UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-Q
 (Mark
One)
 
 x
              QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
   For the
quarterly period ended March 31, 2009
  oTRANSITION REPORT
UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   For the
transition period from __________ to ____________.
 
 Commission
file number: 000-52614
 
 Show Me Ethanol,
LLC
 (Exact
name of small business issuer as specified in its charter)
 
 Missouri
              
              20-4594551(State
      or other jurisdiction of
              
              (IRS
      Employerincorporation
      or organization)
              
              Identification
      No.)
  P. O. Box
9
 26530
Highway 24 East, Carrollton, Missouri 64633
 (Address
of principal executive offices)
 
 (660)
542-6493
 (Issuer’s
telephone number)
 
 Check
whether the small business issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the small business issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 
 Yeso  Nox
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
 
 Yeso  Noo
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
the Exchange Act. (Check one):
  Large
accelerated filer  ̈
Accelerated filer  ̈Non-accelerated filer  ̈ Smaller reporting
company x
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 
 Yeso  Nox
 
 As of
March 31, 2009, the latest practicable date, 1,498 of the issuer’s Class A
Membership Units, were issued and outstanding.
  
 
 TABLE
OF CONTENTS
 
 PagePART
      I -FINANCIAL INFORMATION
              
              3Item
      1.
              
              Financial
      Statements (Unaudited)
              
              3Balance
      Sheet
              
              3Statements
      of Operations
              
              4Statement
      of Members’ Equity
              
              5Statements
      of Cash Flows
              
              6Notes
      to Unaudited Financial Statements
              
              7Item
      2.
              
              Management’s
      Discussion and Analysis of Financial Condition and Result of
      Operations
              
              15Item
      3.
              
              Quantitative
      and Qualitative Discussion of Market Risks
              
              20Item
      4.
              
              Controls
      and Procedures
              
              20PART
      II - OTHER INFORMATION
              
              22Item
      1.
              
              Legal
      Proceedings
              
              22Item 1a.
              
              Risk
      Factors
              
              22Item
      2.
              
              Unregistered
      Sales of Equity Securities and Use of Proceeds
              
              33Item
      3.
              
              Defaults
      Upon Senior Securities
              
              33Item
      4.
              
              Submission
      of Matters to a Vote of Security Holders
              
              33Item
      5.
              
              Other
      Information
              
              33Item
      6.
              
              Exhibits
              
              34
  2
  PART
1 - FINANCIAL INFORMATION
 ITEM
1. FINANCIAL STATEMENTS
 
 SHOW
ME ETHANOL, LLC
 CONDENSED
BALANCE SHEETS
 March
31, 2009 and December 31, 2008
 
 
 March
      31, 2009
              
              
              December
      31, 2008(unaudited)ASSETSCURRENT
      ASSETSCash
              
              $
              6,447,708
              
              
              $
              608,143Accounts
      receivable
              
              
              2,290,535
              
              
              
              2,304,855Prepaid
      expenses
              
              
              321,703
              
              
              
              537,141Inventory
              
              
              4,265,773
              
              
              
              4,101,379Total
      current assets
              
              
              13,325,719
              
              
              
              7,551,518PROPERTY,
      PLANT AND EQUIPMENTOperating
      equipment
              
              
              69,619,289
              
              
              
              69,265,196Land
      and buildings
              
              
              11,732,018
              
              
              
              11,732,018Accumulated
      depreciation
              
              
              (6,814,400
              )
              
              
              (4,822,163
              )Property,
      plant and equipment, net
              
              
              74,536,907
              
              
              
              76,175,051OTHER
      ASSETS
              
              
              605,116
              
              
              
              616,665Total
      assets
              
              $
              88,467,742
              
              
              $
              84,343,234LIABILITIES
      AND MEMBERS' EQUITYCURRENT
      LIABILITIESAccounts
      payable, including related party; 2009 - $2,290,792, 2008 -
      $938,751
              
              $
              3,073,855
              
              
              $
              1,361,804Accrued
      expenses
              
              
              428,571
              
              
              
              449,223Accrued
      loss on forward contracts
              
              
              -
              
              
              
              14,135,849Current
      portion of long term debt and revolving line of credit
              
              
              8,627,656
              
              
              
              50,702,495Total
      current liabilities
              
              
              12,130,082
              
              
              
              66,649,370LONG-TERM
      DEBT
              
              
              58,879,524
              
              
              
              3,711,465Total
      liabilities
              
              
              71,009,606
              
              
              
              70,360,835MEMBERS'
      EQUITYClass
      A capital units, 1,498 issued
              
              
              26,132,300
              
              
              
              22,969,600Class
      B capital units, 422 issued
              
              
              8,317,365
              
              
              
              6,317,365Class
      C capital units, 213 issued
              
              
              3,889,386
              
              
              
              3,189,118Retained
      earnings (deficit)
              
              
              (20,880,915
              )
              
              
              (18,493,684
              )Total
      members' equity
              
              
              17,458,136
              
              
              
              13,982,399Total
      liabilities and members' equity
              
              $
              88,467,742
              
              
              $
              84,343,234
 
 See Notes
to Condensed Financial Statements
 
 3
 
 SHOW
ME ETHANOL, LLC
 CONDENSED
STATEMENTS OF OPERATIONS
 For
the Three Months Ended March 31
 (unaudited)
 
 2009
              
              
              2008SALESEthanol
      Sales
              
              $
              16,950,134
              
              
              $
              -Distillers
      Sales to related parties
              
              
              3,999,702
              
              
              
              -Ethanol
      producer credit
              
              
              209,924
              
              
              
              -Total
      sales
              
              
              21,159,760
              
              
              
              -COST
      OF SALESCost
      of sales (Note 11)
              
              
              21,410,756
              
              
              
              -Loss
      on forward contracts
              
              
              1,364,152
              
              
              
              -Total
      cost of sales
              
              
              22,774,908
              
              
              
              -Gross
      loss
              
              
              (1,615,148
              )
              
              
              -GENERAL
      AND ADMINISTRATIVEEXPENSESGeneral
      and administrative expenses
              
              
              537,532
              
              
              
              215,035Total
      general and administrative expenses
              
              
              537,532
              
              
              
              215,035Operating
      loss
              
              
              (2,152,680
              )
              
              
              (215,035
              )OTHER
      INCOME (EXPENSE)Interest
      expense
              
              
              (608,010
              )
              
              
              -Grant
      incomeInterest
      and other income
              
              
              373,459
              
              
              
              26,733Net
      other income (expense)
              
              
              (234,551
              )
              
              
              26,733Net
      loss
              
              $
              (2,387,231
              )
              
              $
              (188,301
              )Net
      loss per unit - basic and diluted
              
              $
              (1,119.19
              )
              
              $
              (88.28
              )Weighted
      average units outstanding - basic and diluted
              
              
              2,133
              
              
              
              2,133
 
 See Notes
to Condensed Financial Statements
 
 4
 
 SHOW
ME ETHANOL, LLC
 CONDENSED
STATEMENTS OF MEMBERS' EQUITY
 For
the Three Months Ended March 31, 2009 (unaudited) and the Year ended December
31, 2008
  Class
      A
                
                
                Class
      B
                
                
                Class
      C
                
                
                RetainedBalance
      January 1, 2008
                
                
                1,498
                
                
                $
                22,969,600
                
                
                
                422
                
                
                $
                6,317,365
                
                
                
                213
                
                
                $
                3,189,118
                
                
                $
                488,670
                
                
                $
                32,964,753Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (18,982,354
                )
                
                
                (18,982,354
                )Balance,
      December 31, 2008
                
                
                1,498
                
                
                $
                22,969,600
                
                
                
                422
                
                
                $
                6,317,365
                
                
                
                213
                
                
                $
                3,189,118
                
                
                $
                (18,493,684
                )
                
                $
                13,982,399Capital
      contribution
                
                
                
                
                
                $
                3,162,700
                
                
                
                
                
                
                $
                2,000,000
                
                
                
                
                
                
                $
                700,268
                
                
                
                
                
                
                
                5,862,968Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (2,387,231
                )
                
                
                (2,387,231
                )Balance,
      March 31, 2009
                
                
                1,498
                
                
                $
                26,132,300
                
                
                
                422
                
                
                $
                8,317,365
                
                
                
                213
                
                
                $
                3,889,386
                
                
                $
                (20,880,915
                )
                
                $
                17,458,136


See
Notes to Condensed Financial Statements


5
 
 SHOW
ME ETHANOL, LLC
 CONDENSED
STATEMENTS OF CASH FLOWS
 For
the Three Months Ended March 31
 (unaudited)
 
 2009
              
              
              2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (2,387,231
              )
              
              $
              (188,302
              )Items
      not requiring (providing) cash:Depreciation
      and amortization
              
              
              2,012,962Changes
      in:Accounts
      receivable
              
              
              14,320
              
              
              
              (19,311
              )Prepaid
      expenses
              
              
              215,438
              
              
              
              35,322Accounts
      payable and accrued expenses
              
              
              1,691,399
              
              
              
              (20,148
              )Inventories
              
              
              (164,394
              )
              
              
              -Accrued
      loss on forward contracts
              
              
              (135,849
              )Other
      assets and liabilities
              
              
              825
              
              
              
              -Net
      cash provided (used) by operating activities
              
              
              1,247,470
              
              
              
              (192,439
              )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchases
      of property, plant and equipment
              
              
              (354,094
              )
              
              
              (16,598,804
              )Net
      cash used in investing activities
              
              
              (354,094
              )
              
              
              (16,598,804
              )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from issuance of long-term debt and revolving line of
    credit
              
              
              1,123,000
              
              
              
              14,643,960Payments
      on capital lease obligations
              
              
              (7,744
              )Payments
      for financing costs
              
              
              (10,000
              )
              
              
              (11,880
              )Principal
      payments on long-term debt
              
              
              (22,035
              )
              
              
              -Voluntary
      capital contribution
              
              
              3,862,968
              
              
              
              -Net
      cash provided by financing activities
              
              
              4,946,189
              
              
              
              14,632,080Net
      change in cash
              
              
              5,839,565
              
              
              
              (2,159,163
              )Cash,
      beginning of period
              
              
              608,143
              
              
              
              4,652,087Cash,
      end of period
              
              $
              6,447,708
              
              
              $
              2,492,924Supplemental
      Cash Flow InformationInterest
      paid (net of amount capitalized)
              
              $
              526,441Settlement
      of accrued loss on forward contracts byissuance
      of long-term debt
              
              
              12,000,000Settlement
      of accrued loss on forward contractsin
      lieu of capital contribution
              
              
              2,000,000Construction
      in progress included in accounts payable
              
              
              
              
              
              $
              3,032,071Loan
      fees included in other assets capitalized in construction in
      progress
              
              
              
              
              
              
              254,688
  See Notes
to Condensed Financial Statements
 
  6
  SHOW
ME ETHANOL, LLC
 
 NOTES
TO CONDENSED FINANCIAL STATEMENTS
 March
31, 2009
 (Unaudited)
 
 1.
              SIGNIFICANT
      ACCOUNTING POLICIES
 
 Basis of
presentation:The accompanying condensed financial statements
reflect all adjustments that are, in the opinion of the Company's management,
necessary to fairly present the financial position, results of operations and
cash flows of the Company. Those adjustments consist only of normal recurring
adjustments.  The results of operations for the period are not
necessarily indicative of the results to be expected for a full
year.  The condensed balance sheet as of December 31, 2008 has been
derived from the audited balance sheet of the Company as of that date. Certain
information and note disclosures normally included in the Company's annual
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. These
condensed financial statements should be read in conjunction with the financial
statements and notes thereto in the Company's Form 10-K Annual Report for 2008
filed with the Securities and Exchange Commission, as amended.
 
 Description of
business:  Show Me Ethanol, LLC is a limited liability company
organized in the State of Missouri for the purpose of developing, owning and
operating a 55 million gallon per year dry-mill ethanol plant and a related
co-products processing facility in west central Missouri.  Show Me
Ethanol, LLC was organized on January 24, 2006 and began operations May 22, 2008
and ceased reporting as a development stage company as of that date. The total
deficit accumulated during the development stage amounted to approximately
$57,000.  The financial statements are presented in accordance with
generally accepted accounting principles in the United States of
America.
 
 Fiscal reporting
period:The Company has adopted a fiscal year ending December
31st
for reporting financial operations.
 
 Management
estimates:Management uses estimates and assumptions in
preparing these financial statements in accordance with U.S. generally accepted
accounting principles.  Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosures of contingent assets
and liabilities, and the reported amounts of revenues and expenses during the
reporting periods.  Actual results could differ from the estimates
that were used.
 
 Cash:  Cash
consists principally of a collateralized interest bearing repurchase account
which provides the Company security on balances that exceed the FDIC insurance
limit on demand deposit accounts.
 
 Land easement and engineering
services:  Costs incurred for the purchase of the land
easements are capitalized.  Engineering costs that relate to future
acquisition of property and equipment are capitalized.  Depreciation
or amortization of engineering costs is computed using the straight line method
over the estimated useful life of the related assets when the assets are placed
in service.
 
 Property, plant and
equipment:  Property, plant and equipment is stated at
cost.  Depreciation is computed using the straight-line method over
their estimated useful lives of three to twenty years.
 
 Accounts receivable:Accounts
receivable are stated at the amount billed to customers.  The Company,
if necessary, provides an allowance for doubtful accounts, which is based upon a
review of outstanding receivables, historical collection information and
existing economic conditions.  Accounts receivable are ordinarily due
in 15 and 7 days for distillers and ethanol products, respectively after the
issuance of the invoice.  Accounts past due more than 30 days are
considered delinquent.  Delinquent receivables are written off based
on individual credit evaluation and specific circumstances of the
customer.
 
 Capitalized
interest:  Interest costs incurred on borrowings during the
construction period were capitalized as part of the cost of the ethanol
plant.  Total interest and fees capitalized during the year ended
December 31, 2008 was $967,847.  No interest was capitalized during
first quarter 2009. Capitalized
interest from inception through startup at May 22, 2008, was
$1,532,303.
 
 7
  Income taxes:  The
Company is organized as a limited liability company under Missouri
law.  As a limited liability company that has elected to be taxed as a
partnership, the Company’s earnings pass through to the members and are taxed at
the member level.  Accordingly, no income tax provision has been
included in these financial statements.  Differences between the
financial statement basis of assets and the tax basis of assets is related to
depreciation and the capitalization and amortization of organization and
start-up costs for tax purposes, whereas these costs were expensed for financial
statement purposes.
 
 Earnings per capital unit:For purposes of calculating basic earnings per capital unit, capital
units subscribed for and issued by the Company are considered outstanding on the
effective date of issuance. As a result of the March 31, 2009 voluntary
capital fundraising, the Company has modified the allocation method for
distributions and earnings. As of March 31, 2009 distributions and earnings will
be allocated based on individual member’s contributed capital as a percentage of
total capital contributed. The Company maintains capital accounts by individual
members. For purposes of calculating diluted earnings per capital unit,
subscribed units are included in the calculation of earnings per unit based on
the treasury unit method.  There were no differences between basic and
diluted earnings per unit for any periods from inception through March 31,
2009.
 
 Capital contributions: On
March 31, 2009 the Company completed a fundraising totaling $3,862,968 in cash
and  $2,000,000 in settlement of corn forward contract liability as
part of a voluntary capital fundraising from current members (the
“Fundraising”).  As part of the Fundraising, participating member’s
capital accounts were credited by the amount of each member’s capital
contribution, resulting in such contributing members owning a greater percentage
of the business in the form of voting rights and distributions than before the
fundraising, however no additional membership units were issued.  See
also Note 1.
 
 Revenue
recognition:  Revenue from the production of ethanol and
related products is recorded at the time title to the goods and all risks of
ownership transfers to the customers. This generally occurs upon shipment to
customers.  Interest income is recognized as earned.  Income
from government incentive programs is recognized as ethanol is produced and
requests for reimbursement are filed by the Company.
 
 Missouri tax
credits:  The Company has recognized $371,021 in Missouri
Enhanced Enterprise Zone tax credits in Other Income on the Condensed Statement
of Operations at March 31, 2009.
 
 Fair value of financial
instruments:  Fair value estimates discussed herein are based
upon certain market assumptions and pertinent information available to
management as of March 31, 2009, and December 31, 2008.  The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values due primarily to their short-term nature or
variable interest rate terms.  These financial instruments include
cash, accounts receivable, accounts payable, and long-term debt.  Fair
values were assumed to approximate carrying values for these financial
instruments.
 
 Recently issued accounting
pronouncements:  On March 19, 2008, The FASB issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities – an Amendment of FASB Statement 133. Statement 161 enhances
required disclosures regarding derivatives and hedging activities, including
enhanced disclosures regarding how: (a) an entity uses derivative instruments;
(b) derivative instruments and related hedged items are accounted for under FASB
Statement 133, Accounting for
Derivative Instruments and Hedging Activities; and (c) derivative
instruments and related hedged items effect an entity’s financial position,
financial performance, and cash flows. Specifically, Statement 161
requires:
 
 ·
              Disclosure
      of the objective for using derivative instruments be disclosed in terms of
      underlying risk and accounting designation;
 ·
              Disclosure
      of the fair values of derivative instruments and their gains and losses in
      a tabular format;
 ·
              Disclosure
      of information about credit-risk related contingent features;
      and
 ·
              Cross-reference
      from the derivative footnote to other footnotes in which
      derivative-related information is
disclosed.
 
 Statement
161 is effective for fiscal years and interim periods beginning after November
15, 2008. As of March 31, 2009, the Company does not hold any derivitave
instruments. As a result, the adoption of this Statement had no impact on the
financial statements of the Company.
 
 Forward contracts:The Company has
used forward contracts to manage the exposure to price risk related to corn
purchases and ethanol sales.  At March 31, 2009, the Company had no
forward purchase contracts.  Settlement of forward sales contracts
occurs through delivery of quantities expected to be  sold by the
Company over a reasonable period in the normal course of business. As a result,
these forward contracts qualify for the normal purchases and sales exception
under the provision of Statement of Financial Accounting Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities.  This exception exempts
these contracts from being recorded at fair value and instead subjects them to a
lower of cost or market evaluation.  Should the cost of forward
contracts exceed the market value of contracts that qualify for the normal
purchases and sales exception, an unrealized loss will be recognized by the
Company in results of operations in the period the loss occurs. The Company
recorded unrealized losses on forward contracts totaling approximately
$14,136,000 for the year ended December 31, 2008. See also Note 12.
  8
 
 2.
              RELATED
      PARTIES
 
 On April
30, 2007 the Company entered into an agreement of right of first purchase and
right of first refusal with Ray-Carroll County Grain Growers, Inc. (also herein
as “Ray-Carroll”), an investor (the “buy-sell agreement”).  Pursuant
to the buy-sell agreement, the Company has granted a right of first purchase and
a right of first refusal to purchase all or any part of the property comprising
the ethanol plant.  In exchange, Ray-Carroll County Grain Growers,
Inc. has granted the Company a right of first purchase and a right of first
refusal to purchase all or any part of certain grain elevator
property.  The buy-sell agreement’s term is through April 30,
2027.
 
 The
Company also has multiple agreements in place with Ray-Carroll County Grain
Growers, Inc., as noted in Note 10 and has sold subordinated secured notes to
investors as more fully described in Note 7.
 
 3.
              INVENTORIES
 
 Inventories
are physically counted at each month end and are valued using the lower of
first-in first-out (FIFO) cost or market. They consisted of the following at
March 31, 2009:
 
 Ethanol
              
              $
              1,868,259Corn
              
              
              229,299Distillers
      dried grains
              
              
              281,611Work
      in process
              
              
              1,192,534Production
      chemicals
              
              
              270,070Other
              
              
              424,000Total
              
              $
              4,265,773
 
 4.
              INTANGIBLE
      ASSETS
 
 Intangible
assets are recorded at cost.  Loan origination costs are being
amortized over the term of the related loans using the interest
method.  The carrying basis and accumulated amortization of recognized
intangible assets recorded in other assets at March 31, 2009 and December 31,
2008, were:
 
 March
      31, 2009
              
              
              December
      31, 2008Gross
              
              
              
              
              
              GrossCarrying
              
              
              Accumulated
              
              
              Carrying
              
              
              AccumulatedAmortized
      intangible assets
              
              Amount
              
              
              Amortization
              
              
              Amount
              
              
              AmortizationLoan
      origination costs
              
              $
              541,217
              
              
              $
              106,760
              
              
              $
              531,217
              
              
              $
              86,036Permits
              
              
              98,832
              
              
              
              -
              
              
              
              95,857
              
              
              
              -Total
              
              $
              640,049
              
              
              $
              106,760
              
              
              $
              627,074
              
              
              $
              86,036
  9
  Amortization
expense for the three months ended March 31, 2009 and 2008 was $20,724 and zero
dollars respectively.  Estimated amortization expense for each of the
following five years is:
  2010
              
              $
              78,3692011
              
              
              70,0832012
              
              
              61,7972013
              
              
              53,5112014
              
              
              45,226
 
 6.
              REVOLVING
      CREDIT AGREEMENT
 
 On
November 6, 2007, the Company entered into a revolving credit agreement with FCS
for up to $5 million. Borrowings under the revolving credit agreement are
subject to availability under a borrowing base calculation based on accounts
receivable, inventory and accounts payable.  Each borrowing, at the
option of the Company, can be a revolving base rate loan or a revolving LIBOR
rate loan plus 3.5% at December 31, 2008, and 2.5% at March 31,
2009.  The interest rates at December 31, 2008 and March 31, 2009
were  5.4% and 3.0%, respectively. The revolving credit agreement
includes a 0.50% closing fee, paid at closing on the entire amount of the
revolving loan commitment and an unused commitment fee of 0.30% of the unused
portion of the revolving loan commitment, payable monthly.  During the
three month periods ended March 31, 2009 and  2008, the Company paid
$1,653 and $22,704, respectively, of  unused commitment
fees.  The amount paid in 2008 was capitalized as property, plant and
equipment prior to the plant becoming operational in May, 2008. The revolving
credit agreement is secured by all of the Company’s real property and personal
property now owned or hereafter acquired by the Company. On March 31,
2009,  the Company amended its revolving credit agreement among the
Company and the Senior Lender executed on November 6, 2007 (the “Revolving
Loan”) to modify the maturity date of the Revolving Loan to be due in full on
June 2, 2010. As of March 31, 2009 and December 31, 2008, the outstanding
balance of the credit agreement was $3,775,245 and $2,652,245,
respectively.
 
 Under the
terms of the revolving credit agreement, the Company may request that FCS issue
one or more letters of credit, subject to borrowing availability.  The
Company agrees to pay FCS a fee of 2.5%, payable quarterly, on the face amount
of each letter of credit issued. As of March 31, 2009,  a $120,000
undrawn letter of credit was issued by FCS on behalf of the Company to cover
bonding provisions. The letter of credit had a one-year term and was considered
a portion of the revolving credit agreement. At December 31, 2008 there were no
letters of credit outstanding.
 
 7.
              FINANCING
      ARRANGEMENTS
  Construction
      note and Term Loan (A)
              
              $
              48,000,000Subordinated
      related party note (B)
              
              
              12,000,000Equipment
      notes (C)
              
              
              61,198Capital
      lease obligations (D)
              
              
              80,737Subordinated
      related party notes (E)
              
              
              3,590,000Total
      long term debt
              
              
              63,731,935Less
      current maturities
              
              
              4,852,411$
              58,879,524
  (A) On
March 1, 2007, the Company entered into a credit agreement with FCS Financial,
PCA (FCS) under which FSC will perform agent and servicing responsibilities in
the closing and funding of a $48 million construction and term loan agreement
for the Company.  Under the terms of the loan agreement, the Company
was obligated to spend a minimum of $15,800,000 on the ethanol project using
equity funds before requesting draws on the construction loan.  The
loan is secured by all of the Company’s real property and personal property now
owned or hereafter acquired by the Company.  The construction loan
accrued interest at a variable rate.
 
 The
construction loan was converted to a term loan October 7, 2008 and is being
repaid over ten years starting on the conversion date. The Company will make
quarterly principal payments of $1,200,000 beginning February 1, 2009, with
interest payable monthly at the prime rate at December 31, 2008, and at LIBOR
plus 3.5% at March 31, 2009 (4.0% at December 31, 2008, and March 31, 2009,
respectively).  The Company will also be required to pay fifty percent
of its excess cash flow, as defined in the loan agreement, on an annual basis to
repay the loan until such time as $15,000,000 of excess cash flow has been used
to reduce the principal balance of the loan.
 
 10
  On March
31, 2009, the term loan and revolving credit agreement were
amended.  The amendment permits the Company to defer up to four term
loan principal payments, delays the excess cash flow sweep until January 1,
2011, requires the Company to comply with new cash flow reporting and hedging
policy obligations, requires the Company to hire a plant manager and a risk
manager, and requires the Company to make a commercially reasonable inquiry into
amending its existing air permit.  The amendment also deletes the
Minimum Equity and the Minimum Net Worth covenants after March 31, 2009 until
the maturity date of the loan.  The amendment also resets the
financial requirements of the Minimum Working Capital and the Minimum Fixed
Charge Coverage covenants.  Pursuant to the term loan amendment, the
Company deferred its February 1, 2009 term loan payment.
 
 The
Company was in compliance with the loan covenants as of March 31,
2009.
  (B)
Simultaneous with the closing of the Fundraising and financing amendments,
the  Company entered into a Conversion Agreement, dated as of March
31, 2009 with Ray-Carroll County Grain Growers, Inc.  to settle the
outstanding forward corn purchase contracts at $15.5 million, make payment to
Ray-Carroll on the corn contracts in the amount of $1.5 million, provide
settlement of $2.0 million of  the corn contracts liability in
exchange for a $2.0 million capital contribution and settle the remaining
liability through the Company’s issuance of a $12 million subordinated secured
promissory note to Ray-Carroll.  Ray-Carroll is the largest equity
owner of the Company, the Company’s sole distributor of distillers’ grains and
the Company’s sole supplier of corn (See Note 11).  In addition, the
Conversion Agreement also establishes certain financial conditions whereby a
previously issued $1 million 9% Subordinated Secured Promissory Note issued by
the Company to Ray-Carroll on June 5, 2008  may mature on June 5, 2011
instead of June 5, 2010 (see section D).  In return for the potential
delayed maturity of the $1 million note, the Company may not make financial
distributions to its members until such $1 million note is repaid.
 
 The $12
million note will mature on March 31, 2014 and bears interest, payable
quarterly, at the rate of LIBOR plus 4.5%.  Principal is due at
maturity; however, the note also contains an excess quarterly cash sweep that is
effective upon the end of the first quarter in 2011, granting Ray-Carroll 50% of
all such excess quarterly cash as defined.  The $12 million note is
secured by a leasehold deed of trust pledged by the Company to Ray-Carroll as
defined for the ethanol plant’s real property.  The $12 million note
is also secured by a security agreement which grants a security interest to
Ray-Carroll over substantially all the Company’s current or future personal
property as collateral for the $12 million note.
 
 In
connection with the settlement of the outstanding corn contracts with
Ray-Carroll and the credit agreement amendments with FCS, on March 31, 2009,
Ray-Carroll, FCS and the Company entered into an Intercreditor Agreement to
contractually establish that the obligations of the term loan and revolving loan
to FCS are senior to the obligations of the $12 million Note to
Ray-Carroll.  The Intercreditor Agreement also establishes the rights
and obligations of each party should the Company declare bankruptcy or default
under its existing agreements.
 
 (C) In
March 2007, the Company purchased a piece of equipment for $113,800 with
$106,300 being financed by the equipment manufacturer.  The Company is
required to make five annual payments of $23,383, including interest at 5.0%
with the last payment being due in March 2011.  As of March 31, 2009,
the outstanding balance on this loan is $43,466.  The Company has an
equipment note payable totaling $17,732. This note is due in 36 monthly
installments of principal and interest of $701, with the final installment due
July, 2011. The note accrues interest at a variable rate of Citibank, N. A.
prime plus 0.60% (3.85% at December 31, 2008, and  March 31, 2009).
These loans are collateralized by the equipment.
 
 (D) The
Company leases office equipment under a capital lease for a term of four years
expiring in February 2012. The lease obligation is payable in monthly
installments of $636 with a final installment of $2,891 at maturity. The Company
also leases lab equipment under a capital lease for a term of four years
expiring March, 2012. The lease obligation is payable in monthly installments of
$1,507 with a final installment of $8,210 at maturity.
 
 (E) On
June 5, 2008, the Company entered into a purchase agreement whereby
approximately 40 accredited investors named therein purchased approximately $3.6
million worth of 9% subordinated secured notes issued by the Company. The
Subordinated Notes bear interest at 9% per annum computed on the basis of a
360-day year for the actual number of days elapsed and will mature on June 4,
2010. Principal of $2,590,000 is due at maturity; however as disclosed in
section (B), $1 million of the principal amount due Ray-Carroll County Growers,
Inc. may be extended to June 5, 2011 based on the financial conditions of the
Company.  Interest is payable annually, with the first installment
being payable on June 5, 2009, including the maturity date. The Subordinated
Notes are secured pursuant to a loan and security agreement among the Company as
debtor, the State Bank of Slater as agent and the holders from time to time as a
party thereto as lenders dated June 5, 2008, whereby the Company granted a
second lien security interest over substantially all of Company’s personal
property in support of the obligation to repay the Subordinated Notes. The
Subordinated Notes are also secured by a leasehold deed of trust, assignment of
rents and security agreement, among the Company as grantor, Thomas Kreamer as
trustee and the Bank of Slater as grantee dated June 5, 2008. The Company also
agreed that debt created by the issuance of the Subordinated Notes is
subordinate to loans provided primarily by FCS Financial, PCA, as specified in
the Intercreditor/Subordination Agreement executed on June 5, 2008 among the
Company, the Senior Lender and the Investors. In connection with the issuance of
Subordinated Notes, the Company amended its construction term loan agreement
among the Company and the Senior Lender, as administrative agent and the other
lenders thereto, executed on March 7, 2007.  The Term Loan was amended
on June 2, 2008 by the Company and the Senior Lender, as administrative agent
and the other lenders thereto, to permit the issuance of Subordinated Notes by
the Company.
  11
 
 The
estimated maturities of long-term debt during the years ending March 31, are as
follows:
 
 Revolving
      lineof
      credit andLong
      Term
              
              
              Capital
      Lease LeaseDebt
              
              
              Obligations2010
              
              
              
              $
              4,828,778
              
              
              $
              25,7202011
              
              
              
              
              7,420,263
              
              
              
              25,7202012
              
              
              
              
              5,802,157
              
              
              
              34,0402013
              
              
              
              
              4,800,0002014
              
              
              
              
              16,800,000
              
              
              
              -Thereafter
              
              
              
              
              24,000,000
              
              
              
              -Total
      long-term debt
              
              $
              63,651,198
              
              
              
              85,480Less
      amount representing interest
              
              
              
              
              
              
              (4,743
              )Present
      value of future minimum lease payments
              
              
              
              
              
              $
              80,737
 
 As of
March 31, 2009 property, plant, and equipment included equipment under capital
lease totaling $105,520 with accumulated depreciation of $16,555.
 
 8.
              CHAPTER
      100 BONDS
 
 In
September 2006, the Company entered into an Economic Development Agreement with
the County of Carroll, Missouri to implement a tax abatement plan under Missouri
Statutes Chapter 100.  The plan provides for 100% abatement of real
property taxes for twenty years (through December 2028) to improve the Company’s
cash flow and savings of expenses.  Under the plan, legal title of the
Company’s real property will be transferred to the County.  On April
29th, 2008
the County issued bonds under Chapter 100 of the Missouri Revised Statutes in
the aggregate amount of $88.5 million.  The bonds were issued to the
Company, so no cash exchanged hands.  The County then leased the real
estate back to the Company.  The lease payments will equal the amount
of the payments on the bonds.  All of the Company’s right, title, and
interest in the bonds are pledged to their finance company as additional
security for the term loan.  At any time, the Company has the option
to purchase the real property by paying off the bonds, paying the trustee fees,
plus $1,000.
 
 In return
for the abatement of property taxes by the County, the Company has agreed to pay
the County an issuance fee of $10,000 and an additional $10,000 on each
anniversary date thereafter until the bonds are no longer
outstanding.  In addition, the Company has agreed to make annual grant
payments in lieu of property taxes beginning in 2009 in the amount of $90,000
for twenty years, the expected term of the bonds.  The Company also
agrees to pay the fees of the bond counsel for the transaction and any financial
advisor selected by the County. Due to the form of the transaction, the Company
has not recorded the bond or the capital lease associated with sale lease-back
transaction. The original cost of the Company’s property and equipment is being
recorded on the balance sheet and will be depreciated accordingly. To correlate
with the mortgaged debt, the bond has also been assigned to the senior lender as
collateral.
 
 12
  9.
              REGULATION
 
 The
construction of the plant requires various state and local permits to comply
with existing governmental regulations designed to protect the environment and
worker safety.  The Company is subject to regulation on emissions of
the United States Environmental Protection Agency (EPA) which require the
Company to obtain air, water and other permits or approvals in connection with
the construction and operation of the Company’s business.  State and
federal rules can and do change and such changes could result in greater
regulatory burdens on the Company.
 
 Ethanol
production will require the Company to emit a significant amount of carbon
dioxide into the air.  Current Missouri law regulating emission does
not restrict or prevent the Company from emitting carbon dioxide in to the air,
but this could change in the future.
 
 The
Company has obtained the necessary air and water permits to operate the plant,
including a permit to discharge wastewater from the plant.
 
 In
addition to the foregoing regulations affecting air and water quality, the
Company is subject to regulation for fuel storage tanks.  If the
Company is found to have violated federal, state or local environmental
regulations in the future, the Company could incur liability for clean-up costs,
damage claims from third parties and civil and criminal penalties that could
adversely affect its business.
 
 10.
              COMMITMENTS,
      CONTINGENCIES AND SUBSEQUENT EVENTS
 
 The
Company has taken assignment from Ray-Carroll County Grain Growers, Inc. of an
agreement with U.S. Energy Services, Inc. for energy management and engineering
services.  The initial term of the agreement began on December 1, 2005
and will continue until May, 2009.  Thereafter the agreement will be
month-to-month.  The agreement currently provides for fees of $3,262
per month with an annual increase of 4% each year on the anniversary date. Total
fees for the three months ended March 31, 2009, and 2008 were $9,536 and $9,411,
respectively.
 
 In March
2006, the Company entered into a grain supply agreement with Ray-Carroll County
Grain Growers, Inc.  Under the agreement, the Company agrees to
purchase all corn needed to operate a 50-65 million gallon per year ethanol
facility, up to twenty-two million bushels per year.  The Company
agreed to pay $0.116 per bushel over Ray-Carroll County Grain Growers, Inc.’s
posted bid at their Carrollton facility, with the rate increasing annually by
3.0%.  At March 31, 2009 and December 31, 2008, the rate was $0.1268
and $0.1231, respectively. The term of this agreement is twenty years from the
first delivery of the product by the supplier to the Company.  Corn
costs included in cost of sales related to the agreement for the three months
ended March 31, 2009 were approximately $15,896,000.
 
 As of
March 31, 2009 and December 31, 2008, amounts due Ray-Carroll County Grain
Growers, Inc. included in accounts payable totaled approximately $2,291,000 and
$939,000, respectively.  As of December 31, 2008, the
Company  entered into forward purchase contracts under this agreement
with Ray-Carroll County Grain Growers totaling 4.9 million bushels for delivery
through May, 2009 at prices ranging from $5.80 to $7.20 per
bushel.  These contracts were written down to the lower of cost or
market which resulted in recording an unrealized loss on forward purchase
contracts of $14,135,849 at December 31, 2008.  As part of the
Company’s negotiations with FCS related to debt covenant solutions, the Company
was required to settle the corn forward purchase contracts.  Pursuant
to the requirement, the Company entered into a conversion agreement with
Ray-Carroll County Grain Growers, Inc. to settle the corn forward purchase
contracts for $15.5 million resulting in an additional loss of $1,364,151 for
the three months ended March 31, 2008.  For terms of settlement on the
corn forward purchase contracts, see Note 7.
 
 At March
31, 2009, the Company had variable priced ethanol forward sales contracts
totaling 5,712,000 gallons for delivery through May, 2009.
  The
Company has entered into a marketing agreement with a marketing company for the
exclusive rights to market, sell and distribute the entire ethanol inventory
produced by the Company.  The agreement extends for a period of five
years from the time the Company originally ships ethanol.  The Company
pays the marketing company 1% per net gallon for each gallon of ethanol sold by
the marketing company.  Marketing expense recorded by the Company
related to the agreement totaled approximately $196,403 for the three months
ended March 31, 2009.
 
 13
  In August
2007, the Company entered into a marketing agreement with Ray-Carroll County
Grain Growers, Inc. that specifies that Ray-Carroll will be the exclusive
marketer of all distiller grain products produced by the Company.  The
Company agrees to pay a marketing fee to Ray-Carroll of 2.5% to 4.5% of the net
price of the distiller grains, depending on type; however, the fee shall not be
less than $1 per ton.  The contract began May 22, 2008 and has an
initial term of three years.  Amounts totaling approximately $137,000
and 594,000 due the Company for distiller grain marketed under this agreement
are included in accounts receivables as of March 31, 2009 and December 31, 2008,
respectively.
 
 11.
              ETHANOL
      PRODUCER CREDIT
 
 The State
of Missouri sponsors the Missouri Qualified Fuel Ethanol Producer Incentive
Program that pays $0.20 per gallon produced for the first 12,500,000 gallons and
then $0.05 per gallon produced for the next 12,500,000 gallons for a total
incentive payment of $3,125,000 during a program year beginning July 1st. Our
production reached the 25,000,000 gallon limit in February, 2009.  We
will receive no further payments until the new program begins on July 1, 2009.
Generally, we will be qualified to participate in this program for a total of 60
months.   Credits totaling approximately $150,000 and $197,000
are included in accounts receivable as of March 31, 2009 and December 31, 2008,
respectively.
 
 12.
              MANAGEMENT’S
      CONSIDERATION OF LIQUIDITY AND WORKING
  CAPITAL
 
 In an
effort to cure financing covenant defaults, the Company negotiated amendments to
its existing credit agreements with FCS Financial, PCA.   The
amendments reset the financial requirements of the minimum working capital and
the minimum fixed charge coverage covenants and delete the minimum equity and
the minimum net worth covenants after March 31, 2009 until the maturity date of
each loan.  The term loan amendment permits the Company to defer up to
four principal payments, delays the excess cash flow sweep until January 1,
2011, requires the Company to comply with new cash flow reporting and hedging
policy obligations.
 
 The
Company obtained additional capital in a fundraising simultaneously with the
amendment to the credit agreements, totaling $3,862,968 in cash from current
members.  The Company also received additional capital in the form of
a $2,000,000 write off of forward purchase corn contracts with Ray-Carroll
County Grain Growers, Inc. as part of a conversion agreement.
 
 The
conversion agreement required the settlement of the outstanding forward corn
purchase contracts.  The agreement fixed the value of outstanding
forward purchase contracts of corn at $15.5 million, and required the Company to
make payment to Ray-Carroll on the corn contracts in the amount of $1.5 million,
accept a write-off of $2.0 million worth of corn contracts in exchange for $2.0
worth of capital contribution and settle the remaining debt by the Company’s
issuance of a $12 million secured promissory note to Ray-Carroll.  In
addition, the Conversion Agreement also establishes certain financial conditions
of the Company upon which the $1 million 9% Subordinated Secured Promissory Note
previously issued by the Company to Ray-Carroll may mature on June 5, 2011
instead of June 5, 2010.  In return for the potential delayed maturity
of the $1 million note, the Company may not make financial distributions to its
members until such $1 million note is repaid.
 
 As a
result of the additional capital raised and the amended financing agreements,
the Company believes it has adequate capital and financing arrangements to meet
its current needs.
  14
  ITEM
2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  Forward
Looking Statements
  This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  This
Quarterly Report includes statements regarding our plans, goals, strategies,
intent, beliefs or current expectations.  These statements are
expressed in good faith and based upon a reasonable basis when made, but there
can be no assurance that these expectations will be achieved or
accomplished.  These forward looking statements can be identified by
the use of terms and phrases such as “believe,” “plan,” “intend,” “anticipate,”
“target,” “estimate,” “expect,” and the like, and/or future-tense or conditional
constructions (“will,” “may,” “could,” “should,” etc.).  Items
contemplating or making assumptions about, actual or potential future sales,
market size, collaborations, and trends or operating results also constitute
such forward-looking statements.
 
 Although
forward-looking statements in this Quarterly Report reflect the good faith
judgment of management, forward-looking statements are inherently subject to
known and unknown risks, business, economic and other risks and uncertainties
that may cause actual results to be materially different from those discussed in
these forward-looking statements.  Readers are urged not to place
undue reliance on these forward-looking statements, which speak only as of the
date of this Quarterly Report.  We assume no obligation to update any
forward-looking statements in order to reflect any event or circumstance that
may arise after the date of this Quarterly Report, other than as may be required
by applicable law or regulation.  Readers are urged to carefully
review and consider the various disclosures made by us in the our reports filed
with the Securities and Exchange Commission which attempt to advise interested
parties of the risks and factors that may affect our business, financial
condition, results of operation and cash flows.  This discussion
should be read in conjunction with the financial statements including the
related footnotes.  If one or more of these risks or uncertainties
materialize, or if the underlying assumptions prove incorrect, our actual
results may vary materially from those expected or projected.  Such
risks and factors include, but are not limited to, the risk factors set forth in
the section below entitled “RISK FACTORS”.
 
 The
following discussion should be read in conjunction with the accompanying
unaudited financial statements and footnotes and our December 31, 2008 audited
financial statements included in Show me Ethanol, LLC’s annual report on Form
10-K, as amended.  Those financial statements include additional
information about our significant accounting policies and practices and the
events that underlie our financial results.  Except for the historical
information contained herein, the matters discussed below are forward-looking
statements that involve certain risks and uncertainties.
  Overview
  Show Me
Ethanol, LLC (the “Company”) is a
Missouri limited liability company that processes corn into and sells fuel grade
ethanol and distillers grains.  Our plant has an approximate
production capacity of 55 million gallons per year (mgpy) and is located in
Carroll County, Missouri (the “Ethanol
Plant”).  We began construction of the Ethanol Plant in June
2007 and began operations in late May 2008. The total cost of our Ethanol Plant
was about $81.4 million and we currently employ thirty-seven full time
employees.
  Since we
became operational in May 2008, we do not yet have comparable income, production
or sales data for the three months ended March 31, 2009.  Accordingly,
we do not provide a comparison of our financial results between reporting
periods in this report.  If you undertake your own comparison of the
first three months of 2008 and the first three months of 2009, it is important
that you keep this in mind.
  15
  Selected
Financial Information
  The
following table shows some results of our operations for the three months ended
March 31, 2009:
  Quarter Ended
                March
      31, 2009
                (Unaudited)
              
              
              PercentSales
              
              $
              20,949,836
              
              
              
              99.0
              %Ethanol
      Producer Credit
              
              
              209,924
              
              
              
              1.0
              %Total
      Sales
              
              
              21,159,760
              
              
              
              100
              %Cost
      of Sales
              
              
              21,410,756
              
              
              
              101.2
              %Loss
      on Forward Contracts
              
              
              1,364,152
              
              
              
              6.5
              %General
      and Administrative Expenses
              
              
              537,532
              
              
              
              2.5
              %Interest
      Expense
              
              
              608,010
              
              
              
              2.9
              %Interest
      and other income
              
              
              373,459
              
              
              
              1.8
              %3⁄4
              
              
              
              3⁄4Net
      Loss
              
              $
              2,387,231
              
              
              
              11.3
              %
 
 Sales
  Our sales
are divided into two categories: sales of fuel ethanol and sales of distillers
grains.  For the three months ended March 31, 2009, we received
approximately 80% of our sales from the sale of fuel ethanol and approximately
19% of our sales from the sale of distillers grains.  We expect the
sale price of our fuel ethanol to remain relatively consistent with current
levels based on information from our marketer and other factors, including the
price of gasoline and petroleum.
  We
continue to explore, through our ethanol marketer, ways to expand into market
areas in the southeastern United States.  Should we be successful in
selling our product into a new geographical region we believe we will attain
higher margins for our product than we are currently getting.  At this
time, our efforts have only been preliminary and we cannot predict the
likelihood of expanding our sales into the southeastern United States nor
predict what profit levels we may be able to attain.
  Ethanol Producer
Credit
  The State
of Missouri sponsors the Missouri Qualified Fuel Ethanol Producer Incentive
Program that pays $0.20 per gallon produced for the first 12,500,000 and then
$0.05 per gallon produced for the next 12,500,000 gallons for a total incentive
payment of $3,125,000 during a program year beginning July 1st.  Our
production exceeded the 25,000,000 gallon limit in February, 2009.  We
will receive no further payments until the new program cycle begins on July 1,
2009.  We expect that we will be qualified to participate in this
program for a total of 60 months.
  Cost of
Sales
  Our cost
of sales as a percentage of total sales was 108%, including the loss on forward
contracts,  for the three months ended March 31, 2009.  Our
average cost paid for corn per bushel was $3.96 for this period.  Our
two largest costs of production are corn and natural gas.  Both of
these costs are affected by factors largely out of our control.
  16
  We do not
have any views as to the projected cost of natural gas.
  Please
see the analysis below under “Trends and Uncertainties Impacting the Corn and
Natural Gas Markets and Our Future Cost of Goods Sold”.
  General and Administrative
Expenses
  Our
general and administrative expenses as a percentage of total sales was 2.5% for
the three months ended March 31, 2009.  We expect that general and
administrative expenses will remain relatively constant for the rest of the
fiscal year.
  Interest
Expense
  Interest
expense as a percentage of total sales was 2.9% for the three months ended March
31, 2009.  On October 7, 2008 our construction loan, which we refer to
below as the “Term Loan,” was converted to a variable rate loan based on the
prime rate.  After December 31, 2008, the interest rate was changed to
LIBOR + 3.5%.  The current rate applied to outstanding balances is
4%.
  Additional
Operational Data
  For the
quarter ended on  March 31, 2009, our operating statistics are as
follows:
  Ethanol
      sold (gallons)
              
              
              11,513,654Dried
      distillers grains sold (tons)
              
              
              27,785Modified
      distillers grains sold (tons)
              
              
              9,049Ethanol
      average price per gallon
              
              $
              1.49Dried
      distillers grain average price per ton
              
              $
              127.90Modified
      distillers grain average price per ton
              
              $
              65.51Average
      corn cost per bushel
              
              $
              3.96
 
  The
average corn cost per bushel is determined by the cost of the corn that was used
in the production of ethanol during the period reported and not a reflection of
corn that was bought during the period of this report.
  Trends
and Uncertainties Impacting the Ethanol Industry and Our Future
Operations
  We
continue to be subject to industry-wide factors, as well as factors affecting
the economy at large, that affect our operating and financial
performance.  The industry-wide factors include, but are not limited
to, the available supply and cost of corn from which our ethanol and distillers
grains are processed; the cost of natural gas, which we use in the production
process; dependence on our ethanol marketer (Eco-Energy) and distillers grains
marketer (Ray-Carroll County Grain Growers, Inc.) to market and distribute our
products; the cost of gasoline and petroleum; the intensely competitive nature
of the ethanol industry, including ethanol imported from Caribbean basin
countries and Brazil; possible legislation at the federal, state and/or local
level; changes in federal ethanol tax incentives and the cost of complying with
extensive environmental laws that regulate our industry.
  We expect
ethanol sales to constitute the bulk of our future revenues.  We
expect to benefit from federal ethanol supports and federal tax
incentives.  Changes to these supports or incentives could
significantly impact demand for ethanol.
  17
  Trends
and Uncertainties Impacting the Corn and Natural Gas Markets and Our Future Cost
of Goods Sold
  Our cost
of goods sold consists primarily of costs relating to the corn and natural gas
supplies and depreciation necessary to produce ethanol and distillers grains for
sale. Variables such as planting dates, rainfall, and temperatures will likely
cause market uncertainty and create corn price volatility throughout the
year.
  In March
2006, the Company entered into a grain supply agreement with Ray-Carroll County
Grain Growers, Inc.  Under the agreement, the Company agrees to
purchase all corn needed to operate a 50-65 million gallon per year ethanol
facility, up to twenty-two million bushels per year.  The Company
agreed to pay $0.116 per bushel over Ray-Carroll County Grain Growers, Inc.’s
posted bid at their Carrollton facility, with the rate increasing annually by
3.0%.  At March 31, 2009 the rate was $0.1268. The term of this
agreement is twenty years from the first delivery of the product by the supplier
to the Company.  Corn costs included in cost of sales related to the
agreement for the three months ended March 31, 2009 were approximately
$15,900,000.  The Company had entered into forward purchase contracts
under this agreement with Ray-Carroll County Grain Growers, Inc. totaling 4.9
million bushels for delivery through May, 2009 at prices ranging from $5.20 to
$7.20 per bushel.  These contracts were written down to the lower of
cost or market which resulted in recording unrealized losses on future
contracts.  The Company entered into a Conversion Agreement, dated as
of March 31, 2009 with Ray-Carroll County Grain Growers, Inc. to settle the
outstanding forward corn purchase contracts at $15.5 million, make payment to
Ray-Carroll on the corn contracts in the amount of $1.5 million, provide
settlement of $2.0 million of  the corn contracts liability in
exchange for a $2.0 million capital contribution and settle the remaining
liability through the Company’s issuance of a $12 million subordinated secured
promissory note to Ray-Carroll.
 
 Natural
gas is also an important input commodity to our manufacturing process. We
estimate that our natural gas usage will be approximately 10% to 15% of our
annual total production cost.  We expect continued volatility in the
natural gas market.  Any ongoing increases in the price of natural gas
will increase our cost of production and may negatively impact our future profit
margins.
 
 Liquidity
and Capital Resources
  As of
March 31, 2009, we had total assets of $88,467,742 consisting primarily of cash,
prepaid expenses, inventories and property, plant and equipment.  We
had current liabilities of $12,130,082, which was the current portion of
long-term debt and accounts payable.  Total members’ equity as of
March 31, 2009, was $17,458,136.
   The
financial statements have been prepared assuming the Company will continue as a
going concern, realizing assets and liquidating liabilities in the ordinary
course of business.
  On March
31, 2009 the Company completed a fundraising totaling $3,862,968 in cash and
$2,000,000 in settlement of corn forward contract liability as part of a
voluntary capital fundraising from current members (the
“Fundraising”).  As part of the Fundraising, participating member’s
capital accounts were credited by the amount of each member’s capital
contribution, resulting in such contributing members owning a greater percentage
of the business in the form of voting rights and distributions than before the
Fundraising; however, no additional membership units were issued.
 
 Term
Loan
  On March
7, 2007, the Company entered into a $48,000,000 construction loan (the “Term Loan”) pursuant
to a Construction and Term Loan Agreement (the “Term Loan Agreement”)
with FCS Financial, PCA serving as the administrative agent for the
transaction.  The participating banks in the Term Loan include FCS
Financial, PCA, AgriBank, FCB, Southwest Bank, CoBank, ACB, 1st Farm
Credit Services, FLCA, Bank Midwest, N.A. and Progressive FCS (collectively, the
“Banks”).  The
Term Loan has a maturity date of October 7, 2018.  The Term Loan is
secured by a first priority security interest in our real and personal property,
including our interest in the Ethanol Project.  Under the terms of the
Term Loan Agreement, 50% of our Excess Cash Flow, as defined in the Term Loan
Agreement, is to be applied on an annual basis to prepay the Term Loan until
such time as $15,000,000 of our Excess Cash Flow has been used to prepay the
Term Loan.
  On March
31, 2009, the Company’s Term Loan was amended.  The amendment permits
the Company to defer up to four term loan principal payments, delays the excess
cash flow sweep until January 1, 2011, requires the Company to comply with new
cash flow reporting and hedging policy obligations, requires the Company to hire
a plant manager and a risk manager, and requires the Company to make a
commercially reasonable inquiry into amending its existing air
permit.  The amendment also deletes the Minimum Equity and the Minimum
Net Worth covenants after March 31, 2009 until the maturity date of the
loan.  The amendment also resets the financial requirements of the
Minimum Working Capital and the Minimum Fixed Charge Coverage
covenants.  Pursuant to the term loan amendment, the Company deferred
its February 1, 2009 term loan payment.
 
 18
  At March
31, 2009, the Company was in compliance with Term Loan covenants.
 
 Revolving
Loan
  On
November 6, 2007, the Company as borrower entered into a revolving credit
agreement with FCS Financial, PCA (“FCS”) as lender for a
total borrowing up to $5 million (the “Revolving Credit
Agreement”). The purposes of the Revolving Credit Agreement is to (i)
fund proper corporate business purposes of the Company, (ii) fund the Company’s
maintenance capital expenditures and (iii) to finance letters of
credit.  Borrowings under the Revolving Credit Agreement are subject
to availability under a borrowing base calculation based on accounts receivable,
inventory and accounts payable.  Each borrowing, at the option of the
Company, can be either a revolving base rate loan or a revolving LIBOR rate
loan  plus 3.5% at December 31, 2008, and 2.5% at March 31, 2009 (in
either case, a “Revolving
Loan”).  The Company may select interest periods of one, two,
three or six months for LIBOR loans.  The Revolving Loan is secured by
all of the Company’s real property and personal property now owned or hereafter
acquired by the Company, secured equally and ratably with the Term Loan on the
same lien priority basis.  On March 31, 2009 the Company amended its
Revolving Credit Agreement to, among other things, modify the maturity date of
the Revolving Loans to be due in full on June 2, 2010.  The financial
covenants in the Revolving Credit Agreement were also amended in the same way as
in the Term Loan.
  On March
31, 2009, the Company was in compliance with all Revolving Credit Agreement
covenants.
  The 2010
Notes
  On June
5, 2008, the Company entered into a purchase agreement whereby approximately 40
accredited investors named therein purchased approximately $3.6 million worth of
9% subordinated secured notes (the “Notes”) issued by the
Company.  The Notes bear interest at 9% per annum computed on the
basis of a 360-day year for the actual number of days elapsed and will mature on
June 4, 2010.  Interest will be payable annually, with the first
installment being payable on June 5, 2009, and thereafter on June 4, 2010, at
which time the entire outstanding principal balance, together with all accrued
and unpaid interest, will be immediately due and payable in full.  The
Notes are secured pursuant to a loan and security agreement among the Company as
debtor, the State Bank of Slater as agent and the holders from time to time as a
party thereto as lenders dated June 5, 2008, whereby the Company granted a
second lien security interest over substantially all of Company’s personal
property in support of the obligation to repay the Notes. The Notes are also
secured by a leasehold deed of trust, assignment of rents and security
agreement, among the Company as grantor, Thomas Kreamer as trustee and the Bank
of Slater as grantee dated June 5, 2008, whereby the Company granted a second
lien security interest over substantially all of Company’s personal property in
support of the obligation to repay the Notes.  The Company also agreed
that debt created by the issuance of the Notes is subordinate to loans provided
primarily by FCS.  On March 31, 2009, the Company entered into
a  Conversion Agreement that established certain financial conditions
whereby a previously issued $1 million 9% Subordinated Secured Promissory Note
issued by the Company to Ray-Carroll on June 5, 2008  may mature on
June 5, 2011 instead of June 5, 2010.  In return for the potential
delayed maturity of the $1 million note, the Company may not make financial
distributions to its members until such $1 million note is repaid.
  Chapter 100
Bonds
  In
September 2006, the Company entered into an Economic Development Agreement with
the County of Carroll, Missouri to implement a tax abatement plan under Missouri
law.  The plan provides for 100% abatement of real property taxes for
approximately twenty years.  On April 29, 2008, the County issued
bonds under Chapter 100 of the Missouri Revised Statutes in a maximum amount of
$88,500,000.  Legal title of our real and personal property was
transferred to the County and the County then leased the property back to
us.  The bonds were issued to the Company so no cash was
exchanged.  The lease payments are equal to the amount of the debt
service payments on these bonds.  The Banks, and agents under the Term
Loan Agreement received an assignment of the Chapter 100 Bonds and retained
their first priority position against the real property over the Chapter 100
Bonds.  We have an option to purchase the real property by paying off
these bonds, paying the trustee fees, plus $1,000.  In return for the
abatement of property taxes by the County, we have agreed to pay the County
$10,000 on each anniversary date of the Chapter 100 Bonds issuance until the
bonds are no longer outstanding.  In addition and commencing in 2009,
we have agreed to make annual grant payments in lieu of property taxes in the
amount of $90,000 for the period during which the bonds are
outstanding.
  19
  The 2014
Note
  On March
31, 2009 the Company issued a $12 million subordinated secured promissory note
to Ray-Carroll County Grain Growers, Inc.  The $12 million note will
mature on March 31, 2014 and bears interest, payable quarterly, at the rate of
LIBOR plus 4.5%.  Principal is due at maturity; however, the note also
contains an excess quarterly cash sweep that is effective upon the end of the
first quarter in 2011, granting Ray-Carroll 50% of all such excess quarterly
cash as defined in the $12 million note.  The $12 million note is
secured by a leasehold deed of trust pledged by the Company to Ray-Carroll for
the ethanol plant’s real property.  The $12 million note is also
secured by a security agreement which grants a security interest to Ray-Carroll
over substantially all the Company’s current or future personal property as
collateral for the $12 million note.
  Off-Balance
Sheet Arrangements
  The
Company has variable priced ethanol forward sales contracts not shown on the
balance sheet.  The Company believes that due to the variable price
and limited nature of the contracts, such contracts do not have an affect on the
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.  Pursuant to the marketing agreement between
the Company and Eco-Energy, Inc. (previously filed as Exhibit 10.5 to the
Company’s Form 10-SB, and incorporated herein by reference), the Company
contracts to sell ethanol to Eco-Energy, Inc. under forward sales contracts with
a typical forward delivery date of two weeks.  An entry of a sale and
receivable onto the Company’s balance sheet is made only at the time of
delivery.  The price of the ethanol subject to the forward contract is
based on OPIS index pricing.  These forward sales contracts are used
in order to ensure that the Company will have a buyer for its ethanol product,
once produced.  All revenue and cash flows sourced to sales of ethanol
are comprised of spot priced contracts and forward sales
contracts.  These contracts are subject to the Eco-Energy, Inc.
marketing agreement and are expected to continue through the duration of the
contract (May 2013).  Due to the relatively short time frame between
entering into the sale contract and recording the sale, the nature of OPIS index
pricing and the prevalence of this sale process in the industry the Company does
not view these forward sales contracts as a source of risk to the Company’s
financial position or financial reporting, nor does it view these forward sales
contracts as material information for investors.
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
  The
Company is not required to provide information under this item as it is a small
reporting company, pursuant to the exclusion provided in S-K Item
305(e).
  ITEM
4. CONTROLS AND PROCEDURES
  Disclosures
Controls and Procedures
  We have
adopted and maintain disclosure controls and procedures (as such term is defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended (the “Exchange
Act”)) that are designed to ensure that information required to be
disclosed in our reports under the Exchange Act, is recorded, processed,
summarized and reported within the time periods required under the SEC’s rules
and forms and that the information is gathered and communicated to our
management, including our General Manager (Principal Executive Officer) and
Chief Financial Officer (Principal Financial Officer), as appropriate, to allow
for timely decisions regarding required disclosure.
  As
required by SEC Rule 15d-15(b), our Principal Executive Officer and Chief
Financial Officer carried out an evaluation of the effectiveness of the design
and operation of our disclosure controls and procedures pursuant to Exchange Act
Rule 15d-14 as of the end of the period covered by this report.  Based
on the foregoing evaluation, our Principal Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are not
effective in timely alerting them to material information required to be
included in our periodic SEC filings and to ensure that information required to
be disclosed in our periodic SEC filings is accumulated and communicated to our
management, including our Principal Executive Officer and Chief Financial
Officer, to allow timely decisions regarding required disclosure as a result of
the deficiency in our internal control over financial reporting discussed
below.
  20
  At
December 31, 2008 and as of March 31, 2009, management identified material
weaknesses in the Company’s disclosure controls and procedures and internal
control over financial reporting regarding proper (1) inventory accounting and
(2) preparation of financial statements. Management also identified significant
deficiencies relating to (1) the Company’s use of information technology, (2)
adjustments to accounts receivable and (3) lack of segregation  of
accounting duties by the Chief Financial Officer.
  The
identified material weaknesses are being remediated as follows: (1) the Company
now counts physical inventory using consistently applied accounting procedures
as well as implementing additional supervisory oversight and (2) the Company is
currently evaluating the cost-benefit trade-off of using external consultants to
provide advice regarding the preparation of complete and adequate financial
disclosures.
  The
identified significant deficiencies are being remediated as follows: (1) the
Company’s significant deficiencies regarding the use of information technology
(including lack of oversight for financial data entry, over-reliance on
electronic spreadsheets, password control, lack of review of Chief Financial
Officer’s information technology access privileges, lack of review of master
file changes and lack of due diligence on information technology service
providers), each are under review and procedures will be modified where possible
to remediate the deficiency, (2) future adjustments to accounts receivable will
be reviewed and compared to physical shipments for proper treatment of accounts
receivable timing and value and (3) lack of segregation of accounting duties
under the responsibility of the Chief Financial Officer is under review as well;
the Company is considering the viability and cost of hiring additional personnel
to segregate accounting duties.
  21
  PART
II - OTHER INFORMATION
  ITEM
1. LEGAL
PROCEEDINGS
  None.
  ITEM 1A.RISK FACTORS
  Our
business is subject to a number of risks and uncertainties.  If any of
the events contemplated by the following risks actually occur, then our
business, financial condition or results of operations could be materially and
adversely affected.  Additional risks and uncertainties not currently
known to us or that we currently deem to be immaterial may also materially and
adversely affect our business, financial condition and results of
operations.
 
 Risk Factors Related to The
Industry
 
 Overcapacity in the industry
may result in a decrease in the price ofethanoland dried distiller’s
grains with solubles (“DDGS”).
 
 Excess
capacity in the ethanol industry would have an adverse impact on
our results of operations, cash flows and general financial condition. Excess
capacity may also result or intensify from increases in production capacity
coupled with insufficient demand. If the demand forethanol
does not grow at the same pace as the supply increase, we expect the price for
ethanol to decline. If excess capacity in the ethanol industry occurs, the
market price of ethanol may decline to a level that is inadequate to
generate sufficient cash flow to cover our costs. In addition, because ethanol
production produces DDGS as a co-product, increased ethanol production may lead
to increased supplies of DDGS. An increase in the supply of DDGS, without
corresponding increases in demand, could lead to lower prices for, or an
inability to sell, our DDGS. Any decline in the price of DDGS or in the demand
for DDGS generally could have a material adverse effect on our business and
financial condition.
 
 The United Statesethanolindustry is highly
dependent upon a myriad of federal and state legislation and regulation and any
changes in such legislation or regulation could have a material adverse effect
on our results of operations and financial condition.
 
 The
elimination or significant reduction in the Federal Excise Tax Credit could have
a material adverse effect on our results of operations.
 
 The
production of ethanol is made significantly more profitable by
federal tax incentives. The federal excise tax incentive program, which is
scheduled to expire on December 31, 2010, allows gasoline distributors who blendethanol with gasoline to receive a federal excise tax rate
reduction for each blended gallon they sell regardless of the blend rate. The
current federal excise tax on gasoline is $0.184 per gallon, and is paid at the
terminal by refiners and marketers. If the fuel is blended withethanol, the blender may claim a $0.51 per gallon tax credit for
each gallon ofethanol used in the mixture. The federal
excise tax incentive program may not be renewed prior to its expiration in 2010,
or if renewed, it may be renewed on terms significantly less favorable than
current tax incentives. The elimination or significant reduction in the federal
excise tax incentive program could have a material adverse effect on our results
of operations.
  Waivers
or repeal of the national Renewable Fuel Standards (RFS) minimum levels of
renewable fuels included in gasoline could have a material adverse affect on our
results of operations and financial condition.
 
 Shortly
after passage of the Energy Independence and Security Act of 2007, which
increased the minimum mandated required usage of ethanol, a
Congressional sub-committee held hearings on the potential impact of the new
national RFS on commodity prices. While no action was taken by the sub-committee
towards repeal of the new national RFS, any attempt by Congress to re-visit,
repeal or grant waivers of the new national RFS could adversely affect demand
forethanol and could have a material adverse effect on our
results of operations and financial condition.
 
 While
the Energy Independence and Security Act of 2007 imposes the national RFS, it
does not mandate only the use of ethanol.
 
 The
Energy Independence and Security Act of 2007 imposes the national RFS, but does
not mandate only the use of ethanol.  While the
Renewable Fuels Association (“RFA”) expects thatethanol should account for the largest share of renewable
fuels produced and consumed under the national RFS, the national RFS is not
limited toethanol and also includes biodiesel and any other
liquid fuel produced from biomass or biogas.  An increase in the
availability of alternative sources of renewable fuels meeting federal standards
may adversely affect demand for ethanol and could have a material adverse effect
on our results of operations and financial conditions.
 
 22
  The
elimination or significant reduction in the Missouri Qualified Fuel Ethanol
Producer Incentive Program could have a material adverse effect on our results
of operations.
 
 The State
of Missouri sponsors the Missouri Qualified Fuel Ethanol Producer Incentive
Program that pays $0.20 per gallon produced for the first 12,500,000 gallons and
then $0.05 per gallon produced for the next 12,500,000 gallons for a total
incentive payment of $3,125,000 during a program year beginning July 1st. Our
production exceeded the 25,000,000 gallon limit in February 2009 and we will
receive no further payments until the new program begins on July 1, 2009.
Generally, we will be qualified to participate in this program for a total of 60
months. The elimination or significant reduction in this Program could have a
material adverse effect on our results of operations.  Further, once
the 60 months allowed by the program lapses, our profitability may be
impacted.  Also, because we will produce more than the 25,000,000
gallons of ethanol eligible for this credit in any one calendar year, our profit
margin on each gallon produced over 25,000,000 gallons will
decrease.
 
 The market price ofethanolis dependent on many
factors, including the price of gasoline, which is in turn dependent on the
price of petroleum. Fluctuations in these prices may cause our results of
operations to fluctuate significantly.
 
 Petroleum
prices are highly volatile and difficult to forecast due to frequent changes in
global politics and the world economy. The distribution of petroleum throughout
the world is affected by incidents in unstable political environments, such as
Iraq, Iran, Kuwait, Saudi Arabia, the Russian Federation, Venezuela and other
countries and regions. The industrialized world depends on oil from these areas
and any disruption or other reduction in oil supply can cause significant
fluctuations in the prices of oil and gasoline. The unpredictability of the
future price of oil or wholesale gasoline may lead to
fluctuations in the market price ofethanol, causing our
profitability to fluctuate significantly.
 
 The
current weakened global economy has placed added downward pressures on the price
of oil due to a lessened demand therefor.  The decreased demand and
price of oil may continue to result in a substantial decrease in the demand for,
or price of, ethanol, which would significantly and adversely affect our sales
and profitability.
 
 Ethanol industry growth is
dependent on the changes to and expansion of related infrastructure which may
not occur on a timely basis, if at all.
 
 Substantial
development of infrastructure will be required by persons and entities outside
of our control for the ethanol industry to grow. Areas requiring
expansion include, but are not limited to:
  ·
                additional
      rail capacity;
 ·
                  additional
      storage facilities forethanol;
  ·
                increases
      in truck fleets capable of transporting ethanol within
      localized markets;
  
 ·
                    expansion of
      refining and blending facilities to handleethanol;
 
 ·
                    growth in
      service stations equipped to handleethanol
      fuels;
and
 
 ·
                    growth
      in the fleet of flexible fuel
vehicles.
  The lack
of infrastructure prevents the use of ethanol in certain areas where there might
otherwise be demand and results in excess ethanol supply in areas with more
established ethanol infrastructure, depressing ethanol prices in those
areas.
  23
  Substantial
investments required for the development and expansion of infrastructure may not
be made or they may not be made on a timely basis. Any delay or failure in the
development or expansion of infrastructure could hurt the demand or prices for
products, impede delivery of products, impose additional costs or otherwise have
a material adverse effect on results of operations or financial position. Our
business is dependent on the continuing availability of infrastructure and any
infrastructure disruptions could have a material adverse effect on our business.
  Ethanolcompetes
with other existing products and other alternative products could be developed
for use as fuel additives.
 
 Our
revenue is derived primarily from the sale of ethanol.Ethanol competes with MTBE (methyl tertiary butyl ether) as an
oxygenate in gasoline to meet both oxy-fuel and reformulated gasoline
requirements. Historically, MTBE has been the most widely used oxygenate to meet
the requirements of the Clean Air Act Amendments of 1990. However, MTBE has
shown significant adverse environmental and health safety characteristics that
have led to the decision by several key States to ban its use.
  We expect
to be completely focused on the production of ethanol and its
co-products for the foreseeable future. We may be unable to shift our business
focus away from the production ofethanol to other renewable
fuels or competing products. Accordingly, an industry shift away fromethanol or the emergence of new competing products may reduce the
demand forethanol. A downturn in the demand forethanol would significantly and adversely affect our sales and
profitability.
 
 The spread between ethanol
and corn prices can vary significantly.
 
 Corn
costs significantly impact our cost of goods sold.  The spread between
the price of ethanol and the price we pay per bushel of corn has fluctuated
significantly in the past and may fluctuate significantly in the future
leading  to volatility in our net income.  Any reduction in
the spread between ethanol and corn prices, whether as a result of an increase
in corn prices or a reduction in ethanol prices, would adversely affect our
results of operations and financial condition.
 
 The price of ethanol is not
necessarily correlated to gasoline prices and/or corn
 
 The
relative immaturity of the ethanol market, coupled with its recent volatility,
make predicting the future price of ethanol nearly impossible.  While
some industry experts suggest that the main factor affecting the market price of
ethanol is corn, others suggest it is gasoline.  However, neither
factor seems to have a perfect correlative effect.  Thus, because the
factors affecting the price of ethanol are indeterminable, we cannot predict or
protect ourselves from drastic fluctuations in the market
price.  Fluctuations in the market price of ethanol may cause our
profitability to fluctuate significantly.
 
 Ethanol
imported from Caribbean basin countries and Brazil may be a less expensive
alternative to our ethanol.
 
 Ethanol
produced or processed in certain countries in Central America and the Caribbean
region is eligible for tariff reduction or elimination upon importation to the
United States under a program known as the Caribbean Basin Initiative. Large
ethanol producers, such as Cargill, have built dehydration plants in
participating Caribbean Basin countries, such as El Salvador, which convert
ethanol into fuel-grade ethanol for shipment to the United States. Ethanol
imported from Caribbean Basin countries may be a less expensive alternative to
domestically produced ethanol. Competition from ethanol imported from Caribbean
Basin countries may affect our ability to sell our ethanol profitably, adversely
affecting our results of operations and financial condition.
  Brazil is
currently the world’s largest exporter of ethanol and, until recently, was
also the world’s largest producer of ethanol.  In Brazil, ethanol is
produced primarily from sugarcane, which is also used to produce food-grade
sugar.  Ethanol imported from Brazil may be a less expensive alternative to
domestically produced ethanol, which is primarily made from corn. Tariffs
presently protecting U.S. ethanol producers may be reduced or eliminated.
Competition from ethanol imported from Brazil may affect our ability to sell our
ethanol profitably, adversely affecting our results of operations and financial
condition.
 
 Corn-based
ethanol may compete with cellulose-based ethanol in the future, which could make
it more difficult for us to produce ethanol on a cost-effective
basis.
 
 Most
ethanol is currently produced from corn and other raw grains, such as milo or
sorghum-especially in the Midwest. The current trend in ethanol production
research is to develop an efficient method of producing ethanol from
cellulose-based biomass, such as agricultural waste, forest residue, municipal
solid waste, and energy crops. This trend is driven by the fact that
cellulose-based biomass is generally cheaper than corn, and producing ethanol
from cellulose-based biomass would create opportunities to produce ethanol in
areas which are unable to grow corn. Although current technology is not
sufficiently efficient to be competitive, new conversion technologies may be
developed in the future. If an efficient method of producing ethanol from
cellulose-based biomass is developed, we may not be able to compete effectively.
If we are unable to produce ethanol as cost-effectively as cellulose-based
producers, our ability to generate revenue will be negatively
impacted.
  24
 
 Carbon dioxide may be
regulated in the future by the EPA as an air pollutant requiring us to obtain
additional permits and install additional environmental mitigation equipment,
which could adversely affect our financial performance.
 
 In an
April 2007 decision, the United States Supreme Court ruled that carbon
dioxide is an air pollutant under the Clean Air Act for the purposes of motor
vehicle emissions.  The lawsuit sought to require the Environmental
Protection Agency (the “EPA”) to regulate
carbon dioxide in vehicle emissions.  Similar lawsuits have been filed
seeking to require the EPA to regulate carbon dioxide emissions from stationary
sources such as our ethanol plant under the Clean Air Act. Our plant produces a
significant amount of carbon dioxide.  While there are currently no
regulations applicable to us concerning our carbon dioxide emissions, if the EPA
or the State of Missouri elects to regulate carbon dioxide emissions by plants
such as ours, we may have to apply for additional permits or we may be required
to install carbon dioxide mitigation equipment or take other steps to comply
with these potential regulations.  Compliance with any future regulation of
carbon dioxide emissions could be costly and may prevent us from operating our
ethanol plant profitably which could decrease or eliminate the value of our
units.
 
 In addition to sellingethanol, we also intend to sell
carbon dioxide, a co-product of ethanol production, and the markets for this
product may decrease in the future.
 
 Carbon
dioxide is produced during the fermentation stage of the ethanol
production process. This excess gas is captured and sold to carbon dioxide
resellers. The carbon dioxide market is well established and consists of three
major segments: the beverage market (27%), the food market (43%), and the
industrial market (30%). The market is cyclical in that demand increases during
the summer as beverage and food demands create shortages and higher spot prices.
Transportation is a limiting factor when sourcing carbon dioxide. On average,
transportation costs account for 50% of the delivered cost of carbon dioxide.
For that reason, customers generally must be located within 200 miles of the
plant. As increasing volumes ofethanol production come
on-line, it is possible that the market prices for carbon dioxide will soften
due to a finite amount of demand and an increasing supply.
 
 The price of DDGS is
affected by the price of other commodity products, such as soybeans, and
decreases in the price of these commodities could decrease the price of
DDGS.
 
 DDGS
compete with other protein-based animal feed products. The price of DDGS may
decrease when the price of competing feed products decrease. The prices of
competing animal feed products are based in part on the prices of the
commodities from which they are derived. Downward pressure on commodity prices,
such as soybeans, will generally cause the price of competing animal feed
products to decline, resulting in downward pressure on the price of DDGS.
Because the price of DDGS is not tied to production costs, decreases in the
price of DDGS will result in less revenue generated and lower profit
margins.
 
 The price of corn is
affected by the price of other commodity products, such as
soybeans.
 
 The
market price for other commodities will affect the price we pay for
corn.  If the price of soybeans or other commodities rises, decisions
to plant soybeans or other commodities in lieu of corn will ensue, resulting in
a decreased supply of corn and thus, upward pressure on the price for
corn.  Any change in corn price would have an effect on our profit
margin and could adversely affect our results of operations and financial
condition.
 
 New
technology may lessen the demand for ethanol and negatively impact our
profitability.
 
 Alternative
fuels, gasoline oxygenates and ethanol production methods are continually under
development. A number of automotive, industrial and power generation
manufacturers are developing more efficient engines, hybrid engines and
alternative clean power systems using fuel cells or clean burning gaseous fuels.
Vehicle manufacturers are working to develop vehicles that are more fuel
efficient and have reduced emissions using conventional gasoline. Vehicle
manufacturers have developed and continue to work to improve hybrid technology,
which powers vehicles by engines that utilize both electric and conventional
gasoline fuel sources. If the fuel cell and hydrogen industries continue to
expand and gain broad acceptance, and hydrogen becomes readily available to
consumers for motor vehicle use, the demand for ethanol may
decrease.  Likewise, further development and use of vehicles running
on electricity may lessen the demand for ethanol. This resulting decrease in the
demand for ethanol may negatively impact our financial condition.
  25
 
 Consumer resistance to the
use of ethanol based on the belief that ethanol is expensive, adds to air
pollution, harms engines and takes more energy to produce than it contributes,
may affect the demand for ethanol which could affect our ability to market our
product.
 
 Certain
individuals believe that use of ethanol will have a negative impact on retail
prices.  Many also believe that ethanol adds to air pollution and harms car
and truck engines.  Still other consumers believe that the process of
producing ethanol actually uses more fossil fuels than the amount of ethanol
that is produced.  If consumers choose not to buy ethanol, it would affect
the demand for the ethanol that we produce and negatively affect our
profitability.
 
 
 Risk Factors Related to Our
Operations
 
 We have a limited operating
history and our business may not be successful.
 
 Our
operating facility began producing ethanol in May, 2008. Accordingly, we have a
limited operating history from which you can evaluate our business and
prospects. In addition, our prospects must be considered in light of the risks
and uncertainties encountered by a company with limited operating history in a
rapidly evolving market, such as the ethanol market, where supply
and demand may change significantly in a short amount of time.
  Some of
these risks relate to our potential inability to:
   ·
                effectively manage
      business and
operations;




·
              adequately
      establish policies, procedures and oversight related to corporate
      governance, risk management and
finance;




·
                  successfully execute
      plans to sell ethanol;
  ·
                    recruit and retain
      key personnel;
  ·
                      successfully
      maintain a low-cost
structure;
  ·
                        manage rapid growth
      in personnel and operations;
  ·
                          develop new products
      that complement existing business;
and
  ·
                            successfully address
      the other risks to the
business.
  If we
cannot successfully address these risks, our business, future results of
operations and financial position may be materially adversely affected, and we
may experience operating losses in the future.
 
 We have a significant amount
of debt, and our existing debt financing agreements contain, and our future debt
financing agreements may contain, restrictive covenants that limit distributions
and impose restrictions on the operation of our business. Our debt level and our
failure to comply with applicable debt financing covenants and agreements could
have a material adverse effect on our business, results of operations and
financial condition.
 
 26
  The use
of debt financing makes it more difficult for us to operate because we must make
principal and interest payments on the indebtedness and abide by covenants
contained in our debt financing agreements. The level of our debt may have
important implications on our operations, including, among other
things:
  ·
                  limiting our ability
      to obtain additional debt or equity
financing;
  ·
                  making us vulnerable
      to increases in prevailing interest
rates;
   ·
                placing us at a
      competitive disadvantage because we may be substantially more leveraged
      than some of our competitors;
 ·
                  subjecting all or
      substantially all of our assets to liens, which means that there may be no
      assets left for shareholders in the event of a
  liquidation;
 ·
                  limiting our ability
      to adjust to changing market conditions, which could make us more
      vulnerable to a downturn in the general economic condition of our
      business; and
  ·
                  limiting our ability to make business and
      operational decisions regarding our business, including, among other
      things, limiting our ability to pay dividends, make capital improvements,
      sell or purchase assets or engage in transactions we deem to be
      appropriate and in our best
interest.
  The terms
of our existing debt financing agreements contain, and any future debt financing
agreement we enter into may contain, financial, maintenance, organizational,
operational and other restrictive covenants. If we are unable to comply with
these covenants or service our debt, we may lose control of our business and be
forced to reduce or delay planned capital expenditures, sell assets, restructure
our indebtedness or submit to foreclosure proceedings, all of which could result
in a material adverse effect upon our business, results of operations and
financial condition and thus, you could lose your entire investment. Our debt
arrangements also include subordinated debt, which contain restrictions and be
on less favorable terms than our senior debt. If we issue subordinated debt, we
may have to give the lender the right to take control of our business in the
event of a default or other rights and benefits as the lender may require, which
may impose onerous financial restrictions on our business.  The
foregoing risks and hindrances are further exacerbated by the current global
economic debt market conditions and may significantly impede or completely
eliminate our access to capital markets.
 
 We have incurred significant
losses and negative operating cash flow in the past and we may incur significant
losses and negative operating cash flow in the future. Continued losses and
negative operating cash flow may negatively affect our operations and prevent us
from expanding, or continuing to operate, our business.
 
 We have
incurred significant losses and negative operating cash flow in the
past.  We expect to rely on cash on hand, cash, if any, generated from
our operations and cash, if any, generated from our financing activities to fund
all of the cash requirements of our business. Continued losses and negative
operating cash flow may negatively affect our operations and prevent us from
expanding our business or may prevent us from continuing the business as a going
concern. Continued losses and negative operating cash flow are also likely to
make our capital raising needs more acute while limiting our ability to raise
additional financing on satisfactory terms.
 
 The raw materials and energy
necessary to produceethanolmay be unavailable or may
increase in price, adversely affecting our business, results of operations and
financial condition.
 
 The
principal raw material we use to produce ethanol and its
co-products is corn. Changes in the price of corn can significantly affect our
business. In general, rising corn prices result in lower profit margins and,
therefore, represent unfavorable market conditions. This is especially true
since market conditions generally do not allow us to pass along increased corn
prices to our customers because the price ofethanol is
determined by many factors, including the supply ofethanol
and the price of oil and gasoline. At certain levels, corn prices may even makeethanol production uneconomical depending on the prevailing
price ofethanol.
 
 The price
of corn is influenced by general economic, market and regulatory factors. These
factors include weather conditions, crop conditions and yields, farmer planting
decisions, government policies and subsidies with respect to agriculture and
international trade and global supply and demand. The significance and relative
impact of these factors on the price of corn is difficult to predict. Any event
that tends to negatively impact the supply of corn will tend to increase prices
and potentially harm our business.  Likewise, events that increase the
supply of corn may cause the price of corn to decrease; however, the price of
corn may not decrease fast enough to off-set the resulting decrease in the price
of ethanol.
 
 27
  The
production of ethanol also requires a significant and
uninterrupted supply of other raw materials and energy, primarily water,
electricity and natural gas. The prices of electricity and natural gas have
fluctuated significantly in the past and may fluctuate significantly in the
future. Local water, electricity and gas utilities may not be able to reliably
supply the water, electricity and natural gas that our facility needs or may not
be able to supply those resources on acceptable terms. Any disruptions in theethanol production infrastructure network, whether caused by
labor difficulties, earthquakes, storms, other natural disasters or human error
or malfeasance or other reasons, could prevent timely deliveries of corn or
other raw materials and energy and may require us to halt production which could
have a material adverse effect on our business, results of operations and
financial condition.
 
 The crisis in the financial
markets, considerable volatility in the commodities markets and sustained
weakening of the economy could further significantly impact our business and
financial condition and may limit our ability to raise additional
capital.
  As widely
reported, financial markets in the United States and the rest of the world are
experiencing extreme disruption, including, among other things, extreme
volatility in securities and commodities prices, as well as severely diminished
liquidity and credit availability. As a result, our ability to access the
capital markets and raise funds required for our operations may be severely
restricted at a time when we would like, or need, to do so, which could have an
adverse effect on our ability to meet our current and future funding
requirements and on our flexibility to react to changing economic and business
conditions. Current economic and market conditions, and particularly, the
significant decline in the price of crude oil, could also result in reduced
demand for all of our products. We are not able to predict the duration or
severity of the current disruption in financial markets, fluctuations in the
price of crude oil or other adverse economic conditions in the United States.
However, if economic conditions continue to worsen, it is likely that these
factors would have an adverse effect on our results of operations and future
prospects.
 
 Our business is limited to
the production and sale of fuel-grade ethanol and DDGS.
 
 Our
business is not well diversified; rather, it is principally limited to the
production and sale of fuel-grade ethanol produced from corn and the sale of the
related co-product, DDGS. The lack of diversification of our business may limit
our ability to adapt to changing business and market conditions.
 
 We will are dependent on
Ray-Carroll Country Grain Growers Inc. for various services including our grain
sourcing.
 
 We depend
on Ray-Carroll, a holder of our Class B Units, for our grain feedstock sourcing.
If Ray-Carroll defaults on its agreement to timely provide us grain feedstock
sourcing in sufficient quantities for our operation, we would be materially
adversely affected as it would be very difficult to replace this feedstock
source.
 
 We are dependent on
Eco-Energy for all Distribution of Our Ethanol
 
 We depend
on Eco-Energy for distribution and sales of all of our Ethanol.  If
Eco-Energy defaults on its agreement, fails to perform adequately, or is
otherwise negligent in its duties owed to us, we would be materially adversely
affected as it would be very difficult to, quickly, adequately, or otherwise,
replace this service.
 
 Our lack of long-term
ethanol orders and commitments by our customers could lead to a rapid decline in
our sales and profitability.
 
 We cannot
rely on long-term ethanol orders or commitments by our customers for protection
from the negative financial effects of a decline in the demand for ethanol. The
limited certainty of ethanol orders can make it difficult for us to forecast our
sales and allocate our resources in a manner consistent with our actual sales.
Moreover, our expense levels are based in part on our expectations of future
sales and, if our expectations regarding future sales are inaccurate, we may be
unable to reduce costs in a timely manner to adjust for sales shortfalls.
Furthermore, because of the relatively small number of customers for our
ethanol, the magnitude of the ramifications of these risks is greater than if
our sales were less concentrated. As a result of our lack of long-term ethanol
orders and commitments, we may experience a rapid decline in our sales and
profitability.
  28
  We lack
an effective hedging program.
 
 Due to
the relative immaturity of our business operations, we have not enacted a
hedging program in the corn or ethanol futures markets.  We intend to
implement a hedging program to the extent possible, but due to the limited
market for sales of ethanol with a future delivery date, such a program may be
impossible to implement.  The effectiveness of such hedging activities is
dependent, among other things, upon the cost of corn and natural gas and our
ability to sell sufficient products to utilize all of the corn and natural gas
subject to the futures contracts.  There is no assurance that our hedging
activities will reduce the risk caused by price fluctuation which may leave us
vulnerable to high corn and natural gas prices.  In addition, we may choose
not to take hedging positions in the future, which may adversely affect our
financial condition if corn and natural gas prices increase. Our hedging
activities can also result in increased costs because price movements in corn
and natural gas are highly volatile and are influenced by many factors that are
beyond our control.
 
 We
compete with other establishedethanolproduction companies who have greater experience and resources than we currently
have.
 
 We have
several significant competitors in the ethanol production
industry. These companies are presently producingethanol in
substantial volume, have greater financial resources and have more experienced
personnel than we presently do.  Those competitors who are presently
producingethanol have greater capital resources than we
currently do. As a result, this is a significant obstacle that we will need to
overcome. In addition, our lack of experience in our chosen industry relative to
many of our significant competitors may cause us to fail to anticipate or
respond adequately to new developments and other competitive pressures. This
failure could reduce our competitiveness and cause a decline in our market
share, sales and profitability.
 
 We may be adversely affected
by environmental, health and safety laws, regulations and
liabilities.
 
 We are
subject to various federal, state and local environmental laws and regulations,
including those relating to the discharge of materials into the air, water and
ground, the generation, storage, handling, use, transportation and disposal of
hazardous materials, and the health and safety of our employees. In addition,
some of these laws and regulations require our facilities to operate under
permits that are subject to renewal or modification. These laws, regulations and
permits can often require expensive pollution control equipment or operational
changes to limit actual or potential impacts to the environment. A violation of
these laws and regulations or permit conditions can result in substantial fines,
natural resource damages, criminal sanctions, permit revocations and/or facility
shutdowns.
 
 We may be
liable for the investigation and cleanup of environmental contamination at each
of the properties that we own or operate and at off-site locations where we
arrange for the disposal of hazardous substances. If these substances have been
or are disposed of or released at sites that undergo investigation and/or
remediation by regulatory agencies, we may be responsible under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, or
other environmental laws for all or part of the costs of investigation and/or
remediation, and for damages to natural resources. We may also be subject to
related claims by private parties alleging property damage and personal injury
due to exposure to hazardous or other materials at or from those properties.
Some of these matters may require us to expend significant amounts for
investigation, cleanup or other costs.
  In
addition, new laws, new interpretations of existing laws, increased governmental
enforcement of environmental laws or other developments could require us to make
additional significant expenditures. Continued government and public emphasis on
environmental issues can be expected to result in increased future investments
for environmental controls at our production facilities. Present and future
environmental laws and regulations (and interpretations thereof) applicable to
our operations, more vigorous enforcement policies and discovery of currently
unknown conditions may require substantial expenditures that could have a
material adverse effect on our results of operations and financial
condition.
 
 The
hazards and risks associated with producing and transporting our products (such
as fires, natural disasters, explosions and abnormal pressures and blowouts) may
also result in personal injury claims or damage to property and third parties.
As protection against operating hazards, we maintain insurance coverage against
some, but not all, potential losses. However, we could sustain losses for
uninsurable or uninsured risks, or in amounts in excess of existing insurance
coverage. Events that result in significant personal injury or damage to our
property or third parties or other losses that are not fully covered by
insurance could have a material adverse effect on our results of operations and
financial condition.
 
 29
  Operational difficulties at
our production facilities could negatively impact our sales volumes and could
cause us to incur substantial losses.
 
 Our
operations are subject to labor disruptions, unscheduled downtime and other
operational hazards inherent in our industry, such as equipment failures, fires,
explosions, abnormal pressures, blowouts, pipeline ruptures, transportation
accidents and natural disasters. Some of these operational hazards may cause
personal injury or loss of life, severe damage to or destruction of property and
equipment or environmental damage, and may result in suspension of operations
and the imposition of civil or criminal penalties. Our insurance may not be
adequate to fully cover the potential operational hazards described above or we
may not be able to renew this insurance on commercially reasonable terms or at
all.
 
 Moreover,
our plant may not operate as planned or expected. Our plant is designed to
operate at or above a certain production capacity. The operation of our plant is
and will be, however, subject to various uncertainties. As a result, our plant
may not produce ethanol and DDGS at the levels we expect. In the
event our plant does not run at its expected capacity level, our business,
results of operations and financial condition may be materially and adversely
affected.
 
 The slowing economy may
decrease the consumer demand for animal protein and our
DDGS.
 
 The
continued deterioration of the economy may decrease the demand for animal
protein, which would decrease the demand for animal feedstock and thus would
decrease the demand for our DDGS and negatively affect the price.  Any
decline in the price of DDGS or the DDGS market generally could have a material
adverse effect on our business and financial condition.
  We depend on a small number
of customers for the majority of our sales. A reduction in business from any of
these customers could cause a significant decline in our overall sales and
profitability.
 
 The
majority of our sales are generated from a small number of
customers.  We expect that we will continue to depend for the
foreseeable future upon a small number of customers for a significant portion of
our sales. Our agreements with these customers generally do not require them to
purchase any specified amount of ethanol or dollar amount of sales or to make
any purchases whatsoever. Therefore, in any future period, our sales generated
from these customers, individually or in the aggregate, may not equal or exceed
historical levels. If sales to any of these customers cease or decline, we may
be unable to replace these sales with sales to either existing or new customers
in a timely manner, or at all. A cessation or reduction of sales to one or more
of these customers could cause a significant decline in our overall sales and
profitability.
 
 We are subject to financial
reporting and other requirements, and we will become subject to additional
financial reporting and other requirements, in each case for which our
accounting, internal audit and other management systems and resources may not be
adequately prepared. We have experienced material weaknesses in our internal
controls.
 
 We are
subject to reporting and other obligations under the Securities Exchange Act of
1934, as amended, including the requirements of Section 404 of Sarbanes-Oxley
Act of 2002 (“SOX”). Section 404 of
SOX requires annual management assessment of the effectiveness of a company’s
internal controls over financial reporting and a report by its independent
registered public accounting firm addressing the effectiveness of our internal
controls over financial reporting. These reporting and other obligations place
significant demands on our management, administrative, operational, internal
audit and accounting resources. If we are unable to meet these demands in a
timely and effective fashion, our ability to comply with our financial reporting
requirements and other rules that apply to us could be impaired. Any failure to
maintain effective internal controls could have a material adverse effect on our
business, results of operations and financial condition.
  In
connection with the report of our financial statements for the year ended
December 31, 2008, and quarter ended March 31, 2009, we identified several
material weaknesses and significant deficiencies in our internal controls over
financial reporting. A “material weakness” is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of the company’s annual or
interim financial statements will not be prevented or detected on a timely
basis. A “significant deficiency” is a deficiency, or a combination of
deficiencies, in internal control over financial reporting that is less severe
than a material weakness yet important enough to merit attention by those
responsible for oversight of the Company’s financial reporting.  We
may have future deficiencies or weaknesses in our internal controls over
financial reporting.
  30
  Any
material weaknesses or significant deficiency could cause us to fail to meet our
reporting obligations and subsequently impair our ability to raise money or
operate the business.
 
 We may be exposed to
potential risks relating to our internal controls over financial reporting and
our ability to have those controls attested to by our independent
auditors.
 
 As
directed by Section 404 of SOX, the Securities and Exchange Commission adopted
rules requiring public companies to include a report of management on the
company’s internal controls over financial reporting in their annual reports,
including Form 10-K.
 
 While we
have expended resources in identifying financial reporting risks, and controls
that address them as required by Section 404 of SOX, there can be no positive
assurance that we will receive a positive attestation from our independent
auditors.  In the event we are unable to receive a positive
attestation from our independent auditors with respect to our internal controls,
investors and others may lose confidence in the reliability of our financial
statements and our ability to obtain equity or debt financing could
suffer.
  We are dependent upon our
officers for management and direction, and the loss of any of these persons
could adversely affect our operations and results.
  We are
dependent upon our officers for implementation of our business strategy and
execution of our business plan. The loss of any of these officers could have a
material adverse effect upon our results of operations and our financial
position.  We do not have employment agreements with our officers or
other key personnel. In addition, we do not maintain “key person” life insurance
for any of our respective officers. The loss of any of these officers could
delay or prevent the achievement of our business objectives.
  Competition for qualified
personnel in the ethanol industry is intense and we may not be able to hire and
retain qualified personnel to operate our ethanol plants.
  Our
success depends, in part, on our ability to attract and retain competent
personnel.  Qualified managers, engineers, operations and other
personnel must be hired, which can be challenging in a rural community.
Competition for both managers and plant employees in the ethanol industry is
intense, and we may not be able to attract and retain qualified personnel. If we
are unable to hire and retain productive and competent personnel, our strategy
may be adversely affected, the amount of ethanol we produce may decrease and we
may not be able to efficiently operate our ethanol plant and execute our
business strategy.
 
 Risk Factors Related to Our
Units
 
 There is no public market
for the Class A Units.
 
 There is
currently no market for the Class A Units. We do not intend to apply for listing
of the Class A Units on any stock exchange or quotation system. Our Articles of
Organization and Operating Agreement contain restrictions on the transfer of
Class A Units. In addition, federal and state law restricts transferability of
the Class A Units. It may be difficult or impossible for you to liquidate your
investment when you desire to do so. Therefore, you may be required to bear the
economic risks of the investment for an indefinite period of time.
 
 We do not
anticipate payment of dividends, and investors will be wholly dependent upon the
value of their units to realize economic benefit from their
investment.
 
 As
holders of our units, you will only be entitled to receive those dividends that
are declared by our board of managers out of retained earnings. We do not expect
to have retained earnings available for declaration of dividends in the
foreseeable future. There is no assurance that such retained earnings will ever
materialize to permit payment of dividends to you. Our board of managers will
determine future dividend policy based upon our results of operations, financial
condition, capital requirements, reserve needs and other
circumstances.
 
 31
  The value of our units may
fluctuate significantly in the future.
 
 The value
of our units may fluctuate in response to one or more of the following factors,
many of which are beyond our control:
  ·
              the
      volume and timing of the receipt of orders for ethanol from
      major customers;·
              competitive
      pricing pressures;·
              our
      ability to produce, sell and deliver ethanol on a
      cost-effective and timely basis;·
              our
      inability to obtain construction, acquisition, capital equipment and/or
      working capital financing;·
              the
      introduction and announcement of one or more new alternatives to ethanol by our competitors;·
              changing
      conditions in the ethanol and fuel
    markets;·
              changes
      in market valuations of similar companies;·
              regulatory
      developments;·
              future
      sales of our units or other securities; and·
              various
      other risks as articulated in our risk
factors.
  We do not have significant
financial reporting experience, which may lead to delays in filing required
reports with the Securities and Exchange Commission.
 
 Because
we do not have significant financial reporting experience, we may experience
delays in filing required reports with the Securities and Exchange
Commission.  Delays may cause us to have additional difficulty in
raising capital or growing our business.  Such reports may also
distract management from focusing on growing the operation and the
business.
  We cannot predict whether we will
successfully effectuate our current business plan. Each investor is encouraged
to carefully analyze the risks and merits of an investment in our units and
should take into consideration when making such analysis, among others, the Risk
Factors discussed above.
  32
  ITEM
2. UNREGISTERED SALES
OF EQUITY SECURITIES & USE OF PROCEEDS
  None.
  ITEM
3. DEFAULTS ON SENIOR
SECURITIES
  None.
  ITEM
4. SUBMISSION OF
MATTERS TO A VOTE OF SECURITY HOLDERS
  None.
  ITEM
5. OTHER
INFORMATION
  None.
  33
  ITEM
6. EXHIBITS
 
 The
following exhibits are filed with or incorporated as part of this report as
required by Item 601 of Regulation S-K:
 
 Exhibit
      No.
              
              Description
              
              Reference31.1
              
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002. *31.2
              
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of
      the Sarbanes-Oxley Act of 2002. *32
              
              Certification
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002.**
              Filed
      herewith.
  34
  SIGNATURES
 
 In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
  SHOW ME ETHANOL,
LLC
 
 Date: May
15,
2009
  
 By: /s/ Richard A.
Hanson
 
 Name:  Richard
A. Hansonl
 Title:    Chief
Financial Officer
  35