UNITED
      STATES
              SECURITIES
      AND EXCHANGE COMMISSION
              Washington,
      D.C. 20549Form
      10-Q(Mark
      one)R
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended December 31, 2009£
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _________ to __________Commission
      file number 000-53041SOUTHWEST
      IOWA RENEWABLE ENERGY, LLC(Exact
      name of registrant as specified in its charter)Iowa
            20-2735046(State
      or other jurisdiction of incorporation or organization)
            (I.R.S.
      Employer Identification No.)10868 189th Street, Council Bluffs, Iowa
      51503(Address
      of principal executive offices)(712) 366-0392(Registrant’s
      telephone number, including area code)__________________________________________________________________(Former
      name, former address and former fiscal year, of changed since last
      report)Indicate
      by check mark whether the registrant has (1) filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days.  Yes R    No
      £Indicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Web site, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-T
      (§232.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).  Yes £    No
      RIndicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting
      company. See the definitions of “large accelerated filer,” “accelerated
      filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
      Act.Large
      accelerated
      filer                                           
      £      Accelerated
      filer £      Non-accelerated
      filer £      Smaller
      reporting company RIndicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  Yes £    No
      RAs
      of December 31, 2009, the issuer had 8,805 Series A Units, 3,334 Series B
      Units, and 1,000 Series C Units issued and
  outstanding.








TABLE
OF CONTENTS





PART
      I—FINANCIAL INFORMATIONItem
      Number
            Item
      Matter
            Page
      NumberItem
      1.
            Financial
      Statements.
            1Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
            16Item
      4T.
            Controls
      and Procedures.
            23PART
      II—OTHER INFORMATIONItem
      1.
            Legal
      Proceedings.
            24Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds.
            24Item
      3.
            Defaults
      Upon Senior Securities.
            24Item
      4.
            Submission
      of Matters to a Vote of Security Holders.
            24Item
      5.
            Other
      Information.
            24Item
      6.
            Exhibits.
            24Signatures
            30Certifications
            See
      Exhibits 31 and 32











PART
      I—FINANCIAL INFORMATION





Item
1.                                Unaudited
Financial Statements.





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLCCondensed
      Balance SheetsASSETS
            
            December
      31, 2009
            
            September
      30, 2009(Unaudited)Current
      AssetsCash
      and cash equivalents
            
            $
            10,930,649
            
            
            
            $
            7,455,084Accounts
      receivable
            
            
            1,799
            
            
            
            
            1,831,722Accounts
      receivable, related party
            
            
            10,357,853
            
            
            
            
            12,396,172Due
      from broker
            
            
            2,813,943
            
            
            
            
            2,108,267Inventory
            
            
            11,091,426
            
            
            
            
            4,913,675Derivative
      financial instruments
            
            
            -
            
            
            
            
            263,688Prepaid
      expenses and other
            
            
            1,033,058
            
            
            
            
            439,431Total
      current assets
            
            
            36,228,728
            
            
            
            
            29,408,039Property,
      Plant, and EquipmentLand
            
            
            2,064,090
            
            
            
            
            2,064,090Plant,
      Building and Equipment
            
            
            197,741,411
            
            
            
            
            197,435,327Office
      and Other Equipment
            
            
            695,761
            
            
            
            
            680,145Total
      Cost
            
            
            200,501,262
            
            
            
            
            200,179,562Accumulated
      Depreciation
            
            
            (14,362,982
            )
            
            
            
            (9,600,217
            )Net
      property and equipment
            
            
            186,138,280
            
            
            
            
            190,579,345Other
      AssetsFinancing
      costs, net of amortization of $1,557,125 and $1,467,677
            
            
            2,292,869
            
            
            
            
            2,382,317Total
      Assets
            
            $
            224,659,877
            
            
            
            
            222,369,701Notes
      to Condensed Unaudited Financial Statements are an integral part of this
      Statement.





1





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLCCondensed
      Balance SheetsLIABILITIES
      AND MEMBERS’ EQUITY
            December
      31,
              2009
            September
      30, 2009(Unaudited)Current
      LiabilitiesAccounts
      payable
            $
            855,117
            $
            1,351,156Accounts
      payable, related parties
            
            2,486,811
            
            4,297,990Retainage
      payable, related parties
            
            372,770
            
            697,770Accrued
      expenses
            
            2,502,842
            
            1,704,014Accrued expenses, related parties
            
            4,138,642
            
            4,023,231Derivative
      financial instruments
            
            376,450
            
            -Current
      maturities of notes payable
            
            24,789,732
            
            18,215,803Total
      current liabilities
            
            35,522,364
            (b)$
            30,289,964Long
      Term LiabilitiesNotes
      payable, less current maturities
            
            129,535,382
            
            130,897,350Other
            
            775,003
            
            800,002Total
      long term liabilities
            
            130,310,385
            
            131,697,352Commitments
      and ContingenciesMembers’
      EquityMembers’
      capital, 13,139 units issued and outstanding
            
            76,474,111
            
            76,474,111Accumulated
      (deficit)
            
            (17,646,983)
            
            (16,091,726)Total
      members’ equity
            
            58,827,128
            
            60,382,385Total
      Liabilities and Members’ Equity
            $
            224,659,877
            
            222,369,701Notes
      to Condensed Unaudited Financial Statements are an integral part of this
      Statement.








2





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLCCONDENSED
      STATEMENTS OF OPERATIONSThree
      Months Ended December 31, 2009
            Three
      Months Ended December 31, 2008(Unaudited)
            (Unaudited)Revenues
            $
            50,748,439
            $
            -Cost
      of Goods Sold
            
            48,854,151
            
            -Gross
      Margin
            
            1,894,288
            
            -Selling,
      General, and Administrative Expenses
            
            1,138,298
            
            1,711,629Operating
      Income (Loss)
            
            755,990
            
            (1,711,629)Other
      Income (Expense)Realized
      and unrealized losses on derivative financial instruments
            
            -
            
            (656,973)Interest
      income
            
            13,163
            
            46,134Interest
      expense
            
            (2,330,384)
            
            -Miscellaneous
      income
            
            5,974
            
            5,340Total
            
            (2,311,247)
            
            (605,499)Net
      (Loss)
            $
            (1,555,257)
            
            (2,317,128)Weighted
      Average UnitsOutstanding—Basic
      & Diluted
            
            13,139
            
            13,139Net
      (loss) per unit –basic & diluted
            $
            ($118.37)
            
            ($176.35)Notes
      to Condensed Unaudited Financial Statements are an integral part of this
      Statement.


3





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLCCondensed
      Statements of Cash FlowsThree
      Months Ended
              December
      31, 2009
            
            Three
      Months Ended
              December
      31, 2008(Unaudited)
            
            (Unaudited)Cash
      Flows from Operating ActivitiesNet
      (loss)
            $
            (1,555,257)
            
            $
            (2,317,128)Adjustments
      to reconcile net (loss) to net cash (used in)operating
      activities:
              Depreciation
            4,762,765
            
            7,524Amortization
            119,585
            
            -Other(Increase)
      decrease in current assets:
              Accounts
      receivable
            3,868,242
            
            -Inventories
            (6,177,751)
            
            (7,520,931)Prepaid
      expenses and other
            (593,627)
            
            (186,766)Derivative
      financial instruments
            263,688
            
            -Due
      from broker
            (705,676)
            
            (1,447,694)Increase
      (decrease) in current liabilities:Accounts
      and retainage payable
            (1,471,914)
            
            1,387,472Derivative
      financial instruments
            376,450
            
            882,738Accrued
      expenses
            954,206
            
            (5,007)Net
      cash (used in) operating activities
            (159,289)
            
            (9,229,792)Cash
      Flows from Investing ActivitiesPurchase
      of property and equipment
            (1,482,004)
            
            (20,951,788)(Increase)
      in prepaid expenses and other
            -
            
            -Increase
      in restricted cash
            -
            
            (24,471)Net
      cash (used in) investing activities
            (1,482,004)
            
            (20,976,259)Cash
      Flows from Financing ActivitiesPayments
      for financing costs
            (30,137)
            
            (74,501)Proceeds
      from long term borrowings
            7,151,995
            
            25,568,930Payments
      on long term borrowings
            (2,005,000)
            
            (5,000)Net
      cash provided by financing activities
            5,116,858
            
            25,489,429Net
      increase (decrease) in cash and cash equivalents
            3,475,565
            
            (4,716,622)Cash
      and Equivalents—Beginning of Period
            7,455,084
            
            6,557,394Cash
      and Equivalents—End of Period
            10,930,649
            
            1,840,772Supplemental
      Disclosures of Noncash InvestingAnd
      Financing ActivitiesProperty,
      plant and equipment included in accounts and retainage
    payable
            729,277
            
            9,887,766Interest
      capitalized and included in long term debt and accruals
            -
            
            1,394,063Bridge
      loan accrued interest included in long term debt
            64,966
            
            -Cash
      Paid for Interest
            941,367
            
            -








Notes to
Condensed Unaudited Financial Statements are an integral part of this
Statement.








4





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLC
              Notes
      to Financial Statements (unaudited)
              December
      31, 2009


Note
1:  Nature of Business




Southwest
Iowa Renewable Energy, LLC (the “Company”), located in
Council Bluffs, Iowa, was formed in March, 2005 to construct and operate a 110
million gallon capacity ethanol plant.  The Company began producing
ethanol in February 2009.  During the quarter ended December 31, 2009,
the Company operated at 100% of its 110 million gallon nameplate
capacity.  The Company sells its ethanol, modified wet distillers
grains with solubles, and corn syrup in the continental United
States.  The Company sells its dried distillers grains with solubles
in the continental United States, Mexico, and the Pacific Rim.




Note
2:  Summary of Significant Accounting Policies




Basis
of Presentation and other information




The
balance sheet as of September 30, 2009 was derived from the Company’s audited
balance as of that date.  The accompanying financial statements as of
and for the three months ended December 31, 2009 and 2008 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the interim
periods.  These unaudited financial statements and notes should be
read in conjunction with the audited financial statements and notes thereto, for
the year ended September 30, 2009 contained in the Company’s Annual Report on
Form 10-K.  The results of operations for the interim periods
presented are not necessarily indicative of the results for the entire
year.




Use
of Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from these
estimates.




Cash
& Cash Equivalents Accounting Policy




The
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less when purchased to be cash equivalents.




Financing
Costs Policy




Financing
costs are associated with the construction and revolving loans are recorded at
cost and include expenditures directly related to securing debt
financing.  The Company amortizes these costs using the effective
interest method over the terms of the agreements.  The interest
expense was capitalized during the development stage as construction in
progress.




Concentration
of Credit Risk




The
Company’s cash balances are maintained in bank deposit accounts which at times
may exceed federally-insured limits.  The Company has not experienced
any losses in such accounts.




Revenue
Recognition




The
Company sells ethanol and related products pursuant to marketing
agreements.  Revenues are recognized when the marketing company (the
“customer”) has taken title to the product, prices are fixed or determinable and
collectability is reasonably assured.   The Company’s products
are generally shipped FOB loading point.  Until August 18, 2009,
ethanol sales were handled through a marketing agreement with Lansing (“Lansing”); with the
conclusion of the Lansing agreement, ethanol sales are handled through an
ethanol agreement (the “Ethanol Agreement”)
with Bunge North America, Inc. (“Bunge”), a related
party.  Syrup, distillers grains and solubles, and modified wet
distillers grains with solubles are sold through a distillers grains agreement
(the “DG
Agreement”) with Bunge, which sets the price based on the market price to
third parties.  Marketing fees and commissions due to









5







Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
2: Summary of Significant Accounting Policies (Continued)




the
marketers are paid separately from the settlement for the sale of the ethanol
products and co-products and are included as a component of cost of goods
sold.  Shipping and handling costs incurred by the Company for the
sale of ethanol and co-products are included in cost of goods sold.




Accounts
Receivable




Trade
accounts receivable are recorded at original invoice amounts less an estimate
made for doubtful receivables based on a review of all outstanding amounts on a
monthly basis.  Management determines the allowance for doubtful
accounts by regularly evaluating individual customer receivables and considering
customers’ financial condition, credit history and current economic
conditions.  As of December 31, 2009, management has determined no
allowance is necessary.  Receivables are written off when deemed
uncollectible.  Recoveries of receivables written off are recorded
when received.  Receivables from related parties are discussed below
in Note 10.




Investment
in Commodities Contracts, Derivative Instruments and Hedging
Activities




The
Company adopted new disclosure requirements, which require entities to provide
greater transparency in interim and annual financial statements about how and
why the entity uses derivative instruments, how the instruments and related
hedged items are accounted for, and how the instruments and related hedged items
affect the financial position, results of operations, and cash flows of the
entity.




The
Company is exposed to certain risks related to ongoing business
operations.  The primary risks that the Company manages by using
forward or derivative instruments are price risk on anticipated purchases of
corn and sales of ethanol.




The
Company is subject to market risk with respect to the price and availability of
corn, the principal raw material used to produce ethanol and ethanol
by-products.  In general, rising corn prices result in lower profit
margins and, therefore, represent unfavorable market conditions.  This
is especially true when market conditions do not allow the Company to pass along
increased corn costs to customers.  The availability and price of corn
is subject to wide fluctuations due to unpredictable factors such as weather
conditions, farmer planting decisions, governmental policies with respect to
agriculture and international trade and global demand and supply.




Certain
contracts that literally meet the definition of a derivative may be exempted
from derivative accounting as normal purchases or normal
sales.  Normal purchases and normal sales are contracts that provide
for the purchase or sale of something other than a financial instrument or
derivative instrument that will be delivered in quantities expected to be used
or sold over a reasonable period in the normal course of
business.  Contracts that meet the requirements of normal purchases or
sales are documented as normal and exempted from the accounting and reporting
requirements of derivative accounting.




The
Company enters into short-term cash, options and futures contracts as a means of
securing corn for the ethanol plant and managing exposure to changes in
commodity prices.  In addition, from time to time, the Company enters
into derivative contracts to hedge the exposure to price risk as it relates to
ethanol sales.  The Company maintains a risk management strategy that
uses derivative instruments to minimize significant, unanticipated earnings
fluctuations caused by market fluctuations.  The Company’s specific
goal is to protect the Company from large moves in commodity
costs.  All derivatives will be designated as non-hedge derivatives
and the contracts will be accounted for as mark-to-market.  Although
the contracts will be effective economic hedges of specified risks, they are not
designated as and accounted for as hedging instruments.




As part
of its trading activity, the Company uses futures and option contracts offered
through regulated commodity exchanges to reduce risk and is exposed to risk of
loss in the market value of inventories.  To reduce that risk, the
Company generally takes positions using cash and futures contracts and
options.  Accordingly, any realized or unrealized gain or loss related
to these derivative instruments was recorded in the statement of operations as a
component of non-operating income (expense) until the plant was
operational.  Once operational, the gains or losses  are
included in revenue if the contracts relate to ethanol and cost of goods sold if
the contracts relate to corn.  During the development stage, the
Company recorded a combined realized and unrealized loss of ($656,973) for the
three months ended December 31, 2008 as a component of non-operating
income.




6


Southwest
Iowa Southwest Iowa Renewable Energy, LLC







Notes
to Unaudited Financial Statements




Note
2: Summary of Significant Accounting Policies (Continued)




There
were no gains or losses on ethanol contracts during the three months ended
December 31, 2009 or 2008.




The
derivative financial instruments asset (liability) of ($376,450) and $263,688
consists of 5,810,000 and 1,525,000 bushels of corn,
respectively.  There were no gallons of ethanol under contract at
December 31, 2009 and September 30, 2009.   Derivatives not
designated as hedging instruments at December 31, 2009 and 2008 were as
follows:




Three
      Months
              Ended
              December
      31, 2009
            
            
            Three
      Months
              Ended
              December
      31, 2008Increase
      (decrease) in cost of goods sold due to derivatives related to corn
      costs:Realized
            
            $
            (721,937
            )
            
            $
            -Unrealized
            
            
            640,138
            
            
            
            -Total
      effect on cost
              of
      goods sold
            
            $
            (81,799
            )
            
            $
            -Total
      increase
              (decrease)
      to operating
              income
      due to
              derivative
      activities
            
            $
            81,799
            
            
            $
            -







Inventory




Inventory
is stated at the lower of cost or market value using the first-in, first-out
method.  Market value is based on current replacement values, except
that it does not exceednet realizable values
and it is not less than the net realizable values reduced by an allowance for
normal profit margin.




Property
and Equipment




Property
and equipment are stated at cost.  Depreciation is computed using the
straight-line method over the following estimated useful lives:








Buildings
            40 YearsProcess
      Equipment
            10 YearsOffice
      Equipment
            3-7 Years







Maintenance
and repairs are charged to expense as incurred; major improvements and
betterments are capitalized.




Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable.   An impairment loss would be recognized when
estimated undiscounted future cash flows from operations are less than the
carrying value of the asset group.  An impairment loss would be
measured by the amount by which the carrying value of the asset exceeds the fair
value of the asset.




In
accordance with Company policies, management has evaluated the plant for
possible impairment based on projected future cash flows from
operations.  Management has determined that its projected future cash
flows from operations exceed the carrying value of the plant and that no
impairment existed at December 31, 2009.




7





Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
2: Summary of Significant Accounting Policies (Continued)




Income
Taxes




The
Company has elected to be treated as a partnership for federal and state income
tax purposes and generally does not incur income taxes.  Instead, the
Company’s earnings and losses pass through to the income tax returns of the
members.  Therefore, no provision or liability for federal or state
income taxes has been included in these financial statements.




Net
(loss) per unit




(Loss)
per unit has been computed on the basis of the weighted average number of units
outstanding during each period presented.




Fair
value of financial instruments




The
carrying amounts of cash and cash equivalents, derivative financial instruments,
accounts receivable, accounts payable and accrued expenses approximate fair
value.  The carrying amount of long-term debt approximates fair value
because the interest rates fluctuate with market rates and other rates currently
available to the Company for similar issues of debt, taking into account the
current credit risk of the Company.







Note
3:  Inventory




Inventory
is comprised of the following at:




December
      31, 2009
            
            
            September
      30, 2009Raw
      materials - corn
            
            $
            5,788,274
            
            
            $
            1,401,680Supplies
      and chemicals
            
            
            1,567,648
            
            
            
            1,335,874Work
      in process
            
            
            1,312,181
            
            
            
            1,033,185Finished
      goods
            
            
            2,423,323
            
            
            
            1,142,936Total
            
            $
            11,091,426
            
            
            $
            4,913,675










Note
4: Members’ Equity





The
Company was formed on March 28, 2005 to have a perpetual life with no limit on
the number of authorized units.  The Company was initially capitalized
by an aggregate of $570,000 in exchange for 285 Series A membership
units.  In December 2005, the Company issued an additional 360 Series
A membership units in exchange for $1,080,000.  In March 2006, the
Company completed a private placement offering with one membership unit at
$6,000 being at risk and the remaining investment held in escrow until closing
of the offering.  The Company approved and issued 687 Series A and one
Series B at risk membership units at $6,000 per unit for


total
proceeds of $4,128,000.  The offering was closed in November 2006 with
the issuance of 7,313 Series A membership units, 3,333 Series B membership units
and 1,000 Series C membership units for total proceeds of
$69,876,000.





In May
2007, 25 Series A membership units were issued to a development group for its
efforts to develop the project.  In addition, in May 2007, 135 Series
A membership units were issued to a related party for its organizational
services.














8





Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
4: Members’ Equity (Continued)







At
December 31, 2009 and September 30, 2009 outstanding member units
were:




A
      Units
            8,805B
      Units
            3,334C
      Units
            1,000





The
Series A, B and C unit holders all vote on certain matters with equal
rights.  The Series C unit holders as a group have the right to elect
one Board member.  The Series B unit holders as a group have the right
to elect that number of Board members which bears the same proportion to the
total number of Directors in relation to Series B outstanding units to total
outstanding units.  Series A unit holders as a group have the right to
elect the remaining number of Directors not elected by the Series C and B unit
holders.





On March
7, 2008, the Company obtained a bridge loan in the maximum principal amount of
$36,000,000 (the “Bridge
Loan”).  The Company entered into a Series C Unit Issuance
Agreement (the “Series
C Agreement”) with ICM, Inc. (“ICM”) in connection
with ICM’s provision of a letter of credit (“LC”) to secure the
Company’s repayment of the Bridge Loan.  Under the Series C Agreement,
the Company agreed to pay ICM a fee for its issuance of the LC equal to 6% per
annum of the undrawn face amount of the LC.  In the event that the LC
or ICM makes any payment to Commerce Bank, N.A. (the “Bridge Lender”) that
reduces amounts owed by the Company under the Bridge Loan (each, a “Bridge Loan
Payment”), the Series C Agreement provides that the Company will
immediately reimburse ICM for the amount of such Bridge Loan Payment by issuing
Class C Units to ICM.





The
Bridge Loan matures on June 15, 2010, and in connection with it, ICM caused its
lender to issue a letter of credit in favor of the Bridge Lender to secure the
repayment of a portion of the Bridge Loan and the Company entered into a Second
Amendment to the Series C Unit Issuance Agreement (“Series C Amendment”)
with ICM under which, among other things, we agreed to issue Series C Units to
ICM for any Bridge Loan payments made by ICM.  Under the Series C
Amendment, if ICM makes a Bridge Loan Payment, the Company will immediately
issue Series C Units to ICM based on a Unit price that is equal to the lesser of
$3,000 or one half (1/2) of the lowest purchase price paid by any party for a
Unit who acquired (or who has entered into any agreement, instrument or document
to acquire) such Unit as part of any private placement after the date of the
Series C Amendment but prior to the date of any Bridge Loan Payment made by
ICM.  The Series C Amendment further provides that ICM will have the
right to purchase its pro-rata share of any Units issued by the Company at any
time after the date of the Series C Amendment.





Bunge
N.A. Holdings Inc. (“Holdings”) extended
to the Company a Subordinated Term Note (the “Term Note”) in favor
of Holdings effective August 26, 2009 in the amount of approximately $27,107,000
and a Subordinated Revolving Credit Note (the “Revolving
Note”).  The Term Note was used to reduce the Bridge Loan in a
corresponding amount.




Holdings,
at its option, may convert the Term Note to Series U Units of the Company at a
per unit price of $3,000 in satisfaction of any outstanding principal balance
due to Holdings by the Company pursuant to the Term Note.  As a result
of issuance of the Term Note and Revolving Note, a prior agreement with Bunge
whereby Bunge would receive Series E Units in connection with any payments made
to reduce the Bridge Loan on behalf of the Company was terminated.



















9





Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
5: Construction, Revolving Loan/Credit Agreements





AgStar





The
Company is party to a Credit Agreement (the “Credit Agreement”)
with AgStar Financial Services, PCA (“AgStar”) for
$126,000,000 senior secured debt, consisting of a $111,000,000 construction loan
and a $15,000,000 revolving line of credit.  On August 1, 2009 the
construction loan was segmented into two credit facilities, an amortizing term
facility of $101,000,000, a term revolver of $10,000,000 and a revolving working
capital term facility of $15,000,000.  On September 1, 2009, the
Company elected to convert  the term note into a fixed rate of
LIBOR plus 3.45%, with a 5% floor.  The Credit Agreement requires the
maintenance of certain financial and nonfinancial
covenants.  Borrowings under the Credit Agreement are collateralized
by substantially all of the Company’s assets.  The term credit
facility of $101,000,000 requires monthly principal payments starting March 1,
2010.  The loan is amortized over 114 months and matures five years
after the conversion date, August 1, 2014.  The term of the
$15,000,000 revolving working capital facility agreement matures on March 31,
2010.  The $10,000,000 term revolver is interest only until maturity
on August 1, 2014.  Borrowings are subject to borrowing base
restrictions, and the Credit Agreement includes certain prepayment
penalties.





Under the
terms of the Credit Agreement, the Company may draw the lesser of $15,000,000 or
75 percent of eligible accounts receivable and eligible inventory, the borrowing
base.  As part of the revolving line of credit, the Company may
request letters of credit to be issued up to a maximum of $5,000,000 in the
aggregate.  One letter of credit is outstanding under this provision,
in favor of MidAmerica Energy Company (“MidAm”), in the
amount of $2,000,000.




As of
December 31, 2009 and September 30, 2009, the outstanding balance under the
Credit Agreement was approximately $118,425,241 and $111,273,245,
respectively.  In addition to all other payments due under the Credit
Agreement, the Company also agreed to pay, beginning at the end of the June 30,
2010 quarter, an amount equal to 65% of the Company’s Excess Cash Flow (as
defined in the Credit Agreement), up to a total of $4,000,000 per year, and
$16,000,000 over the term of the Credit Agreement.




Bridge
Loan




As
mentioned above in Note 4, On March 7, 2008, the Company obtained the Bridge
Loan, and on March 1, 2009, the Company extended the terms of the Bridge Loan
through June 15, 2010 and the maximum principal amount was increased to
$36,600,000.  The Bridge Loan debt is secured by the Collateral,
described below.




Holdings
pledged a money market account in the amount equal to 76% of the maximum
principal amount of the Bridge Loan in favor of the Bridge Lender (the “Collateral”) through
August 2009 when Bunge’s portion of the Bridge Loan was replaced by the Term
Note.  ICM caused its lender to issue the LC in the amount equal to
24% of the maximum principal amount of the Bridge Loan in favor of the Bridge
Lender.  The ICM LC expires on September 17, 2010, and the Bridge
Lender will only draw against the LC to the extent that the Company defaults
under the Bridge Loan or if the Company has not repaid the Bridge Loan in full
by June 2010.  As the Company repays the principal of the Bridge Loan,
the LC will automatically be reduced in the same proportion.  As of
December 31, 2009 and September 30, 2009, there was an outstanding principal and
interest balance of approximately $8,650,461 and $8,585,496 respectively under
the Bridge Loan.




10


Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
6: Notes Payable




Notes
payable consists of the following as of December 31, 2009 and September 30,
2009:




December
      31, 2009
            
            September
      30, 2009$200,000
      Note payable to Iowa Department Economic Development (“IDED”) a non-interest bearing obligation
      with monthly payments of $1,667 due through the maturity date of March
      2012 on the non-forgivable portion. (A)
            $
            143,333
            $
            148,333Bridge
      Loan bearing interest at LIBOR plus 1.50% with a floor of 3.00 % (3.00% at
      December 31, 2009) through maturity on June 15, 2010 secured by a letter
      of credit and a money market account as described in Note
    5.
            
            8,650,461
            
            8,585,496Note
      payable to affiliate Holdings, bearing interest at LIBOR plus 7.50-10.5%
      with a floor of 3.00% (8.41% at December 31, 2009); maturity on August 31,
      2014.
            
            27,106,079
            
            27,106,079Term
      facility and term revolver payable to AgStar bearing interest at LIBOR
      plus 3.45% (5.00% at December 31, 2009).  See maturity
      discussed in Note 5.
            
            101,000,000
              7,925,241
            
            101,000,000
              7,273,245$15
      million revolving working capital term facility payable to AgStar bearing
      interest at LIBOR plus 3.45% (5.00% at September 30, 2009), maturing March
      31, 2010.
            
            9,500,000
            
            3,000,000Revolving
      line of credit payable to affiliate Holdings that matured on December 24,
      2009.
            
            -
            
            2,000,000Less
      current maturities
            
            154,325,114
              (24,789,732)
            
            149,113,153
              (18,215,803)Total
      long term debt
            $
            129,535,382
            $
            130,897,350







(A) The IDED debt is comprised
of two components under the Master Contract (the “Master Contract”)
between the Company and the IDED.  A $100,000 loan is non
interest-bearing and due in monthly payments of $1,667 beginning April 2007,
with a final payment of $1,667 due March 2012; and a $100,000 forgivable
loan.  Both notes under the Master Contract are collateralized by
substantially all of the Company’s assets and subordinate to the Credit
Agreement.  The $100,000 forgivable loan may be forgiven upon IDED’s
confirmation of the creation and retention of qualifying jobs under the Master
Contract.  If the Company does not meet the requirements of the Master
Contract, the note is due on an agreed upon payment schedule.




The Term
Note due to Holdings is subordinated to the Credit
Agreement.  Principal and interest may be paid only after payment in
full of all amounts due under the Credit Agreement.  Extension of the
Term Note, in the approximate principal amount of $27,100,000, resulted in
reduction of the Bridge Loan principal in a corresponding amount.




In
addition, the Company entered into the Revolving Note with Holdings, with a
two-year maturity, providing for the extension of a maximum of $10,000,000 in
revolving credit.  Holdings has a commitment, subject to certain
conditions, to advance up to $3,750,000 at the Company's request under the
Holdings Revolving Note; amounts in excess of $3,750,000 may be advanced by
Holdings at its discretion.  The Company is required to draw the
maximum amount available under the AgStar Credit Agreement to pay any
outstanding advances under the Holdings Revolving Note.




11


Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
6: Notes Payable (continued)




While
repayment of the Revolving Note is subordinated to the Credit Agreement, the
Company may make payments on the Revolving Note so long as the Company is in
compliance with its borrowing base covenant and there is not a payment default
under the AgStar Credit Agreement.




Note
7:  Fair Value Measurement




The
Company adopted the fair value measurements and disclosures standard, which
provides a framework for measuring fair value under GAAP and is applicable to
all financial instruments that are being measured and reported on a fair value
basis.




Fair
value is the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date.  The fair value hierarchy ranks the quality and
reliability of the information used to determine fair
values.  Financial assets and liabilities carried at fair value will
be classified and disclosed in one of the following three
categories:




Level
1 -      Valuations for assets and liabilities
traded in active markets from readily available pricing sources for


market
transactions involving identical assets or liabilities.





Level
2 -      Valuations for assets and liabilities
traded in less active dealer or broker markets.  Valuations
are


obtained
from third-party pricing services for identical or similar assets or
liabilities.





Level
3-       Valuations incorporate certain
assumptions and projections in determining the fair value assigned
to


such
assets or liabilities.







A
description of the valuation methodologies used for instruments measured at fair
value, including the general classifications of such instruments pursuant to the
valuation hierarchy, is set below.  These valuation methodologies were
applied to all of the Company’s financial assets and financial liabilities
carried at fair value.




Derivative financial
statements.  Commodity futures and exchange traded options are
reported at fair value utilizing Level 1 inputs. For these contracts, the
Company obtains fair value measurements from an independent pricing
service.  The fair value measurements consider observable data that
may include dealer quotes and live trading levels from the CME
market.




The
following table summarizes financial liabilities measured at fair value on a
recurring basis as of December 31, 2009, segregated by the level of the
valuation inputs within the fair value hierarchy utilized to measure fair
value:









Total
            
            Level
      1
            
            Level
      2
            
            Level
      3Derivative
      financial instrumentsCorn
            $
            (376,450)
            
            $
            (376,450)
            
            $
            ---
            
            $
            ---$
            (376,450)
            
            $
            (376,450)
            
            $
            ---
            
            $
            ---







The
following table summarizes financial liabilities measured at fair value on a
recurring basis as of September 30, 2009, segregated by the level of the
valuation inputs within the fair value hierarchy utilized to measure fair
value:




Total
            
            Level
      1
            
            Level
      2
            
            Level
      3Derivative
      financial instrumentsCorn
            $
            263,687
            
            $
            263,687
            
            $
            ---
            
            $
            ---$
            263,687
            
            $
            263,687
            
            $
            ---
            
            $
            ---


12


Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
8: Related Party Transactions




In
September, 2006, the Company entered into a design-build agreement with ICM, a
related party and a member of the Company, for a lump-sum contract price of
$118,000,000 (the “ICM
Contract”).  As of December 31, 2009 and September 30, 2009,
the Company incurred approximately $147,656,016 and $147,608,000of costs, respectively,
under the ICM Contract.  A total of $372,770 is included in retainage
payable as of December 31, 2009.




The
Company entered into an agreement in October, 2006 with Bunge, a related party
and a member of the Company, to purchase all of the distillers grains with
solubles (“DG”)
produced by the plant (the “DG
Agreement”).  Bunge pays a sales price less transportation
costs, rail lease charge and a fixed rate marketing fee for the DG
produced.  The DG Agreement continues until February 1, 2019, when it
will automatically renew for successive three-year terms unless a 180-day
written notice is given of either party’s election not to renew before the
expiration of the initial term or the then-current renewal term.  The
Company is required to pay a minimum annual marketing fee of
$150,000.  Beginning on February 1, 2012, the annual minimum amount
and the purchase price may be adjusted.  Either party may terminate
the agreement as provided in the DG Agreement.   The Company has
incurred $226,193 of marketing expenses during the quarter ended December 31,
2009, and there were no expenses incurred for the quarter ended December 31,
2008.




In
October, 2006, the Company entered into an agreement with a company in which
Bunge holds a membership interest, AGRI-Bunge, LLC (“AB”), to procure all
grain required for the Company’s ethanol plant.  The Company pays an
agency fee mutually agreed to by both parties for corn delivered by truck or
rail, with a minimum annual fee. On December 15, 2008, this agreement was
suspended and replaced with a grain supply agreement between the
parties.  The new agreement has a term of ten years and automatically
renews for successive three-year terms unless a 180-day written notice is given
by either party.  The Company pays an annual minimum fee of $675,000
under the new agreement.  Expenses for the quarter ended December 31,
2009 were $326,099.  There were no fees incurred for the quarter ended
December 31, 2008.




On
January 30, 2008, the Company and Bunge entered into a Support Services
Agreement (the “Support Services
Agreement”), under which Bunge agreed to provide engineering support to
the project, provide reports to AgStar and assist the Company with requests by
the lender’s agent.  The Company paid, in addition to Bunge’s out of
pocket expenses, an hourly fee of $95 for such services.  The terms of
the Support Services Agreement expired on December 31, 2008; however the
agreement has been continued on a month to month basis.  Expenses for
the quarters ended December 31, 2009 and 2008 were none and $21,000,
respectively.




In
December, 2008, the Company and Bunge entered into other various agreements.
Under a Lease Agreement (the “Lease Agreement”),
the Company leased from Bunge a grain elevator located in Council Bluffs, Iowa,
for approximately $67,000 per month.  Expenses for the quarters ended
December 31, 2009 and 2008 were $200,001 and $33,000,
respectively.   In connection with the signing of the Lease
Agreement in December, 2008, the Company entered into a grain purchase
agreement, under which the Company agreed to purchase the grain inventory at the
grain elevator and the grain inventory located in the Company’s on-site storage
Facility.  The Company purchased approximately 1,900,000 bushels of
corn at an approximate market value of $6,000,000.




Under an
Ethanol Purchase Agreement (the “Ethanol Purchase
Agreement”), the Company sells Bunge all of the ethanol produced at the
ethanol plant, and Bunge purchases the same, up to the ethanol plant’s nameplate
capacity of 110,000,000 gallons a year.  The Company pays Bunge a
per-gallon fee for ethanol sold by Bunge, subject to a minimum annual fee of
$750,000 and adjusted according to specified indexes after three
years.  The initial term of the agreement commenced August 20, 2009,
is three years and it will automatically renew for successive three-year terms
unless one party provides the other with notice of their election to terminate
180 days prior to the end of the term.  The Company has incurred
expenses of $113,207 and none during the quarters ended December 31, 2009 and
2008.









13


Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
8: Related Party Transactions (continued)




Under a
Risk Management Services Agreement effective January 1, 2009, Bunge agreed to
provide the Company with assistance in managing its commodity price risks for a
quarterly fee of $75,000.  The agreement has an initial term of three
years and will automatically renew for successive three year terms, unless one
party provides the other notice of their election to terminate 180 days prior to
the end of the term.  Expenses for quarter ended December 31, 2009
were $75,000.  There were no expenses incurred for the quarter ended
December 31, 2008.




In June,
2007, the Company entered into an operating lease agreement with Bunge for the
lease of 320 ethanol tank cars and 300 distillers grain
cars.  The  lease  began in January 2009,
continues  for  a  term  of  ten  years,  and  terminates  upon  the
termination  of the final car lease.  On June 26, 2009, the
Company executed an Amended and Restated Railcar Lease Agreement (“Railcar Agreement”)
with Bunge for the lease of 325 ethanol cars and 300 hopper cars which will be
used for the delivery and marketing of the Company’s ethanol and distillers
grains.  Under the Railcar Agreement, the Company will lease railcars
for terms lasting 120 months and continuing on a month to month basis
thereafter. The Railcar Agreement will terminate upon the expiration of all
railcar leases.  The Railcar Agreement reflects changes as a result of
Bunge’s purchase and sale/leaseback of railcars from a new railcar equipment
lessor other than contemplated in the 2007 Railcar Sublease Agreement (the
“Railcar Sublease
Agreement”) between the Company and Bunge.  The Railcar
Agreement provides that the Company is a lessee rather than a sublessee as under
the Railcar Sublease Agreement and that Bunge is the lessor rather than the
lessee as under the Railcar Sublease Agreement.  Expenses for the
quarter ended December 31, 2009 and 2008 were $1,215,505 and
$64,676.




In
connection with obtaining the Bridge Loan, the Company entered into the Series C
Unit Agreement, as described above in Note 4.




Holdings
has agreed to extend the Term Note to the Company, which matures on August 31,
2014, repayment of which is subordinated to the Credit Agreement, as described
in Note  6.




In
addition, the Company entered into the Revolving Note with affiliate Holdings
providing for the extension of a maximum of $10,000,000 in revolving credit, as
described in Note 6.




Note
9: Commitments




The
Company has entered into a steam contract with an unrelated party under which
the vendor agreed to provide the steam required by the Company, up to 475,000
pounds per hour. The Company agreed to pay a net energy rate for all steam
provided under the contract and a monthly demand charge. The net energy rate is
set for the first three years then adjusted each year beginning on the third
anniversary date.  The steam contract will remain in effect until
January 1, 2019.  Expenses for the quarter ended December 31, 2009
were $2,615,532.  There were no expenses incurred for the quarter
ended December 31, 2008.




In April,
2008 the Company entered into a Firm Throughput Service Agreement with a natural
gas supplier, an unrelated party, under which the vendor agreed to provide the
gas, up to 900 Dth per day, as required by the Company. The Company agreed to
pay the maximum reservation and commodity rates as provided under the vendor’s
FERC Gas Tariff as revised from time to time, as well as other additional
charges. The agreement specifies an in-service date of October 1, 2008, and the
term of the agreement is seven years.  Expenses for the quarter ended
December 31, 2009 and 2008 were $7,765 and $52,400, respectively.





The
Company has purchased 16,957M Kilowatts of electricity for the quarter ended
December 31, 2009 from MidAmerica Energy Company (“MidAm”) under an
Electric Service Contract (“Electric Contract”)
dated December 15, 2006.  In the Electric Contract, the Company agreed
to own and operate a 13 kV switchgear with metering bay, all distribution
transformers, and all 13 kV and low voltage cable on our side of the
switchgear.





These
rates only apply to the primary voltage electric service provided under the
Electric Contract.  The electric service will continue at these prices
for up to 60 months, but in any event will terminate on June 30,
2012.  The pricing under the Electric Contract is based on the
assumptions that we will have an average billing demand of 7,300M kilowatts per
month and that we will average an 85% load factor over a 12 month
period.


14


Southwest
Iowa Southwest Iowa Renewable Energy, LLC





Notes
to Unaudited Financial Statements




Note
9: Commitments (continued)





If these
assumptions are not met, the Company will pay the most applicable tariff
rate.  Additionally, at any time, we may elect to be charged under one
of MidAm’s electric tariffs.  These rates only apply to the primary
voltage electric service provided under the Electric Contract.  The
electric service will continue at these prices for up to 60 months, but in any
event will terminate on June 30, 2012.  The pricing under the Electric
Contract is based on the assumptions that we will have an average billing demand
of 7,300M kilowatts per month and that we will average an 85% load factor over a
12 month period.  If these assumptions are not met, the Company will
pay the most applicable tariff rate.  Additionally, at any time, we
may elect to be charged under one of MidAm’s electric tariffs.







In
January, 2007, the Company entered into an agreement with Iowa Interstate
Railroad, LTD to provide the transportation of the Company’s commodities from
Council Bluffs, Iowa to an agreed upon customer location.   The
agreement commenced on December 1, 2007 and continues for five years and will
automatically renew for additional one year periods unless cancelled by either
party.  The Company agreed to pay a mutually agreed upon rate per
car.  Expenses for the quarter ended December 31, 2009 were
approximately $277,686, of which approximately $10,577 was included in accounts
payable.  There were no expenses for the quarter ended December 31,
2008.




In
August, 2008, the Company entered into an agreement with an unrelated party
which establishes terms governing the Company’s purchase of natural
gas.  The agreement commenced in August, 2008 and has a term of two
years.  The Company has incurred expenses of $1,131,374, for the year
ended December 31, 2009.  There were no expenses for the quarter ended
December 31, 2008.




The
Company leases certain equipment, vehicles, and operating facilities under
non-cancellable operating leases that expire on various dates through
2017.  Rent expense related to operating leases for the quarter ended
December 31, 2009 was $1,459,315.  Rent expense related to operating
leases for the quarter ended December 31, 2008 was approximately
$231,460.




Note
10: Major Customers




The
Company entered into an agreement with a related entity and major customer for
marketing, selling, and distributing all of the ethanol produced by the Company
beginning on August 20, 2009.




In
addition, the Company has an agreement with the same related entity and major
customer for marketing, selling, and distributing all of the distiller’s grains
with solubles produced by the Company.  Revenues with this customer
were $50,748,439 for the quarter ended December 31, 2009.  Trade
accounts receivable due from this customer were $10,357,853 at December 31,
2009.




Note
11: Subsequent Events




Subsequent
events have been evaluated through February 12, 2010, the date of this
filing.  Management does not believe there are any material subsequent
events which would require disclosure.









15


Item
2.     Management's Discussion and Analysis or Plan of
Operation.







Forward
Looking Statements





This
report contains forward-looking statements that involve future events, our
future performance and our expected future operations and actions.  In
some cases you can
identify  forward-looking  statements  by the use
of words such as “may,” “should,” “anticipate,” “believe,” “expect,” “plan,”
“future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,”
“continue,” or the negative of these terms or other similar
expressions.  These forward-looking statements are only our
predictions and involve numerous assumptions, risks and
uncertainties.  Our actual results or actions may differ materially
from these forward-looking statements for many reasons, including the following
factors:





·
            Overcapacity
      in the ethanol industry;


·
            Fluctuations
      in the price and market for ethanol and distillers
  grains;


·
            Availability
      and costs of products and raw materials, particularly corn, steam and
      natural gas;


·
            Changes
      in our business strategy, capital improvements or development
      plans;


·
            Changes
      in the environmental regulations that apply to our plant site and
      operations;


·
            Our
      ability to hire and retain key employees for the operation of the
      plant;


·
            Changes
      in general economic conditions or the occurrence of certain events causing
      an economic impact in the agricultural, oil or automobile
      industries;


·
            Changes
      in the weather and economic conditions impacting the availability and
      price of corn and natural gas;


·
            Changes
      in federal and/or state laws (including the elimination of any federal
      and/or state ethanol tax
incentives);


·
            Changes
      and advances in ethanol production technology, and competition from
      alternative fuel additives;


·
            Lack
      of transport, storage and blending infrastructure preventing ethanol from
      reaching high demand markets;


·
            Changes
      in interest rates and lending conditions;
and


·
            Results
      of our hedging strategies.





Our
actual results or actions could and likely will differ materially from those
anticipated in the forward-looking statements for many reasons, including the
reasons described in this report.  We are not under any duty to update
the forward-looking statements contained in this report. We cannot guarantee
future results, levels of activity, performance or achievements. We caution you
not to put undue reliance on any forward-looking statements, which speak only as
of the date of this report.  You should  read
this  report and the  documents  that we
reference  in this  report and have filed
as  exhibits  completely  and with the
understanding  that our actual future  results may be
materially  different from what we currently expect. We qualify all of
our forward-looking statements by these cautionary statements.





Overview,
Status and Recent Developments





The
Company is an Iowa limited liability company, located in Council Bluffs, Iowa,
was formed in March, 2005 to construct and operate a 110 million gallon capacity
ethanol plant.  We began producing ethanol in February, 2009 and sell
our ethanol, modified wet distillers grains with solubles, and corn syrup in the
continental United States.  We sell our dried distillers grains with
solubles in the continental United States, Mexico, and the Pacific
Rim.





Our
production facility (the “Facility”) is located
in Pottawattamie County in southwestern Iowa. It is near two major interstate
highways, within a half a mile of the Missouri River and has access to five
major rail carriers. This location is in close proximity to raw materials and
product market access. The Facility receives corn and chemical deliveries
primarily by truck but is able to utilize rail delivery if
necessary.  Finished products are shipped by rail and
truck.  The site has access to water from ground wells and from the
Missouri river. In addition to close proximity to the Facility’s primary energy
source, steam, there are two natural gas providers available, both with
infrastructure immediately accessible.








16


Results
of Operations





The
following table shows our results of operations, stated as a percentage of
revenue.  Because we did not begin operating the Facility until
mid-February 2009, we do not have comparable data for the three months ended
December 31, 2008.  We do, however, have a comparison for the three
months ended December 31, 2009 to the three months ended September 30,
2009.








Three
      Months Ended December 31, 2009
              (Unaudited)
            
            Three
      Months Ended September 30, 2009 (1)
              (Unaudited)Amounts
            
            %
      of
              Revenues
            Gallons(2)
            
            Amounts
            
            %
      of
              Revenues
            
            Gallons(2)Income
      Statement DataRevenues
            $
            50,748,439
            
            100%
            $
            1.84
            
            $
            45,548,073
            
            100%
            
            $
            1.89Cost
      of Goods Sold
            
            48,854,151
            
            96%
            
            1.77
            
            
            44,148,010
            
            97%
            
            
            1.94Gross
      Margin
            
            1,894,288
            
            4%
            
            0.07
            
            
            1,400,063
            
            3%
            
            
            (0.05)Selling,
      General and Administrative Expenses
            
            1,138,298
            
            2%
            
            0.05
            
            
            1,400,996
            
            3%
            
            
            0.05Other
      (Expense)
            
            (2,311,247)
            
            (5%)
            
            (0.08)
            
            
            (1,582,749)
            
            (3%)
            
            
            (0.10)Net
      Loss
            $
            (1,555,257)
            
            (3%)
            $
            (0.06)
            
            $
            (1,583,682)
            
            (3%)
            
            $
            (0.20)





(1)
            Because
      we did not begin operations of the Facility until mid-February and we were
      operating at a reduced capacity of approximately 84% during this period,
      the losses that we incurred are not indicative of any losses or profits
      that we might achieve when the plant is running at full
      capacity


(2)    Includes
ethanol and distillers grains converted to gallons.





Revenues




Our
revenue from operations is derived from two primary sources: sales of ethanol
and distillers grains.  The following chart displays statistical
information regarding our revenues. The increase in revenue from the fourth
quarter, 2009 to the first quarter, 2010 was due to an additional 1.4 million
gallons of ethanol sold with the average price per gallon increasing by
approximately $0.06 between the two quarters.









Three
      Months Ended December 31, 2009
              (Unaudited)
            
            Three
      Months Ended September 30, 2009 (1)
              (Unaudited)Gallons/Tons
      Sold
            
            %
      of
              Revenues
            Gallons/Tons
              Average
      Price
            
            Gallons/Tons
      Sold
            
            %
      of
              Revenues
            
            Gallons/Tons
              Average
      PriceStatistical
      Revenue InformationDenatured
      Ethanol
            
            27,543,976
            
            85%
            $
            1.57
            
            
            25,156,463
            
            83%
            
            $
            1.51Dry
      Distiller’s Grains
            
            70,908
            
            15%
            $
            100.10
            
            
            75,150
            
            17%
            
            $
            98.8







Cost
of Goods Sold




Our cost
of goods sold showed a slight decrease of 1% between the fourth quarter, 2009 to
the first quarter, 2010.  Our two primary costs of producing ethanol
and distillers grains are corn and energy, with steam as our primary energy
source and to a lesser extent, natural gas.  Our corn prices varied
during the fourth quarter, 2009 and the first quarter, 2010, ranging from $3.18
to $3.71 per bushel. We did generate a reduction in our corn costs due to
realized and unrealized gains on our hedging activities during the two
quarters.  Our average price of corn ground was approximately $3.40
per bushel in both quarters and our average steam and natural gas energy cost
was $5.85 and $5.00 per MMBTU in the first quarter, 2010 and fourth quarter
2009, respectively.   Our cost of goods sold per gallon decreased
by $0.17 a gallon from the fourth quarter, 2009 to the first quarter, 2010 due
to reaching full production capacity.




General
& Administrative Expense




Our
general and administrative expenses as a percentage of revenues dropped from 3%
to 2% in comparing fourth quarter 2009 to first quarter
2010.  Operating expenses include salaries and benefits of
administrative




17


employees,
professional fees and other general administrative costs.  The
decrease in selling, general, and administrative expenses from fourth quarter
2009 to first quarter 2010 was primarily due to reduction in consulting and
legal fees.  We expect our operating expenses to remain flat to
slightly decreasing during the first two quarters of Fiscal 2010.




Other
(Expense)




Our other
expenses for the first quarter, 2010 and the fourth quarter, 2009 were
approximately 5% and 3% of our revenues, respectively. The majority of this
increase in 2010 in other expenses was an increase in interest expense after
drawing additional amounts on credit agreements and one time insurance proceeds
received of approximately $620,000 included in other income for the three months
ended September 30, 2009.




Net
(Loss)




Our net
loss from operations for the quarters ended December 31, 2009 and September 30,
2009 as a percentage of income were both 3%.  The operating
margins for the three months ended December 31, 2009, as noted
above,  were better than during the three months ended September 30,
2009; however this additional revenue was offset byincreased
interest expense due to additional amounts borrowed on the Credit
Agreement.




Liquidity
and Capital Resources




As of
December 31, 2009, we have drawn approximately $118,425,200 under our Credit
Agreement, and had approximately $8,650,500 of principal and interest
outstanding under the Bridge Loan.  We also agreed to pay, beginning
at the end of the June 30, 2010 fiscal quarter, an amount equal to 65% of our
Excess Cash Flow (as defined in the Credit Agreement), up to a total of
$4,000,000 per year, and $16,000,000 over the term of the Credit
Agreement.  Effective August 1, 2009, in addition to compliance with
the borrowing base, we are subject to working capital and tangible net worth
covenants under the Credit Agreement.


Under our $15 million revolving line of credit with AgStar (the “Revolving LOC”), we
have borrowed $9,500,000 as of December 31, 2009, with an additional $1,500,000
available at December 31, 2009. In addition, under our $10,000,000 construction
revolving line of credit with AgStar we have an additional $2,000,000 revolving
ling of credit available at December 31, 2009.  A letter of credit
issued in favor of our steam provider, MidAm, in the amount of $2,000,000
reduces the availability under our Revolving LOC.  We are also relying
on receipt of our accounts receivable to help fund
operations.
  In addition, we have entered into the Revolving Note with Holdings providing for
the extension of a maximum of $10,000,000 in revolving credit under the
Revolving Note.  Holdings committed, subject to certain conditions, to
advance up to $3,750,000 at our request under the Revolving Note, and amounts in
excess of $3,750,000 may be advanced by Holdings in its
discretion.  As of December 31, 2009, we have no outstanding balance
under the Revolving Note.  We are required to draw the maximum amount
available under the Credit Agreement to pay any outstanding advances under the
Revolving Note from Holdings.




Although
the spot prices have increased slightly since October 2009 we believe operating
margins will be break-even to slightly positive over the next two to three
quarters.  We anticipate margins will remain under pressure for the
foreseeable future as ethanol production increases as a result of mergers and
acquisitions of troubled plants and commencement of a few remaining projects
that are under construction.  In addition, cash flow from operations
may not allow us to make our principal payments under the Credit Agreement which
are scheduled to commence March 1, 2010. In that event, we would request AgStar
to delay our payment of the initial principal payment.  If our
principal payments are not delayed, we may be dependent upon our lines of credit
to make these payments.  We may use our line of credit to hedge corn,
natural gas and ethanol.  The volatility in the commodities markets
has resulted in wide swings in margins for ethanol production.




Primary
Working Capital Needs




Cash
(used in) operations for the quarters ended December 31, 2009 and 2008 was
($159,289) and ($9,229,792), respectively.  Cash has been used
primarily to fund cyclical inventory buildup in the first quarter of 2010, in
the first quarter of 2009, cash was used to fund operational start up
expenditures and build inventory prior to operating.  For the quarters
ended December 31, 2009 and 2008, net cash (used in) investing activities was
($1,482,004) and ($20,976,259), respectively, primarily related to the final
construction and start-up of our plant.  For the quarters ending
December 31, 2009 and 2008, cash provided by financing activities was $5,116,858
and $25,489,429, respectively.  This cash was generated through loan
proceeds.




18


Through
December 31, 2009, we have incurred $147,656,016 for construction services under
our construction contract with ICM (“ICM Contract”),
leaving $372,770 of retainage, which we expect to pay in the second quarter of
fiscal year 2010.  During the next quarter, we estimate that we will
require approximately $34,000,000 or more per quarter for our primary input of
corn and $4,000,000 for our energy sources of steam and natural
gas.  We cannot estimate the availability of funds for hedging in the
future.




Trends
and Uncertainties Impacting Ethanol Industry and Our Future
Operations




Our
operations are highly dependent on commodity prices, especially prices for corn,
ethanol and distillers grains. As a result of price volatility for these
commodities, our operating results may fluctuate substantially. The price and
availability of corn are subject to significant fluctuations depending upon a
number of factors that affect commodity prices in general, including crop
conditions, weather, governmental programs and foreign purchases. We may
experience increasing costs for corn and natural gas and decreasing prices for
ethanol and distillers grains which could significantly impact our operating
results. Because the market price of ethanol is not directly related to corn
prices, ethanol producers are generally not able to compensate for increases in
the cost of corn feedstock through adjustments in prices charged for
ethanol.  We continue to monitor corn and ethanol prices and their
effect on our longer-term profitability.




The price
of corn has been volatile during the last two years. Since September, 2009, the
Chicago Mercantile Exchange (“CME”) near-month corn
price has increased $0.63 per bushel. As of January15, 2010 the CME near-month
corn price for January 2010 was $3.49 per bushel. We believe the increase in
corn prices was primarily due to the late harvest, the harvest season weather
conditions, and the inability to measure the fall 2009 harvest. Increasing corn
prices will negatively affect our costs of production. However, we also believe
that higher corn prices may, depending on the prices of alternative crops,
encourage farmers to plant more acres of corn in the coming years and possibly
divert land in the Conservation Reserve Program to corn production. We believe
an increase in land devoted to corn production could reduce the price of corn to
some extent in the future.




The
United States Department of Agriculture (“USDA”) has increased
the forecast of the amount of corn to be used for ethanol production during the
current marketing year (2010) by 500 million bushels, to a total of 4.2 billion.
The forecast is 628 million bushels more than used in that category last
year.  The USDA cited record ethanol use in December, 2009, continuing
recovery in the production of gasoline blends with ethanol, and more favorable
blender margins as reasons for the increase. In its January 12, 2010 update, the
USDA also increased the projection of U.S. corn exports for the current
marketing year by 192 million bushels, to 2.05 billion bushels.  This
projection is 192 million bushels greater than the projection of last fall, 504
million less than the record exports of 2007-08.




The
USDA report for crop year 2009 (the period of September, 2009 through August,
2010) has projected the season-average farm price of corn at $3.40 to $4.00 per
bushel.  This compares with the 2007/08 record of $4.20 per
bushel.  We feel that there will continue to be volatility in the corn
market.




In the
past, ethanol prices have tended to track the wholesale price of gasoline.
Ethanol prices can vary from state to state at any given time. For the past two
years as of January, 2010 according to ProExporter, the average U.S. ethanol
price was $1.85 per gallon.  For the same time period, the average
U.S. wholesale gasoline price was $2.17 per gallon.  During 2009, the
average U.S. ethanol price was $1.56 per gallon. For the same time period, U.S.
wholesale gasoline prices have averaged $1.76 per gallon, or approximately $.20
per gallon above ethanol prices.




The
Renewable Fuels Standard




The
Energy Improvement & Extension Act of 2008 (the “2008 Act”) included
cellulosic ethanol supports applicable to corn-based ethanol and bolsters those
contained in the 2007 Act.  Theses supports have impacted the ethanol
industry by enhancing both the production and use of ethanol.  The
2008 Act modified the provisions of the 2005 Act that created the RFS. 
The U.S. Environmental Protection Agency (the "EPA") is responsible
for revising and implementing regulations to ensure that transportation fuel
sold in the United States contains a minimum volume of renewable
fuel.  On February 3, 2010, the EPA implemented a
regulation that requires 12.95 billion gallons of renewable
fuel be sold or dispensed in 2010, increasing to 36 billion gallons by
2022.  This requirement does not apply solely to corn-based ethanol, but
includes all forms of fuel created from feedstocks that qualify as
“renewable biomass.”  The EPA regulation also expanded the RFS
program beyond gasoline to generally cover all transportation
fuel.  We cannot assure that this program’s mandates will continue in
the future.  We believe that any reversal in federal policy could have
a profound impact on the ethanol industry.









19


Market
Risks




We are
exposed to market risk from changes in commodity prices and, to the extent we
have working capital available, we engage in hedging transactions which involve
risks that could harm our business.  Exposure to commodity price risk
results from our dependence on corn, and to the extent our steam source is not
available, natural gas, in the ethanol production process.  We seek to
minimize the risks from fluctuations in the price of corn through the use of
hedging instruments when working capital is available.  The effectiveness
of our hedging strategies is dependent upon the cost of commodities and our
ability to sell sufficient products to use all of the commodities for which we
have futures contracts. There is no assurance that our hedging activities will
successfully reduce the risk caused by price fluctuation which may leave us
vulnerable to high prices. Alternatively, we may choose not to engage in hedging
transactions in the future. As a result, our future results of operations and
financial conditions may also be adversely affected during periods in which corn
prices increase. We do not designate these contracts as hedges for accounting
purposes.




Competition




We
believe that the competition in the ethanol market will increase in the near
term as the ethanol plants recently sold by bankruptcy proceedings return to
production.  Several of our competitors including certain subsidiaries
of Pacific Ethanol, Inc. and Aventine Renewable Energy Holdings, Inc. have filed
to reorganize under federal bankruptcy laws as a result of margin pressure,
inadequate liquidity and other considerations.  Valero Renewable Fuels
Company, LLC announced its agreement to acquire three, 110 million gallon
ethanol plants on December 15, 2009, two of which were completely
offline.  We believe that ethanol prices will remain relatively stable
through the end of 2010 as a result of restarted capacity that was recently idle
and other competitive dynamics impacting supply and demand.




Summary
of Critical Accounting Policies and Estimates




Note 2 to
our financial statements contains a summary of our significant accounting
policies, many of which require the use of estimates and
assumptions.  Accounting estimates are an integral part of the
preparation of financial statements and are based upon management’s current
judgment.  We used our knowledge and experience about past events and
certain future assumptions to make estimates and judgments involving matters
that are inherently uncertain and that affect the carrying value of our assets
and liabilities.  We believe that of our significant accounting
policies, the following are noteworthy because changes in these estimates or
assumptions could materially affect our financial position and results of
operations




Revenue
Recognition




We sell
ethanol and related products pursuant to marketing
agreements.  Revenues are recognized when the marketing company (the
“customer”) has taken title to the product, prices are fixed or determinable and
collectability is reasonably assured.  Our products are generally
shipped FOB loading point.  With the conclusion of the Lansing
Agreement, ethanol sales are handled through the Ethanol Agreement with
Bunge.  Syrup, distillers grains and solubles, and modified wet
distillers grains with solubles are sold through the DG Agreement with Bunge,
which sets the price based on the market price to third
parties.  Marketing fees and commissions due to the marketers are paid
separately from the settlement for the sale of the ethanol products and
co-products and are included as a component of cost of goods
sold.  Shipping and handling costs incurred by us for the sale of
ethanol and co-products are included in cost of goods sold.




Investment
in Commodities Contracts, Derivative Instruments and Hedging
Activities




When we
have sufficient working capital available, we enter into derivative contracts to
hedge our exposure to price risk related to forecasted corn needs and forward
corn purchase contracts.  We use cash, futures and options contracts
to hedge changes to the commodity prices of corn and ethanol.  The
Company adopted new disclosure requirements, which require entities to provide
greater transparency in interim and annual financial statements about how and
why the entity uses derivative instruments, how the instruments and related
hedged items are accounted for, and how the instruments and related hedged items
affect the financial position, results of operations, and cash flows of the
entity.




We are
exposed to certain risks related to ongoing business operations.  The
primary risks that we manage by using forward or derivative instruments are
price risk on anticipated purchases of corn and sales of ethanol.




We are
subject to market risk with respect to the price and availability of corn, the
principal raw material used to produce ethanol and ethanol
by-products.  In general, rising corn prices result in lower profit
margins and,




20


therefore,
represent unfavorable market conditions.  This is especially true when
market conditions do not allow us to pass along increased corn costs to
customers.  The availability and price of corn is subject to wide
fluctuations due to unpredictable factors such as weather conditions, farmer
planting decisions, governmental policies with respect to agriculture and
international trade and global demand and supply.




Certain
contracts that literally meet the definition of a derivative may be exempted
from derivative accounting as normal purchases or normal
sales.  Normal purchases and normal sales are contracts that provide
for the purchase or sale of something other than a financial instrument or
derivative instrument that will be delivered in quantities expected to be used
or sold over a reasonable period in the normal course of
business.  Contracts that meet the requirements of normal purchases or
sales are documented as normal and exempted from the accounting and reporting
requirements of derivative accounting.




We enter
into short-term cash, options and futures contracts as a means of securing corn
for the ethanol plant and managing exposure to changes in commodity
prices.  In addition, from time to time, we enter into derivative
contracts to hedge the exposure to price risk as it relates to ethanol
sales.  We maintain a risk management strategy that uses derivative
instruments to minimize significant, unanticipated earnings fluctuations caused
by market fluctuations.  Our specific goal is to protect the Company
from large moves in commodity costs.  All derivatives will be
designated as non-hedge derivatives and the contracts will be accounted for as
mark to market.  Although the contracts will be effective economic
hedges of specified risks, they are not designated as and accounted for as
hedging instruments.




As part
of our trading activity, we use futures and option contracts offered through
regulated commodity exchanges to reduce risk and is exposed to risk of loss in
the market value of inventories.  To reduce that risk, we generally
take positions using cash and futures contracts and
options.  Accordingly, any realized or unrealized gain or loss related
to these derivative instruments was recorded in the statement of operations as a
component of non-operating income (expense) until the plant was
operational.  Once Operational, the gains or losses are included in
revenue if the contracts relate to ethanol and cost of goods sold if the
contracts relate to corn.   During the developmental stage, the
Company recorded a combined realized and unrealized loss of ($656,973) for the
three months ended December 31, 2008 as a component of non-operating
income.  There were no gains or losses on ethanol contracts during the
three months ended December 31, 2009 or 2008.  The derivative
financial instruments asset (liability) of ($376,450) and $263,688 consists of
5,810,000 and 1,525,000 bushels of corn, respectively.  There were no
gallons of ethanol at December 31, 2009 and September 30, 2009.




Derivatives
not designated as hedging instruments at December 31, 2009 and 2008 were as
follows:




Three
      Months
              Ended
              December
      31, 2009
            
            Three
      Months
              Ended
              December
      31, 2008Increase
      (decrease) in cost of goods sold due to derivatives related to corn
      costs:Realized
            $
            (721,937)
            
            $
            -Unrealized
            
            640,138
            
            
            -Total
      effect on cost
              of
      goods sold
            $
            (81,799)
            
            $
            -Total
      increase
              (decrease)
      to operating
              income
      due to
              derivative
      activities
            $
            81,799
            
            $
            -







Inventory




Inventory
is stated at the lower of cost or market value using the first-in, first-out
method.  Market value is based on current replacement values, except
that it does not exceed net realizable values and it is not less than the net
realizable values reduced by an allowance for normal profit margin.




21


Property
and Equipment




Property
and equipment is stated at cost. Construction in progress is comprised of costs
related to constructing the plant and is depreciated upon completion of the
plant.  Depreciation is computed using the straight-line method over
the following estimated useful lives:




Buildings
              40 YearsProcess
      Equipment
              10 YearsOffice
      Equipment
              3-7 Years







Maintenance
and repairs are charged to expense as incurred; major improvements are
capitalized.




Long-lived
assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of the asset may not be
recoverable.  An impairment loss would be recognized when estimated
undiscounted future cash flows from operations are less than the carrying value
of the asset group.  An impairment loss would be measured by the
amount by which the carrying value of the asset exceeds the fair value of the
asset.  In accordance with our policies, management has evaluated the
plants for possible impairment based on projected future cash flows from
operations.  Management has determined that its projected future cash
flows from operations exceed the carrying value of the plant and that no
impairment existed at December 31, 2009.





Off-Balance
Sheet Arrangements





The
Company currently does not have any off balance sheet arrangements.





Relationships
and Related Party Transactions





In
September, 2006, the Company entered into a design-build agreement with ICM, a
related party and a member of the Company, for a lump-sum contract price of
$118,000,000 (the “ICM
Contract”).  As of December 31, 2009 and September 30, 2009,
the Company incurred approximately $147,656,016 and $147,608,000of costs, respectively,
under the ICM Contract.  A total of $372,770 is included in retainage
payable as of December 31, 2009.





The
Company entered into an agreement in October, 2006 with Bunge, a related party
and a member of the Company, to purchase all of the distillers grains with
solubles (“DG”)
produced by the plant (the “DG
Agreement”).  Bunge pays a sales price less transportation
costs, rail lease charge and a fixed rate marketing fee for the DG
produced.  The DG Agreement continues until February 1, 2019, when it
will automatically renew for successive three-year terms unless a 180-day
written notice is given of either party’s election not to renew before the
expiration of the initial term or the then-current renewal term.  The
Company is required to pay a minimum annual marketing fee of
$150,000.  Beginning on February 1, 2012, the annual minimum amount
and the purchase price may be adjusted.  Either party may terminate
the agreement as provided in the DG Agreement.   The Company has
incurred $226,193 of marketing expenses during the quarter ended December 31,
2009, and there were no expenses incurred for the quarter ended December 31,
2008.







In
October, 2006, the Company entered into an agreement with a company in which
Bunge holds a membership interest, AGRI-Bunge, LLC (“AB”), to procure all
grain required for the Company’s ethanol plant.  The Company pays an
agency fee mutually agreed to by both parties for corn delivered by truck or
rail, with a minimum annual fee. On December 15, 2008, this agreement was
suspended and replaced with a grain supply agreement between the
parties.  The new agreement has a term of ten years and automatically
renews for successive three-year terms unless a 180-day written notice is given
by either party.  The Company pays an annual minimum fee of $675,000
under the new agreement.  Expenses for the quarter ended December 31,
2009 were $326,099.  There were no fees incurred for the quarter ended
December 31, 2008.




On
January 30, 2008, the Company and Bunge entered into a Support Services
Agreement (the “Support Services
Agreement”), under which Bunge agreed to provide engineering support to
the project, provide reports to AgStar and assist the Company with requests by
the lender’s agent.  The Company paid, in addition to Bunge’s out of
pocket expenses, an hourly fee of $95 for such services.  The terms of
the Support Services Agreement expired on December 31, 2008; however the
agreement has been continued on a month to month basis.  Expenses for
the quarters ended December 31, 2009 and 2008 were none and $21,000,
respectively.




22


In
December, 2008, the Company and Bunge entered into other various agreements.
Under a Lease Agreement (the “Lease Agreement”),
the Company leased from Bunge a grain elevator located in Council Bluffs, Iowa,
for approximately $67,000 per month.  Expenses for the quarters ended
December 31, 2009 and 2008 were $200,001 and $33,000,
respectively.   In connection with the signing of the Lease
Agreement in December, 2008, the Company entered into a grain purchase
agreement, under which the Company agreed to purchase the grain inventory at the
grain elevator and the grain inventory located in the Company’s on-site storage
Facility.  The Company purchased approximately 1,900,000 bushels of
corn at an approximate market value of $6,000,000.




Under an
Ethanol Purchase Agreement (the “Ethanol Purchase
Agreement”), the Company sells Bunge all of the ethanol produced at the
ethanol plant, and Bunge purchases the same, up to the ethanol plant’s nameplate
capacity of 110,000,000 gallons a year.  The Company pays Bunge a
per-gallon fee for ethanol sold by Bunge, subject to a minimum annual fee of
$750,000 and adjusted according to specified indexes after three
years.  The initial term of the agreement commenced August 20, 2009,
is three years and it will automatically renew for successive three-year terms
unless one party provides the other with notice of their election to terminate
180 days prior to the end of the term.  The Company has incurred
expenses of $113,207 and none during the quarters ended December 31, 2009 and
2008.





Under a
Risk Management Services Agreement effective January 1, 2009, Bunge agreed to
provide the Company with assistance in managing its commodity price risks for a
quarterly fee of $75,000.  The agreement has an initial term of three
years and will automatically renew for successive three year terms, unless one
party provides the other notice of their election to terminate 180 days prior to
the end of the term.  Expenses for quarter ended December 31, 2009
were $75,000.  There were no expenses incurred for the quarter ended
December 31, 2008.




In June,
2007, the Company entered into an operating lease agreement with Bunge for the
lease of 320 ethanol tank cars and 300 distillers grain
cars.  The  lease  began in January 2009,
continues  for  a  term  of  ten  years,  and  terminates  upon  the
termination  of the final car lease.  On June 26, 2009, the
Company executed an Amended and Restated Railcar Lease Agreement (“Railcar Agreement”)
with Bunge for the lease of 325 ethanol cars and 300 hopper cars which will be
used for the delivery and marketing of the Company’s ethanol and distillers
grains.  Under the Railcar Agreement, the Company will lease railcars
for terms lasting 120 months and continuing on a month to month basis
thereafter. The Railcar Agreement will terminate upon the expiration of all
railcar leases.  The Railcar Agreement reflects changes as a result of
Bunge’s purchase and sale/leaseback of railcars from a new railcar equipment
lessor other than contemplated in the 2007 Railcar Sublease Agreement (the
“Railcar Sublease
Agreement”) between the Company and Bunge.  The Railcar
Agreement provides that the Company is a lessee rather than a sublessee as under
the Railcar Sublease Agreement and that Bunge is the lessor rather than the
lessee as under the Railcar Sublease Agreement.  Expenses for the
quarters ended December 31, 2009 and 2008 were $1,215,505 and $64,676,
respectively.




In
connection with obtaining the Bridge Loan, we entered into the Series C Unit
Amendment as described above.




Holdings
has agreed to extend the Term Note to us, due in five years, repayment of which
is subordinated to the Credit Agreement, as described above.




In
addition, we entered into the Revolving Note with Holdings, with a two-year
maturity, providing for the extension of a maximum of $10,000,000 in revolving
credit, as described above.




We do not
presently have any policies finalized and adopted by the Board governing the
review or approval of related party transactions.







Item
4(T).  Controls and Procedures.




Our
management, including our President (our principal executive officer), Brian T.
Cahill, along with our Controller (principal financial officer), Karen Kroymann,
have reviewed and evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 15d-15 under the under the Securities Exchange
Act of 1934), as of December 31, 2009.  Based upon this review and
evaluation, these officers believe that our disclosure controls and procedures
are presently effective in ensuring that material information related to us is
recorded, processed, summarized and reported for the quarterly period ending
December 31, 2009.




23







Changes
in Internal Control Over Financial Reporting




Our
management has evaluated, with the participation of our President, any change in
our internal control over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Securities Exchange Act of 1934) that occurred during the
period covered by this Quarterly Report on Form 10-Q. There was no change in our
internal control over financial reporting identified in that evaluation that
occurred during the fiscal period covered by this Quarterly Report on Form 10-Q
that has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting.




PART
II





Item
1.  Legal Proceedings.





None.





Item
2.  Unregistered Sales of Equity Securities and Use of
Proceeds.





None.





Item
3.  Defaults Upon Senior Securities.





None.





Item
4.  Submission of Matters to a Vote of Security Holders.





None.





Item
5.  Other Information.





None.





Item
6.  Exhibits.





Exhibit
numbers 10.36 and 10.37 are management contracts.





2
            Omitted
      – Inapplicable.


3(i)
            Articles
      of Organization, as filed with the Iowa Secretary of State on March 28,
      2005 (incorporated by reference to Exhibit 3(i) of Registration Statement
      on Form 10 filed by the Company on January 28,
  2008).


4(i)
            Second
      Amended and Restated Operating Agreement dated March 7, 2008 (incorporated
      by reference to Exhibit 4(i) of Amendment No. 1 to Registration Statement
      on Form 10 filed by the Company on March 21,
  2008).


4(ii)
            Third
      Amended and Restated Operating Agreement dated July 17, 2009 (incorporated
      by reference to Exhibit 3.1 of Form 8-K filed by the Company on August 21,
      2009).


9
            Omitted
      – Inapplicable.


10.1
            Agreement
      dated October 13, 2006 with Bunge North America, Inc. (incorporated by
      reference to Exhibit 10.1 of Registration Statement on Form 10/A filed by
      the Company on October 23, 2008). Portions of the Agreement have been
      omitted pursuant to a request for confidential
  treatment.


10.2
            Ethanol
      Merchandising Agreement dated November 1, 2006 with Lansing Ethanol
      Services, LLC (incorporated by reference to Exhibit 10.2 of Registration
      Statement on Form 10 filed by the Company on October 23,
      2008).  Portions of the Agreement have been omitted pursuant to
      a request for confidential
treatment.


10.3
            Assignment
      of Ethanol Merchandising Agreement dated May 2, 2007 between AgStar
      Financial Services, PCA and Southwest Iowa Renewable Energy, LLC
      (incorporated by reference to Exhibit 10.3 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.4
            Executed
      Steam Service Contract dated January 22, 2007 with MidAmerican Energy
      Company (incorporated by reference to Exhibit 10.4 of Registration
      Statement on Form 10/A filed by the Company

                on
      October 23, 2008).   Portions of the Contract have been
      omitted pursuant to a request for confidential
      treatment.


24





10.5
            Assignment
      of Steam Service Contract dated May 2, 2007 in favor of AgStar Financial
      Services, PCA (incorporated by reference to Exhibit 10.5 of Registration
      Statement on Form 10 filed by the Company on January 28,
      2008).


10.6
            Electric
      Service Contract dated December 15, 2006 with MidAmerican Energy Company
      (incorporated by reference to Exhibit 10.6 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.7
            Assignment
      of Electric Service Contract dated May 2, 2007 in favor of AgStar
      Financial Services, PCA (incorporated by reference to Exhibit 10.7 of
      Registration Statement on Form 10 filed by the Company on January 28,
      2008).


10.8
            Distillers
      Grain Purchase Agreement dated October 13, 2006 with Bunge North America,
      Inc. (incorporated by reference to Exhibit 10.8 of Registration Statement
      on Form 10 filed by the Company on January 28, 2008).  Portions
      of the Agreement have been omitted pursuant to a request for confidential
      treatment.


10.9
            Assignment
      of Distillers Grain Purchase Agreement dated May 2, 2007 in favor of
      AgStar Financial Services, PCA (incorporated by reference to Exhibit 10.9
      of Registration Statement on Form 10 filed by the Company on January 28,
      2008).


10.10
            Grain
      Feedstock Agency Agreement dated October 13, 2006 with AGRI-Bunge, LLC
      (incorporated by reference to Exhibit 10.10 of Registration Statement on
      Form 10 filed by the Company on October 23, 2008).  Portions of
      the Agreement have been omitted pursuant to a request for confidential
      treatment.


10.11
            Assignment
      of Grain Feedstock Agency Agreement dated May 2, 2007 with AgStar
      Financial Services, PCA (incorporated by reference to Exhibit 10.11 of
      Registration Statement on Form 10 filed by the Company on January 28,
      2008).


10.12
            Agreement
      between Owner and Design/Builder Based on The Basis of a Stipulated Price
      dated September 25, 2006 with ICM, Inc. (incorporated by reference to
      Exhibit 10.12 of Registration Statement on Form 10/A filed by the Company
      on October 23, 2008).  Portions of the Agreement have been
      omitted pursuant to a request for confidential
  treatment.


10.13
            Railcar
      Sublease Agreement dated June 25, 2007 with Bunge North America, Inc.
      (incorporated by reference to Exhibit 10.13 of Registration Statement on
      Form 10 filed by the Company on January 28, 2008).  Portions of
      the Agreement have been omitted pursuant to a request for confidential
      treatment.


10.14
            Credit
      Agreement dated May 2, 2007 with AgStar Financial Services, PCA
      (incorporated by reference to Exhibit 10.14 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.15
            Security
      Agreement dated May 2, 2007 with AgStar Financial Services, PCA
      (incorporated by reference to Exhibit 10.15 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.16
            Mortgage,
      Security Agreement Assignment of Rents and Leases and Fixture Filing dated
      May 2, 2007 in favor of AgStar Financial Services, PCA (incorporated by
      reference to Exhibit 10.16 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.17
            Environmental
      Indemnity Agreement dated May 2, 2007 with AgStar Financial Services, PCA
      (incorporated by reference to Exhibit 10.17 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.18
            Convertible
      Note dated May 2, 2007 in favor of Monumental Life Insurance Company
      (incorporated by reference to Exhibit 10.18 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.19
            Convertible
      Note dated May 2, 2007 in favor of Metlife Bank, N.A. (incorporated by
      reference to Exhibit 10.19 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.20
            Convertible
      Note dated May 2, 2007 in favor of Cooperative Centrale
      Raiffeisen-Boerenleenbank, B.A. (incorporated by reference to Exhibit
      10.20 of Registration Statement on Form 10 filed by the Company on January
      28, 2008).


10.21
            Convertible
      Note dated May 2, 2007 in favor of Metropolitan Life Insurance Company
      (incorporated by reference to Exhibit 10.21 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.22
            Convertible
      Note dated May 2, 2007 in favor of First National Bank of Omaha
      (incorporated by reference to Exhibit 10.22 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.23
            Revolving
      Line of Credit Note in favor of Cooperative Centrale
      Raiffeisen-Boerenleenbank, B.A. (incorporated by reference to Exhibit
      10.23 of Registration Statement on Form 10 filed by the Company on January
      28, 2008).


25


10.24
            Revolving
      Line of Credit Note in favor of Metropolitan Life Insurance Company
      (incorporated by reference to Exhibit 10.24 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.25
            Revolving
      Line of Credit Note in favor of First National Bank of Omaha (incorporated
      by reference to Exhibit 10.25 of Registration Statement on Form 10 filed
      by the Company on January 28,
2008).


10.26
            Term
      Revolving Note in favor of Metlife Bank, N.A. (incorporated by reference
      to Exhibit 10.26 of Registration Statement on Form 10 filed by the Company
      on January 28, 2008).


10.27
            Term
      Revolving Note in favor of Cooperative Centrale Raiffeisen-Boerenleenbank,
      B.A. (incorporated by reference to Exhibit 10.27 of Registration Statement
      on Form 10 filed by the Company on January 28,
  2008).


10.28
            Term
      Revolving Note in favor of Metropolitan Life Insurance Company
      (incorporated by reference to Exhibit 10.28 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.29
            Term
      Revolving Note in favor of First National Bank of Omaha (incorporated by
      reference to Exhibit 10.29 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.30
            Lien
      Subordination Agreement dated May 2, 2007 among Southwest Iowa Renewable
      Energy, LLC, AgStar Financial Services, PCA and Iowa Department of
      Economic Development (incorporated by reference to Exhibit 10.30 of
      Registration Statement on Form 10 filed by the Company on January 28,
      2008).


10.31
            Value
      Added Agricultural Product Marketing Development Grant Agreement dated
      November 3, 2006 with the United States of America (incorporated by
      reference to Exhibit 10.31 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.32
            Engineering
      Services Agreement dated November 27, 2006 with HGM Associates, Inc.
      (incorporated by reference to Exhibit 10.32 of Registration Statement on
      Form 10 filed by the Company on January 28, 2008).  Portions of
      the Contract have been omitted pursuant to a request for confidential
      treatment.


10.33
            Fee
      Letter dated May 2, 2007 with AgStar Financial Services, PCA (incorporated
      by reference to Exhibit 10.33 of Registration Statement on Form 10 filed
      by the Company on January 28,
2008).


10.34
            Design-Build
      Agreement dated December 18, 2006 with Todd & Sargent, Inc.
      (incorporated by reference to Exhibit 10.34 of Registration Statement on
      Form 10 filed by the Company on January 28,
  2008).


10.35
            Master
      Contract dated November 21, 2006 with Iowa Department of Economic
      Development (incorporated by reference to Exhibit 10.35 of Registration
      Statement on Form 10 filed by the Company on January 28,
      2008).


10.36
            Employment
      Agreement dated January 31, 2007 with Mark Drake (incorporated by
      reference to Exhibit 10.36 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.37
            Letter
      Agreement dated July 23, 2007 with Cindy Patterson (incorporated by
      reference to Exhibit 10.37 of Registration Statement on Form 10 filed by
      the Company on January 28, 2008).


10.38
            First
      Amendment to Credit Agreement dated March 7, 2008 with AgStar Financial
      Services, PCA (incorporated by reference to Exhibit 10.38 of Amendment No.
      1 to Registration Statement on Form 10  filed by the Company on
      March 21, 2008) .


10.39
            Amended
      and Restated Disbursing Agreement dated March 7, 2008 with AgStar
      Financial Services, PCA (incorporated by reference to Exhibit 10.39 of
      Amendment No. 1 to Registration Statement on Form 10 filed by the Company
      on March 21, 2008).


10.40
            Promissory
      Note dated March 7, 2008 in favor of Commerce Bank, N.A (incorporated by
      reference to Exhibit 10.40 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.41
            Irrevocable
      Standby Letter of Credit No. S500381 made by UMB Bank, N.A., for the
      account of Bunge North America, Inc. in favor of Commerce Bank, N.A. dated
      March 10, 2008 (incorporated by reference to Exhibit 10.41 of Amendment
      No. 1 to Registration Statement on Form 10 filed by the Company on March
      21, 2008).


10.42
            Irrevocable
      Standby Letter of Credit No. 08SBLC0345 made by INTRUST Bank, N.A. for the
      account of ICM Inc. in favor of Commerce Bank, N.A. dated March 7, 2008
      (incorporated by reference to Exhibit 10.42 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.43
            Allonge
      to Revolving Line of Credit Note in favor of First National Bank of Omaha
      dated March 7, 2008 (incorporated by reference to Exhibit 10.43 of
      Amendment No. 1 to Registration Statement on Form 10 filed by the Company
      on March 21, 2008).


26


10.44
            Allonge
      to Revolving Line of Credit Note in favor of Cooperative Centrale
      Raiffeisen-Boerenleenbank, B.A., dated March 7, 2008 (incorporated by
      reference to Exhibit 10.44 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.45
            Allonge
      to Revolving Line of Credit Note in favor of Metropolitan Life Insurance
      Company, dated March 7, 2008 (incorporated by reference to Exhibit 10.45
      of Amendment No. 1 to Registration Statement on Form 10 filed by the
      Company on March 21, 2008).


10.46
            Allonge
      to Convertible Note in favor of First National Bank of Omaha, dated March
      7, 2008 (incorporated by reference to Exhibit 10.46 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.47
            Allonge
      to Convertible Note in favor of Metlife Bank, N.A., dated March 7, 2008
      (incorporated by reference to Exhibit 10.47 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.48
            Allonge
      to Convertible Note in favor of Metropolitan Life Insurance Company, dated
      March 7, 2008 (incorporated by reference to Exhibit 10.48 of Amendment No.
      1 to Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.49
            Allonge
      to Convertible Note in favor of Cooperative Centrale
      Raiffeisen-Boerenleenbank, B.A., dated March 7, 2008 (incorporated by
      reference to Exhibit 10.49 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.50
            Allonge
      to Term Revolving Note in favor of First National Bank of Omaha, dated
      March 7, 2008 (incorporated by reference to Exhibit 10.50 of Amendment No.
      1 to Registration Statement on Form 10  filed by the Company on
      March 21, 2008).


10.51
            Allonge
      to Term Revolving Note in favor of Cooperative Centrale
      Raiffeisen-Boerenleenbank, B.A., dated March 7, 2008 (incorporated by
      reference to Exhibit 10.51 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.52
            Allonge
      to Term Revolving Note in favor of Metlife Bank, N.A., dated March 7, 2008
      (incorporated by reference to Exhibit 10.52 of Amendment No. 1 to
      Registration Statement on Form 10  filed by the Company on March
      21, 2008).


10.53
            Allonge
      to Term Revolving Note in favor of Metropolitan Life Insurance Company,
      dated March 7, 2008 (incorporated by reference to Exhibit 10.53 of
      Amendment No. 1 to Registration Statement on Form 10 filed by the Company
      on March 21, 2008).


10.54
            Allonge
      to Convertible Note in favor of Monumental Life Insurance Company, dated
      March 7, 2008 (incorporated by reference to Exhibit 10.54 of Amendment No.
      1 to Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.55
            Term
      Revolving Note in favor of Amarillo National Bank (incorporated by
      reference to Exhibit 10.55 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.56
            Allonge
      to Term Revolving Note in favor of Amarillo National Bank, dated March 7,
      2008 (incorporated by reference to Exhibit 10.56 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.57
            Convertible
      Note dated May 2, 2007, in favor of Amarillo National Bank (incorporated
      by reference to Exhibit 10.57 of Amendment No. 1 to Registration Statement
      on Form 10 filed by the Company on March 21,
  2008).


10.58
            Allonge
      to Convertible Note in favor of Amarillo National Bank, dated March 7,
      2008 (incorporated by reference to Exhibit 10.58 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.59
            Revolving
      Line of Credit Note in favor of Amarillo National Bank (incorporated by
      reference to Exhibit 10.59 of Amendment No. 1 to Registration Statement on
      Form 10 filed by the Company on March 21,
2008).


10.60
            Allonge
      to Revolving Line of Credit Note in favor of Amarillo National Bank, dated
      March 7, 2008 (incorporated by reference to Exhibit 10.60 of Amendment No.
      1 to Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.61
            Series
      C Unit Issuance Agreement dated March 7, 2008 with ICM, Inc. (incorporated
      by reference to Exhibit 10.61 of Amendment No. 1 to Registration Statement
      on Form 10 filed by the Company on March 21,
  2008).


10.62
            Series
      E Unit Issuance Agreement dated March 7, 2008 with Bunge North America,
      Inc. (incorporated by reference to Exhibit 10.62 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


27


10.63
            Support
      Services Agreement dated January 30, 2008 with Bunge North America, Inc.
      (incorporated by reference to Exhibit 10.63 of Amendment No. 1 to
      Registration Statement on Form 10 filed by the Company on March 21,
      2008).


10.64
            Amendment
      No. 01 dated March 9, 2007 with Iowa Department of Economic Development
      (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the
      Company on June 10, 2006).


10.65
            Amendment
      No. 02 dated May 30, 2008 with Iowa Department of Economic Development
      (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the
      Company on June 10, 2006).


10.66
            Industrial
      Track Agreement dated as of June 18, 2008 with CBEC Railway, Inc.
      (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the
      Company on June 25, 2006).


10.67
            Base
      Agreement dated August 27, 2008 between Southwest Iowa Renewable Energy,
      LLC and Cornerstone Energy, LLC (incorporated by reference to Exhibit 10.1
      of Form 8-K filed by the Company on September 2,
  2008).


10.68
            Lease
      Agreement dated December 15, 2008 with Bunge North America, Inc.
      (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the
      Company on December 22, 2008).


10.69
            Ethanol
      Purchase Agreement dated December 15, 2008 with Bunge North America,
      Inc.  Portions of the Agreement have been omitted pursuant to a
      request for confidential treatment (incorporated by reference to Exhibit
      10.3 of Form 8-K filed by the Company on December 22,
    2008).


10.70
            Risk
      Management Services Agreement dated December 15, 2008 with Bunge North
      America, Inc. (incorporated by reference to Exhibit 10.4 of Form 8-K filed
      by the Company on December 22,
2008).


10.71
            Base
      Agreement with Cornerstone Energy, LLC d/b/a Constellation Energy dated
      August 27, 2008 (incorporated by reference to Exhibit 10.1 of Report on
      Form 8-K filed by the Registrant on September 2,
  2008).


10.72
            Grain
      Feedstock Supply Agreement dated December 15, 2008 with AGRI-Bunge,
      LLC.  Portions of the Agreement have been omitted pursuant to a
      request for confidential treatment (incorporated by reference to Exhibit
      10.1 of Form 8-K filed by the Company on December 22,
    2008).


10.73
            Fifth
      Amendment to Credit Agreement dated August 1, 2009 by and among Southwest
      Iowa Renewable Energy, LLC and AgStar Financial Services, PCA;
      Metropolitan Life Insurance Company; MetLife Bank, N.A.; Cooperative
      Centrale Raiffeisen-Boerenleenbank B.A.; Amarillo National Bank; First
      National Bank of Omaha; Bank of the West; Monumental Life Insurance
      Company; M&I Marshall & Ilsley Bank (incorporated by reference to
      Exhibit 10.1 of Form 8-K filed by the Company on August 20,
      2009).


10.74
            Second
      Amendment to Series C Unit Issuance Agreement dated August 1, 2009 between
      Southwest Iowa Renewable Energy, LLC and ICM, Inc. (incorporated by
      reference to Exhibit 10.2 of Form 8-K filed by the Company on August 20,
      2009).


10.75
            Subordinated
      Term Loan Note made by Southwest Iowa Renewable Energy, LLC in favor of
      Bunge N.A. Holdings, Inc. dated effective August 26, 2009 (incorporated by
      reference to Exhibit 10.1 of Form 8-K filed by the Company on September 3,
      2009).


10.76
            Subordinated
      Revolving Credit Note made by Southwest Iowa Renewable Energy, LLC in
      favor of Bunge N.A. Holdings, Inc. dated effective August 26, 2009
      (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the
      Company on September 3, 2009).


10.77
            Employment
      Agreement dated August 27, 2009 between Southwest Iowa Renewable Energy,
      LLC and Mr. Brian T. Cahill (incorporated by reference to Exhibit 10.3 of
      Form 8-K filed by the Company on September 3,
  2009).


10.78
            Sixth
      Amendment to Credit Agreement by and among Southwest Iowa Renewable
      Energy, LLC and AgStar Financial Services, PCA, Metropolitan Life
      Insurance Company, MetLife Bank, N.A., Cooperative Centrale
      Raiffeisen-Boerenleenbank B.A., Amarillo National Bank, First National
      Bank of Omaha, Bank of the West, Monumental Life Insurance Company,
      M&I Marshall & Ilsley Bank, dated effective December 18, 2009
      (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the
      Company on December 29, 2009).


10.79
            Fourth
      Amendment to Steam Service Contract by and between Southwest Iowa
      Renewable Energy, LLC and MidAmerican Energy Company dated effective
      December 1, 2009 (incorporated
      by reference to Form 8-K filing by the company on December 31,
      2009).





11
            Omitted
      – Inapplicable.


12
            Omitted
      – Inapplicable.


13
            Omitted
      – Inapplicable.


14
            Omitted
      – Inapplicable.


16
            Omitted
      – Inapplicable.


18
            Omitted
      – Inapplicable.


28


21
            Omitted
      – Inapplicable.


22
            Omitted
      – Inapplicable.


23
            Omitted
      – Inapplicable.


24
            Omitted
      – Inapplicable.


31.1
            Certification
      (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) executed by
      Chief Executive Officer.


31.2
            Certification
      (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) executed by
      Principal Financial Officer.


32.1
            Certification
      (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) executed by
      the Chief Executive Officer.


32.2
            Certification
      (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) executed by
      the Principal Financial
Officer.


29


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.





SOUTHWEST
      IOWA RENEWABLE ENERGY, LLCDate:
      February 12, 2010
            /s/ Brian T. CahillInterim
      President and Chief Executive OfficerDate:
      February 12, 2010
            /s/ Karen L. KroymannController
      and Principal Financial Officer



















30