**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington
      D.C. 20549**





**FORM
      10-K**





[X]
            ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      fiscal year ended **September
      30, 2006**





[
                ]
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934





For
      the
      transition period from ________________  to_______________




Commission
      file number: **0-50714**





**Western
      Plains Energy, L.L.C.**


(Exact
      name of registrant as specified in its charter)





**Kansas**
            **48-1247506**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)




**3022
      County Road 18, Oakley, Kansas 67748**   ****


(Address
      of principal executive offices)





Registrant’s
      telephone number, including area code:  **(785)
      672-8810**





Securities
      registered pursuant to Section 12(b) of the Act: **None**





Securities
      registered pursuant to Section 12(g) of the Act: **Class
      A Capital Units**







Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes o No x





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No o





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K. o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o   Accelerated
      filer o    Non-accelerated
      filer x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o  No x





The
      aggregate market value of the capital units held by non-affiliates of the
      registrant as of September 30, 2006, was $27,468,000, computed by reference
      to
      the price at which membership units were last sold. There is no established
      public trading market for our securities.





As
      of
      December 29, 2006, 2,286 Class A Capital Units, 1,744 Class B Capital Units
      and
      50 Class C Capital Units of the registrant were outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE:** None.

















**TABLE
      OF CONTENTS**





PART
                  IItem
                  1.
              Business
              1Item
                  1A.
              Risk
                  Factors
              12Item
                  2.
              Properties
              18Item
                  3.
              Legal
                  Proceedings
              19Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              19PART
                  IIItem
                  5.
              Market
                  for Registrant’s Equity
              20Item
                  6.
              Selected
                  Financial Data
              21Item
                  7.
              Management’s
                  Discussion and Analysis
              22Item
                  7A.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              38Item
                  8.
              Financial
                  Statements and Supplementary Data
              40Item
                  9.
              Changes
                  in and Disagreements with Accountants
              40Item
                  9A.
              Controls
                  and Procedures
              40PART
                  IIIItem
                  10.
              Directors,
                  Executive Officers and Corporate Governance
              41Item
                  11.
              Executive
                  Compensation
              47Item
                  12.
              Security
                  Ownership and Related Stockholder Matters
              48Item
                  13.
              Related
                  Party Transactions
              49Item
                  14.
              Principal
                  Accounting Fees and Services
              50PART
                  IV
              
              50Item
                  15.
              Exhibits,
                  Financial Statements and SchedulesSIGNATURES
              51











**Additional
      Information**





Descriptions
      in this report are qualified by reference to the contents of any contract,
      agreement or other document described herein and are not necessarily complete.
      Reference is made to each such contract, agreement or document as an exhibit
      to
      this report, or incorporated by reference as permitted by regulations of the
      Securities and Exchange Commission. For more information regarding these
      documents, see the section titled “Item 13. Exhibits” in this
      report.





**Special
      Note Regarding Forward-Looking Statements**





Please
      see the note under "Item 6. Management's Discussion and Analysis or Plan of
      Operation," for a description of special factors potentially affecting
      forward-looking statements included in this report.

















**PART
      I**





**Item
      1.**  **Business**





**Overview**





Our
      business focuses on the production and sale of ethanol and its co-products.
      Ethanol is a type of alcohol which in the U.S. is typically produced from corn.
      Ethanol is primarily used as a blend component for gasoline, and is typically
      added by refiners or distributors to increase octane and reduce tailpipe
      emissions from vehicles. The ethanol industry has grown significantly over
      the
      past few years, increasing production capacity in the U.S. by approximately
      88%
      between 2002 and 2006. We believe ethanol production will continue to grow
      as a
      result of many factors, some of which are its favorable production economics
      relative to gasoline, a shortage of domestic petroleum refining capacity, its
      clean-burning characteristics and federally mandated renewable fuel usage.
      We
      also believe that E85 (see “Our Products and Their Markets,” below) will also
      become increasingly important over time as an alternative to unleaded
      gasoline.





We
      produce fuel grade ethanol by processing corn and milo utilizing what’s known as
“dry-milling” technology. The grain is received by semitrailer truck, weighed
      and cleaned of rocks and debris before it is conveyed to one of two concrete
      storage silos. The grain is then transported to a hammer mill or grinder where
      it is ground into flour and conveyed into a slurry tank for processing. We
      add
      water, heat and enzymes to break the ground grain into a mash. The mash is
      heat
      sterilized and pumped into a tank where other enzymes are added to convert
      the
      starches into glucose sugars. Next, the mash is pumped into one of four
      fermenters, where yeast is added to begin a 48 to 50 hour batch fermentation
      process. A distillation process vaporizes the alcohol from the mash. The alcohol
      is further dried in a rectifier and molecular sieve. The resulting 200
      proof-alcohol is then pumped to shift tanks and blended to achieve a mixture
      consisting of approximately 95% ethanol and 5% gasoline as it is pumped into
      denatured ethanol storage tanks.





Grain
      mash exiting the distillation process is pumped into one of several centrifuges.
      Water from the centrifuges, called thin stillage, is condensed into a thicker
      syrup called condensed solubles. The solids that exit the centrifuge are called
      distillers wet grains (“WDGS”). A portion of these distillers wet grains are
      sold in that form and a portion are subsequently dried and mixed with condensed
      solubles to produce distillers grains with solubles, which may be used as animal
      feed and are known as distillers dry grains (“DDGS”). See "Our Products and
      Their Markets," below. During fiscal year 2006, we produced 45.9 million gallons
      of fuel grade ethanol and 3.6 million and 385,197 tons of WDGS and DDGS,
      respectively.





**History**





We
      were
      organized as a Kansas limited liability company in 2001. We constructed our
      facility, located in western Kansas, during 2003 and began production of ethanol
      in January 2004. Our historic nameplate production was 30 million gallons of
      ethanol per year. During fiscal year 2005, we completed construction on an
      expansion of our facility to give us nameplate capacity of 40 million gallons
      of
      ethanol per year.





-
          1
          -


**Recent
      Developments**





In
      October 2006, we acquired a grain storage facility on an adjacent property.
      In
      addition to purchasing this grain storage facility, we are currently
      constructing two new grain storage bins and hammer mills on our property which
      will increase our grain storage capacity by 567% if all additional storage
      space
      is utilized. It is anticipated that construction of the new storage
      facilities will be completed by spring or summer of 2007. We believe
      the increase in storage capacity will allow us to more efficiently operate
      our ethanol plant. The risk of production interruption due to an inability
      to
      receive new shipments of grain is lessened. We will also benefit by having
      increased flexibility in when we make grain purchases as a result of being
      able
      to time purchases farther in advance of anticipated need for
      production.





In
      June
      2006, we paid off our term loan with our lender, AgCountry Farm Credit Services,
      FLCA (“AgCountry”). We maintain a revolving line of credit with AgCountry. On
      October 1, 2006, pursuant to our lending agreement, the amount of credit
      available was reduced to $4 million and the interest rate decreased to LIBOR
      plus 2.5%, however we currently do not have an outstanding balance. The
      revolving line of credit is subject to the terms of our credit agreement with
      AgCountry dated July 2003, as amended (“Credit Agreement”), which includes a
      minimum working capital requirement and a defined leverage ratio. See “Item 7.
      Management’s Discussion and Analysis” for additional information related to our
      indebtedness.





In
      December 2005, we purchased 80 acres of land adjacent to our property, which
      included 95 acre feet of water rights. The well on this property was converted
      from agricultural use to industrial use and during fiscal 2006 we completed
      improvements on the land necessary for piping the water from the well to our
      ethanol plant. This water supplements the source that we have used historically
      for our ethanol production.





The
      ethanol industry underwent some demographic changes during the last fiscal
      year.
      In addition to dramatic growth in the number of operating and proposed ethanol
      plants which are locally owned and operated, the industry also began to
      experience a trend toward consolidation. A few large ethanol producers began
      expanding their businesses by constructing or acquiring additional ethanol
      plants in new markets, developing their own marketing and resale services and
      changing their organizational form to a corporate structure to allow their
      equity to be publicly traded on national securities exchanges. Some examples
      of
      these companies are VeraSun Energy Corporation, Aventine Renewable Energy
      Holdings, Inc. and US BioEnergy Corporation.





In
      keeping with this trend, potential buyers approached our management during
      fiscal 2006 in an effort to acquire our plant. While we entertained discussions
      with all interested groups, as of the date of this report we have not entered
      into a definitive agreement for any sale or other transaction. It is our
      expectation that this trend toward consolidation in the industry will continue
      in the foreseeable future as the industry matures.





**Our
      Products and Their Markets**





*Ethanol.* We
      produce ethanol to be used as a fuel component that serves as:





•  An
      octane
      enhancer in fuels;


•  An
      oxygenated fuel additive that can reduce carbon monoxide vehicle emissions;
      and


•  A
      non-petroleum-based gasoline extender.





-
          2
          -


Ethanol
      in its primary form is mostly used for blending with unleaded gasoline and
      other
      fuel products. The implementation of the federal Clean Air Act has made ethanol
      fuels an important domestic renewable fuel additive. According to the American
      Coalition for Ethanol (“ACE”), approximately one-third of all gasoline sold in
      the U.S. is blended with ethanol. Most of the ethanol is blended as E10, a
      mixture of 10% ethanol and 90% petroleum gasoline. This fuel is covered by
      warranty for use in all makes and models of vehicles. Some ethanol is blended
      as
      E85, a mixture of 85% ethanol and 15% gasoline. This mixture is used in flexible
      fuel vehicles (“FFVs”). Used as a fuel oxygenate, ethanol provides a means to
      reduce carbon monoxide vehicle emissions.





The
      principal purchasers of ethanol are generally the refined and wholesale gasoline
      marketer or blender. The principal end markets for our ethanol are petroleum
      terminals on the east and west coasts of the United States. During the 2006
      fiscal year, 89% of our net revenue was derived from the sale of ethanol, and
      we
      expect the sale of ethanol to comprise a substantial majority of our revenue
      in
      the future. The remainder of our revenue is derived from the sale of distillers
      grains, discussed in more detail below.





*Distillers
      Grains.* A
      principal co-product of the ethanol production process is distillers grains,
      which is a high-protein, high-energy animal feed supplement primarily marketed
      to the
      dairy
      and beef industry. By using the dry-milling ethanol production process with
      a
      dryer system that can produce two moisture levels, we are able to produce both
      WDGS and DDGS. WDGS are processed grain mash and condensed solubles that contain
      approximately 65% moisture. It has a shelf life slightly longer than three
      days
      and is sold to nearby markets. DDGS are mash that has been dried to 10%
      moisture. It has an almost indefinite shelf life and is sold and shipped via
      truck or railcar to many markets regardless of their vicinity to our ethanol
      plant. During the 2006 fiscal year, approximately 11% of our net revenue was
      derived from the sale of distillers grains, and we expect the sale of distillers
      grains to continue to comprise a minority of our revenue in the future when
      compared to our revenue from ethanol.





**Raw
      Materials**





*Corn
      and Milo Procurement.* During
      the 2006 fiscal year, we used approximately 16.3 million bushels of corn and
      milo to produce ethanol. We obtained a majority of this grain from producers
      in
      western Kansas, where our plant is located. According to the Kansas Agricultural
      Statistic Service, approximately 90.4 million bushels of corn for grain were
      produced in the northwest and west central portions of Kansas in calendar 2005.
      We believe that grain producers in proximity to our plant will produce
      sufficient grain for our needs for the foreseeable future. In the event such
      producers are unable to deliver our requirements, we believe an adequate supply
      is available from producers in other states, such as Nebraska and
      Colorado.





Under
      the
      terms of our operating agreement, the holders of our Class A membership units
      are entitled to a freight allowance for grain sold to us or distillers grains
      acquired from us. During the 2006 fiscal year, our Board of Managers approved
      a
      freight allowance for grain delivered pursuant to this arrangement. The
      allowance during the fiscal year was insignificant.


-
          3
          -





We
      enter
      into hedging transactions in an effort to stabilize the price that we pay for
      such grain. Hedging involves the acquisition of option and futures contracts,
      designed as hedges of specific volumes of grain expected to be used in our
      production process. We also use derivative financial instruments to manage
      the
      exposure to price risk related to grain purchases. At September 30, 2006, we
      had
      open long and short positions in option contracts, which positions were recorded
      in our financial statements at fair value. As a result, we recorded $95,293
      of
      unrealized losses in accumulated comprehensive losses at September 30, 2006
      with
      respect to option and future contracts.





We
      anticipate that our increased storage capacity will assist us in reducing our
      risk from price fluctuations for grain in the future. By increasing our storage
      capacity, we have greater flexibility in determining when we purchase grain.
      To
      the extent we can purchase and store large amounts of grain in advance of our
      needs, it will reduce price volatility and the adverse impact of increases
      in
      grain prices.





The
      price
      and availability of corn and milo are subject to significant fluctuations
      depending upon a number of factors which affect grain commodity prices in
      general, including crop conditions, pestilence, weather, supply and demand,
      government programs and foreign purchases. Because the market price of ethanol
      is not related to grain prices, ethanol producers are generally not able to
      compensate for increases in the cost of grain through adjustments and prices
      charged for their ethanol. Therefore, any increase in the cost of grain or
      transportation expenses would adversely affect our business.





Drought
      and other environmental occurrences could adversely effect the production and
      availability of corn, milo and other grain products in the future. Because
      of
      its relative aridity, the western United States is more susceptible to drought
      than certain other areas of the country. The drought experienced in the western
      United States during 2002 was partially mitigated between 2003 and 2006, but
      there is no assurance that the conditions during 2002 will not repeat. In that
      event, we anticipate that our grain requirements could be satisfied from other
      parts of the country, although transportation costs would be significantly
      higher.





An
      increase in the number of ethanol plants in our geographic region may also
      adversely affect the availability of corn, milo and other grain products to
      us
      in the future. According to the Renewable Fuels Association (“RFA”), between
      January 2002 and December 2006, the number of ethanol plants currently producing
      fuel grade ethanol in the U.S. increased from 61 to 97 and an additional 33
      ethanol plants are currently under construction. Some of these plants are
      located in Kansas, eastern Colorado and southwestern Nebraska and they may
      compete with us for procurement of local grain. On a national level, the
      emergence of new ethanol plants will increase competition with us for our grain
      requirements that we may be forced to satisfy from other parts of the country.





All
      of
      the corn and milo we purchase is tested and must meet high quality control
      standards to ensure the efficient operation and quality production of our plant.
      We use the United States Department of Agriculture's grade requirements for
      U.S.
      Number Two Corn and U.S. Number Two Grain Sorghum. From time to time, we also
      accept grain that does not meet the criteria for U.S. Number Two Corn or U.S.
      Number Two Grain Sorghum or is otherwise substandard. When we do, we discount
      the price or make other allowances to account for the lesser grade quality
      or
      condition at delivery.


-
          4
          -





*Other
      Raw Materials.* The
      other critical raw materials for the production of ethanol are water and natural
      gas. Water is mixed with the processed grain to begin the fermentation process.
      Natural gas is used to heat the resulting mixture in conjunction with the
      fermentation process.





An
      adequate supply of water is important to our ethanol business. We currently
      have
      water wells to the north and east of our plant site from which we pipe water
      to
      our facility. There are two additional wells located on our property which
      are
      not currently permitted for industrial use. We believe that we have sufficient
      water to operate our plant. However, should we require more water, we believe
      that we can obtain it from the existing wells on our property. See “Item 2.
      Description of Property.” We have received all necessary permits to obtain water
      and believe that we currently are operating in compliance with all regulations
      of the Kansas Department of Agriculture, Division of Water
      Resources.





In
      order
      to be assured of a steady source of natural gas, we entered into a Natural
      Gas
      Service Agreement with Midwest Energy, Inc. (“Midwest”) in September 2003
      pursuant to which they deliver natural gas to our plant. We purchase the gas
      from another third party. This agreement supplements a previous agreement with
      Kinder Morgan Energy Partners and Kinder Morgan Interstate Gas Transmission
      LLC
      to deliver the gas to Midwest. In exchange for our agreement not to bypass
      its
      local gas distribution system, Midwest agreed to install and maintain a gas
      main
      directly to our property in Gove County, Kansas. We pay a monthly charge based
      on the amount of gas utilized each month. The rates are fixed through December
      31, 2008, and are subject to change thereafter based on increases or decreases
      applicable to distribution services generally and subject to review by the
      Kansas Corporation Commission. Our contract with Midwest extends through
      December 31, 2013.





We
      also
      contract with Post Rock Gas, LLC ("PRG") to acquire the gas that is transported
      by Kinder Morgan and Midwest to our plant. Our agreement with PRG commenced
      in
      December 2003 and is terminable by either party on not less than 30 days'
      advance notice. The price we paid for gas during the 2006 fiscal year was
      determined by reference to a published "spot" price. We believe our agreements
      with PRG, Kinder Morgan and Midwest will provide an ample supply of natural
      gas
      for the foreseeable future.





Our
      agreement with PRG helps us manage our risk from natural gas price fluctuations.
      At the time we purchased some of our contracts for natural gas, the market
      was
      experiencing a great deal of price uncertainty. Due to this uncertainty, we
      purchased amounts of gas for all of the plant’s needs through calendar 2006 and
      implemented derivative instruments on a portion of our requirements to allow
      us
      to benefit in the event natural gas prices declined. Prices for natural gas
      decreased during the second half of fiscal 2006 as the market supply recovered
      from hurricane-related shortages during the first part of the fiscal year.
      We
      currently have contracts in place to supply approximately 18% of our natural
      gas
      needs beginning in calendar 2007.





We
      have
      entered into an agreement with U.S. Energy Service, Inc. under which U.S. Energy
      Service provides consulting services to us to help us manage our energy use
      and
      costs. The agreement is effective through August 31, 2007 and is renewable
      for
      additional one-year terms unless terminated by either party with 30 days advance
      notice.





-
          5
          -


**Customers**





We
      sell
      essentially all of our products to two marketing firms, which in turn sell
      to
      other purchasers. We have executed an exclusive marketing agreement to market
      the ethanol produced at our plant with Ethanol Products, LLC (“Ethanol
      Products”) of Wichita, Kansas. The agreement is effective for an initial term of
      five years beginning January 2004 and is automatically renewable for subsequent
      five-year terms unless terminated by either party prior to expiration. Ethanol
      Products has agreed to purchase all of the ethanol that is produced at our
      plant
      and is solely responsible for determining the price and terms at which the
      ethanol acquired from our plant is sold and to whom it will be sold. In
      exchange, we receive the gross sales price of the ethanol, less the costs of
      transportation and storage and an administrative fee of $0.01 per gallon sold.
      In the event that our relationship with Ethanol Products is interrupted for
      any
      reason, we believe that we would be able to locate another entity to market
      our
      ethanol. However, any interruption could temporarily disrupt the sale of our
      principal product and adversely affect our operating results.





We
      have
      also executed an exclusive agreement to market all of our distillers grains
      with
      United Bio Energy Ingredients, LLC (“UBE”), an affiliate of ICM, Inc. ICM was
      the general contractor for our ethanol plant. Under the terms of that agreement,
      we receive the gross selling price of all distillers grains sold by UBE, less
      applicable transportation costs and a fee of 2-2.5 % of the gross selling price
      depending on whether we sell DDGS or WDGS. The initial term of the agreement
      with UBE was for one year expiring September 30, 2006 and was automatically
      renewed for an additional one year term. The annual automatic renewal will
      continue unless the agreement is terminated by either party following 90 days
      advance written notice. As with the marketing arrangement with Ethanol Products,
      any interruption in our relationship with UBE could temporarily affect our
      business, although we believe that we could find another entity to market our
      grains.





**Transportation
      and Delivery**





The
      grain
      that we receive is delivered by trucks. Due to our proximity to Interstate
      70,
      transportation to and from the plant is efficient. Distillers grains are
      transported exclusively by semitruck. UBE, as our exclusive purchaser of
      distillers grains, selects the carrier.





Our
      plant
      was designed with a rail spur and connection to the Union Pacific railway
      system, which facilitates transporting our ethanol to national markets. Our
      plant is also located adjacent to Interstate 70. We ship our ethanol by rail
      and
      by truck, determined with reference to a review and analysis of the current
      market conditions, transportation costs and applicable environmental
      regulations. The target for rail-transported ethanol includes the State of
      California, the southwest and eastern United States. Ethanol targeted for more
      proximate markets is transported by truck.





-
          6
          -


**Legislation
      and Federal and State Supports or Subsidies**





*Legislation.* The
      Energy Policy Act, which was enacted in 2005, will likely enhance the use of
      ethanol as a fuel additive for the foreseeable future. The Energy Policy Act
      established the first ever Renewable Fuel Standard (“RFS”) in federal law,
      requiring that at least 4 billion gallons of ethanol and biodiesel be used
      in
      2006, increasing to at least 7.5 billion gallons in 2012. For reference
      purposes, approximately 4.3 billion (including 3.9 billion fuel grade) gallons
      of ethanol was produced during calendar 2005. Pursuant to this law, the United
      States Environmental Protection Agency (“EPA”) is directed to promulgate rules
      requiring refineries, blenders, distributors and importers to introduce or
      sell
      volumes of ethanol and biodiesel into commerce in accordance with the annual
      RFS. The following table describes minimum ethanol and biodiesel use for years
      2006 through 2012 established by the Energy Policy Act:





Ethanol
                DemandYear
            (in
                billions of gallons)2006
            4.02007
            4.72008
            5.42009
            6.12010
            6.82011
            7.42012
            7.5





For
      years
      2013 and thereafter, the EPA is directed to establish a new RFS, based on the
      amount of ethanol expected to be sold in commerce in each of those years. The
      use of ethanol and biodiesel in 2013 shall not be less than the percentage
      of
      7.5 billion gallons to the total volume of U.S. gasoline supply in 2012. While
      the precise impact of this law cannot yet be determined, we anticipate that
      it
      will maintain or enhance production of ethanol in the United States, since
      it
      sets minimum standards for use.





The
      American Jobs Creation Act of 2004 contained the Volumetric Ethanol Excise
      Tax
      Credit ("VEETC"). This law amended the Federal gasoline excise tax structure
      effective January 1, 2005. As amended, the law creates a new volumetric ethanol
      excise tax credit of $0.51 per gallon of ethanol blended at 10%. The credit
      provided by VEETC replaced an exemption which allowed ethanol blended fuel
      to be
      taxed at a lower rate than regular gasoline. The use of ethanol as a fuel
      additive is enhanced by the availability of a credit from the federal gasoline
      excise tax.





In
      addition to the legislation discussed above, ethanol sales have been favorably
      affected by other legislation, including the Clear Air Act Amendments of 1990,
      particularly the federal oxygenation program, which became effective November
      1,
      1992. The program requires the sale of oxygenated motor fuels during the fall
      and winter months in certain major metropolitan areas to reduce carbon monoxide
      pollution. Ethanol use also has increased due to a second Clean Air Act program,
      the Reformulated Gasoline Program. This program became effective January 1,
      1995, and requires the sale of reformulated gasoline in certain major urban
      areas to reduce pollutants, including those that contribute to ground level
      ozone, better known as smog.


-
          7
          -





The
      use
      of ethanol as an oxygenate to blend with fuel to comply with federal mandates
      also has been aided by federal tax policy. The Energy Tax Act of 1978 exempted
      ethanol blended gasoline from the federal gas tax as a means of stimulating
      the
      development of a domestic ethanol industry and mitigating the United States'
      dependence on foreign oil. As amended, the federal gasoline tax credit currently
      allows the market price of ethanol to compete with the price of domestic
      gasoline. Although the federal tax credit is not directly available to us,
      it
      allows us to sell our ethanol at prices that are competitive with other less
      expensive additives and gasoline.





Fuel
      grade ethanol prices traditionally have varied directly with the wholesale
      price
      of gasoline. However, in some states, fuel grade ethanol typically sells for
      a
      higher price per gallon than wholesale gasoline because of the aforementioned
      excise tax incentives. Historically, fuel grade ethanol prices also have
      reflected a premium due to the oxygenate and octane enhancing properties of
      this
      motor fuel additive.





*Federal
      Ethanol Supports.* During
      fiscal 2006, we participated in the United States Department of Agriculture
      Commodity Credit Corporation Bioenergy Program and earned $224,630 from the
      program. The purpose of the program is to encourage increased purchases of
      eligible commodities for the purpose of expanding the production of commercial
      fuel grade ethanol and commercial biodiesel and support new production capacity
      for such bioenergy. The program was terminated June 30, 2006 and therefore
      we do
      not expect to receive amounts under this program during fiscal
      2007.





A
      federal
      tax credit for small ethanol producers is generally available to our company
      and
      its members. Eligibility to receive the credit is based upon plant capacity
      and
      the Energy Policy Act increased the capacity limit from 30 million to 60 million
      gallons of production. Ethanol producers that qualify for the credit can deduct
      from their federal income tax $0.10 per gallon on the first 15 million gallons
      produced annually. The small producer credit is scheduled to expire by its
      terms
      on December 31, 2008. Due to the pass-through nature of our partnership taxation
      structure, we expect this credit will be passed through to our members. However,
      the amount of any such credit received by our members must also be included
      in
      his or her gross income, which could result in taxation on the amount of the
      credit passed through to the member. Also, the use of the credit by our members
      may be limited, so each member should consult his or her tax advisor. This
      tax
      credit may foster additional growth in ethanol plants of a larger size and
      increase competition in this particular plant size category.





*State
      Ethanol Supports.* The
      State of Kansas provides an incentive production payment to ethanol producers.
      The production incentive available to Kansas ethanol producers that commence
      production after July 1, 2001 and sell at least 5 million gallons consists
      of a
      direct payment of $0.075 per gallon for up to 15 million gallons per year.
      Accordingly, the maximum amount a Kansas ethanol producer can currently receive
      in a year is $1,125,000. These incentive payments are available for the first
      seven years of production. The available statewide funding for these incentive
      payments was $1.5 million per year for 2002-2004 and will increase to $3.5
      million per year for 2005-2011 plus any excess balance carried over from the
      prior year's current production account. Any shortfall in the available funds
      will result in a pro rata decrease in the incentives paid to the individual
      ethanol producers. During the 2006 fiscal year, we were entitled to the maximum
      amount available to producers. We received payments of $902,936, and have
      accrued an additional $222,064 which we expect to receive subsequent to the
      end
      of the calendar year.


-
          8
          -





We
      are
      unable to predict what effect, if any, expiration or termination of federal
      and
      state subsidies will have on the market or price for our ethanol. However,
      either event may adversely affect our business. See "Item 6. Management's
      Discussion and Analysis or Plan of Operation," for further information relating
      to supports and subsidies.





**Environmental
      Matters**





The
      construction and expansion of our plant required various state and local permits
      to comply with existing governmental regulations designed to protect the
      environment and worker safety. While we are also subject to regulations on
      emissions by the EPA, current EPA rules did not require us to obtain any permits
      or approvals in connection with the construction and operation of our business.
      Additional expenditures which may be required to achieve or maintain compliance
      with future laws and more stringent standards for environmental matters may
      also
      limit our operating flexibility.





Our
      ethanol production requires us to emit a significant amount of carbon dioxide
      into the air. Current Kansas law regulating emissions does not restrict or
      prevent us from emitting carbon dioxide gas into the air, but this could change
      in the future. However, the EPA has promulgated National Emissions Standards
      for
      Hazardous Air Pollutants (“NESHAP”), under the Clean Air Act and it could apply
      to our facility if the emissions of hazardous air pollutants exceed certain
      thresholds. If our facility is authorized to emit hazardous air pollutants
      above
      the threshold level, then we are required to comply with NESHAP for our
      manufacturing process and would be required to come into compliance with another
      NESHAP standard applicable to boilers and process heaters by September 13,
      2007.
      We could also be subject to environmental or nuisance claims from adjacent
      property owners or residents in the area based on foul smells or other air
      or
      water discharges from the plant.





We
      obtained what we believe are all the necessary air and water permits to operate
      our plant before we commenced operations, including a permit to discharge
      wastewater from our plant. Under normal conditions, our plant utilizes a closed
      system and will not discharge process wastewater, but we obtained a permit
      to
      discharge wastewater in case of emergency failure of our wastewater treatment
      equipment. We also obtained a permit to discharge water used in our cooling
      tower and boiler.





In
      addition to the foregoing regulations affecting air and water quality, we are
      subject to regulation for our fuel storage tanks. If we are found to have
      violated federal, state or local environmental regulations in the future, we
      could incur liability for clean-up costs, damage claims from third parties
      and
      civil or criminal penalties that could adversely affect our
      business.





-
          9
          -


**Our
      Competitive Strengths**





*Plant
      expansion and improvements.* We
      expanded the nameplate capacity of our ethanol plant in fiscal 2005 to 40
      million gallons per year. The expansion included, among other things, a 750,000
      gallon beer well, expansion of our existing cooling towers by one cell, a new
      cooling pump, a new style burner and a new centrifuge. The expansion was built
      on our existing plant site by ICM, Inc., the contractor for our original plant,
      and did not require the acquisition of any additional property. Our expansion
      was placed into service during the second quarter of fiscal 2005. We believe
      our
      increase in production capacity positions us favorably in the marketplace.
      According to the ACE, our plant is currently the second-largest producer in
      Kansas and we may benefit over smaller producers from an increase in name
      recognition or purchasing power due to our size.





*Plant
      technology and efficiency* .
      At
      September 30, 2006, our plant was producing ethanol at or above the nameplate
      capacity, primarily due to capital improvements we made in addition to the
      expansion. We purchased and installed an additional boiler to provide additional
      steam to our plant and upgraded our thermal oxidizer which helps maintain more
      consistent temperatures during the manufacturing process. We believe we will
      continue to compete as a low-cost producer of ethanol in the future due to
      the
      improved efficiency from our equipment upgrades.





*Proximity
      to grain* .
      The
      proximity of our plant to producers of the grain we need to make ethanol favors
      us over some of our competitors. Local producers generally produce more than
      enough grain to meet our requirements, and the close proximity for delivery
      can
      result in competitively favorable prices for us. Additionally, many local grain
      producers are members of our company who supply us at competitive
      prices.





*Reduction
      of debt* .
      In June
      2006, we paid off the outstanding balance on our term loan with AgCountry.
      We
      maintain a revolving line of credit in the amount of $4 million with AgCountry
      at an interest rate of LIBOR plus 2.5%, however we currently do not have an
      outstanding balance. The reduction of our debt positions us favorably over
      other
      competitors who have long-term debt. As a result eliminating payments on
      long-term debt, we may be less sensitive to fluctuations in revenue as a result
      of changes in the price of ethanol or the costs of our raw materials as compared
      to other ethanol plants that are required to make payments under long-term
      debt
      contracts. Additionally, our improved cash position allows us to have more
      flexibility in determining how to use working capital.


.





-
          10
          -


**Competition**





We
      are in
      direct competition with numerous other ethanol producers, many of which have
      greater resources than we do. According to the RFA, eight producers in the
      State
      of Kansas produce approximately 210 million gallons of fuel grade ethanol
      annually and additional ethanol production facilities are currently under
      construction. Nationally, fuel grade ethanol plants produced over 3.9 billion
      gallons of ethanol in 2005, a 15% increase from 2004 and 121% increase since
      2001. We also expect that additional ethanol producers will enter the market
      if
      the demand for ethanol continues to increase. Our ethanol plant competes with
      other ethanol producers on the basis of price and, to a lesser extent, delivery
      service. We believe we can compete favorably with other ethanol producers due
      to
      our proximity to ample corn and milo supplies at generally favorable
      prices.





The
      largest ethanol producers include Abengoa Bioenergy Corp., Archer Daniels
      Midland Company, Aventine Renewable Energy, LLC, Cargill, Inc., Hawkeye
      Renewables, LLC, New Energy Corporation and VeraSun Energy Corporation, all
      of
      which are capable of producing more ethanol than we produce. In addition, there
      are many regional, farmer-owned entities recently formed, or in the process
      of
      formation, of a similar size and with similar resources to ours. Most ethanol
      plants also produce distillers grains.





In
      addition, new plants are under construction and plans to expand existing plants
      have been announced, which would increase the ethanol production capacity of
      our
      competitors. We are unable to determine the number and production capacity
      of
      plants that ultimately may be constructed, the timing of such construction
      or
      the effect of resulting production upon the demand or price for our
      ethanol.





We
      may
      also compete with international ethanol producers from countries such as Brazil,
      who may have lower production costs and comparable transportation costs to
      coastal markets and countries like Costa Rica and El Salvador and others subject
      to favorable tariff treatment by the U.S. under the Caribbean Basin
      Initiative.





We
      also
      compete with non-ethanol oxygenates which may cost less to produce than ethanol.
      Alternative fuels, gasoline oxygenates and ethanol production methods are
      continually under development by ethanol and oil companies with far greater
      resources than we have. Development of new products and methods of ethanol
      production by larger and financially stronger competitors could provide them
      with significant competitive advantages over us and thus could harm our
      business. These companies, some of which are publicly traded on national
      securities exchanges, generally have access to larger capital and financing
      markets and thus may be able to obtain financing easier and at more favorable
      terms than us.





**Research
      and Development**





During
      the 2006 fiscal year, we participated in research and development programs
      sponsored by our suppliers. This research was focused primarily on energy
      reduction and other issues related to plant operation and production methods
      to
      develop more efficient methods of producing ethanol. We did not make any
      material expenditures on research and development during that time.





-
          11
          -


**Employees**





As
      of the
      date of filing this report, we have 34 full-time employees. These include a
      General Manager, a plant manager who oversees plant operations and production,
      a
      commodities manager to oversee grain acquisition and risk management, a safety
      director, a lab manager, a maintenance manager, a controller, an office manager
      and an administrative assistant. The remainder of our employees includes
      administrative, production and maintenance support personnel. None of our
      employees are the subject of collective bargaining by labor unions, and we
      believe that we enjoy excellent relations with our employees.





From
      time
      to time, we also retain the services of outside consultants to supplement the
      services provided by our employees. These include engineering, construction,
      legal, accounting and financial advisors. We believe that we can obtain the
      services of all personnel necessary to operate our business.





**Item
      1A. Risk Factors**





*You
      should carefully read and consider the risks and uncertainties below and the
      other information contained in this report. The risks and uncertainties below
      are not the only risks we may face. The following risks, together with
      additional risks and uncertainties not currently known to us or that we
      currently deem immaterial could impair our financial condition and results
      of
      operation.*





**Risks
      Related to Our Business**





***We are
      a relatively new company with a limited operating history in an
      emerging growth industry.*** We
      commenced production of ethanol at our plant in January 2004. Accordingly,
      we
      have a limited operating history from which you can evaluate our business and
      prospects. Our operating results have fluctuated significantly in the past
      and
      could fluctuate significantly in the future as a result of a variety of factors,
      including those discussed throughout this report. Many of these factors are
      outside our control. As a result of these factors, our operating results may
      not
      be indicative of future operating results and you should not rely on them as
      indications of our future performance. In addition, our prospects must be
      considered in light of the risks and uncertainties encountered by an early-stage
      company and in rapidly growing industries, such as the ethanol industry, where
      supply and demand may change substantially in a short amount of
      time.





**** ***Our
      business is not diversified.*** Our
      success depends largely upon our ability to profitably operate our ethanol
      plant. We do not have any other lines of business or other sources of revenue
      if
      we are unable to operate our ethanol plant and manufacture ethanol and
      distillers grains. If economic or political factors adversely affect the market
      for ethanol, the company has no other line of business to rely on if the ethanol
      business declines. Our business would also be significantly harmed if our
      ethanol plant could not operate at full capacity for any extended period of
      time.


-
          12
          -




*Our
      revenues will be
      greatly affected by the price at which we can sell our ethanol and distillers
      grains.* The
      prices of ethanol and distillers grains can be volatile as a result of a number
      of factors. These factors include the overall supply and demand, the price
      of
      gasoline, level of government support, and the availability and price of
      competing products. For instance, the price of ethanol tends to increase as
      the
      price of gasoline increases, and the price of ethanol tends to decrease as
      the
      price of gasoline decreases. Any lowering of gasoline prices will likely also
      lead to lower prices for ethanol, which may decrease our ethanol sales and
      reduce revenues.





***Our
      financial performance is significantly dependent on corn and natural gas
      prices.*** Our
      results of operations and financial condition are significantly affected by
      the
      cost and supply of corn and natural gas. If our region becomes saturated by
      ethanol plants, the corn for ethanol could consume a significant portion of
      the
      total corn production in our region, which would likely drive up local corn
      prices. The amount of corn we used in our operations increased 17% from 2005
      to
      2006 as a result of our plant expansion. If more corn-based ethanol plants
      are
      constructed or existing plants expand their capacity, the increase in demand
      for
      local corn and natural gas may drive up the prices of those commodities.
      Generally, we cannot pass on increases in input prices to our customers. Changes
      in the price and supply of corn and natural gas are subject to and determined
      by
      market forces over which we have no control.





***Corn,
      as with most other crops, is affected by weather, disease and other
      environmental conditions.*** The
      price of corn is also influenced by general economic, market and government
      factors. These factors include weather conditions, farmer planting decisions,
      domestic and foreign government farm programs and policies, global demand and
      supply and quality. Changes in the price of corn can significantly affect our
      business. While the average price of corn decreased 3% in fiscal 2006 when
      compared to fiscal 2005, the price of corn reached a ten-year high around the
      end of our fiscal year. We expect corn prices to remain high into fiscal 2007.
      If a period of high corn prices is sustained for some time, such pricing may
      reduce our ability to generate revenues because of the higher cost of operating
      and may make ethanol uneconomical to use in fuel markets. We cannot offer any
      assurance that we will be able to offset any increase in the price of corn
      by
      increasing the price of our products. If we cannot offset increases in the
      price
      of corn, our financial performance may be materially and adversely affected.





***The
      price of natural gas is also affected by market and environmental conditions
      and
      other factors beyond our control.*** The
      prices for and availability of natural gas are subject to volatile market
      conditions, including supply shortages and infrastructure incapacities. Seasonal
      changes tend to affect the price of natural gas and increases during colder
      months tend to increase our costs of production. Significant disruptions in
      the
      supply of natural gas could impair our ability to manufacture ethanol for our
      customers. Furthermore, increases in natural gas prices or changes in our
      natural gas costs relative to natural gas costs paid by competitors may
      adversely affect our results of operations and financial condition.




***The
      spread between ethanol and corn prices can vary
      significantly.*** **** Corn
      costs significantly impact our cost of goods sold. Our gross margins are
      principally dependent upon the spread between ethanol and corn prices.
      Subsequent to fiscal year end, the spread between ethanol and corn prices has
      been small, primarily as a result of high corn prices and decreasing ethanol
      prices. However, this spread fluctuated significantly in 2006 and may fluctuate
      significantly in the future. Any reduction in the spread between ethanol and
      corn prices, whether as a result of an increase in corn prices or a reduction
      in
      ethanol prices, would adversely affect our results of operations and financial
      condition.




-
          13
          -








***The
      price of ethanol may decrease as new ethanol plants become
      operational.*** We do
      not expect higher prices for ethanol during 2006 to be sustainable as supply
      from new and existing ethanol plants increases to meet increased demand.
      Increased production of ethanol may lead to lower prices. The increased
      production of ethanol could have other adverse effects. For example, the
      increased production could lead to increased supplies of co-products from the
      production of ethanol, such as distillers grains. Those increased supplies
      could
      outpace demand, which would lead to lower prices for those by-products. Also,
      the increased production of ethanol could result in increased demand for corn.
      This could result in higher prices for corn and corn production creating lower
      profits. There can be no assurance as to the price of ethanol or distillers
      grains in the future. Any downward changes in the price of ethanol and/or
      distillers grains may result in less revenue which would decrease
      our profitability.





***We
      sell all of the ethanol we produce to Ethanol Products under our ethanol
      marketing agreement.*** Ethanol
      Products is the sole buyer of all of our ethanol, and we rely heavily on its
      marketing efforts to successfully sell our product. Because Ethanol Products
      sells ethanol for a number of other producers, we have limited control over
      its
      sales efforts. Our financial performance is dependent upon the financial health
      of Ethanol Products, as a significant portion of our accounts receivable are
      attributable to Ethanol Products. If Ethanol Products breaches the ethanol
      marketing agreement or is not in the financial position to purchase and market
      all of the ethanol we produce, we could experience a material loss and we may
      not have any readily available means to sell our ethanol, and our financial
      performance will be adversely and materially affected. If our agreement with
      Ethanol Products terminates, we may seek other arrangements to sell our ethanol,
      including selling our own product, but we give no assurance that our sales
      efforts would achieve results comparable to those achieved by Ethanol Products.





***We
      sell all of the distillers grains we produce to UBE under our distillers grains
      marketing agreement.*** UBE is
      the sole buyer of all of our distillers grains that we sell locally, and we
      rely
      heavily on its marketing efforts to successfully sell our product. Because
      UBE
      sells distillers grains for a number of other producers, we have limited control
      over its sales efforts. Our financial performance is dependent in part upon
      the
      financial health of UBE, as a significant portion of our accounts receivable
      are
      attributable to UBE. If UBE breaches the distillers grains marketing agreement
      or is not in the financial position to purchase and market all of the distillers
      grains we produce, we could experience a material loss and we may not have
      any
      readily available means to sell our distillers grains, and our financial
      performance will be adversely and materially affected. If our agreement with
      UBE
      terminates, we may seek other arrangements to sell our distillers grains,
      including selling our own product, but there is no assurance that our sales
      efforts would achieve results comparable to those achieved by UBE.





***We
      engage in hedging transactions that may be costly and
      ineffective.*** We are
      exposed to market risk from changes in commodity prices. Exposure to commodity
      price risk results from our dependence on corn and natural gas in the ethanol
      production process. We seek to minimize the risks from fluctuations in the
      prices of corn and natural gas through the use of hedging instruments. The
      effectiveness of our hedging strategies is dependent upon the cost of corn
      and
      natural gas and our ability to sell sufficient products to use all of the corn
      and natural gas for which we have futures contracts. There is no assurance
      that
      our hedging activities will successfully reduce the risk caused by price
      fluctuation which may leave us vulnerable to high corn and natural prices.
      Alternatively, we may choose not to engage in hedging transactions in the
      future. As a result, our results of operations and financial conditions may
      also
      be adversely affected during periods in which corn and/or natural gas prices
      increase.


-
          14
          -





***Hedging
      activities themselves can result in costs because price movements in corn and
      natural gas contracts are highly volatile and are influenced by many factors
      that are beyond our control.*** There
      are several variables that could affect the extent to which our derivative
      instruments are impacted by price fluctuations in the cost of corn or natural
      gas. However, it is likely that commodity cash prices will have the greatest
      impact on the derivatives instruments with delivery dates nearest the current
      cash price. We may incur such costs and they may be significant.





***Advances
      in ethanol production technology could require us to incur costs to update
      our
      plant or could otherwise hinder our ability to compete or operate
      profitably.*** Advances
      and changes in the technology of ethanol production are expected to occur.
      Such
      advances and changes may make the ethanol production technology installed in
      our
      plant less desirable or obsolete. These advances could also allow our
      competitors to produce ethanol at a lower cost than us. If we are unable to
      adopt or incorporate technological advances, our ethanol production methods
      and
      processes could be less efficient than our competitors, which could cause our
      plant to become uncompetitive or completely obsolete. If our competitors
      develop, obtain or license technology that is superior to ours or that makes
      our
      technology obsolete, we may be required to incur significant costs to enhance
      or
      acquire new technology so that our ethanol production remains competitive.
      Alternatively, we may be required to seek third-party licenses, which could
      also
      result in significant expenditures. We cannot assure you that third-party
      licenses will be available or, once obtained, will continue to be available
      on
      commercially reasonable terms, if at all. These costs could negatively impact
      our financial performance by increasing our operating costs and reducing our
      net
      income.





**Risks
      Related to Ethanol Industry**





***New
      plants or decreases in the demand for ethanol may result in excess production
      capacity.*** The
      supply of domestically produced ethanol is at an all-time high. The RFA
      estimates that ethanol production in calendar 2005 reached a record 4.3 billion
      gallons and that this amount will be surpassed in calendar 2006. Production
      of
      fuel grade ethanol has increased 121% since 2001. There are at least 97
      production facilities currently operating in the United States with more under
      construction or planned for construction in the foreseeable future. Excluding
      our facility, Kansas currently has at least 10 ethanol plants operating or
      under
      currently under construction and approximately 10 more in various stages of
      planning. Excess capacity in the ethanol industry would have an adverse impact
      on our results of operations, cash flows and general financial condition. Excess
      capacity may also result or intensify from increases in production capacity
      coupled with insufficient demand. If the demand for ethanol does not grow at
      the
      same pace as increases in supply, we would expect the price for ethanol to
      decline. If excess capacity in the ethanol industry occurs, the market price
      of
      ethanol may decline to a level that is inadequate to generate sufficient cash
      flow to cover our costs.


-
          15
          -





***We
      operate in a competitive industry and compete with larger, better financed
      entities.*** There is
      significant competition among ethanol producers with numerous producer and
      privately owned ethanol plants planned and operating throughout the Midwest
      and
      elsewhere in the United States. The number of ethanol plants being developed
      and
      constructed in the United States continues to increase at a rapid pace. The
      recent passage of the Energy Policy Act of 2005 included a renewable fuels
      mandate that we expect will further increase the number of domestic ethanol
      production facilities. The largest ethanol producers include Abengoa Bioenergy
      Corp., Archer Daniels Midland Company, Aventine Renewable Energy, LLC, Cargill,
      Inc., Hawkeye Renewables, LLC, New Energy Corp. and VeraSun Energy Corporation,
      each of which are capable of producing more ethanol than we expect to produce.
      Larger, better financed ethanol producers may be able to expand their production
      capacity and adapt to new technologies easier than us. Archer Daniels Midland
      is
      currently the largest ethanol producer in the U.S. and controls a significant
      portion of the ethanol market. If the demand for ethanol does not grow at the
      same pace as increases in supply, we expect that lower prices for ethanol will
      result which may adversely affect our ability to generate profits and our
      financial condition.





***We
      compete with other gasoline additives.*** Our
      ethanol plant also competes with producers of other gasoline additives made
      from
      raw materials other than corn having similar octane and oxygenate values as
      ethanol, including but not limited to methyl tertiary butyl ether
      (“MTBE”).  Alternative fuels, gasoline oxygenates and alternative ethanol
      production methods are also continually under development. The major oil
      companies have significantly greater resources than we have to market MTBE,
      to
      develop alternative products, and to influence legislation and public perception
      of MTBE and ethanol. These companies also have significant resources to begin
      production of ethanol should they choose to do so.





***Competition
      from the advancement of alternative fuels may lessen the demand for
      ethanol.*** Alternative fuels, gasoline oxygenates and ethanol production methods are
      continually under development. A number of automotive, industrial and power
      generation manufacturers are developing alternative clean power systems using
      fuel cells or clean burning gaseous fuels. Like ethanol, the emerging fuel
      cell
      industry offers a technological option to address increasing worldwide energy
      costs, the long-term availability of petroleum reserves and environmental
      concerns. Fuel cells have emerged as a potential alternative to certain existing
      power sources because of their higher efficiency, reduced noise and lower
      emissions. Fuel cell industry participants are currently targeting the
      transportation, stationary power and portable power markets in order to decrease
      fuel costs, lessen dependence on crude oil and reduce harmful emissions. If
      the
      fuel cell and hydrogen industries continue to expand and gain broad acceptance,
      and hydrogen becomes readily available to consumers for motor vehicle use,
      we
      may not be able to compete effectively. This additional competition could reduce
      the demand for ethanol, resulting in lower ethanol prices that might adversely
      affect our results of operations and financial condition.


-
          16
          -





***Cellulose-based
      ethanol may compete with corn-based ethanol in the future
      .*** Especially in the Midwest, most ethanol is currently produced from corn and
      other raw grains, such as milo or sorghum. The current trend in ethanol
      production research is to develop an efficient method of producing ethanol
      from
      cellulose-based biomass, such as agricultural waste, forest residue, municipal
      solid waste, and energy crops. This trend is driven by the fact that
      cellulose-based biomass is generally cheaper than corn, and producing ethanol
      from cellulose-based biomass would create opportunities to produce ethanol
      in
      areas which are unable to grow corn. The Energy Policy Act of 2005 included
      incentives designed to boost production of cellulose-based ethanol. Although
      current cellulose technology is not sufficiently efficient to be competitive,
      new conversion technologies may be developed in the future and one of our
      competitors recently announced it was beginning construction on a facility
      slated to be cellulose-based. If an efficient method of producing ethanol from
      cellulose-based biomass is developed, we may not be able to compete effectively.
      We do not believe it will be cost-effective to convert our ethanol plant into
      a
      plant which will use cellulose-based biomass to produce ethanol. If we are
      unable to produce ethanol as cost-effectively as cellulose-based producers,
      our
      ability to generate revenue and financial condition will be negatively impacted.





***Ethanol
      imported from Caribbean basin countries and Brazil may be a less expensive
      alternative to our ethanol.*** Ethanol
      produced or processed in certain countries in Central America and the Caribbean
      region is eligible for tariff reduction or elimination upon importation to
      the
      United States under a program known as the Caribbean Basin Initiative. Large
      ethanol producers, such as Cargill, have expressed interest in building
      dehydration plants in participating Caribbean Basin countries, such as El
      Salvador, which would convert ethanol into fuel-grade ethanol for shipment
      to
      the United States. Ethanol imported from Caribbean Basin countries may be a
      less
      expensive alternative to domestically produced ethanol. Competition from ethanol
      imported from Caribbean Basin countries may affect our ability to sell our
      ethanol profitably, adversely affect our results of operations and financial
      condition.





Brazil
      is
      currently the world’s largest exporter of ethanol. In Brazil, ethanol is
      produced primarily from sugarcane, which is also used to produce food-grade
      sugar. Ethanol imported from Brazil may be a less expensive alternative to
      domestically produced ethanol, which is primarily made from corn. Tariffs
      presently protecting U.S. ethanol producers may be reduced or eliminated.
      Competition from ethanol imported from Brazil may affect our ability to sell
      our
      ethanol profitably and our financial condition.





***Consumer
      beliefs may affect the demand for ethanol.*** We
      believe that certain consumers perceive the use of ethanol to have a negative
      impact on gasoline prices at the pump. Some consumers also believe that ethanol
      adds to air pollution and harms car and truck engines. Still other consumers
      believe that the process of producing ethanol actually uses more fossil energy,
      such as oil and natural gas, than the amount of ethanol that is produced. These
      consumer beliefs could potentially be widespread. If consumers choose not to
      buy
      ethanol, it would affect the demand for the ethanol we produce which could
      lower
      demand for our product and negatively affect our profitability and financial
      condition.


-
          17
          -





**Risks
      Related to Regulation and Governmental Action**





***A
      change in government policies favorable to ethanol may cause demand for ethanol
      to decline.*** Growth
      and demand for ethanol may be driven primarily by federal and state government
      policies, such as state laws banning MTBE and the national renewable fuels
      standard. The continuation of these policies is uncertain, which means that
      demand for ethanol may decline if these policies change or are discontinued.
      A
      decline in the demand for ethanol is likely to cause lower ethanol prices which
      in turn will negatively affect our results of operations, financial condition
      and cash flows.





***Government
      incentives for ethanol production may be eliminated in the
      future.*** The
      ethanol industry and our business are assisted by various federal ethanol tax
      incentives, including those contained in the Energy Policy Act of 2005. The
      provision of the Energy Policy Act of 2005 likely to have the greatest impact
      on
      the ethanol industry is the creation of a 7.5 billion gallon Renewable Fuels
      Standard (“RFS”). The RFS mandates begin with 4 billion gallons in 2006, and
      increase to 7.5 billion gallons by 2012. Additionally, the State of Kansas
      may
      pass state legislation setting its own renewable fuel standard in the
      foreseeable future. The RFS helps support a market for ethanol that might
      disappear without this incentive. The elimination or reduction of tax incentives
      to the ethanol industry could reduce the market for ethanol, which could reduce
      prices and our revenues by making it more costly or difficult for us to produce
      and sell ethanol. If the federal tax incentives are eliminated or sharply
      curtailed, we believe that a decreased demand for ethanol will result, which
      could negatively affect our profitability and financial condition.





***Changes
      in environmental regulations or violations of the regulations could reduce
      our
      profitability.*** We are
      subject to extensive air, water and other environmental laws and regulations.
      In
      addition some of these laws require our plant to operate under a number of
      environmental permits. These laws, regulations and permits can often require
      expensive pollution control equipment or operation changes to limit actual
      or
      potential impacts to the environment. A violation of these laws and regulations
      or permit conditions can result in substantial fines, damages, criminal
      sanctions, permit revocations and/or plant shutdowns. We do not assure you
      that
      we have been, are or will be at all times in complete compliance with these
      laws, regulations or permits or that we have had or have all permits required
      to
      operate our business. We do not assure you that we will not be subject to legal
      actions brought by environmental advocacy groups and other parties for actual
      or
      alleged violations of environmental laws or our permits. Additionally, any
      changes in environmental laws and regulations, both at the federal and state
      level, could require us to invest or spend considerable resources in order
      to
      comply with future environmental regulations. The expense of compliance could
      be
      significant enough to reduce our profitability and negatively affect our
      financial condition.





**Item
      2.**  **Properties.**





We
      currently have an interest in 411 acres of real property in the state
      of Kansas, most of which is currently undeveloped. In October 2003, we completed
      an industrial revenue bond financing with Gove County that provides us with
      property tax savings on our plant site. As part of the financing, title to
      our
      plant site and all of our facilities have been transferred to Gove County as
      security for the repayment of the bonds. We are leasing back the site for an
      amount that is equal to the amount of the interest that is payable on the
      bonds. The term of the lease is 30 years or as long as the bonds are
      outstanding. Also under the terms of the lease, we can repurchase the site
      for a
      nominal amount upon repayment of the bonds.


-
          18
          -








We
      initially acquired a 53.5 acre parcel of partially developed land in Gove County
      for the purpose of constructing our plant. Our plant was developed on
      approximately 20 acres of the 53.5 acre parcel. In February 2002, we acquired
      a
      137 acre parcel approximately one and a half miles east of the parcel where
      our
      plant is located. In December 2004, we acquired a 141 acre parcel of land
      immediately to the east of our plant site. Property measuring approximately
      80
      acres separated the land surrounding our plant site from the 137 acre parcel
      we
      had previously acquired. In December 2005, we acquired the 80 acre parcel for
      $96,000 and now own a contiguous parcel of property in Gove County.





We
      acquired water appropriation rights for two wells when we purchased the 137
      acre
      parcel and one well when we purchased the 80 acre parcel. We applied to the
      Kansas Department of Agriculture, Division of Water Resources to change the
      type
      of water use from agricultural irrigation use to industrial use for the well
      on
      the 80 acre parcel and constructed a system for delivery of water from that
      well
      to our plant. We anticipate the same undertaking if we decide to utilize the
      wells on the 137 acre parcel, which would be likely to occur in the event we
      further expand our plant capacity. We have agreed to lease the 137 acre property
      back to one of the sellers for a period of five years with the amount of rent
      based on the portion of the land that is dry land acres and the portion that
      is
      irrigated acres, with the seller expressly recognizing that the water available
      for irrigation may be dramatically reduced, and possibly eliminated, if we
      use
      the water from this property in our ethanol plant operations.





In
      addition to our ethanol plant, we also own an administrative building adjacent
      to the plant. The administrative building consists of approximately 3,000
      finished square feet (including a partially finished basement) and provides
      offices for our administrative staff. We believe our existing facilities are
      sufficient for the foreseeable future.





Subsequent
      to fiscal year end, we acquired a grain elevator located on a neighboring parcel
      for $1,200,000. The underlying land is owned by Union Pacific Railroad and
      we
      assumed the prior owner’s lease with the railroad. To further increase our
      storage capacity for grain, we are constructing additional storage facilities
      near our ethanol plant. We anticipate that construction will be finished in
      spring or summer of 2007.





**Item
      3.**  **Legal
      Proceedings.**





From
      time
      to time we may be subject to litigation that is incidental to our business.
      However, we are not currently a party to any pending legal proceedings that
      are
      not routine litigation incidental to our business.





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





We
      did
      not submit any matter to a vote of our security holders through the solicitation
      of proxies or otherwise during the fourth quarter of the 2006 fiscal year.
      Our
      next annual meeting of members is scheduled for March 2007.








-
          19
          -


**PART
      II**





**Item
      5. Market for Our Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.**





**Market
      Information**





There
      is
      no public trading market for our capital units. Article 4 of our Third Amended
      and Restated Operating Agreement (“Operating Agreement”) provides a number of
      restrictions on the transfer of capital units by our members. In essence, any
      proposed transfer must be approved by our Board of Managers.





In
      addition to the restrictions on transfer contained in our operating agreement,
      we are also subject to limitations imposed by the United States Internal Revenue
      Code (“Code”). In order to maintain our status as a partnership for income tax
      purposes, we must not be treated as a “publicly traded partnership” under
      relevant provisions of the Code. Generally, the Code provides that a publicly
      traded partnership will be taxed as a corporation. In order to comply with
      these
      rules, we do not intend to list any of our capital units on a stock exchange
      or
      apply for quotations in any electronic trading system.





In
      order
      to comply with the IRS rules but in an effort to provide some liquidity for
      our
      members, we designed a “matching service” whereby interested members and
      prospective purchasers of our units could communicate their interest on an
      electronic bulletin board maintained by us. Potential buyers and sellers would
      be matched by the service and would be afforded the opportunity to negotiate
      an
      acceptable sales agreement. Any such matching service will require the approval
      of the Kansas Securities Commission. Although we applied for the matching system
      approval some time ago, we have not pursued the matter further at this
      time.





While
      we
      currently do not maintain a matching service, holders of our capital units
      who locate a purchaser or receive an offer to purchase can sell the capital
      units to the purchaser subject to the approval of the Board of Managers. Our
      Operating Agreement also allows transfer of the capital units by:





• Gift;


• Last
      will
      or the laws of descent;


• Transfers
      between members of a family; and


• “Block”
      transfers.





A
      block
      transfer is a transfer by a member and any related person, as defined in the
      Code, of membership interests representing in the aggregate more than 2% of
      the
      total interest in our capital or profits in one or more transactions during
      any
      30 calendar day period.





**Capital
      Unit Holders**





As of December 29, 2006, there were 2,286 Class A capital units, 1,744 Class
      B
      capital units and 50 Class C capital units outstanding, owned by a total of
      approximately 628 members.





-
          20
          -


**Distributions
      to Members**





Under
      the
      terms of our Operating Agreement, we are required to make an annual distribution
      to our members of a minimum of 20% of the net cash we earn from operations,
      as
      defined in the Operating Agreement, as long as net cash from operations exceeds
      $500,000 for that year. However, we are prohibited from making any distributions
      if it would violate or cause us to default under any of the terms of any of
      our
      credit facilities or debt instruments. Until the credit facility with AgCountry
      was paid-in-full in June 2006, we sought and received AgCountry’s approval of
      distributions paid to our members.





During
      the 2006 fiscal year, we made cash distributions to our members approximately
      once each quarter for a total of $28,560,000. During the 2005 fiscal year,
      we
      distributed a total of $8,608,800 in cash to our members. Future distributions
      may be subject to a restriction that materially limits our ability to pay such
      distributions, such as our credit facilities if we have an outstanding balance
      with our lender. To the extent we are not subject to any restriction that
      materially limits our ability to pay distributions, however, future
      distributions in excess of the amount required under our Operating Agreement
      will be made in the discretion of our Board of Managers.





**Securities
      Authorized for Issuance under Equity Compensation Plans**





We

      currently have no equity compensation plan.





**Item
      6. Selected Financial Data.**





We
      completed construction of our plant and started operations in January 2004.
      We
      changed our fiscal year end from December 31 to September 30 beginning in 2004.
      The following selected financial data sets forth our summary historical
      financial data as of and for the years ended September 30, 2006 and 2005, the
      period January 1, 2004 through September 30, 2004, and for the year ended
      December 31, 2003. This information was derived from our audited financial
      statements and notes thereto for each year. Our selected historical financial
      data is qualified in its entirety by, and should be read in conjunction with,
      “Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” and the financial statements and the notes thereto included
      elsewhere in this report. For additional information relating to our operations,
      see “Item 1. Business” and “Item 2. Properties.”





-
          21
          -





**Year
                Ended**
              **September
                30,**
            
            **Nine
                Months**
              **Ended
                September 30,**
            
            **Year
                Ended**
              **December
                31,****2006**
            
            **2005**
            
            **2004****(1)**
            
            **2003****(2)****Income
                Statement data:**Net
                sales
            
            $
            108,794,979
            
            $
            62,347,178
            
            $
            39,862,629
            
            $
            --Net
                Income (loss)
            
            
            45,895,967
            
            
            13,009,369
            
            
            7,393,563
            
            
            (532,031
            )Earnings
                (loss) per capital unit
            
            
            11,249
            
            
            3,189
            
            
            1,812
            
            
            (433
            )Cash
                distributionsdeclared
                per capital unit
            
            
            7,000
            
            
            2,110
            
            
            --
            
            
            --**September
                30,**
            
            
            **December
                31,****2006**
            
            
            **2005**
            
            
            **2004**
            
            
            **2003****Balance
                Sheet data:**Total
                assets
            
            $
            82,304,265
            
            $
            70,731,153
            
            $
            73,879,570
            
            $
            53,920,581Total
                debt (currentand
                long term)(3)
            
            
            34,458,846
            
            
            40,158,220
            
            
            48,298,319
            
            
            35,109,968Members’
                equity
            
            
            47,845,419
            
            
            30,572,933
            
            
            25,581,251
            
            
            18,810,613Book
              value per capital unit(4)
            
            
            11,727
            
            
            7,493
            
            
            6,270
            
            
            4,610








(1)
      -     The information for 2004 represents operations for the
      nine months ending September 30, 2004 resulting from a change in fiscal year
      end. We began producing ethanol in January 2004.


(2)
      -     Our company was in start-up phase during 2003 and
      therefore had no operating revenue.


(3)
      -     Includes a $32,000,000 lease obligation related to our
      sale and leaseback transaction with Gove County. We sold our property to Gove
      County in exchange for industrial revenue bonds and the amount of our lease
      obligation is offset by the amount of interest we receive on the
      bonds.


(4)
      -     Members’ equity divided by membership units
      outstanding as of the end of the period.





**Item
      7.**  **Management’s
      Discussion and Analysis.**





***Except
      for the historical information, the following discussion contains
      forward-looking statements that are subject to risks and uncertainties. We
      caution you not to put undue reliance on any forward-looking statements, which
      speak only as of the date of this report. Our actual results or actions may
      differ materially from these forward-looking statements for many reasons,
      including the risks described in “Item 1A - Risk Factors” and elsewhere in this
      annual report. Our discussion and analysis of our financial condition and
      results of operations should be read in conjunction with the financial
      statements and related notes and with the understanding that our actual future
      results may be materially different from what we currently
      expect.***


-
          22
          -





**Introduction**





The
      following discussion analyzes our operating results for the three fiscal years
      ended September 30, 2006 and our financial condition at September 30, 2004,
      2005
      and 2006, with a particular emphasis on the year ended September 30, 2006.
      Due
      to the change of our fiscal year for SEC reporting purposes in 2004, the
      discussion of our results of operations for fiscal 2004 compares the nine-month
      period ended September 30, 2004 to the twelve-month period ended September
      30,
      2005. For that reason, among others, changes from 2004 to 2005 may not be
      representative of changes to be expected in the future. Additionally, we
      expanded our ethanol production capacity during the second quarter of fiscal
      2005, further complicating the comparison of 2005 to 2004.





We
      derive
      revenue from the sale of fuel grade ethanol and distillers grains. We operate
      in
      one industry segment for accounting purposes. We commenced production of ethanol
      in January 2004. Prior to that date, we were considered to be in the development
      stage for accounting purposes.





**Results
      of Operations for the Year Ended September 30, 2006 compared to September 30,
      2005**





*Overview* .
      The
      following table highlights certain of our operating results for the years ended
      September 30, 2006 and 2005. This table should be read in conjunction with
      our
      financial statements and accompanying notes under Item 8 of this
      report:








**Fiscal
                Year Ended**
              **September
                30, 2006**
            
            **Fiscal
                Year Ended**
              **September
                30, 2005**Revenue
            
            $
            108,794,979
            
            $
            62,347,178Cost
                of sales
            
            
            56,127,926
            
            
            44,092,866Gross
                profit
            
            
            52,667,053
            
            
            18,254,312General
                & administrative expenses
            
            
            2,235,393
            
            
            1,716,228Income
                from operations
            
            
            44,746,901
            
            
            11,050,831Other
                income
            
            
            1,149,066
            
            
            1,958,538Interest
                expense
            
            
            (241,952
            )
            
            (931,710
            )Net
                income
            
            
            45,895,967
            
            
            13,009,369Net
                income per unit
            
            
            11,249
            
            
            3,189Comprehensive
                income
            
            
            45,832,486
            
            
            12,977,556





As
      shown
      in the table, our operating results improved significantly from 2005 to 2006.
      The results are primarily attributable to ethanol prices reaching historic
      highs
      and favorable grain prices during fiscal 2006 along with strong demand for
      ethanol. Specifically, the price of and demand for fuel grade ethanol remained
      high during the summer months of calendar 2006 when ethanol prices typically
      decrease. This was due in part to the fact that high gasoline prices, most
      likely the result of hurricane-related shortages the previous fall and winter,
      helped drive up the price for ethanol and also in part because many refiners
      delayed their decision to purchase ethanol for MTBE replacement. Additionally,
      we believe our ethanol marketer was able to take advantage of these favorable
      prices and capitalize on the market. We do not believe we will experience
      similar prices for ethanol during fiscal 2007.


-
          23
          -








During
      2005, we also placed into service an expansion of our ethanol plant, which
      increased our production from a nameplate capacity of 30 million gallons to
      40
      million gallons. This allowed us to reap the added benefit of ten million
      gallons of additional nameplate capacity production at historically high prices.
      The increase in production at favorable prices more than offset the increase
      in
      production costs associated with the expansion.





*Net
      Income* .
      Net
      income for the 2006 fiscal year increased $32,886,598, or approximately 253%,
      from fiscal 2005. We attribute this increase primarily to a significant increase
      in revenue as a result of high ethanol prices and an improved profit margin
      due
      to relatively stable grain prices and decreasing natural gas costs during the
      2006 fiscal year.





Operating
      income for the 2006 fiscal year increased more dramatically than net income,
      rising $33,696,070, or approximately 305%, from 2005. Operating income excludes
      the effect of other income or expense, which primarily includes government
      grants and subsidies.





*Revenue* .
      Revenue
      for the 2006 fiscal year increased $46,447,801, or approximately 75%, from
      2005.
      Revenue consisted of approximately 90% in ethanol sales and 10% from the sale
      of
      distillers grains, an increase by 6% from 2005 in the relative amount of revenue
      derived from ethanol sales. This increase, again, was due to the favorable
      price
      for ethanol during the year.





The
      increase in revenue for the 2006 fiscal year compared to 2005 is attributable
      to
      both an increase in production and historic highs for ethanol prices. The
      average price that we received for our ethanol increased approximately 21%
      during fiscal 2006 compared to 2005, adding to the increase in revenue. This
      report also marks the first time we are reporting revenue for a full fiscal
      year
      after expanding our plant capacity. Accordingly, the results of our operations
      for the 2005 fiscal year included approximately six months of lower production.





Ethanol
      prices, which typically experience a seasonal decline in the spring and summer
      months, had an uncharacteristic jump in price from May through September 2006,
      resulting from high gasoline prices and increased demand for ethanol as a
      replacement for MTBE. Historically, ethanol prices have been seasonal,
      increasing in the late summer and fall as gasoline blenders and marketers
      increase inventory in anticipation of mandatory blending in the winter months,
      and decreasing in the spring and summer when mandatory blending ceases. The
      rise
      in ethanol prices during 2006 was remarkable because it started sooner than
      the
      seasonal norm and rose higher than historical norms, due to a variety of
      factors, including increased prices for gasoline resulting from
      hurricane-related shortages and the world geopolitical situation. Also
      remarkable is the fact that ethanol prices, which tend to track with gas prices,
      remained high despite declines in the price of gasoline and natural gas at
      the
      end of summer months. Due to the number of factors affecting the price of
      ethanol, we are unable to predict with any degree of certainty where prices
      might be during fiscal 2007, although we do not expect a repeat of fiscal 2006.





*Costs
      of Goods Sold* .
      Our
      cost of goods sold for the 2006 fiscal year totaled 52% of revenue, resulting
      in
      a gross profit margin of 48%. This represents a substantial improvement from
      2005, when our profit margin was 29%. We believe this improvement can be
      attributed to several factors including:




-
          24
          -





•  Higher
      average prices for ethanol;


•  A
      relatively small increase in the price of grain;


•  Lower
      prices for natural gas in fiscal 2006 compared to 2005; and


•  Increased
      operating efficiencies during 2006.





Grain
      prices, which represent the significant majority of our cost of goods sold,
      increased during the second half of fiscal 2006 and reached a ten-year high
      subsequent to the fiscal year end. However, due in part to our hedging efforts,
      our cost of grain for the year was relatively constant from 2005. The average
      price we paid for grain decreased approximately 3% in 2006 as compared to 2005.
      We believe the increased price of grain stems in part from increased demand,
      in
      part attributable to more ethanol plants being placed in production. We expect
      grain prices to remain at or near record-highs for 2007, adjusted for seasonal
      fluctuations.





We
      believe we continue to improve the efficiency with which we operate our plant
      based on a year-over-year basis. As a result, our production costs (exclusive
      of
      commodity costs) continue to decrease.





Energy
      costs, representing the second largest component of our costs of good sold,
      saw
      a steady decrease during our 2006 fiscal year. Natural gas prices saw a
      significant increase during the summer and fall of calendar 2005 and the winter
      of calendar 2006 as a result of the hurricanes and the interruption of
      production in the Gulf of Mexico. Prices almost doubled as a result of the
      hurricanes, and it took several months for prices to begin falling. We were
      able
      to control some of our costs through hedging activities during the year. Due
      to
      the high gas prices at the beginning of fiscal 2006, we forward contracted
      for a
      substantial amount of our natural gas needs and maintained provisions in our
      contracts that allowed us to benefit from decreases in prices. We expect gas
      prices to be less volatile during fiscal 2007.





We
      continue to believe that hedging is an integral part of our business as a means
      of risk management. Our strategy is to mitigate the impact of large adverse
      price changes in costs, such as natural gas and grain, as well as the products
      we sell. Our operating results include both realized and unrealized gains or
      losses in these hedging activities. For the 2006 fiscal year, we credited
      $182,272 to operations relating to grain and other futures contracts, which
      amount is included in costs of goods sold. In addition, we
      recorded unrealized losses on grain hedging contracts of $63,481 for
      the year ended September 30, 2006.





*General
      and Administrative Expenses* .
      General
      and administrative expenses for the 2006 fiscal year increased $519,165, or
      approximately 30% from 2005. Significant components of these expenses include
      salaries, professional fees and insurance. We attribute a portion of the
      increase to additional administrative expenses to an increase in the cost of
      professional fees, insurance, advertising expenses, and director expenses.
      The
      increase in professional fees, in turn, is attributable to the strategic
      alternatives that we explored during the year.





*Depreciation
      and Amortization.* Depreciation and amortization remained relatively constant from the fiscal
      year
      ended September 30, 2005 through the 2006 fiscal year. During that time,
      depreciation and amortization expenses increased approximately 3.5%. The slight
      increase during 2006 is attributable to the additional expense of the expansion
      that we placed in service during 2005.


-
          25
          -





*Other
      Income.* Other
      income for the 2006 fiscal year decreased by $809,472 from 2005, or
      approximately 41%. A significant portion of that decrease represents reduced
      grants and subsidies from state and federal governments, which decreased
      $1,434,846 from 2005 to 2006, or approximately 52%. The largest factor
      contributing to the decrease in grants and subsidies was the cessation of the
      federal Bioenergy Program, administered by the United States Department of
      Agriculture’s Commodity Credit Corporation. That program paid subsidies to
      eligible participants for year-over-year increases in ethanol production.
      However, we received notice during fiscal 2006 that this program was
      discontinued. Thus, we do not expect to receive other income from this program
      in 2007.





We
      were
      awarded the maximum amount of $1,125,000 from the State of Kansas as part of
      its
      state ethanol support program. Interest expense for the 2006 fiscal year
      decreased $689,758, or approximately 74%, from 2005, primarily as a result
      of
      the reduction in our debt.





**Results
      of Operations for the Year Ended September 30, 2005 compared to the Nine Months
      Ended September 30, 2004**





The
      following table summarizes revenue, cost of sales, operating expenses and other
      items for the fiscal year ended September 30, 2005 and the nine-month transition
      period ended September 30, 2004. This table should be read in conjunction with
      our financial statements and accompanying notes found under Item 8 of this
      report:








**Fiscal
                Year Ended**
              **September
                30, 2005**
            
            **Nine-month
                Period Ended**
              **September
                30, 2004**Revenue
            
            $
            62,347,178
            
            $
            39,862,629Cost
                of sales
            
            
            44,092,866
            
            
            32,271,179Gross
                profit
            
            
            18,254,312
            
            
            7,591,450General
                & administrative expenses
            
            
            1,716,228
            
            
            1,003,228Income
                from operations
            
            
            11,050,831
            
            
            1,726,226Other
                income
            
            
            1,958,538
            
            
            5,661,337Interest
                expense
            
            
            (931,710
            )
            
            (738,053
            )Net
                income
            
            
            13,009,369
            
            
            7,393,563Net
                income per unit
            
            
            3,189
            
            
            1,812Comprehensive
                income
            
            
            12,977,556
            
            
            6,770,638





As
      shown
      in the table, our operating results improved significantly from 2004 to 2005,
      even accounting for the difference between a nine-month and a twelve-month
      period. Our improved operating results are generally attributable to favorable
      grain and ethanol prices which prevailed during fiscal 2005. Also during the
      second quarter of fiscal 2005, we placed into service an expansion of our
      ethanol plant, which increased our production from a nameplate capacity of
      30
      million gallons to 40 million gallons.





-
          26
          -


*Net
      Income.* Net
      income increased $5,615,806, or approximately 76% in 2005 from the transition
      period. We attributed this increase to several factors, including:





• A
      significant increase in revenue during the 2005 fiscal year;


• An
      increase in our profit margin during fiscal 2005; and


• Relatively
      consistent costs and expenses.





Operating
      income for the 2005 fiscal year increased by $9,324,605, or approximately 540%,
      from the transition period.





*Revenue.* Revenue
      for the 2005 fiscal year increased $22,484,549, or approximately 56%, from
      the
      transition period. Revenue consisted of approximately 84% in ethanol sales
      and
      16% from the sale of distillers grains, an increase of approximately 3% from
      the
      transition period in the relative amount of revenue derived from ethanol
      sales.





We
      attribute the increase in revenue for the 2005 fiscal year compared to the
      transition period to both an increase in production and favorable ethanol prices
      in latter 2005. In the second quarter of our fiscal year, we placed the
      expansion to our ethanol plant online, which increased our nameplate capacity
      by
      approximately 33%. Accordingly, the results of our operations for the 2005
      fiscal year included approximately six months of increased production. The
      average price that we received for our ethanol increased approximately 7% during
      fiscal 2005 compared to 2004, adding to the increase in revenue.





*Costs
      of Goods Sold.* Our cost
      of goods sold for the 2005 fiscal year was approximately 71% of revenue,
      resulting in a gross profit margin of 29%. This represents a substantial
      improvement from the transition period, when our profit margin was approximately
      19%. We attributed the improvement to several factors including:





•
            Higher
                average prices for ethanol;


•
            Lower
                prices for grain in fiscal 2005 compared to 2004;
                and


•
            Increased
                operating efficiencies during 2005.





Grain
      prices, which represent the significant majority of our cost of goods sold,
      remained favorable during fiscal 2005. Good weather conditions contributed
      to an
      excellent harvest in 2004 which produced lower prices for purchasers. The
      average price we paid for grain decreased from approximately $2.79 per bushel
      in
      2004 to $2.05 in 2005.





Since
      fiscal 2005 represented the second year of operating our ethanol plant, we
      believe we operated the plant more efficiently during that time. As a result,
      our production costs were somewhat lower.





Energy
      costs, representing the second largest component of our costs of good sold,
      saw
      a significant increase during the 2005 fiscal year. Natural gas prices began
      increasing during the fall of 2004 and saw a significant increase during the
      summer and fall of 2005 as a result of the hurricanes and the interruption
      of
      production in the Gulf of Mexico. Prices almost doubled as a result of the
      hurricanes. The cost of electricity also increased, since a significant amount
      of electricity is generated by natural gas. Notwithstanding this increase,
      we
      were able to control some of our costs through hedging activities during the
      year.


-
          27
          -





We
      tried
      to mitigate the impact of large adverse price changes in costs, such as natural
      gas and grain and the products we sell through hedging activities. Our operating
      results include both realized and unrealized gains or losses on these hedging
      activities. For the 2005 fiscal year, we charged $1,231,852 to operations
      relating to costs in grain and other futures contracts, which amount is included
      in costs of good sold. In addition, we recorded an unrealized loss on grain
      hedging contracts of $31,813 at September 30, 2005.





*General
      and Administrative Expenses.* During
      2005, general and administrative expenses increased $713,000 or approximately
      71% from the transition period. Significant components of these expenses include
      salaries, professional fees and insurance. We attributed a portion of the
      increase to additional administrative expenses associated with our expanded
      plant and some to the difference in comparing a nine-month period to a
      twelve-month period.





*Depreciation
      and Amortization* .
      Depreciation and amortization remained relatively constant from the transition
      period ended September 30, 2004 to the 2005 fiscal year. During that time,
      depreciation and amortization expenses increased approximately 13%, a smaller
      increase than would be expected comparing a nine-month period to a twelve-month
      period. We attribute this smaller increase to revisions in the estimated lives
      of certain assets as a result of a cost segregation study completed in late
      2004
      and implemented in 2005.





*Other
      Income.* Other
      income for the 2005 fiscal year decreased significantly from the transition
      period ended September 30, 2004, falling $3,708,799, or approximately 65%.
      A
      significant portion of that decrease represents reduced grants and subsidies
      from state and federal governments, which fell $3,595,700, or approximately
      56%.
      The largest factor contributing to the decrease in grants and subsidies was
      a
      decrease in payments from the federal Bioenergy Program, which paid subsidies
      for year-over-year increases in ethanol production. Since we started fiscal
      2005
      with a higher base than 2004, the amount of the subsidy was significantly lower.





Interest
      expense for the 2005 fiscal year increased $193,657, or approximately 26%,
      from
      the transition period, primarily attributable to comparing a twelve-month period
      to a nine-month period and to a lesser extent, our reduced debt.





**Trends
      that may Impact our Future Operating Results**





*Prices
      for Ethanol.* Demand
      for and the price of ethanol can vary significantly over time and a decrease
      in
      the price of ethanol will adversely affect our profitability. The price of
      ethanol tends to fluctuate with the price of petroleum gasoline. Since gasoline
      prices have fallen from the historic highs caused in part by the hurricanes
      in
      the Gulf of Mexico and geopolitical tension, we expect ethanol prices will
      be
      lower during 2007. Another factor that may affect the price of ethanol is the
      increased supply anticipated to result from the new plants coming on line and
      expected to be coming on line in the future. The increase in production capacity
      will increase the supply of ethanol, which will tend to reduce the price for
      ethanol if demand does not also increase.


-
          28
          -





*Supply
      and price of grain.* Rising
      grain prices produce lower profit margins for the production of ethanol and
      therefore, represent unfavorable market conditions. The grain market is
      dependent upon a variety of factors unrelated to the ethanol market. The price
      of grain is generally dependent upon regional and international grain supplies,
      which can be very volatile. Grain supplies and the resultant prices are affected
      by weather, governmental policy, disease and other conditions. While grain
      markets were relatively stable during 2005, corn prices steadily increased
      during the latter half of fiscal 2006, and we expect grain prices to remain
      high
      for the foreseeable future. The increase in grain price will likely cause a
      decrease in our gross profit.





*Government
      supports.* As
      discussed elsewhere in this report, current federal law is favorable to ethanol
      because it mandates certain oxygenate blending. In addition, as noted above
      in
      Item 1, the RFS established by the Energy Policy Act of 2005 mandates that
      fuel
      refiners use a certain minimum amount of ethanol and other renewable fuels.
      While the RFS may not have an immediate impact on the ethanol market since
      current national ethanol production capacity exceeds the 2006 RFS requirement
      of
      4 billion gallons, it is possible that the increased RFS requirement of 7.5
      billion gallons of renewable fuel by 2012 may help support the ethanol industry
      in the long-term. It is also possible that cessation of supports and incentives
      may adversely affect price and demand.





*Production
      of ethanol.* As noted
      above, with the new ethanol plants and plant expansions currently under
      construction along with new construction expected in the near future, the
      nationwide production capacity for ethanol is expected to increase dramatically
      in the next couple of years. Experts in the ethanol industry have differing
      views as to whether this increased production will create a surplus in the
      ethanol market. At a minimum, this increased capacity creates some uncertainty
      for the ethanol industry. Although we believe that there will be an increase
      in
      the demand for ethanol as a result of the phase out of MTBE, we cannot provide
      any assurance or guarantee that there will be any material or significant
      increases in the demand for ethanol. If the production of ethanol exceeds either
      the demand for ethanol or the petroleum industry’s ability to blend ethanol with
      gasoline, then the price of ethanol would be expected to fall, and such fall
      in
      ethanol prices could be significant. In that case, our revenues would decrease
      accordingly. However, we believe that our lack of significant long-term debt
      positions us favorably to endure lower ethanol prices compared to some of
      our competitors.





**Liquidity
      and Capital Resources**





*Overview* .
      The
      following table highlights certain information relating to our liquidity and
      capital resources at September 30, 2006 and 2005:





**September
                30, 2006**
            
            **September
                30, 2005**Working
                Capital
            
            $
            20,127,552
            
            $
            3,516,039Current
                Assets
            
            
            22,543,454
            
            
            7,194,259Current
                Liabilities
            
            
            2,415,902
            
            
            3,678,220Long-term
                Debt
            
            
            42,944
            
            
            4,480,000Members’
                Equity
            
            
            47,845,419
            
            
            30,572,933





-
          29
          -





Our
      working capital at September 30, 2006 increased by $16,611,513, or approximately
      472%, from September 30, 2005. Current assets increased $15,349,195, or
      approximately 213%, while current liabilities decreased $1,262,318, or
      approximately 34%. Based on these substantial improvements from 2005, we believe
      we have sufficient liquidity for the foreseeable future. The significant cash
      generated by our operations, as discussed further below, provides an ample
      source of liquidity and capital. During the 2006 fiscal year, we distributed
      $28,560,000 in cash to our members.





Under
      the
      terms of our Operating Agreement, we are required to make an annual distribution
      of cash to our members of a minimum of 20% of the net cash we earn from
      operations, as defined in that agreement, as long as net cash from operations
      exceeds $500,000 for that year. Additional distributions may be made in the
      sole
      discretion of our Board of Managers. However, we are prohibited from making
      any
      distribution that would violate or cause a default under any of the terms of
      our
      credit facilities or debt instruments.





Our
      capital resources consist of: (i) cash from operations; (ii) permanent
      financing, in the form of capital contributions by our members; (iii) bank
      debt;
      and (iv) industrial development bonds. At September 30, 2006, we believe the
      mix
      of our capital resources was appropriate and adequate for the foreseeable
      future. Other than financing continuing operations, additional capital would
      be
      necessary should we decide to further expand our plant.





*Working
      Capital* .
      Our
      working capital at September 30, 2006 increased significantly from September
      30,
      2005. We attribute this increase to several factors, including:





• Favorable
      operating results from increased capacity and high ethanol prices;


• Dramatically
      increased revenue; and


• Eliminating
      payments on our long-term debt.





By significantly reducing our long-term debt during 2006, we reduced our current
      liabilities by $1,262,318, or approximately 34%, when compared to the end of
      fiscal 2005, representing the current portion of long-term debt. While we think
      it is unlikely we will continue to show this type of increase in working capital
      on a year over year basis, we believe our working capital is sufficient for
      the
      foreseeable future.





In
      addition to the working capital we had available at September 30, 2006, we
      maintain a line of credit to finance short-term working capital
      requirements. On October 2, 2006, the amount of the line was reduced
      from $4.5 million to $4 million in accordance with our lending agreement. The
      portion of long-term debt representing the amount borrowed to finance
      construction of our plant was paid in full at fiscal year end 2006. The
      remaining long-term debt at September 30, 2006 represents the long-term portion
      of notes payable for purchase of a tract of land and a vehicle.





At
      fiscal
      year end, we had approximately $15,000,000 of cash on hand. Subsequent to fiscal
      year end, we distributed additional cash to our members in the amount of
      $16,320,000 which significantly decreased the amount of cash on hand. However,
      we believe cash from operations and accounts receivable will replenish our
      cash
      on hand during the first quarter of fiscal 2007.


-
          30
          -





*Cash
      Flow.* Cash
      generated by operations during the 2006 fiscal year increased $29,280,096,
      or
      approximately 213% compared to 2005. The biggest factor affecting the increase
      in cash flow was the increase in our net income due to higher ethanol prices.
      The cash generated from our operations allowed us to continue to accelerate
      repayment of our long-term debt and pay significant distributions to our
      members.





The
      use
      of cash for our investing activities during fiscal 2006 was reduced by
      $2,740,788 from the fiscal year ended September 30, 2005. We attribute this
      decrease to the fact that expenditures during 2005 for our plant expansion
      were
      not repeated in 2006. Purchases of plant improvements, equipment, land and
      vehicles totaled $1,908,675 during fiscal 2006.




Cash
      used
      in financing activities increased by $16,279,431 in 2006 as compared to fiscal
      year end 2005. In both periods, we made significant reductions in our notes
      payable. The most notable increase resulted from cash distributions to our
      members, which increased $19,951,200 in 2006 compared to 2005. Although not
      required to do so, the Board of Managers has declared cash distributions to
      members each fiscal quarter since the first quarter of fiscal 2005.





*Equity
      Financing.* Our
      members contributed $19,801,035 in equity financing, primarily from our initial
      public offering completed in 2003. We do not anticipate that any additional
      equity financing will be necessary in the foreseeable future. During the 2006
      fiscal year, our members’ equity increased $17,272,486, or approximately 56%,
      despite the distribution of more than $28 million to our members.





*Debt
      Financing.* Under
      our arrangement with AgCountry, we borrowed $22,000,000 under a construction
      loan in 2003. The proceeds of that loan were used by us to complete construction
      of the plant and to commence operations. In August 2004, we converted the loan
      to permanent financing in the form of a $16,000,000 term loan and a line of
      credit in the amount of $5,000,000. At that time, we paid AgCountry $5,000,000
      to reduce the loan, all of which was used to create the line of credit. We
      paid
      the AgCountry term loan in full in June 2006 and continue to maintain the line
      of credit. Pursuant to the terms of our Credit Agreement, the amount available
      on the line of credit was reduced to $4 million and the interest rate decreased
      to LIBOR plus 2.5% on October 2, 2006. We do not currently have a balance
      outstanding on this line of credit.





Our
      known
      obligations at fiscal year end are set forth in the table below:





**Contractual
                Obligations**
            
            **Total**
            
            **Less
                than 1 year**
            
            **1-3
                years**
            
            **3-5
                years**
            
            **More
                than 5 years**Capital
                lease(1)
            
            $
            32,000,000
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            32,000,000Vehicle
                purchase
            
            
            29,769
            
            
            10,824
            
            
            10,824
            
            
            8,121
            
            
            -Land
                purchase
            
            
            48,000
            
            
            24,000
            
            
            24,000
            
            
            -
            
            
            -Total
            
            $
            32,077,769
            
            $
            34,824
            
            $
            34,824
            
            $
            8,121
            
            $
            32,000,000





__________________________





(1)  Includes
      a $32,000,000 lease obligation related to our sale and leaseback transaction
      with Gove County. We sold our property and facilities to Gove County in exchange
      for industrial revenue bonds. The amount of our lease obligation is offset
      by
      the amount of interest we receive on the bonds.


-
          31
          -





Our
      existing repayment obligations under the credit agreement with AgCountry are
      secured by all of our tangible and intangible real and personal property. In
      addition, the bonds acquired from Gove County have been pledged to AgCountry
      to
      secure our borrowing. As part of the credit agreement, we agreed to certain
      affirmative, negative and financial covenants which potentially affect our
      operations, including, but not limited to, the following:





•
            We
                must provide AgCountry with audited annual and unaudited quarterly
                financial statements, annual budgetary and business plan information,
                and
                a notice of the occurrence of an event of default and other material
                events;





•
            We
                must permit AgCountry representatives to visit and inspect our properties,
                conduct audits of the collateral, examine our books and records and
                review
                documents related to construction of our
                plant;





•
            With
                certain exceptions, we may not incur additional indebtedness, allow
                our
                real or personal properties to be used as collateral for any other
                obligations or make any other investments of any kind;





•
            We
                may not make distributions to our members except for such distributions
                payable in our membership interests or distributions that do not
                exceed
                40% of the excess of our net income over amounts payable to AgCountry
                under the credit agreement; and


•
                  We
                      must maintain certain financial ratios, beginning at various
                      times,
                      including a fixed charge coverage ratio, leverage ratio and
                      current ratio
                      and we must meet minimum net worth requirements. We also may
                      not, after
                      completion of construction of the plant, make any capital expenditures
                      in
                      excess of $250,000 during any fiscal year without AgCountry's
                      prior
                      written approval.


In
      March
      2006, we amended our loan agreement with AgCountry. The amendment revises
      certain terms defined in the original loan agreement and revises certain
      financial ratios as follows:





*No
      additional payment obligation* .
      We are
      no longer required to make “additional payments” of not less than 40% of Free
      Cash Flow on a quarterly basis, up to $2 million per year.





*Free
      Cash Flow* shall
      mean for any period, the EBITDA (earnings before interest, taxes, depreciation
      and amortization) less the sum of Mandatory Debt Retirement, Taxes paid by
      Borrower and its Subsidiaries, and Non-Financed Maintenance Capital
      Expenditures.





*Distributions* .
      We can
      distribute up to 75% of our net income to our members. If we maintain a Leverage
      Ratio of 0.60:1.00 and working capital greater than $5 million (each as reported
      in audited year-end financial statements prepared in accordance with generally
      accepted accounting principles), we can distribute 100% of our net income to
      our
      members.





*Leverage
      Ratio* .
      For the
      calculation of the leverage ratio, our total assets and liabilities will be
      net
      of the "Gove County IDR Bonds" asset and liability accounts (listed at
      $32,000,000 as of September 30, 2006).




Minimum
      Net Worth .
      We must
      maintain, on September 30, 2006, and at all times thereafter, a minimum net
      worth of $25,000,000.


On October 2, 2006, we amended our agreement with AgCountry to reduce the
        applicable interest rate to LIBOR plus 2.5%, suspend the annual administration
        fee and reduce the quarterly unused committment fee to 0.25% of the unused
        revolving loan committment balance for the quarter.  The capital
        expenditure allowance was increased to $2,500,000 before written approval
        is
        required


-
          32
          -




At
      September 30, 2006, we believe we satisfied all of the covenants under the
      loan
      agreement.




**Critical Accounting Policies and Estimates**





Preparation
      of our financial statements necessarily requires estimates and judgments to
      be
      made that affect the amounts of assets, liabilities, revenues and expenses
      reported. Such decisions include the selection of the appropriate accounting
      principles to be applied and the assumptions on which to base accounting
      estimates. Our management continually evaluates these estimates based on
      assumptions it believes to be reasonable under the circumstances.





The
      difficulty in applying these policies arises from the assumptions, estimates
      and
      judgments that must be made currently about matters that are inherently
      uncertain, such as future economic conditions, operating results and valuations,
      as well as management intentions. As the uncertainty increases, the level of
      precision decreases, meaning that actual results can, and probably will be,
      different from those currently estimated.





Of
      the
      significant accounting policies described in the notes to the financial
      statements, we believe that the following may involve a higher degree of
      estimates, judgments and complexity:





*Revenue
      Recognition.* Revenue
      from the production of ethanol and related products is recorded upon delivery
      to
      customers. Interest income is recognized as earned. Income from government
      grant programs is recognized as costs are incurred. Government subsidies are
      recognized based on fulfillment of program criteria, completion of application
      and determination of available funding.





*Derivatives
      and Financial Instruments.* We
      account for derivatives in accordance with Statement of Financial Accounting
      Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging
      Activities”. SFAS No. 133 requires the recognition of derivatives in the balance
      sheet and the measurement of these instruments at fair value. Changes in the
      fair value of derivatives are recorded as a component of Cost of Sales unless
      the normal purchase or sale exception applies or hedge accounting is elected.




We
      enter
      into derivative instruments including future contracts and swap agreements
      and
      purchased options to fix prices for a portion of future raw material
      requirements. We have designated, documented and assessed for hedge
      relationships, which mostly resulted in cash flow hedges that require us to
      record the derivative assets and liabilities at their fair value on the balance
      sheet with an offset in other comprehensive income. Amounts are removed from
      other comprehensive income as the underlying transactions occur and realized
      gains or losses are recorded. We have included in its cost of sales an aggregate
      of $182,272 of gains on completed contracts related to its hedging activities
      and has recorded an aggregate of $63,481 of unrealized losses for the year
      ended
      September 30, 2006, as a charge to comprehensive income as compared to
      $1,294,070 gains on contracts and $31,812 of unrealized losses for the period
      ended September 30, 2005. At September 30, 2006, the Commodities trading
      account-futures and options contracts amounted to $202,065, representing the
      lower of the cost or fair market value of the futures and options contracts
      recorded on the balance sheet.


-
          33
          -





*Commitments
      and Contingencies.* Contingencies,
      by their nature, relate to uncertainties that require management to exercise
      judgment both in assessing the likelihood that a liability has been incurred,
      as
      well as in estimating the amount of the potential expense. In conformity with
      accounting principles generally accepted in the United States, we accrue an
      expense when it is probable that a liability has been incurred and the amount
      can be reasonably estimated.





*Long-Lived
      Assets.* Depreciation
      and amortization of our property, plant and equipment is applied on the
      straight-line method by charges to operations at rates based upon the expected
      useful lives of individual or groups of assets placed in service. Economic
      circumstances or other factors may cause management's estimates of expected
      useful lives to differ from the actual useful lives. Differences between
      estimated lives and actual lives may be significant, but management does not
      expect events that occur during the normal operation of our plant related to
      estimated useful lives to have a significant effect on results of
      operations.





Long-lived
      assets, including property, plant and equipment and investments, are evaluated
      for impairment on the basis of undiscounted cash flows whenever events or
      changes in circumstances indicate that the carrying amount of an asset may
      not
      be recoverable. An impaired asset is written down to its estimated fair market
      value based on the best information available. Considerable management judgment
      is necessary to estimate future cash flows and may differ from actual cash
      flows. Management does not expect an impairment of assets will exist based
      on
      their assessment of the risks and rewards related to the ownership of these
      assets and the expected cash flows generated from the operation of the
      plant.




**Recent Accounting Pronouncements**





In
      November 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS 151
      "Inventory Costs."  This Statement amends the guidance in ARB No. 43,
      Chapter 4, "Inventory Pricing, to clarify the accounting for abnormal amounts
      of
      idle facility expense, freight, handling costs, and wasted material (spoilage).
      In addition, this Statement requires that allocation of fixed production
      overhead to the costs of conversion be based on the normal capacity of the
      production facilities. The provisions of this Statement will be effective for
      our company beginning with its fiscal year ending September, 2007. We are
      currently evaluating the impact this new Standard will have on its operations,
      but believes that it will not have a material impact on our financial position,
      results of operations or cash flows.





In
      December 2004, the FASB issued SFAS 153 "Exchanges of Non monetary Assets -
      an
      amendment of APB Opinion No. 29." This Statement amended APB Opinion 29 to
      eliminate the exception for non monetary exchanges of similar productive assets
      and replaces it with a general exception for exchanges of non monetary assets
      that do not have commercial substance. A non monetary exchange has commercial
      substance if the future cash flows of the entity are expected to change
      significantly as a result of the exchange. The adoption of this Standard is
      not
      expected to have any material impact on our financial position, results of
      operations or cash flows.





In
      August
      2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections."
      This
      Statement applies to all voluntary changes in accounting principle and to
      changes required by an accounting pronouncement if the pronouncement does not
      include specific transition provisions, and it changes the requirements for
      accounting for and reporting them. Unless it is impractical, the Statement
      requires retrospective application of the changes to prior periods' financial
      statements. This Statement is effective for accounting changes and correction
      of
      errors made in fiscal years beginning after December 15, 2005.


-
          34
          -








SFAS
      155
      - "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB
      Statements No. 133 and 140." This Statement, issued in February 2006, amends
      FASB Statements No. 133, "Accounting for Derivative Instruments and Hedging
      Activities", and No. 140, "Accounting for Transfers and Servicing of Financial
      Assets and Extinguishments of Liabilities." This Statement resolves issues
      addressed in Statement 133 Implementation Issue No. D1, "Application of
      Statement 133 to Beneficial Interests in Securitized Financial
      Assets."





This
      Statement:





a. Permits fair value remeasurement for any hybrid financial instrument that
      contains an embedded derivative that otherwise would require
      bifurcation





b. Clarifies which interest-only strips and principal-only strips are not
      subject to the requirements of Statement 133





c. Establishes a requirement to evaluate interests in securitized financial
      assets to identify interests that are freestanding derivatives or that are
      hybrid financial instruments that contain an embedded derivative requiring
      bifurcation





d. Clarifies that concentrations of credit risk in the form of subordination
      are
      not embedded derivatives





e. Amends Statement 140 to eliminate the prohibition on a qualifying
      special-purpose entity from holding a derivative financial instrument that
      pertains to a beneficial interest other than another derivative financial
      instrument.





This
      Statement is effective for all financial instruments acquired or issued after
      the beginning of our fiscal year beginning October 1, 2007.





The
      fair
      value election provided for in paragraph 4(c) of this Statement may also be
      applied upon adoption of this Statement for hybrid financial instruments that
      had been bifurcated under paragraph 12 of Statement 133 prior to the adoption
      of
      this Statement. Earlier adoption is permitted as of the beginning of our fiscal
      year, provided we have not yet issued financial statements, including financial
      statements for any interim period, for that fiscal year. Provisions of this
      Statement may be applied to instruments that we hold at the date of adoption
      on
      an instrument-by-instrument basis. We are currently reviewing the effects of
      adoption of this statement but it is not expected to have a material impact
      on
      our financial statements.





SFAS
      156
      - "Accounting for Servicing of Financial Assets--an amendment of FASB Statement
      No. 140." This Statement, issued in March 2006, amends FASB Statement No. 140,
      "Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities", with respect to the accounting for separately recognized
      servicing assets and servicing liabilities.





This
      Statement:





a. Requires an entity to recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      servicing contract in certain situations.


-
          35
          -





b. Requires all separately recognized servicing assets and servicing liabilities
      to be initially measured at fair value, if practicable.





c. Permits an entity to choose either the amortization method or the fair value
      measurement method for each class of separately recognized servicing assets
      and
      servicing liabilities.





d. At its initial adoption, permits a one-time reclassification of
      available-for-sale securities to trading securities by entities with recognized
      servicing rights, without calling into question the treatment of other
      available-for-sale securities under Statement 115, provided that the
      available-for-sale securities are identified in some manner as offsetting the
      entity's exposure to changes in fair value of servicing assets or servicing
      liabilities that a servicer elects to subsequently measure at fair
      value.





e. Requires separate presentation of servicing assets and servicing liabilities
      subsequently measured at fair value in the statement of financial position
      and
      additional disclosures for all separately recognized servicing assets and
      servicing liabilities.





Adoption
      of this Statement is required as of the beginning of the first fiscal year
      that
      begins after September 15, 2006. The adoption of this statement is not expected
      to have a material impact on our financial statements.





In
      September 2006, the FASB issued Statement No. 157, "Fair Value Measurements."
      This Statement defines fair value, establishes a framework for measuring fair
      value in generally accepted accounting principles and expands disclosure about
      fair value measurement. The implementation of this guidance is not expected
      to
      have any impact on our financial statements.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement
      Plans, an amendment of FASB Statements No. 87, 106, and 132(R)" ("SFAS No.
      158"). SFAS No. 158 requires companies to recognize a net liability or asset
      and
      an offsetting adjustment to accumulated other comprehensive income to report
      the
      funded status of defined benefit pension and other postretirement benefit plans.
      SFAS No. 158 requires prospective application, recognition and disclosure
      requirements effective for our fiscal year ending September 30, 2007.
      Additionally, SFAS No. 158 requires companies to measure plan assets and
      obligations at their year-end balance sheet date. This requirement is effective
      for our fiscal year ending September 30, 2009. We are currently evaluating
      the
      impact of the adoption of SFAS No. 158 and do not expect that it will have
      a
      material impact on our financial statements.


-
          36
          -





In
      September 2006, the SEC issued SAB No. 108, "Considering the Effects of Prior
      Year Misstatements when Quantifying Misstatements in Current Year Financial
      Statements." This SAB provides guidance on the consideration of the effects
      of
      prior year misstatements in quantifying current year misstatements for the
      purpose of a materiality assessment. SAB 108 establishes an approach that
      requires quantification of financial statement errors based on the effects
      of
      each of the company's balance sheet and statement of operations financial
      statements and the related financial statement disclosures. The SAB permits
      existing public companies to record the cumulative effect of initially applying
      this approach in the first year ending after November 15, 2006 by recording
      the
      necessary correcting adjustments to the carrying values of assets and
      liabilities as of the beginning of that year with the offsetting adjustment
      recorded to the opening balance of retained earnings. Additionally, the use
      of
      the cumulative effect transition method requires detailed disclosure of the
      nature and amount of each individual error being corrected through the
      cumulative adjustment and how and when it arose. We are currently evaluating
      the
      impact, if any, that SAB 108 may have on our results of operations or financial
      position.





In
      July
      2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
      in
      Income Taxes-an interpretation of FASB Statement No. 109." This Interpretation
      prescribes a recognition threshold and measurement attribute for the financial
      statement recognition and measurement of a tax position taken or expected to
      be
      taken in a tax return. This Interpretation also provides guidance on
      derecognition, classification, interest and penalties, accounting in interim
      periods, disclosure, and transition. The Interpretation is effective for fiscal
      years beginning after December 15, 2006 and we are currently evaluating the
      impact, if any, that FASB No. 48 may have on our results of operations or
      financial position.




**Forward-Looking Statements**





This
      report contains or incorporates by reference "forward-looking statements,"
      as
      that term is used in federal securities laws, about our financial condition,
      results of operations and business. These statements include, among
      others:





•
            statements
                concerning the benefits that we expect will result from our business
                activities and certain transactions that we have completed, such
                as
                increased revenues, decreased expenses and avoided expenses and
                expenditures; and


•
            statements
                of our expectations, beliefs, future plans and strategies, anticipated
                developments and other matters that are not historical
                facts.





These
      statements may be made expressly in this document or may be incorporated by
      reference to other documents that we will file with the SEC. You can find many
      of these statements by looking for words such as "believes," "expects,"
      "anticipates," "estimates" or similar expressions used in this report or
      incorporated by reference in this report.





These
      forward-looking statements are subject to numerous assumptions, risks and
      uncertainties that may cause our actual results to be materially different
      from
      any future results expressed or implied by us in those statements. Because
      the
      statements are subject to risks and uncertainties, actual results may differ
      materially from those expressed or implied. We caution you not to put undue
      reliance on these statements, which speak only as of the date of this report.
      Further, the information contained in this document or incorporated herein
      by
      reference is a statement of our present intention, is based on present facts
      and
      assumptions and may change at any time and without notice based on changes
      in
      such facts or assumptions.


-
          37
          -








A
      few of
      the uncertainties that could affect the accuracy of forward-looking statements,
      besides the specific "Risk Factors" identified above, include:





•
            The
                state of the United States economy and how it affects the desire
                for
                automobile travel;


•
            The
                relative price of gasoline and other competing
                fuels;


•
            Changes
                in government regulations for air and water quality or subsidies
                for
                production of ethanol and other fossil fuel alternatives;


•
            Technological
                advances in the process for producing ethanol;
                and


•
            Drought
                and other environmental conditions.








**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk.**





We
      are
      exposed to the impact of market fluctuations associated with interest rates
      and
      commodity prices as discussed below. We have no exposure to foreign currency
      risk as all of our business is conducted in U.S. Dollars. We use derivative
      financial instruments as part of an overall strategy to manage market risk.
      We
      use cash, futures and option contracts to hedge changes to the commodity prices
      of corn and natural gas. We do not enter into these derivative financial
      instruments for trading or speculative purposes, nor do we designate these
      contracts as hedges for accounting purposes pursuant to the requirements of
      SFAS
      No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* .





**Interest
      Rate Risk**





We
      are
      exposed to market risk from changes in interest rates. Exposure to interest
      rate
      risk results from holding a revolving promissory note which bears a variable
      interest rate. At September 30, 2006 there was no outstanding balance on this
      note. In the event that we use these funds in the future, we will be
      obligated to pay interest at the rate of LIBOR plus 2.5% on the outstanding
      balance.





**Commodity
      Price Risk**





We
      are
      also exposed to market risk from changes in commodity prices. Exposure to
      commodity price risk results from our dependence on grain and natural gas in
      the
      ethanol production process. We seek to minimize the risks from fluctuations
      in
      the prices of grain and natural gas through the use of hedging instruments.
      In
      practice, as markets move, we actively manage our risk and adjust hedging
      strategies as we believe appropriate. Although we believe our hedge positions
      accomplish an economic hedge against our future purchases, they are not
      designated as such for hedge accounting purposes, which would match the gain
      or
      loss on our hedge positions to the specific commodity purchase being hedged.
      We
      are marking to market our hedge positions, which means as the current market
      price of our hedge positions changes, the gains and losses are immediately
      recognized in our cost of goods sold. For example, it is likely and we would
      generally expect that a 10% increase in the cash price of grain and natural
      gas
      would produce an increase in the fair value of our derivative instruments equal
      to approximately $20,207 based on our positions at September 30, 2006.


-
          38
          -





The
      immediate recognition of hedging gains and losses can cause net income to be
      volatile from quarter to quarter due to the timing of the change in value of
      the
      derivative instruments relative to the cost and use of the commodity being
      hedged. As of September 30, 2006, the fair value of our derivative instruments
      for grain is an asset in the amount of $202,065. We recorded a loss in the
      amount of $63,481 for the fiscal year ended September 30, 2006. There are
      several variables that could affect the extent to which our derivative
      instruments are impacted by price fluctuations in the cost of grain or natural
      gas. However, it is likely that commodity cash prices will have the greatest
      impact on the derivatives instruments with delivery dates nearest the current
      cash price.




To
      manage
      our grain price risk, our hedging strategy is designed to establish a price
      ceiling and floor for our purchases. We have taken a net long position on our
      exchange traded futures and options contracts, which allows us to offset
      increases or decreases in the market price of grain. The upper limit of loss
      on
      our futures contracts is the difference between the contract price and the
      cash
      market price of corn and milo at the time of the execution of the contract.
      The
      upper limit of loss on our exchange traded and over-the-counter option contracts
      is limited to the amount of the premium we paid for the option.




We
      estimate that our expected grain usage is approximately 16.6 million bushels
      per
      year for the production of 44.8 million gallons of ethanol. We have price
      protection for approximately 47% of our expected grain usage for fiscal year
      ending September 30, 2007 using CBOT futures and options and over the counter
      option contracts. As we move forward, additional protection may be necessary.
      As
      grain prices move in reaction to market trends and information, our income
      statement will be affected depending on the impact such market movements have
      on
      the value of our derivative instruments. As we move forward, additional price
      protection may be required to solidify our margins into fiscal year 2007.
      Depending on market movements, crop prospects and weather, these price
      protection positions may cause immediate adverse effects, but are expected
      to
      produce long-term positive growth for us.





To
      manage
      our natural gas price risk, we entered into a natural gas purchase agreement
      with our natural gas supplier. This purchase agreement fixes the price at which
      we purchase natural gas. We estimate that we have forward contracts in place
      for
      approximately 18% of our natural gas needs for fiscal 2007. We expect to acquire
      additional fiscal 2008 contracts for gas during August 2007 which is
      historically the month when the lowest annual prices occur.




At
      the
      time we purchased price protection for natural gas, the market was experiencing
      a great deal of price uncertainty. Due to this uncertainty, we purchased amounts
      of gas for most of the plant’s needs and implemented derivative instruments on a
      portion of our requirements to allow us to benefit in the event natural gas
      prices declined. Energy sector prices have increased and natural gas, as a
      portion of the total energy market, has responded with higher prices to be
      cost
      competitive with its alternatives. In the future, we may not be able to secure
      natural gas for prices less than current market price and we may not recover
      high costs of production resulting from high natural gas prices, which may
      raise
      our costs of production.




A
      sensitivity analysis has been prepared to estimate our exposure to grain and
      natural gas price risk. The table presents the fair value of our derivative
      instruments as of September 30, 2006 and September 30, 2005 and the potential
      loss in fair value resulting from a hypothetical 10% adverse change in such
      prices. The fair value of the positions is a summation of the fair values
      calculated by valuing each net position at quoted market prices as of the
      applicable date. The results of this analysis, which may differ from actual
      results, are as follows:


-
          39
          -








**Period
                Ended**
            
            **Fair
                Value**
            
            **Effect
                of**
              **Hypothetical
                Adverse**
              **Change
                - Market Risk**September
                30, 2006
            
            $
            202,065
            
            $
            20,207September
                30, 2005
            
            
            319,967
            
            
            31,997








We
      are
      also exposed to market risk from changes in ethanol prices. These price
      fluctuations are minimized in part by advanced contract pricing of our ethanol,
      which is designed to establish a price floor for our ethanol sales. Currently,
      we have entered into priced contracts for the entire amount of our anticipated
      ethanol production through the first three months of fiscal 2007. We have
      contracted for approximately 38% and 5% of our anticipated production through
      the second and third quarter of fiscal 2007, respectively. We will continue
      to
      advance contract for ethanol sales in fiscal 2007 to attempt to further reduce
      our risk related to price decreases. While this strategy minimizes the risk
      associated with downward price fluctuations of ethanol, it may also prevent
      us
      from realizing the full benefit of upward price movements. Although using priced
      contracts makes our revenue more predictable, we cannot predict the extent
      to
      which other factors such as inflation, government regulation or changing prices
      may affect our financial performance.





**Item
      8. Financial Statements and Supplementary Data.**





Our
      financial statements and supplementary data are included on pages F-1 to F-24
      of
      this report.





**Item
      9.**  **Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.**





There
      has
      been no change in our independent accountants since 2003. Stark Winter Schenkein
      & Co., LLP has been our independent registered public accounting firm since
      that time.





**Item
      9A. Controls and Procedures.**





We
      maintain a system of controls and procedures designed to provide reasonable
      assurance as to the reliability of the financial statements and other
      disclosures included in this report. As of September 30, 2006, under the
      supervision and with the participation of our Chief Executive Officer and Chief
      Financial Officer, management has evaluated the effectiveness of the design
      and
      operation of our disclosure controls and procedures. Based on that evaluation,
      the Chief Executive Officer and the Chief Financial Officer concluded that
      our
      disclosure controls and procedures were effective in timely alerting them to
      the
      requirements to be included in our periodic filing with the SEC. No significant
      changes were made to internal controls or other factors that could significantly
      affect those controls subsequent to the date of their evaluation.








-
          40
          -


**PART
      III**





**Item
      10. Directors, Executive Officers and Corporate
      Governance.**





**Managers
      and Officers**





The
      following table reflects our current managers and executive officers:





**Name**
            **Age**
            **Positions
                With the Company**
            **Term
                of Office**
            **Manager
                Since**Jeff
                Torluemke(1)(4)
            47
            Chief
                Executive Officer, Board President, Manager
            2006Annual Meeting*
            2001Richard
                Sterrett(2)(5)
            62
            Chief
                Financial Officer, Board Vice President, Manager
            2008
                Annual Meeting
            2001Ben
                Dickman(1)(2)(3)
            52
            Board
                Secretary, Manager
            2006
                Annual Meeting
            2001Brian
                Baalman(2)(3)
            48
            Manager
            2007
                Annual Meeting
            2001Ron
                Blaesi(1)(2)
            57
            Manager
            2007
                Annual Meeting
            2001Robert
                Casper(4)
            51
            Manager
            2006
                Annual Meeting
            2001Scott
                Foote(2)
            30
            Manager
            2008
                Annual Meeting
            2006Gary
                Johnson(4)
            59
            Manager
            2008
                Annual Meeting
            2001David
                Mann(1)(2)(3)
            54
            Manager
            2007
                Annual Meeting
            2001Steven
                McNinch(5)
            38
            General
                Manager
            N/A(5)
            N/A




*****
            The
                2006 annual meeting is held following completion of the 2006 fiscal
                year,
                in calendar 2007. Each successive meeting date is calculated similarly.


________________________




(1)  Member
      of
      the Audit Committee.


(2)  Member
      of
      the Risk Management Committee.


(3)  Member
      of
      the Nominating Committee.


(4)  Member
      of
      the Compensation Committee.


(5)  The
      General Manager serves at the pleasure of the Board.


________________________





The
      following information summarizes the business experience for at least the last
      five years, of the managers, officers of the Company, and persons nominated
      to
      be managers of the Company:





*Jeff
      Torluemke* .
      Mr.
      Torluemke has been a member of our Board since our company’s inception. He
      serves as President of the Board and has served as our Chief Executive Officer
      since January 2006. He previously served as our Chief Executive Officer from
      2001 until November 12, 2003. Mr. Torluemke received a Bachelor of Science
      in
      Agricultural Economics from Colorado State University in 1981. He has been
      the
      executive vice president of the State Bank of Hoxie since 1993. From 1985 to
      1993 he held various positions, including Chairman, of the Peoples State Bank
      in
      Colby, Kansas. He has also farmed in the Hoxie, Kansas area since 1976. He
      has
      served as president of the Bankers Association of Northwest Kansas, and on
      the
      Agricultural Committee of the Kansas Bankers Associations.


-
          41
          -





*Richard
      Sterrett* .
      Mr.
      Sterrett has been a member of our Board since our company’s inception and has
      also served as our Chief Financial Officer and Vice President of the Board
      since
      that time. Mr. Sterrett attended Fort Hays State College. He has been farming
      in
      the Quinter, Kansas area since 1961. He owned Sterrett Chemical Co. for 35
      years
      until 2003, and is the owner and manager of SCI Sales, Inc. He currently serves
      on the Ogallala Aquifer Management Committee to the Governor of Kansas, and
      is a
      member of the Smoky Hill-Saline Basin Advisory Committee to the Kansas Water
      Authority. He was the past chairman of the board of trustees of the Gove County
      Medical Center, and a past board member of the Northwest Kansas Groundwater
      Management District, the Kansas Fertilizer and Chemical Institute, and Williams
      Company’s Dealer Advisory Council.





*Ben
      Dickman* .
      Mr.
      Dickman has been a member of our Board since our company’s inception. He serves
      as Secretary of the Board. He received a Bachelor of Science in Agricultural
      Economics from Kansas State University in 1975. He has been farming in the
      Grinnell, Kansas area since 1976 and is currently a member of the School Board
      for the U.S.D. 291 Grinnell School District.





*Brian
      Baalman* .
      Mr.
      Baalman has been a member of our Board since our company’s inception. He has
      been farming in Sheridan, Thomas and Gove counties in Kansas since 1974. He
      also
      owns a 10,000-head feed yard that he leases to a third party. He is a lifetime
      resident of Menlo, Kansas and is currently the President of the Kansas Corn
      Growers Association. He is a past President of the Northwest Kansas Corn Growers
      Association.





*Ron
      Blaesi* .
      Mr.
      Blaesi has been a member of our Board since our company’s inception. He received
      a Bachelor of Science degree in History from Kansas State University in 1971.
      Mr. Blaesi has been a cash grain farmer since 1971 in the Sharon Springs area
      of
      Kansas, and currently serves as the Secretary of the Board of Directors of
      the
      Kansas Corn Commission. He has held various positions in the National Corn
      Growers organization, as well as the U.S. Grain Council. He has also previously
      served as President of the Wallace County Farm Bureau, and as President of
      the
      Northwest Kansas Farm Management Association. Mr. Blaesi has also served on
      the
      Board of Directors of the Wallace County Farmers Union.





*Robert
      Casper* .
      Mr.
      Casper has been a member of our Board since our company’s inception. He received
      a Biology degree from Trinity University in 1977. He is currently the president
      of Ethanol Products, LLC, an ethanol marketing company. Prior to joining Ethanol
      Products in 2000, his previous business experience included seven years as
      Executive Vice President of Koch Petroleum Group, LP, and five years as
      executive vice president of Koch Carbon, Inc. He also previously served as
      Managing Director of Koch Hydrocarbon Partnership, B.V., as Director of Koch
      Supply and Trading, Ltd, as well as vice president of C. Reiss Holding Company,
      and vice president of Matador Coal Company.





*Scott
      Foote* .
      Mr.
      Foote was elected to our Board in March 2006. He grew up on a farm in Bucyrus,
      Kansas and moved to Hoxie when his family purchased Hoxie Feedyard in 1997.
      He
      currently acts as manager of Hoxie Feedyard. He graduated from Kansas State
      University in 1997 with a bachelor's degree in Agricultural Economics and in
      2004 with a master's degree in Agribusiness. Mr. Foote is a member of Hoxie
      Elks
      Lodge, Hoxie Rotary Club, Kansas Cattlemen's Association and R-CALF United
      Stockgrowers of America.


-
          42
          -





*Gary
      Johnson* .
      Mr.
      Johnson has been a member of our Board since our company’s inception. He
      graduated from Cowley County Junior College. He has been co-owner of Mitten
      Truck Stop, Inc. for the past 38 years, and currently serves on the board of
      the
      Kansas Petroleum Marketers Association. He is a past board member of the
      National Texaco Travel Plaza Association and the National Texaco Wholesale
      Association. He has also sat on the Logan County Fair Board and was past
      president of the Oakley Country Club.





*David
      Mann* .
      Mr.
      Mann has been a member of our Board since our company’s inception. He attended
      Kansas State University. Mr. Mann has been a farmer and cattle rancher in the
      Quinter, Kansas area for 31 years. He currently serves as a board member of
      the
      Northwest Kansas Groundwater Management District #4, and has also served on
      the
      school board for the U.S.D. 293 School District, and the board of the Northwest
      Kansas Educational Service Center in Oakley, Kansas.





*Steven
      McNinch* .
      Mr.
      McNinch was appointed General Manager of our company in February 2006.
      Immediately prior to his appointment, Mr. McNinch served as the polyurethane
      department manager for the Belleville Shoe Manufacturing Company in Belleville,
      Illinois, where he was responsible for day-to-day operations, capital budgeting
      and staffing of the department and had occupied that position from November
      2004. Between 2002 and November 2004, he was the manufacturing manager for
      DBM
      Technologies of Owensboro, Kentucky, where he was responsible
      for the day-to-day operations of two manufacturing facilities engaged in the
      production of plastic automotive components. From 1998 to 2001, Mr. McNinch
      served as the manager of manufacturing for Rubbermaid in Winfield, Kansas,
      where
      he was responsible for the day-to-day operation of two manufacturing facilities
      engaged in the production of household products. He received a Bachelor of
      Arts
      in Chemistry and Physics in 1995 and a Master of Business Administration in
      2002
      from the Southwestern College located in Winfield, Kansas.





**Board
      Committees and Meetings**





Our
      Board
      of Managers maintains a standing audit, nominating compensation and risk
      management committee.





*Audit
      Committee* .
      The
      Audit Committee, comprised of Jeff Torleumke, Ben Dickman, Ron Blaesi and David
      Mann, oversees the selection and appointment of our independent accountants
      by
      the Board of Managers, reviews the proposed scope, content and results of the
      audit performed by the accountants and any reports and recommendations made
      by
      them. We believe the members of the Audit Committee meet the definition of
      “independent” as defined in Rule 4200(a)(15) of the Nasdaq Stock Market, Inc.
      Marketplace Rules except for Mr. Torleumke. By virtue of his current service
      as
      our Chief Executive Officer, Mr. Torleumke is not “independent” as defined in
      the rule.


-
          43
          -





Our
      Board
      of Managers has determined that Jeff Torluemke qualifies as an audit committee
      financial expert, in that he has (i) an understanding of generally accepted
      accounting principles and financial statements; (ii) the ability to assess
      the
      general application of such principles in connection with the accounting for
      estimates, accruals and reserves; (iii) experience preparing, auditing,
      analyzing or evaluating financial statements that present a breadth and level
      of
      complexity of accounting issues that are generally comparable to the breadth
      and
      complexity of issues that can reasonably be expected to be raised by the
      Company's financial statements, or experience actively supervising one or more
      persons engaged in such activities; (iv) an understanding of internal controls
      over financial reporting; and (v) an understanding of the audit committee
      functions. Mr. Torluemke acquired these attributes through experience in
      connection with his responsibilities at the State Bank of Hoxie, where he serves
      as an officer. We believe Mr. Torleumke is no longer considered “independent”
under Rule 4200(a)(15) of the Nasdaq Stock Market, Inc. Marketplace Rules due
      to
      the fact that he is serving our company in the capacity of Chief Executive
      Officer.





*Audit
      Committee Report* .
      The
      Audit Committee of our Board of Managers is pleased to present the following
      Audit Committee report:





*We
      have reviewed and discussed the Company's audited financial statements for
      the
      fiscal year ended September 30, 2006 with management and have reviewed related
      written disclosures of Stark Winter Schenkein & Co., LLP, our independent
      registered public accounting firm, of the matters required to be discussed
      by
      SAS 61 (Codification of Statements on Auditing Standards, AU Section 380),
      as
      amended with respect to those statements. We have reviewed the written
      disclosures and the letter from Stark Winter Schenkein & Co., LLP required
      by Independence Standards Board No. 1 (Independence Standards Board Standard
      No.
      1, Independence Discussions with Audit Committees) and have discussed with
      Stark
      Winter Schenkein & Co., LLP its independence in connection with its audit of
      our most recent financial statements. Based on this review and these
      discussions, we recommended to the Board of Managers that the financial
      statements be included in our Annual Report on Form 10-K for the fiscal year
      ended September 30, 2006.*





*We
      have also reviewed the various fees that we paid or accrued to Stark Winter
      Schenkein & Co., LLP during fiscal 2006 for services they rendered in
      connection with our annual audits and quarterly reviews, as well as for any
      other non-audit services they rendered.*





*The
      following table sets forth fees paid to our independent accountants, Stark
      Winter Schenkein & Co., LLP for the last two fiscal years:*





**2006**
            
            **2005**Audit
                Fees
            
            $
            38,050
            
            $
            53,010Audit
                Related Fees
            
            
            15,450
            
            
            0Tax
                Fees
            
            
            0
            
            
            42,867All
                Other Fees
            
            
            8,185
            
            
            8,565Total
                Fees
            
            $
            61,685
            
            $
            104,442





-
          44
          -





*It
      is
      the policy of the Audit Committee to engage the independent accountants selected
      to conduct the financial audit for the Company and to confirm, prior to such
      engagement, that such independent accountants are independent of the Company.
      Also in keeping with its policy, all services of the independent accountants
      reflected above were pre-approved by the Audit Committee.*




*The Audit Committee adopted a written charter in November 2005 which may be
      updated from time to time.*





*Respectfully
      submitted,*





*Ben
      Dickman (Chairman)*


*Jeff
      Torluemke*


*David
      Mann*


*Ron
      Blaesi*





*Nominating
      Committee* .
      The
      Nominating Committee, comprised of Brian Baalman, Ben Dickman and David Mann,
      is
      responsible for identifying and evaluating potential candidates for nomination
      to the Board of Managers and reporting to the Board thereon. The Nominating
      Committee has not adopted a formal charter. Our Board has adopted the following
      criteria which an individual must meet in order to be nominated to our Board
      of
      Managers: (i) the individual must be a natural person over 21 years of age;
      (ii)
      the individual should have management experience; (iii) the individual should
      have knowledge about the issues affecting the Company's business; (iv) the
      individual should have exemplary personal integrity and reputation, sound
      judgment, and strong decision-making ability; (v) independence; and (vi) the
      individual should have sufficient time to devote his or her energy and attention
      to the diligent performance of his or her duties, including, but not limited
      to,
      review of our company's documents, SEC filings and other materials and the
      attendance at Board and committee meetings, as applicable.





Our
      Operating Agreement provides that the Board of Managers shall be comprised
      of
      nine individuals. The Board of Managers evaluates the appropriate size, from
      time to time, and may make recommendations to the members if it deems change
      is
      appropriate. If vacancies are anticipated or otherwise arise, the Board of
      Managers considers candidates for Managers suggested by members of the Board
      of
      Managers, as well as management, members, and other parties. The Board has
      consistently maintained a policy of considering the nomination of candidates
      recommended by its members.





In
      the
      case of an incumbent manager whose term of office expires, the committee or
      the
      Board will review such manager's service to our company during the past term,
      including, but not limited to, the number of Board and committee meetings
      attended, as applicable, quality of participation, and whether the candidate
      continues to meet the general qualifications for a Board member outlined above,
      and make a recommendation regarding such manager's nomination for re-election.
      If any member of the Board of Managers is an incumbent manager eligible to
      stand
      for re-election, such manager shall not participate in the discussion of such
      manager's recommendation for nomination for election as a manager by the Board
      of Managers.


-
          45
          -





In
      the
      case of a new manager candidate, the committee may evaluate whether the nominee
      is independent, as independence is defined in Rule 4200(a)(15) of the NASDAQ
      Stock Market, Inc., Marketplace Rules, and whether the nominee meets the
      qualifications for a Board member outlined above. In connection with such
      evaluation, the committee determines whether the Board should interview the
      nominee, and if warranted, one or more members of the committee shall interview
      the nominee in person or by telephone. Upon completing the evaluation, and
      the
      interview if deemed necessary, the committee makes a recommendation as to
      whether to nominate the director nominee for election at the next meeting of
      members at which managers will be elected.





Our
      Nominating Committee will consider properly submitted member recommendations
      of
      candidates to our Board. A member who wishes to recommend a prospective manager
      nominee should send a letter directed to the Nominating Committee of the Board
      of Managers at 3022 County Road 18, Oakley, Kansas 67748. Such letter must
      be
      signed and dated and the following information must be included in or attached
      to the letter: (i) name and address of the member making the recommendation;
      (ii) proof that the member was the member of record, and/or beneficial owner
      of
      membership units as of the date of the letter; (iii) the name, address and
      resume of the recommended nominee; and (iv) the written consent of the
      recommended nominee to serve as a manager of the Company if so nominated and
      elected.





*Compensation
      Committee* .
      The
      Compensation Committee, comprised of Jeff Torluemke, Gary Johnson and Robert
      Casper, is responsible for reviewing the compensation of our executive officers
      and managers on an ongoing basis. In performing this function, the Compensation
      Committee may consider, among other things, the types of compensation and
      amounts paid to officers and directors of companies of similar size, stage
      of
      development in our industry and activity levels. The committee may also consider
      the need to maintain competitiveness and recruit and retain qualified personnel
      within the context of our financial and other resources.





*Risk
      Management Committee* .
      The
      Risk Management Committee, comprised of Brian Baalman, Ron Blaesi, Ben Dickman,
      Scott Foote, David Mann and Richard Sterrett, is responsible for evaluating
      and
      managing price risks arising from fluctuations in prices of commodities with
      a
      focus on our ethanol price margin. The committee makes recommendations to
      management with respect to our forward-contracting and hedging strategies to
      assist us in managing these risks.





**Section
      16(a) Beneficial Ownership Reporting Compliance**





Based
      on
      a review of Forms 3, 4 and 5, filed under the Securities Exchange Act of 1934,
      and written representations received by our company from its officers,
      directors, and the holders of 10% or more of its membership units, we do not
      believe any individual failed to timely file such form as required by Section
      16
      of the Exchange Act during the fiscal year ended September 30, 2006. However,
      we
      believe that Hoxie Feedyard, the owner of more than 10% of the outstanding
      membership units, has failed to file any reports required by Section
      16 **.**





-
          46
          -


**Code
      of Ethics**





On
      January 18, 2005, our Board of Managers adopted a code of ethics for the Chief Executive
      Officer, Principal Financial and Accounting Officers, controller and persons
      who
      perform similar functions for our company. The code is designed to promote
      honesty and integrity and to avoid conflicts of interest between personal and
      professional relationships in conducting our business affairs. We filed a copy
      of the code as Exhibit 14 to our Annual Report on Form 10-KSB for the fiscal
      year ended September 30, 2005 and any interested member may obtain a copy
      without charge by contacting Debbie Nelson at (785) 672-8810 or
      dnelson@wpcllc.com.





**Item
      11. Executive Compensation.**





Steven
      McNinch serves as our General Manager after joining us in February 2006. In
      fiscal 2006, he was compensated by us at an annual base salary of $120,000
      per
      year, beginning in March 2006. His current yearly salary remains the same.
      Jeff
      Torluemke serves as Chief Executive Officer in an unpaid capacity.





We
      reimburse our officers and managers for reasonable expenses incurred in
      connection with services rendered on our behalf. We recruit and hire permanent
      employees who are compensated on a regular basis pursuant to agreed upon
      salaries. We have not and do not expect to establish any option based or other
      type of equity incentive plan for employees. However, we offer to our full-time
      employees typical health and other employee benefits that do not discriminate
      in
      scope, terms or operation in favor of our executive officers or directors and
      that are available to all of our salaried employees.





The
      following table summarizes the compensation earned by our Chief Executive
      Officer, General Manager and each of the other most highly compensated
      non-executive officer employees whose total compensation exceeded $100,000
      in
      2006, and for the years indicated below:


**Annual
                Compensation**
            
            **Long-Term**
              **Compensation Awards****Name and
                Principal Position**
            
            **Year**
            
            **Salary**
            
            **Bonus**
            
            **Other**
            
            **Restricted**
              **Stock**
              **Awards**
            
            **Securities**
              **Underlying**
              **Options**
            
            **LTIP**
              **Payouts**
            
            **All**
              **Other**
              **Compensation**Jeff
                Torluemke,
            
            
            2006
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —
            
            $
            —(1)Chief
                Executive Officer
            
            
            2005
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —and
                President
            
            
            2004
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Steven
                McNinch,
            
            
            2006(2)
            
            
            73,022
            
            
            30,000
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —General
                Manager


______________________________




(1) 
      Excludes fees received by Mr. Torluemke in his capacity as a member of the
      Board
      of Managers and amounts received as member distributions, which are paid under
      the same terms and conditions as the other members.




(2)
      Mr.
      McNinch was appointed our General Manager effective February 21,
      2006.





**Board
      of Managers**





Each
      member of the Board of Managers receives $300 for each meeting attended in
      person and $150 for each committee meeting attended. We also reimburse the
      Managers for reasonable expenses incurred by them in carrying out their duties
      as such. Members of the Board Managers who are also holders of capital units
      will receive the same membership benefits that other members receive.


-
          47
          -





**Employment
      Agreements**





Effective
      March 27, 2006, we entered into an employment contract with Steven McNinch,
      our
      General Manager, which provides for payment of annual salary to Mr. McNinch
      in
      the amount of $120,000 and certain other benefits, including a moving allowance.
      If the Employment Agreement is terminated without “cause” as defined therein,
      Mr. McNinch is entitled to severance pay equal to three months salary. The
      Employment Agreement continues until February 21, 2007, unless sooner terminated
      in accordance with its terms.





**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      following table sets forth information with respect to the ownership of our
      capital units by each officer and manager individually, all officers and
      managers as a group and all beneficial owners known to us to hold more than
      5%
      of any class of the Company’s membership units. As of December 29, 2006, we had
      issued and outstanding 2,286 Class A units; 1,744 Class B units; and 50 Class
      C
      units. Unless otherwise stated, the address of each individual is c/o Western
      Plains Energy, LLC, 3022 County Road 18, Oakley, Kansas 67748. All unit
      ownership listed in the table is direct, unless otherwise indicated.





The
      following unit holders have sole voting and investment power with respect to
      the
      units, unless otherwise indicated:





**Class**
            **Name**
            **Number
                of Units**
            **%
                of Class**Class
                A
            Jeff
                Torluemke, Manager, Officer(1)
            35
            1.53%Class
                A
            Richard
                Sterrett, Manager, Officer(2)
            48
            2.10%Class
                A
            Brian
                Baalman, Manager(3)
            127
            5.56%Class
                A
            Ronald
                Blaesi, Manager
            12
            0.52%Class
                A
            Ben
                Dickman, Manager(4)
            24
            1.05%Class
                A
            Gary
                Johnson, Manager
            14
            0.61%Class
                A
            David
                Mann, Manager(5)
            14
            0.61%Class
                A
            Managers
                and Officers as a group
            274
            11.99%Class
                B
            Jeff
                Torluemke, Manager, Officer
            107
            6.14%Class
                B
            Richard
                Sterrett, Manager, Officer(6)
            16
            0.92%Class
                B
            Gary
                Johnson, Manager(7)
            18
            1.03%Class
                B
            Scott
                Foote, Manager(8)
            413
            23.68%Class
                B
            Hoxie
                Feedyard, Inc., Member(9)
            413
            23.68%Class
                B
            Roch
                Meier, Member(10)
            100
            5.73%Class
                B
            Brian
                Baalman, Manager
            50
            2.87%Class
                B
            Managers
                and Officers as a group
            604
            34.63%Class
                C
            Robert
                Casper, Manager(11)
            50
            100%Class
                C
            Ethonol
                Products, LLC(12)
            50
            100%Class
                C
            Managers
                and Officers as a group
            50
            100%









(1)  Includes
      five (5) Class A units owned by Mr. Torluemke’s spouse.


(2)  Represents
      Class A units owned by Richard Sterrett Trust No. 9. Mr. Sterrett is the sole
      Trustee.


-
          48
          -





(3)  Includes
      twelve (12) Class A units owned by the Baalman Feedyard Partnership and twelve
      (12) Class A units owned by the B2C Partnership. The Baalman Feedyard
      Partnership is a Kansas general partnership. Its two partners are: B2C
      Partnership, a Kansas general partnership owned and controlled by two Kansas
      corporations, one solely owned by Mr. Baalman and one solely owned by his
      spouse; and the Gary and Janice Baalman, L.P.


(4)  Includes
      four (4) Class A units owned by BJ Ag Producers, Inc., a Kansas corporation.
      Mr.
      Dickman is the President and 50% owner of BJ Ag Producers, Inc. Mr. Dickman’s
      spouse also owns 50% of BJ Ag Producers, Inc.


(5)  Includes
      six (6) Class A units owned by Mr. Mann’s spouse.


(6)  Includes
      sixteen (16) Class B units owned by Sunflower Chemical. Mr. Sterrett has a
      50%
      ownership interest in Sunflower Chemical.


(7)  Includes
      eight (8) Class B units owned by Mitten, Inc. Mr. Johnson owns 51% of Mitten,
      Inc., and is the President and General Manager.


(8)  Includes
      413 Class B units owned by Hoxie Feedyard, Inc.  Mr. Foote is the general
      manager of Hoxie Feedyard, Inc. and in that capacity has been given voting
      control over these units by voting agreement.


(9)
      Hoxie Feedyard Inc.'s address is P.O. Box 65, Hoxie,
      Kansas, 67740.


(10)  The
      unitholder’s address is HC 1 Box 53, Menlo, Kansas, 67753.


(11)  Represents
      the fifty (50) Class C units owned of record by Ethanol Products, LLC.  Mr.
      Casper is the President of Ethanol Products, LLC and has an 18.5% ownership
      interest in that entity.


(12)
      Ethanol Products, LLC's address is 111 South Ellis,
      Wichita, Kansas, 67211.


____________________





**Changes
      in Control**





We
      know
      of no arrangements, including the pledge of any units, that would result in
      a
      change in control of our company.





**Item
      13. Certain Relationships and Related Transactions.**





*Ethanol
      Products, LLC* .
      We sell
      all of the ethanol that we produce to Ethanol Products, LLC. In exchange, we
      receive the gross sales price of the ethanol, less the costs of transportation
      and storage and an administrative fee of $.01 per gallon of ethanol sold. During
      the fiscal years ended September 30, 2006 and 2005, we paid $455,353 and
      $401,800, respectively, in administrative fees to Ethanol Products. Mr. Robert
      Casper, a member of the Board of Managers and the owner of all of the
      outstanding Class C membership units, is the president of that entity and the
      owner of 18.5% of the ownership interest.





*ICM,
      Inc* .
      We
      contracted with ICM, Inc. for the original construction, expansion and
      maintenance of our ethanol plant and the purchase of substantially all the
      equipment used in that facility. During the fiscal year ended September 30,
      2006
      and the 2005 fiscal year, the Company paid ICM an aggregate of $377,206 and
      $4,143,666, respectively, for the construction and expansion of the plant.
      Mr.
      David Vander Griend, a former member of the Board of Managers and the former
      beneficial owner of more than 10% of the outstanding Class B membership units,
      is also the president and controlling shareholder of ICM.





We
      contract with United Bio Energy Ingredients, LLC ("UBE") to sell the distillers
      grains produced at our plant. Under the terms of our contract with UBE, we
      receive the gross selling price of the grain, less applicable transportation
      costs and a fee of two to two and one-half per cent of the selling price,
      depending on whether UBE sells distillers wet grains or distillers dried grains.
      During the fiscal year ended September 30, 2006 and the 2005 fiscal year, the
      Company paid UBE a fee of $295,458 and $261,121, respectively, in connection
      with the sale of distillers grains. UBE is owned by ICM.


-
          49
          -





Our
      Board
      of Managers considers these arrangements with Ethanol Products and ICM to be
      no
      less favorable than could be obtained from an unaffiliated party.





**Item
      14. Principal Accounting Fees and Services.**





See
      Item
      10 above.





**PART
      IV**





**Item
      15. Exhibits, Financial Statement Schedules.**





See
      Exhibit Index following financial statements in this report for a listing of
      exhibits filed with, or incorporated by reference into, this
      report.





-
          50
          -





**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this Report to be signed on its behalf
      by
      the undersigned thereunto duly authorized in Oakley, Kansas on December 28,
      2006.






WESTERN PLAINS ENERGY, L.L.C.By:
            /s/ Jeff
              TorluemkeJeff Torluemke, Chief Executive Officer
              and President


Pursuant
      to the requirements of the Securities Exchange Act of 1934, this Report has
      been
      signed by the following persons in the capacities and on the dates
      indicated.





Signature
            
            Title
            
            Date/s/
                Jeff Torluemke
            
            President,
                Chief Executive Officer and Manager
            
            December
                28, 2006Jeff
                Torluemke/s/
                Richard Sterrett
            
            Vice
                President, Chief Financial
            
            December
                27, 2006Richard
                Sterrett
            
            Officer,
                Chief AccountingOfficer,
                Manager/s/
                Gary Johnson
            
            Manager
            
            December
                28, 2006Gary
                Johnson/s/
                Ronald Blaesi
            
            Manager
            
            December
                28, 2006Ronald
                Blaesi/s/
                Ben Dickman
            
            Manager
            
            December
                28, 2006Ben
                Dickman









-
          51
          -







**WESTERN
        PLAINS ENERGY, L.L.C.**
 **YEAR
        ENDED SEPTEMBER 30, 2006**
 
 
 **Index
        to Financial Statements**
 
 
 Report
                  of Independent Registered Public Accounting Firm
              F-1Balance
                  Sheets at September 30, 2006 and 2005
              F-2Statements
                  of Income for the Fiscal Years Ended September 30, 2006and
                2005 and for the Nine Months Ended September 30, 2004
              F-3Statement
                  of Changes in Members' Equity for the Fiscal Years
                  Ended
                September
                  30, 2006 and 2005 and for the Nine Months Ended September 30,
                  2004
              F-4Statements
                  of Cash Flows for the Fiscal Years Ended September 30, 2006 and
                  2005
                  andfor
                the Nine Months Ended September 30, 2004
              F-5Notes
                  to Financial Statements
              F-6
 
 
 
  
  
 **** **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 
 Members
        and Board of Managers
 Western
        Plains Energy, LLC
 
 
 We
        have
        audited the accompanying balance sheet of Western Plains Energy, LLC as of
        September 30, 2006 and 2005, and the related statements of operations, changes
        in members' equity, and cash flows for the years ended September 30, 2006
        and
        2005 and the nine months ended September 30, 2004. These financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audits.
 
 We
        conducted our audits in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates by management, as well as evaluating the overall financial
        statement presentation. We believe that our audits provide a reasonable basis
        for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of Western Plains Energy, LLC as
        of
        September 30, 2006 and 2005, and the results of its operations, and its cash
        flows for the years ended September 30, 2006 and 2005, and the nine months
        ended September 30, 2004 in conformity with accounting principles generally
        accepted in the United States of America.
 
 
 /s/
        Stark
        Winter Schenkein & Co., LLP
 
 Denver,
        Colorado
 December
        20, 2006
 
 
 
  F-1
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **BALANCE
        SHEETS**
 **SEPTEMBER
        30, 2006 AND 2005**
  
 **ASSETS****CURRENT
                    ASSETS**
                
                **2006**
                
                **2005**Cash
                
                $
                14,990,238
                
                $
                1,245,903Accounts
                    receivable
                
                
                5,624,619
                
                
                3,590,867Accounts
                    receivable - government subsidies
                
                
                222,064
                
                
                490,872Inventory
                
                
                1,456,464
                
                
                1,514,260Prepaid
                    expense
                
                
                48,004
                
                
                32,390Commodities
                    trading account- futures and options contracts
                
                
                202,065
                
                
                319,967**Total
                    current assets**
                
                
                22,543,454
                
                
                7,194,259**PROPERTY
                    AND EQUIPMENT**Land
                
                
                701,872
                
                
                605,872Land
                    improvements
                
                
                748,371
                
                
                660,280Manufacturing
                    equipment
                
                
                38,378,290
                
                
                37,950,052Buildings
                
                
                1,429,128
                
                
                1,399,943Vehicles
                
                
                316,424
                
                
                182,158Office
                    equipment, furniture, fixtures
                
                
                174,803
                
                
                211,629Construction-in-progress
                
                
                1,099,730
                
                
                180,000Spare
                    parts
                
                
                228,967
                
                
                41,98843,077,585
                
                
                41,231,922Less:
                    Accumulated depreciation
                
                
                (15,859,396
                )
                
                (10,278,090
                )27,218,189
                
                
                30,953,832**OTHER
                    ASSETS**Investment
                    in industrial development revenue bonds
                
                
                32,000,000
                
                
                32,000,000Loan
                    origination fees, net
                
                
                264,071
                
                
                297,779Financing
                    fees, net
                
                
                180,717
                
                
                187,449Deposits
                
                
                97,834
                
                
                97,83432,542,622
                
                
                32,583,062**TOTAL
                    ASSETS**
                
                $
                82,304,265
                
                $
                70,731,153**LIABILITIES
                    AND MEMBERS' EQUITY****CURRENT
                    LIABILITIES**Accounts
                    payable and accrued expenses
                
                $
                2,378,714
                
                $
                1,971,162Accrued
                    interest
                
                
                2,363
                
                
                6,058Current
                    portion of long term debt
                
                
                34,825
                
                
                1,701,000**Total
                    current liabilities**
                
                
                2,415,902
                
                
                3,678,220**LONG
                    TERM DEBT**
                
                
                42,944
                
                
                4,480,000**LEASE
                    OBLIGATION**
                
                
                32,000,000
                
                
                32,000,000**COMMITMENTS
                    AND CONTINGENCIES****MEMBERS'
                    EQUITY**Class
                    A Capital Units, 2,286 issued
                
                
                10,910,140
                
                
                10,910,140Class
                    B Capital Units, 1,744 issued
                
                
                8,640,895
                
                
                8,640,895Class
                    C Capital Units, 50 issued
                
                
                250,000
                
                
                250,000Membership
                    distributions
                
                
                (37,168,800
                )
                
                (8,608,800
                )Accumulated
                    comprehensive (loss)
                
                
                (95,293
                )
                
                (31,812
                )Retained
                    earnings
                
                
                65,308,477
                
                
                19,412,510**Total
                    members' equity**
                
                
                47,845,419
                
                
                30,572,933**TOTAL
                    LIABILITIES AND MEMBERS' EQUITY**
                
                $
                82,304,265
                
                $
                70,731,153
 Please
          refer to accompanying notes to financial statements.
  F-2
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **STATEMENTS
        OF INCOME**
 **FOR
        THE FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005, AND**
 **THE
        NINE MONTHS ENDED SEPTEMBER 30, 2004**
 
 
 **FISCAL
                    YEAR**
                
                **FISCAL
                    YEAR**
                
                **NINE
                    MONTHS****ENDED**
                
                
                **ENDED**
                
                
                **ENDED****SEPTEMBER
                    30,**
                
                
                **SEPTEMBER
                    30,**
                
                
                **SEPTEMBER
                    30,****2006**
                
                
                **2005**
                
                
                **2004****REVENUE**
                
                $
                108,794,979
                
                $
                62,347,178
                
                $
                39,862,629**COST
                    OF SALES**
                
                
                56,127,926
                
                
                44,092,866
                
                
                32,271,179**GROSS
                    PROFIT**
                
                
                52,667,053
                
                
                18,254,312
                
                
                7,591,450**EXPENSES**General
                    and administrative expenses
                
                
                2,235,393
                
                
                1,716,228
                
                
                1,003,228Depreciation
                    expense
                
                
                5,644,319
                
                
                5,446,248
                
                
                4,851,327Amortization
                    expense
                
                
                40,440
                
                
                41,005
                
                
                10,669**Total
                    expenses**
                
                
                7,920,152
                
                
                7,203,481
                
                
                5,865,224**Income
                    from operations**
                
                
                44,746,901
                
                
                11,050,831
                
                
                1,726,226**Other
                    income (expense)**Interest
                    expense
                
                
                (241,952)
                
                
                (931,710)
                
                
                (738,053)Interest
                    income
                
                
                164,052
                
                
                39,699
                
                
                -Interest
                    from industrial development revenue bonds
                
                
                1,120,000
                
                
                1,120,000
                
                
                768,746Plant
                    lease expense
                
                
                (1,120,000)
                
                
                (1,120,000)
                
                
                (768,746)Grant
                    and subsidy income
                
                
                1,349,630
                
                
                2,784,476
                
                
                6,380,176Other
                    income (expense)
                
                
                (122,666)
                
                
                66,073
                
                
                25,214**Total
                    other income**
                
                
                1,149,066
                
                
                1,958,538
                
                
                5,667,337**NET
                    INCOME**
                
                
                45,895,967
                
                
                13,009,369
                
                
                7,393,563**Unrealized
                    losses on grain contracts**
                
                
                (63,481)
                
                
                (31,812)
                
                
                (622,925)**COMPREHENSIVE
                    INCOME**
                
                $
                45,832,486
                
                $
                12,977,557
                
                $
                6,770,638**NET
                    INCOME PER UNIT****BASIC
                    AND DILUTED**
                
                $
                11,249.01
                
                $
                3,188.57
                
                $
                1,812.15**DISTRIBUTIONS
                    PER UNIT**
                
                $
                7,000.00
                
                $
                2,110.00
                
                $
                -**WEIGHTED
                    AVERAGE UNITS OUTSTANDING****BASIC
                    AND DILUTED**
                
                
                4,080
                
                
                4,080
                
                
                4,080
  Please
          refer to accompanying notes to financial statements.
  F-3
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **STATEMENTS
        OF CHANGES IN MEMBERS’ EQUITY**
 **FOR
        THE THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND**
 **YEARS
        ENDED SEPTEMBER 30, 2006 AND 2005**
 
 Retained
                
                AccumulatedClass
                    A
                
                Class
                    B
                
                Class
                    C
                
                Membership
                
                Earnings
                
                ComprehensiveUnits
                
                Amount
                
                Units
                
                Amount
                
                Units
                
                Amount
                
                Distributions
                
                (Deficit)
                
                (Loss)
                
                TotalBalance,
                    December 31, 2003
                
                
                2,286
                
                $
                10,910,140
                
                
                1,744
                
                $
                8,640,895
                
                
                50
                
                $
                250,000
                
                $
                -
                
                $
                (990,422
                )
                $
                -
                
                $
                18,810,613Change
                    in grain hedging contracts
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (622,925
                )
                
                (622,925
                )Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                7,393,563
                
                
                -
                
                
                7,393,563Balance,
                    September 30, 2004
                
                
                2,286
                
                
                10,910,140
                
                
                1,744
                
                
                8,640,895
                
                
                50
                
                
                250,000
                
                
                -
                
                
                6,403,141
                
                
                (622,925
                )
                
                25,581,251Distributions
                    to members
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (8,608,800
                )
                
                -
                
                
                -
                
                
                (8,608,800
                )Change
                    in grain hedging contracts
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                591,113
                
                
                591,113Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                13,009,369
                
                
                -
                
                
                13,009,369Balance
                    September 30, 2005
                
                
                2,286
                
                
                10,910,140
                
                
                1,744
                
                
                8,640,895
                
                
                50
                
                
                250,000
                
                
                (8,608,800
                )
                
                19,412,510
                
                
                (31,812
                )
                
                30,572,933Distributions
                    to members
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (28,560,000
                )
                
                -
                
                
                -
                
                
                (28,560,000
                )Change
                    in grain hedging contracts
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (63,481
                )
                
                (63,481
                )Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                45,895,967
                
                
                -
                
                
                45,895,967Balance
                    September 30, 2006
                
                
                2,286
                
                $
                10,910,140
                
                
                1,744
                
                $
                8,640,895
                
                
                50
                
                $
                250,000
                
                $
                (37,168,800
                )
                $
                65,308,477
                
                $
                (95,293
                )
                $
                47,845,419
 Please
        refer to accompanying notes to financial statements.
 F-4
 
 **WESTERN
        PLAINS ENERGY, L.L.C.**
 **STATEMENTS
        OF CASH FLOW**
 **FOR
        THE FISCAL YEARS ENDED SEPTEMBER 30, 2006 AND 2005, AND**
 **THE
        NINE MONTHS ENDED SEPTEMBER 30, 2004**
 
 **FISCAL
                    YEAR**
                
                
                **FISCAL
                    YEAR**
                
                
                **NINE
                    MONTHS****ENDED**
                
                
                **ENDED**
                
                
                **ENDED****SEPTEMBER
                    30,**
                
                
                **SEPTEMBER
                    30,**
                
                
                **SEPTEMBER
                    30,****2006**
                
                
                **2005**
                
                
                **2004****OPERATING
                    ACTIVITIES**Net
                    income
                
                $
                45,895,967
                
                $
                13,009,369
                
                $
                7,393,563Depreciation
                
                
                5,644,319
                
                
                5,446,248
                
                
                4,851,327Amortization
                
                
                40,440
                
                
                41,005
                
                
                10,669Conversion
                    of unrealized losses on grain hedging contracts to realized
                    losses
                
                
                (63,481)
                
                
                591,113
                
                
                (622,925)Changes
                    in assets and liabilitiesAccounts
                    receivable
                
                
                (2,033,752)
                
                
                (1,398,022)
                
                
                (2,192,845)Accounts
                    receivable - Government subsidies
                
                
                268,808
                
                
                1,870,363
                
                
                (2,361,235)Inventory
                
                
                57,796
                
                
                (258,578)
                
                
                (1,255,682)Deposits
                
                
                -
                
                
                -
                
                
                (97,834)Prepaid
                    expenses
                
                
                (15,614)
                
                
                1,330
                
                
                7,080Loan
                    origination and financing fees
                
                
                -
                
                
                -
                
                
                14,583Accounts
                    payable and accrued expenses
                
                
                407,551
                
                
                1,610,986
                
                
                293,931Accrued
                    interest
                
                
                (3,695)
                
                
                4,430
                
                
                1,628Accounts
                    payable - construction -related party
                
                
                -
                
                
                -
                
                
                (5,231,553)**NET
                    CASH PROVIDED BY OPERATING ACTIVITIES**
                
                
                50,198,340
                
                
                20,918,244
                
                
                810,707**INVESTING
                    ACTIVITIES**Purchase
                    of property, plant and equipment
                
                
                (1,908,675)
                
                
                (4,640,399)
                
                
                (2,476,242)Disbursements
                    of advances on grain
                
                
                -
                
                
                -
                
                
                (453,600)Receipts
                    of advances on grain
                
                
                -
                
                
                -
                
                
                453,600Purchase
                    of futures and options contracts
                
                
                117,902
                
                
                108,838
                
                
                (427,805)**NET
                    CASH (USED IN) INVESTING ACTIVITIES**
                
                
                (1,790,773)
                
                
                (4,531,561)
                
                
                (2,904,047)**FINANCING
                    ACTIVITIES**Distributions
                    to members
                
                
                (28,560,000)
                
                
                (8,608,800)
                
                
                -Borrowings
                    on line of credit and advances payable
                
                
                -
                
                
                -
                
                
                (5,000,000)Proceeds
                    from notes payable
                
                
                80,475
                
                
                687,500
                
                
                9,757,634Payment
                    of notes payable
                
                
                (6,183,706)
                
                
                (10,462,500)
                
                
                -**NET
                    CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES**
                
                
                (34,663,231)
                
                
                (18,383,800)
                
                
                4,757,634**NET
                    INCREASE (DECREASE) IN CASH**
                
                
                13,744,335
                
                
                (1,997,117)
                
                
                2,664,294**CASH
                    - BEGINNING OF PERIOD**
                
                
                1,245,903
                
                
                3,243,020
                
                
                578,726**CASH
                    - END OF PERIOD**
                
                $
                14,990,238
                
                $
                1,245,903
                
                $
                3,243,020**SUPPLEMENTAL
                    CASH FLOW INFORMATION**Cash
                    paid for income taxes
                
                $
                -
                
                $
                -
                
                $
                -Cash
                    paid for interest
                
                $
                245,647
                
                $
                927,281
                
                $
                736,425**Non-cash
                    Investing and Financing Activities**Investment
                    in industrial revenue bonds
                
                $
                -
                
                $
                -
                
                $
                13,366,710Lease
                    obligation
                
                $
                -
                
                $
                -
                
                $
                13,366,710Conversion
                    of note payable to line of credit
                
                $
                -
                
                $
                -
                
                $
                5,000,000
  Please
        refer to accompanying notes to financial statements.
  F-5
 
 
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 **NOTE
        1 - NATURE OF OPERATIONS**
  *Principal
        Business Activity*
  Western
        Plains Energy, L.L.C. (a Kansas limited liability company with its principal
        place of business in Gove County, Kansas) owns and operates a 40 million
        gallon
        ethanol plant. Western Plains Energy, L.L.C. (the Company) was organized
        on July
        10, 2001. The Company began its principal operations in January 2004. Prior
        to
        that date, the Company was considered to be in the development
        stage.
 
 
 **NOTE
        2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  *Revenue
        Recognition*
  Revenue
        from the production of ethanol and related products is recorded upon delivery
        to
        customers. Interest income is recognized as earned. Income from government
        grant programs is recognized as costs are incurred. Government subsidies
        are
        recognized based on fulfillment of program criteria, completion of application
        and determination of available funding.
 
 *Derivatives
        and Financial Instruments*
 
 The
        Company accounts for derivatives in accordance with Statement of Financial
        Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and
        Hedging Activities”. SFAS No. 133 requires the recognition of derivatives in the
        balance sheet and the measurement of these instruments at fair value. Changes
        in
        the fair value of derivatives are recorded as a component of Cost of Sales
        unless the normal purchase or sale exception applies or hedge accounting
        is
        elected.
   F-6
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 The
        Company enters into derivative instruments including future contracts and
        swap
        agreements and purchased options to fix prices for a portion of future raw
        material requirements. The Company has designated, documented and assessed
        for
        hedge relationships, which mostly resulted in cash flow hedges that require
        the
        Company to record the derivative assets and liabilities at their fair value
        on
        the balance sheet with an offset in other comprehensive income. Amounts are
        removed from other comprehensive income as the underlying transactions occur
        and
        realized gains or losses are recorded. The Company has included in its cost
        of
        sales an aggregate of $182,272 of gains on completed contracts related to
        its
        hedging activities and has recorded an aggregate of $63,481 of unrealized
        losses
        for the year ended September 30, 2006, as a charge to comprehensive income
        as
        compared to $1,294,070 gains on contracts and $31,812 of unrealized losses
        for
        period ended September 30, 2005. At September 30, 2006, the commodities trading
        account-futures and options contracts amounted to $202,065, representing
        the
        lower of the cost or fair market value of the futures and options contracts
        recorded on the balance sheet.
 
 *Cash
        and Cash Equivalents*
 
 The
        Company considers all highly liquid investments with an original maturity
        of
        three months or less to be cash equivalents.
 
 *Property
        and Equipment*
 
 Property
        and equipment are recorded at cost. Depreciation of assets is computed using
        the
        straight-line method over the following estimated useful lives:
 
 Building
        and manufacturing equipment   5
        - 31.5
        years
 Land
        improvements      15
        years
 Vehicles       7
        years
 Office
        equipment and furniture    7
        years
 
 Depreciation
        expense for the years ended September 30, 2006 and 2005 amounted to $5,644,319 and
        $5,446,248, respectively. For the nine months ended September 30, 2004,
        depreciation expense amounted to $4,851,327.
 
 
  F-7
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 *Long-Lived
        Assets*
  The
        Company reviews the value of its non-current assets for impairment whenever
        events indicate that the carrying amount of the asset may not be recoverable.
        An
        impairment loss is recorded if the sum of the future cash flows is less than
        the
        carrying amount of the asset. The amount of the loss is determined by comparing
        the fair market value of the asset to the carrying amount of the asset. Such
        assessments did not result in any adjustment to the value of non-current
        assets.
  *Offering
        Costs*
  Costs
        incurred related to the initial public offering of Class A and Class B capital
        units were recorded as prepaid offering costs until the subscriptions for
        Class
        A and Class B capital units related to the offering were accepted by the
        Company. Prepaid offering costs were then allocated to members’ equity in
        proportion to the number of units issued versus the total number of units
        issuable from the Company’s offering.  Offering costs include direct costs
        related to the offering such as legal fees, registration costs and other
        direct
        costs associated with the offering.
 
 *Use
        of Estimates*
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amount of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements and revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
  *Concentration
        of Credit Risk*
  The
        Company’s cash balances are maintained in bank depositories and periodically
        exceed federally insured limits. At September 30, 2006, the Company’s balances
        exceeded insured limits by $14,685,662.
   F-8
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 *Fair
        Value of Financial Instruments*
  Fair
        value estimates discussed herein are based upon certain market assumptions
        and
        pertinent information available to management as of September 30, 2006. The
        respective carrying value of certain on-balance-sheet financial instruments
        approximated their fair values. These financial instruments include cash,
        accounts receivable, accounts payable, accrued liabilities, and long-term
        debt.
        Fair values were assumed to approximate carrying values for these financial
        instruments other than long term debt because they are short term in nature
        and
        their carrying amounts approximate fair values. The carrying value of the
        Company’s long-term debt approximated fair values based on the current market
        conditions for similar debt instruments.
 
 *Income
        Taxes*
  The
        Company is organized as a limited liability company under state law. As a
        limited liability company that has elected to be taxed as a partnership,
        the
        Company’s earnings pass through to the members and are taxed at the member
        level. Accordingly, no income tax provision has been included in these financial
        statements except in the unaudited proforma income statement
        data.
 
 *Earnings
        Per Capital Unit*
  For
        purposes of calculating basic earnings per capital unit, capital units
        subscribed for and issued by the Company are considered outstanding on the
        effective date of issuance.
 
 *Segment
        Information*
 
 The
        Company follows SFAS 130, “Disclosures about Segments of an Enterprise and
        Related Information”. Certain information is disclosed, per SFAS 130, based on
        the way management organizes financial information for making operating
        decisions and assessing performance. The Company currently operates in a
        single
        segment and will evaluate additional segment disclosure requirements if it
        expands its operations.
 
  F-9
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 *Comprehensive
        Income*
  The
        Company reports comprehensive income in accordance with SFAS 131, “Reporting
        Comprehensive Income,” which requires the reporting of all changes in equity
        during a period, except those resulting from investment by owners and
        distribution to owners, in a financial statement for the period in which
        they
        are recognized.  This encompasses unrealized gains and losses from
        available-for-sale securities held. The Company recorded a comprehensive
        loss of
        $63,481 and $31,812 at September 30, 2006 and September 30, 2005 respectively,
        and a $622,925 comprehensive loss for the nine months ended September 30,
        2004,
        to recognize a decrease in the fair value of unfulfilled future purchase
        contracts for raw materials at that date.
 
 *Accounts
        Receivable*
 
 The
        Company's accounts receivable are due from distributors in the ethanol and
        livestock feed industries. Credit is extended based on evaluation of a
        customer’s financial condition and collateral is not required. Accounts
        receivable are due within 30 days and are stated at amounts due from customers
        net of an allowance for doubtful accounts. Accounts outstanding longer than
        the
        contractual payment terms are considered past due. The Company determines
        its
        allowance by considering a number of factors, including the length of time
        trade
        accounts receivable are past due, the Company's previous loss history, the
        customer's current ability to pay its obligation to the Company, and the
        condition of the general economy and the industry as a whole. The Company
        writes-off accounts receivable when they become uncollectible, and payments
        subsequently received on such receivables are credited to the allowance for
        doubtful accounts. There was no allowance for doubtful accounts at September
        30,
        2006 and 2005.
 
 *Inventories*
 
 Inventories
        are stated at the lower of cost or market, determined on a first-in, first-out
        basis. Inventory reserves are established for obsolescence based on expiration
        dating of perishable products and excess levels of inventory on hand.
        Inventories at September 30, 2006, 2005, and 2004, consist of the
        following:
 2006
                
                2005
                
                2004Raw
                    materials
                
                $
                462,133
                
                $
                723,333
                
                $
                505,434Work-in-process
                
                
                719,689
                
                
                559,559
                
                
                399,951Finished
                    goods
                
                
                274,642
                
                
                231,368
                
                
                350,297$
                1,456,464
                
                $
                1,514,260
                
                $
                1,255,682
 F-10
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 *Shipping
        and Handling*
 
 The
        cost
        of shipping products to customers is included in cost of goods sold. Amounts
        billed to a customer in a sale transaction related to shipping and handling
        is
        classified as revenue.
 
 *Recent
        Accounting Pronouncements*
 In
        November 2004, the Financial Accounting Standards Board (FASB) issued SFAS151
        "Inventory Costs". This Statement amends the guidance in ARB No. 43, Chapter
        4,
        "Inventory Pricing”, to clarify the accounting for abnormal amounts of idle
        facility expense, freight, handling costs, and wasted material (spoilage).
        In
        addition, this Statement requires that allocation of fixed production overhead
        to the costs of conversion be based on the normal capacity of the
        production
 facilities.
        The provisions of this Statement will be effective for the Company beginning
        with its fiscal year ending September 30, 2007. The Company is currently
        evaluating the impact this new Standard will have on its operations, but
        believes that it will not have a material impact on the Company's financial
        position, results of operations or cash flows.
 
 In
        December 2004, the FASB issued SFAS 153 "Exchanges of Non monetary Assets
        - an
        amendment of APB Opinion No. 29". This Statement amended APB Opinion 29 to
        eliminate the exception for non monetary exchanges of similar productive
        assets
        and replaces it with a general exception for exchanges of non monetary assets
        that do not have commercial substance. A non monetary exchange has commercial
        substance if the future cash flows of the entity are expected to change
        significantly as a result of the exchange. The adoption of this Standard
        is not
        expected to have any material impact on the Company's financial position,
        results of operations or cash flows.
 
 In
        August
        2005, the FASB issued SFAS 154, "Accounting Changes and Error Corrections."
        This
        statement applies to all voluntary changes in accounting principle and to
        changes required by an accounting pronouncement if the pronouncement does
        not
        include specific transition provisions, and it changes the requirements for
        accounting for and reporting them. Unless it is impractical, the statement
        requires retrospective application of the changes to prior periods' financial
        statements. This statement is effective for accounting changes and correction
        of
        errors made in fiscal years beginning after December 15, 2005.
 
  F-11
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 SFAS
        155
        - "Accounting for Certain Hybrid Financial Instruments--an amendment of FASB
        Statements No. 133 and 140" This Statement, issued in February 2006, amends
        FASB
        Statements No. 133, "Accounting for Derivative Instruments and Hedging
        Activities", and No. 140, "Accounting for Transfers and Servicing of Financial
        Assets and Extinguishments of Liabilities". This Statement resolves issues
        addressed in Statement 133 Implementation Issue No. D1, "Application of
        Statement 133 to Beneficial Interests in Securitized Financial
        Assets."
 
 This
        Statement:
 a.
        Permits fair value remeasurement for any hybrid financial instrument that
        contains an embedded derivative that otherwise would require
        bifurcation
 
 b.
        Clarifies which interest-only strips and principal-only strips are not subject
        to the requirements of Statement 133
 
 c.
        Establishes a requirement to evaluate interests in securitized financial
        assets
        to identify interests that are freestanding derivatives or that are hybrid
        financial instruments that contain an
 embedded
        derivative requiring bifurcation
 
 d.
        Clarifies that concentrations of credit risk in the form of subordination
        are
        not embedded derivatives
 
 e.
        Amends
        Statement 140 to eliminate the prohibition on a qualifying special-purpose
        entity from holding a derivative financial instrument that pertains to a
        beneficial interest other than another derivative financial
        instrument.
 This
        Statement is effective for all financial instruments acquired or issued after
        the beginning of the Company’s fiscal year beginning October 1,
        2007.
 
 The
        fair
        value election provided for in paragraph 4(c) of this Statement may also
        be
        applied upon adoption of this Statement for hybrid financial instruments
        that
        had been bifurcated under paragraph 12 of Statement 133 prior to the adoption
        of
        this Statement. Earlier adoption is permitted as of the beginning of our
        fiscal
        year, provided that the Company has not yet issued financial statements,
        including financial statements for any interim period, for that fiscal year.
        Provisions of this Statement may be applied to instruments that the Company
        holds at the date of adoption on an instrument-by-instrument
        basis.
  F-12
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 The
        Company is currently reviewing the effects of adoption of this statement
        but it
        is not expected to have a material impact on its financial
        statements.
 
 SFAS
        156
        - "Accounting for Servicing of Financial Assets--an amendment of FASB Statement
        No. 140"
 
 This
        Statement, issued in March 2006, amends FASB Statement No. 140, "Accounting
        for
        Transfers and Servicing of Financial Assets and Extinguishments of Liabilities",
        with respect to the accounting for separately recognized servicing assets
        and
        servicing liabilities. This Statement:
 1.
        Requires an entity to recognize a servicing asset or servicing liability
        each
        time it undertakes an obligation to service a financial asset by entering
        into a
        servicing contract in certain situations.
 
 2.
        Requires all separately recognized servicing assets and servicing liabilities
        to
        be initially measured at fair value, if practicable.
 
 3.
        Permits an entity to choose either the amortization method or the fair value
        measurement method for each class of separately recognized servicing assets
        and
        servicing liabilities.
 
 4.
        At its
        initial adoption, permits a one-time reclassification of available-for-sale
        securities to trading securities by entities with recognized servicing rights,
        without calling into question the treatment of other available-for-sale
        securities under Statement 115, provided that the available-for-sale securities
        are identified in some manner as offsetting the entity's exposure to changes
        in
        fair value of servicing assets or servicing liabilities that a servicer elects
        to subsequently measure at fair value.
 5.
        Requires separate presentation of servicing assets and servicing liabilities
        subsequently measured at fair value in the statement of financial position
        and
        additional disclosures for all separately recognized servicing assets and
        servicing liabilities.
 
 Adoption
        of this Statement is required as of the beginning of the first fiscal year
        that
        begins after September 15, 2006. The adoption of this statement is not expected
        to have a material impact on the Company’s financial statements.
 
 In
        September 2006, the FASB issued Statement No. 157, "Fair Value Measurements".
        This Statement defines fair value, establishes a framework for measuring
        fair
        value in generally accepted accounting principles and expands disclosure
        about
        fair value measurement. The implementation of this guidance is not expected
        to
        have any impact on the Company's financial statements.
  F-13
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 In
        September 2006, the Financial Accounting Standards Board issued Statement
        of
        Financial Accounting Standards No. 158, "Employers' Accounting for Defined
        Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements
        No. 87, 106, and 132(R)" ("SFAS No. 158"). SFAS No. 158 requires companies
        to
        recognize a net liability or asset and an offsetting adjustment to accumulated
        other comprehensive income to report the funded status of defined benefit
        pension and other postretirement benefit plans. SFAS No. 158 requires
        prospective application, recognition and disclosure requirements effective
        for
        the Company's fiscal year ending September 30, 2007. Additionally, SFAS No.
        158
        requires companies to measure plan assets and obligations at their year-end
        balance sheet date. This requirement is effective for the Company's fiscal
        year
        ending September 30, 2009. The Company is currently evaluating the impact
        of the
        adoption of SFAS No. 158 and does not expect that it will have a material
        impact
 on
        its
        financial statements.
 
 In
        September 2006, the United States Securities and Exchange Commission ("SEC"),
        adopted SAB No. 108, "Considering the Effects of Prior Year Misstatements
        when
        Quantifying Misstatements in Current Year Financial Statements." This SAB
        provides guidance on the consideration of the effects of prior year
        misstatements in quantifying current year misstatements for the purpose of
        a materiality
        assessment. SAB 108 establishes an approach that requires quantification
        of
        financial statement errors based on the effects of each of the company's
        balance
        sheet and statement of operations financial statements and the related financial
        statement disclosures. The SAB permits existing public companies to record
        the
        cumulative effect of initially applying this approach in the first year ending
        after November 15, 2006 by recording the necessary correcting adjustments
        to the
        carrying values of assets and liabilities as of the beginning of that year
        with
        the offsetting adjustment recorded to the opening balance of retained earnings.
        Additionally, the use of the cumulative effect transition method requires
        detailed disclosure of the nature and amount of each individual error being
        corrected through the cumulative adjustment and how and when it arose. The
        Company is currently evaluating the impact, if any, that SAB 108 may have
        on the
        Company's results of operations or financial position.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty
        in
        Income Taxes-an interpretation of FASB Statement No. 109." This Interpretation
        prescribes a recognition threshold and measurement attribute for the financial
        statement recognition and measurement of a tax position taken or expected
        to be
        taken in a tax return. This Interpretation also provides guidance on
        derecognition, classification, interest and penalties, accounting in interim
        periods, disclosure, and transition. The Interpretation is effective for
        fiscal
        years beginning after December 15, 2006 and the Company is currently evaluating
        the impact, if any, that FASB No. 48 may have on the Company's results of
        operations or financial position.
  F-14
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 **NOTE
        3 - LAND**
  During
        the period ended September 30, 2005, the Company capitalized land costs of
        $101,968 in acquiring land with a railway site to facilitate possible plant
        expansion in the future.
 
 During
        the period ended September 30, 2006, the Company capitalized land costs of
        $96,000 in acquiring 80 acres of land with water rights to facilitate possible
        plant expansion in the future.
 
 
 **NOTE
        4 - MEMBERS’ EQUITY**
  As
        specified in the Company’s Third Amended and Restated Operating Agreement, the
        Company has four classes of membership capital units: Class A, B, C and D.
        Capital units of each class are issued in denominations of $5,000.
  Class
        A
        and Class B capital units were offered for sale in the public offering.  A
        total of 3,967 Class A and B capital units were offered at a price of $5,000
        per
        unit pursuant to a registration statement filed with the Securities and Exchange
        Commission, with a minimum of $15,735,000 and a maximum of $19,835,000 proceeds
        from such offering of units.
 
 The
        Company’s Class A capital units were offered only to producers of agricultural
        products, with a minimum purchase of two (2) Class A Capital Units per
        investor.  The Company also offered to sell Class B capital units with a
        minimum purchase of seven (7) Class B capital units per
        investor.
 
 The
        Offering was competed in 2003 with 2,120 Class A and 1,744 Class B units
        sold
        for gross proceeds of $19,330,000.
  For
        Class
        C capital units subscribed in a private placement prior to the public offering,
        10% of the offering price was due upon subscription with the remaining amount
        executed as a promissory note due at the call of the Board of Managers. In
        2003,
        the Company closed the sale of 50 Class C Units, totaling $250,000, from
        Ethanol
        Products, LLC.
  F-15
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 Class
        D
        capital units were offered for sale prior to the public offering at a price
        of
        $5,000 per unit to the members of the Board of Managers and certain others.
        Total equity raised from the sale of Class D units was $415,000 during the
        year
        ended December 31, 2001. Upon completion of the public offering, which occurred
        in March 2003, 83 Class D units automatically converted into 166 Class A
        capital
        units. The Company must approve all transfers or other dispositions of capital
        units.
  Voting
        rights are one vote per member for Class A capital units, and one vote per
        unit
        for Class B and Class C capital units.  Members elect the Board of
        Managers, and members must approve any merger or consolidation with another
        business entity, sale of substantially all of the Company’s assets or voluntary
        dissolution.  The Board of Managers decides all other matters regarding
        operation and management of the Company, including amendment of the Operating
        Agreement.
 
 Income
        and losses are allocated to members based on their respective percentage
        of
        membership interest. Distributions to members must be no less than 20% of
        net
        cash from operations, as defined in the Operating Agreement, if net cash
        from
        operations exceeds $500,000 on an annual basis, provided that any such
        distribution does not constitute or cause a default under any of the Company’s
        loan documents or credit facilities.
  Upon
        dissolution of the Company, and after the payment of all debts and liabilities
        of the Company, the assets shall be distributed to the unit holders ratably
        in
        proportion to the credit balances in their respective capital accounts for
        all
        classes of units.
  During
        the years ended September 30, 2006 and 2005, the Company made distributions
        to
        its members of $28,560,000 and $8,608,800, respectively. There were no
        distributions made during the nine months ended September 30,
        2004.
 
 
  F-16
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 **NOTE
        5 -** **** **FINANCING
        ARRANGEMENTS**
 *Construction
        and permanent financing*
  During
        July 2003, the Company entered into a credit agreement with Ag Country Farm
        Credit Services, FLCA (AgCountry) that established a $22,000,000 (or 55%
        of
        construction costs, whichever is less) multiple-advance, non-revolving
        construction loan for construction of the ethanol plant. The construction
        note
        expired August 1, 2004, with the amount outstanding converted into a
        permanent term loan to be amortized over a 10 year period. This loan was
        paid in
        full June 30, 2006. $5,000,000 of this note was converted to a revolving
        credit
        facility to reduce interest costs and to aid cash management. The borrowing
        amount available under the revolving credit line was reduced to $4,000,000
        at
        September 30, 2006, and the balance outstanding was $0 at September 30,
        2006.
 
 During
        the construction period, interest-only payments equal to the London Interbank
        Offered Rate (LIBOR) plus 4% were due monthly.
 
 During
        August 2004, the Company converted the construction loan into a term loan,
        which
        was being repaid in quarterly principal payments of $425,000 plus accrued
        interest based on the 30 day LIBOR indexed rate of LIBOR plus 4.00%, and
        a
        $5,000,000 credit line. The revolving credit facility was paid in full during
        September 2004. In addition, the Company entered into an agreement with Ag
        Country Farm Credit Services in October 2004 that established a $3,500,000
        expansion loan to fund a portion of a plant expansion to increase ethanol
        production to 40,000,000 gallons per year capacity. This note was paid in
        full
        prior to September 30, 2005.
 
 The
        term
        loan is subject to certain restrictive covenants, and required payment of
        origination, participation and other fees totaling $337,107 and an annual
        administrative fee of $25,000. The
        $362,107 of financing costs are being amortized over the life of the loan
        (10
        years), commencing with the loan’s conversion into a permanent loan which
        occurred during August 2004. Of that amount, $40,440 and $41,005 was amortized
        and expensed in the years ended September 30, 2006, and 2005 respectively.
        $10,669 was amortized over the nine months ended September 30, 2004. The
        annual
        administrative fee is amortized over 12 months.
 
 The
        Third
        Amendment to the Credit Agreement dated July 29, 2003, was executed on March
        7,
        2006, which increased allowable dividends up to 75% of net income with
        distributions up to 100% of net income, so long as Borrower maintains working
        capital that exceeds $5,000,000 and a defined leverage ratio of .60:1. The
        Amendment also waived certain compliance requirements for dividends paid
        in
        prior periods.
  F-17
  During
        the period ended September 30, 2004, the Company entered into two irrevocable
        standby letters of credit (the Letters of Credit) for $120,000 and $500,000,
        respectively. The Letters of Credit are for the benefit of the Company’s utility
        provider. The Letters of Credit expire on December 31, 2011.
 
 The
        Company purchased a new vehicle June 30, 2006. The purchased was financed
        partially by the value of a vehicle traded-in ($11,133), and the balance
        of
        $34,475 was financed by an offer from GMAC financing for a term of 36 months
        at
        0.00% interest. The monthly payment is $902 with the balance of the note
        September 30, 2006, of $29,769.
 
 In
        December 2005, the Company purchased 80 acres of land for $96,000. The terms
        of
        the agreement required the Company to pay $24,000 prior to December 31, 2005,
        and an additional $24,000 prior to January 31, 2006. Both payments were made
        in
        a timely manner. The balance of $48,000 will be paid in two equal principal
        payments of $24,000 plus accrued interest at the rate of 6.0% per annum in
        January 2007, and 2008. The balance of this note at September 30, 2006 was
        $48,000 with accrued interest payable of $2,363.
 
 
 **NOTE
        6 - COMMITMENTS, CONTINGENCIES AND AGREEMENTS**
 
 The
        Board
        of Managers has entered into various agreements regarding the formation,
        operation and management of the Company. Significant agreements are as
        follows:
 
 *Employee
        401-K Plan*
 
 The
        Company established a 401-K retirement plan November 1, 2004, for its employees.
        The Company matches employee contributions to the plan up to 5% of employee’s
        gross income. The amount contributed by the Company is vested 25% per year
        on
        behalf of the employee. The Company contributed $88,421, and $52,202 for
        fiscal
        years ended September 30, 2006, and 2005, respectively.
 
 *Energy
        Management Services*
  The
        Company has entered into an agreement with U.S. Energy Service, Inc. for
        energy
        management and engineering services.  The initial term of the agreement
        expired on August 31, 2003, and is renewable for one-year terms unless
        terminated by either party with 30 days advance notice.  The agreement
        provides for fees of $2,800 per month. The agreement was renewed through
        August
        31, 2006, and again through August 31, 2007.
 
  F-18
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 *Sales
        Service Agreement*
  The
        Company has entered into an agreement with United Bio Energy, LLC (see Notes
        7
        and 10) for the sale of the bulk feed grade products (distiller’s grains)
        produced from the plant.  The agreement expires September 30, 2006, and is
        automatically renewed for one-year terms unless either party provides written
        notice 90 days prior to expiration of the agreement.  Under the terms of
        the agreement, United Bio Energy, LLC purchases all products at a price equal
        to
        98% or 97.5% of the selling price depending on whether it is wet or dry grains,
        less applicable freight.  If the product is sold to members of the Company,
        United Bio Energy, LLC will pay an additional .5% to the members., less
        applicable freight.  United Bio Energy, LLC is responsible for billing and
        account servicing of the product sales and for losses related to non-payment
        unless such non-payment relates to substandard products.
 
 *Marketing
        Agreement*
  The
        Company entered into an agreement on October 31, 2001 with Ethanol Products,
        LLC
        (see Notes 7 and 10) for the marketing of the Company’s ethanol and certain
        administrative services.  The agreement as amended on October 18, 2002, has
        a term of five years and commenced upon start of ethanol production, with
        a fee
        of $.01 per gallon of ethanol produced.  The agreement is renewable for
        five-year terms unless notice of termination has been delivered at least
        90 days
        prior to expiration.
 
 *Storage
        Expansion Contract*
 
 The
        Company entered into a contract to construct two 250,000 bushel grain bins,
        two
        hammer mills, and all the required conveyance and other infrastructure to
        connect the storage facility, the new bins, and the ethanol plant. The total
        contract price is $2,961,105, of which $975,000 was paid prior to September
        30,
        2006, pursuant to the terms of the contract.
 
 *Back-up
        Transformer*
 
 The
        Company contracted with their energy supplier to purchase a back-up transformer
        capable of supplying the entire facility in the event that the existing
        transformer fails. The Company paid $124,730 upon execution of the contract
        and
        the balance will be due when the transformer is delivered which is estimated
        to
        be in early spring of 2007.
  F-19
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 The
        sum
        of the initial payments for the transformer and storage expansion is classified
        on the balance sheet as Construction-in-progress.
 
 
 **NOTE
        7 - RELATED PARTY TRANSACTIONS**
  The
        Company has reimbursed members of the Board of Managers for certain expenses
        incurred by the Company and paid by the members of the Board of Managers
        including attending Board meetings. Expense reimbursements for the years
        ended
        September 30, 2006, and September 30, 2005, totaled $29,944 and $19,239,
        respectively. For the nine months ended September 30, 2004, $6,950 was paid
        to members of the Board.
  Ethanol
        Products, LLC, an entity controlled by a member of the Board of Managers,
        owns
        all 50 Class C capital units, purchased for $250,000.
 
 Revenues
        were concentrated in Ethanol Products which purchases denatured ethanol,
        while
        United Bio Energy, LLC, an affiliate of ICM, purchases distillers grain from
        the
        company on a delivered basis. The following table displays amounts of product
        purchased by the Company’s marketers with the related marketing fees
        paid:
  Fiscal
                  year ended
              
              Fiscal
                  year ended
              
              Nine-months
                  endedSept.
                  30, 2006
              
              Sept.
                  30, 2005
              
              Sept.30,
                  2004Ethanol
                  ProductsRevenue
                  (including freight)
              
              $
              97,066,671
              
              $
              51,855,217
              
              $
              32,214,104Marketing
                  fees paid
              
              
              455,353
              
              
              355,185
              
              
              225,899United
                  Bio EnergyRevenue
                  (including freight)
              
              $
              11,728,308
              
              $
              10,491,961
              
              $
              7,648,525Marketing
                  fees paid
              
              
              295.458
              
              
              261,121
              
              
              151,703
 
 
  F-20
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 **NOTE
        8 - INCENTIVE PAYMENTS**
  During
        the year ended September 30, 2006, the Company received aggregate incentive
        payments for its ethanol production of $224,630 pursuant to a United States
        Department of Agriculture Bio-Energy program.  This
        program was terminated by the U.S.D.A. on June  30,
        2006.  Additionally,
        the Company qualifies for additional production incentive payments under
        a State
        of Kansas program. The Kansas program is limited to an amount of $1,125,000
        per
        year for each producer in excess of five million gallons per year at the
        rate of
        $.075 per gallon. The Company recorded revenue of $1,125,000, received an
        aggregate of $902,936, and recorded a receivable of $222,064 at September
        30,
        2006, from the Kansas incentive program during the year ended September 30,
        2006. The Company also qualified for the maximum payment of $1,125,000 and
        recorded this amount of income in fiscal year ended September 30, 2005, as
        well
        as for the nine months ended September 30, 2004.
 
 **NOTE
        9 - SALE / LEASEBACK TRANSACTION**
 
 On
        October 3, 2003, the Company completed an industrial revenue bond financing
        with
        Gove County, Kansas that will provide property tax savings for 10 years on
        the
        plant site.  As part of the financing, title to the plant site and
        improvements have been transferred to Gove County, as security for the repayment
        of the bonds, and the Company is leasing back the site for an amount that
        is
        equal to the amount of interest to be paid on the Gove County bonds. 
AgCountry consented to this transaction, and the bonds have been pledged
        to
        AgCountry as security for any obligations under the AgCountry Credit
        Agreement.  As part of the financing, the Company paid the bond
        underwriter, W.R. Taylor, $160,000 and agreed to pay an additional $40,000
        only
        if the bonds are converted to a variable rate and remarketed by W.R.
        Taylor.  The maximum principal amount of the bonds is $32,000,000.
 
 The
        $160,000 of financing fees paid to the bond underwriter and $42,040 of legal
        and
        other cost associated with the bond closing are being amortized over the
        30-year
        life of the bonds. A total of $ 6,732  and
        $6,735 of amortization expense was recognized during the year ended September
        30, 2006, and September 30, 2005, respectively. For the nine months ended
        September 30, 2004, $5,051 was recognized as amortization expense relating
        to
        the financing fees.
  F-21
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 The
        Company, as holder of the industrial revenue bonds, is due interest at 3.5%
        per
        annum with interest payable semi-annually on March 1 st and
        September 1 st .
        This
        interest income is directly offset by the lease payments on the plant. Both
        the
        bond and the corresponding lease have terms of 30 years. The lease qualifies
        as
        a capital lease. Interest income recognized on the Industrial Revenue Bonds
        for
        the periods ended September 30, 2006, and September 30, 2005, were $1,120,000
        and $1,120,000, respectively. Interest income recognized for the nine months
        ended September 30, 2004, amounted to $768,746. This amount is equal to the
        lease expense of the plant in each respective period.
 
 
 **NOTE
        10 - CONCENTRATION OF CUSTOMERS**
 
 The
        Company sells essentially all of its products to two marketers, which in
        turn
        sell to other purchasers. The Company has executed an exclusive marketing
        agreement with Ethanol Products LLC (“Ethanol Products”) of Wichita, Kansas (see
        Notes 6 and 7) to market the ethanol produced at its plant. The agreement
        is
        effective for an initial term of five years beginning January 2004 and is
        automatically renewable for subsequent five-year terms unless terminated
        by
        either party prior to expiration. Ethanol Products has agreed to purchase
        all of
        the ethanol that is produced at the plant. Ethanol Products is solely
        responsible for determining the price and terms at which the ethanol acquired
        from the plant is sold and to whom it is sold. In the event that the
        relationship with Ethanol Products is interrupted for any reason, the Company
        believes that it would be able to locate another entity to market the ethanol.
        However, any interruption could temporarily disrupt the sale of the Company’s
        principal product and adversely affect its operations.
 
 The
        Company also has executed an exclusive agreement with ICM Marketing, Inc.
        to
        market all of the distiller’s grains produced at the plant. The rights and
        obligations of ICM under that agreement were subsequently assigned to United
        Bio
        Energy, LLC (“UBE”). The initial term of the agreement with UBE is three years
        expiring September 30, 2006 and was automatically renewed for an additional
        one-year term which will automatically be renewed unless terminated by the
        Company or UBE following 90 days advance written notice. As with the marketing
        arrangement with Ethanol Products, any interruption in the relationship with
        UBE
        could temporarily affect the Company’s business although it is believed that the
        Company could find another entity to market the grains (see Note 6).
 
 
  F-22
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 **NOTE
        11 - REGULATION**
 
 The
        construction of the plant required various state and local permits to comply
        with existing governmental regulations designed to protect the environment
        and
        worker safety. While the Company is subject to regulations on emissions by
        the
        United States Environmental Protection Agency (“EPA”), current EPA rules do not
        require the Company to obtain any permits or approvals in connection with
        the
        construction of the plant or operation of the Company’s business. However, state
        and federal rules can and do change and such changes could result in greater
        regulatory burdens on the Company.
 
 The
        ethanol production will require the Company to emit a significant amount
        of
        carbon dioxide into the air. Current Kansas law regulating emissions does
        not
        restrict or prevent the Company from emitting carbon dioxide gas into the
        air,
        but this could change in the future.
 
 The
        Company obtained what is believed to be all the necessary air and water permits
        to operate the plant, including a permit to discharge wastewater from the
        plant.
 
 In
        addition to the foregoing regulations affecting air and water quality, the
        Company is subject to regulation for fuel storage tanks. If the Company is
        found
        to have violated federal, state or local environmental regulations in the
        future, the Company could incur liability for clean-up costs, damage claims
        from
        third parties and civil or criminal penalties that could adversely affect
        its
        business.
 
 
 **NOTE
        12 - SUBSEQUENT EVENTS**
 
 The
        Company has entered into an agreement to purchase the approximately 1,000,000
        bushel grain storage facility located on land adjacent to the Company’s plant.
        The purchase price was $1,200,000. The transaction was completed October
        10,
        2006.
 
 Based
        on
        the Company’s financial results for the quarter ended September 30, 2006, the
        Board of Members declared a Member distribution equal to $4,000 per share
        totaling $16,320,000. This distribution was paid October 20, 2006. This required
        the Company to draw $800,000 on the “Revolving Loan” which was repaid in
        December 2006.
  F-23
  **WESTERN
        PLAINS ENERGY, L.L.C.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **SEPTEMBER
        30, 2006 AND 2005**
 
 
 The
        Fourth Amendment to the Credit Agreement dated July 29, 2003, between the
        Company and Agcountry Farm Credit Services, was entered into on October 2,
        2006,
        reducing the variable interest rate applicable to the “Revolving Loan” to LIBOR
        plus 2.50%. In addition, the annual administration fee was suspended and
        the
        quarterly “Unused commitment fee” was reduced from .5% to .25% of the unused
        Revolving Loan Commitment balance during the quarter. The Capital Expenditure
        section was deleted and replaced with a requirement for pre-approval of capital
        expenditures in excess of $2,500,000 for any fiscal year. Written approval
        is
        required for capital expenditures which exceed this limit.







F-24






**EXHIBIT
      INDEX**





Exhibit
                No.
            
            Description
            
            Incorporated
                by Reference From3.1(i)
            
            Articles
                of Organization
            
            Appendix
                A of our prospectus filed with the Commission pursuant to Rule 424(b)(3)
                on June 11, 2002 (File No. 333-74982)3.1(ii)
            
            Third
                Amended and Restated Operating Agreement
            
            Exhibit
                3 to our Form 10-QSB for the quarter ended June 30,
                20034.1
            
            Form
                of Class A Capital Unit Certificate
            
            Exhibit
                4.1 to our Form SB-2 filed with the Commission on December 12, 2001
                (File
                No. 333-74982)4.2
            
            Form
                of Class B Capital Unit Certificate
            
            Exhibit
                4.2 to our Form SB-2 filed with the Commission on December 12, 2001
                (File
                No. 333-74982)4.3
            
            Form
                of Class C Capital Unit Certificate
            
            Exhibit
                4.3 to our Form SB-2 filed with the Commission on December 12, 2001
                (File
                No. 333-74982)10.1
            
            Credit
                Agreement with AgCountry Farm Credit Services, FLCA dated July 29,
                2003
            
            Exhibit
                10.1 to our Form 10-QSB for the quarter ended June 30,
                200310.2
            
            DDGS/SWGS
                Marketing Agreement with ICM Marketing, Inc., dated October 1, 2001
            
            Exhibit
                10.5 to our Form SB-2 filed with the Commission on December 12, 2001
                (File
                No. 333-74982)10.3
            
            Ethanol
                Marketing and Services Agreement with Ethanol Products, LLC, dated
                October
                31, 2001
            
            Exhibit
              10.6 to our Form SB-2 filed with the Commission on December 12, 2001
              (File
              No. 333-74982)10.4
            
            Land
                Exchange Agreement, dated November 23, 2001
            
            Exhibit
                10.9 to our Form SB-2 filed with the Commission on December 12, 2001
                (File
                No. 333-74982)10.5
            
            Real
                Estate Purchase Agreement, dated December 21, 2001
            
            Exhibit
                10.10 to our Form SB-2 filed with the Commission on May 1, 2002 (File
                No.
                333-74982)10.6
            
            Well
                Construction and Pumping Agreement, dated November 19, 2001
            
            Exhibit
                10.11 to our Form SB-2 filed with the Commission on December 12,
                2001
                (File No. 333-74982)10.7
            
            Design/Build
                Agreement with ICM Inc., dated April 4, 2002
            
            Exhibit
                10.12 to our Form SB-2 filed with the Commission on May 1, 2002 (File
                No.
                333-74982)10.8
            
            Agreement
                between the Company and ICM, Inc. dated August 26, 2004 for expansion
                of
                our plant
            
            Exhibit
                10.7 to our Annual Report on Form10-KSB
                for the fiscal year ended September 30, 2004 (File No.
                333-749821)10.9
            
            Agreement
                between the Company and United Bio Energy Ingredients, LLC, dated
                August
                2, 2004
            
            Exhibit
                10.8 to our Annual Report on Form 10-KSB for the fiscal year ended
                September 30, 2004
              (File
                No. 333-749821)10.10
            
            Form
                of Second Amendment to the Credit Agreement with AgCountry dated
                July 29,
                2004
            
            Exhibit
                10.9 to our Annual Report on Form 10-KSB for the fiscal year ended
                September 30, 2004
              (File
                No. 333-749821)10.11
            
            Promissory
                Note/Loan Agreement with AgCountry dated November 16, 2004
            
            Exhibit
                10.10 to our Annual Report on Form 10-KSB for the fiscal year ended
                September 30, 2004
              (File
                No. 333-749821)10.12
            
            Third
                Amendment to Credit Agreement with AgCountry dated March 7,
                2006
            
            Exhibit
                10.1 to our Report on Form 8-K dated March 27, 2006 (File No.
                0-50714)10.13
            
            Employment
                Agreement with Steven McNinch dated February 21, 2006
            
            Exhibit
                10.2 to our Report on Form 8-K dated March 27, 2006 (File No.
                0-50714)14.1
            
            Western
                Plains Energy, L.L.C. Code of Ethics for Principal Executive and
                Senior
                Financial Officers
            
            Exhibit
                14.1 to our Annual Report on Form 10-KSB for the fiscal year ended
                September 30, 2005
              (File
                No. 0-50714)31.1*
            
            Certifications
                pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
                Act
                of 193431.2*
            
            Certifications
                pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange
                Act
                of 1934, as amended32*
            
            Certifications
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002___________
              
              *
                Filed herewith