**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**




**Washington,
      D.C. 20549**




**FORM
      10-KSB**


**x**
              **Annual
                    report under Section 13 or 15(d) of the Securities Exchange Act
                    of
                    1934.**


**For
                the fiscal year ended December 31, 2007****OR**




**£**
            **Transition
                report under Section 13 or 15(d) of the Exchange
                Act.**




**For
                the transition period from ______________ to
                ______________.****Commission
                file number 333-141585**





**PRAIRIE
                CREEK ETHANOL, LLC**(Exact
                name of small business issuer as specified in its
                charter)**Iowa**
            
            **20-4956139**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (I.R.S.
                Employer Identification No.)**415
                N. Locust Street, PO Box 280, Goldfield, IA
                50542**(Address
                of principal executive offices)**(515)
                825-3161**(Issuer's
                telephone number)





Check
      whether the issuer is not required to file reports pursuant to Section 13
      or 15(d) of the Exchange Act. o





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





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. x





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).


o Yes x No





State
      issuer’s revenues for its most recent fiscal year. **None**





As
      of
      March 26, 2008, the aggregate market value of the membership units held by
      non-affiliates (computed by reference to the price at which the membership
      units
      were last sold) was $420,000.





As
      of
      March 26, 2008, there were 920 membership units outstanding.





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







**INDEX**





**Page
                No.**PART
                I
            
            
            4ITEM
                1. DESCRIPTION OF BUSINESS
            
            
            4ITEM
                1A. RISK FACTORS
            
            
            21ITEM
                2. DESCRIPTION OF PROPERTY
            
            
            29ITEM
                3. LEGAL PROCEEDINGS
            
            
            29ITEM
                4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            
            29PART
                II
            
            
            30ITEM
                5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
                BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
            
            
            30ITEM
                6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
                OPERATIONS
            
            
            31ITEM
                7. FINANCIAL STATEMENTS
            
            
            42ITEM
                8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                FINANCIAL DISCLOSURE
            
            
            49ITEM
                8A(T). CONTROLS AND PROCEDURES
            
            
            49ITEM
                8B. OTHER INFORMATION
            
            
            49PART
                III
            
            
            49ITEM
                9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND
                CORPORATE
                GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                ACT
            
            
            49ITEM
                10. EXECUTIVE COMPENSATION
            
            
            52ITEM
                11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND
                RELATED STOCKHOLDER MATTERS
            
            
            52ITEM
                12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                INDEPENDENCE
            
            
            53ITEM
                13. EXHIBITS
            
            
            55ITEM
                14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
            
            
            56SIGNATURES
            
            
            57




2


**FORWARD
      LOOKING STATEMENTS**





Some
      of
      the statements in this report may contain forward-looking statements that
      reflect our current view on future events, future business, industry and other
      conditions, our future performance, and our plans and expectations for future
      operations and actions. In some cases you can identify forward-looking
      statements by the use of words such as “may,” “should,” “anticipate,” “believe,”
“expect,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,”
“potential,” “continue,” or the negative of these terms or other similar
      expressions. Many of these forward-looking statements are located in this report
      under Item 1, “Description of Business,” and Item 6, “Management’s
      Discussion and Analysis or Plan of Operations,” but they may appear in other
      sections as well.





These
      forward-looking statements are only our predictions and involve numerous
      assumptions, risks and uncertainties. Important factors that could significantly
      affect our assumptions, plans, anticipated actions and future financial and
      other results include, among others, those matters set forth in the section
      of
      this report in Item 1A—“Risk Factors.” You are urged to consider all of
      those risk factors when evaluating any forward-looking statement, and we caution
      you not to put undue reliance on any forward-looking statements.





You
      should read this report thoroughly with the understanding that our actual
      results may differ materially from those set forth in the forward-looking
      statements for many reasons, including events beyond our control and assumptions
      that prove to be inaccurate or unfounded. We cannot provide any assurance with
      respect to our future performance or results. Our actual results or actions
      may
      differ materially from these forward-looking statements for many reasons,
      including the following factors:





·
            Investors’
                ability to pay the outstanding balances on promissory notes after
                the
                closing of the offering;·
            Our
                ability to obtain the debt financing necessary to construct and operate
                our plant;·
            Changes
                in our business strategy, capital improvements or development
                plans;·
            Construction
                delays and technical difficulties in constructing the
                plant;·
            Changes
                in the environmental regulations that apply to our plant site and
                operations;·
            Changes
                in general economic conditions or the occurrence of certain events
                causing
                an economic impact in the agriculture, oil or automobile
                industries;·
            Changes
                in the availability and price of corn and natural gas and the market
                for
                ethanol and distillers grains;·
            Changes
                in federal and/or state laws (including the elimination of any federal
                and/or state ethanol tax incentives);·
            Changes
                and advances in ethanol production technology; and·
            Competition
                from alternative fuel additives.





Our
      actual results or actions could and likely will differ materially from those
      anticipated in the forward-looking statements for many reasons, including the
      reasons described in this report. We are not under any duty to update the
      forward-looking statements contained in this report. We cannot guarantee future
      results, levels of activity, performance or achievements. We caution you not
      to
      put undue reliance on any forward-looking statements, which speak only as of
      the
      date of this report. You should read this report and the documents that we
      reference in this report and have filed as exhibits completely and with the
      understanding that our actual future results may be materially different from
      what we currently expect. We qualify all of our forward-looking statements
      by
      these cautionary statements.




3





**AVAILABLE
      INFORMATION**





Information
      about us is also available at our website at *www.prairiecreekethanol.com* ,
      under
“Investing,” which includes links to reports we have filed with the Securities
      and Exchange Commission. The contents of our website are not incorporated by
      reference in this Annual Report on Form 10-KSB.





**PART
      I**





**ITEM
      1. DESCRIPTION OF BUSINESS.**





**Business
      Development**





Prairie
      Creek Ethanol, LLC is a development stage Iowa limited liability company formed
      on April 19, 2006. Our business plan is to raise capital to develop, construct,
      own and operate a 55 million gallon dry mill corn-based ethanol plant near
      Wesley, Iowa, which is approximately 130 miles northwest of Des Moines, Iowa.
      Based upon engineering specifications from Fagen, Inc., we expect the ethanol
      plant to process approximately 19.7 million bushels of corn per year into
      approximately 55 million gallons of denatured fuel grade ethanol and
      approximately 149,000 tons of dried distillers grains. We also expect to produce
      approximately 3.5 million gallons of corn oil annually.





We
      are
      financing the development and construction of the ethanol plant with a
      combination of equity and debt.  Through private placements, we raised
      aggregate proceeds of $1,580,000 to fund our development, organizational and
      offering expenses.




We
      filed
      a Registration Statement for an initial public offering of our units with the
      Securities and Exchange Commission on Form SB-2 (SEC Registration
      No. 333-141585), as amended, which first became effective on September 21,
      2007.  We later made changes to the terms of our offering and filed a
      post-effective amendment to our registration statement, which became effective
      on January 23, 2008. We also registered these units with the state securities
      authorities in Florida, Illinois, Iowa, Kansas, Missouri, South Dakota and
      Wisconsin.  We plan to raise a minimum of $36,000,000 and a maximum of
      $85,000,000 in the offering and secure the balance needed to construct the
      plant
      primarily through debt financing.





After
      our
      offering first became effective on September 21, 2007, we made the following
      changes to our offering: (i) our proposed ethanol plant will have a production
      capacity of 55 million gallons per year rather than 100 million gallons per
      year; (ii) our total project cost is now estimated to be $121,000,000 rather
      than $196,250,000; (iii) we are seeking to raise a minimum of $36,000,000 and
      a
      maximum of $85,000,000, rather than a minimum of $59,000,000 and a maximum
      of
      $138,000,000; and (iv) we now expect to utilize corn oil extraction technology
      to extract corn oil as a co-product of the ethanol production process. We
      rejected all the subscriptions we had received pursuant to our prospectus dated
      September 21, 2007 and returned all funds that had been remitted to our escrow
      agent, along with nominal interest, in late December 2007 and early January
      2008. We then filed a post-effective amendment to our registration statement
      containing the changes discussed above, which became effective on January 23,
      2008.




As
      of
      March 26, 2008, we have received subscriptions for approximately 881 units,
      for
      an aggregate amount of approximately $4,405,000.  However, we have not yet
      closed the offering, accepted any of the subscription agreements or released
      funds from escrow. Our offering will close no later than September 21,
      2008.  We will require a significant amount of debt financing to complete
      our project.  We will not release funds from escrow until we have obtained
      a commitment for the necessary debt financing. We are engaging in discussions
      with potential senior lenders; however, no agreement has been executed yet.
      If
      we do not secure the necessary debt financing, we will not be able to construct
      our proposed ethanol plant and may have to abandon our business.





On
      December 28, 2007 we redeemed 603 of our founders’ units for $0.01 per unit as
      part of our capitalization strategy. The purpose of this redemption was to
      reduce the dilution impact to investors in our registered offering following
      the
      changes to our estimated total project cost discussed above.




4





We
      have
      executed a letter of intent with Fagen, Inc. for the design and construction
      of
      our proposed ethanol plant for a price of approximately $81,900,000, which
      does
      not include the anticipated cost of a water treatment facility which we intend
      to construct, the fire protection system we intend to construct, any change
      orders, increases in the costs of materials, the monthly surcharge, or the
      early
      completion bonus agreed to in our letter of intent. The contract price may
      be
      increased if the construction cost index (“CCI”) published by Engineering
      News-Record Magazine is greater than 7,879.54 in the month in which we issue
      to
      Fagen, Inc., a notice to proceed with plant construction. The amount of the
      contract price increase will be equal to the percentage increase in the CCI
      based upon the February 2007 CCI of 7,879.54. If the CCI increases above that
      level in the month in which we issue to Fagen, Inc. a notice to proceed with
      plant construction, the contract price will accordingly increase. Additionally,
      the contract price is subject to a surcharge of one-half of one percent (0.5%)
      for each calendar month that passes between February 2007 and the month in
      which
      we issue to Fagen, Inc., a notice to proceed with plant construction. Since
      approximately thirteen months have passed between February 2007 and the date
      we
      are filing this report, this means that the contract price will be increased
      by
      a minimum of 6.5%, or approximately $5,323,500. Finally, Fagen, Inc. will be
      entitled to an early completion bonus of $10,000 per day (not to exceed
      $1,000,000) for each day that substantial completion of the ethanol plant occurs
      in advance of 425 days after the date we issue a notice to proceed with plant
      construction. Thus, we have allowed for a $10,500,000 contingency in our total
      estimated costs of the project.





We
      are
      still in the development phase, and until the ethanol plant is operational,
      we
      will generate no revenue. We have incurred accumulated losses and we anticipate
      that accumulated losses will continue to increase until the ethanol plant is
      operational.  Since we have not yet become operational, we do not yet have
      comparable income, production or sales data.





**Business
      of Issuer**





***Principal
      Products and Markets***





The
      principal products we anticipate producing at the plant are fuel-grade ethanol,
      distillers grains and corn oil. Once constructed, we expect the ethanol
      plant to process approximately 19.7 million bushels of corn per year into
      approximately 55 million gallons of denatured ethanol, approximately 149,000
      tons of dried distillers grains and approximately 3.5 million gallons of corn
      oil annually.





***Ethanol***




Ethanol
      is ethyl alcohol, a fuel component made primarily from corn and various other
      grains.  According to the Renewable Fuels Association, approximately
      85 percent of ethanol in the United States today is produced from corn, and
      approximately 90 percent of ethanol is produced from a corn and other input
      mix. The ethanol we expect to produce is manufactured from corn.  Corn
      produces large quantities of carbohydrates, which convert into glucose more
      easily than most other kinds of biomass. The Renewable Fuels Association
      estimates current annual domestic ethanol production capacity at approximately
      8.31 billion gallons as of March 17, 2008.




An
      ethanol plant is essentially a fermentation plant.  Ground corn and water
      are mixed with enzymes and yeast to produce a substance called “beer,” which
      contains about 10% alcohol and 90% water.  The “beer” is boiled to separate
      the water, resulting in ethyl alcohol, which is then dehydrated to increase
      the
      alcohol content.  This product is then mixed with a certified denaturant to
      make the product unfit for human consumption and commercially
      saleable.




Ethanol
      can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated
      fuel additive for the purpose of reducing ozone and carbon monoxide vehicle
      emissions; and (iii) a non-petroleum-based gasoline substitute. 
Approximately 95% of all ethanol is used in its primary form for blending with
      unleaded gasoline and other fuel products.  Used as a fuel oxygenate,
      ethanol provides a means to control carbon monoxide emissions in large
      metropolitan areas.  The principal purchasers of ethanol are generally the
      wholesale gasoline marketer or blender.  The principal markets for our
      ethanol are petroleum terminals in the continental United States.




5




***Distillers
      Grains***




The
      principal co-product of the ethanol production process is distillers grains,
      a
      high protein, high-energy animal feed supplement primarily marketed to the
      dairy, beef, poultry and swine industries.  Distillers grains contain
      by-pass protein that is superior to other protein supplements such as cottonseed
      meal and soybean meal.  By-pass proteins are more digestible to the animal,
      thus generating greater lactation in milk cows and greater weight gain in beef
      cattle.  Dry mill ethanol processing creates three forms of distiller
      grains: Distillers Wet Grains with Solubles (“DWS”), Distillers Modified Wet
      Grains with Solubles (“DMWS”) and Distillers Dried Grains with Solubles
      (“DDGS”).  DWS is processed corn mash that contains approximately 70%
      moisture.  DWS has a shelf life of approximately three days and can be sold
      only to farms within the immediate vicinity of an ethanol plant.  DMWS is
      DWS that has been dried to approximately 50% moisture.  DMWS have a
      slightly longer shelf life of approximately ten days and are often sold to
      nearby markets.  DDGS is DWS that has been dried to 10% to 12%
      moisture.  DDGS has an almost indefinite shelf life and may be sold and
      shipped to any market regardless of its vicinity to an ethanol
      plant.





***Corn
      Oil***





Corn
      oil
      can be produced as a co-product of ethanol production by installing equipment
      to
      separate the oil from the distillers grains during the production process. 
Corn oil in its raw form can be used as livestock feed, as a fuel under certain
      operating conditions, refined into bio-diesel fuel, or refined for human
      consumption. Specific details regarding market penetration into human food
      are
      unknown at this time since corn oil extraction in a dry mill situation such
      as
      ours is a relatively new process and its suitability for human consumption
      has
      not been fully determined.





***Ethanol
      and Distillers Grains Markets and Distribution***




***Ethanol
      Markets***





As
      described below in “ *Distribution
      of Principal Products* ,”
we
      intend to market and distribute our ethanol through third
      parties. The
      principal purchasers of ethanol are generally the wholesale gasoline marketer
      or
      blender. The principal markets for our ethanol are petroleum terminals in the
      continental United States. We may also attempt to access local markets, but
      these will be limited and must be evaluated on a case-by-case
      basis.





We
      intend
      to serve regional and national markets by rail. Because ethanol use results
      in
      less air pollution than regular gasoline, regional and national markets
      typically include large cities that are subject to anti-smog measures in either
      carbon monoxide or ozone non-attainment areas. We expect to reach these markets
      by delivering ethanol to terminals which will then blend the ethanol into E10
      and E85 gasoline and transport the blended gasoline to retail outlets in these
      markets. We believe that regional pricing tends to follow national pricing
      less
      the freight difference. We have not yet discussed or negotiated the terms of
      an
      ethanol marketing agreement with any ethanol marketing company.





***Distillers
      Grains Markets***





We
      intend
      to market and distribute our distillers grains through third parties. The
      primary consumers of distillers grains are dairy and beef cattle. In recent
      years, an increasing amount of distillers grains has been used in the swine
      and
      poultry markets. With the advancement of research into the feeding rations
      of
      poultry and swine, we expect these markets to expand and create additional
      demand for distillers grains; however, no assurance can be given that these
      markets will in fact expand, or if they do, that we will benefit from it. The
      market for distillers grains is generally confined to locations where freight
      costs allow it to be competitively priced against other feed ingredients.
      Distillers grains competes with three other feed formulations: corn gluten
      feed,
      dry brewers grain and mill feeds. The primary value of these products as animal
      feed is their protein content. Dry brewers grain and distillers grains have
      about the same protein content, and corn gluten feed and mill feeds have
      slightly lower protein contents.




6





As
      with
      ethanol, the distillers grains markets are both regional and national. These
      national markets are just emerging, primarily in the southeastern and
      southwestern United States, where significant dairy and poultry operations
      are
      located. In addition, there is the possibility of some local marketing. Local
      markets are very limited and highly competitive for the use of distillers
      grains. We plan to initially market our distillers grains to the local livestock
      markets surrounding the plant; however, if the local livestock markets prove
      insufficient to absorb our distillers grains at the prices we desire, we will
      engage a company to market our distillers grains nationally. We have not yet
      discussed or negotiated the terms of a distillers grains marketing agreement
      with any distillers grains marketing company.





**New
      Products and Services**




We
      have
      not introduced any new products or services during this fiscal
      year.





**Federal
      Ethanol Supports and Governmental Regulation**




***Federal
      Ethanol Supports***




*Energy
      Independence and Security Act of 2007*




The
      ethanol industry is heavily dependent on several economic incentives to produce
      ethanol, including federal ethanol supports.  The most recent ethanol
      supports are contained in the Energy Independence and Security Act of 2007
      (the
“2007 Act”), which was signed into law on December 19, 2007.  This
      legislation amends the Renewable Fuels Standard (RFS), a national flexible
      program, which was enacted as part of the Energy Policy Act of 2005.  Under
      the Energy Policy Act of 2005, the RFS required refiners to use 4.7 billion
      gallons of renewable fuels in 2007, increasing to 7.5 billion gallons by
      2012.  The Renewable Fuels Association estimates that domestic ethanol
      production, as of March 2008, was approximately 8.31billion gallons.  This
      rapid increase in production has placed downward pressure on the price of
      ethanol as demand has struggled to keep pace with the increase in
      supply.   The new 2007 Act expands the existing RFS to require the use
      of 9 billion gallons of renewable fuel in 2008, increasing to 36 billion gallons
      of renewable fuel by 2022.  With the exception of the 2008 RFS of 9 billion
      gallons, the 2007 Act will take effect on January 1, 2009.




Only
      a
      portion of the renewable fuel used to satisfy the expanded RFA may come from
      conventional corn-based ethanol.  The 2007 Act requires that 600 million
      gallons of renewable fuel used in 2009 come from advanced biofuels, such as
      ethanol derived from cellulose, sugar, or crop residue and biomass-based diesel,
      increasing to 21 billion gallons in 2022.  The 2007 Act further includes a
      requirement that 500 million gallons of biodiesel and biomass-based diesel
      fuel
      be blended into the national diesel pool in 2009, gradually increasing to 1
      billion gallons by 2012.  While the provisions in the 2007 Act are intended
      to stimulate an increase in the usage and price of ethanol, there is no
      guarantee or assurance that this legislation will have the desired impact on
      the
      ethanol industry.




The
      2007
      Act also authorizes several grants for the advancement of the renewable fuels
      industry.  It authorizes $500 million annually for 2008 to 2015 for the
      production of advanced biofuels that have at least an 80% reduction in GHG
      emissions.  In addition, it authorizes $25 million annually in 2008 through
      2010 for research and development and commercial application of biofuels
      production in states with low rates of ethanol and cellulosic ethanol
      production.  Further, $200 million annually is authorized for 2008 through
      2014 for infrastructure grants for the installation of E85 fuel pumps. 
Funding is also dedicated for government departments to conduct studies on
      the
      feasibility of constructing a dedicated ethanol pipeline, the adequacy of rail
      transportation of renewable fuel and the impact of the RFS program on various
      industries such as the livestock and food industry.  As enacted, the 2007
      Act’s provisions did not include any new tax incentives for the production or
      use of renewable fuels; however, remaining tax incentives explained below remain
      in force.




The
      2007
      Act also contained extensive fuel efficiency standards, which management
      believes may contribute to the increased use of renewable fuels. 
Automakers will be required to achieve an industry-wide average fuel efficiency
      of 35 miles per gallon by 2020 for cars, sport utility vehicles and light
      trucks.




7




*Clean
      Air Act*




Historically,
      ethanol sales have also been favorably affected by the Clean Air Act amendments
      of 1990, particularly the Federal Oxygen Program which became effective
      November 1, 1992.  The Federal Oxygen Program requires the sale of
      oxygenated motor fuels during the winter months in certain major metropolitan
      areas to reduce carbon monoxide pollution.  Ethanol use has increased due
      to a second Clean Air Act program, the Reformulated Gasoline Program.  This
      program became effective January 1, 1995, and requires the sale of
      reformulated gasoline in nine major urban areas to reduce pollutants, including
      those that contribute to ground level ozone, better known as smog.  The two
      major oxygenates added to reformulated gasoline pursuant to these programs
      are
      MTBE and ethanol; however, MTBE has caused groundwater contamination and has
      been banned from use by many states.  Although the Energy Policy Act of
      2005 did not impose a national ban of MTBE, its failure to include liability
      protection for manufacturers of MTBE has resulted in refiners and blenders
      using
      ethanol almost exclusively as an oxygenate rather than MTBE to satisfy the
      reformulated gasoline oxygenate requirement, according to the Environmental
      Protection Agency.  While this may create increased demand in the short
      term, we do not expect this to have a long term impact on the demand for
      ethanol, as the Energy Policy Act repealed the Clean Air Act’s 2% oxygenate
      requirement for reformulated gasoline.  However, the Energy Policy Act did
      not repeal the 2.7% oxygenate requirement for carbon monoxide non-attainment
      areas, which are required to use oxygenated fuels in the winter months. 
While we expect ethanol to be the oxygenate of choice in these areas, there
      is
      no assurance that ethanol will in fact be used.




The
      voluntary shift away from MTBE to ethanol has put increased focus on America’s
      ethanol and gasoline supplies.  By removing the oxygenate requirements
      mandated by the Clean Air Act, the Energy Policy Act of 2005 effectively
      eliminated RFG requirements; however, federal air quality laws in some areas
      of
      the country still require the use of RFG.  As petroleum blenders now phase
      away from MTBE due to environmental liability concerns, the demand for ethanol
      as an oxygenate could increase.  However, on April 25, 2006, President
      Bush announced that he asked EPA Administrator Stephen Johnson to grant
      temporary reformulated gas waivers to areas that need them to relieve critical
      fuel supply shortages.  Such waivers may result in temporary decreases in
      demand for ethanol in some regions, driving down the price of
      ethanol.




*Volumetric
      Ethanol Excise Tax Credit*




The
      use
      of ethanol as an alternative fuel source has been aided by federal tax
      policy.  On October 22, 2004, President Bush signed H.R. 4520, which
      contained the Volumetric Ethanol Excise Tax Credit (VEETC) and amended the
      federal excise tax structure effective as of January 1, 2005.  Prior
      to VEETC, ethanol-blended fuel was taxed at a lower rate than regular gasoline
      ($0.132 on a 10% blend).  Under VEETC, the ethanol excise tax exemption has
      been eliminated, thereby allowing the full federal excise tax of $0.184 per
      gallon of gasoline to be collected on all gasoline and allocated to the highway
      trust fund.  This is expected to add approximately $1.4 billion to the
      highway trust fund revenue annually.  In place of the exemption, the bill
      creates a new volumetric ethanol excise tax credit of $0.51 per gallon of
      ethanol blended with gasoline.  Refiners and gasoline blenders apply for
      this credit on the same tax form as before only it is a credit from general
      revenue, not the highway trust fund.  Based on volume, the VEETC is
      expected to allow much greater refinery flexibility in blending ethanol since
      it
      makes the tax credit available on all ethanol blended with all gasoline, diesel
      and ethyl tertiary butyl ether (ETBE), including ethanol in E85.  The VEETC
      is scheduled to expire on December 31, 2010.  Legislation has been
      introduced in Congress that may remove the sunset provisions of the VEETC,
      thereby making it a permanent tax credit; however, we cannot assure you that
      this legislation will be adopted.




*Small
      Ethanol Producer Tax Credit*




The
      Energy Policy Act of 2005 expanded who qualifies for the small ethanol producer
      tax credit.  Historically, small ethanol producers were allowed a 10-cent
      per gallon production income tax credit on up to 15 million gallons of
      production annually.  The size of the plant eligible for the tax credit was
      limited to 30 million gallons.  Under the Energy Policy Act of 2005, the
      size limitation on the production capacity for small ethanol producers increased
      from 30 million to 60 million gallons.  The credit can be taken on the
      first 15 million gallons of production.  The tax credit is capped at $1.5
      million per year per producer.  The small producer tax credit is scheduled
      to expire on December 31, 2010. We expect that due to our expected capacity
      of 55 million gallons per year, we may qualify for this tax credit. 
However, we may not be able to take advantage of the credit if it expires before
      we our plant is operational.   Legislation has been introduced in
      Congress that may extend this tax credit, but we cannot assure you that this
      legislation will be adopted.




8




In
      addition, the Energy Policy Act of 2005 created a tax credit that permits
      taxpayers to claim a 30% credit (up to $30,000) for the cost of installing
      clean-fuel vehicle refueling equipment, such as an E85 fuel pump, to be used
      in
      a trade or business of the taxpayer or installed at the principal residence
      of
      the taxpayer. Under the provision, clean fuels are any fuel of at least 85%
      of
      the volume of which consists of ethanol, natural gas, compressed natural gas,
      liquefied natural gas, liquefied petroleum gas, and hydrogen and any mixture
      of
      diesel fuel and biodiesel containing at least 20% biodiesel.  The provision
      is effective for equipment placed in service on, or after, January 9, 2007
      and before January 1, 2010. While it is unclear how this credit will affect
      the demand for ethanol in the short term, we expect it will help raise consumer
      awareness of alternative sources of fuel and could positively impact future
      demand for ethanol.




***Effect
      of Governmental Regulation***




The
      ethanol industry and our business depend upon the continuation of the federal
      ethanol supports discussed above.  These incentives have supported a market
      for ethanol that might disappear without these incentives.  It is possible
      that these incentives could be continued at lower levels than at which they
      currently exist.  The elimination or reduction of such federal ethanol
      supports would make it more costly for us to sell our ethanol once we are
      operational and would likely reduce our net income and negatively impact our
      future financial performance.




The
      government’s regulation of the environment changes constantly.  We are
      subject to extensive air, water and other environmental regulations and we
      are
      required to obtain a number of environmental permits to construct and operate
      the plant.  It is possible that more stringent federal or state
      environmental rules or regulations could be adopted, which could increase
      our operating costs and expenses.  It also is possible that federal or
      state environmental rules or regulations could be adopted that could have
      an adverse effect on the use of ethanol.  For example, changes in the
      environmental regulations regarding the required oxygen content of automobile
      emissions could have an adverse effect on the ethanol industry. 
Furthermore, plant operations likely will be governed by the Occupational Safety
      and Health Administration (“OSHA”).  OSHA regulations may change such that
      the costs of the operation of the plant may increase.  Any of these
      regulatory factors may result in higher costs or other materially adverse
      conditions effecting our operations, cash flows and financial
      performance.





**Competition**




We
      will
      be in direct competition with numerous other ethanol producers, many of whom
      have greater resources than we do. We also expect that additional ethanol
      producers will enter the market if the demand for ethanol continues to
      increase.  Ethanol is a commodity product, like corn, which means our
      ethanol plant competes with other ethanol producers on the basis of price and,
      to a lesser extent, delivery service.  We expect to compete favorably with
      other ethanol producers due to our proximity to ethanol markets and multiple
      modes of transportation.  In addition, we believe our plant’s location
      offers an advantage over other ethanol producers in that it has ready access
      by
      rail to growing ethanol markets, which may reduce our cost of
      sales.




Ethanol
      production continues to grow rapidly as additional plants and plant expansions
      become operational. According to the Renewable Fuels Association, as of March
      17, 2008, 145 ethanol plants were producing ethanol with a combined annual
      production capacity of approximately 8.31 billion gallons per year and current
      expansions and plants under construction constituted an additional future
      production capacity of approximately 5.10 billion gallons per year.  POET
      and ADM control a significant portion of the ethanol market, producing an
      aggregate of over 2.2 billion gallons of ethanol annually.  POET plans to
      produce an additional 327 million gallons of ethanol per year and ADM plans
      to
      produce an additional 550 million gallons of ethanol per year through plant
      expansions, which will strengthen their positions in the ethanol industry and
      cause a significant increase in domestic ethanol supply. In addition, in late
      November 2007, VeraSun Energy Corporation and US Bio Energy Corp. announced
      that they entered into a merger agreement which is expected to close during
      the
      first quarter of 2008.  The new entity will retain the VeraSun name and, by
      the end of 2008, is expected to own 16 ethanol facilities with a total
      production capacity of more than 1.6 billion gallons per year, which would
      make
      it one of the largest ethanol producers in the country.




9




Excess
      capacity in the ethanol industry may have an adverse effect on our results
      of
      operations, cash flows and financial condition.  In a manufacturing
      industry with excess capacity, producers have an incentive to manufacture
      additional products for so long as the price exceeds the marginal cost of
      production (i.e., the cost of producing only the next unit, without regard
      to
      interest, overhead or fixed costs).  This incentive can result in the
      reduction of the market price of ethanol to a level that is inadequate to
      generate sufficient cash flow to cover costs.  If the demand for ethanol
      does not grow at the same pace as increases in supply, we expect the price
      for
      ethanol to continue to decline.  Declining ethanol prices will result in
      lower revenues and may reduce or eliminate profits causing the value of your
      investment to be reduced.




According
      to the Renewable Fuels Association and the Nebraska Energy Office, as of
      December 2007, Iowa had 28 operational ethanol plants with the capacity to
      produce approximately 1.98 billion gallons of ethanol per year.  In
      addition, there are another 12 plants under construction and 3 plants undergoing
      an expansion, which are expected to produce an additional 1.46 billion gallons
      of ethanol per year.




We
      also
      expect that there are more entities that have been recently formed or in the
      process of formation that will begin construction on plants in Iowa and
      surrounding states and become operational in the future.  However, there is
      often little information available to the public regarding ethanol projects
      that
      are in the earlier stages of planning and development; therefore, it is
      difficult to estimate the total number of potential ethanol projects within
      our
      region.




The
      following table identifies most of the
      ethanol producers in the United States along with their production
      capacities.





**U.S.
      FUEL ETHANOL INDUSTRY BIOREFINERIES AND PRODUCTION
      CAPACITY**


**Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**Abengoa
                  Bioenergy Corp.
              
              York,
                  NE
              
              Corn/milo
              
              55Colwich,
                  KS
              
              
              
              25Portales,
                  NM
              
              
              
              30Ravenna,
                  NE
              
              
              
              88Aberdeen
                  Energy*
              
              Mina,
                  SD
              
              Corn
              
              
              
              100Absolute
                  Energy, LLC*
              
              St.
                  Ansgar, IA
              
              Corn
              
              100ACE
                  Ethanol, LLC
              
              Stanley,
                  WI
              
              Corn
              
              41Adkins
                  Energy, LLC*
              
              Lena,
                  IL
              
              Corn
              
              40Advanced
                  Bioenergy
              
              Fairmont,
                  NE
              
              Corn
              
              100AGP*
              
              Hastings,
                  NE
              
              Corn
              
              52Agri-Energy,
                  LLC*
              
              Luverne,
                  MN
              
              Corn
              
              21Al-Corn
                  Clean Fuel*
              
              Claremont,
                  MN
              
              Corn
              
              35
              
              15Amaizing
                  Energy, LLC*
              
              Denison,
                  IA
              
              Corn
              
              48Atlantic,
                  IA
              
              Corn
              
              
              
              110Archer
                  Daniels Midland
              
              Decatur,
                  IL
              
              Corn
              
              1,070
              
              550Cedar
                  Rapids, IA
              
              CornClinton,
                  IA
              
              Corn
  10
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**Columbus,
                  NE
              
              CornMarshall,
                  MN
              
              CornPeoria,
                  IL
              
              CornWallhalla,
                  ND
              
              Corn/barleyArkalon
                  Energy, LLC
              
              Liberal,
                  KS
              
              Corn
              
              110Aventine
                  Renewable Energy, LLC
              
              Pekin,
                  IL
              
              Corn
              
              207
              
              226Aurora,
                  NE
              
              CornMt.
                  Vernon, IN
              
              CornBadger
                  State Ethanol, LLC*
              
              Monroe,
                  WI
              
              Corn
              
              48Big
                  River Resources, LLC*
              
              West
                  Burlington, IA
              
              Corn
              
              52BioFuel
                  Energy - Pioneer Trail Energy, LLC
              
              Wood
                  River, NE
              
              Corn
              
              
              
              115BioFuel
                  Energy - Buffalo Lake Energy, LLC
              
              Fairmont,
                  MN
              
              Corn
              
              
              
              115Blue
                  Flint Ethanol
              
              Underwood,
                  ND
              
              Corn
              
              50Bonanza
                  Energy, LLC
              
              Garden
                  City, KS
              
              Corn/milo
              
              55Bushmills
                  Ethanol, Inc.*
              
              Atwater,
                  MN
              
              Corn
              
              40Calgren
              
              Pixley,
                  CA
              
              Corn
              
              
              
              55Cardinal
                  Ethanol
              
              Harrisville,
                  IN
              
              Corn
              
              
              
              100Cargill,
                  Inc.
              
              Blair,
                  NE
              
              Corn
              
              85Eddyville,
                  IA
              
              Corn
              
              35
 Cascade
                  Grain
              
              Clatskanie,
                  OR
              
              Corn
              
              
              
              108Castle
                  Rock Renewable Fuels, LLC
              
              Necedah,
                  WI
              
              Corn
              
              
              
              50Celunol
              
              Jennings,
                  LA
              
              Sugar
                  cane bagasse
              
              
              
              1.5Center
                  Ethanol Company
              
              Sauget,
                  IL
              
              Corn
              
              
              
              54Central
                  Indiana Ethanol, LLC
              
              Marion,
                  IN
              
              Corn
              
              40Central
                  MN Ethanol Coop*
              
              Little
                  Falls, MN
              
              Corn
              
              21.5Chief
                  Ethanol
              
              Hastings,
                  NE
              
              Corn
              
              62Chippewa
                  Valley Ethanol Co.*
              
              Benson,
                  MN
              
              Corn
              
              45Cilion
                  Ethanol
              
              Keyes,
                  CA
              
              Corn
              
              
              
              50Commonwealth
                  Agri-Energy, LLC*
              
              Hopkinsville,
                  KY
              
              Corn
              
              33Corn,
                  LP*
              
              Goldfield,
                  IA
              
              Corn
              
              50Cornhusker
                  Energy Lexington, LLC
              
              Lexington,
                  NE
              
              Corn
              
              40Corn
                  Plus, LLP*
              
              Winnebago,
                  MN
              
              Corn
              
              44Coshoctan
                  Ethanol, OH
              
              Coshoctan,
                  OH
              
              Corn
              
              60Dakota
                  Ethanol, LLC*
              
              Wentworth,
                  SD
              
              Corn
              
              50DENCO,
                  LLC
              
              Morris,
                  MN
              
              Corn
              
              21.5
  11
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**
 E
                  Energy Adams, LLC
              
              Adams,
                  NE
              
              Corn
              
              50E
                  Caruso (Goodland Energy Center)
              
              Goodland,
                  KS
              
              Corn
              
              
              
              20East
                  Kansas Agri-Energy, LLC*
              
              Garnett,
                  KS
              
              Corn
              
              35Elkhorn
                  Valley Ethanol, LLC
              
              Norfolk,
                  NE
              
              Corn
              
              40ESE
                  Alcohol Inc.
              
              Leoti,
                  KS
              
              Seed
                  corn
              
              1.5Ethanol
                  Grain Processors, LLC
              
              Obion,
                  TN
              
              Corn
              
              
              
              100First
                  United Ethanol, LLC (FUEL)
              
              Mitchell
                  Co., GA
              
              Corn
              
              
              
              100Front
                  Range Energy, LLC
              
              Windsor,
                  CO
              
              Corn
              
              40Gateway
                  Ethanol
              
              Pratt,
                  KS
              
              Corn
              
              55Glacial
                  Lakes Energy, LLC*
              
              Watertown,
                  SD
              
              Corn
              
              100Global
                  Ethanol/Midwest Grain Processors
              
              Lakota,
                  IA
              
              Corn
              
              95Riga,
                  MI
              
              Corn
              
              57
 Golden
                  Cheese Company of California*
              
              Corona,
                  CA
              
              Cheese
                  whey
              
              5Golden
                  Grain Energy, LLC*
              
              Mason
                  City, IA
              
              Corn
              
              110
              
              50Golden
                  Triangle Energy, LLC*
              
              Craig,
                  MO
              
              Corn
              
              20Grand
                  River Distribution
              
              Cambria,
                  WI
              
              Corn
              
              
              
              40Grain
                  Processing Corp.
              
              Muscatine,
                  IA
              
              Corn
              
              20Granite
                  Falls Energy, LLC*
              
              Granite
                  Falls, MN
              
              Corn
              
              52Greater
                  Ohio Ethanol, LLC
              
              Lima,
                  OH
              
              Corn
              
              
              
              54Green
                  Plains Renewable Energy
              
              Shenandoah,
                  IA
              
              Corn
              
              50Superior,
                  IA
              
              Corn
              
              
              
              50
 Hawkeye
                  Renewables, LLC
              
              Iowa
                  Falls, IA
              
              Corn
              
              105Fairbank,
                  IA
              
              Corn
              
              115Menlo,
                  IA
              
              Corn
              
              
              
              100Shell
                  Rock, IA
              
              Corn
              
              
              
              110Heartland
                  Corn Products*
              
              Winthrop,
                  MN
              
              Corn
              
              100Heartland
                  Grain Fuels, LP*
              
              Aberdeen,
                  SD
              
              Corn
              
              9Huron,
                  SD
              
              Corn
              
              12
              
              18Heron
                  Lake BioEnergy, LLC
              
              Heron
                  Lake, MN
              
              Corn
              
              
              
              50Holt
                  County Ethanol
              
              O'Neill,
                  NE
              
              Corn
              
              
              
              100Husker
                  Ag, LLC*
              
              Plainview,
                  NE
              
              Corn
              
              26.5Idaho
                  Ethanol Processing
              
              Caldwell,
                  ID
              
              Potato
                  Waste
              
              4Illinois
                  River Energy, LLC
              
              Rochelle,
                  IL
              
              Corn
              
              50Indiana
                  Bio-Energy
              
              Bluffton,
                  IN
              
              Corn
              
              
              
              101Iroquois
                  Bio-Energy Company, LLC
              
              Rensselaer,
                  IN
              
              Corn
              
              40KAAPA
                  Ethanol, LLC*
              
              Minden,
                  NE
              
              Corn
              
              40
  12
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**
 Kansas
                  Ethanol, LLC
              
              Lyons,
                  KS
              
              Corn
              
              
              
              55KL
                  Process Design Group
              
              Upton,
                  WY
              
              Wood
                  waste
              
              1.5Land
                  O' Lakes*
              
              Melrose,
                  MN
              
              Cheese
                  whey
              
              2.6Levelland/Hockley
                  County Ethanol, LLC
              
              Levelland,
                  TX
              
              Corn
              
              40Lifeline
                  Foods, LLC
              
              St.
                  Joseph, MO
              
              Corn
              
              40Lincolnland
                  Agri-Energy, LLC*
              
              Palestine,
                  IL
              
              Corn
              
              48Lincolnway
                  Energy, LLC*
              
              Nevada,
                  IA
              
              Corn
              
              50Little
                  Sioux Corn Processors, LP*
              
              Marcus,
                  IA
              
              Corn
              
              52Marquis
                  Energy, LLC
              
              Hennepin,
                  IL
              
              Corn
              
              
              
              100Marysville
                  Ethanol, LLC
              
              Marysville,
                  MI
              
              Corn
              
              
              
              50Merrick
                  & Company
              
              Golden,
                  CO
              
              Waste
                  beer
              
              3MGP
                  Ingredients, Inc.
              
              Pekin,
                  IL
              
              Corn/wheat
                  starch
              
              78Atchison,
                  KSMid
                  America Agri Products/Wheatland
              
              Madrid,
                  NE
              
              Corn
              
              
              
              44Mid
                  America Agri Products/Horizon
              
              Cambridge,
                  NE
              
              Corn
              
              
              
              44Mid-Missouri
                  Energy, Inc.*
              
              Malta
                  Bend, MO
              
              Corn
              
              45Midwest
                  Renewable Energy, LLC
              
              Sutherland,
                  NE
              
              Corn
              
              25Minnesota
                  Energy*
              
              Buffalo
                  Lake, MN
              
              Corn
              
              18NEDAK
                  Ethanol
              
              Atkinson,
                  NE
              
              Corn
              
              
              
              44New
                  Energy Corp.
              
              South
                  Bend, IN
              
              Corn
              
              102North
                  Country Ethanol, LLC*
              
              Rosholt,
                  SD
              
              Corn
              
              20Northeast
                  Biofuels
              
              Volney,
                  NY
              
              Corn
              
              
              
              114Northwest
                  Renewable, LLC
              
              Longview,
                  WA
              
              Corn
              
              
              
              55Otter
                  Tail Ag Enterprises
              
              Fergus
                  Falls, MN
              
              Corn
              
              
              
              57.5Pacific
                  Ethanol
              
              Madera,
                  CA
              
              Corn
              
              40Boardman,
                  OR
              
              Corn
              
              40Burley,
                  ID
              
              Corn
              
              
              
              50Stockton,
                  CA
              
              Corn
              
              
              
              50Panda
                  Ethanol
              
              Hereford,
                  TX
              
              Corn/milo
              
              
              
              115Parallel
                  Products
              
              Louisville,
                  KY
              
              Beverage
                  waste
              
              5.4R.
                  Cucamonga, CAPatriot
                  Renewable Fuels, LLC
              
              Annawan,
                  IL
              
              Corn
              
              
              
              100Penford
                  Products
              
              Cedar
                  Rapids, IA
              
              Corn
              
              
              
              45Phoenix
                  Biofuels
              
              Goshen,
                  CA
              
              Corn
              
              25
  13
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**
 Pinal
                  Energy, LLC
              
              Maricopa,
                  AZ
              
              Corn
              
              55Pine
                  Lake Corn Processors, LLC*
              
              Steamboat
                  Rock, IA
              
              Corn
              
              20Platinum
                  Ethanol, LLC*
              
              Arthur,
                  IA
              
              Corn
              
              
              
              110Plymouth
                  Ethanol, LLC*
              
              Merrill,
                  IA
              
              Corn
              
              
              
              50POET
              
              Sioux
                  Falls, SD
              
              
              
              1,208
              
              327Alexandria,
                  IN
              
              Corn
              
              
              
              #Ashton,
                  IA
              
              CornBig
                  Stone, SD
              
              CornBingham
                  Lake, MN CornCaro,
                  MI
              
              CornChancellor,
                  SD
              
              CornCoon
                  Rapids, IA
              
              CornCorning,
                  IA
              
              CornEmmetsburg,
                  IA
              
              CornFostoria,
                  OH
              
              Corn
              
              
              
              #Glenville,
                  MN
              
              CornGowrie,
                  IA
              
              CornGroton,
                  SD
              
              CornHanlontown,
                  IA
              
              CornHudson,
                  SD
              
              CornJewell,
                  IA
              
              CornLaddonia,
                  MO
              
              CornLake
                  Crystal, MN
              
              CornLeipsic,
                  OH
              
              CornMacon,
                  MO
              
              CornMarion,
                  OH
              
              Corn
              
              
              
              #Mitchell,
                  SD
              
              CornNorth
                  Manchester, IN
              
              Corn
              
              
              
              #Portland,
                  IN
              
              CornPreston,
                  MN
              
              CornScotland,
                  SD
              
              CornPrairie
                  Horizon Agri-Energy, LLC
              
              Phillipsburg,
                  KS
              
              Corn
              
              40Quad-County
                  Corn Processors*
              
              Galva,
                  IA
              
              Corn
              
              27Range
                  Fuels
              
              Soperton,
                  GA
              
              Wood
                  waste
              
              
              
              20Red
                  Trail Energy, LLC
              
              Richardton,
                  ND
              
              Corn
              
              50
  14
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**
 Redfield
                  Energy, LLC *
              
              Redfield,
                  SD
              
              Corn
              
              50Reeve
                  Agri-Energy
              
              Garden
                  City, KS
              
              Corn/milo
              
              12Renew
                  Energy
              
              Jefferson
                  Junction, WI
              
              Corn
              
              130Siouxland
                  Energy & Livestock Coop*
              
              Sioux
                  Center, IA
              
              Corn
              
              60Siouxland
                  Ethanol, LLC
              
              Jackson,
                  NE
              
              Corn
              
              50Southwest
                  Iowa Renewable Energy, LLC *
              
              Council
                  Bluffs, IA
              
              Corn
              
              
              
              110Sterling
                  Ethanol, LLC
              
              Sterling,
                  CO
              
              Corn
              
              42Tate
                  & Lyle
              
              Loudon,
                  TN
              
              Corn
              
              67
              
              38Ft.
                  Dodge, IA
              
              Corn
              
              
              
              105The
                  Andersons Albion Ethanol LLC
              
              Albion,
                  MI
              
              Corn
              
              55The
                  Andersons Clymers Ethanol, LLC
              
              Clymers,
                  IN
              
              Corn
              
              110The
                  Andersons Marathon Ethanol, LLC
              
              Greenville,
                  OH
              
              Corn
              
              110Tharaldson
                  Ethanol
              
              Casselton,
                  ND
              
              Corn
              
              
              
              110Trenton
                  Agri Products, LLC
              
              Trenton,
                  NE
              
              Corn
              
              40United
                  Ethanol
              
              Milton,
                  WI
              
              Corn
              
              52United
                  WI Grain Producers, LLC*
              
              Friesland,
                  WI
              
              Corn
              
              49US
                  BioEnergy Corp.
              
              Albert
                  City, IA
              
              Corn
              
              420
              
              330Woodbury,
                  MI
              
              CornHankinson,
                  ND
              
              Corn
              
              
              
              #Central
                  City , NE
              
              Corn
              
              
              
              #Ord,
                  NE
              
              CornDyersville,
                  IA
              
              Corn
              
              
              
              #Janesville,
                  MN
              
              Corn
              
              
              
              #Marion,
                  SD
              
              CornUtica
                  Energy, LLC
              
              Oshkosh,
                  WI
              
              Corn
              
              48VeraSun
                  Energy Corporation
              
              Aurora,
                  SD
              
              Corn
              
              560
              
              330Ft.
                  Dodge, IA
              
              CornAlbion,
                  NE
              
              CornCharles
                  City, IA
              
              CornLinden,
                  IN
              
              CornWelcome,
                  MN
              
              Corn
              
              
              
              #Hartely,
                  IA
              
              Corn
              
              
              
              #Bloomingburg,
                  OH
              
              Corn
              
              
              
              #Western
                  New York Energy, LLC
              
              Shelby,
                  NY
              
              Corn
              
              50
  15
  **Company**
              
              **Location**
              
              **Feedstock**
              
              **Current**
                **Capacity****(mgy)**
              
              **Under
                  Construction/**
                **Expansions****(mgy)**
 Western
                  Plains Energy, LLC*
              
              Campus,
                  KS
              
              Corn
              
              45Western
                  Wisconsin Renewable Energy, LLC*
              
              Boyceville,
                  WI
              
              Corn
              
              40White
                  Energy
              
              Hereford,
                  TX
              
              Corn/Milo
              
              100Russell,
                  KS
              
              Milo/wheat
                  starch
              
              48Plainview,
                  TX
              
              Corn
              
              
              
              100Wind
                  Gap Farms
              
              Baconton,
                  GA
              
              Brewery
                  waste
              
              0.4Renova
                  Energy
              
              Torrington,
                  WY
              
              Corn
              
              5Xethanol
                  BioFuels, LLC
              
              Blairstown,
                  IA
              
              Corn
              
              5Yuma
                  Ethanol
              
              Yuma,
                  CO
              
              Corn
              
              40**Total
                  Current Capacity at****145
                  ethanol biorefineries**
              
              
              
              
              
              **8,309.9****Total
                  Under Construction (55)/Expansions (7)**
              
              
              
              
              
              
              
              **5,096.0****Total
                  Capacity**
              
              
              
              
              
              **13,405.9**


*
      locally-owned


#
      plant
      under construction


Source:
      Renewable Fuels Association, Washington, DC


Updated: 
      March 17, 2008





**Competition
      from Alternative Fuels**




Alternative
      fuels and ethanol production methods are continually under development by
      ethanol and oil companies with far greater resources.  The major oil
      companies have significantly greater resources than we have to develop
      alternative products and to influence legislation and public perception of
      ethanol.  New ethanol products or methods of ethanol production developed
      by larger and better-financed competitors could provide them competitive
      advantages and harm our business.




The
      current trend in ethanol production research is to develop an efficient method
      of producing ethanol from cellulose-based biomass, such as agricultural waste,
      forest residue, municipal solid waste, and energy crops.   Large
      companies, such as Iogen Corporation, Abengoa, Royal Dutch Shell Group, Goldman
      Sachs Group, Dupont and Archer Daniels Midland have all indicated that they
      are
      interested in research and development in this area.  In addition, Xethanol
      Corporation has stated plans to convert a six million gallon per year plant
      in
      Blairstown, Iowa to implement cellulose-based ethanol technologies after
      2007.  Furthermore, the Department of Energy and the President have
      recently announced support for the development of cellulose-based ethanol,
      including a $160 million Department of Energy program for pilot plants producing
      cellulose-based ethanol.  On February 28, 2007 the Department of
      Energy announced six recipients for grants to help the producers with the
      upfront capital costs associated with the construction of cellulosic ethanol
      biorefineries.  The grant recipients expect to build plants in Florida,
      California, Iowa, Idaho, Kansas and Georgia.  In addition, the enactment of
      the Energy Independence and Security Act of 2007 mandates that over half of
      the
      Renewable Fuels Standard be met by renewable fuels, other than corn-derived
      ethanol, in the year 2022.  The biomass trend is driven by the fact that
      cellulose-based biomass is generally cheaper than corn, and producing ethanol
      from cellulose-based biomass would create opportunities to produce ethanol
      in
      areas which are unable to grow corn.  Additionally, the enzymes used to
      produce cellulose-based ethanol have recently become less expensive. Although
      current technology is not sufficiently efficient to be competitive on a
      large-scale, a report by the United States Department of Energy entitled
“Outlook for Biomass Ethanol Production and Demand” indicates that new
      conversion technologies may be developed in the future. If an efficient method
      of collecting biomass for ethanol production and producing ethanol from
      cellulose-based biomass is developed, we may not be able to compete effectively.
      We do not believe it will be cost-effective to convert the ethanol plant we
      are
      proposing into a plant which will use cellulose-based biomass to produce
      ethanol.  As a result, it is possible we could be unable to produce ethanol
      as cost-effectively as cellulose-based producers.




16




Our
      ethanol plant will also compete with producers of other gasoline additives
      having similar octane and oxygenate values as ethanol, such as producers of
      MTBE, a petrochemical derived from methanol that costs less to produce than
      ethanol.  Although currently the subject of several state bans, many major
      oil companies can produce MTBE.  Because it is petroleum-based, MTBE’s use
      is strongly supported by major oil companies.




Ethanol
      supply is also affected by the ethanol produced or processed in certain
      countries in Central America and the Caribbean region.  Ethanol produced in
      these countries is eligible for tariff reduction or elimination upon importation
      to the United States under a program known as the Caribbean Basin Initiative
      (CBI).  Large ethanol producers, such as Cargill, have expressed interest
      in building dehydration plants in participating Caribbean Basin countries,
      such
      as El Salvador, which would convert ethanol into fuel-grade ethanol for shipment
      to the United States.  Ethanol imported from Caribbean Basin countries may
      be a less expensive alternative to domestically produced ethanol. 
According to the RFA, the U.S. International Trade Commission (USITC)
      set the 2007 CBI import quota at approximately 350 million gallons, which
      allowed that quantity of duty-free ethanol to enter the U.S., up
      from 268.1 million gallons in 2006.  In the past, legislation has been
      introduced in the Senate that would limit the transshipment of ethanol through
      the CBI.  It is possible that similar legislation will be introduced this
      year; however, there is no assurance or guarantee that such legislation will
      be
      introduced or that it will be successfully passed.




***Distillers
      Grains Competition***




Ethanol
      plants in the Midwest produce the majority of distillers grains and primarily
      compete with other ethanol producers in the production and sales of distillers
      grains.  According to the Renewable Fuels Association’s Ethanol Industry
      Outlook 2008, ethanol plants produced 12 million metric tons of distillers
      grains in 2006 and 14.6 million metric tons in 2007.  The amount of
      distillers grains produced is expected to increase significantly as the number
      of ethanol plants increase.




The
      primary consumers of distillers grains are dairy and beef cattle.  In
      recent years, an increasing amount of distillers grains have been used in the
      swine and poultry markets.  Numerous feeding trials show advantages in milk
      production, growth, rumen health, and palatability over other dairy cattle
      feeds.  With the advancement of research into the feeding rations of
      poultry and swine, we expect these markets to expand and create additional
      demand for distillers grains; however, no assurance can be given that these
      markets will in fact expand, or if they do, that we will benefit from it. 
The market for distillers grains is generally confined to locations where
      freight costs allow it to be competitively priced against other feed
      ingredients.  Distillers grains compete with three other feed
      formulations: corn gluten feed, dry brewers grain and mill feeds.  The
      primary value of these products as animal feed is their protein content. Dry
      brewers grain and distillers grains have about the same protein content, and
      corn gluten feed and mill feeds have slightly lower protein
      contents.





**Sources
      and Availability of Raw Materials**




***Corn
      Feedstock Supply***




The
      major
      raw material required for our ethanol plant to produce ethanol, distillers
      grains and corn oil is corn.  To produce 55 million gallons of ethanol per
      year, our ethanol plant will need approximately 19.7 million bushels of corn
      per
      year as the feedstock for its dry milling process.  We expect to obtain the
      corn supply for our plant primarily from local markets, but may be required
      to
      purchase some of the corn we need from other markets and transport it to our
      plant via truck or rail.   Traditionally, corn grown in the area of
      the plant site has been fed locally to livestock or exported for feeding or
      processing and/or overseas export sales.





We
      anticipate entering into, but have not yet entered into, a grain procurement
      agreement with Gold-Eagle Cooperative and North Central Cooperative. Under
      such
      an agreement, Gold-Eagle and North Central would have the exclusive right and
      responsibility to provide us with our daily requirements of corn. Under such
      an
      agreement, we anticipate that we would purchase corn at the local market price
      delivered to the ethanol plant, plus a fixed fee per bushel of corn purchased.
      Because several of our directors also serve as directors of Gold Eagle and
      North
      Central, such directors may have a conflict of interest when negotiating or
      approving a grain procurement agreement. Additionally, Gold-Eagle and North
      Central are two of our founders and are currently our two largest unit-holders.
      As a result, Gold-Eagle and North Central may be able to obtain a grain
      procurement agreement on more favorable terms than if Gold-Eagle and North
      Central were not unit-holders. Some of our directors are also directors of
      Corn,
      LP, an ethanol plant in Goldfield, Iowa that is one of our founders. Gold-Eagle
      procures all the corn needed for the operations of Corn, LP. This means that
      our
      directors that also serve as directors of Corn, LP may have a conflict of
      interest in negotiating or approving a grain procurement agreement with
      Gold-Eagle. Additionally, our directors that also serve as directors of
      Gold-Eagle may have a conflict of interest due to Gold-Eagle’s obligations to
      Corn, LP.




17




We
      will
      be significantly dependent on the availability and price of corn. The price
      at
      which we will purchase corn will depend on prevailing market prices. Over the
      past several months, corn prices have reached record highs.  There is no
      assurance that a shortage will not develop, particularly if there are other
      ethanol plants competing for corn or an extended drought or other production
      problem.  We anticipate that we will have to pay more for corn than the ten
      year average price as corn prices continue to rise.  If the higher corn
      prices continue, our profitability will be reduced.  Because the market
      price of ethanol is not directly related to grain prices, ethanol producers
      are
      generally not able to compensate for increases in the cost of grain feedstock
      through adjustments in prices charged for their ethanol.  We therefore
      anticipate that our plant’s profitability will be negatively impacted during
      periods of high grain prices.




In
      an
      attempt to minimize the effects of the volatility of corn costs on operating
      profits, we may take hedging positions in corn futures markets.  Hedging
      means protecting the price at which we buy corn and the price at which we will
      sell our products in the future.  It is a way to attempt to reduce the risk
      caused by price fluctuation.  The effectiveness of hedging activities is
      dependent upon, among other things, the cost of corn and our ability to sell
      sufficient amounts of ethanol and distillers grains to utilize all of the corn
      subject to futures contracts.  Hedging activities can result in costs to us
      because price movements in grain contracts are highly volatile and are
      influenced by many factors beyond our control.  These costs may be
      significant.





**Utilities**





The
      production of ethanol is a very energy intensive process that uses significant
      amounts of electricity and natural gas. Water supply and quality are also
      important considerations. We plan to enter into definitive agreements with
      local
      gas and electric utilities to provide our needed energy and we plan to use
      water
      from existing and newly bored high capacity wells. However, we do not currently
      have such agreements. There can be no assurance that any utility provider that
      we contract with will be able to reliably supply the gas and electricity that
      we
      need.





***Natural
      gas***





Natural
      gas accounts for approximately ten to fifteen percent (10%-15%) of the total
      production cost of ethanol. The plant will produce process steam from its own
      boiler system and dry the distillers dried grains co-product via a direct
      gas-fired dryer. If we operate at our project production volume of 55 million
      gallons per year, we will require approximately 1,700,000 Million British
      Thermal Units (“MMBtu”) of natural gas annually.





Our
      proposed site has access to an existing Northern Border interstate natural
      gas
      pipeline located approximately fifteen miles from the expected plant location.
      The existing interstate pipeline is expected to have enough capacity to service
      the proposed plant and for future plant expansion.





Gold-Eagle
      Cooperative entered into and then assigned to us an energy management agreement
      with U.S. Energy Services, Inc. pursuant to which U.S. Energy will provide us
      with the necessary natural gas and electricity management services. Some of
      their services may include an economic comparison of distribution service
      options, negotiation and minimization of interconnect costs, submission of
      the
      necessary pipeline “tap” request, supplying the plant with and/or negotiating
      the procurement of natural gas, development and implementation of a price risk
      management plan targeted at mitigating natural gas price volatility and
      maintaining profitability, providing consolidated monthly invoices that reflect
      all natural gas costs, and U.S. Energy will be responsible for reviewing and
      reconciling all invoices. In exchange for these services as well as services
      relating to electricity, we will pay U.S. Energy a monthly retainer fee of
      $3,800 for an initial contract term of 12 months. This monthly retainer
      increases four percent (4%) every twelve months, unless the agreement is
      terminated. If we decide to utilize U.S. Energy’s hedging service we will have
      to pay an additional $.01 per MMBTu administrative fee for physical or financial
      natural gas hedging. Additional fees may apply for additional services and
      for
      time and travel.




18




***Electricity***





We
      expect
      to require a peak electricity demand of approximately 5.5 megawatts (“MW”) to
      operate the plant. This amount of electricity can be provided to our proposed
      site by the Prairie Energy Cooperative, which has high voltage transmission
      lines on easements within one mile of the proposed site that are available
      to
      supply us with electricity through an onsite substation. We anticipate entering
      into a definitive electric service agreement with Prairie Energy Cooperative
      to
      supply electricity to our facility; however, no agreement has been entered
      into
      as of yet.





Gold-Eagle
      Cooperative entered into and then assigned to us an energy management agreement
      with U.S. Energy Services, Inc. pursuant to which U.S. Energy will provide
      us
      with natural gas and electricity management services. Some of their services
      may
      include analyzing electric service proposals, negotiating final electric service
      agreements, evaluating proposed electric distribution infrastructure, preparing
      and implementing a regulatory strategy, and U.S. Energy will be responsible
      for
      reviewing and reconciling all invoices. In exchange for these services as well
      as services relating to natural gas, we will pay U.S. Energy a monthly retainer
      fee of $3,800 for an initial contract term of 12 months. This monthly retainer
      increases four percent (4%) every twelve months, unless the agreement is
      terminated.





***Water***





We
      will
      require a significant supply of water. We anticipate obtaining water from new
      or
      existing high capacity wells. Permits are required for all water usage.
      Engineering specifications show our plant water requirements to be approximately
      400 gallons per minute. That is approximately 576,000 gallons per day. We have
      engaged ICM, Inc. to assist us in applying for the necessary permits; however,
      there is no assurance that we will be able to obtain the requisite permits
      to
      use the water we need to operate the plant. In the event we are unable to locate
      a sufficient supply of water at the proposed Wesley, Iowa site, we would have
      to
      either locate an alternative plant location or abandon the project.





Much
      of
      the water used in an ethanol plant is recycled back into the process. There
      are,
      however, certain areas of production where fresh water is needed. Those areas
      include boiler makeup water and cooling tower water. Boiler makeup water is
      treated on-site to minimize all elements that will harm the boiler and recycled
      water cannot be used for this process. Cooling tower water is deemed non-contact
      water because it does not come in contact with the mash, and, therefore, can
      be
      regenerated back into the cooling tower process. The makeup water requirements
      for the cooling tower are primarily a result of evaporation. Depending on the
      type of technology utilized in the plant design, much of the water can be
      recycled back into the process, which will minimize the discharge water. This
      will have the long-term effect of lowering wastewater treatment costs. Many
      new
      plants today are zero or near zero effluent discharge facilities. We anticipate
      our plant design will incorporate an ICM/Phoenix Bio-Methanator wastewater
      treatment process. The ICM/Phoenix Bio-Methanator is expected to result in
      a
      zero discharge of plant process water.





**Research
      and Development**




We
      do not
      conduct any research and development activities associated with the development
      of new technologies for use in producing ethanol and distillers
      grains.




19





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




We
      anticipate that we will engage an ethanol marketer and a distillers grains
      marketer to market the ethanol and distillers grains we will produce once our
      plant is constructed and operational. We expect to rely on these marketers
      for
      the sale and distribution of our ethanol and distillers grains. Therefore,
      we
      expect to be highly dependent on these marketers. for the successful marketing
      of our products.  Our letter of intent with Fagen, Inc. requires us to
      market our ethanol through US BioEnergy Corporation, of which Fagen, Inc. and
      certain of its affiliates are affiliates, for a period of two years from the
      date the ethanol plant is completed, provided that US BioEnergy Corporation
      provides competitive rates and services compared to other marketing firms.
      US
      BioEnergy Corporation recently announced its plans to merge with VeraSun Energy
      Corporation during the first quarter of 2008. We anticipate that if this merger
      occurs, we will continue to be required to market our ethanol through the
      surviving entity of the merger. Our obligation to market our ethanol through
      US
      BioEnergy Corporation or the survivor of the proposed merger means that we
      may
      not be able to market our ethanol as effectively as we otherwise would
      have.





**Costs
      and Effects of Compliance with Environmental Laws**




We
      will
      be subject to extensive air, water and other environmental regulation and we
      will need to obtain a number of environmental permits to construct and operate
      the plant. In addition, it is likely that our senior debt financing will be
      contingent on our ability to obtain the various required environmental permits.
      We have not applied for any of these permits, but anticipate doing so before
      we
      begin construction. We have engaged ICM, Inc. to assist us in applying for
      the
      permits required to construct and operate the ethanol plant, and we do not
      anticipate a problem receiving these required environmental permits. However,
      if
      for any reason any of these permits are not granted, construction costs for
      the
      plant may increase, or the plant may not be constructed at all. In addition,
      the
      Iowa Department of Natural Resources (“IDNR”) could impose conditions or other
      restrictions in the permits that are detrimental to us or which increase costs
      to us above those assumed in this project. The IDNR and the United States
      Environmental Protection Agency (“EPA”) could also change their interpretation
      of applicable permit requirements or the testing protocols and methods necessary
      to obtain a permit either before, during or after the permitting process. The
      IDNR may also require us to conduct an environmental assessment prior to
      considering granting any of those permits.




Even
      if
      we receive all required permits from the IDNR, we may also be subject to
      regulations on emissions from the EPA. Currently the EPA’s statutes and rules do
      not require us to obtain separate EPA approval in connection with construction
      and operation of the proposed plant. Iowa is authorized to enforce the EPA’s
      federal emissions program. However, the EPA does retain authority to take action
      if it decides that Iowa is not correctly enforcing its emissions program.
      Additionally, environmental laws and regulations, both at the federal and state
      level, are subject to change and changes can be made retroactively.





We
      anticipate incurring costs and expenses of approximately $150,000 in the next
      12
      months in complying with environmental laws.  Even if we are successful in
      obtaining all of the permits currently required, any retroactive change in
      environmental regulations, either at the federal or state level, could require
      us to obtain additional or new permits or spend considerable resources on
      complying with such regulations.





**Employees**





We
      currently do not have any employees. Prior to completion of plant construction
      and commencement of operations, we intend to hire approximately 38 full-time
      employees. Approximately six of our employees will be involved primarily in
      management and administration and the remainder will be involved primarily
      in
      plant operations. Our officers are Clay Hansen, President; Mervin Krauss, Vice
      President; John Stelzer, Treasurer; and Mark Wigans, Secretary.





The
      following table represents some of the anticipated positions within the plant
      and the minimum number of individuals we expect will be full-time
      personnel:





**#
                Full-Time****Position**
            
            **Personnel**Operations
                Manager
            
            
            1Plant
                Manager
            
            
            1Lab
                Manager
            
            
            1Lab
                Technician
            
            
            1Office/Administrative
            
            
            2Load
                Out/Floaters
            
            
            4Shift
                Supervisors
            
            
            2Maintenance
                Manager
            
            
            1Maintenance
                Technicians
            
            
            8Plant
                Operators
            
            
            18**TOTAL**
            
            
            **38**





20




The
      positions, titles, job responsibilities and number allocated to each position
      may differ when we begin to employ individuals for each position.





We
      intend
      to enter into written confidentiality and assignment agreements with our key
      officers and employees. Among other things, these agreements will require such
      officers and employees to keep all proprietary information developed or used
      by
      us in the course of our business strictly confidential.





Our
      success will depend in part on our ability to attract and retain qualified
      personnel at a competitive wage and benefit level. We must hire qualified
      managers and other personnel. We will operate in a rural area with low
      unemployment. There is no assurance that we will be successful in attracting
      and
      retaining qualified personnel at a wage and benefit structure at or below those
      we have assumed in our project. If we are unsuccessful in this regard, we may
      not be competitive with other ethanol plants.





**ITEM
      1A. RISK FACTORS.**





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





**Risks
      Related to our Financing Plan**





***Even
      if we raise the minimum amount of equity in our offering, we may
      not*** **** ***be
      able to*** ***obtain
      the debt financing necessary to construct and operate our ethanol
      plant,*** **** ***which
      would result in the failure of the project.*** Our
      financing plan requires a significant amount of debt financing. While we are
      actively investigating various lenders in this regard, we have not yet entered
      into any commitment with any bank, lender, governmental entity, underwriter
      or
      financial institution for debt financing. We will not release funds from escrow
      until we secure a written debt financing commitment sufficient to construct
      and
      operate the ethanol plant. If debt financing on acceptable terms is not
      available for any reason, we will be forced to abandon our business plan and
      return your investment from escrow plus nominal interest less deduction for
      escrow agency fees.





***Given
      the unfavorable credit environment, we can provide no assurances or guarantees
      that we will be able to obtain the requisite debt financing or that the debt
      financing will be on favorable terms.***




The
      subprime mortgage lending crisis has contributed to a generally unfavorable
      credit environment. We can offer no assurances or guarantees that we will be
      able to obtain debt financing to fully capitalize our business. If we are unable
      to obtain debt financing, or if the debt financing is at unfavorable terms,
      we
      may be unable to begin construction of the proposed plant or our operations
      may not be as profitable as expected.





**Risks
      Related to Prairie Creek Ethanol as a Development Stage
      Company**





***Prairie
      Creek Ethanol has no operating history, which could result in errors
      in*** **** ***management
      and operations.*** We
      were
      recently formed and have no history of operations. We may not be able to manage
      our start-up effectively or properly staff our operations, and any failure
      to
      manage our start-up effectively could delay the commencement of plant
      operations. A delay in start-up operations is likely to further delay our
      ability to generate revenue and satisfy our debt obligations. We anticipate
      a
      period of significant growth, involving the construction and start-up of
      operations of the plant. This period of growth and the start-up of the plant
      are
      likely to be a substantial challenge to us. If we fail to manage start-up
      effectively, we may not be able to operate our plant profitably or at
      all.




21





***Our
      officers and directors do not have significant experience in managing a public
      company, which may result in errors that reduce the value of your
      investment*** **.** Our
      officers and directors have extensive experience managing various agricultural
      cooperatives, marketing grain, and farming. Several of our officers and
      directors also hold college degrees in accounting, agricultural engineering,
      agricultural management, agronomy, business, and industrial administration.
      Although our officers and directors have extensive management experience and
      education, they do not have significant experience managing a public company
      or
      complying with various reporting requirements and government regulations imposed
      on public companies.




***We
      will depend on Fagen, Inc. for expertise in beginning our operations in
      the*** **** ***ethanol
      industry and any loss of this relationship could cause us delay
      and*** **** ***added
      expense, placing us at a competitive disadvantage.*** We
      will
      be dependent on our relationship with Fagen, Inc. and its employees. Any loss
      of
      this relationship with Fagen, Inc., particularly during the construction and
      start-up period for the plant, may prevent us from commencing operations and
      result in the failure of our business. The time and expense of locating new
      consultants and contractors would result in unforeseen expenses and delays.
      Unforeseen expenses and delays may reduce our ability to generate revenue and
      profitability and significantly damage our competitive position in the ethanol
      industry.





***If
      we fail to finalize critical agreements, such as the ethanol and distillers
      grains marketing agreements and utility supply agreements, or the final
      agreements are unfavorable compared to what we currently anticipate, our project
      may fail*** **.** You
      should be aware that this report makes reference to documents or agreements
      that
      are not yet final or executed, and plans that have not been implemented. In
      some
      instances such documents or agreements are not even in draft form. The
      definitive versions of those agreements, documents, plans or proposals may
      contain terms or conditions that vary significantly from the terms and
      conditions described. These tentative agreements, documents, plans or proposals
      may not materialize or, if they do materialize, may not prove to be
      profitable.





***Our
      business is not diversified.*** We
      expect
      our business to solely consist of ethanol, distillers grains and corn oil.
      We do
      not have any other lines of business or other sources of revenue if we are
      unable to complete the construction and operation of the plant or if we are
      unable to operate our plant and generate ethanol and distillers grains. If
      we
      are unable to generate revenues by the production and sales of ethanol and
      distillers grains our business may fail since we do not expect to have any
      other
      lines of business or alternative revenue sources.





***Your
      investment may decline in value due to decisions made by our initial
      board*** **** ***of
      directors and until the plant is built, your only recourse to replace
      these*** **** ***directors
      will be through amendment to our operating agreement.*** Our
      operating agreement provides that the initial board of directors will serve
      until the first annual or special meeting of the members following commencement
      of substantial operations of the ethanol plant. If our project suffers delays
      due to financing or construction, our initial board of directors could serve
      for
      an extended period of time. In that event, your only recourse to replace these
      directors would be through an amendment to our operating agreement, which could
      be difficult to accomplish.





***We
      do not have any employees, and we may not be able to hire
      employees*** **** ***capable
      of effectively operating the ethanol plant, which may hinder
      our*** **** ***ability
      to operate profitably.*** **** Because
      we are a development-stage company, we do not have any employees. If we are
      not
      able to hire employees who can effectively operate the plant, our ability to
      generate revenue will be significantly reduced or prevented
      altogether.





**Risks
      Related to Construction of the Ethanol Plant**





***We
      are relying on Fagen, Inc. and ICM, Inc. to supply all of the technology
      necessary for the construction of our plant and the production of fuel-grade
      ethanol and distillers grains and we expect they will either own this technology
      or obtain a license to utilize it.*** We
      will
      be dependent upon Fagen, Inc. and/or ICM, Inc. for all of the technology used
      in
      our plant that relates to construction of the plant and the plant’s production
      of fuel-grade ethanol and distillers grains. We expect that Fagen, Inc. or
      ICM,
      Inc. will either own the technology or obtain a license necessary for its use.
      If either Fagen, Inc. or ICM, Inc. fails to provide the necessary technology,
      we
      may not be able to build our plant or successfully operate it.




22





***We
      may need to increase cost estimates for construction of the ethanol
      plant,*** **** ***and
      such increase could result in devaluation of our units if ethanol
      plant*** **** ***construction
      requires additional capital.*** Our
      letter of intent with Fagen, Inc. states that Fagen, Inc. will construct the
      plant for contract price of $81,900,000. This contract price may be further
      increased if the construction cost index (“CCI”) published by Engineering
      News-Record Magazine is greater than 7,879.54 in the month in which we issue
      to
      Fagen, Inc., a notice to proceed with plant construction. The amount of the
      contract price increase will be equal to the percentage increase in the CCI
      based upon the February 2007 CCI of 7,879.54. If the CCI increases above that
      level in the month in which we issue to Fagen, Inc. a notice to proceed with
      plant construction, the contract price will accordingly increase. Additionally,
      the contract price is subject to a surcharge of one-half of one percent (0.5%)
      for each calendar month that passes between February 2007 and the month in
      which
      we issue to Fagen, Inc., a notice to proceed with plant construction. Since
      approximately thirteen months have passed between February 2007 and the date
      we
      are filing this report, this means that the contract price will be increased
      by
      a minimum of 6.5%, or approximately $5,323,500. Finally, Fagen, Inc. will be
      entitled to an early completion bonus of $10,000 per day, not to exceed
      $1,000,000, for each day that substantial completion of the ethanol plant occurs
      in advance of 425 days after the date we issue a notice to proceed with plant
      construction. Thus, we have allowed for a $10,500,000 contingency in our total
      estimated costs of the project.





We
      have
      based our capital needs on a design for the plant that will cost approximately
      $89,900,000, which includes our accrued monthly surcharge and the cost of our
      water treatment equipment and fire protection system not contemplated by our
      letter of intent, with additional start-up and development costs of
      approximately $31,100,000, for a total project completion cost of approximately
      $121,000,000. This price includes construction period interest. The estimated
      cost of the plant is based on preliminary discussions, and there is no assurance
      that the final cost of the plant will not be higher. There is no assurance
      that
      there will not be design changes or cost overruns associated with the
      construction of the plant. In addition, shortages of steel or other building
      materials could affect the final cost and final completion date of the project.
      Any significant increase in the estimated construction cost of the plant could
      delay our ability to generate revenues because our revenue stream may not be
      able to adequately support the increased cost and expense attributable to
      increased construction costs.




***Construction
      delays or defects could result in devaluation of our units if our
      production*** **** ***and
      sale of ethanol and its co-products are delayed.*** We
      currently expect our plant to be complete and operating by early 2010; however,
      construction projects often involve delays in obtaining permits, construction
      delays due to weather conditions, or other events that delay the construction
      schedule, such as unknown environmental problems at the plant site. In addition,
      Fagen, Inc.’s involvement in the construction of a number of other plants while
      constructing our plant could cause delays in our construction schedule. Also,
      any changes in interest rates or the credit environment or any changes in
      political administrations at the federal, state or local level that result
      in
      policy changes toward ethanol or this project, could also cause construction
      and
      operation delays. If it takes longer to construct the plant than we anticipate,
      it would delay our ability to generate revenue and make it difficult for us
      to
      meet our debt service obligations. Additionally, defects in material and/or
      workmanship may delay the commencement of operations at the plant, or, if such
      defects are discovered after operations have commenced, could cause us to halt
      or discontinue the plant’s operations.





***Fagen,
      Inc. and ICM, Inc. may have current or future commitments to design and build
      other ethanol manufacturing facilities ahead of our plant and those commitments
      could delay construction of our plant and our ability to generate revenues.*** We
      do not
      know how many ethanol plants Fagen, Inc. and ICM, Inc. have currently contracted
      to design and build. It is possible that Fagen, Inc. and ICM, Inc. have
      outstanding commitments to other facilities that may cause the construction
      of
      our plant to be delayed. It is also possible that Fagen, Inc. and ICM, Inc.
      will
      continue to contract with new facilities for plant construction and with
      operating facilities for expansion construction. These current and future
      building commitments may reduce the available resources of Fagen, Inc. and
      ICM,
      Inc. to such an extent that construction of our plant is significantly delayed.
      If this occurs, our ability to generate revenue will also be delayed.




23





***We
      have not received certain permits and failure to obtain these permits
      would*** **** ***prevent
      operation of the plant.*** We
      expect
      that we will use water to cool our closed circuit systems in the proposed plant
      based upon engineering specifications. Permits will need to be acquired for
      the
      discharge of certain cooling waters. There can be no assurances that these
      permits will be granted to us. If these permits are not granted, then our plant
      may not be allowed to operate.





We
      currently anticipate obtaining water from high capacity wells near the plant
      site. We anticipate that we will apply for a water permit application for
      appropriation of water from the State of Iowa; however, we may not be able
      to
      obtain such a permit. We anticipate that we will obtain a number of other
      permits from the Iowa Department of Natural Resources related to air emissions
      and wastewater and stormwater discharge. While we anticipate receiving these
      permits, there is no assurance that we will obtain all of the necessary permits.
      Our inability to obtain the necessary environmental permits could prohibit
      commencement of construction or operation of the plant.





**Risks
      Related to our Business**





***We
      have no operating history and our business may not be as successful as we
      anticipate.*** We
      have
      not yet begun plant operations.  Accordingly, we have no operating history
      from which you can evaluate our business and prospects.  Our operating
      results could fluctuate significantly in the future as a result of a variety
      of
      factors, including those discussed throughout these risk factors.  Many of
      these factors are outside our control.   As a result of these factors,
      our operating results may not be indicative of future operating results and
      you
      should not rely on them as indications of our future performance.  In
      addition, our prospects must be considered in light of the risks and
      uncertainties encountered by an early-stage company and in rapidly growing
      industries, such as the ethanol industry, where supply and demand may change
      substantially in a short amount of time.





***The
      expansion of domestic ethanol production in combination with state bans on
      Methyl Tertiary Butyl Ether (MTBE) and/or state renewable fuels standards may
      place strains on rail and terminal infrastructure such that our ethanol cannot
      be marketed and shipped to the blending terminals that would otherwise provide
      us the best cost advantages.*** If
      the
      volume of ethanol shipments continues to increase with the nation’s increased
      production capacity and blenders switch from MTBE to ethanol, there may be
      weaknesses in infrastructure and its capacity to transport ethanol such that
      our
      product cannot reach its target markets.  In addition, ethanol destination
      terminals may not have adequate capacity to handle the supply of ethanol, and
      will have to quickly adapt by building more tanks to hold increased inventory
      before shipping ethanol to the blenders.  Many blending terminals may need
      to make infrastructure changes to blend ethanol instead of MTBE and to blend
      the
      quantities of ethanol that are being produced.  Refineries may be unwilling
      to spend large amounts of capital to expand infrastructure, or may be
      disinclined to blend ethanol absent a legislative mandate to increase
      blending.  If the blending terminals do not have sufficient capacity or the
      necessary infrastructure to make this switch, or are reluctant to make such
      large capital expenditures to blend ethanol, there may be an oversupply of
      ethanol on the market, which could depress ethanol prices and negatively impact
      our financial performance.




***The
      ethanol industry is a feedstock limited industry. An inadequate supply of corn,
      our primary feedstock, could cause the price of corn to increase and threaten
      the viability of our plant.*** We
      anticipate that we will obtain the corn supply for our ethanol plant exclusively
      from Gold-Eagle Cooperative and North Central Cooperative, who are our two
      largest unit-holders. We have not yet executed a binding contract with
      Gold-Eagle Cooperative or North Central Cooperative. However, we expect to
      enter
      into agreements to purchase corn from Gold-Eagle Cooperative and North Central
      Cooperative at market price, and pay Gold-Eagle Cooperative and North Central
      Cooperative under these agreements a fee equal to $0.085 per bushel. Based
      upon
      our anticipated corn usage of 19.7 million bushels per year, this means we
      expect to pay Gold-Eagle Cooperative and North Central Cooperative combined
      an
      annual fee of approximately $1,674,500 for grain origination. However, there
      is
      no guarantee that a binding contract will be executed with Gold-Eagle
      Cooperative or North Central Cooperative or that the terms of these contracts,
      if executed, will not be materially different than we anticipate.





Gold-Eagle
      Cooperative already procures all of the grain needed for the operations of
      Corn,
      LP, a 50 million gallon per year ethanol plant in Goldfield, Iowa, which may
      further decrease the adequate supply of corn available to us. Additionally,
      because Gold-Eagle Cooperative and North Central Cooperative are our two largest
      unit-holders, and because Gold-Eagle Cooperative and North Central Cooperative
      are each entitled to appoint at least one director to our board of directors
      following substantial completion of the ethanol plant, the terms of any grain
      procurement agreement with either such entity may not be as favorable as they
      otherwise would be.




24





The
      number of ethanol manufacturing plants either in production or in the planning
      or construction phases continues to increase at a rapid pace. This increase
      in
      the number of ethanol plants will affect both the supply and the demand for
      corn. As more plants develop and go into production there may not be an adequate
      supply of feedstock to satisfy the demand of the ethanol industry and the
      livestock industry, which uses corn in animal rations. Consequently, the price
      of corn may rise to the point where it threatens the viability of our project.
      Corn supplies are subject to higher prices due to interruptions or shortages
      caused by any number of factors. If a period of high corn prices were to be
      sustained for some time, such pricing may reduce our ability to generate
      revenues because of the higher cost of operating.





***Our
      financial performance will be significantly dependent on
      natural*** **** ***gas
      prices.*** We
      will
      rely on third parties for our supply of natural gas, which is consumed in the
      production of ethanol. The prices for and availability of natural gas are
      subject to volatile market conditions. These market conditions often are
      affected by factors beyond our control such as higher prices resulting from
      colder than average weather conditions, overall economic conditions and foreign
      and domestic governmental regulations. Significant disruptions in the supply
      of
      natural gas could impair our ability to manufacture ethanol for our customers.
      Furthermore, increases in natural gas prices or changes in our natural gas
      costs
      relative to natural gas costs paid by competitors may adversely affect our
      results of operations and financial condition.





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





The
      price
      of ethanol has recently been higher than its 10-year average, although not
      as
      high as the peak reached in spring 2006. We do not expect these prices to be
      sustainable as supply from new and existing ethanol plants increases to meet
      increased demand. Increased production of ethanol, distillers grains and corn
      oil may lead to lower prices. There can be no assurance as to the price of
      ethanol, distillers grains or corn oil in the future. Any downward changes
      in
      the price of ethanol, distillers grains and/or corn oil may result in less
      income which would decrease our revenues.





***We
      will depend on others for sales of our products, which may place us at
      a*** **** ***competitive
      disadvantage and reduce profitability.*** We
      expect
      to hire a third-party marketing firm to market all of the ethanol and most
      of
      the distillers grains we plan to produce. As a result, we expect to be dependent
      on the ethanol broker and distillers grains broker we engage. There is no
      assurance that we will be able to enter into contracts with any ethanol broker
      or distillers grains broker on terms that are favorable to us. If the ethanol
      or
      distillers grains broker breaches the contract or does not have the ability,
      for
      financial or other reasons, to market all of the ethanol or distillers grains
      we
      produce, we will not have any readily available means to sell our products.
      Our
      lack of a sales force and reliance on third parties to sell and market our
      products may place us at a competitive disadvantage. Our failure to sell all
      of
      our ethanol and distillers dried grains feed products may result in less income
      from sales, reducing our revenue stream.





Our
      letter of intent with Fagen, Inc. requires us to market our ethanol through
      US
      BioEnergy Corporation, of which Fagen, Inc. and certain of its affiliates are
      affiliates, for a period of two years from the date the ethanol plant is
      completed, provided that US BioEnergy Corporation provides competitive rates
      and
      services compared to other marketing firms. US BioEnergy Corporation recently
      announced its plans to merge with VeraSun Energy Corporation during the first
      quarter of 2008. We anticipate that if this merger occurs, we will continue
      to
      be required to market our ethanol through the surviving entity of the merger.
      Our obligation to market our ethanol through US BioEnergy Corporation or the
      survivor of the proposed merger means that we may not be able to market our
      ethanol as effectively as we otherwise would have.




25





***The
      extraction of corn oil from distillers grains is a relatively new process,
      and
      we may not be able to efficiently extract corn oil or locate a market for any
      corn oil that is extracted.*** We
      anticipate implementing corn oil extraction technology to separate corn oil
      from
      our distillers grains during the production process. Relatively few ethanol
      plants have corn oil extraction capability, meaning that once our ethanol plant
      with corn oil extraction capability is constructed, we may face challenges
      that
      similarly situated ethanol plants do not. These challenges may prove impossible
      or impracticable to overcome and we ultimately may decide not to extract corn
      oil from our distillers grains. Even if we are able to effectively extract
      corn
      oil, we or any third party that we work with may have difficulty in marketing
      the corn oil that is extracted. Our failure to extract corn oil, or to market
      any corn oil that is extracted may result in less income from sales, reducing
      our revenue stream.





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




**Risks
      Related to the Ethanol Industry**





***New
      ethanol plants under construction or decreases in the demand for ethanol may
      result in excess U.S. production capacity, causing ethanol prices to decline.*** According
      to the Renewable Fuels Association, (the “RFA”), domestic ethanol production
      capacity has increased from 1.9 billion gallons per year (“BGY”) as of January
      2001 to approximately 8.31 BGY as of March 17, 2008. Excess capacity in the
      ethanol industry would have an adverse effect on our contemplated results of
      operations, cash flows, and financial position. In a manufacturing industry
      with
      excess capacity, producers have an incentive to manufacture additional products
      for so long as the price exceeds the marginal cost of production (i.e., the
      cost
      of producing only the next unit, without regard for interest, overhead or fixed
      costs). This incentive can result in the reduction of the market price of
      ethanol to a level that is inadequate to generate sufficient cash flow to cover
      costs.





Excess
      capacity may also result from decreases in the demand for ethanol, which could
      result from a number of factors, including regulatory developments and reduced
      U.S. gasoline consumption. Reduced gasoline consumption could occur as a result
      of increased prices for gasoline or crude oil, which could cause businesses
      and
      consumers to reduce driving or acquire vehicles with more favorable gasoline
      mileage. There is some evidence that this has occurred in the recent past as
      U.S. gasoline prices have increased.





***Competition
      from the advancement of alternative fuels may lessen the demand
      for*** **** ***ethanol
      and negatively impact our profitability.*** Alternative
      fuels, gasoline oxygenates and ethanol production methods are continually under
      development. Although currently in the experimental stage, future large-scale
      biobutanol production may increase competition for agricultural feedstocks,
      including corn, or provide a competitive advantage to pipeline owners.
      Additionally, a number of automotive, industrial and power generation
      manufacturers are developing alternative clean power systems using fuel cells
      or
      clean burning gaseous fuels. Like ethanol, the emerging fuel cell industry
      offers a technological option to address increasing worldwide energy costs,
      the
      long-term availability of petroleum reserves and environmental concerns. Fuel
      cells have emerged as a potential alternative to certain existing power sources
      because of their higher efficiency, reduced noise and lower emissions. Fuel
      cell
      industry participants are currently targeting the transportation, stationary
      power and portable power markets in order to decrease fuel costs, lessen
      dependence on crude oil and reduce harmful emissions. If the fuel cell and
      hydrogen industries continue to expand and gain broad acceptance, and hydrogen
      becomes readily available to consumers for motor vehicle use, we may not be
      able
      to compete effectively. This additional competition could reduce the demand
      for
      ethanol, which would negatively impact our profitability.




26





***Corn-based
      ethanol may compete with cellulose-based ethanol in the
      future,*** **** ***which
      could make it more difficult for us to produce ethanol on
      a*** **** ***cost-effective
      basis.*** Most
      ethanol is currently produced from corn and other raw grains, such as milo
      or
      sorghum - especially in the Midwest. The current trend in ethanol production
      research is to develop an efficient method of producing ethanol from
      cellulose-based biomass, such as agricultural waste, forest residue, municipal
      solid waste, and energy crops. This trend is driven by the fact that
      cellulose-based biomass is generally cheaper than corn, and producing ethanol
      from cellulose-based biomass would create opportunities to produce ethanol
      in
      areas which are unable to grow corn. Although current technology is not
      sufficiently efficient to be competitive, a report by the U.S. Department of
      Energy entitled “Outlook for Biomass Ethanol Production and Demand” indicates
      that new conversion technologies may be developed in the future. If an efficient
      method of producing ethanol from cellulose-based biomass is developed, we may
      not be able to compete effectively. We do not believe it will be cost-effective
      to convert the ethanol plant we are proposing into a plant which will use
      cellulose-based biomass to produce ethanol. If we are unable to produce ethanol
      as cost-effectively as cellulose-based producers, our ability to generate
      revenue will be negatively impacted.




***Consumer
      resistance to the use of ethanol based on the belief that ethanol
      is*** **** ***expensive,
      adds to air pollution, harms engines, reduces fuel efficiency and takes more
      energy to*** **** ***produce
      that it contributes may affect the demand for ethanol which
      could*** **** ***affect
      our ability to market our product.*** Media
      reports in the popular press indicate that some consumers believe that use
      of
      ethanol will have a negative impact on gasoline prices at the pump. Many also
      believe that ethanol adds to air pollution and harms car and truck engines.
      It
      is also widely reported that ethanol products such as E-85 significantly reduce
      fuel economy and cause overall fuel costs to substantially increase. Researchers
      have published studies reporting that the production of ethanol actually uses
      more fossil energy, such as oil and natural gas, than the amount of ethanol
      that
      is produced. These consumer beliefs could potentially be wide-spread. If
      consumers choose not to buy ethanol, it would affect the demand for the ethanol
      we produce, which could lower demand for our product and negatively affect
      our
      profitability.





***Competition
      from ethanol imported from Caribbean Basin countries may be a
      less*** **** ***expensive
      alternative to our ethanol, which would cause us to lose market share.*** Ethanol
      produced or processed in certain countries in Central America and the Caribbean
      region is eligible for tariff reduction or elimination upon importation to
      the
      United States under a program known as the Caribbean Basin Initiative. Large
      ethanol producers, such as Cargill, have expressed interest in building
      dehydration plants in participating Caribbean Basin countries, such as El
      Salvador, which would convert ethanol into fuel-grade ethanol for shipment
      to
      the United States. Ethanol imported from Caribbean Basin countries may be a
      less
      expensive alternative to domestically produced ethanol. Currently, international
      suppliers produce ethanol primarily from sugar cane and have cost structures
      that may be substantially lower than ours. Competition from ethanol imported
      from Caribbean Basin countries may affect our ability to sell our ethanol
      profitably.





***Competition
      from ethanol imported from Brazil may be a less
      expensive*** **** ***alternative
      to our ethanol, which would cause us to lose market share.*** Brazil
      is
      currently the world’s largest producer and exporter of ethanol. In Brazil,
      ethanol is produced primarily from sugarcane, which is also used to produce
      food-grade sugar. Approximately 434 million gallons of Brazilian ethanol were
      imported into the United States in 2006. This is an increase from 2005, when
      the
      U.S. imported approximately 20 million gallons of ethanol from Brazil. Import
      figures for 2007 are not yet available. Ethanol imported from Brazil may be
      a
      less expensive alternative to domestically produced ethanol, which is primarily
      made from corn. Tariffs presently protecting U.S. ethanol producers may be
      reduced or eliminated. Competition from ethanol imported from Brazil may affect
      our ability to sell our ethanol profitably.





***We
      may not be able to compete effectively in the U.S. ethanol industry, which
      would
      cause us to lose market share.*** In
      the
      United States, our contemplated business would compete with other corn
      processors, ethanol producers and refiners. A number of competitors are
      divisions of substantially larger enterprises and have substantially greater
      financial resources than we plan to have. Smaller competitors also pose a
      threat. Farmer-owned cooperatives and independent firms consisting of groups
      of
      individual farmers and investors have been able to compete successfully in
      the
      ethanol industry. These smaller competitors operate smaller facilities which
      do
      not affect the local price of corn grown in the proximity to the facility as
      much as larger facilities. In addition, many of these smaller competitors are
      farmer-owned and often require their farmer-owners to commit to selling them
      a
      certain amount of corn as a requirement of ownership. A significant portion
      of
      production capacity in the ethanol industry consists of smaller-sized
      facilities. Most new ethanol plants under development across the country are
      individually owned. In addition, institutional investors and high net worth
      individuals could heavily invest in ethanol production facilities and oversupply
      the demand for ethanol, resulting in lower ethanol price levels that might
      adversely affect the results of our contemplated operations and financial
      position.




27




***Waivers
      of the RFS minimum levels of renewable fuels included in gasoline could have
      a
      material adverse affect on the results of our contemplated operations.*** Under
      the
      Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007,
      the U.S. Department of Energy, in consultation with the Secretary of Agriculture
      and the Secretary of Energy, may waive the renewable fuels mandate upon the
      petition of one or more states, any person subject to the renewable fuels
      standard or by the Administrator on his own motion, if the Administrator of
      the
      U.S. Environmental Protection Agency determines that implementing the
      requirements would severely harm the economy or the environment of a state,
      a
      region or the U.S., or that there is inadequate supply to meet the requirement.
      Any waiver of the RFS with respect to one or more states would adversely offset
      demand for ethanol and could have a material adverse effect on the results
      of
      our contemplated operations and financial condition.





***Blenders
      may be unwilling or unable to blend ethanol into gasoline at the pace at which
      ethanol is being produced, which could result in an oversupply of ethanol.*** Ethanol
      is blended into gasoline prior to being sold for consumption. There may exist
      a
“blend wall,” a point at which blenders may be logistically unable to blend
      ethanol into gasoline at the pace at which ethanol is being produced. Many
      blending terminals may need to make infrastructure changes to blend ethanol
      instead of methyl tertiary butyl ether (MTBE) and to blend the quantities of
      ethanol that are being produced. Many of the nation’s gasoline terminals that
      blend ethanol are not equipped to accept rail cars. Additionally, most blenders
      must install new tanks, pipes and pumps to handle ethanol. Blenders may be
      unwilling to spend large amounts of capital to expand infrastructure, or may
      be
      disinclined to blend ethanol absent a legislative mandate to increase blending.
      Additionally, many blending terminals are owned by petroleum companies that
      may
      have an economic incentive to resist blending ethanol with gasoline. If blending
      terminals do not have sufficient capacity or the necessary infrastructure to
      blend ethanol, or if blending terminals are merely unwilling to blend ethanol
      with gasoline, there may be an oversupply of ethanol on the market, which could
      depress ethanol prices.





**Risks
      Related to Regulation and Governmental Action**





***A
      change in government policies favorable to ethanol may cause demand
      for*** **** ***ethanol
      to decline.*** Growth
      and demand for ethanol may be driven primarily by federal and state government
      policies, such as state laws banning Methyl Tertiary Butyl Ether (MTBE) and
      the
      national renewable fuels standard. The continuation of these policies is
      uncertain, which means that demand for ethanol may decline if these policies
      change or are discontinued.





***Government
      incentives for ethanol production, including federal tax
      incentives,*** **** ***may
      be eliminated in the future, which could hinder our ability to operate at
      a*** **** ***profit.*** The
      ethanol industry and our business are assisted by various federal ethanol tax
      incentives, including those included in the Energy Policy Act of 2005 and the
      Energy Independence and Security Act of 2007. The Energy Policy Act of 2005
      created a renewable fuels standard (RFS), which was then increased under the
      Energy Independence and Security Act of 2007. The RFS began at 4 billion gallons
      in 2006 and was scheduled to increase to 7.5 billion gallons by 2012. The
      Renewable Fuels Association estimates that current domestic ethanol production
      as of March 2008 is approximately 8.31 billion gallons, thereby surpassing
      the RFS for 2012 contained in the Energy Policy Act of 2005. However, on
      December 19, 2007, President George W. Bush signed into law the Energy
      Independence and Security Act of 2007 (H.R. 6), which increases the RFS
      requirement for 2008 to 9 billion gallons. The RFS will progressively
      increase to a 36 billion gallon requirement by 2022, including 15 billion
      gallons derived from corn starch. The RFS helps support a market for ethanol
      that might disappear without this incentive. The elimination or reduction of
      tax
      incentives to the ethanol industry could reduce the market for ethanol, which
      could reduce prices and our revenues by making it more costly or difficult
      for
      us to produce and sell ethanol. If the federal tax incentives are eliminated
      or
      sharply curtailed, we believe that a decreased demand for ethanol will result,
      which could result in the failure of the business.




28





***Changes
      in environmental regulations or violations of the regulations could
      be*** **** ***expensive
      and reduce our profit.*** We
      will
      be subject to extensive air, water and other environmental regulations and
      we
      will need to obtain a number of environmental permits to construct and operate
      the plant. In addition, it is likely that our senior debt financing will be
      contingent on our ability to obtain the various environmental permits that
      we
      will require. If for any reason, any of these permits are not granted,
      construction costs for the plant may increase, or the plant may not be
      constructed at all. Additionally, any changes in environmental laws and
      regulations, both at the federal and state level, could require us to invest
      or
      spend considerable resources in order to comply with future environmental
      regulations. The expense of compliance could be significant enough to reduce
      our
      profit.





***Carbon
      dioxide may be regulated in the future by the EPA as an air pollutant, requiring
      us to obtain additional permits and install additional environmental mitigation
      equipment, which could adversely affect our financial
      performance*** . 
      The United States Supreme Court recently determined that carbon dioxide is
      an
      air pollutant under the Clean Air Act for the purposes of vehicle
      emissions.  Similar lawsuits have been filed seeking to require the EPA to
      regulate carbon dioxide emissions from stationary sources such as our ethanol
      plant under the Clean Air Act. Our plant will produce a significant amount
      of
      carbon dioxide, which we plan to vent into the atmosphere.  If the EPA
      regulates carbon dioxide emissions by plants such as ours, we may have to apply
      for additional permits or we may be required to install carbon dioxide
      mitigation equipment or take other as yet unknown steps to comply with these
      potential regulations.  Compliance with any future regulation of carbon
      dioxide, if it occurs, could be costly and may prevent us from operating the
      ethanol plant profitably.





**ITEM
      2. DESCRIPTION OF PROPERTY.**





We
      currently hold real estate purchase options on two adjacent parcels of real
      property consisting of approximately 275 acres. Gold-Eagle Cooperative purchased
      the first option on May 25, 2006 for $45,000 and subsequently assigned the
      option to us. The original term of the option was six months, but the option
      agreement provides that the agreement may be renewed for additional six-month
      periods, so long as an additional $45,000 is paid for each such period. We
      renewed the option agreement in November 2006, May 2007 and again in November
      2007 so that we have the right to purchase the site through May 24, 2008. Under
      this first option agreement, we have the right to purchase approximately 200
      acres at a price of $7,500 per acre, for a total purchase price of $1.5 million.
      Only our most recent $45,000 option payment will be applied toward this total
      purchase price, and if we renew the option agreement again, only the most recent
      $45,000 option payment following any such renewal will apply toward the total
      purchase price. We purchased the second option for a total of $9,200, which
      amount will not be applied to the purchase price. The term of this option runs
      through April 10, 2008. Under the second option agreement, we have the right
      to
      acquire a total of approximately 75 acres. The terms of the second option
      agreement require us to exchange approximately 28 acres of the property acquired
      under the first option for 28 acres to be acquired under this second option
      agreement. Additionally, the second option agreement grants us the right to
      purchase approximately 46.72 acres at a price of 13,500 per acre, for a total
      purchase price of $630,720. This means that if we exercise both options, due
      to
      the 28 acre exchange provision contained in the second options agreement we
      will
      acquire a net of approximately 246.72 acres.





**ITEM
      3. LEGAL PROCEEDINGS.**





From
      time
      to time in the ordinary course of business, Prairie Creek Ethanol, LLC may
      be
      named as a defendant in legal proceedings related to various issues, including
      without limitation, workers’ compensation claims, tort claims, or contractual
      disputes.  We are not currently involved in any material legal proceedings,
      directly or indirectly, and we are not aware of any claims pending
      or threatened against us or any of the directors that
      could result in the commencement of legal proceedings.





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





We
      did
      not submit any matter to a vote of our unit holders through the solicitation
      of
      proxies or otherwise during the fourth quarter of the fiscal year ended December
      31, 2007.





29




**PART
      II**





**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY SECURITIES.**





There
      is
      no public trading market for our units.




As
      of
      March 26, 2008 we had approximately 28 unit holders of record.




We
      have
      not declared or paid any distributions on the units. Our board of directors
      has
      complete discretion over the timing and amount of distributions to our unit
      holders. We do not expect to generate revenues until the proposed ethanol plant
      is operational, which is expected to occur approximately 17 to 22 months after
      construction commences. After operation of the proposed ethanol plant begins,
      it
      is anticipated, subject to any loan covenants or restrictions with any senior
      and term lenders, that we will distribute “net cash flow” to our members in
      proportion to the units that each member holds relative to the total number
      of
      units outstanding. “Net cash flow,” means our gross cash proceeds less any
      portion, as determined by the board of directors in their sole discretion,
      used
      to pay or establish reserves for operating expenses, debt payments, capital
      improvements, replacements and contingencies. However, there can be no assurance
      that we will ever be able to pay any distributions to the unit holders.
      Additionally, once we obtain debt financing, our lenders may further restrict
      our ability to make distributions during the initial period of the term
      debt.




Through
      our private placement, we have raised aggregate proceeds of $1,580,000. During
      the time period beginning with the formation of Prairie Creek Ethanol, LLC
      on
      April 19, 2006 and ending on December 31, 2006, we issued and sold 284
      membership units to our seed capital investors at a purchase price of $2,500
      per
      unit and 1,239 units to our founders at an average purchase price of $702.18
      per
      unit (969 units were purchased for $588.24 per unit and 270 units were purchased
      were purchased for $1,111.11 per unit), without registering the units with
      the
      Securities and Exchange Commission. Sales to our founders occurred on August
      10,
      2006, while sales to our seed capital investors occurred on December 31, 2006.
      Each of these sales was deemed to be exempt from registration under the
      Securities Act in reliance on Section 4(2) and Rule 506 of the Securities Act
      of
      1933 as transactions by an issuer not involving a public offering. No
      underwriting discounts or commissions were paid in these transactions and we
      conducted no general solicitation in connection with the offer or sale of the
      securities. The purchasers of the securities in each transaction made
      representations to us regarding their status as accredited investors as defined
      in Regulation D, or as investors with such knowledge and experience in financial
      and business matters that they were capable of evaluating the merits and risks
      of the investment (alone or with a purchaser representative), and their
      intention to acquire the securities for investment only and not with a view
      to
      or for sale in connection with any distribution thereof. Each purchaser agreed
      that a legend was placed on each certificate evidencing the securities stating
      the securities have not been registered under the Securities Act and setting
      forth restrictions on their transferability. All purchasers were provided a
      private placement memorandum containing all material information concerning
      our
      company and the offering. All purchases were made with cash and the total amount
      of cash consideration for those securities was $1,580,000. We subsequently
      redeemed 603 of the units purchased by our founders for $0.01 per unit on
      December 28, 2007, so that as of December 31, 2007 we have a total of 920 units
      issued and outstanding.




The
      Securities and Exchange Commission first declared our Registration Statement
      on
      Form SB-2 (SEC Registration No. 333-141585), as amended, effective on
      September 21, 2007.  We later made changes to the terms of our offering and
      filed a post-effective amendment to our registration statement, which became
      effective on January 23, 2008. We commenced our initial public offering of
      our
      units shortly thereafter.  Certain of our officers and directors are
      offering and selling the units on a best efforts basis without the assistance
      of
      an underwriter.  We are not paying these officers or directors any
      compensation for services related to the offer or sale of the units. We are
      planning to raise a minimum of $36,000,000 and a maximum of $85,000,000 in
      the
      offering and secure the balance needed to construct the plant through federal,
      state and local grants and debt financing.   As of March 26, 2008, we
      have received subscription for approximately 881 units for an aggregate amount
      of approximately $4,405,000.  We have not yet accepted any subscriptions or
      released funds from escrow and therefore have not used any proceeds from the
      offering.


30


**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATIONS.**





**Forward
      Looking Statements**


***This
        report contains forward-looking statements that involve significant risks
        and
        uncertainties. The following discussion, which focuses on our plan of operation
        through the commencement of operations of the plant, consists almost entirely
        of
        forward-looking information and statements. Actual events or results may
        differ
        materially from those indicated or anticipated, as discussed in the section
        entitled “Forward Looking Statements.” This may occur as a result of many
        factors, including those set forth in Item 1, “Description of Business—Risk
        Factors.” The following discussion of our financial condition and plan of
        operation should also be read in conjunction with our financial statements
        and
        notes to financial statements contained in this
        report.***
 
 **Overview**
 
 We
        are a
        development stage Iowa limited liability company formed on April 19, 2006.
        We
        intend to develop, build and operate a 55 million gallon per year ethanol
        plant
        expected to be located near Wesley, Iowa, approximately 130 miles northwest
        of
        Des Moines, Iowa. We have not yet engaged in the production of ethanol,
        distillers grains or corn oil and we do not expect to generate any revenue
        until
        the plant is completely constructed and operational. Based upon engineering
        specifications produced by Fagen, Inc., we expect the plant to annually consume
        approximately 19.7 million bushels of corn each year and annually produce
        approximately 55 million gallons of fuel grade ethanol, approximately 149,000
        tons of distillers grains and approximately 3.5 million gallons of corn oil.
        We
        currently estimate that it will take approximately 17 to 22 months after
        construction commences to complete plant construction.
 
 We
        expect
        the project will cost approximately $121,000,000 to complete. Fagen, Inc.
        will
        construct the plant for a contract price of approximately $81,900,000 based
        on
        our letter of intent, which does not include the anticipated cost of our
        water
        treatment facility or fire protection system, any change orders, increases
        in
        the costs of materials provided by the CCI costs escalator provision contained
        in letter of intent, increases in cost provided by the fixed monthly surcharge
        provision, or the early completion bonus contained in the letter of intent.
        We
        anticipate that the increase in cost pursuant to the fixed monthly surcharge
        provision in the letter of intent will be a minimum of approximately $5,323,500,
        and is likely to be greater than that amount. We anticipate entering into,
        but
        have not yet entered into, a definitive design-build agreement with Fagen,
        Inc.
        We expect that we will be required to satisfy certain conditions pursuant
        to the
        design-build agreement before Fagen, Inc. will begin construction. We have
        based
        our capital needs on a design for the plant that will cost approximately
        $89,900,000, which includes our accrued monthly surcharge and the cost of
        our
        water treatment equipment and fire protection system not contemplated by
        our
        letter of intent with Fagen, Inc., with additional start-up and development
        costs of approximately $31,100,000, for a total project completion cost of
        approximately $121,000,000.
 
 Except
        for our letter of intent with Fagen, Inc., we do not have any binding or
        non-binding agreements with any other contractor for the labor or materials
        necessary to build the plant. The most recent letter of intent with executed
        with Fagen, Inc. supersedes and replaces the prior letter of intent we entered
        into with Fagen, Inc. We executed a memorandum of understanding to engage
        Indeck
        Wesley, L.L.C. to design and build an Illinois Basin coal-based energy plant
        as
        our energy source. However, we have since decided to power the ethanol plant
        with natural gas rather than coal. As a result, pursuant to our memorandum
        of
        understanding we forfeited our down payment of $100,000 to Indeck Wesley,
        L.L.C.
        Our anticipated total project cost is not a firm estimate and is expected
        to
        change from time to time as the project progresses.
 
 We
        are
        still in the development phase, and until the proposed ethanol plant is
        operational, we will generate no revenue. We anticipate that accumulated
        losses
        will continue to increase until the ethanol plant is operational. We currently
        estimate that the construction of the plant will be completed in early
        2010.
 
 **Plan
        of Operations to Start-Up of the Ethanol Plant**
 
 We
        expect
        to spend at least the next 12 months focused on completion of project
        capitalization, site development, and plant construction. We do not expect
        to
        complete construction and begin operations until 17 to 22 months from the
        commencement of construction. We expect the funds raised in our previous
        private
        placements to supply us with enough cash to cover our costs, including staffing,
        office costs, audit, legal, compliance and staff training, until we release
        funds from escrow and procure debt financing. However, in the event that
        these
        funds do not cover our costs, we may need to seek interim debt financing.
        If we
        are unable to obtain additional interim financing, we may be forced to abandon
        our business altogether.
 
 31
  Assuming
        the successful completion of our registered offering and execution of debt
        financing agreements, we expect to have sufficient cash on hand to cover
        all
        costs associated with construction of the project, including, but not limited
        to, site development, utilities, construction and equipment
        acquisition.
 
 *Project
        Capitalization*
 
 In
        the
        next fiscal quarter, our primary focus is expected to be on project
        capitalization. We expect to continue to raise equity through our registered
        offering, collect the offering proceeds from investors and identify potential
        sources of debt financing.
 
 We
        have
        not yet closed on our registered offering. Our registered offering is for
        a
        minimum of 7,200 units and a maximum of 17,000 units at a purchase price
        of
        $5,000 per unit. There is a minimum purchase requirement of two units to
        participate in the offering, with additional units to be purchased in one
        unit
        increments. The minimum aggregate offering amount is $36,000,000 and the
        maximum
        aggregate offering amount is $85,000,000. As of March 26, 2008, we have received
        subscriptions for approximately 881 units from investors, for an aggregate
        amount of approximately $4,405,000. Our subscription procedures require
        subscribers to send 10% of the amount due at the time they sign the subscription
        agreement. At that time, investors are also required to provide a promissory
        note for the remainder of the amount due. As such, even if we receive
        subscriptions for a sufficient number of units, we may not ultimately be
        able to
        collect all funds owed to us by investors under the subscription agreements.
        We
        will not release funds from escrow until we have cash deposits in our escrow
        account in excess of the minimum offering amount of $36,000,000. In addition,
        we
        must obtain a written debt financing commitment for the debt financing we
        need.
        We have begun discussions with potential lenders, but have no commitments
        or
        agreements in place.
 
 A
        debt
        financing commitment obligates the lender to lend us the debt financing that
        we
        need if we satisfy all the conditions of the commitment. These conditions
        may
        include, among others, the total cost of the project being within a specified
        amount; the receipt of engineering and construction contracts acceptable
        to the
        lender; evidence of the issuance of all permits, acceptable insurance coverage
        and title commitment; the contribution of a specified amount of equity; and
        attorney opinions. At this time, we do not know what business and financial
        conditions will be imposed on us by our lender. We may not satisfy the loan
        commitment conditions before closing the offering, or at all. If this occurs
        we
        may:
 
 ·
              commence
                  construction of the plant using all or a part of the equity funds
                  raised
                  while we seek another debt financing source;
 
 ·
              hold
                  the equity funds raised indefinitely in an interest-bearing account
                  while
                  we seek another debt financing source;
                  or
 
 ·
              return
                  the equity funds, if any, to investors with accrued interest, after
                  deducting the currently indeterminate expenses of operating our
                  business
                  or partially constructing the plant before we return the
                  funds.
 
 While
        the
        foregoing alternatives may be available, we do not expect to begin substantial
        plant construction activity before satisfying the loan commitment conditions
        or
        closing the loan transaction because it is very likely that Fagen, Inc. and
        any
        lending institution would prohibit substantial plant construction activity
        until
        satisfaction of loan commitment conditions or loan closing. In the unlikely
        event that the loan commitment and Fagen, Inc. permit us to spend equity
        proceeds prior to closing the loan and obtaining loan proceeds, we may decide
        to
        spend equity proceeds on project development expenses, such as securing critical
        operating contracts or owner’s construction costs such as site development
        expenses.
 
 We
        plan
        to apply for grants from various sources, and applied for and received a
        grant
        of $75,000 from the Rail Revolving Loan and Grant Program administered by
        the
        Iowa Rail Finance Authority. Although we may apply under several programs
        simultaneously and may be awarded grants or other benefits from more than
        one
        program, it must be noted that some combinations of programs are mutually
        exclusive. Under some state and federal programs, awards are not made to
        applicants in cases where construction on the project has started prior to
        the
        award date. There is no guarantee that applications will result in awards
        of
        grants or loans.
  32
 
 *Site
        Acquisition and Development*
 
 For
        the
        next twelve months, we expect to continue working principally on the preliminary
        design and development of our proposed ethanol plant, the acquisition and
        development of a plant site in Kossuth County, Iowa, obtaining the necessary
        construction permits, identifying potential sources of debt financing and
        negotiating the corn supply, ethanol and co-product marketing, utility and
        other
        contracts.
  We
        have
        engaged Yaggy Colby Associates of Iowa Inc. (“Yaggy Colby”) to provide to us
        certain engineering services relating to the proposed ethanol plant site,
        including design survey, land survey and other pre-design services. Under
        our
        agreement with Yaggy Colby, such services will be provided to us on an hourly
        rate basis.
 
 Based
        on
        a resolution adopted by the Kossuth County Board of Supervisors, we expect
        to
        receive a local property tax exemption for one hundred percent of the new
        taxes
        on the proposed ethanol plant site for a period of twenty (20)
        years.
 
 *Plant
        Construction*
 
 We
        expect to complete construction of the proposed plant and commence operations
        approximately 17 to 22 months after construction commences. Our work will
        include completion of the final design and development of the plant. We also
        plan to negotiate and execute finalized contracts concerning the construction
        of
        the plant and corn oil extraction technology, provision of necessary
        electricity, natural gas and other power sources and marketing agreements
        for
        ethanol and co-products. Assuming the successful completion of this offering
        and
        our obtaining the necessary debt financing, we expect to have sufficient
        cash on
        hand to cover construction and related start-up costs necessary to make the
        plant operational. We estimate that we will need approximately $89,900,000
        to
        construct the plant, which includes our accrued monthly surcharge and the
        anticipated cost of the water treatment facility and fire protection system
        we
        intend to construct, and a total of approximately $31,100,000 to cover all
        capital expenditures necessary to complete the project, make the plant
        operational and produce revenue.
 
 We
        have
        entered into a letter of intent, and anticipate entering into a definitive
        design-build agreement, with Fagen, Inc. in connection with the design,
        construction and operation of our ethanol plant. The letter of intent terminates
        on November 30, 2008, unless the size and design of the ethanol plant have
        been
        determined and mutually agreed upon, a specific site has been determined
        and
        mutually agreed upon, and at least ten percent (10%) of the necessary equity
        has
        been raised.
 
 We
        anticipate entering into an engineering services agreement with Fagen
        Engineering, LLC, an affiliate of Fagen, Inc., for the performance of certain
        engineering and design services, although we have not yet entered into such
        an
        agreement. Fagen Engineering, LLC performs the engineering services for projects
        constructed by Fagen, Inc.
 
 Based
        on
        discussions we have had with both Fagen, Inc. and ICM, Inc. and provisions
        found
        in our letter of intent with Fagen, Inc., we expect that ICM, Inc. will serve
        as
        the principal subcontractor for the plant and provide the process engineering
        operations for Fagen, Inc. ICM, Inc. is a full-service engineering,
        manufacturing and merchandising firm based in Colwich, Kansas. We have not
        entered into any legally binding agreements with ICM, Inc. relating to
        subcontracting or process engineering operations. However, we have engaged
        ICM,
        Inc. to provide assistance in securing state approval to start construction
        of
        the plant, primarily in the form of obtaining the environmental permits we
        require to construct and operate the ethanol plant.
 
 *Other
        Agreements*
 
 We
        anticipate entering into, but have not yet entered into, a grain procurement
        agreement with Gold-Eagle Cooperative (“Gold-Eagle”) and North Central
        Cooperative (“North Central”). Under such an agreement, Gold-Eagle and North
        Central would have the exclusive right and responsibility to provide us with
        our
        daily requirements of corn. Under such an agreement, we anticipate that we
        would
        purchase corn at the local market price delivered to the ethanol plant, plus
        a
        fixed fee per bushel of corn purchased. Because several of our directors
        also
        serve as directors of Gold Eagle and North Central, such directors may have
        a
        conflict of interest when negotiating or approving a grain procurement
        agreement. Additionally, Gold-Eagle and North Central are two of our founders
        and are currently our two largest unit-holders. As a result, Gold-Eagle and
        North Central may be able to obtain a grain procurement agreement on more
        favorable terms than if Gold-Eagle and North Central were not unit-holders.
        Some
        of our directors are also directors of Corn, LP, an ethanol plant in Goldfield,
        Iowa that is one of our founders. Gold-Eagle procures all the corn needed
        for
        the operations of Corn, LP. This means that our directors that also serve
        as
        directors of Corn, LP may have a conflict of interest in negotiating or
        approving a grain procurement agreement with Gold-Eagle. Additionally, our
        directors that also serve as directors of Gold-Eagle may have a conflict
        of
        interest due to Gold-Eagle’s obligations to Corn, LP.
  33
 
 We
        have
        engaged U.S. Energy Services, Inc. to provide us with natural gas and
        electricity management services. In exchange for these services, we will
        pay
        U.S. Energy a monthly retainer fee of $3,800 for an initial contract term
        of 12
        months. This monthly retainer increases four percent (4%) every twelve months,
        unless the agreement is terminated. If we decide to utilize U.S. Energy’s
        hedging service we will have to pay an additional $.01 per MMBTu administrative
        fee for physical or financial natural gas hedging. Additional fees may apply
        for
        additional services and for time and travel.
 
 We
        expect
        that the Iowa, Chicago & Eastern Railroad Corporation (the “IC&E
        Railroad”), an affiliate of Cedar American Rail Holdings, Inc., will provide
        rail service to the proposed plant site. We have a preliminary agreement
        with
        Cedar American Rail Holdings, Inc. to provide us rebates of up to $170,000
        in
        the form of $50.00 per car for the construction and maintenance of two mainline
        switches. Under this preliminary agreement, we are required to pay Cedar
        American Rail Holdings, Inc. $3,000 per year for a term of ten years for
        mainline switch maintenance.
 
 We
        anticipate that we will retain TranSystems Corporation for rail infrastructure
        design and construction services; however, we do not currently have such
        an
        agreement. We will need to establish rail access directly to the plant from
        the
        main rail line. We have engaged TranSystems Corporation to provide us with
        certain engineering services on a project-by-project basis.
 
 Our
        letter of intent with Fagen, Inc. requires us to market our ethanol through
        US
        BioEnergy Corporation for a period of two years from the date the ethanol
        plant
        is completed, provided that US BioEnergy Corporation provides competitive
        rates
        and services compared to other marketing firms. Fagen, Inc. and certain of
        its
        affiliates are affiliates of US BioEnergy Corporation. Our obligation to
        market
        our ethanol through US BioEnergy Corporation means that we may not be able
        to
        market our ethanol as effectively as we otherwise would have.
 
 We
        anticipate that Gold-Eagle Cooperative, currently our largest unit-holder,
        will
        manage the ethanol plant, market a portion of our distiller’s grains, and
        provide other services under long-term contracts. However, we have not entered
        into any definitive agreements with Gold-Eagle Cooperative at this time
        regarding the management of the ethanol plant. Because several of our directors
        also serve as directors of Gold Eagle Cooperative, such directors may have
        a
        conflict of interest when negotiating or approving the contemplated
        agreements.
 
 We
        executed a memorandum of understanding to engage Indeck Wesley, L.L.C. to
        design
        and build an Illinois Basin coal-based energy plant as our energy source.
        However, we have since decided to power the ethanol plant with natural gas
        rather than coal. As a result, pursuant to our memorandum of understanding
        we
        forfeited our down payment of $100,000 to Indeck Wesley, L.L.C.
 
 We
        anticipate entering into an electric service agreement with Prairie Energy
        Cooperative, but have not yet entered into a definitive agreement.
 
 We
        have
        engaged ICM, Inc. to provide assistance in securing state approval to start
        construction of the plant, primarily in the form of obtaining the environmental
        permits we require to construct and operate the ethanol plant. The cost of
        ICM,
        Inc.’s permitting services will be based on a time and material basis.
        Additional costs may be imposed if ICM, Inc. is required to address significant
        public comment and/or assist in lengthy agency negotiations regarding specific
        permit terms and conditions.
  34
 
 *Permitting
        and Regulatory Activities*
 
 We
        will
        be subject to extensive air, water and other environmental regulations and
        we
        will need to obtain a number of environmental permits to construct and operate
        the plant. We have not applied for any of these permits, but anticipate doing
        so
        before we begin construction. We have engaged ICM, Inc. to assist us in applying
        for the permits required to construct and operate the ethanol
        plant.
 
 Some
        of
        the permits we will be required to obtain include, but are not necessarily
        limited to, air pollution construction and operation permits, a storm water
        discharge permit, a high capacity water withdrawal permit and an alcohol
        fuel
        producer’s permit. Additionally, we must put a pollution prevention plan and
        spill prevention control and countermeasure plan in place prior to commencing
        operations. If for any reason any of these permits are not granted, construction
        costs for the plant may increase, or the plant may not be constructed at
        all.
        Currently, we do not anticipate problems in obtaining the required permits;
        however, such problems may arise in which case our plant may not be allowed
        to
        operate.
 
 *Trends
        and Uncertainties Impacting the Ethanol Industry*
 
 If
        we are
        successful in building and constructing the ethanol plant, we expect our
        future
        revenues will primarily consist of sales of ethanol, distillers grains and
        corn
        oil. We expect ethanol sales to constitute the bulk of our revenues.
        Historically, the demand for ethanol increased relative to supply, which
        caused
        upward pressure on ethanol market prices. Increased demand, firm crude oil
        and
        gas markets, public acceptance, and positive political signals contributed
        to
        those strong ethanol prices.  Those high prices were not sustained,
        however, due to increased ethanol production, and transportation and logistics
        problems in the industry.  Management believes the industry will need to
        continue to grow demand and have governmental support, and transportation
        and
        logistical problems will need to be alleviated in order for the industry
        to
        realize higher ethanol market prices.
  We
        expect
        to benefit from federal ethanol supports and federal tax incentives. Changes
        to
        these supports or incentives could significantly impact demand for ethanol,
        and
        could negatively impact our business. On August 8, 2005, President George
        W. Bush signed into law the Energy Policy Act of 2005 which contained numerous
        provisions that favorably impacted the ethanol industry by enhancing both
        the
        production and use of ethanol. Most notably, the Energy Policy Act created
        a 7.5
        billion gallon renewable fuels standard (the “RFS”). The RFS is a national
        renewable fuels mandate as to the total amount of national renewable fuels
        usage
        but allows flexibility to refiners by allowing them to use renewable fuel
        blends
        in those areas where it is most cost-effective rather than requiring renewable
        fuels to be used in any particular area or state.   The recently
        enacted Energy Independence and Security Act (the “Act”) amended the RFS to set
        the volume at 9 billion gallons in 2008, increasing to 36 billion gallons
        in
        2022.  The Act expanded the definition of several renewable fuels which may
        be used by blenders to meet the RFS requirement.  The RFS now includes
        conventional biofuels, advanced biofuels, cellulosic biofuels and biodiesel,
        all
        of which can be used to meet the RFS.  In addition, the RFS total annual
        requirement is allocated different in each subsequent year to encourage the
        use
        of more cellulosic biofuels, advanced biofuels and biodiesel.  The RFS for
        conventional biofuel, including corn-based ethanol, will reach 15 billion
        gallons in 2015 and will not increase in subsequent years.
  Ethanol
        production continues to rapidly grow as additional plants and plant expansions
        become operational. According to the Renewable Fuels Association, as of March
        17, 2008, 145 ethanol plants were producing ethanol with a combined annual
        production capacity of 8.31 billion gallons per year and current expansions
        and
        plants under construction constituted an additional future production capacity
        of 5.10 billion gallons per year.  POET and ADM control a significant
        portion of the ethanol market, producing an aggregate of over 2.2 billion
        gallons of ethanol annually.  POET plans to produce an additional 327
        million gallons of ethanol per year and ADM plans to produce an additional
        550
        million gallons of ethanol per year through plant expansions, which will
        strengthen their positions in the ethanol industry and cause a significant
        increase in domestic ethanol supply.  In addition, in late
        November 2007, VeraSun Energy Corporation and US Bio Energy Corp. announced
        that they entered into a merger agreement which is expected to close during
        the
        first quarter of 2008.  The new entity will retain the Vera Sun name and,
        by the end of 2008, is expected to own 16 ethanol facilities with a total
        production capacity of more than 1.6 billion gallons per year, which would
        make
        it one of the largest ethanol producers in the country.  Excess capacity in
        the ethanol industry would have an adverse effect on our results of operations,
        cash flows and financial condition.  In a manufacturing industry with
        excess capacity, producers have an incentive to manufacture additional products
        for so long as the price exceeds the marginal cost of production (i.e., the
        cost
        of producing only the next unit, without regard to interest, overhead or
        fixed
        costs).  This incentive can result in the reduction of the market price of
        ethanol to a level that is inadequate to generate sufficient cash flow to
        cover
        costs.  If the demand for ethanol does not grow at the same pace as
        increases in supply, we expect the price for ethanol to continue to
        decline.  Declining ethanol prices will result in lower revenues and may
        reduce or eliminate profits causing the value of your investment to be
        reduced.
  35
 
 Ethanol
        production is also expanding internationally. Imported ethanol is generally
        subject to a $0.54 per gallon tariff that was designed to offset the $0.51
        per
        gallon ethanol incentive available under the federal excise tax program for
        refineries that blend ethanol in their fuel. There is, however, a special
        exemption from this tariff under a program known as the Caribbean Basin
        Initiative for ethanol imported from 24 countries in Central America and
        the
        Caribbean Islands. Under this exemption, up to 7% of the U.S. ethanol market
        may
        be supplied duty-free by Caribbean Basin Initiative Ethanol containing no
        local
        feedstock. Imports from the exempted countries may increase as a result of
        new
        plants in development. Since production costs for ethanol in these countries
        are
        significantly less than what they are in the U.S., the duty-free import of
        ethanol through the countries exempted from the tariff pursuant to the Caribbean
        Basin Initiative may negatively affect the demand for domestic ethanol and
        the
        price at which we sell our ethanol.
  Demand
        for ethanol may increase as a result of increased consumption of E85 fuel.
        E85
        fuel is a blend of 70% to 85% ethanol and gasoline. According to the Energy
        Information Administration, E85 consumption is projected to increase from
        a
        national total of 22 million gallons in 2004 to 200 million gallons in
        2030.  E85 can be used as an aviation fuel, as reported by the National
        Corn Growers Association, and as a hydrogen source for fuel cells. According
        to
        the RFA, virtually every vehicle in the United States is capable of using
        ethanol blends up to 10%, but it takes a flexible fuel vehicle (FFV) to use
        higher blends up to E85.  According to the National Ethanol Vehicle
        Coalition, there are currently about 6.0 million FFVs capable of operating
        on
        E85.  Automakers such as Ford and General Motors have begun national
        campaigns to promote ethanol and have indicated plans to produce an estimated
        4 million more FFVs per year.
  The
        demand for E85 is largely driven by flexible fuel vehicle penetration of
        the
        United States vehicle fleet, the retail price of E85 compared to regular
        gasoline and the availability of E85 at retail stations. Because flexible
        fuel
        vehicles can operate on both ethanol and gasoline, if the price of regular
        gasoline falls below E85, demand for E85 will decrease as well. In addition,
        gasoline stations offering E85 are relatively scarce. From 2003 to 2007,
        the
        number of retail stations that supply E85 increased from less than 200 to
        over
        1,300 as reported by the American Coalition for Ethanol.  This remains a
        relatively small percentage of the total number of retail gasoline stations
        in
        the United States, which is approximately 170,000.  The Energy Policy Act
        of 2005 established a tax credit of 30% for infrastructure and equipment
        to
        dispense E85 which became effective in 2006, and is scheduled to expire
        December 31, 2010. Legislation was introduced on the first day of the 2007
        Congress that proposes a permanent extension of this tax credit; however,
        there
        is no guarantee that this proposed legislation will be adopted.  This tax
        credit is expected to encourage more retailers to offer E85 as an alternative
        to
        regular gasoline. However, some gas station operators may be hesitant to
        install
        pumps to dispense E85, as it is essentially a competitor to the stations’ main
        product, gasoline.  The Energy Independence and Security Act made it
        unlawful for a franchiser to prohibit a franchise from installing E85 fuel
        tanks
        and pumps within the franchise agreement.  This provision responded to
        concerns that many oil companies were prohibiting the installation of E85
        fuel
        pumps at the stations they owned or operated.  In addition, the Act created
        a grant program for the installation of refueling infrastructure for E85. 
Although the Act does not become effective until January 1, 2009,
        management believes these provisions will encourage the availability and
        use of
        E85.
  Demand
        for ethanol has historically been supported by higher oil prices and its
        refined
        components.  While the mandated usage required by the renewable fuels
        standard is driving demand, management believes that the industry will require
        an increase in voluntary usage in order to experience long-term growth.  We
        expect this will happen only if the price of ethanol is deemed economical
        by
        blenders.  In addition, increased consumer awareness of ethanol-blended
        gasoline will be necessary to motivate blenders to voluntarily increase the
        amount of ethanol blended into gasoline.  In the future, a lack of
        voluntary usage by blenders in combination with additional supply may damage
        our
        ability to generate revenues and maintain positive cash flows.
  36
  Although
        the Energy Policy Act of 2005 did not impose a national ban of MTBE, the
        primary
        competitor of ethanol as a fuel oxygenate, the Act’s failure to include
        liability protection for manufacturers of MTBE could result in refiners and
        blenders using ethanol as an oxygenate rather than MTBE to satisfy the Clean
        Air
        Act’s reformulated gasoline oxygenate requirement. While this may create some
        additional demand in the short term, the Act repeals the Clean Air Act’s 2%
        oxygenate requirement for reformulated gasoline immediately in California
        and
        270 days after enactment elsewhere. However, the Clean Air Act also contains
        an
        oxygenated fuel requirement for areas classified as carbon monoxide
        non-attainment areas. These areas are required to establish an oxygenated
        fuels
        program for a period of no less than three months each winter. The minimum
        oxygen requirement for gasoline sold in these areas is 2.7% by weight. This
        is
        the equivalent of 7.7% ethanol by volume in a gasoline blend. This requirement
        was unaffected by the Act and a number of states, including California,
        participate in this program.
  Consumer
        resistance to the use of ethanol may affect the demand for ethanol which
        could
        affect our ability to market our product and reduce the value of your
        investment. According to media reports in the popular press, some consumers
        believe that use of ethanol will have a negative impact on retail gasoline
        prices. Many also believe that ethanol adds to air pollution and harms car
        and
        truck engines. Still other consumers believe that the process of producing
        ethanol actually uses more fossil energy, such as oil and natural gas, than
        the
        amount of energy in the ethanol that is produced. In addition, recent high
        corn
        prices have added to consumer backlash against ethanol, as many consumers
        blame
        ethanol for high food prices.  These consumer beliefs could potentially be
        wide-spread. If consumers choose not to buy ethanol, it would affect the
        demand
        for the ethanol we produce which could negatively affect our ability to sell
        our
        product and negatively affect our profitability.
 
 *Technology
        Developments*
 
 Most
        ethanol is currently produced from corn and other raw grains, such as milo
        or
        sorghum.  The current trend in ethanol production research is to develop an
        efficient method of producing ethanol from cellulose-based biomass, such
        as
        agricultural waste, forest residue, municipal solid waste, and energy
        crops.  This trend is driven by the fact that cellulose-based biomass is
        generally cheaper than corn, and producing ethanol from cellulose-based biomass
        would create opportunities to produce ethanol in areas which are unable to
        grow
        corn.  Although current technology is not sufficiently efficient to be
        competitive, a report by the United States Department of Energy entitled
        “Outlook for Biomass Ethanol Production and Demand” indicates that new
        conversion technologies may be developed in the future.
  The
        Energy Independence and Security Act expanded the definition of several
        renewable fuels which may be used by blenders to meet the RFS requirement. 
The RFS now includes conventional biofuels, advanced biofuels, cellulosic
        biofuels and biodiesel, all of which can be used to meet the RFS.  In
        addition, the RFS total annual requirement is allocated different in each
        subsequent year to encourage the use of more cellulosic biofuels, advanced
        biofuels and biodiesel.
  The
        Act
        also authorizes several grants for the advancement of the renewable fuels
        industry.  It authorizes $500 million annually for 2008 to 2015 for the
        production of advanced biofuels that have at least an 80% reduction in GHG
        emissions.  In addition, it authorizes $25 million annually in 2008 through
        2010 for research and development and commercial application of biofuels
        production in states with low rates of ethanol and cellulosic ethanol
        production.  Further, $200 million annually in 2008 through 2014 is
        authorized for infrastructure grants for the installation of E85 fuel
        pumps.  Funding is also dedicated for government departments to conduct
        studies on the feasibility of constructing a dedicated ethanol pipeline,
        the
        adequacy of rail transportation of renewable fuel and the impact of the RFS
        program on various industries such as the livestock and food industry.  As
        enacted, the Act’s provisions did not include any new tax incentives for the
        production or use of renewable fuels; however, remaining tax incentives remain
        in force.
  Advances
        and changes in the technology used to produce ethanol may make the technology
        we
        plan to install in our plant less desirable or obsolete.  These advances
        could also allow our competitors to produce ethanol at a lower cost than
        us.  If we are unable to adopt or incorporate technological advances, our
        ethanol production methods and processes could be less efficient than our
        competitors, which could cause our plant to become uncompetitive or completely
        obsolete.
  37
 
 *Trends
        and Uncertainties Impacting the Corn and Natural Gas Markets and Our Future
        Cost
        of Goods Sold*
 
 We
        expect
        our future cost of goods sold will consist primarily of costs relating to
        the
        corn and natural gas supplies necessary to produce ethanol and distillers
        grains
        for sale. The
        United States Department of Agriculture estimated t he
        2007
        corn crop at 13.07 billion bushels, which is 24 percent larger than the 2006
        corn crop.  Despite the large 2007 corn crop, corn prices have increased
        sharply since 2006 and remained high throughout 2007 and into 2008.  We
        expect the price of corn to remain at current price levels well into 2008. Although
        we do not expect to begin operations until early 2010, we expect continued
        volatility in the price of corn, which could significantly impact our cost
        of
        goods sold . 
        The number of operating and planned ethanol plants in our immediate surrounding
        area and nationwide will also significantly increase the demand for corn.
        This
        increase will likely drive the price of corn upwards in our market which
        will
        impact our ability to operate profitably.
  There
        is
        no assurance that a corn shortage will not develop, particularly if there
        are
        other ethanol plants competing for corn, an extended drought or other production
        problems. Historical grain pricing information indicates that the price of
        grain
        has fluctuated significantly in the past and may fluctuate significantly
        in the
        future. Because the market price of ethanol is not related to grain prices,
        ethanol producers are generally not able to compensate for increases in the
        cost
        of grain feedstock through adjustments in prices charged for their ethanol.
        We,
        therefore, anticipate that our plant’s profitability will be negatively impacted
        during periods of high corn prices.  However, the negative impact on
        profitability resulting from high corn prices may be mitigated, in part,
        by the
        increased value of the distillers grains we intend to market, as the price
        of
        corn and the price of distillers grains tend to fluctuate in
        tandem.
  Natural
        gas is also an important input commodity to our manufacturing process. We
        estimate that our natural gas usage will be approximately 10% to 15% of our
        annual total production cost. We use natural gas to dry our distillers grain
        products to moisture contents at which they can be stored for extended periods
        of time and transported greater distances.  The most recent declines in
        natural gas values are attributed to an increased volume of stored natural
        gas
        in the United States market.  We expect continued volatility in the natural
        gas market. Any ongoing increases in the price of natural gas will increase
        our
        cost of production and may negatively impact our future profit
        margins.
 
 **Liquidity
        and Capital Resources**
 
 *Estimated
        Sources of Funds*
 
 Through
        our previous private placements, we raised $1,580,000 of seed capital equity
        to
        fund our development, organizational and offering expenses. We
        expect
        the funds raised in our previous private placements to supply us with enough
        cash to cover our costs until we release offering proceeds from escrow. However,
        if the funds raised in our previous private placements are not sufficient
        to
        cover our costs prior to releasing offering proceeds from escrow, we will
        need
        to seek interim debt financing. If we are unable to obtain additional interim
        financing, we may be forced to abandon our business altogether.
 
 We
        filed
        a Registration Statement for an initial public offering of our units with
        the
        Securities and Exchange Commission on Form SB-2 (SEC Registration No.
        333-141585), as amended, which first became effective on September 21, 2007.
        We
        later made changes to the terms of our offering and filed a post-effective
        amendment to our registration statement, which became effective on January
        23,
        2008. We also registered the units with the state securities authorities
        in
        Florida, Illinois, Iowa, Kansas, Missouri, South Dakota and Wisconsin. We
        plan
        to raise a minimum of $36,000,000 and a maximum of $85,000,000 in the offering
        and secure the balance needed to construct the plant through federal, state
        and
        local grants and debt financing. As of March 26, 2008, we have received
        subscriptions for approximately 881 units, for an aggregate amount of
        approximately $4,405,000. We have not yet closed the offering or released
        funds
        from escrow. We will require a significant amount of debt financing to complete
        our project. We are engaging in preliminary discussions with potential senior
        lenders, however, no agreement has been executed yet. If we do not secure
        the
        necessary debt financing, we will not be able to construct our proposed ethanol
        plant and may have to abandon our business.
  38
 
 The
        following schedule sets forth estimated sources of funds to build our
        proposed ethanol plant near Wesley, Iowa.  This schedule could change
        in the future depending on the amount of equity raised in our registered
        offering and whether we receive additional grants.  The schedule may
        also change depending on the level of senior debt incurred and the amount
        of any
        bond financing we may pursue.
 
 **Sources
                  of Funds**(1)
              
              
              
              **Percent**Offering
                  Proceeds (2)
              
              $
              58,845,000
              
              
              49.19
              %Seed
                  Capital Proceeds (3)
              
              $
              1,580,000
              
              
              0.81
              %Iowa
                  Rail Finance Authority Grant
              
              $
              75,000
              
              
              0.06
              %Senior
                  Debt Financing (4)
              
              $
              60,500,000
              
              
              50.00
              %**Total
                  Sources of Funds**
              
              $
              121,000,000
              
              
              100.00
              %
 
 (1)
              We
                  may receive federal and state grants; however, we have not yet
                  entered
                  into any written definitive agreements for such grants other than
                  a grant
                  of $75,000 from the Rail Revolving Loan and Grant Program administered
                  by
                  the Iowa Rail Finance Authority. Additionally, we may receive bond
                  financing. If we receive additional grants or bond financing, we
                  expect to
                  reduce the amount of equity proceeds or senior debt financing necessary
                  for our capitalization by the same or similar amount.
 
 (2)
              As
                  of March 26, 2008, we had subscriptions from investors for approximately
                  $4,405,000.
 
 (3)
              We
                  issued a total of 1,523 units in our two private placements in
                  exchange
                  for proceeds of $1,580,000. We issued a total of 284 units to our
                  seed
                  capital investors at a price of $2,500.00 per unit. In addition,
                  we issued
                  1,239 units to our founders at an average price of $702.18 per
                  unit. We
                  subsequently redeemed 603 of the units purchased by our founders
                  for $0.01
                  per unit as part of our capitalization
                  strategy.
 
 (4)
              We
                  currently do not have a definitive loan agreement with a senior
                  lender for
                  debt financing in the amount of $60,500,000. We have begun preliminary
                  discussions with potential lenders, but have no commitments or
                  agreements
                  in place.
 
 We
        do not
        expect to begin substantial plant construction activity before closing our
        equity offering, satisfying any loan commitment conditions and closing the
        loan
        transaction.
 
 Assuming
        the successful completion of the offering and execution of loan closing
        agreements, we expect to have sufficient cash on hand to cover all costs
        associated with construction of the project, including, but not limited to,
        site
        development, utilities, construction and equipment acquisition.
 
 *Estimated
        Uses of Proceeds*
 
 The
        following tables describe our proposed estimated use of our offering and
        debt
        financing proceeds for the ethanol plant to be built near Wesley, Iowa. The
        figures are estimates only, and the actual uses of proceeds may vary
        significantly from the descriptions given below.
 
 **Use
                  of Proceeds**
              
              **Amount**
              
              **Percent
                  of**
                **Total**Plant
                  construction
              
              $
              81,900,000
              
              
              67.69
              %Water
                  treatment facility
              
              
              1,500,000
              
              
              1.24
              %CCI
                  and surcharge contingency
              
              
              10,500,000
              
              
              8.68
              %Administration
                  building/equipment
              
              
              400,000
              
              
              0.33
              %Construction
                  performance bond
              
              
              100,000
              
              
              0.08
              %Construction
                  insurance costs
              
              
              150,000
              
              
              0.12
              %Construction
                  contingency
              
              
              1,800,000
              
              
              1.49
              %Development
                  costs
              
              
              3,250,000
              
              
              2.69
              %Land
                  costs
              
              
              2,300,000
              
              
              1.90
              %Railroad
              
              
              3,000,000
              
              
              2.48
              %Rolling
                  stock
              
              
              250,000
              
              
              0.21
              %Fire
                  Protection and water supply
              
              
              2,000,000
              
              
              1.65
              %Capitalized
                  interest
              
              
              2,000,000
              
              
              1.65
              %**Start
                  up costs:**Financing
                  costs
              
              
              600,000
              
              
              0.50
              %Organization
                  costs(1)
              
              
              1,250,000
              
              
              1.03
              %Pre-production
                  period costs
              
              
              1,000,000
              
              
              0.83
              %Working
                  capital
              
              
              7,500,000
              
              
              6.20
              %Inventory
                  - corn(2)
              
              
              1,500,000
              
              
              1.24
              %**Total**
              
              **$**
              **121,000,000**
              
              
              100.00
              %
 
 (1)
              Includes
                  estimated offering expenses of
                  $550,000.
  (2)
              We
                  may finance our corn inventory through Gold-Eagle Cooperative by
                  issuing
                  up to 1,300 membership units in exchange for $6,500,000 of corn
                  inventory
                  financing, equivalent to $5,000 per membership unit. However, we
                  have no
                  definitive agreement in place to do
                  so.
  39
  *Financial
        Results*
 
 As
        of
        December 31, 2007, we have total assets of approximately $1,276,105, including
        current assets of $480,808. As of December 31, 2007, we have current liabilities
        of approximately $23,781. Total members’ equity as of December 31, 2007, was
        approximately $1,252,324. Since inception, we have generated no revenue from
        operations, and as of December 31, 2007, have accumulated net losses of
        approximately $288,273 due to start-up and development costs.
 
 We
        raised
        $1,580,000 in seed capital through previous private placements. We have used
        the
        proceeds to fund development and organizational needs. We expect the funds
        raised in our previous private placements to supply us with enough cash to
        cover
        our costs until we release offering proceeds from escrow. However, if the
        funds
        raised in our previous private placements are not sufficient to cover our
        costs
        prior to releasing offering proceeds from escrow, we will need to seek interim
        debt financing. If we are unable to obtain additional interim financing,
        we may
        be forced to abandon our business altogether.
 
 Based
        on
        our current construction cost estimates, we believe the total project will
        cost
        approximately $121,000,000. We are seeking to raise a minimum of $36,000,000
        and
        a maximum of $85,000,000 of equity in our registered offering. As of March
        26,
        2008, we have received subscriptions for approximately 881 units through
        our
        registered offering for an aggregate amount of approximately $4,405,000.
        We have
        not yet accepted any of the subscriptions. We will not release funds from
        escrow
        until we have cash deposits in our escrow account in excess of the minimum
        offering amount of $36,000,000. In addition, we must obtain a written debt
        financing commitment for the debt financing we need. We have begun preliminary
        discussions with potential lenders, but have no commitments or agreements
        in
        place.
 
 **Critical
        Accounting Estimates**
 
 Management
        uses estimates and assumptions in preparing our financial statements in
        accordance with generally accepted accounting principles. These estimates
        and
        assumptions affect the reported amounts of assets and liabilities, the
        disclosure of contingent assets and liabilities, and the reported revenues
        and
        expenses.  We
        defer
        offering costs until the sale of units is completed. Upon issuance of the
        units,
        these costs will be netted against the proceeds received. If the offering
        is not
        completed, such costs will be expensed.
 
 **Off-Balance
        Sheet Arrangements**
 
 We
        do not
        have any off-balance sheet arrangements.
  40
 
 **Employees**
 
 As
        of the
        date of this report, we have not hired any employees. See “ **DESCRIPTION
        OF BUSINESS - Employees.** ”
  41
  **ITEM
        7. FINANCIAL STATEMENTS.**
 
 
 
 **Report
          of Independent Registered Public Accounting Firm**
 
 
 To
          the
          Board of Managers and Members
 Prairie
          Creek Ethanol, LLC
 Goldfield,
          Iowa
 
 We
          have
          audited the accompanying balance sheets of Prairie Creek Ethanol, LLC (a
          development stage company) as of December 31, 2007 and 2006, and the related
          statements of operations, members’ equity and cash flows for the year ended
          December 31, 2007 and the period from April 19, 2006 (inception) to December
          31,
          2007. These financial statements are the responsibility of the Company’s
          management. Our responsibility is to express an opinion on these financial
          statements based on our audits.
 
 We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on
          test basis, evidence supporting the amounts and disclosures in the financial
          statements. An audit also includes assessing the accounting principles
          used and
          significant estimates made by management, as well as evaluating the overall
          financial statement presentation. We believe that our audits provide a
          reasonable basis for our opinion.
 
 In
          our
          opinion, the financial statements referred to above present fairly, in
          all
          material respects, the financial position of Prairie Creek Ethanol, LLC
          as of
          December 31, 2007 and 2006, and the results of its operations and its cash
          flows
          for the year ended December 31, 2007 and the period from April 19, 2006
          (inception) to December 31, 2007, in conformity with accounting principles
          generally accepted in the United States of America.
 
  Des
        Moines, Iowa
 March
        31,
        2008
 
  McGladrey
        & Pullen, LLP is an independent member firm of RSM
        International,
 an
        affiliation of separate and independent legal entities.
  42
  **Prairie
                    Creek Ethanol, LLC****(A
                    Development Stage Company)****Balance
                    Sheets****December
                    31, 2007 and 2006**
  **2007**
                
                2006**ASSETS**CURRENT
                    ASSETSCash
                    and Cash equivalents
                
                **$**
                **454,238**
                
                $
                1,287,023Prepaid
                    Insurance
                
                
                **26,570**
                
                
                10,809**480,808**
                
                
                1,297,832OTHER
                    ASSETSDeferred
                    Offering Costs
                
                
                **513,827**
                
                
                -Land
                    options
                
                
                **189,200**
                
                
                94,200Other
                    assets and deposits
                
                
                **92,270**
                
                
                71,669**795,297**
                
                
                165,869**$**
                **1,276,105**
                
                $
                1,463,701**LIABILITIES
                    AND MEMBERS’ EQUITY**CURRENT
                    LIABILITIES, accounts payable
                
                **$**
                **23,781**
                
                $
                1,665COMMITMENTS
                    AND CONTINGENCIESMEMBERS’
                    EQUITYMembers’
                    capital
                
                
                **1,540,597**
                
                
                1,544,103Loss
                    accumulated during development stage
                
                
                **(288,273**
                **)**
                
                (82,067
                )**1,252,324**
                
                
                1,462,036**$**
                **1,276,105**
                
                $
                1,463,701
  See
                    Notes to Financial Statements.
  43
  **Prairie
                      Creek Ethanol, LLC****(A
                      Development Stage Company)****Statements
                      of Operations**
  For
                      the
                  
                  For
                      thePeriod
                      from
                  
                  Period
                      from**For
                      the**
                  
                  April
                      19, 2006
                  
                  April
                      19, 2006**Year
                      Ended**
                  
                  (inception)
                      to
                  
                  (inception)
                      to**December
                      31,**
                  
                  December
                      31,
                  
                  December
                      31,**2007**
                  
                  2006
                  
                  2007Revenues
                  
                  **$**
                  **-**
                  
                  $
                  -
                  
                  $
                  -Operating
                      expenses:Project
                      development
                  
                  
                  **96,106**
                  
                  
                  77,158
                  
                  
                  173,264General
                      and administrative
                  
                  
                  **110,100**
                  
                  
                  4,909
                  
                  
                  115,009**206,206**
                  
                  
                  82,067
                  
                  
                  288,273**Loss
                      accumulated during****development
                      stage**
                  
                  **$**
                  **(206,206**
                  **)**
                  $
                  (82,067
                  )
                  $
                  (288,273
                  )Weighted
                      Average Units Outstanding
                  
                  
                  **1,518**
                  
                  
                  1,243
                  
                  
                  1,441Net
                      Loss per Unit-Basic and Diluted
                  
                  **$**
                  **(135.84**
                  **)**
                  $
                  (66.02
                  )
                  $
                  (200.05
                  )
  See
                      Notes to Financial Statements.
  44
  **Prairie
                      Creek Ethanol, LLC****(A
                      Development Stage Company)****Statements
                      of Members’ Equity****For
                      the period from April 19, 2006 (inception) to December 31,
                      2007**
  LossAccumulatedDuring
                  
                  TotalMembers’
                  
                  Development
                  
                  Members’Capital
                  
                  Stage
                  
                  EquityBalance,
                      beginning
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Issuance
                      of 1,523 member units
                  
                  
                  1,580,000
                  
                  
                  -
                  
                  
                  1,580,000Offering
                      cost
                  
                  
                  (35,897
                  )
                  
                  -
                  
                  
                  (35,897
                  )Loss
                      accumulated during development stage
                  
                  
                  -
                  
                  
                  (82,067
                  )
                  
                  (82,067
                  )Balance,
                      December 31, 2006
                  
                  $
                  1,544,103
                  
                  
                  (82,067
                  )
                  
                  1,462,036Offering
                      cost
                  
                  
                  (3,500
                  )
                  
                  -
                  
                  
                  (3,500
                  )Redemption
                      of 603 membership units
                  
                  
                  (6
                  )
                  
                  -
                  
                  
                  (6
                  )Loss
                      accumulated during development stage
                  
                  
                  -
                  
                  
                  (206,206
                  )
                  
                  (206,206
                  )**Balance,
                      December 31, 2007**
                  
                  **$**
                  **1,540,597**
                  
                  **$**
                  **(288,273**
                  **)**
                  **$**
                  **1,252,324**
  See
                      Notes to Financial Statements.
  45
  **Prairie
                      Creek Ethanol, LLC****(A
                      Development Stage Company)****Statements
                      of Cash Flows**
  For
                      the
                  
                  For
                      thePeriod
                      from
                  
                  Period
                      from**For
                      the**
                  
                  April
                      19, 2006
                  
                  April
                      19, 2006**Year
                      Ended**
                  
                  (inception)
                      to
                  
                  (inception)
                      to**December
                      31,**
                  
                  December
                      31,
                  
                  December
                      31,**2007**
                  
                  2006
                  
                  2007OPERATING
                      ACTIVITIESNet
                      (loss) accumulated during development stage
                  
                  **$**
                  **(206,206**
                  **)**
                  $
                  (82,067
                  )
                  $
                  (288,273
                  )Change
                      in working capital components:(Increase)
                      in prepaid expenses
                  
                  
                  **(15,761**
                  **)**
                  
                  (10,809
                  )
                  
                  (26,570
                  )Increase
                      (decrease) in accounts payable
                  
                  
                  **(1,665**
                  **)**
                  
                  1,665
                  
                  
                  -**Net
                      cash (used in) operating activities**
                  
                  
                  **(223,632**
                  **)**
                  
                  (91,211
                  )
                  
                  (314,843
                  )INVESTING
                      ACTIVITIES(Increase)
                      in other assets and deposits
                  
                  
                  **(20,601**
                  **)**
                  
                  (71,669
                  )
                  
                  (92,270
                  )Payment
                      for land option
                  
                  
                  **(95,000**
                  **)**
                  
                  (94,200
                  )
                  
                  (189,200
                  )**Net
                      cash (used in) investing activities**
                  
                  
                  **(115,601**
                  **)**
                  
                  (165,869
                  )
                  
                  (281,470
                  )FINANCING
                      ACTIVITIESMember
                      contributions
                  
                  
                  **-**
                  
                  
                  1,580,000
                  
                  
                  1,580,000Payment
                      of offering costs
                  
                  
                  **(3,500**
                  **)**
                  
                  (35,897
                  )
                  
                  (39,397
                  )Payment
                      of deferred offering costs
                  
                  
                  **(490,052**
                  **)**
                  
                  -
                  
                  
                  (490,052
                  )**Net
                      cash provided by (used in)****financing
                      activities**
                  
                  
                  **(493,552**
                  **)**
                  
                  1,544,103
                  
                  
                  1,050,551**Net
                      increase (decrease) in cash****and
                      cash equivalents**
                  
                  
                  **(832,785**
                  **)**
                  
                  1,287,023
                  
                  
                  454,238CASH
                      AND CASH EQUIVALENTSBeginning
                  
                  
                  **1,287,023**
                  
                  
                  -
                  
                  
                  -Ending
                  
                  **$**
                  **454,238**
                  
                  $
                  1,287,023
                  
                  $
                  454,238SUPPLEMENTAL
                      NONCASH OPERATING ANDFINANCING
                      ACTIVITY:Deferred
                      offering costs in accounts payable
                  
                  **$**
                  **23,775**
                  
                  $
                  -
                  
                  $
                  23,775Redemption
                      of membership units in accounts payable
                  
                  **$**
                  **6**
                  
                  
                  -
                  
                  $
                  6
  See
                      Notes to Financial Statements.
  46
 Prairie
          Creek Ethanol, LLC
 (A
          Development Stage Company)
 
 **Notes
          to Financial Statements**
 **Note
            1.** **Summary
            of Significant Accounting Policies**
 
 Principal
        business activity :
        Prairie
        Creek Ethanol, LLC (the Company), an Iowa Limited Liability Company, was
        organized with the intentions of developing, owning and operating a 55 million
        gallon ethanol manufacturing facility to be located in Wesley, Iowa.
        Construction is anticipated to begin in 2008 with expected completion in
        early
        2010. As of December 31, 2007, the Company is in the development stage with
        its
        efforts being principally devoted to organizational and equity-raising
        activities.
 
 Use
        of
        estimates :
        The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities and disclosure of
        contingent assets and liabilities at the date of the financial statements
        and
        the reported amounts of revenues and expenses during the reporting period.
        Actual results could differ from those estimates.
 
 Cash
        and cash equivalents :
        The
        Company considers checking and money market accounts to be cash and cash
        equivalents. At times throughout the year, the Company’s cash balances may
        exceed amounts insured by the Federal Deposit Insurance
        Corporation.
  Deferred
        offering costs:
        The
        Company defers costs incurred to raise equity until the related equity is
        issued. At the time of issuance of such new equity, the deferred offering
        costs
        will be netted against the proceeds received. If the Company is unable to
        obtain
        the minimum equity of $36,000,000 required within the SB-2 filing that is
        currently outstanding, the deferred offering costs will be
        expensed.
 
 Fair
        value of financial instruments :
        The
        carrying amount for accounts payable approximate fair value due to the
        short-term nature of this instrument.
 
 Income
        taxes :
        The
        Company is organized as a limited liability company under Iowa state law.
        Under
        this type of organization, the Company is treated as a partnership for federal
        and state income tax purposes with the earnings passing through to the members
        and being taxed at the member level. Accordingly, no income tax provision
        has
        been calculated.
 
 Organizational
        and start-up costs :
        The
        Company expenses all organizational and start-up costs as they are
        incurred.
 
 Loss
        per unit :
        Basic
        and diluted loss per unit are computed using the weighted-average number
        of
        units outstanding during the period. Diluted loss per unit for all periods
        presented is the same as basic loss per unit as no equivalent units existed.
  **Note
            2.** **Members’
            Equity**
  The
        Company was formed on April 19, 2006 to have a perpetual life. The Company
        has
        one class of membership units with each unit representing a pro rata ownership
        interest in the Company’s capital, profits, losses and distributions. Income and
        losses are allocated to all members in proportion to units held. Transfer
        of
        units is restricted pursuant to the operating agreement and requires approval
        of
        the board of directors.
 
 The
        Company was initially capitalized by the founding members who contributed
        a
        total of $870,000 in exchange for 1,239 units. A private placement memorandum
        was finalized on December 29, 2006 which raised additional equity of $710,000
        in
        exchange for 284 units.
 
 The
        Company redeemed 603 membership units on December 28, 2007 for $0.01 per
        unit.
  **Note
            3.** **Commitments
            and Contingencies**
  Consulting :
        In June
        2006, the Company entered into an energy management agreement with a consulting
        company to provide consulting and energy management services for thermal
        and
        electricity requirements for the plant. These services will be provided through
        out the construction of the plant at a monthly fee of $3,952.
  47
 Prairie
          Creek Ethanol, LLC
 (A
          Development Stage Company)
 
 **Notes
          to Financial Statements**
 Construction
        contracts :
        In
        December 2006, the Company signed a letter of intent with an unrelated party
        for
        the design and construction of the proposed plant. The estimated cost for
        the
        services is approximately $82,000,000. This letter of intent is subject to
        the
        Company successfully obtaining adequate financing for the project.
 
 Land
        options :
        In May
        2006, the Company entered into an option agreement to purchase approximately
        200
        acres of land for $1,500,000. As of December 31, 2007, the Company had paid
        $180,000 for this option which extends through May 2008. The Company has
        the
        ability to extend the options term for an additional six months with the
        payment
        of $45,000 for each six month extension. If the Company exercises the option
        to
        purchase the land $45,000 can be applied toward the purchase price. If the
        option is allowed to expire, the seller will be entitled to retain any fees
        paid.
 
 In
        May
        2006, the Company entered into an additional option agreement to purchase
        approximately 28 acres of land in exchange for 28 acres acquired in the first
        option above for $140,000. The Company paid $4,200 for this option and an
        additional $5,000 to extend the option through April 2008 and add an additional
        option on 47 acres of land for $630,720.
 
 48
  **ITEM
        8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
        DISCLOSURE.**
 
 McGladrey
        & Pullen, LLP has been our independent registered public accounting firm
        since our inception and are the Company’s independent accountants at the present
        time. We have had no disagreements with our accountants.
 
 **ITEM
        8A(T). CONTROLS AND PROCEDURES.**
 
 Our
        management, including our President (the Principal Executive Officer), Clay
        Hansen, along with our Treasurer, (the Principal Financial and Accounting
        Officer), John Stelzer, have reviewed and evaluated the effectiveness of
        our
        disclosure controls and procedures (as defined in Rule 15d-15(e) under
        the Securities Exchange Act of 1934, as amended) as of December 31, 2007.
        Based
        upon this review and evaluation, these officers believe that our disclosure
        controls and procedures are effective in ensuring that material information
        related to us is recorded, processed, summarized and reported within the
        time
        periods required by the forms and rules of the Securities and Exchange
        Commission.
 
 During
        the period covered by this annual report, there were no changes in our internal
        control over financial reporting that materially affected, or were reasonably
        likely to materially affect, our internal control over financial
        reporting.
 
 This
        annual report does not include a report of management’s assessment regarding
        internal control over financial reporting or an attestation report of the
        company’s registered public accounting firm due to a transition period
        established by rules of the Securities and Exchange Commission for newly
        public
        companies.
 
 **ITEM
        8B. OTHER INFORMATION.**
 
 None.
 
 **PART
        III**
 
 **ITEM
        9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
        GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
        ACT.**
 
 **Identification
        of Directors, Executive Officers and Significant Employees**
 
 The
        following table shows the directors and officers of Prairie Creek Ethanol,
        LLC
        as of the date of this prospectus:
 
 **Board
                  Member/Officer**
              **Position
                  with the Company**William
                  Cruise
              DirectorBrad
                  Davis
              Senior
                  Vice President of Project DevelopmentClay
                  Hansen
              Director,
                  President and ChairmanClay
                  Hobbs
              DirectorJoe
                  Horan
              DirectorGary
                  Keller
              DirectorMervin
                  Krauss
              Director,
                  Vice President and Vice ChairmanDuane
                  Madoerin
              Vice
                  President of CommoditiesMike
                  Nail
              Vice
                  President of MarketingLynn
                  Ostendorf
              Vice
                  President of DevelopmentJohn
                  Rohrer
              Vice
                  President of TransportationJohn
                  Stelzer
              TreasurerMark
                  Wigans
              Director
                  and Secretary
  49
  **Business
        Experience of Directors and Officers**
 
 The
        following is a brief description of the business experience and background
        of
        our directors and officers.
 
 **William
        Cruise, Director** ,
        Age 62,
        2105 250 th Avenue,
        Wesley, Iowa 50483. **** For
        the
        past five years, Mr. Cruise has been farming grain in Hancock County and
        Kossuth
        County, Iowa. He also serves as a Director on the Gold-Eagle Cooperative
        Board.
        Mr. Cruise received his Associate’s Degree from Mason City Junior College. Mr.
        Cruise has served as a director since our inception. Pursuant to our operating
        agreement, he was appointed by the initial members at-large and will serve
        until
        our first annual or special meeting of the members following substantial
        completion of the construction of the Ethanol Plant, and in all cases until
        a
        successor is elected and qualified.
 
 **Brad
        Davis, Senior Vice President of Project Development** ,
        Age 53,
        2601 East Lake Street, Clear Lake, Iowa 50428. For the past five years, Mr.
        Davis has been employed as General Manager of Gold-Eagle Cooperative. He
        also
        serves as Chairman of the Board of Ag Processing, Inc. and is a Director
        for the
        Iowa Renewable Fuels Association. In addition, Mr. Davis serves as General
        Manager of Corn, LP. Mr. Davis graduated from North Iowa Area Community College
        with an Associate’s Degree in Agricultural Business. He
        has
        served as Senior Vice President of Project Development since March 2007.
        He was
        appointed by the Board of Directors and will serve indefinitely at the pleasure
        of the Board of Directors.
 
 **Clay
        Hansen, Director, Chairman and President** ,
        Age 55,
        2310 Virginia Avenue, Thor, Iowa 50591. For
        the
        past five years, Mr. Hansen has been a corn and soybean farmer in the Thor,
        Renwick, and Hardy, Iowa areas. In addition, Mr. Hansen is employed at Town
        & Country Insurance in Eagle Grove, Iowa. He is a Director for Gold-Eagle
        Cooperative and is currently serving as Secretary/Treasurer on that board.
        In
        addition, Mr. Hansen serves as Secretary and a Director of Corn, LP. He is
        also
        Secretary and a Director of Central Iowa Renewable Energy, LLC, the general
        partner of Corn, LP. Mr. Hansen graduated from Gates Business College in
        Waterloo, Iowa with an Associate’s Degree in accounting. Mr. Hansen has served
        as a director since our inception. Pursuant to our operating agreement, he
        was
        appointed by Gold-Eagle Cooperative and will serve indefinitely at the pleasure
        of Gold-Eagle Cooperative until a successor is appointed.
 
 **Clay
        Hobbs, Director** ,
        Age 52,
        450 290 th Street,
        Britt, Iowa 50423. For
        the
        past five years, Mr. Hobbs has been a corn and soybean farmer in the Woden
        and
        Hutchins, Iowa areas. In addition, he is Vice President and a Director on
        the
        North Central Cooperative Board. Mr. Hobbs graduated from North Iowa Area
        Community College with an Associate’s Degree in Farm Operations and Management.
        Mr. Hobbs has served as a director since our inception. Pursuant to our
        operating agreement, he was appointed by North Central Cooperative and will
        serve indefinitely at the pleasure of North Central Cooperative until a
        successor is appointed.
 
 **Joe
        Horan, Director** ,
        Age 52,
        709 Main Street, Manson, Iowa 50563. For the past five years, Mr. Horan
        has operated
        a cash grain operation in the Rockwell City, Iowa area. Mr. Horan serves
        as
        Treasurer and a Director of Corn, LP, as well as Treasurer and a Director
        of
        Central Iowa Renewable Energy, LLC, the general partner of Corn, LP. Mr.
        Horan
        has served as a director since our inception. Pursuant to our operating
        agreement, he was appointed by Corn, LP and will serve indefinitely at the
        pleasure of Corn, LP until a successor is appointed.
 
 **Gary
        Keller, Director** ,
        Age 49,
        2986 Page Avenue, Clarion, Iowa 50525. For
        the
        past five years, Mr. Keller has farmed corn and soybeans. He also serves
        as a
        Director on the North Central Cooperative Board. Mr. Keller graduated from
        Iowa
        State University with a Bachelor’s Degree in Agronomy. He also received a
        Master’s Degree in Agronomy and a Master’s Degree in Industrial Administration,
        both from Purdue University. Mr. Keller has served as a director since our
        inception. Pursuant to our operating agreement, he was appointed by the initial
        members at-large and will serve until our first annual or special meeting
        of the
        members following substantial completion of the construction of the Ethanol
        Plant, and in all cases until a successor is elected and qualified.
 
 **Mervin
        Krauss, Director, Vice-Chairman and Vice President** ,
        Age 58,
        1075 Birch Avenue, Corwith, Iowa 50430. For
        the
        past five years, Mr. Krauss has farmed corn and soybeans in the Corwith,
        Iowa
        area. He serves as a Director of Gold-Eagle Cooperative and as a Director
        of
        Corn, LP. Mr. Krauss graduated from Iowa State University with a Bachelor’s
        Degree in Agricultural Engineering in 1972. Mr. Krauss has served as a director
        since our inception. Pursuant to our operating agreement, he was appointed
        by
        the initial members at-large and will serve until our first annual or special
        meeting of the members following substantial completion of the construction
        of
        the Ethanol Plant, and in all cases until a successor is elected and
        qualified.
  50
 
 **Duane
        Madoerin, Vice President of Commodities** ,
        Age 59,
        1027 North Terrace Drive, Webster City, Iowa 50595. Mr. Madoerin has been
        employed by Gold-Eagle Cooperative as Merchandising Manager for the past
        nine
        months. Over the past five years he has also worked as Grain Division Manager
        for Northeast Iowa Cooperative, worked in risk management for Agri-Grain
        Marketing, and worked as Grain Department Manager for Five Star Co-op. Mr.
        Madoerin graduated from Marshalltown Community College with an Associate’s
        Degree in Business. He
        has
        served as Vice President of Commodities since March 2007. He was appointed
        by
        the Board of Directors and will serve indefinitely at the pleasure of the
        Board
        of Directors.
 
 **Mike
        Nail, Vice President of Marketing** ,
        Age 56,
        710 Birch Lane, Clarion, Iowa 50525. For the past five years, Mr. Nail has
        been
        employed by North Central Cooperative, the past four years as General Manager.
        He graduated from Des Moines Area Community College with an Associate’s Degree
        in Electrical Technology and also attended the University of Northern Iowa. He
        has
        served as Vice President of Marketing since March 2007. He was appointed
        by the
        Board of Directors and will serve indefinitely at the pleasure of the Board
        of
        Directors.
 
 **Lynn
        Ostendorf, Vice President of Development** ,
        Age 52,
        6 East Gate Court, Clear Lake, Iowa 50428. For the past five years, Mr.
        Ostendorf has farmed corn and soybeans and has been employed as Region 3
        Manager
        of Gold-Eagle Cooperative. He
        has
        served as Vice President of Development since March 2007. He was appointed
        by
        the Board of Directors and will serve indefinitely at the pleasure of the
        Board
        of Directors.
 
 **John
        Rohrer, Vice President of Transportation** ,
        Age 50,
        2042 Hancock Avenue, Clarion, Iowa 50525. For the past five years, Mr. Rohrer
        has been employed as Agronomy Manager of North Central Cooperative. He has
        also
        worked as the Clarion Location Manager for North Central Cooperative since
        2004.
        In addition, he is a Certified Crop Advisor. Mr. Rohrer graduated from Iowa
        Central Community College with an Associate’s Degree in Elevator and Farm Supply
        Management. He
        has
        served as Vice President of Transportation since March 2007. He was appointed
        by
        the Board of Directors and will serve indefinitely at the pleasure of the
        Board
        of Directors.
 
 **John
        Stelzer, Treasurer** ,
        Age 41,
        2482 Virginia Parkway, Webster City, Iowa 50595. For
        the
        past five years, Mr. Stelzer has been employed as Comptroller for Gold-Eagle
        Cooperative. In addition, he serves as Vice President of GE-Max Nutrients,
        LLC.
        Mr. Stelzer graduated from the University of Northern Iowa with a Bachelor’s
        Degree in Accounting. He is a Certified Public Accountant and is a member
        of
        AICPA and the Iowa Society of CPAs. Mr. Stelzer has served as Treasurer since
        our inception. He was appointed by the Board of Directors and will serve
        indefinitely at the pleasure of the Board of Directors.
 
 **Mark
        Wigans, Director and Secretary** ,
        Age 42,
        1125 130 th Street,
        Renwick, Iowa 50577. For
        the
        past five years, Mr. Wigans has farmed corn and soybeans in the Renwick,
        Iowa
        area. In addition, he serves as President and as a Director of Gold-Eagle
        Cooperative and as a Director of Corn, LP. Mr. Wigans is also a Director
        of
        Central Iowa Renewable Energy, LLC, the general partner of Corn, LP. Mr.
        Wigans
        graduated from Iowa State University with a Bachelor’s Degree in Agricultural
        Business. Mr. Wigans has served as a director since our inception. Pursuant
        to
        our operating agreement, he was appointed by the initial members at-large
        and
        will serve until our first annual or special meeting of the members following
        substantial completion of the construction of the Ethanol Plant, and in all
        cases until a successor is elected and qualified.
 
 **Code
        of Ethics**
 
 Our
        board
        of directors has not yet adopted a code of ethics because we are not yet
        operational. We expect to adopt a code of ethics prior to commencing
        operations.
 
 **Identification
        of Audit Committee**
  Our
        board
        of directors in its entirety is currently serving as our audit
        committee.
  51
 
 **Audit
        Committee Financial Expert**
  Our
        board
        of directors has determined that we do not currently have an audit committee
        financial expert serving on our audit committee. We do not have an audit
        committee financial expert serving on our audit committee because no member
        of
        our board of directors has the requisite experience and education to qualify
        as
        an audit committee financial expert as defined in Item 407 of Regulation
        S-B and
        the board has not yet created a new director position expressly for this
        purpose. Our board of directors intends to consider such qualifications in
        future nomination to our board and appointments to the audit
        committee.
 
 **ITEM
        10. EXECUTIVE COMPENSATION.**
 
 Clay
        Hansen is currently serving as our president and Mervin Krauss is currently
        serving as our vice president. John Stelzer is our treasurer and Mark Wigans
        is
        our secretary. We do not presently compensate our officers or directors for
        their services.
 
 In
        the
        future, each of our directors may receive compensation for attending board
        meetings. We expect that any director compensation will be a reasonable amount
        based on the standards in the industry.
 
 **Employment
        Agreements**
 
 We
        have
        no employment agreements with any executive officer or director. In the future,
        we may enter into employment agreements with our executive officers or other
        employees that we may hire.
  **Reimbursement
        of Expenses**
 
 We
        reimburse our officers and directors for expenses incurred in connection
        with
        their service. Our reimbursement policy is to reimburse our officers and
        directors for out-of-pocket expenses.
 
 **ITEM
        11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
        STOCKHOLDER MATTERS.**
 
 **Security
        Ownership of Certain Beneficial Owners**
 
 As
        of
        March 26, 2008, the following beneficial owner(s) owned or held 5% or
        more of our outstanding units:
  **Title
                  of Class**
              
              **Name
                  and address of beneficial owner**
              
              **Amount
                  and nature of beneficial owner**
              
              **Percent
                  of Class**Membership
                  Unit
              
              Gold-Eagle
                  Cooperative
                415
                  N. Locust Street
                Goldfield,
                  IA 50542
              
              416
                  units
              
              45.22%Membership
                  Unit
              
              North
                  Central Cooperative
                221
                  4thAvenue NW
                Clarion,
                  IA 50525
              
              180
                  units
              
              19.57%
 
 52
  **Security
        Ownership of Management**
 
 As
        of
        March 26, 2008, members of our board of directors and our executive
        officers own units as follows:
 
 **Title
                  of Class**
              
              **Name
                  of**
                **Beneficial
                  Owner**
              
              **Amount
                  of Ownership**
              
              **Percent
                  of Class**Membership
                  Units
              
              William
                  Cruise
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Brad
                  Davis
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Clay
                  Hansen
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Clay
                  Hobbs
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Joe
                  Horan
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Gary
                  Keller
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Mervin
                  Krauss
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Mike
                  Nail
              
              12
                  units
              
              1.30%Membership
                  Units
              
              Mark
                  Wigans
              
              12
                  units
              
              1.30%**All
                  Directors and Officers as a Group:**
              
              **108
                  Units**
              
              **11.74%**
 
 **ITEM
        12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
        INDEPENDENCE.**
 
 **Certain
        Relationships and Related Transactions**
 
 Due
        to
        their activities in founding and organizing Prairie Creek Ethanol, Gold-Eagle
        Cooperative, North Central Cooperative and Corn, LP are “promoters,” as that
        term is defined in Rule 405 of Regulation C promulgated under the Securities
        Act
        of 1933, of Prairie Creek Ethanol, LLC. We anticipate entering into, but
        have
        not yet entered into, a grain procurement agreement with Gold-Eagle Cooperative
        (“Gold-Eagle”) and North Central Cooperative (“North Central”). Under such an
        agreement, Gold-Eagle and North Central would have the exclusive right and
        responsibility to provide Prairie Creek Ethanol with its daily requirements
        of
        corn meeting quality specifications set forth in the grain procurement
        agreement. Under such an agreement, we anticipate that Prairie Creek Ethanol
        will purchase corn at the local market price delivered to the ethanol plant
        plus
        a fixed fee per bushel of corn purchased. Additionally, we anticipate that
        Prairie Creek Ethanol will provide Gold-Eagle and North Central with an estimate
        of its corn usage at the beginning of each fiscal quarter and Gold-Eagle
        and
        North Central will agree to at all times maintain a certain minimum amount
        of
        corn at the Prairie Creek Ethanol plant. Although we anticipate entering
        into
        such an agreement, no agreement has been entered into as of yet. Because
        several
        of our directors also serve as directors of Gold Eagle and North Central,
        such
        directors may have a conflict of interest when negotiating or approving a
        grain
        procurement agreement. Additionally, Gold-Eagle and North Central are two
        of our
        founders and are currently our two largest unit-holders. As a result, Gold-Eagle
        and North Central may be able to obtain a grain procurement agreement on
        more
        favorable terms than if Gold-Eagle and North Central were not unit-holders.
        Some
        of our directors are also directors of Corn, LP, an ethanol plant in Goldfield,
        Iowa that is one of our founders. Gold-Eagle procures all the corn needed
        for
        the operations of Corn, LP. This means that our directors that also serve
        as
        directors of Corn, LP may have a conflict of interest in negotiating or
        approving a grain procurement agreement with Gold-Eagle. Additionally, our
        directors that also serve as directors of Gold-Eagle may have a conflict
        of
        interest due to Gold-Eagle’s obligations to Corn, LP.
 
 Additionally,
        we anticipate that Gold-Eagle Cooperative, currently our largest unit-holder,
        will manage the ethanol plant, market a portion of our distiller’s grains, and
        provide other services under long-term contracts. We expect to make annual
        payments totaling approximately $600,000 to Gold-Eagle Cooperative in exchange
        for plant management services. However, we have not entered into any definitive
        agreements with Gold-Eagle Cooperative at this time regarding the management
        of
        the ethanol plant.
  53
 
 We
        may
        finance our corn inventory from Gold-Eagle Cooperative in exchange for
        membership units, although we have no definitive agreement in place to do
        so. If
        we enter into such an agreement, we expect that we will obtain from Gold-Eagle
        Cooperative $1,500,000 of corn inventory financing in exchange for up to
        300
        membership units in Prairie Creek Ethanol, LLC, equivalent to $5,000 per
        unit.
  Several
        of our directors also serve as directors for our largest unit-holders. Two
        of
        our directors, Mark Wigans and Clay Hansen, also serve as directors for
        Gold-Eagle Cooperative, currently our largest unit-holder, as well as Corn,
        LP,
        currently our third-largest unit holder, which operates a 50 million gallon
        per
        year ethanol plant in Goldfield, Iowa. Additionally, Mark Wigans serves as
        president of Gold-Eagle Cooperative. Mervin Krauss is also a director of
        Gold-Eagle Cooperative and represents Gold-Eagle Cooperative on the board
        of
        directors of Corn, LP. William Cruise also serves on the board of directors
        of
        Gold-Eagle Cooperative. Another of our directors, Joe Horan, serves as treasurer
        of Corn, LP. Finally, two of our directors, Gary Keller and Clay Hobbs, also
        serve as directors for North Central Cooperative, our second largest
        unit-holder.
 
 Several
        of our officers are employed by our largest unit holders. Brad Davis works
        as
        General Manager for Gold-Eagle Cooperative and Corn, LP. Duane Madoerin is
        employed by Gold-Eagle Cooperative and also serves as commodities manager
        for
        Corn, LP. Additionally, Lynn Ostendorf and John Stelzer are employed by
        Gold-Eagle Cooperative. Mike Nail and John Rohrer are employed by North Central
        Cooperative.
 
 **Director
        Independence**
 
 Our
        independent directors are William Cruise, Joe Horan and Gary Keller. Our
        directors that are not independent are Clay Hansen, Mervin Krause, Mark Wigans
        and Clay Hobbs. The determination of independence is made by reference to
        NASDAQ
        rules 4200 and 4350. Clay Hansen, Mervin Krause and Mark Wigans are not
        considered independent in that they are serving as our executive officers.
        In
        addition, Clay Hansen and Mark Wigans also serve as executive officers of
        Gold-Eagle Cooperative, one of our affiliates. Clay Hobbs is not considered
        independent because he serves as an executive officer of one of our affiliates,
        North Central Cooperative.
 
 ***Audit
        Committee***
 
 All
        the
        members of our board of directors currently serve as our audit committee.
        The
        audit committee is exempt from independence listing standards because our
        securities are not listed on a national securities exchange or listed in
        an
        automated inter-dealer quotation system of a national securities association
        or
        to issuers of such securities. Nevertheless, William Cruise, Joe Horan and
        Gary
        Keller are independent within the definition of independence provided by
        NASDAQ
        rules 4200 and 4350. Clay Hansen, Mervin Krause, Mark Wigans and Clay Hobbs
        are not considered independent for the reasons set forth above.
 
 ***Compensation
        Committee***
 
 All
        the
        members of our board of directors currently serve as our compensation committee.
        The compensation committee is exempt from independence listing standards
        because
        our securities are not listed on a national securities exchange or listed
        in an
        automated inter-dealer quotation system of a national securities association
        or
        to issuers of such securities. Nevertheless, William Cruise, Joe Horan and
        Gary
        Keller are independent within the definition of independence provided by
        NASDAQ
        rules 4200 and 4350. Clay Hansen, Mervin Krause, Mark Wigans and Clay Hobbs
        are not considered independent for the reasons set forth above.
 
 ***Nominating
        Committee***
 
 All
        the
        members of our board of directors currently serve as our nominating committee.
        The nominating committee is exempt from independence listing standards because
        our securities are not listed on a national securities exchange or listed
        in an
        automated inter-dealer quotation system of a national securities association
        or
        to issuers of such securities. Nevertheless, William Cruise, Joe Horan and
        Gary
        Keller are independent within the definition of independence provided by
        NASDAQ
        rules 4200 and 4350. Clay Hansen, Mervin Krause, Mark Wigans and Clay Hobbs
        are not considered independent for the reasons set forth above.
  54
 
 **ITEM
        13. EXHIBITS.**
 
 3.1
              Articles
                  of Organizationfiled
                  as Exhibit 3.1 to the Registrant’s registration statement on Form SB-2
                  filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.3.2
              Second
                  Amended and Restated Operating Agreement filed as Exhibit 3.3 to
                  Pre-Effective Amendment No. 1 to Registrant’s registration statement on
                  Form SB-2 filed with the SEC on May 31, 2007 and incorporated by
                  reference
                  herein.4.1
              Form
                  of Membership Unit Certificatefiled as Exhibit 4.1 to the Registrant’s registration statement on Form
                  SB-2 filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.4.2
              Form
                  of Subscription Agreementfiled as Exhibit 4.2 to Post-Effective Amendment No. 1 to Registrant’s
                  registration statement on Form SB-2 filed with the SEC on January
                  17, 2008
                  and incorporated by reference herein.4.3
              Second
                  Amended and Restated Escrow Agreement dated January 9, 2008 between
                  Prairie Creek Ethanol and Iowa State Bank filed as Exhibit 4.4
                  to
                  Post-Effective Amendment No. 1 to Registrant’s registration statement on
                  Form SB-2 filed with the SEC on January 17, 2008 and incorporated
                  by
                  reference herein.10.1
              Real
                  Estate Option dated May 26, 2006 between Gold-Eagle Cooperative
                  and David
                  Kirsch, Susan Kirsch, Darrell Kirsch and Dawn Kirschfiled as Exhibit 10.2 to the Registrant’s registration statement on Form
                  SB-2 filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.10.2
              Assignment
                  and Assumption Agreement dated May 26, 2006 between Prairie Creek
                  Ethanol,
                  LLC and Gold-Eagle Cooperativefiled as Exhibit 10.3 to the Registrant’s registration statement on Form
                  SB-2 filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.10.3
              Real
                  Estate Option dated May 31, 2006 between Gold-Eagle Cooperative
                  and
                  Rasmussen Family, LLCfiled as Exhibit 10.4 to the Registrant’s registration statement on Form
                  SB-2 filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.10.4
              Assignment
                  and Assumption Agreement dated May 31, 2006 between Prairie Creek
                  Ethanol,
                  LLC and Gold-Eagle Cooperativefiled as Exhibit 10.5 to the Registrant’s registration statement on Form
                  SB-2 filed with the SEC on March 26, 2007 and incorporated by reference
                  herein.10.5
              Amended
                  and Restated Option Agreement dated July 3, 2007 between Prairie
                  Creek
                  Ethanol, LLC and David and Susan Kirsch and Darrell and Dawn Kirsch
                  filed
                  as Exhibit 10.6 to Post-Effective Amendment No. 1 to Registrant’s
                  registration statement on Form SB-2 filed with the SEC on January
                  17, 2008
                  and incorporated by reference herein.10.6
              Letter
                  of Intent dated November 28, 2007 between Prairie Creek Ethanol,
                  LLC and
                  Fagen, Inc. filed as Exhibit 10.7 to Post-Effective Amendment No.
                  1 to the
                  Registrant’s registration statement on Form SB-2 filed with the SEC on
                  January 17, 2008 and incorporated by reference herein.31.1
              Certificate
                  pursuant to 17 CFR 240 15d-14(a) filed herewith.31.2
              Certificate
                  pursuant to 17 CFR 240 15d-14(a) filed herewith.32.1
              Certificate
                  pursuant to 18 U.S.C. Section 1350 filed herewith.32.2
              Certificate
                  pursuant to 18 U.S.C. Section 1350 filed
                  herewith.
  55
  **ITEM
        14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**
 
 The
        aggregate fees billed by the principal independent registered public accountants
        (McGladrey & Pullen, LLP) to the Company for the fiscal year ended December
        31, 2007, and the fiscal year ended December 31, 2006 are as
        follows:
  **Category**
              
              **Year**
              
              **Fees**Audit
                  Fees (1)
              
              
              2007
              
              $
              62,7502006
              
              $
              -Audit-Related
                  Fees
              
              
              2007
              
              $
              -2006
              
              $
              -Tax
                  Fees
              
              
              2007
              
              $
              8,5002006
              
              $
              -All
                  Other Fees
              
              
              2007
              
              $
              68,1012006
              
              $
              -
 
 (1)
              Audit
                  fees consist of fees for services rendered related to the Company’s fiscal
                  year end audits, quarterly reviews, registration statement and
                  related
                  amendments.
  (2)
              Consists
                  of tax fees billed to us by RSM McGladrey, Inc. during
                  2007.
  (3)
              Consists
                  of services related to cost segregation studies, wage benefit credits
                  and
                  various other tax consulting billed to us by RSM McGladrey,
                  Inc.
  Prior
        to
        engagement of the principal independent registered public accountants to
        perform
        audit services for the Company, the principal accountant was pre-approved
        by our
        Audit Committee pursuant to Company policy requiring such approval.
 
 One
        hundred percent (100%) of all audit services, audit-related services and
        tax-related services were pre-approved by our Audit Committee.
  56
  **SIGNATURES**
 
 In
        accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
        this report to be signed on its behalf by the undersigned, thereunto duly
        authorized.
 PRAIRIE
                  CREEK ETHANOL, LLCDate:March
                  31, 2008
              
              /s/
                  Clay HansenClay
                  HansenChairman,
                  President and Director
                (Principal
                  Executive Officer)Date:March
                  31, 2008
              /s/
                  John StelzerJohn
                  StelzerTreasurer
                  (Principal Financial and Accounting
                  Officer)
  In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the registrant and in the capacities and on
        the
        dates indicated.
 
 Date:
                  March 31, 2008
              
              /s/
                  Clay HansenClay
                  HansenPresident,
                  Chairman and Director(Principal
                  Executive Officer)Date:
                  March 31, 2008
              
              /s/
                  Mervin KraussMervin
                  KraussVice
                  President, Vice Chairman,
                Vice
                  President and DirectorDate:
                  March 31, 2008
              
              /s/
                  Mark WigansMark
                  WigansSecretary
                  and DirectorDate:
                  March 31, 2008
              
              /s/
                  William CruiseWilliam
                  Cruise, DirectorDate:
                  March 31, 2008
              
              /s/
                  Clay HobbsClay
                  Hobbs, DirectorDate:
                  March 31, 2008
              
              /s/
                  Gary KellerGary
                  Keller, Director
 
 57