##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarter ended September 30, 2008
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from  to
 Commission file number 000-52617
 WESTERN DUBUQUE BIODIESEL, LLC
  Iowa
(State or other jurisdiction of organization)
    
    20-3857933
(I.R.S. Employer Identification No.)
 904 Jamesmeier Rd.
P.O. Box 82
Farley, IA 52046
 (563) 744-3554
   þ o
  o þ
   Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    23Item 4T. Controls and Procedures
    
    
    23PART II. OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WESTERN DUBUQUE BIODIESEL, LLC
BALANCE SHEETS
 September 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    4,247,852
    
    
    $
    2,011,841Margin deposits
    
    
    5,000
    
    
    
    3,024,770Accounts receivable  related party
    
    
    4,617,834
    
    
    
    2,874,915Other receivables
    
    
    
    
    
    
    150,186Incentive receivables
    
    
    372,088
    
    
    
    694,825Inventory
    
    
    829,497
    
    
    
    4,439,977Prepaid expenses
    
    
    108,450
    
    
    
    319,726Total current assets
    
    
    10,180,721
    
    
    
    13,516,240PROPERTY, PLANT AND EQUIPMENTLand and land improvements
    
    
    3,091,093
    
    
    
    3,091,093Office building and equipment
    
    
    407,203
    
    
    
    407,203Plant and process equipment
    
    
    37,677,017
    
    
    
    37,907,414Vehicles
    
    
    42,537
    
    
    
    42,537Construction in progress
    
    
    
    
    
    
    1,391Total, at cost
    
    
    41,217,850
    
    
    
    41,449,638Less accumulated depreciation
    
    
    2,559,020
    
    
    
    922,368Total property, plant and equipment
    
    
    38,658,830
    
    
    
    40,527,270OTHER ASSETSRestricted cash
    
    
    203,315
    
    
    
    Loan origination fees, net of amortization
    
    
    404,426
    
    
    
    475,796Total other assets
    
    
    607,741
    
    
    
    475,796TOTAL ASSETS
    
    $
    49,447,292
    
    
    $
    54,519,306LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable:Trade
    
    $
    753,717
    
    
    $
    942,768Related party
    
    
    202,560
    
    
    
    164,971Construction  related party
    
    
    
    
    
    
    2,519,733Derivative instruments
    
    
    
    
    
    
    2,533,251Current portion of long-term debt
    
    
    28,891,237
    
    
    
    1,863,675Accrued interest
    
    
    16,784
    
    
    
    209,375Accrued liabilities
    
    
    139,605
    
    
    
    149,901Total current liabilities
    
    
    30,003,903
    
    
    
    8,383,674LONG-TERM LIABILITIESLong-term debt, less current portion above
    
    
    
    
    
    
    27,766,964Total liabilities
    
    
    30,003,903
    
    
    
    36,150,638MEMBERS EQUITYContributed capital
    
    
    26,230,096
    
    
    
    26,230,096Less subscriptions receivable
    
    
    
    
    
    
    (2,500,000
    )Accumulated deficit
    
    
    (6,786,707
    )
    
    
    (5,361,428
    )Total members equity
    
    
    19,443,389
    
    
    
    18,368,668TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    49,447,292
    
    
    $
    54,519,306
   3




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WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Three Months Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2007
    
    
    September 30, 2008
    
    
    September 30, 2007REVENUESBiodiesel and by product sales  related party
    
    $
    15,157,704
    
    
    $
    
    
    
    $
    36,769,476
    
    
    $
    Tolling services  related party
    
    
    930,987
    
    
    
    1,991,747
    
    
    
    955,830
    
    
    
    1,991,747Incentive funds
    
    
    3,217,380
    
    
    
    
    
    
    
    7,765,862
    
    
    
    Total revenues
    
    
    19,306,071
    
    
    
    1,991,747
    
    
    
    45,491,168
    
    
    
    1,991,747COST OF SALESMaterials, labor and overhead
    
    
    19,035,571
    
    
    
    1,625,892
    
    
    
    44,721,030
    
    
    
    1,625,892Net losses on derivative instruments
    
    
    240,081
    
    
    
    471,574
    
    
    
    293,162
    
    
    
    471,574Total cost of sales
    
    
    19,275,652
    
    
    
    2,097,466
    
    
    
    45,014,192
    
    
    
    2,097,466Gross profit (loss)
    
    
    30,419
    
    
    
    (105,719
    )
    
    
    476,976
    
    
    
    (105,719
    )OPERATING EXPENSESConsulting and professional fees
    
    
    73,218
    
    
    
    99,909
    
    
    
    220,013
    
    
    
    238,859Office and administrative expenses
    
    
    103,781
    
    
    
    264,696
    
    
    
    355,146
    
    
    
    509,963Total operating expenses
    
    
    176,999
    
    
    
    364,605
    
    
    
    575,159
    
    
    
    748,822OTHER INCOME (EXPENSE)Interest income
    
    
    5,970
    
    
    
    7,666
    
    
    
    41,459
    
    
    
    9,571Interest expense
    
    
    (412,877
    )
    
    
    (274,141
    )
    
    
    (1,370,255
    )
    
    
    (274,141
    )Net losses on derivative instruments
    
    
    
    
    
    
    (76,776
    )
    
    
    
    
    
    
    (945
    )Other income
    
    
    
    
    
    
    
    
    
    
    1,700
    
    
    
    1,000Total other income (expense)
    
    
    (406,907
    )
    
    
    (343,251
    )
    
    
    (1,327,096
    )
    
    
    (264,515
    )NET LOSS
    
    $
    (553,487
    )
    
    $
    (813,575
    )
    
    $
    (1,425,279
    )
    
    $
    (1,119,056
    )BASIC AND DILUTED LOSS PER UNIT
    
    $
    (18.59
    )
    
    $
    (29.82
    )
    
    $
    (47.91
    )
    
    $
    (41.13
    )WEIGHTED AVERAGE UNITS OUTSTANDING,
BASIC AND DILUTED
    
    
    29,779
    
    
    
    27,279
    
    
    
    29,752
    
    
    
    27,208
   4




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WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF CASH FLOWS
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2008
    
    
    September 30, 2007CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,425,279
    )
    
    $
    (1,119,056
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activitiesDepreciation
    
    
    1,636,652
    
    
    
    374,117Amortization
    
    
    71,370
    
    
    
    15,680Effects of changes in operating assets and liabilitiesMargin deposits
    
    
    3,019,770
    
    
    
    (1,234,518
    )Accounts receivable  related party
    
    
    (1,742,919
    )
    
    
    (479,474
    )Other receivables
    
    
    150,186
    
    
    
    Incentive receivables
    
    
    322,737
    
    
    
    Inventory
    
    
    3,610,480
    
    
    
    (834,943
    )Prepaid expenses
    
    
    211,276
    
    
    
    (154,387
    )Derivative instruments
    
    
    (2,533,251
    )
    
    
    363,036Accounts payable
    
    
    (171,195
    )
    
    
    588,981Accrued liabilities
    
    
    (202,887
    )
    
    
    74,249Net cash provided by (used in) operating activities
    
    
    2,946,940
    
    
    
    (2,406,315
    )CASH FLOWS FROM INVESTING ACTIVITIESProceeds from the sale of property
    
    
    
    
    
    
    25,000Sales tax refund from construction in progress
    
    
    286,190
    
    
    
    Payments for property, plant and equipment,
including construction in progress
    
    
    (54,402
    )
    
    
    (16,753,671
    )Increase in restricted cash
    
    
    (127,971
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    103,817
    
    
    
    (16,728,671
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long-term debt
    
    
    939,540
    
    
    
    18,605,822Payments on long-term debt
    
    
    (1,754,286
    )
    
    
    (20,000
    )Capital contributions
    
    
    
    
    
    
    650,000Net cash provided by (used in) financing activities
    
    
    (814,746
    )
    
    
    19,235,822NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    2,236,011
    
    
    
    100,836CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    2,011,841
    
    
    
    79,316CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    4,247,852
    
    
    $
    180,152
   5




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Use of Estimates in Preparing Financial Statements
  Basis of Accounting
    Revenue Recognition
  Cash and Cash Equivalents
  Restricted Cash
  Accounts Receivable
    6




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 Derivative Instruments and Hedging Activities
    $-0-
 Inventories
  Property and Equipment
   YearsLand improvements
    
    
    20  40Office equipment
    
    
    5  10Office building
    
    
    30Plant and process equipment
    
    
    10  40Vehicles
    
    
    5  7
   7




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
  Loan Origination Fees
  Stock-Based Compensation
 Share-Based
Payment Accounting for Stock Issued to Employees, Black-Scholes-Merton
 Black-Scholes-Merton
 Income Taxes
  Loss Per Unit
   8




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 Cost of Sales
  Shipping and Handling Costs
  Environmental Liabilities
  New Accounting Standards
 Fair Value Measurements
 Disclosures about Derivative Instruments and Hedging
Activities (SFAS No. 161)
 NOTE 2  INCENTIVE PAYMENTS AND RECEIVABLE
   9




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 NOTE 3  INVENTORY
  September 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)Raw material
    
    $
    282,449
    
    
    $
    1,758,762Work in process
    
    
    268,487
    
    
    
    1,150,688Finished goods
    
    
    278,561
    
    
    
    1,530,527Total
    
    $
    829,497
    
    
    $
    4,439,977
 NOTE 4  LONG-TERM DEBT AND FINANCING
  September 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)Note payable to Marshall BankFirst  see details below
    
    $
    28,559,665
    
    
    $
    29,248,708Note payable to the Iowa Department of Economic
Development  see details below
    
    
    315,000
    
    
    
    360,000Note payable to Hodge Material Handling  see
details below
    
    
    16,572
    
    
    
    21,931Total
    
    
    28,891,237
    
    
    
    29,630,639Less current portion
    
    
    
    
    
    
    1,863,675Long-term portion
    
    $
    28,891,237
    
    
    $
    27,766,964
    10




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
    NOTE 5  MEMBERS EQUITY
    NOTE 6  CONCENTRATION OF CREDIT RISK
   11




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
 NOTE 7  CASH FLOW DISCLOSURES
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2008
    
    
    September 30, 2007Cash paid for interest
    
    $
    1,562,846
    
    
    $
    137,710
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30, 2008
    
    
    September 30, 2007Construction in progress in
accounts payable and
accrued interest
    
    $
    
    
    
    $
    2,519,733Loan proceeds transferred
to debt service reserve
fund (restricted cash)
    
    $
    75,344
    
    
    $
    Units issued in exchange
for reduction in
construction payable
    
    $
    2,500,000
    
    
    $
    
 NOTE 8  RELATED PARTY TRANSACTIONS
       12




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
  NOTE 9  COMMITMENTS AND CONTINGENCIES
  NOTE 10  FAIR VALUE OF FINANCIAL INSTRUMENTS
  
    
    Level 1Unadjusted quoted prices for identical assets and liabilities in active
markets;
    
    Level 2Quoted prices for similar assets and liabilities in active markets (other
than those included in Level 1) which are observable for the asset or liability, either
directly or indirectly; and
    
    Level 3Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable.
  SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantActive Markets for
    
    
    Observable
    
    
    UnobservableSeptember 30,
    
    
    Identical Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Financial assets:Cash equivalents
    
    $
    4,152,429
    
    
    $
    4,152,429
    
    
    $
    
    
    
    $
    
 NOTE 11  UNCERTAINTY
   13




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WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
    14




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Item 2. Managements Discussion and Analysis or Plan of Operations
  Cautionary Statements Regarding Forward-Looking Statements
  
    
    The availability and terms and conditions of credit or equity financing needed to
continue our operations in the event that income from operations is insufficient for us to
continue biodiesel production;
    
    Our ability to generate free cash flow to invest in our business and service our debt;
    
    Our ability to comply with our loan covenants and the response of our lender to our
failure to comply with such covenants;
    
    Continued higher than average prices of vegetable oils, particularly soybean oil, and/or
increases in the prices of other feedstock;
    
    Our ability to enter into toll manufacturing agreements or other arrangements that shift
responsibility for feedstock procurement and costs to other parties;
    
    Overcapacity within the biodiesel industry resulting in increased competition and costs
for feedstock and/or decreased prices for our biodiesel and glycerin;
    
    Decreased availability of soybean oil or other feedstock for any reason, including
reduction in soybean production due to increased corn production to service the ethanol
industry;
    
    Our ability to locate alternative feedstock to replace soybean oil (such as refined
animal fats) if desirable or necessary, particularly since we lack pretreatment
capabilities to enable us to process raw animal fats or other crude vegetable oils at our
plant;
    
    Our ability to market our products and our reliance on our marketer to market our
products;
    
    Changes in or elimination of governmental laws, tariffs, trade or other controls or
enforcement practices such as national, state or local energy policy; federal biodiesel tax
incentives; or environmental laws and regulations that apply to our plant operations and
their enforcement; and the ability of the biodiesel industry to successfully lobby for
mandates or other legislation beneficial to the biodiesel industry;
    
    Fuel prices, U.S. consumption of diesel and biodiesel and consumer attitudes regarding
the use of biodiesel;
    
    Changes in plant production capacity or technical difficulties in operating the plant
for any reason, including changes due to events beyond our control or as a result of
intentional reductions in production or plant shutdowns;
    
    Changes and advances in biodiesel production technology, including the ability of our
competitors to process raw animal fats or other feedstock which we are unable to process;
    
    Competition from alternative fuels; and
    
    Other factors described elsewhere in this report.
  15




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Overview
       16




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Results of Operations for the Three Months Ended September 30, 2008
  Quarter EndedSeptember 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    19,306,071
    
    
    
    100.00
    %Cost of Sales
    
    $
    19,275,652
    
    
    
    99.84
    %Gross Profit (Loss)
    
    $
    30,419
    
    
    
    0.16
    %Operating Expenses
    
    $
    176,999
    
    
    
    0.92
    %Other Income (Expense)
    
    $
    (406,907
    )
    
    
    (2.11
    )%Net Loss
    
    $
    (553,487
    )
    
    
    (2.87
    )%
 Revenues
  Quarter EndedSeptember 30, 2008Revenue Sources
    
    Amount
    
    
    PercentBiodiesel and Glycerin Sales
    
    $
    15,157,704
    
    
    
    78.51
    %Tolling Services
    
    $
    930,987
    
    
    
    4.82
    %Incentive funds
    
    $
    3,217,380
    
    
    
    16.67
    %Total Revenues
    
    $
    19,306,071
    
    
    
    100.00
    %
 Cost of Sales
  Operating Expenses
  Other Income (Expenses)
   17




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Results of Operations for the Nine Months Ended September 30, 2008
  Nine Months EndedSeptember 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    45,491,168
    
    
    
    100.00
    %Cost of Sales
    
    $
    45,014,192
    
    
    
    98.95
    %Gross Profit (Loss)
    
    $
    476,976
    
    
    
    1.05
    %Operating Expenses
    
    $
    575,159
    
    
    
    1.26
    %Other Income (Expense)
    
    $
    (1,327,096
    )
    
    
    (2.92
    )%Net Income (Loss)
    
    $
    (1,425,279
    )
    
    
    (3.13
    )%
 Revenues
  Nine Months EndedSeptember 30, 2008Revenue Sources
    
    Amount
    
    
    PercentBiodiesel and Glycerin Sales
    
    $
    36,769,476
    
    
    
    80.83
    %Tolling Services
    
    $
    955,830
    
    
    
    2.1
    %Incentive funds
    
    $
    7,765,862
    
    
    
    17.07
    %Total Revenues
    
    $
    45,491.168
    
    
    
    100.00
    %
 Round-Up
 Cost of Sales
   18




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Operating Expenses
  Other Income (Expenses)
  Cash Flows
 Cash Flow from Operating Activities.
 Cash Flow from Investing Activities.
 Cash Flow from Financing Activities.
 Changes in Financial Condition for the Nine Months Ended September 30, 2008
  September 30, 2008
    
    
    December 31, 2007Current Assets
    
    $
    10,180,721
    
    
    $
    13,516,240Current Liabilities
    
    $
    30,003,903
    
    
    $
    8,383,674Long Term Liabilities
    
    $
    0
    
    
    $
    27,766,964Total Members Equity
    
    $
    19,443,389
    
    
    $
    18,368,668
 Current Assets.
  19




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Current Liabilities.
 Long-Term Debt.
 Members Equity.
 Plan of Operations for the Next 12 Months
  Plant Operations
   Operating Budget and Financing of Plant Operations
   20




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Critical Accounting Estimates
  Liquidity and Capital Resources
  Sources of Funds
 Equity Financing.
 Debt Financing
    21




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Government Programs and Grants
 Off-Balance Sheet Arrangements
  Commodity Price Risk Protection
     22




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Item 3. Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4T. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  There are doubts about our ability to continue as a going concern and if we are unable to
continue our business, our units may have little or no value.
  23




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Doubts about our ability to continue as a going concern may make it difficult to obtain
additional funds in the future.
 We are experiencing liquidity issues which could require us to cease operations.
 An investigation by the European Commission into whether the U.S. biodiesel industry has been
engaging in unfair trade practices could lead to the imposition of duties or tariffs on biodiesel
imported into Europe, which could cause a significant decrease in our revenues.
 Because of the high cost of soybean oil, we are exploring the use of alternative feedstocks,
such as corn oil, to produce our biodiesel, which may have risks and disadvantages of which we are
not yet fully aware.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   24




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Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing31.1
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    *
 
 (*)
    
    Filed herewith. 
 SIGNATURES
  WESTERN DUBUQUE BIODIESEL, LLCDate: November 14, 2008
    
    /s/ Bruce Klostermann

Bruce KlostermannVice Chairman and Director(Principal Executive Officer)Date: November 14, 2008
    
    /s/ George Davis

George DavisTreasurer and Director(Principal Financial and Accounting Officer)
  25