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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

x		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.
		FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2008
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
		FOR THE TRANSITION PERIOD FROM TO

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2009

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 000-53042

OTTER TAIL AG ENTERPRISES, LLC

(Exact name of registrant as specified in its charter)

MINNESOTA		41-2171784
(State or other jurisdiction		(IRS Employer
of incorporation or organization)		Identification No.)

24096 - 170th Avenue ~~Fergus Falls, MN 56537-7518 (Address and Zip Code of Principal Executive Offices)~~

~~(Registrant’s telephone number~~Fergus Falls, ~~including~~MN ~~area code): (218) 998~~56537-~~4301~~7518

~~Securities~~(Address and ~~register~~Zip ~~pursuant~~Code ~~to Section 12(b)~~ of ~~the~~Principal ~~Exchange Act:~~Executive ~~None~~Offices)

~~Securities~~Registrant’s telephone ~~registered~~number, ~~under~~including ~~Section 12~~area code: (g218) of ~~the Exchange Act:~~998-4301

~~Class~~Securities registered pursuant to Section A12(b) of ~~Membership~~the ~~Units~~Act: None

Securities registered under Section 12(g) of the Act: Class A Membership Units

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

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

Indicated by ~~checkmark~~ check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer., or a smaller reporting company. See the ~~definition~~definitions of “large accelerated filer,” ~~and large~~ “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated Filer o Non-accelerated filer o Smaller Reporting Company x

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

The aggregate market value of the membership units held by non-affiliates of the registrant as of September 30, ~~2008~~ 2009 was $4446,~~799~~406,664. There is no established public trading market for our membership units. The aggregate market value was computed by reference to the purchase price of $2.00 per unit that was established in our intrastate offering that closed on October 31, 2006, multiplied by the 22 23,~~399~~203,~~832~~332 Class A Membership units held by non-affiliates of the Company.

AsAPPLICABLE ofONLY ~~September 30,~~TO ~~2008~~REGISTRANTS ~~the~~INVOLVED ~~Company~~IN ~~has 23,944,000 Class A Membership Units outstanding.~~BANKRUPTCY

~~Table~~PROCEEDINGS ofDURING ~~Contents~~THE PRECEDING FIVE YEARS:

~~DOCUMENTS~~Indicate ~~INCORPORATED~~by BYcheck ~~REFERENCE:~~mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes o No o

~~Portions~~As of ~~the registrant’s~~ ~~definitive~~September 30, ~~proxy~~2009 ~~statement for~~ the ~~2009~~Company ~~Annual~~had ~~Meeting of Members are hereby incorporated by reference in Part III~~23, ~~Items 10~~944,000 ~~11,~~Class A ~~12,~~Membership ~~13, and 14 of~~Units ~~this report~~outstanding.

Table of Contents

TABLE OF CONTENTS

Page PART I 2 ITEM 1. BUSINESS 2 ITEM 1A. RISK FACTORS 11 ITEM 2. PROPERTIES 18 ITEM 3. LEGAL PROCEEDINGS 18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19 PART II 19 ITEM 5. MARKET FOR REGISTRANT’S MEMBER UNITS, RELATED MEMBER MATTERS AND ISSUER PURCHASED OF EQUITY SECURITIES 19 ITEM 6. SELECTED FINANCIAL DATA 20 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 21 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 27 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 28 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 28 ITEM 9A(T). CONTROLS AND PROCEDURES. 29 PART III 29 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 29 ITEM 11. EXECUTIVE COMPENSATION 29 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND RELATED STOCKHOLDER MATTERS 29 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 29 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 29 PART IV 30 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 30 EX-10.2 EX-10.45 EX-10.46 EX-10.47 EX-10.48 EX-31.1 EX-32.1

PART I

ITEM 1. BUSINESS	3
ITEM 1A. RISK FACTORS	10
ITEM 2. PROPERTIES	20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	20

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNIT HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	20
ITEM 6. SELECTED FINANCIAL DATA	21
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES	31
ITEM 9A(T). CONTROLS AND PROCEDURES	31

PART III

ITEM 10. GOVERNORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE	32
ITEM 11. EXECUTIVE COMPENSATION	34
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	36
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND GOVERNOR INDEPENDENCE	37
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES	37

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES	39

Exhibit 10.1
Exhibit 31.1
Exhibit 32.1

~~Table of Contents~~2

PART I

ITEM 1. BUSINESS.

Overview

Otter Tail Ag Enterprises, LLC (“We,” “us,” “our,” or the “Company”), organized as a Minnesota limited liability company on January 27, 2005, owns and operates a nameplate capacity 55 million gallons per year corn dry mill ethanol plant in Fergus Falls, Minnesota (the “Plant”), which became fully operational in June 2008. Our Plant annually processes approximately 20 million bushels of corn into 55 million gallons of denatured fuel grade ethanol, 135,500 tons of dried distillers grains with solubles, and 65,500 tons of distillers grains with solubles. In this process, we consume approximately 1,700,000 cubic feet of natural gas per year. Our website is located at www.ottertailethanol.com. Our principal executive offices currently are located at 24096 -170th Avenue, Fergus Falls, Minnesota, 56537-7518, and our telephone number is (218) 998-4301.

General Development of Business

We began preliminary production operations in April 2008, and ethanol was first produced at the Plant in May 2008. The Plant encountered issues typical of a plant startup during the first four months of operation. As of September 30, 2009, we have been producing ethanol at the Plant at or near nameplate capacity, and have been receiving revenues from the sale of ethanol, Distillers Grains With Solubles (“WDGS”) and Distillers Dried Grains with Solubles (“DDGS”). We had a period of profitability following the commencement of ethanol production in May, June, and July 2008; however, since that time we have not been profitable and we may not be able to achieve profitability in the near future, or at all. We violated certain covenants under our master loan agreement (the “Master Loan Agreement”) with Agstar Financial Services, PCA (“Agstar”) and were in default as of September 30, 2008. We received a waiver from Agstar for compliance with such covenants through October 1, 2009 and a waiver from MMCDC New Markets Fund II, LLC (“NMF”) and Otter Tail county pertaining to the cross-default provisions contained in their respective debt financing agreements. However, due to the untimely payments on all our loans they are now all recorded as current and we have been unable to obtain additional waivers from any of our lenders for the year ending September 30 2009. We have incurred net losses of $21.5 million and $8.7 million for the year ended September 30, 2009 and 2008, respectively. In August 2009, we received notice that our senior lender and other secured lenders had filed a foreclosure notice through the court system to retrieve the assets and to appoint a receiver to control and liquidate the business. As a means to protect ourselves and following failed negotiation with our lenders, we filed for bankruptcy on October 30, 2009 under the protection of Chapter 11 of the bankruptcy code.

We plan to utilize the court system to file a reorganization and restructure plan to meet the needs of the business on a going forward basis. We do not have a plan of reorganization plan at present, and any proposed plan must be confirmed by the bankruptcy court. There is no guarantee that such a plan will be confirmed by the bankruptcy court. A major component of this plan will be the restructure of our indebtedness as well as raising a minimum of $10 million of additional equity. There can be no assurance that we will be able to obtain any sources of funding on acceptable terms, or at all. Our long-term plan includes evaluating improved technologies to either earn additional revenue or reduce operating costs as well as evaluate our procurement and offtake agreements with the goal of reducing our input costs and increasing our revenues. There can be no assurance that we will be able to find or add improved technologies or change our procurement or offtake structure.

Financial Information

Please refer to “Item 6 — Selected Financial Data” and “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” for information about our revenues, profit and loss measurements and total assets. Our consolidated financial statements and supplementary data are included beginning at page F-1 of this annual report on Form 10-K.

Principal Products and Their Markets

The principal products we produce at our Plant are fuel grade ethanol and DDGS and WDGS.

Our Main Product - Ethanol

Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains, and can be used as:

an oxygenated fuel additive that can reduce ozone and carbon monoxide vehicle emissions;

a non-petroleum based gasoline substitute; and

an octane enhancer in fuels.

Most ethanol is used in its primary form for blending with unleaded gasoline and other fuel products. The principal purchasers of ethanol are generally wholesale gasoline distributors or blenders.

Ethanol is produced from starch or sugar-based feed products such as corn, potatoes, wheat, and sorghum, as well as from agricultural waste products including sugar, rice straw, cheese whey, beverage wastes and forestry and paper wastes. Historically, corn has been the primary source because of its relatively low cost, wide availability and ability to produce large quantities of carbohydrates that convert into glucose more easily than other products. Today, approximately 90% of the ethanol produced in the United States is produced from corn.

The Dry Mill Process

The Plant uses a dry milling process to produce fuel-grade ethanol as its main product and DDGS and WDGS as co-products. Our Plant has a design capacity to produce 55 million gallons of ethanol per year. In addition, the Plant has a design capacity to produce approximately 135,500 tons of DDGS and 66,500 tons of WDGS. We are presently venting the carbon dioxide gas into the atmosphere. Our Plant has, among others, the following facilities:

Grain Receiving, Storage and Milling Equipment. The Plant contains receiving facilities that have the ability to receive corn by rail and truck. Upon delivery, we weigh the corn and issue a weight ticket. A leg lifts the corn to the storage bins. We have installed a dust collection system in the grain receiving system to limit particulate emissions. We then remove the corn from storage to a scalper to remove rocks and debris before conveying the product and processing it through a hammer-mill. The result of this process is ground corn.

Conversion and Liquefaction System, Fermentation System and Evaporation System. We mix the ground corn in slurry tanks which produces cooked mash. The cooked mash then continues through liquefaction tanks and into fermenters. Simultaneously, we add yeast to the cooked mash as it enters the fermenters. After batch fermentation is complete, the liquid produced by the fermentation process is pumped to wells and then to the distillation column to separate the alcohol from the mash.

Distillation and Molecular Sieve. We dehydrate and separate the ethanol in the distillation column, the side stripper and the molecular sieve system. We then blend the ethanol with up to 5 percent gasoline as it is pumped into storage tanks. The storage tanks contain meters, filters, pumps and loading equipment for transfer to rail cars or trucks.

Liquid/Solid Separation System. The Plant also produces distillers grains. We transport the corn mash from the distillation column to centrifuges and then a dryer, where moisture is removed. The Plant utilizes a dryer system with a regenerative thermal oxidizer. After they are dried, the distillers grains are conveyed to the filter receiver and then to a storage building.

Product Storage Area. We have storage tanks on site to store the ethanol we produce. The Plant also contains a storage building to hold distillers grains until they are shipped to market.

General Plant Infrastructure and Utilities. The Plant also consists of administration facilities, chillers, cooling towers and other processing equipment, some of which require fresh water to operate. We condition boiler water in regenerative softeners and/or other treatment equipment and pump it through a deaerator and into a deaerator tank. Appropriate boiler chemicals are added and the pre-heated water is pumped into the boiler. Steam energy is provided by a steam generator. Process cooling is provided by circulating cooling water through heat exchangers, a chiller and a cooling tower. The Plant contains a compressed air system consisting of an air compressor, receiver tank, pre-filter and air dryer. The Plant design also incorporates the use of a clean-in-place system for cooking, fermentation, distillation, evaporation, centrifuges and other systems.

The block flow diagram below illustrates how the Plant processes corn into ethanol:

For our fiscal years ended September 30, 2009 and 2008, revenue from the sale of ethanol was approximately 85% of total revenues.

Distillers Grains

A principal co-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. The dry mill ethanol processing used by the Plant results in two forms of distiller grains: WDGS and DDGS. WDGS is processed corn mash that has not been dried and that has approximately 65% moisture. WDGS have a shelf life of approximately three days and are often sold to nearby markets. DDGS is processed corn mash that has been dried to 10% to 12% moisture. DDGS has an almost indefinite shelf life and may be sold and shipped to any market regardless of its vicinity to an ethanol plant. At our Plant, the composition of the distillers grains we produce is approximately 40% WDGS and 60% DDGS (by weight).

For our fiscal years ended September 30, 2009 and 2008, revenues from sale of distillers grains was approximately 15% of total revenues.

Employees

We have 33 full time employees, of which five are in general management and administration, and the remainder in Plant operations. We entered into a written agreement to employ a Chief Executive Officer, who also serves as our Chief Financial Officer. We do not maintain an internal sales organization. We rely upon third-party buyers and marketers to buy or market the ethanol and distillers grains that we produce to multiple buyers throughout the United States. Under such a business plan, our principal operations are the general management of our business and the operation of the Plant.

Sales and Marketing

We have hired a national marketing firm to sell our ethanol and another to sell our distillers grain. However, because of the number of local feedlots and livestock operations, we sell a portion of our distillers grains locally, as WDGS.

Ethanol

On July 18, 2006, we entered into an Ethanol Fuel Marketing Agreement with Renewable Products Marketing Group, L.L.C. (“RPMG”) in which RPMG agreed to be the sole marketing representative for our facility’s entire production of ethanol. Under the terms of this agreement, RPMG agrees to use its best efforts to market all our ethanol and its best efforts to find the best price for all fuel grade ethanol obtained pursuant to the agreement, but is not obligated to sell a minimum number of gallons per month. The cost associated with this service is $0.01 per gallon of the sales price of the ethanol. This agreement estimates that we will supply RPMG with an average monthly volume of 4,583,333 gallons of ethanol. If we are unable to achieve this monthly volume and, as a consequence, RPMG is unable to meet its sale obligations to third parties, RPMG may purchase ethanol on the open market and have us reimburse RPMG for any losses. RPMG is under no contractual obligation to buy any minimum amount of our ethanol. If, for any reason, this agreement is terminated by either party, we may incur significant expense in finding a replacement to market our ethanol, which could have a material negative effect on our business.

We believe that utilizing RPMG not only enables us to bypass the need to develop our own internal sales organization, but also provides us access to markets that we would otherwise not be able to penetrate on our own. RPMG has access to numerous markets because they manage large quantities of ethanol and can provide flexibility to meet varying customer needs. We believe that having a diverse customer base through RPMG provides us better flexibility to respond to negative localized market fluctuations. However, we seek to deliver as much product as possible to local markets, which helps minimize our freight costs.

In addition, RPMG offers a variety of services and infrastructure that would be expensive and inefficient for us to implement on our own. For example, RPMG provides scheduling, transportation logistics, permits, invoicing, account collection and payment services. We believe it is more cost effective for us to contract for these services from our marketer rather than developing and funding in house expertise to handle these matters. This type of marketing agreement is customary in the ethanol industry as ethanol producers focus on producing ethanol and enter into agreements with third-party providers with expertise in other key areas.

RPMG is a producer-owned ethanol and bio-diesel marketing company formed in 1999. RPMG applies cooperative principles to the marketing of fuel ethanol and it is the only such association that is wholly owned and managed by its member plants. The five founding member plants of RPMG are Al-Corn Clean Fuels of Claremont, Minnesota; Chippewa Valley Ethanol Company of Benson, Minnesota; Corn Plus of Winnebago, Minnesota; Diversified Energy Company of Morris, Minnesota and Heartland Corn Products in Winthrop, Minnesota. We are not a member of RPMG, but retain RPMG to market our ethanol pursuant to the Ethanol Fuel Marketing Agreement. We do not anticipate any conflicts of interest arising in the future due to RPMG marketing ethanol for other producers and its member plants because RPMG is contractually obligated to use the same best efforts to sell the ethanol produced at all its contracted plants. As a result, RPMG would be in breach of its contracts with us and other members if it favored one plant over another. No such event has occurred, to our knowledge, in the past, nor would we reasonably expect that such an event would happen in the future.

The market segments for our ethanol depend in part on the buyers and marketers we work with and their size and geographic reach. These outlets vary in terms of where they distribute the ethanol and the transportation methods and costs associated with delivering the ethanol to their facilities. Unless rail is an option, ethanol sold in local and regional markets are typically shipped primarily by truck. Ethanol sold into national markets is shipped by rail.

To meet the challenge of marketing ethanol to diverse market segments, we have planned for an extensive rail siding at the production facility. The use of rail allows us to quickly move large quantities of ethanol to the markets that provide the greatest return.

Our ethanol and distillers grains marketers decide where our products will be marketed. Our products are primarily marketed within the United States. However, we may experience increased exports of our products in the future. Further, distillers grains may be exported to countries who require animal feed. Management anticipates that the Asian market may increase demand for distillers grains in the future. As distillers grains become more accepted as an animal feed substitute throughout the world, distillers grains exporting may increase.

Distillers Grains

The market for distillers grains generally consists of local markets for both DDGS and WDGS and national markets for DDGS.

Most of the distillers grains that we sell are in the form of DDGS. On February 28, 2008, we signed an agreement with CHS, Inc. (“CHS”) in which CHS agreed to be the sole marketing representative for our Plant’s entire production of DDGS. If, for any reason, this agreement is terminated by either party, we may incur significant expense in finding a replacement to market our DDGS, which could have a material negative effect on our business.

We sell a portion of our distillers grains as WDGS, which are sold to local markets. We are also party to a Distillers Grain Purchase Agreement with Bilden Farms, LLC (“Bilden”) in which we give Bilden the first right and option to purchase our output of WDGS, and Bilden agrees to utilize its best efforts to purchase and resell the grains. The agreement is for a two-year term. We believe this agreement helps to further reduce our shipping cost and minimize drying costs. If, for any reason, this agreement is terminated by either party, we may incur significant expense in finding a replacement to market our WDGS, which could have a material negative effect on our business.

Procurement Agreements

We are party to a Procurement Agreement with CHS in which CHS agreed to supply and we agreed to buy all of the corn needed for ethanol production at the Plant, estimated to be approximately 20 million bushels per year. Our contract with CHS provides that we will establish the price we will pay for corn and CHS will seek corn for us to buy at this price. In the event CHS cannot locate adequate corn at this price, CHS will notify us and we may elect to change our price in order to obtain more corn. If CHS is unable to obtain enough corn in our immediate trade territory, we have installed rail unloading capability and we have the ability to bring rail cars in from outside our immediate market area. CHS would continue to act as our buying agent and we would set the price. In the event that CHS is unable to obtain corn for us at a price we deem acceptable, we would seek to purchase corn directly from farmers, elevators and other corn supply companies in our local area, as well as from regional and national sources. This agreement is for a term of five years and will expire in 2012.

Dependence on One or a Few Major Customers

We are substantially dependent upon RPMG for the purchase, marketing and distribution of our ethanol. RPMG purchases 100% of the ethanol produced at our Plant, all of which is marketed and distributed to its customers. Therefore, we are highly dependent on RPMG for the successful marketing of our ethanol. In the event that our relationship with RPMG is interrupted or terminated for any reason, we believe that another entity to market the ethanol could be located. However, any interruption or termination of this relationship could temporarily disrupt the sale and production of ethanol and adversely affect our business and operations.

We are substantially dependent on CHS for the purchase, marketing and distribution of our DDGS. CHS purchases 100% of the DDGS produced at the Plant, all of which are marketed and distributed to its customers. Therefore, we are highly dependent on CHS for the successful marketing of our DDGS. In the event that our relationship with CHS is interrupted or terminated for any reason, we believe that another entity to market the DDGS could be located. However, any interruption or termination of this relationship could temporarily disrupt the sale and production of DDGS and adversely affect our business and operations.

Seasonal Factors in Business

In an effort to improve air quality in regions where carbon monoxide and ozone are a problem, the Federal Oxygen Program of the Federal Clean Air Act requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce carbon monoxide pollution. Gasoline that is blended with ethanol has a higher oxygen content than gasoline that does not contain ethanol. As a result, we see fairly light seasonality with respect to our gross profit margins on our ethanol, allowing us to, in some cases, be able to sell our ethanol at a slight premium during the mandated oxygenate period. Conversely, we expect our average sales price for fuel grade ethanol during the summer, when fuel grade ethanol is primarily used as an octane enhancer or a fuel supply extender, to be a little lower.

Financial Information about Geographic Areas

All of our operations and all of our long-lived assets are located in the United States. We believe that all of the products we will sell to our customers in the future will be produced in the United States.

Sources and Availability of Raw Materials

Corn

Our corn supply is secured through a procurement arrangement with CHS. Under the terms of the procurement agreement, CHS agrees to supply and we agree to buy all of the corn needed for ethanol production at the Plant, estimated to be approximately 20 million bushels per year. We believe that CHS can supply all of the corn needed for our ethanol production requirements. For the fiscal year ended September 30, 2009, we had not experienced any problems with our supply of corn from CHS, and do not anticipate experiencing any problems with our supply of corn in fiscal 2010.

Utilities

The production of ethanol is a very energy intensive process that requires significant and uninterrupted amounts of electricity, natural gas and water. We have signed contracts with utility providers to supply us with our energy requirements. A natural gas pipeline has been installed to the Plant distributing to the necessary equipment. If there is any interruption in our supply of energy, such as supply, delivery or mechanical problems, we may have to halt production. Halting production for any extended period of time will harm our business.

Natural Gas

On May 23, 2006, we entered into an agreement with BP Canada Energy Marketing Corp. (“BP Canada”) to provide us with the necessary supply of natural gas when needed at a mutually agreed upon price via telephone. For the fiscal year ended September 30, 2009, we had not experienced any problems with our supply of natural gas from BP Canada, and do not anticipate experiencing any problems with our supply of natural gas in fiscal 2010.

Denaturant

Wholesale gasoline is mixed into the ethanol and used as a denaturant in the ethanol process. Each tank of ethanol that we produce is presently allowed to contain a certain blended amount of gasoline.

Other Inputs

Other inputs to the production process include chemicals, yeast, enzymes and water. Of these, chemicals and enzymes are the largest components.

Transportation and Delivery

The Plant has facilities to receive corn by truck and rail and to load ethanol and distillers grains onto trucks and rail cars. On October 1, 2006, we entered into a lease for an indefinite term with Otter Tail Valley Railroad Company, Inc. (“OTVR”) at a cost of $4,200 per year with a annual increase of 3% for the use of the land in which the railroad will be constructed and used. On May 9, 2006, we entered into an agreement with Railworks Track Systems, Inc. to construct the track at a total cost of approximately $1.5 million. On April 6, 2007, we entered into an industry track agreement with OTVR to maintain and operate the track for a period of one year, with automatic one year renewals thereafter.

We have entered into a pool marketing agreement with RPMG to provide all marketing services for ethanol including both truck and rail transportation. RPMG is responsible for scheduling all logistics based on information we provide to them on the amount of gallons we will be selling and shipping for a given month. The cost for transportation of product by rail to a specific destination is posted on the Burlington Northern Santa Fe railroad Web site. The transportation costs associated with truck is based on a mileage and fuel surcharge basis and is established once a destination is determined. RPMG will be responsible for providing all rail and trucking services, excluding expenses payable to the rail or trucking companies, as part of the fee we pay RPMG. Expenses payable to the rail or trucking companies are paid by RPMG, but deducted from our portion of the ethanol sales price.

We also have entered into an agreement with CHS to distribute and market our DDGS. Under the terms of the agreement, CHS purchases 100% of the DDGS produced at the Plant, all of which are marketed and distributed to its customers.

Ethanol Competition

Many competitors are located in close proximity to our Plant and more may be in the future. These competitors compete with us for, among other things, corn and personnel. Because of their close proximity, these competitors may also be more likely to sell to the same markets that we target for our ethanol and distillers grains.

According to the Renewable Fuels Association, as of October 22, 2009, 202 ethanol refineries had a nameplate production capacity of 13.1 billion gallons, and 11.9 billion gallons of operating production. A majority of the ethanol plants are located in the Midwest, in the corn-producing states of Illinois, Iowa, Minnesota, Nebraska and South Dakota. The largest ethanol producers include Valero Energy Corporation, Abengoa Bioenergy Corp., Archer Daniels Midland Company, Aventine Renewable Energy, Inc., Cargill, Inc., New Energy Corp. and Poet, LLC.

Distillers Grains Competition

Ethanol plants in the Midwest produce the majority of distillers grains and primarily compete with other ethanol producers in the production and sales of distillers grains. The amount of distillers grains produced is expected to increase significantly as the number of ethanol plants increase, which will increase competition in the distillers grains market in our area. In addition, our distillers grains compete with other livestock feed products such as soybean meal, corn gluten feed, dry brewers grain and mill feeds.

International

We also compete and believe we will continue to compete in the future with ethanol that is produced or processed in certain countries in Central America and the Caribbean region, Brazil and other countries. Ethanol produced in the Caribbean basin and Central America may be imported into the United States at low tariff rates or free of tariffs under the Caribbean Basin Initiative and the Dominican Republic — Central America — United States Free Trade Agreement. Although tariffs presently impede large imports of Brazilian ethanol into the United States, low production costs, other market factors or tariff reductions could make ethanol imports from various countries a major competitive factor in the United States.

Alternative Fuel Additives

The development of ethers intended for use as oxygenates is continuing. Methyl tertiary butyl ether, or “MTBE,” is a petrochemical produced by combining isobutylene (a product of the refining industry) with methanol. We expect to compete with producers of MTBE, which costs less to produce than ethanol. MTBE is an oxygenate commonly used in fuels for compliance with the federal Clean Air Act. Many major oil companies produce MTBE. These companies have significant resources to market MTBE and to influence legislation and public perception of MTBE. However, MTBE has been linked to groundwater contamination at various locations in the United States. Many states have enacted legislation prohibiting the sale of gasoline containing certain levels of MTBE or are phasing out the use of MTBE.

Ethyl tertiary butyl ether, or “ETBE,” is produced by combining isobutylene with ethanol. ETBE’s advantages over ethanol as a fuel blend include its low affinity for water and low vapor pressure. Because petroleum pipelines and storage tanks contain water in various amounts, ETBE’s low affinity for water allows it to be distributed through existing pipeline systems. This is not possible for ethanol, which must be shipped via transport trucks or rail cars.

A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells or clean burning gaseous fuels. Like ethanol, the emerging fuel cell industry offers a technological option to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions.

Government Incentives

National Renewable Fuels Standard

The Energy Policy Act of 2005 also introduced a national renewable fuels standard program which sets a national minimum usage requirement that phases in over seven years, beginning with approximately 4.0 billion gallons in 2006 and increases to 7.5 billion gallons by 2012. On December 19, 2007, President Bush signed into law the Energy Independence and Security Act of 2007, which raises the minimum usage requirement to 13.2 billion gallons of ethanol by 2012 and 15 billion gallons by 2015. This law also mandates a minimum requirement of 36 billion gallons of renewable fuels by 2022, with cellulosic ethanol accounting for 16 billion gallons of this total. The renewable fuels standard program should ensure the continued growth of the ethanol market in the near future. While we cannot assure that this program’s mandates will continue in force in the future, the following chart illustrates the potential United States ethanol demand based on the program’s schedule through the year 2022.

Source: BioFuels Journal, December 28, 2007

Incentive Programs

The federal government and various state governments have created incentive programs to encourage ethanol production and to enable ethanol-blended fuel to better compete in domestic fuel markets with gasoline blended with MTBE. The federal incentive programs include excise tax credits to gasoline distributors, direct payments to eligible producers for increased ethanol production and federal income tax credits which eligible producers may earn. State incentive programs include production payments and income tax credits. However, these programs are not without controversy, due in part to their cost, and we cannot assure that they will continue to be available in the future.

Federal Excise Tax Exemption

Although the regulatory program is complicated and there are other federal tax incentives for ethanol production, the most important incentive for the ethanol industry and its customers is the partial exemption from the federal motor fuels excise tax, or the “excise tax exemption.” The excise tax exemption is provided to gasoline distributors as an incentive to blend their gasoline with ethanol. For each gallon of gasoline blended with 10 percent of ethanol, the distributors receive a 4.5¢ per gallon reduction from the 18.3¢ per gallon federal excise tax, which equates to a 45¢ reduction for each gallon of ethanol that they use after annual production or importation of ethanol reaches 7.5 billion gallons. This exemption was lowered in the 2008 Farm Bill from a previous excise tax exemption of 51¢ for each gallon and will expire in December 2010 if not renewed.

Federal Small Producer Credit

The federal Small Ethanol Producer Credit provides an eligible ethanol producer with a 10¢ per gallon tax credit for the first 15 million gallons of ethanol produced annually. Under the program, ethanol producers that qualify or their owners (for pass-through tax entities) can reduce their federal income tax liability by the amount of the annual credit, subject to limitations. However, benefit of the credit is reduced somewhat because the amount of the credit must be added to regular taxable income (but not to alternative minimum taxable income). Until recently, an eligible small ethanol producer was defined as a producer whose annual production capacity was 30 million gallons or less, which effectively precluded most newer plants from qualifying. The Energy Tax Incentives Act of 2005 increased the annual production capacity limitation from 30 million to 60 million gallons. Because our anticipated annual capacity is 55 million gallons, we expect to qualify as a small ethanol producer, at least in our initial year or years of operations. The credit is scheduled to expire on December 31, 2010 and, if it is not extended, taxpayers will have a three-year carry forward in which to utilize unused credits.

Research and Development

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

Costs and Effects of Compliance with Environmental Laws

In the fiscal year ended September 30, 2009, we incurred costs and expenses of approximately $72,000 complying with environmental laws, including the cost of obtaining permits, easements and installing emissions related equipment. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations.

In addition, permitting and environmental and other regulatory requirements may change in the future. Changes in permitting and regulatory requirements could make compliance more difficult and costly. If we are unable to comply with the requirements of such permits or any other environmental regulations, our business may be adversely affected and we may not be able to operate our Plant.

Nuisance

The Plant could be subject to environmental nuisance or related claims by employees, property owners or residents near the Plant arising from air or water discharges. These individuals and entities may object to the air emissions from our Plant. Ethanol production has been known to produce an unpleasant odor to which surrounding residents and property owners could object. Environmental and public nuisance claims, or tort claims based on emissions, or increased environmental compliance costs could significantly increase our operating costs.

Future Products

We anticipate that advances in enzyme processes will increase the ethanol yield realized from grain feedstock. These processes are not refined for commercial application at this time, but we anticipate adopting, if possible, technological advances as they become available if such advances are commercially viable for the Company’s business plan. Past successes in extractable starch and genetically modified corn, has shown marked improvements for wet mill plants such as Minnesota Corn Processors and Archer Daniels Midland. We intend to keep abreast of the advances in increased fermentable starch corn as well as involve their members in the production of genetically modified corn as advances are made.

The production of ethanol from biomass feedstock may also become more economically feasible in future years. We will look for options to benefit from those advances as well. In the interim, the processes we plan to implement are considered to be the most viable for the foreseeable future.

ITEM 1A. RISK FACTORS.

You should carefully read and consider the risks and uncertainties below and the other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we may face. The following risks, together with additional risks and uncertainties not currently known to us or that we currently deem immaterial, could impair our financial condition and results of operations.

Risks Relating to Our Bankruptcy

We may not be able to successfully reorganize under Chapter 11, which would likely terminate our future business prospects and our ability to continue as a going concern and result in a liquidation of our assets.

On October 30, 2009, we filed a voluntary petition for relief in the United States Bankruptcy Court, District of Minnesota (the “Bankruptcy Court”) under Chapter 11 of Title 11 of the U.S. Bankruptcy Code (the “Code”). Our negotiated Chapter 11 bankruptcy filing, In re: Otter Tail AG Enterprises, LLC, was done with the approval of our senior lenders. Under Chapter 11, certain claims in existence prior to our filing of the petition for relief under the Code are stayed while we continue business operations as a debtor-in-possession (“DIP”). We have continued to operate our business as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Code. For the duration of the bankruptcy filing, our operations and our ability to execute our business strategy will be subject to the risks and uncertainties associated with bankruptcy. These risks include:

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our ability to continue as a going concern;

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our ability to operate within the restrictions and the liquidity limitations of any cash collateral order entered by the Bankruptcy Court in connection with the bankruptcy filing;

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our ability to obtain Bankruptcy Court approval with respect to motions filed in the bankruptcy filing from time to time;

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our ability to develop, prosecute, confirm and consummate a plan of reorganization with respect to the Chapter 11 proceedings and our ability to fund and execute our business plan;

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our ability to obtain and maintain normal payment and other terms with customers, vendors and service providers;

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our ability to maintain contracts that are critical to our operations;

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our ability to attract, motivate and retain key employees;

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our ability to attract and retain key customers, including RPMG; and

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our ability to prevent or limit partial or complete dilution of existing member equity in any refinancing required under a plan of reorganization.

We will also be subject to risks and uncertainties with respect to the actions and decisions of our creditors and other third parties who have interests in bankruptcy that may be inconsistent with our plans.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with the bankruptcy filing could adversely affect our relationships with our vendors and employees, as well as with customers, which in turn could adversely affect our operations and financial condition. Also, pursuant to the Code, we need Bankruptcy Court approval for transactions outside the ordinary course of business, which may limit our ability to respond timely to events or take advantage of opportunities. Because of the risks and uncertainties associated with the bankruptcy filing, we cannot predict or quantify the ultimate impact that events occurring during the Chapter 11 reorganization process will have on our business, financial condition and results of operations, and there is no certainty as to our ability to continue as a going concern.

As a result of the bankruptcy filing, realization of assets and liquidation of liabilities are subject to uncertainty. While operating under the protection of the Code, and subject to Bankruptcy Court approval or otherwise as permitted in the normal course of business, we may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those reflected in our consolidated financial statements. Further, a plan of reorganization(which has not yet been completed, submitted to, or confirmed by the Bankruptcy Court) could materially change the amounts and classifications reported in our consolidated historical financial statements, which do not give effect to any adjustments to the carrying value of assets or amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

A long period of operating under Chapter 11 could harm our business.

So long as the bankruptcy filing continues, our senior management, especially our chief executive officer/chief financial officer, will be required to spend a significant amount of time and effort dealing with the bankruptcy filing instead of focusing exclusively on business operations. A prolonged period of operating under Chapter 11 will also make it more difficult to attract and retain management and other key personnel necessary to the success and growth of our business. In addition, the longer the bankruptcy filing continues, the more likely it is that our vendors will lose confidence in our ability to successfully reorganize our business, and they may seek to establish alternative arrangements for providing us with goods and services, including alternative payment arrangements, which in turn could have an adverse effect on our liquidity and/or results of operations. Our having sought bankruptcy protection may also adversely affect our ability to negotiate favorable terms from suppliers, landlords, contract or trading counterparties and others and to attract and retain customers and counterparties. The failure to obtain such favorable terms and to attract and retain customers and other contract or trading counterparties could adversely affect our financial performance.

We may not be able to obtain confirmation of our Chapter 11 plan, and our emergence from Chapter 11 proceedings is not assured.

In order to successfully emerge from Chapter 11 bankruptcy protection, we believe that we must develop, and obtain requisite court and creditor approval of, a viable Chapter 11 plan of reorganization. This process requires us to meet statutory requirements with respect to adequacy of disclosure with respect to a plan, soliciting and obtaining creditor acceptance of a plan, and fulfilling other statutory conditions for plan confirmation. We may not receive the requisite acceptances to confirm a plan. Even if the requisite acceptances of a plan are received, the Bankruptcy Court may not confirm it.

We have substantial liquidity needs and may be required to seek additional financing.

Our principal sources of liquidity have historically consisted of cash provided by operations, cash and cash equivalents on hand and available borrowings under our credit agreements. Our liquidity position is significantly influenced by our operating results, which in turn are substantially dependent on commodity prices, especially prices for corn, ethanol, natural gas and unleaded gasoline. As a result, adverse commodity price movements adversely impact our liquidity. For the fiscal year ended September 30, 2009, operating activities used cash of approximately $50,000, compared to $9.1 million of cash used in operating activities for fiscal year 2008. We incurred a net loss of approximately $21.5 million in fiscal year 2009, and a net loss of approximately $8.7 million in fiscal year 2008.

We face uncertainty regarding the adequacy of our liquidity and capital resources and have limited access to additional financing. In addition to the cash requirements necessary to fund ongoing operations, we have incurred significant professional fees and other costs in connection with the bankruptcy filing and expect that we will continue to incur significant professional fees and costs. We cannot assure you that the amounts of cash available from operations, combined with our cash collateral agreement, will be sufficient to fund our operations, including operations during the period until such time as we are able to have a plan of reorganization confirmed by the Bankruptcy Court. Our ability to maintain adequate liquidity depends in part upon industry conditions and general economic, financial, competitive, regulatory and other factors beyond our control. Accordingly, there can be no assurance as to the success of our efforts. In the event that cash flows are not sufficient to meet our cash requirements, we may be required to seek additional financing. We can provide no assurance that additional financing would be available or, if available, offered to us on acceptable terms. Our access to additional financing is, and for the foreseeable future will likely continue to be, very limited. Our long-term liquidity requirements and the adequacy of our capital resources are difficult to predict at this time and ultimately cannot be determined until a plan of reorganization has been confirmed by the Bankruptcy Court.

We may not have sufficient cash to service our indebtedness and other liquidity requirements.

Our ability to service any stipulations under the cash collateral agreements and successfully consummate a plan of reorganization will depend, in part, on our ability to generate cash. We cannot be certain that cash on hand together with cash from operations will by itself be sufficient to meet our cash and liquidity needs. If we are unable to generate enough cash to meet our liquidity needs, we could be forced to discontinue some or all of our operations.

We may be subject to claims that will not be discharged in the bankruptcy filing, which could have a material adverse effect on our results of operations and profitability.

The Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation and specified debts arising afterwards. With few exceptions, all claims that arose prior to the date of filing and before confirmation of the plan of reorganization (i) would be subject to compromise and/or treatment under the plan of reorganization or (ii) would be discharged in accordance with the Code and the terms of the plan of reorganization. Any claims not ultimately discharged by the Bankruptcy Court could have an adverse effect on our results of operations and profitability. We have not yet submitted, and the Bankruptcy Court has yet to confirm, a plan of reorganization for the Company.

Bankruptcy laws may limit our secured creditors’ ability to realize value from their collateral.

Upon the commencement of a case for relief under Chapter 11, a secured creditor is prohibited from repossessing its security from a debtor in a Chapter 11 case, or from disposing of security repossessed from such debtor, without bankruptcy court approval. Moreover, the Code generally permits the debtor to continue to retain and use collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstance, but it is intended in general to protect the value of the secured creditor’s interest in the collateral and may include cash payments or the granting of additional security if and at such times as the Bankruptcy Court in its discretion determines that the value of the secured creditor’s interest in the collateral is declining during the pendency of the Chapter 11 proceedings. The Bankruptcy Court may determine that a secured creditor may not require compensation for a diminution in the value of its collateral if the value of the collateral exceeds the debt it secures.

In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary power of the Bankruptcy Court, we cannot reliably predict:

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how long payments under our secured debt could be delayed as a result of the Chapter 11 proceedings;

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whether or when secured creditors (or their applicable agents) could repossess or dispose of collateral;

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the value of the collateral; or

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whether or to what extent secured creditors would be compensated for any delay in payment or loss of value of the collateral through the requirement of “adequate protection.”

Furthermore, if the Bankruptcy Court determines that the value of the collateral is not sufficient to repay all amounts due on applicable secured indebtedness, the holders of such indebtedness would hold a secured claim only to the extent of the value of their collateral and would otherwise hold unsecured claims with respect to any shortfall. The Code generally permits the payment and accrual of post-petition interest, costs and attorneys’ fees to a secured creditor during a debtor’s Chapter 11 proceedings only to the extent the value of its collateral is determined by the Bankruptcy Court to exceed the aggregate outstanding principal amount of the obligations secured by the collateral.

Our financial results may be volatile and may not reflect historical trends.

While in bankruptcy, we expect our financial results to continue to be volatile as asset impairments, asset dispositions, restructuring activities, contract terminations and rejections, and claims assessments may significantly impact our consolidated financial statements. As a result, our historical financial performance is likely not indicative of our financial performance after the date of the bankruptcy filing. In addition, if we emerge from bankruptcy, the amounts reported in subsequent consolidated financial statements may materially change relative to historical consolidated financial statements, including as a result of revisions to our operating plans pursuant to a plan of reorganization, if such a plan is confirmed by the Bankruptcy Court. In addition, if we emerge from bankruptcy, we may be required to adopt fresh start accounting. If fresh start accounting is applicable, our assets and liabilities will be recorded at fair value as of the fresh start reporting date. The fair value of our assets and liabilities may differ materially from the recorded values of assets and liabilities on our consolidated balance sheets. In addition, if fresh start accounting is required, our financial results after the application of fresh start accounting may be different from historical trends.

Conducting a successful Chapter 11 reorganization will depend significantly on our ability to retain and motivate management and key employees.

Our success depends significantly on the skills, experience and efforts of our personnel, especially our chief executive officer/chief financial officer. The loss of our chief executive officer/chief financial officer or other key personnel could have a material adverse effect upon our results of operations and our financial position and could delay or prevent the achievement of our business objectives. Our ability to develop and successfully consummate a plan of reorganization will be highly dependent upon the skills, experience and effort of our senior management, including our chief executive officer/chief financial officer, and other personnel. The loss of the services of one or more members of our employees with critical skills, or a diminution in our ability to attract talented, committed individuals to fill vacant positions when needs arise, could have a material adverse effect on our ability to successfully reorganize and emerge from bankruptcy.

We may raise additional capital in the future through one or more offerings of the Company’s units, which may not be successful in raising enough capital for us to continue operations.

As one possible part of the Company’s plan of reorganization, which has yet to be submitted to or confirmed by the Bankrupcy Court, we may raise additional capital through one or more equity raises, including a Minnesota-only offering of our existing Units, or a new class of units, to eligible investors. Details of any of the offerings have yet to be finalized by the Company and have not been approved by the Bankruptcy Court. There can be no assurance that any equity raise will be successful, or will provide the Company with sufficient liquidity to continue operations even if successful. Any equity raise undertaken by the Company will likely result in significant dilution to our existing members. If we are unsuccessful in raising additional capital through one or more offerings of the Company’s units, or if the amounts received in such offerings are insufficient to meet our liquidity needs, we could be forced to discontinue some or all of our operations.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

Our independent registered public accounting firm has issued its report, which includes an explanatory paragraph for a going concern uncertainty on our financial statements as of September 30, 2009 and 2008. As explained in the report, we incurred net losses of $21.5 million and $8.7 million for the years ended September 30, 2009 and 2008, respectively. Based on our operating plan, our existing working capital is not sufficient to meet the cash requirements to fund our planned operating expenses, capital expenditures, and working capital requirements though September 30, 2010 without additional sources of cash and/or the deferral, reduction or elimination of significant planned expenditures. Currently, we have no commitments to obtain additional capital, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all.

Risks Relating to Our Business

We rely on the services of key personnel, the loss of which could adversely affect the future success of the Company.

We are highly dependent on the services of Anthony Hicks, who serves as our Chief Executive Officer and Chief Financial Officer. If we were to lose the services of Mr. Hicks, whether through termination, attrition, incapacitation or otherwise, there are currently no successors who could implement our business and restructuring plans. Therefore, such loss could have a material adverse impact on us and our future profitability and ability to emerge successfully from bankruptcy.

Our lack of business diversification could result in significant operating losses if our revenues from our primary products decrease.

Our business solely consists of the production and sale of ethanol and distillers grains. We do not have any other lines of business or other sources of revenue if we are unable to successfully operate the Plant. Our lack of business diversification could cause us to incur significant operating losses if we are unable to generate revenues through the production and sale of ethanol and distillers grains since we do not have or expect to have any other lines of business or alternative revenue sources.

Our executive officer and governors lack significant experience in financial accounting and preparation of reports under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

Neither our executive officer nor any of our governors has ever served as such with a company that is required to file reports under the Exchange Act. As a result, we may not be able or qualified to efficiently and correctly deal with our financial accounting issues and preparation of the Exchange Act reports. If we are unable to correctly deal with our financial accounting issues and prepare our Exchange Act reports, we may be exposed to significant liabilities and have difficulty raising additional capital. Although we plan to implement a search for a full-time controller or CFO with appropriate U.S. GAAP and SEC experience as part of our remediation plan described under Item 9A(T) of this Annual Report on Form 10-K, it is not clear how long this search will take or whether it will be successful. If we are unsuccessful in attracting qualified candidates we may continue to have difficulty in dealing with our financial accounting issues and preparation of Exchange Act reports.

Risks Related to the Ethanol Industry

The spread between ethanol and corn prices can vary significantly and we expect to incur losses in the near future because of narrow spreads.

We have certain risks and uncertainties that we experience during volatile market conditions such as what we experienced during the fiscal years 2009 and 2008. These volatilities can have a severe impact on operations. Our revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the U.S. and our operating and financial performance is largely driven by the prices at which we sell ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and unleaded gasoline and the petroleum markets, although since 2005 the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. Our largest cost of production is corn. The cost of corn is generally impacted by many factors, including supply and demand, weather, government policies and programs.

We incurred a net loss of approximately $21.5 million for the fiscal year ended September 30, 2009. Net losses were high in large part because of rising corn costs that were not offset by rises in ethanol prices.

We anticipate that our results of operations for the first quarter of 2010 will be affected by the increased production of ethanol as many plants that had been in an idle state have been purchased and placed back in service. This will affect corn price as demand increases. The protracted midwest harvest, combined with unseasonal rain and lack of natural drying, may lead to quality issues in the corn supply, as well as damage from excessive mechanical drying. These quality issues could lead to elevated pricing or lower production from poor quality corn. The volatility that is due to various factors, including uncertainty with respect to the market for our major input (corn) and the major output (ethanol), could lead to further losses.

Hedging transactions that may be undertaken in the future could significantly increase our operating costs if we incorrectly estimate our corn requirements and are not able to utilize all of the corn subject to our futures contracts.

Although we have presently exited all of our hedging positions, we may attempt in the future to minimize the effects of fluctuations in the price of corn on our operations by taking hedging positions in the corn futures markets. Hedging is a means of protecting the price at which we will buy corn in the future. In one type of hedging transaction, we would purchase futures contracts that lock in the amount and price of corn that we will purchase at a future date. Whether our hedging activities would be successful depends upon, among other things, the cost of corn and our ability to sell sufficient amounts of ethanol and distillers grain to utilize all of the corn subject to the futures contracts. Although we would attempt to link hedging activities to sales plans and pricing activities, hedging activities can result in significant costs, especially if we could not use all of the corn subject to our futures contracts. If we are unsuccessful with any hedging efforts we may make in the future, our business may suffer.

Our operating costs could be higher than we expect, and this could reduce our profitability or cause us to lose money.

In addition to general market fluctuations and economic conditions, we could experience significant operating cost increases from numerous factors, many of which are beyond our control. These increases could arise from, among other things:

higher natural gas and electricity prices;

higher labor costs, particularly if there is any labor shortage;

higher corn costs;

higher transportation costs because of greater demands on truck and rail transportation services; and

higher costs of regulatory compliance, including regulations related to the environment and worker safety.

As more ethanol plants are built, ethanol production will increase and, if demand does not sufficiently increase, the price of ethanol and distillers grain may decrease.

Although we have recently witnessed a large volume of ethanol production going offline, we expect that the number of ethanol producers and the amount of ethanol produced will likely continue to increase in the future. We cannot assure that the demand for ethanol will increase in order to compensate for the increased supply. The demand for ethanol is dependent upon numerous factors such as governmental regulations, governmental incentives, whether the phase out or restrictions on the use of MTBE continues and the development of other technologies or products that may compete with ethanol. If the demand for ethanol does not sufficiently increase, increased ethanol production may lead to lower ethanol prices. In addition, because ethanol production produces distillers grain as a co-product, increased ethanol production will also lead to increased supplies of distillers grain. Demand for distillers grain is independent of the demand for ethanol and depends upon various factors, such as the strength of the local and national beef and dairy cattle industry, and the availability of other feed products at more economical prices. An increase in the supply of distillers grain, without offsetting increases in demand, could lead to lower prices. Decreases in the price of ethanol and distillers grain will result in our generating lower revenue and lower profit margin, thereby reducing or eliminating our profits.

Growth in the ethanol industry is dependent on growth in the fuel blending infrastructure to accommodate ethanol, which may be slow and could result in decreased demand for ethanol.

The ethanol industry depends on the fuel blending industry to blend the ethanol that is produced with gasoline so it may be sold to the end consumer. In many parts of the country, the blending infrastructure cannot accommodate ethanol which leads to certain areas that do not blend any ethanol. Substantial investments are required to expand this blending infrastructure that may not be made by the fuel blending industry. Should the ability to blend ethanol not expand at the same rate as increases in ethanol supply, it may decrease the price of ethanol despite the fact that there may be significant demand at the consumer level to purchase ethanol. Should the fuel blending industry not make the required investments to expand the blending infrastructure, it may lead to a decrease in the selling price of ethanol which could impact our ability to operate profitably.

Competition from ethanol imported from Central American and Caribbean basin countries may be a less expensive alternative to our ethanol, which would cause us to lose market share.

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

We face intense competition from competing ethanol producers, and we may not have sufficient resources to compete effectively.

Competition in the ethanol industry is intense. We face formidable competition in every aspect of our business, and particularly from other companies that operate large-scale ethanol plants. We face competitive challenges from larger facilities and organizations that produce a wider range and larger quantity of products than we can, and from other plants similar to our Plant. Our Plant is in direct competition with other ethanol producers and oil companies that have acquired ethanol plants, many of which have more experience and greater resources than we do. Some of these producers are, among other things, capable of producing a significantly greater amount of ethanol and compete with us for corn and product markets. Nationally, the ethanol industry may become more competitive given the substantial amount of construction and expansion that is occurring in the industry. If we are unable to compete effectively in this competitive environment, the value of our business may suffer.

Technological advances could significantly decrease the cost of producing ethanol or result in the production of higher quality ethanol, and if we are unable to adopt or incorporate technological advances into our operations, our Plant could become uncompetitive or obsolete.

We expect that technological advances in the processes and procedures for producing ethanol will continue to occur. It is possible that those advances could make the processes and procedures that we utilize at our Plant less efficient or obsolete, or cause the ethanol we produce to be of a lesser quality. These advances could also allow our competitors to produce ethanol at a lower cost than us. If we are unable to adopt or incorporate technological advances, our ethanol production methods and processes could be less efficient than our competitors, which could cause our Plant to become uncompetitive.

Ethanol production methods are also constantly advancing. The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass such as agricultural waste, forest residue, and municipal solid waste. This trend is driven by the fact that cellulose-based biomass is generally cheaper than corn and producing ethanol from cellulose-based biomass would create opportunities to produce ethanol in areas that are unable to grow corn. Another trend in ethanol production research is to produce ethanol through a chemical process rather than a fermentation process, thereby significantly increasing the ethanol yield per pound of feedstock. Although current technology does not allow these production methods to be competitive, new technologies may develop that would allow these methods to become viable means of producing ethanol in the future. If we are unable to adopt or incorporate these advances into our operations, our cost of producing ethanol could be significantly higher than our competitors, which could make our Plant obsolete and cause member investment to decrease in value or become worthless.

In addition, alternative fuels, additives and oxygenates are continually under development. Alternative fuel additives that can replace ethanol may be developed, which may decrease the demand for ethanol. It is also possible that technological advances in engine and exhaust system design and performance could reduce the use of oxygenates, which would lower the demand for ethanol. If technological advances decrease consumer demand for ethanol, our revenues may decrease and the value of our business may suffer.

If we lose the services of third-party marketers, we will not be able to sell the ethanol or distillers grain that we produce.

We have entered into contracts with third-party providers to market our supply of ethanol and distillers grains. Our dependence on these distributors means that our financial performance depends upon the financial health of the distributors we contract with. We cannot assure that we will be able to find a suitable replacement if a distributor fails to perform. Further, these third-party distributors will likely have relationships and agreements with other ethanol producers. It is possible that a distributor’s ability or willingness to market and sell our products could be impaired by agreements that the distributor may have with other entities not related to us. Consequently, we may not obtain the best possible prices for our products, which may decrease our revenues and the value of our business.

Any interruption in our natural gas or electricity supply may force us to halt operations, and significant increases in the price of natural gas or electricity may increase our costs of operation, thereby harming our profitability.

We require a significant amount of natural gas and electricity to operate our Plant. The price of natural gas and electricity, like other commodities, fluctuate significantly. Any significant increase in the price of gas or electricity will result in increased operating costs and lower profit margins because the price of ethanol tends to track with the price of gasoline and not the cost of production. We may not be able to pass the higher costs on to our customers. Further, natural gas is the only thermal heating source for our Plant and electricity is our only source of power, and if there are any interruptions in supply, we would have to halt operations. An interruption in supply or problems with delivery could have a material adverse effect on our business.

The price of distillers grain is affected by the price of other commodity products, such as soybeans, and decreases in the price of these commodities could decrease the price of distillers grain, which will decrease the amount of revenue we may generate.

Distillers grain competes with other protein-based animal feed products. The price of distillers grain may decrease when the price of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which they are derived. Downward pressure on commodity prices, such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grain. Because the price of distillers grain is not tied to production costs, decreases in the price of distillers grain will result in our generating less revenue and lower profit margins.

Competition for qualified personnel in the ethanol industry is intense and we may not be able to hire and retain qualified officers, engineers, and operators to efficiently operate the Plant.

We have 33 employees, which is all of the personnel that we believe are necessary to operate the Plant. Our success depends in part on our ability to retain competent personnel in a rural community. We cannot assure that we will be able to maintain qualified personnel, or hire competent personnel in the event of turnover. If we are unable to maintain productive and competent personnel, the amount of ethanol we produce may decrease and we may not be able to efficiently operate the Plant.

Risks Related to the Government and Regulatory Environment

The use and demand for ethanol is dependent on various environmental regulations and governmental programs that could change and cause the demand for ethanol to decline.

There are various federal and state laws, regulations and programs that have led to increased use of ethanol in fuel. These laws, regulations and programs are constantly changing. Federal and state legislators and environmental regulators could adopt or modify laws, regulations or programs that could adversely affect the use of ethanol. Certain states oppose the use of ethanol because they must ship ethanol in from other corn producing states, which could significantly increase gasoline prices in the state. Material changes in environmental regulations regarding the use of MTBE or the required oxygen content of automobile emissions or the enforcement of such regulations could decrease the need to use ethanol. If the oxygenated fuel requirements were eliminated or if any state were to receive a waiver, the use and demand for ethanol may decline significantly. Future changes in the law may further postpone or waive requirements to use ethanol. Such changes in laws, regulations and programs may adversely affect our business and its profitability.

Other laws, regulations and programs provide economic incentives to ethanol producers and users. For example, Congress recently adopted a Renewable Fuels Standard directing the Environmental Protection Agency to adopt rules requiring refineries, blenders, distributors and importers to introduce or sell volumes of ethanol and biodiesel into commerce in accordance with an annual renewable fuels schedule. On December 19, 2007, President Bush signed into law the Energy Independence and Security Act of 2007, which raises the minimum usage requirement to 13.2 billion gallons of ethanol by 2012 and 15 billion gallons by 2015. The Act also mandates a minimum requirement of 36 billion gallons of renewable fuels by 2022, with cellulosic ethanol accounting for 16 billion gallons of this total. The passage of pending federal or state energy legislation or any other revocation or amendment of any one or more of these laws, regulations or programs could have a significant adverse effect on the ethanol industry and our business. We cannot assure that any of these laws, regulations or programs will continue in the future or that these laws, regulations or programs will benefit us or benefit us more than our ethanol producing competitors. Some of these laws, regulations and programs will expire under their terms unless extended, such as the federal partial excise tax exemption for gasoline blenders who use ethanol in their gasoline, which is scheduled to expire in December 2010. Government support of the ethanol industry could change and Congress and state legislatures could remove economic incentives that enable ethanol to compete with other fuel additives. The elimination or reduction of government subsidies and tax incentives could cause the cost of ethanol-blended fuel to increase. The increased price could cause consumers to avoid ethanol-blended fuel and cause the demand for ethanol to decline, which could adversely affect our business.

Our business is subject to extensive and potentially costly environmental regulations that could change and significantly increase our operating costs.

The Plant is subject to environmental regulation by the Minnesota Department of Natural Resources and by the United States Environmental Protection Agency (“EPA”). The state of Minnesota or the EPA may seek to implement additional regulations or implement stricter interpretations of existing regulations. Changes in environmental regulations or stricter interpretation of existing regulations may require additional capital expenditures or increase our operating costs. In addition, because our Plant is a 55 million gallons per year Plant, it may be more difficult and costly for us to comply with applicable environmental regulations than smaller ethanol plants. Any increases in operating costs will result in lower profit margins because we may be unable to pass any of these costs on to our customers.

In addition, the Plant could be subject to environmental nuisance or related claims by employees, property owners or residents near the Plant arising from air or water discharges. These individuals and entities may object to the air emissions from our Plant. Ethanol production has been known to produce an unpleasant odor to which surrounding residents and property owners could object. Environmental and public nuisance claims, or tort claims based on emissions, or increased environmental compliance costs could significantly increase our operating costs, which could adversely affect our profitability.

In 2007, the Supreme Court decided a case in which it ruled that carbon dioxide is an air pollutant under the Clean Air Act for the purposes of motor vehicle emissions. The Supreme Court directed the EPA to regulate carbon dioxide from vehicle emissions as a pollutant under the Clean Air Act. Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as our Plant under the Clean Air Act. Initially, we will not likely market and sell any of the carbon dioxide we produce. Instead, we will emit it into the atmosphere. Any fines or settlements based on our carbon emissions could reduce our profitability. While there are currently no regulations applicable to us concerning carbon dioxide, if the EPA or the State of Minnesota were to regulate carbon dioxide emissions by plants such as ours, we may have to apply for additional permits or we may be required to install carbon dioxide mitigation equipment or take other as yet unknown steps to comply with these potential regulations. Compliance with any future regulation of carbon dioxide, if it occurs, could be costly and may prevent us from operating the Plant profitably which could decrease or eliminate the value of our Units.

In addition, the California Air Resources Board recently passed a Low Carbon Fuel Standard (“LCFS”), which sets standards for the carbon intensity of fuels used in the state starting in 2011. Certain provisions of the LCFS, which are not yet final, have the potential to ban ethanol produced at our Plant from being sold in California. While we believe there may be some negative impact to our sales from the approval of the LCFS in California, we believe we will still be able to market all the ethanol produced by our Plant. If more states, or the federal government, adopt similar provisions it could have a severe negative impact on our ability to sell all of the ethanol produced at our Plant.

Our business is subject to extensive occupational safety and health regulations that could increase our operating costs.

We are subject to various occupational safety and health regulations, and we have incurred expense in training employees in occupational safety compliance. On January 10 and 11, 2008, all Plant operational personnel were trained for 10 hours in an Occupational Safety and Health Administration (“OSHA”) safety course. In addition, on February 19, 2008 all operational employees attended a training course on hazardous materials. We have compiled a current Plant Safety Manual with the assistance of our consultants, Natural Resource Group, which is available to all Plant personnel. We will continue to be subject to such safety and health regulations and will continue to incur expense with respect to training and compliance. We do not expect that compliance with these rules and regulations will have a material impact on our business or as to our competitive stance in the industry, as these rules apply to other ethanol plants as well. However, any increase in OSHA compliance costs could negatively affect our profitability.

Risks Related to the Units

Our lenders and other creditors would have priority over unit holders in the event of a liquidation of our assets, and if there are insufficient assets to repay our outstanding liabilities our unit holders could receive only a portion or none of their initial investment.

As further explained under “Risks Relating to Our Bankruptcy,” on October 30, 2009, we filed a voluntary petition for relief in the Bankruptcy Court under Chapter 11 of Title 11 of the Code. Our negotiated Chapter 11 bankruptcy filing, In re: Otter Tail AG Enterprises, LLC, was done with the approval of our senior lenders. In the event that our bankruptcy is not successful, we would have insufficient liquidity to continue operations, and may be forced to proceed with an orderly liquidation of our assets. Under the terms of our debt financing agreements, our senior lender will be repaid first out of the proceeds of any liquidation. Subordinate lien holders, followed by any unsecured creditors, would then be paid with remaining assets in satisfaction of our other debts and liabilities. Unit holders would be paid with proceeds from remaining available assets, if any. There is no guarantee that any funds would be available for our Unit holders after repayment of our debt. In such liquidation scenario, our Unit holders may receive little to no return on their investment in the Company and the value of their Units may be nothing.

The Units have no public market and none is expected to develop, which means it may be difficult for members to sell their Units.

There is no public trading market for the Units and we do not expect one to develop in the foreseeable future. To maintain our partnership tax status, we do not intend to list the Units on any stock exchange. Applicable securities laws impose significant restrictions on the transfer of Units. Consequently, members may have to hold their Units for an indefinite period of time because it may be difficult for them to sell their Units.

There are restrictions on transferring the Units, which may make the Units unattractive to prospective purchasers and may prevent members from selling them when they desire.

Investing in our Units should be considered a long-term investment. The ability to transfer Units is restricted by our Member Control Agreement. Members may not transfer their Units unless the transfer is a “permitted transfer.” Permitted transfers are transfers approved by the Board and that satisfy certain conditions and restrictions set forth in Section 10 of our Member Control Agreement. We have also adopted a Unit transfer policy. All transfers must be approved by the Board.

In addition, members may not transfer their Units if the transfer would cause us to lose our partnership tax status and subject us to the publicly traded partnership rules. The Board will generally approve a transfer so long as the transfer falls within the “safe harbors” contained in the publicly traded partnership rules under the Internal Revenue Code, and the related rules and regulations, as amended (the “Tax Code”). In addition, the transferee of our Units may not become a member unless approved by the Board. These restrictions may make our Units unattractive to prospective transferees, and may prevent members from selling Units when they desire.

Members will be bound by actions taken by members holding a majority of our Units, and because of the restrictions on transfer and lack of dissenters’ rights, they could be forced to hold a substantially changed investment.

We cannot engage in certain transactions, such as a merger, consolidation or sale of all or substantially all of our assets, without the approval of our members. However, if holders of a majority of our Units approve a transaction, members will also be bound to that transaction regardless of whether they agree with the transaction. Under our Member Control Agreement, members will not have any dissenters’ rights to seek appraisal or payment of the fair value of their Units. Consequently, because there is no public market for the Units, they may be forced to keep a substantially changed investment.

Risks Related to Tax Issues in a Limited Liability Company

If we are not taxed as a partnership, we will pay taxes on all of our net income and members will be taxed on any earnings we distribute, and this will reduce the amount of cash available for distributions to holders of our Units.

We expect that we will be taxed as a partnership for federal income tax purposes. This means that we will not pay any federal or state income tax, and our members will pay tax on their allocated share of our income. We cannot assure members, however, that we will be able to maintain our partnership tax treatment. The Internal Revenue Service (“IRS”) may from time to time review our tax status, and we cannot assure members that there will not be changes in the law or our operations that could cause us to lose our partnership tax status. If we lose our partnership tax status, we may be taxed as a corporation. If we were treated as a corporation, we would be taxed on our net income, currently at rates of up to 35 percent, for federal income tax purposes. Further, members would be required to treat distributions that we make as ordinary dividend income to the extent of our earnings and profits. These distributions would not be deductible by us, thus resulting in double taxation of our earnings and profits. This would reduce the amount of cash we may have available for distributions.

Members’ tax liability from the allocated share of our taxable income may exceed any cash distributions members receive, and, as a result, members may have to pay income tax on their allocated share of our taxable income with their personal funds.

Because we expect to be treated as a partnership for federal income tax purposes, all of our profits and losses will “pass-through” to our members. Members must pay tax on their allocated share of our taxable income every year. Members may receive allocations of taxable income that exceed any cash distributions we make to them. This may occur because of various factors, including but not limited to, accounting methodology, the specific tax rates members face, and payment obligations and other debt covenants that restrict our ability to pay cash distributions. If this occurs, members may have to pay income tax on their allocated share of our taxable income with their own personal funds.

Because we are treated as a partnership for federal income tax purposes, any audit of our tax returns resulting in adjustments could cause the IRS to audit members’ tax returns, which could result in additional tax liability to members.

The IRS may audit our tax returns and may disagree with the tax positions that we take on our returns. The rules regarding partnership allocations are complex. The IRS could successfully challenge the allocations set forth in our Member Control Agreement and reallocate items of income, gains, losses, deductions or credits in a manner that adversely affects our members. If challenged by the IRS, the courts may not sustain the position we take on our tax returns. An audit of our tax returns could lead to separate audits of members’ personal tax returns, especially if adjustments are required. This could result in adjustments on members’ personal tax returns and in additional tax liabilities, penalties and interest.

Risks Related to Our Limited Liability Company Structure and Relationships with Affiliates

Our Member Control Agreement contains restrictions on a member’s right to participate in the management of our affairs.

We are governed primarily by our Member Control Agreement. Our Member Control Agreement contains significant restrictions on a member’s right to influence the manner or direction of management. Essentially, members have no right to participate in management other than to elect governors to the Board or to vote on matters that require the consent of our members. Transactions that require the consent of our members are restricted to a merger, consolidation, or the sale of all or substantially all of our assets, amendments to our Articles of Organization or our Member Control Agreement, voluntarily dissolving our business or making material changes to our business purpose.

Under our Member Control Agreement, it may be difficult for members to enforce claims against an officer or governor, and, as a result, they may not be able to recover any losses they may suffer through their ownership of the Units arising from acts of our officers and governors that harm our business.

Our officers and governors must discharge their duties with reasonable care, in good faith and in our best interests. Despite this obligation, Minnesota law and our Member Control Agreement limit an officer’s or governor’s liability to us and our members. Officers or governors are generally not liable to us or our members for monetary damages for breaches of fiduciary duty, unless it involves (i) a willful failure to deal fairly with us or our members in connection with a matter in which the governor or officer has a material conflict of interest; (ii) a violation of criminal law, unless the governor or officer had reasonable cause to believe that his, her or its conduct was lawful or no reasonable cause to believe that the conduct was unlawful; (iii) a transaction from which the governor or officer derived an improper personal profit; or (iv) willful misconduct. These limitations could limit members’ rights to enforce claims against our officers or governors. In addition, our Member Control Agreement contains an indemnification provision which requires us to indemnify any governor or manager to the extent required or permitted by Minnesota Statutes, Section 322B.699, as amended from time to time, or as required or permitted by other provisions of law.

There are conflicts of interest in our business, because we have relationships with and may enter into additional transactions with our officers, governors, and affiliates, which could impair an interested officer’s or governor’s ability to act in our best interest.

Conflicts of interest may exist in our structure and operation. Our governors may have other business interests, which could compete with us for the time and resources of our governors. Our officers, governors and affiliates may sell corn to us and purchase distillers grains on terms similar to those contained in contracts entered into by us with unaffiliated third parties. We may also enter into other transactions with officers, governors and affiliates. Conflicts of interest could have adverse consequences for our business or members because our governors and officers may place their personal interest and those of their affiliates ahead of our interests. We have a conflict of interest policy with our officers and governors, but we cannot assure that conflicts of interest will not harm our business or reduce the value of members’ Units.

ITEM 2. PROPERTIES.

Our Plant was constructed on a 116-acre site two miles northwest of Fergus Falls, Minnesota. On October 25, 2006, we purchased a majority of the site from Jonathan and Brenda Piekarski. Mr. Piekarski is a governor on our Board. The purchase price of the site was $700,000, which is approximately $6,100 per acre.

We are also leasing our distillers grain processing facility from Otter Tail County (the “County”) pursuant to a Solid Waste Facility Lease Agreement. We began payments under the lease on February 25, 2008 and we are scheduled to continue to make payments until November 1, 2019. The amount of total payments under the lease is equal to the aggregate principal amount and interest on the County’s $20 million Subordinate Exempt Facility Revenue Bonds and $6.01 million General Obligation Bonds. We hold restricted cash as part of the capital lease financing. At September 30, 2009, the total of these accounts was approximately $10,000 of capitalized interest reserve and approximately $2.0 million of debt reserve fund.

All of our tangible and intangible property, real and personal, serves as collateral for our senior and subordinated debt agreements with our lenders, including the County under the Solid Waste Facility Lease Agreement. On October 30, 2009, we filed a voluntary petition for relief in the Bankruptcy Court under the Code. The ability of our senior creditors and the County to seek remedies to enforce their rights under the agreements is automatically stayed as a result of the filing of the Chapter 11 petition. The automatic stay invoked by the filing of the Chapter 11 petition effectively precludes any actions by the Company’s senior creditors and County to collect, assert, or recover a claim against us, subject to the applicable provisions of the Code and orders granted by the Bankruptcy Court.

In the event that we do not successfully emerge from Chapter 11, all of our tangible and intangible property is subject to forfeiture to our senior and subordinated lenders, including the County. Our lending agreements and Chapter 11 bankruptcy are discussed in more detail in “Item 3. Legal Proceedings,” “Item 7. Management’s Discussion And Analysis,” and Notes 2, 6 and 7 to our financial statements.

ITEM 3. LEGAL PROCEEDINGS.

On October 30, 2009, we filed a voluntary petition for relief in the United States Bankruptcy Court, District of Minnesota under Chapter 11 of the Code. Our negotiated Chapter 11 bankruptcy filing, In re: Otter Tail AG Enterprises, LLC, was made with the approval of our senior lenders.

Under Chapter 11, certain claims in existence prior to our filing of the petition for relief under the Code are stayed while we continue business operations as a debtor-in-possession. We have continued and will continue to operate our business as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Code.

The Chapter 11 bankruptcy filing described above constitutes an event of default under the Company’s master loan agreement with Agstar Financial Services, PCA, its construction and term loan agreement with MMCDC New Markets Fund II, LLC (collectively, the parties are the “Secured Creditors”), and its capital lease with the County. Prior to that, on June 3, 2009, all obligations under the aforementioned agreements became automatically and immediately due and payable. However, the ability of the Secured Creditors and County to seek remedies to enforce their rights under the agreements is automatically stayed as a result of the filing of the Chapter 11 petition. The automatic stay invoked by the filing of the Chapter 11 petition effectively precludes any actions by the Company’s Secured Creditors and County to collect, assert, or recover a claim against us, subject to the applicable provisions of the Code and orders granted by the Bankruptcy Court.

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

We did not submit any matter to a vote of our unit holders through the solicitation of proxies or otherwise during the fourth quarter of the year ended September 30, 2009.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNIT HOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

There is no established trading market for our Units. To maintain our partnership tax status, members may not trade their Units on an established securities market or readily trade the Units on a secondary market (or the substantial equivalent thereof). All transfers are subject to a determination that the transfer will not cause us to be deemed a publicly traded partnership, and to all applicable securities law restrictions. We engaged AgStockTrade.com to create a qualified matching service in order to facilitate trading of our Units. Since our Units were cleared for trading on AgStockTrade.com on July 1, 2008, there have been no trades of our Units. We suspended all trading in our Units as a result of our negotiated Chapter 11 bankruptcy filing on October 30, 2009.

We have restricted the ability of our members to transfer their Units in our Member Control Agreement. To help ensure that a secondary market does not develop, our Member Control Agreement prohibits transfers without the approval of our Board. The Board will not approve transfers unless they fall within “safe harbors” contained in the publicly traded partnership rules under the Tax Code, which include: (a) transfers by gift, (b) transfer upon death of a member, (c) transfers between certain family members, and (d) transfers that comply with the “qualifying matching service” requirements. Any transfers of Units in violation of the publicly traded partnership rules or without the prior consent of the Board will be invalid.

Securities Authorized for Issuance under Equity Compensation Plans

We previously maintained an equity compensation plan in which eligible executive officers received options to purchase our units. As of September 30, 2008, 20,000 units remained to be issued pursuant to exercise of outstanding options. During fiscal year 2009, all of these options have been cancelled pursuant to the termination of employment of our former chief executive officer and plant manager, effective October 31, 2008, and transition of our chief financial officer to chief executive officer and chief financial officer, effective December 1, 2008.

Effective December 1, 2008, our chief executive officer became eligible to receive 10,000 restricted Units pursuant to a vesting schedule that has 4,500 Units vested on January 1, 2009, 4,500 Units vesting on December 31, 2009, and 1,000 Units vesting on December 31, 2010.

Unit Holders

As of September 30, 2009, there were 966 holders of our Class A Units determined by an examination of our Unit transfer book. There is no other class of membership units issued or outstanding.

Distributions

For the fiscal years ended September 30, 2009 and 2008, we did not make any distributions to members. Distributions are payable at the discretion of our Board, subject to the provisions of the Minnesota Limited Liability Company Act and our Member Control Agreement. In addition, our senior and subordinated long-term debt is subject to various financial and non-financial covenants that restrict our ability to declare distributions. For example, we are prohibited from making distributions if we are in default under our Master Loan Agreement with Agstar. We were in default under this agreement and our other senior and subordinated debt agreements, including our capital lease with the County, as a result of our Chapter 11 bankruptcy filing on October 30, 2009. As a result, we are prohibited from making any distributions to members unless and until we successfully emerge from bankruptcy. Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 6 of our financial statements on this Form 10-K for more information on such restrictions and such debt agreements.

Purchases of Equity Securities by the Company

None.

ITEM 6. SELECTED FINANCIAL DATA.

The following tables set forth selected financial data of the Company for the periods indicated. The audited financial statements for fiscal 2009 and 2008 are included in Item 8 of this Annual Report on Form 10-K and have been audited by our independent auditors, Boulay, Heutmaker, Zibell & Co., P.L.L.P.

	2008			2009
Statements of Operations Data:
Revenues	$	70,099,287		$	95,981,559

Cost of Sales		68,411,568			96,688,753

Lower of Cost or Market Adjustment		4,632,000			—

Impairment of plant and process equipment		—			12,500,000
Operating Expenses		1,708,066			2,254,393

Operating Loss		(4,652,347	)		(15,461,587	)

Other Expense, net		(4,001,728	)		(6,052,538	)

Net Income (Loss)		(8,654,074	)		(21,514,125	)

Weighted Average Units Outstanding - Diluted		23,927,872			23,936,250

Weighted Average Units Outstanding - Basic		23,927,872			23,936,250

Net Income (Loss) Per Unit - Diluted		(0.36	)		(0.90	)

Net Income (Loss) Per Unit - Basic		(0.36	)		(0.90	)

Our selected historical balance sheet information as of September 30, 2009 and 2008 are derived from our audited balance sheets.

	September 30, 2008		September 30, 2009
Balance Sheet Data:
Cash and Equivalents	$	1,138,768	$	4,058,000

Total Assets	$	126,293,160	$	105,153,022

Total Current Liabilities	$	12,478,776	$	90,174,378

Long Term Debt, net of current maturities	$	77,323,865		—

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of Section 21E of the Exchange Act. Forward-looking statements are ~~all~~ all statements other than statements of historical fact, including without limitation those statements that are identified by the words “anticipates,” “believes,” “continue” “could,” “estimates,” “expects,” “future,” “hope,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” “target,” and ~~similar~~ similar expressions, and include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts, including but not limited to the following: our expectations regarding revenues and expenses, corn and ethanol prices and supply, future competition and governmental supports, bankruptcy filing, restructuring and reorganizational plans, and industry and general economic conditions. From time to time, the Company may publish or otherwise make available forward-looking statements of this nature, including statements contained within Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company’s expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Nonetheless, the Company’s expectations, beliefs or projections may not be achieved or accomplished.

Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of the factors, nor can it assess the effect of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by the risk factors and cautionary statements in this Form 10-K, including statements contained within “Item 1A – Risk Factors,” and including developments related to the following:

· ~~Our~~our ability to ~~comply~~successfully ~~with~~emerge ~~covenants~~from ~~under our debt financing agreements with Agstar and our other lenders, and~~ the ~~decisions~~Chapter of11 ~~such~~bankruptcy ~~lenders~~process ~~to grant waivers, exercise default remedies or restrict our access to capital should we violate~~ and ~~not~~continue ~~cure~~normal ~~any covenants in the future. · The availability and adequacy of our cash flow to meet its requirements, including payment of loans; · Economic, competitive, demographic,~~ business and other conditions in our local, regional and national markets; · Changes in the availability and price of corn; · Changes in the availability and price of natural gas; · Changes in the environmental regulations that apply to our Plant operations; · The occurrence of certain events causing an economic impact in the agriculture, oil, or automobile markets; · Lack of transport, storage, and blending infrastructure preventing ethanol from reaching high demand markets; · Changes and advances in ethanol and other renewable fuels production technology; · Changes in interest rates or the availability of credit, and limitations and restrictions contained in the instruments and agreements governing our indebtedness; · The results of our hedging transactions and other risk mitigation strategies; · Our ability to retain key employees and maintain labor relations; · Our ability to develop diverse revenue streams; · Our ability to implement additional financial and management controls, reporting systems and procedures and comply with Section 404 of the Sarbanes-Oxley Act, as amended; · Changes or developments in laws, regulations, tariffs or taxes in the ethanol, agricultural or energy industries; · Actions taken or not taken by third parties, including our suppliers and competitors, as well as legislative, regulatory, judicial and other governmental authorities;

1· our ability to comply in the future with covenants under our debt financing agreements with senior lenders;

~~Table of Contents~~22

· ~~Competition~~the availability and adequacy of our cash flow to meet our requirements, including payment of loans; · economic, competitive, demographic, business and other conditions in ~~the~~our ~~ethanol~~local, ~~industry~~regional and ~~excess~~national ~~capacity~~markets; · changes in the ~~industry~~availability and price of corn; · ~~Litigation~~changes ~~against~~in usthe oravailability ~~any~~and ~~third~~price ~~party~~of ~~suppliers~~natural gas; · ~~The~~changes ~~loss~~in the environmental regulations that apply to our Plant operations; · the occurrence of ~~any~~certain ~~license~~events causing an economic impact in the agriculture, oil, or ~~permit~~automobile markets; · ~~The~~ lack of atransport, ~~public~~storage, ~~market~~and ~~for~~blending ~~our~~infrastructure ~~membership~~preventing ~~units~~ethanol from reaching high demand markets; · changes and advances in ethanol and other renewable fuels production technology; · changes in interest rates or the availability of credit, and limitations and restrictions oncontained ~~unit~~in ~~transfer~~the instruments and agreements governing our indebtedness; · ~~The~~the ~~loss~~results of our ~~Plant~~hedging ~~due~~transactions and other risk mitigation strategies; · our ability to ~~casualty~~retain key employees and maintain labor relations; · our ability to develop diverse revenue streams; · our ability to implement additional financial and management controls, ~~weather~~reporting systems and procedures and comply with Section 404 of the Sarbanes-Oxley Act, ~~mechanical~~as ~~failure~~amended; · changes or ~~any~~developments ~~extended~~in orlaws, ~~extraordinary~~regulations, ~~maintenance~~tariffs or ~~inspection~~taxes ~~that~~in ~~may~~the beethanol, ~~required;~~agricultural ~~AND~~or energy industries; · ~~Changes~~actions intaken or not taken by third parties, including our ~~business~~suppliers ~~strategy~~and competitors, ~~capital~~as towell ~~support~~as ~~capital~~legislative, ~~improvements~~regulatory, judicial and ~~development.~~other governmental authorities;

~~PART I~~· competition in the ethanol industry and excess capacity in the industry; · litigation against us or any third party suppliers; · the loss of any license or permit; · the lack of a public market for our membership units and restrictions on unit transfer; · the loss of our Plant due to casualty, weather, mechanical failure or any extended or extraordinary maintenance or inspection that may be required; and · changes in our business strategy, capital to support capital improvements and development.

~~ITEM~~Critical Accounting ~~1. BUSINESS.~~Estimates

~~Overview~~Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Of the significant accounting policies described in the notes to our financial statements, we believe that the following are the most critical: valuation of inventory, assumptions used in analysis of long-lived asset impairment and estimated useful lives of property, plant and equipment. Actual results may differ from previously estimated amounts and such differences may be material to the financial statements.

Otter Tail Ag Enterprises, LLC (“We,” “us,” “our,” or the “Company”) organized as a Minnesota limited liability company on January 27, 2005, owns and operates a nameplate capacity 55,000,000 gallon per year corn dry mill ethanol plant in Fergus Falls, Minnesota (the “Plant”), which became fully operational in June 2008. Based on estimates from our design engineer, Delta-T Corporation (“Delta-T”), we expect our Plant to annually process approximately 20,000,000 bushels of corn into 55,000,000 gallons of denatured fuel grade ethanol, 135,500 tons of dried distillers grains with solubles, and 65,500 tons of distillers modified wet grains. In this process, we anticipate we will consume approximately 1,855,000 cubic feet of natural gas per year. Our website is located at www.ottertailethanol.com. Our principal executive offices currently are located at 24096 -170th Avenue, Fergus Falls, Minnesota, 56537-7518, and our telephone number is (218) 998-4301.Inventory

~~General~~Inventory consists ~~Development~~of raw materials, work in process, and finished goods. The work in process inventory is based on certain assumptions. The assumptions used in calculating work in process are the quantities in the fermenter and beer well tanks, the lower of ~~Business~~cost ~~since~~or ~~September 30~~market price used to value corn at the end of the month, ~~2007~~the effective yield, and the amount of dried distillers grains assumed to be in the tanks. These assumptions could change in the near term. Inventory is subject to lower of cost or market valuation assumptions.

Our first two fiscal quarters for the fiscal year ended September 30, 2008 were spent preparing for Plant startup and the commencement of operations. We began preliminary production operations in April 2008, and ethanol was first produced in May 2008. The Plant encountered issues typical of a plant startup during the first four months of operation. As of September 30, 2008, we have been producing ethanol at the Plant at or near nameplate capacity, and have been receiving revenues from the sale of ethanol, Distillers Modified Wet Grains (“DMWG”) and Distillers Dried Grains with Solubles (“DDGS”). We had a period of profitability following the commencement of ethanol production in May, June, and July 2008; however, since that time we have not been profitable and we may not be able to achieve profitability in the near future, or at all. We violated certain covenants under our Master Loan Agreement with Agstar and were in default as of September 30, 2008. We received a waiver from Agstar for compliance with such covenants through October 1, 2009 and a waiver from NMF and Otter Tail county pertaining to the cross-default provisions contained in their respective debt financing agreements. However, we may violate the same or other loan covenants in the future and may not receive additional waivers. If we commit and do not cure or receive a waiver for any future violation, our lenders may exercise their default remedies. We would face a severe liquidity crisis if any of our lenders pursued such remedies.23

~~Financial~~The Company ~~Information~~had entered into forward corn purchase contracts and corn purchase agreements under which it was required to take delivery at the contract price. Some of these contract prices were above current market prices for corn. Given the declining ethanol price, upon taking delivery under these contracts, the Company incurred a loss. Accordingly, the Company recorded a loss on these purchase commitments aggregating to $3,600,000 for the fiscal year ended September 30, 2008. The amount of the loss was determined by applying a methodology similar to that used in the impairment evaluation with respect to inventory. Given the uncertainty of future ethanol and corn prices this loss may not be recovered, and future losses on outstanding purchase commitments could be recorded in future periods.

~~Please~~During the ~~refer~~fiscal toyear ~~“Item6~~ended —September 30, ~~Selected~~2008, ~~Financial~~the ~~Data” and~~Company ~~“Item 7~~recorded —an ~~Management’s~~inventory ~~Discussion~~valuation ~~and~~impairment ~~Analysis~~ of ~~Financial~~approximately ~~Condition~~$1,032,000 ~~and~~attributable ~~Results~~primarily to decreases in market prices of ~~Operations” for~~corn ~~information~~and ~~about~~ethanol. ~~our~~The ~~revenues,~~inventory valuation ~~profit~~impairment ~~and~~was ~~loss~~recorded ~~measurements~~in ~~and~~lower ~~total~~of ~~assets.~~cost ~~Our~~or ~~consolidated~~market ~~financial~~ adjustments on the statements of ~~and~~operations. For ~~supplementary~~the ~~data~~fiscal ~~are~~year ~~included~~ended ~~beginning~~September at30, ~~page F-1~~2009, ofthere ~~this~~was ~~Annual~~no ~~Report~~inventory onvaluation ~~Form 10-K~~impairment necessary.

~~Principal~~ Commitments ~~Products~~ and ~~Their Markets~~ Contingencies

~~The~~Contingencies, by ~~principal~~their ~~products~~nature, werelate ~~produce~~to atuncertainties ~~our~~that ~~Plant~~require ~~are~~management to exercise ~~fuel~~judgment ~~grade~~both ~~ethanol~~in ~~and~~assessing ~~DDGS~~the likelihood that a liability has been incurred, as well as in estimating the amount of the potential expense. In conformity with United States generally accepted accounting principles, we accrue an expense when it is probable that a liability has been incurred and ~~DMWG~~the amount can be reasonably estimated.

~~Our Main Product~~ Long- ~~Ethanol~~Lived Assets

~~Ethanol~~Depreciation isand ~~ethyl~~amortization ~~alcohol~~of our property, aplant ~~fuel~~and ~~component~~equipment ~~made~~is ~~primarily~~applied ~~from~~on ~~corn~~the straight-line ~~and~~method ~~various~~by charges to operations at rates based upon the expected useful lives of individual or groups of assets placed in service. Economic circumstances or other factors may cause management’s estimates of expected ~~grains,~~useful lives to differ from the actual useful lives. Differences between estimated lives and ~~can~~actual lives may be ~~used~~significant, ~~as:~~but management does not expect events that occur during the normal operation of our Plant related to estimated useful lives to have a significant effect on results of operations.

~~· an~~Long-lived assets, ~~oxygenated~~including ~~fuel~~property, ~~additive~~plant, equipment and investments, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that ~~can~~the ~~reduce~~carrying amount of an asset may not be ~~ozone~~recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. Considerable management judgment is necessary to estimate future cash flows and ~~carbon~~may ~~monoxide~~differ ~~vehicle~~from ~~emissions;~~actual cash flows. Management recorded an impairment of $12.5 million at September 30, 2009 based on their assessment of the risks and rewards related to the ownership of these assets and the expected cash flows generated from the operation of the Plant. Future impairment analysis will depend on the Company generating positive cash flow from operations of the plant and successful reorganization under Chapter 11 bankruptcy.

2Chapter 11 Bankruptcy

~~Table of Contents~~General

· We suffered significant losses in fiscal 2009 and fiscal 2008 from a ~~non~~dramatic increase in its corn costs, reflecting in part costs attributable to its corn procurement and hedging arrangements, and historically unfavorable margins. Beginning in the third quarter of 2009, these losses, combined with worsening capital market conditions and a tightening of trade credit resulted in severe constraints on our liquidity position. Faced with these constraints, on October 30, 2009 (the “Petition Date”), we filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code (the “Code”) with the United States Bankruptcy Court for the District of Minnesota (the “Bankruptcy Court”). Our Chapter 11 case is being administered by the Bankruptcy Court as In re: Otter Tail AG Enterprises, LLC (the “Bankruptcy Case”). The petition was filed in order to enable us to pursue reorganization efforts under Chapter 11 of the Bankruptcy Code. We intend to continue to operate our business as debtor-~~petroleum~~in-possession under ~~based~~the ~~gasoline~~jurisdiction ~~substitute;~~of the Bankruptcy Court and in accordance with the applicable provisions of the Code and orders of the Bankruptcy Court. In general, as debtors-in-possession, we are authorized under Chapter 11 to continue to operate as an ongoing business, but may not engage in transactions outside of the ordinary course of business without the prior approval of the Bankruptcy Court.

~~· an~~As ~~octane~~a result ~~enhancer~~of the Bankruptcy Case, we are periodically required to file various documents with, and provide certain information to, the Bankruptcy Court, including statements of financial affairs, schedules of assets and liabilities, monthly operating reports and other financial information. Such materials have been and will be prepared according to requirements of federal bankruptcy law. While they would accurately provide then-current information required under federal bankruptcy law, such materials will generally be unaudited and prepared in ~~fuels~~a format different from that used in the Company’s financial statements filed under the securities laws. Accordingly, we believe that the substance and format of such materials do not allow meaningful comparison with our regular publicly-disclosed financial statements.

~~Most~~In order ~~ethanol~~to issuccessfully ~~used~~exit inChapter ~~its~~11 ~~primary~~bankruptcy, ~~form~~we ~~for~~will ~~blending~~need ~~with~~to ~~unleaded~~obtain ~~gasoline~~confirmation by ~~and~~the Bankruptcy Court of a plan of reorganization that satisfies the requirements of the Bankruptcy Code, which plan has yet to be submitted to the Bankruptcy Court. A plan of reorganization would, among other ~~fuel~~things, ~~products~~resolve our pre-petition obligations, set forth the revised capital structure of the newly reorganized entity and provide for corporate governance subsequent to exit from bankruptcy. The ~~principal~~Company is in ~~purchasers~~negotiation with the relevant parties on developing a plan of ~~ethanol~~reorganization which ~~are~~we ~~generally~~anticipate ~~wholesale~~will ~~gasoline~~be ~~distributors~~filed orwith the courts prior to February 28, ~~blenders~~2010. There can be no assurance that a reorganization plan will be confirmed by the Bankruptcy Court, or that any such plan will be consummated.

~~The~~Under section ~~Dry~~365 ~~Mill~~of ~~Process~~the Bankruptcy Code, we may assume, assume and assign, or reject executory contracts and unexpired leases, including real property, railcars and equipment leases, subject to the approval of the Bankruptcy Court and certain other conditions. Rejection constitutes a court-authorized breach of the lease or contract in question and, subject to certain exceptions, relieves us of our future obligations under such lease or contract but creates a deemed pre-petition claim for damages caused by such breach or rejection. Parties whose contracts or leases are rejected may file claims against us for damages. Generally, the assumption of an executory contract or unexpired lease requires us to cure all prior defaults under such executory contract or unexpired lease, including all pre-petition arrearages, and to provide adequate assurance of future performance. In this regard, we expect that liabilities subject to compromise and resolution in the Bankruptcy Case will arise in the future as a result of damage claims created by our rejection of various executory contracts and unexpired leases. Conversely, we would expect that the assumption of certain executory contracts and unexpired leases may convert liabilities shown in future financial statements as subject to compromise to post-petition liabilities. Due to the uncertain nature of many of the potential claims, we are unable to project the magnitude of such claims with any degree of certainty.

The ~~Plant~~Bankruptcy ~~uses~~Court awill ~~dry~~establish ~~milling process to produce fuel-grade ethanol as its main product and DDGS and DMWG as co-products. Our Plant has~~ a ~~design~~deadline ~~capacity~~for tothe ~~produce~~filing ~~55,000,000~~of ~~gallons~~proofs of ~~ethanol~~claim ~~per~~under ~~year. In addition,~~ the ~~Plant~~Bankruptcy ~~has~~Code, ~~a design~~requiring ~~capacity~~our creditors to ~~produce~~submit ~~approximately~~claims ~~135,500~~for liabilities ~~tons~~not ofpaid ~~DDGS~~ and ~~66,500~~for ~~tons of~~damages ~~DMWG~~incurred. We ~~are~~There ~~considering~~may ~~selling~~be ~~the~~differences between ~~carbon~~the ~~dioxide~~amounts ~~gas~~at wewhich ~~produce~~any tosuch aliabilities ~~third-party~~are ~~processor,~~recorded orin ~~vent~~ the ~~carbon~~Company’s ~~dioxide~~financial ~~gas~~statements ~~into~~and the ~~atmosphere~~amount ifclaimed weby ~~are~~our ~~unable to sell it to a third-party processor~~creditors. We ~~are presently venting the~~Significant ~~carbon~~litigation ~~dioxide~~may ~~gas~~be ~~into~~required ~~the~~to ~~atmosphere. Our~~resolve ~~Plant~~any ~~has,~~such ~~among~~disputes ~~others, the following facilities:~~or discrepancies.

~~Grain~~We have ~~Receiving,~~incurred ~~Storage~~ and ~~Milling~~will ~~Equipment. The~~continue ~~Plant contains receiving facilities that have the ability~~ to ~~receive~~incur ~~corn~~significant bycosts ~~rail~~associated ~~and~~with ~~truck. Upon delivery, we weigh~~ the ~~corn and issue a~~ ~~weight ticket~~reorganization. A ~~leg~~The ~~lifts~~amount ~~the~~of ~~corn~~these ~~to the~~costs, ~~storage~~which ~~bins. We~~are ~~have~~being ~~installed~~expensed ~~a dust~~as ~~collection system in the grain receiving system to limit particulate~~incurred, ~~emissions. We~~are ~~then~~expected ~~remove the corn from storage~~ to asignificantly ~~scalper~~affect toour ~~remove~~results ~~rocks and debris before conveying the product and processing it through a hammer-mill. The result~~ of ~~this process is ground corn~~operations.

~~Conversion~~We have ~~and~~approval ~~Liquefaction~~from ~~System,~~the ~~Fermentation~~Bankruptcy ~~System~~Court ~~and~~to ~~Evaporation~~use ~~System. We~~the ~~mix~~cash held at the ~~ground~~date ~~corn~~of filing infor ~~slurry~~bankruptcy. We ~~tanks~~have ~~which~~certain ~~produces~~obligations ~~cooked~~such ~~mash.~~ as reporting to the ~~The~~interested ~~cooked~~parties ~~mash~~on ~~then~~a ~~continues~~weekly ~~through~~basis ~~liquefaction~~as ~~tanks~~well ~~and~~as ~~into~~being required to carry a ~~fermenters~~minimum of $2 million of available cash. ~~Simultaneously,~~ If we ~~add~~fail ~~yeast~~ to ~~the~~meet ~~cooked~~our equity ~~mash~~raise asgoal itof ~~enters~~$10 ~~the~~million ~~fermenters. After~~by ~~batch~~February ~~fermentation~~28, ~~is complete~~2010, ~~the~~we ~~liquid~~may ~~produced~~have byto ~~the~~cease ~~fermentation~~production ~~process~~as isour ~~pumped~~creditors have the right to ~~wells~~further ~~and~~restrict ~~then~~the use of cash under the agreement to the ~~distillation~~extent ~~column~~of towithdrawing permission. We could request an ~~separate~~extension for the ~~alcohol~~use ~~from~~of ~~the~~cash; ~~mash~~however it is not guaranteed that such permission would be granted.

~~Distillation~~As a result of the Bankruptcy Case, realization of assets and ~~Molecular~~liquidation ~~Sieve~~of liabilities are subject to uncertainty. We ~~dehydrate~~While operating as a ~~and~~debtor-in-possession ~~separate~~under the ~~ethanol~~protection of Chapter 11, and subject to Bankruptcy Court approval or otherwise as permitted in the ~~distillation~~normal ~~column~~course of business, ~~the~~we ~~side~~may ~~stripper~~sell or otherwise dispose of assets and ~~the~~liquidate or settle ~~molecular~~liabilities ~~sieve~~for ~~system. We~~amounts ~~then~~other ~~blend~~ than those reflected in the ~~ethanol~~condensed ~~with~~consolidated financial upstatements. toFurther, 5a ~~percent~~plan ~~gasoline~~of asreorganization itcould ismaterially ~~pumped~~change the ~~into~~amounts ~~storage~~and ~~tanks. The~~classifications ~~storage~~reported ~~tanks~~in ~~contain~~our ~~meters,~~consolidated ~~filters,~~financial ~~pumps~~statements. ~~and~~Our ~~loading~~historical ~~equipment~~consolidated ~~for~~financial ~~transfer~~statements do not give effect to ~~rail~~any ~~cars~~adjustments to the carrying value of assets or ~~trucks~~amounts of liabilities that might be necessary as a consequence of confirmation of a plan of reorganization.

~~Liquid/Solid Separation System.~~ The ~~Plant~~ ~~also~~potential ~~produces~~adverse ~~distillers~~publicity ~~grains. We transport~~associated with the ~~corn~~Bankruptcy ~~mash~~Case ~~from~~and the resulting ~~distillation~~uncertainty ~~column~~regarding toour ~~centrifuges~~future ~~and~~prospects ~~then~~may ahinder our ongoing ~~dryer~~business activities and our ability to operate, ~~where~~fund ~~moisture~~and isexecute ~~removed. The~~our business ~~Plant~~plan ~~utilizes~~by aimpairing ~~dryer~~relations ~~system~~ with aexisting ~~regenerative~~and ~~thermal~~potential ~~oxidizer. After~~customers; ~~they~~negatively impacting ~~are~~our ~~dried~~ability to attract, ~~the~~retain ~~distillers~~and ~~grains~~compensate key executives and ~~are~~employees ~~conveyed~~and to ~~the~~retain ~~filter~~employees ~~receiver~~generally; ~~and~~limiting ~~then~~our ability to aobtain trade ~~storage~~credit; ~~building~~and impairing present and future relationships with vendors and service providers.

~~Product~~Under the ~~Storage~~priority ~~Area. We~~scheme ~~have~~established ~~storage~~by ~~tanks~~the onCode, ~~site~~unless creditors agree otherwise, post-petition liabilities and pre-petition liabilities must be satisfied in full before unit holders are entitled to ~~store~~receive any distribution or retain any ~~the~~property ~~ethanol~~under wea ~~produce~~plan of reorganization, which has yet to be submitted to or confirmed by the Bankruptcy Court. The ~~Plant~~ultimate ~~also~~recovery, if any, to creditors ~~contains~~and/or unit holders will not be determined until confirmation and consummation of a ~~storage~~plan ~~building~~or plans of reorganization. No assurance can be given as to ~~hold~~what values, ~~distillers~~if ~~grains~~any, ~~until~~will ~~they~~be ~~are~~ascribed ~~shipped~~in the Bankruptcy Case to each of these ~~market~~constituencies or what types or amounts of distributions, if any, they would receive. A plan of reorganization could result in holders of our units receiving no distribution on account of their interests and cancellation of their existing units.

~~General~~Results ~~Plant Infrastructure and Utilities. The Plant also consists~~ of administration facilities, chillers, cooling towers and other processing equipment, some of which require fresh water to operate. We condition boiler water in regenerative softeners and/or other treatment equipment and pump it through a deaerator and into a deaerator tank. Appropriate boiler chemicals are added and the pre-heated water is pumped into the boiler. Steam energy is provided by a steam generator. Process cooling is provided by circulating cooling water through heat exchangers, a chiller and a cooling tower. The Plant contains a compressed air system consisting of an air compressor, receiver tank, pre-filter and air dryer. The Plant design also incorporates the use of a clean-in-place system for cooking, fermentation, distillation, evaporation, centrifuges and other systems.Operations

~~The~~We own ~~block~~and ~~flow~~operate ~~diagram~~a ~~below~~corn ~~illustrates~~dry-mill ~~how~~ethanol ~~the~~ Plant ~~processes~~in Fergus Falls, Minnesota . We process approximately 20 million bushels of corn into approximately 55 million gallons of ethanol: each year, based on the nameplate capacity of our Plant. In addition, we sell distillers grains, a principal co-product of the ethanol production process, which we will sell as WDGS and DDGS.

3Revenues

~~Table~~For the year ended September 30, 2009, we had revenues of ~~Contents~~approximately $96 million. For the year ended September 30, 2008, we had revenues of approximately $70.1 million. The increase in our revenues of approximately $25.9 million, or 37 percent, was due to our Plant only becoming operational in the second quarter of fiscal 2008. Our increase in revenues reflects the additional amount of time that the Plant was operational in fiscal year 2009 versus fiscal year 2008, and the corresponding greater volume of ethanol sales that offset the higher price per gallon received during 2008. During fiscal year 2009, we witnessed an average sales price for our ethanol of $1.53 per gallon, which represents a decrease of $0.75 per gallon from our average sales price for ethanol in fiscal year 2008. Also, during fiscal year 2009, we witnessed an average sales price for our WDGS of $29.79 per ton, a $4.90 per ton decrease over fiscal year 2008, and an average sales price for our DDGS of $110.48 per ton, a $36.66 per ton decrease over fiscal year 2008.

~~For our fiscal year ended September 30, 2008, revenue from the sale of ethanol was approximately 85% of total revenues. We did not have any revenues prior to the third quarter of fiscal year 2008.~~25

~~Distillers~~ Cost ~~Grains~~of Sales

AFor ~~principal~~the year ~~co-product~~ended ofSeptember ~~the~~30, ~~ethanol~~2009, ~~production process~~we ishad ~~distillers~~costs ~~grains,~~of asales ~~high~~of ~~protein~~approximately $96.7 million, ~~high-energy~~or ~~animal~~approximately ~~feed supplement~~101% ~~primarily~~of ~~marketed~~revenues, toand ~~the~~no ~~dairy~~lower ~~and~~of ~~beef~~cost ~~industry~~or market adjustment. We ~~Distillers~~also ~~grains contain~~incurred ~~by-pass~~an ~~protein~~impairment ~~that~~of isplant ~~superior~~and toprocess equipment ~~other~~charge ~~protein~~of ~~supplements~~$12.5 ~~such~~million. For ~~as cottonseed~~the ~~meal~~year ~~and~~ended September 30, ~~soybean~~2008, ~~meal.~~we ~~By-pass~~had ~~proteins~~costs ~~are~~of ~~more~~sales ~~digestible~~of toapproximately ~~the animal~~$68.4 million, or ~~thus~~approximately ~~generating~~98% ~~greater~~of ~~lactation~~revenues, inand ~~milk~~a ~~cows~~lower ~~and~~of ~~greater~~cost ~~weight~~or ~~gain~~market adjustment of inapproximately ~~beef~~$4.6 ~~cattle~~million. Our ~~The~~higher ~~dry~~costs ~~mill~~of ~~ethanol~~sales, inclusive ~~processing~~of ~~used~~impairment bycharges ~~the~~and ~~Plant~~lower ~~results~~of ~~in two~~cost ~~forms~~or ofmarket ~~distiller~~adjustment, ~~grains:~~for fiscal ~~DMWG~~2009 ~~and~~over ~~DDGS.~~fiscal ~~DMWG~~2008 isof ~~processed~~approximately ~~corn~~$36.1 ~~mash~~million, ~~that has~~or ~~been~~49 ~~dried~~percent, was due to ~~approximately~~our ~~50%~~Plant ~~moisture.~~only ~~DMWG~~becoming ~~have~~operational ain ~~shelf~~the ~~life~~second quarter of fiscal ~~approximately~~2008. Our ~~ten~~increase ~~days~~in ~~and~~costs ~~are~~of ~~often~~sales ~~sold~~reflects tothe ~~nearby~~additional ~~markets.~~amount of ~~DDGS~~time isthat ~~processed corn~~the ~~mash~~Plant ~~that~~was ~~has~~operational ~~been~~in ~~dried~~fiscal to2009 ~~10%~~versus tofiscal ~~12%~~2008, ~~moisture.~~and the ~~DDGS~~corresponding ~~has~~greater anvolume ~~almost~~of input purchases, particularly ~~indefinite~~corn. While ~~shelf~~we ~~life~~witnessed ~~and~~a ~~may~~dramatic berise ~~sold~~in ~~and~~corn ~~shipped~~prices tothroughout the ~~any~~third ~~market~~and ~~regardless~~fourth quarters of ~~its~~ ~~vicinity~~fiscal toyear an2008, ~~ethanol~~corn ~~plant.~~prices Atsomewhat stabilized ~~our~~in ~~Plant,~~fiscal ~~the~~year ~~composition~~2009. Some of the ~~distillers~~other key components of ~~grains~~our wecosts ~~produce~~of isgoods ~~approximately~~sold ~~40%~~(chemicals, ~~DMWG~~denaturant and ~~60%~~natural ~~DDGS~~gas) also decreased during fiscal year 2009 vs. fiscal year 2008.

~~For our fiscal year ended September 30, 2008,~~Operating ~~revenues from sale of distillers grains was approximately 15% of total revenues. We did not have any revenues prior to the third quarter of fiscal year 2008.~~Expenses

~~Employees~~Our operating expenses were approximately $2.3 million and $1.7 million for the fiscal years ended September 30, 2009 and 2008, respectively. Our operating expenses increased by approximately $600,000, or 35 percent, for fiscal year 2009 over 2008. These increases were due primarily to costs associated with running our Plant for a full fiscal year, versus only partial operation in fiscal year 2008, and professional and consulting fees related to the bankruptcy and bank foreclosure proceedings. In fiscal year 2009, our significant operating expenses were: 1) approximately $342,000 related to salaries; and 2) approximately $816,000 related to professional fees (for legal and accounting services). In fiscal year 2008, our significant operating expenses were: 1) approximately $987,000 related to general and administrative expense and 2) approximately $720,000 related to professional fees (for legal and accounting services).

~~We have 31 full time employees, of which five are in~~Other ~~general management and administration~~Income, and the remainder in Plant operations. We entered into a written agreement to employ a Chief Executive Officer. We do not maintain an internal sales organization. We rely upon third-party buyers and marketers to buy or market the ethanol and distillers grains that we produce to multiple buyers throughout the United States. Under such a business plan, our principal operations are the general management of our business and the operation of the Plant.Net

~~Sales~~Interest expense was approximately $4.6 million and ~~Marketing~~$2.9 million for fiscal years September 30, 2009 and 2008, respectively, an increase of 59 percent for fiscal year 2009 over 2008. The increase is due to late charges and default interest being charged in 2009. As of September 30, 2009, we had fully drawn on our senior debt and operating line of credit.

WeInterest ~~have~~income ~~hired~~was aapproximately ~~national~~$27,000 ~~marketing~~and ~~firm~~$222,000 tofor ~~sell~~the ~~our~~fiscal ~~ethanol~~years ~~and another to sell~~ended ~~our~~September 30, ~~distillers~~2009 ~~grain.~~and 2008, ~~However~~respectively, ~~because~~ a decrease of ~~the~~715 ~~number~~percent for offiscal ~~local~~year ~~feedlots~~2009 ~~and~~over ~~livestock~~2008. Interest ~~operations,~~income wedecreased ~~sell~~primarily due to a ~~portion~~reduction ~~of our~~in ~~distillers~~cash ~~grains~~held ~~locally,~~in asinterest ~~DMWG~~bearing accounts and reduction in rate earned.

~~Ethanol~~ Net Loss

OnOur net ~~July 18,~~loss ~~2006,~~was weapproximately ~~entered~~$21.5 ~~into~~million anand ~~Ethanol Fuel Marketing Agreement with Renewable Products Marketing Group, L~~$8.~~L.C.~~7 ~~(“RPMG”)~~million infor ~~which~~the ~~RPMG~~fiscal ~~agreed~~years ~~to be~~ended ~~the~~September ~~sole~~30, ~~marketing~~2009 ~~representative~~and ~~for~~2008, ~~our~~respectively, ~~facility’s~~an ~~entire~~increase ~~production~~ of ~~ethanol. Under~~ ~~the~~147 ~~terms~~percent offor ~~this~~fiscal ~~agreement,~~year ~~RPMG~~2009 ~~agrees~~over to2008. The ~~use~~increase ~~its~~in ~~best~~our ~~efforts~~net toloss ~~market~~was ~~all~~primarily ~~our ethanol and~~the ~~its~~result ~~best~~of ~~efforts to find~~ the ~~best~~continued ~~price~~poor ~~for~~margin ~~all~~situation ~~fuel~~in ~~grade~~the ethanol ~~obtained~~industry during ~~pursuant~~fiscal toyear ~~the agreement~~2009, ~~but~~as iswell ~~not~~as ~~obligated~~an toimpairment ~~sell a minimum number~~ of ~~gallons~~ ~~per~~plant ~~month. The~~and ~~cost~~process ~~associated~~equipment charge ~~with~~of ~~this service is~~ $012.015 ~~per~~million ~~gallon~~during of the ~~sales~~year. During ~~price of~~ the ~~ethanol. This~~fiscal ~~agreement~~year ~~estimates that we will supply~~ended ~~RPMG~~September ~~with~~30, an2009, ~~average~~we ~~monthly~~had ~~volume~~no lower of ~~4,583,333~~cost ~~gallons~~or ~~of ethanol~~market adjustment. If During wethe ~~are~~fiscal ~~unable~~year toended ~~achieve~~September ~~this monthly volume and~~30, ~~as a consequence~~2008, ~~RPMG is unable to meet its sale obligations to~~we ~~third~~had ~~parties,~~a ~~RPMG~~lower ~~may~~of ~~purchase~~cost ~~ethanol~~or ~~on the open~~ market ~~and~~adjustment ~~have~~of ~~us reimburse~~approximately ~~RPMG for any losses~~$4. ~~RPMG is~~6 ~~under~~million. As noprovided ~~contractual~~in ~~obligation~~“Chapter to11 ~~buy~~Bankruptcy” ~~any~~in ~~minimum amount of our ethanol. If, for any reason,~~ this ~~agreement is~~Management’s ~~terminated~~Discussion byand ~~either party~~Analysis, wecontinued ~~may~~net ~~incur~~losses ~~significant~~and ~~expense~~our inworsening ~~finding a~~liquidity ~~replacement~~situation tocaused ~~market~~us ~~our~~to ~~ethanol,~~make ~~which~~a ~~could~~voluntary ~~have~~filing afor ~~material~~Chapter ~~negative~~11 ~~effect~~ protection on October ~~our~~30, ~~business~~2009.

WeMargins ~~believe~~have ~~that~~recently ~~utilizing~~improved ~~RPMG~~across ~~not~~the ~~only~~industry ~~enables~~due us to ~~bypass~~a ~~the~~more ~~need~~balanced tosupply ~~develop~~and ~~our~~demand ~~own~~of ~~internal~~product ~~sales~~in ~~organization,~~the ~~but~~market ~~also~~place. This ~~provides~~margin usimprovement ~~access~~has caused tosome ~~markets~~ of the production capacity that wewas ~~would~~previously ~~otherwise~~slowed ~~not~~down beor ~~able~~shut down to ~~penetrate~~increase onproduction ~~our~~or ~~own. RPMG~~come ~~has~~back ~~access~~on toline. In ~~numerous~~the ~~markets~~event ~~because~~that ~~they~~we ~~manage~~successfully ~~large~~emerge ~~quantities~~from ofbankruptcy ~~ethanol~~ and ~~can~~some ~~provide~~or ~~flexibility~~all toof ~~meet~~production capacity ~~varying~~that ~~customer~~was ~~needs. We~~previously ~~believe~~slowed ~~that~~or shut down comes back on line, we may witness ~~having~~tighter amargins ~~diverse~~in ~~customer~~fiscal ~~base~~year 2010 and possibly beyond.

4 Trends and Factors that May Affect Future Operating Results

~~Table of Contents~~Bankruptcy

~~through~~Our ~~RPMG~~future ~~provides~~operating usresults ~~better~~will ~~flexibility~~be tosignificantly ~~respond~~dependent on our ability to emerge ~~negative~~successfully ~~localized~~from ~~market~~Chapter 11 bankruptcy protection with a court-approved ~~fluctuations. However,~~plan weof ~~seek~~reorganization that allows us to continue operations. Please ~~deliver~~see as“Chapter ~~much~~11 ~~product~~Bankruptcy” asin ~~possible~~this toManagement’s ~~local~~Discussion ~~markets,~~and ~~which~~Analysis ~~helps~~for more ~~minimize~~information on the status of our ~~freight~~ ~~costs~~bankruptcy filing.

RPMG is a producer-owned ethanol and bio-diesel marketing company formed in 1999. RPMG applies cooperative principles to the marketing of fuel ethanol and it is the only such association that is wholly owned and managed by its member plants. The five founding member plants of RPMG are Al-Corn Clean Fuels of Claremont, Minnesota; Chippewa Valley Ethanol ~~Company of~~ Benson, Minnesota; Corn Plus of Winnebago, Minnesota; Diversified Energy Company of Morris, Minnesota and Heartland Corn Products in Winthrop, Minnesota. We are not a member of RPMG, but retain RPMG to market our ethanol pursuant to the Ethanol Fuel Marketing Agreement. We do not anticipate any conflicts of interest arising in the future due to RPMG marketing ethanol for other producers and its member plants because RPMG is contractually obligated to use the same best efforts to sell the ethanol produced at all its contracted plants. As a result, RPMG would be in breach of its contracts with us and other members if it favored one plant over another. No such event has occurred, to our knowledge, in the past, nor would we reasonably expect that such an event would happen in the future.Supports

~~The~~On ~~market~~December 19, ~~segments~~2007, ~~for~~President ~~our~~Bush ~~ethanol~~signed ~~depend~~into inlaw ~~part~~the onEnergy Independence and Security Act of 2007, which raises the ~~buyers~~minimum ~~and~~usage ~~marketers~~requirement weto 13.2 ~~work~~billion ~~with~~gallons ~~and~~of ~~their~~ethanol ~~size~~by 2012 and ~~geographic~~15 ~~reach~~billion gallons by 2015. The Act ~~These~~also ~~outlets~~mandates ~~vary~~a inminimum ~~terms~~requirement of ~~where~~36 ~~they~~billion ~~distribute~~gallons ~~the~~of renewable fuels by 2022, with cellulosic ethanol ~~and~~accounting ~~the~~for 16 billion gallons of this ~~transportation~~total. The ~~methods~~renewable ~~and~~fuels ~~costs~~standard ~~associated~~program ~~with~~should ~~delivering~~ensure the continued growth of the ethanol market in the near future. The Energy Policy Act also provides a small producer credit allowing qualifying producers to deduct from their ~~facilities. Unless~~federal ~~rail~~income istaxes an10¢ per gallon for the first 15 million gallons ~~option,~~of ethanol ~~sold~~produced in ~~local~~a ~~and~~given ~~regional~~year. The ~~markets~~Volumetric ~~are~~Ethanol ~~typically~~Excise ~~shipped~~Tax ~~primarily~~Credit byprovides ~~truck~~refiners 4.5¢ per gallon of ethanol blended at 10 percent, which encourages refiners and gasoline blenders to use ethanol. We expect that the RFS and Volumetric Ethanol ~~sold~~Excise ~~into~~Tax Credit will increase demand for our ~~national~~ethanol ~~markets~~and ishave ~~shipped~~a bypositive ~~rail~~effect on our operating results.

ToCompetition ~~meet~~and ~~the~~Product challenge of marketing ethanol to diverse market segments, we have planned for an extensive rail siding at the production facility. The use of rail allows us to quickly move large quantities of ethanol to the markets that provide the greatest return.Demand

~~Our~~As ~~ethanol~~of October 22, ~~and~~2009, ~~distillers~~according to the Renewable Fuels Association, 202 ethanol ~~grains~~refineries ~~marketers~~had ~~decide~~a ~~where~~nameplate ~~our~~production ~~products~~capacity ~~will~~of bea ~~marketed~~record 13. ~~Our~~1 billion gallons, ~~products~~and ~~are~~11.9 ~~primarily~~billion ~~marketed~~gallons ~~within the~~of ~~United~~operating ~~States~~production. ~~However~~In fiscal year 2009, we ~~may~~witnessed a number of plants temporarily reducing production or ~~experience~~shutting ~~increased~~down ~~exports~~for a limited amount of ~~our~~time ~~products~~or permanently. If and when the margin situation improves in the ~~future. Further~~industry, ~~distillers~~we ~~grains~~would ~~may~~expect beto ~~exported~~see tomuch ~~countries~~of ~~who~~this ~~require~~excess ~~animal~~capacity ~~feed~~coming back online. ~~Management~~ We ~~anticipates~~believe that the ~~Asian~~ ~~market~~influx ~~may~~of ~~increase~~new ~~demand~~ethanol ~~for~~refineries ~~distillers~~and ~~grains~~return inof ~~the~~excess ~~future. As distillers~~capacity ~~grains~~and ~~become~~corresponding increase ~~more~~in ~~accepted~~supply asmay anhave ~~animal~~a ~~feed~~negative ~~substitute~~effect ~~throughout the~~on ~~world,~~our ~~distillers~~short-term ~~grains exporting may increase~~operating results.

~~Distillers~~Commodity ~~Grains~~Prices

~~The market for distillers grains generally consists of local markets for both DDGS and DMWG and national markets for DDGS.~~Corn

~~Most~~Our primary ofgrain ~~the~~feedstock ~~distillers~~is ~~grains that we sell are in the form of DDGS~~corn. OnThe ~~February 28,~~cost ~~2008, we~~of ~~signed~~corn anis ~~agreement~~dependent ~~with~~upon factors ~~CHS, Inc.~~that ~~(“CHS”)~~are ingenerally ~~which~~unrelated ~~CHS agreed~~ to bethose affecting the ~~sole~~price ~~marketing~~of ~~representative~~ethanol. Corn ~~for~~prices ~~our~~generally ~~facility’s~~vary ~~entire~~with ~~production~~international ofand ~~DDGS. If~~regional grain supplies, ~~for~~and ~~any~~can ~~reason,~~be ~~this~~significantly ~~agreement~~affected ~~is terminated~~ by ~~either party~~weather, weplanting ~~may~~and ~~incur significant expense in finding a~~carryout ~~replacement~~projections, togovernment ~~market~~programs, ~~our DDGS~~exports, ~~which~~and ~~could~~other ~~have~~international aand ~~material negative effect on~~regional ~~our~~market ~~business~~conditions.

WeDue ~~sell~~to the asignificant ~~portion~~expansion of ~~our~~the ~~distillers~~ethanol ~~grains~~industry, ascorn ~~DMWG,~~futures rose in fiscal ~~which~~2008 ~~are~~overall ~~sold~~in response to ~~local~~this ~~markets. On~~new ~~January 11~~demand, ~~2008,~~ webut ~~entered~~lowered ~~into~~significantly ain ~~Distillers~~the fourth ~~Grain~~quarter ~~Purchase~~of ~~Agreement~~fiscal ~~with~~2008. Corn ~~Bilden~~futures ~~Farms, LLC~~were ~~(“Bilden”)~~significantly inlower and ~~which~~more westable ~~give~~throughout ~~Bilden~~fiscal ~~the~~2009. We ~~first~~anticipate ~~right~~that ~~and~~this ~~option~~trend will tocontinue, ~~purchase our~~but ~~output~~there ofcan ~~DMWG,~~be ~~and~~no ~~Bilden~~guarantee ~~agrees~~that tocorn ~~utilize~~prices ~~its~~will ~~best~~not ~~efforts~~return to ~~purchase~~ ~~and~~the ~~resell~~high ~~the~~prices ~~grains. The~~and ~~agreement~~significant ~~is for~~volatility athat ~~two-year~~we ~~term. We~~witnessed ~~believe~~in ~~this~~fiscal ~~agreement~~2008. Factors ~~helps~~such toas ~~further~~United ~~reduce~~States ~~our~~Department ~~shipping~~of ~~cost~~Agriculture (“USDA”) ~~and~~estimates ~~minimize~~of ~~drying costs. If~~acres planted, ~~for~~corn ~~any~~yield ~~reason~~increases per acre, ~~this~~export ~~agreement~~demand isand ~~terminated~~domestic byusage ~~either~~also ~~party,~~have wesignificant ~~may~~effects ~~incur~~on ~~significant~~the ~~expense in~~corn ~~finding~~market. Significant aincreases ~~replacement~~in tothe ~~market~~price ~~our~~of ~~DMWG,~~corn ~~which~~will ~~could~~ have a ~~material negative~~significant negative effect on ~~our~~future ~~business~~operating results.

~~Procurement Agreements~~Natural Gas

OnThe ~~February 1, 2007,~~Plant werequires ~~entered into~~ a ~~Procurement~~significant ~~Agreement~~and ~~with~~uninterrupted ~~CHS in which CHS agreed to~~ supply ~~and~~ ~~we agreed to buy all~~ of ~~the~~natural ~~corn~~gas ~~needed~~ for ~~ethanol production at the~~its ~~Plant, estimated to be approximately 20,000,000 bushels per year~~operations. ~~Our~~Natural ~~contract~~gas ~~with~~prices ~~CHS~~have ~~provides~~historically ~~that we will establish the price we will~~fluctuated ~~pay for corn and CHS will seek corn for us to buy at this price~~dramatically. InNatural ~~the~~gas ~~event~~prices ~~CHS~~in ~~cannot~~Minnesota ~~locate~~have ~~adequate~~risen ~~corn at~~greatly ~~this~~in ~~price~~recent years, ~~CHS~~rising ~~will~~from ~~notify~~an usaverage ~~and~~of we$2.98 ~~may~~per ~~elect~~1000 tocubic ~~change~~feet ~~our price~~ in ~~order~~ 1999 to ~~obtain more corn~~$9. If09 ~~CHS is unable to~~per ~~obtain~~thousand ~~enough~~cubic ~~corn~~feet in ~~our~~2008 ~~immediate~~(Industrial ~~trade territory~~Price), weaccording ~~have~~to ~~installed~~U.S. ~~rail~~Department of ~~unloading~~Energy. Natural ~~capability~~gas ~~and~~prices welowered ~~have~~significantly ~~the ability to bring rail cars~~ in ~~from~~fiscal ~~outside~~year ~~our immediate market area~~2009. ~~CHS~~ As ~~would continue~~of toSeptember ~~act~~30, as2009, ~~our~~natural ~~buying~~gas ~~agent~~prices ~~and~~were we$3.94 ~~would~~per 1000 ~~set~~cubic ~~the price~~feet. In We ~~the~~expect ~~event~~ that ~~CHS~~volatility isin ~~unable~~the tonatural ~~obtain corn~~gas ~~for us at a price we deem acceptable, we would seek to purchase corn directly~~market ~~from~~will ~~farmers~~continue, ~~elevators~~ and ~~other~~that ~~corn~~significant ~~supply~~increases ~~companies~~ in ~~our~~the ~~local~~price ~~area,~~of ~~as well~~natural asgas ~~from regional and national sources.~~ would ~~This~~have ~~agreement~~a issignificant ~~for~~negative aeffect ~~term~~on ~~of five~~future ~~years~~operating results.

5Inflation

~~Table~~We do not consider the impact of ~~Contents~~inflation to be material to our revenues and income from operations.

~~Dependence~~Liquidity onand ~~One~~Capital ~~or a Few Major Customers~~Resources

Statement of Cash Flows for the years ended September 30,	2009			2008
Cash flows used in operating activities	$	(51,238	)	$	(9,143,260	)
Cash flows used in investing activities		(36,390	)		(46,540,912	)
Cash flows provided by financing activities		3,006,860			52,221,623

~~We are substantially dependent on CHS for the~~Cash purchase, marketing and distribution of our DDGS. CHS purchases 100% of the DDGS produced at the Plant, all of which are marketed and distributed to its customers. Therefore, we are highly dependent on CHS for the successful marketing of our DDGS. In the event that our relationship with CHS is interrupted or terminated for any reason, we believe that another entity to market the DDGS could be located. However, any interruption or termination of this relationship could temporarily disrupt the sale and production of DDGS and adversely affect our business and operations.Flows

~~Seasonal~~Operating activities. ~~Factors~~Net income before depreciation and amortization is a significant contributor to cash flows from operating activities. The changes in cash ~~Business~~flows from operating activities generally follow the results of operations and also are affected by changes in working capital. Cash flows used in operating activities in 2009 decreased approximately $9.1 million from the comparable prior period. The Company incurred a net loss of approximately $21.5 million due to operational losses from the negative spread between corn and ethanol, together with a onetime impairment of plant and process equipment of $12.5 million, as well as a further impairment of the financing costs of approximately $1.5 million. Depreciation expense accounted for approximately $7 million as compared to $3.7 million in 2008 and an accrued interest increase of approximately $2.3 million over 2008 accrual accounted for the change in cash flows from operations. The Company’s overall cash and equivalent position improved from approximately $1.1 million at September 30, 2008 to approximately $4.0 million at September 30, 2009.

In an effort to improve air quality in regions where carbon monoxide and ozone are a problem, the Federal Oxygen Program of the Federal Clean Air Act requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce carbon monoxide pollution. Gasoline that is blended with ethanol has a higher oxygen content than gasoline that does not contain ethanol. As a result, we expect fairly light seasonality with respect to our gross profit margins on our ethanol, allowing us to, potentially, be able to sell our ethanol at a slight premium during the mandated oxygenate period. Conversely, we expect our average sales price for fuel grade ethanol during the summer, when fuel grade ethanol is primarily used as an octane enhancer or a fuel supply extender, to be a little lower.27

~~Financial~~Investing activities. ~~Information~~Cash ~~about~~flows ~~Geographic~~used ~~Areas~~in investing activities in fiscal 2009 decreased approximately $46.5 million compared to the comparable prior period, the result of no construction in process expenditures in fiscal 2009 as a result of the Plant becoming operational in 2008. There were approximately $46.5 million in construction in process expenditures in fiscal 2008.

~~All~~Financing activities. ofCash ~~our~~flows ~~operations~~provided ~~and~~by ~~all~~financing ofactivities ~~our~~in ~~long-lived~~fiscal 2008 ~~assets~~decreased ~~are~~approximately ~~located~~$49.2 inmillion ~~the~~compared ~~United~~to ~~States.~~the Wecomparable ~~believe~~prior ~~that~~period, primarily ~~all~~the result of ~~the~~proceeds ~~products~~from ~~we will~~our ~~sell~~construction toloan ~~our~~being ~~customers~~fully recognized in ~~the~~fiscal ~~future~~2008. For ~~will~~fiscal beyear ~~produced~~2008, we recognized approximately $47.5 million in ~~the~~proceeds ~~United~~from ~~States~~our construction loan.

~~Sources~~As of September 30, 2009, we had approximately $4 million in cash and ~~Availability~~cash equivalents, approximately $2.8 million in restricted cash, and total assets of approximately ~~Raw~~$105 ~~Materials~~million. As of September 30, 2009, we had current liabilities of approximately $90.2 million, including approximately $80.1 million in current maturities of long-term debt. Total members’ equity as of September 30, 2009 was $14,978,644.

~~Corn~~Since our inception through September 30, 2009, we have an accumulated deficit of approximately $30.2 million. We are in default under all of our senior and subordinated debt, which means that all of our long-term debt has been classified to current maturity. On October 30, 2009, we filed a voluntary petition for relief in the United States Bankruptcy Court, District of Minnesota under Chapter 11 of the Code. Our negotiated Chapter 11 bankruptcy filing, In re: Otter Tail AG Enterprises, LLC, was made with the approval of our senior lenders. Our continued operations will be dependent on successfully emerging from bankruptcy with a court-approved plan of reorganization, which we have yet to submit to the Bankruptcy Court. Based on our operating plan, our existing working capital is not sufficient to meet the cash requirements to fund our planned operating expenses, capital expenditures, and working capital requirements though September 30, 2010 without additional sources of cash and/or the deferral, reduction or elimination of significant planned expenditures. Currently, we have no commitments to obtain additional capital, and there can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If we cannot obtain sufficient additional funding, we will be forced to significantly curtail our operations, or cease operations.

Our corn supply is secured through a procurement arrangement with CHS. Under the terms of the procurement agreement, CHS agrees to supply and we agree to buy all of the corn needed for ethanol production at the Plant, estimated to be approximately 20,000,000 bushels per year. We believe that CHS can supply all of the corn needed for our ethanol production requirements. For the fiscal year ended September ~~30, 2008,~~Contractual weObligations ~~had not experienced any problems with our supply of corn from CHS,~~ and doCommercial ~~not anticipate experiencing any problems with our supply of corn in fiscal 2009.~~Commitments

~~Utilities~~We have entered into several loan agreements and a capital lease agreement for financing of the Plant. The total loan commitment is approximately $60 million and the capital lease is approximately $26 million, and both are described below. As provided above and in Note 2 to the consolidated financial statement notes, we filed for voluntary Chapter 11 bankruptcy protection on October 30, 2009. The ability of our senior creditors and the County to seek remedies to enforce their rights under the agreements listed below is automatically stayed as a result of the filing of the Chapter 11 petition. The automatic stay invoked by the filing of the Chapter 11 petition effectively precludes any actions by the Company’s senior creditors and County to collect, assert, or recover a claim against us, subject to the applicable provisions of the Code and orders granted by the Bankruptcy Court. We are working with our lenders to cure defaults related to the various loans to which we are a party in order to successfully emerge from bankruptcy.

The ~~production of ethanol is a very energy intensive~~loans ~~process~~described ~~that~~below ~~requires~~are ~~significant~~subject ~~and uninterrupted amounts of electricity, natural gas and water. We have signed contracts with utility providers~~ to ~~supply~~credit usagreements with ~~our~~various ~~energy requirements. A~~financial ~~natural gas pipeline has~~and ~~been~~non-financial ~~installed~~covenants tothat ~~the~~limit ~~Plant~~distributions, ~~distributing~~require tominimum ~~the~~debt ~~necessary equipment. If there is any interruption in our supply of~~service ~~energy~~coverage, ~~such~~net asworth ~~supply,~~and ~~delivery~~working orcapital ~~mechanical problems~~requirements, weand ~~may~~secured ~~have~~by ~~to halt~~all ~~production. Halting production for any extended period of time will harm our~~ business assets.

6We were in violation of financial covenants as of September 30, 2008. We failed to meet tangible net worth requirements and reporting requirements as of September 30, 2008. As of September 30, 2008 the financing agencies had waived the compliance with the tangible net worth ratio and reporting requirements through October 1, 2009.

~~Table~~On March 20, 2009, we entered into a forbearance agreement (the “Forbearance Agreement”) with our senior lender, Agstar Financial Services, PCA (“Agstar”), which requires that Agstar not pursue certain remedies available to them until April 30, 2009, which is the end of ~~Contents~~the forbearance period. The terms of the Forbearance Agreement requires us to pay the current principal amounts due as well as all accrued interest at the end of the forbearance period. At that time, if we are unable to pay the amounts due after the forbearance period as required under the Forbearance Agreement, Agstar may (1) declare a default under the loans and (2) consent to remedial action taken by subordinate lenders, and may provide notice of default and/or acceleration.

~~Electricity~~On June 3, 2009, we received a notice letter from Agstar stating we are in default on our loan agreement and that we are in default under our subordinate lender agreements. Under the terms of the notice letter we had to cure all defaults prior to June 15, 2009, or the entire amount due under the agreements would become accelerated. We failed to make these payments under the notice by June 15, 2009.

On ~~May 18~~July 21, ~~2007~~2009, ~~we entered into a contract with Lake Region Electric Cooperative to provide~~ our ~~needed~~senior ~~electrical energy. Despite~~lender ~~this~~declared ~~contract, there can be no assurance that they will be able to reliably supply~~ the ~~electricity~~principal ~~that we~~and ~~need. The~~interest ~~Department~~balance ~~of Energy’s~~under ~~forecast for United States electricity call for industrial prices to grow steadily through 2009 in~~ the ~~Census~~Construction ~~Bureau’s~~Term ~~West~~Note ~~North~~Term ~~Central~~Revolving ~~region (consisting~~Note, ofand ~~the~~Revolving ~~states~~Line of ~~Iowa,~~Credit Loan ~~Kansas,~~(both ~~Minnesota,~~defined ~~Missouri,~~below) ~~Nebraska,~~immediately ~~North Dakota,~~due and ~~South Dakota)~~payable.

~~Source:~~On ~~Energy~~August ~~Information~~31, ~~Administration~~2009, ~~October 2008~~we received a summons and complaint from Agstar and NMF for our defaults on the loan agreements to begin foreclosure proceedings.

~~Natural Gas~~28

~~On May 23, 2006, we entered into an agreement~~New ~~with~~Market BPTax ~~Canada~~Credit ~~Energy Marketing Corp. to provide us with the necessary supply of natural gas when needed at a mutually agreed upon price via telephone.~~Loan

AsIn March ~~illustrated~~2007, inwe entered into the ~~chart~~agreement ~~below~~with NMF for the amount of $19,175,000. ~~industrial~~We have ~~natural~~guaranteed ~~gas~~we ~~prices~~will be in compliance with the ~~Census~~program over the tax credit ~~Bureau’s~~recapture ~~West~~period ~~North~~from ~~Central~~September ~~region~~2007 ~~(consisting~~until ofSeptember ~~the~~2014. ~~states~~The ofNMF ~~Iowa,~~loan ~~Kansas,~~is ~~Minnesota,~~divided ~~Missouri,~~into ~~Nebraska,~~two ~~North~~portions: ~~Dakota~~a term loan of $14,480,500 (the “Term Loan”) and subordinated ~~South~~note ~~Dakota~~for $4,694,500 (the “Subordinated Note”). ~~have~~The ~~remained~~Term Loan ~~relatively~~contains ~~flat~~a provision in which we must make interest only payments on the ~~last~~6th ~~three~~day of ~~years~~the ~~and~~first ~~are~~month ~~projected~~following tothe ~~slightly~~initial ~~decrease~~advancement, August 2007, until the ~~through~~85th ~~2009~~month. ~~The~~ ~~price~~On the sixth day of ~~natural~~the ~~gas~~85th month and continuing for an additional 48 months, we must pay the amortized unpaid principal together with the accrued ~~like~~interest. ~~any~~The ~~commodity,~~interest ~~could~~rate ~~fluctuate~~is ~~and~~calculated ~~increase~~using ~~significantly~~the Wall Street Journal daily money rate (base rate) plus 1.0%.

~~Source:~~The Subordinated ~~Energy~~Note for $4,694,500 carries a fixed interest rate of 2.514%. On the ~~Information~~first ~~Administration~~day of each month following the initial advance, ~~October 2008~~August 2007, interest only payments will be made until September 2014 when a principal payment of $400,000 is required.

7As of September 30, 2009 we are being charged a default interest rate of 5% on the term loan and 4.51% on the subordinated note along with late charges for non-payment.

~~Table~~Construction Term ~~of Contents~~Loan

~~Denaturant~~Upon satisfactory completion of the Plant a portion of the construction loan (the “Construction Loan”) converted to a construction term loan (the “Construction Term Loan”), totaling $29 million. The interest rate reduced to LIBOR plus 2.95% on the Construction Term Loan. The agreement includes an option to convert a portion of the Construction Term Loan to a fixed rate loan. We are required to make interest payments only on the 1st of day of each month for the first six months followed by 114 principal installments of $254,386 plus accrued interest beginning six months following substantial completion, payable in full in June 2018. In addition to the scheduled payments, we will make additional principal payments equal to 65% of our excess cash flow not to exceed $2 million per fiscal year and an aggregate total of $8 million. As part of the financing agreement, the premium above LIBOR may be reduced to 2.65% based on attaining certain financial ratios.

~~Wholesale~~The financing ~~gasoline~~agreement isrequires ~~mixed~~an ~~into~~annual ~~the~~servicing ~~ethanol~~fee ~~and~~of $20,000. We ~~used~~may asmake adistributions ~~denaturant~~which inexceed ~~the~~40% ~~ethanol~~of ~~process. Each~~net ~~tank~~income ofas ~~ethanol~~long ~~that~~as we ~~produce~~have ismade the ~~presently~~required ~~allowed~~excess tocash ~~contain~~flow ~~a certain~~payments ~~blended~~and ~~amount~~maintained ofthe ~~gasoline. We~~required financial ~~are~~covenants. The ~~waiting~~financing onagreement ~~proposed~~contains ~~regulations~~certain ~~issued~~prepayment ~~pursuant~~fees in to the ~~2008~~first ~~Farm~~three ~~Bill~~years on of the ~~amount~~scheduled ofpayments. ~~denaturant~~We ~~that~~are ~~will~~also berequired ~~allowed~~ to obtain beand ~~blended~~maintain ~~into~~financial ~~the~~ratios ~~ethanol that~~on wean ~~produce~~annual basis.

~~Other~~Construction Term ~~Inputs~~Revolving Note

~~Other~~The amount ~~inputs~~of tothe construction term revolving note (the ~~production~~“Construction ~~process~~Term ~~include~~Revolving ~~chemicals,~~Note”) ~~yeast,~~that ~~enzymes~~converted ~~and~~to ~~water~~the term revolving note (the “Term Revolving Note”) was $6 million. In We are required to pay interest on the principal advances monthly at ~~total~~the ~~these~~LIBOR ~~inputs~~rate ~~account~~plus ~~for~~2.95% ~~approximately~~which totaled 3.2256% at September 30, 2009 and 5-6.41% as of ~~total~~September ~~input~~30, ~~costs~~2008. Of The ~~these,~~outstanding ~~chemicals~~principal and ~~enzymes~~any ~~are~~accrued interest is due on the five year anniversary from the conversion date. The ~~largest~~purpose ~~components~~of this loan is for cash and inventory management purpose.

~~Transportation and~~Revolving ~~Delivery~~Line of Credit Loan

~~The~~We ~~Plant~~also have ~~has~~a ~~facilities~~revolving ~~to receive~~line ~~corn~~of bycredit ~~truck~~loan ~~and~~(“Revolving ~~rail~~Line ~~and~~of toCredit ~~load~~Loan”) ~~ethanol~~with ~~and~~the same ~~distillers~~lending ~~grains~~institution ~~onto trucks~~for ~~and~~up ~~rail~~to ~~cars~~$6 million. On We ~~October 1,~~are required to pay ~~2006,~~interest weon ~~entered~~the ~~into~~principal ~~a lease~~advances ~~for~~monthly anat ~~indefinite~~the ~~term~~LIBOR ~~with~~rate ~~OTVR~~plus at2.95% awhich totaled ~~cost~~3.2256% ofat $4September 30,~~200~~ ~~per~~2009 ~~year~~and ~~with~~5.41% aas of September 30, ~~annual~~2008. The ~~increase~~purpose of 3%this loan is for ~~the~~general ~~use~~and operating expenses. The maturity of the ~~land~~Revolving inLine ~~which~~of ~~the~~Credit ~~railroad~~loan ~~will~~is ~~be constructed~~364 ~~and~~days ~~used. On~~from ~~May 9~~commencement, ~~2006,~~on wethe ~~entered~~loan ~~into~~maturity andate ~~agreement~~the ~~with~~principal ~~Railworks~~and ~~Track~~any ~~Systems, Inc.~~outstanding toaccrued interest ~~construct~~will ~~the~~be ~~track~~due. atWe pay a ~~total~~commitment ~~cost~~fee of ~~approximately $1,500,000~~0. On35% ~~April 6,~~on ~~2007,~~the weunused ~~entered~~portion ~~into~~of anthe ~~industry~~revolving ~~track~~promissory ~~agreement~~note ~~with~~(the ~~OTVR~~“Revolving Promissory Note”), payable quarterly in arrears. The interest rate is equal to ~~maintain~~LIBOR ~~and~~plus ~~operate~~2.95% ~~the~~if ~~track~~our ~~for~~tangible owner’s aequity (defined as tangible net worth plus subordinated debt divided by ~~period~~total ofassets) ~~one~~is ~~year,~~less ~~with~~than ~~automatic~~or ~~one~~equal ~~year~~to ~~renewals~~60% ~~thereafter~~or LIBOR plus 2.65% if the tangible owner’s equity is greater than 60%.

WeThe ~~have entered into a pool marketing agreement with~~Term ~~RPMG~~Revolving toNote ~~provide~~as ~~all~~well ~~marketing~~as ~~services~~the ~~for~~Construction ~~ethanol~~Term ~~including~~Note ~~both truck~~ and ~~rail~~ ~~transportation. RPMG is responsible for scheduling all logistics based on information we provide to them on~~ the ~~amount~~ ofRevolving ~~gallons~~Line ~~we will be selling and shipping for a given month. The cost for transportation~~ of Credit ~~product~~Loan ~~by rail~~are subject to a ~~specific~~master ~~destination~~loan isagreement ~~posted on the Burlington Northern Santa Fe (BNSF) railroad Web site. The transportation costs associated~~ with ~~truck~~various isfinancial ~~based on a mileage~~ and ~~fuel~~ ~~surcharge~~non-financial ~~basis~~covenants ~~and~~that islimit ~~established~~distributions, ~~once~~require aminimum ~~destination~~debt ~~is determined. RPMG will be responsible for providing all~~service ~~rail and trucking services~~coverage, ~~excluding~~net ~~expenses~~worth ~~payable~~and toworking ~~the~~capital ~~rail or trucking companies~~requirements, asand ~~part~~secured ~~of the fee we pay RPMG. Expenses payable to the rail or trucking companies are paid~~ by ~~RPMG, but~~all ~~deducted~~business ~~from our portion of the ethanol sales price~~assets.

WeAs ~~also~~of September ~~have~~30, ~~entered~~2009, ~~into~~we anare ~~agreement~~being ~~with~~charged ~~CHS~~default ~~to distribute~~interest ~~and~~at ~~market our DDGS~~5. ~~Under the~~23% ~~terms~~for of the Construction ~~agreement~~Term Note, ~~CHS~~Term ~~purchases~~Revolving ~~100%~~Note ofand ~~the~~Revolving ~~DDGS~~Line ~~produced~~of atCredit ~~the~~Note as ~~Plant,~~well ~~all~~as oflate ~~which~~charges ~~are~~for ~~marketed~~payments ~~and~~not ~~distributed~~made toon ~~its customers~~time.

~~Ethanol~~Under ~~Competition~~the terms of our Master Loan Agreement with Agstar, we may make distributions to members of 40% of our immediately preceding fiscal year’s net income, and make additional distributions permitted by lender after any excess cash flow has been paid. We may not make any distributions while an event of default exists. We were in default under the Master Loan Agreement as of September 30, 2008, but received a waiver for our violations through October 1, 2009, and we filed for Chapter 11 bankruptcy protection on October 30, 2009. We are therefore forbidden from making any distributions to members.

We are in direct competition with producers of ethanol and other alternative fuel additives. We compete with other ethanol producers on the basis of price and delivery service. Our Plant is expected to produce approximately 55,000,000 gallons of ethanol annually. We believe that this volume gives us certain procurement and production efficiencies over smaller competitors. We believe that we should be able, if necessary, to sell some or all of our products at lower prices because of efficiencies arising from the Plant and our anticipated production volume, and the close proximity of the Plant to existing corn supplies and ethanol and distillers grains markets.29

~~Many~~County ~~competitors~~Capital are located in close proximity to our Plant and more may be in the future. These competitors compete with us for, among other things, corn and personnel. Because of their close proximity, these competitors may also be more likely to sell to the same markets that we target for our ethanol and distillers grains.Lease

~~According~~In April to2007, ~~the~~we ~~Renewable~~entered ~~Fuels~~into ~~Association,~~a aslong ofterm ~~December 9,~~equipment ~~2008,~~lease ~~172~~agreement ~~ethanol~~with the County in ~~refineries~~order ~~had~~to afinance ~~production~~equipment ~~capacity~~for ofthe aPlant ~~record~~(the ~~10.4 billion~~“Capital ~~gallons,~~Lease”). The ~~with~~Capital ~~existing~~Lease ~~plants~~has ~~currently~~a ~~increasing~~term ~~capacity~~from toMay ~~produce~~1, an2007 ~~additional~~through ~~660 million~~November ~~gallons~~2019. In ~~addition,~~The 21County ~~refineries~~financed ~~were~~the ~~under~~purchase ~~construction~~of toequipment ~~produce~~through anSubordinate ~~additional~~Exempt ~~1.6~~Facility ~~billion~~Revenue ~~gallons. A~~Bonds ~~majority~~Series of2007A ~~the~~totaling ~~ethanol plants~~$20 ~~are~~million, ~~located~~General inObligation ~~the~~Tax ~~Midwest,~~Abatement inBonds Series ~~the~~2007B ~~corn-producing~~totaling ~~states of Illinois~~$5, ~~Iowa~~245, ~~Minnesota~~000, ~~Nebraska~~ and ~~South~~Taxable ~~Dakota. The~~General ~~largest~~Obligation ~~ethanol~~Tax ~~producers include Abengoa Bioenergy Corp., Archer~~Abatement ~~Daniels~~Bonds ~~Midland~~Series ~~Company,~~2007C ~~Aventine~~totaling ~~Renewable Energy~~$765, ~~Inc.,~~000 ~~Cargill, Inc., New~~(collectively ~~Energy~~the ~~Corp~~“Bonds”). ~~and Poet, LLC.~~

~~Distillers~~Under ~~Grains~~the ~~Competition~~Capital Lease with the County, we began making payments on May 25, 2008 and on the 25th of each month thereafter. Until May 25, 2008, interest was being paid through the interest reserve fund included in restricted cash. The Capital Lease payments correspond to the interest of 1/6 the amount due on the bonds on the next interest payment date. Capital Lease payments for principal were scheduled to begin on November 25, 2009 in an amount equal to 1/6 principal scheduled to become due on the corresponding bonds on the next semi-annual principal payment date. We were expected to make lease payments of principal and interest that correspond to the principal and interest the County will pay on the General Obligation Bonds Series 2007B and 2007C. Interest payments were financed through an interest reserve recorded as restricted cash. We were expected to pay Capital Lease payments that correspond to 1/6 the amount of interest payable due on the bonds on the following February 1 or August 1 and principal amounts equaling 1/12 of the principal due on the following February 1. We have guaranteed that if such assessed lease payments are not sufficient for the required Bond payments, we will provide such funds as are needed to fund the shortfall. The Capital Lease also includes an option to purchase the equipment at fair market value at the end of the lease term. Assets under this lease totaled approximately $20,396,100 with accumulated depreciation of approximately $2,226,740 and $867,000 recorded as of September 30, 2009 and 2008, respectively.

~~Ethanol~~We ~~plants~~failed to inmake ~~the~~basic ~~Midwest~~payments ~~produce~~on the ~~majority~~ County capital lease as of ~~distillers~~December ~~grains~~31, ~~and~~2008, which ~~primarily~~caused ~~compete~~us ~~with~~to ~~other~~default ~~ethanol~~on ~~producers~~the inCapital Lease. Accordingly, the ~~production~~Capital ~~and~~Lease ~~sales~~has ofbeen ~~distillers~~reclassified ~~grains~~to current maturities of long-term debt. The ~~According~~County has continued to ~~Scott~~make ~~Richman,~~required ~~Senior~~principal and ~~Vice~~interest ~~President~~payments ofto ~~Informa~~the ~~Economics, 22~~bondholders.8 As ~~million tons~~ of ~~DDGS~~September ~~were~~30, ~~available~~2009, the ~~for~~County ~~global~~has ~~use~~paid inapproximately ~~2007/2008 marketing year~~$648,000 ~~nearly~~in aprincipal 50through ~~percent~~the ~~increase~~County’s ~~from~~general ~~the~~fund ~~2006/2007~~on ~~marketing~~our ~~year~~behalf. ~~The~~ We included this amount ofdue ~~distillers~~in ~~grains~~the ~~produced~~current isdebt ~~expected~~balance. toInterest ~~increase~~payments ~~significantly~~on as the ~~number~~Capital ofLease ~~ethanol~~have ~~plants~~been ~~increase,~~paid through ~~which~~restricted ~~will~~funds ~~increase~~during ~~competition~~fiscal in2009. We ~~the~~have ~~distillers~~not ~~grains~~accrued ~~market~~a ~~in our area. In~~liability ~~addition,~~to ~~our~~replenish ~~distillers~~those ~~grains~~funds ~~compete~~as ~~with~~of ~~other~~September ~~livestock~~30, ~~feed~~2009, ~~products~~but ~~such as~~may ~~soybean~~be ~~meal,~~required ~~corn~~to ~~gluten~~do ~~feed,~~so in ~~dry~~the ~~brewers~~future ~~grain~~pending ~~and~~the ~~mill~~bankruptcy ~~feeds~~proceedings results.

~~International~~Off-Balance Sheet Transactions

WeAs ~~may~~of September 30, ~~also~~2009, ~~compete~~we indid ~~the~~not ~~future~~have any relationships with unconsolidated ~~ethanol~~entities ~~that~~or isfinancial ~~produced~~partnerships, orsuch ~~processed~~as inentities often ~~certain~~referred ~~countries~~to inas ~~Central~~structured ~~America~~finance ~~and~~or ~~the~~special ~~Caribbean~~purpose ~~region~~entities, ~~Brazil~~which ~~and~~would ~~other~~have ~~countries. Ethanol~~been ~~produced~~established infor the ~~Caribbean~~ ~~basin~~purpose ~~and~~of ~~Central~~facilitating ~~America~~off-balance ~~may~~sheet bearrangements or ~~imported~~other ~~into~~contractually ~~the~~narrow ~~United~~or ~~States~~limited at purposes.

8ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

~~Table~~We are exposed to the impact of ~~Contents~~market fluctuations associated with interest rates as discussed below. We have no exposure to foreign currency risk, as all of our business is conducted in United States Dollars. While we previously used derivative financial instruments as part of an overall strategy to manage market risk, we no longer have any derivative instruments that expose us to commodity price risk.

~~low~~Interest ~~tariff~~Rate rates or free of tariffs under the Caribbean Basin Initiative and the Dominican Republic — Central America — United States Free Trade Agreement. According to the Renewable Fuels Association, Brazil is the world’s second largest producer of ethanol. Although tariffs presently impede large imports of Brazilian ethanol into the United States, low production costs, other market factors or tariff reductions could make ethanol imports from various countries a major competitive factor in the United States.Risk

~~Alternative~~If ~~Fuel~~we ~~Additives~~successfully emerge from bankruptcy, we expect to be exposed to market risk from changes in interest rates on our existing debt facilities. Exposure to interest rate risk results from holding our credit agreements.

~~The~~We used ~~development~~debt ofto ~~ethers~~finance ~~intended~~a ~~for~~significant ~~use~~amount asof ~~oxygenates~~our isexpenditures ~~continuing. Methyl~~in ~~tertiary~~the ~~butyl~~year ~~ether,~~ended September ~~or “MTBE~~30,” is2008 ~~a petrochemical~~and ~~produced~~in bythe ~~combining~~twelve ~~isobutylene~~months (aended ~~product~~September ~~of the refining~~30, ~~industry) with methanol~~2009. We As ~~expect~~of ~~to compete~~September ~~with~~30, ~~producers of MTBE~~2009, ~~which~~we ~~costs~~have ~~less~~approximately to$86.1 ~~produce~~million in ~~than~~short-term ~~ethanol. MTBE~~debt, isincluding anour ~~oxygenate~~line ~~commonly~~of ~~used~~credit. As inwe ~~fuels~~are being ~~for~~charged ~~compliance~~default ~~with~~interest ~~the~~due ~~federal~~to ~~Clean~~our ~~Air~~defaults ~~Act. Many~~on ~~major~~existing ~~oil~~loan ~~companies~~agreements, ~~produce MTBE.~~ our ~~These~~interest ~~companies~~rate ~~have~~is ~~significant~~not ~~resources~~subject to ~~market~~variability ~~MTBE~~as ~~and~~of toSeptember 30, ~~influence~~2009. If ~~legislation~~ and ~~public~~when ~~perception~~we ofsuccessfully ~~MTBE. However,~~emerge ~~MTBE~~from ~~has~~bankruptcy ~~been~~and ~~linked to~~return ~~groundwater~~to ~~contamination~~variable atinterest ~~various~~rates, ~~locations~~a inhypothetical ~~the~~1% ~~United~~change ~~States. Many~~in ~~states~~interest ~~have~~rates ~~enacted legislation~~would ~~prohibiting~~change ~~the~~our ~~sale~~interest ofexpense ~~gasoline~~by ~~containing~~approximately ~~certain~~$861,000 ~~levels~~on ofan ~~MTBE or are~~annual ~~phasing out the use of MTBE~~basis.

~~While~~Commodity ~~MTBE~~Price has not been classified as a carcinogen, it has been shown to cause cancer in animals and its continued use has raised serious environmental concerns. As a result, approximately 25 states, including Minnesota, New York, California and Illinois, have passed laws prohibiting or phasing out the sale of gasoline containing any or more than a specified level of MTBE.Risk

~~Ethyl~~Effective April ~~tertiary~~8, ~~butyl ether~~2008, orwe ~~“ETBE,”~~closed isthe ~~produced by~~majority ~~combining~~of ~~isobutylene~~all ~~with~~derivative ~~ethanol~~positions. At ~~ETBE’s~~September ~~advantages~~30, ~~over~~2009, ~~ethanol~~we ashave no derivative instruments that expose us to commodity price risk. For the period ended September 30, 2009, we recorded a ~~fuel~~realized ~~blend~~loss ~~include~~of ~~its~~approximately ~~low~~$234,000. We ~~affinity~~did not have any firm purchase commitments related to corn for ~~water~~the ~~and~~period ~~low~~ended ~~vapor~~September ~~pressure.~~ 30, ~~Because~~2009. We ~~petroleum~~recorded ~~pipelines~~an ~~and~~accrued ~~storage~~loss ~~tanks~~on ~~contain~~our ~~water~~firm inpurchase ~~various~~commitments ~~amounts,~~related ~~ETBE’s~~to ~~low~~corn ~~affinity~~aggregating to zero for ~~water~~the ~~allows~~period itended toSeptember be30, ~~distributed~~2009 ~~through~~and ~~existing~~approximately ~~pipeline systems~~$3. ~~This~~6 ismillion ~~not~~for the fiscal year ended September 30, ~~possible~~2008. At ~~for~~September ~~ethanol~~30, 2008 the Company recorded a net liability of approximately $10,000, which ~~must~~included bea ~~shipped~~liability ~~via~~of ~~transport~~approximately ~~trucks~~$77,000 orand cash ~~rail~~of ~~cars~~$67,000.

~~Government~~ITEM ~~Incentives~~8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

~~National~~Our financial ~~Renewable~~statements ~~Fuels~~are ~~Standard~~included on pages F-1 to F-17 of this annual report on Form 10-K.

~~The~~ITEM ~~Energy Policy Act of 2005 also introduced a national renewable fuels standard program which sets a national minimum usage requirement that phases in over seven years, beginning with approximately 4~~9.~~0 billion~~ ~~gallons~~CHANGES inIN ~~2006~~AND ~~and increases to 7.5 billion gallons by 2012. On December 19, 2007, President Bush~~DISAGREEMENTS ~~signed~~WITH ~~into~~ACCOUNTANTS ~~law~~ON ~~the~~ACCOUNTING ~~Energy~~AND ~~Independence~~FINANCIAL ~~and Security Act of 2007 (the “Act”), which raises the minimum usage requirement to 13~~DISCLOSURES.2 billion gallons of ethanol by 2012 and 15 billion gallons by 2015. The Act also mandates a minimum requirement of 36 billion gallons of renewable fuels by 2022, with cellulosic ethanol accounting for 16 billion gallons of this total. The renewable fuels standard program should ensure the continued growth of the ethanol market in the near future. While we cannot assure that this program’s mandates will continue in force in the future, the following chart illustrates the potential United States ethanol demand based on the program’s schedule through the year 2022.

~~Source: BioFuels Journal, December 28, 2007~~None.

9ITEM 9A(T). CONTROLS AND PROCEDURES.

~~Table~~Evaluation Of ofDisclosure ~~Contents~~Controls And Procedures

~~Oxygenated~~Under ~~Fuel~~the supervision ~~Requirements~~and with the participation of our management, including our chief executive officer/chief financial officer, we have conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report. Based on that evaluation, the chief executive officer/chief financial officer has concluded that the Company’s disclosure controls and procedures are not yet fully effective to provide reasonable assurance that: (i) information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the chief executive officer/chief financial officer as appropriate to allow timely decisions regarding required disclosure by the Company; and (ii) information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. We are working on a developing a disclosure control remediation plan to remedy our disclosure controls and procedures deficiencies. We expect to have such a plan in place by the end of the second quarter of 2010 and to continue to take additional steps necessary to ensure all controls and procedures are in place for full compliance with a goal to have all of our remediation measures in place by the end of the second quarter of 2010. The remediation plan includes but is not limited toimplementing a search for a full time controller or chief financial officer with appropriate qualification.

~~Most~~The ~~ethanol~~implementation isof ~~used~~this inremediation ~~its~~plan ~~primary~~has ~~form~~been ~~for~~initiated ~~blending~~and ~~with~~will ~~unleaded~~continue through ~~gasoline~~the third quarter of fiscal 2010 and ~~other~~ ~~fuel~~possibly ~~products~~beyond. ~~Recently,~~ The material weakness will not be considered remediated until the applicable remedial ~~demand~~procedures ~~for~~are ~~ethanol~~tested and management has ~~increased~~concluded inthat ~~part~~the ~~because~~procedures are operating effectively. Management recognizes that use of ~~two~~our ~~major~~financial ~~programs~~resources ~~established~~will bybe ~~the~~required ~~Clean~~not ~~Air~~only ~~Act~~for ~~Amendments~~implementation of ~~1990. The~~these ~~first program~~measures, ~~the~~but ~~Oxygenated~~also ~~Gasoline~~for ~~Program,~~testing istheir aeffectiveness ~~recurring~~and ~~wintertime~~may ~~program~~seek ~~designed~~the toassistance ~~reduce~~of ~~carbon~~an ~~monoxide~~outside service ~~levels~~provider ~~during~~to ~~the~~assist ~~winter~~in ~~months~~this process.

~~The second~~If ~~program~~we ~~created by the Clean Air Act Amendments was the Reformulated~~are ~~Gasoline~~not ~~Program. This~~able ~~program,~~to ~~which began~~implement oncontrols ~~January 1, 1995, was intended~~ to ~~reduce~~avoid ~~ground level ozone or smog. The program initially required~~ the ~~year-round~~ ~~use~~occurrence of ~~oxygenated~~material ~~fuel~~weaknesses in ~~nine metropolitan areas with severe ozone~~ ~~pollution. Other~~our ~~less~~internal ~~severely~~control ~~troubled areas have been phased into the program~~ over ~~time. According~~financial toreporting ~~the~~or ~~EPA,~~disclosure ascontrols ofin ~~May 2007, various regions of 14 states and~~ the ~~District of Columbia were required to~~ ~~comply with the program~~future, ~~and~~then ~~all~~we ormight areport ~~portion~~results ofthat 13are ~~states~~not ~~had~~consistent ~~also~~with ~~voluntarily opted~~our ~~into the program. However, states~~actual ~~such~~results ~~as Arizona, Pennsylvania~~ and ~~New~~we ~~York~~may ~~sought~~need ~~waivers~~to ~~from~~restate ~~the program. Under~~results ~~the~~that ~~Energy~~will ~~Policy Act of 2005, the oxygenate standards for reformulated gasoline under the Clean Air Act~~ have been ~~eliminated nationwide~~previously reported.

~~Incentive~~Management’s ~~Programs~~Report On Internal Control Over Financial Reporting

The ~~federal~~Company’s ~~government~~management ~~and~~is ~~various~~responsible ~~state~~for ~~governments~~establishing ~~have~~and ~~created~~maintaining ~~incentive~~an adequate ~~programs~~system toof ~~encourage~~internal ~~ethanol~~control ~~production~~over ~~and~~financial toreporting, ~~enable~~as ~~ethanol-blended~~defined ~~fuel to better compete~~ in ~~domestic~~the ~~fuel~~Exchange Act ~~markets~~Rule 13a-15(f). ~~with~~Management ~~gasoline~~has ~~blended~~conducted, with ~~MTBE. The~~the ~~federal~~participation ~~incentive~~of ~~programs~~our chief ~~include~~executive ~~excise tax~~officer ~~credits~~and tochief ~~gasoline~~financial ~~distributors~~officer, ~~direct~~an ~~payments~~assessment, toincluding testing ~~eligible~~of ~~producers~~the ~~for increased~~effectiveness, ~~ethanol~~of ~~production~~our ~~and~~internal ~~federal~~control ~~income~~over ~~tax~~financial ~~credits~~reporting as ~~which~~of ~~eligible producers~~September ~~may~~30, ~~earn~~2009. ~~State~~ ~~incentive programs~~Management’s ~~include~~assessment ~~production~~of ~~payments~~internal ~~and~~control ~~income~~over financial ~~tax~~reporting ~~credits. However,~~was ~~these~~conducted ~~programs~~using ~~are~~the ~~not~~criteria ~~without controversy,~~in ~~due~~Internal inControl ~~part~~over Financial toReporting ~~their~~– ~~cost,~~Guidance ~~and~~for weSmaller ~~cannot~~Public ~~assure~~Companies ~~that~~issued ~~they~~by ~~will~~the ~~continue~~Committee toof beSponsoring ~~available~~Organizations inof the ~~future~~Treadway Commission (“COSO”).

~~Federal~~A ~~Excise~~material ~~Tax~~weakness ~~Exemption~~is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In connection with management’s assessment of our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act of 2002, we identified the following material weakness in our internal control over financial reporting as of September 30, 2009:

~~Although~~The ~~the~~Company ~~regulatory~~has ~~program~~in isplace ~~complicated~~a policy and ~~there~~procedures ~~are~~manual. However, ~~other~~due ~~federal~~to the ~~tax~~limited staffing, we have a material weakness in segregation of duties. We ~~incentives~~have ~~for~~been ~~ethanol~~unable ~~production,~~to fill the ~~most~~position ~~important~~of ~~incentive~~full-time ~~for~~chief ~~the~~financial ~~ethanol~~officer. so ~~industry~~our ~~and~~senior ~~its~~accountant ~~customers~~has isbeen ~~the~~fulfilling ~~partial~~a ~~exemption~~portion ~~from~~of the ~~federal~~duties ~~motor~~that would ~~fuels~~otherwise ~~excise~~be ~~tax,~~performed orby ~~the~~a ~~“excise~~chief ~~tax~~financial ~~exemption~~officer.” The ~~excise~~work ~~tax~~of ~~exemption~~the senior isaccountant ~~provided~~has ~~to gasoline~~assisted ~~distributors~~in ascreating ansome ~~incentive~~segregation of duties; however, due to ~~blend~~our ~~their~~limited ~~gasoline~~staffing, ~~with~~we anticipate that we always may have some ~~ethanol~~segregation of duties issues. ~~For~~ Also, ~~each~~in ~~gallon~~particular, a significant amount of ~~gasoline~~information about the Company is channeled through the ~~blended~~chief ~~with~~executive 10officer ~~percent~~related ofto ~~ethanol,~~disclosure controls for the ~~distributors~~financial ~~receive~~report and arequired 4SEC filings.5¢ The ~~per~~appointment ~~gallon~~of a chief financial ~~reduction~~officer ~~from~~or controller will enable the ~~18.3¢~~Company ~~per~~to ~~gallon~~have ~~federal~~more ~~excise~~coverage ~~tax~~for Company information, ~~which~~rather ~~equates~~than torelying aupon ~~45¢ reduction~~one ~~for~~individual. Our ~~each~~plan ~~gallon~~to address ofthe ~~ethanol~~disclosure ~~that~~controls ~~they~~issue ~~use~~will ~~after~~be ~~annual~~incorporated ~~production~~in ~~or importation~~the plan of reorganization, ~~ethanol~~which ~~reaches~~has ~~7.5~~yet ~~billion~~to ~~gallons. This~~be ~~exemption~~submitted ~~was~~to ~~recently~~or ~~lowered~~confirmed inby the Bankruptcy ~~2008~~Court. As ~~Farm~~part ~~Bill~~of ~~from~~the plan, we will seek to appoint a ~~previous~~chief ~~excise~~financial offcier ~~tax~~or ~~exemption~~controller ofthat ~~51¢~~has ~~for~~experience ~~each~~in ~~gallon~~preparing SEC periodic reports and ~~will~~related ~~expire~~matters inthat ~~December 2010~~will ifprovide ~~not~~additional ~~renewed~~segregation of internal controls.

~~Federal Small Producer Credit~~31

~~The~~Because ~~federal Small Ethanol Producer Credit provides an eligible ethanol producer with a 10¢ per gallon tax credit for the first 15,000,000 gallons~~ of ~~ethanol produced annually. Under~~ the ~~program, ethanol~~material ~~producers~~weaknesses ~~that~~noted ~~qualify or their owners (for pass-through tax entities) can reduce their federal income tax liability by the amount of the annual credit~~above, ~~subject~~management tohas ~~limitations. However, benefit~~concluded ofthat ~~the~~we ~~credit~~did ~~is reduced somewhat because the amount of the credit must be added to regular taxable income (but~~ not ~~to alternative minimum taxable~~ ~~income). Until~~maintain ~~recently,~~effective aninternal ~~eligible small~~control ~~ethanol~~over ~~producer~~financial ~~was~~reporting ~~defined~~ as ~~a producer whose annual production capacity was 30,000,000 gallons or less, which effectively precluded most newer plants from qualifying. The Energy Tax Incentives Act~~ of ~~2005~~September ~~increased the annual production capacity limitation from~~ 30,~~000,000 to 60,000,000 gallons.~~ ~~Because our anticipated annual capacity is 55~~2009,~~000,000~~ ~~gallons,~~based ~~we expect to qualify as a small ethanol producer, at least in our initial year or years of operations. The credit is scheduled to expire~~ on ~~December 31,~~Internal ~~2010~~Control ~~and,~~over ifFinancial itReporting is– ~~not~~Guidance ~~extended,~~for ~~taxpayers will~~Smaller ~~have~~Public aCompanies ~~three-year~~issued ~~carry~~by ~~forward in which to utilize unused credits~~COSO.

~~Research~~This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange ~~Development~~Commission that permit the company to provide only management's report in this annual report.

WeChanges doIn ~~not~~Internal ~~conduct~~Control ~~any~~Over ~~research~~Financial ~~and development activities associated with the development of new technologies for use in producing ethanol or distillers grains.~~Reporting

~~Costs~~There ~~and~~has been ~~Effects~~no change in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of ~~Compliance~~the ~~with~~Exchange ~~Environmental~~Act) during our most ~~Laws~~recently completed quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~In the fiscal year ended September~~PART ~~30, 2008,~~III we incurred costs and expenses of approximately $100,000 complying with environmental laws, including the cost of obtaining permits, easements and installing emissions related equipment. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations.

~~In addition, permitting and environmental and other regulatory requirements may change in the future.~~ITEM ~~Changes in permitting and regulatory requirements could make compliance more difficult and costly~~10. If weGOVERNORS, ~~are unable to comply with the requirements of~~EXECUTIVE ~~such permits or any other environmental regulations~~OFFICERS, ~~our~~AND ~~business~~CORPORATE ~~may be adversely affected and we may not be able to operate our Plant~~GOVERNANCE.

10The following table contains information with respect to the members of the Company’s board of governors:

Table of Contents

Name	Age	Year First Became A Governor
Gary Thompson, Chairman	58	2009
Hans Ronnevik, Treasurer	64	Inception
John Anderson	50	2009
Philip Deal	40	Inception
Gerald Rust	56	Inception
Ronald Tobkin	61	Inception
Jonathan Piekarski	55	Inception

~~Nuisance~~Gary Thompson, Chairman, Age 58

~~The~~Mr. Thompson ~~Plant~~currently ~~could~~owns beand ~~subject to~~operates ~~environmental~~the ~~nuisance~~27-hole orGeneva ~~related~~Golf ~~claims~~Club byin ~~employees~~Alexandria, Minnesota ~~property~~and ~~owners~~is ~~or residents~~a ~~near~~partner with his oldest son on the ~~Plant~~18-hole ~~arising~~Trilogy Golf Club in Gilbert, Arizona from ~~air~~1999 orto ~~water~~present. From ~~discharges~~1969 to 2001, Mr. ~~These~~ ~~individuals~~Thompson owned and ~~entities~~operated ~~may~~a ~~object~~dairy toand ~~the~~cash ~~air~~grain ~~emissions~~farm ~~from~~with ~~our~~his ~~Plant.~~ father in ~~Ethanol~~Clarissa, ~~production~~Minnesota. He has ~~been~~served ~~known~~on tothe ~~produce~~board anof ~~unpleasant~~Agri-Valley ~~odor~~Farm toCenter ~~which~~in ~~surrounding~~Clarissa, ~~residents~~Minnesota ~~and~~from ~~property~~1974 ~~owners~~to ~~could~~1999 ~~object. Environmental~~ and ~~public~~ ~~nuisance~~was ~~claims,~~Vice orChair ~~tort~~of ~~claims~~Finance ~~based~~for onthe Central ~~emissions,~~Minnesota orEthanol ~~increased environmental~~Cooperative ~~compliance~~in ~~costs~~Little ~~could~~Falls, ~~significantly~~Minnesota ~~increase~~from ~~our~~1997 ~~operating~~to ~~costs~~1999.

~~Future~~Hans Ronnevik, Treasurer, Age ~~Products~~64

WeMr. Ronnevik ~~anticipate~~has ~~that~~been ~~advances~~a partner in ~~enzyme~~Ronnevik ~~processes~~Farms, ~~will~~a ~~increase~~crop ~~the~~farming ~~ethanol~~operation, ~~yield~~since ~~realized from grain feedstock~~1972. ~~These processes~~Mr. Ronnevik ~~are~~was ~~not~~a ~~refined~~board ~~for~~member ~~commercial~~of ~~application~~AgCountry atFarm ~~this time, but we~~Credit ~~anticipate~~Services ~~adopting,~~of ~~if possible~~Fargo, ~~technological~~North ~~advances~~Dakota ~~as they become available if such advances are commercially viable~~ for ~~the~~five ~~Company’s~~years ~~business plan. Past~~from ~~successes~~2003-2008, ~~in extractable starch~~ and ~~genetically~~served ~~modified~~on ~~corn, has shown marked improvements for wet~~the ~~mill~~Audit ~~plants~~Committee ~~such~~each ~~as Minnesota Corn Processors and Archer Daniels Midland~~year. WeMr. Ronnevik ~~intend~~graduated tofrom ~~keep~~North ~~abreast~~Dakota State ofUniversity ~~the advances~~ in ~~increased~~ ~~fermentable~~1967 ~~starch~~with ~~corn~~a asBachelor ~~well~~of asScience ~~involve~~Degree ~~their members~~ in ~~the~~Animal ~~production~~Science. Mr. Ronnevik ofhas ~~genetically~~served ~~modified~~as ~~corn~~Treasurer asand ~~advances~~a ~~are~~governor ~~made~~since our inception.

~~The production~~John ofAnderson, ~~ethanol from biomass feedstock may also become more economically feasible in future years. We will look for options to benefit from those advances as well. In the interim~~Governor, ~~the processes we plan~~Age ~~to implement are considered to be the most viable for the foreseeable future.~~50

~~ITEM~~Mr. Anderson has 1Abeen employed as the manager of NAPA of Perham, an auto parts and service business in Perham, Minnesota since 2000. Mr. Anderson ~~RISK~~has ~~FACTORS~~also been a general partner of New Life Farms, PLLP, and Vice President of NLF Group, Inc. since 2000. From 1982 to 2000, Mr. Anderson served as the owner and manager of Anderson Turkey Farms, a family owned and operated turkey breeding farm. Mr. Anderson serves as Treasurer of MnAg2010, an ad-hoc group of agricultural leaders from a five state area with a mission to promote agricultural issues. Mr. Anderson holds Bachelor of Science and Bachelor of Arts degrees from Moorhead State University.

~~You~~Philip ~~should carefully~~Deal, read and consider the risks and uncertainties below and the other information contained in this Annual Report on Form 10-K. The risks and uncertainties described below are not the only ones we may face. The following risksGovernor, ~~together with additional risks and uncertainties not currently known to~~Age ~~us or that we currently deem immaterial could impair our financial condition and results of operation.~~40

~~Risks~~Since ~~Relating~~1986, Mr. Deal has been actively involved in his family farming operation. Since 2001, he has been the grain merchandiser and manager of the Grain Division of Wheaton-Dumont Coop Elevator in Wheaton, Minnesota, and he was promoted to ~~Default~~general ~~Under~~manager in 2006, a position he currently holds. Mr. Deal received his Bachelor of Science degree in Finance from Moorhead State University. Mr. Deal has been an advisory board member since our ~~Master~~inception. Mr. Deal ~~Loan~~has ~~Agreement~~served as a governor since our inception.

We have received a waiver from our lead and other lenders pertaining to our violation of certain loan covenants under our Master Loan Agreement as of September 30, 2008 but may experience additional events of default in the future, which would entitle each of our lenders to exercise default remedies.32

WeGerald ~~are obligated to comply with various covenants under our debt financing agreements. Our master loan agreement with Agstar (the “Master Loan Agreement”)~~Rust, ~~which governs our construction note (“Construction Note”)~~Governor, ~~term revolving note (“Term Revolving Note”) and our~~Age revolving line of credit note (“Revolving Line of Credit Note”) and mortgage (“Mortgage”) with Agstar (collectively, with all documents and agreements relating thereto, the “Agstar Loans”), states that an event of default will exist if we fail to satisfy certain financial covenants or fail to timely make any payment of principal, interest, fees, expenses, charges or other amounts under any of the Agstar Loans. Likewise, our construction and term loan agreement with NMF (the “NMF Construction and Term Loan Agreement”) states that an event of default exists if we default on any payment of principal or interest, fees, expenses, or other amounts due under the senior loan note, subordinated loan note, and mortgage, and our capital lease with Otter Tail County, pursuant to which we financed equipment for our processing facility and the county issued revenue and general obligation bonds, provides that an event of default exists if we fail to make any payment when due or violate certain other standard covenants. The NMF Construction and Term Loan Agreement and our capital lease with Otter Tail County also contain cross-acceleration and cross-default provisions that are triggered if an event of default occurs and is continuing under any of the Agstar Loans. Thus, a default or acceleration under the Master Loan Agreement could result in the default and acceleration of the NMF Construction and Term Loan Agreement and our capital lease with Otter Tail County (regardless of whether we were in compliance with the terms of such debt agreements). Each of such lenders is entitled to remedies upon default including but not limited to acceleration of all outstanding unpaid principal amounts. Accordingly, a default under the Master Loan Agreement and the Agstar Loans could result in all of our outstanding debt becoming immediately due and payable.56

~~As of September~~Mr. Rust ~~30,~~has ~~2008,~~served we were in violation of two loan covenants under the Master Loan Agreement due to our failure to meet tangible net worth requirements and to furnish audited financial statements to Agstar within ninety days of our fiscal year end. We received a waiver from Agstar effective until October 1, 2009 on ~~these~~ ~~loan~~several ~~covenants,~~local ~~and~~boards ~~also received waivers dated December 9, 2008~~ and ~~January~~ 9,councils ~~2009 from NMF~~ and ~~December~~most 2,recently ~~2008~~was ~~from Otter Tail County for cross default provisions under our agreements with such lenders. Although we have received~~ a ~~waiver for our previous violations, we may violate the same or other~~founding ~~loan~~member ~~covenants in the future~~ and ~~may~~director/governor ~~not~~(1993-2001) ~~receive additional waivers. Agstar would then be entitled to exercise any or all~~ of ~~its~~Chippewa ~~default~~Valley ~~remedies~~Ethanol ~~under~~Co. ~~the~~in ~~Master Loan Agreement~~Benson, ~~including~~Minnesota. In ~~but not limited to the following: accelerating the due date of the unpaid principal balance of the Construction Note~~1998, ~~Term Revolving~~he ~~Note,~~was ~~Revolving~~again ~~Line~~involved ofas ~~Credit Note, Mortgage and all other promissory notes executed and delivered to Agstar by us; appointing~~ a ~~receiver by~~founder ~~Agstar to take possession~~ of ~~some or all of our assets (to the extent~~ ~~necessary~~Diversified toEnergy ~~satisfy~~Co. ~~our~~in ~~debt);~~Morris, ~~requiring~~Minnesota, usserving ~~to pledge to Agstar~~ as ~~security~~governor ~~an amount in immediately available funds equal to the then outstanding Letter of Credit Liabilities;~~ and ~~withholding advances on our Revolving Line of~~board ~~Credit. These~~chairman ~~remedies~~from ~~are cumulative, meaning that Agstar can exercise any one or all of them~~1998-2005. InDuring ~~addition,~~his asinvolvement ~~explained~~with ~~above,~~the ~~because~~ethanol ~~our~~industry ~~NMF~~he ~~Construction~~has ~~and~~been ~~Term~~active ~~Loan~~in ~~Agreement~~the ~~and~~Minnesota ~~our~~Coalition ~~capital~~for ~~lease~~Ethanol, ~~with~~Minnesota ~~Otter Tail~~Corn ~~County are subject to cross~~Co-~~default~~products ~~provisions,~~Export ~~our default under the Master Loan Agreement enables such lenders to exercise default remedies under their respective agreements~~Group, ~~including but not limited to acceleration of all outstanding principal amounts~~U.S. IfGrains ~~Agstar and/or our other lenders exercise their right to accelerate outstanding principal balances~~Council, ~~we would have insufficient cash to pay amounts due~~ and ~~Agstar~~Minnesota ~~and our other lenders would~~Shippers ~~have~~Association. ~~the~~Mr. Rust ~~right~~is toretired. Mr. Rust ~~seize~~has ~~all~~been ofa ~~the~~member ~~collateral to which they are entitled, which includes all~~ of our ~~tangible~~steering ~~and~~advisory ~~intangible~~committee ~~property,~~since ~~real~~February 2005 and ~~personal~~has ~~(to~~served ~~the~~as a ~~extent~~governor ~~necessary~~since ~~to satisfy~~ our ~~debt)~~inception. ~~A loss of these assets would make it impossible to continue operations and we would be forced to shut down operation of the Plant.~~

~~Risks~~Ronald ~~Related~~Tobkin, toGovernor, ~~Our Financing~~Age 61

~~Our~~Mr. Tobkin ~~failure~~has toactively ~~comply~~been ~~with~~involved in the family farming operation since 1972, and has been a ~~single~~self ~~debt~~employed ~~financing~~farmer ~~covenant~~for orthe ~~agreement~~past ~~could~~five ~~have~~years. His past experience includes: Assistant Soil Scientist for University of Minnesota Northwest Experiment Station, Co-Owner, President and General Manager of Perco Farm Service in Perham, Minnesota, Co-Owner, President and General Manager of Prairie Bean Co., Perham, Minnesota, Co-Owner, President and General Manager of Perco Bean Co., Perham, Minnesota, and Managing Partner and majority owner of Little Pine Dairy, LLP Perham, Minnesota. Mr. Tobkin has also been a ~~material~~Chamber of ~~adverse~~Commerce ~~impact~~Officer onfor ~~our~~School ~~business~~Board District 549 Chairman. Mr. Tobkin graduated from North Dakota State University with a Bachelors Degree in Soil Science in 1970. He also graduated and commissioned in the Minnesota Military Academy in 1972. Mr. Tobkin has served as a governor ~~whole~~since our inception.

~~We currently~~Jonathan ~~have over $77~~Piekarski,~~000,000~~ ~~in senior and subordinated debt financing~~Governor, ~~net~~ ofAge current maturities. We have senior debt financing through Agstar Financial Services, PCA (“Agstar”) in the amount of $41,000,000, which included $35,000,000 for construction costs, and a revolving line of credit of up to $6,000,000. We also have financing through the MMCDC New Market Fund II, LLC (“NMF”) of $19,175,000, including a senior loan note of $14,480,500 and subordinated loan note of $4,694,500. Finally, we have a capital lease with Otter Tail County for solid waste equipment in the approximate amofaunt of $26,010,000.55

~~Our debt financing arrangements contain various~~Mr. Piekarski ~~covenants~~has ~~and~~been ~~agreements~~a ~~and contain cross~~self-~~acceleration~~employed ~~and~~grain ~~cross-default provisions. Under~~farmer ~~these~~from ~~provisions,~~1980 ~~a default~~to ~~or acceleration of one debt agreement will result in~~ the ~~default~~present. He ~~and~~has ~~acceleration~~over of20 ~~our~~years ~~other~~experience ~~debt~~as ~~agreements~~a ~~(regardless~~director ~~of whether we were~~ in ~~compliance~~ ~~with~~ the ~~terms~~Farm ofCredit ~~such other debt agreements). Accordingly~~System, astarting ~~default on one debt agreement~~with ~~could~~the ~~result~~Federal inLand ~~all~~Bank Association of ~~our~~Fergus ~~outstanding~~Falls ~~debt becoming immediately due~~ and ~~payable. Our~~ ~~master~~remaining ~~loan~~through ~~agreement with Agstar (~~the ~~“Master Loan Agreement”) contains a provision that states that if~~ wesuccessive ~~default~~mergers onto ~~any~~what ~~payment~~is ofnow ~~principal,~~AgCountry ~~interest,~~Farm ~~fees,~~Credit ~~expenses~~Services, ~~charges or~~headquartered ~~other~~in ~~amounts~~Fargo, ~~under~~North ~~the~~Dakota. In ~~construction~~that ~~loan note~~capacity, ~~term~~Mr. Piekarski ~~loan~~has ~~note,~~served ~~revolving line~~as ofVice-Chair ~~credit note,~~ and ~~mortgage,~~Chairman ~~this will constitute an event~~ of ~~default and Agstar may accelerate~~ the ~~due~~Board ~~date~~ of ~~the~~Directors ~~unpaid balance~~ of ~~the~~Farm ~~principal~~Credit ~~on all~~Services of West ~~the~~Central ~~Agstar promissory notes. Likewise~~Minnesota, ~~our~~Moorhead ~~construction~~ and ~~term~~AgCountry ~~loan~~Farm ~~agreement~~Credit ~~with NMF contains a~~Services. Over ~~provision~~his ~~that~~tenure, ~~states~~Mr. Piekarski ifhas webeen ~~default~~a onmember ~~any payment~~ of ~~principal~~the orstate ~~interest,~~stockholder ~~fees,~~advisory ~~expenses~~committee, orstate ~~other~~legislative ~~amounts~~advisory ~~due under the senior loan note~~committee, ~~subordinated loan~~board ~~note,~~member and ~~mortgage, this will constitute an event of default and NMF may~~ ~~accelerate~~Vice-Chair ~~the due date~~ of the ~~unpaid~~Minnesota ~~balance~~Federation of ~~the~~Farm ~~principal~~Credit onStockholders, ~~all~~member of ~~the~~ ~~NMF~~the ~~notes. The~~Seventh ~~NMF~~Farm ~~construction~~Credit ~~and~~District ~~term loan~~Federation ~~agreement~~Board, ~~also contains a provision that states that if an event of default occurs~~ and ~~is continuing under any of~~ the ~~Agstar loan documents, it shall be deemed an event of default under the NMF agreement~~St. ~~The~~ ~~capital~~Paul ~~lease~~Farm ~~with Otter Tail County (the~~Credit ~~“County”)contains~~Council awhich ~~provision~~does ~~that~~legislative/lobbying ~~states~~activity ~~that~~on ifsystem ~~an event of default occurs and is continuing under any of the Agstar loan documents, it shall be deemed an event of default under the capital lease~~issues. The application of cross-acceleration or cross-default provisions means that our compliance with applicable debt covenants and agreements will be interdependent and one default may materially harm our business as a wholeMr. ~~We were in violation of financial covenants as of September~~ ~~30,~~Piekarski ~~2008,~~has ~~because~~served weon ~~failed to meet tangible net worth requirements and deliver audited financial statements within ninety days of~~ our ~~fiscal~~Board ~~year~~since ~~end. We have received a waiver for these covenants through October 1, 2009. Any further violation after this waiver period could significantly and materially harm~~ our ~~business~~inception.

~~Our high~~Executive level of debt limits our ability to fund general corporate requirements, limits our flexibility in responding to competitive developments and increases our vulnerability to adverse economic and industry conditions.Officers

~~Our total consolidated long-term debt, net of~~Anthony ~~current~~Hicks ~~maturities,~~serves as ~~of September 30, 2008, which includes senior and subordinated debt financing with Agstar, NMF and~~ the ~~County,~~Company’s ~~was~~chief ~~approximately $77,000,000~~executive ~~and~~officer/chief ~~represented approximately 61% of our total capitalization as of~~financial ~~that date~~officer. Information ~~Our~~regarding level of indebtedness could have important adverse consequences on our future operations, including: making it more difficult for us to meet our payment and other obligations under the outstanding Agstar and NMF debt; reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes, and limiting our ability to obtain additional financing for these purposes; limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industries in which we operate and the general economy; and placing us at a competitive disadvantage compared to our competitors that have less debt or are less leveragedMr. ~~Moreover,~~Hicks ~~if we fail to make any required payments under our debt, or otherwise breach the terms of our debt, a substantial portion of our debt could be subject to acceleration. In such a situation, it~~ is unlikely we would be able to repay the accelerated debt, which would have a material adverse impact on our business and ability to continue to operate as a going concern. As mentioned above, as of September 30, 2008, we were in violation of financial covenants related to tangible net worth and delivery of audited financial statements, but the financing agencies have waived compliance with these covenants until October 1, 2009. Any further violation after this waiver period could significantly and materially harm our business.below:

11Anthony J. Hicks, Age 51

~~Table~~Mr. Hicks is currently and has been since October 31, 2008 the Chief Executive Officer of ~~Contents~~the Company, and is currently and has been since May 2007 the Chief Financial Officer of the Company. Mr. Hicks served as the Chief Operating Officer for Bell Farms/Whitestone Farms, LLP, a pig production company located in Burnsville, Minnesota, from May 1996 to May 2007.

~~Our independent auditors have expressed~~Section 16(A) Beneficial ~~substantial~~Ownership ~~doubt~~Reporting ~~about our ability to continue as a going concern, which may hinder our ability to obtain future financing.~~Compliance

~~Our~~Section 16(a) of the ~~independent~~Securities ~~registered~~Exchange ~~public~~Act ~~accounting firm~~of ~~has~~1934 ~~issued~~requires ~~its~~the ~~report~~Company’s officers and governors, ~~which~~and ~~includes~~persons anwho ~~explanatory~~own ~~paragraph~~more ~~for~~than 10% of a ~~going concern~~registered ~~uncertainty~~class onof ~~our~~the Company’s ~~financial~~equity ~~statements~~securities, asto offile ~~September~~reports ~~30,~~of ~~2008. As~~ownership ~~explained~~and changes in ownership with the ~~report,~~Securities weand ~~have~~Exchange ~~incurred~~Commission. Officers, governors anand ~~accumulated~~greater ~~deficit~~than of10% ~~$8.7~~percent ~~million~~Unit asholders are required by SEC regulation to furnish the Company with copies of ~~September~~all ~~30,~~Section 16(a) forms ~~2008~~they file. ~~Based~~To the Company’s knowledge, based solely on ~~our~~a ~~operating~~review ~~plan,~~of ~~our~~the ~~existing~~copies ~~working~~of ~~capital~~such isreports ~~not~~furnished ~~sufficient~~ to ~~meet~~ the ~~cash~~Company ~~requirements~~and towritten ~~fund~~representations from our ~~planned~~officers ~~operating~~and ~~expenses~~governors, ~~capital~~the ~~expenditures,~~Company believes that during fiscal year 2009 all filings with the SEC by its officers and ~~working~~governors ~~capital~~complied with requirements ~~though~~for ~~September~~reporting ~~30,~~ownership ~~2009~~and ~~without~~changes ~~additional~~in ~~sources~~ownership of ~~cash~~the ~~and/or~~Company’s ~~the~~units pursuant ~~deferral,~~to ~~reduction~~Section 16(a) orof ~~elimination~~the ofExchange ~~significant~~Act, ~~planned~~except ~~expenditures.~~as follows: a Form ~~Currently,~~3 wewas ~~have~~not notimely ~~commitments~~filed toupon ~~obtain~~John ~~additional~~Anderson’s ~~capital,~~election ~~and~~to ~~there~~the ~~can~~board of governors bebut nohas ~~assurance~~since ~~that~~been ~~financing~~filed, ~~will~~and bea ~~available~~Form in4 ~~amounts~~was ornot ontimely ~~terms acceptable~~filed to ~~us,~~reflect ifa atunit disposition ~~all~~by governor Ronald Tobkin.

~~Risks~~Conflicts of ~~Relating~~Interest ~~to Our Business~~Policy

WeThe Company ~~rely~~has ona written conflicts of interest policy and whistleblower complaint policy and procedure and anti-retaliation policy, which collectively function as the ~~services~~Company’s code of ~~key~~ethics, ~~personnel~~applicable to its governors, ~~the~~officers, ~~loss~~and employees of ~~which~~the ~~could~~Company, ~~adversely~~including ~~affect~~the Company’s principal executive officer, principal financial officer, and principal accounting officer. The policies are available on the Company’s website at ~~future~~http://www.ottertailethanol.com ~~success~~under the corporate governance section of the website. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of its code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions by posting such information on its website.

We are highly dependent on the services of Anthony Hicks, who serves as our Chief Executive Officer and Chief Financial Officer. If we were to lose the services of Mr. Hicks, whether through termination, attrition, incapacitation or otherwise, there are currently no successors who could implement our business plan. Therefore, such loss could have a material adverse impact on us and our future profitability.33

~~Because we have a limited operating history and experience~~Changes ~~operating~~to anGovernor ~~ethanol~~Nominations ~~plant, we may have difficulties successfully operating the Plant.~~Procedures

WeThere have abeen ~~limited~~no ~~operating~~material ~~history~~changes ~~and~~to ~~resources. We had an operating loss of approximately $8,700,000 for~~ the ~~year~~procedures ~~ended~~by ~~September 30, 2008. We~~which ~~continued~~security ~~incurring~~holders ~~significant~~may ~~losses~~recommend ~~until~~nominees ~~we commenced operation of our Plant, and continued~~ to ~~incur~~the ~~losses as~~Company’s weboard ~~began routine sales~~ of ~~our ethanol. We are dependent on our officers and~~ governors tofrom ~~manage~~those ~~our~~disclosed ~~business~~in ~~and~~the ~~development. Our~~Company’s ~~officers~~proxy ~~and governors~~statement ~~have~~for noits ~~previous~~2009 ~~experience~~annual ~~managing~~meeting ~~and operating a public ethanol business. Our lack~~ of ~~an operating history and inexperience may make it difficult for us to successfully operate the Plant. If we do not successfully operate the Plant~~members, ~~the~~filed ~~value of our Class A Membership Units (the “Units”)~~with ~~will decline. We cannot assure that we will be able to successfully operate~~ the ~~Plant. We~~SEC ~~can~~on ~~give~~January ~~no assurance that the revenue we generate will be sufficient for us to continue operations. We had a period of profitability following the commencement of ethanol production in May~~26, ~~June, and July 2008; however since that time we have not been profitable and we may never achieve profitability~~2009.

~~Our lack of business diversification could result in~~Audit ~~the devaluation of our Units if our revenues from our primary products decrease.~~Committee

~~Our~~The ~~business~~Company ~~solely~~is ~~consists~~not ofa listed issuer, as defined in Rule 10A-3 under the ~~production~~Exchange Act, and ~~sale~~thus ofis ~~ethanol~~not ~~and~~required ~~distillers~~to provide disclosure regarding its audit committee ~~grains~~membership. We The doboard ~~not~~has ~~have~~determined ~~any~~that ~~other~~Hans ~~lines~~Ronnevik is an “audit ofcommittee ~~business~~financial orexpert,” ~~other~~as ~~sources~~defined in Item 407(d)(5)(ii) of ~~revenue~~Regulation ifS-K under wethe ~~are~~Exchange ~~unable~~Act, due to ~~successfully~~previous audit committee and work experience as ~~operate~~provided in the ~~Plant. Our~~governor ~~lack~~information ofprovided ~~business~~above. Mr. Ronnevik is ~~diversification~~independent ~~could~~under ~~cause~~applicable usNasdaq tocorporate ~~lose~~governance ~~all~~regulations, orwhich ~~some~~the Company ofhas ~~our~~adopted ~~members’~~although ~~investments if~~it weis ~~are~~not ~~unable~~a tolisted ~~generate~~issuer. Mr. Ronnevik’s ~~revenues~~designation ~~through~~does ~~the~~not ~~production~~impose ~~and~~on ~~sale~~Mr. ofRonnevik any duties, obligations ~~ethanol~~or liability that are greater than the duties, obligations and ~~distillers~~liability ~~grains~~as ~~since~~a member weof dothe ~~not~~audit ~~expect~~committee toand ~~have~~board ~~any~~of ~~other~~governors ~~lines~~in the absence of such ~~business~~designation or ~~alternative revenue sources~~identification.

WeITEM 11. ~~have little to no experience in the ethanol~~EXECUTIVE ~~industry, which may affect our ability to operate the Plant~~COMPENSATION.

~~We are presently, and are likely for some time to~~Components ~~continue to be, dependent upon our founding members, some~~ of ~~whom~~Compensation also serve as our governors and executive officers. Our Chief Executive Officer and Chief Financial Officer, Anthony Hicks, is experienced in business generally but has no experience in operating an ethanol plant and governing and operating a public company. Many of our governors have no expertise in the ethanol industry. In addition, certain governors on our Board are presently engaged in business and other activities which impose substantial demand on the time and attention of such governors.Program

~~Our~~The compensation ~~executive~~program ~~officer~~for ~~and~~Anthony ~~governors~~Hicks, ~~lack~~our ~~significant~~chief ~~experience~~executive inofficer and chief financial ~~accounting~~officer, ~~and~~during ~~preparation~~the offiscal ~~reports~~years ~~under~~ended ~~the~~September 30, ~~Securities~~2009 and ~~Exchange~~2008 ~~Act~~consisted of ~~1934, as amended (~~the ~~“Exchange~~following ~~Act”).~~components:

~~Neither~~· ~~our~~Base ~~executive officer~~salary ~~nor~~– ~~any~~Mr. ofHicks ~~our~~received ~~governors~~a ~~has~~base ~~ever~~salary ~~served~~ as ~~such~~reflected ~~with~~in athe ~~company~~Summary ~~that~~Compensation ~~is required~~Table tobelow. ~~file~~The ~~reports~~purpose ~~under~~of the ~~Exchange~~base ~~Act. As~~salary awas ~~result, we may not be able or qualified~~ to ~~efficiently~~provide ~~and~~a ~~correctly~~secure ~~deal~~base ~~with our financial accounting issues and preparation~~ of ~~the~~cash ~~Exchange~~compensation ~~Act~~for ~~reports~~Mr. If ~~we are unable to correctly deal with our financial accounting issues and prepare our Exchange Act reports, we may be exposed to significant liabilities and have difficulty raising additional capital~~Hicks. ~~Although~~ weBase ~~plan~~salary towas ~~implement~~paid ain ~~search~~equal ~~for a full~~bi-~~time~~weekly ~~controller~~installments ~~or CFO with appropriate U.S. GAAP~~ and ~~SEC~~was ~~experience as part of our remediation plan described under Item 9A(T) of this Report, it is~~ not ~~clear~~contingent ~~how~~upon ~~long~~achieving ~~this~~any ~~search~~individual ~~will take~~ or ~~whether~~company itperformance ~~will be successful~~goals. ~~If we are unsuccessful in attracting qualified candidates we may continue to have difficulty in dealing with our financial accounting issues and preparation of Exchange Act reports.~~

~~Risks Related~~· Incentive compensation - Mr. Hicks, as Chief Executive Officer and Chief Financial Officer, became eligible effective December 1, 2008 to receive 10,000 restricted Units pursuant to a vesting schedule that has 4,500 Units vesting on January 1, 2009, 4,500 Units vesting on December 31, 2009, and 1,000 Units vesting on December 31, 2010, provided that Mr. Hicks remains a member of the ~~Ethanol~~Company, ~~Industry~~complies with his employment agreement, performs his duties, and substantially complies with regulations governing Plant operations, as evaluated by the compensation committee.

~~The~~· ~~spread~~Term ~~between~~and ~~ethanol~~Termination —Mr. Hicks’s employment agreement as Chief Executive Officer and ~~corn~~Chief ~~prices~~Financial ~~can~~Officer, ~~vary significantly~~as amended September 9, 2009, is set to expire on December 31, 2010. In the event that Mr. Hicks is terminated without cause, Mr. Hicks will receive his pro-rated base salary through the termination date included in the termination notice given to Mr. Hicks, and wea ~~expect~~severance payment equal to ~~incur~~six ~~losses~~months of Mr. Hicks’s then annual base salary. Mr. Hicks may resign at any time by giving 60 days prior written notice to the Company. In connection with the Agreement, Mr. Hicks agreed to a non-competition and non-solicit arrangement under which Mr. Hicks agreed that for a period of two years after the termination of his employment with the Company, Mr. Hicks will not consult for, be employed with, or otherwise perform services for, any person or entity in the ~~near~~ethanol ~~future~~business ~~because~~within 100 miles of ~~narrow spreads~~any outer city limit of Fergus Falls, Minnesota; and that Mr. Hicks will not, directly or indirectly, solicit any customer, supplier, employee, or other representative of the Company.

~~We have certain risks and~~The ~~uncertainties~~compensation ~~that~~program wefor ~~experience~~the ~~during~~Company ~~volatile~~is ~~market~~administered ~~conditions~~by ~~such~~the ~~as what~~compensation wecommittee ~~experienced~~of ~~during~~ the ~~fourth~~Board, ~~quarter~~approved ~~for~~by the ~~year ended September 30~~Board, ~~2008.~~ ~~These~~and ~~volatilities~~reviewed ~~can have a severe impact~~ on ~~operations~~an annual basis. ~~Our revenues~~The ~~are~~objective ~~derived~~of ~~from~~ the ~~sale~~program ~~and~~is ~~distribution~~to ofprovide ~~ethanol~~a fair and ~~distillers~~competitive ~~grains~~compensation topackage ~~customers~~that ~~primarily~~will ~~located~~enable in the ~~U.S.~~Company ~~and~~to ~~our~~attract ~~operating~~ and ~~financial~~ ~~performance~~retain istalented executives ~~largely~~who ~~driven~~will bybe ~~the~~instrumental ~~prices~~in atachieving ~~which~~company wegoals ~~sell~~for ~~ethanol and~~growth ~~the net expense of corn. The price~~and ofprofitability ~~ethanol~~and isin ~~influenced~~positioning bythe ~~factors~~Company ~~such~~to ascompete ~~supply~~in ~~and~~the ~~demand,~~rapidly ~~weather,~~expanding ~~government~~and ~~policies~~evolving ~~and~~renewable ~~programs,~~fuels ~~and~~industry. The ~~unleaded~~compensation ~~gasoline~~committee and the ~~petroleum~~ ~~markets,~~Board ~~although~~believes ~~since~~that ~~2005~~ the ~~prices~~compensation ofpackage ~~ethanol~~must ~~and~~be ~~gasoline~~competitive ~~began~~with afinancial ~~divergence~~arrangements ~~with~~provided ~~ethanol~~to ~~selling~~executive ~~for~~officers ~~less~~of ~~than~~other ~~gasoline~~renewable atfuels ~~the wholesale level.~~companies ~~Excess~~operating ~~ethanol~~not ~~supply~~only in ~~the market~~Minnesota, inbut ~~particular,~~throughout ~~puts downward pressure on~~ the ~~price~~Midwestern ~~of ethanol~~United States. ~~Our largest cost of production is corn.~~ The ~~cost~~compensation ~~of corn~~package isas ~~generally~~adopted ~~impacted~~ by ~~factors~~the ~~such~~governors aswas ~~supply and demand, weather,~~designed ~~government~~to ~~policies~~promote and ~~programs,~~reward ~~and~~both ~~our~~individual ~~risk~~performance ~~management~~of ~~program~~the ~~used~~Executives toand their ~~protect~~collective ~~against~~performance ~~the~~as ~~price~~members ~~volatility~~ of ~~these~~our ~~commodities~~team.

~~We incurred a net loss of~~Decisions ~~approximately~~concerning ~~$8,650,000 for~~ the ~~fiscal~~compensation ~~year ended September 30, 2008. Net losses were high in large part because~~ of ~~rising~~the ~~corn~~Chief ~~costs that~~Executive ~~were~~Officer ~~not~~and ~~offset~~Chief ~~by rises in ethanol prices. Corn prices increased due to~~Financial ~~increases~~Officer ~~in demand~~ for ~~grain from global markets, increased speculation in~~ the ~~commodity~~ ~~markets~~fiscal ~~including~~year ~~oil~~ending ~~and corn, low corn carryout from 2007, and inclement spring weather.~~September ~~Corn costs also were high due to a change in value of our forward purchase contracts~~30, ~~which~~2009 were ~~adversely~~made ~~affected~~ by the ~~change~~compensation incommittee ~~market~~of ~~price. Ethanol prices rose mainly in conjunction with~~ the ~~increase~~Board inand ~~the~~approved ~~price~~by ~~of corn and oil~~the Board.

WeSUMMARY ~~anticipate that our results of operations for the~~COMPENSATION first quarter of 2009 will continue to be affected by high corn prices, a surplus of ethanol, low ethanol prices, and volatility in the commodity markets. While the market price of corn has since dropped to $4.03 per bushel on October 31, 2008 as quoted on the Chicago Board of Trade (“CBOT”) for December 2008 futures from a peak of $7.88 per bushel in late June 2008 as quoted on the CBOT, it still remains relatively volatile. The volatility is due to various factors, including uncertainty with respect to the fall harvest and corn carryout in 2008, increased demand for grain from global and national markets, speculation in the commodity markets, and demand for corn from the ethanol industry. Concurrently, the price of ethanol ($1.75 per gallon as of October 31, 2008 on the CBOT for December 2008 TABLE

12The following table sets forth all compensation earned by our Chief Executive Officer and Chief Financial Officer, and our former Chief Executive Officer (who served as our Chief Executive Officer prior to termination effective October 31, 2008) for services performed during the last two fiscal years.

~~Table of Contents~~34

futures) is expected to lag due to excess supply in the market and sluggish demand growth. As of December 9, 2008, according to the Renewable Fuels Association, 172 ethanol refineries had a production capacity of a record 10.4 billion gallons, with existing plants currently increasing capacity to produce an additional 660 million gallons. In addition, 21 refineries were under construction to produce an additional 1.6 billion gallons. Consequently, we expect margins to be tight or exist not at all in the first quarter of fiscal 2009. Continued tight margins may seriously decrease our liquidity and could cause us to default on one or more of our loan agreements.

	Annual Compensation
Name & Principal Position	Year	Salary		Unit Awards(1)		All Other Compensation			Total
Anthony J. Hicks	2009	$	131,766	$	9,000		—		$	140,766
Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)	2008	$	105,000	$	5,000		—		$	110,000

Kelly Longtin	2009	$	15,447	$	5,000	$	22,833	(2)	$	43,280
Former Chief Executive Officer	2008	$	135,750	$	5,000		—		$	140,750

~~Hedging~~(1) Market ~~transactions~~value ~~could~~of ~~significantly~~Units ~~increase~~based ~~our operating~~by ~~costs~~reference ifto wethe ~~incorrectly~~purchase ~~estimate~~price ~~our~~of ~~corn~~$2.00 ~~requirements~~per ~~and are not~~unit ~~able~~that towas ~~utilize~~established ~~all~~in ofour ~~the~~intrastate ~~corn~~offering ~~subject~~that toclosed ~~our~~on ~~futures~~October ~~contracts~~31, 2006.

~~We attempt to minimize the effects of fluctuations in the price of corn on our operations by taking hedging positions in the corn futures markets~~(2) Mr. ~~Hedging is a means of~~ ~~protecting~~Longtin ~~the~~terminated ~~price~~employment atwith ~~which we will buy corn in~~ the ~~future. In~~Company ~~one~~effective ~~type~~October ~~of hedging transaction~~31, we ~~purchase~~2008. Amounts ~~futures contracts that lock~~ in ~~the~~all ~~amount and price of corn that we will purchase at a future date. Whether our hedging activities are successful depends upon, among~~ other ~~things,~~compensation ~~the cost~~column ofreflect ~~corn and our ability to sell sufficient amounts of ethanol and~~severance ~~distillers~~payments ~~grain to utilize all of the corn subject to the futures contracts~~Mr. ~~Although~~ weLongtin ~~attempt~~received ~~to link hedging activities to sales plans and pricing activities, hedging activities can result~~ in ~~significant~~connection ~~costs, especially if we cannot use all of the corn subject to our futures contracts. If we are unsuccessful~~ with ~~our~~his ~~hedging efforts, our business may suffer~~termination.

~~Our~~During the ~~operating~~fiscal ~~costs~~years ~~could~~ended be2009 ~~higher~~and ~~than~~2008, wethe ~~expect~~Company recognized approximately $2,300 and $9,500, respectively, in compensation expense related to restricted ~~this~~unit ~~could~~grants. As ~~reduce~~of ~~our~~September 30, ~~profitability~~2009 orand ~~cause~~2008, ustotal unit-based compensation expense for restricted unit non-vested awards not yet recognized was $7,600and $22,300, respectively. Unit-based compensation in connection with Unit Options for the year ended September 30, 2008 was $5,000. Pursuant to ~~lose~~his ~~money~~appointment as Chief Executive Officer, Mr. Hicks forfeited 2,500 Unit options granted to Mr. Hicks during his term as Chief Financial Officer which were never exercised, and 2,500 remaining unvested Units that were scheduled to vest on January 1, 2009 pursuant to the terms of his former employment agreement as Chief Financial Officer.

InOUTSTANDING ~~addition~~EQUITY toAWARDS ~~general market fluctuations and~~AT ~~economic~~SEPTEMBER ~~conditions~~30, ~~we could experience significant operating cost increases from numerous factors, many of which are beyond our control. These increases could arise from, among other things:~~2009

· higher natural gas and electricity prices;

Option Awards

Unit Awards

Equity

incentive plan

awards:

Market or

Number of

payout value

securities

unearned

of unearned

underlying

units or other

unexercised

Option

Number of

Market value of

rights that

options (#)

unearned

exercise

expiration

units that have

have not

Name

exercisable

options (#)

price ($)

date

not vested

not vested ($)

vested (#)

vested($)

Anthony Hicks(1)

5,500

2.00

(2)

Chief Executive and Chief Financial Officer

Kelly Longtin(3)

Former Chief Executive Officer

~~· higher~~ (1) Pursuant ~~labor~~to his appointment as Chief Executive Officer, effective ~~costs~~December 1, ~~particularly~~2008, ifMr. Hicks ~~there~~became iseligible ~~any~~effective ~~labor~~December 1, 2008 ~~shortage;~~to receive 10,000 restricted Units pursuant to a vesting schedule that has 4,500 Units vested on January 1, 2009, 4,500 Units vesting on December 31, 2009, and 1,000 Units vesting on December 31, 2010.

~~· higher~~(2) Market value ~~corn~~of Units based by reference to the purchase price of $2.00 per Unit that ~~costs;~~was established in our intrastate offering that closed on October 31, 2006.

~~· higher~~(3) Mr. ~~transportation~~Longtin ~~costs~~terminated ~~because~~employment ofwith ~~greater~~the ~~demands~~Company oneffective ~~truck~~October 31, 2008. At that time, Mr. Longtin had 10,000 Unit options which were never exercised and ~~rail~~were forfeited. He received 2,500 restricted ~~transportation~~Units ~~services;~~which vested on January 1, 2009, and forfeited his remaining unvested restricted Units.

~~· higher costs of regulatory compliance, including regulations related to the environment and worker safety.~~35

AsGovernors’ ~~more ethanol plants are built, ethanol production will increase and, if demand does not sufficiently increase, the price of ethanol and distillers grain may decrease.~~Compensation

~~We expect that the number of ethanol producers and the~~The ~~amount~~following oftable ~~ethanol~~sets ~~produced~~forth ~~will~~all ~~likely~~compensation ~~continue~~earned toby ~~increase. We~~our ~~cannot~~governors ~~assure~~during ~~that~~ the ~~demand for ethanol~~ ~~will~~2009 ~~continue~~fiscal toyear ~~increase. The demand~~ for ~~ethanol~~service ~~is dependent upon numerous factors such as governmental regulations, governmental incentives, whether the phase out or restrictions~~ on ~~the~~ use of MTBE continues and the development of other technologies or products that may compete with ethanol. If the demand for ethanol does not sufficiently increase, increased ethanol production may lead to lower ethanol prices. In addition, because ethanol production produces distillers grain as a co-product, increased ethanol production will also lead to increased supplies of distillers grain. Demand for distillers grain is independent of the demand for ethanol and depends upon various factors, such as the strength of the local and national beef and dairy cattle industry, and the availability of other feed products at more economical prices. An increase in the supply of distillers grain, without offsetting increases in demand, could lead to lower prices. Decreases in the price of ethanol and distillers grain will result in our ~~generating lower revenue and lower profit margin, thereby reducing or eliminating our profits~~Board.

Growth in the ethanol industry is dependent on growth in the fuel blending infrastructure to accommodate ethanol, which may be slow and could result in decreased demand for ethanol.

Name	Fees Earned or Paid in Cash		All Other Compensation(1)		Total
Hans Ronnevik	$	4,175	$	180	$	4,355
Gary Thompson	$	0	$	180	$	180
Philip Deal	$	4,500	$	180	$	4,680
Gerald Rust	$	4,350	$	180	$	4,530
Ron Tobkin	$	3,125	$	180	$	3,305
Jonathan Piekarski	$	3,825	$	180	$	4,025
John Anderson	$	1,425	$	180	$	1,605
Mark Ellison(2)	$	3,025	$	180	$	3,205
Jerry Larson(2)	$	5,900	$	180	$	6,080
Ed Mehl(2)	$	2,850	$	180	$	3,030
Greg Smith(2)	$	2,400	$	180	$	2,580
Lee Rogness(3)	$	450	$	180	$	630
Jeff Stanislawski(4)	$	750	$	180	$	930

~~The ethanol industry depends~~(1) Reflects onpayment ~~the fuel blending industry to blend the ethanol that is produced with gasoline so it may be sold to the end consumer. In many parts~~ of ~~the country,~~insurance ~~the~~premium blending infrastructure cannot accommodate ethanol which leads to certain areas that do not blend any ethanol. Substantial investments are required to expand this blending infrastructure that may not be made by the ~~fuel~~ ~~blending~~Company ~~industry. Should~~for the ~~ability~~benefit ~~to blend ethanol not expand at the same rate as increases in ethanol supply, it may decrease the price~~ of ~~ethanol~~each ~~despite the fact that there may be significant demand at the consumer level to purchase ethanol~~governor. Should the fuel blending industry not make the required investments to expand the blending infrastructure, it may lead to a decrease in the selling price of ethanol which could impact our ability to operate profitably.

~~Consumer~~(2) Resigned ~~resistance~~effective ~~to the use of ethanol based~~ on ~~the~~ ~~belief~~August ~~that ethanol is expensive~~11, ~~adds~~2009 toas ~~air~~reported ~~pollution,~~in ~~harms~~current ~~engines, takes~~report ~~more~~on ~~energy~~Form ~~to produce than it contributes, and/or causes rising food~~8-K ~~prices~~filed ~~may~~on ~~affect~~August ~~the demand for ethanol or government supports for ethanol~~19, ~~which~~ ~~could adversely affect our business~~2009.

13(3) Resigned effective February 19, 2009 as reported in current report on Form 8-K filed on February 23, 2009.

~~Table~~(4) ofResigned ~~Contents~~effective February 12, 2009 as reported in current report on Form 8-K filed on January 23, 2009.

~~According to an April 30, 2008 article in the~~Governor Washington Post titled “Siphoning Off Corn to Fuel Our Cars,” there are questions regarding ethanol’s benefit in reducing greenhouse gases, and ethanol’s role in rising food prices, which rose throughout the summer of 2008. In addition, according to a May 8, 2008 article in the Los Angeles Times titled “Lawmakers Turn Up the Heat on Ethanol in Response to Rising Food Prices,” rising food prices have prompted some lawmakers to propose rolling back the ethanol RFS or granting states waivers from RFS mandates. A lack of government support for corn-based ethanol or decrease in ethanol demand due to consumer concerns over food prices will likely decrease our ethanol revenues.Compensation

~~Competition~~Members of ~~from~~the ~~ethanol~~Board ~~imported~~receive ~~from~~a ~~Central~~monthly $150 per diem for attending meetings and for ~~American~~rendering services to us. Members of the Board receive a monthly retainer of $150, and ~~Caribbean~~the ~~basin~~Chairman ~~countries~~of ~~may~~the beBoard receives an additional $200 monthly retainer. The Secretary receives a ~~less~~monthly ~~expensive~~officer ~~alternative~~retainer toof $100 and ~~our~~the ~~ethanol~~Treasurer receives a monthly officer retainer of $100. Further, members ~~which~~of ~~would~~the ~~cause~~Board usand toofficers ~~lose~~receive ~~market~~reimbursement ~~share~~for reasonable expenses incurred, if any, in connection with attending meetings of the Board and rendering services to us.

A portion of the ethanol produced or processed in certain countries in Central America and the Caribbean region is eligible for tariff reduction or elimination upon importation to the United States under a program known as the Caribbean Basin Initiative. Large ethanol producers, such as Cargill,ITEM ~~Inc~~12.~~, have~~ ~~expressed~~SECURITY ~~interest~~OWNERSHIP ~~in building dehydration plants in participating~~OF ~~Caribbean~~CERTAIN ~~Basin~~BENEFICIAL ~~countries,~~OWNERS ~~such~~AND asMANAGEMENT ElAND ~~Salvador,~~RELATED ~~which~~STOCKHOLDER ~~would convert ethanol into fuel-grade ethanol for shipment to the United States~~MATTERS. ~~Ethanol imported from Caribbean Basin~~ countries may be a less expensive alternative to domestically produced ethanol. Competition from ethanol imported from Caribbean Basin countries may affect our ability to sell our ethanol profitably.

WeThere are ~~face~~no ~~intense~~persons ~~competition~~known ~~from~~to ~~competing~~management ~~ethanol~~of ~~producers,~~the ~~and~~Company wethat ~~may~~currently ~~not~~ have ~~sufficient~~beneficial ownership ~~resources~~of to5% ~~compete~~or ~~effectively~~greater of the Company’s outstanding Units, based on 23,944,000 Units outstanding as of December 16, 2009.

~~Competition in the ethanol industry is intense. We face formidable competition in every~~The ~~aspect~~executive ofofficer ~~our business,~~ and ~~particularly~~the ~~from~~governors ~~other~~own ~~companies~~the ~~that~~following ~~are~~number ~~seeking to develop large-scale ethanol plants. We face competitive challenges from larger facilities and organizations that produce a wider range and larger quantity~~ of ~~products than we can, and from other plants similar to~~ our ~~Plant. Our~~Units ~~Plant~~as ~~is in direct competition with other ethanol producers, many~~ of ~~which~~the ~~have~~date ~~more~~hereof, ~~experience~~based ~~and~~on ~~greater resources than we do. Some of these producers are~~23, ~~among other things~~944,000 ~~capable~~Units ofoutstanding ~~producing~~as ~~a significantly greater amount~~ of ~~ethanol~~December ~~and compete with us for corn and product markets. Nationally~~16, the ethanol industry may become more competitive given the substantial amount of construction and expansion that is occurring in the industry. If we are unable to compete effectively in this competitive environment2009, ~~the value of our business may~~ ~~suffer.~~as follows:

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership			Percent of Class
Anthony Hicks		47,000	(1)		*
Hans Ronnevik		91,668			*
Gary Thompson		200,000			*
Philip Deal		17,500			*
Ron Tobkin		167,500	(2)		*
John Anderson		29,000	(3)		*
Gerald Rust		73,000			*
Jonathan Piekarski		115,000	(4)		*
All officers and governors together as a group (8 persons)		740,668		3.1		%

~~We expect that technological advances in the processes~~ ~~and~~ * ~~procedures~~Designates ~~for producing ethanol will continue to occur. It is possible that those advances could make the processes and procedures that we utilize at our Plant~~ less ~~efficient or obsolete, or cause the ethanol we produce to be of a lesser quality. These advances could also allow our competitors to produce ethanol at a lower cost~~ than ~~us. If~~one wepercent are unable to adopt or incorporate technological advances, our ethanol production methods and processes could be less efficient than our competitors, which could cause our Plant to become uncompetitiveownership.

~~Ethanol production methods are also constantly~~(1) Includes ~~advancing. The~~4,500 ~~current~~restricted ~~trend~~Units insubject ~~ethanol production research is~~ to ~~develop~~forfeiture anif ~~efficient method of producing ethanol from cellulose-based biomass such as agricultural waste, forest residue, and municipal solid waste~~Mr. ~~This~~ Hicks ~~trend~~ceases ishis ~~driven~~employment bywith the ~~fact~~Company ~~that~~prior ~~cellulose-based biomass is generally cheaper than corn and producing ethanol from cellulose-based biomass would create opportunities~~ to ~~produce ethanol in areas that are unable to grow corn. Another trend in ethanol production research is to produce ethanol through a chemical process rather than a fermentation process~~December 31, ~~thereby~~2009 ~~significantly~~and ~~increasing the ethanol yield per pound of feedstock. Although current technology does not allow these production methods to be competitive~~1,000 ~~new technologies may develop that~~restricted ~~would~~Units ~~allow~~subject ~~these methods~~ to ~~become~~forfeiture ~~viable~~if ~~means~~Mr. Hicks ofceases ~~producing~~his ~~ethanol~~employment inwith the ~~future. If~~Company weprior ~~are unable~~ to ~~adopt or incorporate these advances into our operations~~December 31, ~~our cost of producing ethanol could be significantly higher than our competitors, which could make our Plant obsolete and cause member investment to decrease in value or become worthless~~2010.

If(2) Includes 12,500 weUnits held by RNR LLP, an entity in which Mr. Tobkin is an owner. ~~lose~~Mr. Tobkin ~~the~~disclaims ~~services~~beneficial ownership of ~~third-party~~all ~~marketers~~but 4,167 weof ~~will~~such Units. Also ~~not~~includes be50,000 ~~able~~Units toheld ~~sell~~by ~~the~~Lakes Five, LLC, an entity in ~~ethanol~~which orMr. Tobkin ~~distillers~~is ~~grain~~an ~~that~~owner. weMr. Tobkin ~~produce~~disclaims beneficial ownership of all but 10,000 of such Units.

14(3) Includes 9,000 Units held by New Life Farms, LLLP, an entity in which Mr. Anderson is general partner.

~~Table~~(4) Includes 80,000 Units held by Piekarski Energy Holdings, an entity in which Mr. Piekarski is an owner. Mr. Piekarski disclaims beneficial ownership of ~~Contents~~all but 27,500 of such Units.

~~We have entered into contracts with third-party~~Securities ~~providers~~Authorized to market our supply of ethanol and distillers grains. Our dependence on these distributors means that our financial performance depends upon the financial health of the distributors we contract with. We cannot assure that we will be able to find a suitable replacement if a distributor fails to perform. Further, these third-party distributors will likely have relationships and agreements with other ethanol producers. It is possible that a distributor’s ability or willingness to market and sell our products could be impaired by agreements that the distributor may have with other entities not related to us. Consequently, we may not obtain the best possible prices for ~~our products,~~Issuance ~~which~~under ~~may~~Equity ~~decrease~~Compensation ~~our revenues and the value of our business.~~Plans

~~Any~~All options ~~interruption~~previously inauthorized ~~our~~for ~~natural~~issuance ~~gas~~under orequity ~~electricity~~compensation ~~supply~~plans were ~~may~~cancelled ~~force~~pursuant us to ~~halt~~the ~~operations,~~termination ~~and~~of ~~significant~~employment ~~increases~~of inour ~~the~~former ~~price of~~chief ~~natural~~executive ~~gas~~officer orand ~~electricity~~plant ~~may~~manager, ~~increase~~effective ~~our~~October ~~costs~~31, ~~of operation~~2008, ~~thereby~~and ~~harming~~transition of our ~~profitability~~chief financial officer to chief executive officer, effective December 1, 2008.

We require a significant amount of natural gas and electricity to operate our Plant. The price of natural gas and electricity, like other commodities, fluctuate significantly. Any significant increase in the price of gas or electricity will result in increased operating costs and lower profit margins because the price of ethanol tends to track with the price of gasoline and not the cost of production.ITEM ~~We may not be able to pass the higher costs on to our customers~~13. ~~Further,~~ ~~natural~~CERTAIN ~~gas is the only thermal~~RELATIONSHIPS ~~heating~~AND ~~source~~RELATED ~~for our Plant and electricity is our only source of power~~TRANSACTIONS, ~~and if~~AND ~~there~~GOVERNOR ~~are any interruptions in supply, we would have to halt operations~~INDEPENDENCE. An ~~interruption in supply or problems with delivery could have a material adverse effect on our business.~~

~~The price of distillers grain is affected by the price of~~Transactions ~~other~~With ~~commodity~~Related ~~products, such as soybeans, and decreases in the price of these commodities could decrease the price of distillers grain, which will decrease the amount of revenue we may generate.~~Persons

~~Distillers~~The ~~grain~~Board has ~~competes~~adopted ~~with~~a ~~other~~policy ~~protein-based animal~~requiring ~~feed~~all ~~products. The~~governors, ~~price~~officers ~~of distillers~~and ~~grain~~employees, ~~may~~and ~~decrease~~their immediate ~~when~~family ~~the~~members ~~price~~to ofnotify ~~competing~~the ~~feed~~Board ~~products decrease. The~~about ~~prices~~any transaction, of ~~competing~~any ~~animal~~size, ~~feed~~with ~~products are based in part on~~ the ~~prices~~Company. For of the ~~commodities~~fiscal ~~from~~year ~~which they~~ended ~~are~~September ~~derived. Downward~~30, ~~pressure~~2009 onand ~~commodity~~September 30, ~~prices~~2008, ~~such~~we aspaid ~~soybeans~~$176,000 ~~will~~for ~~generally~~storage ~~cause~~and ~~the~~corn ~~price of competing~~procurement ~~animal~~services ~~feed~~to ~~products~~Wheaton-Dumont toCoop ~~decline~~Elevator, ~~resulting~~an entity in ~~downward~~which ~~pressure~~one ~~on the price~~ of ~~distillers~~ ~~grain. Because the price of~~our ~~distillers~~governors, ~~grain~~Philip ~~is not tied to production costs~~Deal, ~~decreases~~serves inas the ~~price~~general ofmanager. This transaction ~~distillers~~was ~~grain~~approved ~~will~~in ~~result~~accordance inwith our ~~generating~~policies ~~less~~and ~~revenue~~procedures ~~and~~for ~~lower~~review ~~profit~~and ~~margins~~approval of related party transactions.

~~Competition~~Our ~~for~~Member ~~qualified~~Control ~~personnel~~Agreement inprovides that the ~~ethanol~~existence ~~industry~~and isterms ~~intense~~of ~~and~~any wesuch transactions must be fully disclosed to the Board. The Board may ~~not~~approve the betransaction only if it determines that it is on terms no more favorable to ~~able~~the governors, executive officers, members or their affiliates than generally afforded to ~~hire~~non-affiliated parties in a similar transaction. A majority of our governors who are disinterested in such a transaction must approve the transaction and, ~~retain~~acting ~~qualified~~as ~~officers~~fiduciaries, ~~engineers~~conclude that it is in our best interest. In addition, ~~and~~our ~~operators~~Member Control Agreement permits us to enter ~~efficiently~~into ~~operate~~transactions related to the ~~Plant~~sale of corn with governors, executive officers, or their affiliates without any formal Board approval process, provided that the terms of the transaction are commercially reasonable and no less favorable to the Company than could be obtained from an unaffiliated third party.

~~We have 31 employees, which is all of the personnel~~Governor that we believe are necessary to operate the Plant. Our success depends in part on our ability to retain competent personnel in a rural community. We cannot assure that we will be able to maintain qualified personnel, or hire competent personnel in the event of turnover. If we are unable to maintain productive and competent personnel, the amount of ethanol we produce may decrease and we may not be able to efficiently operate the Plant.Independence

~~Risks~~Although the Company is not required to comply with NASDAQ rules and regulations, we evaluate governor independence based on the NASDAQ definition of “independent director” found in NASDAQ Rule 5605(a)(2). None of our current governors are employees of the Company. Each of the governors hold an ownership interest (or a beneficial interest) in the number of Units specified in “Security Ownership of Certain Beneficial Owners and Management.” No governor has provided services or goods to us or purchased services or goods from us, except for those described below under “Transactions with Related Persons, Promoters, and Certain Control Persons.” Based on that information, it is our view that each of its governors that served during the fiscal year ended September 30, 2009 is an “independent director” under the NASDAQ listing standards related to director indepence for the ~~Government~~board and ~~Regulatory~~each ~~Environment~~of its committees. The Company has adopted a conflict of interest policy applicable to all employees, officers, committee members and governors, including the Company’s chief executive officer and chief financial officer, that establishes Company-wide policies for gifts, financial interests in outside organizations, and avoiding conflicts of interest. The conflict of interest policy is available on the Investor Relations section of our website at http://www.ottertailethanol.com.

~~The use~~ITEM 14. ~~and~~PRINCIPAL ~~demand for ethanol is dependent on various environmental regulations and~~ACCOUNTANT ~~governmental~~FEES ~~programs~~AND ~~that could change and cause the demand for ethanol to decline~~SERVICES.

~~There are various federal and state laws, regulations~~Independent ~~and~~Registered ~~programs~~Public ~~that~~Accounting have led to increased use of ethanol in fuel. These laws, regulations and programs are constantly changing. Federal and state legislators and environmental regulators could adopt or modify laws, regulations or programs that could adversely affect the use of ethanol. Certain states oppose the use of ethanol because they must ship ethanol in from other corn producing states, which could significantly increase gasoline prices in the state. Material changes in environmental regulations regarding the use of MTBE or the required oxygen content of automobile emissions or the enforcement of such regulations could decrease the need to use ethanol. If the oxygenated fuel requirements were eliminated or if any state were to receive a waiver, the use and demand for ethanol may decline significantly. Future changes in the law may further postpone or waive requirements to use ethanol. Such changes in laws, regulations and programs may adversely affect our business and its profitability.Firm

~~Other laws~~Boulay, ~~regulations and programs provide economic~~ ~~incentives to ethanol producers and users. For example~~Heutmaker, ~~Congress recently adopted a Renewable Fuels Standard directing the Environmental Protection Agency to adopt rules~~Zibell ~~requiring refineries,~~& ~~blenders, distributors and importers to introduce or sell volumes of ethanol and biodiesel into commerce in accordance with an annual renewable fuels schedule~~Co. ~~On December 19~~, ~~2007,~~ ~~President Bush signed into law the Energy Independence and Security Act of 2007, which raises the minimum usage requirement to 13~~P.~~2 billion gallons of ethanol by 2012 and 15 billion gallons by 2015~~L. ~~The Act also mandates a minimum requirement of 36 billion gallons of renewable fuels by 2022, with cellulosic ethanol accounting for 16 billion gallons of this total~~L. The passage of pending federal or state energy legislation or any other revocation or amendment of any one or more of these laws, regulations or programs could have a significant adverse effect on the ethanol industry and our businessP. We ~~cannot~~(“BHZ”) ~~assure~~currently ~~that~~serves ~~any~~as ~~of these laws, regulations or programs will continue in the future or that these laws, regulations or programs will benefit us or benefit us more than~~ our ~~ethanol~~ ~~producing~~independent ~~competitors. Some of these laws~~auditor, ~~regulations~~ and ~~programs~~has ~~will~~served ~~expire~~as ~~under their terms unless extended,~~ such asduring ~~the~~our ~~federal~~previous ~~partial~~two ~~excise tax exemption for gasoline blenders who use~~fiscal ~~ethanol in their gasoline, which is scheduled to expire in December 2010~~years. ~~Government~~The ~~support~~Board ofhas ~~the~~appointed ~~ethanol~~BHZ ~~industry could change and Congress and state legislatures could remove economic incentives that enable ethanol~~ to ~~compete~~be ~~with~~the ~~other~~Company’s ~~fuel~~independent ~~additives. The elimination or reduction of government~~auditor ~~subsidies~~for ~~and tax incentives could cause~~ the ~~cost~~fiscal ofyear ~~ethanol-blended~~ending ~~fuel~~September 30, ~~to increase~~2010.

15Auditors’ Fees

~~Table~~BHZ billed ofthe ~~Contents~~Company the following amounts for services provided during fiscal years 2008 and 2009:

The increased price could cause consumers to avoid ethanol-blended fuel and cause the demand for ethanol to decline, which could adversely affect our business.

	2008		2009
Audit Fees	$	127,000	$	118,000
Audit-Related Fees		—		—
Tax Fees		—		2,100
All Other Fees		—		—
Total Fees	$	127,000	$	120,100

~~Our business is subject to extensive and potentially costly environmental regulations that could change and significantly increase our operating costs.~~37

The ~~Plant is subject to environmental regulation by~~fees ~~the~~provided ~~Minnesota~~above ~~Department~~are ofbroken ~~Natural~~into ~~Resources and by~~ the ~~United~~following States Environmental Protection Agency (“EPA”). The state of Minnesota or the EPA may seek to implement additional regulations or implement stricter interpretations of existing regulations. Changes in environmental regulations or stricter interpretation of existing regulations may require additional capital expenditures or increase our operating costs. In addition, because our Plant is a 55,000,000 gallon per year Plant, it may be more difficult and costly for us to comply with applicable environmental regulations than smaller ethanol plants. Any increases in operating costs will result in lower profit margins because we may be unable to pass any of these costs on to our customers.categories:

In· ~~addition,~~Audit Fees. This category includes the ~~Plant~~fees ~~could~~and beout-of-pocket ~~subject~~expenses ~~to environmental~~for ~~nuisance~~the oraudit ~~related~~of ~~claims~~the byCompany’s ~~employees,~~2008 ~~property~~and ~~owners~~2009 ~~or residents~~annual ~~near~~financial ~~the~~statements ~~Plant~~and ~~arising~~review ~~from~~of ~~air~~the orCompany’s ~~water~~quarterly ~~discharges~~reports. ~~These~~ ~~individuals~~· Audit-Related Fees. This category consists of fees for assurance and ~~entities~~related ~~may~~services ~~object~~reasonably related to the ~~air~~performance ~~emissions~~of ~~from~~the ~~our~~audit ~~Plant~~or the review of the Company’s financial statements, not otherwise reported under Audit Fees. ~~Ethanol~~ ~~production~~BHZ ~~has~~did ~~been~~not ~~known~~perform any services to ~~produce~~us andisclosable ~~unpleasant~~under ~~odor~~Audit-Related toFees. ~~which surrounding~~· ~~residents~~Tax Fees. This category consists of fees for tax compliance, tax advice and ~~property~~tax ~~owners~~planning. ~~could~~BHZ ~~object~~did not perform any services to us disclosable under Tax Fees for fiscal 2008. ~~Environmental~~ ~~and~~In ~~public~~fiscal ~~nuisance~~year ~~claims~~2009, ~~or tort~~BHZ ~~claims~~consulted ~~based~~with the Company on ~~emissions,~~tax oradvice ~~increased~~related ~~environmental~~to ~~compliance~~the ~~costs could~~bankruptcy ~~significantly~~proceeding ~~increase~~and ~~our~~foreclosure. ~~operating~~· ~~costs,~~All ~~which~~Other ~~could~~Fees. ~~adversely~~This ~~affect our~~category ~~profitability~~consists of fees for other non-audit services. BHZ did not perform any services to us disclosable under All Other Fees.

InThe ~~2007,~~Board is ~~the~~required ~~Supreme~~to ~~Court~~pre-approve ~~decided~~all aaudit ~~case~~and innon-audit ~~which~~services ~~it ruled~~performed ~~that~~by ~~carbon~~the Company’s ~~dioxide~~independent isauditor anto ~~air~~assure ~~pollutant~~that ~~under~~ the ~~Clean~~provision ~~Air~~of ~~Act~~such ~~for~~services ~~the~~does ~~purposes~~not ofimpair ~~motor~~the ~~vehicle~~auditor’s ~~emissions~~independence. The ~~Supreme~~Board ~~Court~~will ~~directed~~not ~~the~~authorize ~~EPA to regulate carbon dioxide from vehicle emissions as a pollutant under~~ the ~~Clean~~independent ~~Air~~auditor ~~Act. Similar~~to ~~lawsuits~~perform ~~have~~any ~~been~~non-audit ~~filed~~service ~~seeking~~which toindependent ~~require the~~auditors ~~EPA~~are toprohibited ~~regulate carbon dioxide emissions~~ from ~~stationary~~performing ~~sources such as our Plant~~ under the ~~Clean Air Act.~~rules ~~Initially, we will not likely market~~ and ~~sell~~regulations ~~any~~ of the ~~carbon dioxide~~ weSecurities ~~produce. Instead,~~and weExchange ~~will~~Commission ~~emit~~or ~~it into~~ the ~~atmosphere. Any~~Public ~~fines~~Company ~~or settlements~~Accounting ~~based on our carbon emissions could reduce our profitability~~Oversight Board. ~~While~~The ~~there~~Board ~~are~~may ~~currently~~delegate noits ~~regulations applicable~~pre-approval authority to usone ~~concerning carbon dioxide, if the EPA~~ or ~~the~~more ~~State~~ of ~~Minnesota~~its ~~were to regulate carbon dioxide emissions by plants such as ours~~members, ~~we may~~but ~~have~~not to ~~apply~~management. ~~for~~The ~~additional~~member ~~permits~~ or wemembers ~~may be required~~ to ~~install carbon~~whom ~~dioxide~~such ~~mitigation equipment or take other as yet unknown steps to~~authority ~~comply~~is ~~with~~delegated ~~these~~shall ~~potential~~report ~~regulations. Compliance with~~ any ~~future regulation~~pre-approval ofdecisions ~~carbon~~to ~~dioxide, if it occurs, could be costly and may prevent us from operating~~ the ~~Plant~~Board ~~profitably~~at ~~which~~its ~~could decrease or eliminate the value~~next ofscheduled ~~our Units~~meeting.

~~Our business is subject to extensive occupational safety and health regulations that could increase our operating costs.~~38

~~We are subject to various occupational safety and health regulations, and we have incurred expense in training employees in occupational safety compliance. On January~~PART ~~10 and~~IV 11, 2008, all Plant operational personnel were trained for 10 hours in an OSHA safety course. In addition, on February 19, 2008 all operational employees attended a training course on hazardous materials. We have compiled a current Plant Safety Manual with the assistance of our consultants, Natural Resource Group, which is available to all Plant personnel. We will continue to be subject to such safety and health regulations and will continue to incur expense with respect to training and compliance. We do not expect that compliance with these rules and regulations will have a material impact on our business or as to our competitive stance in the industry, as these rules apply to other ethanol plants as well. However, any increase in OSHA compliance costs could negatively affect our profitability.

~~Risks~~ITEM ~~Related~~15. toEXHIBITS, ~~the~~FINANCIAL STATEMENT ~~Units~~SCHEDULES.

~~Our~~The following ~~lenders~~exhibits and ~~other~~financial ~~creditors would~~statements ~~have~~are ~~priority~~file ~~over~~as ~~Unit~~part ~~holders in the event~~ of ~~a liquidation of our assets~~, ~~and~~or ~~if there~~ are ~~insufficient assets to repay our outstanding~~ ~~liabilities~~incorporated ~~our~~by ~~Unit~~reference ~~holders~~into, ~~could~~this ~~receive only a portion or none of their initial investment.~~ report:

As further explained under “Risks Relating to Default Under our Master Loan Agreement,” and “Risks Related to Our Financing,” our debt financing agreements contain covenants relating to financial ratios, delivery of financial statements and timely repayment of debt. As of September 30, 2008, we were in violation of two loan covenants under the Master Loan Agreement due to our failure to meet tangible net worth requirements and to furnish audited financial statements to Agstar within ninety days of our fiscal year end. We received a waiver from Agstar effective until October (1~~, 2009 on these loan covenants, and also received waivers dated~~) Financial December 9, 2008 and January 9, 2009 from NMF and December 2, 2008 from Otter Tail County for cross default provisions under our agreements with such lenders. Although we have received a waiver for our previous violations, we may violate the same or other loan covenants in the future and may not receive additional waivers. An event of default would entitle Agstar and, pursuant to cross-default provisions, our other lenders, to exercise any and all of their default remedies against us, including but not limited to acceleration of the due date of the outstanding principal balance under each of our loans. Moreover, an event of default may limit our ability to access capital under our Revolving Line of Credit and make it less likely that we could obtain alternative debt or equity financing. If an event of default occurs and is not waived in the future and any of our lenders choose to exercise their default remedies, we would have insufficient liquidity to continue operations, and may be forced to proceed with an orderly liquidation of our assets. Under the terms of our debt financing agreements, our senior lender will be repaid first out of the proceeds of any liquidation. Subordinate lien holders, followed by any unsecured creditors, would then be paid with remaining assets in satisfaction of our other debts and liabilities. Unit holders would be paid with proceeds from remaining available assets, if any. There is no guarantee that any funds would be available for our Unit holders after repayment of our debt. In such liquidation scenario, our Unit holders may receive little to no return on their investment in the Company and the value of their Units may be nothing.Statements

The ~~Units have no public market and none is expected to~~ ~~develop,~~financial ~~which~~statements ~~means~~appear itbeginning ~~may~~at bepage F-1 ~~difficult~~of ~~for~~this ~~members to sell their Units~~Annual Report.

There is no public trading market for the Units and we do not expect one to develop in the foreseeable future. To maintain our partnership tax status, we do not intend to list the Units on any stock exchange. Applicable securities laws impose significant restrictions on the transfer of Units.(2) Financial ~~Consequently,~~Statement ~~members may have to hold their Units for an indefinite period of time because it may be difficult for them to sell their Units.~~Schedules

~~There~~All supplemental schedules are ~~restrictions~~omitted onas ~~transferring~~ the ~~Units,~~required ~~which~~information ~~may~~is inapplicable ~~make~~or the ~~Units~~information ~~unattractive~~is topresented ~~prospective~~in ~~purchasers~~the ~~and~~consolidated ~~may~~financial ~~prevent~~statements ~~members~~or ~~from~~related ~~selling them when they desire~~notes.

Investing in our Units should be considered a long-term investment. The ability to transfer Units is restricted by our Member Control Agreement. Members may not transfer their Units unless the transfer is a “permitted transfer.” Permitted transfers are transfers approved by the Board and that satisfy certain conditions and restrictions set forth in Section(3) ~~10 of our Member Control Agreement. We have also adopted a Unit transfer policy. All transfers must be approved by the Board.~~Exhibits

~~In addition, members may not transfer their Units if~~EXHIBIT the transfer would cause us to lose our partnership tax status and subject us to the publicly traded partnership rules. The Board will generally approve a transfer so long as the transfer falls within the “safe harbors” contained INDEX

Exhibit
Number		Description

3.1		Articles of Organization filed September 22, 2006(a)
4.1		Membership Unit Specimen Certificate(a)
4.2		Membership Unit Specimen Certificate for Seed Units(a)
4.3		Membership Unit Specimen Certificate for Incentive Units(a)
4.4		Operating and Member Control Agreement dated effective January 20, 2006(a)
10.1		Amended and Restated Employment Agreement of Chief Executive Officer effective September 9, 2009 between the Company and Anthony Hicks*+
10.2		Base Contract for Sale and Purchase of Natural Gas dated May 1, 2006 between BP Canada Energy Marketing Corp. and the Company(a)(Exhibit 10.1)
10.3		Natural Gas Services Agreement as of May 23, 2006 by and between BP Canada Energy Marketing Corp. and the Company(a)
10.4		Forbearance Agreement dated March 20, 2009 with Agstar Financial Services, PCA (d) (Exhibit 10.1)
10.5		Agreement dated June 1, 2006 by and among AL-Corn Clean Fuel Cooperative, Corn Plus Cooperative, Heartland Corn Products Cooperative, Chippewa Valley Ethanol Company, Diversified Energy Company, Central MN Ethanol Co-op, Bushmills Ethanol Inc., Minnesota Energy LLC, Red Trail Energy LLC, the Company and Commodity Specialists Company(a)
10.6		Ethanol Fuel Marketing Agreement dated July 18, 2006, by and between Renewable Products Marketing Group, L.L.C. and the Company(a)
10.7		Lease of Land For Construction/Rehabilitation of Track made October 1, 2006 by and between BNSF Railway Company, Otter Tail Valley Railroad Company, Inc. and the Company(a)
10.8		Contract for Construction dated October 24, 2006 between Riley Brothers Companies and the Company(a)
10.9		Engineering, Procurement and Construction Services Fixed Price Contract dated October 24, 2006 between Harris Mechanical Contracting Company and the Company(b)
10.10		License of Technology dated October 24, 2006 between Delta-T Corporation and the Company(b)
10.11		Purchase Agreement executed October 25, 2006 by and between Jonathan C. Piekarski and Brenda K. Piekarski and the Company(a)
10.12		Real Estate Warranty Deed recorded November 1, 2006 at 2:05 p.m.(a)
10.13		Construction Management Services Contract dated November 3, 2006 between Knutson Construction Services and the Company(a)
10.14		Engineering, Procurement and Construction Services Fixed Price Contract dated November 13, 2006 between Gateway Building Systems and the Company(a)
10.15		Job Opportunity Building Zone Business Subsidy Agreement made on January 2, 2007 by and between the City of Fergus Falls, Minnesota and the Company(a)
10.16		Engineering, Procurement and Construction Services Fixed Price Contract dated January 9, 2007 between Woessner Construction, Inc. and the Company(a)
10.17		Agreement Regarding Corn Procurement made effective as of February 1, 2007 by and between CHS Inc. and the Company(a)
10.18		Letter Regarding Employment dated April 10, 2007 to Anthony Hicks(a)+
10.19		Electric Service Agreement dated May 18, 2007 by and between Lake Region Electric Cooperative and the Company(a)

~~Table of Contents~~39

in the publicly traded partnership rules under the Internal Revenue Code, and the related rules and regulations, as amended (the “Tax Code”). In addition, the transferee of our Units may not become a member unless approved by the Board. These restrictions may make our Units unattractive to prospective transferees, and may prevent members from selling Units when they desire.

10.20		Master Loan Agreement dated as of March 28, 2007 by and among Agstar Financial Services, PCA and the Company(a)
10.21		First Supplement to the Master Loan Agreement (Construction and Term Loan) dated as of March 28, 2007 between Agstar Financial Services, PCA and the Company(a)
10.22		Second Supplement to the Master Loan Agreement (Term Revolving Loan) dated as of March 28, 2007 between

		Agstar Financial Services, PCA and the Company(a)
10.23		Third Supplement to the Master Loan Agreement (Revolving Line of Credit Loan) dated March 28, 2007 between Agstar Financial Services, PCA and the Company(a)
10.24		Intercreditor Agreement entered into as of March 28, 2007 by and among Agstar Financial Services, PCA, MMCDC New Markets Fund II, LLC, U.S. Bank, National Association, and Otter Tail County, Minnesota(a)
10.25		Disbursing Agreement as of March 28, 2007 by and among the Company, Agstar Financial Services, PCA, MMCDC New Markets Fund II, LLC, U.S. Bank, National Association, Otter Tail County, Minnesota, and First Minnesota Title & Abstract, LLC(a)
10.26		$35,000,000.00 Construction Note dated March 28, 2007 with the Company as Borrower and Agstar Financial Services, PCA as Lender(a)
10.27		$6,000,000.00 Term Revolving Note dated March 28, 2007 with the Company as Borrower and Agstar Financial Services, PCA as Lender(a)
10.28		$4,000,000.00 Revolving Line of Credit Note dated March 28, 2007 with the Company as Borrower and Agstar Financial Services, PCA as Lender(a)
10.29		Construction and Term Loan Agreement dated as of March 30, 2007 by and among MMCDC New Markets Fund II, LLC and the Company(a)
10.30		$14,480,500.00 MMCDC Senior Loan Note dated March 30, 2007 with the Company as Borrower and MMCDC New Markets Fund II, LLC as Lender(a)
10.31		$4,694,500.00 MMCDC Subordinated Loan Note dated March 30, 2007 with the Company as Borrower and MMCDC New Markets Fund II, LLC as Lender(a)
10.32		Industry Track Agreement made April 6, 2007 by and between BNSF Railway Company, Otter Tail Valley Railroad Company, Inc. and the Company(a)
10.33		Lease Agreement as of May 1, 2007 between Otter Tail County, Minnesota and the Company(a)
10.34		Bill of Sale dated May 1, 2007 from the Company to Otter Tail County, Minnesota(a)
10.35		Gas Transportation Agreement dated September 1, 2007 by and between Great Plains Natural Gas Co., a Division of MDU Resources Group, Inc. and the Company(a)
10.36		Value-Added Producer Grant Agreement dated October 1, 2007 between the Rural Business-Cooperative Service of the United States Department of Agriculture and the Company(a)
10.37		Distiller’s Grain Purchase Agreement effective as of January 11, 2008 with Bilden Farms, LLC and the Company(a)
10.38		Railroad Car Lease Agreement made the February 21, 2008 between Trinity Industries Leasing Company and the Company(b)
10.39		Distiller’s Grain Marketing Agreement effective as of February 25, 2008 by and between CHS Inc. and the Company(b)
10.40		First Amendment to Master Loan Agreement entered into as of April 1, 2008 by and between Agstar Financial Services, PCA and the Company(b)
10.41		Allonge to Revolving Line of Credit Note dated March 28, 2007, made and entered into as of April 1, 2007 by and between Agstar Financial Services, PCA and the Company(b)
10.42		Allonge to Term Revolving Note dated March 28, 2007, made and entered into as of April 1, 2007 by and between Agstar Financial Services, PCA and the Company(b)
10.43		Allonge to Construction Note dated March 28, 2007, made and entered into as of April 1, 2007 by and between Agstar Financial Services, PCA and the Company(b)
10.44		Collaboration Agreement dated April 24, 2008 made by Agricultural Utilization Research Institute (AURI)/Minnesota’s Center for Producer-Owned Energy and the Company(b)
10.45		Covenant Waiver dated January 8, 2009 from Agstar Financial Services, PCA(c)
10.46		Covenant Waiver dated December 9, 2008 from MMCDC New Markets Fund II, LLC(c)
10.47		Covenant Waiver dated January 9, 2009 from MMCDC New Markets Fund II, LLC(c)
10.48		Covenant Waiver dated December 2, 2008 from Otter Tail County(c)
31.1		Section 302 Certification of Chief Executive Officer and Chief Financial Officer*
32.1		Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. § 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

(a)		Previously filed as an exhibit under the same exhibit number (unless otherwise specified) to the Company’s Form 10-12G (No. 000-53042 ) filed on January 28, 2008.
(b)		Previously filed as an exhibit under the same exhibit number (unless otherwise specified) to the Company’s Amendment No. 1 to Form 10-12G (No. 000-53042 ) filed on April 30, 2008.
(c)		Previously filed as an exhibit under the same exhibit number to the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2008, filed on January 13, 2009.
(d)		Previously filed as an exhibit to the Company’s Current Report on Form 8-K, filed on March 26, 2009.
*		Filed Herewith
+		Management contract or compensatory plan or arrangement.

~~Risks Related to Tax Issues in a Limited Liability Company~~40

~~We expect that we will be taxed as a partnership for~~Pursuant ~~federal~~to ~~income~~the ~~tax~~requirements ~~purposes. This~~of ~~means that~~Section we13 ~~will not pay any federal~~ or ~~state~~15(d) ~~income~~of ~~tax,~~the ~~and~~Securities ~~our~~Exchange ~~members~~Act ~~will pay tax on their allocated share~~ of ~~our income.~~ ~~We cannot assure members~~1934, however, that we will be able to maintain our partnership tax treatment. The Internal Revenue Service (“IRS”) may from time to time review our tax status, and we cannot assure members that there will not be changes in the ~~law~~registrant orhas ~~our operations~~duly ~~that~~caused ~~could~~this ~~cause~~report us to ~~lose our partnership tax status. If we lose our partnership tax status, we may~~ be ~~taxed~~signed ~~as a corporation. If we were treated as a corporation, we would be taxed~~ on ~~our~~its ~~net~~behalf ~~income, currently at~~by ~~rates of up to 35 percent, for federal income tax purposes. Further, members would be required to treat distributions that we make as ordinary dividend income to~~ the ~~extent of our earnings and profits. These distributions would not be deductible by us~~undersigned, ~~thus~~thereunto ~~resulting~~duly ~~in double taxation of our earnings and profits~~authorized. ~~This would reduce the amount of cash we may have available for distributions.~~

	OTTER TAIL AG ENTERPRISES, LLC

Date: December 31, 2009	By: /s/ Anthony Hicks

	Anthony Hicks
	Chief Executive Officer
	(Principal Executive Officer) Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

~~Because we expect to be treated as a partnership for~~POWER ~~federal~~OF income tax purposes, all of our profits and losses will “pass-through” to our members. Members must pay tax on their allocated share of our taxable income every year. Members may receive allocations of taxable income that exceed any cash distributions we make to them. This may occur because of various factors, including but not limited to, accounting methodology, the specific tax rates members face, and payment obligations and other debt covenants that restrict our ability to pay cash distributions. If this occurs, members may have to pay income tax on their allocated share of our taxable income with their own personal funds.ATTORNEY

~~Because~~KNOW weALL PERSONS ~~are~~BY ~~treated~~THESE asPRESENTS, athat ~~partnership~~each ~~for~~person ~~federal~~whose ~~income~~signature appears below ~~tax~~constitutes ~~purposes~~and appoints ANTHONY HICKS, ~~any~~his ~~audit~~attorney-in-fact, ofeach ~~our~~with ~~tax~~the power ~~returns~~of ~~resulting~~substitution, for him in ~~adjustments~~any ~~could~~and ~~cause the~~all ~~IRS~~capacities, to ~~audit~~sign ~~members’~~any ~~tax~~amendments in ~~returns~~this Annual Report on Form 10-K, ~~which~~and ~~could~~to ~~result~~file the same, with exhibits thereto and other documents in ~~additional~~connections ~~tax~~therewith, with the Securities and ~~liability~~Exchange Commission, hereby ratifying and conforming all that said attorney-in-fact, or his substitutes, may do or cause to ~~members~~be done by virtue of hereof.

~~The IRS may audit our tax returns and may disagree~~Pursuant ~~with~~to the ~~tax~~requirements ~~positions~~of ~~that we take on our returns. The rules regarding partnership allocations are complex. The IRS could successfully challenge~~ the ~~allocations~~Securities ~~set~~Exchange ~~forth~~Act ~~in our Member Control Agreement and reallocate items~~ of ~~income~~1934, ~~gains,~~this ~~losses,~~report ~~deductions~~has ~~or credits~~been insigned abelow ~~manner that adversely affects our members. If challenged~~ by the ~~IRS,~~following ~~the~~persons ~~courts may not sustain the position we take~~ on ~~our~~behalf ~~tax returns. An audit~~ of ~~our tax~~the ~~returns~~registrant ~~could~~and ~~lead~~in ~~to separate audits of members’ personal tax returns,~~the ~~especially~~capacities ifand ~~adjustments are required. This could result in adjustments~~ on ~~members’~~the ~~personal~~dates ~~tax returns and in additional tax liabilities, penalties and interest~~indicated.

Risks Related to Our Limited Liability Company Structure and Relationships with Affiliates

Date: December 31, 2009	/s/ Anthony Hicks

	Anthony Hicks
	Chief Executive Officer
	(Principal Executive Officer) Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

Date: December 31, 2009	/s/ Gary Thompson

	Gary Thompson, Chairman of the Board and Governor

Date: December 31, 2009	/s/ Hans Ronnevik

	Hans Ronnevik, Treasurer and Governor

Date: December 31, 2009	/s/ Philip Deal

	Philip Deal, Governor

~~Our Member Control Agreement contains restrictions on a member’s right to participate in the management of our affairs.~~41

Date: December 31, 2009	/s/ Gerald Rust

	Gerald Rust, Governor

Date: December 31, 2009	/s/ Ron Tobkin

	Ron Tobkin, Governor

Date: December 31, 2009	/s/ Jonathan Piekarski

	Jonathan Piekarski, Governor

~~Under~~Date: ~~our~~December ~~Member Control Agreement~~31, it2009 ~~may~~/s/ beJohn ~~difficult~~Anderson ~~for members~~John ~~to enforce claims against an officer or governor~~Anderson, ~~and, as a result, they may not be able to recover any losses they may suffer through their ownership of the Units arising from acts of our officers and governors that harm our business.~~Governor

1742

~~Table~~Otter Tail ofAg ~~Contents~~Enterprises, LLC

~~Our officers and governors must discharge their duties~~Financial with reasonable care, in good faith and in our best interests. Despite this obligation, Minnesota law and our Member Control Agreement limit an officer’s or governor’s liability to us and our members. Officers or governors are generally not liable to us or our members for monetary damages for breaches of fiduciary duty, unless it involves (i) a willful failure to deal fairly with us or our members in connection with a matter in which the governor or officer has a material conflict of interest; (ii) a violation of criminal law, unless the governor or officer had reasonable cause to believe that his, her or its conduct was lawful or no reasonable cause to believe that the conduct was unlawful; (iii) a transaction from which the governor or officer derived an improper personal profit; or (iv) willful misconduct. These limitations could limit members’ rights to enforce claims against our officers or governors. In addition, our Member Control Agreement contains an indemnification provision which requires us to indemnify any governor or manager to the extent required or permitted by Minnesota Statutes, Section 322B.699, as amended from time to time, or as required or permitted by other provisions of law.Statements

~~There are conflicts of interest in our business~~September 30, ~~because we~~ ~~have~~2009 ~~relationships with~~ and ~~may enter into additional transactions with our officers, governors, and affiliates, which could impair an interested officer’s or governor’s ability to act in our best interest.~~2008

Conflicts of interest may exist in our structure and operation. One of our governors, Lee Rogness, is an owner of Interstate Inc. and Store Manager of RDO Fergus Falls, agricultural equipment dealerships which have supplied equipment to us. Another one of our governors, Dr. Gregory M. Smith, is a physician at Fergus Falls Medical Group, which provides some healthcare services to our employees. Jerry Larson, our Board Chairman, has ownership in Chippewa Valley Ethanol Company (“CVEC”), a co-operative in Benson, Minnesota, through which he is obliged to deliver corn as part of his patronage. In return he is paid for the corn and receives a dividend based upon his holding if such a return is authorized by the board of CVEC. Mark Ellison serves as chairman of the board of Ag Country, a financial group making loans to agriculture of which a portion is in ethanol plants. Our governors may have other business interests, which could compete with us for the time and resources of our governors. Our officers, governors and affiliates may sell corn to us and purchase distillers grains on terms similar to those contained in contracts entered into by us with unaffiliated third parties. We may also enter into other transactions with officers, governors and affiliates. Conflicts of interest could have adverse consequences for our business or members because our governors and officers may place their personal interest and those of their affiliates ahead of our interests. We have a conflict of interest policy with our officers and governors, but we cannot assure that conflicts of interest will not harm our business or reduce the value of members’ Units.CONTENTS

ITEM 2. PROPERTIES.

		Page
Report of Independent Registered Public Accounting Firm		F-2

Financial Statements

Balance Sheets		F-3

Statements of Operations		F-4

Statements of Changes in Members’ Equity		F-5

Statements of Cash Flows		F-6

Notes to Financial Statements		F-7-17

~~We constructed the Plant on a 116~~F-acre site two miles northwest of Fergus Falls, Minnesota. On October 25, 2006, we purchased a majority of the site from Jonathan and Brenda Piekarski. Mr. Piekarski is a governor on our Board. The purchase price of the site was $700,000, which is approximately $6,100 per acre. We believe that certain major requirements of a successful ethanol plant site location are met with this site:1

~~· Adequate~~REPORT ~~Corn Supply. We~~OF ~~believe~~INDEPENDENT ~~that~~REGISTERED ~~the~~PUBLIC ~~Fergus~~ACCOUNTING Falls area has sufficient grain corn production to meet our anticipated needs. We believe that the Fergus Falls area has sufficient grain corn production to meet our anticipated needs. We contracted the services of PRX in 2005 to do a study on the corn supply in Fergus Falls and the surrounding area. PRX reported sufficient corn supply to operate the Plant.FIRM

~~· Road~~To ~~Access.~~ the ~~The~~Board ~~site~~of isDirectors ~~adjacent to U.S. Interstate 94~~ and ~~State Highway 210.~~

~~· Rail Access.~~ Members ~~The site is on the main line~~ of ~~the~~Otter ~~OTVR,~~Tail ~~which~~Ag ~~connects to the Burlington Northern Santa Fe mainline railroad~~Enterprises, ~~which is expected to facilitate the shipping of ethanol and DDGS to both the east and west coast markets.~~LLC

~~We are also leasing our distillers grain processing~~Fergus ~~facility from the County pursuant to a Solid Waste Facility Lease Agreement. We began payments under the lease on February 25~~Falls, 2008 and we will continue to make payments until November 1, 2019. The amount of total payments under the lease is equal to the aggregate principal amount and interest on the County’s $20,000,000 Subordinate Exempt Facility Revenue Bonds and $6,010,000 General Obligation Bonds. We hold restricted cash as part of the capital lease financing, at September 30, 2008, the total of these accounts was approximately $640,000 of capitalized interest reserve and approximately $2,600,000 of debt reserve fund. Pursuant to a cross-default provision in our capital lease with Otter Tail county, if we fail to comply with covenants under our Master Loan Agreement in the future and do not receive a waiver from Agstar, the resulting default would entitle the County to declare the outstanding principal amounts due and owing.Minnesota

~~All~~We have ofaudited ~~our~~the ~~tangible~~accompanying ~~and~~balance ~~intangible~~sheets ~~property,~~of ~~real~~Otter ~~and~~Tail ~~personal~~Ag Enterprises, ~~serves~~LLC as of ~~collateral~~September ~~for~~30, ~~our~~2009 ~~senior~~ and ~~subordinated~~2008, ~~debt~~and ~~agreements~~the ~~with~~related ~~our~~statements ~~lenders. Although~~of weoperations, ~~received a waiver from~~members’ ~~each~~equity, ofand ~~our~~cash ~~lenders~~flows for athe ~~default~~fiscal ~~under~~years ~~our~~then ~~Master~~ended ~~Loan Agreement as of~~ September 30, ~~2008,~~2009 ~~if we commit a future default~~ and 2008. doOtter ~~not~~Tail ~~receive~~Ag ~~waivers~~Enterprises, ~~our~~ ~~lenders~~LLC’s ~~would~~management beis ~~entitled~~responsible tofor ~~accelerate our outstanding principal balances~~these ~~and~~financial ~~seize~~statements. ~~the~~Our ~~collateral~~responsibility ifis ~~we have insufficient funds~~ to ~~satisfy~~express ~~those obligations. Our~~an ~~lending~~opinion ~~agreements~~on ~~are discussed in more~~these ~~detail~~financial instatements ~~“Item~~based 7.on ~~Management’s Discussion And Analysis” and Note 8 of~~ our ~~financial~~ ~~statements~~audits.

~~ITEM~~We conducted 3our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). ~~LEGAL~~Those ~~PROCEEDINGS~~standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~From~~In ~~time~~our opinion, the financial statements referred to ~~time~~above ~~and~~present fairly, in all material respects, the ~~ordinary~~financial ~~course~~position of ~~our~~Otter Tail Ag Enterprises, LLC as ~~business~~of September 30, we2009 ~~may~~and be2008, ~~named~~and asthe aresults ~~defendant~~of inits ~~legal~~operations ~~proceedings~~and ~~related~~its tocash ~~various~~flows ~~issues,~~for ~~including~~the ~~worker’s~~years ~~compensation~~then ~~claims,~~ended ~~tort~~September ~~claims~~30, 2009 and ~~contractual~~ ~~disputes. In~~2008, ~~the~~in ~~ordinary~~conformity with ~~course~~accounting ofprinciples ~~our~~generally ~~business,~~accepted wein ~~may~~the ~~also~~United States of America.

18The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred an accumulated deficit of approximately $30 million as of September 30, 2009. Based on the Company’s operating plan, its existing working capital is not sufficient to meet the cash requirements to fund Otter Tail Ag Enterprises, LLC’s planned operating expenses, capital expenditures, and working capital requirements through September 30, 2010 without additional sources of cash and/or the deferral, reduction or elimination of significant planned expenditures. Also, on October 30, 2009, the Company filed for protection under Chapter 11 of the Bankrupcy Code. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

~~Table~~/s/ Boulay, ofHeutmaker, ~~Contents~~Zibell & Co. P.L.L.P

~~commence~~Minneapolis, suit as a plaintiff. We are currently involved in no such legal proceedings and are not aware of any potential claims that could result in the commencement of legal proceedings. We carry insurance that provide protection against certain types of claims.Minnesota

~~ITEM~~December 31, ~~4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.~~2009

~~We did not submit any matter to a vote of our unit holders through the solicitation of proxies or otherwise during the fourth quarter of the year ended September 30, 2008.~~F-2

~~PART II~~Otter Tail Ag Enterprises, LLC

~~ITEM~~Balance ~~5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNIT HOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES.~~Sheets

Market Information

	September 30,			September 30,
	2009			2008
ASSETS

Current Assets
Cash and equivalents	$	4,058,000		$	1,138,768
Restricted cash		2,790,971			1,417,490
Accounts receivable		2,829,033			2,657,721
Inventory		3,827,702			5,761,323
Prepaid expenses and other		400,902			366,322
Total current assets		13,906,608			11,341,624

Property and Equipment
Land and land improvements		4,388,517			4,388,517
Buildings		941,836			941,836
Office equipment		141,203			141,203
Plant and process equipment		96,499,794			108,963,404
		101,971,350			114,434,960
Less accumulated depreciation		(10,724,936	)		(3,678,591	)
Net property and equipment		91,246,414			110,756,369

Other Assets
Debt service reserve		—			2,638,895
Debt issuance costs, net of amortization		—			1,556,272
Total other assets		—			4,195,167

Total Assets	$	105,153,022		$	126,293,160

LIABILITIES AND MEMBERS’ EQUITY

Current Liabilities
Operating line of credit	$	6,000,000		$	4,034,349
Accounts payable		646,809			702,661
Accrued liabilities		182,086			133,888
Construction payable		—			20,046
Construction payable - related party		254,564			255,500
Accrued interest		2,976,949			718,022
Accrued purchase commitments		—			3,600,000
Current maturities of long-term debt		80,113,970			3,014,310
Total current liabilities		90,174,378			12,478,776

Long-term debt, net of current maturities		—			77,323,865

Commitments and Contingencies

Members’ Equity, 23,944,000 units authorized and outstanding
Members’ equity		45,237,798			45,235,548
Accumulated deficit		(30,259,154	)		(8,745,029	)
Total Members’ Equity		14,978,644			36,490,519
Total Liabilities and Members’ Equity	$	105,153,022		$	126,293,160

~~There~~Notes ~~is no established trading market for our~~to ~~membership~~Financial ~~Units. To~~Statements ~~maintain~~are ~~our partnership tax status, members may not trade their membership Units on~~ an ~~established~~ ~~securities~~integral ~~market~~part or readily trade the membership Units on a secondary market (or the substantial equivalent thereof). All transfers are subject to a determination that the transfer will not cause us to be deemed a publicly traded partnership, and to all applicable securities law restrictions. We have engaged AgStockTrade.com to create a qualified matching service in order to facilitate trading of ~~our~~this ~~Units~~Statement. ~~Since our Units were cleared for trading on AgStockTrade.com on July 1, 2008, there have been no trades of our Units.~~

~~We have no formal equity incentive plan for our~~Otter ~~Executives~~Tail orAg ~~employees.~~Enterprises, LLC

~~Unit~~Statements ~~Holders~~of Operations

As of September 30, 2008, there were 966 holders of our Class A Units determined by an examination of our Unit transfer book. There is no other class of membership units issued or outstanding.

	Year Ended			Year Ended
	September 30,			September 30,
	2009			2008

Revenues	$	95,981,559		$	70,099,287

Cost of sales		96,688,753			68,411,568

Impairment of plant and process equipment		12,500,000			—

Lower of cost or market adjustment		—			4,632,000

Gross Loss		(13,207,194	)		(2,944,281	)

Professional fees		815,595			721,418
General and administrative		1,438,798			986,648
Total operating expenses		2,254,393			1,708,066

Operating Loss		(15,461,587	)		(4,652,347	)

Other income (expense)
Loss on derivatives		—			(1,342,712	)
Interest expense		(4,583,257	)		(2,888,102	)
Impairment of financing costs		(1,496,476	)		—
Interest income		27,195			229,086
Total other expense, net		(6,052,538	)		(4,001,728	)

Net Loss	$	(21,514,125	)	$	(8,654,075	)

Weighted Average Units
Outstanding – Basic and Diluted		23,936,250			23,927,872

Net Loss Per Unit – Basic and Diluted	$	(0.90	)	$	(0.36	)

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

For the fiscal year ended September 30, 2008, we did not make any distributions to members. For the fiscal year ended September 30, 2007, we made distributions of $5,568 to members. Distributions are payable at the discretion of our Board, subject to the provisions of the Minnesota Limited Liability Company Act and our Member Control Agreement. In addition, our senior and subordinated longF-term debt is subject to various financial and non-financial covenants that restrict our ability to declare distributions. For example, we are prohibited from making distributions if we are in default under our Master Loan Agreement with Agstar. We were in default under this agreement as of September 30, 2008 but have received a waiver from Agstar and our other lenders. If we experience an event of default in the future, we may be unable to obtain waivers and would be restricted from making distributions for so long as the default continued. Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation” and Note 8 of our financial statements on this Form 10-K for more information on such restrictions and such debt agreements.4

~~Securities~~Otter Tail ~~Authorized~~Ag ~~for~~Enterprises, ~~Issuance under Equity Compensation Plans~~LLC

~~The~~Statements ~~following table shows our securities to be issued pursuant to equity compensation agreements with our officers, as~~ of ~~September 30, 2008. The~~Changes securities were issued pursuant to employment agreements for our chief executive officer, chief financial officer, and plant manager for the fiscal year ended September 30, 2008. Under the terms of the agreements, each executive received an option to purchase our Units at a later date as an incentive to increase the value of the Company. Beginning January 1, 2009, our chief executive officer becomes eligible to purchase our Units at a per-Unit cost of $2.00, with the number of eligible Units determined according to the return on investment schedule specified in ~~his Incentive Goals.~~ Members’ Our chief financial officer holds an option to purchase our Units at a per-Unit cost of $2.00 for up to 5,000 Units if the Sarbanes-Oxley reporting compliance and lender reporting compliance targets in the CFO incentive goals portion of the employment agreement are both met, beginning January 1, 2008. Our plant manager holds an option to purchase our Units at a per-Unit cost of $2.00 for up to 5,000 Units if certain Plant safety and efficiency goals specified in his Incentive Goals are met, beginning December 1, 2008. As disclosed in the footnote to the table, the securities were cancelled pursuant to the termination of employment of our former chief executive officer and plant manager, effective October 31, 2008, and transition of our chief financial officer to chief executive officer and chief financial officer, effective December 1, 2008.Equity

Balance - September 30, 2007	$	45,124,125

Unit based compensation		14,469

Equity exchanged for land easement 3,000 @ $2 per unit		6,000

Net loss		(8,654,075	)

Balance - September 30, 2008	$	36,490,519

Unit based compensation		2,250

Net loss		(21,514,125	)

Balance - September 30, 2009	$	14,978,644

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

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted- average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)	(c)
Equity compensation plans approved by security holders	—		—	—
Equity compensation plans not approved by security holders	20,000	(1)	2.00	—
Total	20,000		2.00	—

F-5

~~(1) Subsequent to the fiscal year ended September 30,~~OTTER ~~2008,~~TAIL ~~all~~AG 20ENTERPRISES,~~000~~ of these options have been cancelled pursuant to the termination of employment of our former chief executive officer and plant manager, effective October 31, 2008, and transition of our chief financial officer to chief executive officer and chief financial officer, effective December 1, 2008.LLC

~~Purchases~~Statements of ~~Equity Securities by the Company~~Cash Flows

None.

	Year Ended			Year Ended
	September 30,			September 30,
	2009			2008

Cash Flows from Operating Activities
Net loss	$	(21,514,125	)	$	(8,654,075	)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation		7,046,345			3,669,433
Amortization of debt financing costs		59,796			105,744
Impairment of debt financing costs		1,496,476			—
Impairment of plant and process equipment		12,500,000			—
Lower of cost or market adjustment		—			4,632,000
Unit based compensation		2,250			14,469
Unrealized loss on derivative investments		—			77,174
Change in assets and liabilities:
Accounts receivable		(171,312	)		(2,657,721	)
Interest receivable		—			15,975
Inventory		1,933,621			(6,793,323	)
Prepaid expenses and other		(34,580	)		(348,149	)
Commodity derivatives		—			(2,191	)
Accounts payable		(76,834	)		684,930
Accrued interest and other		2,307,125			112,474
Accrued purchase commitments		(3,600,000	)		—
Net cash used in operating activities		(51,238	)		(9,143,260	)

Cash Flows from Investing Activities
Capital expenditures		(36,390	)		—
Payments for construction in process		—			(46,540,912	)
Net cash used in investing activities		(36,390	)		(46,540,912	)

Cash Flows from Financing Activities
Payments for long-term debt		(224,205	)		(30,212	)
Change in restricted cash		1,265,414			722,813
Payments for debt issuance costs		—			(46,669	)
Proceeds from line of credit		1,965,651			4,034,348
Proceeds from construction loan		—			47,531,343
Net cash provided by financing activities		3,006,860			52,211,623

Net Increase (Decrease) in Cash and Equivalents		2,919,232			(3,472,549	)

Cash and Equivalents – Beginning of Period		1,138,768			4,611,317

Cash and Equivalents – End of Period	$	4,058,000		$	1,138,768

Supplemental Disclosure of Cash Flow Information
Interest paid, net of capitalized of $0 and $2,595,717 at September 30, 2009 and 2008, respectively	$	2,324,330		$	2,453,842

Supplemental Disclosure of Noncash Operating, Investing and Financing Activities
Units issued for line of land and construction	$	—		$	6,000
Construction costs included in accounts payable	$	254,564		$	275,546
Financing costs paid with debt proceeds	$	—		$	17,296

~~RECENT~~ Notes to ~~SALES~~Financial OFStatements ~~UNREGISTERED SECURITIES~~are an integral part of this Statement.

In connection with his employment as chief financial officer in 2007, our chief executive officer/chief financial officer was granted options to purchase up to 5,000 of our Units at a cost of $2.00 per Unit with vesting beginning January 1, 2008. He was also granted 5,000 Restricted Units vesting at 20% beginning on January 1, 2008. As of December 1, 2008, in connection with his employment agreement as chief executive officer, the option to purchase the 5,000 Units at $2.00 per Unit were cancelled, and 7,000 Restricted Units with vesting beginning January 1, 2009 were granted so long as he remains an executive being employed with the Company. The terms of the vesting of the January 1, 2008 grant of 5,000 Restricted Units were also modified in connection with his employment agreement as chief executive officer so that 3,000 units will have vested by January 1, 2009, 1,000 will vest on December 31, 2009 and 1,000 on December 31, 2010 as long as he remains an executive of the Company. The grants were exempt pursuant to Regulation E, Rule 701, because they were each 1) an offer 2) pursuant to a written compensation contract 3) issued to employees and 4) the aggregate sales price is less than $1,000,000 when combined within a 12F-~~month period with any other of our Rule 701 offerings. The grants do not integrate with prior or subsequent offerings since they are made pursuant to Rule 701.~~6

~~ITEM~~OTTER TAIL 6.AG ~~SELECTED~~ENTERPRISES, ~~FINANCIAL DATA.~~LLC

~~The~~NOTES ~~following~~TO ~~tables~~FINANCIAL set forth selected consolidated financial data of the Company for the periods indicated. The audited financial statements for fiscal 2008 and 2007 are included in Item 8 of this Annual Report on Form 10-K have been audited by our independent auditors, Boulay, Heutmaker, Zibell & Co., P.L.L.P.STATEMENTS

	2006			2007			2008
Statements of Operations Data:
Revenues	$	—		$	—		$	70,099,287
Cost of Sales	—			—			68,503,693
Lower of Cost or Market Adjustment	—			—			4,632,000
Operating Expenses	702,132			1,274,153			1,615,941
Operating Loss	(702,132		)	(1,274,153		)	(4,652,347		)
Other Income, net	89,938			1,813,462			(4,001,728		)
Net Income (Loss)	(612,194		)	539,309			(8,654,075		)
Weighted Average Units Outstanding - Diluted	2,400,000			22,085,744			23,927,872
Weighted Average Units Outstanding - Basic	2,400,000			22,092,309			23,927,872
Net Income (Loss) Per Unit - Diluted	(0.26		)	0.02			(0.36		)
Net Income (Loss) Per Unit - Basic	(0.26		)	0.02			(0.36		)

September 30, 2009 and 2008

20NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

~~Table~~Nature of ~~Contents~~ Business

~~Our~~Otter Tail ~~selected~~Ag ~~historical~~Enterprises, ~~balance~~LLC, ~~sheet~~a ~~information~~Minnesota aslimited liability Company (the ‘Company”) ofwas ~~September 30,~~organized ~~2008,~~with ~~September 30,~~the ~~2007~~intention of developing, owning and ~~September 30~~operating a 55 million gallon per year capacity dry-mill ethanol plant near Fergus Falls, ~~2006~~Minnesota. The ~~are~~Company ~~derived~~was ~~from~~in ~~our~~the ~~audited~~development ~~balance~~stage ~~sheets~~until March 2008, when the Company commenced operations.

	September 30, 2006		September 30, 2007		September 30, 2008
Balance Sheet Data:
Cash and Equivalents	$	1,195,049	$	4,611,317	$	1,920,972
Total Assets	$	2,012,176	$	89,952,726	$	126,293,160
Total Current Liabilities	$	237,274	$	12,192,239	$	12,478,776
Long Term Debt, net of current maturities	$	—	$	32,636,362	$	77,323,865

Accounting Estimates

~~ITEM~~Management uses 7estimates and assumptions in preparing these consolidated financial statements in accordance with generally accepted accounting principles in the United States of America. ~~MANAGEMENT’S~~Those ~~DISCUSSION~~estimates ~~AND~~and ~~ANALYSIS~~assumptions OFaffect ~~FINANCIAL~~the ~~CONDITION~~reported amounts ~~AND~~of ~~RESULTS~~assets OFand ~~OPERATION~~liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for the following significant matters, among others: economic lives of property, plant, and equipment; valuation of inventory, and assumptions used in the analysis of long-lived assets impairment. Actual results may differ from previously estimated amounts, and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions, and the effects of any such revisions are reflected in the period in which the revision is made.

~~This Item includes statements that are “forward-looking statements”~~Revenue within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding our expectations, intentions or strategies regarding the future. All statements, other than statements of historical facts, included in this Item regarding our financial position, business strategy and other plans and objectives for future operations are forward-looking statements. Although we believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations reflected in such forward-looking statements will prove to have been correct or that we will take any actions that may presently be planned. Certain important factors that could cause actual results to differ materially from our expectations are disclosed in Item 1A, “Risk Factors.” All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by such factors.Recognition

21The Company sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer (the marketing companies as further discussed in Note 8) has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. The Company’s products are sold FOB shipping point.

~~Table~~In accordance with the Company’s agreements for the marketing and sale of ~~Contents~~ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price at the time payment is remitted to the Company. Marketing fees remitted by the Company are presented net in revenue. Marketing fees were approximately $531,000 and $262,000 for the years ended September 30, 2009 and 2008, respectively.

~~Critical~~Cash ~~Accounting Estimates~~and Equivalents

~~Management uses estimates and assumptions in~~The ~~preparing~~Company ~~our~~considers ~~financial~~all ~~statements~~highly inliquid ~~accordance~~debt instruments with ~~generally~~a ~~accepted accounting~~maturity ~~principles. These estimates and assumptions affect the reported amounts~~ of ~~assets and liabilities, the disclosure of contingent assets and~~three ~~liabilities,~~months ~~and~~or ~~the~~less ~~reported revenues and expenses. Of the significant accounting policies described in the notes~~ to ~~our~~be ~~financial~~cash ~~statements,~~and ~~we believe that the following are the most critical~~equivalents.

~~We account for derivative instruments and hedging~~The ~~activities~~Company inmaintains ~~accordance~~its ~~with~~accounts ~~Statement~~primarily ofat ~~Financial~~two ~~Accounting Standards (“SFAS”)~~financial Noinstitutions. ~~133,~~ At ~~Accounting~~times ~~for~~throughout ~~Derivative Instruments~~the ~~and Hedging Activities~~year, ~~as amended (“SFAS No. 133”). SFAS No. 133 requires a company to evaluate its contracts to determine whether~~ the ~~contracts~~Company’s ~~are~~cash ~~derivatives. Certain contracts that literally meet~~and ~~the~~equivalents ~~definition~~balances ~~of a derivative~~ may beexceed ~~exempted~~amounts ~~from~~insured ~~SFAS~~by ~~No. 133 as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for~~ the ~~purchase~~Federal orDeposit ~~sale of something other than a financial instrument~~Insurance or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal are documented as normal and exempted from accounting and reporting requirements of SFAS No. 133.Corporation

~~In order to reduce the risk caused by market~~Accounts fluctuations of corn, ethanol and interest rates, we enter into option, futures and swap contracts. These contracts are used to fix the purchase price of our anticipated requirements of corn in production activities and the selling price of our ethanol product and limit the effect of increases in interest rates. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter markets. The fair value of the derivatives is continually subject to change due to the changing market conditions. We do not typically enter into derivative instruments other than for hedging purposes. On the date the derivative instrument is entered into, we will designate the derivative as a hedge. Changes in the fair value of a derivative instrument that is designated and meets all of the required criteria for a cash flow or fair value hedge is recorded in accumulated other comprehensive income and reclassified into earnings as the hedged items affect earnings. Changes in fair value of a derivative instrument that is not designated and accounted for as a cash flow or fair value hedge is recorded in current period earnings. Although certain derivative instruments may not be designated and accounted for as a cash flow or fair value hedge, they are effective economic hedges of specific risks.Receivable

~~The amount of the loss was determined by applying a~~Credit ~~methodology~~terms ~~similar~~are extended to ~~that~~customers ~~used~~ in the ~~impairment~~normal ~~evaluation~~course ~~with~~of ~~respect to inventory~~business. The Company ~~Given~~performs ~~the~~ongoing ~~uncertainty~~credit evaluations of ~~future~~its ~~ethanol~~customers’ ~~and corn prices this loss~~financial ~~may~~condition ~~not~~and, ~~be recovered~~generally, ~~and~~requires ~~future~~no ~~losses on outstanding purchase commitments could be recorded in future periods~~collateral.

~~Inventory~~Accounts receivable are recorded at their estimated net realizable value. Accounts are considered past due if payment is not made on a timely basis in accordance with the Company’s credit terms. Accounts considered uncollectible are written off. The Company’s estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any. At September 30, 2009 and 2008, the Company was of the belief that such amounts would be collectible and thus an allowance was not considered necessary. It is at least possible this estimate will change in the future.

~~Inventory~~Restricted ~~consists~~Cash ~~of raw materials, work in process,~~ and ~~finished goods. The work in process inventory is based on certain~~Debt ~~assumptions.~~Service The assumptions used in calculating work in process are the quantities in the fermenter and beer well tanks, the lower of cost or market price used to value corn at the end of the month, the effective yield, and the amount of dried distillers grains assumed to be in the tanks. These assumptions could change in the near term.Reserve

~~Inventory is subject to~~The ~~lower~~Company ofmaintains ~~cost~~cash oraccounts ~~market~~set ~~valuation~~aside ~~assumptions. During~~for ~~the~~requirements ~~fiscal~~as ~~year~~part ~~ended September 30, 2008, we recorded an inventory valuation impairment~~ of ~~approximately $1,032,000 attributable~~the ~~primarily~~capital tolease ~~decreases~~financing inagreement. ~~market~~At ~~prices~~September of30, ~~corn~~2009 and ~~ethanol.~~September ~~The~~30, ~~inventory~~2008, ~~valuation~~the ~~impairment~~total ~~was recorded in lower~~ of ~~cost~~these oraccounts ~~market~~was ~~adjustments~~approximately on$2,800,000 ~~the statement~~and ~~of operations~~$4,100,000, respectively.

The Company had entered into forward corn purchase contracts and corn purchase agreements under which it is required to take delivery at the contract price. Currently, some of these contract prices are above current market prices for corn. Given the declining ethanol price, upon taking delivery under these contracts, the Company would incur a loss. Accordingly, the Company recorded a loss on these purchase commitments aggregating to $3,600,000 for the fiscal year ended September 30, 2008. The amount of the loss was determined by applying a methodology similar to that used in the impairment evaluation with respect to inventory. Given the uncertainty of future ethanol and corn prices this loss may not be recovered, and future losses on outstanding purchase commitments could be recorded in future periods.F-7

22OTTER TAIL AG ENTERPRISES, LLC

~~Table~~NOTES TO ofFINANCIAL ~~Contents~~STATEMENTS

~~Commitments~~September 30, 2009 and ~~Contingencies~~2008

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

~~Long~~Inventories consist of raw materials; work in process and finished goods. Corn is the primary raw material and along with other raw materials, is stated at the lower of average cost or market. Finished goods consist of ethanol, dried distiller grains and wet distiller grains, and are stated at the lower of cost or market, on a first-~~Lived~~in, ~~Assets~~first-out basis.

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

~~Long-lived assets, including property, plant,~~Property ~~equipment~~ and ~~investments,~~equipment ~~are~~is ~~evaluated~~stated ~~for~~at ~~impairment~~cost. Depreciation onis ~~the~~provided ~~basis~~over ofan ~~undiscounted~~estimated ~~cash~~useful ~~flows~~life ~~whenever~~by ~~events~~use orof ~~changes in circumstances indicate that~~ the ~~carrying~~straight ~~amount~~line ofdepreciation ~~an asset may not be recoverable~~method. ~~An impaired asset~~Plant ismaintenance ~~written~~and ~~down~~repairs toare ~~its~~expensed ~~estimated~~as ~~fair~~incurred; ~~market~~major ~~value~~improvements ~~based on the best~~and ~~information~~betterments ~~available~~are capitalized. The ~~Considerable~~Company ~~management~~initiated ~~judgment~~Plant ~~is necessary to~~operations ~~estimate~~in ~~future~~March ~~cash~~2008 ~~flows~~ and ~~may~~began ~~differ~~depreciating ~~from~~the ~~actual~~plant ~~cash flows. Management believes no impairment exists~~ at ~~September 30, 2008 based on their assessment of~~that ~~the~~time. Depreciation ~~risks~~is ~~and~~computed ~~rewards~~using ~~related to~~ the ~~ownership~~straight-line ofmethod ~~these assets and the expected~~over ~~cash flows generated from~~ the ~~operation~~following ofestimated ~~the~~useful ~~Plant. Future impairment analysis will depend on the Company generating positive cash flow from operations of the plant.~~lives:

Results of Operations

Land improvements		15-20
Buildings		10-40
Office equipment		5
Plant and process equipment		10-20

~~As of September 30, 2008, we have begun~~Capitalized producing and selling fuel grade ethanol. We expect to be able to process approximately 20,000,000 bushels of corn into approximately 55,000,000 gallons of ethanol each year. In addition, we sell distillers grains, a principal co-product of the ethanol production process, which we will sell as DMWG and DDGS.Interest

~~Revenues~~The Company’s policy is to capitalize interest cost incurred on debt during the construction of major projects exceeding one year. During fiscal year 2008 approximately $2,595,700 of incurred interest cost was capitalized to property and equipment. No interest was capitalized to property and equipment during fiscal year 2009.

~~We had no sales or revenue for the fiscal year ended~~Long-lived ~~September 30, 2007. For the year ended September 30, 2008, we had revenues of approximately $70,100,000.~~Assets

~~Cost~~The Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of ~~Sales~~the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life.

WeRecoverability is ~~had~~assessed nobased ~~costs~~on the carrying amount of ~~sales~~the ~~for~~asset and its fair value which is generally determined based on the ~~fiscal~~sum ~~year~~of ~~ended~~the ~~September 30~~undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as ~~2007~~specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. For the year ended September 30, ~~2008~~2009, weimpairment ~~had~~of financing costs ofwas ~~sales~~recognized oftotaling approximately $681,~~500~~496,000. On ~~and~~June a30, ~~lower~~2009, impairment of ~~cost~~plant orand process ~~market~~equipment ~~adjustment~~costs ~~of approximately~~was recognized totaling $412,~~600~~500,000. An analysis was reperformed as of September 30, 2009 and no further impairment was deemed necessary. No impairment was recognized on long-lived assets for the year ended September 30, 2008.

~~Operating Expenses~~Unit-Based Compensation

~~Our operating expenses were approximately $1,600,000~~The ~~and~~Company ~~$1,300,000~~recognizes ~~for~~compensation ~~the~~expense ~~fiscal years ended September 30, 2008 and 2007, respectively. Our operating expenses increased by approximately $350,000 or 27 percent~~ for ~~fiscal~~employee ~~year~~stock ~~2008~~options ~~over 2007. These~~based ~~increases~~on ~~were due primarily~~the toestimated ~~costs~~grant ~~associated~~date ~~with~~fair ~~starting~~value ~~construction~~using onthe ~~our~~Black-Scholes ~~Plant,~~option-pricing ~~and professional and consulting fees~~model. ~~In fiscal year~~ ~~2008,~~The ~~our~~Company ~~significant~~accounts ~~operating~~for ~~expenses~~unit ~~were: 1)~~based ~~approximately~~instruments ~~$900,000~~granted ~~related~~ to ~~general~~nonemployees ~~and administrative expense~~under ~~and~~the 2)fair ~~approximately~~value ~~$720,000~~method. Unit ~~related~~based toinstruments ~~professional~~usually ~~fees~~are ~~(for~~recorded ~~legal~~at ~~and~~their ~~accounting~~underlying ~~services)~~fair value. In ~~fiscal~~certain ~~year~~instances ~~2007, our~~the ~~significant~~fair ~~operating~~value ~~expenses~~of ~~were: 1) approximately $385,000 related to compensation expenses to~~ the ~~Board~~goods ~~and other consultants; 2) approximately~~or ~~$278,000~~services ~~related~~is toused ~~salaries; 3) approximately $210,000 related~~ to ~~professional fees~~determine ~~(for~~the ~~legal~~value ~~and~~of ~~accounting~~the ~~services);~~equity ~~and~~instrument 4)as ~~approximately~~it ~~$47,000~~is ~~related~~a tobetter ~~office~~measure ~~and~~of ~~insurance~~fair ~~expenses~~value.

~~Other~~Fair ~~Income,~~Value ~~Net~~of Financial Instruments

~~Interest expense was approximately $2,900,000 and $600 for~~The ~~fiscal~~carrying ~~years~~value ~~September 30,~~of ~~2008~~cash and ~~2007~~equivalents, ~~respectively. As~~ ofrestricted ~~September 30~~cash, ~~2008,~~ ~~we had drawn on approximately $39~~receivables,~~000,000~~ ofand payables ~~our~~approximates ~~senior~~their ~~debt~~fair value.

~~Interest~~It ~~income~~is ~~was~~not currently ~~approximately~~practicable to estimate the fair value of the debt financing. Senior debt consisting of a term loan of approximately $~~220~~34,806,000 and a revolving line of credit of $16,~~800~~000,000 ~~for~~that bear a variable interest rate that fluctuates with the ~~fiscal~~market ~~years~~and ~~ended~~therefore ~~September 30,~~approximates ~~2008~~fair value. Subordinate debt consists of New Markets Tax Credit Loan of $19,175,000 and ~~2007~~a County capital lease of $26, ~~respectively~~010,000 that bear a fixed interest rate. Due to the current defaults under the senior and subordinate ~~Interest~~loan ~~income~~agreements ~~increased~~and ~~primarily~~the ~~due~~Company’s bankruptcy proceedings, at the present time, we are unable to ~~interest~~enter ~~earned~~into onreplacement ~~equity~~debt and therefore are unable to ~~raised~~determine ~~from~~a ~~member~~fair ~~investments~~value of the fixed rate subordinate debt.

~~Grant Income~~F-8

~~In April 2005, we received approximately~~OTTER ~~$110,000~~TAIL ~~from~~AG ~~the Agricultural Utilization Research Institute for technical assistance~~ENTERPRISES, ~~business assistance, outreach and development assistance. This agreement was effective from April 22, 2005 through June 22, 2006.~~LLC

23NOTES TO FINANCIAL STATEMENTS

~~Table~~September 30, of2009 ~~Contents~~and 2008

~~We are also the recipient of a Value-Added Producer Grant~~Environmental with the United States Department of Agriculture in the amount of $300,000. The funding period of the grant began on October 1, 2007 and will conclude no later than December 31, 2008. The grant funds have been used only for Plant operation start-up costs, and were recognized in the year ended September 30, 2008.Liabilities

~~Project~~The Company’s ~~Capitalization~~operations are subject to environmental laws and regulations adopted by various governmental entities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health, and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the financial liability, which could result from such events. Environmental liabilities are recorded when the liability is probable and the costs can be reasonably estimated. No liabilities were recorded at September 30, 2009 or 2008.

OnNet ~~October 1,~~Income 2005, we raised $2,400,000 in our seed capital offering and an additional $42,200,000 from the sale of our Units in a Minnesota-only registered offering from February 28, 2006 to October 31, 2006. In addition, on March 28, 2007, we closed on a construction loan agreement with Agstar of $39,000,000, which includes $35,000,000 for construction costs, and a revolving line of credit of up to $4,000,000 (~~which was raised to $6,000,000 in a June 2008 amendment~~Loss)~~. On~~ ~~March 30, 2007, we~~per ~~closed on a loan agreement with NMF of $19,175,000, including a senior loan note of $14,480,500 and subordinated loan note of $4,694,500.~~Unit

OnBasic ~~April 2007,~~net income we(loss) ~~entered~~per ~~into~~unit ais ~~long~~computed ~~term~~by dividing net income by the weighted ~~equipment~~average ~~lease~~number ~~agreement~~of ~~with~~members’ ~~Otter~~units ~~Tail~~outstanding ~~County~~during (the period. Diluted ~~“County”~~net income (loss) inper ~~order~~unit tois computed by dividing ~~finance~~net ~~equipment~~income ~~for~~by the ~~Plant. The lease~~weighted ~~has~~average anumber ~~term~~of ~~from~~members’ ~~May 1,~~units ~~2007~~and ~~through~~members’ ~~November 2019. The~~unit equivalents ~~County~~outstanding ~~financed~~during the ~~purchase~~period. As of ~~equipment~~September 30, 2009, ~~through~~the ~~Subordinate~~Company ~~Exempt~~had ~~Facility~~12,600 ~~Revenue~~unit ~~Bonds~~equivalents ~~Series 2007A~~outstanding ~~totaling~~relating to outstanding unit ~~$20~~options and unvested restricted units. As of September 30,~~000~~ 2008,~~000~~ the Company had 11,375 ~~General~~unit ~~Obligation~~equivalents ~~Tax~~outstanding. ~~Abatement~~At ~~Bonds~~September ~~Series 2007B~~30, ~~totaling~~2009 and 2008 the effects $5these units are excluded from the computation of diluted units outstanding as their effects would be anti-dilutive,~~245,000,~~ ~~and~~due ~~Taxable~~to ~~General~~the ~~Obligation~~Company’s ~~Tax~~net ~~Abatement~~loss ~~Bonds~~for ~~Series 2007C~~the ~~totaling~~years ~~$765~~ended September 30,~~000~~ 2009 and 2008.

~~Trends and Factors that May Affect Future Operating~~Income ~~Results~~Taxes

~~Ethanol~~The Company ~~Supports~~is treated as a partnership for federal and state income tax purposes, and generally does not incur income taxes. Instead its earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal and state income taxes has been included in these financial statements.

~~On December 19, 2007, President Bush signed~~Subsequent into law the Energy Independence and Security Act of 2007, which raises the minimum usage requirement to 13.2 billion gallons of ethanol by 2012 and 15 billion gallons by 2015. The Act also mandates a minimum requirement of 36 billion gallons of renewable fuels by 2022, with cellulosic ethanol accounting for 16 billion gallons of this total. The RFS program should ensure the continued growth of the ethanol market in the near future. The Energy Policy Act also provides a small producer credit allowing qualifying producers to deduct from their federal income taxes 10¢ per gallon for the first 15,000,000 gallons of ethanol produced in a given year. The Volumetric Ethanol Excise Tax Credit provides refiners 4.5¢ per gallon of ethanol blended at 10 percent, which encourages refiners and gasoline blenders to use ethanol. We expect that the RFS and Volumetric Ethanol Excise Tax Credit will increase demand for our ethanol and have a positive effect on our operating results.Events

~~Competition~~The Company ~~and~~has ~~Product~~evaluated ~~Demand~~subsequent events through December 31, 2009, the date which the financial statements were available to be issued.

~~As of December 9, 2008, according to the~~NOTE ~~Renewable Fuels Association, 172 ethanol refineries had a production capacity of a record 10~~2.~~4 billion~~ ~~gallons,~~GOING with existing plants currently increasing capacity to produce an additional 660 million gallons. In addition, 21 refineries were under construction to produce an additional 1.6 billion gallons. We believe that the influx of new ethanol refineries and increase in supply may have a negative effect on our short-term operating results.CONCERN

~~Commodity~~The Company ~~Prices~~incurred net losses of approximately $21,500,000 and $8,700,000 for the years ended September 30, 2009 and 2008 respectively. Based on the Company’s operating plan, its existing working capital is not sufficient to meet the cash requirements to fund the Company’s planned operating expenses, capital expenditures, and working capital requirements for the next year without additional sources of cash and/or the deferral, reduction or elimination of significant planned expenditures.

~~Corn~~These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business.

~~Our~~The Company ~~primary~~has ~~grain~~incurred ~~feedstock~~operating islosses ~~corn. The~~and ~~cost~~negative ofoperating ~~corn~~cash isflows ~~dependent upon factors~~since ~~that~~September ~~are~~2008. The ~~generally~~Company ~~unrelated~~was toin ~~those~~violation ~~affecting~~of ~~the~~certain ~~price~~covenants ofas at ~~ethanol. Corn~~September ~~prices~~2008 ~~generally~~for ~~vary~~which ~~with~~it ~~international and~~received ~~regional~~a ~~grain supplies~~waiver, ~~and~~the ~~can~~Company beremained ~~significantly~~in violation ~~affected~~since bythat ~~weather, planting~~time ~~and~~for ~~carryout~~quarters ~~projections,~~ending ~~government~~December ~~programs~~2008, ~~exports~~March 2009, ~~and other~~June ~~international~~2009 ~~and~~as ~~regional~~well ~~market~~as ~~conditions~~September 2009.

~~Due~~As toof September ~~the~~30, ~~significant~~2009 ~~expansion~~market ofconditions have improved in the ethanol industry. The Company projects that, ~~corn~~if ~~futures~~current ~~rose~~market inconditions prevail ~~fiscal~~it ~~2008~~may ~~overall~~be inpossible ~~response~~for the industry to ~~this~~see ~~new demand,~~periods ~~but~~of ~~lowered~~profitably; however ~~significantly~~numerous inplants ~~the~~that ~~fourth~~have ~~quarter~~been out of ~~fiscal~~production ~~2008. This~~for ~~volatility~~a invariety ~~corn~~of reasons ~~prices~~have iseither ~~likely~~restarted ~~to continue. Factors~~or ~~such~~may asstart ~~USDA~~in ~~estimates of~~the ~~acres~~future. ~~planted,~~This ~~corn~~additional production ~~yield~~could ~~increases~~create ~~per~~an ~~acre,~~oversupply ~~export~~situation ~~demand~~which ~~and~~may ~~domestic~~cause similar poor ~~usage~~market ~~also~~conditions ~~have~~as ~~significant~~previously ~~effects~~recorded. onThe ~~the~~improvement ~~corn~~in present market~~. Significant~~ conditions ~~increases~~was ininsufficient ~~the~~to ~~price~~enable ofthe ~~corn will~~Company ~~have~~to astall ~~significant~~the ~~negative~~foreclosure motion ~~effect~~filed onby ~~future~~the ~~operating~~senior ~~results~~lenders.

~~Natural~~On ~~Gas~~March 20, 2009, the Company entered into a forbearance agreement (the “Forbearance Agreement”) with the Agstar Financial Services, PCA (the “Senior Lender”), which required the Senior Lender to forbear from pursuing certain remedies available to them until April 30, 2009, the end of the forbearance period (the “Forbearance Period”). The terms of the Forbearance Agreement required the Company to pay the current principal due as well as all accrued interest at the end of the Forbearance Period. At that time, if the Company was unable to pay the amounts due as required under the Forbearance Agreement, Senior Lender may (1) declare a default under the loans and (2) consent to remedial action taken by subordinate lenders, and may provide notice of default and/or acceleration. On June 3, 2009, the Company received a notice letter from AgStar stating that the Company is in default of its loan agreement and that the Company is in default under its subordinate lender agreements. Under the terms of the notice letter the Company had to cure all defaults prior to June 15, 2009, or the entire amount due under the agreements would become accelerated. The Company failed to cure the defaults under the notice by June 15, 2009.

The Plant requires a significant and uninterrupted supply of natural gas for its operations. Natural gas prices have historically fluctuated dramatically. Natural gas prices in Minnesota have risen greatly in recent years, rising from an average of $2.98 per 1000 cubic feet in 1999 to $7.70 per thousand cubic feet in 2007 (Industrial Price), according to U.S. Department of Energy. We expect that volatility in the natural gas market will continue, and that significant increases in the price of natural gas would have a significant negative effect on future operating results.F-9

~~Inflation~~OTTER TAIL AG ENTERPRISES, LLC

WeNOTES doTO ~~not~~FINANCIAL ~~consider the impact of inflation to be material to our revenues and income from operations.~~STATEMENTS

24September 30, 2009 and 2008

~~Table~~The Company received notice that the Senior Lender and other secured lenders had filed a foreclosure notice through the court system to retrieve the assets and to appoint a receiver to control and liquidate the business. As a means to protect itself the Company following negotiation with their lenders filed for bankruptcy on October 30, 2009 under the protection of ~~Contents~~Chapter 11 of the bankruptcy code.

~~Liquidity~~The Company plans to utilize the court system to file a reorganization and restructure ~~Capital~~plan ~~Resources~~to meet the needs of the business on a going forward basis. A major component of this plan will be the restructure of its indebtedness as well as to raise a minimum of $10,000,000 of additional equity. The Company’s long-term plan includes evaluating improved technologies to either earn additional revenue or reduce operating costs. There can be no assurance that the Company will be able to obtain any sources of funding on acceptable terms, or at all.

Statement of Cash Flows for the years ended September 30,	2008			2007
Cash flows from (used in) operating activities	$	(9,143,260	)	$	510,770
Cash flows used in investing activities	(46,540,912		)	(65,441,978		)
Cash flows from financing activities	52,993,827			68,347,475

If the Company cannot obtain sufficient additional funding, it will be forced to significantly curtail its operations, or cease operations. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be forced to take any such actions.

~~Cash~~NOTE 3. ~~flows~~INCOME TAXES

~~Operating activities. Net income before depreciation and~~The ~~amortization~~Company ishas adopted a ~~significant~~tax ~~contributor~~year toend ~~cash~~of ~~flows from operating activities~~December 31. The ~~changes~~differences inbetween financial ~~cash~~statement ~~flows~~basis ~~from~~and ~~operating~~tax ~~activities~~basis ~~generally follow~~of ~~the~~assets ~~results~~as of ~~operations~~September 30, 2009 and ~~also~~2008 are ~~affected by changes in working capital. Cash flows used in operating activities in 2008 increased approximately $9,500,000 from the comparable prior period,~~ as ~~a result of~~follows:

· A net loss of approximately $8,700,000, due to operational losses incurred as a result of narrow spreads between corn and ethanol prices and a lower of cost or market adjustment of approximately $4,600,000; and

	2009			2008
Financial statement basis of total assets	$	105,153,022		$	126,293,160

Organization costs expensed for financial reporting purposes		4,226,207			4,546,247

Depreciation		(20,256,218	)		(5,684,885	)

Impairment recorded for financial reporting purposes		12,500,000			-
Taxable income tax basis of total assets	$	101,623,011		$	125,154,522

~~· Inventory purchases of approximately $5,800,000,~~NOTE ~~due to the Plant becoming operational in fiscal 2008~~4. CONCENTRATIONS

~~Investing~~Two customers ~~activities.~~totaled ~~Cash~~approximately ~~flows~~98% ~~used~~and in96% ~~investing~~of ~~activities~~total ~~in fiscal~~revenue ~~2008~~as ~~decreased~~of ~~approximately~~September ~~$18~~30,~~900,000~~ 2009 ~~compared~~and to2008, ~~the~~respectively. As ~~comparable prior~~of ~~period~~September 30, ~~the~~2009 ~~result~~and of2008, ~~lower~~these two ~~construction~~customers inaccounted ~~progress~~for ~~expenditures~~approximately ~~in fiscal~~99% ~~2008~~and as97%, arespectively, ~~result~~ of the Company’s ~~Plant~~outstanding ~~becoming~~accounts ~~operational in 2008~~receivable.

~~Financing activities. Cash flows provided by financing activities~~NOTE in fiscal 2008 decreased approximately $15,400,000 compared to the comparable prior period, primarily the result of member contributions of approximately $42,000,000 being raised in fiscal 2007, partially offset by increased proceeds from our construction loan of approximately $15,400,0005. INVENTORY

~~As of September 30, 2008, we had approximately~~Inventories ~~$1,900,000~~consist ~~in cash and total assets~~ of ~~approximately~~the $126,000,000. As of September 30, 2008, we raised a total of $42,234,134 in equity net of deferred offering costs and distributions. As of September 30, 2008, we had current liabilities of $12,478,776. Since our inception through September 30, 2008, we have an accumulated deficit of $8,745,030. Total members’ equity as of September 30, 2008 was $36,490,519. Since our inception through September 30, 2008, we have received approximately $70,100,000 in revenues.following:

As of the date hereof, we have expended all funds from our equity financings. All of these proceeds were devoted to our construction expenses and general operating expenses. Current and remaining operating expenses will be paid for with the proceeds from our loan agreements and our operating revenues.

	September 30, 2009		September 30, 2008
Raw materials	$	1,896,519	$	2,075,474

Work in progress		1,017,363		1,999,300

Finished goods		520,059		1,294,635

Spare parts

Filing Compare · Otter Tail Ag Enterprises, LLC