**UNITEDSTATESSECURITIES 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 March 31, 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, Suite110  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 for suchshorter 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 for each of the issuer’s classesof common equity as of the latest practicable date:  As of May 10, 2003,there were 1,313,000 Class A Units outstanding.

 

Transitional Small 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     |
|           |
| CERTIFICATIONS |

 

i

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| **PART  I.** |   | **FINANCIAL INFORMATION** |
|--------------|--------|---------------------------|
|         |   |                      |
| **Item  1.** |   | **Financial Statements**  |

** **

** **

**ILLINOISRIVER ENERGY, LLC**(A Development Stage Company)

 

BALANCE SHEETS

 
|                                                                |   | **March 31,  2003** |       | **December 31,  2002** |       |
|---------------------------------------------------------------------|--------|---------------------|------------|------------------------|------------|
|                                                                |   | **(Unaudited)**     |       | **Audited**            |       |
|                                                                |   |                |       |                   |       |
| **ASSETS**                                                          |   |                |       |                   |       |
| **CURRENT ASSETS**                                                  |   |                |       |                   |       |
| Cash and cash equivalents                                           |   | $                   | 26,087     |                   | $          | 30,914 |   |
| Prepaid insurance                                                   |   | 1,282               |       | $                      | 3,208      |   |
| Other receivables                                                   |   | 55,670              |       | 0                      |       |
|                                                                |   |                |       |                   |       |
| Total Current Assets                                                |   | $                   | 83,039     |                   | $          | 34,122 |   |
|                                                                |   |                |       |                   |       |
| **PROPERTY AND EQUIPMENT**                                          |   |                |       |                   |       |
| Office equipment                                                    |   | $                   | 20,807     |                   | $          | 20,807 |   |
| Accumulated depreciation                                            |   | (2,610              | )          | (1,570                 | )          |
|                                                                |   |                |       |                   |       |
| Net Property and Equipment                                          |   | $                   | 18,197     |                   | $          | 19,237 |   |
|                                                                |   |                |       |                   |       |
| **OTHER ASSETS**                                                    |   |                |       |                   |       |
| Deposits and deferred land costs                                    |   | $                   | 21,000     |                   | $          | 20,000 |   |
| Deferred offering costs                                             |   | 283,292             |       | 218,078                |       |
|                                                                |   |                |       |                   |       |
| Total Other Assets                                                  |   | $                   | 304,292    |                   | $          | 238,078 |   |
|                                                                |   |                |       |                   |       |
| **TOTAL ASSETS**                                                    |   | $                   | 405,528    |                   | $          | 291,437 |   |
|                                                                |   |                |       |                   |       |
| **LIABILITIES  AND MEMBERS’ EQUITY (DEFICIT)**                 |   |                | ** ** |                   | ** ** |
|                                                                |   |                |       |                   |       |
| **CURRENT LIABILITIES**                                             |   |                |       |                   |       |
| Accounts payable                                                    |   | $                   | 468,582    |                   | $          | 317,618 |   |
| Note payable                                                        |   | 50,000              |       | 0                      |       |
| Current maturities of capital lease obligation                      |   | 1,067               |       | 1,030                  |       |
|                                                                |   |                |       |                   |       |
| Total Current Liabilities                                           |   | $                   | 519,649    |                   | $          | 318,648 |   |
|                                                                |   |                |       |                   |       |
| **LONG-TERM DEBT**, Less Current Maturities                         |   | 5,335               |       | 5,616                  |       |
|                                                                |   |                |       |                   |       |
| **MEMBERS’ EQUITY (DEFICIT)**                                  |   |                |       |                   |       |
| Member contributions, net of costs related to capital contributions |   | $                   | 568,476    |                   | $          | 562,976 |   |
| Deficit accumulated during development stage                        |   | (687,932            | )          | (595,803               | )          |
|                                                                |   |                |       |                   |       |
| Total Members’ Equity (Deficit)                                |   | $                   | (119,456   | )                      | $          | (32,827 | ) |
|                                                                |   |                |       |                   |       |
| **TOTAL LIABILITIES AND MEMBERS’ EQUITY (DEFICIT)**            |   | $                   | 405,528    |                   | $          | 291,437 |   |

 

See Accompanying Notes

 

1

----

 

**ILLINOIS RIVER ENERGY, LLC**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF OPERATIONS

 
|                                             |   | **Quarter Ended March 31,** |     | **Date of  Inception  (February 20,  2002) to** |   |
|--------------------------------------------------|--------|-----------------------------|----------|------------------------------------------------------|--------|
|                                             |   | **2003**                    |     | **2002**                                             |   | **March 31, 2003** |   |
|                                             |   | **(Unaudited)**             |     | **(Unaudited)**                                      |   | **(Unaudited)** |   |
|                                             |   |                        |     |                                                 |   |   |   |
| **REVENUE**                                      |   | $                           | 0        |                                                 | $      | 0 |   | $ | 0 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| **OPERATING EXPENSES**                           |   |                        |     |                                                 |   |   |   |
| Consulting fees                                  |   | $                           | 2,103    |                                                 | $      | 150,000 |   | $ | 152,103 |   |
| Legal fees                                       |   | 18,716                      |     | 500                                                  |   | 125,712 |   |
| Accounting fees                                  |   | 27,294                      |     | 0                                                    |   | 81,175 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| Project coordinator                              |   | 20,750                      |     | 6,750                                                |   | 88,250 |   |
| Construction contract                            |   | 0                           |     | 0                                                    |   | 89,904 |   |
| Site engineering                                 |   | 0                           |     | 0                                                    |   | 14,498 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| Office                                           |   | 17,005                      |     | 1,102                                                |   | 50,491 |   |
| Advertising and meetings                         |   | 6,985                       |     | 0                                                    |   | 12,042 |   |
| Insurance expense                                |   | 1,926                       |     | 0                                                    |   | 7,418 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| Management expense                               |   | 34,523                      |     | 60                                                   |   | 118,720 |   |
| Miscellaneous                                    |   | 60                          |     | 0                                                    |   | 5,617 |   |
| Depreciation                                     |   | 1,040                       |     | 0                                                    |   | 2,610 |   |
| Travel and mileage                               |   | 1,890                       |     | 56                                                   |   | 1,890 |   |
| Total Operating Expenses                         |   | $                           | 132,292  |                                                 | $      | 158,468 |   | $ | 750,430 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| **OPERATING LOSS**                               |   | $                           | (132,292 | )                                                    | $      | (158,468 | ) | $ | (750,430 | ) |
|                                             |   |                        |     |                                                 |   |   |   |
| **OTHER INCOME**                                 |   |                        |     |                                                 |   |   |   |
| Grant income                                     |   | $                           | 40,000   |                                                 | $      | 0 |   | $ | 60,000 |   |
| Other income                                     |   | 163                         |     | 0                                                    |   | 2,498 |   |
| Total Other Income                               |   | $                           | 40,163   |                                                 | $      | 0 |   | $ | 62,498 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| **DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE** |   | $                           | (92,129  | )                                                    | $      | (158,468 | ) | $ | (687,932 | ) |
|                                             |   |                        |     |                                                 |   |   |   |
| **Weighted average units outstanding**           |   | 1,313,000                   |     | 842,026                                              |   | 1,267,535 |   |
|                                             |   |                        |     |                                                 |   |   |   |
| **Loss per unit**                                |   | $                           | (0.07    | )                                                    | $      | (0.19 | ) | $ | (0.54 | ) |

 

SeeAccompanying Notes

 

2

----

 

**ILLINOIS RIVER ENERGY, LLC**

(A DEVELOPMENT STAGE COMPANY)

STATEMENTS OF CHANGES IN MEMBERS’ EQUITY

 
|                                                                           |   | **Quarter Ended March 31,** |     | **Date of  Inception  (February 20,  2002) to** |   |
|--------------------------------------------------------------------------------|--------|-----------------------------|----------|------------------------------------------------------|--------|
|                                                                           |   | **2003**                    |     | **2002**                                             |   | **March 31, 2003** |   |
|                                                                           |   | **(Unaudited)**             |     | **(Unaudited)**                                      |   | **(Unaudited)** |   |
|                                                                           |   |                        |     |                                                 |   |   |   |
| **MEMBERS’ EQUITY (DEFICIT) - BEGINNING OF PERIOD**                       |   | $                           | (32,827  | )                                                    | $      | 0 |   | $ | 0 |   |
|                                                                           |   |                        |     |                                                 |   |   |   |
| Founders’ member contributions, February 26, 2002, for 264,000 units      |   | 0                           |     | 67,000                                               |   | 67,000 |   |
|                                                                           |   |                        |     |                                                 |   |   |   |
| Seed investors’ member contributions, March 8, 2002, for 1,049,000  units |   | 0                           |     | 524,500                                              |   | 524,500 |   |
|                                                                           |   |                        |     |                                                 |   |   |   |
| Costs related to capital contributions                                         |   | 0                           |     | (23,024                                              | )      | (23,024 | ) |
|                                                                           |   |                        |     |                                                 |   |   |   |
| Member units subscribed                                                        |   | 5,500                       |     | (5,500                                               | )      | 0 |   |
|                                                                           |   |                        |     |                                                 |   |   |   |
| Deficit accumulated during development stage                                   |   | (92,129                     | )        | (158,468                                             | )      | (687,932 | ) |
|                                                                           |   |                        |     |                                                 |   |   |   |
| **MEMBERS’ EQUITY (DEFICIT) - END OF PERIOD**                             |   | $                           | (119,456 | )                                                    | $      | 404,508 |   | $ | (119,456 | ) |

 

SeeAccompanying Notes

 

3

----

 

**ILLINOIS RIVER ENERGY, LLC**

(ADEVELOPMENT STAGE COMPANY)

STATEMENTSOF CASH FLOWS

 
|                                                                                                                 |   | **Quarter Ended March 31,** |       | **Date of  Inception  (February 20,  2002) to** |       |
|----------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|------------------------------------------------------|------------|
|                                                                                                                 |   | **2003**                    |       | **2002**                                             |       | **March 31, 2003** |   |
|                                                                                                                 |   | **(Unaudited)**             |       | **(Unaudited)**                                      |       | **(Unaudited)** |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **CASH FLOWS FROM OPERATING ACTIVITIES**                                                                             |   |                        |       |                                                 |       |   |   |
| Deficit accumulated during development stage                                                                         |   | $                           | (92,129    | )                                                    | $          | (158,468 | ) | $ | (687,932 | ) |
| Adjustments to reconcile deficit accumulated during development stage  to net cash provided by operating activities: |   |                        |       |                                                 |       |   |   |
| Depreciation                                                                                                         |   | 1,040                       |       | 56                                                   |       | 2,610 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| (Increase) decrease in:                                                                                              |   |                        |       |                                                 |       |   |   |
| Prepaid insurance                                                                                                    |   | 1,926                       |       | 0                                                    |       | (1,282 | ) |
| Other current receivables                                                                                            |   | (55,670                     | )          | 0                                                    |       | (55,670 | ) |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Increase (decrease) in:                                                                                              |   |                        |       |                                                 |       |   |   |
| Accounts payable                                                                                                     |   | 118,956                     |       | 0                                                    |       | 297,120 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Net Cash Used By Operating Activities                                                                                |   | $                           | (25,877    | )                                                    | $          | (158,412 | ) | $ | (445,154 | ) |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES**                                                                             |   |                        |       |                                                 |       |   |   |
| Capital expenditures for equipment                                                                                   |   | $                           | 0          |                                                 | $          | (3,651 | ) | $ | (13,700 | ) |
| Deposits and deferred land costs                                                                                     |   | (1,000                      | )          | 0                                                    |       | (21,000 | ) |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Net Cash Used By Investing Activities                                                                                |   | $                           | (1,000     | )                                                    | $          | (3,651 | ) | $ | (34,700 | ) |
|                                                                                                                 |   |                        | ** ** |                                                 | ** ** |   | ** ** |
| **CASH FLOWS FROM FINANCING ACTIVITIES**                                                                             |   |                        |       |                                                 |       |   |   |
| Borrowings under note payable                                                                                        |   | $                           | 50,000     |                                                 | $          | 0 |   | $ | 50,000 |   |
| Capital lease obligation payments                                                                                    |   | (244                        | )          | 0                                                    |       | (705 | ) |
| Payments for the costs of raising capital                                                                            |   | (33,206                     | )          | 0                                                    |       | (134,854 | ) |
| Receipt of member contributions                                                                                      |   | 5,500                       |       | 586,000                                              |       | 591,500 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Net Cash Provided By Financing Activities                                                                            |   | $                           | 22,050     |                                                 | $          | 586,000 |   | $ | 505,941 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                                                             |   | $                           | (4,827     | )                                                    | $          | 423,937 |   | $ | 26,087 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **CASH AND CASH EQUIVALENTS - beginning of period**                                                                  |   | 30,914                      |       | 0                                                    |       | 0 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **CASH AND CASH EQUIVALENTS - end of period**                                                                        |   | $                           | 26,087     |                                                 | $          | 423,937 |   | $ | 26,087 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **SCHEDULE OF NONCASH INVESTING AND FINANCING  ACTIVITIES**                                                          |   |                        |       |                                                 |       |   |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Office equipment financed with capital lease                                                                         |   | $                           | 0          |                                                 | $          | 0 |   | $ | 7,107 |   |
| Member units subscribed                                                                                              |   | $                           | 0          |                                                 | $          | 5,500 |   | $ | 0 |   |
| Offering costs in accounts payable                                                                                   |   | $                           | 171,462    |                                                 | $          | 23,024 |   | $ | 171,462 |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| **SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION**                                                                |   |                        |       |                                                 |       |   |   |
|                                                                                                                 |   |                        |       |                                                 |       |   |   |
| Cash paid during the period for interest                                                                             |   | $                           | 233        |                                                 | $          | 0 |   | $ | 408 |   |

 

SeeAccompanying Notes

 

4

----

 

**ILLINOISRIVER ENERGY, LLC**(A Development Stage Company)

 

Notes to FinancialStatements

 

March 31, 2003

 

The statements included herein have been preparedby Illinois River Energy, 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 financial statementsfor the interim period, on a basis consistent with the annual audited financialstatements.  The adjustments made tothese financial statements consist only of normal recurring adjustments.  These financial statements should be read inconjunction with the financial statements and the summary of significantaccounting polices and notes thereto included in the Company’s RegistrationStatement on Form SB-2, as amended (SEC Registration No. 333-96977).

 

**1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

*Natureof Business*

 

Illinois River Energy, LLC (a Delaware Limited Liability Company) to belocated near Rochelle, Illinois, was organized to pool investors and to providea corn supply initially for a 50 million gallon per year ethanol plant, withthe intent to consider expanding capacity shortly after the start-up of theinitial plant.  As of March 31, 2003,the Company is in the development stage with its efforts being principallydevoted to organizational and project feasibility activities.  Preliminary design preparation began in late2002.

 

*FiscalReporting Period*

 

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

 

*AccountingEstimates*

 

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.

 

*Cashand Equivalents*

 

The Company considers all highly liquid debt instruments purchased witha maturity of three months or less to be cash equivalents.

 

The Company maintains its accounts primarily at two financialinstitutions.  At times, the Company’scash balances may exceed amounts insured by the Federal Deposit InsuranceCorporation.

 

*Propertyand Equipment*

 

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 areincluded in equipment.  Amortization ofequipment under 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.

 

5

----

 

*IncomeTaxes*

 

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.

 

**2.  DEVELOPMENT STAGE ENTERPRISE**

 

The Company was formed 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 the accompanying financial statements, the Company incurreda net loss of $92,129 and $158,468 during the periods ended March 31, 2003 and2002, respectively.  As of March 31,2003, current liabilities substantially exceed current assets and totalliabilities exceed total assets. Management has developed a plan, which wasadopted by the Board of Managers on March 21, 2003, to defer certain accountspayable until after offering proceeds have been raised and to obtain short termfinancing by issuing promissory notes with warrants to certain existing memberstotaling approximately $125,000.

 

The notes will bear interest at the prime rate plus 4% and contain awarrant to purchase one unit per $1 of principal lent to the Company at $1 perunit for five years from the date of issuance. 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,or if the Company is unable to close on the minimum amount of units, one yearfrom the 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. NOTE PAYABLE**

 

As of March 31, 2003, the Company issued a $50,000 promissory note, dueon demand, to one of its members who is also on the Board of Managers.  The parties intend to convert this note aspart of the bridge financing, with terms consistent with the bridge financing,as discussed above.

 

6

----

 

**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 Statement wasdeclared effective by the Securities and Exchange Commission (SEC) for up to20,000,000 Class B units and up to 45,000,000 Class A units less the number ofClass B units sold.  Both Class A and Bunits are available for sale at $1 per unit. Should the Company not raise theminimum of $25,000,000 through this offering by June 30, 2003, subject to extensionto December 31, 2003, the capital raised through the offering will be returnedto the respective investors. Should the Company raise the minimum of$25,000,000 through the offering, but not yet obtain a commitment letter fordebt financing from a lender, 10% of the subscription proceeds will be releasedto the Company to purchase the land and begin plant constructionactivities.  Thereafter, should the debtcommitment not be obtained, the remaining subscription proceeds raised throughthe offering will be returned to the respective investors.  As of March 31, 2003, the Company hasreceived subscriptions for 1,983,000 Class A units.  The proceeds from those subscriptions, however, are held inescrow and include certain rescission rights. The Company has not received any subscriptions for Class B units.

 

**5.  RELATED PARTY TRANSACTIONS**

 

At March 31, 2003, the Company included in accounts payable $3,875 owedto the project coordinator and $90,000 owed to the board of managers foradministrative per diem expenses, who are also investors in the Company. Forthe three month period ended March 31, 2003, the Company had incurred $20,750of project coordinator 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.  Themember will act as the project coordinator and be responsible for thecoordination of the completion 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 totalproject capitalization is due upon successful production of ethanol meetingdefined 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. These agreements require a total nonrefundable fee of $40,000 andprovide for additional fees based on the total project capitalization andequity investment.  A fee of 1.50% ofthe total equity financing of the project is due upon the release of offeringproceeds from escrow and a fee of 1.75% of the total project capitalization isdue at the financial close.  Anadditional .25% of the total project capitalization is due upon successfulcommissioning of the plant and production of ethanol meeting definedspecifications and guarantees and is payable in nine monthly installments.  Total project capitalization is estimated at$68 million, excluding certain site improvements, which the Company expects tobe provided by the City of Rochelle.  OnMarch 25, 2003, management entered into a termination agreement with thefinancial institution and entered into new agreements on similar terms withanother party.  A receivable balance of$55,670 is due from this financial institution as of March 31, 2003 forreimbursement of certain expenditures incurred by the Company.  Management does not anticipate anyadditional cost or commitments due to the change.

 

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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 ofunits in lieu of cash at the option of the cooperative.  In addition, the agreement requires anannual fee of 0.80% for five years based on the aggregate amount invested bythe cooperatives’ members.  This amountis capped at $50,000 annually.  The agreementis terminable upon 90 days notice by either the Company or the cooperative.

 

The Company signed a design-build agreement with an engineer andgeneral contractor to construct a plant for a fixed lump sum amount of $53.5million.  Plant construction iscontingent on securing financing for the project.

 

The Company entered into two option agreements for two adjacent parcelsof land.  The first option agreement isfor a forty-eight acre parcel for which the Company made a payment of $10,000.  This option, if exercised, allows theCompany to purchase the land for $14,500 per acre. The second option agreementis for a thirty-eight acre parcel for which the Company made a payment of$10,000.  This option, if exercised,allows the Company to purchase the land for $20,000 per acre.  Both options expire on July 4, 2003.  The Company considers these parcels of landas a viable site for its ethanol plant. The costs of these options are included in deposits and deferred landcosts on the balance sheet.  The optionpayments are nonrefundable, but will be applied towards the purchase of theland for the respective sites if the options are exercised.  If these options expire before they areexercised, the costs will be expensed at that time.

 

The Company has had preliminary discussions with the City of Rochelle,Illinois and expects to receive a commitment from the city to assist with theconstruction and improvement of the transportation and other infrastructure tothe plant.

 

**7.  SUBSEQUENT EVENT**

 

In April 2003 the Company entered into a land exchange agreement withan unrelated third party.  The Companywill exchange the land it has under option agreements for approximately 81acres of land the other party has under option agreements.  The exchange agreement is subject to a 30day inspection period and either party may terminate the agreement if notsatisfied with the physical condition of the other party’s land.  The exchange agreement is also conditionedon, among other things, each party executing an annexation agreement relatingto its respective site with the City of Rochelle by June 30, 2003, subject tothe review and approval of the other party. If the Company closes on the exchange agreement, it will also receive a$630,000 payment to cover certain costs relating to site infrastructure anddevelopment it has already incurred on the land it has under option or willincur on the land it would receive pursuant to the exchange.

 

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| **Item  2.** |   | **Management’s Discussion and  Analysis 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 orother similar expressions. These forward-looking statements are only ourpredictions and involve numerous assumptions, risks and uncertainties. Ouractual results or actions may differ materially from these forward-lookingstatements for many reasons, including the risks described in our RegistrationStatement on Form SB-2, as amended (SEC Registration No. 333-96977) andappearing elsewhere in this report. We are not under any duty to update theforward-looking statements contained in this report. We cannot guarantee futureresults, levels of activity, performance or achievements. We caution you not toput undue reliance on any forward-looking statements, which speak only as ofthe date of this report.  You should read this report and the documentsthat we reference in this report and have filed as exhibits, completely andwith the understanding that our actual future results may be materiallydifferent from what we currently expect. We qualify all of our forward-lookingstatements by these cautionary statements.

 

**Overview**

 

We are a start-up company in development stage. Weplan to build a corn-based ethanol processing facility that will produceethanol, distillers grains and carbon dioxide. 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 approximately120,000 tons of carbon dioxide and approximately 160,000 tons of distillersgrains 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 minimum of 25,000,000and an aggregate maximum of 45,000,000 Class A and Class B Units (the“Offering”).  We subsequently amended the Registration Statement toreflect certain changes from and additions to the Registration Statement thatwas originally declared effective.  TheSecurities and Exchange Commission declared the subsequently amendedRegistration Statement effective on 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, assuming we receive certain site improvements fromthe City of Rochelle and, if we close on the exchange agreement (describedbelow), DP Industrial, LLC.  We haveraised $591,500 in seed capital and plan to raise a minimum of $25,000,000 anda maximum of $45,000,000 in equity capital pursuant to the Offering, obtaincertain site improvements and secure the balance through federal, state andlocal grants and debt financing.  Wewill require a significant amount of debt financing to complete ourproject.  The amount of debt financingthat we need depends on the amount we raise in the Offering and whether wereceive the grants we intend to pursue or the anticipated site improvements. Wewill close on the entire Offering when we raise the minimum amount offered andsecure an executed commitment letter from a lender for our debt financing.However, an executed commitment letter is not a binding loan agreement. If weobtain an executed commitment letter, but the lender later declines the loan, thenwe will seek debt financing from other lenders. We have no agreement with anylender for the debt financing that we need. If we do not secure the debt financing that we need, we will not be ableto construct our proposed ethanol plant and may have to liquidate our assetsand 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 the maximum amount offered, we intend toconsider expanding the ethanol plant shortly after plant start-up. We do notintend to establish an internal sales organization to market our products andplan to sell our ethanol and distillers grains to third party distributors. Wealso plan to sell our carbon dioxide to a third party processor who may build aprocessing facility next to our ethanol plant. We have no agreement with anyparty to sell any of our expected products. We plan to pay commissions or feesto distributors to market and sell our products. We intend to hire staff onlyfor the direct operations of our ethanol business.

 

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

 

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**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 witha higher building height to accommodate an additional level in the main piperack for expansion purposes. If we raise the maximum amount offered, we intendto consider expanding the ethanol plant shortly after plant start-up. This isin part to maximize the payments potentially available to us under theCommodity Credit Corporation (CCC) Bioenergy Program. As described below,expanding production over several fiscal years of this program could generateadditional payments to us under the program. While we intend to considerpursuing this expansion strategy if we raise the maximum amount offered in theOffering, we currently have no agreements for the expansion of the ethanol plant.

 

Whether we expand the ethanol plant is contingent uponnumerous 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 managerswill determine, in their sole discretion, whether we expand the ethanol plant.Although we intend to consider expanding the ethanol plant if we raise themaximum amount offered, we cannot assure you that we will ever be in a positionto 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 Bioenergy Program makes payments of up to $7,500,000per year through fiscal year 2006 (September 30, 2006) to eligible ethanolproducers for increases in their production of ethanol over their prior year’sproduction. New production is eligible and is considered increased production.Payments under the program are subject to pro rata reduction if aggregatepayments to all producers in any one fiscal year exceed the maximum annualfunding of $150,000,000 authorized by Congress. In addition, payments under theprogram in any one fiscal year may be less if Congress does not fully fund theprogram for that fiscal year (funding for the program is subject to an annualappropriation).

 

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. Forexample, a producer that produces 30,000,000 gallons of ethanol this fiscalyear, but produced only 20,000,000 gallons last fiscal year is entitled topayment for one bushel of corn for every 2.5 bushels of corn used to produce 10,000,000gallons of ethanol, which represents this fiscal year’s increased productionover the prior fiscal year’s production. Under the Program, which assumes that1 bushel of corn produces 2.5 gallons of ethanol, the ethanol producer would beentitled to receive reimbursement for 1 bushel of corn for every 2.5 bushelsused for the increased ethanol production. The reimbursement drops to 1 bushelof corn for every 3.5 bushels used if the producer’s annual production capacityis equal to or more than 65,000,000 gallons. The per bushel value forreimbursement purposes is determined by the CCC in accordance with establishedterminal market prices announced daily by the Kansas City Commodity Office,adjusted by the county average differential for the county in which the ethanolplant is located and the applicable quality factors determined by the CCC. Ifthere is no established terminal market price, then the CCC will set the price.

 

Based on the program’s formula for calculatingpayments, we estimate that we would reach the $7,500,000 maximum per fiscalyear cap with approximately 21,000,000 gallons of increased production. Wearrived at this number by dividing 21,000,000 gallons by 2.5 to determine thenumber of bushels of corn used to generate the increased production. We thendivided the number of bushels of corn (8,400,000 bushels) by 2.5 to arrive atthe qualified number of bushels subject to reimbursement. Assuming that theprice of corn is $2.26 per bushel, we estimate that for 21,000,000 gallons ofincreased production, we would be entitled to receive the $7,500,000 maximumper fiscal year payment under the program. This means that a ramp-up ofproduction that straddles over several of the program’s fiscal years couldresult in higher aggregate payments under the program as compared to having allincreased production occurring within a single fiscal year.

 

In addition, there is a Federal Small Producer Creditthat provides a 10¢ per gallon tax credit for the first 15,000,000 gallons ofethanol produced annually. The tax credit is currently available only toproducers with an annual capacity of 30,000,000 gallons or less and isscheduled to expire on December 31, 2007. Therefore, under currentlegislation, our proposed ethanol plant would not be eligible for the taxcredit. However, legislation has been 

 

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introduced which, in its current form, would renew the tax credit andextend the benefits to ethanol plants with up to 60,000,000 gallons of annualcapacity. We cannot assure you that the legislation will pass. Ethanolproducers that qualify can deduct the credit from their federal income taxannually. However, the credit is considered taxable income and taxes must bepaid on the amount credited.

 

**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 offactors, including the availability and cost of corn, natural gas, water supplyand electric service, transportation costs, permitting requirements, andproximity 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 favorableattributes for locating a large scale ethanol plant, including:

 

•                  An abundant cornsupply, because according to the Illinois Agricultural Statistics Supplement2001, in the year 2001, approximately 669,000,000 bushels of corn were grownwithin a 100-mile radius of Rochelle, Illinois;

 

•                  Favorabletransportation logistics because Rochelle, Illinois is close to theChicago/Milwaukee area, one of the largest ethanol markets in the UnitedStates;

 

•                  Favorable railcosts because the City of Rochelle is situated on an intersection of BurlingtonNorthern Railroad Company’s and Union Pacific Railroad Company’s mainline railsystems. In addition, we can use the City of Rochelle’s short line rail systemthat connects into Burlington Northern’s and Union Pacific’s main rail linewithout any switching fees;

 

•                  Close proximityto the intermodal facility for rail and truck, which should bring significanttruck traffic to the area and allow us to pick and choose from among manypossible subcontractors to haul our products;

 

•                  The availabilityof city run utilities that provides readily usable water and electricity atsubstantial savings as compared to other Illinois sites we considered; and

 

•                  The GreaterRochelle Economic Development Authority’s assistance with certain siteimprovements and its willingness to assist us with applying for grants forwhich we may be eligible.

 

We have executed options with unaffiliated privatelandowners to purchase an 86 acre site near Rochelle, Illinois forapproximately $1,468,000. We paid an aggregate option fee of $20,000 for theoptions, which will be credited against the purchase price if we exercise theoptions. If we do not exercise the options, then we will forfeit the $20,000option fee. The options expire on July 4, 2003. We have begun preliminarysite investigation work, and have completed the following:

 

•                  Boundary Survey

 

•                  Topography Map

 

•                  Preliminary TestPit Investigation

 

•                  Preliminary SiteLayout

 

•                  Soil Borings

 

We have also completed a Phase I Environmental Site Assessment of the86 acre site, which revealed no evidence of recognized environmental conditionson the site. We have also determined that no endangered species exist on thesite and have prepared a location issues report.

 

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In the alternative, we may build the ethanol plant onan 81 acre site located near Rochelle, Illinois, approximately half a milesouth of the 86 acre site. A Phase I Environmental Site Assessment of the 81acre site has been completed and revealed no recognized environmentalconditions on the site.

 

To secure the 81 acre site, we have entered into anagreement with DP Industrial, LLC, an unaffiliated third party, under which wewould exchange the 86 acre site for the 81 acre site immediately afterpurchasing the 86 acre site. When considering entering into the exchangeagreement, our board of managers considered, among other things, the following:

 

•                  Anticipatedbuilding conditions on the two sites, which we expect will be more favorable atthe 81 acre site because of lower water tables and better overall drainage;

 

•                  The location ofthe two sites, both of which are located on and have access to the same rail andhighway transportation systems;

 

•                  The availabilityof utilities at the two sites, both of which have access to the same gas,electric and other utility services; and

 

•                  Our belief thatmoving the ethanol plant to the 81 acre site will not change the timing,requirements or consideration of our air pollution construction permitapplication.

 

Upon executing the exchange agreement, we received anon-refundable $30,000 payment from DP Industrial to cover a portion of ourcosts relating to site infrastructure and development. In addition, when weclose on the exchange agreement, DP Industrial will, among other things,provide us with the following:

 

•                  An additional$630,000 payment to cover other costs relating to site infrastructure anddevelopment that we have already performed on the 86 acre site or will performon the 81 acre site;

 

•                  Construction ofwater and sewer extensions and road improvements to the 81 acre site at no costto us; and

 

•                  Paying the first$75,000 of the incremental cost to build a 125 foot exhaust stack rather than a73 foot exhaust stack, and 50% of all incremental costs over $75,000, up to anaggregate maximum payment of $150,000.

 

Under the exchange agreement, each party has 30 daysto complete its environmental and site investigations, and may terminate theagreement if not satisfied with the physical condition of the site for anyreason. The exchange is also conditioned on each party executing an annexationagreement relating to its respective site with the City of Rochelle by June 30,2003, subject to the review and approval of the other party. We expect that theannexation agreement relating to the 81 acre site will require the City ofRochelle to extend rail to that site similar to its undertaking with respect tothe 86 acre site, as described in our letter of understanding with the City.The exchange is also conditioned on each party being satisfied with thecondition of ownership of the other party’s site. If we purchase the 86 acresite but do not close on the exchange agreement, we intend to proceed with theproject and construct the ethanol plant on the 86 acre site.

 

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

 

•                  The total costof the project;

 

•                  The regionalprice of ethanol, distillers grains and carbon dioxide;

 

•                  Productioncosts;

 

•                  General andadministrative expenses; and

 

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•                  Interestexpenses.

 

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 currently estimate that total project costs will beapproximately $67,000,000 to $68,000,000, or $1.34 to $1.36 per gallon ofestimated annual ethanol production, assuming we receive certain siteimprovements from the City of Rochelle and, if we close on the exchangeagreement, DP Industrial. We have entered into a preliminary design-buildagreement with Lurgi PSI to construct the ethanol plant for a fixed lump sumprice of $53,500,000, which translates into an ethanol plant construction costof $1.07 per gallon of estimated annual ethanol production.

 

According to Oil Price Information Service, theaverage price of ethanol over the past five years in Illinois, Minnesota andColorado was approximately $1.25 per gallon. According to the Commodity ServicesCorporation, the average FOB Chicago price of distillers grains over the pastfive years was approximately $96 per ton, excluding commissions. We believedthat these historical prices were reasonable and warranted our moving forwardon the project. However, we cannot assure you that we will receive these pricesfor our products or that we will be able to operate profitably.  Based upon our preliminary discussions withseveral carbon dioxide processors, we also believe that we can sell about halfof the raw carbon dioxide that we produce (or 60,000 tons annually).

 

Controlling costs is fundamental to the success of anyethanol plant. We expect that corn will be the principal cost of our revenue.Based on the process guarantees of our preliminary design-build agreement, wewill need to process approximately 17,800,000 bushels of corn annually.According to John Stewart and Associates, the average price of corn in theRochelle, Illinois area from 1992 through 2001, excluding the highest andlowest annual corn prices, is approximately $2.23 per bushel. Based on theseaverages, we believe that our cost of corn for our ethanol plant in theRochelle, Illinois area will compare favorably to other similarly sized ethanolproducers located in other areas of the state of Illinois. However, corn priceschange constantly and we cannot assure you that our corn costs will not besignificantly 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 estimate that offering expenses will be approximately $350,000. Weanticipate paying our Selling Agent, Northland Securities, Inc. a placement feeequal to 3.25% of the equity raised in the Offering. 1.5% of the fee is due onthe date or dates that offering proceeds are released from escrow and areavailable for our immediate use and the remaining 1.75% is due at the time offinancial close. By financial close, we mean when we close on all projectfinancing, including our debt financing. We have also agreed to pay the SellingAgent an additional fee of .25% of the equity raised in the offering. Thisadditional fee is due and payable in nine monthly installments after ethanolproduction at the ethanol plant meets design specifications on a daily basisand all production meets the guarantees provided by engineers and contractors.We have also agreed to pay a finder a fee equal to 4% of the offering price perunit for all sales to members of the finder who were in good standing andlisted on its membership roster as of June 1, 2002. Because the number ofunits that we will sell to these members is not determinable as of the date ofthis prospectus, we have estimated the aggregate finder’s fee at $320,000 ifthe minimum is sold and $400,000 if the maximum is sold. The finder may electto receive Class A Units in lieu of its finder’s fee at a price of $1.00per 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 offeredin the Offering. We have also agreed to pay the finder an annual fee of .80% ofthe offering price per unit sold to these members, up to a maximum of $50,000per year, for five years after the financial closing date. By financial closingdate, we mean the date upon which we secure an executed commitment letter forour debt financing, which along with proceeds from the sale of units, will besufficient 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.

 

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|                                   |   | **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 anaggregate placement fee payable to Northland Securities of 3.25% of the equityraised in the Offering.

(2)                Reflects estimatedfinder’s fees of $320,000 if the minimum is sold and $400,000 if the maximum issold.

 

We plan to use a portion of the net proceeds from theoffering to repay $125,000 in interim bridge financing from our managers andothers. We plan to use the remaining net proceeds, as well as funds fromfederal, state and local grants and our debt financing to purchase a site,construct the ethanol plant and fund start-up costs. A portion of the proceedswill also be used to purchase the initial inventory of corn, chemicals, yeastand denaturant, our major raw materials and to cover other operating costsuntil we begin selling ethanol and collecting on our accounts receivable.

 

**Plan of Operation to Close of theOffering**

 

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 to meet our target construction schedule,we intend to use the proceeds to accomplish 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 costs andexpenditures until we close the Offering. These are only estimates and ouractual costs and expenditures could be much higher.

 

| Cost of site             |   | $       | 1,448,000 |   |
|--------------------------|--------|---------|-----------|--------|
| Site work                |   | 420,000 |      |
| Permits                  |   | 95,000  |      |
| Project  coordinator     |   | 60,000  |      |
| Offering  expenses       |   | 238,000 |      |
| Preliminary  engineering |   | 280,000 |      |
| Working capital          |   | 84,000  |      |
|                     |   |    |      |
| Total                    |   | $       | 2,625,000 |   |

 

We are obtaining $125,000 in interim bridge financingfrom our managers and others to help fund a portion of these costs andexpenditures on an interim basis prior to our receiving any proceeds from theOffering. We estimate that if we receive $2,500,000, if the minimum number ofunits offered is sold, and $4,500,000, if the maximum 

 

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number of units offered is sold, we will have sufficient cash on handto fund the remaining costs and expenditures until we close the Offering andwithdraw the remaining 90% of the subscription proceeds held in escrow. We planto spend approximately $1,448,000 to acquire the 86 acre site, which we mayexchange for the 81 acre site. We expect that we will spend approximately$795,000 on site work, permitting and preliminary engineering costs. We alsoplan to pay approximately $238,000 of costs related to the Offering, includinglegal, accounting and printing fees. We expect that our consulting costs andworking capital needs will total approximately $144,000. If we do not havesufficient cash on hand or if we decide to acquire a site and begin certainsite work prior to our closing on all or a portion of the Offering, it will benecessary for us to borrow other funds. We currently have no commitments forthis financing.

 

**Plan of Operations to Start-up ofEthanol 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. If we secure the debt financing that we need and complete thesale of the remaining 90% of the units subscribed, we expect to have sufficientcash on hand to cover our costs through start-up operations.  We expect that we will have sufficient cashon hand to cover development costs, including, but not limited to, installationof utilities, construction, equipment acquisition, and interest expenses. Inaddition, we expect to have sufficient cash on hand to cover our operating andadministrative costs, such as raw materials, personnel, general andadministrative expenses, and legal and accounting fees for the first few weeksof operations until we begin collecting payment for the ethanol, distillersgrains and carbon dioxide we produce and sell.

 

Our financing plan assumes that the City of Rochelleprovides us with certain site improvements. We have not executed a definitiveagreement with the City of Rochelle to fund these improvements. We only have apreliminary non-binding letter of understanding, which outlines whatimprovements the City of Rochelle is proposing to provide for the 86 acre site,but does not obligate the City to provide these improvements. Under the letterof understanding, the City of Rochelle will provide us with the extension ofrail to the site and a portion of road improvements and extension of water andsewer to the site.

 

In exchange for financial assistance relating to the aboveimprovements, the City of Rochelle is requiring that approximately48 acres of the 86 acre site which is currently not part of the City beannexed into the City. We are negotiating with the City on an annexationagreement that will provide for the annexation of the 48 acres in exchangefor the City’s assisting us with the above improvements. The annexation willrequire a public hearing before the Planning Commission regarding theannexation agreement. This hearing requires that 30 days prior notice begiven to the public. If the Planning Commission approves the annexationagreement, then we will proceed to a public hearing before the city council.This hearing also requires that 30 days prior notice be given to thepublic. If the city council approves, then the annexation agreement will becomeeffective. Once the annexation is complete, property taxes will be assessed onthe entire site by the City of Rochelle and Ogle County. If the annexation isnot completed, then the City of Rochelle will assess property taxes only on theapproximately 38 acres of the site that is currently part of the City. OgleCounty will continue to assess property taxes on the entire site.

 

We have executed an agreement with DP Industrial toexchange the 86 acre site for an 81 acre site located approximately half a milesouth of the 86 acre site. If we close on the exchange agreement and use the 81acre site, we expect DP Industrial to provide the necessary water and sewerextensions and road improvements to that site at no cost to us. Also, theexchange is conditioned on each party executing an annexation agreementrelating to its respective site with the City of Rochelle. We expect that theannexation agreement relating to the 81 acre site will require the City ofRochelle to provide us with the extension of rail to that site similar to thatdescribed in our letter of understanding with the City regarding the 86 acresite.

 

We believe we may be eligible for federal, state, andlocal grants to help fund our project. We have engaged a professional grantwriter to assist us with preparing grant applications and proposals. We havebeen awarded a grant from the Illinois Corn Marketing Board for $20,000. Wereceived the proceeds from this grant on November 25, 2002. We have also beenawarded a grant from the Illinois AgriFirst Program for $40,000. We receivedthe proceeds from this grant on February 11, 2003. In addition, we have beenawarded a $25,000 grant from the Illinois Department of Commerce and CommunityAffairs to assist with site engineering drawings. We received $20,000 of thegrant on April 7, 2003 and will receive the remaining $5,000 uponsubmitting a project completion certification form. We have no bindingcommitment for 

 

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any other grants. We cannot assure you that we will receive anyadditional grants. If we do not receive additional grant proceeds and theanticipated site improvements, we will need to secure additional debt financingto cover any shortfall. We cannot assure you that we will be able to obtain anyadditional debt financing 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. Thefollowing schedule assumes that if we use the 86 acre site, the City ofRochelle will provide us with the extension of rail to that site and a portionof road improvements and extension of water and sewer to the site. If weinstead close on the exchange agreement and use the 81 acre site, the scheduleassumes that DP Industrial will provide us the water and sewer extensions androad improvements and the City of Rochelle will provide us with the extensionof rail. Because the funding we receive from the City of Rochelle and DP Industrialwill come in the form of site improvements, we have not included the source anduse of the funds for these improvements in the schedule below. The followingschedule also assumes that we build a 50,000,000 gallon per year ethanol plantand that we receive $1,020,000 from grants. The information set forth below areonly 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 are obtaining $125,000 in interim bridge financingfrom our managers and others to bridge the timing differences between ourreceipt of estimated sources of funds and our expenditure of estimated uses offunds. Obtaining the bridge financing does not represent an additional sourceof funds for the project because it will be repaid from the net proceeds of theOffering when we complete the sale of the minimum offering amount. Similarly,the use of the bridge financing does not increase the total estimated uses offunds because the expenses we plan to pay with the bridge financing are alreadyincluded in the estimated uses of funds shown on the schedule below. Becausethe use of bridge financing does not increase the total estimated uses of fundsfor the project and will ultimately be funded by the Offering proceeds, thereceipt and repayment of the bridge financing are not specifically shown on theschedule below.

 

**Sourcesof Funds:**

 

|                                 |   | **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** | ** ** |

 

**Uses ofFunds:**

 

|                                    |   | **Minimum** |           | **Maximum** |   |
|-----------------------------------------|--------|-------------|----------------|-------------|--------|
| Plant  Construction(3)                  |   | $           | 53,500,000     |        | $      | 53,500,000 |   |
| Construction  Contingency               |   | 1,350,000   |           | 1,350,000   |   |
| Site Acquisition                        |   | 1,468,000   |           | 1,468,000   |   |
| Site  Infrastructure and Development(4) |   | 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(5)                     |   | 2,219,000   |           | 2,197,000   |   |
| Offering  Expenses                      |   | 350,000     |           | 350,000     |   |
| Selling Agent’s  Fee(6)            |   | 812,500     |           | 1,462,500   |   |
| Finder’s Fee(7)                    |   | 320,000     |           | 400,000     |   |
| Capitalized  Interest(8)                |   | 900,000     |           | 0           |   |
| Sales Taxes                             |   | 150,000     |           | 150,000     |   |
| ***Financing Costs:***                  |   |        |           |        |   |
| Consulting and  Debt Placement Fee(9)   |   | 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(10)         |   | 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** | ** ** |

 

16

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(1)           Assumes we complete thesale of an aggregate minimum of 25,000,000 units and an aggregate maximum of45,000,000 units in the Offering.

 

(2)           Represents $586,000 ofseed capital previously raised (excludes subscription receivable ofapproximately $5,000, which has been received as of March 31, 2003) less thecost of raising capital of approximately $23,000.

 

(3)           Assumes we use the 86acre site. If we instead close on the exchange agreement and use the 81 acresite, we will construct a 125 foot exhaust stack rather than a 73 foot exhauststack at an anticipated maximum incremental cost of $219,000, of which our costnet of DP Industrial’s reimbursement will be up to $72,000.

 

(4)           Assumes we use the 86acre site. If we instead close on the exchange agreement and use the 81 acresite, we may realize cost savings on site infrastructure and development inpart because DP Industrial will construct all water and sewer extensions androad improvements to the 81 acre site and in part because DP Industrial willprovide us an additional $630,000 payment to cover costs relating to siteinfrastructure and development that we have performed on the 86 acre site orwill perform on the 81 acre site. There may also be additional expenses as aresult of the exchange. We will allocate any net cost savings to constructioncontingency and working capital.

 

(5)           Reflects consultingfees payable to GreenWay Consulting, LLC at the time we close on our seniordebt financing. We have also agreed to pay GreenWay an additional fee of .75%of the total sources of funds for the project, excluding seed capital. Thisadditional fee is due and payable in nine monthly installments after ethanolproduction at the ethanol plant meets design specifications on a daily basisand all production meets the guarantees provided by engineers and contractors.

 

(6)           Reflects an aggregateplacement fee payable to Northland Securities of 3.25% of the equity raised inthe Offering.

 

(7)           Reflects estimatedfinder’s fees of $320,000 if the minimum is sold and $400,000 if the maximum issold.

 

(8)           Net of interest incomeearned on offering proceeds.

 

(9)           Includes a consultingfee payable to Northland Securities of 1.75% of total sources of funds for theproject, excluding seed capital and the equity raised in the Offering.

 

17

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(10)     Includes accrued per diemfees payable to our managers as of March 31, 2003 of $90,000, plusestimated additional per diem fees from March 31, 2003 to start-up of theethanol plant of approximately $35,750.

 

We estimate that our expenses relating to the Offeringwill total approximately $350,000.  Weestimate that our financing cost for our debt financing will totalapproximately $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 commitmentfees and consulting and debt placement fees, as well as out-of-pocket expensessuch as title insurance, legal fees, appraisal costs and filing fees. Becausewe intend to capitalize all of our interest expenses and not make any paymentson our debt financing until we begin start-up operations, we estimate that bythe time we begin start-up operations, capitalized interest will totalapproximately $900,000 if the minimum number of units offered is sold. We expectthat we will not have capitalized interest if we raise the maximum amountoffered because our interest earnings on the Offering proceeds should offsetour interest expenses. We estimate that we will spend approximately $109,000 onmanagers and officers’ insurance, builder’s risk insurance, general commercialliability, workers’ compensation and property insurance for our business.Because our consulting fees are based upon our total project cost, we expectthat our consulting fees will total approximately $2,219,000 if we raise theminimum amount offered and $2,197,000 if we raise the maximum amount offered.We also expect to spend approximately $100,000 to procure necessary permits. Wehave spent approximately $92,000 to organize our limited liability company,including legal, accounting and related expenses.

 

We expect to spend the majority of our funds,approximately $58,018,000, on site acquisition, site preparation, andconstruction of the ethanol plant, infrastructure, equipment and sales taxes.These costs include leveling and grading the site, general site work to preparefor construction of the ethanol plant, preparing and pouring foundations, andmaterial and labor to construct the plant and ancillary facilities. We willalso be purchasing and installing ethanol production equipment, such as pumps,grinders, processing equipment, storage tanks and conveyors. We expect thatLurgi PSI will handle construction, equipment purchases and installation, whichwe will pay for by making monthly progress payments based on the work completedand invoiced to us by Lurgi PSI. If we successfully construct the ethanolplant, we anticipate spending approximately $3,700,000 on start-up costs. Theseinclude costs to procure spare parts, corn, chemicals, yeast and othersupplies, and other pre-production costs. We also plan to have approximately$250,000 of cash on hand to fund other working capital needs.

 

**Administration**

 

We currently do not have a full-time office staff, andwe do not expect to retain one until the ethanol plant is near completion.Until then, we are dependent upon our Associate Vice President—Chief OperatingOfficer, our part-time officers and the board of managers to maintain our booksand records. These individuals are responsible for complying with the rules andregulations promulgated under the Securities and Exchange Act of 1934concerning the maintenance of accurate books and records, and the timelysubmission of periodic reports and other requirements with the Securities andExchange Commission.

 

**Operating Expenses**

 

When the ethanol plant nears completion, we expect toincur various operating expenses, such as supplies, utilities and salaries foradministration and production personnel. Along with operating expenses, weanticipate that we will have significant expenses relating to financing andinterest. We have allocated funds in our capital structure for these expenses,but cannot assure you that the funds allocated will be sufficient to coverthese expenses. We may need additional funding to cover these costs ifsufficient funds are not available or if costs are higher than expected.

 

**Employees**

 

Upon completion of the ethanol plant, we expect tohave approximately 28 employees, including 22 in ethanol production operations,and six in general management and administration. We will not maintain aninternal sales organization. We anticipate that we will need the followingpersonnel to operate and manage our ethanol plant:

 

18

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| **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 March 31, 2003, we had cash and cash equivalentsof $26,087 and total assets of $405,528. To date, we have raised $591,500 inseed capital, which we have used to fund our organization and operation todate. As of March 31, 2003, we had current liabilities of $519,649, whichconsists primarily of our accounts payable. Since our inception onFebruary 20, 2002 through March 31, 2003, we have an accumulated deficitof $687,932. Total members’ equity as of March 31, 2003 was ($119,456). Sinceinception, we have generated no revenue from operations, and cash flowsprovided by financing activities through March 31, 2003 consists primarily ofmember contributions.

 

We are obtaining $125,000 in interim bridge financingfrom our managers and others to help fund a portion of our estimated costs andexpenditures on an interim basis prior to our receiving any proceeds from theOffering. We are issuing promissory notes together with warrants to purchaseClass A Units to each person who is providing us the bridge financing. Thenotes pay interest at a rate of prime plus four percent per annum. We willnot make any principal or interest payments on the notes until we complete thesale of the minimum offering amount, at which time the notes will become dueand payable. If we do not complete the sale of the minimum offering amount, thenotes will become due and payable one year 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. Thewarrants are exercisable at any time for a period of five years from the dateof issuance.

 

As of March 31, 2003, our current liabilitiessubstantially exceeded our current assets and our total liabilities exceededour total assets. We have continued to incur losses since that time. Inaddition to obtaining the interim debt financing described above, we plan todefer certain accounts payable until after we have obtained sufficient proceedsfrom the Offering. Our ability to continue as a going concern is dependent onthe execution and success of these plans and a successful completion of theOffering. 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 and amaximum of $45,000,000 in the Offering. Depending on the results of theOffering, we believe that the project will cost a total of approximately$67,000,000 to $68,000,000, assuming we receive certain site improvements fromthe City of Rochelle and, if we close on the exchange agreement, DP Industrial.We plan to finance the project with seed capital, proceeds from the Offering,federal, state and local grants, assistance with site improvements and debtfinancing. Other than two grants totaling $45,000, we have no commitment forany other grants. We do not have any commitments for the debt financing that weneed. Completion of the proposed ethanol plant depends on our ability tosatisfy all conditions to breaking escrow and close on the entire Offering.

 

19

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We expect that our debt financing will be in the formof a construction loan that will convert to a permanent loan when we beginoperations. We also expect that the loan will be secured by all of our real propertyand substantially all of our other assets, including receivables andinventories. 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 capitalizeall of our interest until we commence start-up operation, which means that wewill not make any payment on the loan until we construct the ethanol plant andbegin producing ethanol. We expect that our debt financing will consist of aconstruction loan with a term of 13 months, which will then convert to apermanent loan when we begin operations. We expect that the permanent loan willbe for a term of 120 months. We expect to repay the permanent loan throughfixed quarterly payments of principal and interest beginning after we commenceoperations. If the project suffers delays, we may not be able to timely repaythe loan. If interest rates increase, we will have higher interest payments,which could adversely affect our business.

 

The amount of debt financing that we need depends onthe amount of equity we raise in the Offering and whether we receive any of thegrants we intend to pursue or assistance from the City of Rochelle. 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. We plan to locate these lenders either byattending trade conferences for lenders relating to the ethanol industry or bycontacting lenders who currently provide debt financing to the ethanolindustry. 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.

 

**Item 3:****          Controlsand Procedures.**

 

(a)                                  Evaluationof Disclosure Controls and Procedures.

 

Our President (the principal executive officer),Floyd  A. Schultz, and our Treasurer(the principal financial officer), Douglas G. Foss, have reviewed ourdisclosure controls and procedures within 90 days prior to the filing of thisreport.  Based upon this review, these officers believe that ourdisclosure controls and procedures are effective in ensuring that materialinformation related to us is made known to them by others within the Company.

 

(b)                                 Changesin Internal Controls.

 

There were no significant changes in our internalcontrols or in other factors that could significantly affect these controlssubsequent to the date of their evaluation.

 

**PART II****.    OTHER INFORMATION**

 

**Item 1.****           LegalProceedings.**

 

None.

 

**Item 2.****           Changesin Securities.**

 

The Securities and Exchange Commission originallydeclared our Registration Statement on Form SB-2 (SEC Registration No.333-96977), as amended (the “Registration Statement”), effective on January 10,2003.  We commenced our initial public offering of our Class A and Class BUnits on January 10, 2003.  We subsequently amended the Registration Statementto reflect certain changes from and additions to the Registration Statementthat was originally declared effective, and ceased our selling efforts pendingeffectiveness of the subsequently amended Registration Statement.  The Securities and Exchange Commission declaredthe subsequently amended Registration Statement effective on May 8, 2003, andwe thereupon resumed our selling efforts. We have not closed the Offering and are continuing to offer the units.We have hired Northland Securities, Inc. to act as our Selling Agent to offerand 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.

 

20

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We registered a total of 45,000,000 Class A and ClassB Units with an aggregate gross offering price of $45,000,000, or $1.00 perunit. We intend to close the Offering on June 30, 2003.  The board of managers, in its discretion,may extend the Offering to no later than December 31, 2003.  As of March 31, 2003, we have receivedsubscriptions for approximately 1,983,000 units, or an aggregate of $1,983,000of subscription payments. We are depositing all subscription payments from theOffering in an escrow account.  We have not yet met the conditions tobreaking escrow and therefore have not completed the sale of any of the unitssubscribed. In addition, each of these subscriptions are subject to certainwithdrawal rights as described in the Registration Statement.  We will not break escrow and complete thesale of any of the units subscribed until we raise at least the minimum amountoffered.  If we raise the minimum amountoffered, then 10% of each investor’s investment will be released to us to payfor project development costs and we will issue the investor units for 10% ofthe amount subscribed.  We will notbreak escrow and complete the sale of the remaining 90% of each investor’ssubscription until we secure an executed commitment letter for $20,840,000 to$44,400,000 of debt financing (the $44,400,000 assumes that we only raise theminimum amount offered and do not receive any additional grant proceeds or siteimprovements from the City of Rochelle or DP Industrial, Inc.).

 

From January 10, 2003 (the original effective date ofthe Registration Statement) to March 31, 2003, we incurred no expenses for ouraccount in connection with the issuance and distribution of the unitsregistered for underwriting discounts and commissions, finders’ fees, expensespaid to or for underwriters.  Other (and total) expenses incurred for thisperiod were approximately $65,000. None of these payments were direct orindirect payments to our managers, officers or their associates, persons owning10% or more of any class of our equity securities or our affiliates.  From January 10, 2003 to March 31, 2003, wedid not receive or use any net offering proceeds.

 

**Item 3.****           DefaultsUpon Senior Securities.**

 

None.

 

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

 

None.

 

**Item 5****.****           OtherInformation.**

 

None.

 

**Item 6****.****           Exhibitsand Reports on Form 8-K.**

 

(a)          The following exhibitsare included herein:

 

1.1                           AgencyAgreement with Northland Securities, Inc. (Incorporated herein by reference toExhibit 1.3 to Post-Effective Amendment No. 1 to the Company’sRegistration Statement on Form SB-2 filed on March 31, 2003 (SECRegistration No. 333-96977)

1.2                           Amendmentto Agency Agreement with Northland Securities, Inc. (Incorporated herein byreference to Exhibit 1.3.1 to Post-Effective Amendment No. 4 to the Company’sRegistration Statement on Form SB-2 filed on May 14, 2003 (SEC Registration No.333-96977))

4.1                           EscrowAgreement, as amended (Incorporated herein by reference to Exhibit 4.4 toPost-Effective Amendment No. 1 to the Company’s Registration statement onForm SB-2 filed on March 31, 2003 (SEC RegistrationNo. 333-96977)

4.2                           Noticeof Amendment to Escrow Agreement (Incorporated herein by reference to Exhibit4.4.1 to Post-Effective Amendment No. 4 to the Company’s Registration Statementon Form SB-2 filed on May 14, 2003 (SEC Registration No. 333-96977))

10.1                     ConsultingAgreement with McCabe & Associates, Inc., as amended (Incorporated hereinby reference to Exhibit 10.1 to Post-Effective Amendment No. 1 to the Company’sRegistration Statement on Form SB-2 filed on March 31, 2003 (SEC RegistrationNo. 333-96977))

10.2                     FinancialServices Agreement with Northland Securities, Inc. (Incorporated herein byreference to Exhibit 10.3 to Post-Effective Amendment No. 1 to the Company’sRegistration Statement on Form SB-2 filed on March 31, 2003 (SEC RegistrationNo. 333-96977))

10.3                     Form ofSubscription Agreement for Bridge Financing (Incorporated herein by referenceto Exhibit 10.10 to Post-Effective Amendment No. 1 to the Company’sRegistration Statement on Form SB-2 filed on March 31, 2003 (SEC RegistrationNo. 333-96977))

 

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10.4                     Real EstateExchange Agreement with DP Industrial, LLC (Incorporated herein by reference to Exhibit 10.11 to Post-EffectiveAmendment No. 3 to the Company’s Registration Statement on Form SB-2 filed onMay 2, 2003 (SEC Registration No. 333-96977))

99.1                     CertificationPursuant to 18 U.S.C. § 1350

 

(b)         Reports on Form 8-K:

 

On January 22, 2003, theCompany filed a Current Report on Form 8-K reporting on its entering into anagency agreement with U.S. Bancorp Piper Jaffray Inc.

 

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SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrantcaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 

 
|   |         | ILLINOIS RIVER ENERGY, LLC                                |
|--------|--------------|-----------------------------------------------------------|
|   |         |                                                      |
|   |         |                                                      |
| Date:  | May 15, 2003 |                                                      | /s/ Floyd A.  Schultz |
|   |         | Floyd A. Schultz                                          |
|   |         | President *(Principal Executive Officer)*                 |
|   |         |                                                      |
|   |         |                                                      |
| Date:  | May 15, 2003 |                                                      | /s/ Douglas G.  Foss |
|   |         | Douglas G. Foss                                           |
|   |         | Treasurer *(Principal Financial and Accounting  Officer)* |

 

23

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**CERTIFICATIONS**

 

I, Floyd A. Schultz, certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-QSB of Illinois River Energy,LLC;

 

2.                                     Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                     Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                     Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)                                   designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period inwhich this quarterly report is being prepared;

 

b)                                  evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                    presented in this quarterly report ourconclusions about the effectiveness of the disclosure controls and proceduresbased on our evaluation as of the Evaluation Date;

 

5.                                     Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)                                    all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)                                  anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                                     Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  | May 15, 2003 |      | /s/ Floyd A.  Schultz |
|--------|--------------|-----------|-----------------------|
|   |         | President |

 

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I, Douglas G. Foss, certify that:

 

1.                                       Ihave reviewed this quarterly report on Form 10-QSB of Illinois River Energy,LLC;

 

2.                                     Basedon my knowledge, this quarterly report does not contain any untrue statement ofa material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements weremade, not misleading with respect to the period covered by this quarterlyreport;

 

3.                                     Basedon my knowledge, the financial statements, and other financial informationincluded in this quarterly report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this quarterly report;

 

4.                                     Theregistrant’s other certifying officers and I are responsible for establishingand maintaining disclosure controls and procedures (as defined in Exchange ActRules 13a-14 and 15d-14) for the registrant and have:

 

a)                                    designed such disclosure controls andprocedures to ensure that material information relating to the registrant,including its consolidated subsidiaries, is made known to us by others withinthose entities, particularly during the period in which this quarterly reportis being prepared;

 

b)                                  evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this quarterly report (the“Evaluation Date”); and

 

c)                                   presentedin this quarterly report our conclusions about the effectiveness of thedisclosure controls and procedures based on our evaluation as of the EvaluationDate;

 

5.                                     Theregistrant’s other certifying officers and I have disclosed, based on our mostrecent evaluation, to the registrant’s auditors and the audit committee ofregistrant’s board of directors (or persons performing the equivalentfunctions):

 

a)                                    all significant deficiencies in thedesign or operation of internal controls which could adversely affect theregistrant’s ability to record, process, summarize and report financial dataand have identified for the registrant’s auditors any material weaknesses ininternal controls; and

 

b)                                  anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

6.                                     Theregistrant’s other certifying officers and I have indicated in this quarterlyreport whether or not there were significant changes in internal controls or inother factors that could significantly affect internal controls subsequent tothe date of our most recent evaluation, including any corrective actions withregard to significant deficiencies and material weaknesses.

 

 
| Date:  | May 15, 2003 |      | /s/ Douglas G.  Foss |
|--------|--------------|-----------|----------------------|
|   |         | Treasurer |

 

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