Advanced BioEnergy (ABENU) 425 Business combination disclosure

Exhibit 99.2

HEARTLAND GRAIN FUELS, L.P.

Aberdeen, South Dakota

BALANCE SHEETS

September 30, 2006 and 2005

(unaudited)

ASSETS

	September 30, 2006			September 30, 2005
CURRENT ASSETS
Cash	$	2,488,339		$	2,872,308
Receivables
Trade	1,802,909			998,410
Other	293,807			247,178
Inventories	1,088,406			547,325
Supplies	305,969			302,802
Prepaid Expenses	25,189			68,488
Total Current Assets	6,004,619			5,036,511
PROPERTY, PLANT AND EQUIPMENT
Land	96,441			96,441
Buildings	10,050,908			9,950,957
Process Equipment	19,907,988			19,477,423
Office Equipment	268,115			236,073
	30,323,452			29,760,894
Accumulated Depreciation	(18,524,758		)	(16,099,406		)
Undepreciated Cost	11,798,694			13,661,488
Construction in Process	29,668,206			2,023,193
Net Property, Plant and Equipment	41,466,900			15,684,681
OTHER ASSETS
Investment in Cooperatives	602,734			522,123
Critical Replacement Parts	564,691			572,830
Total Other Assets	1,167,425			1,094,953
TOTAL ASSETS	$	48,638,944		$	21,816,145

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LIABILITIES AND PARTNERS’ EQUITY

	September 30, 2006		September 30, 2005
CURRENT LIABILITIES
Current Maturities of Long-Term Debt	$	3,000,000	$	877,220
Payables	2,890,407		1,636,897
Accrued Expenses
Property Taxes	176,899		179,882
Interest	144,669		32,642
Payroll	82,947		69,254
Other	13,651		11,992
Total Current Liabilities	6,308,573		2,807,887
LONG-TERM LIABILITIES
Notes Payable – Net of Current Maturities	18,000,000		4,881,375
PARTNERS’ EQUITY
South Dakota Wheat Growers Association	6,670,537		5,422,924
Heartland Producers, LLC.	6,445,759		5,240,187
Aventine Renewable Energy, Inc.	696,327		566,091
Dakota Fuels, Inc.	113,919		92,613
Current Income	10,403,829		2,805,068
Total Partners’ Equity	24,330,371		14,126,883
TOTAL LIABILITIES AND PARTNERS’ EQUITY	$	48,638,944	$	21,816,145

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HEARTLAND GRAIN FUELS, L.P.

Aberdeen, South Dakota

STATEMENT OF INCOME

Nine-Month Periods Ended September 30, 2006 and 2005

(unaudited)

	2006		2005
Sales
Ethanol	$	35,130,730	$	23,941,198
By-Products	2,870,303		3,532,808
Total Sales	38,001,033		27,474,006
Cost of Sales
Raw Materials	21,645,962		20,501,438
Utilities	733,353		664,150
Repairs & Maintenance	492,297		379,178
Lease	61,359		36,428
Personnel Costs	1,688,608		1,460,728
Depreciation	2,046,579		1,350,000
Interest	929,722		318,110
Insurance	224,359		160,471
Property Taxes	168,659		176,782
Permits and Fees	21,691		11,912
Advertising & Promotion	24,967		25,223
Other	57,426		44,274
Total Cost of Sales	28,094,982		25,128,694
Gross Income on Sales	9,906,051		2,345,312
Other Income
State Incentives	506,292		426,153
CCC Bioenergy Payments	317		—
Interest	115,643		49,757
Other	9,586		18,125
Total Other Income	631,838		494,035
Total Gross Income	10,537,889		2,839,347
General & Administrative Expenses	186,654		115,181
Operating Net Income	10,351,235		2,724,166
Patronage Dividend Income	52,594		80,902
Net Income	$	10,403,829	$	2,805,068

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HEARTLAND GRAIN FUELS, L.P.
Aberdeen, South Dakota

STATEMENTS OF PARTNERS’ EQUITY
Nine-Month Periods Ended September 30, 2006 and 2005
(unaudited)

	Balance					Current		Balance
	12-31-05		Distributions			Income		09-30-06
South Dakota Wheat Growers Assoc.	$	7,245,313	$	(574,776	)	$	—	$	6,670,537
Heartland Producers, LLC	7,001,167		(555,408		)	—		6,445,759
Aventine Renewable Energy, Inc.	756,327		(60,000		)	—		696,327
Dakota Fuels, Inc.	123,735		(9,816		)	—		113,919
Current Income	0		0			10,403,829		10,403,829
	$	15,126,542	$	(1,200,000	)	$	10,403,829	$	24,330,371

	Balance		Current			Balance
	12-31-04		Distributions			Income		09-30-05
South Dakota Wheat Growers Assoc.	$	5,901,904	$	(478,980	)	$	—	$	5,422,924
Heartland Producers, LLC	5,703,027		(462,840		)	—		5,240,187
Aventine Renewable Energy, Inc.	616,091		(50,000		)	—		566,091
Dakota Fuels, Inc.	100,793		(8,180		)	—		92,613
Current Income	0		0			2,805,068		2,805,068
	$	12,321,815	$	(1,000,000	)	$	2,805,068	$	14,126,883

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HEARTLAND GRAIN FUELS, L.P.
Aberdeen, South Dakota

STATEMENTS OF CASH FLOWS
Nine-Month Periods Ended September 30, 2006 and 2005
(unaudited)

	2006		2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$10,403,829		$2,805,068
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Depreciation	2,046,579		1,350,000
Patronage Dividends Received as Equity	(22,030	)	(48,541	)
Change in Assets and Liabilities
Increase in Receivables	(1,185,691	)	(628,903	)
(Increase) Decrease in Inventories	(278,708	)	420,939
Increase in Supplies	(15,060	)	(13,109	)
(Increase) Decrease in Prepaid Expenses	236,679		(51,163	)
Increase in Payables	855,809		543,733
Decrease in Accrued Expenses	(151,597	)	(171,564	)
Net Cash Provided by Operating Activities	11,889,810		4,206,460
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for Property, Plant & Equipment	(23,909,369	)	(2,228,454	)
Decrease in Long-Term Receivables	526		1,767
Increase in Other Assets	(8,845	)	(24,588	)
Net Cash Used in Investing Activities	(23,917,688	)	(2,251,275	)
CASH FLOWS FROM FINANCING ACTIVITIES
Additional Long-Term Borrowing	15,250,000		—
Distributions of Partners’ Equity	(1,200,000	)	(1,000,000	)
Retirement of Long-Term Debt	(8,225	)	(1,758,718	)
Net Cash Provided by Financing Activities	14,041,775		(2,758,718	)
Net Increase (Decrease) in Cash	2,013,897		(803,533	)
Cash — Beginning of the Period	474,442		3,675,841
Cash — End of Period	$2,488,339		$2,872,308
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid During the Year for:
Interest	$818,621		$326,938

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Notes to Unaudited Financial Statements

Note 1: Organization and Nature of Business

The Partnership is organized as a limited partnership under the laws of the state of Delaware.  The Partnership operates ethanol plants in Aberdeen and Huron, South Dakota with 39,000,000 gallon of production capability.  These plants process corn, which produces ethanol, to be sold for blending with gasoline, and by-products to be used in the manufacturing of feed.

Approximately 92% of the Partnership’s sales and other income were generated by ethanol and E-85 production and marketing and the remaining 8% were from by-product production and other miscellaneous income.

Note 2: Summary of Significant Accounting Policies

The significant accounting practices and policies are summarized below.

UNAUDITED FINANCIAL STATEMENTS

The accompanying financial statements as of September 30, 2006 and September 30, 2005 and the nine months then ended are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair representation of the financial position and operating results for the interim periods.  The interim financial statements should be read in conjunction with the audited financial statements and notes thereto, contained in the registration statement on Form SB-2 to which these financial statements are included.  The results of operations for the nine months ended September 30, 2006 are not necessarily indicative of the results for the fiscal year ending December 31, 2006.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

Bad debts are provided for on the reserve method based on historical experience and management’s evaluation of outstanding receivables at the end of the year.  No allowance for doubtful accounts were considered necessary for the nine-month periods ended September 30, 2006 and 2005, respectively.

INVENTORY VALUATIONS

Raw material inventories are valued at the lower of cost (first-in, first-out method) or market price.  Work-in-process and finished goods inventories are valued at market price multiplied by their respective percentage of completion.

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DERIVATIVE FINANCIAL INSTRUMENTS

The Partnership has only limited involvement with derivative financial instruments and does not use them for trading purposes.  They are used to manage well-defined commodity price risks.  The Partnership may use futures, forward, option and swap contracts to reduce the market volatility of grain and finished products.  These contracts permit final settlement by delivery of the specified commodity.  Unrealized gains or losses are recognized in the valuation of the respective commodity’s ending inventory.

ADVERTISING

The Partnership expenses advertising and promotion costs as they are incurred, which amounted to $24,967 and $25,223 for the nine-month periods ended September 30, 2006 and 2005, respectively.

PROPERTY, PLANT AND EQUIPMENT

Land, buildings and equipment are stated at cost.  Depreciation methods and estimated useful lives of assets are discussed in Note 6.

Maintenance and repairs are expensed as incurred. Expenditures for new facilities and those which increase the useful lives of the buildings and equipment are capitalized. When assets are sold or otherwise disposed of, the related cost and accumulated depreciation are removed from the accounts and gains or losses on the dispositions are recognized in earnings.

LONG-LIVED ASSETS

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable.  When required, impairment losses on assets to be held or used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of their carrying amount or their fair value less selling costs.

ENVIRONMENTAL EXPENDITURES

Environmental compliance costs would include ongoing maintenance, monitoring and similar costs.  Such costs will be expensed as incurred.  Environmental remediation costs would be accrued, except to the extent costs can be capitalized, when environmental assessments and/or remedial efforts are probable, and the cost could be reasonably estimated.  Environmental costs which improve the condition of the property as compared to the condition when constructed or acquired and create future revenue generation are capitalized.

PATRONAGE DIVIDEND INCOME

Patronage dividend income from cooperatives is recognized as income in the year the Partnership receives formal notification from the distributing cooperative.

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INCOME TAXES

The Partnership, as a limited partnership, is not subject to income taxes.  Income is taxed directly to its partners.

DISTRIBUTION OF NET INCOME (LOSS)

In accordance with the Partnership’s agreement of limited partnership, the Partnership will allocate net income (loss) and alcohol credits in accordance with their respective percentage interests.

Note 3: Significant Concentrations of Risk

CREDIT RISK - RECEIVABLES

The Partnership issues credit to customers, substantially all of whom are ethanol wholesalers or E-85 retailers, under industry standard terms without collateral in most cases.

CREDIT RISK - FINANCIAL INSTITUTIONS

The Partnership maintains cash balances with local and national financial institutions, which may at times exceed the $100,000 coverage by the U.S. Federal Deposit Insurance Corporation (FDIC).

Note 4: Related Party Transactions

The Partnership has significant transactions with its limited partners and their affiliates for the nine-month periods ended September 30, 2006 and 2005, respectively which include:

e)An agreement to purchase corn from a limited partner at their cost plus 10¢ per bushel (11¢ at the Huron facility).

f)An agreement with a limited partner to market the total output of ethanol produced by the Aberdeen and Huron facilities.

g)An agreement with a limited partner affiliate to market the total output of by-products produced by the Aberdeen and Huron facilities.

h)Various purchases, services and financing arrangements.

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Note 5: Inventory

The major components of inventory as of September 30, 2006 and 2005 were as follows:

	2006		2005
Raw Materials	$	116,462	$	102,155
Work in Process	519,738		253,971
Finished Goods	452,206		191,199
	$	1,088,406	$	547,325

Note 6: Property, Plant and Equipment

Depreciation is computed over the estimated useful lives of the individual assets using the straight-line method. The estimated useful lives of depreciable assets is as follows:

Buildings	10-40 years
Process and Lab Equipment	5-20 years
Office Equipment	5-20 years

Depreciation expense for the nine-month periods ended September 30, 2006 and 2005 amounted to $2,046,579 and $1,350,000, respectively.

Construction in Process at September 30, 2006	Costs To Date		Budgeted Cost
Huron Plant Expansion – 30,000,000 Gallon Capacity	$	22,050,745	$	24,000,000
Aberdeen Plant Expansion – 40,000,000 Gallon Plant	7,617,461		78,000,000
	$	29,668,206	$	102,000,000

Note 7: Investments in Cooperatives

Investments in cooperatives are recorded at cost, plus unredeemed patronage dividends received in the form of capital stock and other equities. Cooperative stocks normally are not transferable, thereby precluding any market value, but they may be used as collateral in securing loans. Any impairment of equities normally is not recognized by the Partnership until formal notification is received. Redemption of these equities is at the discretion of the various organizations. A substantial portion of the business of these cooperatives is dependent upon the agribusiness economic sector.

At September 30, 2006 and 2005, the Partnership had investments in cooperatives as follows:

	2006		2005
CoBank, ACB	$	452,829	$	452,829
Dakota Energy Cooperative	147,730		67,119
Country Hedging, Inc.	2,175		2,175
	$	602,734	$	522,123

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Note 8: Financing Arrangements

Financing arrangements at September 30, 2006 and 2005 were as follows:

	Interest		Balance
Lender	Rate		2006		2005
Dakota Fuels, Inc.
Aberdeen, South Dakota
Term (RIA475T02-HGF) – $6,750,000 commitment, revolving term loan with a quarterly commitment reduction of $750,000 starting 09-01-11, with the balance due on 06-01-13	7.397	%	$	6,750,000	$	—
Dakota Fuels, Inc.
Term (RIA475T03-HGF) – $15,000,000 commitment, term loan with a quarterly payment of $750,000, starting 09-01-06, with balance due on 06-01-11	8.679	%*	14,250,000		—
CoBank, ACB
Omaha, Nebraska
Term (A475T02B) – Revolving term loan with a quarterly commitment reduction of $375,000 starting 9-01-04, balance due 12-01-08	6.76	%*	—		5,750,000

*      Indicates a continuously variable interest rate

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	Interest		Balance
Lender	Rate		2006		2005
Dakota Energy Cooperative
Huron, South Dakota
Purchase Agreement
Monthly payment of $185, with balance due 08-31-09	0.00	%	—		8,595
US Bank
St. Paul, Minnesota
Commercial Note – Commitment of $500,000 ending 12-31-06	7.72	%*	—		—
			21,000,000		5,758,595
Less: Current Portion			3,000,000		877,220
Total Long-Term Liabilities			$	18,000,000	$	4,881,375

*    Indicates a continuously variable interest rate

The Partnership, in 2005, entered into an Administrative Agency Agreement with Dakota Fuels, Inc. and CoBank, ACB, where CoBank, ACB has been appointed as the administrative agent for the loan documents and security agreements with the Partnership.  CoBank, ACB has agreed to undertake the obligations as administrative agent for these loans.

The term note (RIA475T02-HGF) with Dakota Fuels, Inc. is a revolving term note that the Partnership may borrow against and repay at their discretion except for any portion of note principal with fixed interest rates.  The revolving term note has fixed interest rates on term debt ranging from 6.40% to 7.29% with a weighted average of 7.397%, which includes $2,000,000 of term debt at the current variable interest rate of 8.50%.

Term notes with Dakota Fuels, Inc. are secured by CoBank, ACB’s first mortgage lien covering real property owned by the Partnership, together with CoBank, ACB’s security agreement under the Uniform Commercial Code covering substantially all personal property owned by the Partnership, including receivables, inventories and equipment subject to perfected security interests.  The Partnership also has $452,829 of equity in CoBank, ACB at September 30, 2006, which is held as additional collateral.

The purchase agreement with Dakota Energy Cooperative is secured by a perfected security interest in Auto-Var Capacitor Banks purchased for the Huron facility.

Restrictive covenants on the loan agreements with Dakota Fuels, Inc. provide, among other things, (1) restrictions on incurring additional indebtedness, (2) restrictions on the ability to mortgage, pledge, assign or grant security interest in any assets to any other party, (3) minimum working capital balances of at least $3,500,000, except that in determining current assets, any available commitment not considered due in the next year may be included, (4) minimum net worth balances of at least $12,500,000, and (5) restrictions on scheduled payments made to lessors during each fiscal year.

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The commercial note with US Bank is unsecured with a variable interest rate (2.5% plus current one month “LIBOR” rate).

Total interest expense charged to operations amounted to $929,722 and $318,110 for the nine-month periods ended September 30, 2006 and 2005, respectively.

Aggregate annual maturities of the long-term debt outstanding at September 30, 2006 are as follows:

Maturity Date – Year Ending September 30,
2007	$	3,000,000
2008	3,000,000
2009	3,000,000
2010	3,000,000
2011	3,000,000
2012 & Thereafter	6,000,000
	$	21,000,000

Note 9: Pension Plans

The Partnership participates in a defined contribution thrift plan (401(k)).  Under the terms of the plan, qualifying employees may elect to contribute to the plan a percentage of their compensation, such contributed compensation may be partially matched by the Partnership, up to a maximum of 4%.  The Partnership contributed $40,884 and $35,273 to the thrift plan for the nine-month periods ended September 30, 2006 and 2005, respectively.

The Partnership participates in the “Co-op Retirement Plan”, administered by the United Benefits Group, which is a multiple-employer defined benefit plan that is funded by contributions from employees and the Partnership.  The Partnership intends to participate in the plan indefinitely; however it may voluntarily discontinue the plan at anytime.  The plan, which has no funding deficiencies, used the aggregate cost method of valuation. Under this method, the normal cost is adjusted each year to reflect the experience under the plan, automatically spreading gains or losses over future years.  The relative position of each employer associated with the plan, with respect to the actuarial present value of accumulated benefits, is not determinable.

The Partnership made contributions and paid administration fees for the defined benefit retirement plans totaling $105,947 and $98,181 for the nine-month periods ended September 30, 2006 and 2005, respectively.

Note 10: Operating Leases

The Partnership has certain cancelable and non-cancelable operating leases and rental agreements on land and equipment of $61,859 and $36,928 for the nine-month periods ended September 30, 2006 and 2005, respectively.

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Note 11: Contingencies and Commitments  

c)The Partnership is subject to various federal and state regulations regarding the care, delivery and containment of products which the Partnership handles and has handled.  The Company is contingently liable for any associated costs which could arise from the handling, delivery and containment of these products.  These costs cannot be determined at present.  While resolution of any such costs in the future may have an effect on the Company’s financial results for a particular period, management believes any such future costs will not have a material adverse effect on the financial position of the Company as a whole.

d)The Partnership is aware of initiatives by the EPA seeking to require best available control technology (BACT) on ethanol plants.  The EPA’s position is that ethanol plants are major sources of hazardous air pollutants based upon different test methods from the ones used when the ethanol plants initially obtained air permits.  Under this method, emissions exceed the allowed thresholds.  The EPA is currently reviewing South Dakota ethanol plants.  The EPA has imposed penalties and required BACT installed on ethanol plants in other states.  The EPA and South Dakota DENR have yet to determine what, if any, control technology will be required and whether any enforcement action will commence.

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