**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-QSB**

 

| **ý**                                                                                                                                                                                | ** ** | **Quarterly report under Section 13 or 15(d)  of the Securities Exchange Act of 1934.** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------|
|                                                                                                                                                                                      |       |                                                                                         |
| **For the quarterly period ended  June 30, 2004**                                                                                                                                    |
|                                                                                                                                                                                      |       |                                                                                         |
| **OR**                                                                                                                                                                                    |
|                                                                                                                                                                                      |       |                                                                                         |
| **o**                                                                                                                                                                                     | ** ** | **Transition report under Section 13 or 15(d)  of the Exchange Act.**                   |
|                                                                                                                                                                                      |       |                                                                                         |
| **For the transition period from              to              .** |

 

**COMMISSION FILE NUMBER 333-92188**

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

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

 

| **Wisconsin**                                                       | ** ** | **39-2032455**                            |
|---------------------------------------------------------------------|------------|-------------------------------------------|
| **(State or other jurisdiction of  incorporation or organization)** | ** ** | **(I.R.S. Employer Identification  No.)** |

 

**W1231 Tessmann Road, Cambria, Wisconsin 53923**

(Address of principal executive offices)

 

**(920) 348-5016**

(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 90days.                     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 August 13, 2004,there were 28,780 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 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**                           | ** **                                                                         |

 

2

----

 

**PART I.  FINANCIAL INFORMATION**

 

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

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

CondensedBalance Sheet

 
| ** **                    | ** ** | **June 30,  2004** | ** ** |
|-------------------------------|------------|-------------------------|------------|
| ** **                    | ** ** | **(Unaudited)**         | ** ** |
| **ASSETS**                    |       |                    |       |
| **Current Assets**            |       |                    |       |
| Cash and cash equivalents     |       | $                       | 8,076,087  |   |
| Derivative instruments        |       | 428,706                 |       |
| Account receivable            |       | 3,668                   |       |
| Grant receivable              |       | 42,951                  |       |
| Prepaid expenses              |       | 28,029                  |       |
| Total current assets          |       | 8,579,441               |       |
|                          |       |                    |       |
| **Equipment**                 |       |                    |       |
| Land                          |       | 1,019,809               |       |
| Office equipment              |       | 32,576                  |       |
| Construction in process       |       | 18,751,553              |       |
| Total property and equipment  |       | 19,803,938              |       |
| Less accumulated depreciation |       | (2,346                  | )          |
| Net equipment                 |       | 19,801,592              |       |
|                          |       |                    |       |
| **Other Assets**              |       |                    |       |
| Debt issuance costs           |       | 501,326                 |       |
| Total other assets            |       | 501,326                 |       |
|                          |       |                    |       |
| **Total Assets**              |       | $                       | 28,882,359 |   |

 

Notes to Condensed Financial Statements are anintegral part of this Statement.

 

3

----

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

Condensed Balance Sheet

 
| ** **                                                                                                           | ** ** | **June 30,  2004** | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                                                           | ** ** | **(Unaudited)**         | ** ** |
| **LIABILITIES AND  EQUITY**                                                                                          |       |                    |       |
| **Current Liabilities**                                                                                              |       |                    |       |
| Current maturities of long-term debt                                                                                 |       | $                       | 1,760      |   |
| Accounts payable                                                                                                     |       | 135,599                 |       |
| Construction accounts payable                                                                                        |       | 2,109,435               |       |
| Accrued liabilities                                                                                                  |       | 2,884                   |       |
| Note payable                                                                                                         |       | 41,509                  |       |
| Total current liabilities                                                                                            |       | 2,291,187               |       |
|                                                                                                                 |       |                    |       |
| **Commitments and  Contingencies**                                                                                   |       |                    |       |
|                                                                                                                 |       |                    |       |
| **Long-Term Debt,  less current maturities**                                                                         |       | 1,403                   |       |
|                                                                                                                 |       |                    |       |
| **Members’ Equity**                                                                                             |       |                    |       |
| Member contributions, net of costs related  to capital contributions, 28,780 units outstanding at June 30, 2004 |       | 27,694,234              |       |
| Deficit accumulated during development  stage                                                                        |       | (1,104,465              | )          |
| Total members’ equity                                                                                           |       | 26,589,769              |       |
|                                                                                                                 |       |                    |       |
| **Total Liabilities  and Members’ Equity**                                                                      |       | $                       | 28,882,359 |   |

 

Notes to Condensed Financial Statements are anintegral part of this Statement.

 

4

----

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

Condensed Statements of Operations

 
| ** **                                                                                       | ** ** | **Quarter Ended  June 30,  2004** | ** **   | **Quarter Ended  June 30,  2003** | ** ** | **Date of  Inception to  June 30, 2004** | ** ** |
|--------------------------------------------------------------------------------------------------|------------|----------------------------------------|--------------|----------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                       | ** ** | **(Unaudited)**                        | ** **   | **(Unaudited)**                        | ** ** | **(Unaudited)**                               | ** ** |
|                                                                                             |       |                                   |         |                                   |       |                                          |       |
| **Revenues**                                                                                     | ** ** | **$**                                  | **—**   | ** **                             | $          | —                                        |       | $ | — |   |
|                                                                                             |       |                                   | ** **   |                                   |       |                                          |       |
| **Operating Expenses**                                                                           |       |                                   | ** **   |                                   |       |                                          |       |
| Project coordinator                                                                              | ** ** | **30,000**                             | ** **   | 9,011                                  |       | 176,973                                       |       |
| Organization costs                                                                               |       | —                                 | ** **   | 5,965                                  |       | 59,271                                        |       |
| Consulting and professional fees                                                                 | ** ** | **83,661**                             | ** **   | 39,017                                 |       | 496,053                                       |       |
| Administrative                                                                                   | ** ** | **80,729**                             | ** **   | 81,726                                 |       | 503,296                                       |       |
| Totals                                                                                           | ** ** | **194,390**                            | ** **   | 135,719                                |       | 1,235,593                                     |       |
|                                                                                             |       |                                   | ** **   |                                   |       |                                          |       |
| **Operating Loss**                                                                               | ** ** | **(194,390**                           | **)**        | (135,719                               | )          | (1,235,593                                    | )          |
|                                                                                             |       |                                   | ** **   |                                   |       |                                          |       |
| **Other Income (Expense)**                                                                       |       |                                   | ** **   |                                   |       |                                          |       |
| Grant income                                                                                     | ** ** | **50,901**                             | ** **   | —                                 |       | 84,869                                        |       |
| Interest income                                                                                  | ** ** | **19,577**                             | ** **   | —                                 |       | 103,350                                       |       |
| Interest expense                                                                                 | ** ** | **(1,161**                             | **)**        | (285                                   | )          | (4,954                                        | )          |
| Unrealized loss on derivative instruments                                                        | ** ** | **(71,294**                            | **)**        | —                                 |       | (71,294                                       | )          |
| Miscellaneous income                                                                             | ** ** | **7,232**                              | ** **   | 4,650                                  |       | 19,157                                        |       |
| Total other income, net                                                                          | ** ** | **5,255**                              | ** **   | 4,365                                  |       | 131,128                                       |       |
|                                                                                             |       |                                   | ** **   |                                   |       |                                          |       |
| **Net Loss**                                                                                     | ** ** | **$**                                  | **(189,135** | **)**                                  | $          | (131,354                                      | )          | $ | (1,104,465 | ) |
|                                                                                             |       |                                   | ** **   |                                   |       |                                          |       |
| **Net Loss Per Unit**(28,683,  1,280 and 8,361 weighted average units outstanding, respectively) |       | $                                      | (6.59        | )                                      | $          | (102.62                                       | )          | $ | (132.10 | ) |

 

Notes to Condensed Financial Statements are anintegral part of this Statement.

 

5

----

 
| ** **                                                                                 | ** ** | **Six Months Ended  June 30,  2004** | ** **   | **Six Months Ended  June 30,  2003** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-------------------------------------------|--------------|-------------------------------------------|------------|
| ** **                                                                                 | ** ** | **(Unaudited)**                           | ** **   | **(Unaudited)**                           | ** ** |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Revenues**                                                                               | ** ** | **$**                                     | **—**   | ** **                                | $          | — |   |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Operating Expenses**                                                                     |       |                                      | ** **   |                                      |       |
| Project coordinator                                                                        | ** ** | **65,750**                                | ** **   | 16,001                                    |       |
| Organization costs                                                                         |       | —                                    | ** **   | 15,806                                    |       |
| Consulting and professional fees                                                           | ** ** | **158,876**                               | ** **   | 61,147                                    |       |
| Administrative                                                                             | ** ** | **142,463**                               | ** **   | 159,812                                   |       |
| Totals                                                                                     | ** ** | **367,089**                               | ** **   | 252,766                                   |       |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Operating Loss**                                                                         | ** ** | **(367,089**                              | **)**        | (252,766                                  | )          |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Other Income  (Expense)**                                                                |       |                                      | ** **   |                                      |       |
| Grant income                                                                               | ** ** | **75,119**                                | ** **   | —                                    |       |
| Interest income                                                                            | ** ** | **57,480**                                | ** **   | 177                                       |       |
| Interest expense                                                                           | ** ** | **(1,949**                                | **)**        | (285                                      | )          |
| Unrealized loss on derivative instruments                                                  | ** ** | **(71,294**                               | **)**        |                                      |       |
| Miscellaneous income                                                                       | ** ** | **7,232**                                 | ** **   | 4,900                                     |       |
| Total other income, net                                                                    | ** ** | **66,588**                                | ** **   | 4,792                                     |       |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Net Loss**                                                                               | ** ** | **$**                                     | **(300,501** | **)**                                     | $          | (247,974 | ) |
|                                                                                       |       |                                      | ** **   |                                      |       |
| **Net Loss Per Unit**(27,754,  and 1,280 weighted average units outstanding, respectively) |       | $                                         | (10.83       | )                                         | $          | (193.73 | ) |

 

Notes to Condensed Financial Statements are anintegral part of this Statement.

 

6

----

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

Condensed Statements of Cash Flows

 
| ** **                                                         | ** ** | **Six Months  Ended  June 30, 2004** | ** **    | **Six Months  Ended  June 30, 2003** | ** ** | **Date of  Inception to  June 30, 2004** | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------|---------------|-------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                         | ** ** | **(Unaudited)**                           | ** **    | **(Unaudited)**                           | ** ** | **(Unaudited)**                               | ** ** |
| **Cash Flows from  Operating Activities**                          |       |                                      |          |                                      |       |                                          |       |
| Net loss                                                           | ** ** | **$**                                     | **(300,501**  | **)**                                     | $          | (247,974                                      | )          | $ | (1,104,465 | ) |
| Adjustments to reconcile net loss to net  cash used in operations: |       |                                      | ** **    |                                      |       |                                          |       |
| Depreciation                                                       | ** ** | **1,233**                                 | ** **    | 399                                       |       | 2,346                                         |       |
| Unrealized loss on derivative instruments                          | ** ** | **71,294**                                | ** **    | —                                    |       | 71,294                                        |       |
| Grant income                                                       | ** ** | **(75,119**                               | **)**         | —                                    |       | (84,869                                       | )          |
| Deposits on expired land options                                   | ** ** | **3,000**                                 | ** **    | —                                    |       | 3,000                                         |       |
| Current assets:                                                    |       |                                      | ** **    |                                      |       |                                          |       |
| Derivative instruments                                             | ** ** | **(500,000**                              | **)**         | —                                    |       | (500,000                                      | )          |
| Accounts receivable                                                | ** ** | **(3,668**                                | **)**         | (6,067                                    | )          | (3,668                                        | )          |
| Prepaid expenses                                                   | ** ** | **(22,928**                               | **)**         | (3,370                                    | )          | (28,029                                       | )          |
| Current liabilities:                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Accounts payable                                                   | ** ** | **42,321**                                | ** **    | 113,395                                   |       | 119,505                                       |       |
| Accrued liabilities                                                | ** ** | **(6,325**                                | **)**         | 4,068                                     |       | 2,884                                         |       |
| Net cash used in operating activities                              | ** ** | **(790,693**                              | **)**         | (139,549                                  | )          | (1,522,002                                    | )          |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Cash Flows from  Investing Activities**                          |       |                                      | ** **    |                                      |       |                                          |       |
| Land                                                               | ** ** | **(300,061**                              | **)**         | —                                    |       | (1,009,809                                    | )          |
| Capital expenditures                                               | ** ** | **(18,578**                               | **)**         | —                                    |       | (19,818                                       | )          |
| Capital expenditures for construction in progress                  | ** ** | **(13,637,641**                           | **)**         | —                                    |       | (16,549,773                                   | )          |
| Deposits on land                                                   | ** ** | **—**                                | ** **    | —                                    |       | (13,000                                       | )          |
| Net cash used in investing activities                              | ** ** | **(13,956,280**                           | **)**         | —                                    |       | (17,592,400                                   | )          |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Cash Flows from  Financing Activities**                          |       |                                      | ** **    |                                      |       |                                          |       |
| Proceeds from grant                                                | ** ** | **32,168**                                | ** **    | —                                    |       | 41,918                                        |       |
| Member contributions                                               | ** ** | **3,175,000**                             | ** **    | —                                    |       | 28,102,500                                    |       |
| Refunds (Payments) for costs of raising  capital                   | ** ** | **4,851**                                 | ** **    | (85,428                                   | )          | (373,266                                      | )          |
| Payments on short-term notes                                       | ** ** | **(50,836**                               | **)**         | —                                    |       | (50,836                                       | )          |
| Proceeds from long-term debt                                       | ** ** | **—**                                | ** **    | 82,000                                    |       | —                                        |       |
| Payments on long-term debt                                         | ** ** | **(835**                                  | **)**         | (827                                      | )          | (2,468                                        | )          |
| Payments for debt issuance costs                                   | ** ** | **(472,359**                              | **)**         | —                                    |       | (492,359                                      | )          |
| Payments for membership unit redemption                            | ** ** | **(15,000**                               | **)**         | —                                    |       | (35,000                                       | )          |
| Net cash from (used in) financing  activities                      | ** ** | **2,672,989**                             | ** **    | (4,255                                    | )          | 27,190,489                                    |       |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Net Increase  (Decrease) in Cash and Cash Equivalents**          | ** ** | **(12,073,984**                           | **)**         | (143,804                                  | )          | 8,076,087                                     |       |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Cash and Cash  Equivalents –** Beginning of Period          | ** ** | **20,150,071**                            | ** **    | 163,779                                   |       | —                                        |       |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Cash and Cash  Equivalents –** End of Period                | ** ** | **$**                                     | **8,076,087** | ** **                                | $          | 19,975                                        |       | $ | 8,076,087 |   |
| ** **                                                         | ** ** | ** **                                | ** **    | ** **                                |       |                                          |       |   |   |   |
| **Supplemental Cash  Flow Information**                            |       |                                      | ** **    |                                      |       |                                          |       |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Cash paid during the period for:                                   |       |                                      | ** **    |                                      |       |                                          |       |
| Interest                                                           |       | $                                         | 1,949         | ** **                                | $          | 285                                           |       | $ | 4,954 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| **Noncash Investing  and Financing Activities**                    |       |                                      | ** **    |                                      |       |                                          |       |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Costs of raising capital in accounts  payable                      |       | $                                         | —        | ** **                                | $          | 71,265                                        |       | $ | — |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Capital expenditures funded by long-term  debt                     |       | $                                         | —        | ** **                                | $          | 5,631                                         |       | $ | 5,631 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Construction in progress in accounts  payable                      |       | $                                         | 2,109,435     | ** **                                | $          | —                                        |       | $ | 2,109,435 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Construction in progress funded by notes  payable                  |       | $                                         | 92,345        | ** **                                | $          | —                                        |       | $ | 92,345 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Debt issuance costs in accounts payable                            |       | $                                         | 8,967         | ** **                                | $          | —                                        |       | $ | 8,967 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Deposits applied for the purchase of land                          |       | $                                         | —        | ** **                                | $          | —                                        |       | $ | 10,000 |   |
|                                                               |       |                                      | ** **    |                                      |       |                                          |       |
| Capital expenditures purchased by accounts  payable                |       | $                                         | 7,127         | ** **                                | $          | —                                        |       | $ | 7,127 |   |

 

Notes to Financial Statement are an integralpart of this Statement.

 

7

----

 

**UNITEDWISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

Notes to Financial Statements

 

June 30, 2004

 

**1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

The accompanying unauditedcondensed financial statements have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission.  Certain information and footnote disclosuresnormally included in annual financial statements prepared in accordance withaccounting principles generally accepted in the United States of America havebeen condensed or omitted as permitted by such rules and regulations.  These financial statements and related notesshould be read in conjunction with the financial statements and notes theretoincluded in the Company’s audited financial statements for the year ended December 31,2003, contained in the Company’s annual report on Form 10-KSB/A for 2003.

 

In the opinion of management, the interim condensed financialstatements reflect all adjustments considered necessary for fairpresentation.  The adjustments made tothese statements consist only of normal recurring adjustments.

 

*Nature of Business*

 

The Company was organized to pool investors,some of whom intend to provide a corn supply, for a 40 million gallon ethanolplant to be located near the town of Friesland in the township of Randolph,Wisconsin, with distribution to upper Midwest states. In addition, the Companyintends to produce and sell distillers dried grains as a co-product of ethanolproduction. The Company began construction of its ethanol plant inNovember 2003. As of June 30, 2004, the Company is in the developmentstage with its efforts principally devoted to construction activities.

 

*Accounting Estimates*

 

Management uses estimates and assumptions inpreparing these financial statements in accordance with generally acceptedaccounting principles.  Those estimatesand assumptions affect the reported amounts of assets and liabilities, thedisclosure of contingent assets and liabilities, and the reported revenues andexpenses.  Actual results could differfrom those estimates.

 

*Derivative Instruments*

 

The Companyenters into derivative contracts to hedge the Company’s exposure to price riskrelated to forecasted corn and natural gas purchases and forward corn purchasecontracts.  The Company does not typically enter into derivativeinstruments other than for hedging purposes. All derivative contracts are recognized on the June 30, 2004balance sheet at their fair market value.

 

At June 30,2004, the Company's derivative instruments include 400 December 2004 long corncalls for between $2.90 and $3.00 per bushel and 400 December 2004 short corncalls for $3.70 per bushel.

 

On the datethe derivative instrument is entered into, the Company will designate thederivative as either (1) a hedge of the fair value of a recognized asset orliability or of an unrecognized firm commitment (fair value hedge), (2) a hedgeof a forecasted transaction or of the variability of cash flows to be receivedor paid related to a recognized asset or liability (cash flow hedge) or (3)will not designate the derivative as a hedge. Changes in the fair value of a derivative that is designated as andmeets all the required criteria for a fair value hedge, along with the gain orloss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings.  Changes in the fair value of a derivativethat is designated as and meets all the required criteria for a cash flow hedgeare recorded in accumulated other comprehensive income and reclassified into earningsas the underlying hedged item affects earnings. Changes in the fair value of a derivative that is not designated as ahedge are recorded in current period earnings. Although the Company believes its derivative positions are economichedges, none have been designated as a hedge for accounting purposes.

 

The Companyhas recorded a unrealized loss on derivativeinstruments for $71,294 related to its derivative contracts for the six monthsended June 30, 2004.

 

8

----

 

*Grants*

 

The Company will recognize grantincome as other income for reimbursement of expenses incurred upon complyingwith the conditions of the grant.  Forreimbursements of capital expenditures, the grants are recognized as areduction of the basis of the asset upon complying with the conditions of thegrant.

 

*Recently Issued Accounting Pronouncements*

 

The Financial Accounting Standards Board (FASB) has issued StatementNo. 149, “Amendment of Statement 133 on Derivative Instruments and HedgingActivities.”  The Statement amends and clarifies accountingfor derivative instruments, including certain derivative instruments embeddedin other contracts, and for hedging activities under Statement 133. The Companyhas implemented this pronouncement and it did not have a significant effect onthe Company's financial statements.

 

The Financial Accounting Standards Board (FASB) has issued StatementNo. 150, “Accounting for Certain Financial Instruments with Characteristics ofboth Liabilities and Equity*.*” The Statement establishes standards for how an issuer classifies andmeasures certain financial instruments. Management does not expect theimplementation of this pronouncement to have a significant effect on theCompany’s financial statements.

 

**2.****              BANK FINANCING**

 

On February 26, 2004 the Company closed on a construction loanfrom a financial institution.  Theconstruction loan for $33,024,200 converts, within sixty days post constructionupon certification of completion and attainment of the engineer’s productionguarantee, into two loans with the first loan a $4,000,000 revolving loan andthe second with a $29,024,200 term loan. The term of the loans is five years with a ten-year amortization.  The loan commitment offers a variable andfixed interest rate option.  The variableinterest rate option has a variable base rate determined by the percentage ofmembers’ equity at a range from 275 to 375 basis points.  The construction period is 16 months fromloan closing not to exceed 60 days from initial plant start-up.  The fixed rate quote option is subject tochange weekly and is available at the conversion of the construction loan tothe term loan.  The final term facilitycan be segmented between a fixed portion and a variable portion.

 

The loan fees consist of underwriting fees, participation fee, andannual facility fee.  The underwritingfees are $100,000 of which $20,000 was due and was paid upon acceptance of theterm sheet and $80,000 was due and paid at loan closing.  There was a 75 basis point participation feeon the entire credit facility paid at loan closing totaling $247,682.  This fee will be shared pro rata with thesenior debt participants.  There is anannual facility fee of $40,000 beginning at the conversion of the constructionloan to the facility term note and upon each anniversary for four years.  If any of the senior debt is prepaid,prepayment penalties of 3%, 2% and 1% of the prepaid principal will apply inthe first, second and third year, respectively.

 

These loans are subject to protective covenants requiring the Companyto maintain various financial ratios, are secured by all business assets, andrequire additional loan payments based on excess cash flow.   The loan is secured by substantially all theCompany’s assets.

 

**3. NOTE PAYABLE**

 

In February 2004, the Company executed a note with an insurancebroker.  The new agreement permits theCompany to finance the annual builders risk premiums in nine installmentpayments of $10,531 including interest at 7.11%.  The line is secured by certain assets of theCompany.  As of June 30, 2004, thebalance outstanding is $41,509.

 

9

----

 

**4. LONG TERM DEBT**

 

In April 2003, the Company entered into a capital lease agreementfor office equipment for $5,631 with accumulated depreciation at June 30,2004 of $1,384.  The lease calls forthirty-six monthly payments of $160 including interest at 7%, maturingMarch 2006 and secured by equipment.

 

Long term debt maturities are as follows:

 
| **Periods  Ending June 30,** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|
| 2005                              |       | $          | 1,760      |   |
| 2006                              |       | 1,403      |       |
|                              |       | $          | 3,163      |   |

 

**5. MEMBERS’ EQUITY**

 

As specified in the Company’s operatingagreement, the Company will have one class of membership units. The Company isauthorized to issue up to 28,000 membership units in addition to the seedcapital units issued prior to the registered offering.

 

The Company prepared and filed, on Form SB-2,a Registration Statement with the Securities and Exchange Commission(SEC).  The Offering was for up to 27,500membership units at $1,000 per unit. As of May 14, 2003, the RegistrationStatement was declared effective.  In October 2003, the Company hadraised the minimum of $19,250,000 through the Offering and obtained andaccepted a written debt financing commitment through a lender as discussed inNote 2.  The Company reached their maximumOffering and the Offering was closed on April 9, 2004.

 

Income and losses are allocated to allmembers based upon their respective percentage units held.

 

**6. RELATED PARTY TRANSACTIONS**

 

Through June 30, 2004, the Company had incurred $19,375 in projectcoordinator fees to three current members and one former member.  At June 30, 2004, there was no accountspayable balance relating to these costs.

 

Through June 30, 2004, the Company has also incurred $124,482 indirector fees and related expense, of which $61,175 is included in accountspayable at June 30, 2004 to eight members.

 

**7. GRANTS**

 

In October 2003, the Wisconsin Department of Commerce approved agrant for $271,000 in funds to reimburse the Company for infrastructurecosts.  At June 30, 2004, theCompany has not incurred any costs associated with this grant.

 

In January 2004, the Company was approved for a matching grantfrom the United States Department of Agriculture for $450,000.  Grant revenue from inception to date relatedto this grant totals $75,119 of which $42,951 is in grant receivable atJune 30, 2004.

 

In February 2004, the Company was approved for a matching grantfrom the Transportation Facilities Economic Development Program (TEA) for$160,000.  At June 30, 2004, theCompany has not incurred any costs eligible for this grant.

 

10

----

 

**8. COMMITMENTS AND CONTINGENCIES**

 

The Company estimates total costsof the project to be $59,850,715.  TheCompany anticipates funding the development of the ethanol plant by usingapproximately $881,000 of grants, the proceeds it raised through the close ofthe Offering, and utilizing debt financing for the remainder of the costs.

 

The Company entered an agreement in March 2002, with a railroadengineering firm to complete a Preliminary Rail Design and the requireddocumentation covering a Transportation Economic Assistance grant. The TEAgrant may fund up to fifty percent of the project costs relating totransportation improvements. The estimated commitment for this agreement isapproximately $64,400. As of June 30, 2004, the Company has incurred$29,915 of this cost.

 

In October 2003, the Company entered into an agreement with anelectric cooperative to provide electrical service.  The Company is required to make anon-refundable payment in aid of construction for the facilities the electricalcooperative will install for the benefit of the Company.  The amount of this aid of construction shallbe $146,000, unless there are changes in the scope of the facilities and theamount may be adjusted accordingly.  Asof June 30, 2004, the Company has made an aid of construction payment of$60,000.

 

In October 2003, the Company entered into an agreement with acontractor for work site grading.  Worksite grade work began in October 2003. The total amount to be paid for the work as originally engagedapproximated $570,710.  The contractorhas been approved for additional services above the original contract amountand at June 30, 2004, $772,334 of cost has been incurred of which $76,395is included in construction accounts payable.

 

On October 8, 2003, the Company entered into an agreement with arelated party, Fagen, Inc., to perform all design and construction services,provide all material, equipment, tools and labor, necessary to build a 40million gallon dry grind ethanol plant for $45,575,000, subsequently amended bychange orders to $45,604,143.  Thedesign-build contract provides that the Company may be entitled to receiveeither consequential damages for losses such as loss of use, profits, business,reputation or financing, or liquidated damages in the event Fagen, Inc. failsto substantially complete the plant by the scheduled completion date.  These liquidated damages are in lieu ofconsequential damages for any losses we may incur, such as loss of use,profits, business, reputation, or financing. If Fagen, Inc. does not complete within specified dates, they will paythe Company for each day that substantial completion remains outstanding.  If the plant is substantially completed 1 to 60days prior to substantial completion date, the Company will pay the Fagen, Inc.an early performance bonus for each day that substantial completion is achievedprior to the substantial completion date. If the contract is terminated by the Company without cause or by Fagen,Inc. for cause, the Company is required to pay the Fagen, Inc. a fee of$1,000,000 if the Company resumes construction of the plant through their ownemployees or third parties.  As ofJune 30, 2004, the Company has incurred $17,154,880 in costs related tothis contract and $2,006,953 is included in construction accounts payable.

 

In November 2003, the Company entered into an agreement forconsulting services from November 17, 2003 to February 17, 2004.  This agreement has been verballyextended.  Fees are to be $500 perday.  As of June 30, 2004, theCompany has incurred $91,203 of these costs of which $7,041 is in accounts payable.

 

In April 2004, the Company entered into an agreement forexcavating services for sewer and water main construction and roadwayconstruction for $185,603.  The Companyhas incurred $166,126 of these costs of which $9,280 is in accounts payable.

 

In April 2004, the Company entered into two natural gas relatedagreements.  The natural gas salesagreement commits the Company to purchase specified quantities of natural gasat a then prevailing market prices once the ethanol plant becomesoperational.  The second agreement, thenatural gas transportation service agreement, provides transportation of thenatural gas to the ethanol plant at specific transportation rates.

 

In April 2004, the Company entered into an agreement for theseptic system for the administration building for $14,480.  All of these costs have been incurred ofwhich $4,480 is in accounts payable.

 

11

----

 

In May 2004, the Company entered into an agreement for theadministration building for $379,214, subsequently amended to $380,494.  As of June 30, 2004, the Company has incurred$8,698 of these costs of which all are in accounts payable.

 

In June 2004, the Company entered into an agreement for watertreatment chemicals and service program for a period of three years from thestartup of the plant.  The agreementincludes $10,000 for integration software, $15,590 for start up costs and anannual operating cost of $71,784.  Thisagreement may be terminated by either party with 30 day written notice.

 

In June, 2004, the Company purchased 10 acres with buildings for$300,061.

 

12

----

 

**Item 2.****  Management’s Discussion and Analysis and Planof Operations**

 

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,” “should,”“anticipate,” “believe,” “expect,” “will,” “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 factors described inthis report.  We are not under any dutyto update the forward-looking statements contained in this report.  We cannot guarantee future results, levels ofactivity, performance or achievements.  Wecaution you not to put undue reliance on any forward-looking statements, whichspeak only as of the date of this report. You should read this report and the documents that we reference in thisreport and have filed as exhibits, completely and with the understanding thatour actual future results may be materially different from what we currentlyexpect.  We qualify all of ourforward-looking statements by these cautionary statements.

 

**Overview**

 

United Wisconsin Grain Producers, LLC was formed as a Wisconsin limitedliability company on November 2, 2001 for the purpose of constructing andoperating a 40-million gallon per year ethanol plant near Friesland,Wisconsin.  We expect the total projectcost to be approximately $59,850,715, which includes approximately $45,604,143to build the plant.

 

We raised equity by a public offering registered with the Securitiesand Exchange Commission on Form SB-2, which was declared effective on May 14,2003 and closed on April 9, 2004. We raised $27,500,000 in our offering. In February 2004, we executed debt financing agreements for aconstruction loan of $33,024,200.  Uponcompletion of the project, the construction loan converts into a term loan of$29,024,200 and a revolving loan of $4,000,000. Based upon our offering proceeds, senior credit facility and grantfinancing, we will have approximately $61,405,200 of capital available for theproject.  On April 30, 2004, wefiled a Form 8-A Registration Statement with the Securities Exchange Commissionindicating that we have total assets exceeding $10 million and more than 500unit holders.

 

Construction of the project is progressing on schedule and weanticipate the plant will be substantially complete by the middle ofMarch 2005.  Start-up operations areexpected to begin shortly after substantial completion.

 

**Plan of Operations to Start-up of the EthanolPlant**

 

*ConstructionSchedule and Project Budget*

 

We expect to spend the next 12 months continuing the construction ofthe ethanol plant and commencing start-up operations.  As of the date of this report, constructionof the ethanol facility is progressing according to schedule.  We anticipate plant construction will besubstantially complete by the middle of March 2005 and expect start-upoperations to begin shortly thereafter. These dates are only estimates and we may experience construction delaysor delays in testing and start-up operations that would cause substantialcompletion and start-up operations to occur later than we currently expect.

 

Phase I of the construction process is nearly complete.  Site grading, concrete and dirt work are 80% complete.  Phase II of the construction process has beenstarted.  Phase II work includesinstallation of the utilities infrastructure. We expect to begin installing the water distribution system in the nextfew weeks.

 

Union Pacific Railroad is revising its standardized rail sidingagreement, which has caused an administrative delay in our execution of anagreement for construction of the rail siding at the site.  It is possible that this delay will result inthe rail siding not being completed before the plant is operational.  If the rail siding is not complete when ourplant begins operations, we will be forced to transport a greater than plannedpercentage of our ethanol by truck. Transporting all of our ethanol production by truck may be moreexpensive and may have a material adverse impact on our earnings.

 

Construction has been initiated in the grainreceiving and storage area with the excavation of the grain and dry distillersgrains transfer tunnel as well as the sub-soil excavation for the grainsilos.  Additionally, construction hasbegun on the dry distillers grains building, with the building’s foundationfooting poured.  We have receivedstructural steel for the actual building which we are storing on site.

 

13

----

 

In the fermentation area, the field tankfabricators continue to erect the fermentation tanks with two tanks nearingcompletion.  The process equipment slabhas been poured for this area.  In theprocess building, the floor sumps have been poured and the column foundation isbeing formed.

 

The rings walls for the field erected tanksin the stillage and syrup storage areas have been completed.  Dirt work for the ethanol tank farm has begunwith the installation of the retaining walls. The cooling tower sump has been poured and excavation on the towerfoundation has begun.

 

On May 12, 2004, we entered into an agreementwith Oelke Construction Co., Inc. for the construction of the administrationbuilding for $379,214, which was subsequently amended to $380,494.  Oelke Construction has started theconstruction of the administration building.

 

Utility supply and offsite connections areprogressing as well.  Both wells havebeen drilled and water samples have been sent for analysis.  The plant fire loop has been installed andexcavation for the new electrical substation has been initiated.

 

The rising price of steel couldaffect the final cost of construction of the ethanol plant.  Although we are locked into a guaranteedmaximum price under our Design Build Agreement with Fagen, Inc., any changeorders involving the use of steel could inflate the price of the project abovethe guaranteed maximum price.  Inaddition, shortages of steel could affect the final completion date of theproject.

 

We anticipate having sufficientcapital available to meet our costs and obligations over the next 12months.  The following is our estimate ofour costs and expenditures for the next 12 months. These estimates arebased upon our design-builder and prime subcontractor’s experience with otherethanol plants.  It is only an estimateand our actual expenses could be much higher due to a variety of factorsdescribed elsewhere in our report and in our Form 10-KSB/A.

 
| PLANT CONSTRUCTION COST(1)           |   | $      | 45,665,000 |   |
|--------------------------------------|--------|--------|------------|--------|
| ADMINISTRATIVE BUILDING              |   | $      | 617,000    |   |
| RAILROAD                             |   | $      | 1,561,928  |   |
| OTHER PLANT EQUIPMENT                |   | $      | 356,000    |   |
| ROLLING STOCK                        |   | $      | 63,000     |   |
| LAND AND SITE DEVELOPMENT            |   | $      | 3,290,000  |   |
| OTHER BUILDING COSTS                 |   |   |       |
| Insurance-Builders Risk (14 months)  |   | $      | 138,000    |   |
| Construction Bond                    |   | $      | 308,895    |   |
| INVENTORY-WORKING CAPITAL            |   |   |       |
| Inventory-corn                       |   | $      | 2,500,000  |   |
| Inventory-ethanol and DDGS           |   | $      | 1,505,000  |   |
| Inventory-process supplies/chemicals |   | $      | 97,000     |   |
| Corn Hedging                         |   | $      | 500,000    |   |
| Spare Parts                          |   | $      | 200,000    |   |
| ENTITY ORGANIZATION                  |   | $      | 58,771     |   |
| FINANCING COSTS                      |   | $      | 870,800    |   |
| COST OF RAISING CAPITAL              |   | $      | 390,351    |   |
| EQUITY CLOSING                       |   | $      | 540,310    |   |
| PRE-OPERATING COSTS                  |   | $      | 1,188,660  |   |
| TOTAL                                |   | $      | 59,850,715 |   |

 

14

----

 

----

(1)  Change orders are not included in our currentestimate of costs.  If we execute changeorders that materially impact our estimated plant construction cost, the budgetwill be revised to reflect such impact.

 

Our current budget estimates atotal project cost of $59,850,715, which includes $45,665,000 to build theplant and $14,185,715 for other project costs including land and sitedevelopment, railroad costs, inventory, entity organization, equity closing,pre-operating costs and working capital.

 

The numbers in the table ofcosts and expenditures are only estimates and our actual expenses and costscould be much higher due to a variety of factors outside our control, such as:

 

•                  Changes in theavailability and price of corn;

•                  Changes in theprice of steel;

•                  Changes in theenvironmental regulations that apply to our plant operations;

•                  Increasedcompetition in the ethanol industry;

•                  Changes ininterest rates or the availability of credit;

•                  Changes in ourbusiness strategy, capital improvements or development plans;

•                  Changes in plantproduction capacity or technical difficulties in operating the plant;

•                  Changes ingeneral economic conditions or the occurrence of certain events causing aneconomic impact in the agriculture, oil or automobile industries; and

•                  Changes in theavailability and price of natural gas and the market for wet and modified wet distillers grains.

 

*Market Trends and Uncertainties*

 

The continuing volatility in the corn futures market and variances in cropconditions in Wisconsin present uncertainties as to our anticipated cost ofcorn per bushel.  Variances in the priceof corn increase or decrease the breakeven cost per gallon of producingethanol.  The cost of corn is now tradingin the lower 1/3 of its anticipated price range.  For the previous quarter ended March 31,2004, corn was trading in the top 1/3 of its anticipated price range. We intendto minimize our exposure to corn price volatility by using price riskmanagement strategies such as forward contracting and price hedging.   We have engaged the firm of R.J. O’Brien toassist us with the development and implementation of these price riskstrategies.

 

At June 30, 2004, the Company's derivative instruments include 400December 2004 long corn calls for between $2.90 and $3.00 per bushel and 400December 2004 short corn calls for $3.70 per bushel.

 

We may also be subject to ethanol price risk as Brazil and othercountries have developed a process for producing ethanol from sugar cane at alower cost of production than corn-based ethanol production.  With up to 7% of the United States productiontariff free under the rules of the Caribbean Basin, this foreign ethanolproduction could increase the supply of ethanol in the United States therebyreducing the price of domestic ethanol and decreasing our revenues.

 

The prices ofnatural gas, electricity and gasoline have been trending at a higher up-trendline then anticipated.  This will causeus to pay more for electricity and natural gas. Natural gas will be an important input to our manufacturingprocess.  We expect to use natural gas todry our distillers grains products to moisturecontents at which they can be stored for long periods and transported greaterdistances, so that we can market them to broader

 

15

----

 

livestockmarkets, including poultry and swine markets in the continental UnitedStates.  We expect the increased costswill be offset by higher selling prices for our dried distillers grains.  We intend to minimize our exposure to suchnatural gas price volatility by using price risk management strategies such asforward contracting and price hedging. We have engaged the firm of R.J. O’Brien to assist us with thedevelopment and implementation of these price risk strategies.

 

Some of the risk from foreignethanol production may be offset by a continued growth in demand.  One reason for the increased demand forethanol is the continued phase out legislation for MTBE.  MTBE is a commonly used oxygenateused in fuels for compliance with Federal Clean Air Act mandates, and is amajor competitor of ethanol.  New Yorkand Connecticut have banned the use of MTBE. Sixteen states, including California, have passed phase out legislationfor MTBE.  In January 2005, Atlanta,Georgia will begin ethanol blending, which is expected to create an estimatedannual demand of 250 million gallons of ethanol. The price of unleaded gasolineis also trading at historically high prices, causing the price of ethanol toremain favorable and helping to offset the high price of corn.

 

*Operating Contracts*

 

In April 2004, we enteredinto two natural gas related agreements. The natural gas sales agreement commits the Company to purchasespecified quantities of natural gas at a then prevailing market prices once theethanol plant becomes operational.  Thesecond agreement, the natural gas transportation service agreement, providestransportation of the natural gas to the ethanol plant at specifictransportation rates.  Additionally, inApril, the Company entered into an agreement for the septic system for theadministration building for $14,480 and a land surveying agreement for stakingand office support.

 

On May 12, 2004 we hired Diamond Sunset, LLCto be our grain merchandiser.  DiamondSunset, LLC is an independent contractor. Under our agreement with Diamond Sunset, LLC, we will pay $275 per dayplus reimbursable expenses in exchange for assistance with grainprocurement.  This includes market reviewof potential off farm purchases, elevator supply agreements, corn procurementplan and strategy, promotion of the business with area producers and commercialgrain handlers and the negotiation of supply agreements with commercialhandlers.  This agreement terminates onDecember 31,2004 unless extended by theparties.  On May 12, 2004 we contractedwith G.A. Foster to serve as interim project coordinator to complete specifictasks.  Subsequently, G.A. Foster’s taskswere completed and we hired John Haas as project coordinator.  John Haas began work on July 13,2004.  John Haas will assist us in the development of our plant, completingresponsibilities related to the management of subcontractors on theconstruction site and providing technical experience on practices andprocedures for the operational phase of the project.  We will pay John Haas $325 per day for hisservices.  The agreement terminates onDecember 31, 2004, unless extended by the parties.

 

In June 2004, we enteredinto an agreement for water treatment chemicals and service program for aperiod of three years from the startup of the plant.  The agreement includes $10,000 forintegration software, $15,590 for start up costs and an annual operating costof $71,784.  Either party may terminatethis agreement with 30 day written notice.

 

In June 2004, we completedthe purchase of 10 acres of land for the plant site with buildings for $300,061from Douglas and Heather Tessmann.  Weare leasing use of the land back to the Tessmanns under a one-year lease.

 

On June 7, 2004 we enteredinto a development agreement with the town of Randolph, Wisconsin.  Under this agreement, Randolph will enterinto an agreement with the Wisconsin Department of Commerce for a $271,000community development block grant, which will be used to reimburse us forinfrastructure improvements to our plant, such as roads and a water towertank.  In exchange for the reimbursementfor these improvements, we have agreed to create and fill at least 32 full-timepositions at our plant, with at least 51% of those jobs being made available tolow to moderate-income persons.

 

We are discussing the terms andconditions of an ethanol marketing agreement with a potential ethanol marketingfirm.  We anticipate entering into anethanol marketing agreement prior to substantial completion of plantconstruction.  We are also discussing theterms and conditions of a distillers grains marketing agreement with potentialdistillers grains marketing firms.  Weanticipate entering into a distillers grains marketing agreement prior

 

16

----

 

to substantialcompletion of plant construction.  Inaddition, we are discussing terms for a railroad construction contract.  We anticipate entering into a railroadconstruction contract in Fall 2004.

 

Subsequent to the period ofthis report, we have entered into a one-year risk management contract with R.J.O’Brien.  R.J. O’Brien will be developingand implementing risk management strategies for our natural gas, corn, ethanol,and distillers grain. Under the agreement, we will pay R.J. O’Brien a flat fee of $12,500, afixed monthly fee of $1,500 and commissions for futures and optionstransactions that are volume dependent.

 

Upon start-up of plant operations, we will be applying for a grant fromthe USDA’s Commodity Credit Corporation Bioenergy Program. Under the grantprogram, the Commodity Credit Corporation will reimburse eligible ethanolproducers of less than 65 million gallons of bioenergy one bushel of cornfor every two and one-half bushels of corn used for the increased production ofethanol. No eligible producer may receive more than $7.5 million annuallyunder the program. Because we expect to be an eligible producer and to annuallyutilize 15 million bushels of corn in the increased production of ethanol,we expect to potentially receive the maximum award of $7.5 million.However, the Commodity Credit Corporation may award only $150 millionannually fiscal years 2003 through 2006, and any award we received may bereduced based upon the volume of applications from other eligibleproducers.   As more plants are built andcurrent plants increase production, we expect there will be more eligibleproducers applying for grant proceeds. The CCC has reduced its 2004 Bioenergy Program payments by approximately65% to 70% based upon the volume of applications from eligible producers.  A similar or greater pro rata reduction maybe made to any grant award we receive. In addition, payments under the program in any one fiscal year may beless if Congress does not fully fund the program for that fiscal year (fundingfor the program is subject to an annual appropriation).  We expect to be eligible to receive an awardunder the program only once during the life of our project.  However, to the extent that our start-upperiod covers more than one fiscal year of the U.S. government, we may applytwice and receive more than one award under the program.  The Commodity Credit Corporation BioenergyProgram is scheduled to expire on September 30, 2006.  The grants available under the CCC programmay not continue beyond their scheduled expiration date or if they do continue,the grants may not be at the same level. If our ethanol plant is not operational by the expiration of the CCC programor has not had substantial operations, we may not be eligible for the grants ormay receive a reduced amount.

 

**Liquidity and Capital Resources**

 

As of June 30, 2004, we hadcash of $8,076,087 and total assets of $28,882,359, includingconstruction-in-process of $18,751,553. As of June 30, 2004, we had current liabilities of $2,291,187, whichconsists primarily of our construction accounts payable.  Since our inception through June 30, 2004, wehave an accumulated deficit of $1,104,465. Total members’ equity as of June 30, 2004 was $26,589,769.  Since our inception, we have generated norevenue from operations.

 

As of June 30, 2004, wehave sold a total of 27,500 units in the offering and collected the maximumoffering proceeds of $27,500,000.  Ourcurrent total outstanding units are 28,780 which representsthe 27,500 units sold in the offering plus 1,280 seed capital units.

 

We have entered into a seniorcredit facility consisting of a $33,024,200 single construction loan withAgStar Financial Services, PCA.  Thecredit facility is secured by substantially all of our assets. Duringconstruction, which is expected to be for a period of up to 16 months, we willmake interest only payments on the principal balance of $33,024,200 at aninterest rate equal to the one-month LIBOR (the London Interbank Offered Rate)plus 3.75%.  This interest rate may beadjusted downward depending on the level of owners’ equity as reported in ourmonthly financial statements.  If owners’equity is between 50% and 54.99%, the interest rate will be at the monthly LIBORplus 3.25%.  If owners’ equity exceeds55%, the interest rate will be equal to the monthly LIBOR plus 2.75%.

 

In connection with the seniorcredit facility, we paid loan fees of approximately $347,682.  In addition we will pay an annual facilityfee of $40,000 beginning at the conversion of the construction loan to the termnote and continuing for four years.  Wewill have to pay prepayment penalties if we prepay any portion of the loanprincipal within the first three years.

 

17

----

 

When the ethanol plant is complete andoperating, the construction loan will be converted into two loans.  The first will be a term loan equal to thelesser of $29,024,200 or 55% of the total project cost. The second will be a $4,000,000revolving loan.  The term loan of$29,024,200 or 55% of total project cost is for five years with a ten-yearamortization.  Payments on the convertedterm loan will be paid in monthly installments including principal andinterest.  Interest on the converted termloan will be at a rate equal to the monthly LIBOR plus 3.75%.  This interest rate may be adjusted downwardin exactly the manner as the interest rate on our construction loan, dependingon our level of owners’ equity as reported in our monthly financialstatements.  Interest on the revolvingloan will accrue at a rate equal to the monthly LIBOR plus 3.75%.  However, this interest rate may be adjusteddownward in exactly the same manner as the interest rate on our constructionloan, depending on our level of owners’ equity.

 

The construction loan, converted term loanand line of credit agreements contain restrictions and financial covenants towhich we will be subject during the term of the agreements.  If the project suffers delays, we may not beable to timely repay the loan.  Ifinterest rates increase, we will have higher interest payments, which couldadversely affect our business.

 

We estimate that we will need approximately$45,665,000 to construct the plant and a total of approximately $59,850,715 tocover all expenditures necessary to complete the project, make the plantoperational and produce revenue.  Basedupon the offering proceeds of $27,500,000, the senior credit facility of$33,024,200, and grant financing of approximately $881,000, we expect to haveapproximately $61,405,200 of capital available. This means that we expect to have sufficient cash on hand to coverconstruction and related start-up costs necessary to make the plant operational.

 

**Administration**

 

We currently have an office staff comprisedof one full-time employee, one part-time employee and one project consultantserving as an independent contractor.  Weare also dependent on our board of directors to maintain our books and records.  These individuals are ultimately responsiblefor complying with the rules and regulations promulgated under the Securitiesand Exchange Act of 1934 concerning the maintenance of accurate books andrecords, and the timely submission of periodic reports and other requirementswith the Securities and Exchange Commission.

 

**Operating Expenses**

 

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

 

**Employees**

 

Upon completion of the ethanol plant, we intend to hire approximately34 additional employees. Approximately eleven of our employees will be involvedprimarily in management and administration and the remainder will be involvedprimarily in plant operations.

 

The following table represents some of the anticipated positions withinthe plant and the minimum number of individuals we intend to employ for 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        |       | 14             |       |
| **TOTAL**              | ** ** | **34**         | ** ** |

 

18

----

 

**Item3****.****  Controls andProcedures**

 

Ourmanagement, including our President (the principal executive officer), Kevin M.Roche, and our Treasurer (the principal financial officer), Robert J. Miller,have reviewed and evaluated the effectiveness of our disclosure controls andprocedures as of the end of the period covered by this report.  Based upon this review and evaluation, theseofficers believe that our disclosure controls and procedures are effective inensuring that material information related to us is recorded, processed,summarized and reported within the time periods required by the forms and rulesof the Securities and Exchange Commission.

 

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.****  OTHER INFORMATION**

 

**Item 1.****  Legal Proceedings**

 

None.

 

**Item 2.****  Changes in Securities**

 

The Securities and Exchange Commissiondeclared our Registration Statement on Form SB-2 (SEC Registration No.333-92188) effective on May 14, 2003.  Wecommenced our initial public offering of our units shortly thereafter.  The following is a breakdown of the unitsregistered and the units sold in the offering:

 
| **Amount  Registered** | ** ** | **Aggregate price of the  amount registered** | ** ** | **Amount Sold** | ** ** | **Aggregate price of the  amount sold to date** | ** ** |
|------------------------|------------|-----------------------------------------------|------------|-----------------|------------|-------------------------------------------------|------------|
| 27,500                 |       | $                                             | 27,500,000 |            | 27,500     |                                            | $          | 27,500,000 |   |
|                        |            |                                               |            |                 |            |                                                 |            |  |  |

 

On October 15, 2003, we released funds from escrow and issued23,275 units to our members.  OnApril 9, 2004, we closed the offering and stopped selling units registeredunder our registration statement.  Duringthe offering we sold 27,500 units and received aggregate offering proceeds of$27,500,000.  We sold the units withoutthe assistance of an underwriter.  Whenwe released funds from escrow, we netted our offering expenses against theaggregate subscription proceeds.  Nooffering expenses were paid to related parties.

 

19

----

 

The following table describes our use of ournet offering proceeds as of June 30, 2004:

 
| TOTAL PLANT CONSTRUCTION COST: |   | $      | 15,147,927 |   |
|--------------------------------|--------|--------|------------|--------|
|                           |   |   |       |
| LAND AND SITE DEVELOPMENT:     |   | $      | 2,409,591  |   |
|                           |   |   |       |
| OTHER COSTS(1):                |   | $      | 906,840    |   |
|                           |   |   |       |
| CORN HEDGING:                  |   | $      | 500,000    |   |
|                           |   |   |       |
| FINANCING COSTS:               |   | $      | 492,359    |   |
|                           |   |   |       |
| BUILDER’S RISK:           |   | $      | 75,023     |   |
|                           |   |   |       |
| TOTAL:                         |   | $      | 19,531,740 |   |

 

----

(1)  Other costs consist of board fees, projectmanager fees, investor unit redemptions, line of credit payoff, professionalfees and other general and administrative costs.  No single expenditure in any of the foregoingcost categories exceeded $100,000.

 

**Item 3.****  Defaults Upon SeniorSecurities**

 

None.

 

**Item 4.****  Submission of Matters to a Vote of SecurityHolders**

 

None.

 

**Item 5.****  Other Information**

 

None.

 

**Item 6.****  Exhibits And ReportsOn Form 8-K**

 

(a)                                  Thefollowing exhibits are included herein:

 
| **Exhibit No.** | ** ** | **Exhibit**                                                                                                                                       |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1            |       | Agreement  for Individually-Contracted Firm Natural Gas Transportation Service with  Wisconsin Power and Light Company dated April 8, 2004.* |
|            |       |                                                                                                                                              |
| 10.2            |       | Gas Sales  Agreement with WPS Energy Services, Inc. dated April 1, 2004.*                                                                    |
|            |       |                                                                                                                                              |
| 10.3            |       | Standard  Form of Agreement Between Owner and Contractor with Oelke Construction Co.,  Inc. dated May 12, 2004.                                   |
|            |       |                                                                                                                                              |
| 10.4            |       | Development  Agreement with the town of Randolph, Wisconsin dated June 7, 2004.                                                              |
|            |       |                                                                                                                                              |
| 10.5            |       | Agreement  for commodities management with Diamond Sunset, LLC dated May 12, 2004.                                                                |
|            |       |                                                                                                                                              |
| 31.1            |       | Certificate Pursuant to 17 CFR 240.13a-14(a).                                                                                                     |
|            |       |                                                                                                                                              |
| 31.2            |       | Certificate Pursuant to 17 CFR 240.13a-14(a).                                                                                                     |
|            |       |                                                                                                                                              |
| 32.1            |       | Certificate  Pursuant to 18 U.S.C. § 1350.                                                                                              |
|            |       |                                                                                                                                              |
| 32.2            |       | Certificate  Pursuant to 18 U.S.C. § 1350.                                                                                              |

 

20

----

 

----

*                  Material has been omitted pursuant toa request for confidential treatment and such materials have been filedseparately with the Securities and Exchange Commission.

 

(b)                                 Reportson Form 8-K.

 

On April 26, 2004, we filed an 8-K withthe SEC regarding our press release announcing the successful completion of theoffering of our membership units, and our loan closing in February 2004.

 

 

**SIGNATURES**

 

In accordance with the requirements of theExchange Act, the registrant caused this report to be signed on its behalf bythe undersigned, thereunto duly authorized.

 

 
|   |                 | UNITED WISCONSIN GRAIN PRODUCERS, LLC                   |
|--------|----------------------|---------------------------------------------------------|
|   |                 |                                                    |
|   |                 |                                                    |
| Date:  | August 16, 2004 |                                                    | /s/ Kevin M. Roche |   |
|   |                 | Kevin M. Roche                                          |
|   |                 | President  (Principal Executive Officer)                |
|   |                 |                                                    |
|   |                 |                                                    |
| Date:  | August 16, 2004 |                                                    | /s/ Robert J. Miller |   |
|   |                 | Robert J. Miller                                        |
|   |                 | Treasurer  (Principal Financial and Accounting Officer) |

 

21

----