##### 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 June 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




---



##### 



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 4. 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
    
    
    25Item 3. Defaults Upon Senior Securities
    
    
    25Item 4. Submission of Matters to Security Holders
    
    
    25Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    26SIGNATURES
    
    
    26Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WESTERN DUBUQUE BIODIESEL, LLC
BALANCE SHEET
 June 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    360,241
    
    
    $
    2,011,841Margin deposits
    
    
    17,260
    
    
    
    3,024,770Accounts receivable  related party
    
    
    3,690,725
    
    
    
    2,874,915Other receivables
    
    
    5,647
    
    
    
    150,186Incentive receivables
    
    
    1,637,066
    
    
    
    694,825Inventory
    
    
    3,804,510
    
    
    
    4,439,977Prepaid expenses
    
    
    1,148,194
    
    
    
    319,726Total current assets
    
    
    10,663,643
    
    
    
    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
    
    
    37,643,316
    
    
    
    37,907,414Vehicles
    
    
    42,537
    
    
    
    42,537Construction in progress
    
    
    
    
    
    
    1,391Total, at cost
    
    
    41,184,149
    
    
    
    41,449,638Less accumulated depreciation
    
    
    2,014,660
    
    
    
    922,368Total property, plant and equipment
    
    
    39,169,489
    
    
    
    40,527,270OTHER ASSETSRestricted cash
    
    
    171,464
    
    
    
    Loan origination fees, net of amortization
    
    
    428,216
    
    
    
    475,796Total other assets
    
    
    599,680
    
    
    
    475,796TOTAL ASSETS
    
    $
    50,432,812
    
    
    $
    54,519,306LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable:Trade
    
    $
    485,543
    
    
    $
    942,768Related party
    
    
    167,438
    
    
    
    164,971Construction  related party
    
    
    
    
    
    
    2,519,733Derivative instruments
    
    
    2,442
    
    
    
    2,533,251Current portion of long-term debt
    
    
    2,403,977
    
    
    
    1,863,675Accrued interest
    
    
    17,166
    
    
    
    209,375Accrued liabilities
    
    
    211,842
    
    
    
    149,901Total current liabilities
    
    
    3,288,408
    
    
    
    8,383,674LONG-TERM LIABILITIESLong-term debt, less current portion above
    
    
    27,147,528
    
    
    
    27,766,964Total liabilities
    
    
    30,435,936
    
    
    
    36,150,638MEMBERS EQUITYContributed capital
    
    
    26,230,096
    
    
    
    26,230,096Less subscriptions receivable
    
    
    
    
    
    
    (2,500,000
    )Accumulated deficit
    
    
    (6,233,220
    )
    
    
    (5,361,428
    )Total members equity
    
    
    19,996,876
    
    
    
    18,368,668TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    50,432,812
    
    
    $
    54,519,306
   3




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2007REVENUESBiodiesel and by product sales  related party
    
    $
    17,075,895
    
    
    $
    21,611,772
    
    
    $
    
    
    
    $
    Tolling services  related party
    
    
    
    
    
    
    24,843
    
    
    
    
    
    
    
    Incentive funds
    
    
    3,025,398
    
    
    
    4,548,482
    
    
    
    
    
    
    
    Total revenues
    
    
    20,101,293
    
    
    
    26,185,097
    
    
    
    
    
    
    
    COST OF SALESMaterials, labor and overhead
    
    
    19,407,182
    
    
    
    25,685,459
    
    
    
    
    
    
    
    Net (gains) losses on derivative instruments
    
    
    (239,037
    )
    
    
    53,081
    
    
    
    
    
    
    
    Total cost of sales
    
    
    19,168,145
    
    
    
    25,738,540
    
    
    
    
    
    
    
    Gross profit
    
    
    933,148
    
    
    
    446,557
    
    
    
    
    
    
    
    OPERATING EXPENSESConsulting and professional fees
    
    
    65,365
    
    
    
    146,795
    
    
    
    84,699
    
    
    
    138,950Office and administrative expenses
    
    
    116,581
    
    
    
    251,365
    
    
    
    231,803
    
    
    
    245,267Total operating expenses
    
    
    181,946
    
    
    
    398,160
    
    
    
    316,502
    
    
    
    384,217OTHER INCOME (EXPENSE)Interest income
    
    
    8,460
    
    
    
    35,489
    
    
    
    1,031
    
    
    
    1,905Interest expense
    
    
    (419,830
    )
    
    
    (957,378
    )
    
    
    
    
    
    
    Net gains on derivative instruments
    
    
    
    
    
    
    
    
    
    
    75,831
    
    
    
    75,831Other income
    
    
    1,700
    
    
    
    1,700
    
    
    
    1,000
    
    
    
    1,000Total other income (expense)
    
    
    (409,670
    )
    
    
    (920,189
    )
    
    
    77,862
    
    
    
    78,736NET INCOME (LOSS)
    
    $
    341,532
    
    
    $
    (871,792
    )
    
    $
    (238,640
    )
    
    $
    (305,481
    )BASIC AND DILUTED INCOME (LOSS) PER UNIT
    
    $
    11.47
    
    
    $
    (29.32
    )
    
    $
    (8.75
    )
    
    $
    (11.24
    )WEIGHTED AVERAGE UNITS OUTSTANDING,
BASIC AND DILUTED
    
    
    29,779
    
    
    
    29,738
    
    
    
    27,279
    
    
    
    27,171
   4




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
STATEMENTS OF CASH FLOWS
 Six Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (871,792
    )
    
    $
    (305,481
    )Adjustments to reconcile net loss to net cash
provided by operating activitiesDepreciation
    
    
    1,092,292
    
    
    
    7,224Amortization
    
    
    47,580
    
    
    
    Effects of changes in operating assets and liabilitiesMargin deposits
    
    
    3,007,510
    
    
    
    (728,680
    )Accounts receivable  related party
    
    
    (815,810
    )
    
    
    Other receivables
    
    
    144,539
    
    
    
    (14,057
    )Incentive receivables
    
    
    (942,241
    )
    
    
    Inventory
    
    
    635,467
    
    
    
    (4,035
    )Prepaid expenses
    
    
    (828,468
    )
    
    
    (18,187
    )Derivative instruments
    
    
    (2,530,809
    )
    
    
    552,849Accounts payable
    
    
    (474,491
    )
    
    
    62,086Accrued liabilities
    
    
    (130,268
    )
    
    
    Net cash used in operating activities
    
    
    (1,666,491
    )
    
    
    (448,281
    )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
    
    
    (20,700
    )
    
    
    (15,782,680
    )Increase in restricted cash
    
    
    (96,120
    )
    
    
    Net cash provided by (used in) investing activities
    
    
    169,370
    
    
    
    (15,757,680
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from long-term debt
    
    
    939,540
    
    
    
    16,699,146Payments on long-term debt
    
    
    (1,094,019
    )
    
    
    (5,000
    )Capital contributions
    
    
    
    
    
    
    650,000Net cash provided by (used in) financing activities
    
    
    (154,479
    )
    
    
    17,344,146NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (1,651,600
    )
    
    
    1,138,185CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    2,011,841
    
    
    
    79,316CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    360,241
    
    
    $
    1,217,501
   5




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 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




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 Derivative Instruments and Hedging Activities
     Inventories
  Property and Equipment
   YearsLand improvements
    
    
    20  40Office equipment
    
    
    5  10Office building
    
    
    30Plant and process equipment
    
    
    10  40Vehicles
    
    
    5  7
    7




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 Loan Origination Fees
  Stock-Based Compensation
 Share-Based
Payment Accounting for Stock Issued to Employees,
 Black-Scholes-Merton
 Income Taxes
  Earnings (Loss) Per Unit
  Cost of Sales
   8




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 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




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 NOTE 3  INVENTORY
  June 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)Raw material
    
    $
    969,456
    
    
    $
    1,758,762Work in process
    
    
    1,280,712
    
    
    
    1,150,688Finished goods
    
    
    1,554,342
    
    
    
    1,530,527Total
    
    $
    3,804,510
    
    
    $
    4,439,977
 NOTE 4  LONG-TERM DEBT AND FINANCING
  June 30,
    
    
    December 31,2008
    
    
    2007(UNAUDITED)Note payable to Marshall BankFirst  see details below
    
    $
    29,203,099
    
    
    $
    29,248,708Note payable to the Iowa Department of Economic
Development  see details below
    
    
    330,000
    
    
    
    360,000Note payable to Hodge Material Handling  see
details below
    
    
    18,406
    
    
    
    21,931Total
    
    
    29,551,505
    
    
    
    29,630,639Less current portion
    
    
    2,403,977
    
    
    
    1,863,675Long-term portion
    
    $
    27,147,528
    
    
    $
    27,766,964
  2009
    
    $
    2,403,9762010
    
    
    2,777,4582011
    
    
    2,919,8192012
    
    
    3,059,7822013
    
    
    18,290,470Later
    
    
    100,000Total
    
    $
    29,551,505
   10




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
     NOTE 5  MEMBERS EQUITY
     11




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 NOTE 6  CONCENTRATION OF CREDIT RISK
  NOTE 7  CASH FLOW DISCLOSURES
  Six Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007Cash paid for interest
    
    $
    1,149,587
    
    
    $
    
  Six Months Ended
    
    
    Six Months EndedJune 30, 2008
    
    
    June 30, 2007Construction in progress in
accounts payable and accrued
interest
    
    $
    
    
    
    $
    2,718,400Loan 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




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 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
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsJune 30, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Financial assets:Cash equivalents
    
    $
    529,196
    
    
    $
    529,196
    
    
    $
    
    
    
    $
    Financial liabilities:Commodity derivatives
    
    $
    2,442
    
    
    $
    
    
    
    $
    2,442
    
    
    $
    
  NOTE 11  SUBSEQUENT EVENT
   13




---



##### Table of Contents



WESTERN DUBUQUE BIODIESEL, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2008
 NOTE 12  UNCERTAINTY
     14




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operations
  Cautionary Statements Regarding Forward-Looking Statements
  
    
    Changes in interest rates or the availability 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;
 
    
    Continued higher than average prices of vegetable oils, particularly soybean oil, and/or
increases in the prices of other feedstock;
 
    
    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;
 
    
    Our ability to enter into toll manufacturing agreements or other arrangements that shift
responsibility for feedstock procurement and costs to other parties;
 
    
    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;
 
    
    Total 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




---



##### Table of Contents



Overview
 co-product,
     16




---



##### Table of Contents



Results of Operations for the Three Months Ended June 30, 2008
  Quarter EndedJune 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    20,101,293
    
    
    
    100.00
    %Cost of Sales
    
    $
    19,168,145
    
    
    
    95.36
    %Gross Profit (Loss)
    
    $
    933,148
    
    
    
    4.64
    %Operating Expenses
    
    $
    181,946
    
    
    
    0.91
    %Other Income (Expense)
    
    $
    (409,670
    )
    
    
    (2.04
    )%Net Income
    
    $
    341,532
    
    
    
    1.69
    %
 Revenues
  Quarter EndedJune 30, 2008Revenue Sources
    
    Amount
    
    
    PercentBiodiesel and Glycerin Sales
    
    $
    17,075,895
    
    
    
    84.95
    %Tolling Services
    
    $
    0
    
    
    
    0.0
    %Incentive funds
    
    $
    3,025,398
    
    
    
    15.05
    %Total Revenues
    
    $
    20,101,293
    
    
    
    100.00
    %
 Cost of Sales
  Operating Expenses
  Other Income (Expenses)
   17




---



##### Table of Contents



Results of Operations for the Six Months Ended June 30, 2008
  Six Months EndedJune 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    26,185,097
    
    
    
    100.00
    %Cost of Sales
    
    $
    25,738,540
    
    
    
    98.29
    %Gross Profit (Loss)
    
    $
    446,557
    
    
    
    1.71
    %Operating Expenses
    
    $
    398,160
    
    
    
    1.52
    %Other Income (Expense)
    
    $
    (920,189
    )
    
    
    (3.51
    )%Net Income (Loss)
    
    $
    (871,792
    )
    
    
    (3.32
    )%
 Revenues
  Six Months EndedJune 30, 2008Revenue Sources
    
    Amount
    
    
    PercentBiodiesel and Glycerin Sales
    
    $
    21,611,772
    
    
    
    82.53
    %Tolling Services
    
    $
    24,843
    
    
    
    0.1
    %Incentive funds
    
    $
    4,548,482
    
    
    
    17.37
    %Total Revenues
    
    $
    26,185,097
    
    
    
    100.00
    %
  Cost of Sales
    18




---



##### Table of Contents



Operating Expenses
  Other Income (Expenses)
  Cash Flows
 Cash Flow from Operating Activities.
 Cash Flow from Investing Activities.
 Cash Flow from Financing Activities.
  19




---



##### Table of Contents



Changes in Financial Condition for the Six Months Ended June 30, 2008
  June 30, 2008
    
    
    December 31, 2007Current Assets
    
    $
    10,663,643
    
    
    $
    13,516,240Current Liabilities
    
    $
    3,288,408
    
    
    $
    8,383,674Long Term Liabilities
    
    $
    27,147,528
    
    
    $
    27,766,964Total Members Equity
    
    $
    19,996,876
    
    
    $
    18,368,668
 Current Assets.
 Current Liabilities.
 Long-Term Debt.
 Members Equity.
 Plan of Operations for the Next 12 Months
  Plant Operations
     20




---



##### Table of Contents



Operating Budget and Financing of Plant Operations
  Critical Accounting Estimates
  Liquidity and Capital Resources
  Sources of Funds
 Equity Financing.
 Debt Financing
  21




---



##### Table of Contents



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




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures about Market Risks
  
 Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   23




---



##### Table of Contents



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. non-compliance
 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.
 If the provisions of the VEETC that apply to biodiesel are not extended past December 31,
2008, the demand for biodiesel would likely be significantly reduced.
  24




---



##### Table of Contents



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
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to Security Holders
  Proposal
 Director Elections
    
    For
    
    
    Against
    
    
    AbstainEd Recker
    
    
    10,582
    
    
    
    55
    
    
    
    235Denny Mauser
    
    
    10,461
    
    
    
    235
    
    
    
    140George Davis
    
    
    10,546
    
    
    
    50
    
    
    
    265
 
 Item 5. Other Information
   25




---



##### Table of Contents



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: August 14, 2008
    
    /s/ Bruce Klostermann

Bruce KlostermannVice Chairman and Director(Principal Executive Officer)Date: August 14, 2008
    
    /s/ George DavisGeorge DavisTreasurer and Director(Principal Financial and Accounting Officer)
  26