**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

# **FORM 10-QSB**

# ** **

| **ý**                                                                                                                                                                                                                                                                                                           |   | **Quarterly  report under Section 13 or 15(d) of the Securities Exchange Act of 1934.** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                 |   |                                                                                         |
| **For the  quarterly period ended September 30, 2003**                                                                                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                 |   |                                                                                         |
| **OR**                                                                                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                 |   |                                                                                         |
| **o**                                                                                                                                                                                                                                                                                                                |   | **Transition  report under Section 13 or 15(d) of the Exchange Act.**                   |
|                                                                                                                                                                                                                                                                                                                 |   |                                                                                         |
| **For the  transition period from                          to                        .** |
|                                                                                                                                                                                                                                                                                                                 |   |                                                                                         |
| **Commission file number 333-96977**                                                                                                                                                                                                                                                                                 |

 

| **ILLINOIS RIVER  ENERGY, LLC**                                      |
|----------------------------------------------------------------------|
| (Exact name of small  business issuer as specified in its charter)   |
|                                                                 |   |   |
| **Delaware**                                                         |   | **30-0044341** |
| (State or other  jurisdiction of  incorporation or organization)     |   | (I.R.S. Employer  Identification No.) |
|                                                                 |   |   |
| **1201 South Seventh Street, Suite 110****Rochelle, IL  61068** |
| (Address of principal  executive offices)                            |
|                                                                 |   |   |
| **(815)  561-0650**                                                  |
| (Issuer’s telephone  number)                                    |

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.  ý  Yes      o  No

 

State the number of shares outstanding of each of the issuer’s classesof common equity, as of the latest practicable date: As ofNovember 10, 2003, there were 1,313,000 Class A Units outstanding.

 

TransitionalSmall Business Disclosure Format (Check one):  o  Yes    ý  No

 

 

----

 

**INDEX**

 
|  PART I. | FINANCIAL INFORMATION                                           |   |
|---------------|-----------------------------------------------------------------|--------|
|          |                                                            |   |
| Item 1.       | Financial Statements                                            |   |
|          |                                                            |   |
| Item  2.      | Management’s Discussion and Analysis or  Plan of Operation |   |
|          |                                                            |   |
| Item 3.       | Controls and  Procedures                                        |   |
|          |                                                            |   |
| PART  II.     | OTHER  INFORMATION                                              |   |
|          |                                                            |   |
| Item 1.       | Legal Proceedings                                               |   |
|          |                                                            |   |
| Item 2.       | Changes in Securities                                           |   |
|          |                                                            |   |
| Item 3.       | Defaults Upon  Senior Securities                                |   |
|          |                                                            |   |
| Item  4.      | Submission  of Matters to a Vote of Security Holders            |   |
|          |                                                            |   |
| Item 5.       | Other Information                                               |   |
|          |                                                            |   |
| Item 6.       | Exhibits and  Reports on Form 8-K                               |   |
|          |                                                            |   |
| SIGNATURES    |                                                            |
|               |                                                                 |        |  |

 

i

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**PART I.****                                                   ****FINANCIAL INFORMATION**

 

**Item 1.****                                                          ****Financial Statements**

 

**ILLINOIS RIVER ENERGY, LLC**

(A DEVELOPMENT STAGE COMPANY)

BALANCE SHEETS

 
|                                                                |   | **September 30,  2003** |       | **December 31,  2002** |       |
|---------------------------------------------------------------------|--------|------------------------------|------------|-----------------------------|------------|
|                                                                |   | **(Unaudited)**              |       | **Audited**                 |       |
|                                                                |   |                         |       |                        |       |
| **ASSETS**                                                          |   |                         |       |                        |       |
|                                                                |   |                         |       |                        |       |
| **CURRENT ASSETS**                                                  |   |                         |       |                        |       |
| Cash and cash equivalents                                           |   | $                            | 101,311    |                        | $          | 30,914 |   |
| Prepaid insurance                                                   |   | 14,939                       |       | 3,208                       |       |
|                                                                |   |                         |       |                        |       |
| Total Current Assets                                                |   | $                            | 116,250    |                        | $          | 34,122 |   |
|                                                                |   |                         |       |                        |       |
| **PROPERTY AND EQUIPMENT**                                          |   |                         |       |                        |       |
| Office equipment                                                    |   | $                            | 27,249     |                        | $          | 20,807 |   |
| Accumulated depreciation                                            |   | (5,336                       | )          | (1,570                      | )          |
|                                                                |   |                         |       |                        |       |
| Net Property and Equipment                                          |   | $                            | 21,913     |                        | $          | 19,237 |   |
|                                                                |   |                         |       |                        |       |
| **OTHER ASSETS**                                                    |   |                         |       |                        |       |
| Deposits and deferred land costs                                    |   | $                            | 20,000     |                        | $          | 20,000 |   |
| Deferred offering costs                                             |   | 609,638                      |       | 218,078                     |       |
|                                                                |   |                         |       |                        |       |
| Total Other Assets                                                  |   | $                            | 629,638    |                        | $          | 238,078 |   |
|                                                                |   |                         |       |                        |       |
| **TOTAL ASSETS**                                                    |   | $                            | 767,801    |                        | $          | 291,437 |   |
|                                                                |   |                         |       |                        |       |
| **LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)**                  |   |                         | ** ** |                        | ** ** |
|                                                                |   |                         |       |                        |       |
| **CURRENT LIABILITIES**                                             |   |                         |       |                        |       |
| Accounts payable                                                    |   | $                            | 740,486    |                        | $          | 317,618 |   |
| Notes payable                                                       |   | 174,749                      |       | 0                           |       |
| Accrued interest                                                    |   | 3,994                        |       | 0                           |       |
| Current maturities of capital lease obligation                      |   | 1,145                        |       | 1,030                       |       |
|                                                                |   |                         |       |                        |       |
| Total Current Liabilities                                           |   | $                            | 920,374    |                        | $          | 318,648 |   |
|                                                                |   |                         |       |                        |       |
| **LONG-TERM DEBT**,  Less Current Maturities                        |   | 4,742                        |       | 5,616                       |       |
|                                                                |   |                         |       |                        |       |
| **MEMBERS’ EQUITY (DEFICIT)**                                  |   |                         |       |                        |       |
| Member contributions, net of costs related to capital contributions |   | $                            | 568,476    |                        | $          | 562,976 |   |
| Deficit accumulated during development stage                        |   | (725,791                     | )          | (595,803                    | )          |
|                                                                |   |                         |       |                        |       |
| Total Members’ Equity (Deficit)                                |   | $                            | (157,315   | )                           | $          | (32,827 | ) |
|                                                                |   |                         |       |                        |       |
| **TOTAL LIABILITIES AND MEMBERS’ EQUITY  (DEFICIT)**           |   | $                            | 767,801    |                        | $          | 291,437 |   |

 

See Accompanying Notes

 

1

----

 

**ILLINOIS RIVER ENERGY, LLC**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

 
|                                   |   | **Quarter Ended  September 30,** |     | **Year to Date  September 30,** |     | **Date of Inception  (February 20, 2002) to  September 30, 2003** |   |
|----------------------------------------|--------|---------------------------------------|----------|--------------------------------------|----------|------------------------------------------------------------------------|--------|
| **2003**                               |   | **2002**                              | **2003** |                                 | **2002** |
|                                   |   | **(Unaudited)**                       |     | **(Unaudited)**                      |     | **(Unaudited)**                                                        |   | **(Unaudited)** |   | **(Unaudited)** |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **REVENUE**                            |   | $                                     | 0        |                                 | $        | 0                                                                      |   | $ | 0 |   | $ | 0 |   | $ | 0 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **OPERATING EXPENSES**                 |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Consulting  fees                       |   | $                                     | 206,503  |                                 | $        | 0                                                                      |   | $ | 209,210 |   | $ | 150,000 |   | $ | 359,210 |   |
| Legal  fees                            |   | 17,583                                |     | 23,245                               |     | 132,467                                                                |   | 67,819 |   | 239,463 |   |
| Accounting  fees                       |   | 20,660                                |     | 29,333                               |     | 60,097                                                                 |   | 37,533 |   | 113,978 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Project  coordinator                   |   | 26,156                                |     | 23,625                               |     | 67,675                                                                 |   | 47,250 |   | 135,175 |   |
| Construction  contract                 |   | 0                                     |     | 0                                    |     | 0                                                                      |   | 0 |   | 89,904 |   |
| Site  engineering                      |   | 0                                     |     | 0                                    |     | 0                                                                      |   | 0 |   | 14,498 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Office                                 |   | 37,332                                |     | 18,353                               |     | 65,392                                                                 |   | 22,703 |   | 98,878 |   |
| Advertising  and meetings              |   | 0                                     |     | 2,004                                |     | 10,866                                                                 |   | 2,004 |   | 15,923 |   |
| Insurance  expense                     |   | 6,913                                 |     | 3,708                                |     | 14,389                                                                 |   | 3,708 |   | 19,881 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Management  expense                    |   | 44,278                                |     | 45,254                               |     | 91,417                                                                 |   | 61,685 |   | 175,614 |   |
| Miscellaneous                          |   | 890                                   |     | 4,190                                |     | 1,673                                                                  |   | 4,620 |   | 7,230 |   |
| Depreciation                           |   | 1,685                                 |     | 504                                  |     | 3,766                                                                  |   | 611 |   | 5,336 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Site  construction cost recovery       |   | (11,450                               | )        | 0                                    |     | 0                                                                      |   | 0 |   | 0 |   |
| Travel  and mileage                    |   | 20,482                                |     | 105                                  |     | 32,627                                                                 |   | 8,202 |   | 32,627 |   |
| Total  Operating Expenses              |   | $                                     | 371,032  |                                 | $        | 150,321                                                                |   | $ | 689,579 |   | $ | 406,135 |   | $ | 1,307,717 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **OPERATING LOSS**                     |   | $                                     | (371,032 | )                                    | $        | (150,321                                                               | )      | $ | (689,579 | ) | $ | (406,135 | ) | $ | (1,307,717 | ) |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **OTHER INCOME (EXPENSE)**             |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| Grant  income                          |   | $                                     | 0        |                                 | $        | 20,000                                                                 |   | $ | 105,000 |   | $ | 20,000 |   | $ | 125,000 |   |
| Interest  expense                      |   | (6,868                                | )        | 0                                    |     | (7,325                                                                 | )      | 0 |   | (7,325 | ) |
| Other  income (expense), net (Note 2)  |   | 431,695                               |     | (1,161                               | )        | 461,916                                                                |   | 2,107 |   | 464,251 |   |
| Total  Other Income Expenses           |   | $                                     | 424,827  |                                 | $        | 18,839                                                                 |   | $ | 559,591 |   | $ | 22,107 |   | $ | 581,926 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **NET INCOME (LOSS)**                  |   | $                                     | 53,795   |                                 | $        | (131,482                                                               | )      | $ | (129,988 | ) | $ | (384,028 | ) | $ | (725,791 | ) |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **Weighted average units outstanding** |   | 1,313,000                             |     | 1,313,000                            |     | 1,313,000                                                              |   | 1,230,261 |   | 1,281,709 |   |
|                                   |   |                                  |     |                                 |     |                                                                   |   |   |   |   |   |
| **Income (Loss) per unit**             |   | $                                     | 0.04     |                                 | $        | (0.10                                                                  | )      | $ | (0.10 | ) | $ | (0.31 | ) | $ | (0.57 | ) |

 

See Accompanying Notes

 

2

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**ILLINOIS RIVER ENERGY, LLC**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CASH FLOWS

 
|                                                                                                                  |   | **Year to Date  September 30,** |       | **Date of  Inception  (February 20, 2002) to  September 30, 2003** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **2003**                                                                                                              |   | **2002**                             |
|                                                                                                                  |   | **(Unaudited)**                      |       | **(Unaudited)**                                                         |       | **(Unaudited)** | ** ** |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES**                                                                              |   |                                 |       |                                                                    |       |   |   |
| Net  Loss                                                                                                             |   | $                                    | (129,988   | )                                                                       | $          | (384,028 | ) | $ | (725,791 | ) |
| Adjustments  to reconcile deficit accumulated during development stage to net cash  provided by operating activities: |   |                                 |       |                                                                    |       |   |   |
| Depreciation                                                                                                          |   | 3,766                                |       | 611                                                                     |       | 5,336 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| (Increase)  decrease in:                                                                                              |   |                                 |       |                                                                    |       |   |   |
| Prepaid  insurance                                                                                                    |   | (11,731                              | )          | (4,492                                                                  | )          | (14,939 | ) |
| Other  current receivables                                                                                            |   | 0                                    |       | (20,045                                                                 | )          | 0 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| Increase  (decrease) in:                                                                                              |   |                                 |       |                                                                    |       |   |   |
| Accrued  interest                                                                                                     |   | 3,994                                |       | 0                                                                       |       | 3,994 |   |
| Accounts  payable                                                                                                     |   | 159,160                              |       | 31,759                                                                  |       | 476,778 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| Net  Cash Provided (Used) by Operating Activities                                                                     |   | $                                    | 25,201     |                                                                    | $          | (376,195 | ) | $ | (254,622 | ) |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                              |   |                                 |       |                                                                    |       |   |   |
| Capital  expenditures for equipment                                                                                   |   | $                                    | (6,442     | )                                                                       | $          | (11,178 | ) | $ | (20,142 | ) |
| Deposits  and deferred land costs                                                                                     |   | 0                                    |       | (20,000                                                                 | )          | (20,000 | ) |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| Net  Cash Used By Investing Activities                                                                                |   | $                                    | (6,442     | )                                                                       | $          | (31,178 | ) | $ | (40,142 | ) |
|                                                                                                                  |   |                                 | ** ** |                                                                    | ** ** |   | ** ** |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                                                              |   |                                 |       |                                                                    |       |   |   |
| Borrowings  under notes payable                                                                                       |   | $                                    | 101,500    |                                                                    | $          | 0 |   | $ | 101,500 |   |
| Repayments  on notes payable                                                                                          |   | (22,995                              | )          | 0                                                                       |       | (22,995 | ) |
| Capital  lease obligation payments                                                                                    |   | (759                                 | )          | 0                                                                       |       | (1,220 | ) |
| Payments  for the costs of raising capital                                                                            |   | (31,608                              | )          | (23,024                                                                 | )          | (272,710 | ) |
| Receipt  of member contributions                                                                                      |   | 5,500                                |       | 586,000                                                                 |       | 591,500 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| Net  Cash Provided By Financing Activities                                                                            |   | $                                    | 51,638     |                                                                    | $          | 562,976 |   | $ | 396,075 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| **NET INCREASE IN CASH AND CASH EQUIVALENTS**                                                                         |   | $                                    | 70,397     |                                                                    | $          | 155,603 |   | $ | 101,311 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| **CASH AND CASH EQUIVALENTS - beginning of period**                                                                   |   | 30,914                               |       | 0                                                                       |       | 0 |   |
|                                                                                                                  |   |                                 |       |                                                                    |       |   |   |
| **CASH AND CASH EQUIVALENTS - end of period**                                                                         |   | $                                    | 101,311    |                                                                    | $          | 155,603 |   | $ | 101,311 |   |

 

See Accompanying Notes

 

3

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|                                                                            |   | **Year to Date  September 30,** | ** ** | **Date of  Inception to  September 30, 2003** | ** ** |
|---------------------------------------------------------------------------------|--------|--------------------------------------|------------|----------------------------------------------------|------------|
| **2003**                                                                        |   | **2002**                             |
|                                                                            |   | **(Unaudited)**                      |       | **(Unaudited)**                                    |       | **(Unaudited)** |   |
|                                                                            |   |                                 |       |                                               |       |   |   |
| **SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES**                 |   |                                 |       |                                               |       |   |   |
|                                                                            |   |                                 |       |                                               |       |   |   |
| Office  equipment financed with capital lease                                   |   | $                                    | 0          |                                               | $          | 0 |   | $ | 7,107 |   |
| Member  units subscribed                                                        |   | $                                    | 0          |                                               | $          | 5,500 |   | $ | 0 |   |
| Deferred  offering costs in accounts payable                                    |   | $                                    | 263,708    |                                               | $          | 181,639 |   | $ | 263,708 |   |
| Accounts  payable related to deferred offering costs converted to notes payable |   | $                                    | 96,244     |                                               | $          | 0 |   | $ | 96,244 |   |
|                                                                            |   |                                 |       |                                               |       |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION**                           |   |                                 |       |                                               |       |   |   |
|                                                                            |   |                                 |       |                                               |       |   |   |
| Cash  paid during the period for interest                                       |   | $                                    | 3,331      |                                               | $          | 0 |   | $ | 3,506 |   |

 

See Accompanying Notes

 

4

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**ILLINOISRIVER ENERGY, LLC**

(A Development Stage Company)

 

Notes to Unaudited Financial Statements

 

September 30, 2003 and 2002

 

The statements included herein have been prepared by Illinois RiverEnergy, LLC, without audit, pursuant to the rules and regulations of theSecurities and Exchange Commission, and reflect all adjustments which are, inthe opinion of management, necessary to a fair presentation of the financialstatements for the interim period, on a basis consistent with the annualaudited financial statements.  Theadjustments made to these financial statements consist only of normal recurringadjustments.  These financial statementsshould be read in conjunction with the financial statements and the summary ofsignificant accounting polices and notes thereto included in the Company’sRegistration Statement on Form SB-2, as amended (SEC Registration No.333-96977).

 

**1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

*Nature of Business*

 

Illinois RiverEnergy, LLC (a Delaware Limited Liability Company) to be located near Rochelle,Illinois, was organized to pool investors and to provide a corn supplyinitially for a 50 million gallon per year ethanol plant, with the intent toconsider expanding capacity shortly after the start-up of the initial plant.  As of September 30, 2003, the Companyis in the development stage with its efforts being principally devoted toorganizational and project feasibility activities.  Preliminary design preparation began in late 2002.

 

*Fiscal ReportingPeriod*

 

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

 

## ***Accounting Estimates***

## ** **

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

 

*Cash and Equivalents*

## ** **

The Company considersall highly liquid debt instruments purchased with a maturity of three months orless to be cash equivalents.

 

The Companymaintains its accounts primarily at two financial institutions.  At times, the Company’s cash balances mayexceed amounts insured by the Federal Deposit Insurance Corporation.

 

5

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*Property andEquipment*

 

Property and equipment are stated at the lower of cost or estimatedfair value.  Depreciation is providedover the estimated useful lives by use of the straight-line method.  Maintenance and repairs are expensed asincurred; major improvements and betterments are capitalized.  The present values of capital leaseobligations are classified as long-term debt and the related assets are includedin equipment.  Amortization of equipmentunder capital leases is included in depreciation expense.

 

*Deferred Offering Costs*

## ** **

The Company defers the costs incurred to raise equity financing untilthat financing occurs.  At such timethat the issuance of new equity occurs, these costs will be netted against theproceeds received; or if the financing does not occur, they will be expensed.

 

*Income Taxes*

 

The Company is treated as a partnership for Federal and state incometax purposes and does not incur income taxes. Instead, its earnings and losses are included in the income tax returnsof the members. Therefore, no provision or liability for Federal or stateincome taxes has been included in these financial statements.

 

*Grants*

 

The Company recognizes grant income as other income for reimbursementof expenses incurred upon complying with the conditions of the grant.  For reimbursements of capital expenditures,the grants are recognized as a reduction of the basis of the depreciable assetupon complying with the conditions of the grant.

 

*FinancialInstruments*

 

Financial instruments consisting of cash and equivalents and a capitallease obligation are carried at amounts that approximate fair value.  It is not currently practicable to estimatefair value of the notes payable discussed in Note 2.  Because these notes contain certain unique terms, conditions,covenants, and restrictions, as discussed in Note 2, there is no readilydeterminable similar instrument on which to base an estimate of fair value.

 

6

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**2.  DEVELOPMENT STAGE ENTERPRISE**

 

The Company wasformed February 20, 2002 to have a perpetual life.  The Company was initially capitalized bycontributions from its founding members and later by seed capital investors.  The four founding members contributed$67,000 for 264,000 units.  Seed capitalinvestors contributed $524,500 for 1,049,000 units.

 

Income and losses are allocated to all members based upon theirrespective percentage of total units held. See Note 4 for further discussion of members’ equity.

 

As shown in theaccompanying financial statements, the Company incurred a net loss of $129,988and $384,028 for the year to date period ended September 30, 2003 and2002, respectively.  As ofSeptember 30, 2003, current liabilities substantially exceed currentassets and total liabilities exceed total assets. Management has developed aplan, which was adopted by the Board of Managers on March 21, 2003, todefer certain accounts payable until after offering proceeds have been raisedand to obtain short term financing by issuing promissory notes with warrants tocertain existing members.  As ofSeptember 30, 2003, the Company issued $101,500 in promissory notes to sixof its members, of which five are also on the Board of Managers.  During the quarter ended September 30, 2003,the Company received approximately $400,000, net of applicable closing costs,in connection with the land exchange agreement referred to in Note 6.

 

The aforementioned notes bear interest at the prime rate plus 4% andcontain a warrant to purchase one unit per $1 of principal lent to the Companyat $1 per unit for five years from the date of issuance.  The warrants have an anti-dilutive impact onthe earnings per share calculations and are therefore not included in thecalculations.  The value of the warrantsare insignificant to the financial statements. The notes will be due upon completion of the sale of the minimum amountof units, 25,000,000, as described in Note 4 and securing a debt commitment, orif the Company is unable to close on the minimum amount of units, one year fromthe date of issuance.  Managementbelieves this short-term bridge financing will be adequate to meet theCompany’s current obligations as they continue to raise equity financing andseek a debt commitment.  The ability ofthe Company to continue as a going concern is dependent on the execution andsuccess of this plan and a successful offering.  The financial statements do not include any adjustments thatmight be necessary if the Company is unable to continue as a going concern.

 

**3.  NOTES PAYABLE**

 

A summary of notes payable as ofSeptember 30, 2003 is as follows:

 

| Notes  payable to six members, as described in Note 2, unsecured                                                     |   | $      | 101,500 |   |
|----------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
|                                                                                                                 |   |   |    |
| Note  payable to a vendor, monthly payments of $8,551, including interest at 12%,  due July 31, 2004, unsecured |   | 73,249 |    |
| Total                                                                                                                |   | $      | 174,749 |   |

 

7

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**4.  MEMBERS’ EQUITY**

 

As specified in the Company’s operating agreement, the Company willhave Class A and Class B units and is authorized to issue up to an aggregate of75,000,000 units.  The Company hasdesignated 20,000,000 units as Class B units with the remaining 55,000,000units designated as Class A units.  TheClass B members must own a minimum of one million (1,000,000) Class B unitswhile the Class A members must own a minimum of five thousand (5,000) Class Aunits.

 

On January 10, 2003 the Company’s Form SB-2 Registration Statementwas declared effective by the Securities and Exchange Commission (SEC) for upto 20,000,000 Class B units and up to 45,000,000 Class A units less the numberof Class B units sold.  The RegistrationStatement was subsequently amended and declared effective May 8, 2003.  Both Class A and B units are available forsale at $1 per unit. Should the Company not raise the minimum of $25,000,000through this offering by no later than December 31, 2003, the capitalraised through the offering will be returned to the respective investors.Should the Company raise the minimum of $25,000,000 through the offering, butnot yet obtain a commitment letter for debt financing from a lender, 10% of thesubscription proceeds will be released to the Company to purchase the land andbegin plant construction activities.  Thereafter,should the debt commitment not be obtained, the remaining subscription proceedsraised through the offering will be returned to the respective investors.  As of September 30, 2003, the Companyhas received subscriptions for 2,747,000 Class A units.  The proceeds from those sales, however, areheld in escrow.  The Company has notreceived any subscriptions for Class B units.

 

**5.  RELATED PARTY TRANSACTIONS**

 

At September 30, 2003, the Company included in accounts payable$155,255 owed for administrative per diem expenses, to the members of the boardof managers, who are also investors in the Company. For the nine month periodended September 30, 2003, the Company had incurred $67,675 of projectcoordinator fees, which were paid to an investor of the Company.

 

**6.  COMMITMENTS AND CONTINGENCIES**

 

The Company entered into an agreement with a member to performconsulting services for $6,750 a month, which expired on February 28,2003.  The agreement was renewed untilAugust 31, 2003 for $7,250 a month. The Company and the member verbally extended the agreement toDecember 31, 2003.  The member actsas the project coordinator and is responsible for the coordination of thecompletion of the proposed ethanol plant.

 

The Company entered into an agreement with a consulting firm to performproject services including project financing, facility design and construction,and initial plant operations.  Theagreement required a nonrefundable fee of $110,000 and provides for additionalfees based on the total project capitalization.  An aggregate of 3.25% of the total project capitalization is dueupon successful completion of the offering, construction and production ofethanol.  An additional 0.75% of total

 

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project capitalization is due upon successful production of ethanolmeeting defined specifications and guarantees. This 0.75% will be paid in nine monthly installments.  The agreement expires nine months after theproduction of ethanol and plant operations meet the planned specifications.

 

The Company entered into an agency agreement and financial servicesagreement with a financial institution to act as selling agent to offer andsell the units and to help the Company place the debt financing, which includesassisting and advising the Company in developing and implementing a financingstrategy and evaluating financing options. On March 25, 2003, managemententered into a termination agreement with the financial institution and enteredinto new agreements on similar terms with another party.  These agreements provide for fees based onthe total project capitalization and equity investment.  A fee of 1.50% of the total equity financingof the project is due upon the release of offering proceeds from escrow and afee of 1.75% of the total project capitalization is due at the financialclose.  An additional .25% of the totalproject capitalization is due upon successful commissioning of the plant andproduction of ethanol meeting defined specifications and guarantees and ispayable in nine monthly installments. Total project capitalization is estimated at $68 million, excludingcertain site improvements which the Company expects to be provided by the Cityof Rochelle and DP Industrial, LLC. Under these agreements, the Company is eligible for reimbursement ofcertain expenditures resulting from the change in selling agent.

 

The Company entered into a finder’s fee agreement with a cooperativeassociation to provide a list of members of the cooperative and an introductionto its affiliates as potential investors in the Company. The agreement requiresan initial payment of 4.00% of any investment made by a member of thecooperative due upon successful completion of the offering.  This payment may be made in the form of unitsin lieu of cash at the option of the cooperative.  In addition, the agreement requires an annual fee of 0.80% forfive years based on the aggregate amount invested by the cooperatives’ members.  This amount is capped at $50,000annually.  The agreement is terminableupon 90 days notice by either the Company or the cooperative.

 

The Company signed a preliminary design-build agreement with anengineer and general contractor to construct a plant for a fixed lump sumamount of $53.5 million.  Plantconstruction is contingent on securing financing for the project.

 

In July 2002, the Company had entered into two option agreementsfor two adjacent parcels of land totaling approximately 86 acres.  The Company paid a total of $20,000 forthese options.  The costs of theseoptions are included in deposits and deferred land costs on the balancesheet.  The option payments arenonrefundable, but will be applied towards the purchase of the 81-acre sitedescribed below.

 

InApril 2003, the Company had entered into a land exchange agreement with DPIndustrial, LLC, an unrelated third party. Under this agreement the Company would exchange the 86 acres it hadunder option agreements for approximately 81 acres of land that DP Industrial,LLC party had under option agreements.

 

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The Companyreceived $30,000 upon delivery of this agreement, which has been recorded asother income to cover a portion of the site costs incurred thus far.  The Company considers this 81-acre parcel ofland as a viable site for its ethanol plant.

 

In July 2003,the Company entered into an agreement with an unrelated individual assigningthe options it had to purchase the 86 acres to this individual who thenpurchased the 86 acres of land.  Uponpurchasing the 86 acres of land, this individual exchanged the 86 acres for the81 acres, thereby executing the land exchange agreement entered into by theCompany.  The Company has entered intoan option agreement with this individual allowing the Company to purchase the81 acre site for approximately $1,964,000. The Company paid $20,000 for this option, which expires on July 28,2004.  In return for executing theexchange, the Company received $630,000 to cover costs relating to thediligence and site infrastructure and development.  The Company received net proceeds of approximately $400,000 afterclosing costs which included $151,000 paid to this individual.  The Company has recognized the net proceedsin other income as it has fulfilled all of its obligations for thesefunds.  In addition, if the Companyexercises the land option, the Company will pay the individual 5% interest onthe individual's net purchase costs to acquire the land of $1,317,000.

 

In conjunctionwith the execution of the land exchange agreement, the City of Rochelle annexedthe 81-acre site.  The City of Rochelleand DP Industrial, LLC, along with some assistance from the Company, will payfor the rail, water and sewer extensions, and road improvements to the site.

 

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**Item 2.****                                                          ****Management’s Discussion andAnalysis or Plan of Operation.**

 

This report contains forward-looking statements thatinvolve future events, our future performance and our expected futureoperations and actions. In some cases you can identify forward-lookingstatements by the use of words such as “may,” “should,” “anticipate,”“believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,”“predict,” “hope,” “potential,” “continue,” or the negative of these terms or othersimilar expressions.  Theseforward-looking statements are only our predictions and involve numerousassumptions, risks and uncertainties. Our actual results or actions may differ materially from theseforward-looking statements for many reasons, including the risks described inour Registration Statement on Form SB-2, as amended (SEC Registration No.333-96977) and appearing elsewhere in this report.  We are not under any duty to update the forward-looking statementscontained in this report.  We cannotguarantee future results, levels of activity, performance or achievements.  We caution you not to put undue reliance onany forward-looking statements, which speak only as of the date of thisreport.  You should read this report and the documents that we referencein this report and have filed as exhibits, completely and with theunderstanding that our actual future results may be materially different fromwhat we currently expect.  We qualifyall of our forward-looking statements by these cautionary statements.

 

**Overview**

 

We are a start-up company in development stage.  We plan to build a corn-based ethanolprocessing facility that will produce ethanol, distillers grains and carbondioxide.  We plan to build our ethanolplant near Rochelle, Illinois and process approximately 17,800,000 bushels ofcorn per year into 50,000,000 gallons of denatured fuel grade ethanol, which weintend to sell throughout the nation. We also intend to produce approximately 120,000 tons of carbon dioxideand approximately 160,000 tons of distillers grains per year.

 

We filed a Registration Statement on Form SB-2 (SECRegistration No. 333-96977), as amended (the “Registration Statement”), withthe Securities and Exchange Commission, which originally became effective onJanuary 10, 2003, for an initial public offering of an aggregate minimumof 25,000,000 and an aggregate maximum of 45,000,000 Class A and Class B Units(the “Offering”).  We subsequently amended the Registration Statementto reflect certain changes from and additions to the Registration Statement asit was originally declared effective.  The Securities and ExchangeCommission declared the subsequently amended Registration Statement effectiveon May 8, 2003.

 

Depending on the amount of equity we raise in theOffering, we expect that the project will cost a total of approximately$67,000,000 to $68,000,000, excluding certain site improvements from the Cityof Rochelle and DP Industrial, LLC.  We have raised $591,500 in seedcapital and plan to raise a minimum of $25,000,000 and a maximum of $45,000,000in equity capital pursuant to the Offering, and secure the balance throughfederal, state and local grants and debt financing.  We will require asignificant amount of debt financing to complete our project.  The amount ofdebt financing that we need depends on the amount we raise in the Offering andwhether we receive the grants we intend to pursue or the anticipated siteimprovements.  We will close on theentire Offering when we raise the minimum amount offered and secure an executedcommitment letter from a lender for our debt financing.  However, an executed commitment letter isnot a binding loan agreement.  If weobtain an executed commitment letter, but the lender later declines the loan,then we will seek debt financing from other lenders.  We have no agreement with any lender for the debt financing thatwe need.  If we do not secure the debt financing that we need, we will notbe able to construct our proposed ethanol plant and may have to liquidate ourassets and abandon our business.

 

We expect that it will take at least 13 monthsfrom the date we close the Offering to construct the ethanol plant and commencestart-up operations.  If we raise themaximum amount offered, we intend to consider expanding the ethanol plantshortly after plant start-up.  We do notintend to hire a sales staff to market our products, and intend to hire staffonly to operate our ethanol plant and manage our business.  We plan toengage third party distributors to market or purchase our ethanol anddistillers grains.  We also plan to sellour carbon dioxide to a third party processor who may build a processingfacility next to our ethanol plant.  Wehave no agreement with any party to sell any of our expected products.  We plan to pay commissions or fees todistributors to market and sell our products.

 

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We plan to use the calendar year as our fiscal year.

 

**Size of Ethanol Plant**

 

We intend to build a 50,000,000 gallon per yearethanol plant near Rochelle, Illinois. We intend to build an ethanol plant with a higher building height toaccommodate an additional level in the main pipe rack for expansionpurposes.  If we raise the maximumamount offered, we intend to consider expanding the ethanol plant shortly afterplant start-up.  This is in part tomaximize the payments potentially available to us under the Commodity CreditCorporation (“CCC”) Bioenergy Program. As described below, expanding production over several fiscal years ofthis program could generate additional payments to us under the program.  While we intend to consider pursuing thisexpansion strategy if we raise the maximum amount offered in the Offering, wecurrently have no agreements for the expansion of the ethanol plant.

 

Whether we expand the ethanol plant is contingentupon numerous factors, including, among others, financing, the condition of theethanol and distillers grains markets in general, environmental and otherregulatory requirements, general economic conditions, increased cost ofoperation and our financial performance and condition.  The board of managers will determine, intheir sole discretion, whether we expand the ethanol plant.  Although we intend to consider expanding theethanol plant if we raise the maximum amount offered, we cannot assure you thatwe will ever be in a position to expand the ethanol plant.

 

One reason we are planning to build a 50,000,000gallon per year ethanol plant and considering expanding its production capacityfollowing plant start-up, rather than initially constructing an expanded sizeplant, is to take full advantage of the payments available under the CCCBioenergy Program.  The CCC BioenergyProgram makes payments of up to $7,500,000 per year through fiscal year 2006(September 30, 2006) to eligible ethanol producers for increases in theirproduction of ethanol over their prior year’s production.  New production is eligible and is consideredincreased production.  The maximumannual funding authorized under the program is $150,000,000. However, paymentsunder the program in any one fiscal year may be less if Congress does not fullyfund the program for that fiscal year (funding for the program is subject to anannual appropriation). For fiscal year 2003, the program received funding of$115,500,000. Payments under the program are subject to pro rata reduction ifaggregate payments to all producers in any one fiscal year would otherwiseexceed the annual available funding. No producer may receive more than 5% ofthe available funding for the program in any fiscal year. According to theUnited States Department of Agriculture’s Farm Service Agency, applications forpayments for the first three quarters of fiscal year 2003 have already exceededthe program’s available funding for the entire fiscal year.

 

Under the program, ethanol producers may receivepayments based upon the producer’s increased production during a fiscal yearthat exceeds the producer’s production during the prior fiscal year.  For example, a producer that produces 30,000,000gallons of ethanol this fiscal year, but produced only 20,000,000 gallons lastfiscal year is entitled to payment for one bushel of corn for every 2.5 bushelsof corn used to produce 10,000,000 gallons of ethanol, which represents thisfiscal year’s increased production over the prior fiscal year’sproduction.  Under the Program, whichassumes that 1 bushel of corn produces 2.5 gallons of ethanol, the ethanolproducer would be entitled to receive reimbursement for 1 bushel of corn forevery 2.5 bushels used for the increased ethanol production.  The reimbursement drops to 1 bushel of cornfor every 3.5 bushels used if the producer’s annual production capacity isequal to or more than 65,000,000 gallons. The per bushel value for reimbursement purposes is determined by the CCCin accordance with established terminal market prices announced daily by theKansas City Commodity Office, adjusted by the county average differential forthe county in which the ethanol plant is located and the applicable qualityfactors determined by the CCC.  If thereis no established terminal market price, then the CCC will set the price.

 

Based on the program’s formula for calculatingpayments and assuming the price of corn was $2.26 per bushel, we estimate thatwe would reach the $7,500,000 maximum per fiscal year cap (assuming the programis fully funded and not subject to pro rata reduction) with approximately21,000,000 gallons of increased production. We arrived at this number by dividing 21,000,000 gallons by 2.5 to determinethe number of bushels of corn used to generate the increased production.  We then divided the number of bushels ofcorn (8,400,000 bushels) by 2.5 to arrive at the qualified number of bushelssubject to reimbursement.  This meansthat a ramp-up of production that

 

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straddles over several of the program’s fiscal years could result inhigher aggregate payments under the program as compared to having all increasedproduction occurring within a single fiscal year.

 

In addition, there is a Federal Small ProducerCredit that provides a 10¢ per gallon tax credit for the first 15,000,000gallons of ethanol produced annually. Under the program, ethanol producers that qualify or their owners (forpass-through tax entities) can deduct the credit from their federal income taxannually. The credit is considered taxable income and taxes must be paid on theamount credited. The tax credit is currently available only to producers withan annual capacity of 30,000,000 gallons or less and is scheduled to expire onDecember 31, 2007. Therefore, under current legislation, our proposedethanol plant would not be eligible for the tax credit. Legislation has beenintroduced which would extend benefits to ethanol plants with up to 60,000,000gallons of annual capacity. However, we cannot assure you that the legislationwill ever be enacted into law.

 

**Site Selection and Project Analysis**

 

We intend to build the ethanol plant near Rochelle,Illinois.  We selected the Rochelle,Illinois area based upon a number of factors, including the availability andcost of corn, natural gas, water supply and electric service, transportationcosts, permitting requirements, and proximity to certain ethanol markets.  However, we may modify or change thelocation of the ethanol plant if we cannot obtain the necessary permits,approvals, utility and other services, or cannot obtain them at reasonablecost.  We believe that the Rochelle,Illinois area has several favorable attributes for locating a large scaleethanol plant, including:

 

•                  An abundant corn supply, because according tothe Illinois Agricultural Statistics Supplement 2001, in the year 2001,approximately 669,000,000 bushels of corn were grown within a 100-mile radiusof Rochelle, Illinois;

 

•                  Favorable transportation logistics becauseRochelle, Illinois is close to the Chicago/Milwaukee area, one of the largestethanol markets in the United States;

 

•                  Favorable rail costs because the City ofRochelle is situated on an intersection of Burlington Northern RailroadCompany’s and Union Pacific Railroad Company’s mainline rail systems.  In addition, we can use the City ofRochelle’s short line rail system that connects into Burlington Northern’s andUnion Pacific’s main rail line without any switching fees;

 

•                  Close proximity to the intermodal facilityfor rail and truck, which should bring significant truck traffic to the areaand allow us to pick and choose from among many possible subcontractors to haulour products;

 

•                  The availability of city run utilities thatprovide readily usable water and electricity at substantial savings as comparedto other Illinois sites we considered; and

 

•                  The Greater Rochelle Economic DevelopmentAuthority’s assistance with certain site improvements and its willingness toassist us with applying for grants for which we may be eligible.

 

We expect to build the ethanol plant on anapproximately 81 acre site near Rochelle, Illinois.  A Phase I Environmental Site Assessment of the site has beencompleted and revealed no evidence of recognized environmental conditions.  The Phase I Environmental Site Assessmentexamined evidence of certain environmental concerns relating to the site.However, it does not purport to reveal all possible environmental issues and wemay later encounter other environmental deficiencies that could increase thecost of the project.

 

We had executed options with unrelated privatelandowners to purchase an approximately 86 acre site located approximately halfa mile north of the 81 acre site for approximately $1,468,000.  Because the options were expiring onJuly 4, 2003, we assigned the options to Mr. James D. Carmichael, anunrelated third party, who then exercised the options and purchased the site.  We had also entered into an agreement withDP Industrial, LLC, an unrelated third party, under which we would exchange the86 acre site for the 81 acre site. After purchasing the 86 acre site, Mr. Carmichael exchanged the site forthe 81 acre site.  We paid fees ofapproximately $151,000 to Mr. Carmichael in part to reflect the reduction inacreage.  We have entered into an optionagreement with Mr.

 

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Carmichael giving us the right to purchase the 81 acre site forapproximately $1,964,000, together with interest on the net amount paid by Mr.Carmichael to acquire the 86 acre site, approximately $1,317,000, at a rate of5% per annum.  The fee of $20,000 forthe option was satisfied by a credit of the fees we originally paid for theoptions on the 86 acre site.  The optionexpires on July 28, 2004.

 

The City of Rochelle has annexed the 81 acresite.  Under the annexation agreement,the City of Rochelle will provide certain rail extensions to this site.  In addition, the City of Rochelle willconstruct certain water and sewer extensions and road improvements.  The City of Rochelle and DP Industrial,along with some assistance from us, will pay for those rail, water and sewerextensions and road improvements.

 

Upon executing the exchange agreement, wereceived a non-refundable $30,000 payment from DP Industrial to cover a portionof our costs relating to site infrastructure and development.  When the exchange was completed, DPIndustrial paid us $630,000 pursuant to the exchange agreement, less the approximately$151,000 in fees paid to Mr. Carmichael. In addition, DP Industrial will, among other things, pay the first$75,000 of the incremental cost to build a 125 foot exhaust stack rather than a73 foot exhaust stack on the ethanol plant, and 50% of all incremental costsover $75,000, up to an aggregate maximum payment of $150,000.

 

When considering entering into the exchangeagreement, our board of managers considered, among other things, the following:

 

•                  Anticipated building conditions on the 86 acresite and the 81 acre site, which we expect will be more favorable at the 81acre site because of lower water tables and better overall drainage;

 

•                  The location of the two sites, both of whichare located on and have access to the same rail and highway transportationsystems;

 

•                  The availability of utilities at the twosites, both of which have access to the same gas, electric and other utilityservices; and

 

•                  Our belief that moving the ethanol plant tothe 81 acre site would not change the timing, requirements or consideration ofour air pollution construction permit application.

 

When considering the development of our ethanolplant and selecting a site, the key criteria that we examined were:

 

•                  The total cost of the project;

 

•                  The regional price of ethanol, distillersgrains and carbon dioxide;

 

•                  Production costs;

 

•                  General and administrative expenses; and

 

•                  Interest expenses.

 

Based on our preliminary design-build agreement withLurgi PSI, we estimate that our proposed ethanol plant, once constructed, willprocess approximately 17,800,000 bushels of corn into approximately 50,000,000gallons of ethanol, 160,000 tons of distillers grains and 120,000 tons of rawcarbon dioxide annually.  We currentlyestimate that total project costs will be approximately $67,000,000 to$68,000,000, or $1.34 to $1.36 per gallon of estimated annual ethanolproduction, excluding the anticipated site improvements from the City ofRochelle and DP Industrial.  We haveentered into a preliminary design-build agreement with Lurgi PSI to constructthe ethanol plant for a fixed lump sum price of $53,500,000, which translatesinto an ethanol plant construction cost of $1.07 per gallon of estimated annualethanol production.

 

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According to Oil Price Information Service, theaverage price of ethanol from May 1997 to May 2002 in Illinois,Minnesota and Colorado was approximately $1.25 per gallon.  According to the Commodity ServicesCorporation, the average FOB Chicago price of distillers grains fromFebruary 1997 to February 2002 was approximately $96 per ton,excluding commissions.  We believed thatthese historical prices were reasonable and warranted our moving forward on theproject.  However, we cannot assure youthat we will receive these prices for our products or that we will be able tooperate profitably.  Based upon our preliminary discussions with severalcarbon dioxide processors, we also believe that we can sell about half of theraw carbon dioxide that we produce (or 60,000 tons annually).

 

Controlling costs is fundamental to the success ofany ethanol plant.  We expect that cornwill be the principal cost of our revenue. Based on the process guarantees of our preliminary design-buildagreement, we will need to process approximately 17,800,000 bushels of cornannually.  According to John Stewart andAssociates, the average price of corn in the Rochelle, Illinois area from 1992through 2001, excluding the highest and lowest annual corn prices, isapproximately $2.23 per bushel.  Basedon these averages, we believe that our cost of corn for our ethanol plant inthe Rochelle, Illinois area will compare favorably to other similarly sizedethanol producers located in other areas of the state of Illinois.  However, corn prices change constantly andwe cannot assure you that our corn costs will not be significantly higher.

 

**Net Offering Proceeds**

 

Gross proceeds from the Offering will be $25,000,000if the minimum number of units offered is sold, and $45,000,000 if the maximumis sold.  We estimated that offeringexpenses will be approximately $350,000. Due to the delay in the completion of the Offering, we have incurred andexpect to incur additional offering-related expenses.  We believe that these additional expenses will not materiallyincrease the total project cost.  Weanticipate paying our selling agent, Northland Securities, Inc., a placementfee equal to 3.25% of the equity raised in the Offering.  1.5% of the fee is due on the date or datesthat offering proceeds are released from escrow and are available for ourimmediate use and the remaining 1.75% is due at the time of financialclose.  By financial close, we mean whenwe close on all project financing, including our debt financing.  We have also agreed to pay the selling agentan additional fee of .25% of the equity raised in the Offering.  This additional fee is due and payable innine monthly installments after ethanol production at the ethanol plant meetsdesign specifications on a daily basis and all production meets the guaranteesprovided by engineers and contractors. We have also agreed to pay a finder, Producer’s Alliance, a fee equal to4% of the offering price per unit for all units sold in the Offering to membersof the finder who were in good standing and listed on its membership roster asof June 1, 2002.  Because thenumber of units that we will sell to these members is not yet determinable, wehave estimated the aggregate finder’s fee at $320,000 if the minimum is soldand $400,000 if the maximum is sold. The finder may elect to receive Class A Units in lieu of itsfinder’s fee at a price of $1.00 per unit. These units will not count towards our meeting the minimum number ofunits offered, but are included as part of the maximum number of units offered inthe Offering.  We have also agreed topay the finder an annual fee of .80% of the offering price per unit sold tothese members, up to a maximum of $50,000 per year, for five years after thefinancial closing date.  By financialclosing date, we mean the date upon which we secure an executed commitmentletter for our debt financing, which along with proceeds from the sale ofunits, will be sufficient to finance the project.

 

We estimate that net proceeds, after deductingoffering expenses, from the Offering will be $23,517,500 if the minimum numberof units offered is sold, and $42,787,500 if the maximum is sold, as set forthin the following table.

 

|                                  |   | **Minimum** |       | **Maximum** |   |
|---------------------------------------|--------|-------------|------------|-------------|--------|
| Gross  offering proceeds              |   | $           | 25,000,000 |        | $      | 45,000,000 |   |
| Offering expenses                     |   | 350,000     |       | 350,000     |   |
| Selling Agent’s fee(1)           |   | 812,500     |       | 1,462,500   |   |
| Finder’s fee(2)                  |   | 320,000     |       | 400,000     |   |
|                                  |   |        |       |        |   |
| Net proceeds to Illinois River Energy |   | $           | 23,517,500 |        | $      | 42,787,500 |   |

 

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(1)                Reflects an aggregate placement feepayable to Northland Securities of 3.25% of the equity raised in the Offering.

 

(2)                Reflects estimated finder’s fee of$320,000 if the minimum is sold and $400,000 if the maximum is sold in theOffering.

 

We plan to use a portion of the net proceeds fromthe Offering to repay approximately $100,000 in interim bridge financing fromour managers and others.  We plan to usethe remaining net proceeds, as well as funds from federal, state and localgrants and our debt financing, to purchase a site, construct the ethanol plantand fund start-up costs.  A portion ofthe proceeds will also be used to purchase the initial inventory of corn,chemicals, yeast and denaturant, our major raw materials and to cover otheroperating costs.

 

**Plan of Operation to Close of the Offering**

 

Under the terms of the Offering, if we raise theminimum amount offered, 10% of the proceeds will be released to us from escrow,even if we have not secured an executed commitment letter for the debtfinancing that we need.  In an effort tomeet our target construction schedule, we intend to use any such proceedsreceived prior to the close of the Offering, approximately $100,000 in interimbridge financing from our managers and others and the net proceeds we receivedfrom DP Industrial upon completion of the exchange of the 86 acre site for the81 acre site to accomplish some or all of the following by the time we closethe Offering:

 

•                  Purchase a site;

 

•                  Complete certainsite and project specific pre-construction engineering work, such as generalarrangement drawing, piping, instrumentation, manufacturing specifications andcontrol equipment, and engineering drawings necessary to secure the regulatorypermits that we need to begin construction; and

 

•                  Complete certainsite improvements, including, but not limited to, soil boring, site grading,and installation of a rough grade road.

 

The following table sets forth our estimated costsand expenses from May 2003 to the close of the Offering, assuming that 10%of the proceeds from the Offering are released to us from escrow.  These are only estimates and our actualcosts and expenditures could be much higher.

 

| Cost of  site (1)       |   | $       | 1,490,000 |   |
|-------------------------|--------|---------|-----------|--------|
| Site work               |   | 420,000 |      |
| Permits                 |   | 95,000  |      |
| Project coordinator     |   | 60,000  |      |
| Offering expenses       |   | 238,000 |      |
| Preliminary engineering |   | 280,000 |      |
| Working capital         |   | 84,000  |      |
|                    |   |    |      |
| Total                   |   | $       | 2,667,000 |   |

 

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(1)          Reflectssite acquisition cost of approximately $2,170,000, less the $660,000 ofpayments from DP Industrial pursuant to the exchange agreement and the $20,000option fee previously paid.

 

We plan to spend a net amount of approximately$1,490,000 to acquire the 81 acre site. We expect that we will spend approximately $795,000 on site work,permitting and preliminary engineering costs. We also plan to pay approximately $238,000 of costs related to theOffering, including, among other things, legal, accounting and printingfees.  We expect that our consultingcosts and working capital needs will total approximately $144,000.  If we do not have sufficient cash on hand orif we decide to acquire a site and begin certain site work prior to our closingon all or a portion of the Offering, it will be necessary for us to borrowother funds or defer payment of certain expenses.  We currently have no commitments for any additional interimfinancing.

 

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**Plan of Operations to Start-up of Ethanol Plant**

 

If we close on the debt financing that we need andcomplete the sale of the remaining 90% of the units subscribed, we plan tospend the following 13 months designing, developing and constructing theethanol plant.  We expect to have sufficient funds to cover our coststhrough start-up operations, including working capital (cash, inventory andspare parts).  We anticipate funding, among other things, developmentcosts, such as installation of utilities, construction, equipment acquisition,and other expenses.  We expect to also fund our operating andadministrative costs, such as, among other things, raw materials, personnel,general and administrative expenses, and legal and accounting fees.

 

We believe we may be eligible for federal, state,and local grants to help fund our project. We have engaged a professional grantwriter to assist us with preparing grant applications and proposals.  We received $20,000 in grant proceeds fromthe Illinois Corn Marketing Board in November 2002.  We also received $40,000 in grant proceedsfrom the Illinois AgriFirst Program in February 2003 and an additional$40,000 in grant proceeds in July 2003. In addition, in April 2003, we received $20,000 in grant proceedsfrom the Illinois Department of Commerce and Community Affairs to assist withsite engineering drawings and an additional $5,000 in July 2003.  We have no binding commitment for any othergrants.  We cannot assure you that wewill receive any additional grants.  Ifwe do not receive additional grant proceeds, we will need to secure additionaldebt financing to cover any shortfall. We cannot assure you that we will be able to obtain any additional debtfinancing on reasonable terms, or at all.

 

The following is an estimate of our sources and usesof funds until the ethanol plant is built and we begin operations.  The following schedule assumes that weuse the 81 acre site and the City of Rochelle and DP Industrial provide us withcertain rail, water and sewer extensions and road improvements to thatsite.  Because any assistance we receivefrom the City of Rochelle and DP Industrial will come in the form of siteimprovements, we have not included the source and use of the funds for theseimprovements in the schedule below. The following schedule also assumes that we build a 50,000,000gallon per year ethanol plant and that we receive $1,020,000 from grants.  The information set forth below representsonly estimates and actual sources and uses of funds could be much higher due toa variety of factors, including those described in the Registration Statementand elsewhere in this report.

 

We have obtained approximately $100,000 in interimbridge financing from our managers and others to bridge the timing differencesbetween our receipt of estimated sources of funds and our expenditure ofestimated uses of funds.  Obtaining thebridge financing does not represent an additional source of funds for theproject because it will be repaid from the net proceeds of the Offering when wecomplete the sale of the minimum offering amount.  Similarly, the use of the bridge financing does not increase thetotal estimated uses of funds because the expenses we plan to pay with thebridge financing are already included in the estimated uses of funds shown onthe schedule below.  Because theuse of bridge financing does not increase the total estimated uses of funds forthe project and will ultimately be funded by proceeds from the Offering, thereceipt and repayment of the bridge financing are not specifically shown on theschedule below.

 

**Sources ofFunds:**

 

|                                |   | **Minimum** |           | **Maximum** |   |
|-------------------------------------|--------|-------------|----------------|-------------|--------|
| Equity(1)                           |   | $           | 25,000,000     |        | $      | 45,000,000 |   |
| Seed Capital(2)                     |   | 563,000     |           | 563,000     |   |
| Debt financing                      |   | 41,500,000  |           | 20,840,000  |   |
| Illinois Corn Marketing Board Grant |   | 20,000      |           | 20,000      |   |
| Expected Grants                     |   | 1,000,000   |           | 1,000,000   |   |
|                                |   |        |           |        |   |
| **Total sources of  funds**         |   | **$**       | **68,083,000** | ** **  | **$**  | **67,423,000** | ** ** |

 

17

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**Uses ofFunds:**

 

|                                        |   | **Minimum** |           | **Maximum** |   |
|---------------------------------------------|--------|-------------|----------------|-------------|--------|
| Plant Construction(3)                       |   | $           | 53,500,000     |        | $      | 53,500,000 |   |
| Construction Contingency                    |   | 1,308,000   |           | 1,308,000   |   |
| Site Acquisition(4)                         |   | 1,510,000   |           | 1,510,000   |   |
| Site Infrastructure and Development(5)      |   | 1,550,000   |           | 1,550,000   |   |
| Insurance Costs                             |   | 109,000     |           | 109,000     |   |
| Organizational Costs                        |   | 92,000      |           | 92,000      |   |
| Permits                                     |   | 100,000     |           | 100,000     |   |
| Consulting Fees(6)                          |   | 2,219,000   |           | 2,197,000   |   |
| Offering Expenses                           |   | 350,000     |           | 350,000     |   |
| Selling Agent’s Fee(7)                 |   | 812,500     |           | 1,462,500   |   |
| Finder’s Fee(8)                        |   | 320,000     |           | 400,000     |   |
| Capitalized Interest(9)                     |   | 900,000     |           | 0           |   |
| Sales Taxes                                 |   | 150,000     |           | 150,000     |   |
| ***Financing  Costs:***                     |   |        |           |        |   |
| Consulting and Debt Placement Fee(10)       |   | 754,000     |           | 393,000     |   |
| Legal Fees                                  |   | 185,000     |           | 185,000     |   |
| Commitment Fees                             |   | 207,000     |           | 104,000     |   |
| Miscellaneous Expenses                      |   | 65,000      |           | 65,000      |   |
| ***Start  Up Costs:***                      |   |        |           |        |   |
| Preproduction Period Costs(11)              |   | 535,000     |           | 535,000     |   |
| Inventory—Corn                         |   | 795,000     |           | 795,000     |   |
| Inventory—Chemicals, Yeast, Denaturant |   | 865,000     |           | 865,000     |   |
| Inventory—Ethanol                      |   | 1,000,000   |           | 1,000,000   |   |
| Inventory—Distillers Grains            |   | 250,000     |           | 250,000     |   |
| Spare Parts                                 |   | 250,000     |           | 250,000     |   |
| Other Working Capital                       |   | 256,500     |           | 252,500     |   |
|                                        |   |        |           |        |   |
| **Total Uses of Funds**                     |   | **$**       | **68,083,000** | ** **  | **$**  | **67,423,000** | ** ** |

 

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(1)           Assumes we complete the sale of an aggregateminimum of 25,000,000 units and an aggregate maximum of 45,000,000 units in theOffering.

 

(2)           Represents $586,000 of seed capitalpreviously raised (excludes subscription receivable of approximately $5,000,which has now been received) less the cost of raising capital of approximately$23,000.

 

(3)           Does not include the construction of a 125foot exhaust stack rather than a 73 foot exhaust stack at an anticipatedmaximum incremental cost of $219,000, of which our cost net of DP Industrial’sreimbursement will be up to $72,000.

 

(4)           Reflects site acquisition cost ofapproximately $2,170,000, less the $660,000 of payments from DP Industrialpursuant to the exchange agreement.

 

(5)           We may realize cost savings on siteinfrastructure and development because the City of Rochelle and DP Industrialhave agreed to cover certain water and sewer extensions and roadimprovements.  There may also beadditional expenses as a result of our use of the 81 acre site.  We will allocate any net cost savings toconstruction contingency and working capital.

 

18

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(6)           Reflects consulting fees payable to GreenWayConsulting, LLC at the time we close on our senior debt financing.  We have also agreed to pay GreenWay anadditional fee of .75% of the total sources of funds for the project, excludingseed capital.  This additional fee isdue and payable in nine monthly installments after ethanol production at theethanol plant meets design specifications on a daily basis and all productionmeets the guarantees provided by engineers and contractors.

 

(7)           Reflects an aggregate placement fee payableto Northland Securities of 3.25% of the equity raised in the Offering.

 

(8)           Reflects estimated finder’s fees of $320,000if the minimum is sold and $400,000 if the maximum is sold.

 

(9)           Net of interest income earned on offeringproceeds.

 

(10)     Includes a consulting fee payable to NorthlandSecurities of 1.75% of the total sources of funds for the project, excludingseed capital and the equity raised in the Offering.

 

(11)     Includes accrued per diem fees payable to ourmanagers as of September 30, 2003 of $155,255, plus estimated additionalper diem fees from October 1, 2003 to start-up of the ethanol plant ofapproximately $46,000.

 

We estimated that our expenses relating tothe Offering will total approximately $350,000.  Due to the delay in the completion of the Offering, wehave incurred and expect to incur additional offering-related expenses.  We believe that these additional expenseswill not materially increase the total project cost.  We estimate that our financing cost for our debt financing willtotal approximately $1,211,000 if the minimum number of units offered is sold,and approximately $747,000 if the maximum is sold.  Financing costs includes lender commitment fees and consultingand debt placement fees, as well as out-of-pocket expenses such as titleinsurance, legal fees, appraisal costs and filing fees.  Because we intend to capitalize all of ourinterest expenses and not make any payments on our debt financing until webegin start-up operations, we estimate that by the time we begin start-upoperations, capitalized interest will total approximately $900,000 if theminimum number of units offered is sold. We expect that we will not have any capitalized interest if we raise themaximum amount offered because our interest earnings on the proceeds from theOffering should offset our interest expenses. We estimate that we will spend approximately $109,000 on managers andofficers’ insurance, builder’s risk insurance, general commercial liability,workers’ compensation and property insurance for our business.  Because our consulting fees are based uponour total project cost, we expect that our consulting fees will totalapproximately $2,219,000 if we raise the minimum amount offered and $2,197,000if we raise the maximum amount offered. We also expect to spend approximately $100,000 to procure necessarypermits.  We have spent approximately$92,000 to organize our limited liability company, including legal, accountingand related expenses.

 

We expect to spend the majority of our funds,approximately $58,018,000, on site acquisition, site preparation, engineeringand construction of the ethanol plant, infrastructure, equipment and salestaxes.  These costs include leveling andgrading the site, general site work to prepare for construction of the ethanolplant, preparing and pouring foundations, and material and labor to constructthe plant and ancillary facilities.  Wewill also be purchasing and installing ethanol production equipment, such aspumps, grinders, processing equipment, storage tanks and conveyors.  We expect that Lurgi PSI will handleconstruction, equipment purchases and installation, which we will pay for bymaking monthly progress payments based on the work completed and invoiced to usby Lurgi PSI.  We estimate that we willspend approximately $535,000 on preproduction costs, such as administrative andother expenses.  We anticipate having working capital of approximately$3,410,000 at plant start-up, consisting of approximately $3,160,000 of spareparts and corn, chemicals, yeast, denaturant, ethanol and distillers grainsinventory, and approximately $250,000 of cash.

 

**Administration**

 

We currently do not have a full-time office staff,and we do not expect to retain one until the ethanol plant is nearcompletion.  Until then, we aredependent upon our Associate Vice President—Chief Operating Officer, ourpart-time officers and the board of managers to maintain our books andrecords.  These individuals areresponsible for complying with the rules and regulations promulgated under theSecurities and Exchange Act of 1934

 

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concerning the maintenance of accurate books and records, and thetimely submission of periodic reports and other requirements with theSecurities and Exchange Commission.

 

**Operating Expenses**

 

When the ethanol plant nears completion, we expectto incur various operating expenses, such as supplies, utilities and salariesfor administration and production personnel. Along with operating expenses, we anticipate that we will havesignificant expenses relating to financing and interest.  We have allocated funds in our capitalstructure for these expenses, but cannot assure you that the funds allocatedwill be sufficient to cover these expenses. We may need additional funding to cover these costs if sufficient fundsare not available or if costs are higher than expected.

 

**Employees**

 

Upon completion of the ethanol plant, we expect to haveapproximately 28 employees, including 22 in ethanol production operations, andsix in general management and administration. We will not maintain an internal sales organization.  We anticipate that we will need thefollowing personnel to operate the ethanol plant and manage our business:

 

| **Position**                                      |   | **# of Employees** |   |
|---------------------------------------------------|--------|--------------------|--------|
| General Manager                                   |   | 1                  |   |
| Controller                                        |   | 1                  |   |
| Production Manager                                |   | 1                  |   |
| Lab Manager                                       |   | 1                  |   |
| First Line Supervisors (Shift Supervisors)        |   | 4                  |   |
| Stationary Engineers                              |   | 4                  |   |
| Plant and System Operators                        |   | 4                  |   |
| Tank Car and Truck Loaders                        |   | 2                  |   |
| First Line Supervisors (Maintenance  Supervisors) |   | 1                  |   |
| Maintenance Repairer                              |   | 4                  |   |
| Precision Instrument Repairer                     |   | 1                  |   |
| Electrician                                       |   | 1                  |   |
| Lab Technician                                    |   | 1                  |   |
| Office Staff                                      |   | 2                  |   |
|                                              |   |               |   |
| Total                                             |   | 28                 |   |

 

**Liquidity and Capital Resources**

 

As of September 30, 2003, we had cash and cashequivalents of $101,311, current assets of $116,250 and total assets of$767,801.  Our total assets include$609,638 of deferred offering costs relating to the Offering.  At the timewe issue units in the Offering, these costs will be netted against the proceedsreceived, or if we do not complete the sale of any units in the Offering, theywill be expensed.  To date, we have raised $591,500 in seed capital, whichwe have used to fund our organization and operation to date.  We have also received net payments ofapproximately $400,000 from DP Industrial pursuant to the exchangeagreement.  As of September 30,2003, we had current liabilities of $920,374, which consists primarily of ouraccounts payable.  Since our inceptionon February 20, 2002 through September 30, 2003, we have anaccumulated deficit of $725,791.  Totalmembers’ equity as of September 30, 2003 was ($157,315).  Since inception, we have generated norevenue from operations.

 

We have obtained approximately $100,000 in interimbridge financing from our managers and others to help fund a portion of ourestimated costs and expenditures on an interim basis prior to our receiving anyproceeds from the Offering.  We areissuing promissory notes together with warrants to purchase Class A Unitsto each

 

20

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person who provided us the bridge financing.  The notes pay interest at a rate of prime plus four percentper annum.  We will not make anyprincipal or interest payments on the notes until we complete the sale of theminimum amount offered in the Offering, at which time the notes will become dueand payable.  If we do not complete thesale of the minimum amount offered, the notes will become due and payable oneyear from the date of issuance.  Thewarrants give the holders the right to purchase one Class A Unit for eachdollar of financing provided, at an exercise price of $1.00 per unit.  The warrants are exercisable at any time fora period of five years from the date of issuance.

 

As of September 30, 2003, our currentliabilities substantially exceeded our current assets and our total liabilitiesexceeded our total assets.  In additionto the interim debt financing described above, we plan to defer certainaccounts payable until after we have obtained sufficient proceeds from theOffering.  Our ability to continue as agoing concern is dependent on the execution and success of these plans and asuccessful completion of the Offering. Our financial statements do not include any adjustments that might benecessary if we are unable to continue as a going concern.

 

We are seeking to raise a minimum of $25,000,000 anda maximum of $45,000,000 in the Offering. Depending on the results of the Offering, we believe that the projectwill cost a total of approximately $67,000,000 to $68,000,000, excludingcertain site improvements from the City of Rochelle and DP Industrial.  We plan to finance the project with seedcapital, proceeds from the Offering, federal, state and local grants,assistance with site improvements and debt financing.  Other than three grants totaling $125,000, we have no commitmentfor any other grants.  We do not haveany commitment for the debt financing that we need.  Completion of the proposed ethanol plant depends, in part, on ourability to close on our debt financing and satisfy all other conditions tobreaking escrow and close on at least the minimum amount offered in theOffering.

 

We expect that our debt financing will be in theform of a construction loan that will convert to a permanent loan when we beginoperations.  We also expect that theloan will be secured by all of our real property and substantially all of ourother assets, including receivables and inventories.  In addition to repaying the principal, we plan to pay interest atmarket rate for loans to start-up ethanol projects, plus annual fees formaintenance and observation of the loan by the lender.  We intend to capitalize all of our interestuntil we commence operations, which means that we will not make any payment onthe loan until we construct the ethanol plant and begin producing ethanol.  We expect that our debt financing willconsist of a construction loan with a term of 13 months, which will thenconvert to a permanent loan when we begin operations.  We expect to repay the permanent loan through fixed quarterlypayments of principal and interest beginning after we commence operations.  If the project suffers delays, we may not beable to timely repay the loan.  If interestrates increase, we will have higher interest payments, which could adverselyaffect our business.

 

The amount of debt financing that we need depends onthe amount of equity we raise in the Offering and whether we receive anyadditional grant proceeds or our anticipated site improvements from the City ofRochelle and DP Industrial.  We intendto seek debt financing from lenders who have provided debt financing to otherethanol projects in the past or who have expressed an interest in providingdebt financing to ethanol projects.  Weplan to locate these lenders either by attending trade conferences for lendersrelating to the ethanol industry or by contacting lenders who currently providedebt financing to the ethanol industry. These lenders include farm credit system financial institutions withTitle I and Title II authority under the Farm Credit Act, other state orfederally chartered financial institutions, and insurance companies.

 

**Item3.  Controls and Procedures.**

 

(a)                                  Evaluation of Disclosure Controls andProcedures.

 

Our President (the principal executive officer),Floyd A. Schultz, and our Treasurer (the principal financial officer), DouglasG. Foss, have evaluated our disclosure controls and procedures as of the end ofthe period covered by this report.  Disclosure controls and procedures aredesigned to provide a reasonable level of assurance that information requiredto be disclosed in the Company’s reports under the Securities and Exchange Actof 1934 is recorded and reported within the appropriate time periods.  Based upon that review, they have concludedthat these controls and procedures are effective.

 

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(b)                                 Changes in Internal Controls.

 

There have been no changes in our internal controlover financial reporting that occurred during the fiscal quarter covered bythis report that have materially affected, or are reasonably likely tomaterially affect, our internal control over financial reporting.

 

**PART II.      OTHERINFORMATION**

 

**Item 1.  Legal Proceedings.**

 

None.

 

**Item2.  Changes in Securities.**

 

(a)                                  None.

 

(b)                                 None.

 

(c)                                  None.

 

(d)                                 The Securities and Exchange Commissionoriginally declared our Registration Statement on Form SB-2 (SEC RegistrationNo. 333-96977), as amended (the “Registration Statement”), effective onJanuary 10, 2003.  We commenced our initial public offering of ourClass A and Class B Units on January 10, 2003.  We subsequentlyamended the Registration Statement to reflect certain changes from and additionsto the Registration Statement as it was originally declared effective, andceased our selling efforts pending effectiveness of the subsequently amendedRegistration Statement.  The Securitiesand Exchange Commission declared the subsequently amended Registration Statementeffective on May 8, 2003, and we thereupon resumed our sellingefforts.  We have not closed theOffering and are continuing to offer the units.  We have hired Northland Securities, Inc. to act as our SellingAgent to offer and sell the units on our behalf on a best efforts basis.  Northland Securities is an underwriter underthe Securities Act.  Our officers andmanagers may also participate in the offer and sale of the units.  We donot pay our officers or managers any compensation for services related to theoffer or sale of the units.

 

We registered a total of 45,000,000 Class A andClass B Units with an aggregate gross offering price of $45,000,000, or $1.00per unit.  We intend to close theOffering on December 31, 2003.  Asof September 30, 2003, we have received subscriptions for approximately2,747,000 units, or an aggregate of $2,747,000 of subscription payments.  We are depositing all subscription paymentsfrom the Offering in an escrow account.  We have not yet met theconditions to breaking escrow and therefore have not completed the sale of anyof the units subscribed.  We will notbreak escrow and complete the sale of any of the units subscribed until weraise at least the minimum amount offered. If we raise the minimum amount offered, then 10% of each investor’sinvestment will be released to us to pay for project development costs and wewill issue the investor units for 10% of the amount subscribed.  We will not break escrow and complete thesale of the remaining 90% of each investor’s subscription until we secure anexecuted commitment letter for $20,840,000 to $44,400,000 of debt financing(the $44,400,000 assumes that we only raise the minimum amount offered and donot receive any additional grant proceeds or site improvements from the City ofRochelle or DP Industrial).

 

From January 10, 2003 (the original effectivedate of the Registration Statement) to September 30, 2003, we incurred noexpenses for our account in connection with the issuance and distribution ofthe units registered for underwriting discounts and commissions, finders’ fees,expenses paid to or for underwriters. Other (and total) expenses incurred from January 10, 2003 toSeptember 30, 2003 for our account in connection with the issuance anddistribution of the units are estimated at $391,560.  None of these payments were direct or indirect payments to ourmanagers, officers or their associates, persons owning 10% or more of any classof our equity securities or our affiliates.**** From January 10, 2003 toSeptember 30, 2003, we did not receive or use any net offering proceeds.

 

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**Item 3.  Defaults UponSenior Securities.**

 

None.

 

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

 

None.

 

**Item5.  Other Information.**

 

None.

 

**Item 6.  Exhibits andReports on Form 8-K.**

 

(a)                  The following exhibits are included herein:

 
| 10.1   |   | Assignment  of Option Agreements with James D. Carmichael (Incorporated herein by  reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-QSB  for the quarter ended June 30, 2003 filed on August 14, 2003)                    |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                     |
| 10.2   |   | Option  Agreement with James D. Carmichael, as amended                                                                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.3   |   | First  Amendment to Real Estate Exchange Agreement with DP Industrial, LLC  (Incorporated herein by reference to Exhibit 10.3a to the Company’s  Quarterly Report on Form 10-QSB for the quarter ended June 30, 2003  filed on August 14, 2003) |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.4   |   | Annexation Agreement between the City of Rochelle and DP Industrial,  LLC                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                     |
| 10.5   |   | Rider to DP Industrial Annexation Agreement                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                     |
| 31     |   | Certifications pursuant to Section 302 of the Sarbanes-Oxley Act  of 2002 (Rules 13a-14 and 15d-14 of the Exchange Act)                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                     |
| 32     |   | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act  of 2002 (18 U.S.C. §1350)                                                                                                                                                                    |

 

(b)                 Reports on Form 8-K:

 

None.

 

**SIGNATURES**

 

Inaccordance with the requirements of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|   |                    | ILLINOIS  RIVER ENERGY, LLC                                |
|--------|-------------------------|------------------------------------------------------------|
|   |                    |                                                       |
| Date:  | November 14,  2003 |                                                       | /s/  Floyd A. Schultz |
|   |                    | Floyd  A. Schultz                                          |
|   |                    | President  *(Principal Executive Officer)*                 |
|   |                    |                                                       |
|   |                    |                                                       |
| Date:  | November 14,  2003 |                                                       | /s/  Douglas G. Foss |
|   |                    | Douglas  G. Foss                                           |
|   |                    | Treasurer  *(Principal Financial and Accounting  Officer)* |

 

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