##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the fiscal year ended September 30, 2010
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from  to
 Commission file number 000-53039
 FIRST UNITED ETHANOL, LLC
  Georgia
(State or other jurisdiction of 
incorporation or organization)
    
    20-2497196
(I.R.S. Employer Identification No.)4433 Lewis B. Collins Road, Pelham, Georgia
(Address of principal executive offices)
    
    31779
(Zip Code)
 (229) 522-2822
 o Yes þ No
 o Yes þ No
  þ Yes o No
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o Yes þ No
   DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



INDEX
 PagePART I
    
    
    4ITEM 1. BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    12ITEM 2. PROPERTIES
    
    
    14ITEM 3. LEGAL PROCEEDINGS
    
    
    14ITEM 4. REMOVED AND RESERVED
    
    
    14PART II
    
    
    14ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
    
    
    14ITEM 6. SELECTED FINANCIAL DATA
    
    
    16ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    16ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    28ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
    
    
    45ITEM 9A. CONTROLS AND PROCEDURES
    
    
    45ITEM 9B. OTHER INFORMATION
    
    
    46PART III
    
    
    46ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
    
    
    46ITEM 11. EXECUTIVE COMPENSATION
    
    
    46ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
    
    
    46ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    47ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    47PART IV
    
    
    47ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
    
    
    47SIGNATURES
    
    
    48Exhibit 10.3Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FORWARD LOOKING STATEMENTS
    
    
    Changes in our business strategy or capital improvements;
 
    
    Volatility of corn, natural gas, ethanol, unleaded gasoline, oil, distillers grain
and other commodities prices;
 
    
    Limitations and restrictions contained in the instruments and agreements governing
our indebtedness;
 
    
    Our ability to generate sufficient liquidity to fund our operations, debt service
requirements and capital expenditures;
 
    
    The results of our hedging transactions and other risk management strategies;
 
    
    Our anticipated inelastic demand for corn, as it is the only available feedstock for
our plant;
 
    
    Changes in the environmental regulations or in our ability to comply with the
environmental regulations that apply to our plant site and our operations;
 
    
    The effects of mergers or consolidations in the ethanol industry;
 
    
    Changes in general economic conditions or the occurrence of certain events causing
an economic impact in the agriculture, oil or automobile industries;
 
    
    Changes in the availability of credit to support the level of liquidity necessary to
implement our risk management activities;
 
    
    Changes in or elimination of federal and/or state laws (including the elimination of
any federal and/or state ethanol tax incentives);
 
    
    Overcapacity within the ethanol industry;
 
    
    Limitations on the demand for ethanol resulting from the blend wall which limits
the amount of ethanol blended into the national gasoline pool based on current 10
percent blend rate in standard vehicles;
 
    
    Changes and advances in ethanol production technology that may make it more
difficult for us to compete with other ethanol plants utilizing such technology;
 
    
    Our reliance on key management personnel;
 
    
    The development of infrastructure related to the sale and distribution of ethanol;
and
 
    
    Competition in the ethanol industry and from other alternative fuel additives.
   3




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AVAILABLE INFORMATION
 www.firstunitedethanol.com
 
 PART I
 
 ITEM 1.
    
    BUSINESS.
 Overview
   rd
  4




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Deregistration
     Principal Products and Markets
  Ethanol
   Distillers Grains
   5




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##### Table of Contents



Ethanol and Distillers Grains Markets
 Distribution of Principal Products
   Distribution of Principal Products
  Ethanol Distribution
  Distillers Grains Distribution
   6




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##### Table of Contents



New Products and Services
  Sources and Availability of Raw Materials
 Corn Supply
     Utilities
 Natural Gas
 Electricity
  7




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##### Table of Contents



Water
  Patents, Trademarks, Licenses, Franchises and Concessions
  Seasonality Sales
  Competition
    8




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##### Table of Contents



U.S. FUEL ETHANOL PRODUCTION CAPACITY
BY TOP PRODUCERS
Producers of Approximately 400
 million gallons per year (mmgy) or more
 Under Construction/Current Capacity
    
    
    ExpansionsCompany
    
    (mmgy)
    
    
    (mmgy)POET Biorefining
    
    
    1,629.0
    
    
    
    5.0Archer Daniels Midland
    
    
    1,450.0
    
    
    
    275Valero Renewable Fuels
    
    
    1,130.0Green Plains Renewable Energy
    
    
    657.0
  Competition from Alternative Fuels
   Distillers Grains Competition
   Research and Development
   9




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Governmental Regulation and Federal Ethanol Supports
 Federal Ethanol Supports
      10




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Effect of Governmental Regulation
    Employees
   11




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##### Table of Contents



Dependence on a Few Major Customers
  Costs and Effects of Compliance with Environmental Laws
  Alcohol Fuel Producers Permit.
 SPCC and RMP.
  Air Permits.
  
 ITEM 1A. RISK FACTORS.
 You should carefully read and consider the risks and uncertainties below and the other
information contained in this report. 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 operation.
  12




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##### Table of Contents



Risks Relating to Our Business
 If the Federal Volumetric Ethanol Excise Tax Credit (VEETC) expires on December 31, 2011, it
could negatively impact our profitability
 We have a significant amount of debt, and our existing debt financing agreements contain, and
our future debt financing agreements may contain, restrictive covenants that limit distributions
and impose restrictions on the operation of our business.
 Our financial performance is significantly dependent on corn and ethanol prices and generally
we will not be able to pass on increases in input prices to our customers.
 The spread between ethanol and corn prices can vary significantly.
 Risks Related to Ethanol Industry
 The California Low Carbon Fuel Standard may decrease demand for corn based ethanol which could
negatively impact our profitability.
 Overcapacity within the ethanol industry could cause an oversupply of ethanol and a decline in
ethanol prices.
 Risks Related to Regulation and Governmental Action
 Changes in environmental regulations or violations of the regulations could be expensive and
reduce our profitability.
  13




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ITEM 2.
    
    PROPERTIES.
  
    
    A process building, which contains processing equipment, laboratories, a control
room and offices;
 
    
    A water treatment building containing equipment for water supply and treatment;
 
    
    A grain receiving and shipping building; and
 
    
    An administrative building, along with furniture and fixtures, office equipment
and computer and telephone systems.
  Item 7  Managements Discussion and Analysis of
Financial Condition and Results of Operations
 
 ITEM 3.
    
    Legal Proceedings.
  
 ITEM 4.
    
    REMOVED AND RESERVED.
 
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS ISSUER PURCHASES OF
EQUITY SECURITIES.
    14




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# ofQuarter
    
    Low Price
    
    
    High Price
    
    
    Average Price
    
    
    Units Traded2009 1st
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 2nd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 3rd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 4th
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 1st
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 2nd
    
    $
    700
    
    
    $
    700
    
    
    $
    700
    
    
    
    502010 3rd
    
    $
    650
    
    
    $
    650
    
    
    $
    650
    
    
    
    202010 4th
    
    $
    500
    
    
    $
    500
    
    
    $
    500
    
    
    
    50
  # ofSellers Quarter
    
    Low Price
    
    
    High Price
    
    
    Average Price
    
    
    Units Listed2009 1st
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    
    502009 2nd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 3rd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 4th
    
    $
    770.00
    
    
    $
    770.00
    
    
    $
    770.00
    
    
    
    502010 1st
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    
    1002010 2nd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 3rd
    
    $
    800.00
    
    
    $
    1,000.00
    
    
    $
    900.00
    
    
    
    2152010 4th
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    $
    1,000.00
    
    
    
    60# ofBuyers Quarter
    
    Low Price
    
    
    High Price
    
    
    Average Price
    
    
    Units Listed2009 1st
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 2nd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 3rd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2009 4th
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 1st
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 2nd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 3rd
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    2010 4th
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    
    
  15




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Number of securitiesremaining availablefor future issuanceNumber of securities to
    
    
    Weighted-average
    
    
    under equitybe issued upon exercise
    
    
    exercise price of
    
    
    compensation plansof outstanding options,
    
    
    outstanding options,
    
    
    (excluding securitieswarrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    0
    
    
    
    0
    
    
    
    0Equity compensation
plans not approved
by security holders
    
    
    951
    
    
    $
    1,000
    
    
    
    581Total
    
    
    951
    
    
    $
    1,000
    
    
    
    581
 Item 7  Managements Discussion and Analysis of Financial
Condition and Results of Operations.
 
 ITEM 6.
    
    SELECTED FINANCIAL DATA
  
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
   16




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Results of Operations
 Comparison of Fiscal Years Ended September 30, 2010 and 2009
 2010
    
    
    2009Income Statement Data
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Revenues
    
    $
    203,485,521
    
    
    
    100.0
    %
    
    $
    166,561,773
    
    
    
    100.0
    %Cost of Goods Sold
    
    $
    192,493,946
    
    
    
    94.60
    %
    
    $
    178,695,057
    
    
    
    107.3
    %Gross Profit (Loss)
    
    $
    10,991,575
    
    
    
    5.40
    %
    
    $
    (12,133,284
    )
    
    
    (7.3
    )%General and Administrative Expenses
    
    $
    4,521,297
    
    
    
    2.22
    %
    
    $
    5,123,484
    
    
    
    3.1
    %Operating Income (Loss)
    
    $
    6,470,278
    
    
    
    3.18
    %
    
    $
    (17,256,768
    )
    
    
    (10.4
    )%Other (Expense)
    
    $
    (8,645,471
    )
    
    
    (4.25
    )%
    
    $
    (11,208,202
    )
    
    
    (6.7
    )%Net (Loss)
    
    $
    (2,175,193
    )
    
    
    (1.07
    )%
    
    $
    (28,464,970
    )
    
    
    (17.1
    )%
 Revenues
   Fiscal Year End
    
    
    Fiscal Year EndSeptember 30, 2010
    
    
    September 30, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesEthanol Sales
    
    $
    168,892,332
    
    
    
    83.00
    %
    
    $
    135,876,057
    
    
    
    81.58
    %Dried Distillers Grains Sales
    
    
    32,668,542
    
    
    
    16.05
    %
    
    
    29,947,009
    
    
    
    17.98
    %Wet Distillers Grains Sales
    
    
    1,622,821
    
    
    
    .80
    %
    
    
    370,878
    
    
    
    0.23
    %Other
    
    
    301,826
    
    
    
    .15
    %
    
    
    367,829
    
    
    
    0.21
    %Total Revenues
    
    $
    203,485,521
    
    
    
    100.0
    %
    
    $
    166,561,773
    
    
    
    100.0
    %
   17




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Ethanol
   Distillers Grains
     18




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##### Table of Contents



Carbon Dioxide
  Cost of Goods Sold
     General and Administrative Expenses
  Other (Expense)
  Net (Loss)
   19




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##### Table of Contents



Additional Information
  Twelve Months ended
    
    
    Twelve Months endedSeptember 30, 2010
    
    
    September 30, 2009Production:Ethanol sold (gallons)
    
    
    89,013,569
    
    
    
    79,537,767Dried distillers grains sold (tons)
    
    
    250,789
    
    
    
    214,039Wet distillers grains sold (tons)
    
    
    75,667
    
    
    
    7,342Revenues:Ethanol average price per gallon
    
    
    1.897
    
    
    
    1.708Dried distillers grains revenue per gallon of ethanol sold
    
    
    .367
    
    
    
    .376Wet distillers grains revenue per gallon of ethanol sold
    
    
    .018
    
    
    
    .005Other
    
    
    .007
    
    
    
    .005Total revenue per gallon of ethanol sold
    
    
    2.289
    
    
    
    2.094Costs:Corn cost per gallon of ethanol sold (including freight)
    
    
    1.582
    
    
    
    1.657Overhead and other direct costs per gallon of ethanol sold
    
    
    .510
    
    
    
    .589Total cost per gallon of ethanol sold
    
    
    2.092
    
    
    
    2.246
 Three Month Period Ended September 30, 2010 and 2009
  Quarter Ended
    
    
    Quarter EndedSeptember 30, 2010
    
    
    September 30, 2009Income Statement Data
    
    Amount
    
    
    %
    
    
    Amount
    
    
    %Revenues
    
    
    51,480,330
    
    
    
    100.00
    %
    
    
    46,337,542
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    50,224,044
    
    
    
    97.56
    %
    
    
    47,657,806
    
    
    
    102.85
    %Gross (Loss)
    
    
    1,256,286
    
    
    
    2.44
    %
    
    
    (1,320,264
    )
    
    
    (2.85
    )%General and
Administrative
Expenses
    
    
    1,354,157
    
    
    
    2.63
    %
    
    
    1,270,453
    
    
    
    2.74
    %Operating (Loss)
    
    
    (97,871
    )
    
    
    (0.19
    )%
    
    
    (2,590,717
    )
    
    
    (5.59
    )%Other (Expense)
    
    
    (3,246,304
    )
    
    
    (6.31
    )%
    
    
    (1,925,519
    )
    
    
    (4.16
    )%Net (Loss)
    
    
    (3,344,175
    )
    
    
    (6.50
    )%
    
    
    (4,516,236
    )
    
    
    (9.75
    )%
  20




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##### Table of Contents



Percentage of Increase (Decrease) forcomparison of Three Months EndedSeptember 30, 2010 toSeptember 30, 2009Production:Ethanol sold (gallons)
    
    2.1
    %Dried distillers grains sold (tons)
    
    16.7
    %Wet distillers grains sold (tons)
    
    376.2
    %Revenues:Ethanol average price per gallon
    
    8.7
    %Dried distillers grains revenue per gallon of ethanol sold
    
    13.4
    %Wet distillers grains revenue per gallon of ethanol sold
    
    180.0
    %Other Revenue
    
    (17.7
    %)Total revenue per gallon of ethanol sold
    
    8.9
    %Costs:Corn cost per gallon of ethanol sold (including freight)
    
    .6
    %Overhead and other direct costs per gallon of ethanol sold
    
    12.7
    %Total cost per gallon of ethanol sold
    
    3.6
    %
 Changes in Financial Condition for Fiscal Years Ended September 30, 2010 and 2009
     Liquidity and Capital Resources
   21




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rd
  Year ended September 30,2010
    
    
    2009Net cash from (used for) operating activities
    
    $
    7,896,288
    
    
    $
    (23,157,338
    )Net cash (used for) investing activities
    
    $
    (75,804
    )
    
    $
    (5,284,882
    )Net cash provided by (used for) financing activities
    
    $
    (7,234,018
    )
    
    $
    20,756,242
 Cash Flow From (Used For) Operations
  Cash Flow Used For Investing Activities
  Cash Flow From (Used In) Financing Activities
   22




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Financial Results
   Senior Credit Facility
        23




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##### Table of Contents



Subordinated Debt
   Other Notes Payable
   September 30,
    
    
    September 30,2010
    
    
    2009West LB Construction Loan, variable interest rates from 4.00% to 4.28%
    
    $
    92,200,000
    
    
    
    98,500,000Subordinated Fagen Note, interest rate of 4.0% through June 20, 2010
and 8% thereafter
    
    
    3,977,545
    
    
    
    3,977,545Subordinated debt facility, interest rate of 7.5%
    
    
    9,250,000
    
    
    
    9,850,000Notes payable John Deere Credit, interest rate of 5.3%
    
    
    136,244
    
    
    
    202,050115,563,789
    
    
    
    112,529,595Less current portion
    
    
    (11,081,911
    )
    
    
    (9,204,578
    )Long-term debt outstanding as of September 30:
    
    $
    94,481,878
    
    
    
    103,325,017
  24




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Critical Accounting Estimates
  Revenue Recognition
    Investment in Commodities Contracts, Derivative Instruments and Hedging Activities
       25




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##### Table of Contents



Balance Sheet
    
    September 30,
    
    
    September 30,Classification
    
    2010
    
    
    2009Futures and options contracts
    
    (Current Liabilities)
    
    $
    
    
    
    $
    (61,325
    )Interest rate swap
    
    (Current Liabilities)
    
    
    (525,658
    )
    
    
    (817,718
    )Interest rate swap
    
    (Non-Current Liabilities)
    
    
    (131,414
    )
    
    
    (954,004
    )
 Statement of Operations
    
    September 30,
    
    
    September 30,Classification
    
    2010
    
    
    2009Net realized and unrealized
gains (losses) related to
futures and options
contracts  ethanol
    
    Revenues
    
    $
    (13,780
    )
    
    $
    Net realized and unrealized
gains related to futures and
options contracts  corn
    
    Cost of Goods Sold
    
    
    51,203
    
    
    
    1,078,187Net realized and unrealized
(losses) related to the
interest rate swap
    
    Other non-operating (expense)
    
    
    (373,490
    )
    
    
    (2,485,401
    )
 Inventories
   26




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##### Table of Contents



Property and Equipment
  Buildings
    
    20 YearsPlant and Process Equipment
    
    5-20 YearsOffice Furniture and Equipment
    
    3-10 Years
   Fair Value of Financial Instruments
  Employees
  Off-Balance Sheet Arrangements
  
 ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   27




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##### Table of Contents



ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
  
 
     
  28




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##### Table of Contents



FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
 September 30, 2010
    
    
    September 30, 2009ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    586,466
    
    
    $
    Trade receivables, net of allowance for doubtful
accounts of approximately $30,000 and $53,500, respectively
    
    
    5,088,073
    
    
    
    4,080,745Due from broker
    
    
    457
    
    
    
    109,700Inventory
    
    
    9,859,841
    
    
    
    7,619,273Other assets
    
    
    1,100,281
    
    
    
    75,714Total current assets
    
    
    16,635,118
    
    
    
    11,885,432PROPERTY AND EQUIPMENTOffice building, furniture and equipment
    
    
    1,103,781
    
    
    
    808,949Land and improvements
    
    
    2,508,148
    
    
    
    1,000,000Plant buildings and equipment
    
    
    161,482,167
    
    
    
    163,069,329165,094,096
    
    
    
    164,878,278Less accumulated depreciation
    
    
    (17,553,797
    )
    
    
    (8,840,707
    )147,560,299
    
    
    
    156,037,571RESTRICTED CASH AND CERTIFICATES OF DEPOSIT
    
    
    2,779,643
    
    
    
    4,269,662FINANCING COSTS, net of amortization of $2,894,432 and $1,876,558
    
    
    3,723,702
    
    
    
    4,483,577TOTAL ASSETS
    
    $
    170,698,762
    
    
    $
    176,676,242LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESExcess of outstanding checks over bank balance
    
    $
    
    
    
    $
    81,555Revolving line of credit
    
    
    13,634,129
    
    
    
    13,784,129Current portion of long-term debt
    
    
    11,081,911
    
    
    
    9,204,578Current portion of capital lease obligations
    
    
    1,706,620
    
    
    
    1,019,029Current portion of interest rate swap liability
    
    
    525,658
    
    
    
    817,718Accounts payable and accrued expenses
    
    
    11,979,176
    
    
    
    9,243,647Accrued interest
    
    
    847,363
    
    
    
    615,625Deferred revenue
    
    
    411,423
    
    
    
    Derivative financial instruments
    
    
    
    
    
    
    61,325Total current liabilities
    
    
    40,186,280
    
    
    
    34,827,606INTEREST RATE SWAP LIABILITY
    
    
    131,414
    
    
    
    954,004CAPITAL LEASE OBLIGATIONS
    
    
    2,007,748
    
    
    
    3,073,996ACCRUED INTEREST
    
    
    1,374,686
    
    
    
    LONG-TERM DEBT
    
    
    94,481,878
    
    
    
    103,325,017TOTAL LIABILITIES
    
    
    183,182,006
    
    
    
    142,180,623COMMITMENTS AND CONTINGENCIESMEMBERS EQUITYMembership contributions, 81,984 units issued and outstanding
    
    
    77,422,691
    
    
    
    77,226,361Accumulated deficit
    
    
    (44,905,935
    )
    
    
    (42,730,742
    )Total members equity
    
    
    32,516,756
    
    
    
    34,495,619TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    170,698,762
    
    
    $
    176,676,242
 See Notes to Consolidated Financial Statements.
  29




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
 Year ending
    
    
    Year endingSeptember 30, 2010
    
    
    September 30, 2009Revenues
    
    $
    203,485,521
    
    
    $
    166,561,773Cost of goods sold
    
    
    192,493,946
    
    
    
    178,695,057Gross profit (loss)
    
    
    10,991,575
    
    
    
    (12,133,284
    )General and administrative expenses
    
    
    4,521,297
    
    
    
    5,123,484Operating income (loss)
    
    
    6,470,278
    
    
    
    (17,256,768
    )Other income (expense)Unrealized gain (loss) on interest rate swap
    
    
    1,114,650
    
    
    
    (1,140,395
    )Interest expense
    
    
    (9,767,774
    )
    
    
    (10,077,221
    )Interest income
    
    
    7,653
    
    
    
    9,414(8,645,471
    )
    
    
    (11,208,202
    )Net loss
    
    $
    (2,175,193
    )
    
    $
    (28,464,970
    )Net loss per unit (Basic and Diluted)
    
    $
    (26.53
    )
    
    $
    (361.82
    )Weighted average units outstanding
    
    
    81,984
    
    
    
    78,671
 See Notes to Consolidated Financial Statements.
  30




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year ending
    
    
    Year endingSeptember 30, 2010
    
    
    September 30, 2009CASH FLOWS FROM OPERATING ACTIVITIESNet (loss)
    
    $
    (2,175,193
    )
    
    $
    (28,464,970
    )Adjustments to reconcile net (loss) to net
cash provided by (used in) operating activities:Depreciation
    
    
    8,698,530
    
    
    
    8,800,499Amortization
    
    
    1,017,875
    
    
    
    1,002,161Non-cash compensation expense
    
    
    196,330
    
    
    
    146,175Loss on sale of equipment
    
    
    5,815
    
    
    
    Unrealized (gain) loss on interest rate swap
    
    
    (1,114,650
    )
    
    
    1,140,395Provision (recovery) of doubtful receivables
    
    
    (7,500
    )
    
    
    53,468Changes in assets and liabilities:(Increase) in trade receivables
    
    
    (999,828
    )
    
    
    (4,134,213
    )(Increase) decrease in due from broker
    
    
    109,243
    
    
    
    (109,700
    )(Increase) in inventory
    
    
    (2,240,568
    )
    
    
    (3,077,174
    )(Increase) decrease in other assets
    
    
    (1,024,567
    )
    
    
    1,166,696Increase in accounts payable and
accrued expenses
    
    
    3,474,279
    
    
    
    572,693Increase (decrease) in accrued interest payable
    
    
    1,606,424
    
    
    
    (314,693
    )Increase in deferred revenue
    
    
    411,423
    
    
    
    Increase (decrease) in derivative financial instruments
    
    
    (61,325
    )
    
    
    61,325Net cash provided by (used in) operating activities
    
    
    7,896,288
    
    
    
    (23,157,338
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of certificates of deposit
    
    
    (50,000
    )
    
    
    Proceeds received from sale of euipment
    
    
    755
    
    
    
    Purchase of property and equipment, net of returns
    
    
    (227,828
    )
    
    
    (2,259,314
    )Release (funding) of restricted cash balance
    
    
    201,269
    
    
    
    (3,025,568
    )Net cash (used in) investing activities
    
    
    (75,804
    )
    
    
    (5,284,882
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    
    
    
    
    18,988,632Payment of financing costs
    
    
    (258,000
    )
    
    
    Repayment of long-term debt and capital lease obligations
    
    
    (6,744,463
    )
    
    
    (2,235,624
    )Proceeds from revolving line of credit
    
    
    
    
    
    
    2,384,129Payments on revolving line of credit
    
    
    (150,000
    )
    
    
    (500,000
    )Proceeds from sale of units
    
    
    
    
    
    
    2,037,550Excess of outstanding checks over bank balance
    
    
    (81,555
    )
    
    
    81,555Net cash provided by (used in) financing activities
    
    
    (7,234,018
    )
    
    
    20,756,242Increase (decrease) in cash and cash equivalents
    
    
    586,466
    
    
    
    (7,685,978
    )Cash and cash equivalents, beginning of period
    
    
    
    
    
    
    7,685,978Cash and cash equivalents, end of period
    
    $
    586,466
    
    
    $
    SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest
    
    $
    7,143,475
    
    
    $
    9,389,753SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIESRepayment of notes and interest payable paid by Bond Trustee
    
    $
    1,338,750
    
    
    $
    900,000Assets acquired under capital lease or financing arrangement
    
    
    
    
    
    
    4,612,472Accrued expenses reclassed to subordinated debt
    
    
    
    
    
    
    3,977,544Deferred revenue applied to property & equipment
    
    
    
    
    
    
    50,000
 See Notes to Consolidated Financial Statements.
  31




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
STATEMENT OF CHANGES IN MEMBERS EQUITY
 Membership
    
    
    AccumulatedUnits
    
    
    contributions
    
    
    (deficit)
    
    
    TotalBalance, September 30, 2008
    
    
    76,610
    
    
    $
    75,042,636
    
    
    $
    (14,265,772
    )
    
    $
    60,776,864Unit-based compensation expense for unit options to employees
    
    
    
    
    
    
    146,175
    
    
    
    
    
    
    
    146,175Membership units issued
    
    
    5,369
    
    
    
    2,032,550
    
    
    
    
    
    
    
    2,032,550Membership unit options exercised
    
    
    5
    
    
    
    5,000
    
    
    
    
    
    
    
    5,000Net loss for the year ended September 30, 2009
    
    
    
    
    
    
    
    
    
    
    (28,464,970
    )
    
    
    (28,464,970
    )Balance, September 30, 2009
    
    
    81,984
    
    
    $
    77,226,361
    
    
    $
    (42,730,742
    )
    
    $
    34,495,619Unit-based compensation expense for unit options to employees
    
    
    
    
    
    
    196,330
    
    
    
    
    
    
    
    196,330Net loss for the year ended September 30, 2010
    
    
    
    
    
    
    
    
    
    
    (2,175,193
    )
    
    
    (2,175,193
    )Balance, September 30, 2010
    
    
    81,984
    
    
    $
    77,422,691
    
    
    $
    (44,905,935
    )
    
    $
    32,516,756
 See Notes to Consolidated Financial Statements.
  32




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  NOTE 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 Nature of Business
   Basis of Presentation
  Principles of Consolidation
  Use of Estimates
  Cash and Cash Equivalents and Restricted Cash and Certificates of Deposit
  Trade Accounts Receivable
  Inventories
  Financing Costs
   33




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  Property and Equipment
  Buildings
    
    20 YearsPlant and Process Equipment
    
    5-20 YearsOffice Furniture and Equipment
    
    3-10 Years
   Investment in Commodities Contracts, Derivative Instruments and Hedging Activities
       34




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
      Balance Sheet
    
    September 30,
    
    
    September 30,Classification
    
    2010
    
    
    2009Futures and options contracts
    
    (Current Liabilities)
    
    $
    
    
    
    $
    (61,325
    )Interest rate swap
    
    (Current Liabilities)
    
    
    (525,658
    )
    
    
    (817,718
    )Interest rate swap
    
    (Non-Current Liabilities)
    
    
    (131,414
    )
    
    
    (954,004
    )
 Statement ofOperations
    
    September 30,
    
    
    September 30,Classification
    
    2010
    
    
    2009Net realized and unrealized
(Losses) related to futures
and options contracts 
ethanol
    
    Revenue
    
    $
    (13,780
    )
    
    $
    Net realized and unrealized
gains related to futures and
options contracts  corn
    
    Cost of Goods Sold
    
    
    51,203
    
    
    
    1,078,187Net realized and unrealized
(losses) related to the
interest rate swap
    
    Other non-operating (expense)
    
    
    (373,490
    )
    
    
    (2,485,401
    )
 Revenue Recognition
    35




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##### Table of Contents



FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  Revenue Recognition
  2010
    
    
    2009Ethanol
    
    $
    168,878,551
    
    
    $
    135,876,057Distillers Grain
    
    
    34,291,364
    
    
    
    30,317,887Other
    
    
    315,606
    
    
    
    367,829Total
    
    $
    203,485,521
    
    
    $
    166,561,773
  Net Loss per Membership Unit
  Income Taxes
   Fair Value of Financial Instruments
  Risks and Uncertainties
     36




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  NOTE 2. INVENTORIES
  September 30,
    
    
    September 30,2010
    
    
    2009Corn
    
    $
    4,943,188
    
    
    $
    3,958,543Denaturant and chemical supplies
    
    
    432,434
    
    
    
    287,640Work in process
    
    
    1,902,712
    
    
    
    1,095,000Ethanol
    
    
    1,618,807
    
    
    
    1,649,895Distiller grains
    
    
    962,700
    
    
    
    628,195Total
    
    $
    9,859,841
    
    
    $
    7,619,273
 NOTE 3. MEMBERS EQUITY
      37




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##### Table of Contents



FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  NOTE 4. RELATED PARTIES
   NOTE 5. UNIT OPTION PLAN
      2009Expected volatility
    
    
    66
    %Expected dividends
    
    
    Expected term (in years)
    
    
    6Risk-free interest rate
    
    
    2.96
    %
  38




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##### Table of Contents



FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
   Weighted-Weighted-
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    ContractualOptions
    
    Units
    
    
    Price
    
    
    TermOutstanding at September 30, 2008
    
    
    573
    
    
    
    1,000
    
    
    
    9.25Granted
    
    
    383
    
    
    
    1,000
    
    
    
    10Exercised
    
    
    (5
    )
    
    
    1,000
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    Outstanding at September 30, 2009
    
    
    951
    
    
    
    1,000
    
    
    
    8.80Outstanding at September 30, 2010
    
    
    951
    
    
    
    1,000
    
    
    
    7.80Exercisable at September 30, 2010
    
    
    682
    
    
    $
    1,000
    
    
    $
    
  NOTE 6. LEASES
    September 30,
    
    
    September 30,2010
    
    
    2009De Lage Landen Financial Services,
60 months, interest rate of 7.5%
    
    $
    96,778
    
    
    $
    126,327Georgia Power Substation lease, 36 months,
interest rate of 5.85%
    
    
    1,299,364
    
    
    
    1,299,364Natural Gas Facilities lease, 80 months,
interest rate of 6.59%
    
    
    2,318,226
    
    
    
    2,667,3343,714,368
    
    
    
    4,093,025Less current portion
    
    
    (1,706,620
    )
    
    
    (1,019,029
    )$
    2,007,748
    
    
    $
    3,073,996
  39




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  Year ending September 30:2011
    
    $
    1,927,3592012
    
    
    554,7432013
    
    
    548,4062014
    
    
    516,7222015
    
    
    516,722Thereafter
    
    
    167,593Total future minimum lease payments
    
    
    4,231,545Amounts representing interest
    
    
    (517,177
    )Present value of future net minimum lease payments
    
    $
    3,714,368
  Year ending September 30:2011
    
    $
    1,874,0002012
    
    
    1,042,0002013
    
    
    447,0002014
    
    
    447,0002015
    
    
    447,000Thereafter
    
    
    522,000Total minimum operating lease payments
    
    $
    4,779,000
 NOTE 7. DEBT FINANCING ARRANGEMENTS
  September 30,
    
    
    September 30,2010
    
    
    2009West LB Term Loan, variable interest rates from 4.00% - 4.28%
    
    $
    92,200,000
    
    
    $
    98,500,000Subordinated Fagen note, 4% through June 30, 2010 and 8% thereafter
    
    
    3,977,545
    
    
    
    3,977,545Subordinated debt facility, interest rate of 7.5%, described below
    
    
    9,250,000
    
    
    
    9,850,000Notes payable John Deere Credit, interest rate of 5.3%, described below
    
    
    136,244
    
    
    
    202,050105,563,789
    
    
    
    112,529,595Less current portion
    
    
    (11,081,911
    )
    
    
    (9,204,578
    )$
    94,481,878
    
    
    $
    103,325,017
  40




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  Year ending September 30:2011
    
    $
    11,081,9112012
    
    
    6,996,8782013
    
    
    6,970,0002014
    
    
    6,715,0002015
    
    
    67,560,000Thereafter
    
    
    6,240,000Total
    
    $
    105,563,789
 West LB Credit Arrangement  Senior Debt
        41




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##### Table of Contents



FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
   Subordinated Debt Facility
  Subordinated Fagen Note
  Other Notes Payable
  NOTE 8. FAIR VALUE MEASUREMENTS
   42




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
   Level 1 Observable inputs -
    
    unadjusted quoted prices in active
markets for identical assets and
liabilities; Level 2 Observable inputs -
    
    other than quoted prices included
in Level 1 that are observable for
the asset or liability through
corroboration with market data; and Level 3 Unobservable inputs -
    
    includes amounts derived from
valuation models where one or more
significant inputs are
unobservable.
   Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Investments in marketable
securities, included in
restricted cash
    
    $
    258,476
    
    
    $
    
    
    
    $
    
    
    
    $
    258.476Total assets
    
    $
    258,476
    
    
    $
    
    
    
    $
    
    
    
    $
    258,476Liabilities:Derivative instruments:Interest rate swap
    
    $
    
    
    
    $
    657,072
    
    
    $
    
    
    
    $
    657,072Total liabilities
    
    $
    
    
    
    $
    657,072
    
    
    $
    
    
    
    $
    657,072
  Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Investments in
marketable securities,
included in restricted
cash
    
    $
    1,597,109
    
    
    $
    
    
    
    $
    
    
    
    $
    1,597,109Total assets
    
    $
    1,597,109
    
    
    $
    
    
    
    $
    
    
    
    $
    1,597,109Liabilities:Derivative instruments:Commodity positions
    
    $
    61,325
    
    
    $
    
    
    
    $
    
    
    
    $
    61,325Interest rate swap
    
    
    
    
    
    
    1,771,722
    
    
    
    
    
    
    
    1,771,722Total liabilities
    
    $
    61,325
    
    
    $
    1,771,722
    
    
    $
    
    
    
    $
    1,833,047
  43




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FIRST UNITED ETHANOL, LLC AND SUBSIDIARY
  NOTE 9. COMMITMENTS AND CONTINGENCIES
 Liquidity
  Commitments and Major Customer
   NOTE 10. GOING CONCERN
  rd
  44




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ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES.
 Disclosure Controls and Procedures
   Internal Control Over Financial Reporting
 Inherent Limitations Over Internal Controls
       45




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Managements Annual Report on Internal Control Over Financial Reporting
 
  Changes in Internal Control Over Financial Reporting
  
 ITEM 9B.
    
    OTHER INFORMATION.
  
 PART III.
  
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   46




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ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing10.1
    
    
    Fourth Amendment to Accounts Agreement between
Southwest Georgia Ethanol, LLC and WestLB Ag dated
June 7, 2010.
    
    
    110.2
    
    
    Sixth Amendment to Senior Credit Agreement between
Southwest Georgia Ethanol, LLC and WestLB Ag dated
June 7, 2010.
    
    
    110.3
    
    
    Grain Brokerage Agreement between Southwest Georgia
Ethanol, LLC and Palmetto Grain Brokerage, LLC
dated December 15, 2009.
    
    
    *31.1
    
    
    Certificate pursuant to 17 CFR 240 15d-14(a)
    
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 15d-14(a)
    
    
    *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *
 
 (1)
    
    Incorporated by reference to Exhibit of the same number filed with our quarterly report on
Form 10-Q filed with the Securities and Exchange Commission on August 16, 2010.(*)
    
    Filed herewith.  47




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SIGNATURES
  FIRST UNITED ETHANOL, LLCDate:      December 29, 2010
    /s/ Murray CampbellMurray CampbellChief Executive Officer and DirectorDate:      December 29, 2010
    /s/ Lawrence KampLawrence KampChief Financial Officer  Date:      December 29, 2010
    /s/ Murray CampbellMurray CampbellChief Executive Officer and DirectorDate:      December 29, 2010
    /s/ Lawrence KampLawrence KampChief Financial OfficerDate:      December 29, 2010
    /s/ Miley AdamsMiley Adams, DirectorDate:      December 29, 2010
    /s/ Steve CollinsSteve Collins, Treasurer and DirectorDate:Mark Glass, DirectorDate:      December 29, 2010
    /s/ Donald ShirahDonald Shirah, DirectorDate:      December 29, 2010
    /s/ Tommy HilliardTommy Hilliard, Vice Chairman and DirectorDate:      December 29, 2010
    /s/ Thomas H. Dollar, IIThomas H. Dollar, II, Chairman and DirectorDate:      December 29, 2010
    /s/ Robert L. Holden, Sr.Robert L. Holden, Sr., DirectorDate:      December 29, 2010
    /s/ Kenneth Jack HunnicuttKenneth Jack Hunnicutt, DirectorDate:Ralph Powell, Director  48




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EXHIBIT INDEX
 Exhibit

    
    
    
    Method ofNo.

    
    Description
    
    Filing10.1
    
    
    Fourth Amendment to Accounts Agreement between
Southwest Georgia Ethanol, LLC and WestLB Ag dated
June 7, 2010.
    
    
    110.2
    
    
    Sixth Amendment to Senior Credit Agreement between
Southwest Georgia Ethanol, LLC and WestLB Ag dated
June 7, 2010.
    
    
    110.3
    
    
    Grain Brokerage Agreement between Southwest Georgia
Ethanol, LLC and Palmetto Grain Brokerage, LLC
dated December 15, 2009.
    
    
    *31.1
    
    
    Certificate pursuant to 17 CFR 240 15d-14(a)
    
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 15d-14(a)
    
    
    *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *
 
 (1)
    
    Incorporated by reference to Exhibit of the same number filed with our quarterly report on
Form 10-Q filed with the Securities and Exchange Commission on August 16, 2010.(*)
    
    Filed herewith.  49