RISK FACTORS

The purchase of units involves substantial risks, and the investment is suitable only for persons with the financial capability to make and hold long-term investments not readily converted into cash. Investors must, therefore, have adequate means of providing for their current and future needs and personal contingencies. Prospective purchasers of the units should carefully consider the risk factors set forth below, as well as the other information appearing in this prospectus, before making any investment in the units. Investors should understand that there is a possibility that they could lose their entire investment in us.

RISKS RELATED TO OUR BUSINESS

We were a development-stage company and until recently had no operating history, which could result in errors in management and operations causing a reduction in the value of your investment.

We were recently formed and until the first closing of the Heartland transaction had no history of operations. We cannot provide assurance that we can manage the Heartland Grain Fuels operations or our start-up activities effectively, and any failure to manage the Heartland Grain Fuels operations or to complete these start-up activities effectively could delay the commencement of the Aberdeen plant expansion or our other plant operations. A delay in these start-up operations is likely to further delay our ability to generate adequate revenue to satisfy our debt obligations. Our proposed operations are subject to all the risks inherent in the establishment of a new business enterprise. We anticipate a period of significant growth, involving the construction and start-up of operations of the ethanol plants and the expansion of the Aberdeen plant. This period of growth and the start-up or expansion of the ethanol plants is likely to present substantial challenges to us. If we fail to manage our start-up effectively, you could lose all or a substantial part of your investment.

We may not be able to develop or expand our business as planned.

We plan to grow our business by investing in new or existing ethanol plants. We have an approximately 53% ownership interest in a partnership that owns two existing ethanol plants, the Aberdeen and Huron plants, and has begun building an additional plant adjacent to its current Aberdeen plant. Constructing ethanol plants is subject to a number of risks, any of which could prevent us from commencing operations at a particular plant as expected or at all, including zoning and permitting matters, site suitability, adverse weather, defects in materials and workmanship, labor and material shortages, transportation constraints, construction change orders, site changes, labor issues and other unforeseen difficulties. Moreover, we will need substantial additional capital to expand our business, but we may not obtain this needed capital or it may not be available to us on acceptable terms. If we are not able to develop or expand our business as planned, the value of your investment will decline and may become worthless.

We have little to no experience in the ethanol industry, which increases the risk of our inability to expand, build and operate the ethanol plants.

Our current board of directors and management team are experienced in business generally but few have any experience in raising capital from the public, operating ethanol plants or governing and operating a public company. With the exception of Dale Locken, who was recently appointed to our board as a representative of SDWG, no members of our board of directors have expertise in the ethanol industry. Revis L. Stephenson III, our chief executive officer, and Richard Peterson, our chief financial officer, also have no prior experience in the ethanol industry. In addition, certain directors are presently engaged in other activities that impose substantial demands on their time and attention. You should not purchase units unless you are willing to entrust all aspects of our management to our board of directors and current management team.

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We will depend on Fagen, Inc. and ICM, Inc. for expertise in beginning operations in the ethanol industry and any loss of these relationships could cause us delay and added expense, placing us at a competitive disadvantage.

We will be dependent on our relationships with Fagen, Inc., ICM, Inc. and their employees. Any loss of these relationships may prevent us from commencing operations at the proposed plants, including the Aberdeen plant expansion, and result in the failure of our business. The time and expense of locating new consultants and contractors to replace Fagen and ICM would result in unforeseen expenses and delays, which may reduce our ability to generate revenue and obtain profitability and may significantly damage our competitive position in the ethanol industry such that you could lose some or all of your investment.

If we fail to finalize critical agreements, such as the design-build agreements for the Indiana and Minnesota plants, ethanol and distillers grains marketing agreements and utility supply agreements, or if the final agreements are unfavorable when compared to what we currently anticipate, our projects may fail or be harmed in ways that reduce the value of your investment.

You should be aware that this prospectus makes reference to documents or agreements that are not yet final or executed and plans that have not been implemented. In some instances these 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 existing debt financing agreements contain, and our future debt financing agreements may contain, restrictive covenants that limit distributions and impose restrictions on the operation of our business. Our failure, or the failure of any of our subsidiaries, to comply with applicable debt financing covenants and agreements could have a material adverse effect on our business, results of operations and financial condition.

We will need a significant amount of additional debt financing to complete our projects and operate our ethanol plants following construction, but we may not be able to obtain additional debt financing on acceptable terms or at all. The use of debt financing makes it more difficult for us to operate because we must make principal and interest payments on the indebtedness and abide by covenants contained in our debt financing agreements. The level of our debt may have important implications on our operations.

The terms of our existing debt financing agreements contain, and any future debt financing agreement we enter into may contain, financial, maintenance, organizational, operational and other restrictive covenants. If we are unable to comply with these covenants or service our debt, we may lose control of our business and be forced to reduce or delay planned capital expenditures, sell assets, restructure our indebtedness or submit to foreclosure proceedings, all of which could result in a material adverse effect upon our business, results of operations and financial condition. Our debt arrangements may also include subordinated debt, which may contain even more restrictions and be on less favorable terms than our senior debt. To secure subordinated debt, we may have to give the lender warrants, put rights, conversion rights, the right to take control of our business in the event of a default or other rights and benefits as the lender may require. This could further dilute your ownership interest in us.

Our debt financing arrangements may contain cross-acceleration and cross-default provisions. Under these provisions, a default or acceleration of one debt agreement will result in the default and acceleration of our other debt agreements (regardless of whether we were in compliance with the terms of such other debt agreements), providing the lenders under such other debt agreements the right to accelerate the obligations due under such other debt agreements. Accordingly, a default, whether by us or any of our subsidiaries, could result in all of our outstanding debt becoming immediately due and payable.

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For a description of our existing debt arrangements, see “Management’s Discussion and Analysis and Plan of Operation for Advanced BioEnergy—Liquidity and Capital Resources,” and “Management’s Discussion and Analysis and Plan of Operation for Heartland Grain Fuels—Liquidity and Capital Resources.”

Our lack of business diversification could result in the devaluation of our units if our revenues from our primary products decrease.

We expect our business to primarily consist of ethanol and distillers grains production and sales. We do not have any other lines of business or other potential sources of revenue. Our lack of business diversification could cause you to lose all or some of your investment if we are unable to generate revenues by the production and sale of ethanol and distillers grains because we do not currently expect to have any other lines of business or alternative revenue sources.

We have a history of losses and may not ever operate profitably.

For the period of January 4, 2005 through September 30, 2006, we incurred an accumulated net loss of approximately $2.0 million. There is no assurance that we will be successful in our efforts to build and operate ethanol plants. Even if we successfully meet all of these objectives, there is no assurance that we will be able to operate profitably.

We are dependent on certain key personnel, and the loss of any of these persons may prevent us from implementing our business plan in an effective and timely manner.

Our success depends largely upon the continued services of our executive officers and other key personnel, including operational executives. Any loss or interruption of the services of one or more of our executive officers or these key personnel could result in our inability to manage our operations effectively or pursue our business strategy.

RISKS RELATED TO THE HEARTLAND TRANSACTION

We are relying on the members of Heartland Producers to approve the combination with Heartland Grain Fuels.

Our business strategy includes growth through acquisitions. On November 7, 2006, we entered into a partnership interest and stock purchase agreement, known as the first purchase agreement, with Heartland Producers for the purchase of 100% of its partnership interests in Heartland Grain Fuels, a company with two fuel-grade ethanol production facilities and total annual output of 39 million gallons of ethanol per year. As a condition to closing on the sale of its interest in Heartland Grain Fuels, the Heartland Producers members must first approve the combination. If the members do not approve the combination, Heartland Producers will remain a limited partner in Heartland Grain Fuels and will still control 49% of the stock of Dakota Fuels, Inc., the general partner of Heartland Grain Fuels. Should the members of Heartland Producers fail to approve the transaction, we will be a majority owner in, but will not control, Heartland Grain Fuels.

We do not control the board of Dakota Fuels, the general partner of Heartland Grain Fuels; therefore, we can not be assured that Heartland Grain Fuels will act in our best interest or take actions that are consistent with the wishes of our designees to the board of directors of Dakota Fuels.

Heartland Grain Fuels is managed by its general partner, Dakota Fuels, which is managed by its board of directors. We currently have the right to designate two directors to the four member board of directors. The remaining two directors are designated by Heartland Producers. If the members of Heartland Producers do not approve the Heartland transaction, we have agreed with Heartland Producers to take all

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necessary action to expand the board and appoint a fifth independent director who is acceptable to each of us, but it is possible that we will not be able to reach agreement on a fifth director or recruit or retain a fifth director.

If we are not able to recruit or retain a fifth director, there is the possibility that there could be deadlocks on the board of Dakota Fuels, which could adversely affect Heartland Grain Fuel’s business and operations. If a fifth director is appointed, actions could be taken by the board of Dakota Fuels that are not supported by our designees to the board. For example, the board of Dakota Fuels may not accept our proposed investment or accept it on terms that are not as favorable as those we propose or the board may choose not to distribute cash from the profits of Heartland Grain Fuels to the partners. Any of these actions or other actions of Dakota Fuels may decrease the value of our investment in Heartland Grain Fuels, which ultimately may have a material adverse effect on our business, results of operations and profitability.

We may have unanticipated liabilities or have negotiated terms that prove to be unfavorable in connection with the Heartland transaction.

Notwithstanding our review and investigation into Heartland Grain Fuels at the time we entered into the agreement to acquire the partnership interests in Heartland Grain Fuels, we had limited knowledge about Heartland Grain Fuels, including its specific operating history and financial condition. No assurance can be given that we paid a reasonable price for Heartland Grain Fuels, or that we negotiated appropriate contractual terms, including seller representations and warranties. To the extent that we must pay for significant unanticipated obligations of Heartland Grain Fuels, we could be materially and adversely affected, which would negatively impact the value of your investment.

The Heartland transaction may adversely affect our financial results.

We are accounting for the acquisition of the interest in Heartland Grain Fuels using purchase accounting. As a result, we have acquired substantial goodwill and will be subject to impairment testing under GAAP. We may be required to take non-recurring charges, including write downs of significant amounts of intangible assets with indefinite lives or goodwill. Our business, results of operations and financial condition may be harmed by such charges.

The pro forma adjustments reflected in the pro forma financial information included in “Unaudited Pro Forma Consolidated Financial Information” are based on certain estimates and assumptions as of September 30, 2006. The actual adjustments upon the consummation of the second closing of the acquisition will depend on a number of factors, including changes in the estimated fair value of net assets and the measurement date for purposes of measuring the fair value of the units issued as consideration to effect the acquisition. Therefore, the actual adjustments may be different from the adjustments made to prepare the unaudited pro forma consolidated financial information, and such differences may be material.

RISKS RELATED TO OUR FINANCING PLAN

The growth of our business will be dependent upon the availability of adequate capital.

The growth of our business will depend on the availability of adequate capital, which in turn will depend in large part on cash flow generated by our business and the availability of equity and debt financing. To date, we have relied on equity capital and debt financing to commence construction of the Nebraska plant. Heartland Grain Fuels also has significant indebtedness. We cannot assure you that our operations will generate positive cash flow or that we will be able to obtain equity or debt financing necessary to complete, or even to start, our other projects on acceptable terms or at all.

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We may not obtain the debt financing necessary to construct and operate the ethanol plants, which could result in the failure of these projects and our company.

In addition to the equity raised in this offering and the amount of any grants we may be awarded, we will need to obtain significant debt financing to fully capitalize the Aberdeen plant expansion and the Indiana plant and substantial additional equity and debt financing in order to fully capitalize the Minnesota plant. We have entered into loan agreements establishing senior credit facilities for construction of the Nebraska plant and Heartland Grain Fuels has entered into loan agreements establishing senior credit facilities for the Aberdeen plant expansion, but these lenders are only obligated to lend the funds for construction if certain conditions are satisfied. We have no commitments for debt financing for the Indiana plant or the Minnesota plant. To the extent that we cannot obtain adequate financing, we will be unable to complete our current expansion and construction plans, which will cause the value of an investment in our company to decline.

We intend to borrow up to $5 million to fund expenses relating to the Aberdeen plant expansion, secured by our ownership interest in Heartland Grain Fuels. If we are unable to repay this loan when due, we may lose our ownership interest in Heartland Grain Fuels.

Our wholly owned subsidiary, HGF Acquisition, has obtained a commitment from Kruse Investments for a $5 million loan due July 1, 2007 in order to partially finance the expansion of the Aberdeen facility. This loan is secured by a pledge of all of our ownership interest in Heartland Grain Fuels. Following release of the proceeds of this offering from escrow, we intend to use a portion of the offering proceeds to repay the loan. If we default under the loan, the lender would be able to foreclose on the pledge of our ownership interest in Heartland Grain Fuels. If that happens, we would no longer be able to consider Heartland Grain Fuels as part of our business.

If we do not raise sufficient funding in this offering, it is unlikely we will complete the Aberdeen plant expansion or construct the Indiana plant.

We estimate that we will need at least $36.0 million in equity funding to complete the Aberdeen plant expansion, $55.0 million in equity funding to build the Indiana plant and substantial additional equity funding to build the Minnesota plant. While we are not seeking to raise sufficient funds to build the Minnesota plant in this offering, there can be no assurance that we will raise a sufficient amount in this offering to complete the Aberdeen plant expansion or construct the Indiana plant. If we fail to raise the required amounts, it is unlikely that we will locate other sources of capital that will allow us to complete the Aberdeen plant expansion or construct the proposed plants.

RISKS RELATED TO CONSTRUCTION OF THE ETHANOL PLANTS

We are and expect to be highly dependent upon Fagen, Inc. and ICM, Inc. to design and build our plants.

We have entered into agreements with Fagen to design and build the Nebraska and Minnesota plants and a letter of intent with ICM for construction of the Indiana plant. Heartland Grain Fuels has entered into a design-build agreement with ICM for the Aberdeen plant expansion. We expect to enter into a definitive design-build agreement with ICM for the Indiana plant. Fagen will use ICM technology in the Nebraska and Minnesota plants. Therefore, we expect to be highly dependent upon Fagen and ICM for their expertise within the ethanol industry, and any loss of our relationship with either company could place us at a competitive disadvantage. We will depend on Fagen and ICM for timely completion of the plants; however, their involvement with other projects could delay the commencement and start-up operations of our projects. If either company were to terminate its relationship with us, we might not be able to secure a suitable replacement and our business would be materially harmed.

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We may need to increase cost estimates for construction of the ethanol plants, and these increases could result in devaluation of our units if ethanol plant construction requires additional capital.

Initially, we expected the Nebraska plant to cost approximately $142.0 million and the Indiana plant to cost approximately $165.0 million, each including start-up and development costs. The costs for each of these plants have increased significantly. These cost increases are primarily attributable to increased site development, organizational and construction costs and additional working capital to properly finance operations. Change orders or changes in indexed costs such as steel, wood and concrete could result in further cost increases. Advances and changes in technology may require changes to our current plans in order to remain competitive. We may determine that it is necessary to change the design of the plants in order to implement new technology. Any significant increase in the estimated construction cost of the new or expanded plants could delay our ability to generate revenues from these plants and reduce the value of our units because our revenue stream may not be able to adequately support the increased cost and expense attributable to increased construction costs.

Construction delays could result in devaluation of our units if our production and sale of ethanol and its by-products are similarly delayed.

We currently expect our Nebraska plant to be operating in September 2007, the Aberdeen plant expansion to be completed in the first calendar quarter of 2008 and our Indiana plant to be operating in the first calendar quarter of 2009; however, construction projects often involve delays in obtaining permits, construction delays due to weather conditions or other events that delay the construction schedule. Changes in interest rates or the credit environment or changes in political administrations at the federal, state or local level that result in policy changes towards ethanol or these projects could cause construction and operational delays. If it takes longer to construct the plants than we anticipate, it would delay our ability to generate revenue from them and make it difficult for us to meet our debt service obligations. This will likely reduce the value of our units.

Defects in plant construction could result in devaluation of our units if our plants do not produce ethanol and its by-products as anticipated.

There is no assurance that defects in materials and/or workmanship in the plants will not occur. Under the terms of our design-build agreements with Fagen and ICM, we have (and anticipate having in future design-build agreements) warranties that are limited in scope. We will be relying on our design-build contractors to satisfy their warranties, and these warranties may not provide adequate recourse if there are defects in materials and/or workmanship. Notwithstanding any warranties, defects in material or workmanship may still occur and could delay the commencement of operations, or, if such defects are discovered after operations have commenced, could cause us to halt or discontinue the plants’ operation. Halting or discontinuing plant operations could delay our ability to generate revenues from these plants and reduce the value of our units.

The Indiana and Minnesota plant sites may have unknown environmental problems that could be expensive and time consuming to correct, which may delay or halt plant construction and delay our ability to generate revenue from these plants.

We have not completed environmental studies of the land that we intend to use to build the Indiana and Minnesota plants. We may determine that this land contains environmental hazards that will make construction costly or impossible, which could lead us to suspend development or construction of the plants or require us to purchase more expensive land on which to build the plants. The presence of a hazardous condition will likely delay construction of a plant and may require significant expenditure of our resources to correct the condition. In addition, Fagen or ICM will be entitled to an adjustment in price and time of performance if it has been adversely affected by the hazardous condition. If we encounter any

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hazardous conditions during construction that require time or money to correct, such event could delay our ability to generate revenue from these plants and reduce the value of our units.

Any delay or unanticipated cost in providing rail infrastructure to the plants could significantly impact our ability to operate the plants.

We do not have an approved rail plan to cover the increased shipments that will be generated by the Aberdeen plant after the expansion is complete. Increased costs for rail access or a delay in obtaining rail access could significantly impact our ability to operate the plant since we expect to ship most or all of our ethanol and distillers grains by rail. As a result, the value of your investment could decline.

Similarly, access to the proposed Indiana and Minnesota sites by rail service is critical to the success of these plants. Any delay in obtaining rail access, or inability to obtain rail access, could significantly impact our ability to operate those plants.

If we were not able to obtain the required zoning to build at the proposed site for the Minnesota plant, we may not be able to proceed with that plant.

Our proposed site for the Minnesota plant may need to be rezoned. Bridgewater Township, Minnesota, where the proposed plant would be located, has adopted a one-year moratorium on ethanol plant construction while the township considers whether to adopt its own zoning code. If we are not able to have the land rezoned, we will not be able to build the Minnesota plant at its proposed site and will attempt to find other locations to build the plant; however, this may prove unsuccessful. No assurance can be given that we will be successful in getting the proposed site rezoned.

Lack of a completion bond or other performance guaranty for construction of our Nebraska plant or the Aberdeen plant expansion could lead to potentially adverse effects and reduce the value of your investment.

Completion bonds or performance guaranties are not required under the terms of the financing arrangements for the Aberdeen plant expansion or the Nebraska plant. While we believe we have sufficient cash on hand and debt financing in place to cover construction and related start-up costs for the Nebraska plant and that the minimum offering proceeds will be sufficient to capitalize the Aberdeen plant expansion, there is no guaranty of the completion of either facility and the lack of any completion bond or other performance guaranty could have an adverse effect on your investment.

RISKS RELATED TO ETHANOL PRODUCTION

We may have difficulty obtaining enough corn to operate the plants profitably.

There may not be an adequate supply of corn produced in the areas surrounding our plants to satisfy our requirements. Even if there is an adequate supply of corn and we make arrangements to purchase it, we could encounter difficulties finalizing the sales transaction and securing delivery of the corn. If we do not obtain corn in the quantities we plan to use, we may not be able to operate our plants at full capacity. If the price of corn in our local markets is higher than the national average, our profitability may suffer and we may incur significant losses from operations. As a result, our ability to make a profit may decline, causing a reduction in the value of your investment.

Our financial performance will be dependent on corn prices and market prices for ethanol and distillers grains, and the value of your investment in us may be directly affected by changes in these market prices.

Our results of operations and financial condition will be significantly affected by the cost and supply of corn and by the selling price for ethanol and distillers grains, which are commodities. Generally, higher corn prices will produce lower profit margins, and corn prices have spiked significantly in the past quarter.

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Changes in the price and supply of these commodities are subject to and determined by market forces over which we have no control. If a period of high corn prices were to be sustained for some time, this pricing may reduce our ability to generate revenues and harm our profitability because of the higher cost of operating and could potentially lead to the loss of some or all of your investment. We purchase our corn in the cash market and from time to time hedge corn price risk through futures contracts, options and over-the-counter instruments to reduce short-term exposure to price fluctuations. There is no assurance that our hedging activities will successfully reduce the risk caused by price fluctuation, which may leave us vulnerable to high corn prices. Hedging activities themselves can result in costs because price movements in corn contracts are highly volatile and are influenced by many factors that are beyond our control. We may incur these costs and they may be significant.

Our revenues will be exclusively dependent on the market prices for ethanol and distillers grains. These prices can be volatile as a result of a number of factors. These factors include the overall supply and demand, the price of gasoline, the 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, causing a reduction in the value of your investment.

There can be no assurance as to the price of ethanol or distillers grains in the future. Any downward changes in the price of ethanol and/or distillers grains may result in less income, which would decrease our revenues and you could lose some or all of your investment as a result.

Our ability to successfully operate is dependent on the availability of energy and water at anticipated prices.

Adequate energy and water is critical to ethanol plant operations. We have not yet entered into any definitive agreements to obtain energy and water resources for the Indiana and Minnesota plants, and we may have to pay more than we expect to access sufficient energy and water resources. As a result, our ability to make a profit may decline.

We expect to depend on natural gas energy to power the ethanol plants.

We intend to use natural gas as the power source for our ethanol plants. According to the Ohio Corn Growers Association, natural gas costs traditionally represent approximately 15% of the total cost of production of ethanol. Natural gas prices are volatile and may lead to higher operating costs. Between January 1, 2001 and November 30, 2006, the price per million British thermal units of natural gas based on the New York Mercantile Exchange (NYMEX), known as a MMBtu, has ranged from a low of $1.83 to a high of $15.38. On November 29, 2006, the price of the NYMEX future contract for January 2007 delivery settled at $8.871 per MMBtu. Any increase in the price of natural gas could lead to an increase in operating cost.

We will depend on others for sales of our products, which may place us at a competitive disadvantage and reduce profitability.

We currently have agreements with third-party marketing firms to market all of the ethanol produced at the South Dakota plants and the ethanol we plan to produce at the Nebraska plant, and we may hire a third-party marketing firm to market all of the ethanol we plan to produce at our other plants. We currently expect to market a portion of our own distillers grains generated by our Nebraska, Indiana and Minnesota plants locally by selling to local livestock, poultry and swine markets. We have contracted with Commodity Specialist Company to market and sell a portion or all of our distillers grains generated by the Nebraska plant, but we have retained the right to independently market our wet distillers grains and

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modified wet distillers grains and solubles. Heartland Grain Fuels has a contract with Dakotaland Feeds, LLC whereby Dakotaland Feeds markets locally the sale of distillers grains produced at the South Dakota plants. As a result, we expect to be dependent on the ethanol marketer and any distillers grains marketer we engage. There is no assurance that we will be able to enter into contracts with any ethanol marketer for the ethanol at our Indiana and Minnesota plants or distillers grains marketer on terms that are favorable to us. If the ethanol or distillers grains marketer 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 grains may result in less income from sales, reducing our revenue stream, which could reduce the value of your investment.

Changes and advances in ethanol production technology could require us to incur costs to update our ethanol plants 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. Any advances and changes may make the ethanol production technology installed in our plants 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 plants 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 or we may determine that it is in the best interests of our company 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, all of which could reduce the value of your investment.

There is currently a shortage of rail cars to transport ethanol. If we are not able to obtain rail cars at favorable prices, we may not be able to operate profitably.

We currently expect to transport a substantial amount of the ethanol produced at our plants by rail, which requires a sufficient supply of specialized rail cars. There is currently a shortage of adequate rail cars, and rail car manufacturers have informed us that there is a significant backlog on rail car orders; therefore, it may be costly to obtain rail cars in a timely fashion or rail cars may not be available at all. If demand for rail cars remains high, we may be required to pay higher prices than we currently anticipate to purchase rail cars or to ship our ethanol and distillers grains by truck and receive a lesser value, which would limit our ability to make a profit and cause our sales to decline.

RISKS RELATED TO THE ETHANOL INDUSTRY

Competition from the advancement of technology may lessen the demand for ethanol and negatively impact our profitability, which could reduce the value of your investment.

Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing more efficient engines, hybrid engines and alternative clean power systems using fuel cells or clean burning gaseous fuels. Vehicle manufacturers are working to develop vehicles that are more fuel efficient and have reduced emissions using conventional gasoline. Vehicle manufacturers have developed and continue to work to improve hybrid technology, which powers vehicles by engines that utilize both electric and

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conventional gasoline fuel sources. In the future, 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, causing a reduction in the value of your investment.

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 and could reduce the value of your investment.

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 that are unable to grow corn. 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 existing South Dakota plants or the ethanol plants we are proposing to build into plants that 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 and your investment could lose value.

Volatility in gasoline selling price and production cost may reduce our gross margins.

Ethanol is utilized both as a fuel additive to reduce vehicle emissions and as an octane enhancer to improve the octane rating of the gasoline with which it is blended. Therefore, the supply and demand for gasoline impacts the price of ethanol, and our business and future results of operations may be materially adversely affected if gasoline demand or price decreases.

Competition in the ethanol industry could limit our growth and harm our operating results.

The market for ethanol and other biofuels is highly competitive. Our current and prospective competitors include many large companies that have substantially greater market presence, name recognition and financial, marketing and other resources than we do. We compete directly or indirectly with large companies, such as Archer-Daniels-Midland Company and Cargill, Inc., and with other companies that are seeking to develop large-scale ethanol plants and alliances. As of June 2006, the top ten producers accounted for approximately 46% of the ethanol production capacity in the U.S. according to the Renewable Fuels Association. Farmer-owned cooperatives and independent firms consisting of groups of individual farmers and investors have been able to compete successfully in the ethanol industry due in part to their ability to attract sufficient supplies of corn at relatively low prices. Pressure from our competitors could require us to reduce our prices or increase our spending for marketing, which would erode our margins and could have a material adverse effect on our business, financial condition and results of operations.

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Commencement of ethanol plant construction by other parties prior to us in the areas where we intend to build plants could force us to abandon one or more of our proposed plants.

At present, there are many individuals and groups that are attempting to build ethanol plants throughout the U.S. If a third party begins construction on a plant in or around the area of one of our proposed plants, lenders may not be willing to fund the debt we would need to build in the area. In addition, plant builders often refuse to construct plants nearby other ethanol plants. This could cause us to abandon or relocate one of our proposed plants, which could have a material adverse effect on our business, financial condition and results of operations.

As domestic ethanol production continues to grow, ethanol supply may exceed demand, causing ethanol prices to decline and the value of your investment to be reduced.

The number of ethanol plants being developed and constructed in the United States continues to increase at a rapid pace. As these plants begin operations, we expect domestic ethanol production to significantly increase. If the demand for ethanol and ethanol by-products does not grow at the same pace as increases in supply, we would expect the price for ethanol and ethanol by-products to decline. Declining ethanol prices and prices for ethanol by-products will result in lower revenues and may reduce or eliminate profits, causing the value of your investment to be reduced.

Consumer resistance to the use of ethanol based on the belief that ethanol is expensive, adds to air pollution, harms engines and takes more energy to produce than it contributes may affect the demand for ethanol, which could affect our ability to market our product and reduce the value of your investment.

Certain individuals believe that use of ethanol will have a negative impact on retail prices of gasoline. 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 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.

Ethanol imported from Caribbean basin countries may be a less expensive alternative to our ethanol, which would cause us to lose market share and reduce the value of your investment.

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

Ethanol imported from Brazil may be a less expensive alternative to our ethanol, which would cause us to lose market share and reduce the value of your investment.

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. Ethanol produced from sugarcane is less costly to produce than corn-based ethanol because of the higher sugar content of sugarcane. Brazil experienced a dramatic increase in ethanol production and trade in 2004, exporting approximately 112 million gallons to the U.S. alone. Ethanol imported from Brazil may be a less expensive alternative to domestically produced ethanol, which is primarily made from corn. The current 54 cent per gallon tariff imposed by the United States on ethanol imported from Brazil and recently extended through January 2009 significantly reduces competition from Brazilian ethanol producers for sales of ethanol in the

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United States. In the event tariffs presently protecting U.S. ethanol producers are reduced or eliminated, a significant barrier to entry into the U.S. ethanol market would be removed or reduced. Competition from ethanol imported from Brazil may affect our ability to sell our ethanol profitably, which would reduce the value of your investment.

RISKS RELATED TO REGULATION AND GOVERNMENTAL ACTION

Loss of or ineligibility for favorable tax benefits for ethanol production could hinder our ability to operate at a profit and reduce the value of your investment in us.

The ethanol industry and our business are assisted by various federal ethanol tax incentives, including those included in the Energy Policy Act of 2005. The provision of the Energy Policy Act of 2005 likely to have the greatest impact on the ethanol industry is the creation of a Renewable Fuels Standard, known as the RFS. The RFS will begin at 4 billion gallons per year in 2006, increasing to 7.5 billion gallons per year by 2012. 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 and the potential loss of some or all of your investment.

A change in environmental regulations or violations thereof could result in the devaluation of our units and a reduction in the value of your investment.

We are subject to extensive air, water and other environmental regulations, including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees, and we will need to obtain a number of environmental permits to construct and operate the plants.

We are in the process of applying for the permits necessary for construction and operation of our Nebraska plant and the Aberdeen plant expansion and have received some of these permits. We have not yet applied for the necessary permits for the Indiana and Minnesota plants. If for any reason any of these permits are not granted, construction costs for the plants may increase, or the plants may not be constructed at all. Permit conditions could also restrict or limit the extent of our operations. We cannot assure you that we will be able to obtain and comply with all necessary permits to construct and continue to operate our ethanol plants. Failure to comply with all applicable permits and licenses could subject us to future claims or increase costs and materially adversely affect our business and results of operations.

Each ethanol plant we operate or intend to operate is subject to environmental regulation by the state in which the plant is located and by the U.S. Environmental Protection Agency. These laws, regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts on the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, natural resource damages, criminal sanctions, permit revocations and/or facility shutdowns, liability for the costs of investigation and/or remediation, and for damages to natural resources. We may also be subject to related claims by private parties alleging property damage and personal injury due to exposure to hazardous or other materials at or from those plants. Additionally, the hazards and risks associated with producing and transporting our products (such as fires, natural disasters, explosions, abnormal pressures and blowouts) may also result in personal injury claims by third parties or damage to property owned by us or by third parties. We could sustain losses for uninsurable or uninsured events, or in amounts in excess of existing insurance coverage. Events that result in significant personal injury to third parties or damage to property owned by us or third parties or other losses that are not fully covered by insurance could have a material adverse effect on our business, results of operations and financial condition.

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Additionally, environmental laws and regulations, both at the federal and state level, are subject to change and changes can be made retroactively. Consequently, even if we obtain the required permits, we may be required to invest or spend considerable resources to comply with future environmental regulations or new or modified interpretations of those regulations, which may reduce our profitability and cause you to lose some or all of your investment.

Delays in E85 pump certifications could decrease the market for ethanol and decrease production of flexible fuel vehicles, causing ethanol prices to decline and the value of your investment to be reduced.

While demand for ethanol may increase as a result of increased consumption of E85 fuel (a blend of 85% ethanol and 15% unleaded gasoline) in flexible fuel vehicles, there are some problems certifying pumps to dispense E85 fuel. In high concentrations, the alcohol in ethanol can corrode some types of metal, such as aluminum, and damage conventional rubber fittings and hoses.

Under some state laws, service stations will be required to have Underwriters Laboratories, Inc., known as UL, certified E85 pumps in the future. UL is a private product-safety group used by fire marshals and state agencies. At this time, UL has not certified any pumps to dispense E85 and in October 2006, it suspended its approval of various internal pump components while it completes its review. After UL suspended approval of pump components, the fire marshal in Columbus, Ohio closed two service stations in the city. UL estimates that it could take from six months to two years to finish its review of E85 pumps.

Should UL fail to approve pump components in the future, it could decrease the market for ethanol and reduce the value of your investment.

RISKS RELATED TO THE OFFERING

The minimum offering amount will not enable us to undertake all of the projects discussed in this prospectus.

We anticipate using a portion of the funds raised in this offering to expand the Aberdeen plant, increase our working capital, construct the Indiana plant and continue planning the Minnesota plant. Based on our business plan and current construction cost estimates, we believe we will need to raise approximately $175.0 million in both debt and equity for construction and start-up expenses relating to the Indiana plant and substantial additional debt and equity to construct and start-up the Minnesota plant. We will need to raise at least $40.0 million in this offering in order to release funds from escrow and which we anticipate will also permit us to incur debt financing to complete construction of the Aberdeen plant expansion. This is a “best efforts” offering and there is a risk that we may not be able to sell sufficient units in this offering to raise the equity capital portion of the financing necessary to construct the Indiana plant or to raise sufficient funds to undertake the planning of the Minnesota plant. Even if we raise the maximum proceeds in this offering, we will not have sufficient funds to finance the construction of the Minnesota plant.

We have limited experience in selling securities and no one has agreed to assist us or purchase any units that we cannot sell ourselves, which may result in the failure of this offering.

We are making this offering without the use of an underwriter or placement agent. We have no firm commitment from any prospective buyer to purchase our units and there can be no assurance that the offering will be successful. We plan to offer the units directly to investors. We plan to advertise in local media and by mailing information to area residents. We may also hold informational meetings. Our management has significant responsibilities in their primary occupations in addition to trying to raise capital. Most of our executive officers and directors have limited or no broker-dealer experience and most have limited or no experience with public offerings of securities. There can be no assurance that we will be successful in securing investors for the offering.

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Investors will not be allowed to withdraw their investments, which means that you should invest only if you are willing to have your investment unavailable to you for an indefinite period of time.

Investors will not be allowed to withdraw their investments for any reason, absent termination of the offering without meeting the minimum offering amounts. This means that from the date of your investment, your investment will be unavailable to you. You should only invest in us if you are willing to have your investment be unavailable for an indefinite period of time. There are significant transfer restrictions on our units.

RISKS RELATED TO OUR UNITS

There has been no independent valuation of the units, which means that the units may be worth less than the price at which they are offered.

We have determined the unit purchase price without independent valuation. We established the offering price based on the information set forth in this prospectus and otherwise available to us, our estimates of the present cost to acquire or design and construct ethanol plants substantially similar to our current and planned facilities, our history and prospects and the history of and prospects for the industry in which we compete, our prospects for future earnings and present state of development of our plants and the recent market prices of and the demand for publicly traded common stock of generally comparable companies, as well as other factors, not based on perceived market value, book value or other established criteria. We did not obtain an independent appraisal opinion on the valuation of the units. The units may have a value significantly less than the offering price and there is no guarantee that the units will ever obtain a value equal to or greater than the offering price.

No public trading market exists for our units and we do not anticipate the creation of such a market, which means that it will be difficult for you to liquidate your investment.

There is currently no established public trading market for our units, and an active trading market will not develop as a result of this offering. In order for the company to maintain its partnership tax status, unitholders may not trade the units on an established securities market or readily trade the units on a secondary market (or the substantial equivalent thereof). Therefore, we do not expect to apply for listing of the units on any securities exchange following this offering. As a result, you should not expect to readily sell your units.

We have placed significant restrictions on transferability of the units.

The units are subject to substantial transfer restrictions pursuant to our operating agreement. In addition, transfers of the units may be restricted by federal and state securities laws. As a result, investors may not be able to liquidate their investments in the units and, therefore, may be required to assume the risks of investments in us for an indefinite period of time, which may be the life of our company. We have not developed an exit strategy.

To help ensure that a secondary market does not develop, our operating agreement prohibits transfers without the approval of our board of directors. See “Summary of Our Operating Agreement.” The board of directors will not approve transfers unless they fall within “safe harbors” contained in the publicly traded partnership rules under the tax code, which include, without limitation, the following:

·        transfers by gift to the member’s descendants;

·        transfer upon the death of a member;

·        transfers between family members; and

·        transfers that comply with the “qualifying matching services” requirements.

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There is no assurance that an investor will receive cash distributions, which could result in an investor receiving little or no return on his or her investment.

Distributions are payable at the sole discretion of our board of directors, subject to the provisions of the Delaware Limited Liability Company Act, our operating agreement and the requirements of our creditors. Cash distributions are not assured, and we may never be in a position to make distributions. See “Description of Membership Units.” Our board may elect to retain future profits to provide operational financing for the plants, debt retirement and possible plant expansion, the construction or acquisition of additional plants or other company opportunities. This means that you may receive little or no return on your investment and be unable to liquidate your investment due to transfer restrictions and lack of a public trading market. This could result in a reduction in the value of or the loss of your entire investment.

The presence of members holding 25% or more of the outstanding units is required to take action at a meeting of our members.

In order to take action at a meeting, a quorum of members holding only 25% of the outstanding units must be represented in person, by proxy or by mail ballot. See “Summary of Our Operating Agreement.” This means that the unitholders of a minority of outstanding units could pass a vote and take an action which would then bind all unitholders.

You will have limited voting rights.

You cannot exercise control over our daily business affairs and implement changes in our policy. Subject to the provisions in our operating agreement, our board of directors may modify our business plans without your consent.

In addition to the election of directors, you may vote only in a limited number of specific instances. These situations consist of the following matters, which require the affirmative vote of a majority of our membership voting interests:

·        disposition of substantially all of our assets through merger, exchange or otherwise, except for dissolution of our company or a transfer of our assets to a wholly owned subsidiary;

·        issuance of more than 20 million units;

·        causing our company to acquire debt or equity of any director or its affiliates, or otherwise making loans to a director or its affiliates in excess of $500,000; or

·        amendments to our operating agreement (other than amendments that would modify the limited liability of a member or alter the member’s economic interest, which require a two-thirds vote of the membership interests adversely affected).

Except for a decree of judicial dissolution, dissolution requires the vote of 75% of the membership voting interests.

These units will be diluted in value and will be subject to further dilution in value.

To date, 7,210,450 of our outstanding units have been issued at a price less than $20 per unit. The presence of these previously issued units will dilute the relative ownership interests of the units purchased in this offering because these earlier investors received a relatively greater share of equity for less consideration. As a result, investors will incur immediate and substantial dilution in the value of their units upon acquisition. The 2,631,578 units issued or to be issued in the Heartland transaction were issued in exchange for consideration that we valued at $20 per unit, but we did not obtain an independent valuation of Heartland Grain Fuels in connection with the transaction. As a result, if the consideration received by us proves to be less than $20 per unit, investors may incur additional dilution in the value of their units.

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We may, in the future, adopt a unit incentive plan or otherwise grant units, options, warrants or other securities in order to attract and retain key personnel to operate our plants and to provide incentives to key management, consultants, directors and officers. These actions, if taken, could lower the value of our units and cause additional dilution to your investment and a reduction in your equity interest.

We may decide to build or acquire additional ethanol plants or undertake additional business ventures, which could affect our profitability and result in the loss of a portion or all of your investment.

In the future, we may explore the possibility of building or acquiring additional ethanol plants or undertaking unrelated business ventures. If we decide to take advantage of these opportunities, we might issue additional equity, which could dilute the units issued in this offering and cause us to incur additional significant debt obligations in order to fund the new construction or venture. Any proposed additional plants or ventures may also impose substantial additional demands on the time and attention of our executive officers and directors. If we decide to build or acquire additional plants or undertake other business ventures, we may not be successful, which could lead to an unrecoverable investment by us and you could lose a portion or all of your investment. Even if we are successful, the profitability of the operations of those additional plants and ventures will affect the value of your investment in this offering.

RISKS RELATED TO TAX ISSUES

EACH PROSPECTIVE MEMBER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR CONCERNING THE IMPACT THAT HIS, HER OR ITS PARTICIPATION IN THE COMPANY MAY HAVE ON HIS, HER OR ITS FEDERAL INCOME TAX LIABILITY AND THE APPLICATION OF STATE AND LOCAL INCOME AND OTHER TAX LAWS TO HIS, HER OR ITS PARTICIPATION IN THIS OFFERING.

PROSPECTIVE MEMBERS ARE STRONGLY ENCOURAGED TO CAREFULLY REVIEW “FEDERAL INCOME TAX CONSEQUENCES OF OWNING OUR UNITS” ON PAGE 135 FOR A DISCUSSION OF THE FEDERAL INCOME TAX PROVISIONS THAT MAY AFFECT THEIR OWNERSHIP OF UNITS.

IRS classification of the company as a corporation rather than as a partnership would result in higher taxation and reduced profits, which could reduce the value of your investment in us.

We are a Delaware limited liability company that has elected to be taxed as a partnership for federal and state income tax purposes, with income, gain, loss, deduction and credit passed through to the holders of the units. However, if for any reason the IRS would successfully determine that we should be taxed as a corporation rather than as a partnership, we would be taxed on our net income at rates of up to 35% for federal income tax purposes, and all items of our income, gain, loss, deduction and credit would be reflected only on our tax returns and would not be passed through to the holders of the units. If we were to be taxed as a corporation for any reason, distributions we make to investors will be treated as ordinary dividend income to the extent of our earnings and profits, and the payment of dividends would not be deductible by us, thus resulting in double taxation of our earnings and profits. If we pay taxes as a corporation, we will have less cash to distribute to our unitholders. See “Federal Income Tax Consequences of Owning Units—Partnership Status” for additional details.

We might elect to convert our entity status from a limited liability company to a corporation, which would increase our tax burden.

Although we have no current plans to convert to a corporation, our board of directors has discussed expansion, acquisition, consolidation and financing scenarios that may require our company to convert to a corporation for successful implementation. So long as our company is a limited liability company, we will attempt to distribute an amount approximating the additional federal and state income tax attributable to

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investors as a result of profits allocable to investors. If we convert to a corporation, no profits will be allocable to investors, there will be no tax liability to our shareholders unless we pay a dividend and our company, as a result, would not make tax distributions to our shareholders with respect to these allocable profits. Conversion to a corporation would require an approval by member vote pursuant to our operating agreement.

If we elect to be organized as a corporation, we will be subject to Subchapter C of the Internal Revenue Code. We would be taxed on our net income at rates of up to 35% for federal income tax purposes, and all items of our income, gain, loss, deduction and credit would be reflected only on our tax returns and would not be passed through to the holders of the units. Distributions, if made to investors, would be treated as ordinary dividend income to the extent of our earnings and profits, and the payment of dividends would not be deductible by us, resulting in double taxation of our earnings and profits. If we pay taxes as a corporation, we will also have less cash to distribute to our unitholders. See “Federal Income Tax Consequences of Owning Our Units—Tax Consequences of Converting from a Limited Liability Company to a Corporation” for additional details.

The IRS may classify your investment as a passive activity, resulting in your inability to deduct losses associated with your investment.

It is likely that an investor’s interest in us will be treated as a “passive activity” for tax purposes. If an investor is either an individual or a closely held corporation, and if the investor’s interest is deemed to be a “passive activity,” then the investor’s allocated share of any loss we incur will be deductible only against income or gains the investor has earned from other passive activities. Passive activity losses that are disallowed in any taxable year are suspended and may be carried forward and used as an offset against passive activity income in future years. These rules could restrict an investor’s ability to currently deduct any of our losses that are passed through to such investor. See “Federal Income Tax Consequences of Owning Our Units—Deductibility of Losses, Basis, At-Risk and Passive Loss Limitations” for additional details.

Income allocations assigned to an investor’s units may result in taxable income in excess of cash distributions, which means you may have to pay income tax on your investment with personal funds.

Investors will be required to pay tax on their allocated shares of our taxable income. We anticipate receiving an allocated share of the taxable income of Heartland Grain Fuels. We do not control distributions of cash by Heartland Grain Fuels. As a result, it is likely that an investor will receive allocations of taxable income that result in a tax liability that is in excess of any cash distributions we may make to the investor. Among other things, this result might occur due to accounting methodology, lending covenants that restrict our ability to pay cash distributions, or our decision to retain the cash generated by the business to fund our operating activities and obligations. Accordingly, investors are likely to be required to pay some or all of the income tax on their allocated shares of our taxable income with personal funds.

An IRS audit could result in adjustments to our allocations of income, gain, loss and deduction, causing additional tax liability to our members.

The IRS may audit our income tax returns and may challenge positions taken for tax purposes and allocations of income, gain, loss and deduction to investors. If the IRS were successful in challenging our allocations in a manner that reduces loss or increases income allocable to investors, you may have additional tax liabilities. In addition, such an audit could lead to separate audits of an investor’s tax returns, especially if adjustments are required, which could result in adjustments on your tax returns. Any of these events could result in additional tax liabilities, penalties and interest to you, and the cost of filing amended

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tax returns. See “Federal Income Tax Consequences of Owning Units—Audit of Income Tax Returns” for additional details.

RISKS RELATED TO CONFLICTS OF INTEREST

Our directors have other business and management responsibilities which may cause conflicts of interest in the allocation of their time and services to our business.

Our directors have other management responsibilities and business interests apart from our business. Therefore, our directors may experience conflicts of interest in allocating their time and services between us and their other business responsibilities.

Certain of our directors have other interests that may result in conflicts of interest.

Our director Revis L. Stephenson III (who is also our chief executive officer) may be entitled under a project development fee agreement to additional units up to 1% of the difference between $1.25 million and the total project cost on the date the Nebraska plant begins producing ethanol if the actual project development cost exceeds $1.25 million. In addition, the restricted units that Mr. Stephenson holds vest upon a change in control. These arrangements could cause Mr. Stephenson to have a conflict of interest in decision making related to our financing plan or other decisions relating to our company.

At the closing of SDWG’s sale of its interests in Heartland Grain Fuels and Dakota Fuels to our company, we entered into a grain origination agreement with SDWG, pursuant to which SDWG will provide the corn required for the operation of the South Dakota plants, including the Aberdeen plant expansion. Subsequent to the execution of this agreement, Dale Locken, the chief executive officer of SDWG, became a member of our board of directors. The grain origination agreement could cause Mr. Locken a conflict of interest in decision making related to the operation of the South Dakota plants.

We may have conflicting financial interests with Fagen, Inc. and ICM, Inc., which could cause Fagen, Inc. and ICM, Inc. to put its financial interests ahead of ours.

Most of the cost of our projects will be paid to Fagen, Inc. and ICM, Inc. for the design and construction of our Nebraska, Indiana and Minnesota plants and the Aberdeen plant expansion. Fagen and ICM may experience conflicts of interest that cause them to put their financial interest in the design and construction of our plants ahead of our best interests. For example, they may seek high profit margins or seek additional funds to complete construction in lieu of absorbing certain costs. In addition, because of the extensive roles that Fagen and ICM will have in the construction and operation of the plants, it may be difficult or impossible for us to enforce claims that we may have against them. Such conflicts of interest may reduce our profitability and the value of the units.

Fagen, ICM and their affiliates may also have conflicts of interest with us because employees or agents of Fagen and ICM are involved as owners, creditors, builders and designers and in other capacities with other ethanol plants in the United States. We cannot require Fagen or ICM to devote their full time or attention to our activities. As a result, Fagen and ICM may have, or come to have, a conflict of interest in allocating personnel, materials and other resources to our plants.

Before making any decision to invest in us, investors should read this entire prospectus, including all of its annexes, and consult with their own investment, legal, tax and other professional advisors.

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