ThZeal - The Zeal

S-1 1 s1.txt FORM S-1 As filed with the Securities and Exchange Commission on December 16, 2004. Registration Statement No. 333-_________ ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM S-1 Registration Statement Under the Securities Act of 1933 Green Plains Renewable Energy, Inc. ----------------------------------------- (Exact name of registrant in its charter) Iowa 2869 84-1652107 ------------------------------ ---------------------------- -------------------- (State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 9635 Irvine Bay Court, Las Vegas, NV 89147 ------------------------------------------------------------ (Address and telephone number of principal executive offices and principal place of business) Barry A. Ellsworth Chairman of the Board and President 9635 Irvine Bay Court Las Vegas, NV 89147 (702) 524-8928 -------------------------------------------------------- (Name, address and telephone number of agent for service) Copies to: Eric L. Robinson BLACKBURN & STOLL, LC 257 East 200 South, Suite 800 Salt Lake City, UT 84101 (801) 521-7900 Approximate date of proposed sale to the public: As soon as practicable from time to time after this Registration Statement becomes effective. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.[ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.[ ] CALCULATION OF REGISTRATION FEE

(1) Estimated solely for the purposes of calculating the registration fee which was computed pursuant to Rule 457(a) as promulgated under the Securities Act of 1933. (2) This registration statement also relates to the issuance of warrants exercisable for up to 950,000 shares of common stock that are issuable upon purchase of common stock in this offering. In accordance with Rule 416 under the Securities Act of 1933 in order to prevent dilution, a presently indeterminable number of shares of common stock are registered hereunder which may be issued in the event of a stock split, stock dividend or similar transactions. No additional registration fee has been paid for these shares of common stock. (3) These shares are issuable upon the exercise of the common stock underlying the warrants. The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to completion, dated ____________ , 2005. Green Plains Renewable Energy, Inc. an Iowa Corporation We are offering up to 3,800,000 shares of our common stock at $10.00 per share. Each share purchased includes a warrant to purchase 1/4 of an additional share of common stock from the Company at a purchase price of $30.00 per share. The warrants may be submitted to us and exercised at any time through December 31, 2007. An investor must purchase a minimum of one thousand (1,000) shares. After making an initial purchase, an investor may purchase incremental shares in blocks of five hundred (500) thereafter. The securities are offered on a "minimum/maximum, best efforts" basis directly through our officers and directors. No commission or other compensation related to the sale of the shares will be paid to our officers and directors. However, broker/dealers may participate in the offering. If a broker/dealer chooses to participate, a seven percent (7%) commission may be paid to that broker/dealer for any shares sold by said broker/dealer. You may purchase the shares from our directors or officers by submitting 100% of the total subscription price or 20% of the subscription price and executing a promissory note for the remaining balance. The proceeds of the offering will be placed and held in an escrow account at U.S. Bank N.A., until a minimum of $29,667,000 in proceeds after deduction of selling commissions has been received as proceeds from sale of the securities and we have received a letter of commitment from a lending institution to fund the construction of the Plant. If we do not receive the minimum proceeds within 180 days from the date of this prospectus, unless extended by us for up to an additional 90 days, but not past November 29, 2005, your investment will be promptly returned to you without interest and without any deductions. This offering will expire 60 days after the minimum offering is raised. We may terminate this offering prior to the expiration date. There is no public market for our common stock or the warrants at this time and no assurance can be given that a public market will ever be established. Investing in our securities involves substantial risks. See "Risk Factors" beginning on page 6 for a discussion of certain factors that should be considered by prospective purchasers of our securities. _________________________ Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. This Prospectus is dated _______, 2005 TABLE OF CONTENTS PROSPECTUS SUMMARY............................................................1 RISK FACTORS .................................................................6 FORWARD-LOOKING STATEMENTS...................................................22 ESTIMATED USE OF PROCEEDS....................................................23 SOURCE OF THE FUNDS..........................................................24 DETERMINATION OF OFFERING PRICE..............................................25 MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................................................25 DILUTION.....................................................................26 SELECTED FINANCIAL DATA......................................................27 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................................................27 BUSINESS.....................................................................31 PROPERTY.....................................................................54 MANAGEMENT...................................................................54 EXECUTIVE COMPENSATION.......................................................56 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.........................56 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...............57 DESCRIPTION OF SECURITIES....................................................58 PLAN OF DISTRIBUTION.........................................................60 LEGAL PROCEEDINGS............................................................62 LEGAL MATTERS................................................................62 LIMITATIONS OF DIRECTORS' AND SHARE HOLDERS' LIABILITY AND INDEMNIFICATION........................................................62 EXPERTS......................................................................62 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...................................................62 AVAILABLE INFORMATION........................................................62 FINANCIAL STATEMENTS........................................................F-1 PROSPECTUS SUMMARY This summary highlights some of the information contained elsewhere in this prospectus. We urge your to read the entire prospectus carefully, including the "Risk Factors" section and our financial statements and notes to those statements, before deciding whether or not to buy our common stock Except as otherwise noted, when we refer to "GPRE", "we", "us", "our" or the "Company" this reference is to made with respect to Green Plains Renewable Energy, Inc. . The Company Green Plains Renewable Energy, Inc., an Iowa Corporation, was organized on June 29, 2004 to construct and operate a dry mill, fuel grade ethanol plant ("Plant"). The Plant may be located near the town of Shenandoah, Iowa, elsewhere in Iowa, or in Nebraska, (if the State of Nebraska were to create a tax incentive plan that would make it feasible for us to do so). We have entered into a letter of intent with an ethanol construction and engineering firm, Fagen, Inc., who is expected to work with ICM, Inc. to design and construct our proposed ethanol plant. Fagen, Inc. will be our design-builder and ICM, Inc. will be Fagen, Inc.'s primary engineering subcontractor. These two firms have developed, designed, and built numerous ethanol plants throughout the country. Fagen, Inc. has been the principal contractor on over 28 ethanol projects and has performed significant work on over 50 other projects. The letter of intent is not a binding legal agreement, and until a binding agreement is executed, either party may withdraw at any time without penalty or further obligation. Prospective purchasers or representatives having questions or desiring additional information should contact us at (702) 524-8928 or at our business address: Green Plains Renewable Energy, Inc. 9635 Irvine Bay Court, Las Vegas, NV 89147. The Offering We are offering common stock and warrants of Green Plains Renewable Energy, Inc., an Iowa Corporation. As of the date of this prospectus, the common stock presently represents our only outstanding equity security. We intend to use the offering proceeds to pay for a portion of the construction and start-up operational costs of a 50 million gallon per year ethanol plant expected to be located in southwestern Iowa, elsewhere in Iowa, or in Nebraska. We will also need to secure significant debt financing in order to complete the project. Our financing plan therefore contemplates substantial leverage. This is our initial public offering and no public market exists for our common stock. The Ethanol Industry Ethanol is produced by processing corn and/or other biomass. Ethanol is utilized primarily as an "oxygenate," or an additive to gasoline to increase the oxygen level in fuel so the gasoline burns more cleanly. Ethanol is also used to enhance octane in gasoline and as a gasoline extender. The increased use of ethanol is attributable in part to the Federal Clean Air Act Amendments of 1990, which established the federal oxygenated gasoline programs to reduce smog in certain urban areas by requiring the use of oxygenated fuels during the winter months. In addition, under the Clean Air Amendments, ten major U.S. metropolitan areas are required to use oxygenated fuel year-round. Currently, the mandates of the Federal Clean Air Act Amendments of 1990 are being satisfied primarily with ethanol or methyl tertiary butyl ether or "MTBE," which is cheaper than ethanol. However, unlike MTBE, which is petroleum-based, ethanol is biodegradable. MTBE is being phased out or is currently banned in certain states, including, among others, California, Connecticut, Illinois, and New York, due to concerns over groundwater contamination. Other states may do the same in the future. Due in part to federal and state policies promoting cleaner air and federal and state tax and production incentives, the ethanol industry has grown substantially in recent years. According to Renewable Fuels Association, there 1 are currently 81 producing ethanol plants in the US capable of producing approximately 3.6 billion gallons of ethanol per year. At the writing of this document, there are 14 new plants currently under construction, which will add about 560 million gallons of new production capability. Ultimately, pending federal and state legislation regarding the use of MTBE as an oxygenate, continuation of the clean air standards, and the creation of a national renewable fuels standard may materially affect the ethanol industry and our business. The Project If we are successful in this offering, and are able to obtain the debt financing that we seek, we plan to build a 50 million-gallon-per-year dry mill, bio-fuel (ethanol) and livestock feed manufacturing plant. We expect the Plant to convert, on an annual basis, approximately 18.5 million bushels of corn into approximately 50 million gallons of ethanol and 160 thousand tons of distillers grains. We also expect to produce approximately 148 thousand tons of raw carbon dioxide gas on an annual basis. We expect to locate the Plant in southwestern Iowa in Fremont County near or in the town of Shenandoah, or elsewhere in Iowa, or in Nebraska. The Shenandoah site is located next to a spur of the Burlington Northern Railroad main line and is within a quarter mile of State Highways 59 and 2. A possible site in Wahoo, Nebraska is located next to the lines of Union Pacific Railroad and within 1 mile of US Highway 77. Our board of directors reserves the right to select a different site to construct the Plant in Iowa or Nebraska if it believes that doing so would be better for our business. We expect to commence construction, depending upon the season and the weather, approximately 60 days after we close on this offering. This is contingent upon our receipt of written agreements from lenders to provide debt financing and subject to our entering into anticipated construction agreements with Fagen, Inc. and ICM, Inc. There are no assurances that we will be able raise the minimum amount of capital to close this offering, to secure debt financing, or to finalize agreements with Fagen, Inc. and ICM, Inc. regarding construction of the plant. If we can satisfy these contingencies, and construction is commenced within 60 days of closing, we expect that the construction will take approximately 12 to 16 months, in addition to two months of post-construction testing and engineering. Assuming that the foregoing contingencies are satisfied, we plan to begin accepting shipments of grain and producing ethanol and distillers grains approximately 14 to 16 months after the close of this offering. The following diagram depicts the plant that we intend to build. 2 [DIAGRAM OMITTED] 1. Ethanol Storage Tanks: Two ethanol storage tanks. Three tanks used for 190 proof ethanol, 200 proof undenatured ethanol and denaturant. All of the described tanks will be within a retention berm. 2. Administration Building: This building will have brick and/or siding on the exterior and will be approximately 2,700 square feet. 3. DDGS Building: This will be a steel sided building and will be 21,875 square feet. All dry distillers grain will be stored in this building. 4. Grain Receiving Building: The building will be a steel sided building 165' long by 65' wide and approximately 40' tall. There will be two truck bays and one rail bay. 5. Two Concrete Corn Holding Structures: 100 ft tall, 250,000 bushel each, two 15,000 bushel per hour legs. 6. Fermentation Tanks: Three fermentation tanks and one beer well. 7. Main Process Building: Structural steel frame building housing tanks, pumps and heat exchangers as well as a control room and laboratory. Total square footage is approximately 25,000'. 8. Two Methanator Tanks. 9. Thermal Oxidizer Stack: Approximately 125 feet tall. The exact height will depend on air modeling and input from the DNR. 10. Distillation and Evaporation Center: 11. Stillage and Syrup Tanks. 3 12. Energy Center: Structural steel building totaling approximately 13,750 square feet housing both of the DDGS dryers and the Thermal Oxidizer. 13. Cooling Tower: Four cell induced draft cooling tower. Our Financing Plan Our letter of intent with Fagen, Inc. provides that the proposed Plant will cost no more than $56,619,000. We expect that expenses incidental to construction and start-up will cost approximately an additional $19,290,000. Total costs to build the Plant are expected to be approximately $75,909,000. We intend to raise a minimum of $29,667,000 in proceeds after deduction of selling commissions in this offering. We anticipate that our lender will require us to contribute 45% of the capital needed to fund the construction and operation of the Plant, or $34,159,050, before it will issue a loan to us. We expect to realize a savings by selling all or a portion of the offering ourselves. We anticipate using Tax Increment Financing (TIF) for approximately $3,925,000 of the needed equity, and we have raised $637,500 in seed capital that we anticipate will be counted as equity also by the lending institution. We also intend to seek a variety of state and federal grants. However, we are unsure at this time what dollar amounts of any such grants we may qualify for, if any. If we cannot obtain grants of any kind, we will seek the remaining balance of approximately $41,679,500 in debt. If all 3,800,000 shares of common stock are issued for $10.00 each, approximately $36,006,500 will be sought in term debt from banks. If less than the maximum number of common shares are sold, the amount of the debt will be raised proportionately to achieve the approximately $75,909,000 funding of equity and term debt for a 50 million gallon plant. We may also seek third party credit providers to provide subordinated debt sufficient to raise the necessary capital for the construction and initial operating and maintenance costs of the project. Although such subordinated debt holders would have rights inferior to those of the senior lenders in the event of liquidation, their rights would be superior to our stockholders, including investors in this offering. Because the exact amount of equity to be raised cannot be known at this time, we cannot yet know the amount of total debt required to finance our project. If we do not raise at least $29,667,000, after payment of selling commission, in this offering, the offering will fail. We presently have no contracts or commitments with any bank, lender or financial institution for this debt financing, but we will not close on this offering until we have received a letter of commitment to finance the construction of the Plant. In total, we intend to raise approximately $75,909,000 including equity, indebtedness, and grant and government financing proceeds. There are no assurances that we will be able to obtain the necessary debt financing or other financing referred to in this section. Suitability of Investors Investing in our common stock is highly speculative and very risky. Our common stock is suitable only as a long-term investment and only if you can sustain a complete loss of your investment in us. Our common stock is suitable only for persons of adequate financial means. We intend to attempt to establish a public market for the common stock once the offering has been completed. However, no assurance can be given that a public market will be established at this time. The board of directors reserves the right to reject any subscription for any reason, including if the board determines that the securities are not a suitable investment for a particular investor. Subscription Procedures To invest, you must complete the Subscription Agreement included as Exhibit 99.1 to this prospectus. You must also provide a check payable to "U.S. Bank, Escrow Agent for "GPRE, INC." as Escrow Agent for Green Plains Renewable Energy, Inc., for either the total amount, or an amount representing 20% of the amount due for the securities for which subscription is sought in which case you will also need to deliver an executed promissory note for the remainder of the amount due. In the Subscription Agreement, you will make representations to us 4 concerning, among other things, that you have received and had the opportunity to read this prospectus and any supplements. The Subscription Agreement also requires information about the nature of the ownership of the common stock, state of residence, and taxpayer identification or social security number. Our board of directors reserves the right to reject any subscription. If we reject a subscription, we will return the subscription funds and signature page of the note executed by the subscriber, if any. We do not intend to consider any Subscription Agreements for acceptance or rejection until after the minimum amount of $29,667,000 in proceeds, after deduction of offering commissions, has been deposited into escrow. Therefore, your investment may not be accepted or returned to you until after November 29, 2005 Escrow Procedures Proceeds from subscriptions for the securities will be deposited in an interest-bearing escrow account that we have established with U.S. Bank, as Escrow Agent under a written escrow agreement. We will not close on the offering until the specific conditions to closing the offering are satisfied. The closing of the offering is subject to certain conditions and we will return your investment with nominal interest within 30 days under the following scenarios: o If we do not receive the minimum proceeds within 180 days from the date of this prospectus, unless extended by us for up to an additional 90 days, but not past November 29, 2005; or o Even if we raise the $29,667,000 minimum, but as of 180 days from the date of this prospectus, unless extended by us for up to an additional 90 days, but not past November 29, 2005, we do not have binding written agreements with a lender or lenders for $41,679,500 in term debt or such amount as the board of directors deems sufficient to complete construction and start-up of the Plant. If we close on the offering, we will deliver certificate representing ownership of the common stock within 30 days of closing. Funds in the escrow account cannot be accessed. We will invest the escrow funds in short-term certificates of deposit issued by a bank, money market funds, or other financial vehicles including those available through the escrow agent. 5 RISK FACTORS The purchase of our common stock 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 securities 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 securities. Investors should understand that there is a possibility that they could loose their entire investment in us. Risks Related to the Offering We are not experienced 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 the offering. This offering is made on a "best efforts" basis. We have no underwriter or placement agent for the offering, and there can be no assurance that the offering will be successful. We plan to offer the securities directly to investors. However, broker/dealers may participate in the offering. If a broker/dealer chooses to participate, a seven percent (7%) commission will be paid to any broker/dealer for any Shares sold by said broker/dealer. Our directors have significant responsibilities in their primary occupations in addition to trying to raise capital. Some of these individuals have no experience in raising capital for such projects and have never been involved in a public offering of securities. There can be no assurance that our directors will be successful in seeking investors for the offering. We may not be able to sell the minimum amount of common stock required to close on this offering. Among other things, at least $29,667,000 must be received into escrow, after deduction of selling commissions, and debt funding arrangements must be in place before we can close and utilize the offering proceeds. If we are not able to raise the $29,667,000 in offering proceeds, the offering will fail. Additionally, investors should not assume that the $29,667,000 minimum will be sold only to unaffiliated third party investors. Moreover, we plan to offer the common stock for sale in only a limited number of states which may further increase the risk that the offering will fail. The sale of the specified minimum is not designed to indicate that an investor's investment decision is shared by other unaffiliated investors. Common stock may be purchased by directors, officers and other affiliates of the Company. Investors should not expect that the sale of common stock to reach the specified minimum, or in excess of that minimum, indicates that such sales have been made to investors who have no financial or other interest in the offering, or who otherwise are exercising independent judgment. The sale of the specified minimum, while necessary to the business operations of the Company, is not designed as a protection to investors, to indicate that their investment decision is shared by other unaffiliated investors. Each investor must make his own investment decision as to the merits of this offering. Risks Related to the Common Stock We plan to construct the Plant by means of substantial leverage of equity, resulting in substantial debt service requirements that could reduce the value of your investment. Upon completion of the Plant, we anticipate that our total term debt obligations will be approximately $36,006,500 assuming that all 3,800,000 common shares are issued at $10.00 per share. As a result, our capital structure will be highly leveraged. If we raise only the minimum $29,667,000 in proceeds from 6 the sale of common stock, this would increase our anticipated term debt obligations to up to $41,679,500. Our debt load and service requirements could have important consequences which could reduce the value of your investment, including: o Limiting our ability to borrow additional amounts for operating capital and other purposes or creating a situation in which such ability to borrow may be available on terms that are not favorable to us; o Reducing funds available for operations and distributions because a substantial portion of our cash flow will be used to pay interest and principal on our debt; o Making us vulnerable to increases in prevailing interest rates; o Placing us at a competitive disadvantage because we may be substantially more leveraged than some of our competitors; o Subjecting all, or substantially all of our assets to liens, which means that there will be virtually no assets left for stockholders in the event of a liquidation; and, o Limiting our ability to adjust to changing market conditions, which could increase our vulnerability to a downturn in our business or general economic conditions. In the event that we are unable to pay our debt service obligations, we could be forced to: (a) reduce or eliminate dividends to stockholders, if they were to commence or (b) reduce or eliminated needed capital expenditures. It is possible that we could be forced to sell assets, seek to obtain additional equity capital or refinance or restructure all or a portion of its debt. In the event that we are unable to refinance our indebtedness or raise funds through asset sales, sales of equity or otherwise, our business would be adversely affected and we may be forced to liquidate, and you could lose your entire investment. There is currently no established public trading market for our common stock and your investment may be illiquid for an indefinite amount of time. There can be no assurance that an active, public trading market will ever develop even if we are successful with this offering. There can be no assurance that our stock will be accepted for listing or trading any exchange or NASDAQ market. Lenders may require us to abide by restrictive loan covenants that may hinder our ability to operate and reduce our profitability. We anticipate that the loan agreements governing our secured debt financing will contain a number of restrictive affirmative and negative covenants. These covenants may limit our ability to, among other things: o Incur additional indebtedness; o Make capital expenditures in excess of prescribed thresholds; o Pay dividends to stockholders; o Make various investments; 7 o Create liens on our assets; o Utilize the proceeds of asset sales; or, o Merge or consolidate or dispose of all or substantially all of our assets. We also will likely be required to maintain specified financial ratios, including minimum cash flow coverage, minimum working capital and minimum net worth. We also will likely be required to utilize a portion of any excess cash flow generated by operations to prepay our term debt. A breach of any of these covenants or requirements could result in a default under our debt agreements. If we default, and if such default is not cured or waived, a lender could, among other remedies, accelerate our debt and declare that such debt is immediately due and payable. If this occurs, we may not be able to repay such debt or borrow sufficient funds to refinance. Even if new financing is available, it may not be on terms that are acceptable. Such an occurrence could cause us to cease building the Plant, or if the Plant is constructed, such an occurrence could cause us to cease operations. No assurance can be given that our future operating results will be sufficient to achieve compliance with such covenants and requirements, or in the event of a default, to remedy such default. The common stock will be subordinate to our debts and other liabilities, subjection your investment to greater risk of loss if we are forced to liquidate our assts. The common stock is subordinate in right of payment to all our current and future debt. In the event of our insolvency, liquidation, dissolution or other winding up of our affairs, all of our debts (including winding-up expenses) must be paid in full before any payment is made to the holders of the common stock. In the event of our bankruptcy, liquidation or reorganization, all common stock will be paid with all our other equity holders. There is no assurance that there would be any remaining funds after the payment of all our debts for any distribution to the holders of the common stock. The offering price was arbitrarily not determined based on customary valuation methods. The offering price for the securities was determined arbitrarily by our board of directors, without any consultation with third parties. There is no underwriter for the offering or for establishing an offering price. The offering price of the securities is not, therefore, based on customary valuation or pricing techniques for new issuances. The common stock will be diluted in value and will be subject to further dilution in value. We have issued a total of 765,000 shares of common stock to our founders and to seed capital investors. Initially, 550,000 shares of common stock were sold to our two founding stockholders for an average price of $.181 per share. We then issued an additional 215,000 shares were sold to seed capital investors at a price of $2.50 per share. Securities are being offered to investors with this offering at significantly higher prices. The issuance of the founding and seed capital shares is dilutive to the common stock offered in this offering. In addition, if for any reason we are required in the future to raise additional equity capital, and if such equity capital is raised at a lesser price or on more favorable terms than those in this offering, investors in this offering will suffer further dilution of their common stock. There is no assurance that the common stock will not be diluted in the future. Risks Related to the Company We have no operating history and our management has no material experience in the ethanol industry. 8 We were recently formed and have no history of operations. Our proposed operations are subject to all the risks inherent in the establishment of a new business enterprise. We do not have material experience in the ethanol industry. There is no assurance that we will be successful in completing this offering, in securing additional debt financing, and/or in our efforts to build and operate the Plant. Even if we successfully meet all of these objectives and begin operations at the Plant, there is no assurance that we will be able to market the ethanol produced or operate the Plant profitably. We may not be able to manage our start-up period effectively. We anticipate a period of significant growth, involving the construction and start-up of operations of the Plant and the hiring of our employees. This period of growth and the start-up of the Plant are likely to be a substantial challenge to us. We have limited financial and human resources. We will need to implement operational, financial and management systems and to recruit, train, motivate and manage our employees. We operate in an area of low unemployment. Though we believe that we can manage start-up effectively and properly staff our operations, there is no assurance that this will occur, and any failure by us to manage our start-up effectively could have a material adverse effect on us, our financial condition, cash flows, results of operations and our ability to execute our business plan. If our cash flow from operations is not sufficient to service our anticipated debts, then the business may fail and you may lose your entire investment. Our ability to repay our anticipated debt will depend on our financial and operating performance and on our ability to successfully implement our business strategy. We cannot assure you that we will be successful in implementing our strategy or in realizing our anticipated financial results. Our financial and operational performance depends on numerous factors including prevailing economic conditions and certain financial, business and other factors beyond our control. Our cash flows and capital resources may be insufficient to repay our anticipated debt obligations. If we cannot pay our debt service, we may be forced to reduce or delay capital expenditures, sell assets, restructure our indebtedness or seek additional capital. If we are unable to restructure our indebtedness or raise funds through sales of assets, equity or otherwise, our ability to operate could be harmed and the value of your common stock could decline. Any institution lending funds to us, whether through a leasing arrangement or direct loans, will take a security interest in our assets, including the property and the Plant. If we fail to make our debt financing payments, the lender will have the right to repossess the secured assets, including the property and the Plant, in addition to other remedies. Such action would end our ability to continue operations. If we fail to make our financing payments and we cease operations, your rights as a holder of common stock are inferior to the rights of our creditors. We may not have sufficient assets to make any payments to you after we pay our creditors. No Assurance of Equity Financing Based on our business plan and current construction cost estimates, we believe we will need to raise approximately $75,909,000 in total funding to construct the Plant and finance the start-up of our operations. We believe that we must raise approximately $29,667,000 in proceeds in this offering after deduction of selling commissions in order to obtain debt financing sufficient to complete our business plan. This offering is being made on a "best efforts" basis by us, and there is no assurance that the offering will be successful. If the offering is not successful, we will return the investors' investment from escrow with nominal interest, less a deduction for escrow agency fees. 9 A necessary part of our plan of operations is the receipt of significant debt funding, of which there can be no assurance. Assuming that the maximum offering is sold in this offering, we will seek to secure approximately $36,006,500 in senior long term debt from one or more commercial banks or other lenders to complete its financing. If less than the maximum offering is sold, we anticipate that the amount of the debt will be raised proportionately to achieve the approximately 45% equity, 55% debt ratio that is expected to be needed to borrow the term debt necessary to fund the project. Because the amount of equity raised is not known at this time, the amount and nature of total debt is also not known. We have no contracts or commitments with any bank, lender or financial institution for this debt financing, but we will not close on this offering until we execute binding financing agreements. We have initiated discussions with potential lenders regarding debt financing, but have not received any commitment for such financing. There is no assurance that such commitment will be received, or if it is received, that it will be on anticipated terms or terms that are otherwise acceptable to us. If debt financing on acceptable terms is unavailable for any reason, we will be forced to abandon our business plan and will return the investors' investments from escrow with nominal interest less deduction for escrow agency fees. Our plan of operations does not provide for any material diversification of income sources. It is anticipated that our business will be that of the production and marketing of ethanol and its by-products such as Distillers Dried Grains with Solubles ("DDGS") and carbon dioxide ("CO 2 "). 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 not able to market ethanol and its by-products. Our business success is dependent on unproven management. We are presently, and are likely for some time to continue to be, dependent upon our current management who were also the founding stockholders. We presently have no employees, and our founders and initial directors will therefore be instrumental to our success. We currently have eight directors. Our two founding stockholders and initial directors live in Nevada and Utah. Since inception, six other directors have been added to our board. Four of our other directors live in Iowa, a seventh lives in Nevada, and an eighth in Utah. These individuals are experienced in business generally, and some have experience in raising capital, in governing and operating companies, but none of them have any experience in organizing, building and operating an ethanol plant. It is possible that one or more of our founding stockholders and/or initial directors may later become unable to serve, and we may be unable to recruit and retain suitable replacements. Our dependence on our founding stockholders and initial directors may have a material adverse impact upon our operations, our cash flows and overall financial performance. Our board of directors will have the exclusive right to make all decisions with respect to the management and operation of our business and our affairs. Investors will have no right to participate in the decisions of our board of directors or in the management of the Plant. Investors will only be permitted to vote in a limited number of circumstances. Accordingly, no person should purchase securities unless such person is willing to entrust all aspects of our management to the board of directors. We are presently managed by our board of directors. However, none of the directors have expertise in the ethanol industry. In addition, all members of our board of directors are presently engaged in business and other activities outside of and in addition to our business. These other activities all impose substantial demand on the time and attention of such directors. We anticipate hiring a manager for the Plant with experience in the ethanol industry and a production plant similar to our proposed Plant. However, there is no assurance that we will be successful in attracting or retaining such an individual because of a limited number of individuals with expertise in the area and a competitive market with many new plants being constructed. 10 Furthermore, we may have difficulty in attracting other competent personnel to relocate to Shenandoah, Iowa, in the event that such personnel are not available locally. We might face the same problems elsewhere in Iowa, or in Nebraska, if we were to build the plant in another location. Our failure to attract and retain such individuals would likely have a material adverse effect on our operations, cash flows and financial performance. We will be dependent on Fagen, Inc. for expertise in the commencement of operation in the ethanol industry and any loss of this relationship could result in diminished returns or the loss of your investment. We are dependent on our relationship with Fagen, Inc., and its employees. Specifically, we are dependent upon the Fagen, Inc. employees Mr. Roland "Ron" Fagen and Mr. Wayne Mitchell. Mr. Fagen and Mr. Mitchell have considerable experience in the construction, start-up and operation of ethanol plants. Any loss of our relationship with Fagen, Inc., Mr. Fagen, or Mr. Mitchell, particularly during the construction and start-up period for the Plant, may have a material adverse impact on our operations, cash flows and financial performance. Furthermore, we do not have a binding contract with Fagen, Inc., but only a letter of intent. There are no assurances that Fagen, Inc. will enter into a binding contract. We have a history of losses and may not ever operate profitably. For the period from our formation on June 29, 2004 through November 30, 2004, we incurred an accumulated net loss of $12,495. We believe we will incur significant losses from this time forward until we are able to secure financing and successfully complete construction and commence operations of the Plant. There is no assurance that we will be successful in completing this offering, in securing additional financing and/or in our efforts to build and operate an ethanol plant. Even if we successfully meet all of these objectives and begin operations at the ethanol plant, there is no assurance that we will be able to operate profitably. Risks Related to Construction of the Plant We will depend on key suppliers, whose failure to perform could hinder our ability to operate profitably and decrease the value of your investment. We are highly dependent upon Fagen, Inc. and ICM, Inc. to design and build the Plant, but have no definitive binding agreement with either entity. We have entered into a non-binding letter of intent with Fagen, Inc. and ICM, Inc. for various design and construction services. Fagen, Inc. has indicated its intention to deliver to us a proposed Design-Build Contract, in which Fagen, Inc. will serve as our general contractor and will engage ICM, Inc. to provide design and engineering services. We anticipate that we will execute a definitive binding Design-Build Contract with Fagen, Inc. to construct the Plant. However, there is no assurance that such an agreement will be executed. If we were not to execute a definitive, binding Design-Build Contract with Fagen, Inc., or if Fagen, Inc. were to terminate its relationship with us after construction was initiated, there is no assurance that we would be able to obtain a replacement general contractor. Any such event would likely have a material adverse affect on our operations, cash flows and financial performance. We anticipate that the agreement with Fagen, Inc. will contain a number of provisions that are favorable to Fagen, Inc. and unfavorable to us. The agreement could also include a liquidated damages or consequential damages provision. This would benefit us, but it could result in an early completion bonus clause for Fagen, Inc. Although no such provisions have been discussed, if such a provision is ultimately agreed upon, our payment of an early completion bonus could substantially reduce our net cash flows and financial performance during the periods of the payment of such bonus. 11 We will depend on Fagen, Inc. for timely completion of our plant and training of personnel, but Fagen, Inc.'s involvement in other projects could delay the commencement of our operations and further delay our ability to commence operations. We believe Fagen, Inc. is negotiating with other parties to begin construction with other ethanol plants in 2005. If Fagen, Inc. has entered into other Design-Build contracts with liquidated damage or consequential damage clauses with other plants, there could be substantial risk to our project. For example, if Fagen, Inc. is under pressure to complete another project in order to avoid the operation of such a clause or is already operating under such a clause, Fagen, Inc. may prioritize the completion of these other plants ahead of our Plant. As a result, our ability to sell ethanol products would be delayed having a material adverse effect upon our operations, cash flows, and financial performance. We are also highly dependent upon Fagen, Inc.'s and ICM, Inc.'s experience and ability to train our personnel in operating the Plant. If the Plant is built and does not operate to the level anticipated by us in our business plan, we will rely on Fagen, Inc. and ICM, Inc. to adequately address such deficiency. There is no assurance that Fagen, Inc. and/or ICM, Inc. will be able to address such deficiency in an acceptable manner. Failure to do so could have a material adverse affect on our operations, cash flows and financial performance. Construction delays could result in a delay in our commencement of operations and generation of revenue, if any. We expect that it will be an estimated twelve to sixteen months after we close on this offering before we begin operation of the proposed Plant. Construction projects often involve delays in obtaining permits, construction delays due to weather conditions, or other events that delay the construction schedule. In addition, changes in interest rates or the credit environment or changes in political administrations at the federal, state or local level that result in policy change towards ethanol or this project, could cause construction and operation delays. If it takes longer to raise the financing, obtain necessary permits or construct the Plant than we anticipate, it would delay our ability to generate revenues and make it difficult for us to meet our debt service obligations. This could reduce the value of our common stock and could negatively effect our ability to execute our plan of operation. If there are defects in Plant construction it may negatively affect our ability to operate the Plant. There is no assurance that defects in materials and/or workmanship in the Plant will not occur. Under the terms of the anticipated Design-Build Contract, Fagen, Inc. would warrant that the material and equipment furnished to build the Plant would be new, of good quality, and free from material defects in material or workmanship at the time of delivery. Though the Design-Build Contract is anticipated to require Fagen, Inc. to correct all defects in material or workmanship for a period of one year after substantial completion of the Plant, material defects in material or workmanship may still occur. Such defects could cause us to delay the commencement of operations of the Plant, or, if such defects are discovered after operations have commenced, to halt or discontinue the Plant's operation. Any such event may have a material adverse effect on our operations, cash flows and financial performance. If the preliminary plant site identified in Shenandoah, Iowa is not viable, it could result in substantial delays and costs. We have preliminarily selected a site for construction of the Plant near or in Shenandoah, Iowa. However, we may locate the Plant elsewhere in Iowa or in Nebraska. Although, after choosing the final site, the site will be tested prior to commencing construction, there can be no assurance that we will not encounter hazardous conditions at the site. We are relying on Fagen, Inc. to determine the adequacy of the site for construction of the Plant. We may encounter hazardous conditions at the site that may delay the construction of the Plant. Fagen, Inc. is not responsible for any hazardous conditions 12 encountered at the site. Upon encountering a hazardous condition, Fagen, Inc. may suspend work in the affected area. If we receive notice of a hazardous condition, we may be required to correct the condition prior to continuing construction. The presence of a hazardous condition will likely delay construction of the Plant and may require significant expenditure of our resources to correct the condition. In addition, it is anticipated that Fagen, Inc. 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 hazardous conditions during construction, such event may have a material adverse effect on our operations, cash flows and financial performance. The site in Shenandoah, Iowa is also situated near the city's airport. Therefore, we have applied to the FAA (Federal Aviation Administration) to receive approval to build the plant in this location. The FAA may inform us that we cannot build the plant in such close proximity to the airport, due to the height of our tallest structure, which will be the grain lift between the two grain storage silos. This structure is anticipated to be 165'. As mentioned, we have submitted an application the FAA to obtain their approval to build the Plant at this location and an official from the FAA has verbally indicated that he believes the issue can be worked out, but no assurance can be given at this time that final approval will be received. Further, even if approval were given, it might be a conditional approval and we would be required to re-engineer the Plant and perhaps lower the silos and/or grain lift. Or, the FAA may ask us to paint these structures and/or add lighting to them, or both. Doing these things could decrease the overall efficiency of the plant and increase our construction and operating costs, which could negatively affect our cash flows and financial performance. If approval from the FAA is not received, we would have to change the plant site, which could cost the Company a significant amount of time and money, and no assurance can be given at this time that we would be able to find another site that would be suitable. We have also contracted with Mr. Marty Ruikka of PRX - The ProExporters Network to conduct a feasibility study of the proposed Plant site in Shenandoah, as well as two other possible sites. Mr. Ruikka's study will be required by the lending institutions before we will be able to borrow the needed debt-financing. Mr. Ruikka's study will look at things like the availability of corn in the area and its price, the availability of water, rail, electricity, natural gas, etc. If Mr. Ruikka's study were to find the proposed site Shenandoah to be deficient in any way, the lending institutions would, in all likelihood, not be willing to loan us the money needed to complete the Plant at Shenandoah. We would then be forced to locate the Plant at another more suitable location, which could cost the Company a considerable amount of time and money. No assurance can be given at this time that Mr. Ruikka's study will not discover deficiencies at the proposed site in Shenandoah, or at the other sites he is considering in his study, or that we would be able to locate another site at which to build the Plant, if that were to happen, and we were not able to build the Plant at any of the proposed locations. Failure to meet the requirements of Mr. Ruikka's feasibility study would have a material adverse effect on us, our cash flows and financial performance, and could require us to abandon the project. Any delay or unanticipated cost in providing rail service infrastructure to the Plant could significantly impede our ability to successfully operate the Plan. Rail service is available in Shenandoah, Iowa. The site lies adjacent to the lines of the Burlington Northern Railroad (BNSF). However, the spur on which the plant will be located needs to be upgraded to meet HAZMAT (Hazardous Materials) standards. Approximately 18 miles of the spur will need to be upgraded. The cost to upgrade the rail will be approximately 3.5 million dollars. After discussions, it is anticipated that GPRE and three other companies that currently use the rail in the area of Shenandoah will put up sufficient funds to pay for those upgrades. BNSF has agreed, verbally in meetings we have held with BNSF , to upgrade the rail within a year after receiving the funds from the users of the rail, and then to pay the users of the rail back for supplying those funds over a five to eight year period based on rail usage and railcar rebates. However, no assurance can be given at this time that the rail extension will be funded by other users, that BNSF will perform the needed upgrades in a timely fashion, or that we will be able to negotiate a final contract with BNSF to upgrade the rail. If we were not able to come to an agreement with BNSF to upgrade the rail, or they could not upgrade the track in a timely fashion, we would have to move the Plant to another location. If we 13 could come to an agreement with BNSF to upgrade the rail, but a delay were to occur in the upgrading of the spur, it would hinder our ability to market our ethanol and distillers grains and could cost a significant amount of time and money. No matter where we decide to locate the Plant, we will need to establish a rail spur from the main line and lay more track for railcar storage at the Plant. In order to have rail service for the Plant, a rail siding to accommodate at least 35 rail cars of approximately 5,800 feet will need to be added to the site. The estimated cost of such rail siding is approximately $1,250,000 to $1,800,000. We will need to negotiate with the nearest railroad or with another third party to provide this rail at the Plant. There is no assurance that an acceptable agreement will be reached with a railroad or other third party to do this, or on acceptable terms. Failure to reach such an agreement would have a material adverse effect on us, our cash flows and financial performance, and could require us to abandon the project. Any significant delay in the anticipated Plant construction period could significantly delay our ability to successfully operate the Plant. The construction of the Plant is a major project. There are general risks and potential delays associated with such a project, including, but not limited to, fire, weather, permitting issues, and delays in the provision of materials or labor to the construction site. Any significant delay in the planned completion date may have a material adverse effect on our operations, cash flows and financial performance. Any material various of the actual cost verses our cost estimates relating to the construction and operation of the Plant could materially and adversely affect our ability to operation the Plant profitably. It is anticipated that Fagen, Inc. will construct the Plant for a fixed contract price, based on the plans and specifications in the anticipated Design-Build Contract. We have based our capital needs on a design for the Plant that will cost $56.62 million and additional start-up and development costs of $19.29 million for a total of $75.9 million. 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. Any significant increase in the estimated construction cost of the Plant may have a material adverse effect on our operations, cash flows and financial performance. We will acquire insurance that we believe to be adequate to prevent loss from foreseeable risks. However, events occur for which no insurance is available or for which insurance is not available on terms that are acceptable to us. Loss from such an event, such as, but not limited to, earthquake, tornados, war, riot, terrorism or other risks, may not be insured and such a loss may have a material adverse effect on our operations, cash flows and financial performance. Risks Related to Ethanol Production Our ability to operate at a profit is largely dependent on grain prices and ethanol and distillers dried grains prices. Our results of operations and financial condition will be significantly affected by the cost and supply of grain and by the selling price for ethanol and DDGS. Price and supply are subject to and determined by market forces over which we have no control. We will be dependent on the availability and price of corn. Although the areas surrounding each of the proposed Plant sites produce a significant amount of corn and we do not anticipate problems sourcing corn, there is no assurance that a shortage will not develop, particularly if there were an extended drought or other production problem. In addition, our financial projections assume that we can purchase grain for approximately $2.35 per bushel. The current average price for corn in the area of the proposed Plant 14 site in Shenandoah is much less, approximately $1.70 per bushel. Historically, the average price for corn has been approximately $2.22 per bushel, in Iowa, and approximately .15 to 18 cents higher in Nebraska. However, there is no assurance that we will be able to purchase corn for any of these prices. Corn prices are primarily dependent on world feedstuffs supply and demand and on U.S. and global corn crop production. These factors can be volatile because of weather, stocks prices, export prices and the government's agricultural policy. The price of corn has fluctuated significantly in the past and may fluctuate significantly in the future. We anticipate purchasing our corn from farmers in the area surrounding the Plant and in the cash market and hedging corn through futures contracts to reduce short-term exposure to price fluctuations. We intend to contract with third parties to manage our hedging activities and corn purchasing. However, we have no definitive agreements with any third party to do so at this time, nor do we have any contracts with any corn producers to provide corn to the Plant. We may also enter into supply agreements with local elevators for the origination, supply and delivery of corn to the Plant. There is no assurance that such agreements will be available or be on acceptable terms. Our purchasing and hedging activities may or may not lower our price of corn, and in a period of declining corn prices, these advance purchase and hedging strategies may result in our paying a higher price for corn than our competitors. Further, hedging for protection against the adverse changes in the price of corn may be unsuccessful, and could result in substantial losses to us. Generally, higher corn prices will produce lower profit margins. This is especially true if market conditions do not allow us to pass through increased corn costs to our customers. There is no assurance that we will be able to pass through higher corn prices. If a period of high corn prices were to be sustained for some time, such pricing may have a material adverse effect on our operations, cash flows and financial performance. Our revenues will be dependent on the market prices for ethanol and DDGS. 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, 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 and adversely affect our operating results Increased ethanol productions may negatively affect ethanol prices and materially reduce our ability to operation successfully. We believe that ethanol production is expanding rapidly at this time. There are a number of new plants under construction or planned for construction, both inside and outside the States of Iowa and Nebraska. We further expect existing ethanol plants to expand by increasing production. We cannot provide any assurance or guarantee that there will be any material or significant increases in the demand for ethanol. Increased production of ethanol may lead to lower prices. The increased production of ethanol could have other adverse effects as well. For example, the increased production could lead to increased supplies of co-products from the production of ethanol, such as DDGS. Those increased supplies could lead to lower prices for those co-products. Also, the increased production of ethanol could result in increased demand for corn. This could result in higher prices for corn and corn production creating lower profits. There can be no assurance as to the price of ethanol or DDGS in the future. Any material adverse change affecting the price of ethanol and/or DDGS may have a material adverse effect on our operations, cash flows and financial performance. We expect to compete with existing and future ethanol plants and oil companies, which may result in diminished returns on your investment. We will operate in a very competitive environment. We will compete with large, multi-product companies that have much greater resources than we anticipate having, and plants with a capacity greater than, equal to or less 15 than our Plant. We will face competition for capital, labor, management, corn and other resources. Many of our competitors have greater resources than we currently have or will have in the future. We anticipate that as additional ethanol plants are constructed and brought on line, the supply of ethanol will increase. The absence of increased demand may result in prices for ethanol to decrease. There is no assurance that we will be able to compete successfully or that such competition will not have a material adverse effect on our operations, cash flows and financial performance. We will also compete with producers of other gasoline additives having similar octane and oxygenate values as ethanol. An example of such other additives is MTBE, a petrochemical derived from methanol. MTBE costs less to produce than ethanol. Many major oil companies produce MTBE and because it is petroleum-based, its use is strongly supported by major oil companies. Alternative fuels, gasoline oxygenates and alternative ethanol production methods are also continually under development. The major oil companies have significantly greater resources than we have to market MTBE, to develop alternative products, and to influence legislation and public perception of MTBE and ethanol. Despite this fact, the use of MTBE may become legally restricted as a pollutant in several, and possibly, most, if not all states. California has already banned the use of MTBE as have New York and Connecticut. However, California has asked for a waiver of federal standards requiring oxygenates in reformulated gasoline in the past. This means that rather than using ethanol as an alternative oxygenate to MTBE, California sought to be released from federal requirements to use any oxygenates at all. If such requests were ever granted, whether limited to or expanded beyond California, the demand for ethanol would not increase and could diminish. Furthermore, the United States petroleum industry is pursuing a repeal of all federal oxygenated fuel requirements. These companies also have sufficient resources to begin production of ethanol should they choose to do so. Competition from these companies may have a material adverse effect on our operations, cash flows and financial performance. We are dependent on others third-party brokers or other to sell our product which may result in diminished returns. We currently have no sales force of our own to market ethanol and DDGS and do not intend to establish such a sales force. We intend to sell all of our ethanol to a third-party broker pursuant to an output contract and intend to contract with a third-party broker to market and sell our DDGS feed products. As a result, we will be dependent on the ethanol broker and the feed broker. There is no assurance that we will be able to enter into contracts with any ethanol broker or feed product broker on acceptable terms. If the ethanol broker breaches the contract or does not have the ability (for financial or other reasons) to purchase all of the ethanol we produce, we will not have any readily available means to sell our ethanol. 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 DDGS feed products may have a material adverse effect on our operations, cash flows and financial performance. Engaging in hedging activities to minimize the potential volatility of corn prices could result in substantial costs and expenses. In an attempt to minimize the effects of the volatility of corn costs on operating profits, we will likely take hedging positions in corn futures markets and in the natural gas 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 such hedging activities is dependent upon, among other things, the cost of corn and natural gas and our ability to sell sufficient amounts of ethanol and DDGS. Although we will attempt to link hedging activities to sales plans and pricing activities, such hedging activities can themselves result in costs because price movements in corn contracts and natural gas are highly volatile and are influenced by many factors that are beyond our control. We may incur such costs and they may be significant. 16 Changes in production technology could require us to commit resources to updating the plant or could otherwise hinder our ability to compete in the ethanol industry or to 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 less desirable or obsolete. The Plant is a single-purpose entity and has no use other than the production of ethanol and associated products. Any such event may have a material adverse effect on our operations, cash flows and financial performance. Our ability to successfully operate is dependent on availability of energy and water at anticipated prices. The Plant will require a significant and uninterrupted supply of electricity, natural gas and water to operate. We plan to enter into agreements with local gas, electric, and water utilities to provide our needed energy and water. There can be no assurance that those utilities will be able to reliably supply the gas, electricity, and water that we need. If there is an interruption in the supply of energy or water for any reason, such as supply, delivery or mechanical problems, we may be required to halt production. If production is halted for an extended period of time, it may have a material adverse effect on our operations, cash flows and financial performance. If we were to build the plant in Shenandoah, Iowa, a new gas pipeline of approximately 9 miles will have to be run to the site. We have been in discussions with Mid American Energy to build this line for us. As per our discussions, the estimated cost to build the gas line will be approximately $3,510,000. We would be required to put up approximately $1.5 million of that cost. However, no assurance can be given at this time that we will be able to build the pipeline for this price and even if we could, when the gas pipeline were to be completed, at the present time, we have no contracts, commitments or understandings with any natural gas supplier to supply gas to the plant. We have entered into an agreement with U.S. Energy Services, Inc. of Wayzata, Minnesota to negotiate and purchase natural gas for the plant from third party providers of natural gas for up to six months after the Plant becomes operational. However, there can be no assurance given at this time that we or U.S. Energy Services will be able to obtain a sufficient supply of natural gas or that we will be able to procure alternative sources of natural gas on acceptable terms, even with the assistance of U.S. Energy Services. In addition, natural gas prices have historically fluctuated. Presently, prices are much higher than the historical average price we have assumed for this project. Sustained increases in the price of natural gas would increase our cost of production and may have a material adverse effect on our operations, cash flows and financial performance. We will also need to purchase significant amounts of electricity to operate the proposed Plant. We have negotiated an agreement with Mid American Energy to supply electricity to the Plant, if we were to build it in Shenandoah. We believe the prices we have negotiated with Mid American will be beneficial to the Company. However, no assurance can be given that we will be able to negotiate such favorable rates after the five year period is over. Electricity prices have historically fluctuated significantly. Sustained increases in the price of electricity would increase our cost of production. As a result, these issues may have a material adverse effect on our operations, cash flows and financial performance. Sufficient availability and quality of water are important requirements to produce ethanol. We anticipate that our water requirements to be approximately 400 to 600 gallons per minute, depending on the quality of the water. The town of Shenandoah has sufficient capacities of water to meet our needs and we have negotiated a contract with the city to supply water to the Plant at a price that we believe will be favorable to our operations. We expect our alternate plant sites to provide similar levels of water service. However, no assurance can be given that a prolonged drought could not diminish the water supplies in the areas of the proposed Plant, especially if we were to build the Plant in Shenandoah, or that we would continue to have sufficient water supplies in the future. Shenandoah is in the southwestern part of the State of Iowa and has a history of water shortages. Historically, this area of the State has 17 experienced periods of drought. We are exploring the possibility of acquiring the rights two one or two wells in the area of the proposed site in Shenandoah to use as back up for the Plant. However, no assurance can be given at this time that we will be able to acquire these rights. The inability to obtain the rights to these wells, and the possibility of drought, may have a material adverse effect on our operations, cash flows and financial performance and could even cause us to cease production for periods of time. Our ability to successfully operate is dependent on availability and cost of labor. We presently have no permanent employees. 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, accounting, human resources 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, such event may have a material adverse effect on our operations, cash flows and financial performance. Our ability to successfully operate is dependent on availability and cost of insurance. We must obtain liability, property and casualty and other policies of insurance prior to the commencement of construction of the Plant. Those policies must be maintained during operations. There is no assurance that we will be able to obtain such insurance on acceptable terms or at all. Any failure by us to secure and maintain adequate insurance, with adequate policy limits and/or self-retention limits, may have a material adverse effect on our operations, cash flows and financial performance. Risks Related to Regulation and Governmental Action The loss of favorable tax benefits for ethanol production could hinder our ability to successfully operate. Congress currently provides federal tax incentives for oxygenated fuel producers and marketers. Ethanol blended with gasoline is one of the oxygenated fuels that qualify for federal tax incentives. These tax incentives allow a lower federal excise tax rate for gasoline blended with at least 10%, 7.7%, or 5.7% ethanol. Additionally, income tax credits are available for blenders of ethanol mixtures and small ethanol producers. Gasoline marketers pay a reduced tax on gasoline sold that contains ethanol. The current credit for gasoline blended with 10% ethanol is 5.4(cent) per gallon. The subsidy will gradually drop to 5.1(cent) per gallon by 2005. Currently, a gasoline marketer that sells gas without ethanol must pay a federal tax of 18.4(cent) per gallon compared to 13(cent) per gallon for gas with 10% ethanol. The tax on gasoline blended with 10% ethanol will gradually increase to 13.3(cent) per gallon by 2005. Smaller credits are available for gasoline blended with 7.7 percent and 5.7 percent ethanol. The ethanol industry and our business are dependent upon the continuation of the federal ethanol credit. This credit has supported a market for ethanol that may disappear without the credit. The federal tax incentives were scheduled to expire on September 30, 2007, but have recently been replaced by legislation which has extended those incentives to the year 2010. (See Risks Related To Regulation And Governmental Action--Other Legislative Or Regulatory Developments, below). These tax incentives to the ethanol industry may not continue beyond their scheduled expiration date or, if they continue, the incentives may not be at the same level. The revocation or amendment of any one or more of those laws, regulations or programs could adversely affect the future use of ethanol in a material way. We cannot assure you that any of those laws, regulations or programs will continue. The elimination or reduction of federal tax incentives to the ethanol industry would have a material adverse impact on our business by making it more costly or difficult for us to produce and sell ethanol. If the federal ethanol tax incentives are eliminated or sharply curtailed, we believe that a decreased demand for ethanol will result. 18 Lack of state or local tax incentive programs may hinder our ability to successfully compete. The average price of corn in Iowa has historically been less than in any other part of the country, which is why we are focusing so intently on Iowa for site location. However, unlike some neighboring states, such as Minnesota, South Dakota, Nebraska, and Wisconsin in which some of our competitors are doing business, the State of Iowa does not have a state ethanol producer incentive payment program. The lack of such an incentive may place us at a competitive disadvantage for capital and other resources when compared to competing ethanol producers in other states. A change in environmental regulations or violations thereof could impede our ability to successfully operate the Plant. 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 environmental permits that we will require. Assuming we build the Plant in Iowa, the Iowa Department of Natural Resources ("IDNR") may also require us to conduct an environmental assessment prior to considering any permits. Ethanol production involves the emission of various airborne pollutants, including particulate (PM10), carbon monoxide (CO), oxides of nitrogen (N0x) and volatile organic compounds. As a result, we will need to obtain an air quality permit from the IDNR. We intend to apply for this permit during the spring of 2005. We also intend to apply for and receive from the IDNR a storm-water discharge permit, a water withdrawal permit, public water supply permit, and a water discharge permit. We anticipate applying for these permits before construction commences. We do not anticipate a problem receiving all 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 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. Any such event would likely have a material adverse impact on our operations, cash flows and financial performance. Even if we receive all required permits from the IDNR, we may also be subject to regulations on emissions from the Environmental Protection Agency ("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. 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 have the proper permits at the present time, we may be required to invest or spend considerable resources to comply with future environmental regulations. If any of these events were to occur, they may have a material adverse impact on our operations, cash flows and financial performance. Other legislative or regulatory developments may impede our ability to successfully operate. Federal government laws that require the use of oxygenated gasoline encourage ethanol production and use. Ethanol contains 35% oxygen by weight. When combined with gasoline, ethanol acts as an oxygenate. As a result, the gasoline burns cleaner, and releases less carbon monoxide and other exhaust emissions into the atmosphere. The federal government encourages the use of oxygenated gasoline as a measure to protect the environment. Oxygenated gasoline is commonly referred to as reformulated gasoline or "RFG." Several United States Senators have introduced legislation that would establish the "Renewable Fuels Standard" which would revise the current method in which ethanol use is required. The proposed legislation would determine the specific volume requirements of ethanol use in RFG on a nationwide basis. The proposed volumes would begin in the year 2004 at 2.3 billion gallons (which has already been surpassed) and grow at a rate of approximately 300 million gallons per year to a volume of 5 billion gallons in 2012. The production capacity of currently operating ethanol plants exceeds 2.3 billion gallons by approximately 1.3 19 billion gallons. Additional plants are under construction that will bring total domestic ethanol production capacity to approximately 5.60 billion gallons by 2006. Accordingly, fuel ethanol production may exceed required volumes under the proposed legislation in its early stages. If this legislation or similar legislation is adopted, it may have an adverse impact on our early operations, cash flows and financial performance. The government's regulation of the environment changes constantly. 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. Our inability to obtain required regulatory permits and/or approvals will impede our ability and may prohibit completed our ability to successfully operate the Plant. 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. As mentioned, we will also need to acquire a permit from the FAA to build the Plant in such close proximity to the airport in Shenandoah, Iowa. In addition, it is likely that our senior debt financing will be contingent on our ability to obtain the various required environmental permits. The Iowa Department of Natural Resources, "IDNR", may also require us to conduct an environmental assessment prior to considering granting any of those permits. Ethanol production involves the emission of various airborne pollutants, including particulate (PM1O), carbon monoxide (CO), oxides of nitrogen (NOx) and volatile organic compounds. Regardless of the fuel source, we will need to obtain an air quality permit from the IDNR. We also intend to apply for and receive from the IDNR a storm-water discharge permit, a water withdrawal permit, public water supply permit, and a water discharge permit. We have not applied for any of these permits, but anticipate doing so before we begin construction. We do not anticipate a problem receiving all 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 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 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 and the EPA could also modify the requirements for obtaining a permit. Any such event would likely have a material adverse impact on our operations, cash flows and financial performance. Even if we receive all required permits from the IDNR, we may also be subject to regulations on emissions from the United States Environmental Protection Agency, "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. 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 have the proper permits at the present time, we may be required to invest or spend considerable resources to comply with future environmental regulations or new or modified interpretations of those regulations, to the detriment of our financial performance. We may engage ICM, Inc.'s environmental consulting division to coordinate, advise and assist us with obtaining certain environmental, occupational health, and safety permits, plans, submissions, and programs. Or we may engage another third party to assist us with these issues. 20 Risks Related to Conflicts of Interest We presently have no procedure to identify and address potential conflicts of interest, which could result in a failure to identify and obviate such conflicts and could reduce our ability to successfully operate the Plant. Significant conflicts of interest may exist in our organizational structure and operations. For example, Fagen, Inc. or other parties with whom we contract may purchase blocks of our securities in this offering and enjoy the rights of other security holders, including voting for management. Though we will attempt to address actual or potential material conflicts of interest as they arise or become known, we have not established any formal procedures to address or resolve conflicts of interest. There is no assurance that any conflict of interest will not have adverse consequences to our operations, cash flows and financial performance. We have conflicts of interest with our directors and founders, which could result in loss of capital and reduced financial performance. Our directors also have management responsibilities and may have conflicts of interest with respect to other entities with which we do or may do business with in the future. All of our directors have conflicts of interests in allocating management time between us and other responsibilities. Our directors and officers have and may purchase Company securities in this offering or otherwise. Any purchases of Company securities by the directors and officers should not be relied upon as an indication of the merits of this offering. Mr. Gary Thien, one of our directors and a stockholder, along with his wife, who is also stockholder, own a farm southeast of Essex, Iowa. Grain from this farm may or may not be sold to Green Plains Renewable Energy, Inc. This could create a conflict of interest in that Mr. Thien, as a director of the Company, may be able to influence the prices paid for any grain sold to the Company from this farm. Mr. Thien is the owner and President of Thien Farm Management, Inc. Thien Farm Management currently manages sixteen farms in Page, Fremont, Mills, Montgomery, Cass, and Taylor counties in Iowa, Cass County in Nebraska, and Atchison County in Missouri. Corn production from these farms may or may not be sold to GPRE at prices favorable or not favorable to Mr. Thien and his operations. Mr. Thien is also the agent for Bunge North America. Bunge is a significant purchaser of corn originating in southwest Iowa. This may create another conflict of interest for Mr. Thien, in that both Bunge and GPRE will be attempting to purchase corn from the surrounding area of the plant, if we were to build the Plant in Shenandoah, Iowa. David Hart, another of our directors, is both a corn producer and a feeder of livestock in the area surrounding the proposed site in Shenandoah. Conflicts of interest could arise for Mr. Hart that would be similar to those confronting Mr. Thien, as well as an added conflict as a feeder of livestock. As such, Mr. Hart may or may not purchase distillers grains from the Plant and in his position as a director he could exert influence over the price of distillers grains purchased for his operations. Brent Lorimor, one of our directors, is both a corn producer and a feeder of livestock in the area surrounding the proposed site in Shenandoah. Conflicts of interest could arise for Mr. Lorimor that would be similar to those confronting Mr. Thien, as well as the added conflict as a feeder of livestock faced by Mr. Hart described above. As such, Mr. Lorimor may or may not purchase distillers grains from the Plant and in his position as a director he could exert influence over the price of distillers grains purchased for his operations. 21 Robert Vavra, one of our directors, is President of Bank Iowa. Bank Iowa may loan money to individuals investing in this offering, specifically for that purpose. This could create a conflict of interest for Mr. Vavra. In the future, Green Plains Renewable Energy, Inc. may attempt to borrow money from Bank Iowa for various reasons. This could create another conflict for Mr. Vavra. The conflicts described above do exist and will, in all likelihood, continue to exist in the future. We have conflicts of interest with Fagen, Inc. which could result in loss of capital and reduced financial performance. As discussed above, we expect that our directors will be advised by one or more employees or associates of Fagen, Inc. Fagen, Inc. is expected to continue to be involved in substantially all material aspects of our formation, capital formation, and operations. Consequently, the terms and conditions of our agreements and understandings with Fagen, Inc. (and, through Fagen, Inc., with ICM, Inc.) have not been negotiated at arm's length. Therefore, there is no assurance that our arrangements with such parties are as favorable to us as could have been if obtained from unaffiliated third parties. In addition, because of the extensive roles that Fagen, Inc. and ICM, Inc. are expected to have in the construction and operation of the Plant, it may be difficult or impossible for us to enforce claims that we may have against Fagen, Inc. and/or ICM, Inc. If this were to occur, it may have a material adverse impact on our operations, cash flows and financial performance. Fagen, Inc. and its affiliates may also have conflicts of interest because employees or agents of Fagen, Inc. are involved as owners, creditors and in other capacities with other ethanol plants in the United States. We cannot require Fagen, Inc. to devote its full time or attention to our activities. As a result, Fagen, Inc. may have or come to have a conflict of interest in allocating personnel, materials and other resources to our Plant. Unidentified Risks The foregoing discussion is not a complete list or explanation of the risks involved with an investment in this business. Additional risks will likely be experienced that are not presently foreseen by us. Investors are not to construe this prospectus as constituting legal or tax advice. Before making any decision to invest in us, investors should read this entire prospectus, including all of its exhibits, and consult with their own investment, legal, tax and other professional advisors. An investor should be aware that we will assert that the investor consented to the risks and the conflicts of interest described or inherent in this prospectus if the investor brings a claim against us or any of our directors, officers, managers, employee, advisors, agents or representatives. FORWARD-LOOKING STATEMENTS Throughout this prospectus, we make "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include the words "may," "will," "estimate," "continue," "believe," "expect" or "anticipate" and other similar words. The forward-looking statements contained in this prospectus are generally located in the material set forth under the headings "Summary of the Offering," "Risk Factors," "Estimated Use of Proceeds," and "The Project," but may be found in other locations as well. These forward-looking statements generally relate to our plans and objectives for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that our plans and objectives reflected in or suggested by such forward-looking statements are reasonable, we may not achieve such plans or objectives. Actual results may differ from projected results due, but not limited, to unforeseen developments, including developments relating to the following: 22 o The availability and adequacy of our cash flow to meet its requirements, including payment of loans; o Economic, competitive, demographic, business and other conditions in our local and regional markets; o Changes or developments in laws, regulations or taxes in the ethanol, agricultural or energy industries; o Actions taken or omitted to be taken by third parties including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities; o Competition in the ethanol industry; o The loss of any license or permit; o The loss of our Plant due to casualty, weather, mechanical failure or any extended or extraordinary maintenance or inspection that may be required; o Changes in our business strategy, capital improvements or development plans; o The availability of additional capital to support capital improvements and development; and, o Other factors discussed under "Risk Factors" or elsewhere in this prospectus. You should read this prospectus completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements specified in this prospectus have been compiled as of the date of this prospectus and should be evaluated with consideration of any changes occurring after the date of this prospectus. We will not update forward-looking statements even though our situation may change in the future. ESTIMATED USE OF PROCEEDS The gross proceeds from this offering will be $29,667,000 if the minimum amount of securities offered is sold and our directors, and $38,000,000 if the maximum number of securities are sold before deducting expenses. We estimated offering expenses to be approximately $80,000. We estimate the net proceeds of the offering to be $29,667,000 if the minimum offering is obtained and not lower than $35,340,000 if the maximum offering is obtained. The following table sets froth our estimate net offering proceeds from the sale of the minimum and the maximum amount of securities offered.

(1) We intend to offer these securities through our officers and directors. However, securities may be sold through broker-dealers who will receive a 7% commission in connection with sales. We do not know what percentage of sales will result for broker-dealer sales. Out estimated offering costs are $80,000. For purposes of this table we have assumed selling commissions and estimated offering expenses will not exceed 7% of the gross proceeds from the offering. 23 We intend to use the net proceeds of the offering to build the Plant and to start operating the Plant. We must supplement the proceeds of this offering with debt financing to meet our stated goals. We estimate total expenditures for the construction and start-up of the plant will be $75,909,000. See "Management's Discussion and Analysis of Financial Conditions and Results of Operations -Overview" for a detailed description of our estimated use of proceeds. We expect the total funding required for the Plant to be $75,909,000, which includes $56,619,000 to build the Plant and $19,290,000 for other project development costs including land, site development, utilities, start-up costs, capitalized fees and interest, inventories and working capital. If the Plant is constructed in Shenandoah, the city of Shenandoah has agreed to give us approximately 12 acres of land and we would expect to purchase other land at a cost of approximately $400,000 to $650,000. We have acquired two different options to purchase land in Shenandoah. The construction of the Plant itself is by far the single largest expense at $56,119,000. If the Plant is constructed in Shenandoah, approximately 9 miles of natural gas pipeline must be installed at an estimated cost of $3.45 million dollars. We expect that we would have to put up approximately $1,500,000 of the cost associated with the natural gas pipeline and Mid American Energy would put up the rest. Rail improvement costs (upgrades, siding and switches) are estimated at $4,641,000. The estimated cost of the administration building and office equipment is $375,000. In addition to the cost to build the ethanol plant and bring rail and utilities to the site, there are significant owner's costs that will be incurred to build and operate the facility successfully. Start-up inventories of ethanol, corn, distillers grains (DDGS), chemicals, yeast, denaturant and spare parts are estimated to be $5,985,000. Other start-up costs are estimated at $710,000. We are reserving funds under the heading "Other Start-Up Costs" in the table set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations -Overview", to cover anticipated costs associated with general and administrative activities, insurance coverage, construction contingencies, and an estimated construction bond premium of approximately $300,000. This reserve amount is based on an estimate only and our actual insurance costs may exceed the reserved amount. Loan fees and interest during construction will be capitalized and are estimated to be $1,740,000. Organizational, offering, miscellaneous and contingency costs are estimated to be $1,893,000. Total estimated construction costs including bringing utilities and rail to the site are $75,909,000 or $1.52 per gallon of annual denatured ethanol production capacity, assuming capacity production of 50,000,000. SOURCE OF THE FUNDS We must obtain debt financing in order to complete construction on the Plant. The amount and nature of the debt financing that we are seeking is subject to the interest rates and the credit environment as well as other economic factors over which we have no control. We have no binding contracts or commitments with any bank, lender or financial institution for our debt financing, but we will not close on this offering until we execute binding financing arrangements. After completion of this offering and the receipt of the required debt financing, if we require additional cash, we may seek additional financing by borrowing, and/or through the sale of additional securities. In addition, we will be requesting tax increment financing ("TIF") from the City of Shenandoah or Fremont County of approximately $3,925,000. However, we cannot guarantee that we will be successful in obtaining additional financing if needed. Below is an estimate of the source of the funds depending upon the amount of securities sold in the offering.

DETERMINATION OF OFFERING PRICE The offering price of the securities was arbitrarily determined by our management. The offering price bears no relationship to our assets, book value, net worth or other economic or recognized criteria of value. In no event should the offering price be regarded as an indicator of any future market price of our securities. In determining the offering price, we considered such factors as the prospects for the Plant, our management's previous experience, amount of needed funds and our present financial resources. MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information Currently, there is no public trading market for our securities and there can be no assurance that any market will develop. If a market develops for our securities, it may be limited, sporadic and highly volatile. We do not have any agreements with market makers regarding the trading of our shares, but at some time in the future a market maker may make application for listing our shares. Presently, we are privately owned. This is our initial public offering. Most initial public offerings are underwritten by a registered broker-dealer firm or an underwriting group. These underwriters generally will act as market makers in the stock of a company they underwrite to help insure a public market for the stock. This offering is to be sold by our officers and directors and, perhaps, a limited number of broker-dealers. We have no commitment from any brokers to sell shares in this offering. As a result, we will not have the typical broker public market interest normally generated with an initial public offering. Lack of a market for shares of our stock could adversely affect a stockholder in the event a stockholder desires to sell his shares. Shares Available for Future Sale As of the date of this prospectus, there are 765,000 shares of our common stock issued and outstanding. Upon the effectiveness of this registration statement, the shares sold in this offering to not-affiliates of the Company will be freely tradable if a marked for the securities exists, of which there can be no assurance. Sales of shares of stock in the public markets may have an adverse effect on prevailing market prices for the common stock. Rule 144 governs resale of "restricted securities" for the account of any person, other than an issuer, and restricted and unrestricted securities for the account of an "affiliate" of the issuer. Restricted securities generally include any securities acquired directly or indirectly from an issuer or its affiliates which were not issued or sold in connection with a public offering registered under the Securities Act. An affiliate of the issuer is any person who directly or indirectly controls, is controlled by, or is under common control with the issuer. Affiliates of a company may include its directors, executive officers, and person directly or indirectly owning 10% or more of the 25 outstanding common stock. Under Rule 144 unregistered resales of restricted common stock cannot be made until it has been held for one year from the later of its acquisition from the issuer or an affiliate of the issuer. Thereafter, shares of common stock may be resold without registration subject to Rule 144's volume limitation, aggregation, broker transaction, notice filing requirements, and requirements concerning publicly available information about the company ("Applicable Requirements"). Resales by the issuer's affiliates of restricted and unrestricted securities are subject to the Applicable Requirements. The volume limitations provide that a person (or persons who must aggregate their sales) cannot, within any three-month period, sell more than the greater of one percent of the then outstanding shares, or the average weekly reported trading volume during the four calendar weeks preceding each such sale. A non-affiliate may resell restricted common stock which has been held for two years free of the Applicable Requirements. Dividend Policy To date, we have not paid dividends on our common stock. The payment of dividends on the common stock in the future, if any, is within the discretion of the board of directors and will depend upon our earnings, capital requirements, financial condition and other factors the board views are relevant. The board does not intend to declare any dividends in the foreseeable future, but instead intends to retain all earnings, if any, for use in our operations. Holders of Record As of the date of this prospectus, there were thirty-one holders of record of our common stock. DILUTION As of November 30, 2004, we had a net tangible book value, which is the total tangible assets less total liabilities, of $623,293, or approximately $.82 per share. The following table shows the dilution to your investment without taking into account any changes in our net tangible book value after November 30, 2004, except the sale of the minimum and maximum number of shares offered.

(1) The numbers used for Present Stockholders assumes that none of the present stockholders purchase additional shares in this offering. (2) Prior to this offering, we had 765,000 shares of common stock outstanding. Of these shares, 550,000 shares were issued for $.182 and 215,000 shares were issued for $2.50. SELECTED FINANCIAL DATA The following selected historical financial data of is only a summary and you should read it in conjunction with our consolidated financial statements and the notes to those financial statements. June 29, 2004 (Date of Inception) to November 30, 2004 Statement of Operations Data: (Audited) -------------------------- Revenues....................................... $ 0 Operating Expenses............................. 12,805 Loss From Operations........................... (12,805) Net Loss....................................... (12,805) Loss Per Common Share.......................... (.02) Balance Sheet Data: Current assets................................. $ 629,093 Total assets................................... 629,093 Current liabilities............................ 5,800 Total liabilities.............................. 5,800 Stockholder's equity (deficit)................. 623,293 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THOSE INDICATED IN SUCH FORWARD-LOOKING STATEMENTS. THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OUR OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. 27 Overview We are a start-up company in development stage, which was formed for the purpose of building a plant to produce ethanol and animal feed products in southwestern Iowa or southeastern Nebraska. We do not expect to operate at a profit before the ethanol plant is completely constructed and operational. Our plant is expected to annually consume approximately 18.5 million bushels of locally grown corn and annually produce approximately 50 million gallons of fuel-grade ethanol, 160,000 tons of DDGS on a dry basis. We plan to hire a broker to sell our DDGS for us. We anticipate locating the Plant in Shenandoah, Iowa, an area where we believe there are over 200 hundred thousand feed cattle on feeder lots within a 50 mile radius of the Plant. We believe we can sell a portion of our distillers grains in a wet form because of this, which will save us a significant amount of money because we will not have to dry the grain before selling it. Additionally, we will produce approximately 148 thousand tons of carbon dioxide that may be recovered on an annual basis. While we intend to have discussions with several companies regarding construction of a facility to capture raw carbon dioxide, we presently have no agreement with any third party to capture or market the raw carbon dioxide, and the market may be too saturated in Iowa to recover the carbon dioxide profitably. We therefore may choose to vent off the C0(2) and may have no market for it of any kind. We currently estimate that it will take 12 to 16 months from the date that we close the offering, which includes obtaining our debt financing, and obtaining all necessary permits, to complete the construction of the plant. We anticipate that we will have an agreement with an experienced ethanol marketer to sell our ethanol production. We also anticipate that we will have an agreement with an experienced marketer to sell our animal feed products. We have no agreements with any party to sell any of our expected products. We will be hiring staff to handle the direct operation of the plant, and currently expect to employ approximately 32 people. We do not intend to hire a sales staff to market our products. Third-party marketing agents will coordinate all shipping. The following table describes our proposed use of proceeds, based upon a minimum offering of $29,667,000, net of selling commissions, and a maximum offering of $38,000,000. The total use of proceeds is estimated to be $75,909,000. The actual use of funds is based upon contingencies, such as the estimated cost of plant construction, the suitability and cost of the proposed site, the regulatory permits required and the cost of debt financing and inventory costs, which are driven by the market. Therefore, the following figures are intended to be estimates only based on between 36% and 46% investor equity, and the actual use of funds may vary significantly from the descriptions given below depending on the contingencies described above. However, we anticipate that any variation in our use of proceeds will occur in the level of proceeds attributable to a particular use (as set forth below) rather than a change from one of the uses set forth below to a use not identified in this prospectus.

Plan for the Next 24 Months of Operations We expect to spend the next 24 months in financing, design-development and construction of the Plant. Assuming the successful completion of this offering and the related debt financing, we expect to have sufficient cash on hand to cover all costs associated with construction of the project, including but not limited to, site acquisition, utilities, construction, equipment acquisition and site development. In addition, we expect to have enough cash to cover our costs through this period, including staffing, office costs, audit, legal, compliance and staff training. We estimate that we will need approximately $75,909,000 to complete the project. The tables above describing the estimated sources of funds and various costs associated with the project also describe operations for the next 24 months. These tables are only estimates and actual expenses could be much higher due to a variety of factors described in the section entitled "Risk Factors". All sources of funding are only estimates. The Company has no commitments or agreements with any third party to provide the necessary funds. Condition of Records We currently have no experienced general manager, and we do not expect to retain one until some time in 2005. We are dependent entirely on our board of directors and an outside accounting firm for maintenance of books and records. We intend to hire and train staff well before the start of the Plant operations, and we have included an expense allocation for this in our budget. However, there can be no assurance that we will be able to retain qualified individuals. It is possible that accounting or other financing functions may not be performed on time, if at all. Operating Expenses We expect to have certain operating expenses, such as salaries, when the Plant manager and other office staff are hired. Along with operating expenses, we anticipate that we will have significant expenses related to financing and interest. We have allocated funds in our capital structure for these expenses. However, there can be no assurance that the funds allocated are sufficient to cover the expenses. We may need additional funding to cover these costs if sufficient funds are not retained up-front or if costs are higher than expected. Liquidity and Capital Resources We are seeking to raise a minimum of $29,667,000 and a maximum of $38,000,000 in this offering. The offering proceeds will be placed in an escrow account with U.S. Bank. We will not close on the escrow until we execute definitive binding agreements for our debt financing. Assuming that the maximum offering is raised, approximately $41,679,500 in debt and other funding will be 29 needed to complete the project. If less than the maximum offering is raised, additional debt must be sought. We do not have financing commitments for any amount. Completion of the project relies entirely on our ability to attract these loans and close on this offering. We may engage a financing company to attempt to obtain the loans. If we cannot close on our debt financing within 180 days from the date of this prospectus, unless extended by us for up to an additional 90 days, but not past November 29, 2005, your investment will be promptly returned to you without interest and without any deductions. We hope to attract the senior bank loan from a major bank, with participating loans from other banks, to construct the Plant. We expect that the combined minimum loan amount of $36,256,500 will be secured by all of our real property, including receivables and inventories. We expect to pay near prime rate on this loan, plus annual fees for maintenance and observation of the loan by the lender. If we were to issue warrants in connection with any subordinated financing, it could reduce the value of our common stock. Critical Accounting Policies Because of our limited operations and business activities, we do not have any accounting policies that we believes are critical to facilitate an investor's understanding of our financial and operating status. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, results of operations or liquidity. Recent Accounting Pronouncements Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. It is effective immediately for variable interest entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities acquired before February 1, 2003. The impact of adoption of this statement is not expected to be significant. SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, amends and clarifies accounting for derivative instruments under SFAS No. 133. It is effective for contracts entered into after June 30, 2003. The impact of adoption of this statement is not expected to be significant. SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liability and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The impact of adoption of this statement is not expected to be significant. Grant and Government Programs We believe that we are eligible for and anticipate applying for various state and federal grant, loan and forgivable loan programs. Most grants that may be awarded to us are considered paid-in capital for tax purposes and are not taxable income. 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 30 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. We are also not depending on the award of any such grants as part of our funding of the Project. However, we may be eligible to receive such grants. If we do, the amount of money we will have to borrow will be reduced by that amount. We intend to apply for tax increment financing (TIF) from the town of Shenandoah, Iowa or, if an alternate Plant site is chosen, from the corresponding town or city. Tax increment financing is a program created by state statute and provides city councils or county boards of supervisors the power to use all or part of the property tax resulting from the increase in taxable valuation due to the construction of new industrial or commercial facilities to provide economic incentives. We will be seeking approval to receive tax increment financing from the City Council or governing body of the city or town in which we locate the Plant. We currently anticipate that we will be able to TIF approximately 3.925 million dollars. However, there can be no assurance that any TIF will be received. We will be applying for a grant from the USDA's Commodity Credit Corporation, if the program is extended to continue past 2006 when it is it scheduled to expire. It has been extended in the past and we hope that it will be extended once again. Under the grant program, the Commodity Credit Corporation will reimburse eligible ethanol producers of less than 65 million gallons of bioenergy one bushel of corn for every two and one-half bushels of corn used for the increased production of ethanol. No eligible producer may receive more than $7.5 million under the program. Because we expect to be an eligible producer and to annually utilize 18.5 million bushels of corn in the increased production of ethanol, we expect to potentially receive the maximum award of $7.5 million. However, the Commodity Credit Corporation may award only $150 million annually fiscal years 2003 through 2006 and any award we received may be reduced based upon the volume of applications from other eligible producers. We expect to be eligible to receive an award under the program only once during the life of our project, if the program is extended. If it is not extended by the U.S. Congress, we do not believe we would be in production early enough to receive any benefits from the program. There can be no assurance that any amounts will be received under this program. There may be additional tax credits in the State of Iowa that we may be eligible for as a producer of ethanol. There may also be benefits that the Company will receive from the State of Iowa for developing a business in an enterprise zone. These programs may benefit the Company financially. There may be other state and federal programs that we are not aware of at this time. Programs and incentives offered by state and federal agencies are subject to change and new programs and incentives may become available. As changes in current programs and incentives are made and new programs and incentives become available, we will endeavor to stay informed and to take advantage of the programs and incentives for which we are eligible. However, there can be no assurance that we will receive any funding under any federal or state funding initiative. BUSINESS We intend to raise capital to develop, construct, own, and operate a 50 million gallon dry mill ethanol Plant in southwestern Iowa, elsewhere in Iowa, or in southeastern Nebraska. We plan to build the Plant such that it will have an annual capacity to process approximately 18.5 million bushels of corn into approximately 50 million gallons of ethanol. We also expect the Plant to produce approximately 160,000 tons annually of animal feed known as Distillers Dried Grains with Solubles ("DDGS") on a dry matter basis. These are the principal by-products of the ethanol production process. The Plant will also produce approximately 148 thousand tons of raw carbon dioxide annually as another by-product of the ethanol production process. We are still exploring the options available to us to recover and market the raw carbon dioxide. However, because there is significant ethanol production in the areas where we intend to locate the Plant, we might not be able to find a market for our CO(2) and may end up venting it off as many other producers do. 31 Primary Product--Ethanol Ethanol is a chemical produced by the fermentation of sugars found in grains and other biomass. Ethanol can be produced from a number of different types of grains, such as wheat and sorghum, as well as from agricultural waste products such as sugar, rice hulls, cheese whey, potato waste, brewery and beverage wastes and forestry and paper wastes. However, approximately 90% of ethanol in the United States today is produced from corn because corn contains large quantities of carbohydrates that convert into glucose more easily than most other kinds of biomass. Description of Dry Mill Process Our Plant will produce ethanol by processing corn. The corn will be received by rail and by truck, then weighed and unloaded in a receiving building. It will then be transported to a scalper to remove rocks and debris before it is conveyed to storage bins. Thereafter, the corn will be transported to a hammer mill or grinder where it is ground into a mash and conveyed into a slurry tank for enzymatic processing. We will add water, heat and enzymes to break the ground grain into a fine slurry. The slurry will be heated for sterilization and pumped to a liquefaction tank where additional enzymes are added. Next, the grain slurry is pumped into fermenters, where yeast is added, to begin a batch fermentation process. A vacuum distillation system will divide the alcohol from the grain mash. Alcohol is then transported through a rectifier column, a side stripper and a molecular sieve system where it is dehydrated. The 200 proof alcohol is then pumped to farm shift tanks and blended with five percent denaturant (usually gasoline) as it is pumped into storage tanks. Corn mash from the distillation stripper is pumped into one of several decanter type centrifuges for dewatering. The water ("thin stillage") is then pumped from the centrifuges and then to an evaporator where it is dried into a thick syrup. The solids that exit the centrifuge or evaporators ("the wet cake") are conveyed to the DDGS dryer system. Syrup is added to the "the wet cake" as it enters the dryer, where moisture is removed. The process will produce distillers grains, which are processed corn mash that can be used as animal feed. Assuming that financing will be in place to begin plant construction in the Spring or Summer of 2005, the Company intends that the plant begin producing ethanol and by-products in the summer of 2006. The following flow chart illustrates the dry mill process: 32 [FLOW CHART OMITTED] Thermal Oxidizer Ethanol plants such as ours may produce odors in the production of ethanol and its primary by-product, DDGS that some people find to be unpleasant. We intend to employ a thermal oxidizer emissions system to help reduce the risk of this problem. We expect a thermal oxidizer emissions system to reduce any unpleasant odors caused by the ethanol and distillers grains manufacturing process. Tests have shown that a thermal oxidizer, which heats emissions, may destroy up to 99 percent of the volatile organic carbon compounds in emissions that cause odor in the drying process. We expect this addition to the Plant to reduce the risk of possible nuisance claims and any related negative public reaction against us. 33 By-Products The principal by-product of the ethanol production process is distillers grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy and beef industry. 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 distillers grains: Distillers Wet Grains with Solubles ("DWGS"), Distillers Modified Wet Grains with Solubles ("DMWG") and Distillers Dried Grains with Solubles ("DDGS"). DWGS is processed corn mash that contains approximately 70% moisture. DWGS has a shelf life of approximately three days and can be sold only to farms within the immediate vicinity of an ethanol plant. DMWG is DWGS that has been dried to approximately 50% moisture. DMWG have a slightly longer shelf life of approximately three weeks and are often sold to nearby markets. DDGS is DWGS that has been dried to 10% 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. We intend to market DDGS and are exploring possibilities of local demand for DMWG to market at least a portion of our distillers grains in this form. Corn Feedstock Supply We anticipate that our Plant will need approximately 18.5 million bushels of grain per year or 50,600 bushels per day as the feedstock for its dry milling process. The corn supply for our plant will be obtained primarily from local markets. In the year 2003, in the area surrounding the proposed site at Shenandoah corn production was approximately 154.4 million bushels. The following table provides a summary of the approximate number of bushels of corn produced by suppliers, by county, located within approximately 60 miles of the site in Shenandoah, Iowa, during the year 2003. County District Corn (bushels) ------------------------------- -------------------- -------------------- Adair, Iowa SW 13,400,000 Fremont, Iowa SW 15,000,000 Cass, Iowa SW 15,700,000 Page, Iowa WC 12,500,000 Mills, Iowa SW 12,900,000 Montgomery, Iowa SW 11,400,000 Pottawattamie, Iowa SW 27,900,000 Taylor, Iowa SW 7,800,000 Atchison, Missouri SW 12,354,000 Nodaway, Missouri NW 11,636,000 Nemaha, Nebraska SW 6,752,000 Cass, Nebraska SE 11,492,000 Otoe, Nebraska SE 8,600,000 -------------------- Total 167,434,000 Source: USDA Website The price and availability of grain are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, governmental programs and foreign purchases. Because the market price of ethanol is not related to corn prices, ethanol producers are generally not able to compensate for increases in the cost of corn feedstock through adjustments in prices charged for their ethanol. We 34 therefore anticipate that our Plant's profitability will be negatively impacted during periods of high corn prices. We have determined, however, that the average price for corn in Iowa and the areas surrounding the proposed sites over the last ten years has been approximately $2.22 per bushel. Grain Elevators We anticipate establishing ongoing business relationships with local corn farmers and elevators to acquire the corn needed for the project. Much of our corn is expected to be acquired directly from farmers. Most of the farmers in the area have their own dry storage facilities. This will allow us to purchase much of the corn needed to operate the Plant directly from farmers. We expect to become licensed as an Iowa Grain Dealer, which will allow us to contract to purchase Iowa grains. We have identified a number of farms and elevators as potential sources of corn in Iowa and discussions are in progress for future corn delivery. We have no contracts, agreements or understandings with any grain producers in the area, although we anticipate procuring corn from these sources. Commodities Manager We intend to hire a commodities manager to ensure the consistent scheduling of corn deliveries and to establish and fill forward contracts through the grain elevators and local farmers. The commodities manager will coordinate corn deliveries between the trucks, railroad and the participating farmers and elevators. Additionally, the commodities manager will develop price protection through the use of hedging strategies. We anticipate that we will hire a commodities purchaser or engage a third party that has expertise in this area to carry out these activities. Ethanol Markets Ethanol has important applications. Primarily, ethanol can be used as a high quality octane enhancer and an oxygenate capable of reducing air pollution and improving automobile performance. The ethanol industry is heavily dependent on several economic incentives to produce ethanol. Local Ethanol Markets Local markets are, of course, the easiest to service because of their close proximity. However, the local market where we intend to build our Plant may be oversold with other local and regional marketers, and if we were to focus solely on local markets, it could depress the local ethanol price. Therefore, we intend to market the majority of our ethanol to regional and national markets. Regional Ethanol Markets Typically a regional market is one that is outside of the local market, yet within the neighboring states. This market will likely be serviced by rail, and is within a 450-mile radius of the Plant. The rail lines of Burlington Northern railroad run adjacent to our proposed site in Iowa. Union Pacific services the Wahoo, Nebraska location. We will have to build a switching spur on the site to load the rail cars with ethanol. We estimate this will cost approximately $150,000 to $250,000 to construct. The Burlington Northern rail lines run adjacent to the proposed site in Iowa and the Union Pacific lines run along the property in Wahoo, Nebraska. These lines will allow us to sell our products to both the Western and Eastern markets. The rail lines and the nearness of Interstate Highways will allow us to transport our products to regional markets. Regional markets typically include large cities that are either carbon monoxide or ozone non-attainment areas. 35 Generally, the regional market is good business to develop. The freight is reasonable, the competition, while aggressive, is not too severe, and the turn-around time on the rail cars is an advantage. In addition, it is often easier to obtain letters of intent to purchase product from regional buyers than from national buyers. These letters, while not binding, do tend to raise the comfort level of the financial lending institutions. Not surprising in a regional market, letters of intent to purchase are taken quite seriously by the buyer. Regional pricing tends to follow national pricing less the freight difference. As with national markets, the use of a group-marketing program or a broker is advantageous, especially in the first one to three years of operation. Occasionally there are Opport Shareies to obtain backhaul rates from local trucking companies. These are rates that are reduced since the truck is loaded both ways. Normally the trucks drive to the refined fuels terminals empty and load gasoline product for delivery. A backhaul is the opport Sharey to load the truck with ethanol to drive to the terminal. National Ethanol Markets Recently, California has been the focus of a major ethanol campaign as MTBE has now been phased out. California banned the use of MTBE beginning January 1, 2003. California represents a market of about 950 million gallons annually due to the oxygenate requirement for RFG. With the recent denial of the California RFG oxygenate waiver request, the size of the California market is now better known. While there is a great deal of focus on California, another emerging ethanol market is in the Northeast. Both New York and Connecticut banned the use of MTBE as of January 1, 2004. As in California, the primary drivers are the health and water concerns surrounding the use of MTBE. The market potential for ethanol in the Northeast is estimated at about 1 billion gallons annually. The ultimate size of the California and Northeast markets will depend on how the RFG oxygenate and MTBE debate plays out in the political arena. The States of Georgia and Louisiana began blending ethanol in June of 2004. These States are expected to consume an additional 250 million gallons per year. As of the writing of this document, it is believed that other States will introduce legislation to ban the use of MTBE in the coming years. The location of Burlington Northern or Union Pacific rail lines running adjacent to our proposed Plant sites will allow us to transport our ethanol to markets throughout the country. Being an ethanol producer west of the Mississippi, we believe the Western markets will become our largest and best markets, because it will be less expensive to transport our products to the western markets than to the eastern. However, we intend to market our ethanol to the best available market at any given time. California, Illinois, Ohio and Minnesota are by far the largest ethanol markets. In addition to California there are also other significant national ethanol market opport Shareies such as Arizona, Colorado, Texas, Oregon, Washington, New Mexico and Nevada. State Total Ethanol Consumed in 1999 (gallons) --------------------------------------------- ------------------------------- Arizona 13,737,000 California 52,384,000 Colorado 47,925,000 Illinois 215,565,000 Minnesota 206,542,000 Nevada 23,883,000 New Mexico 21,030,000 Ohio 207,956,000 Oregon 11,238,000 Texas 51,218,000 Washington 26,651,000 36 Source: U.S. Department of Transportation Highway Statistics 1999 General Demand Ethanol demand is expected to continue at a very aggressive pace as demonstrated in the following chart from the Department of Energy's Energy Information Administration (EIA). 1999's 2.8 billion gallon per year demand is expected to grow to 4.5 billion gallons by the year 2015 according to the EIA. If the use of MTBE is phased out on a national level in the next few years and the RFG oxygenate requirement remains unchanged, a doubling of ethanol demand could occur much sooner. U.S. ETHANOL DEMAND (000 Gallons) [GRAPH OMITTED] Source: Energy Information Administration This outlook may be affected by pending legislation. Currently, bills have been introduced in the United States Senate and House that would revise the current method in which fuel ethanol use is required. The proposed legislation will determine the specific volume of ethanol to be used in gasoline on a nationwide basis. The proposed volumes would begin in the year 2004 at 2.3 billion gallons and grow at a rate of approximately 300 million gallons per year to a volume of 5 billion gallons in 2012. Although the current rate of growth exceeds earlier projections over several years, demand for ethanol in the near future may diminish, or increase, if the legislation is enacted. Ethanol Pricing Historical ethanol, corn and gasoline prices are shown in the following chart. Ethanol prices tend to track the wholesale gasoline price plus the federal tax incentive of 53(cent) per gallon. In 1996 the ethanol price increased dramatically because high corn prices caused many ethanol plants to curtail operations or shutdown. The chart below shows the historical relationships between the prices of ethanol, gasoline, and corn. 37 Average U.S. Market Pricing of Ethanol, Gasoline and Corn [GRAPH OMITTED] Wholesale Gasoline Data Source: DOE U.S. Refiner Prices of Petroleum Products for Resale; Corn and Sorghum Data Source: USDA; Ethanol Data Source: Hart's Oxy-Fuel News; Prepared by BBI International. Federal Ethanol Supports Ethanol sales have 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. Increasingly stricter EPA regulations are expected to increase the number of metropolitan areas deemed in non-compliance with Clean Air Standards, which could increase the demand for ethanol. The use of ethanol as an oxygenate to blend with fuel to comply with federal mandates also has been aided by federal tax policy. The Energy Tax Act of 1978 exempted ethanol blended gasoline from the federal gas tax as a means of stimulating the development of a domestic ethanol industry and mitigating the country's dependence on foreign oil. As amended, the federal tax exemption currently allows the market price of ethanol to compete with the price of domestic gasoline. The exemption for a 10% ethanol blend is the equivalent of providing a per gallon "equalization" payment that allows blenders to pay more for ethanol than the wholesale price of gasoline and still retain profit margins equal to those received upon the sale of gasoline that is not blended with ethanol. Under current legislation, the federal gasoline tax is $0.184 per gallon and the tax on a 10% ethanol blend is $0.13 38 per gallon, providing a $0.054 difference. The exemption will gradually drop to 5.1 cents in 2005. This federal tax exemption is scheduled to expire in 2007. As discussed above, a bill has been introduced in the United States Senate that would revise the current method and volume in which fuel ethanol use is required. Project Location--Proximity to Markets We intend to build our Plant in southwestern Iowa in Fremont County near the town of Shenandoah, or elsewhere in Iowa, or in Nebraska, (if the State of Nebraska were to pass tax incentives that would make it feasible for us to do so), or at another site in the southwest area of Iowa. Site selection is based upon location to existing grain production and price, animal feed lots, roads, rail transportation, natural gas lines, and major population centers. There are two possible locations for the Plant in Shenandoah. One would be located on an undeveloped 54-acre parcel of land owned by the town of Shenandoah and we would purchase more land from a private land owner which lies adjacent to the 54-acre parcel to increase the total land area to approximately 85 acres. Or we would purchase 66.9 acres from a private individual who owns a parcel of land to the Northwest of the city's land. We have acquired an option to purchase this land. The city would then donate an additional 12 acres to us. A letter of intent has been signed with the town of Shenandoah to this effect. Depending on which location is chosen, the rail lines of Burlington Northern would run along the either the Northern border of the property or the Southern border of the property. These lines will connect us to the regional and national ethanol markets of the U.S. The site in Wahoo, Nebraska is an 80-acre undeveloped parcel. Final site selection is contingent on analysis of such issues as cost of water, utilities and transportation, and upon raising sufficient funds to allow for construction, the securing of additional financing needed, and obtaining necessary permits and approvals to build at the selected location. A letter of intent has been signed with the town of Shenandoah to this effect. Our board has reserved the right, in their sole discretion, to modify or change the location for any reason. These letters of intent will be our only property other than cash holdings. Transportation and Delivery The Plant will have the facilities to receive grain by truck and rail and to load ethanol and distiller's grains onto trucks and rail cars. The Burlington Northern and Santa Fe Railway currently provides rail service to the Shenandoah site. However, as stated elsewhere in this prospectus, an 18 mile span of rail running from Red Oak, Iowa to Shenandoah must be upgraded to meet Hazmat (Hazardous Materials) Standards. BNSF, in meetings, has verbally agreed to do the work necessary to bring the rail up to Hazmat Standards at a cost of approximately $3,500,000 dollars that the Company, Eaton Corporation, Essex Elevator and DeBruce Grain have all agreed to give upfront to BNSF. The Company's share will be approximately 2.4 million dollars. BNSF has then agreed to pay us back for that amount over a 5-8 year period. Union Pacific would service the Wahoo site. Other potential sites may be served by the same railroads. We expect to negotiate a marketing service relationship with the appropriate railroad, but do not currently have any agreement for the provision of such services. In terms of freight rates, rail is considerably more cost effective than trucking to the majority of our ethanol and DDGS markets. Utilities The production of ethanol is a very energy intensive process that uses significant amounts of electricity and natural gas. Water supply and quality is also an important consideration. Natural Gas The Plant will produce process steam from its own boiler system and dry the DDGS by-product via a direct gas-fired dryer. We anticipate the Plant will use approximately 5,500 deca-therms per day. The price of natural gas is volatile and we expect to be able to purchase natural gas at a significant discount to the spot markets at any given time, due to the quantities of gas we 39 will use to operate the Plant. We also expect to use hedging strategies to protect us from the volatility of gas prices, and we expect to hire a third party who is experienced in doing this to assist us. We expect to purchase natural gas from a local provider at whatever site is eventually chosen. Mid American and/or Northern Natural Gas are possible vendors. However, we have not yet entered into any agreement with a utility regarding the specific type and nature of service to be provided. If we were to chose the site at Shenandoah, to access sufficient supplies of natural gas to operate the Plant, a connection to a distribution pipeline located underground, which lies about 9 miles away from the site will be required. Mid American Energy has agreed that they would pay for the majority of the costs to run the additional pipe needed to make our Plant operational. However, we would be expected to pay for approximately $1,500,000 of those additional costs. The Wahoo site has sufficient gas within 2 miles of the site and a pipeline to connect to that source would also have to be built. The economics of these things will be more fully revealed to us after the feasibility study is completed and will help us make our decision as to site selection. We have entered into an agreement with U.S. Energy Services, Inc. to act as our natural gas purchaser and we anticipate entering into agreements, with the assistance of U.S. Energy Services, with a natural gas supplier(s) at whatever site we choose before we begin construction of the Plant. U.S. Energy Services, Inc. will also act as our risk manager where natural gas is concerned. Electricity The proposed plant will require approximately 30,000,000 kilowatts hours per year. We have been in discussions with Mid American Energy concerning the purchase of electricity. We believe that we will be able to purchase electricity from Mid American and that Mid American will supply electricity to the plant at rates that will be favorable for the Company for a period of 5 years at the Shenandoah site. Electricity at other sites in Iowa may or may not be supplied by Mid American, but we would expect to be able to negotiate favorable rates at other sites with Mid American or other electricity providers. However, no assurance can be given that we would be able to negotiate favorable rates at any of the sites. The Wahoo site offers two alternative electricity energy providers that we would negotiate with if we were to build the Plant at that location. We would anticipate negotiating an agreement with a power supplier at any site before we began construction of the Plant. Water We will require a significant supply of water. The water requirements for a 50 million-gallon per-year plant are approximately 400 to 600 gallons per minute. That is approximately 864,000 gallons per day if we were to use the maximum amount. Much of the water used in an ethanol plant is recycled back into the process. We will need boiler makeup water and cooling tower water. Boiler makeup water is treated on-site to minimize all elements that will harm the boiler. Recycled water cannot be used for this process. Cooling tower water is deemed non-contact water (it does not come in contact with the mash) and, therefore, can be regenerated back into the cooling tower process. We anticipate using "grey water" that the City has agreed to give us for the cost of pumping the water from their treatment plant to our site, for this part of the Plant at the Shenandoah site. This water will makeup about two thirds of the water that we will use at the Plant. We anticipate purchasing the potable water needed at the Plant from the City of Shenandoah also. 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 facilities. At most, there should be no more than 300 gallons per minute of non-contact cooling water effluent. Each of the proposed sites has sufficient water to meet our needs and we have negotiated water rates with the City of Shenandoah, Iowa that we feel would be favorable to the Company. 40 Our Primary Competition We will be in direct competition with numerous other ethanol producers, many of whom have much greater resources. We also expect that additional ethanol producers will enter the market if the demand for ethanol continues to increase. Our proposed Plant will compete with other ethanol producers on the basis of price and, to a lesser extent, delivery service. We believe we can compete favorably with other ethanol producers due to our proximity to ample grain supplies at favorable prices. During the last twenty years, ethanol production capacity in the United States has grown from almost nothing to an estimated 3.6 billion gallons per year. Plans to construct new plants or to expand existing plants have been announced which would increase capacity by approximately 523 million gallons per year. This increase in capacity may continue in the future. We cannot determine the effect of this type of an increase upon the demand or price of ethanol. The ethanol industry has grown to approximately 81 production facilities in the United States. Industry authorities estimate that these facilities are capable of producing approximately 3.6 billion gallons of ethanol per year. The largest ethanol producers include Archer Daniels Midland, Cargill, Minnesota Corn Processors, Midwest Grain, Williams Energy Service, New Energy Corporation and High Plains Corporation, all of which are capable of producing more ethanol than we expect to produce. In addition, there are several regional entities recently formed, or in the process of formation, of a similar size and with similar resources to ours. The following table identifies most of the producers in the United States along with their production capacities.

* farmer-owned ^ under construction Last Updated: May 2004 *Source: Renewable Fuels Association Operating Ethanol Plants in the State of Iowa There are currently 13 operating ethanol plants in Iowa, (producing approximately 553.5 million gallons of ethanol per year). Three other plants are currently under construction and will be capable of producing approximately an additional 120 million gallons. The plants are scattered throughout the State, but are concentrated, for the most part, in the central regions where a majority of the corn is produced. We plan to build our Plant in the southwestern part of Iowa and corn has historically been less expensive in this part of the State. Competition from Alternative Fuel Additives Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol and oil companies with far great resources. New products or methods of ethanol production developed by larger and better-financed competitors could provide them competitive advantages and harm our business. The development of ethers to be used as oxygenates may provide a growth segment for ethanol. Ethers are composed of isobutylene (a product of the refining industry) and ethanol or methanol. The products are ethyl tertiary butyl ether ("ETBE") or methyl tertiary butyl ether ("MTBE"). We expect to compete with producers of MTBE, a petrochemical derived from methanol that costs less to produce than ethanol. MTBE is a commonly used oxygenate used in fuels for compliance with Federal Clean Air Act mandates, and is a major competitor of ethanol. Many major oil companies produce MTBE, and strongly favor its use because it is petroleum based. These companies have significant resources to market MTBE and to influence legislation and public perception of MTBE. These companies also have sufficient resources to begin production of ethanol should they choose to do so. However, MTBE has been linked to groundwater contamination at various locations in the east and west. As a result, California passed legislation which completely phased out MTBE from its gasoline pool as of January 1, 2004. Similarly, New York and Connecticut passed legislation to phase out the use of MTBE by December 31, 2004. At the writing of this document, Management believes that other States have written legislation to ban the use of MTBE. It is further believed that such legislation will be introduced to the legislative bodies of those States during the year of 2005. Ethanol is the most readily available substitute for MTBE in these markets. Assuming that more states, and/or the US Environmental Protection Agency, force elimination of MTBE, the demand for ethanol could increase from the current 3.3 billion gallons per year, to 5 to 8 billion gallons per year in 2012. MTBE's advantages over ethanol in a blend include its low affinity for water and low vapor pressure. Because petroleum pipelines and storage tanks contain water in various amounts, MTBE's low affinity for water allows it to be distributed through existing pipeline systems, as contrasted with ethanol, which must be shipped via transport truck or rail car. In addition, blending MTBE with 44 gasoline reduces the overall vapor pressure of the blend thereby reducing the normal volatile organic compound evaporative emissions. ETBE is not widely commercially available yet, and it may suffer from the same negative environmental effects as MTBE. Scientific research to better define the properties of ETBE as it relates to the environment is underway. Employees Prior to completion of the Plant construction and commencement of operations, we intend to hire approximately 32 employees. Approximately ten of our employees will work in management and administration and the remainder will work in Plant operations. The following table represents some of the anticipated positions within the plant and the minimum number of individuals we intend to employ for each position: Position Number Employed ------------------------------------------------- ------------------------------ General Manager 1 Plant Manager 1 Commodities Manager 1 Controller 1 Lab Manager 1 Lab Technician 2 Secretary/Clerical 4 Shift Supervisors 4 Maintenance Supervisor 1 Maintenance Craftsmen 4 Plant Operators 12 ------------------------------ TOTAL 32 The position titles, job responsibilities and numbers 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 officers and employees. Among other things, these agreements are expected to require such officers and employees to keep strictly confidential all proprietary information developed or used by us in the course of our business. Sales and Marketing We intend to sell and market the ethanol and distiller's grains produced at the Plant through normal and established markets. We hope to market all of the ethanol produced with the assistance of an ethanol distributor, but have not entered into any agreements regarding the sale of our ethanol. Similarly, we hope to sell all of our DDGS through the use of an ethanol-byproducts marketing firm, but have not entered into any agreements regarding the sale of our DDGS. We do not plan to hire or establish a sales organization to market any of the products or by-products we produce. Consequently, we will be extremely dependent upon the entities we plan to engage to purchase or market each of our products. 45 Strategic Partners and Development Services Team We have entered into a non-binding letter of intent with Fagen, Inc. in connection with the design, construction and operation of the proposed Plant. However, the Company reserves the right to contract with another firm if it deems that doing so would be in the best interests of the Company. Fagen, Inc. Fagen, Inc. has been involved in the construction of more ethanol plants than any other company in this industry. Fagen, Inc. is providing two services for the project. First, Fagen, Inc. is acting as co-developer for the project. Second, Fagen, Inc. will act as the general contractor on the project. Fagen, Inc. has extensive experience in the area of heavy industrial projects, particularly agricultural based facilities. The expertise of Fagen, Inc. in integrating process and facility design into a construction and operationally efficient facility is very important. In particular, Fagen, Inc. has been the principal contractor on approximately 28 ethanol projects and has performed significant work on over 50 ethanol plants in the United States. In many instances, Fagen, Inc. has been asked to return to the plant as the maintenance contractor or follow up construction for major expansions. Fagen, Inc. has done repeat work for Chief Ethanol Fuels and Minnesota Corn Processors, both of whom rank in the top ten in terms of the largest ethanol producers. Fagen, Inc.'s understanding of operational efficiencies and integration of various processes are essential to our success. Fagen, Inc. also has knowledge and support to assist our management team in executing a successful start-up. Fagen, Inc. is a meaningful project participant because of its investment and desire to facilitate the project's successful transition from start-up to day-to-day profitable operation. ICM, Inc. ICM, Inc. is a full-service, engineering, manufacturing and merchandising firm based in Colwich, Kansas and is expected to be the principal subcontractor for the Plant. ICM, Inc. is expected to provide the process engineering operations for Fagen, Inc. ICM, Inc.'s merchandising operation currently procures and markets various grain products. ICM, Inc. personnel have over 60 years of combined dry and wet mill operation and design experience. They have been involved in the research, design, and construction of ethanol plants for many years. Principals of ICM, Inc. have over twenty years of experience in the ethanol industry and have been involved in the design, fabrication and operations of many ethanol plants. Since 1995, ICM, Inc. has developed a very successful new design for DDG dryers and estimates that it currently has more than seventy-five percent of the market for DDG dryers. ICM, Inc. also works closely with Phoenix Bio-Systems, which brings over twenty years of brewery and ethanol production experience. Phoenix Bio Systems designed a Bio-Methanator, a high rate treatment system for organics in wastewater. The methanator, combined with ICM, Inc.'s ethanol plant design, allows for the development of zero process water discharge ethanol plants. This design will be incorporated into our proposed ethanol plant allowing a no process water discharge during normal operation. Letter of Intent We have executed a letter of intent with Fagen, Inc. The letter of intent states that Fagen, Inc. will enter into good faith negotiations with us to prepare definitive agreements for financial, design and construction services. It is estimated we will pay Fagen, Inc. up to $56.619 million in exchange for the following services: 46 o Providing a preliminary design and construction schedule and a guaranteed maximum price for the design and construction of the ethanol plant; o Assisting us with site evaluation and selection, pre-development activities, including, but not limited to, government approvals, coordination of civil and soil engineering, railroad spur design, etc; o Providing the needed construction expertise, sufficient financial responsibility to satisfy construction lender requirements, designing and building the ethanol plant; and o Assisting us in locating appropriate operational management for the Plant. We will also be responsible for fees and expenses related to financing, such as printing and publication expenses, legal fees, ratings, credit enhancements, trustee or agent fees and any registration fees. RMT, Inc. We may contract with RMT, Inc. to provide environmental management consulting. RMT, Inc. offers environmental, engineering and construction management services, and will provide us with soil and hydrology studies, as well as permitting services for the Plant. RMT Inc. has worked with regulatory agencies to permit and site the Badger State Ethanol, LLC plant in Monroe, Wisconsin. RMT, Inc. is part of Alliant Energy Corporation, a large diversified energy and industrial services company. However, the Company reserves the right to contract with another firm if it deems that doing so would be in the best interests of the Company. Construction of the Project--Proposed Design-Build Contract Fagen, Inc. has advised us that it will provide to us a proposed Design-Build contract. No Design-Build contract has been executed with respect to this project. The Design-Build contract is expected to be completed and executed prior to closing of our larger equity offering. However, no assurances can be given that a Design-Build contract will be entered into with Fagen, Inc. The proposed Design-Build contract is subject to modification and approval by lenders. Pursuant to the proposed Design-Build contract, Fagen, Inc. will act as our general contractor and will design and construct the Plant. General Terms and Conditions Based on terms of other Design-Build contracts into which Fagen, Inc. has entered, and our proposed letter of intent with Fagen, Inc., we have identified typical terms generally included in such Design-Build contracts. We expect to pay Fagen, Inc. up to an anticipated maximum of $56,619,000 to design and construct the Plant. All drawings, specifications and other construction related documents would belong to Fagen, Inc. We will be granted an irrevocable limited license to use such drawings, specifications and related documents in connection with our occupancy of the Plant. If the contract is terminated by us without cause or by Fagen, Inc. for cause, such as failure to pay undisputed amounts when due, then we may be required to pay Fagen, Inc. a fee of $1,000,000 if we resume construction of the Plant through our own employees or third parties. We expect to make payments to Fagen, Inc. on an agreed upon progress billing basis, based upon monthly applications for payment submitted to us by Fagen, Inc. for all work performed as of the date of the application. We expect to retain 10% of the amount submitted in each application for payment. When at least 50% of the work has been completed, and approved for operation by 47 government authorities, we expect to pay the full amount of each application for payment. When the Plant is substantially completed, we expect to pay Fagen, Inc. all amounts we have retained. If we do not pay all undisputed amounts within five days after the due date, we expect to be charged interest at a rate of approximately 18% per year. If Fagen, Inc. encounters "differing site conditions," it will expect to be entitled to an adjustment in the contract price and time of performance, if such conditions adversely affect its costs and performance time. By "differing site conditions," we mean any concealed physical conditions at the site that: o Materially differ from the conditions contemplated in the contract; or o Any unusual conditions which differ materially from the conditions ordinarily encountered in similar work. We expect that once the proposed Design-Build contract is executed and we have graded the site pursuant to Fagen, Inc.'s and ICM, Inc.'s specifications, work on the Plant will begin within five days from our notice to proceed. We expect substantial completion of the Plant to occur no later than 550 calendar days after Fagen, Inc. receives notice from us to proceed. By "substantial completion," we mean when the Plant is sufficiently complete so that we can occupy and use the plant to produce ethanol. In addition, Fagen, Inc. is expected to be responsible for the following: o Providing all necessary design services, such as architectural, engineering and other professional design services, consistent with applicable law and provided by licensed design professionals either employed by Fagen, Inc. or qualified independent licensed design consultants; o Performing all work in accordance with all legal requirements; o Obtaining all permits, approvals, licenses and fees related to the construction of the Plant, except that we will be responsible for obtaining an Air Pollution Construction and Operation Permit and National Pollutant Discharge Elimination permits; o Performing its responsibilities in a safe manner so as to prevent damage, injury or loss; o Providing to us a warranty that the work performed for us is of good quality, conforms to all contract and construction documents, and is free of defect in materials and workmanship; o For a period of one year after substantial completion, correcting, at their cost, any defects in materials and workmanship and commencing correction of defects within seven days of receipt of notice from us that the work performed was defective; o Obtaining and providing us with a certificate of insurance covering claims arising from worker's compensation or disability; claims for bodily injury, sickness, death or disease, regardless of whether the person injured was an employee of Fagen, Inc.; claims for damage or destruction of tangible personal property; claims for damages arising from personal injury, death or property damage resulting from ownership, use and maintenance of any motor vehicles; or claims pursuant to any duty to indemnify. Such insurance must be maintained throughout the development and construction of the Plant; and o Indemnifying, defending and holding us, our officers, directors, agents and employees harmless against any claims, losses, damages, liabilities, including attorney's fees and expenses, for any bodily injury, sickness, death or damage or destruction of property if such arises from the negligent acts or omissions of Fagen, Inc., its consultants, agents or employees. We expect to be responsible for the following: o Obtaining and maintaining liability insurance to protect us from any claim that may arise from performance of our responsibilities; o Obtaining and maintaining property insurance for the full insurable value of the Plant, including professional fees, overtime premiums and all other expenses incurred to replace or repair the ethanol plant; o Indemnifying, defending and holding Fagen, Inc., its officers, directors, agents and employees harmless against any claims, losses, damages, liabilities, including attorney's fees and expenses, for any bodily injury, sickness, death or damage or destruction of property due to the negligent act or omission of any separate contractors we hire; 48 o Rough grading the construction site to the specifications of Fagen, Inc. or ICM, Inc.; o Providing at least one access road of sufficient quality to withstand semi-truck traffic; o Procuring an Air Pollution Construction and Operation permit; o Obtaining the necessary Iowa, (and/or other presiding government authority) air and water discharge permits; o Providing for a continuous supply of natural gas of at least 1.5 billion cubic feet per year and supply meter and regulators to provide burner tip pressures as specified by ICM, Inc.; o Providing a continuous supply of electricity of 15,000 kva, 12,400-volt electrical energy, a high voltage switch, a substation, if required, and meter as specified by the electric company; and o Providing rail tracks, ties and ballast to the Plant at grades specified by ICM, Inc. We expect that Fagen, Inc. will have the right to stop or postpone work and to reasonably adjust the time for completion of the Plant if any of the following occurs: o We do not provide reasonable evidence indicating that we have adequate funds to fulfill all our contractual obligations or do not pay amounts properly due according to the progress payments, without cause, and we do not cure within seven days after we receive notice from Fagen, Inc. and work on the Plant has stopped; o Any acts, omissions, conditions, events or circumstances beyond its control, if the act or omission was not caused by Fagen, Inc. or anyone for whom they are responsible. If Fagen, Inc.'s delay in performance is caused by us or those under our control, then the contract price may be appropriately adjusted; o The presence of any hazardous conditions at the construction site. Upon receiving notice of a hazardous condition, we must immediately proceed to correct the condition. After the condition is corrected and our experts provides written certification that the hazardous condition has been corrected and all necessary governmental approvals have been obtained, Fagen, Inc. should resume work in the effected area. Fagen, Inc. may be entitled to an adjustment in price and time for completion of the Plant if its price and time for performance has been adversely affected by the hazardous condition; o Work on the Plant has stopped for 60 consecutive days, or more than 90 days total, because of any order from us or a court or governmental authority, if such stoppage is not because of any act or omission of 49 Fagen, Inc. or because we failed to provide Fagen, Inc. with information, permits or approvals for which we will be responsible. Fagen, Inc. may terminate the Design-Build contract if we do not begin to correct the above within seven days after receipt of Fagen, Inc.'s termination notice. We expect to have the right to terminate the Design-Build contract for any reason; but if our termination is without cause, then we expect to be required to provide Fagen, Inc. with 10 days prior written notice. In addition, we expect to be required to pay Fagen, Inc. for the following: o All work completed to date and any proven loss, cost or expense incurred in connection with such work; o Reasonable costs and expenses attributable to the termination, including demobilization costs and amounts due to settle terminated contracts with subcontractors and consultants; and o Overhead and profit in the amount of 15% of the sum of the above payments to the point of termination. Dispute Resolution It is anticipated that the Design-Build contract will provide that any party making a claim must provide written notice within a reasonable time, but not to exceed 21 days after the occurrence. Disputes would first be resolved through discussions between Fagen, Inc and us. If the dispute is still not resolved, then the parties would submit the matter to non-binding mediation. In the event that the dispute is still not settled, the matter must be resolved by arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, unless the parties agree otherwise. The determination of the arbitrator is expected to be final and may not be appealed to any court. The prevailing party in any arbitration proceeding is entitled to recover reasonable attorney's fees and expenses incurred. Limitation of Consequential Damages It is anticipated that the Design-Build contract will provide that we may be entitled to receive either consequential damages for losses such as loss of use, profits, business, reputation or financing, or liquidated damages approximating $8,000 per day in the event Fagen, Inc. fails to substantially complete the Plant on the scheduled substantial completion date. It is anticipated that the substantial completion date will be approximately 12 to 16 months after the close of our proposed public offering. It is also anticipated that if Fagen, Inc. finishes the Plant and it is fully operational on or before the scheduled substantial completion date, we expect that we may be asked to pay Fagen, Inc. a performance bonus of a certain amount per day for those days delivered prior to the scheduled substantial completion date. That amount will be negotiated in the future. Construction and Timetable for Completion of the Project Assuming this offering is successful, and we are able to complete our proposed public offering and secure the debt portion of our financing, we estimate that the project will be completed approximately 12 to 16 months after we close on our proposed public offering. This schedule assumes that two months of detailed design will occur prior to closing and a twelve to sixteen-month construction schedule followed by two months of commissioning. This schedule also assumes that weather, interest rates, and other factors beyond our control do not upset our timetable. There can be no assurance that the timetable that we have set will be followed, and factors or events beyond our control could hamper our efforts to complete the project in a timely fashion. 50 Regulatory Permits We anticipate that we will engage an environmental consulting firm to coordinate, advise and assist us with obtaining certain environmental, occupational health, and safety permits, plans, submissions, and programs. Many of those permits are discussed below. In addition to these permits, we will apply for other local, state, and federal permits related to environmental, occupational health, and safety requirements as needed. The information below is based in part on information generally relied upon by consultants and may include certain assumptions regarding the accuracy of specifications provided by manufacturers of the equipment and other components used in the construction of the Plant. Pursuant to the anticipated Design-Build contract, Fagen, Inc. and ICM, Inc. are expected to be responsible for all construction permits. Waste Water Discharge Permit This Plant will be a zero-discharge facility. We expect that we will use water to cool our closed circuit systems in the Plant. In order to maintain a high quality of water for the cooling system, the water will be continuously replaced with make-up water. As a result, this plant will discharge clean, non-contact cooling water from boilers and the cooling towers. Several discharge options, including publicly owned treatment works, use of a holding pond, discharge to a receiving stream, subsurface infiltration, irrigation and other options are under consideration by our consulting engineers and us. Each of these options will require an appropriate permit. We anticipate submitting the applicable permit applications(s) no later than 180 days prior to beginning of construction. Storm Water Discharge Permit and Storm Water Pollution Prevention Plan (SWPPP Permits) Before we can begin construction of our Plant, we must obtain an Industrial Storm Water Discharge Permit from the Iowa Department of Natural Resources ("IDNR"). This permit will be classified as either general or specific by the IDNR and the application for it must be filed at least 180 days before construction begins. In connection with this permit, we must have a Storm Water Pollution Prevention Plan in place that outlines various measures we plan to implement to prevent storm water pollution. Other compliance and reporting requirements would also apply. Prior to the commencement of construction of the Plant, We must file a notice of intent and application for a Construction Site Storm Water Discharge Permit. If the IDNR does not object to the notice of intent, we could begin construction and allow storm water discharge fourteen days after the filing. As part of the application for the Construction Site Storm Water Discharge Permit, we will need to prepare a construction site erosion control plan. We would also be subject to certain reporting and monitoring requirements. We anticipate, but there can be no assurances, that we will be able to obtain these permits. High Capacity Well Permit We believe at this time that we will have a sufficient supply of water to meet the needs of the Plant. However, we are considering the advantages of drilling a new high capacity well to use as a back-up water supply to meet the plant's water needs. If our consulting engineers determine that a well is needed, or cost effective, we would need to apply to the IDNR for a High Capacity Well Permit. Before issuing such a permit, the IDNR will require us to calculate the drawdown of water levels in the major stratigraphic at various distances away from the pumping well and the effect of the well on the town well. 51 Bureau of Alcohol, Tobacco and Firearms Requirements Before we can begin operations, we will have to comply with applicable Bureau of Alcohol, Tobacco and Firearms ("ATF") regulations. These regulations require that we first make application for and obtain an alcohol fuel producer's permit. 27 CFR ss.19.915. The application must include information identifying the principal persons involved in our venture and a statement as to whether any such person has ever been convicted of a felony or misdemeanor under federal or state law. The term of the permit is indefinite until terminated, revoked, or suspended. The permit also requires that we maintain certain security measures. We must also secure an operations bond pursuant to 27 CFR ss. 19.957. There are other taxation requirements related to special occupational tax and a special tax stamp. FAA The proposed site in Shenandoah, Iowa is situated within a few thousand feet of the Shenandoah airport. Our highest structure, the grain lift between our two main storage silos, is anticipated to be 165'. Therefore, we will need to receive approval from the FAA to build the Plant at the Shenandoah site. We have applied to the FAA to receive the needed approval. The City Engineer in Shenandoah has indicated to us that he doesn't believe there will be a problem if we can keep the structure below 150'. Engineers at Fagen, Inc. have indicated that we can redesign the Plant to keep the grain lift under 150'. Therefore, we have applied to the FAA for the approval to build the Plant with the highest structure not to exceed 150'. If they grant us that approval, we will then resubmit for approval to build a 165' structure. We decided to do it this way because the City Engineer and the City Administrator in Shenandoah, who have significant experience with the FAA, have indicated to us that getting approval for a 165' structure would probably take several more months. Therefore, we hope to have approval within 30 days to build the Plant with the highest structure being 150' and then submitting for the 165' structure. However, no assurance can be given at this time that we will be able to build the Plant at the proposed site in Shenandoah since it is in such close proximity to the airport. If we are turned down by the FAA, we would have to locate another site on which to build the Plant. This could cause the Company to incur greater looses financially and take a good deal of time. No assurance can be given that we would be successful in locating another site. EPA Even if we receive all environmental permits for construction and operation of the Plant, we will also be subject to oversight activities by the EPA. There is always a risk that the EPA may enforce certain rules and regulations differently than an individual state's environmental administrators. Environmental rules are subject to change, and any such changes could result in greater regulatory burdens. Expected Timing of Permitting and Consequences of Delay or Failure Without the air pollution construction permits, we will be unable to begin construction. It is anticipated that the air pollution construction permit applications will be filed four months prior to the beginning of construction. We anticipate that if granted the air pollution construction and operation permit, we will commence construction thereafter, assuming we successfully complete the offering and secure our debt financing. Once granted, the permit is valid indefinitely until the plant is modified or there is a process change that changes air emissions. 52 We must apply for the Storm Water Discharge Permit 180 days prior to the beginning of construction. We must file a notice of intent and application for a Construction Site Storm Water Discharge Permit 14 days before construction begins. In addition, we must have in place a pollution prevention plan submitted before operations. We have not applied for any of these permits, but plan to do so at the appropriate time. There can be no assurance that these permits will be granted to us. We must complete our spill prevention control and countermeasure ("SPCC") plan at or near the time of commencement of operations. If we decided to drill a well at the site, we would also need to obtain a high capacity water withdrawal permit before commencing operations, There is no assurance that this permit would be granted. We are also in negotiations to obtain the rights to one to two wells in close proximity to the proposed site in Shenandoah. Even if we were to obtain the rights to these wells, we would also have to obtain a different type of permit from IDNR to use the water from these wells in that they are currently only permitted for a different type of use. There is no assurance that these new permits would be granted. We must obtain an Alcohol Fuel Producer's Permit, post an operations bond, and file certain information with the Bureau of Alcohol, Tobacco, and Firearms before we begin operations. There is no assurance that this Permit will be granted. Without the air pollution construction permit, the waste water discharge permit, the various storm water discharge permits, water withdrawal permit, spill prevention control and countermeasures plan, and alcohol fuel producer's permit, we will be unable to begin or continue operations. Small Ethanol Producer Tax Credit "Small Ethanol Producers" are allowed a 10-cents-per-gallon production income tax credit on up to 15 million gallons of production annually. Under current law, small ethanol producers are those ethanol producers producing less than 30 million gallons per year. We do not expect to be classified as a small ethanol producer for purposes of the tax credit because we expect to produce approximately 50 million gallons of ethanol per year. Although we do not qualify to receive the credit under current law, federal tax legislation has been introduced, which, if enacted, would change the definition of a "Small Ethanol Producer." Specifically, producers producing up to 60 million gallons of ethanol per year would become eligible to receive the credit. If the tax legislation were enacted, we would expect to become able to receive the credit for our first 15 million gallons of annual production. If we do become eligible to receive the credit, this credit could be beneficial to our profits and loss statements. However, there is no assurance that the tax legislation will be passed by the Congress or enacted into law by the President. Nuisance Even if we receive all EPA and Iowa environmental permits for construction and operation of the Plant, we may be subject to the regulations on emissions by the Environmental Protection Agency. We could also be subject to environmental or nuisance claims from adjacent property owners or residents in the area arising from odors or other air or water discharges from the Plant, although we do not expect any such claims. To minimize the risk of such claims, we intend to employ a thermal oxidizer. 53 PROPERTY We currently own no plants or other physical properties. MANAGEMENT Directors, Executive Officers, Promoters and Control Persons Set forth below is certain information concerning each of our directors and executive officers as of December 16, 2004. With the Company Name Age Position Since ---- --- -------- ----- Barry Ellsworth 50 President/CEO/Chairman 2004 Dan Christensen 58 Treasurer/Secretary/Director 2004 Gary Thien 52 Vice President/Director 2004 David A. Hart 51 Director 2004 Steven Nicholson 78 Director 2004 Robert D. Vavra 54 Director 2004 Brent Lorimor 38 Director 2004 Hersch Patton 59 Director 2004 Our board is divided into three classes. One class of directors is elected at each annual meeting of stockholders for a three-year term. Each year a different class of directors is elected on a rotating basis. The terms of Gary Thien, David Hart, and Brent Lorimor expire at the 2005 annual meeting of stockholders. The terms of Dan Christensen, Steve Nicholson, and Robert Vavra expire at the 2006 annual meeting of stockholders. The terms of Barry Ellsworth and Hersch Patton expire at the 2007 annual meeting of stockholders. The number of directors currently comprising the board of directors is eight. The bylaws authorize from one to nine directors, the exact number of which may be determined by resolution of the board. Business Experience of Management The following is a brief description of the business experience and background of the above-named officers and directors of our Company. BARRY A. ELLSWORTH, resides in Las Vegas, Nevada. He assumed his present positions with the Company as President and as a director on June 29, 2004, upon the formation of the Company and is responsible for the day to day operations of the Company. Mr. Ellsworth graduated from Brigham Young University in 1977, with a BA in Communications. He later attended Cal Western School of Law in San Diego, CA. For the past five years, Mr. Ellsworth has acted as the Managing Director of Red Rock Investment Partners, a financial consulting firm, specializing in Mergers and Acquisitions. Earlier, he owned the financial consulting firm of Ellsworth and Associates. Prior to that, he gained experience in finance working as a stockbroker at the firms of Prudential-Bache Securities, Wilson-Davis Securities, and Dean Witter Reynolds. He has been instrumental in taking companies public and has raised capital for various concerns. DAN E. CHRISTENSEN, resides in Salt Lake City, Utah. He assumed his present positions with the Company as Treasurer, Secretary and as a director on June 29, 2004, upon the formation of the Company. Mr. Christensen graduated from Brigham Young University with a Bachelor's Degree in Business in 1969 and received a Management Administration Degree from the California Savings and Loan Institute in 1973. He has acted as the CEO of Commercial Mortgage and Investment, LLC, (CMI), with offices in South Jordan, Utah and San Francisco, 54 California, since 1981. CMI provides mortgage banking services for selected real estate projects, nationwide, including real estate development projects for his own account. Mr. Christensen has procured over 3 billion dollars in financing for numerous real estate development projects over the years, including many of his own projects. GARY THIEN, resides in Council Bluffs, Iowa. Gary graduated from Iowa State University in Ames, Iowa in 1974, with a Bachelor of Science Degree in Agricultural Business. For the past 10 years, Mr. Thien has owned and operated Thien Farm Management, located in Council Bluffs, Iowa, which manages approximately 20 thousand acres of farm land in Southwest Iowa. He is also a real estate broker and has expertise in commodity marketing, insurance and risk management, budgeting, cash flow analysis, etc. Mr. Thien is also President of the American Society of Farm Managers and Rural Appraisers. DAVID A. HART, resides in rural Stanton, Iowa. Dave attended Iowa Western Community College in Council Bluffs, Iowa, where he studied Farm Operations and Management. He began farming in 1973. Mr. Hart and his wife Cathy, operate Hart Farms in a 20 mile area around Stanton. This diversified operation includes: Grain Production, Cattle Feeding and Backgrounding, Cow/Calf Production, Custom Farming, Grain Hauling, Custom Spraying, and Seed Sales. Hart Farms plants and harvests approximately 3,000 acres of corn and soybeans. This operation also includes approximately 1,500 acres of hay and pasture. Mr. Hart has served on numerous church and community boards. He is a member of Stanton Fire and Rescue, having served 8 years as Fire Chief. As a Certified Emergency Medical Technician, Dave also serves on the Montgomery County 911 board. Other memberships include the National Cattlemen's Association, Corn and Soybean Associations, and the Farm Bureau. R. STEVEN NICHOLSON, resides in Las Vegas, Nevada. Mr. Nicholson served in the US Navy during WWII from 1942-1946. He graduated with an AB in History and Philosophy in 1950 from Wesleyan University. He received an MA in Cultural Anthropology from Syracuse University in 1956 and received a PhD. in the Sociology of Large Scale Organizations/Japanese and Chinese Cultures from Michigan State University in 1971. From 1956-1962 Mr. Nicholson was Director of World Vision Japan. From 1963-1971 he served as the Academic Dean, Lansing Community College-Michigan; 1971-1973 President, Daily College-Chicago; 1973-1976 President, Southern Nevada Community College, Las Vegas; 1976-1985 President, Mount Hood Community College-Oregon; 1985-1990 President, Oakland Community College-Michigan; 1990-1992 Chancellor, Higher Colleges of Technology Abu Dhabi, United Arab Emirates;1992-1994 Christian College Coalition - Oregon; 1994-1999 Senior Fellow for Higher Education-Murdock Charitable Trust Vancouver, Washington. Mr. Nicholson has served on various other boards throughout the years, including Mercy Corps International (International Relief and Development); Pontiac, Michigan Manpower Development Authority; American Association of Community Colleges, Washington, DC; and the World Affairs Council - Japan/America Society. ROBERT D. VAVRA, resides in Shenandoah, Iowa. Robert graduated from Black Hills State University in Spearfish, South Dakota in 1972 with Bachelor of Science Degrees in Math and History and graduated from the Graduate School of Banking in Boulder, Colorado in 1991. Robert has been President and Director of Bank Iowa, since 1996. He has worked for the same bank since 1986 in the role of a loan officer and Executive Vice President. Mr. Vavra has served on a number of community boards, over the years, which include the Shenandoah Optimist Club, Shenandoah Memorial Hospital and the Essex Commercial Club. Currently he serves on the Forest Park Manor Board of directors and serves as a member of the Banking Committee for the Shenandoah Chamber and Industry Association, Board of directors. BRENT LORIMOR, of rural Farragut, Iowa, was elected to serve as a director of Green Plains Renewable Energy in November of 2004. Brent graduated from Northwest Missouri State University in 1988 and taught vocational agriculture in southeast Iowa for three years before returning home to farm. Since 1992, Mr. Lorimor has been involved in the family farm operation with his brother and mother. Lorimor Farming Corporation consists of 2500 acres of corn and soybeans in Fremont, Page, and Montgomery counties. In addition to the crops, Lorimor Farming Corporation feeds out over 2000 head of cattle annually. 55 Brent is the 5th generation to farm land in the area dating back to 1856. Mr. Lorimor is a member of the Iowa and National Cattlemen's Association, Corn & Soybean Grower's Association, as well as St. Mary's church in Shenandoah, Iowa. HERSCHEL C. PATTON II, 59, resides in Salt Lake City, Utah and was elected to the Board of Directors of Green Pains Renewable Energy, Inc. in November of 2004. Hersch attended the University of Nevada/Reno and graduated from flight school in 1970. Hersch was a senior captain and pilot for both Western and Delta Airlines beginning in 1975 until retirement in 2004. During his tenure as a captain for Delta, Mr. Patton was involved in the ownership and development of various successful commercial and residential real estate ventures including the acquisition and sale of the Jeremy Ranch Golf and Country Club and the Cottonwood Creek Retail Center. Hersch remains active in real estate and various other investments. Committees of the Board of Directors Committees may be established by the directors by resolution and an affirmative vote. The Company anticipates forming an audit committee and a compensation committee in the future. At this time, neither an audit, compensation or any other committee has been created. These functions are being handled by the board of directors. EXECUTIVE COMPENSATION None of the Company's officers work of the Company on a full time basis. None of the officers received any salary, wage or other compensation for services through November 30, 2004, and no arrangements have been made with respect to future compensation and no employment agreements exist with any officer of the Company. There are presently no ongoing pension or other plans or arrangements pursuant to which remuneration is proposed to be paid in the future to any of the officers and directors of the Company. We do reimburse our officers and directors for out of pocket expenses incurred in connection with their service to the Company. It is expected that after the offering is completed that employment agreements and compensation packages will be negotiated. We expect to hire a project manager to assist us in the development of the Plant and with other matters. We intend to recruit and hire permanent employees who will be compensated on a regular basis pursuant to agreed upon salaries once the Plant is completed. We expect to offer typical health and other employee benefits. Director Compensation No cash fees or other consideration were paid to our directors for service on the board from inception through November 30, 2004. No arrangements have been agreed with respect to future compensation of our directors. It is anticipated that no compensation will be paid to the directors until completion of the offering. thereafter, it is expected that the board will adopt a reasonable compensation package for the board members. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Since our inception, we have engaged in transactions with related parties. We currently do not have outside directors or unaffiliated stockholders to evaluate related party transactions. Sale and Issuance of Common Stock On July 1, 2004, 550,000 shares of common stock were issued to our two initial directors and founders for cash payments to the Company. Barry A. Ellsworth contributed $50,000 to the Company at that time and was issued three 56 hundred fifty thousand Shares (350,000) of Common Stock. Dan E. Christensen contributed $50,000 to the Company and was issued two hundred thousand (200,000) Shares of Common Stock. The average purchase price for these Shares was $.18 per share. Fagen, Inc. and ICM, Inc. On November 4, 2004, we entered into a letter of intent with Fagen, Inc., which is expected to contract with ICM, Inc. Fagen, Inc and ICM, Inc. are to provide services to us in connection with our plan to build the Plant for a total of $56,619,000, which includes not only the Plant, but also costs associated with operations. Under the terms of the letter of intent, Fagen, Inc. and ICM, Inc. express their intent to enter into definitive agreements to provide design and construction related services. The letter of intent does not constitute a binding agreement, but the parties are obligated to enter into good faith negotiations to prepare definitive agreements. Prior to negotiating definitive agreements, any party could withdraw from the terms of the letter of intent. The board expects that Fagen, Inc. will purchase a minority interest in us. Under the letter of intent, Fagen, Inc. agrees to provide services to us in the following areas: o Providing a Preliminary Schedule and Guaranteed Maximum Price ("GMP") and Design-Build contract for the design and construction of the proposed Plant; o Assisting in all phases of the permitting process including taking a lead role in obtaining all required permits for the construction and operation of the proposed Plant; o Designing and building the proposed Plant in accordance with a Design Build Contract, based upon the Design-Build Institute of America form contract; and o Assisting in identifying appropriate operational management for the Plant. Under the letter of intent, we have agreed to pay Fagen, Inc. an aggregate of $56,619,000. Pursuant to a proposed Design-Build contract Fagen, Inc. delivered to us, Fagen, Inc. will act as our general contractor. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of the date of this prospectus, the Company has issued and outstanding seven hundred sixty-five thousand (765,000) shares of its Common Stock, $0.001 par value. Each share is entitled to one vote. The following table sets forth the names, addresses and stock ownership of all persons who own, of record or beneficially, ten percent or more the Company's outstanding Common Stock as of the date of this Memorandum, together with the stock ownership of the Company's directors individually, and all officers and directors as a group, as of the date of this Memorandum. The following table sets forth certain information with respect to the beneficial ownership of our common stock as of November 30, 2004, for: (i) each person who is known by us to beneficially own more than five percent of our common stock, (ii) each of our directors, (iii) each of our named executive officers, and (iv) all directors and executive officers as a group. On November 30,2004 the Company had 765,000 shares of common stock outstanding. 57

(1) Except where otherwise indicated, the address of the beneficial owner is deemed to be the same address as the company. (2) Beneficial ownership is determined in accordance with SEC rules and generally includes holding voting and investment power with respect to the securities. Shares of common stock subject to options or warrants currently exercisable, or exercisable within 60 days, are deemed outstanding for computing the percentage of the total number of shares beneficially owned by the designated person, but are not deemed outstanding for computing the percentage for any other person. (3) These shares are held by Mr. Thien and his wife, as joint tenants. (4) These shares are held by Mr. Nicholson and his wife, as joint tenants. (5) These shares are held by Mr. Vavra and his wife, as joint tenants. Securities Authorized for Issuance Under Equity Compensation Plans We have no securities authorized for issuance under equity compensation plans. Compensation Committee Interlocks and Insider Participation None of our executive officers serve on our Compensation Committee or in a like capacity in any other entity. DESCRIPTION OF SECURITIES Our authorized capital stock currently consists of 25,000,000 shares of common stock, $.001 par value per share. The following descriptions are a summary and qualified in their entirety by the provisions of our Articles of Incorporation and by the provisions of the Iowa Business Corporation Act. 58 Common Stock As of the date of this prospectus, we had 765,000 shares of common stock outstanding. Except as otherwise required by applicable law, all voting rights are vested in and exercised by the holders of the common, with each share of common stock being entitled to one (1) vote. In the event of liquidation, holders of common stock are entitled to share ratably in the distribution of assets remaining after payment of liabilities, if any. Holders of common stock have no cumulative voting rights. Holders of common stock have no preemptive or other rights to subscribe for shares. Dividends Dividends are payable at the discretion of our board of directors, subject to the provisions of the Iowa Statutes and our Bylaws. The board has no obligation to pay dividends to stockholders, even if we were to become profitable. We have not declared or paid any distributions on our common stock. Stockholders are entitled to receive dividends of cash or property if and when a dividend is declared by our directors. Dividends will be made to investors in proportion to the number of common stock investors own as compared to all of our common stock that are then issued and outstanding. Our directors have the sole authority to authorize dividends based on available cash (after payment of expenses and resources). We do not expect to generate revenues until the proposed Plant is operational. We expect that will occur approximately 12 to 16 months after construction commences. After operation of the proposed Plant begins, and if we become profitable and have sufficient funds for current and anticipated operating needs (including funds held in debt reserves), we may begin paying dividends of a portion of our available net cash flows and profits to our stockholders in proportion to the common stock held and in accordance with our Bylaws, unless we decide to use the available net cash to increase the size of the Plant or to build a second Plant at another location. By net cash flow, we mean our gross cash proceeds received, less any portion, as reasonably determined by our directors in their sole discretion, used to pay or establish reserves for our expenses, taxes, debt payments, capital improvements, replacements and contingencies. If our financial performance and loan covenants permit, our directors will try to make cash dividends at times and in amounts that will permit stockholders to benefit from the profitable operations of the Plant, but that will not place any undue financial burdens on our operations. However, we might not ever be able to pay any cash dividends. Any such dividends are totally discretionary with the board and may not, for various reasons, occur. As a result, you may never make any profit on your investment. The board may elect to retain future profits to provide operational financing for the Plant, further debt retirement, possible Plant expansion or to build additional plant(s). We do not know the amount of cash that we will generate once we begin operations. At the start, we will generate no revenues and do not expect to generate any operating revenue until the proposed Plant is operating fully. Cash dividends are not assured, and we may never be in a position to pay dividends. Whether we will be able to generate sufficient cash flow from our business to pay dividends to members will depend upon numerous factors, including: (i) Successful and timely completion of construction since we will not generate any revenue until our Plant is constructed and operational; (ii) Required principal and interest payments on any debt and compliance with applicable loan covenants which will reduce the amount of cash available for dividends; (iii) Our ability to operate our Plant at full capacity which directly impacts our revenues; (iv) Adjustments and amounts of cash set aside for reserves and unforeseen expenses; and, (v) State and federal regulations and subsidies, and support for ethanol generally which can impact our profitability and the cash available for dividends. 59 Warrants The Warrants are exercisable for shares of common stock at an exercise price of $30 per share. The Warrants expire on December 31, 2006 (the "Warrant Term"). The Warrants are exercised by surrendering to the Company a Warrant certificate evidencing the Warrants to be exercised, with the exercise form included therein duly completed and executed, and paying to the Company the exercise price per share in cash or check payable to the Company. Stock certificates with respect to shares purchased through the exercise of Warrants will be issued as soon thereafter as practicable. Fractional shares will not be issued upon the exercise of Warrants, and no payment will be made with respect to any fractional share of common stock to which any warrant holder might otherwise be entitled upon exercise of Warrants. No adjustments as to previously declared or paid cash dividends, if any, will be made upon any exercise of Warrants. The Warrants do not confer voting, dividend, liquidation, or preemptive rights, or any other rights of stockholders of the Company. The exercise price of the Warrants may be adjusted downward at any time in the sole discretion of the Board. Transfer Agent and Registrar Pacific Stock Transfer Company, 500 E. Warm Springs Road, Suite 240, Las Vegas, NV 89119, is our stock transfer agent. PLAN OF DISTRIBUTION Before purchasing any securities, an investor must execute a Subscription Agreement and a promissory note, if applicable, due upon closing. The Subscription Agreement will contain, among other provisions, an acknowledgement that the investor received a prospectus. All subscriptions are subject to approval by our directors and we reserve the right to reject any Subscription Agreement. An investor must purchase a minimum of one thousand (1,000) shares of common stock and blocks of 500 shares thereafter. The Offer We are hereby offering, on a best efforts basis, a maximum of 3,800,000 common shares and a minimum of 3,190,000 shares of common stock at an offering price of $10.00 per share. Each share includes a Warrant to purchase an additional 1/4 of a Share of the Company's Common Stock at a purchase price of $30.00 per share. The Warrants will be exercisable at any time after this offering has been closed. The shares will be sold by our officers and directors, who are listed under the heading "Management--Directors, Executive Officers, Promoters and Control Persons.". We will not pay commissions to our officers or directors for these sales. Broker/Dealers may participate in this offering. We may pay a commission of up to 7% for shares sold in this offering by Broker/Dealers. We intend to use the proceeds of this offering to construct an ethanol plant and to operate the plant as a going concern. We require a minimum purchase of 1,000 Shares (minimum investment of $10,000) and blocks of five hundred (500) additional shares thereafter. Method of Subscription Each person desiring to purchase 1,000 or more shares of common stock and thereby become a stockholder of the Company must execute and deliver to us the Subscription Agreement delivered together with this prospectus. Such documents must be submitted together with a check payable to US Bank, Escrow for "GPRE, Inc." for the total amount. Or you may pay twenty percent (20%) of the total amount due for the number of the securities for which subscription is sought and deliver an executed promissory note for the remaining eighty percent 60 (80%) of that price. Such notes will be due and payable within 10 days, upon notice from the Company that the minimum amount of common stock being offered herewith has been subscribed to. We reserve the right to accept or reject, in whole or in part, any subscription for any reason. Further, the initial board and/or officers of the Company and their principals may purchase common stock in this offering on the same terms as other investors. Proceeds from subscriptions for the common stock will be deposited in an interest-bearing escrow account that we have established with U.S. Bank, as Escrow Agent under a written escrow agreement. Subscription Period The initial closing date for the offering will be within 180 days from the date of this prospectus, unless extended by us for up to an additional 90 days, but not past November 29, 2005. This offering will expire 60 days after the minimum offering is raised. We reserve the right to cancel the offering at any time, to reject subscriptions for common stock in whole or in part and to waive conditions to the purchase of securities. Delivery of Certificates If we satisfy all offering conditions, upon closing of the offering, we will issue certificates for the common stock and warrants subscribed for in this offering. Unless otherwise specifically provided in the Subscription Agreement, we will issue certificates for any subscription signed by more than one subscriber as joint tenants, with full rights of survivorship. Suitability of Investors Investing in the securities offered hereby involves a high degree of risk. Accordingly, the purchase of securities is suitable only for persons of substantial financial means that have no need for liquidity in their investments and can bear the economic risk of loss of any investment in the securities. Upon acceptance of a subscription by the directors, the funds accompanying the request will be deposited in an escrow account and credited to the investor's account in accordance with the terms of this prospectus. Investors that may be deemed the beneficial owners of 5% or more, and 10% or more of our issued and outstanding common stock may have reporting obligations under Section 13 and Section 16 of the Securities and Exchange Act. A beneficial owner of 5% or more of our outstanding common stock should consult legal counsel to determine what filing and reporting obligations may be required under the federal securities laws. Summary of Promotional and Sales Material In addition to and apart from this prospectus, we will use certain sales material in connection with this offering. The material may include a brochure, a question-and-answer booklet, a speech for public seminars, invitations to seminars, news articles, public advertisements and audio-visual materials, such as a Power Point presentation. In certain jurisdictions, such sales materials may not be available. Other than as described herein, we have not authorized the use of any other sales material. This offering is made only by means of this prospectus. Although the information contained in such sales materials does not conflict with any of the information contained in this prospectus, such material does not purport to be complete and should not be considered as a part of this prospectus or of the Registration Statement of which this prospectus is a part, or as incorporated in this prospectus or the Registration Statement by reference. 61 LEGAL PROCEEDINGS We are not party to any legal proceedings. LEGAL MATTERS The validity of the common stock offered by this prospectus will be passed upon for us by Blackburn & Stoll, LC, Salt Lake City, Utah. LIMITATIONS OF DIRECTORS' AND SHARE HOLDERS' LIABILITY AND INDEMNIFICATION Our Bylaws provides that none of our directors or stockholders will be liable to us for any breach of their duty of care. This could prevent us and our stockholders from bringing an action against any director for monetary damages arising out of a breach of that director's duty of care or grossly negligent business decisions. This provision does not affect possible injunctive or other equitable remedies to enforce a directors' duty of loyalty for acts or omissions not taken in good faith, that involve intentional misconduct or a knowing violation of law, or for any transaction from which the director derived an improper personal benefit. Under Iowa law, no officer, director or stockholder will be liable for any of our debts, obligations or liabilities merely because he or she is an officer, director, or stockholder. In addition, Iowa law and our Bylaws contain an extensive indemnification provision which requires us to indemnify any officer or director who was or is a party, or who is threatened to be made a party to any current or potential legal action because he or she is our director, officer, employee or agent. We must also indemnify these individuals if they were serving another entity at our request. We must also indemnify against expenses, including attorneys' fees, judgments, fines and any amounts paid in any settlement that was actually and reasonably incurred by these individuals in connection with any legal proceedings, including legal proceedings based upon violations of the Securities Act or state securities laws. Our indemnification obligations may include criminal or other proceedings. EXPERTS The financial statements as of November 30, 2004 included in this prospectus and registration statement have been audited by L. L. Bradford & Company, LLC, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. AVAILABLE INFORMATION We have filed a Registration Statement on Form S-1under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the shares offered hereby. This prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to Quest Group International, Inc. and the 62 shares offered hereby, reference is made to the Registration Statement and the exhibits and schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement, and the exhibits and schedules thereto, may be inspected without charge at the public reference facilities maintained by the Securities and Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. and copies of all or any part of the Registration Statement may be obtained from the Commission upon payment of a prescribed fee. This information is also available from the Commission's Internet website, http://www.sec.gov. Until 90 days after the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 63 FINANCIAL STATEMENTS GREEN PLAINS RENEWALBE ENERGY, INC. TABLE OF CONTENTS PAGE NO. Report of Independent Registered Public Accountants F-1 Financial statements Balance sheet F-2 Statement of operations F-3 Statement of stockholders' equity F-4 Statement of cash flows F-5 Notes to financial statements F-6 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS To the Board of Directors and Stockholders Green Plains Renewable Energy, Inc. (A Development Stage Company) Las Vegas, Nevada We have audited the accompanying balance sheet of Green Plains Renewable Energy, Inc. (A Development Stage Company) as of November 30, 2004, and the related statements of operations, stockholders' equity, and cash flows for the period from June 29, 2004 (Inception) through November 30, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Green Plains Renewable Energy, Inc. as of November 30, 2004, and the results of its activities and cash flows for the period from June 29, 2004 (Inception) through November 30, 2004, in conformity with accounting principles generally accepted in the United States of America. /s/ L.L. Bradford & Company, LLC L.L. Bradford & Company, LLC December 3, 2004 Las Vegas, Nevada F-1

GREEN PLAINS RENEWABLE ENERGY, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS, HISTORY, AND SUMMARY OF SIGNIFICANT POLICIES Description of business - Green Plains Renewable Energy, Inc. (hereinafter referred to as the "Company") is a development stage company incorporated on June 29, 2004 under the laws of the state of Iowa. Green Plains Renewable Energy, Inc. was organized to construct and operate a 50 million gallon, dry mill, fuel grade ethanol plant ("Plant"). Definition of fiscal year - The Company's fiscal year end is November 30. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents - The Company considers all unrestricted highly liquid investments with an initial maturity of three months or less to be cash equivalents. The Company maintains cash balances with several regional financial institutions. Accounts are insured by the Federal Deposit Insurance Corporation up to $100,000. As of November 30, 2004, the Company's uninsured cash balances totaled $531,100. Income taxes - The Company accounts for its income taxes in accordance with Statement of Financial Accounting Standards No. 109. Deferred tax assets and liabilities at the end of each period are determined using the tax rate expected to be in effect when taxes are actually paid or recovered. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. As of November 30, 2004, the Company established a valuation allowance for the entire deferred tax asset of approximately $4,000. Net loss per common share - The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share (SFAS 128) and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of SFAS 128 and SAB 98, basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of shares of common stock outstanding during the period. The calculation of diluted net loss per share gives effect to common stock equivalents, however, potential common shares are excluded if their effect is antidilutive. For the period from June 29, 2004 (Inception) through November 30, 2004, no shares were excluded from the computation of diluted earnings per share because their effect would be antidilutive. New accounting pronouncements - Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51, Consolidated Financial Statements, addresses consolidation by business enterprises of variable interest entities. It is effective immediately for variable interest entities created after January 31, 2003. It applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities acquired before February 1, 2003. The impact of adoption of this statement is not expected to be significant. SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities, amends and clarifies accounting for derivative instruments under SFAS No. 133. It is effective for contracts entered into after June 30, 2003. The impact of adoption of this statement is not expected to be significant. SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, establishes standards for how an issuer classifies and measures certain financial instruments with F-6 characteristics of both liability and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The impact of adoption of this statement is not expected to be significant. 2. OTHER CURRENT ASSETS As of November 30, 2004 other assets totaling $3,000 consists of the following: Deposit related to the option agreement to purchase approximately 22.0 acres of farm real estate located in Fremont county, Iowa $ 1,000 Deposit related to the option agreement to purchase approximately 66.6 acres of farm real estate located in Fremont county, Iowa 2,000 ------- $ 3,000 ======= 3. STOCKHOLDERS' EQUITY During July 2004, the Company issued 550,000 shares of common stock to the founders of the Company for cash totaling $100,000. During August, October and November 2004, the Company issued 73,000 shares of common stock to directors for cash totaling $182,500. During August, September, October and November 2004, the Company issued 142,000 shares of common stock to various individuals and entities for cash totaling $355,000. 4. COMMITMENTS AND CONTINGENCIES The Company entered into an agreement with U.S. Energy Services, Inc. for consulting and energy management services. These services will be provided prior to and during the construction of the Plant ("Construction Period"), and after the Construction Period when the Plant has been placed in service ("Completion Date"). The Completion Date shall be determined when the Plant begins producing ethanol. U.S. Energy's fee for services shall be $2,900 per month. The Company may defer payment on the invoiced amounts until documents for closing and funding the loans necessary for the plant have been secured. In the event that plant financing is not secured, this agreement shall become null and void and both parties will be relieved of professional and/or financial obligations due the other party. For the period from June 29, 2004 (Inception) through November 30, 2004, total fees related to these services were $5,800, and were recorded as accrued liabilities on the balance sheet. F-7 II-4 PART II - INFORMATION NOT REQUIRED IN PROSPECTUS Item 24. Indemnification of Directors And Officers The Iowa Business Corporation Act permits us to indemnify our directors, officers, employees and agents, subject to limitations imposed by the Iowa Business Corporation Act. Our Bylaws require us to indemnify directors and officers to the full extent permitted by the Iowa Business Corporation Act. Item 25. Other Expenses Of Issuance And Distribution The following table sets forth all estimated costs and expenses, other than underwriting discounts, commissions and expense allowances, payable by the registrant in connection with the maximum offering for the securities included in this Registration Statement: Securities and Exchange Commission registration fee..... $8,426 Blue Sky fees and expenses.............................. 2,000 Printing and shipping expenses.......................... 10,000 Legal fees and expenses................................. 30,000 Accounting fees and expenses............................ 15,000 Miscellaneous fees ..................................... 15,000 -------------- Total................................................... $80,426 ============== ------------------- All expenses are estimated except the Commission filing fee. Item 26. Recent Sales Of Unregistered Securities In July, 2004, we sold 550,000 shares of common stock to Barry Ellsworth and Dan Christensen, our founders and initial directors and accredited investors, in a private offering in consideration for $100,000. The sale of the these securities was exempt from registration pursuant to Rule 506 of Regulation D and Sections 4(2) and 4(6) of the Securities Act of 1933, as amended. We did not use an underwriter or pay any commissions in connection with these transactions. During the months of July through November, 2004, we sold an aggregate of 215,000 shares of common stock to 29 accredited investors in a private offering in consideration for an aggregate of $537,500. The sale of the these securities was exempt from registration pursuant to Rule 506 of Regulation D and Sections 4(2) and 4(6) of the Securities Act of 1933, as amended. We did not use an underwriter or pay any commissions in connection with these transactions Item 27. Exhibits Index EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 3(i).1 Amended and Restated Articles of Incorporation of the Company 3(ii).1 Bylaws of the Company 4.1 Form of Warrant Certificate 5.1 Opinion of Blackburn & Stoll, LC 10.1 Option Agreement on Hilger West Property, by and between the Company and Alberta A. Bryon, dated November 12, 2005. II-1 EXHIBIT NO. DESCRIPTION OF EXHIBIT ------- ---------------------- 10.2 Option Agreement on Hilger East Property, by and between the Company and Alberta A. Bryon, dated October 20, 2005. 10.3 Letter of Intent relating to the purchase of real property from Shenandoah Chamber & Industry Association, dated November 12, 2004. 10.4 Letter of Intent by and between Fagen, Inc. and Green Plains Renewable Energy, Inc. dated November 4, 2004. 10.5 Letter Agreement by and between the Company and U.S. Energy, Inc., dated October 5, 2004. 23.1 Consent of L.L. Bradford & Company, LLC 23.2 Consent of Blackburn & Stoll, LC (included in Exhibit 5.1 hereto) 24.1 Powers of Attorney (included in Part II of this Registration Statement) 99.1 Subscription Agreement 99.2 Escrow Agreement ---------------- Item 28. Undertakings The registrant hereby undertakes that it will: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume or securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in the volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) Include any additional or changed material information on the plan of distribution. (2) For determining any liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 SIGNATURES In accordance with the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Las Vegas, State of Nevada, on December 14, 2004. GREEN PLAINS RENEWABLE ENERGY, INC. (Registrant) By /s/ Barry A. Ellsworth -------------------------------------- Barry A. Ellsworth, President and Chairman We the undersigned, directors and officers of Green Plains Renewable Energy, Inc., do hereby severally constitute and appoint Barry A. Ellsworth as our true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign and all amendments or post-effective amendments to this registration statement, and to file the same with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys and agents, and each or any of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that the said attorneys-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Barry A. Ellsworth President and Chairman (acts as ------------------------ Principal Executive Officer and December 14, 2004 Barry A. Ellsworth Principal Financial Officer) /s/ Dan Christensen Secretary, Treasurer and Director December 14, 2004 ------------------------ (acts as Principal Financial Dan Christensen Officer) /s/ Gary Thien Director and Vice President December 14, 2004 ------------------------ Gary Thien /s/ David A. Hart Director December 14, 2004 ------------------------ David A. Hart /s/ Steve Nicholson Director December 14, 2004 ------------------------ Steve Nicholson /s/ Robert D. Vavra Director December 14, 2004 ------------------------ Robert D. Vavra /s/ Brent Lorimor Director December 14, 2004 ------------------------ Brent Lorimor /s/ Hersch Patton Director December 14, 2004 ------------------------ Hersch Patton II-3