,409             |       | 1,236,092                         |       |
|                                                     |       |                  |       |                |       |                              |       |
| **NET  LOSS**                                            |       | $                     | (1,045,330 | )                   | $          | (1,307,550                        | )          | $ | (1,701,158 | ) |
| ** **                                               |       |                  |       |                |       |                              |       |
| **NET  LOSS PER MEMBER UNIT - BASIC**                    |       | $                     | (0.03      | )                   | $          | (0.03                             | )          | $ | (0.06 | ) |
| **NET  LOSS PER MEMBER UNIT - DILUTED**                  |       | $                     | (0.03      | )                   | $          | (0.03                             | )          | $ | (0.06 | ) |
| ** **                                               |       |                  |       |                |       |                              |       |
| **WEIGHTED  AVERAGE MEMBER UNITS OUTSTANDING - BASIC**   |       | 41,250,000            |       | 41,250,000          |       | 30,440,814                        |       |
| **WEIGHTED AVERAGE MEMBER UNITS  OUTSTANDING - DILUTED** |       | 41,250,000            |       | 41,250,000          |       | 30,440,814                        |       |

 

Seenotes to condensed financial statements.

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**MILLENNIUMETHANOL, LLC**

**(ADEVELOPMENT STAGE COMPANY)**

**CONDENSED STATEMENTS OF CASH FLOWS**
| ** **                                                                                                             | ** ** | ** **          | ** ** | **Period from**              | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|---------------------|------------|-----------------------------------|------------|
| ** **                                                                                                             | ** ** | **Six Months** | ** ** | **Inception**                     | ** ** |
| ** **                                                                                                             | ** ** | **Ended**           | ** ** | **(September 6, 2005)** | ** ** |
| ** **                                                                                                             | ** ** | **June 30,**   | ** ** | **to June 30,**         | ** ** |
| ** **                                                                                                             | ** ** | **2007**            | ** ** | **2007**                          | ** ** |
| ** **                                                                                                             | ** ** | **(Unaudited)**     | ** ** | **(Unaudited)**                   | ** ** |
| **OPERATING  ACTIVITIES**                                                                                              | ** ** | ** **          |       |                              |       |
| Net loss                                                                                                               |       | $                   | (1,307,550 | )                                 | $          | (1,701,158 | ) |
| Changes to net loss not affecting cash                                                                                 |       |                |       |                              |       |
| Depreciation                                                                                                           |       | 8,568               |       | 9,477                             |       |
| Equity issued in exchange for services                                                                                 |       | —              |       | 500,000                           |       |
| Changes in current assets and liabilities                                                                              |       |                |       |                              |       |
| Interest receivable                                                                                                    |       | 1,246               |       | —                            |       |
| Prepaid expenses                                                                                                       |       | (11,978             | )          | (68,526                           | )          |
| Accounts payable                                                                                                       |       | 453,842             |       | 515,715                           |       |
| Accrued expenses                                                                                                       |       | 52,065              |       | 73,104                            |       |
|                                                                                                                   |       |                |       |                              |       |
| **NET  CASH USED IN OPERATING ACTIVITIES**                                                                             |       | (803,807            | )          | (671,388                          | )          |
|                                                                                                                   |       |                |       |                              |       |
| **INVESTING  ACTIVITIES**                                                                                              | ** ** | ** **          |       |                              |       |
| Purchase of property and equipment                                                                                     |       | (39,809,857         | )          | (62,045,552                       | )          |
| Payment of water treatment plant costs                                                                                 |       | —              |       | (2,928,000                        | )          |
| Payments to construction escrow account                                                                                |       | (21,365             | )          | (31,365                           | )          |
|                                                                                                                   |       |                |       |                              |       |
| **NET  CASH USED IN INVESTING ACTIVITIES**                                                                             |       | (39,831,222         | )          | (65,004,917                       | )          |
|                                                                                                                   |       |                |       |                              |       |
| **FINANCING  ACTIVITIES**                                                                                              | ** ** | ** **          |       |                              |       |
| Proceeds from subordinated convertible note payable,  including $2,000,000 attributed to beneficial conversion feature |       | —              |       | 14,000,000                        |       |
| Proceeds from long-term debt                                                                                           |       | 14,142,388          |       | 14,142,388                        |       |
| Payment of deferred financing costs                                                                                    |       | (256,140            | )          | (4,086,752                        | )          |
| Sale of membership units and collection of unit  subscriptions                                                         |       | —              |       | 40,045,000                        |       |
| Payment of costs of raising capital                                                                                    |       | —              |       | (206,393                          | )          |
| Proceeds from tax increment financing                                                                                  |       | 1,939,063           |       | 1,939,063                         |       |
|                                                                                                                   |       |                |       |                              |       |
| **NET  CASH PROVIDED BY FINANCING ACTIVITIES**                                                                         |       | 15,825,311          |       | 65,833,306                        |       |
|                                                                                                                   |       |                |       |                              |       |
| **NET  INCREASE (DECREASE) IN CASH**                                                                                   |       | (24,809,718         | )          | 157,001                           |       |
| ** **                                                                                                             | ** ** | ** **          |       |                              |       |
| **CASH -  beginning of period**                                                                                        |       | 24,966,719          |       | —                            |       |
| ** **                                                                                                             | ** ** | ** **          |       |                              |       |
| **CASH - end of period**                                                                                               |       | $                   | 157,001    |                              | $          | 157,001 |   |

 

Seenotes to condensed financial statements.

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**MILLENNIUMETHANOL, LLC**

**(ADEVELOPMENT STAGE COMPANY)**

**NOTES TO CONDENSED FINANCIALSTATEMENTS (UNAUDITED)**

**NOTE A:  BASIS OF PRESENTATION AND SIGNIFICANTACCOUNTING POLICIES**

The accompanying balance sheet as of December 31,2006, which has been derived from the Company’s audited financial statements,and the unaudited June 30, 2007 condensed financial statements have beenprepared pursuant to the rules and regulations of the Securities and ExchangeCommission. Certain information and note disclosures normally included in theannual financial statements prepared in accordance with generally acceptedaccounting principles have been condensed or omitted pursuant to those rulesand regulations. In the opinion of management, the unaudited financialstatements contain all normal recurring adjustments necessary for a fairstatement of the financial position and results of operations and cash flowsfor the interim periods presented.

Management is required to make certain estimates andassumptions which affect the amounts of assets, liabilities, revenues andexpenses the Company has reported, and its disclosure of contingent assets andliabilities at the date of the financial statements. The results of the interimperiods are not necessarily indicative of the results for the full year.Accordingly, these condensed financial statements should be read in conjunctionwith the audited financial statements and the related notes included in theRegistration Statement on Form 10 previously filed with the Securities andExchange Commission as of December 31, 2006.

**DERIVATIVE FINANCIAL INSTRUMENTS**- The Company enters into forward cash purchase contracts for corn, which meetsthe definition of a derivative under the Financial Accounting Standards BoardStatement of Accounting Standards No. 133, but qualify for the normal purchasesexception to fair value accounting. These contracts provide for the purchase of corn that will be deliveredin quantities expected to be used over a reasonable period in the normal courseof business.  These contracts are notmarked to market in the financial statements.

**EARNINGS PER UNIT**– Weightedaverage member units totaling 21,176,471 related to the subordinatedconvertible note payable were not included in the computation of dilutedearnings per unit for the three and six months ended June 30, 2007 and 7,795,969 for the period from inception(September 6, 2005) to June 30, 2007 because of the Company’s net loss.

**RECENTLY ISSUED ACCOUNTING STANDARDS**- In September 2006, the FASB issued Statement No. 157, Fair ValueMeasurements.  FASB Statement No. 157defines fair value, establishes a framework for measuring fair value ingenerally accepted accounting principles and expands disclosures about fairvalue measurements.  Specifically, itsets forth a definition of fair value, and establishes a hierarchy prioritizingthe inputs to valuation techniques, giving the highest priority to quotedprices in active markets for identical assets and liabilities and the lowestpriority to unobservable inputs.  The provisionsof FASB Statement No. 157 are generally required to be applied on a prospectivebasis, except to certain financial instruments accounted for under FASBStatement No. 133, Accounting for Derivative Instruments and HedgingActivities, for which the provisions of FASB Statement No. 157 should beapplied retrospectively.  The Companywill adopt FASB Statement No. 157 in the first quarter of 2008 and isevaluating the effect, if any; it may have on financial position or results ofoperations.

In February 2007, theFASB issued Statement No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities- Including and amendment of FASBStatement No. 115*, which provides all entities with an option toreport selected 

5

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financial assets andliabilities at fair value.  The Companywill adopt FASB Statement No. 159 in the first quarter of 2008 and isevaluating the effect, if any it may have on financial position or results ofoperations.

**NOTE B:  LONG TERM DEBT**

Asof June 30, 2007, $14,142,388 had been advanced on the construction term loan,and the Company was in compliance with all terms, covenants and conditions ofthe senior loan agreement.  After allequity proceeds and subordinated debt and tax increment financing have beenspent on Project costs, and other conditions precedent to the initial advanceare satisfied, including for example that there be no event of default, thenconstruction loan advances may be used to pay Project costs.

**NOTE C:  COMMITMENTS AND CONTINGENCIES**

Forward Purchase Contracts

Asof June 30, 2007, the Company has entered into forward contracts to purchase7,554,199 bushels of corn at various contract prices per bushel throughOctober, 2010.

Tax Increment Financing (TIF)

InFebruary 2007, the Company received a net grant of $1,939,063 from the proceedsof tax increment financing bonds issued by Turner County, South Dakota.  Under South Dakota law, proceeds from taxincrement financing are not a liability of the Company but are an obligation ofthe taxing district issuing the bonds. The grant was provided to fund improvements to the property owned by theCompany and the bonds will be repaid by Turner County from the incrementalincrease in property taxes related to the improvement of the Company’s realproperty.  The proceeds of the financinghave been recorded as deferred revenue and will be amortized into income basedon the life of the related property and equipment.

Agreement and Plan of Merger

On May 31, 2007, the Company entered into amerger agreement (the “Merger Agreement”) with US BioEnergy Corporation, aSouth Dakota corporation (“US BioEnergy”) pursuant to which US BioEnergy wouldacquire the Company (the “Acquisition”) in consideration of $135 millionpayable to the Company’s members in US BioEnergy common stock, cash, or anycombination thereof at US BioEnergy’s election. US BioEnergy would also assumethe Company’s debt incurred for plant construction. The consummation of theAcquisition is subject to a number of conditions, including the approval of theAcquisition by the Company’s members 

6

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and receipt of third party and regulatoryapprovals.

In the event of the closing of the merger, theCompany shall be reimbursed by US BioEnergy for reasonable out-of-pocketexpenses incurred by the Company prior to May 8, 2007 in connection withcertain tax-exempt bond financing transactions not to exceed $370,000.  In addition, in the event that the agreementis terminated for reasons forbidden in the agreement the Company shall beobligated to pay US BioEnergy $6,000,000 if done on or before September 30,2007 and $3,000,000 if terminated after September 30, 2007.  See management’s discussion and analysis andresults of operations in the accompanying Form 10-Q for additional informationon the merger agreement.

7

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**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS ANDRESULTS OF OPERATION**

***Disclosure RegardingForward-looking Statements***

This report contains statements which, to the extentthat they do not recite historical fact, constitute “forward-looking statements”.  The words “believe,” “expect,” “estimate,” “may,”“will,” “could,” “plan” or “continue” and similar expressions are intended toidentify forward-looking statements. Such forward-looking information involves important risks anduncertainties that could materially alter results in the future from thoseexpressed in any forward-looking statements made by us or on our behalf.  These risks and uncertainties include, butare not limited to:

·                  Risks related tothe units;

·                  Risks related tofuture debt financing;

·                  Risks related toconstruction and development of the plant;

·                  Risks related toproposed operations;

·                  Government andregulatory risks; and

·                  Risks related totax issues in a limited liability company.

In addition, this report contains industry data relatedto our business and the markets in which we operate.  This data includes projections that are basedon a number of assumptions.  If theseassumptions turn out to be incorrect, actual results could differ from theprojections.

We caution you that forward-looking statements areonly predictions and that actual events or results may differ materially.  In evaluating these statements, you shouldspecifically consider the various factors that could cause actual events orresults to differ materially from those indicated by the forward-lookingstatements.  Readers are cautioned not toplace undue reliance on these forward-looking statements.  We do not undertake any obligation to updateor revise any forward-looking statements. All subsequent written or oral forward-looking statements attributableto us or persons acting on our behalf are expressly qualified in their entiretyby these factors.

***Business Summary***

MillenniumEthanol, LLC is a limited liability company organized under the laws of thestate of South Dakota on September 6, 2005. We are constructing a 100 million gallon per year dry mill ethanol plantin Turner County, South Dakota, that will process corn into ethanol anddistillers grains.

We area development stage company with no revenues from operations.   To date, we have devoted our effortsprincipally to planning and constructing our proposed ethanol plant and relatedactivities.  We broke ground on plantconstruction at our site in Turner County, South Dakota in July, 2006.  Until construction of the proposed ethanolplant has been completed and operations have begun, we will have no revenue,and non operating interest earned by investment of our resources and ourexpenses will be associated with the development of our business.  Full production at the plant is scheduled tobegin approximately February 2008.

Ourplant is designed to use a dry milling process to produce fuel-grade ethanol asits main product and distillers grains as a co-product.  The plant has a design capacity to produce100 million gallons of ethanol per year. In addition, we expect the plant will produce approximately 320,000 tonsof dried distillers grains with solubles (DDGS) each year.

As wehave previously disclosed, US BioEnergy Corporation has agreed to acquire MillenniumEthanol, LLC under the terms of a merger agreement between the companies thatis described in the proxy statement/prospectus dated July 27, 2007 and firstmailed to our voting members on or about July 30, 2007.  Under the terms of the merger agreement, itis anticipated that a newly formed, wholly-owned subsidiary of US BioEnergywill merge with and into Millennium with Millennium surviving the merger as awholly-owned subsidiary of US BioEnergy. Upon completion of the merger, eachoutstanding Millennium unit will be converted, pursuant to a formula set forthin the merger agreement, into the right to receive a portion of the aggregatemerger consideration. The merger agreement

8

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and the proposed transaction with US BioEnergy will besubmitted to our voting members for approval at a special meeting to be held onTuesday, August 28, 2007.

Under the terms of themerger agreement:

·                  if the averageper share closing price of US BioEnergy’s common stock on the NASDAQ GlobalMarket for the ten most recent trading days ending on the trading day one dayprior to the date of the special meeting is greater than or equal to $15.88 pershare, the aggregate merger consideration is 8.5 million shares of US BioEnergycommon stock, and

·                  if the averageper share closing price of US BioEnergy’s common stock on the NASDAQ GlobalMarket for the ten most recent trading days ending on the trading day one dayprior to the date of the special meeting is less than $15.88 per share, theaggregate consideration payable to Millennium’s members in the transaction is$135 million payable in US BioEnergy common stock (with any shares issuedvalued at the average per share closing price described above), cash or anycombination thereof at US BioEnergy’s election; provided, that in no event willUS BioEnergy issue more than 11.5 million shares of stock in the merger. If USBioEnergy would be required to issue more than 11.5 million shares of stock toprovide $135 million of value (with any shares issued valued at the average pershare closing price described above), US BioEnergy will pay the balance of theconsideration in cash.

In either case, theaggregate merger consideration will be reduced by certain expenses, asdescribed in “The Merger Agreement — Conversion of Millennium Units in theMerger” beginning on page 79 of the proxy statement/prospectus previouslydistributed to our voting members.

Pursuantto the terms of the merger agreement, the aggregate merger consideration (netof expenses as described above) will be allocated to our different classes ofunits as follows:

·                  each Class Aunit will be converted into the right to receive its pro rata share of 61.08%of the aggregate net merger consideration;

·                  each Class Bunit will be converted into the right to receive its pro rata share of 5% ofthe aggregate net merger consideration; and

·                  each Class Cunit will be converted into the right to receive its pro rata share of 33.92%of the aggregate net merger consideration

Theconsummation of the merger agreement is subject to a number of conditions,including the approval of the acquisition by the Company’s members and receiptof third party and regulatory approvals. In the event that (1) US BioEnergy terminates the agreement because theCompany’s Board of Managers withdraws its recommendation for the approval ofthe agreement, or (2) the Company’s members do not approve the agreement andthe Company enters into another agreement to be acquired within six monthsthereafter, the Company may be required to pay US BioEnergy up to $6.0 million.

***Critical Accounting Policies***

Ourmanagement’s discussion and analysis of our financial condition and results ofoperations are based on our financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United Statesof America.  The preparation of thesefinancial statements requires us to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements as well as thereported revenues and expenses during the reporting periods.  On an ongoing basis, we evaluate ourestimates and judgments related to these estimates.  We base our estimates on historicalexperience and on various other factors that we believe are reasonable underthe circumstances, the results of which form the basis for making judgmentsabout the carrying values of assets and liabilities that are not readilyapparent from other sources.  Actualresults may differ from these estimates under different assumptions orconditions.

***Long Lived Assets***

Depreciationon property and equipment is provided on the straight-line method over theestimated useful lives of the assets. Economic circumstances or other factorsmay cause managements estimates of useful lives to differ from actual.

Otherassets primarily consist of water treatment plant costs which will be amortizedto expense over the estimated useful life of the water treatment facility as itrelates to the ethanol plant and financing costs which will be

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amortized to expense over the term of the related debtinstrument by a method which approximates the interest method.

**DERIVATIVE FINANCIAL INSTRUMENTS**- The Company enters into forward cash purchase contracts for corn, which meetsthe definition of a derivative under the Financial Accounting Standards BoardStatement of Accounting Standards No. 133, but qualify for the normal purchasesexception to fair value accounting. These contracts provide for the purchase of corn that will be deliveredin quantities expected to be used over a reasonable period in the normal courseof business.  These contracts are notmarked to market in the financial statements.

***Results of Historical Operations***

Asindicated above, we are in the process of constructing the ethanol plant thatwill be our active business if the proposed merger with US BioEnergy is notcompleted. (If the proposed merger is approved by our voting members,Millennium Ethanol will no longer be an independent entity, but will be asubsidiary of US BioEnergy.)

Untilconstruction of the proposed ethanol plant has been completed and operationshave begun, we will have no revenue and non operating interest earned byinvestment of our resources and our expenses will be associated with thedevelopment of our business. During the three months ended June 30, 2007 we hada net loss of $1,045,330, in comparison to a net loss during the six monthsended June 30, 2007 of $1,307,550 and a net loss during the period frominception through December 31, 2006 of $1,701,158. The net loss during thethree months ended June 30, 2007 reflects interest income during such threemonth period earned on a significantly smaller amount of equity investmentavailable to earn interest income due to our expenditures in connection withconstruction of our proposed ethanol plant. In addition, during the three months ended June 30, 2007, we incurred$724,402 of merger related costs.

Ourexpenses during the three months ended June 30, 2007 totaled $1,099,577 incomparison to expenses during the six months ended June 30, 2007 of $1,577,959and expenses during the period from inception through June 30, 2007 of$2,937,250.  This increase reflectsMillennium’s continuing development stage activities.  During the three months ended June 30, 2007we had non operating interest income of $54,247, in comparison to non operatinginterest income of $270,409 during the six month period ended June 30, 2007 andnon operating interest income during the period from our inception on September6, 2005 through June 30, 2007 of $1,236,092. The decrease in our non operating income reflects the smaller amounts wehad to invest during the most recent three month period due to the payment ofconstruction costs and development stage expenses.  In addition, during the three months endedJune 30, 2007, we incurred $724,402 of merger related costs.

***Future Plan of Operations***

If theproposed merger with US BioEnergy is not completed, we expect to spend the nextseveral months continuing site development, permitting and plant construction,as well as preparing for start-up operations, including recruiting qualifiedpersonnel to operate our plant. We anticipate that our losses will continue toincrease until the ethanol plant is operational.  The total cost of the project, including theconstruction of the ethanol plant and start-up expenses, is expected to totalapproximately $154,755,000.

*Site Development and Permitting.* We haveentered into various consulting arrangements for the completion of site developmentand permitting associated with our plant, including agreements for engineeringservices and engineering design services for a rail track and environmentalservices including air pollution control permit applications, environmentalassessments and other permitting work.

*Plant Construction and Equipment.* We haveentered into a lump-sum design-build agreement with Fagen for the constructionof our ethanol plant. Under the agreement, Fagen is to provide the processdesign and engineering, construction, equipment purchases and installation.

*Start-Up Costs.* In anticipation ofplant-start up, we will incur various pre-production costs. As of plantstart-up, we will also need to finance spare parts and corn, chemicals, yeast,denaturant, ethanol and distillers grains inventory.

***Production Costs***

Weexpect that corn and energy costs will represent approximately eighty-twopercent (82%) of production costs (at current prices and after adjusting fordepreciation and amortization).  Corn, asthe feedstock to produce ethanol, represents approximately sixty percent (60%)to sixty-two percent (62%) of the total production costs and natural gasrepresents ten to fifteen percent (10-15%) of production costs.  We believe that controlling a reliable supplyof feedstock and minimizing the costs associated with feedstock and energy arecritical to the success of any ethanol plant.

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*Corn -*In 2005, South Dakota was thesixth largest corn producing state in the United States.  The ten-county area surrounding our plantproduced an annual average of approximately 126.3 million bushels of corn forthe six-year period 2000-2005 according to the USDA National AgriculturalStatistics Service.

Webelieve that the lowest cost feedstock will be locally grown corn.  We have entered into a corn procurement andstorage agreement with FREMAR, LLC (“FREMAR”). The plant will use approximately thirty-six (36) million bushelsannually.  FREMAR, currently handlesapproximately seventeen (17) million bushels of corn annually through its grainelevator.  FREMAR’s plan is to directthis corn to our plant and to procure an additional approximately nineteen (19)million bushels annually by retaining the corn exported out of the region.  Adjusting for the corn already handled byFREMAR, the approximately nineteen (19) million bushels FREMAR, will need toprocure and retain in the region is approximately 30.5 percent of the cornexported out of the region annually by elevators other than the elevatoroperated by FREMAR.

Thecorn storage capacity at existing grain handling facility adjacent to the plantis 8.575 million bushels.  We willconstruct storage for an additional one (1) million bushels of corn on itssite.  This storage capacity may beutilized if market conditions warrant and the total capacity is equal to overthree months of the required feedstock needs of our plant.

*Energy -*The plant will be anatural-gas-fired facility.  We haveentered into a ten-year agreement with Northern Natural Gas to supply naturalgas capacity to the facility.  However,that contract is subject to final regulatory approval.  Our risk management for energy needs will beprovided by Energy Management & Consulting Services, LLC.

*Rail -*BNSF Railroad currently servesFREMAR’s grain handling facility (110-car rail load-out capability) and therail line bisects FREMAR’s site and the site of our plant.  We will install switching and rail sidingdedicated to 95-car outbound ethanol and 100-car outbound DDGS, with thecapability for inbound corn.  With BNSFdiscounts for unit trains, we estimate it will save approximately $4,300,000 ayear compared to smaller plants which utilize smaller blocks of cars.  We also believe that the discount spreadswill continue to widen as destination markets continue to come on line.  This has already occurred in the whole grainindustry as railroads have increased prices for inefficient users.  The adjacent grain facility was the secondlargest shuttle loader on the BNSF in the four-state area of South Dakota,North Dakota, Minnesota, and Montana for the two-year period 2004-2005.

***Trends and UncertaintiesImpacting the Ethanol Industry and Our Future Operations***

If the proposed merger with US BioEnergy is notcompleted, we expect ethanol and distillers grains sales to constitute the bulkof our future revenues.  If we are ableto construct the plant and begin operations, we will be subject toindustry-wide factors that affect our operating and financial performance.  These factors include, but are not limitedto, the available supply and cost of corn from which our ethanol and distillersgrains will be processed; the cost of natural gas, which we will use in theproduction process; dependence on our ethanol marketer and distillers grainsmarketer to market and distribute our products; the intensely competitivenature of the ethanol industry; possible legislation at the federal, stateand/or local level; changes in federal ethanol tax incentives and the cost ofcomplying with extensive environmental laws that regulate our industry.  We expect our future cost of goods sold willconsist primarily of costs relating to the corn and natural gas suppliesnecessary to produce ethanol and distillers grains for sale.  As with other commodities, the price of corn,natural gas, ethanol and distillers grains can fluctuate significantly.  Any significant increase in the price of ourinputs without corresponding increases in the prices of our outputs would beexpected to have a material adverse effect upon our potential net income.

***Liquidity and Capital Resources***

As ofJune 30, 2007, we had current assets of $1,328,944 consisting primarily of anexcise tax refund receivable.  As of June30, 2007, we had current liabilities of $18,677,413.  Since our inception through June 30, 2007, wehave an accumulated deficit of $1,701,158. Total liabilities and members’ equity as of June 30, 2007 was$90,609,646.

Weestimate the total cost of our ethanol plant project through construction andstart-up to be $154,755,000.  We intendto fund the construction of our ethanol plant with our financing arrangementsin the form of a combination of equity investments, a construction loan, andsubordinated convertible mezzanine debt.

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Webelieve that with the cash generated from the proceeds from our equityofferings and the debt financing we have secured, as described in the followingparagraphs, we will have adequate funds to support our projected workingcapital and capital expenditures for the construction of our ethanol plantuntil it begins operation, currently projected to be approximately February2008, assuming that the proposed merger with US BioEnergy is not completed.

***Contractual Obligations and Commercial Commitments***

*SeniorDebt*

OnJune 22, 2006, we entered into a construction/term loan agreement withDougherty Funding LLC which provides for a new construction term loancommitment of $90,000,000 to be used for the construction of the ethanol plant.A portion of the construction loan commitment may be replaced by the proceedsof the tax exempt bonds and, therefore, the maximum amount to be disbursedunder the construction loan may be reduced to approximately $65,000,000. Thesenior debt is secured by substantially all of our assets. Under the terms ofthe agreement, distributions to members, including tax distributions, cannot exceed75% of pre-tax net income. In addition, distributions cannot be made if ourdebt service coverage ratio, as defined, is less than 1.25x. We are alsorestricted from incurring additional debt, and are limited to capital leases of$250,000 and operating leases with annual rents of $100,000. The term of thesenior construction loan commitment allows advances to be made through May 31,2008. The senior loan agreement provides a variable interest rate at LIBOR plus4%. During the construction phase, interest is due monthly. During the termphase, payments will be based on monthly amortized payments of principal andinterest sufficient to amortize the remaining unpaid principal balance to amaturity date of March 31, 2013.

Thesenior loan agreement provides that the lender will hold back from disbursementfrom the senior loan a $4,200,000 construction contingency reserve and a$6,900,000 interest reserve until drawn on under the agreement, or if not drawnwill be deposited into the debt service cash reserve account. A debt servicecash reserve account will be set up based on 75% of Project Free Cash Flows asdefined in the agreement up to an aggregate of $7,000,000 to be maintained withthe lender. Additionally, beginning the first month of the second year of theterm phase of the loan, and monthly thereafter, we will be required to deposit$50,000 in an interest-bearing account for capital expenditures for thereplacement of machinery and equipment. As of June 30, 2007, $14,142,388 hadbeen advanced on the construction term loan, and we were in compliance with allapplicable terms, covenants and conditions thereof. After all equity proceedsand subordinated debt and tax increment financing proceeds have been spent onProject costs, and the other conditions precedent to the initial advance aresatisfied, including for example that there be no event of default, thenconstruction loan advances may be used to pay Project costs.

*TaxIncrement Financing (TIF)*

TheCounty has issued its Tax Incremental Bonds in the original aggregate principalamount of $2,490,000, pursuant to the Tax Increment Indenture. The TaxIncrement Bonds are limited obligations of the County, payable solely from thecollections of tax increments received by the County from the District which havebeen irrevocably pledged to the payment thereof, and from certain other moneyheld by the County. The ethanol plant is located in the District and theavailability of tax increment to pay the Tax Increment Bonds is dependent, inlarge part, upon the successful completion of the Project and its successfuland continued operation. The Tax Increment Bonds are not general obligations ofthe County, the State of South Dakota, or any other political subdivision ofthe State.

Theproceeds derived by the County from the sale of the Tax Increment Bonds will beapplied to the following purposes: (i) to make a grant to the District to paycosts of land acquisition associated with the Project; (ii) to pay the costs ofissuance of the Tax Increment Bonds; and (iii) to fund a debt service reservefund to secure timely payment of the Tax Increment Bonds. Millennium hasreceived the proceeds derived from the sale of the Tax Increment Bonds and$1,939,063 was made available for the land acquisition grant.

*SubordinatedDebt*

The Mezzanine Loan was provided to us by FarmersEnergy, a wholly-owned-or-controlled subsidiary of Rex Radio. The following arethe terms of the Mezzanine Loan:

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| Loan Amount:            |   | $14,000,000                                                                                                                                                                                                                                                                                                                                                                             |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Loan Term:              |   | Seven (7) years.                                                                                                                                                                                                                                                                                                                                                                        |
| Interest Rate:          |   | Fixed at 15.6% (1.3% monthly)                                                                                                                                                                                                                                                                                                                                                           |
| Repayment/Amortization: |   | P&I payable monthly over a 10 year amortization.                                                                                                                                                                                                                                                                                                                                    |
| Conversion  Rights:     |   | Farmers Energy will retain the right to purchase up  to 20,000,000 Class C Units at $0.90 per unit (or 21,176,470 Class C Units at  $0.85 per unit if conversion is requested earlier by Millennium) until the  maturity date of the Mezzanine Loan. This constitutes all of the Class C  Units. If Farmers Energy fully exercises its rights, the purchase price will  be $18,000,000. |

 

Duringthe construction period, interest on the Mezzanine Loan will accrue and beadded to the principal balance. Accrued interest is estimated to totalapproximately $2,650,000 during the construction period. Therefore, when theamortization period begins at the commencement of ethanol production, theprincipal balance of the Mezzanine Loan will total approximately $16,650,000.Millennium has the right to prepay the Mezzanine Loan down to a prepaid balanceof $11,000,000, with a prepayment fee equal to six months interest on theprepaid amount.

TheMezzanine Loan is secured by a third mortgage and security interest on ourproperty and payment is fully subordinated to the construction term loan, thetax exempt bonds, the letter of credit facility and the line of creditfacility. Under the terms of the construction term loan agreement, the proceedsof the Mezzanine Loan are required to be expended on Project costs prior to anydisbursement of the proceeds of the construction term loan or the proceeds ofthe tax exempt bonds. Farmers Energy has funded the Mezzanine Loan. As ofDecember 31, 2006, the expected maturities of this Mezzanine Loan are asfollows: 2007 $0; 2008 $676,543; 2009 $856,371; 2010 $999,943; 2011 $1,167,585;and thereafter $10,378,425.

*Lineof Credit*

OnJune 29, 2006, we entered into a revolving credit and security agreement withDougherty which provides for a revolving line of credit up to $7,000,000 toprovide working capital for the operation of the Project. The revolving creditfacility was subsequently assigned and transferred by the original lender onJanuary 15, 2007 to First Bank & Trust, a South Dakota state bank. Therevolving credit facility is secured by Millennium’s accounts and inventory.The revolving line of credit of $7,000,000 is limited to the amount calculatedin the borrowing base report and expires May 28, 2009. The revolving loanagreement provides a variable interest rate at LIBOR plus 4%. There is acommitment fee of $140,000 and an unused line fee on the daily portion of thecommitment at a rate of 1/4 of 1 percent per quarter payable on the last day ofeach quarter. As of June 30, 2007, no amounts had been advanced on therevolving loan. Millennium does not anticipate using the line of credit untilcloser to completion of the construction phase.

***Off-Balance Sheet Transactions***

As of June 30,2007, we did not have any relationships with unconsolidated entities orfinancial partnerships, such as entities often referred to as structuredfinance or special purpose entities, which would have been established for thepurpose of facilitating off-balance sheet arrangements or other contractuallynarrow or limited purposes.

**ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

Given that we areinvolved in the construction of our ethanol plant and have not yet commencedoperations (and do not expect to do so until early 2008), we are not yetengaged in the level of trading and market activity that will be present whenour facility is in full operation.  Inanticipation of the completion of our facility, we have made our initialarrangements to acquire corn for use in the facility initial operations.  We have entered into contracts for the

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purchase of approximately 7.6 million bushels of cornat various times and at various prices (including some prices above and someprices below current market prices for corn). When construction of our ethanol plant has been completed and we beginactive operations, we will be entering into arrangements pursuant to which wewill be exposed to certain market risks. Prior to the commencement of active operations, we will adopt policiesand strategies to manage any such market risk exposures.

**ITEM 4.  CONTROLS AND PROCEDURES**

*Evaluationof Disclosure Controls and Procedures.*

We carried out anevaluation, under the supervision of our management, including our chiefexecutive officer and our chief financial officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures pursuant toRule 13a-15(b) under the Securities Exchange Act of 1934 (the “ExchangeAct”). Based on those evaluations, our chief executive officer and chieffinancial officer have concluded that, as of the end of the period covered bythis quarterly report, our disclosure controls and procedures were not effectivebecause of the material weaknesses discussed below.

As a result of theaudit of our financial statements as of December 31, 2006, material weaknessesin internal control over financial reporting were identified, related to aninadequate segregation of accounting and financial reporting duties and nothaving accounting resources with specialized knowledge necessary to address thecomplex transactions we are entering into. Our management is working with our Audit Committee to identify andimplement corrective actions where required to improve our internal controls,including the enhancement of our reporting systems and procedures. Changes madein these areas were or will be determined with the involvement of our AuditCommittee, our general counsel, our Chief Financial Officer and our ChiefExecutive Officer.  Our efforts toremediate the remaining weaknesses will be focused on hiring additionalaccounting personnel with specific expertise to address our financial reportingrequirements if the proposed merger with US BioEnergy is not completed.

*Changesin Internal Control over Financial Reporting*

Except as notedabove, there have been no changes in our internal control over financialreporting that occurred during the period covered by this quarterly report thathave materially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

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**PART II — OTHER INFORMATION**

**ITEM1.  LEGAL PROCEEDINGS**

None.

**ITEM1A.  RISK FACTORS**

None.

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

None.

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

None.

**ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS**

None.

**ITEM 5. OTHER INFORMATION**

None.

**ITEM 6. EXHIBITS**
| Exhibit No.     | ** ** | **Description**                                                                                                                                                               |
|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   2.1 |       | Agreement and Plan of Merger dated May 31, 2007  between US BioEnergy Corporation, US Bio Acquisition Sub, LLC and  Millennium Ethanol, LLC(1)                      |
|            |       |                                                                                                                                                                          |
| 10.1            |       | Service Provider Consent and Amendment to Electric  Service Agreement dated May 24, 2007 between Southeastern Electric  Cooperative, Inc. and Millennium Ethanol, LLC(1) |
|            |       |                                                                                                                                                                          |
| 10.2            |       | Base Contract for Sale and Purchase of Natural Gas between  BP Canada Energy Marketing Corp. and Millennium Ethanol, LLC                                                 |
|            |       |                                                                                                                                                                          |
| 31.1            |       | Certification of the Chief Executive Officer  pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act                                                      |
|            |       |                                                                                                                                                                          |
| 31.2            |       | Certification of the Chief Financial Officer  pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act                                                      |
|            |       |                                                                                                                                                                          |
| 32              |       | Certification of the Chief Executive Officer and  Chief Financial Officer pursuant to 18 U.S.C. Section 1350                                                             |

 

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 (1) Incorporated by reference toMillennium Ethanol, LLC’s Registration Statement on Amendment No.1 to Form 10filed with the Securities and Exchange Commission on June 18, 2007.

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**SIGNATURES**

In accordance with therequirements of the Exchange Act the issuer has duly caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|                       |   |   |   | MILLENNIUM ETHANOL, LLC. |
|-----------------------|--------|--------|--------|--------------------------|
|                  |   |   |   |                     |
|                  |   |   |   |                     |
| Date: August 14, 2007 |   | By:    |   | /s/ Steve Domm           |
|                  |   |   |   | Steve Domm               |
|                  |   |   |   | Chief Executive Officer  |
|                  |   |   |   |                     |
|                  |   |   |   |                     |
| Date: August 14, 2007 |   | By:    |   | /s/ Brent Edwards        |
|                  |   |   |   | Brent Edwards            |
|                  |   |   |   | Chief Financial Officer  |

 

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