##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarterly period ended March 31, 2010
 OR
 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 000-52617
 WESTERN DUBUQUE BIODIESEL, LLC
  Iowa
    
    20-3857933(State or other jurisdiction of organization)
    
    (I.R.S. Employer Identification No.)
 904 Jamesmeier Rd.
P.O. Box 82
Farley, IA 52046
 (563) 744-3554
 þ o
 o Yes o No
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer þ
    
    Smaller Reporting Company o
 o þ




---



##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risks
    
    
    20PART II. OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. (Removed and Reserved)
    
    
    22Item 5. Other Information
    
    
    22Item 6. Exhibits
    
    
    22SIGNATURES
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   ii




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WESTERN DUBUQUE BIODIESEL, LLC
BALANCE SHEETS
 (UNAUDITED)March 31,
    
    
    December 31,2010
    
    
    2009ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    4,304,336
    
    
    $
    3,379,382Margin deposits
    
    
    247,552
    
    
    
    13,890Accounts receivable:Trade
    
    
    
    
    
    
    55,090Related party
    
    
    
    
    
    
    143,059Other receivables
    
    
    89,160
    
    
    
    12,000Incentive receivables
    
    
    
    
    
    
    3,494,322Inventory
    
    
    1,737,817
    
    
    
    313,929Utility deposits
    
    
    87,099
    
    
    
    Prepaid feedstocks and expenses
    
    
    1,314,445
    
    
    
    93,829Total current assets
    
    
    7,780,409
    
    
    
    7,505,501PROPERTY, PLANT AND EQUIPMENTLand and land improvements
    
    
    3,091,093
    
    
    
    3,091,093Office building and equipment
    
    
    407,203
    
    
    
    407,203Plant and process equipment
    
    
    37,799,987
    
    
    
    37,799,987Vehicles
    
    
    42,537
    
    
    
    42,537Total, at cost
    
    
    41,340,820
    
    
    
    41,340,820Less accumulated depreciation
    
    
    5,842,138
    
    
    
    5,294,490Total property, plant and equipment
    
    
    35,498,682
    
    
    
    36,046,330OTHER ASSETSRestricted cash
    
    
    406,929
    
    
    
    406,929Loan origination fees, net of amortization
    
    
    261,688
    
    
    
    285,477Total other assets
    
    
    668,617
    
    
    
    692,406TOTAL ASSETS
    
    $
    43,947,708
    
    
    $
    44,244,237LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable:Trade
    
    $
    100,294
    
    
    $
    390,791Related party
    
    
    
    
    
    
    1,047,081Short-term borrowings  related party
    
    
    2,548,975
    
    
    
    Current portion of long-term debt
    
    
    25,188,029
    
    
    
    25,435,486Derivative instruments
    
    
    168,311
    
    
    
    5,737Accrued liabilities
    
    
    49,748
    
    
    
    63,138Deferred rent
    
    
    16,750
    
    
    
    17,400Total current liabilities
    
    
    28,072,107
    
    
    
    26,959,633MEMBERS EQUITYContributed capital
    
    
    26,230,096
    
    
    
    26,230,096Accumulated deficit
    
    
    (10,354,495
    )
    
    
    (8,945,492
    )Total members equity
    
    
    15,875,601
    
    
    
    17,284,604TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    43,947,708
    
    
    $
    44,244,237
   1




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF OPERATIONS

(UNAUDITED)
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009REVENUESBiodiesel and by product sales  related party
    
    $
    
    
    
    $
    45,534Tolling services  related party
    
    
    
    
    
    
    1,030,385Total revenues
    
    
    
    
    
    
    1,075,919COST OF SALESMaterials, labor and overhead
    
    
    863,267
    
    
    
    1,835,352Net losses (gains) on derivative instruments
    
    
    168,911
    
    
    
    (10,736
    )Total cost of sales
    
    
    1,032,178
    
    
    
    1,824,616Gross loss
    
    
    (1,032,178
    )
    
    
    (748,697
    )OPERATING EXPENSESConsulting and professional fees
    
    
    77,816
    
    
    
    70,202Office and administrative expenses
    
    
    62,983
    
    
    
    63,002Total operating expenses
    
    
    140,799
    
    
    
    133,204OTHER INCOME (EXPENSE)Other income
    
    
    650
    
    
    
    650Interest income
    
    
    10,018
    
    
    
    32,139Interest expense
    
    
    (246,694
    )
    
    
    (261,855
    )Total other expense
    
    
    (236,026
    )
    
    
    (229,066
    )NET LOSS
    
    $
    (1,409,003
    )
    
    $
    (1,110,967
    )BASIC AND DILUTED LOSS PER UNIT
    
    $
    (47.32
    )
    
    $
    (37.41
    )WEIGHTED AVERAGE UNITS OUTSTANDING,
BASIC AND DILUTED
    
    
    29,779
    
    
    
    29,697
   2




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF CASH FLOWS

(UNAUDITED)
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (1,409,003
    )
    
    $
    (1,110,967
    )Adjustments to reconcile net loss to net cash
provided by operating activitiesDepreciation
    
    
    547,648
    
    
    
    547,130Amortization
    
    
    23,789
    
    
    
    23,790Effects of changes in operating assets and liabilitiesMargin deposits
    
    
    (233,662
    )
    
    
    (43,850
    )Accounts receivable
    
    
    198,149
    
    
    
    1,467,983Other receivables
    
    
    (77,160
    )
    
    
    (4,000
    )Incentive receivables
    
    
    3,494,322
    
    
    
    Inventory
    
    
    (1,423,888
    )
    
    
    (238,823
    )Utility deposits
    
    
    (87,099
    )
    
    
    Prepaid feedstocks and expenses
    
    
    (1,220,616
    )
    
    
    (184,773
    )Derivative instruments
    
    
    162,574
    
    
    
    (10,886
    )Accounts payable
    
    
    (1,337,578
    )
    
    
    (328,002
    )Accrued liabilities
    
    
    (13,390
    )
    
    
    (53,000
    )Deferred rent
    
    
    (650
    )
    
    
    9,350Net cash provided by (used in) operating activities
    
    
    (1,376,564
    )
    
    
    73,952CASH FLOWS FROM INVESTING ACTIVITIESPayments for property, plant and equipment,
including construction in progress
    
    
    
    
    
    
    (7,391
    )Increase in restricted cash
    
    
    
    
    
    
    (69,447
    )Net cash used in investing activities
    
    
    
    
    
    
    (76,838
    )CASH FLOWS FROM FINANCING ACTIVITIESNet borrowings under short-term financing with related party
    
    
    2,548,975Payments on long-term debt
    
    
    (247,457
    )
    
    
    (836,848
    )Net cash provided by (used in) financing activities
    
    
    2,301,518
    
    
    
    (836,848
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    924,954
    
    
    
    (839,734
    )CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    3,379,382
    
    
    
    7,553,554CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    4,304,336
    
    
    $
    6,713,820
   3




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
 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
 Note 4.
 Accounts Receivable
    4




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
 Derivative Instruments and Hedging Activities
 Derivatives and Hedging
 Inventories
  Property and Equipment
   YearsLand improvements
    
    20  40Office equipment
    
    5  10Office building
    
    30Plant and process equipment
    
    10  40Vehicles
    
    5  7
  Loan Origination Fees
  Income Taxes
   5




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
 Loss Per Unit
  Cost of Sales
   Shipping and Handling Costs
  Environmental Liabilities
  Fair Value of Financial Instruments
  Current assets and current liabilities
 Long-term debt
 New Accounting Standards
 Subsequent Events
  6




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
 Fair Value Measurements and Disclosures
 NOTE 2  INCENTIVE PAYMENTS AND RECEIVABLE
   NOTE 3  INVENTORY
  March 31,
    
    
    December 31,2010
    
    
    2009(UNAUDITED)Raw material
    
    $
    994,684
    
    
    $
    161,471Work in progress
    
    
    685,805
    
    
    
    72,996Finished goods
    
    
    57,328
    
    
    
    79,462Total
    
    $
    1,737,817
    
    
    $
    313,929
 NOTE 4  LONG-TERM DEBT AND FINANCING
  March 31,
    
    
    December 31,2010
    
    
    2009(UNAUDITED)Note payable to Beal Bank  see details below
    
    $
    24,958,549
    
    
    $
    25,188,855Note payable to the Iowa Department of Economic
Development  see details below
    
    
    225,000
    
    
    
    240,000Note payable to Hodge Material Handling  see
details below
    
    
    4,480
    
    
    
    6,631Total
    
    
    25,188,029
    
    
    
    25,435,486Less current portion
    
    
    25,188,029
    
    
    
    25,435,486Long-term portion
    
    $
    
    
    
    $
    
   7




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
      NOTE 5  MEMBERS EQUITY
   8




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
 NOTE 6  CASH FLOW DISCLOSURES
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Cash paid for interest
    
    $
    222,904
    
    
    $
    240,588
 NOTE 7  RELATED PARTY TRANSACTIONS
          9




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
  NOTE 8  COMMITMENTS AND CONTINGENCIES
    NOTE 9  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.
  March 31, 2010 (UNAUDITED)SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantCarrying Amount
    
    
    Active Markets for
    
    
    Observable
    
    
    Unobservableon
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsBalance Sheet
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Financial liabilities:Commodity derivatives
    
    $
    (168,311
    )
    
    $
    (168,311
    )
    
    $
    
    
    
    $
    December 31, 2009SignificantQuoted Prices in
    
    
    Other
    
    
    SignificantCarrying Amount
    
    
    Active Markets for
    
    
    Observable
    
    
    Unobservableon
    
    
    Identical Assets
    
    
    Inputs
    
    
    InputsBalance Sheet
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Financial liabilities:Commodity derivatives
    
    $
    (5,737
    )
    
    $
    (5,737
    )
    
    $
    
    
    
    $
    
  10




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
  NOTE 10  DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
 Derivatives and Hedging,
 Objectives and Strategies for Holding Derivative Instruments
  Commodity Risk Management
  Accounting for Derivative Instruments and Hedging Activities
   Liability Derivatives
    
    
    Liability DerivativesMarch 31, 2010 (UNAUDITED)
    
    
    December 31, 2009Balance Sheet
    
    
    
    
    
    Balance SheetLocation
    
    Fair Value
    
    
    Location
    
    Fair ValueCommodity contracts 
Heat oil swaps
    
    Current liabilities
    
    $
    (168,311
    )
    
    Current liabilities
    
    $
    (5,737
    )
  11




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2010
  Derivative (Gain) Loss
    
    
    Derivative (Gain) LossThree Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Statement of
    
    
    
    
    
    
    Statement ofOperations Location
    
    
    (Gain) Loss
    
    
    Operations Location
    
    
    (Gain) LossCommodity contracts 
Heat oil swaps
    
    Cost of sales
    
    $
    168,911
    
    
    Cost of sales
    
    $
    (10,736
    )
 NOTE 11  UNCERTAINTY
    NOTE 12  SUBSEQUENT EVENTS
   12




---



##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Cautionary Statements Regarding Forward-Looking Statements
  
    
    The failure of the federal government to reinstate the $1.00 per gallon biodiesel
blenders credit;
 
    
    Our inability to secure alternative service providers starting in August 2010 when our
Management and Operational Services Agreement (MOSA) with Renewable Energy Group, Inc.
(REG) terminates;
 
    
    The availability and terms and conditions of credit or equity financing needed to
continue our operations if 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;
 
    
    Our ability to market our products and our reliance on our marketer to market our
products;
 
    
    Fuel prices, consumption of diesel and biodiesel and consumer attitudes regarding the
use of biodiesel;
 
    
    Prices of vegetable oils (particularly soybean oil), animal fats and/or other feedstock;
 
    
    Our ability to enter into toll manufacturing agreements or other arrangements that shift
responsibility for feedstock procurement and costs to other parties;
 
    
    The continued imposition of tariffs or other duties on biodiesel exported to Europe;
 
    
    Overcapacity within the biodiesel industry resulting in increased competition and costs
for feedstock and/or decreased prices for our biodiesel and glycerin;
 
    
    Changes in soy-based biodiesels qualification under the Renewable Fuel Standard (RFS)
and similar legislation;
 
    
    Decreased availability of soybean oil, animal fat or other feedstock for any reason;
 
    
    Our ability to locate alternative feedstock to respond to market conditions,
particularly since we lack pretreatment capabilities to enable us to process raw animal
fats or other crude vegetable oils at our plant;
 
    
    Changes in or elimination of 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; and the ability of the biodiesel industry to
successfully lobby for mandates or other legislation beneficial to the biodiesel industry;
 
    
    Changes in plant production capacity or technical difficulties in operating the plant,
including changes due to events beyond our control or as a result of intentional reductions
in or halting of production;
  13




---



##### Table of Contents




    
    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.
  Overview
    Results of Operations for the Three Months Ended March 31, 2010
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009(Unaudited)
    
    
    (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    0
    
    
    
    
    
    
    $
    1,075,919
    
    
    
    100.00
    %Cost of Sales
    
    
    1,032,178
    
    
    
    
    
    
    
    1,824,616
    
    
    
    169.59
    %Gross Profit (loss)
    
    
    (1,032,178
    )
    
    
    
    
    
    
    (748,697
    )
    
    
    (69.59
    %)Operating Expenses
    
    
    140,799
    
    
    
    
    
    
    
    133,204
    
    
    
    12.38
    %Other (Expense)
    
    
    (236,026
    )
    
    
    
    
    
    
    (229,066
    )
    
    
    (21.29
    %)Net Loss
    
    $
    (1,409,003
    )
    
    
    
    
    
    $
    (1,110,967
    )
    
    
    (103.26
    %)
  14




---



##### Table of Contents



Revenues
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel/Glycerin Sales
    
    
    
    
    
    
    
    
    
    $
    45,534
    
    
    
    4.2
    %Tolling Services
    
    
    
    
    
    
    
    
    
    $
    1,030,385
    
    
    
    95.8
    %
    
    
    
    
    
    
    $
    1,075,919
    
    
    
    100.0
    %
     Cost of Sales
   15




---



##### Table of Contents



Operating Expenses
  Other Income (Expenses)
  Changes in Financial Condition for the Three Months Ended March 31, 2010
  March 31, 2010
    
    
    December 31, 2009Current Assets
    
    $
    7,780,409
    
    
    $
    7,505,501Current Liabilities
    
    $
    28,072,107
    
    
    $
    26,959,633Total Members Equity
    
    $
    15,875,601
    
    
    $
    17,284,604
 Current Assets
  Current Liabilities
    16




---



##### Table of Contents



Members Equity
  Plan of Operations for the Next 12 Months
 Plant Operations
    Operating Budget and Financing of Plant Operations
    17




---



##### Table of Contents



Critical Accounting Estimates
  Liquidity and Capital Resources
 Cash Flows
 Cash Flow from Operating Activities.
 Cash Flow from Investing Activities.
 Cash Flow from Financing Activities.
 Sources of Funds
 Equity Financing.
 Debt Financing
   18




---



##### Table of Contents



Government Programs and Grants
  Distribution to Unit Holders
  Off-Balance Sheet Arrangements
   19




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risks
  Interest Rate Risk
  Outstanding Variable Rate Debt at
    
    Interest Rate at
    
    
    Adverse 10% Change in
    
    
    Annual Adverse ChangeMarch 31, 2010
    
    March 31, 2010
    
    
    Interest Rates
    
    
    to Income$24,958,549
    
    
    3.50
    %
    
    
    3.85
    %
    
    $
    89,980.77
 Commodity Price Risk
 Derivatives and Hedging
     20




---



##### Table of Contents



Effect ofHypotheticalAdverse Change -Fair Value
    
    
    Market RiskMarch 31, 2010
    
    $
    79,214.59
    
    
    $
    423,000December 31, 2009
    
    $
    8,152.39
    
    
    $
    18,000
 Item 4. 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.
  21




---



##### Table of Contents



Loss of or ineligibility for favorable tax benefits for biodiesel production could result in
the permanent shutdown of our plant.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. (Removed and Reserved)
 
 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
    
    *
 
   22




---



##### Table of Contents



SIGNATURES
  WESTERN DUBUQUE BIODIESEL, LLCDate: May 17, 2010
    /s/ Bruce KlostermannBruce KlostermannVice Chairman and Director
(Principal Executive Officer)Date: May 17, 2010
    /s/ George DavisGeorge DavisTreasurer and Director
(Principal Financial and Accounting Officer)  23