**UNITEDSTATES****SECURITIES AND EXCHANGECOMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-QSB**

 

**ý****Quarterly report under Section 13 or 15(d) of theSecurities Exchange Act of 1934.**

 

**Forthe quarterly period ended March 31, 2004**

 

**OR**

 

**o****Transition report under Section 13 or 15(d) of theExchange Act.**

 

**Commissionfile number 333-96703**

 

**EASTKANSAS AGRI-ENERGY, L.L.C.**

(Exact name of small business issuer asspecified in its charter)

 
| **Kansas**                                                           |   | **48-1251578**                            |
|----------------------------------------------------------------------|--------|-------------------------------------------|
| **(State or other jurisdiction of  incorporation or organization)**  |   | **(I.R.S. Employer Identification  No.)** |
|                                                                 |   |                                      |
| **P.O. Box 225,  210 1/2 East 4th Ave. Garnett, Kansas  66032** |
| (Address of principal executive offices)                             |
|                                                                 |   |                                      |
| **(785) 448-2888**                                                   |
| (Issuer’s telephone number)                                     |

** **

** **

Check whether the issuer:  (1)filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.                                                            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 March 31, 2004, there were 14,707 membership units outstanding.

 

Transitional Small Business Disclosure Format (Checkone):                  o   Yes                  ý   No

 

 

----

 

**INDEX**

 
| **PART I.  FINANCIAL INFORMATION** |        |
|-----------------------------------------|-------------|
|                                    |        |   |   |
|                                    | **Item 1.** | **Financial Statements** |   |
|                                    | **Item 2.** | **Management’s  Discussion and Analysis** |   |
|                                    | **Item 3.** | **Controls and  Procedures** |   |
|                                    |        |   |   |
| **PART II.  OTHER INFORMATION 8**  |        |
|                                    |        |   |   |
|                                    | **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**                          |        |

** **

** **

2

----

 

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

 

**Item 1.****    FinancialStatements**

 

**EAST KANSASAGRI-ENERGY, LLC**

 

Table of Contents

 
| FINANCIAL STATEMENTS |                                                      |
|----------------------|-----------------------------------------------------------|
|                 | Balance Sheet (Unaudited)                                 |   |
|                 | Statements of Operations (Unaudited)                      |   |
|                 | Statements of Changes in Members’ Equity (Unaudited) |   |
|                 | Statements of Cash Flows (Unaudited)                      |   |
|                 | Notes to Unaudited Financial Statements                   |   |

 

3

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**BALANCESHEET (UNAUDITED)**

**MARCH 31, 2004**

 
| **ASSETS**                                                                                                               |   |       |       |
|--------------------------------------------------------------------------------------------------------------------------|--------|------------|------------|
|                                                                                                                     |   |       |       |
| CURRENT ASSETS                                                                                                           |   |       |       |
| Cash and cash equivalents                                                                                                |   | $          | 11,696,239 |   |
| Grant receivable                                                                                                         |   | 37,153     |       |
| Interest receivable                                                                                                      |   | 1,921      |       |
| Prepaid expense                                                                                                          |   | 5,489      |       |
| Total current assets                                                                                                     |   | 11,740,802 |       |
|                                                                                                                     |   |       |       |
| PROPERTY, PLANT AND EQUIPMENT                                                                                            |   |       |       |
| Office equipment                                                                                                         |   | 16,490     |       |
| Construction in progress                                                                                                 |   | 92,542     |       |
|                                                                                                                     |   | 109,032    |       |
| Less accumulated depreciation                                                                                            |   | 4,314      |       |
|                                                                                                                     |   | 104,718    |       |
| OTHER ASSETS                                                                                                             |   |       |       |
| Financing costs                                                                                                          |   | 20,000     |       |
| Land option                                                                                                              |   | 15,000     |       |
|                                                                                                                     |   | 35,000     |       |
|                                                                                                                     |   |       |       |
| Total assets                                                                                                             |   | $          | 11,880,520 |   |
|                                                                                                                     |   |       |       |
| **LIABILITIES AND  MEMBERS’ EQUITY**                                                                                |   |       |       |
|                                                                                                                     |   |       |       |
| CURRENT LIABILITIES                                                                                                      |   |       |       |
| Current portion of long-term debt                                                                                        |   | $          | 75,000     |   |
| Accounts payable                                                                                                         |   |       |       |
| Trade                                                                                                                    |   | 76,849     |       |
| Related party                                                                                                            |   | 37,574     |       |
| Accrued payroll, taxes, and withholdings                                                                                 |   | 8,598      |       |
| Accrued interest                                                                                                         |   | 2,032      |       |
| Total current liabilities                                                                                                |   | 200,053    |       |
|                                                                                                                     |   |       |       |
| MEMBERS’ EQUITY                                                                                                     |   |       |       |
| Capital contributions, 20,000 units  authorized,   14,707 units subscribed, 12,707 outstanding as of March 31, 2004 |   | 14,707,000 |       |
| Deficit accumulated during the development  stage                                                                        |   | (1,276,533 | )          |
| Less subscriptions receivable - related  party                                                                           |   | (1,750,000 | )          |
| Total members’ equity                                                                                               |   | 11,680,467 |       |
|                                                                                                                     |   |       |       |
| Total liabilities and members’ equity                                                                               |   | $          | 11,880,520 |   |

 

See Notes to Unaudited Financial Statements

 

4

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTSOF OPERATIONS****(UNAUDITED)**

 
|                                                   |   | **Three Months  Ended  March 31,  2004** |        | **Three  Months  Ended  March 31,  2003** |   | **From  January 3,  2001 (Date of  Inception) to  March 31,  2004** |   |
|--------------------------------------------------------|--------|-----------------------------------------------|-------------|------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                   |   |                                          |        |                                           |   |                                                                          |   |
| REVENUE                                                |   | **$**                                         | **—**  |                                           | $      | —                                                                        |   | $ | — |   |
|                                                   |   |                                          |        |                                           |   |                                                                          |   |
| OPERATING EXPENSES                                     |   |                                          |        |                                           |   |                                                                          |   |
| Organizational expenses                                |   | **—**                                    |        | —                                         |   | 3,643                                                                         |   |
| Start-up expenses                                      |   | **80,884**                                    |        | 80,213                                         |   | 400,965                                                                       |   |
|                                                   |   | **80,884**                                    |        | 80,213                                         |   | 404,608                                                                       |   |
| OTHER INCOME (EXPENSE)                                 |   |                                          |        |                                           |   |                                                                          |   |
| Interest income                                        |   | **10,324**                                    |        | 1,158                                          |   | 16,952                                                                        |   |
| Interest expense                                       |   | **(1,219**                                    | )           | —                                         |   | (2,350                                                                        | )      |
| Other income                                           |   | **—**                                    |        | —                                         |   | 2,000                                                                         |   |
|                                                   |   | **9,105**                                     |        | 1,158                                          |   | 16,602                                                                        |   |
|                                                   |   |                                          |        |                                           |   |                                                                          |   |
| NET LOSS                                               |   | **$**                                         | **(71,779** | )                                              | $      | (79,055                                                                       | )      | $ | (388,006 | ) |
|                                                   |   |                                          |        |                                           |   |                                                                          |   |
| BASIC AND DILUTED LOSS PER UNIT                        |   | **$**                                         | **(30**     | )                                              | $      | (65                                                                           | )      |   |   |
|                                                   |   |                                          |        |                                           |   |                                                                          |   |
| WEIGHTED AVERAGE UNITS OUTSTANDING, BASIC  AND DILUTED |   | **2,356**                                     |        | 1,220                                          |   |                                                                          |   |

 

See Notes to Unaudited Financial Statements

 

5

----

 

**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTSOF CHANGES****INMEMBERS’ EQUITY (UNAUDITED)**

 
|                                                       |   | **Units**  |       | **Contributed  Capital** |           | **Subscriptions  Receivable** |   | **Deficit  Accumulated  During the  Development  Stage** |   | **Total**   |           |
|------------------------------------------------------------|--------|------------|------------|--------------------------|----------------|-------------------------------|--------|----------------------------------------------------------|--------|-------------|----------------|
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Balance, January 3, 2001 (Date of  Inception)         |   | —     |       | $                        | —         |                          | $      | —                                                   |   | $           | —         |   | $ | — |   |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Net loss for the period ended  December 31, 2001      |   | —     |       | —                   |           | —                        |   | (30,484                                                  | )      | (30,484     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Balance as of December 31, 2001                       |   | —     |       | —                   |           | —                        |   | (30,484                                                  | )      | (30,484     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Units issued                                               |   | 1,220      |       | 610,000                  |           | —                        |   | —                                                   |   | 610,000     |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Impact of units issued at a discount                       |   | —     |       | 610,000                  |           | —                        |   | (610,000                                                 | )      | —      |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Cost of raising capital                                    |   | —     |       | —                   |           | —                        |   | (14,398                                                  | )      | (14,398     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Net loss for the year ended  December 31, 2002        |   | —     |       | —                   |           | —                        |   | (127,123                                                 | )      | (127,123    | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Balance as of December 31, 2002                       |   | 1,220      |       | 1,220,000                |           | —                        |   | (782,005                                                 | )      | 437,995     |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Net loss for the three months ended  March 31, 2003   |   | —     |       | —                   |           | —                        |   | (79,055                                                  | )      | (79,055     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Balance as of March 31, 2003                          |   | 1,220      |       | 1,220,000                |           | —                        |   | (861,060                                                 | )      | 358,940     |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Net loss for the nine months ended  December 31, 2003 |   | —     |       | —                   |           | —                        |   | (79,565                                                  | )      | (79,565     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Balance as of December 31, 2003                       |   | 1,220      |       | 1,220,000                |           | —                        |   | (940,625                                                 | )      | 279,375     |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Units subscribed                                           |   | 13,457     |       | 13,457,000               |           | —                        |   | —                                                   |   | 13,457,000  |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Subscriptions receivable                                   |   | —     |       | —                   |           | (13,457,000                   | )      | —                                                   |   | (13,457,000 | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Collection of unit subscriptions                           |   | —     |       | —                   |           | 11,707,000                    |   | —                                                   |   | 11,707,000  |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Units issued for compensation                              |   | 30         |       | 30,000                   |           | —                        |   | —                                                   |   | 30,000      |           |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Cost of raising capital                                    |   | —     |       | —                   |           | —                        |   | (264,129                                                 | )      | (264,129    | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| Net loss for the three months ended  March 31, 2004   |   | —     |       | —                   |           | —                        |   | (71,779                                                  | )      | (71,779     | )              |
|                                                       |   |       |       |                     |           |                          |   |                                                     |   |        |           |
| **Balance as of  March 31, 2004**                     |   | **14,707** | ** ** | **$**                    | **14,707,000** | ** **                    | **$**  | **(1,750,000**                                           | **)**  | **$**       | **(1,276,533** | **)** | **$** | **11,680,467** | ** ** |

 

See Notes to Unaudited Financial Statements

 

6

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTSOF CASH FLOWS****(UNAUDITED)**

 
|                                                                        |   | **Three Months  Ended  March 31,  2004** |           | **Three  Months  Ended  March 31,  2003** |   | **From  January 3,  2001 (Date of  Inception) to  March 31,  2004** |   |
|-----------------------------------------------------------------------------|--------|-----------------------------------------------|----------------|------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                        |   |                                          |           |                                           |   |                                                                          |   |
| Net loss                                                                    |   | **$**                                         | **(71,779**    | )                                              | $      | (79,055                                                                       | )      | $ | (388,006 | ) |
| Adjustments to reconcile net loss to net  cash used in operating activities |   |                                          |           |                                           |   |                                                                          |   |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| Depreciation                                                                |   | **820**                                       |           | 617                                            |   | 4,314                                                                         |   |
| Non-cash compensation for capital units                                     |   | **30,000**                                    |           | —                                         |   | 30,000                                                                        |   |
| Increase in current assets                                                  |   |                                          |           |                                           |   |                                                                          |   |
| Grand and interest receivable                                               |   | **(12,015**                                   | )              | (59,447                                        | )      | (39,074                                                                       | )      |
| Prepaid expense                                                             |   | **(4,070**                                    | )              | (11,098                                        | )      | (41,243                                                                       | )      |
| Increase (decrease) in current liabilities                                  |   |                                          |           |                                           |   |                                                                          |   |
| Accounts payable                                                            |   | **37,286**                                    |           | 48,928                                         |   | 80,525                                                                        |   |
| Accrued payroll, taxes, and withholdings                                    |   | **2,670**                                     |           | 5,426                                          |   | 8,598                                                                         |   |
| Accrued interest                                                            |   | **1,219**                                     |           | —                                         |   | 2,032                                                                         |   |
| Net cash (used in) operating activities                                     |   | **(15,869**                                   | )              | (94,629                                        | )      | (342,854                                                                      | )      |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                        |   |                                          |           |                                           |   |                                                                          |   |
| Purchase of equipment                                                       |   | **—**                                    |           | (7,274                                         | )      | (16,490                                                                       | )      |
| Payments for land options                                                   |   | **(5,000**                                    | )              | (5,000                                         | )      | (15,000                                                                       | )      |
| Construction in progress                                                    |   | **(1,570**                                    | )              | (6,320                                         | )      | (58,644                                                                       | )      |
| Net cash (used in) investing activities                                     |   | **(6,570**                                    | )              | (18,594                                        | )      | (90,134                                                                       | )      |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                        |   |                                          |           |                                           |   |                                                                          |   |
| Cost of raising capital                                                     |   | **(10,909**                                   | )              | (119,263                                       | )      | (242,773                                                                      | )      |
| Payment of financing costs                                                  |   | **(20,000**                                   | )              | —                                         |   | (20,000                                                                       | )      |
| Proceeds from notes payable                                                 |   | —                                        |           | —                                         |   | 137,000                                                                       |   |
| Repayment of notes payable                                                  |   | **—**                                    |           | —                                         |   | (137,000                                                                      | )      |
| Proceeds from long-term debt                                                |   | **—**                                    |           | —                                         |   | 75,000                                                                        |   |
| Capital contributions                                                       |   | **11,707,000**                                |           | —                                         |   | 12,317,000                                                                    |   |
| Net cash provided by (used in) financing  activities                        |   | **11,676,091**                                |           | (119,263                                       | )      | 12,129,227                                                                    |   |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| NET INCREASE (DECREASE) IN CASH AND CASH  EQUIVALENTS                       |   | **11,653,652**                                |           | (232,486                                       | )      | 11,696,239                                                                    |   |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD                             |   | **42,587**                                    |           | 374,190                                        |   | —                                                                        |   |
|                                                                        |   |                                          |           |                                           |   |                                                                          |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                    |   | **$**                                         | **11,696,239** |                                           | $      | 141,704                                                                       |   | $ | 11,696,239 |   |

 

See Notes to Unaudited Financial Statements

 

7

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**STATEMENTS OF CASH FLOWS (UNAUDITED)**

 
|                                                          |   | **Three Months  Ended  March 31,  2004** |        | **Three  Months  Ended  March 31,  2003** |   | **From  January 3,  2001 (Date of  Inception) to  March 31,  2004** |   |
|---------------------------------------------------------------|--------|-----------------------------------------------|-------------|------------------------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW  INFORMATION             |   |                                          |        |                                           |   |                                                                          |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Cash paid for interest                                        |   | **$**                                         | **—**  |                                           | $      | —                                                                        |   | $ | 318 |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| NON CASH INVESTING AND FINANCING ACTIVITIES                   |   |                                          |        |                                           |   |                                                                          |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Prepaid expenses reclassified to deferred  offering costs     |   | **$**                                         | **—**  |                                           | $      | —                                                                        |   | $ | 35,754 |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Property, plant, and equipment costs  incurred                |   | **$**                                         | **33,898**  |                                           | $      | 2,266                                                                         |   | $ | 33,898 |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Cost of raising capital reclassified to  members’ equity |   | **$**                                         | **264,129** |                                           | $      | —                                                                        |   | $ | 278,527 |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Capital contributions issued at discount                      |   | **$**                                         | **—**  |                                           | $      | —                                                                        |   | $ | 610,000 |   |
|                                                          |   |                                          |        |                                           |   |                                                                          |   |
| Capital contributions issued for  compensation                |   |                                          |        |                                           |   |                                                                          |   |
| Expensed during the 3 months ended  March 31, 2004       |   | **$**                                         | **15,000**  |                                           | $      | —                                                                        |   | $ | 15,000 |   |
| Liability converted to capital units                          |   | **15,000**                                    |        | —                                         |   | 15,000                                                                        |   |
|                                                          |   | **$**                                         | **30,000**  |                                           | $      | —                                                                        |   | $ | 30,000 |   |

 

See Notes to Unaudited Financial Statements

 

8

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTESTO UNAUDITED FINANCIAL STATEMENTS**

 

**NOTE 1 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

** **

*Nature of Business*

 

East Kansas Agri-Energy, LLC, (a developmentstage Kansas limited liability company) to be located in Garnett, Kansas, wasorganized to pool investors to build a 25 million gallon ethanol plant withdistribution within the United States. East Kansas Agri-Energy, LLC (theCompany) anticipates completing construction by the summer of 2005. As ofMarch 31, 2004, the Company is in the development stage with its effortsbeing principally devoted to financing and construction activities.

 

The Company was formally organized as a limited liability company as ofOctober 16, 2001. Prior to that date the Company operated as a generalpartnership with no formal partnership agreement.

 

*Basis of Accounting*

 

The unaudited financialstatements contained herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission. Accordingly, they do notinclude all the information and footnotes required by accounting principlesgenerally accepted in the United States of America.

 

In the opinion of management, all adjustments considered necessary fora fair presentation have been included in the accompanying financialstatements. The results of operationsfor the three months ended March 31, 2004 and 2003, are not necessarilyindicative of the results to be expected for a full year.

 

These financial statements should be read in conjunction with thefinancial statements and notes included in the Company’s financial statementsfor the year ended December 31, 2003.

 

*Estimates*

 

Managementuses estimates and assumptions in preparing financial statements. Thoseestimates and assumptions affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities at the date ofthe financial statements, and the reported amounts of revenues and expenses.Actual results could differ from the estimates used.

 

*Prepaid Offering Costs*

 

Costs incurredrelated to the sale of units are recorded as prepaid offering costs until therelated units are issued. Upon issuance of units, offering costs are deductedfrom additional paid-in capital, with any remaining amount applied to retainedearnings (deficit accumulated during the development stage). Offering costsinclude direct costs related to the offering such as legal fees, cost ofmeetings and materials and related costs associated with the Company’s privateoffering and initial public offering.

 

*Financing costs*

 

Costs incurredrelated to origination of debt financing are recorded as an asset and amortizedto interest capitalized during construction or interest expense over theexpected term of the debt.

 

9

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO UNAUDITED FINANCIAL STATEMENTS**

 

*Earnings Per Unit*

 

Earnings perunit are calculated based on the period of time units have been issued andoutstanding. For purposes of calculating diluted earnings per capital unit,units subscribed for but not issued are included in the computation ofoutstanding capital units. As of March 31, 2004, there were no unitsincludable in diluted earnings per unit related to subscribed units as thecalculation would have been antidilutive.

 

*Stock based compensation*

 

The Company records stock basedcompensation based on the fair value of the units issued for the compensation.

 

**NOTE 2 -  COMMITMENTS AND CONTINGENCIES**

** **

The Company has entered into an option agreement to purchaseapproximately 10 acres of land. The option was originally purchased for $5,000,plus $5,000 for an extension during 2003, and provides for a purchase price of$9,000 per acre, plus the cost to replace boundary fencing and relocate anexisting structure along with water and electric utilities. During the threemonths ended March 31, 2004, the option was extended to July 1, 2004and the Company paid an additional $5,000 for the extension. The purchase priceof the land will be reduced by amounts previously paid for the option andextensions.

 

On May 14, 2002, the Company entered into an option to purchase realproperty for the plant site with a fair value of approximately $172,500. Theoption is for the purchase of approximately 23 acres within the Golden PrairieIndustrial Park of the City of Garnett, Kansas for $1. The option was extendedand expires on June 1, 2004.

 

The Company entered into an agreement for preliminary engineering forthe proposed ethanol plant with Fagan Engineering LLC. The agreement obligatesthe Company for no more than $30,000, of which approximately $24,000 had beenincurred as of March 31, 2004.

 

During the year ended December 31, 2003, the Company terminatedits agreement with Value Added Ventures, LLC (VAV). The Company has beennotified by VAV requesting payment for services from the inception of thecontract through the date of termination totaling $33,380. The Company and VAVare negotiating settlement of this contract. The Company has recorded aliability related to this agreement of $5,847 as of March 31, 2004.

 

During the year endedDecember 31, 2003, the Company negotiated with a board member to performcertain consulting services which were to begin on October 1, 2003. Theparties did not execute a contract for these services. Subsequent toDecember 31, 2003, the board member resigned and the Company received aclaim for payment of approximately $50,000, consisting of approximately $2,000and 48 Units of the Company. The Company contends that since a contract was notexecuted and services were not performed related to the proposed agreement, noliability exists. The Company intends to vigorously defend itself against theclaim.

 

During the three months ended March 31,2004, the Company completed its initial public offering and escrow was broken.A total of 13,457 units were subscribed, with subscriptions receivable of$1,750,000 related to 2000 units remaining unpaid as of March 31, 2004.

 

The Company entered into a repurchaseagreement with Garnett State Savings Bank to provide security for cash balancesheld in anticipation of construction. The Company has approximately$11,565,000, included in cash and cash equivalents, under the repurchaseagreement.

 

10

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**EAST KANSAS AGRI-ENERGY, LLC**

**(A DEVELOPMENT STAGE COMPANY)**

**NOTES TO UNAUDITED FINANCIAL STATEMENTS**

 

The Company has entered into a conditionalloan commitment for approximately $20,000,000 of construction debt convertingto term debt and a $1,000,000 line of credit. Terms of the proposed loanagreement include a minimum of $17,000,000 of equity, grants or subordinatedebt, with at least $14,800,000 of equity and grants. Interest on the debt willbe based on a variable rate structure of prime plus 1.5%, with a floor of 6%,with a maturity of up to 10 years on the term debt and the line of creditsubject to renewal on an annual basis. The term debt also includes prepaymentpenalties and requires compliance with certain financial covenants, includinglimitation of distribution of earnings of the Company and requires prepaymentof principal on an annual basis determined by a portion of free cash flow or75% of amounts received from any CCC Bio Energy Program. Fees for originationof the loan are expected to be approximately $435,000, plus out of pocket costsrelated to completion of loan documentation. Collateral for the debt willinclude a mortgage of the property, assignment of certain agreements, and asecurity interest in all assets. The commitment is conditioned upon completionof terms and conditions in form and substance satisfactory to the lender,including participation by other financial institutions of $15,000,000 andreceipt of a USDA loan guarantee on $5,000,000 of the debt. ThroughMarch 31, 2004, $20,000 of the fees has been paid related to originationof the loan.

 

The Company received a commitment forsubordinated debt of up to $2,000,000 from Fagen, Inc. The proposed termsinclude interest at 9%, and repayment over a term not to exceed 10 years. Inaddition, Fagen, Inc. has subscribed for units of the Company, and is alsonegotiating a contract for the construction of the ethanol plant with the Company.

 

**NOTE 3 -  MEMBERS’ EQUITY**

** **

In addition to transactions discussed in Note 2, the Company issued atotal of 30 units for compensation. The former project coordinator received 15units in exchange for amounts previously owed for services.

 

The current project coordinator and treasurer (who are full timeemployees of the Company) received a total of 15 units as a bonus for theirservices related to the development and financing of the Company. Compensationexpense related to this bonus totaled $15,000 for the three months endedMarch 31, 2004.

 

**NOTE 4 -  CONCENTRATION OF CREDIT RISK**

** **

The Company maintains cash balances at a financial institution in itstrade area. The account is secured by the Federal Deposit Insurance Corporationup to $100,000. At times, the Company’s bank balance may exceed $100,000.

 

**NOTE 5 -  VALUE ADDED GRANT**

** **

During the year ended December 31, 2003,the Company received notification of award of a United States Department ofAgriculture Value-Added Agricultural Product Market Development Grant (theGrant) for approximately $450,000. The Grant can be used to pay for certainorganizational, offering and start-up costs related to the formation andcapitalization of the Company. For the three months ended March 31, 2004and 2003, the Company qualified for reimbursement of $54,634 and $59,447,respectively, of which $1,409 and $24,781, respectively, related to cost ofraising capital. For the period from inception through March 31, 2004, theCompany qualified for reimbursement of $263,855 of costs, of which $61,602related to cost of raising capital and $202,253 was recorded as a reduction ofstart-up costs.

 

11

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**Item 2.****    Management’sDiscussion And Analysis**

 

This report contains forward-looking statements that involve futureevents, our future performance and our expected future operations andactions.  In some cases you can identifyforward-looking statements by the use of `words such as “may,” “will,” “should,”“anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,”“estimate,” “predict,” “hope,” “potential,” “continue,” or the negative ofthese terms or other similar expressions. These forward-looking statements are only our predictions and involvenumerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from theseforward-looking statements for many reasons, including the reasons described inthis report.  We are not under any dutyto update the forward-looking statements contained in this report.  We cannot guarantee future results, levelsof activity, performance or achievements. We caution you not to put undue reliance on any forward-lookingstatements, which speak only as of the date of this report.  You should read this report and thedocuments that we reference in this report and have filed as exhibits,completely and with the understanding that our actual future results may bematerially different from what we currently expect.  We qualify all of our forward-looking statements by thesecautionary statements.

 

**Application of Critical Accounting Policies**

 

Management uses estimates and assumptions in preparing our financialstatements, in accordance with generally accepted accounting principles.  These estimates and assumptions affect thereported amounts of assets and liabilities, the disclosure of contingent assetsand liabilities, and the reported revenues and expenses.

 

**Overview**

 

East Kansas Agri-Energy, LLC was formed as a Kansas limited liabilitycompany on October 16, 2001, for the purpose of constructing and operatingan ethanol plant near Garnett, Kansas. We plan to build a corn-based ethanol plant that will produce ethanol,distiller’s grains and carbon dioxide. The ethanol plant was originally expected to process approximately 7.5million bushels of corn and sorghum per year into 20 million gallons ofdenatured fuel grade ethanol, 64 thousand tons of dried distiller’s grains with solubles and 63thousand tons of raw carbon dioxide gas.  We now expect to convert, on an annual basis, approximately 9million bushels of corn and sorghum per year into 25 million gallons ofdenatured fuel grade ethanol, approximately 80 thousand tons of dried distiller’s grains with solubles andapproximately 79 thousand tons of raw carbon dioxide gas.  We expect this change to result in moreefficient operations.  This change isnot expected to increase the cost of construction of our ethanol plant or delayits anticipated date of operation.

 

We expect that the project will cost approximately $37,000,000.  We are still in the development phase, anduntil the proposed ethanol plant is operational, will generate no revenue.  We anticipate that accumulated losses willcontinue to increase until the ethanol plant is operating.  We expect that it will take approximately 14to 16 months from the date we released funds from escrow to construct theethanol plant and commence start-up operations.  Our anticipated date of substantial completion is currentlysummer of 2005.

 

We raised equity by a public offeringregistered with the Securities and Exchange Commission on Form SB-2 (SECRegistration No. 333-96703) as amended, which was declared effective onJanuary 24, 2003, and terminated January 24, 2004.  The offering was for a minimum $9,000,000and a maximum of $18,000,000.  Duringthe offering we sold 13,457 membershipunits for a total of $13,457,000 in subscription proceeds.  The proceeds were placed in an account withGarnett State Savings Bank subject to an escrow agreement datedNovember 14, 2002, and amended effective December 31, 2003. Inaddition to the units sold, we issued a total of thirty membership units toindividuals for compensation.  JillZimmerman, a full time employee who is also our Treasurer, principal financialofficer and a member, was awarded five membership units as part of her bonusfor services related to our development and financing.  We awarded ten units to our employee andproject coordinator, Diane Allen, as part of her bonus.  Our former project coordinator, Bill Barnes,received fifteen units for amounts previously owed for services.

 

Additionally, as of March 31, 2004, we had raised approximately$610,000 in seed capital.  The seedcapital was raised through two offerings. On January 2, 2002, we issued 110 membership units to our directorsfor $500 per unit in an offering exempt from federal and stateregistration.  On February 1, 2002,we issued 1,110

 

12

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membership units to other seed capital investors for $500 per unit inan offering registered with the state of Kansas and exempt from federalregistration.

 

We have received a written debt financing commitment consisting of aterm loan of $20,000,000 and a $1,000,000 line of credit from Home FederalSavings Bank of Rochester, Minnesota. We have also received a written commitment from Fagen, Inc. of GraniteFalls, Minnesota to provide subordinated debt financing of up to$2,000,000.  Fagen Inc. is expected toserve as our design-builder.  In returnfor the written commitment for subordinated debt financing from Fagen Inc., weintend to engage United Bio Energy Management, LLC, United Bio Energy Fuels, LLC,United Bio Energy Ingredients, LLC, and United Bio Energy Trading, LLC, toprovide us services including ethanol plant general management, ethanol anddistillers grains marketing, grain origination services and overall riskmanagement.  These companies are ownedby United Bio Energy, LLC, of Wichita, Kansas. The majority owners of United Bio Energy, LLC are Fagen, Inc., and ICM, Inc.of Colwich, Kansas, who is expected to serve as our principalsubcontractor.  As such, we expect to bevery dependent on United Bio Energy, LLC, and its subsidiaries.

 

We released proceeds of our equity offering from escrow onMarch 22, 2004 and issued a total of 13,487 membership units.  We placed $150,000 of the proceeds in ourmoney market account with Garnett State Savings Bank to cover our short-termdevelopment needs.  The remainingproceeds were placed in a separate account with Garnett State Savings Bank andwill be held and invested pursuant to a Master Repurchase Agreement executedwith Garnett State Savings Bank on March 16, 2004.  We may draw on these funds at any time, butdo not intend to do so prior to the commencement of substantial construction ofthe ethanol plant.

 

**Plan of Operationsfor the Next 12 Months**

 

We expect to spend the next 12 months in design development andconstruction of the ethanol plant.  We plan to acquire 23 acres of landin the Golden Prairie Industrial Park on the edge of Garnett, Kansas toconstruct our ethanol plant.  We havereceived an option to purchase the real estate from the City of Garnett,Kansas.  That option was obtained for acost of $1.00 and was scheduled to expire on December 1, 2002, but wasextended for six months to June 3, 2003. The option granted us the right to purchase the real estate for$1.00.  On May 13, 2003, the GarnettCity Commission extended the option for another year to June 1, 2004.  The option was extended without additionalcosts to us.  We intend to exercise thisoption, however, we are also currently negotiating an agreement with the Cityof Garnett, Kansas, which we expect will provide for improvements to the realestate, grants, tax abatement and bonds.

 

We also plan to purchaseten acres of real estate in Anderson County, Kansas to allow the placement of arailroad spur from the proposed plant site to existing Union Pacific Railroadtrack in Garnett, Kansas.  We havereceived an option to purchase the real estate from Clarence L White andBerniece F. White.  That option grantedus the right to purchase approximately ten acres for $9,000 per acre and wasobtained at a cost of $5,000.  Theoption was scheduled to expire on March 31, 2003, but was extended untilMarch 14, 2004, in exchange for an additional payment of $5,000.  The option was extended a second time toJuly 1, 2004 for an additional $5,000 payment.  The purchase price of the land will be reduced by the amountspaid for the option and extensions.  Thereal estate was used as a surface dumpsite many years ago and waste needs to bemoved and buried.  The estimated cost toclean up the site is $7,500 which we expect will be completed by June 30,2004.  The City of Garnett, Kansas hasapplied for and received grant funds which we expect will be used to pay forclean up required on the site.

 

We plan to negotiate andexecute finalized contracts needed in connection with the construction of theethanol plant.  We have executed anon-binding letter of intent with Fagen, Inc. in connection with the designconstruction and operation of the ethanol plant.  We are currently in the process of negotiating a legally bindingdesign-build contract and estimate that we will pay Fagen, Inc. approximately$27,700,000 pursuant to that agreement. No assurances can be given that a design-build contract will be executedwith Fagen, Inc.  The risingprice of steel could affect the final cost of construction of the ethanolplant.  In addition, shortages of steelcould affect the final completion date of the project.  After the design-build contract isexecuted, we expect to begin Phase 1 of the construction of our ethanol plantwhich is expected to include construction of the plant access road and in-plantroads, soil stabilization, site grading, replacement fill, construction layout,and storm water drainage and detention.

 

13

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We have engaged Fagen Engineering, LLC, to provide preliminary civilengineering for our ethanol plant.  Theestimated fees proposed for preliminary site development and a deliverable siteare $30,000.  Preliminary site work hasalready begun.  A Phase 1 EnvironmentalStudy was completed on April 23, 2004. We have also engaged Natwick & Associates of Fargo, North Dakota toconduct an appraisal and Taylor Design Group of Ottawa, Kansas has been engagedto survey the property.

 

GeoSystems/Kleinfelder of Lenexa, Kansas, has been hiredto conduct soil testings and we are currently waiting the results of thelaboratory analysis.  EnvironmentalResource Group of Minneapolis, Minnesota, engaged to coordinate and assist uswith proper permitting, has completed the application for the NPDES WastewaterDischarge Permit which we anticipate we will submit to the Kansas Department ofHealth and Environment in the next fiscal quarter.

 

We also expect to negotiate and execute contracts for the provision ofelectricity, natural gas, water and other utilities.  We have not yet entered into any such contracts, but have engagedU.S. Energy Services, Inc. of Wayzata, Minnesota, to provide consulting andenergy management services for supplies of electricity and natural gas.  We have begun negotiations with U.S. WaterServices for the provision of water treatment chemicals and services.

 

We are also currently negotiating contracts for the operation of theethanol plant with United Bio Energy Management, LLC, United Bio Energy Fuels, LLC,United Bio Energy Ingredients, LLC, and United Bio Energy Trading, LLC.  We expect that United Bio Energy Management,LLC, will manage the ethanol plant and United Bio Energy Fuels, LLC, willprovide us ethanol marketing.  Inaddition, we expect that United Bio Energy Ingredients, LLC, will provide usdistiller’s grains marketing and grain origination services.  United Bio Energy Trading, LLC, is expectedto provide us with overall risk management. As such, we expect to be very dependent on these companies after webegin operations.

 

We also plan to market anddistribute the carbon dioxide that will be produced at the plant as aby-product of our ethanol production. On January 28, 2004, we entered in to a letter of intent with BOCGroup, Inc. of Murray Hill, New Jersey. The terms of the letter of intent provide that we will make available toBOC Group, Inc. for purchase all of the carbon dioxide produced at theplant.  The letter of intentcontemplates that BOC Group, Inc. will purchase a substantial quantity of ourraw carbon dioxide gas annually and will construct a carbon dioxideliquefaction plant.  We expect to leasea parcel of our land adjacent to our ethanol plant to BOC Group, Inc. forconstruction of the liquefaction plant. The letter of intent was scheduled to expire by its terms onMarch 31, 2004, but has been extended to July 31, 2004.  We are currently negotiating a legallybinding contract with BOC Group, Inc. However, there is no guarantee that a final contract will be executed.

 

**Sourcesand Uses of Funds**

 

We expect to have sufficient cash available to cover our costs over thenext 12 months, including construction, staffing, office, audit, legal,compliance costs and start up working capital costs.  The following is our estimate of our costs and expenditures forthe next 12 months.  Theseestimates are based upon consultation with Fagen, Inc., ICM, Inc., and ourfinancial advisor’s experience with other businesses.  It is only an estimate and our actual expenses could be muchhigher due to a variety of factors described in our Form SB-2 registrationstatement under the section entitled “Risk Factors.” 

 
| **USE OF FUNDS**                           |   |       |       |
|--------------------------------------------|--------|------------|------------|
| Plant construction                         |   | $          | 27,700,000 |   |
| Land & site development costs          |   | 900,000    |       |
| Railroad                                   |   | 1,210,000  |       |
| Fire Protection / Water Supply             |   | 420,000    |       |
| Construction insurance costs               |   | 65,000     |       |
| Construction contingency                   |   | 600,000    |       |
| Capitalized interest                       |   | 500,000    |       |
| Rolling stock                              |   | 190,000    |       |
| Start up costs:                            |   |       |       |
| Financing costs                            |   | 550,000    |       |
| Organization costs                         |   | 650,000    |       |
| Pre Production period costs                |   | 500,000    |       |
| Spare parts – process equipment       |   | 200,000    |       |
| Working capital                            |   | 2,165,000  |       |
| Inventory – corn and milo             |   | 450,000    |       |
| Inventory – chemicals and ingredients |   | 250,000    |       |
| Inventory – Ethanol and DDGS          |   | 650,000    |       |
|                                       |   |       |       |
|                                       |   | 37,000,000 |       |
|                                            |        |            |            |  |

 

14

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We expect the total funding required for the plant to be$37,000,000.  We estimate that we willneed approximately $27,700,000 to construct the plant and a total ofapproximately $9,300,000 to cover all capital expenditures necessary tocomplete the project, make the plant operational and produce revenue.  The total project cost has increased.  The change includes a $2,455,000 increase toInventory and Working Capital resulting from our decision to increase ourexpected annual production of fuel grade ethanol from 20 million gallons to 25million gallons.

 

Based upon offering proceeds of $13,457,000, seed capital proceeds of$610,000, a term loan of $20,000,000, a line of credit of $483,000, grantfinancing of $450,000, and subordinated debt of $2,000,000, we expect that wewill have approximately $37,000,000 of debt and equity available, which meanswe expect to have sufficient cash on hand to cover construction and relatedstart-up costs necessary to make the plant operational.

 

**Administration**

 

We currently have an office staff comprisedof two full-time and two part-time employees. One of the full-time employees, Jill Zimmerman, is also our Treasurer,principal financial officer and member of the company.  We have executed an employment agreement withJill Zimmerman.  The term of thisagreement has been extended through September 30, 2004.

 

**Employees**

 

Upon completion of the ethanol plant, weintend to hire approximately 31 full-time employees.  Approximately three of our employees will be involved primarilyin management and administration and the remainder will be involved primarilyin plant operations.  We expect thatUnited Bio Energy Management, LLC will also employ and provide our GeneralManager.  Accordingly, we expectapproximately a total 32 full-time personnel at the ethanol plant, includingthe General Manager.

 

The following table represents some of the anticipated positions withinthe plant and the minimum number of individuals we intend will occupy eachposition:

 

| **Position**           |   | **# Employed** |   |
|------------------------|--------|----------------|--------|
| General Manager        |   | 1              |   |
| Plant Manager          |   | 1              |   |
| Commodities Manager    |   | 1              |   |
| Controller             |   | 1              |   |
| Lab Manager            |   | 1              |   |
| Lab Technician         |   | 2              |   |
| Secretary/Clerical     |   | 4              |   |
| Shift Supervisors      |   | 4              |   |
| Maintenance Supervisor |   | 1              |   |
| Maintenance Craftsmen  |   | 4              |   |
| Plant Operators        |   | 12             |   |
| **TOTAL**              |   | **32**         |   |

 

15

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**Liquidity and CapitalResources**

 

As ofMarch 31, 2004, we had cash and cash equivalents of $11,696,239 and totalcurrent assets of $11,740,802.  To date,we have sold units in our public offering with a price of $13,457,000 and haveraised an additional $610,000 in seed capital. As of March 31, 2004, we had current liabilities of $200,053consisting primarily of our accounts payable and a note payable to the KansasDepartment of Commerce and Housing. Since our inception through March 31, 2004, we have an accumulateddeficit of $1,276,533 and a subscriptions receivable in the amount of$1,750,000.  We have reduced member’sequity by $264,129, the amount of the prepaid offering costs related to theoffering.  Total members’ equity as ofMarch 31, 2004, was $11,680,467. Since our inception, we have generated no revenue from operations.  For the quarter ended March 31, 2004,we have a net loss of $71,779 primarily due to start-up costs.

 

We have received a written debt financingcommitment consisting of a term loan of $20,000,000 and up to a $1,000,000 lineof credit from Home Federal Savings Bank of Rochester, Minnesota.  The loan commitment requires a minimum of$17,000,000 of equity, grants or subordinate debt, with at least $14,800,000 ofequity and grants.  The loan commitmentprovides that interest will be a variable of prime plus 1.5% with a floor of6%, with a maturity of five years for $15,000,000 and ten years for $5,000,000with the term to begin after completion of construction.  We expect that the senior debt facilitywould be secured by substantially all of our assets.  We have also received a written commitment from Fagen, Inc. toprovide subordinated debt financing of up to $2,000,000.  The commitment provides for 9% interest andrepayment over a term not to exceed ten years.

 

We received a Value-Added Agricultural Product Market Development Grantof $450,000 from the USDA, which is a matching grant to be used for start-upcosts.

 

We will be applying for a grant from the USDA’s Commodity CreditCorporation. Under the grant program, the Commodity Credit Corporation willreimburse eligible ethanol producers of less than 65 million gallons ofbioenergy one bushel of corn for every two and one-half bushels of corn usedfor the increased production of ethanol. Under the program, no eligibleproducer may receive more than $7.5 million in any fiscal year.  However, some ethanol producers havereceived more than this amount when the start-up period has extended over morethan one fiscal year of the U.S. government. Because we expect to be an eligible producer and to annually utilizeapproximately 9 million bushels of corn annually in the increasedproduction of ethanol, we expect to potentially receive a maximum award ofapproximately $7.5 million. However, the Commodity Credit Corporation may award only$150 million annually fiscal years 2003 through 2006, and any award wereceive may be reduced based upon the volume of applications from othereligible producers.  In addition, paymentsunder the program in any one fiscal year may be less if Congress does not fullyfund the program for that fiscal year (funding for the program is subject to anannual appropriation).  We expect to beeligible to receive an award under the program only once during the life of ourproject.  The Commodity CreditCorporation Bioenergy Program is scheduled to expire on September 30,2006.  The grants available under theCCC program may not continue beyond their scheduled expiration date or if theydo continue, the grants may not be at the same level.  If our ethanol plant is not operational by the expiration of theCCC program or has not had substantial operations, we may not be eligible forthe grants or may receive a reduced amount.

 

The following schedule sets forth our estimated sources of funds.  This schedule could change in thefuture depending on whether we receive additional grants.  The schedule may also change dependingon the level of subordinated debt incurred.

 
| **Source of Funds**         |   |   |           | **Percent of Total** |       |
|-----------------------------|--------|--------|----------------|----------------------|------------|
| Member  Equity              |   | $      | 14,067,000     |                 | 38.02      | % |
| Term  Debt                  |   | $      | 20,000,000     |                 | 54.05      | % |
| Subordinated  Debt          |   | $      | 2,000,000      |                 | 5.41       | % |
| Line  of Credit             |   | $      | 483,000        |                 | 1.31       | % |
| Grants                      |   | $      | 450,000        |                 | 1.22       | % |
|                        |   |   |           |                 |       |
| **Total Sources of  Funds** |   | **$**  | **37,000,000** | ** **           | **100.00** | **%** |

 

16

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**Off-BalanceSheet Arrangements**

 

We do not have any off-balancesheet arrangements.

 

**Item 3.  Controls And Procedures**

 

Our management, including our President (theprincipal executive officer), William Pracht, and our Treasurer (the principalfinancial officer), Jill Zimmerman, have reviewed and evaluated theeffectiveness of our disclosure controls and procedures as of the end of theperiod covered by this report.  Basedupon this review and evaluation, these officers believe that our disclosurecontrols and procedures are effective in ensuring that material informationrelated to us is recorded, processed, summarized and reported within the timeperiods required by the forms and rules of the Securities and ExchangeCommission.

 

Our management, including our principal executive officer and principalfinancial officer, have reviewed and evaluated any changes in our internalcontrol over financial reporting that occurred as of the end of the periodcovered by this report and there has been no change that has materiallyaffected or is reasonably likely to materially affect our internal control overfinancial reporting.

 

**PART II****.****                OTHERINFORMATION**

 

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

 

None.

 

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

 

The Securities and Exchange Commissiondeclared our registration statement on Form SB-2 (SEC Registration No.333-96703) effective on January 24, 2003. We commenced our public offering shortly thereafter.

 

The following is a breakdown of membershipunits registered and the membership units sold in the offering:

 
| **Amount Registered** |   | **Aggregate  price of the  amount registered** |       | **Amount  Sold** |   | **Aggregate  price of the  amount sold to date** |   |
|-----------------------|--------|------------------------------------------------|------------|------------------|--------|--------------------------------------------------|--------|
| 18,000                |   | $                                              | 18,000,000 |             | 13,457 |                                             | $      | 13,457,000 |   |
|                       |        |                                                |            |                  |        |                                                  |        |  |  |

 

On January 24, 2004 we closed theoffering and stopped selling units registered under our registrationstatement.  During the offering we sold 13,457units for an aggregate price of $13,457,000 of which a total of $1,750,000 has not yet been received from twosubscribers, Fagen, Inc. and Fagen Energy, Inc.  We expect to receive the remaining proceeds before execution ofdefinitive loan documents with our senior lender.  We sold the units without the assistance of an underwriter.

 

In addition to the units sold, we issued atotal of thirty membership units for compensation.  Jill Zimmerman, a full time employee who is also our Treasurer,principal financial officer and a member, was awarded five membership units aspart of her bonus for services related to our development and financing.  We awarded ten units to our employee andproject coordinator, Diane Allen, as part of her bonus.  Finally, we issued fifteen units to a ourformer project coordinator, Bill Barnes, in exchange for amounts previouslyowed for services.

 

OnMarch 22, 2004, we released funds from escrow and issued 13,487 units inthe Company.  As of March 31, 2004,we had not used net offering proceeds in excess of $100,000 for any purpose.

 

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

 

None.

 

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

 

None.

 

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

 

Therehas been no change in our procedures by which Members may recommend nominees tothe Company’s Board of Directors.  Theprocess continues to be as described in our Operating Agreement.

 

**Item 6.****   ****Exhibits And Reports On Form 8-K****.**

 

(a)           Thefollowing exhibits are included herein:

 
| **Exhibit No.** |   | **Exhibit**                                                                                      |
|-----------------|--------|--------------------------------------------------------------------------------------------------|
|            |   |                                                                                             |
| 10.7            |   | Letter Agreement with U.S. Energy Services,  Inc. dated March 9, 2004                       |
| 10.8            |   | Letter Agreement with U.S. Energy Services,  Inc. dated March 9, 2004                       |
| 10.9            |   | March 15, 2004 Option to Purchase Real  Estate from Clarence L. White and Berniece F. White |
| 31.1            |   | Certificate Pursuant to 17 CFR  240.15d-14(a)                                                    |
| 31.2            |   | Certificate Pursuant to 17 CFR  240.15d-14(a)                                                    |
| 32.1            |   | Certificate Pursuant to 18 U.S.C.  Section 1350                                             |
| 32.2            |   | Certificate Pursuant to 18 U.S.C.  Section 1350                                             |

 

(b)           Reportson Form 8-K.

 

None.

 

**SIGNATURES**

 

In accordance with Section 13 or 15(d)of the Exchange Act, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

 
|   |         | EAST KANSAS AGRI-ENERGY, LLC                 |
|--------|--------------|----------------------------------------------|
|   |         |                                         |
|   |         |                                         |
| Date:  | May 17, 2004 |                                         | /s/ William Pracht |
|   |         | William Pracht                               |
|   |         | President                                    |
|   |         | (Principal Executive Officer)                |
|   |         |                                         |
|   |         |                                         |
| Date:  | May 17, 2004 |                                         | /s/ Jill Zimmerman |
|   |         | Jill Zimmerman                               |
|   |         | Treasurer                                    |
|   |         | (Principal Financial and Accounting Officer) |

 

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