**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB**

 

**ý**                          **Annual report under Section 13 or15(d) of the Securities Exchange Act of 1934.**

 

**For theyear ended December 31, 2004**

 

**OR**

 

**o**                          **Transition report under Section13 or 15(d) of the Exchange Act.**

 

**For thetransition period from                 to                 **

 

**Commission file number 333-92188**

 

**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(Exact name of small business issuer as specified in its charter)

 
| **Wisconsin**                                                       | ** ** | **39-2032455**                            |
|---------------------------------------------------------------------|------------|-------------------------------------------|
| **(State or other jurisdiction of  incorporation or organization)** | ** ** | **(I.R.S. Employer Identification  No.)** |
| ** **                                                          | ** ** | ** **                                |
| **W1231 Tessman Road, Cambria, Wisconsin 53923**                    |
| (Address of principal executive offices)                            |
|                                                                |       |                                      |
| **(920) 348-5016**                                                  |
| (Issuer’s telephone number)                                    |

 

Securities registered under Section 12(b) of the Exchange Act:  **None**

 

Securities registered under Section 12(g) of the Exchange Act:  **None**

 

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

 

Check if there is no disclosure of delinquent filers in response toItem 405 of Regulation S-B is not contained in this form, and no disclosurewill be contained, to the best of registrant’s knowledge, in definitive proxyor information statements incorporated by reference in Part III of this Form10-KSB or any amendment to this Form 10-KSB. ý

 

State issuer’srevenues for its most recent fiscal year.   None 

 

As of March18, 2005, the aggregate market value of the membership units held bynon-affiliates (computed by reference to the most recent offering price of suchmembership units) was $28,780,000.

 

As of March18, 2005, there were 28,780 membership units outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE    None.

 

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

 

 

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**INDEX**

 
| **PART I**     | ** **                                                                                      | ** ** |
|----------------|-------------------------------------------------------------------------------------------------|------------|
| ** **     | ** **                                                                                      | ** ** |
| **ITEM 1.**    | **DESCRIPTION OF  BUSINESS**                                                                    | ** ** |
| **ITEM 2.**    | **DESCRIPTION OF  PROPERTY**                                                                    | ** ** |
| **ITEM 3.**    | **LEGAL PROCEEDINGS**                                                                           | ** ** |
| **ITEM  4.**   | **SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS**                                        | ** ** |
| ** **     | ** **                                                                                      | ** ** |
| **PART II**    | ** **                                                                                      | ** ** |
| ** **     | ** **                                                                                      | ** ** |
| **ITEM  5.**   | **MARKET  FOR MEMBERSHIP UNITS AND RELATED MEMBER MATTERS**                                     | ** ** |
| **ITEM 6.**    | **MANAGEMENT’S  DISCUSSION AND ANALYSIS AND PLAN OF OPERATION**                            | ** ** |
| **ITEM 7.**    | **FINANCIAL STATEMENTS**                                                                        | ** ** |
| **ITEM  8.**   | **CHANGES  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES**      | ** ** |
| **ITEM 8A.**   | **CONTROLS AND  PROCEDURES**                                                                    | ** ** |
| ** **     | ** **                                                                                      | ** ** |
| **PART  III**  | ** **                                                                                      | ** ** |
| ** **     | ** **                                                                                      | ** ** |
| **ITEM  9.**   | **DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS**                               | ** ** |
| **ITEM 10.**   | **EXECUTIVE  COMPENSATION**                                                                     | ** ** |
| **ITEM  11.**  | **SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED MEMBER  MATTERS** | ** ** |
| **ITEM  12.**  | **CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS**                                             | ** ** |
| **ITEM 13.**   | **EXHIBITS**                                                                                    | ** ** |
| **ITEM  14.**  | **PRINCIPAL  ACCOUNTANT FEES AND SERVICES**                                                     | ** ** |
| ** **     | ** **                                                                                      | ** ** |
| **SIGNATURES** | ** **                                                                                      | ** ** |

 

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**PART I.**

 

**ITEM 1.****                                                     DESCRIPTIONOF BUSINESS.**

 

UnitedWisconsin Grain Producers, LLC was formed as a Wisconsin limited liabilitycompany on November 2, 2001.  Referencesto “we”, “us”, “our”, “United Wisconsin” and the “Company” refer to UnitedWisconsin Grain Producers, LLC.  As ofour fiscal year end on December 31, 2004 we are a start-up company in thedevelopment stage.  We are building a 40million gallon per-year corn-based ethanol plant near the village of Frieslandin the township of Randolph, Wisconsin, that will produce ethanol and distillersgrains.

 

**Principal Products and Markets**

 

We are in the final stages of constructionof our ethanol plant in the township of Randolph, just outside the village ofFriesland in Columbia County, Wisconsin in south central Wisconsin.  The project site is located within one-halfmile of the state highway 33 and two miles east of state highway 73.  The Union Pacific Railroad is expected toprovide rail service to the site.  Wecommenced construction in November 2003 and estimate that construction will becomplete and we will begin operations on approximately April 21, 2005.  We selected this site because ofits proximity to existing grain production, accessibility to road and railtransportation and availability of utilities.

 

The principalproducts we expect to produce at the ethanol plant are fuel grade ethanol anddistillers grain.  Ethanol is ethylalcohol, a fuel component made primarily from corn and various other grains,and can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fueladditive for the purpose of reducing ozone and carbon monoxide vehicleemissions; and (iii) a non-petroleum-based gasoline substitute.  Approximately 95% of all ethanol is used inits primary form for blending with unleaded gasoline and other fuel products.  The implementation of the Federal Clean AirAct has made ethanol fuels an important domestic renewable fuel additive.  Used as a fuel oxygenate, ethanol provides ameans to control carbon monoxide emissions in large metropolitan areas.  The principal purchasers of ethanol aregenerally the wholesale gasoline marketer or blender.  We expect the principal markets for ourethanol to be petroleum terminals in the continental United States.

 

A principalby-product of the ethanol production process is distillers grains, a highprotein, high-energy animal feed supplement primarily marketed to the dairy andbeef industry.  Distillers grains containbypass protein that is superior to other protein supplements such as cottonseedmeal and soybean meal.  Bypass proteinsare more digestible to the animal, thus generating greater lactation in milkcows and greater weight gain in beef cattle. Dry mill ethanol processing creates three forms of distillersgrains:  Distillers Wet Grains (“DWS”),Distillers Modified Wet Grains (“DMWGS”), and Distillers Dried Grains withSolubles (“DDGS”).  DWS is processed cornmash that contains approximately 70% moisture. DWS has a shelf life of approximately three days and can be sold only tofarms within the immediate vicinity of an ethanol plant.  DMWGS is DWS that with syrup added and driedto approximately 50% moisture.  DMWGShave a slightly longer shelf life of approximately ten days and are often soldto nearby markets.  DDGS is DWS that hasbeen dried to 10% to 12% moisture.  DDGShave an almost indefinite shelf life and may be sold and shipped to any marketregardless of its vicinity to an ethanol plant. We intend to market DDGS and may explore possibilities of local demandfor DMWGS and DWS to market at least a portion of our distillers grains inthese forms.

 

We do notcurrently have any prospects for revenue from the capture and sale of carbondioxide produced at our facility.

 

*Local Ethanol Markets*

 

Local marketswill be limited and must be evaluated on a case-by-case basis.  Although local markets will be the easiest toservice, they may be oversold, which may depress the price at which we can sellour ethanol.

 

*Regional Ethanol Markets*

 

Typically aregional market is one that is outside of the local market, yet within theneighboring states.  This market will likely be serviced by rail, and iswithin a 450-mile radius of the plant.  We are constructing a

 

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railroad spur to our plant so that we mayreach regional and national markets with our products.  Because ethanoluse results in less air pollution than regular gasoline, regional marketstypically include large cities that are subject to anti-smog measures as eithercarbon monoxide or ozone non-attainment areas, such as: Minneapolis, Chicago,and St. Louis.

 

Generally, theregional market is good business to develop.  The freight is reasonable,the competition, while aggressive, is not too severe, and the turn-around timeon the rail cars is an advantage.  Regional pricing tends to follownational pricing less the freight difference.  As with national markets,the use of a group-marketing program or a broker is advantageous, especially inthe first one to three years of operation.

 

Occasionallythere are opportunities to obtain backhaul rates from local truckingcompanies.  These are rates that are reduced since the truck is loadedboth ways.  Normally the trucks drive tothe refined fuels terminals empty and load gasoline product for delivery. A backhaul is the opportunity to load the truck with ethanol to drive to theterminal.

 

*National Ethanol Markets*

 

Methyl tertiary butyl ether (“MTBE”) is acommonly used oxygenate used in fuels for compliance with Federal Clean Air Actmandates, and is a major competitor of ethanol. However, with the health and water concerns surrounding the use of MTBE,18 states have already banned the use of MTBE and 2 more states havelegislation pending.  After implementinga ban on MTBE to curtail further water contamination, the states of California,New York and Connecticut now account for more than 1.4 billion gallons ofannual ethanol demand.  In 2005, severalstates, including Idaho, Iowa, Missouri, Montana, Oregon, and Wisconsin, areconsidering legislation to join Hawaii and Minnesota in requiring the use ofethanol in gasoline.  We expect ethanolto replace MTBE as the oxygenate in the federal reformulated gasoline program,however, other MTBE replacements may capture a portion or all of thesepotential markets.

 

**2004Ethanol Use by Market**

 
| **Market**                           | ** ** | **Million Gallons** | ** ** |
|--------------------------------------|------------|---------------------|------------|
| Federal Reformulated  Gasoline (RFG) |       | 1,950               |       |
| Conventional Gasoline                |       | 1,050               |       |
| Federal Winter  Oxygenated Fuels     |       | 290                 |       |
| Minnesota Ethanol  Program           |       | 280                 |       |
| **Total  Use**                       | ** ** | **3,570**           | ** ** |

 

Source:Renewable FuelsAssociation

 

**Distribution Methods**

 

We entered into an exclusive marketingagreement with Renewable Products Marketing Group, LLC (“RPMG”) in August 2004for the purposes of marketing and distributing our ethanol.  Under this agreement, our shipments and netrack price will be pooled with 12 other ethanol plants that RPMG currently marketsfor.  We pay RPMG a pooling fee forethanol delivered to the pool and RPMG pays us a netback price per gallon thatis based upon the difference between the pooled average delivered ethanolselling price and the pooled average distribution expense.  These averages are calculated based upon eachpool participant’s selling price and expense averaged in direct proportion tothe volume of ethanol supplied by each participant to the pool.  Each participant in the pool receives thesame per gallon net rack price.

 

We entered into a marketing agreement withCommodity Specialist Company (“CSC”) in August 2004 for the purpose ofmarketing and selling all the dried distillers grains that we elect to ship byrail out of state.  We receive a percentageof the selling price actually received by CSC from the sales of our distillersgrains to its customers. We may attempt to sell a portion of ourdried distillers grains to local markets.

 

**Competition**

 

We expect to be in direct competition withother ethanol producers, many of who have greater resources than we do.  We expect that additional ethanol producerswill enter the market as the demand for ethanol increases.

 

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Our ethanol plant will compete with otherethanol producers on the basis of price and, to a lesser extent, deliveryservice. We expect to compete favorably with other ethanol producers due to ourproximity to ample grain supplies and multiple modes of transportation.  We believe our plant’s location offers anadvantage over other ethanol producers in that it has ready access by rail togrowing ethanol markets, which we expect to reduce our cost of sales overcompetition located more distant to markets.

 

Currently, Wisconsin has three other operatingethanol plants and one or more ethanol plant(s) in the development stage.  Badger State Ethanol has constructed a 40million gallon per year ethanol plant in Monroe, Wisconsin, which isapproximately 70 miles from our plant site. Ace Ethanol operates a 15 million gallon per year ethanol plant inStanley, Wisconsin, which is approximately 125 miles from our plant site.  Utica Energy in Oshkosh, Wisconsin, produces40 million gallons of ethanol per year. Utica Energy is approximately 50 miles from our plant site and mayoverlap the northeastern edge of our expected corn supply area.  Western Wisconsin Renewable EnergyCooperative is a 40 million gallon per year development-stage ethanol plant inBoyceville, Wisconsin, which is approximately 150 miles from our plantsite.  There are also numerous otherproducer and privately owned ethanol plants planned and operating throughoutthe Midwest and elsewhere in the United States.

 

The largest ethanol producers includeArcher Daniels Midland, Cargill, Midwest Grain, Aventine Renewable Energy,Inc., VeraSun Energy Corporation and Abengoa Bioenergy Corp., each of which arecapable of producing several times the amount of ethanol we expect to produce.In addition, there are several regional entities recently formed, or in theprocess of formation, of a similar size and with similar resources to us.

 

The ethanol industry has grown to over 82production facilities in the United States. Industry authorities estimate that these facilities are capable ofproducing approximately 3.7 billion gallons of ethanol per year.  Plans to construct new plants or to expandexisting plants have been announced which would increase capacity byapproximately 739 million gallons per year. We cannot determine the effect of this type of an increase upon thedemand or price of ethanol.  Thefollowing table sets forth the current and planned major ethanol productionfacilities in the United States, according to the Renewable Fuels Association,U.S. Fuel Ethanol Production Capacity February 2005 Report.

 

**U.S. FUEL ETHANOL PRODUCTION CAPACITY**

million gallons per year (mmgy)

 
| **COMPANY**                      | ** ** | **LOCATION**     | ** ** | **FEEDSTOCK** | ** ** | **Current  Capacity** | ** ** | **Under  Construction/  Expansions** |
|----------------------------------|------------|------------------|------------|---------------|------------|-----------------------|------------|--------------------------------------|
| ** **                       | ** ** | ** **       | ** ** | ** **    | ** ** | **(mmgy)**            | ** ** | **(mmgy)**                           |
| Abengoa Bioenergy Corp.          |       | York, NE         |       | Corn/milo     |       | 55                    |       |                                 |
|                             |       | Colwich, KS      |       |          |       | 25                    |       |                                 |
|                             |       | Portales, NM     |       |          |       | 15                    |       | 15                                   |
| ACE Ethanol                      |       | Stanley, WI      |       | Corn          |       | 30                    |       |                                 |
| Adkins Energy, LLC*              |       | Lena, IL         |       | Corn          |       | 40                    |       |                                 |
| AGP*                             |       | Hastings, NE     |       | Corn          |       | 52                    |       |                                 |
| Agra Resources Coop. d/b/a EXOL* |       | Albert Lea, MN   |       | Corn          |       | 40                    |       |                                 |
| Agri-Energy, LLC*                |       | Luverne, MN      |       | Corn          |       | 21                    |       |                                 |
| Alchem Ltd. LLLP                 |       | Grafton, ND      |       | Corn          |       | 10.5                  |       |                                 |
| Al-Corn Clean Fuel*              |       | Claremont, MN    |       | Corn          |       | 30                    |       |                                 |
| Amaizing Energy, LLC^            |       | Denison, IA      |       | Corn          |       |                  |       | 40                                   |
| Archer Daniels Midland           |       | Decatur, IL      |       | Corn          |       | 1070                  |       |                                 |
|                             |       | Cedar Rapids, IA |       | Corn          |       |                  |       |                                 |
|                             |       | Clinton, IA      |       | Corn          |       |                  |       |                                 |
|                             |       | Columbus, NE     |       | Corn          |       |                  |       |                                 |
|                             |       | Marshall, MN     |       | Corn          |       |                  |       |                                 |
|                             |       | Peoria, IL       |       | Corn          |       |                  |       |                                 |
|                             |       | Wallhalla, ND    |       | Corn/barley   |       |                  |       |                                 |

 

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| Aventine Renewable Energy, Inc.      |   | Pekin, IL           |   | Corn        |   | 100    |   |   |
|--------------------------------------|--------|---------------------|--------|-------------|--------|--------|--------|--------|
|                                 |   | Aurora, NE          |   | Corn        |   | 40     |   |   |
| Badger State Ethanol, LLC*           |   | Monroe, WI          |   | Corn        |   | 48     |   |   |
| Big River Resources, LLC*            |   | West Burlington, IA |   | Corn        |   | 40     |   |   |
| Broin Enterprises, Inc.              |   | Scotland, SD        |   | Corn        |   | 9      |   |   |
| Bushmills Ethanol*^                  |   | Atwater, MN         |   | Corn        |   |   |   | 40     |
| Cargill, Inc.                        |   | Blair, NE           |   | Corn        |   | 85     |   |   |
|                                 |   | Eddyville, IA       |   | Corn        |   | 35     |   |   |
| Central Iowa Renewable Energy LLC*^  |   | Goldfield, IA       |   | Corn        |   |   |   | 50     |
| Central MN Ethanol Coop*             |   | Little Falls, MN    |   | Corn        |   | 20.5   |   |   |
| Central Wisconsin Alcohol            |   | Plover, WI          |   | Seed corn   |   | 4      |   |   |
| Chief Ethanol                        |   | Hastings, NE        |   | Corn        |   | 62     |   |   |
| Chippewa Valley Ethanol Co.*         |   | Benson, MN          |   | Corn        |   | 45     |   |   |
| Commonwealth Agri-Energy, LLC*       |   | Hopkinsville, KY    |   | Corn        |   | 23     |   |   |
| Corn Plus, LLP*                      |   | Winnebago, MN       |   | Corn        |   | 44     |   |   |
| Dakota Ethanol, LLC*                 |   | Wentworth, SD       |   | Corn        |   | 50     |   |   |
| DENCO, LLC*                          |   | Morris, MN          |   | Corn        |   | 21.5   |   |   |
| East Kansas Agri-Energy, LLC*^       |   | Garnett, KS         |   | Corn        |   |   |   | 35     |
| ESE Alcohol Inc.                     |   | Leoti, KS           |   | Seed Corn   |   | 1.5    |   |   |
| Ethanol2000, LLP*                    |   | Bingham Lake, MN    |   | Corn        |   | 30     |   |   |
| Glacial Lakes Energy, LLC*           |   | Watertown, SD       |   | Corn        |   | 50     |   |   |
| Golden Cheese Company of California* |   | Corona, CA          |   | Cheese whey |   | 5      |   |   |
| Golden Grain Energy, LLC*            |   | Mason City, IA      |   | Corn        |   | 40     |   |   |
| Golden Triangle Energy, LLC*         |   | Craig, MO           |   | Corn        |   | 20     |   |   |
| Grain Processing Corp.               |   | Muscatine, IA       |   | Corn        |   | 20     |   |   |
| Granite Falls Energy, LLC^           |   | Granite Falls, MN   |   | Corn        |   |   |   | 45     |
| Great Plains Ethanol, LLC*           |   | Chancellor, SD      |   | Corn        |   | 50     |   |   |
| Hawkeye Renewables,LLC               |   | Iowa Falls, IA      |   | Corn        |   | 45     |   |   |
| Heartland Corn Products*             |   | Winthrop, MN        |   | Corn        |   | 36     |   |   |
| Heartland Grain Fuels, LP*           |   | Aberdeen, SD        |   | Corn        |   | 8      |   |   |
|                                 |   | Huron, SD           |   | Corn        |   | 14     |   |   |
| Husker Ag, LLC*                      |   | Plainview, NE       |   | Corn        |   | 24     |   |   |
| Illinois River Energy LLC^           |   | Rochelle, IL        |   | Corn        |   |   |   | 50     |
| Iowa Ethanol, LLC*                   |   | Hanlontown, IA      |   | Corn        |   | 55     |   |   |
| James Valley Ethanol, LLC            |   | Groton, SD          |   | Corn        |   | 50     |   |   |
| KAAPA Ethanol, LLC*                  |   | Minden, NE          |   | Corn        |   | 40     |   |   |
| Land O’ Lakes*                  |   | Melrose, MN         |   | Cheese whey |   | 2.6    |   |   |
| Lincolnland Agri-Energy, LLC*^       |   | Robinson, IL        |   | Corn        |   | 40     |   |   |
| Lincolnway Energy, LLC*^             |   | Nevada, IA          |   | Corn        |   |   |   | 50     |

 

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| Liquid Resources of Ohio^                 |       | Medina, OH         |       | Waste Beverage        |   |   |   | 4      |
|-------------------------------------------|------------|--------------------|------------|-----------------------|--------|--------|--------|--------|
| Little Sioux Corn Processors, LP*         |       | Marcus, IA         |       | Corn                  |   | 49     |   |   |
| Merrick/Coors                             |       | Golden, CO         |       | Waste beer            |   | 1.5    |   |   |
| Michigan Ethanol, LLC                     |       | Caro, MI           |       | Corn                  |   | 50     |   |   |
| MGP Ingredients, Inc.                     |       | Pekin, IL          |       | Corn/wheat starch     |   | 78     |   |   |
|                                      |       | Atchison, KS       |       |                  |   |   |   |   |
| Mid-Missouri Energy, INC*                 |       | Malta Bend, MO     |       | Corn                  |   | 45     |   |   |
| Midwest Grain Processors*                 |       | Lakota, IA         |       | Corn                  |   | 50     |   | 45     |
| Midwest Renewable Energy LLC              |       | Sutherland, NE     |       | Corn                  |   | 15     |   |   |
| Miller Brewing Co.                        |       | Olympia, WA        |       | Brewery waste         |   | 0.7    |   |   |
| Minnesota Energy*                         |       | Buffalo Lake, MN   |       | Corn                  |   | 18     |   |   |
| New Energy Corp.                          |       | South Bend, IN     |       | Corn                  |   | 102    |   |   |
| Northeast Missouri Grain, LLC*            |       | Macon, MO          |       | Corn                  |   | 40     |   |   |
| Northern Lights Ethanol, LLC*             |       | Big Stone City, SD |       | Corn                  |   | 50     |   |   |
| Northstar Ethanol, LLC^                   |       | Lake Crystal, MN   |       | Corn                  |   |   |   | 50     |
| Otter Creek Ethanol, LLC*                 |       | Ashton, IA         |       | Corn                  |   | 55     |   |   |
| Panhandle Energies of Dumas, LP^          |       | Dumas, TX          |       | Sorghum               |   |   |   | 30     |
| Parallel Products                         |       | Louisville, KY     |       | Beverage waste        |   | 5.4    |   |   |
|                                      |       | R. Cucamonga, CA   |       |                  |   |   |   |   |
| Permeate Refining                         |       | Hopkinton, IA      |       | Sugars & starches |   | 1.5    |   |   |
| Phoenix Biofuels^                         |       | Goshen, CA         |       | Corn                  |   |   |   | 25     |
| Pine Lake Corn Processors, LLC*^          |       | Steamboat Rock, IA |       | Corn                  |   |   |   | 20     |
| Platte Valley Fuel Ethanol, LLC           |       | Central City, NE   |       | Corn                  |   | 40     |   |   |
| Pro-Corn, LLC*                            |       | Preston, MN        |       | Corn                  |   | 40     |   |   |
| Quad-County Corn Processors*              |       | Galva, IA          |       | Corn                  |   | 23     |   |   |
| Reeve Agri-Energy                         |       | Garden City, KS    |       | Corn/milo             |   | 12     |   |   |
| Siouxland Energy & Livestock Coop*    |       | Sioux Center, IA   |       | Corn                  |   | 22     |   |   |
| Sioux River Ethanol, LLC*                 |       | Hudson, SD         |       | Corn                  |   | 55     |   |   |
| Tall Corn Ethanol, LLC*                   |       | Coon Rapids, IA    |       | Corn                  |   | 49     |   |   |
| Tate & Lyle                           |       | Loudon, TN         |       | Corn                  |   | 67     |   |   |
| Trenton Agri Products, LLC                |       | Trenton, NE        |       | Corn                  |   | 30     |   |   |
| Tri-State Ethanol Co, LLC*                |       | Rosholt, SD        |       | Corn                  |   | 18     |   |   |
| United Wisconsin Grain Producers, LLC*^   |       | Friesland, WI      |       | Corn                  |   |   |   | 40     |
| U.S. Energy Partners, LLC                 |       | Russell, KS        |       | Milo/wheat starch     |   | 40     |   |   |
| Utica Energy, LLC                         |       | Oshkosh, WI        |       | Corn                  |   | 48     |   |   |
| VeraSun Energy Corporation                |       | Aurora, SD         |       | Corn                  |   | 102    |   |   |
| VeraSun Fort Dodge, LLC^                  |       | Ft. Dodge, IA      |       | Corn                  |   |   |   | 110    |
| Voyager Ethanol, LLC*^                    |       | Emmetsburg, IA     |       | Corn                  |   |   |   | 50     |
| Western Plains Energy, LLC*               |       | Campus, KS         |       | Corn                  |   | 30     |   |   |
| Western Wisconsin Renewable Energy, LLC*^ |       | Boyceville, WI     |       | Corn                  |   |   |   | 40     |
| Wyoming Ethanol                           |       | Torrington, WY     |       | Corn                  |   | 5      |   |   |
| **Total Existing Capacity**               | ** ** | **3688.70**        | ** ** | ** **            |
| **Total Under Construction/Expansions**   | ** ** | ** **         | ** ** | **739.0**             |
| **TOTAL CAPACITY**                        | ** ** | **4427.70**        | ** ** | ** **            |

 

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| * farmer-owned       | Source:  Renewable Fuels Association |   |
|----------------------|--------------------------------------|--------|
| ^ under construction | Last Updated: February 2005          |   |

 

The ethanol industry is verycompetitive.  While the ethanol industryhas been growing, there is significant competition among ethanolproducers.  Nationally, ethanolproduction is concentrated in a few large companies. Our ethanol plant willface a competitive challenge from larger facilities, from plants that canproduce a wider range of products than our plant, and from other plants similarto our planned ethanol plant.

 

Our ethanol plant will also compete withproducers of other gasoline additives having similar octane and oxygenatevalues as ethanol, such as producers of MTBE, a petrochemical derived frommethanol that costs less to produce than ethanol. Although currently thesubject of a federal ban, many major oil companies can produce MTBE and becauseit is petroleum-based, its use is strongly supported by major oil companies.Alternative fuels, gasoline oxygenates and alternative ethanol productionmethods are also continually under development. The major oil companies havesignificantly greater resources than we have to market MTBE and otheradditives, to develop alternative products, and to influence legislation andpublic perception of MTBE and ethanol. These companies also have sufficientresources to begin production of ethanol should they choose to do so.

 

Ethanolproduction is also expanding internationally. Ethanol produced or processed in certain countries in Central Americanand the Caribbean region is eligible for tariff reduction or elimination uponimportation to the United States under a program known as the Caribbean BasinInitiative.  Large ethanol producers,such as Cargill, have expressed interest in building dehydration plants inparticipating Caribbean Basin countries, such as El Salvador, which would convertethanol into fuel-grade ethanol for shipment to the United States.  Ethanol imported from Caribbean Basincountries may be a less expensive alternative to domestically produced ethanoland may affect our ability to sell our ethanol profitably. The InternationalTrade Commission recently announced the 2005 CBI import quota of 240.4 milliongallons of ethanol.  Last year,legislation was introduced in the Senate that would limit the transshipment ofethanol through the CBI.  It is possiblethat similar legislation will be introduced this year, however, there is noassurance or guarantee that such legislation will be introduced or that it willbe successfully passed.

 

A number ofautomotive, industrial and power generation manufacturers are developingalternative clean power systems using fuel cells or clean burning gaseousfuels.  Like ethanol, the emerging fuelcell industry offers a technological option to address increasing worldwideenergy costs, the long-term availability of petroleum reserves and environmentalconcerns.  Fuel cells have emerged as apotential alternative to certain existing power sources because of their higherefficiency, reduced noise and lower emissions. Fuel cell industry participantsare currently targeting the transportation, stationary power and portable powermarkets in order to decrease fuel costs, lessen dependence on crude oil andreduce harmful emissions.  If the fuelcell and hydrogen industries continue to expand and gain broad acceptance andhydrogen becomes readily available to consumers for motor vehicle use, we maynot be able to compete effectively.  Thisadditional competition could reduce the demand for ethanol, which wouldnegatively impact our profitability.

 

**Sources of Raw Materials - Corn FeedstockSupply**

 

We anticipate that ourplant will need approximately 15 million bushels of corn per year or 42,000bushels per day as the feedstock for its dry milling process.  We have hired a commoditiesmanager to ensure the consistent scheduling of corn deliveries and to establishand fill forward contracts with producers and grain elevators.  Alternatively, we may contract with a thirdparty, such as a grain elevator, to originate or source our grain.  Sincewe are a licensed Wisconsin grain dealer, we intend to buy as much grain aspossible from local producers and from local elevators.  We haveidentified a number of elevators as potential sources of corn in Wisconsin andhave

 

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already contracted a largeamount of corn from producers and commercial elevators for futuredelivery.  We may purchase additionalgrain from outside of our trade area as need and price dictates.

 

Although the area surrounding the plant produces a significant amountof corn and we do not anticipate problems sourcing grain, there is no assurancethat a shortage will not develop due to an extended drought or other productionproblem or from increased demand for corn from the growing ethanol industry. Our financial projections assume that we can purchase grain for prices near theten-year average for corn in the area of the plant which is $2.27 per bushel. However, there is no assurance that we will be able to purchase grain for theseprices.  Grain prices are primarily dependent on world feedstuffs supplyand demand and on U.S. and global corn crop production, which can be volatileas a result of a number of factors, the most important of which are weather,current and anticipated stocks and prices, export prices and supports and thegovernment’s current and anticipated agricultural policy.  The price of grain has fluctuatedsignificantly in the past and may fluctuate significantly in the future.Currently, local corn prices are approximately $2.25 per bushel.  Because the market price of ethanol is notrelated to corn prices, ethanol producers are generally not able to compensatefor increases in the cost of corn feedstock through adjustments in pricescharged for their ethanol.  We therefore anticipate that our plant’sprofitability will be negatively impacted during periods of high corn prices.

 

Dueto fluctuations in the price of corn, we intend to utilize forward contractingand hedging strategies to manage our commodity risk exposure and optimizefinished product pricing.  We anticipate that most of our grain will beacquired in this manner.  We intend to do this to help guard against pricemovements that often occur in corn markets.  Hedging means protecting theprice at which we buy corn and the price at which we will sell our products inthe future.  It is a way to attempt to reduce the risk caused by pricefluctuation.  The effectiveness of such hedging activities is dependentupon, among other things, the cost of corn and our ability to forward sellsufficient amounts of ethanol and distillers dried grains.  Although wewill attempt to link hedging activities to sales plans and pricing activities,such hedging activities can themselves result in costs because price movementsin corn contracts are highly volatile and are influenced by many factors thatare beyond our control.  We may incur such costs and they may besignificant. See “Management’s Discussion and Analysis and Plan ofOperation” for a more detaileddiscussion of corn supply, corn market trends and risks relating to corn pricerisk protection.

 

**Utilities**

 

The plant will require a significant anduninterrupted supply of electricity, natural gas and water to operate.  We have entered into agreements withproviders of these utilities as follows:

 

*Natural Gas*

 

To access sufficient supplies of naturalgas to operate the plant, a connection to a distribution pipeline locatedunderground at our site will be required. A pipeline owned by Alliant Energy is approximately one and one-halfmile from our plant location and connects 3.5 miles away to an interstatepipeline owned by ANR.  A new pipelinehas been constructed by Alliant to connect our facility to the existing AlliantEnergy pipeline.  We will pay a surchargeon the gas volume moved through the new pipeline.  We have a natural gas purchase agreement withWPS Energy Services, Inc. of Green Bay, Wisconsin to provide natural gas andbalancing services.  We have engagedEnergy Solutions Inc. of Madison Wisconsin to provide natural gas managementservices including assistance with negotiation of our natural gas supply andtransportation.

 

We are pursuing a 10 year capacityagreement on the ANR pipeline capacity expansion, “Wisconsin 2006 ExpansionProject”.  If we are successful inpurchasing capacity on this expanded pipeline, we would have the right to movea guaranteed volume of gas through the pipeline. The additional capacity wouldbe transferable and may allow us to negotiate better pricing on our naturalgas.

 

*Electricity*

 

In October 2003, we entered into anagreement with Adams-Columbia Electric Cooperative for the provision of allelectrical energy required by the plant. We will purchase electricity at the Cooperative’s power supply ratesthen in effect, which will be applied to our metered usage.  In addition, we expect to pay a monthlycharge of $700 plus a monthly facility surcharge of $2,138 for the substation distributionequipment costs.  The

 

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Cooperative will install, own and operate a substation at ourplant site to facilitate electrical distribution to our plant.  At each anniversary date of the first dateservice is provided, the agreement is automatically extended for another threeyear period unless either party gives written notice of intent not to extend.

 

*Water*

 

We will require a significant supply ofwater.  Water requirements for a 40million gallon per year plant are approximately 150 gallons per minute.  That is approximately 216,000 gallons perday.  In the Friesland area,approximately 650 feet of hydraulic head are available in the aquifer under theplant site according to the Wisconsin Geological and Natural History Survey(1978).  This means the aquifer couldsustain wells capable of yielding 1,000 gallons per minute.  We have drilled two 500 gallon per minutewells at our plant site and water quality tests have been performed whichindicate the quality of the water is suitable for our purposes given certaintreatment and filtration.

 

**Dependence on One or a Few Major Customers**

 

As discussed above, we have entered intomarketing agreements with RPMG and CSC for the purposes of marketing and distributingour ethanol and distillers grains. We will rely on RPMG and CSC for the saleand distribution of all of our ethanol and a large percentage of our distillersgrains.  Therefore, we will be highlydependent on RPMG and CSC for the successful marketing of our products.

 

**Design-Build Contract**

 

On October 8, 2003, we executed a design-build contract with Fagen,Inc.  Under this contract, Fagen, Inc. isserving as the design-builder of our ethanol plant.  We expect to complete construction of theproposed plant and commence operations in April 2005, assuming constantavailability of supplies and labor and assuming reasonable weatherconditions.  Fagen, Inc.’s involvementwith other ethanol projects may delay the progress of construction on ourethanol plant and commencement of plant operations.  Any delay in construction of our plant and/orcommencement of plant operations could affect our ability to generate revenueand make distributions of profits to our members.  As of December 31, 2004, the plant was approximately82% complete and is progressing on schedule for an anticipated start-up date onor about April 21, 2005.

 

There is noassurance that defects in materials and/or workmanship in the plant will notoccur.  Under the terms of the design-build contract, Fagen, Inc. warrantsthat the material and equipment furnished to build the plant is new, of goodquality, and free from material defects in material or workmanship at the timeof delivery.  Though the design-build contract requires Fagen, Inc. tocorrect all defects in material or workmanship for a period of one year aftersubstantial completion of the plant, material defects in material orworkmanship may still occur.  Such defects could cause us to delay the commencementof operations of the plant, or, if such defects are discovered after operationshave commenced, to halt or discontinue the plant’s operation.  Any suchevent may have a material adverse effect on our operations, cash flows andfinancial performance.

 

*Limitation of Consequential Damages and EarlyCompletion Bonus*

 

Thedesign-build contract provides that we may be entitled to receive liquidateddamages in the event Fagen, Inc. fails to substantially complete the plantwithin 30 to 90 days after the scheduled substantial completion date.  The design-build contract provides forliquidated damages in lieu of consequential damages for any losses we may incursuch as loss of use, profits, business, reputation or financing.  Under the terms of the design-build contract,the scheduled substantial completion date is April 21, 2005.  If Fagen, Inc. fails to substantiallycomplete the plant within 30 to 90 days from the substantial completion date,Fagen, Inc. will pay us liquidated damages for each day that substantialcompletion remains outstanding.  If theplant is substantially completed prior to the substantial completion date ofApril 21, 2005, we will pay Fagen, Inc. an early performance bonus for each daythat substantial completion is achieved prior to April 21, 2005.

 

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*Insurance Requirements*

 

We haveobtained and must maintain liability, property and casualty and other policiesof insurance during the period of construction of the plant and once plantoperations commence.  Any failure by usto maintain adequate insurance, with adequate policy limits and/orself-retention limits, may have a material adverse effect on our operations,cash flows and financial performance.

 

**Effect of Governmental Regulation**

 

Ethanol has important applications,primarily as a high quality octane enhancer and an oxygenate capable ofreducing air pollution and improving automobile performance. Ethanol contains35% oxygen by weight.  When combined withgasoline, ethanol acts as an oxygenate. As a result, the gasoline burns cleaner, and releases less carbonmonoxide and other exhaust emissions in the atmosphere.  The federal government encourages the use ofoxygenated gasoline as a measure to protect the environment.  Oxygenated gasoline is commonly referred toas reformulated gasoline.

 

The ethanol industry is heavily dependenton several economic incentives to produce ethanol, including federal ethanolsupports. Ethanol sales have been favorably affected by the Clean Air Act amendmentsof 1990, particularly the Federal Oxygen Program which became effectiveNovember 1, 1992. The Federal Oxygen Program requires the sale of oxygenatedmotor fuels during the winter months in certain major metropolitan areas toreduce carbon monoxide pollution. Ethanol use has increased due to a secondClean Air Act program, the Reformulated Gasoline Program. This program becameeffective January 1, 1995, and requires the sale of reformulated gasoline innine major urban areas to reduce pollutants, including those that contribute toground level ozone, better known as smog. Increasingly stricter EPA regulationsare expected to increase the number of metropolitan areas deemed innon-compliance with Clean Air Standards, which could increase the demand forethanol.

 

A bill (S. 791, 108thCong.) including provisions known as the Renewable Fuels Standard (“RFS”) wasintroduced in the United States Senate during the 108th Session, which ended in2004. If passed, it would have served as a catalyst for investment in renewablefuel processing fuels and new technologies. The former proposed legislationwould have determined the specific baseline volume of ethanol to be used ingasoline on a nationwide basis. The bill anticipated that volumes would beginin the year 2003 at 2.3 billion gallons and grow at a rate of approximately 300million gallons per year to a volume of 5 billion gallons in 2012. The RFSwould have banned the use of MTBE effective 4 years after enactment.  However, individual states would still havebeen permitted to continue to allow the use of MTBE by notifying theadministrator of the EPA of this intent.

 

There is nocurrent RFS legislation before the U.S. House of Representatives or the Senatein the 109th Congress. However, a draft bill is being considered by the U.S. House Energy andCommerce Committee’s Subcommittee on Energy and Air Quality and efforts areunderway to increase both the targeted amount of production and accelerate theproduction schedule from last year’s proposed legislation.  The Senate is tentatively scheduled to beginconsideration of RFS legislation beginning with the Environment and PublicWorks Committee’s consideration of an energy bill.  There is no assurance or guarantee that Congress will pass RFS legislationor that any RFS legislation approved by Congress will contain provisionssufficiently favorable to the ethanol industry to increase demand.

 

The government’s regulationof the environment changes constantly. It is possible that more stringentfederal or state environmental rules or regulations could be adopted, whichcould increase our operating costs and expenses. It also is possible thatfederal or state environmental rules or regulations could be adopted that couldhave an adverse effect on the use of ethanol. For example, changes in theenvironmental regulations regarding the required oxygen content of automobileemissions could have an adverse effect on the ethanol industry. Furthermore,plant operations likely will be governed by the Occupational Safety and HealthAdministration (“OSHA”). OSHA regulations may change such that the costs of theoperation of the plant may increase. Any of these regulatory factors may resultin higher costs or other materially adverse conditions effecting ouroperations, cash flows and financial performance.

 

The use of ethanol as an oxygenate toblend with fuel to comply with federal mandates also has been aided by federaltax policy. The Energy Tax Act of 1978 exempted ethanol blended gasoline fromthe federal gas tax as a means of stimulating the development of a domesticethanol industry and mitigating the country’s dependence on

 

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foreign oil. As amended, the federal tax exemption currentlyallows the market price of ethanol to compete with the price of domesticgasoline. The exemption for a 10% ethanol blend is the equivalent of providinga per gallon “equalization” payment that allows blenders to pay more forethanol than the wholesale price of gasoline and still retain profit marginsequal to those received upon the sale of gasoline that is not blended withethanol. The federal gasoline tax exemption for a 10% blend was 5.2 cents pergallon.  This exemption was scheduled togradually drop to 5.1 cents per gallon in 2005, however, as of January 1, 2005,this federal tax incentive has been replaced by a new volumetric ethanol excisetax credit discussed below.

 

On October 22, 2004,President Bush signed H.R. 4520, which contained the Volumetric Ethanol ExciseTax Credit (“VEETC”) and amended the federal excise tax structure effective asof January 1, 2005.  Prior to VEETC,ethanol-blended fuel was taxed at a lower rate than regular gasoline (13.2cents on a 10% blend).  Under VEETC, theethanol excise tax exemption has been eliminated, thereby allowing thefull federal excise tax of 18.4 cents per gallon of gasoline to be collectedand allocated to the highway trust fund. This is expected to add approximately $1.4 billion to the highway trustfund revenue annually.  In place of thecurrent exemption, the bill creates a new volumetric ethanol excise tax credit(VEETC) of 5.1 cents per gallon of ethanol blended at 10%.  Refiners and gasoline blenders would applyfor this credit on the same tax form as before only it would be a credit fromgeneral revenue, not the highway trust fund. Based on volume, the VEETC may allow greater refinery flexibility inblending ethanol since it makesthe tax credit available on all ethanol blended with all gasoline, diesel andethyl tertiary butyl ether (“ETBE”), including ethanol in E-85 and the proposedE-20 in Minnesota.  The VEETC isscheduled to expire on December 31, 2010.

 

The ethanol industry and our business willdepend upon continuation of the federal ethanol supports discussed above.  These incentives have supported a market forethanol that might disappear without the incentives.  Alternatively, the incentives may becontinued at lower levels than at which they currently exist.  The elimination or reduction of such federalethanol supports would make it more costly for us to produce and sell ourethanol and would likely reduce our net income.

 

**Costs and Effects of Compliance withEnvironmental Laws**

 

We will be subject to extensive air, waterand other environmental regulations and we will be required to obtain a numberof environmental permits to construct and operate the plant.  We have engaged RMT, Inc., of Madison,Wisconsin to provide environmental consulting, engineering and analyticalservices in connection with the construction and operation of our plant.  In the fall of 2003, we received an airpollution construction permit, a pollutant discharge elimination system generalpermit, a storm water discharge permit and water withdrawal permit.  We still need to obtain an alcohol fuelproducer’s permit, which we anticipate receiving shortly prior to commencementof operations. In addition, we will be required to complete a spill preventioncontrol and countermeasures plan prior to commencement of plantoperations.  Through 2004 we have incurredcosts of approximately $2,300,000 in complying with environmental laws.  These costs have been capitalized as part ofthe plant construction.  Even if we aresuccessful in obtaining all of the permits currently required, any retroactivechange in environmental regulations, either at the federal or state level,could require us to obtain additional or new permits or spend considerableresources on complying with such regulations.

 

We are subject to oversight activities bythe EPA. There is always a risk that the EPA may enforce certain rules andregulations differently than Wisconsin’s environmental administrators.  Wisconsin and EPA rules are subject tochange, and any such changes could result in greater regulatory burdens onplant operations.  We could also besubject to environmental or nuisance claims from adjacent property owners orresidents in the area arising from possible foul smells or other air or waterdischarges from the plant.  Such claimsmay result in an adverse result in court if we are deemed to engage in anuisance that substantially impairs the fair use and enjoyment of real estate.

 

**Employees**

 

We currently have four full-time employees and one part-timeemployee.  We intend to hireapproximately 30 additional full-time employees prior to our start-up.

 

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**ITEM 2.****                                                     DESCRIPTIONOF PROPERTY.**

 

The ethanol plant is being constructed on a115-acre site located on state highway 33 and two miles east of state highway73.  The plant’s address is W1231Tessmann Road, Cambria, Wisconsin 53923. The mailing address is PO Box 247, Friesland, Wisconsin, 53935.

 

*LandAcquisitions*

 

We obtained two real estate options forpotential plant sites.  We purchased oneoption from Doug and Heather Tessmann for a price of $10,000.  The Tessmann option granted us the right topurchase 115 acres with buildings for $8,395 per acre for a total purchaseprice of $1,000,000.  Doug and Heather Tessmannare not affiliated with us, our officers or directors.  On September 22, 2003, we gave notice of ourintent to exercise the option to purchase the 115-acre parcel.  On October 16, 2003, we closed on part of theTessmann parcel by purchasing 105 acres, excluding buildings, of the 115-acreparcel.  At this closing, we paid a purchaseprice of $700,000 and applied our $10,000 deposit for a cash purchase price of$690,000.  We closed on the remaining 10acres, including the buildings, on June 14, 2004 for $300,000.

 

We located the Tessmann parcel with theassistance of a buyer’s agent, RW Wisconsin Real Estate, Inc., which was paid afee of 2% of the total purchase price or $20,000 when we closed on the realestate transaction.  The agent of RWWisconsin Real Estate, Inc. is John F. Roche, who is the uncle of ourPresident, Kevin M. Roche.

 

We had also purchased a real estate optionon a different potential plant site from Jung Seed Genetics for a price of$3,000.  This option granted us the rightto purchase 59 acres at a price of $4,000 per acre for a total purchase price of$236,000.  The option expired unexercisedon March 31, 2004.

 

On December 9, 2004 we purchasedapproximately 3⁄4 of an acre of land from Ray and Judy Stiemsma, an unrelatedparty.  This property is adjacent to thenortheast corner of our main property holding and allowed us to improve serviceaccess to our north mainline rail turnout and lead rail spur.

 

*PropertyImprovements and Plant*

 

The ethanolfacility occupies about 40 acres of our 115 acre property.  A Union Pacific mainline runs along the eastproperty line, Highway 33 to the south, and county road EF runs along the westside of our property.

 

Constructionof the facility is in the final stages. Start-up is planned for April 21, 2005. During operation the plant will grind 15 million or more bushels of cornannually and produce in excess of 40 million gallons of fuel grade denaturedethanol.  The plant and propertyimprovements include:

 

•                  A dry bulk products shipping and receivingfacility with main elevators and conveyors of 15,000 bushel per hour capacity,one truck and one combination truck and rail handling lane.  As well as grain storage for 400,000 bushelsand cleaning, grinding, and dust control equipment.

 

•                  The ethanol production system is comprised ofa mixing system, cooker, liquefaction vessels, three 750,000 gallon fermentors,a 900,000 gallon beer well vessel, distillation system, and alcohol driers.This equipment is arranged in and around the process and production building,which also houses the electrical and process control center, control room,maintenance facilities, staff facilities, and operations management offices.

 

•                  The ethanol storage area consists of two950,000 gallon storage tanks with floating lids, two shift tanks with acombined capacity of 200,000 gallons and an unleaded gasoline storage tank witha capacity of 100,000 gallons.  Thesevessels are contained within a spill containment area to contain any spills ofthe contents of the tanks which might occur. There are catch basins at the rail and truck loading stations which draininto this containment area as well.

 

•                  An energy building houses the natural gasburning equipment consisting of the thermal oxidizer and waste heat steamboiler, and the distiller grains dryers.

 

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•                  The waste mash processing system consists offour centrifuges, a multistage evaporation system and various stainless steelvessels.

 

•                  The fire protection system consists of a470,000 gallon water storage tank, two 500 gallon per minute on site waterwells, a 2,500 gallon per minute diesel fire pump and underground fire waterdistribution piping network supplying a series of hydrants, sprinklers and adeluge system.

 

•                  A cooling tower installation with 4 - 75 HPcooling fans and 3 - 200 hp water pumps.

 

•                  Transportation facilities include 8,000 feetof rail and switches, 4,000 of road, a 90X12 foot truck scale, and truck andrail ethanol load out stations.

 

•                  A 4,200 sq ft administration and sales officebuilding, furniture and equipment, parking lot and landscaping.

 

On February 25, 2004, we executed amortgage in favor of AgStar Financial Services, PCA, creating a first lien onour real estate and the construction-in-process and a security interest in allpersonal property located on our property. The mortgage and security interest secure the construction loan of$33,024,200, which was executed simultaneous to the mortgage.  Upon completion of construction, theconstruction loan of $33,024,200 will be converted into a term loan equal tothe lesser of $29,024,200 or 55% of the total project cost and a revolving lineof credit of $4,000,000.

 

**ITEM 3.****                                                     LEGALPROCEEDINGS.**

 

None.

 

**ITEM 4.****                                                     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS.**

 

None.

 

**PART II**

 

**ITEM 5.****                                                     MARKETFOR MEMBERSHIP UNITS AND RELATED MEMBER MATTERS.**

 

There is no public trading market for ourmembership units.  At March 18, 2005,there are approximately 862 holders of our units.  We have not declared or paid anydistributions on our units. Distributions are payable at the discretion of ourboard of directors, subject to the provisions of the Wisconsin LimitedLiability Company Act and our operating agreement.  Our operating agreement requires theboard of directors to endeavor to make cash distributions at such times and insuch amounts as will permit our unit holders to satisfy their income taxliability in a timely fashion.  Distributionsare restricted by certain loan covenants in our construction loan and revolvingcredit financing agreements.

 

**ITEM 6.****                                                     MANAGEMENT’SDISCUSSION AND ANALYSIS.**

 

**Forward Looking Statements**

 

This report contains forward-looking statements that involve futureevents, our future performance and our expected future operations andactions.  In some cases you can identifyforward-looking statements by the use of words such as “may,” “will,” “should,”“anticipate,” “believe,” “expect,” “plan,” “future,” “intend,” “could,” “estimate,”“predict,” “hope,” “potential,” “continue,” or the negative of these terms orother similar expressions.  Theseforward-looking statements are only our predictions and involve numerousassumptions, risks and uncertainties. Our actual results or actions may differ materially from theseforward-looking statements for many reasons, including the reasons described inthis report.  We are not under any dutyto update the forward-looking statements contained in this report.  We cannot guarantee future results, levels ofactivity, performance or achievements. We caution you not to put undue reliance on any forward-lookingstatements, which speak only as of the date of this report.  You should read this report and the documentsthat we reference in this report and have filed

 

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as exhibits, completely andwith the understanding that our actual future results may be materiallydifferent from what we currently expect. We qualify all of our forward-looking statements by these cautionarystatements.

 

**Overview**

 

United Wisconsin Grain Producers, LLC was formed as a Wisconsin limitedliability company on November 2, 2001, for the purpose of constructing andoperating a 40 million gallon per year ethanol plant near Friesland,Wisconsin.  We expect that the projectwill cost approximately $60,473,710.

 

We raised equity by a public offering registered with the Securitiesand Exchange Commission on Form SB-2, which was declared effective on May 14,2003.  Our offering began on June 1, 2003and closed on April 9, 2004. During the offering we sold 27,500,000 units andreceived aggregate offering proceeds of $27,500,000 to supplement our initial seedcapital.  To complete financing of theproject, we executed debt financing agreements securing a senior creditfacility of $33,024,200 from AgStar Financial Services, PCA.

 

We expect thatit will take approximately 14 to 16 months from December 2003, the date we gaveFagen, Inc. notice to proceed, to construct the ethanol plant and commencestart-up operations.  Construction of theproject is progressing on schedule and we anticipate the plant will besubstantially complete by April 21, 2005. Start-up operations are expected to begin shortly after substantialcompletion.

 

Weare subject to industry-wide factors that affect our operating and financialperformance. These factors include, but are not limited to, the available supplyand cost of corn from which our ethanol and distillers grains are processed;the cost of natural gas, which we use in the production process; dependence onour ethanol marketer and distillers grains marketer to market and distributeour products; the intensely competitive nature of the ethanol industry;possible legislation at the federal, state and/or local level; changes infederal ethanol tax incentives and the cost of complying with extensiveenvironmental laws that regulate our industry.

 

**Plan of Operations for the Next 12 Months**

 

We expect to spend the next12 months finalizing our plant construction, commencing start–up operations,and operating the ethanol plant to produce and sell ethanol anddistillers grains.  We will focusprimarily on these three areas: (i) finishing plant construction as soon aspossible; (ii) purchasing important manufacturing inputs such as corn andnatural gas as cost effectively as possible; and (iii) maximizing our plant’soperational efficiency to operate as competitively as possible..

 

*Plant Construction*

 

As of December31, 2004, plant construction was in process and the outstanding account payablebalance on the plant design-build contract was $2,928,600.  Other construction account payables totaled $591,954as of December 31, 2004.

 

As of the dateof this report we are in the final stages of construction and anticipate beingoperational by April 2005. We expect to have sufficient cash available to coverour costs over the next 12 months, including construction, staffing,office, audit, legal, compliance costs and start up working capital costs. Thefollowing is our estimate of our costs and expenditures to completeconstruction. These estimates are based upon our design-builder, primesubcontractor and financial advisor’s experience with other businesses.  It is only an estimate and our actualexpenses could be much higher due to a variety of factors described in thisreport.

 

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| TOTAL DESIGN  BUILDER COST:                           |   | $      | 45,605,205 |   |
|-------------------------------------------------------|--------|--------|------------|--------|
|                                                  |   |   |       |   |
| LAND, SITE DEVELOPMENT & ADMINISTRATION  BUILDING |   | $      | 5,529,600  |   |
|                                                  |   |   |       |   |
| CONSTRUCTION INSURANCE                                |   | $      | 446,895    |   |
|                                                  |   |   |       |   |
| OTHER PLANT COSTS & ROLLING STOCK                 |   | $      | 441,500    |   |
|                                                  |   |   |       |   |
| OFFERING EXPENSES                                     |   | $      | 374,790    |   |
|                                                  |   |   |       |   |
| CAPITALIZED INTEREST                                  |   | $      | 600,000    |   |
|                                                  |   |   |       |   |
| ORGANIZATIONAL COSTS                                  |   | $      | 608,160    |   |
|                                                  |   |   |       |   |
| FINANCING COSTS                                       |   | $      | 550,300    |   |
|                                                  |   |   |       |   |
| START-UP COSTS:                                       |   |   |       |
|                                                  |   |   |       |
| Pre-production period costs                           |   | $      | 1,515,260  |   |
|                                                  |   |   |       |   |
| Inventory - Corn                                      |   | $      | 2,040,000  |   |
|                                                  |   |   |       |   |
| Inventory - Chemicals, Yeast, Denaturant              |   | $      | 97,000     |   |
|                                                  |   |   |       |   |
| Inventory - Ethanol and Distillers Dried  Grains      |   | $      | 1,000,000  |   |
|                                                  |   |   |       |   |
| Spare Parts                                           |   | $      | 300,000    |   |
|                                                  |   |   |       |   |
| Working Capital                                       |   | $      | 1,365,000  |   |
|                                                  |   |   |       |   |
| TOTAL                                                 |   | $      | 60,473,710 |   |

 

We expect the total funding required for the plant to be $60,473,710,which includes $45,605,205 for our design builder and $14,868,505 for otherproject development costs including land, site development, utilities, capitalassets, start-up costs, capitalized fees and interest, inventories and workingcapital.  The total project cost has increased by $1,421,710 from$59,050,000 to $60,473,710.  The increaseof $1,421,710 includes the cost of installing a recuperative thermal oxidizerrather than a standard thermal oxidizer, an increase in our contingency budget,which is reflected in pre-production period costs, and inflation.  The recuperative thermal oxidizer will allowus to operate at a lower usage rate of natural gas.

 

We estimate that we will need approximately $45,605,205 for the designbuilder contract and a total of approximately $60,473,710 to cover all capitalexpenditures necessary to complete the project, make the plant operational andproduce revenue.  Based upon offeringproceeds of $27,500,000, our initial members capital contribution of $567,500,the senior credit facility of $33,024,200 and grant financing of $881,000, wewill have approximately $61,972,700 of capital available to cover totalestimated costs of $60,473,710.

 

In October 2003 we began civil work phase I,rough site grading and dirt work at the plant site.  Phase I and road construction have beencompleted.  Phase II of the constructionprocess has been started.  Phase II workincludes installation of the utilities infrastructure, including the waterdistribution system.  Phase II work is inits final stages.

 

Expenditureswith Fagen, Inc., our design builder, for the design and construction of thefacility are 90% of the scheduled value through January 14, 2005. Ourconstruction items (railroad, land, site development, office building, fireprotection, water supply, and owner’s equipment) plus project “soft costs”(performance bond, insurance, financing costs, inventory and organizationcosts) are 55% complete. Overall, the project is about 82% complete. TheGeneral Contractor, Fagen Inc., has been on-site since December of 2003. Thetarget date for substantial completion remains April 21, 2005.

 

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*Major Commodity supplies, Market Trends andRisks related to Price Protection*

 

The 2004 corn crop was thelargest corn crop on record with national production at approximately 11.8billion bushels.  The 2004 cornsupply is expected to outpace demand by approximately 1 billion bushels. Locally,however, our production suffered due to an excessively rainy planting season.To the north of our plant, many acres were left idle and not planted.  As a result, the cash basis for locally growncorn is higher than normal.  This hasequated to slightly higher corn prices than most areas of the Midwestern UnitedStates.  National corn prices shouldremain low into the 2005 spring planting season. However, as we get nearer tocorn planting season we expect the grain market to begin focusing on prospectsfor the 2005 corn crop.  Variables suchas planting dates, rainfall, and temperatures will likely cause marketuncertainty and create corn price volatility as the growing season begins.

 

As of February17, 2005, we have forward corn purchase contracts totaling 5,200,000 bushelsfor various delivery periods, May through December 2005.  The prices on these contracts range from$2.05 to $2.44 per bushel.  We also haveprice protection in place in the form of long corn futures positions on the ChicagoBoard of Trade for approximately 32% of our corn needs through December2005.  Our combined forward contracts andfutures coverage represents price protection for approximately 76% of our cornneeds through December 2005.  As we moveforward, we will continue to monitor our risk in the corn market.  We may determine that additional protection isnecessary.  As corn prices move inreaction to market trends and information, our income statement will beaffected depending on the impact such market movements have on the value of ourforward contracts and futures positions, which are classified as derivativeinstruments in our financial statements. Depending on market movements, crop prospects and weather, these priceprotection positions may lose value in the short-term but are expected to producelong-term positive growth for us.

 

Natural gas isalso an important input commodity to our manufacturing process.  We estimate that our natural gas usage willbe approximately 118,000 million British thermal units (mmbtu) per month.  We use natural gas to dry our distiller’sgrain products to moisture contents at which they can be stored for longperiods of time, and can be transported greater distances.  Dry distiller’s grains have a much broadermarket base, including the western cattle feedlots, and the dairies ofCalifornia and Florida.  Unseasonablycold temps across much of the country in the summer of 2004 kept the demand forgas fired peak plants low, coupled with a favorable injection season whichfilled the storage space available for gas. Prices as a result have trended lower, but still remain considerablyhigher than the last 10 year average.  Welook for continued volatility in the natural gas market, led mainly by thespeculators who are taking advantage of this market, and any increases in theprice of natural gas will increase our cost of production and impact our profitmargins.  We have secured a marketingfirm and an energy consultant for our natural gas, and will work with them todevelop ways to protect our business against adverse price risk.

 

On February17, 2005, our board of directors approved a risk management policy as presentedby our risk management committee.  Thepolicy contains five primary sections. The first section details our risk management objectives, which includesproactively managing our commodity price risk. The second section outlines approved derivative instruments for purposesof commodity transactions, including instruments related to price protectionfor corn, natural gas, distillers grains, ethanol and denaturant.  This section also outlines approvedderivative instruments for purposes of financial transactions and riskmanagement activities.  The third sectioncontains our approved position limits and forward pricing guidelines.  The fourth section outlines the basicstructure and levels of authority regarding forward pricing and risk managementdecisions. The fifth section provides suggested guidelines with respect to riskcontrol procedures.  We expect to designand implement our risk management strategy within the limits contained in ourrisk management policy.

 

*Trends Impacting the EthanolIndustry*

 

Ethanol demand is expectedto continue at a very aggressive pace. Today’s demand of more than 3.3 billiongallons per year is expected to grow to at least 4 billion gallons per year bythe year 2012 under current law according to the National Corn GrowersAssociation. This increase in demand does not include implementation of aRenewable Fuels Standard or similar legislation, which could cause an increasein demand to be greater than currently projected.  If the use of MTBE is phased out on anational level in the next few years and the RFG oxygenate requirement remainsunchanged, the anticipated growth may yield a doubling of ethanol demand muchsooner.

 

17

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We currently benefit from federalethanol supports and federal tax incentives. Changes to these supports orincentives could significantly impact demand for our ethanol. If a RenewableFuels Standard bill or similar legislation is adopted, we may experience a short-termdecline in demand for ethanol because national ethanol production may exceedthe production volumes required in early years. However, we would expect thelegislation to provide a substantial long-term market for our ethanol asrequired volumes increase over time. The current Renewable Fuels Standard billexpired in 2004 but we expect similar legislation to be introduced this year.

 

Demand forethanol may also increase as a result of increased consumption of E85fuel.  E85 fuel is a blend of 70% to 85%ethanol and gasoline.  According to theEnergy Information Administration, E85 consumption is projected to increasefrom a national total of 11 million gallons in 2003 to 47 million gallons in2025.  E85 is used as an aviation fueland as a hydrogen source for fuel cells.  In the U.S., there are currently about 3million flexible fuel vehicles capable of operating on E85 and 400 retailstations supplying it.  Automakers haveindicated plans to produce an estimated 2 million more flexible fuel vehiclesper year.

 

Ethanol production continuesto grow as additional plants become operational. Demand for ethanol has beensupported by higher oil prices and its refined components. Clean air standardsmandated by federal agencies have required highly populated areas to blendethanol into their gasoline supplies as an oxygenate. The intent of the airstandards is to reduce harmful emissions into the atmosphere. These mandateshave been challenged in several metropolitan areas, and are currently beingreviewed by the courts. In the future, the combination of additional supply,successful challenges to the clean air standards and stagnant or reduced demandmay adversely affect our profit margin and our ability to maintain positivecash flows.

 

*Technology Developments*

 

A new technologyhas recently been introduced by Vortex Dehydration Technology of Hanover,Maryland, to remove corn oil from concentrated thin stillage (a byproduct of “drymilling” ethanol processing facilities) which would be used as an animal feed supplementor possibly as an input for bio-diesel production.  Although the recovery of oil from the thinstillage may be economically feasible, it fails to produce the advantages ofremoving the oil prior to the fermentation process.  The FWS Group of Companies, headquartered outof Canada with offices in the United States, is currently working on a starchseparation technology that would economically separate a corn kernel into itsmain components. The process removes the germ, pericarp and tip of the kernel leavingonly the endosperm of kernel for the production of ethanol.  This technology has the capability to reducedrying costs and the loading of volatile organic compounds.  The separated germ would also be available throughthis process for other uses such as high oil feeds or bio-diesel production.  Each of these new technologies is currentlyin its early stages of development. There is no guarantee that either technology will be successful or thatwe will be able to implement the technology in our ethanol plant.

 

**Employees**

 

Once our ethanol plant is fully staffed, we willemploy approximately 34 full-time employees. Approximately ten of our employeeswill be involved primarily in management and administration.  The remainder will be involved primarily inplant operations.

 

The following table represents some of the anticipated positions withinthe plant and the minimum number of individuals we intend to employ for eachposition:

 

| **Position**                | ** ** | **# Employed** | ** ** |
|-----------------------------|------------|----------------|------------|
| General  Manager            |       | 1              |       |
| Chief  Financial Officer    |       | 1              |       |
| Commodities  Manager        |       | 1              |       |
| Plant  Manager              |       | 1              |       |
| Safety &  Enviro Manger |       | 1              |       |
| Lab Manager                 |       | 1              |       |
| Lab  Technician             |       | 1              |       |
| Secretary/Clerical          |       | 3              |       |
| Maintenance  Manager        |       | 1              |       |
| Maintenance  Craftsmen      |       | 5              |       |
| Shift  Supervisors          |       | 4              |       |
| Plant  Operators            |       | 8              |       |
| Shipping and  Receiving     |       | 6              |       |
| **TOTAL**                   | ** ** | **34**         | ** ** |

 

18

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**Application of Critical Accounting Policies**

 

Management uses estimates and assumptions in preparing our financialstatements, in accordance with generally accepted accounting principles.  These estimates and assumptions affect thereported amounts of assets and liabilities, the disclosure of contingent assetsand liabilities, and the reported revenues and expenses.  Of the significant accounting policiesdescribed in the notes to our financial statements, we believe that thefollowing are the most critical:

 

*Derivative Instruments*

 

We enter intoderivative contracts to hedge our exposure to price risk related to forecastedcorn and natural gas purchases and forward corn purchase contracts.  We do not typically enter into derivativeinstruments other than for hedging purposes. All derivative contracts are recognized on the December 31, 2004 balancesheet at their fair market value.

 

On the date the derivativeinstrument is entered into, we will designate the derivative as either (1) ahedge of the fair value of a recognized asset or liability or of anunrecognized firm commitment (fair value hedge), (2) a hedge of a forecastedtransaction or of the variability of cash flows to be received or paid relatedto a recognized asset or liability (cash flow hedge) or (3) will not designatethe derivative as a hedge.  Changes inthe fair value of a derivative that is designated as and meets all the requiredcriteria for a fair value hedge, along with the gain or loss on the hedgedasset or liability that is attributable to the hedged risk are recorded incurrent period earnings. Changes in the fair value of a derivative that isdesignated as and meets all the required criteria for a cash flow hedge arerecorded in accumulated other comprehensive income and reclassified intoearnings as the underlying hedge item affects earnings.  Changes in the fair value of a derivativethat is not designated as a hedge are recorded in current period earnings.  Although we believe our derivative positionsare economic hedges, none have been designated as a hedge for accountingpurposes.

 

**Liquidity and Capital Resources**

 

As of December 31, 2004, we had cash and cashequivalents of $9,068, current assets of $491,921 and total assets of $44,253,414. As of December 31, 2004, we had currentliabilities of $18,003,423 and long term liabilities of $77,723.

 

The members’ contributions, net of costsrelated to capital contributions, are $27,696,394.  The accumulated deficit from inception throughDecember 31, 2004, is $1,524,126.  Totalmembers’ equity as of December 31, 2004, is $26,172,268.  Since our inception, we have generated norevenue from operations.

 

*Short-Term and Long-Term Debt Sources*

 

On February 26, 2004 we entered into a seniorcredit facility consisting of a $33,024,200 single construction loan withAgStar Financial Services, PCA.  As ofDecember 31, 2004 our loan balance was $14,336,543.  The credit facility is secured bysubstantially all of our assets. During construction we have made interest onlypayments on the principal balance at an interest rate equal to the one-monthLIBOR (the London Interbank Offered Rate) plus 3.75%.  This interest rate may be adjusted downwarddepending on the level of owners’ equity as reported in our monthly financialstatements.  If owners’ equity is between50% and 54.99%, the interest rate will be at the monthly LIBOR plus 3.25%.  If owners’ equity exceeds 55%, the interestrate will be equal to the monthly LIBOR plus 2.75%.

 

19

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When the ethanol plant is complete andoperating, the construction loan will be converted into two loans.  The first will be a term loan equal to thelesser of $29,024,200 or 55% of the total project cost. The second will be a$4,000,000 revolving loan.  The term loanof $29,024,200 or 55% of total project cost is for five years with a ten-yearamortization.  Payments on the convertedterm loan will be paid in monthly installments including principal andinterest.  The loan commitment offers avariable and a fixed interest rate option. The variable interest rate on the converted term loan will be at a rateequal to the monthly LIBOR plus 3.75%. This variable interest rate may be adjusted downward in exactly themanner as the interest rate on our construction loan, depending on our level ofowners’ equity as reported in our monthly financial statements.  The fixed interest rate option is subject tochange weekly and is available at the conversion of the construction loan tothe term loan.  The final term facilitycan be segmented between a fixed portion and a variable portion. Interest onthe revolving loan will accrue at a rate equal to the monthly LIBOR plus3.75%.  However, this interest rate maybe adjusted downward in exactly the same manner as the interest rate on ourconstruction loan, depending on our level of owners’ equity.

 

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

 

The following schedule sets forth our estimated sources as of the dateof this report.  This schedule couldchange in the future depending on whether we receive additional offeringproceeds and grants.

 
| **Source of Funds**        | ** ** | **28,270 Units Sold** | ** **     | **Percent of Total** | ** ** |
|----------------------------|------------|-----------------------|----------------|----------------------|------------|
| Offering Proceeds          |       | $                     | 28,067,500     |                 | 45.29      | % |
| Term Debt                  |       | $                     | 33,024,200     |                 | 53.29      | % |
| Grants                     |       | $                     | 881,000        |                 | 1.42       | % |
|                       |       |                  |           |                 |       |
| **Total Sources of Funds** | ** ** | **$**                 | **61,972,700** | ** **           | **100.00** | **%** |

 

We expect these sources will cover all project costs and we do notcurrently anticipate any liquidity problems.

 

*Bioenergy Program Payments*

 

Wehave applied for a grant from the USDA’s Commodity Credit Corporation. Underthe USDA CCC Bioenergy program, the Commodity Credit Corporation will reimburseeligible ethanol producers of less than 65 million gallons of bioenergyone bushel of corn for every two and one-half bushels of corn used for theincreased production of ethanol. No eligible producer may receive more than$7.5 million under the program. Because we expect to be an eligibleproducer and to annually utilize 15 million bushels of corn in theincreased production of ethanol, we expect to potentially receive the maximumaward of $7.5 million. However, the Commodity Credit Corporation may awardonly $100 million annually fiscal years 2005 through 2006, and any awardwe received may be reduced based upon the volume of applications from othereligible producers.  In addition,payments under the program in any one fiscal year may be less if Congress doesnot fully fund the program for that fiscal year (funding for the program issubject to an annual appropriation).  Basedupon the recent increase in national ethanol production, we anticipate a prorata reduction in aggregate payments to all eligible producers.  We anticipate the pro rata reduction to be inthe range of 55% to 60%.  Therefore, wemay not receive the maximum award of $7.5 million.  In addition, the Commodity Credit CorporationBioenergy Program is scheduled to expire on September 30, 2006.  The grants available under the CCC programmay not continue beyond their scheduled expiration date or if they do continue,the grants may not be at the same level. If our ethanol plant is not operational by the expiration of the CCCprogram or has not had substantial operations, we may not be eligible for thegrants or may receive a reduced amount.

 

*OperatingBudget and Financing of Plant Operations*

 

We expect to have sufficient cash from cash flow generated by plantoperations, current cash reserves, our senior credit facility and other sourcesof debt financing to cover our operating costs over the next 12 months,including the cost of corn and natural gas supplies, other production costs,staffing, office audit, legal compliance

 

20

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and working capital costs.  The following is our estimate of ouroperating costs and expenditures for the next 12 months, assuming a shortoperational year of 8 months which is based upon a plant start-up date on orabout April 21, 2005:

 

| Operating Costs:                 | ** ** | ** ** | ** ** |
|----------------------------------|------------|------------|------------|
| Cost of Corn                     |       | $          | 25,428,000 |   |
| Cost of Utilities                |       | 7,970,000  |       |
| Cost of Production               |       | 6,352,000  |       |
| General and Administrative Costs |       | 3,166,000  |       |
|                             |       |       |       |
| Total Operating Costs            |       | $          | 42,916,000 |   |

 

The estimatesin the table set forth above are based upon the experience of our generalcontractor with other ethanol plants similar to ours.  These are only estimates and our actualexpenses and costs could be much higher due to a variety of factors outside ourcontrol, such as:

 

•                  Changesin the availability and price of corn;

•                  Changesin the environmental regulations that apply to our plant operations;

•                  Changesin interest rates or the availability of credit;

•                  Changesin our business strategy, capital improvement or development plans;

•                  Changesin plant production capacity or technical difficulties in operating the plant;

•                  Changesin general economic conditions or the occurrence of certain events causing aneconomic impact in the agriculture, oil or automobile industries;

•                  Changesin the availability and price of natural gas;

•                  Increasesor decreases in the supply and demand for distiller grains; and

•                  Changesand advances in ethanol production technology.

 

**Off-Balance Sheet Arrangements**

 

We do not haveany off-balance sheet arrangements.  Wehave commitments and contingencies as described in Note 9 to our FinancialStatements.

 

**ITEM 7.****                                                     FINANCIALSTATEMENTS.**

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Boardof Directors

UnitedWisconsin Grain Producers, LLC

Friesland,Wisconsin

 

Wehave audited the accompanying balance sheet of United Wisconsin GrainProducers, LLC (a developmental stage company), as of December 31, 2004 and2003, and the related statements of operations, changes in members’ equity, andcash flows for the years ended December 31, 2004 and 2003, and from inception(November 2, 2001) to December 31, 2004. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits.

 

We conducted our audits in accordance with the standards of the PublicCompany Accounting Oversight Board (United States).  Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements.  An audit also includes assessing theaccounting principles used and significant estimates made by management, as wellas evaluating the overall financial statement presentation.  We believe that our audits provide areasonable basis for our opinion.

 

21

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Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of United Wisconsin Grain Producers,LLC (a developmental stage company) as of December 31, 2004 and 2003, and theresults of its operations and its cash flows for the years ended December 31,2004 and 2003 and from inception to December 31, 2004 in conformity with U.S.generally accepted accounting principles.

 
|                    | /s/ Boulay, Heutmaker, Zibell & Co., P.L.L.P. |
|-------------------------|---------------------------------------------------|
|                    | Certified  Public Accountants                     |
|                    |                                              |
|                    |                                              |
| Minneapolis,  Minnesota |                                              |
| January  27, 2005       |                                              |

 

22

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**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(A Development StageCompany)

 

Balance Sheet

 
| **ASSETS**                         | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                               |       |                        |       |                        |       |
| **Current Assets**                 |       |                        |       |                        |       |
| Cash and  cash equivalents         |       | $                           | 9,068      |                        | $          | 20,150,071 |   |
| Derivative  instruments            |       | 164,776                     |       |                        |       |
| Account  receivable                |       | 4,383                       |       |                        |       |
| Grants  receivable                 |       | 459,670                     |       |                        |       |
| Prepaid  expenses                  |       | 14,024                      |       | 5,101                       |       |
| Total  current assets              |       | 651,921                     |       | 20,155,172                  |       |
|                               |       |                        |       |                        |       |
| **Property, Plant and Equipment**  |       |                        |       |                        |       |
| Land                               |       | 1,029,909                   |       | 719,748                     |       |
| Office  equipment                  |       | 110,985                     |       | 6,871                       |       |
| Administration  building           |       | 412,847                     |       |                        |       |
| Construction  in process           |       | 41,528,009                  |       | 4,568,043                   |       |
| Total  property and equipment      |       | 43,081,750                  |       | 5,294,662                   |       |
| Less  accumulated depreciation     |       | 5,342                       |       | 1,113                       |       |
| Net  property, plant and equipment |       | 43,076,408                  |       | 5,293,549                   |       |
|                               |       |                        |       |                        |       |
| **Other Assets**                   |       |                        |       |                        |       |
| Deposits on  land                  |       | —                      |       | 3,000                       |       |
| Debt  issuance costs               |       | 525,085                     |       | 95,000                      |       |
| Total other  assets                |       | 525,085                     |       | 98,000                      |       |
|                               |       |                        |       |                        |       |
| **Total Assets**                   |       | $                           | 44,253,414 |                        | $          | 25,546,721 |   |

 

Notesto Financial Statements are an integral part of this Statement.

 

23

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**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(A Development StageCompany)

 

Balance Sheet

 
| **LIABILITIES AND MEMBERS’ EQUITY**                             | ** ** | **December 31,  2004** | ** ** | **December 31,  2003** | ** ** |
|----------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
|                                                                 |       |                        |       |                        |       |
| **Current Liabilities**                                              |       |                        |       |                        |       |
| Current  maturities of long-term debt                                |       | $                           | 10,574     |                        | $          | 1,700 |   |
| Accounts  payable                                                    |       | 119,610                     |       | 152,184                     |       |
| Construction  accounts payable                                       |       | 3,520,554                   |       | 1,655,911                   |       |
| Construction  loan                                                   |       | 14,336,543                  |       | —                      |       |
| Accrued  liabilities                                                 |       | 16,142                      |       | 9,209                       |       |
| Other  payables                                                      |       | —                      |       | 15,000                      |       |
| Total  current liabilities                                           |       | 18,003,423                  |       | 1,834,004                   |       |
|                                                                 |       |                        |       |                        |       |
| **Long-Term Debt, less current maturities**                          |       | 77,723                      |       | 2,298                       |       |
|                                                                 |       |                        |       |                        |       |
| **Commitments and Contingencies**                                    |       |                        |       |                        |       |
|                                                                 |       |                        |       |                        |       |
| **Members’ Equity**                                             |       |                        |       |                        |       |
| Member  contributions, net of costs related to capital contributions |       | 27,696,394                  |       | 24,514,383                  |       |
| Deficit  accumulated during development stage                        |       | (1,524,126                  | )          | (803,964                    | )          |
| Total  members’ equity                                          |       | 26,172,268                  |       | 23,710,419                  |       |
|                                                                 |       |                        |       |                        |       |
| **Total Liabilities and Members’ Equity**                       |       | $                           | 44,253,414 |                        | $          | 25,546,721 |   |

 

Notes toFinancial Statements are an integral part of this Statement.

 

24

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**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(A Development StageCompany)

 

Statement of Operations

 
| ** **                                                                                        | ** ** | **Year Ended  December 31,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** | **From  Inception  (November 2, 2001)  to December 31, 2004** | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------------|------------|
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Revenues**                                                                                      |       | $                                       | —     |                                    | $          | —                                                                  |       | $ | — |   |
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Operating Expenses**                                                                            |       |                                    |       |                                    |       |                                                                    |       |
| Project  coordinator                                                                              |       | 126,150                                 |       | 54,222                                  |       | 237,373                                                                 |       |
| Organization  costs                                                                               |       | —                                  |       | 20,547                                  |       | 59,271                                                                  |       |
| Consulting  and professional fees                                                                 |       | 239,008                                 |       | 171,613                                 |       | 576,186                                                                 |       |
| Administrative                                                                                    |       | 353,273                                 |       | 319,307                                 |       | 714,105                                                                 |       |
| Totals                                                                                            |       | 718,431                                 |       | 565,689                                 |       | 1,586,935                                                               |       |
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Operating Loss**                                                                                |       | (718,431                                | )          | (565,689                                | )          | (1,586,935                                                              | )          |
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Other Income (Expense)**                                                                        |       |                                    |       |                                    |       |                                                                    |       |
| Grant income                                                                                      |       | 165,849                                 |       | —                                  |       | 165,849                                                                 |       |
| Interest  income                                                                                  |       | 64,130                                  |       | 41,670                                  |       | 110,000                                                                 |       |
| Interest  expense                                                                                 |       | (2,664                                  | )          | (3,005                                  | )          | (5,669                                                                  | )          |
| Unrealized  loss on hedging                                                                       |       | (260,224                                | )          | —                                  |       | (260,224                                                                | )          |
| Miscellaneous                                                                                     |       | 31,178                                  |       | 4,900                                   |       | 52,853                                                                  |       |
| Total other  income (expense), net                                                                |       | (1,731                                  | )          | 43,565                                  |       | 62,809                                                                  |       |
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Net Loss**                                                                                      |       | $                                       | (720,162   | )                                       | $          | (522,124                                                                | )          | $ | (1,524,126 | ) |
|                                                                                              |       |                                    |       |                                    |       |                                                                    |       |
| **Net Loss Per Unit**(28,270, 3,071 and 11,706  weighted average units outstanding, respectively) |       | $                                       | (25.47     | )                                       | $          | (170.02                                                                 | )          | $ | (130.20 | ) |

 

Notesto Financial Statements are an integral part of this Statement.

 

25

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

(A Development StageCompany)

 

Statement of Changes inMembers’ Equity

 
| **Balance - November 2, 2001**                                                                             |   | $          | —     |   |
|-----------------------------------------------------------------------------------------------------------------|--------|------------|------------|--------|
|                                                                                                            |   |       |       |
| Initial  capital contributions, December 4, 2001 for 235 membership units at $500  per unit                |   | 117,500    |       |
|                                                                                                            |   |       |       |
| Net loss for  the period from November 2, 2001 (Date of Inception) through December 31,  2001         |   | (26,964    | )          |
|                                                                                                            |   |       |       |
| **Balance - December 31, 2001**                                                                            |   | $          | 90,536     |   |
|                                                                                                            |   |       |       |
| Capital  contributions, January 4, 2002 for 485 membership units at $1,000 per  unit                       |   | 485,000    |       |
|                                                                                                            |   |       |       |
| Costs  related to capital contributions                                                                         |   | (23,595    | )          |
|                                                                                                            |   |       |       |
| Membership  unit redemption, October 16, 2002 of 160 membership units at $218.75 per  unit                 |   | (35,000    | )          |
|                                                                                                            |   |       |       |
| Net loss for  the year ended December 31, 2002                                                             |   | (254,875   | )          |
|                                                                                                            |   |       |       |
| **Balance - December 31, 2002**                                                                            |   | $          | 262,066    |   |
|                                                                                                            |   |       |       |
| Capital  contributions, October through December 2003 for 24,325 membership  units at $1,000 per unit |   | 24,325,000 |       |
|                                                                                                            |   |       |       |
| Costs  related to capital contributions                                                                         |   | (354,523   | )          |
|                                                                                                            |   |       |       |
| Net loss for  the year ended December 31, 2003                                                             |   | (522,124   | )          |
|                                                                                                            |   |       |       |
| **Balance - December 31, 2003**                                                                            |   | $          | 23,710,419 |   |
|                                                                                                            |   |       |       |
| Capital  contributions, January through April 2004 for 3,175 membership units  at $1,000 per unit     |   | 3,175,000  |       |
|                                                                                                            |   |       |       |
| Costs  related to capital contributions                                                                         |   | 7,011      |       |
|                                                                                                            |   |       |       |
| Net loss for  the year ended December 31, 2004                                                             |   | (720,162   | )          |
|                                                                                                            |   |       |       |
| **Balance - December 31, 2004**                                                                            |   | $          | 26,172,268 |   |

 

Notesto Financial Statements are an integral part of this Statement.

 

26

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**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(A Development StageCompany)

 

Statements of Cash Flows

 
| ** **                                                         | ** ** | **Year Ended  December 31,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** | **From  Inception  (November 2, 2001)  to December 31, 2004** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------------|------------|
| **Cash Flows from Operating Activities**                           |       |                                    |       |                                    |       |                                                                    |       |
| Net loss                                                           |       | $                                       | (720,162   | )                                       | $          | (522,124                                                                | )          | $ | (1,524,126 | ) |
| Adjustments  to reconcile net loss to net cash used in operations: |       |                                    |       |                                    |       |                                                                    |       |
| Depreciation                                                       |       | 4,229                                   |       | 1,072                                   |       | 5,342                                                                   |       |
| Unrealized  loss on hedging                                        |       | 260,224                                 |       | —                                  |       | 260,224                                                                 |       |
| Grant income                                                       |       | (165,849                                | )          | —                                  |       | (165,849                                                                | )          |
| Deposits on  expired land options                                  |       | 3,000                                   |       | —                                  |       | 3,000                                                                   |       |
| Changes in  assets and liabilities:                                |       |                                    |       |                                    |       | —                                                                  |       |
| Derivative  instruments                                            |       | (425,000                                | )          | —                                  |       | (425,000                                                                | )          |
| Accounts  receivable                                               |       | (4,383                                  | )          | —                                  |       | (4,383                                                                  | )          |
| Prepaid  expenses                                                  |       | (8,923                                  | )          | 3,024                                   |       | (14,024                                                                 | )          |
| Other  payable                                                     |       | (15,000                                 | )          | —                                  |       | —                                                                  |       |
| Accounts  payable                                                  |       | 32,991                                  |       | 27,470                                  |       | 110,175                                                                 |       |
| Accrued  liabilities                                               |       | 6,933                                   |       | 9,209                                   |       | 16,142                                                                  |       |
| Net cash  used in operating activities                             |       | (1,031,940                              | )          | (481,349                                | )          | (1,738,499                                                              | )          |
|                                                               |       |                                    |       |                                    |       |                                                                    |       |
| **Cash Flows from Investing Activities**                           |       |                                    |       |                                    |       |                                                                    |       |
| Land  acquisitions                                                 |       | (310,161                                | )          | (709,748                                | )          | (1,032,909                                                              | )          |
| Capital  expenditures                                              |       | (337,659                                | )          | —                                  |       | (338,899                                                                | )          |
| Payments for  construction in process                              |       | (21,731,845                             | )          | (2,912,132                              | )          | (24,643,977                                                             | )          |
| Net cash  used in investing activities                             |       | (22,379,665                             | )          | (3,621,880                              | )          | (26,015,785                                                             | )          |
|                                                               |       |                                    |       |                                    |       |                                                                    |       |
| **Cash Flows from Financing Activities**                           |       |                                    |       |                                    |       |                                                                    |       |
| Member  contributions                                              |       | 3,175,000                               |       | 24,325,000                              |       | 28,102,500                                                              |       |
| Proceeds  from grants for operating expenses                       |       | 135,065                                 |       | —                                  |       | 135,065                                                                 |       |
| Proceeds  from grants for capital expenditures                     |       | 42,643                                  |       | —                                  |       | 42,643                                                                  |       |
| Proceeds  from construction loan                                   |       | 408,234                                 |       | —                                  |       | 408,234                                                                 |       |
| Payments for  long term debt                                       |       | (1,701                                  | )          | (1,633                                  | )          | (3,334                                                                  | )          |
| Payments for  debt issuance costs                                  |       | (495,650                                | )          | (20,000                                 | )          | (515,650                                                                | )          |
| Refunds  (Payments) for costs of raising capital                   |       | 7,011                                   |       | (213,846                                | )          | (371,106                                                                | )          |
| Payments for  membership unit redemption                           |       | —                                  |       | —                                  |       | (35,000                                                                 | )          |
| Net cash  provided by financing activities                         |       | 3,270,602                               |       | 24,089,521                              |       | 27,763,352                                                              |       |
|                                                               |       |                                    |       |                                    |       |                                                                    |       |
| **Net Increase (Decrease) in Cash**                                |       | (20,141,003                             | )          | 19,986,292                              |       | 9,068                                                                   |       |
| ** **                                                         |       |                                    |       |                                    |       |                                                                    |       |
| **Cash and Cash Equivalents–**Beginning of  Period            |       |                                    |       |                                    |       |                                                                    |       |
| Period                                                             |       | 20,150,071                              |       | 163,779                                 |       | —                                                                  |       |
|                                                               |       |                                    |       |                                    |       |                                                                    |       |
| **Cash and Cash Equivalents–**End of Period                   |       | $                                       | 9,068      |                                    | $          | 20,150,071                                                              |       | $ | 9,068 |   |

 

Notes to Financial Statements are an integral partof this Statement.

 

27

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**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(A Development StateCompany)

 

Statements of Cash Flows

 
| ** **                                                                    | ** ** | **Year Ended  December 31,  2004** | ** ** | **Year Ended  December 31,  2003** | ** ** | **From  Inception  (November 2, 2001)  to December 31, 2004** | ** ** |
|-------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|-------------------------------------------------------------------------|------------|
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| **Supplemental Cash Flow Information**                                        |       |                                    |       |                                    |       |                                                                    |       |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Cash paid  during the year for:                                               |       |                                    |       |                                    |       |                                                                    |       |
| Interest                                                                      |       | $                                       | 2,664      |                                    | $          | 3,005                                                                   |       | $ | 5,669 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| **Noncash Investing and Financing Activities**                                |       |                                    |       |                                    |       |                                                                    |       |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Capital  expenditures and construction in process funded by long-term debt    |       | $                                       | 86,000     |                                    | $          | 5,631                                                                   |       | $ | 91,631 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Capital  expenditures and construction in process funded by construction loan |       | $                                       | 13,927,308 |                                    | $          | —                                                                  |       | $ | 13,927,308 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Operating  expenses funded by construction loan                               |       | $                                       | 1,000      |                                    | $          | —                                                                  |       | $ | 1,000 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Construction  in process in grants receivable                                 |       | $                                       | 428,886    |                                    | $          | —                                                                  |       | $ | 428,886 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Construction  in process in accounts payable                                  |       | $                                       | 3,520,554  |                                    | $          | 1,655,911                                                               |       | $ | 3,520,554 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Debt  issuance costs in accounts payable                                      |       | $                                       | 9,435      |                                    | $          | 75,000                                                                  |       | $ | 9,435 |   |
|                                                                          |       |                                    |       |                                    |       |                                                                    |       |
| Deposits  applied to purchased land                                           |       | $                                       | —     |                                    | $          | 10,000                                                                  |       | $ | 10,000 |   |

 

Notes to Financial Statements are an integral part of this Statement.

 

28

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**UNITEDWISCONSIN GRAIN PRODUCERS, LLC**

(A Development Stage Company)

 

Notes to Financial Statements

 

December 31, 2004 and 2003

 

**1.  SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

*Nature of Business*

 

The Company was organized to pool investors,some of whom intend to provide a corn supply, for a 40 million gallon ethanolplant to be located near the town of Friesland in the township of Randolph,Wisconsin, with distribution to upper Midwest states. In addition, the Companyintends to produce and sell distillers grains, a co-product of ethanolproduction. The Company began construction of its ethanol plant in November 2003.As of December 31, 2004, the Company is in the development stage with itsefforts principally devoted to construction activities.  The Company anticipates operations to beginin April 2005.

 

*Fiscal Reporting Period*

 

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

 

## *Accounting Estimates*

##  

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

 

## *Derivative Instruments*

##  

The Company enters into derivative contractsto hedge the Company’s exposure to price risk related to forecasted corn andnatural gas purchases.  The Company doesnot typically enter into derivative instruments other than for hedgingpurposes.  All derivative contracts arerecognized on the December 31, 2004 balance sheet at their fair market value.

 

On the date the derivative instrument isentered into, the Company will designate the derivative as either (1) ahedge of the fair value of a recognized asset or liability or of anunrecognized firm commitment (fair value hedge), (2) a hedge of a forecastedtransaction or of the variability of cash flows to be received or paid relatedto a recognized asset or liability (cash flow hedge) or (3) will notdesignate the derivative as a hedge. Changes in the fair value of a derivative that is designated as andmeets all the required criteria for a fair value hedge, along with the gain orloss on the hedged asset or liability that is attributable to the hedged riskare recorded in current period earnings. Changes in the fair value of aderivative that is designated as and meets all the required criteria for a cashflow hedge are recorded in accumulated other comprehensive income andreclassified into earnings as the underlying hedge item affects earnings.  Changes in the fair value of a derivativethat is not designated as a hedge are recorded in current period earnings.  Although the Company believes its derivativepositions are economic hedges, none have been designated as a hedge foraccounting purposes.

 

The Company has recorded an unrealized losson derivative instruments of $260,224 related to its derivative contracts forthe year ended December 31, 2004. These losses are recorded in other income since operations had notcommenced as of December 31, 2004.

 

## *Cash and Cash Equivalents*

##  

At times throughout the year, the Company’scash balances may exceed amounts insured by the Federal Deposit InsuranceCorporation (FDIC).  The Companyconsiders all highly liquid investments with maturity of three months or lessto be cash equivalents.  At December 31,2004, cash and cash equivalents were insured by FDIC. At December 31,2003, cash and cash equivalents of $18,539,195 were not insured by the FDIC.

 

29

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*Property, Plant and Equipment*

 

Property, plant and equipment is stated atthe lower of cost or estimated fair value. Depreciation is provided by use of the straight-line method over theestimated useful lives of 5 years for office equipment and 39 years for theadministration building.  Depreciationexpense for the years ended December 31, 2004 and 2003 was $4,229 and$1,072, respectively.  The present valueof the capital lease is classified as long-term debt and the related asset isincluded in property, plant, and equipment. The amortization of the present value of the capital lease is includedin depreciation.  Maintenance and repairsare expensed as incurred; major improvements and betterments are capitalized.

 

*Grants*

 

TheCompany will recognize grant income as other income for reimbursement ofexpenses incurred upon complying with the conditions of the grant.  For reimbursements of capital expenditures,the grants are recognized as a reduction of the basis of the asset uponcomplying with the conditions of the grant.

 

*Fair Value of Financial Instruments*

 

Thefair value of the Company’s cash and cash equivalents approximates its carryingvalue.  The Company believes the carrying amount of derivative instrumentsapproximates fair value based on current market prices.  It is not currently practicable to estimatethe fair value of the construction loan or long-term debt since theseagreements contain unique terms, conditions, and restrictions, which werenegotiated at arm’s length.

 

*Deposits on Land*

 

## Prior to 2003, the Company made deposits on land options for 115 and 59acres for its facility. At December 31, 2003, the total of all deposits onland was $3,000.  The Company exercisedthe option to purchase the 105 acres in fiscal year 2003 and closed on theremaining 10 acres during 2004.  The 59acre land option expired unexercised on March 31, 2004 and the $3,000deposit was written off*.*

 

## *Deferred Offering Costs*

##  

TheCompany defers the costs incurred to raise equity financing until thatfinancing occurs.  At such time that theissuance of new equity units occurs, these costs are netted against theproceeds received; or if the financing does not occur, they are expensed.  The initial issuance of new equity occurred October 15,2003 and total costs of $354,523 was transferred to cost of raising capital andcharged against members’ equity.  Therewere no further costs of raising capital incurred in 2004, however, the Companydid receive refunds of previously expensed costs of $7,011.  These refunds were applied to offset theoriginal cost of these items and reduce the total cost charged against members’equity.

 

*Debt Issuance Costs*

 

Costsrelating to the Company’s debt financing have been capitalized asincurred.  Upon conversion of the Company’sconstruction loan to a term note, the Company will begin to amortize the debt issuancecosts using the effective interest rate method.

 

*Income Taxes*

 

The Company is treated as a partnership forfederal and state income tax purposes and is generally not subject to eitherfederal or state income taxes.  Instead,its earnings and losses are included in the income tax returns of the members.Therefore, no provision or liability for federal or state income taxes has beenincluded in these financial statements.

 

30

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**2.  DEVELOPMENTSTAGE ENTERPRISE**

 

The Company was formed on November 2,2001 to have a perpetual life.  TheCompany was initially capitalized by contributions from its founding membersand later by additional seed capital investors. The ten founders contributed anaggregate of $117,500 for 235 units. Forty-six members, including nine of the founders, contributed anadditional aggregate of $485,000 for 485 units that were issued in January 2002.

 

EffectiveApril 1, 2002, the 720 units purchased by the founding members and seedcapital investors were split on a two-for-one basis resulting in 1,440 sharesoutstanding.

 

EffectiveOctober 16, 2002, the Company redeemed a total of 160 units from two boardmembers for $35,000, of which $20,000 was paid by the Company in 2002 and theremaining $15,000 was paid in 2004.

 

DuringOctober through December 2003, the Company accepted subscriptionagreements from its equity offering drive of 24,325 units at $1,000 perunit.  In January through April 2004the Company accepted subscription agreements from its equity offering drive of3,175 units at $1,000 per unit.  At December 31,2004 and 2003, the Company had 28,780 and 25,605 units outstanding,respectively.

 

Theweighted average units and loss per unit computations have been adjustedretroactively to account for the aforementioned split.

 

**3.  BANKFINANCING**

 

OnFebruary 26, 2004 the Company closed on a construction loan from afinancial institution. The construction loan for $33,024,200 converts, withinsixty days post construction upon certification of completion and attainment ofthe engineer’s production guarantee, into two loans with the first loan a $4million revolving loan and the second with a $29,024,200 term loan.  The term of the loan is five years with aten-year amortization.  The loancommitment offers a variable and fixed interest rate option.  The variable interest rate option has avariable base rate determined by the percentage of members’ equity at a rangefrom 275 to 375 basis points.   The fixedrate quote option is subject to change weekly and is available at theconversion of the construction loan to the term loan.  The final term facility can be segmentedbetween a fixed portion and a variable portion. The construction period is 16 months from loan closing not to exceed 60days from initial plant start-up.

 

Theloan fees consist of underwriting fees, participation fee, and annual facilityfee.  The underwriting fees are $100,000of which $20,000 was due and paid upon acceptance of the term sheet and $80,000was due and paid at loan closing.  Thereis a 75 basis point participation fee on the entire credit facility paid atloan closing totaling $247,682.  There isan annual facility fee of $40,000 beginning at the conversion of theconstruction loan to the facility term note and upon each anniversary for fouryears.  If any of the senior debt isprepaid in whole or in part, within three years following the date of theagreement; a prepayment penalty applies. Prepayment penalties of 3%, 2% and 1% of the amount prepaid will apply inthe first, second and third year, respectively.

 

Theseloans are subject to protective covenants restricting distributions and requiringthe Company to maintain various financial ratios, are secured by all businessassets, and require additional loan payments based on excess cash flow.   The loan is secured by substantially all theCompany’s assets.  As of December 31,2004, the Company had borrowed $14,336,543 on this credit facility.

 

**4.  LONG TERMDEBT**

 

InApril 2003, the Company entered into a capital lease agreement for officeequipment for $5,631 with accumulated depreciation at December 31, 2004,of $1,951.  The lease calls forthirty-six monthly payments of $160 including interest at 7%, maturing March 2006and secured by equipment.

 

31

----

 

InMarch 2004, the Company finalized the agreement with an electriccooperative to finance the remaining $86,000 of the aid-to-constructcosts.  The agreement calls for 60monthly payments of $2,138 including interest at 17%, beginning April 2005and maturing March 2010.

 

Long term debt maturities are as follows:

 

 

| **Years  Ending December 31,** | ** ** | ** ** | ** ** |
|-------------------------------------|------------|------------|------------|
| 2005                                |       | $          | 10,574     |   |
| 2006                                |       | 14,012     |       |
| 2007                                |       | 16,027     |       |
| 2008                                |       | 18,978     |       |
| 2009                                |       | 22,471     |       |
| 2010                                |       | 6,235      |       |
|                                |       | $          | 88,297     |   |

 

**5.  MEMBERS’ EQUITY**

 

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

 

The Company prepared and filed, on Form SB-2,a Registration Statement with the Securities and Exchange Commission(SEC).  The Offering was for up to 27,500 membership units at $1,000 perunit. As of May 14, 2003, the Registration Statement was declaredeffective.  In October 2003, the Company had raised the minimum of$19,250,000 through the Offering as discussed in Note 2 and obtained andaccepted a written debt financing commitment through a lender as discussed inNote 3.  The Company reached theirmaximum Offering and the Offering was closed on April 9, 2004.

 

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

 

**6.  RELATEDPARTY TRANSACTIONS**

 

Inthe year of 2004 the Company incurred field supervisor fees of $42,977 to oneof the current members.  At December 31,2004, $30,622 of these costs was included in accounts payable.  Through December 31, 2003, the Companyhad incurred $19,375 in project coordinator fees to three current members andone former member.  At December 31,2003, there were no related accounts payable balances relating to these costs.

 

ThroughDecember 31, 2004, the Company has also incurred $97,413 in director feesand related expense, of which $13,856 is included in accounts payable at December 31,2004 to seven members.

 

**7.  GRANTS**

 

InOctober 2003, the Wisconsin Department of Commerce approved a grant for$271,000 in funds to reimburse the Company for infrastructure costs.  At December 31, 2004, the Company hadincurred costs of $230,250 associated with this grant and had not yet beenreimbursed for these amounts.  $227,775of this amount is associated with capital expenditures and has been recognizedas a reduction of the basis of the asset and the remaining $2,475 of thisamount is associated with expenses and is reflected in grant income. TheCompany subsequently received the $230,250 and expects to incur the balance ofthese costs and be reimbursed by March 31, 2005.  At December 31, 2003, the Company hadnot incurred any costs associated with this grant.

 

32

----

 

InJanuary 2004, the Company was approved for a matching grant from theUnited States Department of Agriculture for $450,000.  At December 31, 2004, the Company had incurredcosts of $247,128 associated with this grant. $163,374 of this amount isassociated with expenses and is reflected in grant income and the remaining$83,754 is associated with capital expenditures and has been recognized as areduction of the basis of the asset.  At December 31,2004 the Company had been reimbursed by the United States Department ofAgriculture for all but $69,420 of the eligible costs, which is reflected ingrant receivables.

 

InFebruary 2004, the Company was approved for a matching grant from theTransportation Facilities Economic Development Program (TEA) for $160,000.  The proceeds of this grant will be used tofund a portion of a single contract with a contractor hired to do the rail spurdevelopment.  At December 31, 2004,the contractor reported to the Company that their work was forty percentcomplete.  The Company has accounted forthis grant as a receivable and has reduced the basis of the capital expenditurewhich is included in construction in process.

 

**8.  INCOME TAXES**

 

Thedifferences between financial statement basis and tax basis of assets are asfollows at December 31:

 
| ** **                                         | ** ** | **2004**  | ** ** | **2003** | ** ** |
|----------------------------------------------------|------------|-----------|------------|----------|------------|
|                                               |       |      |       |     |       |
| Financial  statement basis of total assets         |       | $         | 44,253,414 |     | $          | 25,546,721 |   |
|                                               |       |      |       |     |       |
| Organizational  and start-up costs capitalized     |       | 1,469,352 |       | 685,771  |       |
| Syndication  costs not deductible for tax purposes |       | 506,501   |       | 506,501  |       |
| Accumulated  depreciation and amortization         |       | (1,553    | )          | (1,553   | )          |
|                                               |       |      |       |     |       |
| Taxable  income tax basis of total assets          |       | $         | 46,227,714 |     | $          | 26,737,440 |   |

 

Therewere no differences between the financial statement basis and tax basis of theCompany’s liabilities.

 

**9.  COMMITMENTSAND CONTINGENCIES**

 

The Company has revised it estimate of totalcosts of the project from $59,050,000 to $60,473,710.  The Companyanticipates funding the development of the ethanol plant by using grants, theproceeds it raises through its Offering, and utilizing debt financing for theremainder of the costs.

 

TheCompany is party to an unasserted claim that it may have to defend.  The amount of liability, if any, from theunasserted claim cannot be estimated, but management is of the opinion that theoutcome of the claim will not have a material impact on the Company’s financialposition.  Nevertheless, due touncertainties in the settlement process, it is at least reasonably possiblethat management’s view of the outcome may change in the near term.

 

InOctober 2003, the Company entered into an agreement with an electriccooperative to provide electrical service. The Company is required to make a non-refundable payment in aid ofconstruction for the facilities the electrical cooperative will install for thebenefit of the Company.  The amount ofthis aid-to-construction shall be $146,000, unless there are changes in thescope of the facilities and the amount may be adjusted accordingly.  As of December 31, 2004, the Company hasmade a payment of $60,000 and the electric cooperative has agreed to pay a $700monthly service charge and 60 monthly payments of $2,138 each beginning in April 2005for the remaining $86,000.

 

OnOctober 8, 2003, the Company entered into an agreement with a member,Fagen, Inc., to perform all design and construction services, provide allmaterial, equipment, tools and labor, necessary to build a 40 million gallondry grind ethanol plant for $45,575,000, subsequently amended to$45,605,205.  The design-build contractprovides that

 

33

----

 

theCompany may be entitled to receive either consequential damages for losses suchas loss of use, profits, business, reputation or financing, or liquidateddamages in the event Fagen, Inc. fails to substantially complete the plantwithin 30 to 90 days after the scheduled completion date.  These liquidated damages are in lieu ofconsequential damages for any losses we may incur, such as loss of use,profits, business, reputation, or financing. If Fagen, Inc. does not complete construction within specifieddates, they will pay the Company for each day that substantial completionremains outstanding.  If the plant issubstantially completed 1 to 90 days prior to substantial completion date, theCompany will pay the Fagen, Inc. an early performance bonus for each daythat substantial completion is achieved prior to the substantial completiondate.  If the contract is terminated bythe Company without cause or by Fagen, Inc. for cause, the Company isrequired to pay the Fagen, Inc. a fee of $1,000,000 if the Company resumesconstruction of the plant through their own employees or third parties.  As of December 31, 2004, the Company hasincurred $38,272,074 in costs related to this contract and $2,928,600 isincluded in construction accounts payable.

 

InApril 2004, the Company entered into two natural gas relatedagreements.  The natural gas purchaseagreement commits the Company to purchase specified quantities of natural gasat a then prevailing market price once the ethanol plant becomesoperational.  The agreement shall renewautomatically at the end of its initial term, April 20, 2006 if noticeterminating is not given 60 days prior. The second agreement, the natural gas transportation service agreement,provides transportation of the natural gas to the plant at specifictransportation rates for a period of five years.

 

InJune 2004, the Company entered into an agreement for water treatmentchemicals and service program for a period of three years from the startup ofthe plant.  The agreement includes$10,000 for integration software, $15,590 for start up costs and an annualoperating cost of $71,784.  Thisagreement may be terminated by either party with 30 day written notice.

 

InAugust 2004, the Company entered into a marketing agreement with a companyto market, sell and distribute the entire ethanol produced at thisfacility.  The agreement shall commenceon the first day of the month that the Company initially ships ethanol andshall continue for a period of 12 months.

 

InAugust 2004, the Company entered into a marketing agreement with a companyfor the purpose of marketing and selling all the distillers grains the Companyelects to ship by rail out of state.  Theinitial term of the agreement is one year, and shall remain in effect untilterminated by either party at its unqualified option, by providing writtennotice of not less than 90 days to the other party.

 

OnAugust 31, 2004, the Company entered into a ten-year lease agreement witha leasing company for eighty-five covered hopper cars.  The Company will pay $460 per car, per month.

 

InOctober 2004, the Company entered into an agreement with a company for therail yard construction for $815,539, subsequently amended to $825,589.   As of December 31, 2004, theconstruction was forty percent complete therefore; $330,236 was accrued andincluded in construction accounts payable.

 

InOctober 2004, the Company entered into an agreement with a storage systemcompany to construct a steel fire protection water storage system for$241,062.  As of December 31, 2004,the Company has incurred $166,732 of these costs.

 

InNovember 2004, the Company entered into an agreement with a fireprotection company to provide a fire protection system for $183,340.  As of December 31, 2004, the Company hasnot incurred any of these costs.

 

Asof December 31, 2004, the Company had commitments to purchaseapproximately 2,200,000 bushels of corn at various dates through November 2005.  The price of those contracts ranges between$2.07 and $2.40 per bushel.

 

34

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**ITEM 8.****                                                     CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES.**

 

Boulay,Heutmaker, Zibell & Co., P.L.L.P. has been our independent registeredpublic accounting firm since our inception and is our independent registeredpublic accounting firm at the present time. We have had no disagreements with our auditors.

 

**ITEM 8A.****                                            CONTROLSAND PROCEDURES.**

 

Our management, including our Chief ExecutiveOfficer, Jeff Robertson, and our Chief Financial Officer, Barb J. Bontrager,have reviewed and evaluated the effectiveness of our disclosure controls andprocedures as of the end of the period covered by this report.  Based upon this review and evaluation, theseofficers believe that our disclosure controls and procedures are effective inensuring that material information related to us is recorded, processed,summarized and reported within the time periods required by the forms and rules ofthe Securities and Exchange Commission.

 

Our management, including our principalexecutive officer and principal financial officer, have reviewed and evaluatedany changes in our internal control over financial reporting that occurred asof the end of the period covered by this report and there has been no changethat has materially affected or is reasonably likely to materially affect ourinternal control over financial reporting.

 

**ITEM 8B.****                                            OTHERINFORMATION**.

 

On March 17, 2005, the Boardapproved a motion to hire Jeff Robertson as our Chief Executive Officer.For two of the past five years, Mr. Robertsonhas acted as our general and construction manager.  Prior to his engagement with United WisconsinGrain Producers LLC, Mr. Robertson held various management positions inagriculture businesses in western Canada. His responsibilities included marketing, logistics, operations and businessdevelopment.

 

**PART III**

 

**ITEM 9.****     DIRECTORS, EXECUTIVE OFFICERS,PROMOTERS AND CONTROL PERSONS.**

 

**Identificationof Directors, Executive Officers and Significant Employees**

 

As of December 31, 2004, our Board of Directors consists of thefollowing directors:

 

**Kevin M. Roche, Chairman, President andDirector – Age 37**

 

**Mr. Rochehas served as Chairman, President and a director on our board since itsinception.  For the past five years, Mr. Rochehas operated a 4,000 acre corn, soybean and wheat farming operation inpartnership with his father and brother. He also**owns and operates Roche Farms, Inc.,which runs a 1,200 head cattle feeding operation.

 

Mr. Rochecurrently serves as our Chairman and President. Mr. Roche is anticipated to continue serving as a director and inthe offices of Chairman and President until the first annual members meetingfollowing substantial completion of the plant and until a successor is electedand qualified.

 

*William R.Herrmann, Vice Chairman, Vice President and Director – Age 62*

 

Mr. Herrmannhas served as Vice Chairman and Vice President since August 29, 2002 andas a director on our board since its inception. For the past five years, Mr. Herrmann has operated a 1,500 acrecrop farming enterprise.

 

Mr. Herrmanncurrently serves as our Vice Chairman and Vice President.  Mr. Herrmann is anticipated to continueserving as a director and in the offices of Vice Chairman and Vice Presidentuntil the first annual members meeting following substantial completion of theplant and until a successor is elected and qualified.

 

35

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*RobertLange, Secretary and Director – Age 54*

 

Mr. Langehas served as Secretary since August 29, 2002 and as a director on our boardsince its inception.  For the past fiveyears, Mr. Lange has operated a cow/calf operation.  Prior to 2001, Mr. Lange operated a1,500 head cattle feedlot and a 1,800 corn, soybean and wheat farm.

 

Mr. Langecurrently serves as our Secretary.  Mr. Langeis anticipated to continue serving as a director and in the office of Secretaryuntil the first annual members meeting following substantial completion of theplant and until a successor is elected and qualified.

 

*Robert J.Miller, Director – Age 52*

 

Mr. Millerhas served as a director on our board since its inception.  For the past five years, Mr. Miller hasoperated a 3,000 acre farming enterprise.

 

Mr. Millerwas previously our Treasurer.  Effectiveas of December 16, 2004, the position of Treasurer was eliminated and theduties and responsibilities of the Treasurer were re-assigned to the office ofChief Financial Officer.  Mr. Milleris anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*Carl T.Benck, Director – Age 44*

 

Mr. Benckhas served as a director on our board since its inception.  For the past five years, Mr. Benck hasoperated a 1,700 corn, soybean and wheat farm.

 

Mr. Benckis anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*Jerry H.Franz, Director – Age 70*

 

Mr. Franzhas served as a director on our board since its inception.  For the past five years, Mr. Franz hasoperated a Franz Family Farms, Inc., which runs a 1,800 acre corn, soybeanand wheat farm.

 

Mr. Franzis anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*Cal Dalton,Director – Age 47*

 

Mr. Daltonhas served as a director on our board since its inception.  For the past five years, Mr. Dalton hasoperated a 2,100 acre corn, soybean, wheat and hay farm.

 

Mr. Daltonis anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*Berwyn G.Westra, Director – Age 59*

 

Mr. Westrahas served as a director on our board since its inception.  For the past five years, Mr. Westra hasbeen an accountant with the firm of Westra, Tillema & O’Connor, CPAs,L.L.C., which he founded in 1987.

 

Mr. Westrais anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*LawrenceLagowski, Director – Age 52*

 

Mr. Lagowskihas served as a director on our board since October 28, 2003 when he wasappointed by the current board of directors to fill a vacant board seat.  For the past five years, Mr. Lagowskihas served as Chief Financial Officer of Indeck Energy Services, Inc.

 

Mr. Lagowskiis anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

36

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*WayneMitchell, Director – Age 49*

 

Mr. Mitchellhas served as a director on our board since October 28, 2003 when he wasappointed by the current board of directors to fill a vacant board seat.  Mr. Mitchell is currently the SeniorVice President, Technology and Business Development for Fagen, Inc., andhas been employed by Fagen, Inc., since June 2000.  Prior to joining Fagen, Inc., he servedas Process Team Leader for Reilly Industries, Inc., where he directedmulti-disciplinary teams engaged in chemical process research anddevelopment.  Mr. Mitchell serves asa director for two other publicly reporting companies.  He is a director on the boards of directorsof Husker Ag, LLC, an ethanol plant in Plainview, Nebraska and Badger StateEthanol, LLC, an ethanol plant in Monroe, Wisconsin.

 

Mr. Mitchellis anticipated to continue serving as a director until the first annual membersmeeting following substantial completion of the plant and until a successor iselected and qualified.

 

*JeffRobertson, Chief Executive Officer  – Age48*

 

Mr. Robertsonhas been acting as our general and construction manager under contract since November 2003.  Subsequent to the period covered by thisreport, the Board approved a motion to hire Jeff Robertson as our ChiefExecutive Officer.   Prior to hisengagement with United Wisconsin Grain Producers LLC, Mr. Robertson heldvarious management positions in agriculture businesses in western Canada.  His responsibilities included marketing,logistics, operations and business development. Mr. Robertson graduated from the University of Saskatchewan in1991.

 

*Barb J. Bontrager, Chief Financial Officer –Age 42*

 

On December 16, 2004, the board ofdirectors appointed Barb Bontrager as Chief Financial Officer and terminatedthe position of Treasurer, previously held by Robert Miller.  The duties and responsibilities of theTreasurer’s office have been re-assigned to the Chief Financial Officer.  Ms. Bontrager’s most recent position, priorto her appointment as the Chief Financial Officer, was a senior tax specialistwith Badgerland Farm Credit Service for three years.  Prior to that, she was the controller forBethal Grain, a grain elevator and corn milling company.  Ms. Bontrager graduated from Lakeland in1997 with a B.A. in accounting and she is a certified public accountant in thestate of Wisconsin.

 

*Dan J. Wegner, Commodities Manager  – Age 38*

 

Mr. Wegner began employment with us on December 13,2004.  Prior to his employment with us, Mr. Wegnerwas employed with ConAgra as grain merchandiser for 13 years.  Mr. Wegner graduated from University ofIllinois in Champaign, IL with a B.S. in Ag Economics in 1990.

 

*Peter J. Schrandt, Plant Manager – Age 42*

 

On February 28, 2004, Mr. Schrandtbegan employment with us as plant manager. Prior to his employment with the us, Mr. Schrandt was afermentation supervisor for Diamond V Mills of Cedar Rapids, Iowa.  Mr. Schrandt was employed with Diamond VMills for eleven and also served as a project specialist, manufacturing supportspecialist, production foreman, operator, and millhand.  Mr. Schrandt attended Iowa StateUniversity.

 

*John R. Haas, Safety and EnvironmentalManager – Age 45*

 

Mr. Haas, began engagement with usasproject coordinator on July 12, 2004. Prior to his employment with us, Mr. Haas was theoperations/technical manager for Utica Energy of Oshkosh, Wisconsin for twoyears and served as the operations manager at Corn Plus of Winnebago, Minnesotabefore that.  Mr. Haas attendedBismarck Technical College majoring in process plant technology in 1984 and1985.

 

All successor directors will be elected tostaggered 3-year terms as provided in our operating agreement.

 

37

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**Audit Committee and Audit Committee FinancialExpert**

 

We have anaudit committee.  The following directorsare members of our audit committee: Berwyn G. Westra, Kevin M. Roche, andLawrence Lagowski.  The Board ofDirectors has determined that we have at least one audit committee financialexpert serving on our audit committee. Berwyn G. Westra is our audit committee financial expert.  He is independent as defined by the NASDAQrules.

 

**Adoptionof Code of Ethics**

 

Our Board ofDirectors has adopted a code of ethics that applies to our Chairman and President,Kevin M. Roche, our Vice-President, William R. Herrmann, our Chief ExecutiveOfficer, Jeff Robertson, our Chief Financial Officer, Barb J. Bontrager, andour Secretary, Robert Lange.  Each ofthese individuals signed an acknowledgment of his or her receipt of our code ofethics.  Our code of ethics was filed as Exhibit 14.1to our annual report on Form 10-KSB for the fiscal year ended December 31,2003 and is included as current Exhibit 14.1 to this report byincorporation by reference.

 

**Proceduresfor Recommending Nominees to Board of Directors**

 

There has been no change in our procedures by which members mayrecommend nominees to our board of directors. The process continues to be as described in our Operating Agreement.

 

**ITEM 10.****                                              EXECUTIVECOMPENSATION.**

 

During 2004,we paid Kevin M. Roche $8,712 for his services as our President, ChiefExecutive Officer and Chairman.  We reimburseour directors at a rate of $25 per hour for the performance of tasks authorizedin advance by our President.  We alsoreimburse our directors for out-of-pocket costs and mileage for travel to andfrom meetings and other locations to perform these tasks.   We do not have any compensatory securityoption plan for our executive officers and directors.  None of our directors or officers has anyoptions, warrants, or other similar rights to purchase our securities.

 

Thefollowing table sets forth the compensation that we have paid to our President,Chief Executive Officer and Chairman.

 
| **Name and  Principal  Position** | ** ** | **Year** | ** ** | **Salary** | ** ** | **All Other Compensation** | ** ** |
|-----------------------------------|------------|----------|------------|------------|------------|----------------------------|------------|
| Kevin M. Roche                    |       | 2004     |       | $          | 0          |                       | $          | 8,712 | (1) |
|                              |       | 2003     |       | $          | 0          |                       | $          | 14,288 |   |
|                              |       | 2002     |       | $          | 0          |                       | $          | 0 |   |

 

----

(1) Includes amounts payable for director’s fees at $25/hr ($7,188), mileagereimbursement ($1,434) and reimbursement for other out of pocket expenses ($90)

 

Subsequentto the period covered by this report, our board of directors approved directorrelated compensation for 2004, excluding reimbursement for mileage andout-of-pocket expenses, in an aggregate amount of $18,163 to all directors,except Robert Lange.  Subsequent to thedate of this report, our board of directors also approved a directorcompensation policy.  The policy providesfor payment to directors of an attendance fee for each board or committeemeeting a director attends either in person or by telephone. The fees we intendto pay are as follows:

 

•                  $450.00 per board meeting/President

•                  $300.00 per board meeting/Director (in person)

•                  $250.00 per board meeting/Director (by telephone)

•                  $250.00 per committee meeting

 

In addition to these fees, the policycontinues to provide for reimbursement to directors at a rate of $25.00 perhour for the performance of tasks authorized in advance by the President andfor reimbursement to directors for all out-of-pocket costs and mileage fortravel to and from meetings and other locations to perform these tasks.  At our 2005 Annual Meeting of Members, weintend to ask our members to ratify the board’s approval of payments made todirectors in 2004 and its adoption of the previously described director’scompensation policy.

 

38

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During 2004,we entered into an oral agreement with director Robert Lange to serve asfull-time field supervisor.  Under theterms of our agreement, Mr. Lange was responsible for supervising andcoordinating plant construction, developing policies regarding construction ofthe project, monitoring project development, public relations and other on-sitedevelopment issues.  As of December 31,2004, we paid Mr. Lange $42,977 for these services at the rate of $25 perhour.  The amount we paid Mr. Langeincluded reimbursement for his mileage and out-of-pocket expenses incurredwhile performing his duties.

 

**ITEM 11.****                                              SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED MEMBERMATTERS.**

 

**Security Ownership ofCertain Beneficial Owners**

 

As of December 31, 2004, thefollowing beneficial owners owned or held 5% or more of our outstanding units:

 
| **(1) Title of Class** | ** ** | **(2) Name and Address of  Beneficial Owner**                                               | ** ** | **(3) Amount and Nature of  Beneficial Ownership** | ** ** | **(4) Percent of Class** | ** ** |
|-----------------------------|------------|--------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------|------------|-------------------------------|------------|
| Membership Units            |       | Fagen, Inc.  (1)  501 W. Highway 212  P.O. Box 159  Granite Falls, MN  56241 |       | 2,000 Units                                             |       | 6.95                          | %          |
| Membership Units            |       | Indeck Energy Services, Inc.  600 North Buffalo Grove Rd.  Buffalo Grove, IL  60089    |       | 2,000 Units                                             |       | 6.95                          | %          |

 

Fagen, Inc.beneficially owns 1,000 of its 2,000 Class A Units through its control of FagenEnergy, Inc.

 

**Security Ownership ofManagement**

 

As of December 31,2004, members of our board of directors own units as follows:

 
| **(1) Title of Class** | ** ** | **(2) Name and Address of Beneficial  Owner**                                                           | ** ** | **(3) Amount and  Nature of  Beneficial  Ownership** | ** ** | **(4) Percent of  Class** | ** ** |
|-----------------------------|------------|--------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------|------------|--------------------------------|------------|
| Membership Units            |       | Kevin M. Roche, Chairman, President and  Director (1)  N3432 Cty BB  Columbus, WI  53925                |       | 152 Units                                                 |       | 0.53                           | %          |
| Membership Units            |       | William R. Herrmann, Vice Chairman, Vice  President and Director  W2553 Duborg Rd.  Columbus, WI  53925 |       | 210 Units                                                 |       | 0.73                           | %          |
| Membership Units            |       | Robert J. Miller,  Director (2)  N 68 W 35460 Hwy K  Oconomowoc, WI 53066                               |       | 1,086 Units                                               |       | 3.77                           | %          |
| Membership Units            |       | Robert Lange, Secretary and Director  W11715 Behan Rd.  Columbus, WI  53925                             |       | 120 Units                                                 |       | 0.42                           | %          |
| Membership Units            |       | Carl T. Benck, Director  W772 Hwy Z  Fall River, WI  53932                                              |       | 70 Units                                                  |       | 0.24                           | %          |
| Membership Units            |       | Jerry H. Franz, Director  N2775 Kroncke Rd.  Poynette, WI  53955                                        |       | 135 Units                                                 |       | 0.47                           | %          |
| Membership Units            |       | Cal Dalton, Director  407 Lake St., P.O. Box 715  Pardeeville, WI  53954                           |       | 200 Units                                                 |       | 0.69                           | %          |

 

39

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| Membership Units |   | Berwyn G. Westra, Director  N8693 Cty FW  Beaver Dam, WI  53916          |   | 135 Units   |   | 0.47 | % |
|------------------|--------|-------------------------------------------------------------------------------|--------|-------------|--------|------|---|
| Membership Units |   | Wayne Mitchell, Director  2001 Country Club Drive NE  Willmar, MN  56201 |   | 10 Units    |   | 0.03 | % |
| **TOTAL:**       |   |                                                                          |   | 2,118 Units |   | 7.36 | % |

 

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(1)          KevinRoche owns and controls the Roche Family Fund, which owns 16 Units.  These 16 Units are included in Kevin Roche’sownership total.

(2)          RobertJ. Miller owns and controls L&NM Enterprises, LLC, which owns 500Units.  These 500 Units are included inRobert J. Miller’s ownership total.

 

**ITEM 12.****                                              CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS.**

 

As of December 31,2004, we have engaged in the following transactions with related parties.

 

*Fagen, Inc.*

 

Fagen, Inc.,beneficially owns 2,000 of our Units.  Fagen, Inc.,owns 1,000 Units and Fagen Engineering, LLC, owns 1,000 Units.  At December 31, 2004, we had 28,780Units outstanding.  Fagen, Inc.’sownership of 2,000 Units means that it owns a 6.95% membership interest in us.  We entered into a design-build contract withFagen, Inc., for the purpose of providing design, development andconstruction services to us in connection with our ethanol plant.  Pursuant to the design-build contract, Fagen, Inc.,has agreed to design, develop and construct a 40 million gallon per yearethanol plant for an amount not to exceed approximately $45,605,205, subject tochange orders approved by us.  The amountwe expect to pay Fagen, Inc., for construction of the ethanol plant iscomparable to that of an arms-length transaction.

 

*Indeck EnergyServices, Inc.*

 

IndeckEnergy Services, Inc. beneficially owns 2,000 of our Units.  At December 31, 2004, we had 28,780Units outstanding.  Indeck EnergyServices, Inc.’s ownership of 2,000 Units meaning that it owns a 6.95%membership interest in us.  Indeck EnergyServices, Inc., as a subcontractor under the design-build contract, isexpected to provide us with a recuperative thermal oxidizer in connection withthe development and construction of our ethanol plant.  We expect the recuperative thermal oxidizerto decrease our emission of any volatile organic compounds and ease ourregulatory compliance.  The cost of thethermal oxidizer is estimated at $2,100,000 and is included in the design-buildcontract price of $45,605,205.  Theamount we expect to pay Indeck Energy Services, Inc., for the recuperativethermal oxidizer for our ethanol plant is comparable to that of an arms-lengthtransaction.

 

**ITEM 13.****                                             ****EXHIBITS..**

 

**ExhibitsFiled as Part of this Report and Exhibits Incorporated by Reference.**

 

The followingexhibits are filed as part of this report. Exhibits previously filed are incorporated by reference, as noted.

 

 
| **Exhibit No.** | ** ** | **Exhibit**                                                                                                                                                                                                              |
|----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.1                  |       | Articles of  Organization of registrant.  Filed as Exhibit 3.1 to the registrant’s  registration statement on Form SB-2 (Commission File 333-92188) and  incorporated by reference herein.           |
|                 |       |                                                                                                                                                                                                                     |
| 3.2                  |       | Operating Agreement of the  registrant.  Filed as Exhibit 3.2 to the registrant’s registrations  statement on Form SB-2 (Commission File 333-92188) and incorporated by  reference herein.           |
|                 |       |                                                                                                                                                                                                                     |
| 4.1                  |       | Form of Subscription Agreement of  Registrant.  File as Exhibit 4.1 to the Registrant’s registration  statement on Form SB-2 (Commission File 333-92188) and incorporated by  reference herein. |

 

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| 4.2    |   | Form of  Membership Unit Certificate.  Filed as Exhibit 4.2 to the  registrant’s registration statement on Form SB-2 (Commission File 333-92188)  and incorporated by reference herein.                                                                                                                                             |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 4.3    |   | Escrow  Agreement dated June 18, 2002.  Filed as Exhibit 4.3 to the  Registrant’s registration statement on Form SB-2 (Commission File 333-92188)  and incorporated by reference herein.                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.1   |   | Agreement by  and between Key Railroad Development, LLC and United Wisconsin Grain  Producers, LLC dated January 30, 2003.   Filed as Exhibit 10.10 to the registrant’s registration statement  on Form SB-2/A (Commission File 333-92188) filed May 8, 2003 and  incorporated by reference herein.                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.2   |   | Accepted  Proposal for Provision of Services by Key Engineering Group, Inc. dated June 10,  2003.  Filed as Exhibit 10.14 to  registrant’s periodic report on Form 10-QSB (Commission File 333-92188)  filed November 11, 2003 and incorporated by reference herein.                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.3   |   | Change Order  Request No. 1 by Key Railroad Development, LLC dated July 21,  2003.  Filed as Exhibit 10.15 to  registrant’s periodic report on Form 10-QSB (Commission File 333-92188)  filed November 11, 2003 and incorporated by reference herein.                                                                     |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.4   |   | Electric  Service Agreement dated October 3, 2003 by and between Adams-Columbia  Electric Cooperative of Friendship and United Wisconsin Grain Producers,  LLC.  Filed as Exhibit 10.6 to  registrant’s periodic report on Form 10-KSB (Commission File 333-92188)  filed March 30, 2004 and incorporated by reference herein. |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.5   |   | Contract for  Construction Services between Iverson and Son’s LLC and United Wisconsin  Grain Producers, LLC.  Filed as Exhibit 10.7  to registrant’s periodic report on Form 10-KSB (Commission File 333-92188)  filed March 30, 2004 and incorporated by reference herein.                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.6   |   | Design-Build  Contract dated October 8, 2003 between Fagen, Inc. and United  Wisconsin Grain Producers, LLC.*  Filed  as Exhibit 10.8 to registrant’s periodic report on Form 10-KSB  (Commission File 333-92188) filed March 30, 2004 and incorporated by  reference herein.                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.7   |   | Contract  Change Order dated December 30, 2003 between Fagen, Inc. and United  Wisconsin Grain Producers, LLC.*  Filed  as Exhibit 10.9 to registrant’s periodic report on Form 10-KSB  (Commission File 333-92188) filed March 30, 2004 and incorporated by  reference herein.                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.8   |   | Natural Gas  Sales & Service agreement dated April 1, 2004 between WPS  Energy Services, Inc. and United Wisconsin Grain Producers LLC. Filed as  Exhibit 10.2 to registrant’s period report on Form 10-QSB  (Commission File 000-50733) filed August 16, 2004 and incorporated by  reference herein.                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.9   |   | Natural Gas  Transportation Service agreement dated April 8, 2004 between Wisconsin  Power and Light Company and United Wisconsin Grain Producers LLC. Filed as Exhibit 10.1  to registrant’s period report on Form 10-QSB (Commission File 000-50733)  filed August 16, 2004 and incorporated by reference herein.                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.10  |   | Ethanol Fuel  Marketing Agreement dated August 25, 2004 between Renewable Products  Marketing Group LLC and United Wisconsin Grain Producers LLC.  Filed as Exhibit 10.1 to registrant’s  periodic report on Form 10-QSB (Commission File 333-92188) filed November 15,  2004 and incorporated by reference herein.            |
|   |   |                                                                                                                                                                                                                                                                                                                                                         |
| 10.11  |   | Distiller’s  Grain Marketing Agreement dated August 31, 2004 between Commodity  Specialist Company and United Wisconsin Grain Producers LLC.  Filed as Exhibit 10.2 to                                                                                                                                                                   |

 

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|   |   | registrant’s  periodic report on Form 10-QSB (Commission File 333-92188) filed November 15,  2004 and incorporated by reference herein.                                                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.12  |   | Facility Use  Agreement dated October 4, 2004 between Town of Randolph and United  Wisconsin Grain Producers LLC. Filed as Exhibit 10.3 to registrant’s  periodic report on Form 10-QSB (Commission File 333-92188) filed November 15,  2004 and incorporated by reference herein. |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.13  |   | Railroad  Spur Construction Agreement dated October 15, 2004 between the Town of  Randolph and Volkmann Railroad Builders, Inc.                                                                                                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 14.1   |   | Code of  Ethics of United Wisconsin Grain Producers, LLC adopted March 18,  2004.   Filed as Exhibit 14.1 to  registrant’s periodic report on Form 10-KSB (Commission File 333-92188)  filed March 30, 2004 and incorporated by reference herein.                        |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 31.1   |   | Certificate  pursuant to 17 CFR 240.15d-14(a).                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 31.2   |   | Certificate  pursuant to 17 CFR 240.15d-14(a).                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 32.1   |   | Certificate  pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 32.2   |   | Certificate  pursuant to 18 U.S.C. Section 1350.                                                                                                                                                                                                                                                       |

 

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*Material has been omitted pursuant to a request for confidentialtreatment and such materials have been filed separately with the Securities andExchange Commission.

 

**ITEM 14.****                                              PRINCIPALACCOUNTANT FEES AND SERVICES.**

 
| **Category**        | ** ** | **Year** | ** ** | **Fees** | ** ** |
|---------------------|------------|----------|------------|----------|------------|
| Audit Fees          |       | 2004     |       | $        | 55,000     |   |
|                |       | 2003     |       | $        | 46,000     |   |
| Audit-Related  Fees |       | 2004     |       | $        | 0          |   |
|                |       | 2003     |       | $        | 0          |   |
| Tax Fees            |       | 2004     |       | $        | 8,500      |   |
|                |       | 2003     |       | $        | 0          |   |
| All Other  Fees     |       | 2004     |       | $        | 0          |   |
|                |       | 2003     |       | $        | 0          |   |

 

Consistentwith the Securities and Exchange Commission requirements regarding auditorindependence, it is the Audit Committee’s policy to pre-approve on acase-by-case basis the audit and permissible non-audit services provided by theindependent auditor prior to the commencement of the specified service.  All services provided by our independentauditor, Boulay, Heutmaker, Zibell & Co., have been pre-approved bythe Audit Committee.

 

42

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**SIGNATURES**

 

In accordancewith Section 13 or 15(d) of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

 
|   |                | UNITED WISCONSIN GRAIN PRODUCERS, LLC                                 |
|--------|---------------------|-----------------------------------------------------------------------|
|   |                |                                                                  |
|   |                |                                                                  |
| Date:  | March 17, 2005 |                                                                  | /s/ J. F. Robertson |   |
|   |                | J. F. Robertson                                                       |
|   |                | Chief Executive Officer  (Principal Executive Officer)                |
|   |                |                                                                  |
|   |                |                                                                  |
| Date:  | March 17, 2005 |                                                                  | /s/ Barb Bontrager |   |
|   |                | Barb Bontrager                                                        |
|   |                | Chief Financial Officer  (Principal Financial and Accounting Officer) |

 

In accordance with the Exchange Act, thisreport has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated.

 

 
| Date: March 17, 2005 | /s/ Kevin M. Roche                                |   |
|---------------------------|---------------------------------------------------|--------|
|                      | Kevin M. Roche, Chairman, President and  Director |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ William R. Herrmann                           |   |
|                      | William R. Herrmann, Vice-President and  Director |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Robert Lange                                  |   |
|                      | Robert Lange, Secretary and Director              |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Robert J. Miller                              |   |
|                      | Robert J. Miller, Director                        |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Carl Benck                                    |   |
|                      | Carl Benck, Director                              |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Cal Dalton                                    |   |
|                      | Cal Dalton, Director                              |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Jerry H. Franz                                |   |
|                      | Jerry H. Franz, Director                          |
|                      |                                              |
|                      |                                              |
| Date: March 17, 2005 | /s/ Berwyn G. Westra                              |   |
|                      | Berwyn G. Westra, Director                        |

 

43

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| Date: March 17, 2005 | /s/ Lawrence Lagowski       |   |
|---------------------------|-----------------------------|--------|
|                      | Lawrence Lagowski, Director |
|                      |                        |
|                      |                        |
| Date: March 17, 2005 | /s/ Wayne Mitchell          |   |
|                      | Wayne Mitchell, Director    |

 

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