##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q/A
 Amendment No. 1
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended: March 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 000-50282
 
 PANDA ETHANOL, INC.
 (Exact name of registrant as specified in its charter)
 
 Nevada
    
    33-0986282(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 4100 Spring Valley, Suite 1002
Dallas, Texas
75244
(Address of principal executive offices)
(Zip Code)
 (972) 361-1200
(Registrants telephone number, including area code)
 
 þ o
  o o þ
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PANDA ETHANOL, INC.
 FORM 10-Q/A
 AMENDMENT NO. 1
 FOR THE FISCAL QUARTER ENDED MARCH 31, 2007
 INDEX
 PagePART IItem 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    9Item 4. Controls and Procedures
    
    
    14PART
IIItem 6. Exhibits
    
    
    15Certification of Principal Executive OfficerCertification of Principal Financial OfficerCertification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  EXPLANATORY NOTE




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PART 1  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 PANDA ETHANOL, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (UNAUDITED)
 December 31,
    
    
    March 31,2006
    
    
    2007As Restated -See Note 7ASSETSCurrent assets:Cash and cash equivalents
    
    $
    713,529
    
    
    $
    2,364,230Accounts receivable from former parent
    
    
    32,265
    
    
    
    Investments available for sale
    
    
    14,700,000
    
    
    
    10,000,000Prepaid expenses and other assets
    
    
    932,214
    
    
    
    641,224Total current assets
    
    
    16,378,008
    
    
    
    13,005,454Restricted cash and cash equivalents
    
    
    135,607,427
    
    
    
    130,082,537Restricted short-term investments
    
    
    12,495,335
    
    
    
    Property, plant and equipment:Construction in progress
    
    
    66,087,367
    
    
    
    90,995,701Development costs
    
    
    2,084,463
    
    
    
    2,570,291Furniture and fixtures
    
    
    76,693
    
    
    
    236,518Accumulated depreciation
    
    
    (3,079
    )
    
    
    (15,632
    )Total property, plant and equipment, net
    
    
    68,245,444
    
    
    
    93,786,878Debt issuance costs, net of accumulated amortization
of $520,393 and $831,472 at December 31, 2006
and March 31, 2007, respectively
    
    
    8,902,699
    
    
    
    8,591,620Total assets
    
    $
    241,628,913
    
    
    $
    245,466,489LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts
payable and accrued liabilities  property, plant and equipment
    
    $
    6,309,361
    
    
    $
    12,081,014Accounts payable and accrued liabilities  operating expenses
    
    
    1,051,919
    
    
    
    1,120,291Accounts payable to former parent  operating expenses
    
    
    
    
    
    
    11,131Accrued interest
    
    
    491,497
    
    
    
    491,130Total current liabilities
    
    
    7,852,777
    
    
    
    13,703,566Financial derivatives
    
    
    7,659,400
    
    
    
    12,227,240Long-term debt, net
    
    
    136,369,890
    
    
    
    137,562,462Commitments and contingencies (Notes 3 and 5)Temporary equity  payable to former parent
    
    
    4,301,558
    
    
    
    4,301,558Shareholders equity:Preferred stock, par value $.001; 100,000,000 shares
authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock, par value $.001; 250,000,000 shares authorized;
31,066,667 and 31,066,659 shares issued and outstanding
at December 31, 2006 and March 31, 2007, respectively
    
    
    31,067
    
    
    
    31,067Additional contributed capital
    
    
    104,405,191
    
    
    
    104,673,413Accumulated other comprehensive losses
    
    
    (513,400
    )
    
    
    (705,240
    )Deficit accumulated during the development stage
    
    
    (18,477,570
    )
    
    
    (26,327,577
    )Total shareholders equity
    
    
    85,445,288
    
    
    
    77,671,663Total liabilities and shareholders equity
    
    $
    241,628,913
    
    
    $
    245,466,489
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PANDA ETHANOL, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2007,
AND FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2007
 (UNAUDITED)
 InceptionThree Months Ended March 31,
    
    
    Through2006
    
    
    2007
    
    
    March 31, 2007Development and administrative expenses:Development and administrative expenses
allocated from former parent
    
    $
    1,847,552
    
    
    $
    134,019
    
    
    $
    12,303,762Other development and administrative expenses
    
    
    597,935
    
    
    
    3,534,988
    
    
    
    11,682,688Total development and administrative expenses
    
    
    2,445,487
    
    
    
    3,669,007
    
    
    
    23,986,450Other expense (income):Interest income
    
    
    
    
    
    
    (1,760,259
    )
    
    
    (5,491,092
    )Interest expense and letter of credit fees
    
    
    
    
    
    
    1,429,904
    
    
    
    4,567,793Amortization of debt issuance costs
    
    
    
    
    
    
    122,802
    
    
    
    394,794Depreciation
    
    
    
    
    
    
    12,553
    
    
    
    15,632Increase in fair value of financial derivative
    
    
    
    
    
    
    4,376,000
    
    
    
    2,854,000Total other expense (income)
    
    
    
    
    
    
    4,181,000
    
    
    
    2,341,127Net loss
    
    $
    2,445,487
    
    
    $
    7,850,007
    
    
    $
    26,327,577Net loss
per common share  basic and dilutive:Net loss per common share
    
    $
    0.18
    
    
    $
    0.25Weighted average common shares outstanding  basic and dilutive
    
    
    13,817,341
    
    
    
    31,066,659
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PANDA ETHANOL, INC.
AND SUBSIDIARIES
(A Development Stage Enterprise)
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE THREE MONTHS ENDED MARCH 31, 2006 AND 2007,
AND FOR THE PERIOD FROM INCEPTION THROUGH MARCH 31, 2007
 (UNAUDITED)
 Three Months Ended March 31,
    
    
    Inception Through2006
    
    
    2007
    
    
    March 31, 2007As Restated -
    
    
    As Restated -See Note 7
    
    
    See Note 7Operating activities:Net loss
    
    $
    (2,445,487
    )
    
    $
    (7,850,007
    )
    
    $
    (26,327,577
    )Adjustments to reconcile net loss to
net cash used by operating activities:Interest expense added to debt principal
    
    
    
    
    
    
    1,192,573
    
    
    
    3,130,463Amortization of debt issuance costs
    
    
    
    
    
    
    122,802
    
    
    
    394,794Depreciation
    
    
    
    
    
    
    12,553
    
    
    
    12,553Increase in fair value of financial derivative
    
    
    
    
    
    
    4,376,000
    
    
    
    2,854,000Decrease in accounts receivable from former parent
    
    
    
    
    
    
    32,265
    
    
    
    (Increase) decrease in prepaid expenses
    
    
    
    
    
    
    290,990
    
    
    
    (641,224
    )Increase in accounts payable and
accrued liabilities  operating expenses
    
    
    329,869
    
    
    
    68,372
    
    
    
    1,120,291Increase in accounts payable to former parent -
operating expenses
    
    
    
    
    
    
    279,353
    
    
    
    279,353Increase (decrease) in accrued interest
    
    
    
    
    
    
    (367
    )
    
    
    491,130Net cash used in operating activities
    
    
    (2,115,618
    )
    
    
    (1,475,466
    )
    
    
    (18,686,217
    )Investing activities:Purchases of investments available for sale
    
    
    
    
    
    
    (5,000,000
    )
    
    
    (88,025,000
    )Sales of investments available for sale
    
    
    
    
    
    
    9,700,000
    
    
    
    78,025,000(Increase) decrease in restricted cash and cash equivalents
    
    
    
    
    
    
    5,524,890
    
    
    
    (130,082,537
    )Decrease in restricted short-term investments
    
    
    
    
    
    
    12,495,335
    
    
    
    Additions to property, plant and equipment
    
    
    (3,092,378
    )
    
    
    (19,594,058
    )
    
    
    (81,281,740
    )Net cash provided by (used in) investing activities
    
    
    (3,092,378
    )
    
    
    3,126,167
    
    
    
    (221,364,277
    )Financing activities:Capital contributions from former parent
    
    
    3,291,508
    
    
    
    
    
    
    
    16,133,464Capital distributions to former parent
    
    
    
    
    
    
    
    
    
    
    (5,480,712
    )Temporary equity advanced from former parent
    
    
    1,891,445
    
    
    
    
    
    
    
    4,301,558Issuance of common stock to former parent
    
    
    
    
    
    
    
    
    
    
    2,859,354Issuance of common stock to non-affiliates
    
    
    
    
    
    
    
    
    
    
    90,924,152Issuance of long-term debt and financial derivative
    
    
    
    
    
    
    
    
    
    
    143,100,000Debt issuance costs
    
    
    
    
    
    
    
    
    
    
    (9,423,092
    )Net cash provided by financing activities
    
    
    5,182,953
    
    
    
    
    
    
    
    242,414,724Increase (decrease) in cash and cash equivalents
    
    
    (25,043
    )
    
    
    1,650,701
    
    
    
    2,364,230Cash and cash equivalents, beginning of period
    
    
    25,043
    
    
    
    713,529
    
    
    
    Cash and cash equivalents, end of period
    
    $
    
    
    
    $
    2,364,230
    
    
    $
    2,364,230Noncash investing and financing activities:Property, plant and equipment costs accrued
    
    $
    660,415
    
    
    $
    5,771,653
    
    
    $
    12,081,014Interest cost accrued to long-term debt principal
    
    $
    
    
    
    $
    1,192,573
    
    
    $
    3,130,463Capital contribution from former parent by
reduction of accounts payable
    
    $
    
    
    
    $
    268,222
    
    
    $
    268,222Supplemental cash flow information:Interest paid, net of amounts capitalized
    
    $
    
    
    
    $
    237,698
    
    
    $
    946,200
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PANDA ETHANOL, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)
 NOTES TO UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
 For the Three Months Ended March 31, 2006 and 2007
And For the Period from Inception (November 1, 2004) through March 31, 2007
 (Unaudited)
 1. ORGANIZATION AND BASIS OF PRESENTATION
   Development Stage Enterprise 
 Liquidity and Going Concern Considerations
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2. SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
 Condensed Footnote Disclosures
 Adoption of New Accounting Pronouncement
   5




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3. ETHANOL PROJECTS
      4. RELATED PARTY TRANSACTIONS
  6




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5. LONG-TERM DEBT
    .
   6. COMMODITY PURCHASE COMMITMENTS
  7




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7. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
     As PreviouslyReported
    
    As RestatedAs of March 31, 2007:Cash and cash equivalents
    
    $
    12,364,230
    
    
    $
    2,364,230Investments available for sale
    
    
    
    
    
    
    10,000,000Total current assets
    
    
    143,087,991
    
    
    
    13,005,454
  As PreviouslyReported
    
    As RestatedFor the three months ended March 31, 2007:Cash flows from investing activities:Purchases of investments available for
sale
    
    $
    
    
    
    $
    (5,000,000
    )Sales of investments available for sale
    
    
    
    
    
    
    9,700,000Net cash provided by (used in)
investing activities
    
    
    (1,573,833
    )
    
    
    3,126,167Increase (decrease) in cash and cash
equivalents
    
    
    (3,049,299
    )
    
    
    1,650,701Cash and cash equivalents, beginning of
period
    
    
    15,413,529
    
    
    
    713,529Cash and cash equivalents, end of period
    
    
    12,364,230
    
    
    
    2,364,230From inception through March 31, 2007:Cash flows from investing activities:Purchases of investments available for
sale
    
    $
    
    
    
    $
    (88,025,000
    )Sales of investments available for sale
    
    
    
    
    
    
    78,025,000Net cash used in investing activities
    
    
    (211,364,277
    )
    
    
    (221,364,277
    )Increase in cash and cash equivalents
    
    
    12,364,230
    
    
    
    2,364,230Cash and cash equivalents, end of period
    
    
    12,364,230
    
    
    
    2,364,230
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and the related notes to those
statements included elsewhere in this Amendment No. 1. In this quarterly report on Form 10-Q , as
amended, the words Panda Ethanol refer to Panda Ethanol, Inc. and its subsidiaries, unless
otherwise stated or the context otherwise requires. Panda Ethanol is a Nevada corporation. On
November 6, 2006, Panda Ethanol, Inc. (a Delaware corporation), which is referred to in this
quarterly report, as amended, as Panda Ethanol-Delaware, merged with and into Cirracor, Inc., which
we refer to as Cirracor, a Nevada corporation. The surviving Nevada corporation after the merger
changed its name to Panda Ethanol, Inc. In this quarterly report on Form 10-Q , as amended, the
words Company, we, our, ours and us refer to the surviving company after the merger and
its subsidiaries, unless otherwise stated or the context otherwise requires.
 Restatement  As discussed in the Explanatory Note, the Company has restated certain
previously reported financial statements to reflect the correction of errors regarding the balance
sheet classification of certain assets and the related presentation in the consolidated statements
of cash flows. The amounts under Liquidity and Capital Resources below reflect such restatement.
 Forward-Looking Statements
   
    
    the effectiveness of the reorganization
    
    the availability of and necessity for continued access to former management;
    
    our ability to obtain additional capital to finance our initiatives;
    
    the time, cost and ability to construct or complete construction of our Hereford
and other ethanol plants;
    
    issues arising in connection with the development and construction of our
projects, including those relating to permits, easements, site conditions, workmanship,
process engineering, and conflicts of interest;
    
    the projected growth or contraction of the ethanol market in which we will
operate;
    
    fluctuations in the market price of ethanol;
    
    our business strategy for expanding, maintaining or contracting our presence in
this market and related markets;
    
    our ability to obtain the necessary capital to finance our initiatives;
    
    the sale of interests in, or entry into, partnerships or joint ventures with
respect to specific projects;
    
    anticipated trends in our financial condition and results of operations;
    
    our ability to distinguish ourselves from our current and future competitors;
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
    
    changes in or elimination of laws, tariffs, trade or other controls or
enforcement practices such as:
 
    
    national, state or local energy policy;
    
    federal ethanol tax incentives;
    
    regulation currently under consideration pursuant to the passage of the
Energy Policy Act of 2005, or Energy Policy Act, which contains a renewable fuel
standard and other legislation mandating the usage of ethanol or other oxygenate
additives;
    
    state and federal regulation restricting or banning the use of methyl
tertiary butyl ether, or MTBE;
    
    environmental laws and regulations applicable to our operations and the
enforcement thereof; and
    
    regulations related to homeland security;
 
    
    changes in weather and general economic conditions;
    
    overcapacity within the ethanol and petroleum production and refining industries;
    
    total United States consumption of gasoline;
    
    availability and costs of products and raw materials, particularly corn, natural
gas, stainless steel and carbon steel;
    
    labor costs;
    
    labor relations;
    
    fluctuations in petroleum prices;
    
    our or our employees failure to comply with applicable laws and regulations;
    
    our ability to generate free cash flow to invest in our business and service our
indebtedness;
    
    limitations and restrictions contained in the instruments and agreements
governing our and our subsidiaries indebtedness;
    
    changes in interest rates;
    
    our ability to retain key employees;
    
    liability resulting from actual or potential future litigation;
    
    competition with respect to any of our products;
    
    consolidation in the industry;
    
    plant shutdowns or disruptions at our planned plant;
    
    availability of shuttle trains, rail cars, trucks and barges;
    
    risks regarding a loss of or substantial decrease in purchases by our major
ethanol customers or any customer of our by-products;
    
    risks related to hedging decisions, including whether or not to enter into
hedging arrangements and the possibility of financial losses related to hedging
arrangements; and
    
    risks related to diverting managements attention from ongoing business
operations.
 Overview
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Summary of Critical Accounting Policies and Estimates
  Allocation of Expenses from the Former Parent
  11




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Results of Operations
 For the three months ended March 31, 2006 as compared to the three months ended March 31, 2007
     Liquidity and Capital Resources
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Hereford Facility Project Financing
  Contractual Commitments
 
 Off-balance sheet arrangements
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
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Changes in Internal Control over Financial Reporting
   
 PART II  OTHER INFORMATION
 
 Item 6. Exhibits
 ExhibitNumber
    
    Description31.1
    
    Certification of Principal Executive Officer.31.2
    
    Certification of Principal Financial Officer.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
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SIGNATURES
  PANDA ETHANOL, INC.Date: November 2, 2007
    /s/ Franklin ByrdFranklin Byrd, Chief Financial Officer(Principal financial officer duly authorized to
sign on behalf of Registrant) 16




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EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    Certification of Principal Executive Officer.31.2
    
    Certification of Principal Financial Officer.32.1
    
    Certification of Chief Executive Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.