U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



|                                                  |                                                                                          | 
|------------------------------------------------- | ---------------------------------------------------------------------------------------- | 
|(Mark One)                                       
|x                                                 | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                  |                                                                                          | 
|For the quarterly period ended July 31, 2009     
|                                                  |                                                                                          | 
|o                                                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                                  |                                                                                          | 
|For the transition period from _______ to _______
|Commission file number  000-51574                

FOUR RIVERS BIOENERGY INC.

(Exact name of small business issuer as specified in its charter)



|                                                               |                                     
|-------------------------------------------------------------- | ------------------------------------
|Nevada                                                         | 980442163                           
|(State or other jurisdiction of
incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     
|P.O. Box 1056
Calvert City, Kentucky                           | 42029                               
|(Address of principal executive offices)                       | (Zip Code)                          



Issuers telephone number:  (270) 282-0943

________________________________
(Former name, former address and former
fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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  ý     No  o



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o     Accelerated Filer ý     Non-accelerated filer o     Smaller reporting company o



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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes o No o



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  oNo  ý









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APPLICABLE ONLY TO CORPORATE ISSUERS



State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 7,704,689 shares of common stock, par value $.001 per share, outstanding as of September 11, 2009.





ii



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FOUR RIVERS BIOENERGY INC.

TABLE OF CONTENTS

|                               |      |                                                                                       |   
|------------------------------ | ---- | ------------------------------------------------------------------------------------- | --
|                               | Page
|PART I  FINANCIAL INFORMATION |     
|                               |      |                                                                                       |   
|Item 1.                        |      | Financial Statements:                                                                 | 1 
|Item 2.                        |      | Managements Discussion and Analysis of Financial Condition and Results of Operations | 20
|Item 3.                        |      | Quantitative and Qualitative Disclosures About Market Risk                            | 33
|Item 4.                        |      | Controls and Procedures                                                               | 33
|                               |      |                                                                                       |   
|PART II  OTHER INFORMATION    |     
|                               |      |                                                                                       |   
|Item 1.                        |      | Legal Proceedings                                                                     | 34
|Item 1A.                       |      | Risk Factors                                                                          | 34
|Item 2.                        |      | Unregistered Sales of Equity Securities and Use of Proceeds                           | 34
|Item 3.                        |      | Defaults Upon Senior Securities                                                       | 34
|Item 4.                        |      | Submission of Matters to a Vote of Security Holders                                   | 35
|Item 5.                        |      | Other Information                                                                     | 35
|Item 6.                        |      | Exhibits                                                                              | 35
|                               |      |                                                                                       |   
|SIGNATURES                     | 36  







iii



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Any statements contained in this report that are not statements of historical fact may be forward-looking statements. When we use the words anticipates, plans, expects, believes, should, could, may, will and similar expressions, we are identifying forward-looking statements. Forward-looking statements involve risks and uncertainties, which may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.  These factors include our limited experience with our business plan; unexercised options to acquire land suitable for our business; unconstructed bio-energy production facilities; integration and deployment of acquired assets; pricing pressures on our product caused by competition, sensitivity to corn prices and bio-oils, the demand for bio-fuels, the capital cost of construction, the cost of energy, the cost of production, and the price and production of diesel and gasoline; the status of the federal bio-fuel incentives and our compliance with regulatory impositions; the continuing world interest in alternative energy sources; and our capital needs.

Except as may be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume no obligation to update any forward-looking statements contained in this report as a result of new information or future events or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report and our other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks, uncertainties and other factors that may affect our business.







iv



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PART I  FINANCIAL INFORMATION

Item 1.  Financial Statements.

FOUR RIVERS BIOENERGY INC.



INDEX TO FINANCIAL STATEMENTS



|                                                                                                                                                                                                                     |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -
|                                                                                                                                                                                                                     |  
|                                                                                                                                                                                                                     |  
|Condensed Consolidated Balance Sheets as of July 31, 2009 (Unaudited) and October 31, 2008                                                                                                                           | 2
|                                                                                                                                                                                                                     |  
|Condensed Consolidated Statements of Operations for the three month and nine month periods ended July 31, 2009 and 2008 and for the period from March 9, 2007 (dated of inception) through July 31, 2009 (Unaudited) | 3
|                                                                                                                                                                                                                     |  
|Condensed Consolidated Statements of Stockholders Equity for period from March 9, 2007 (date of inception) through July 31, 2009 (Unaudited)                                                                        | 4
|                                                                                                                                                                                                                     |  
|Condensed Consolidated Statements of Cash Flows for the nine month periods ended July 31, 2009 and 2008 and for the period from March 9, 2007 (date of inception) through July 31, 2009 (Unaudited)                  | 5
|                                                                                                                                                                                                                     |  
|Notes to Condensed Consolidated Financial Statements (Unaudited)                                                                                                                                                     | 7





1



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|                                                                                                                                                                                                                          |             |              |             |   |            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------ | ----------- | - | -----------
|Four Rivers BioEnergy Inc.                                                                                                                                                                                                |             |              |             |   |            
|(A Development Stage Enterprise)                                                                                                                                                                                          |             |              |             |   |            
|Condensed Consolidated Balance Sheets                                                                                                                                                                                     |             |              |             |   |            
|                                                                                                                                                                                                                          |             |              |             |   |            
|                                                                                                                                                                                                                          | July 31,    |              | October 31,
|                                                                                                                                                                                                                          | 2009        |              | 2008       
|                                                                                                                                                                                                                          | (unaudited) |              |             |  
|Assets                                                                                                                                                                                                                    |             |              |             |   |            
|Current assets                                                                                                                                                                                                            |             |              |             |   |            
|Cash and cash equivalents                                                                                                                                                                                                 | $           | 3,157,537    |             | $ | 15,044,772 
|Restricted cash - in escrow                                                                                                                                                                                               |             | 275,000      |             |   | -          
|Accounts receivable                                                                                                                                                                                                       |             | 185,648      |             |   | -          
|Inventory                                                                                                                                                                                                                 |             | 591,362      |             |   | -          
|Value added tax refunds receivable                                                                                                                                                                                        |             | 224,385      |             |   | -          
|Prepaid expenses and other current assets                                                                                                                                                                                 |             | 107,954      |             |   | 470,711    
|Total current assets                                                                                                                                                                                                      |             | 4,541,886    |             |   | 15,515,483 
|                                                                                                                                                                                                                          |             |              |             |   |            
|Property and equipment                                                                                                                                                                                                    |             | 11,680,293   |             |   | 5,862,933  
|                                                                                                                                                                                                                          |             |              |             |   |            
|Plant under construction                                                                                                                                                                                                  |             | 1,535,890    |             |   | 1,476,278  
|Patents and other                                                                                                                                                                                                         |             | 728,713      |             |   | -          
|Total Assets                                                                                                                                                                                                              | $           | 18,486,782   |             | $ | 22,854,694 
|                                                                                                                                                                                                                          |             |              |             |   |            
|                                                                                                                                                                                                                          |             |              |             |   |            
|                                                                                                                                                                                                                          |             |              |             |   |            
|Liabilities and Stockholders' Equity                                                                                                                                                                                      |             |              |             |   |            
|Current liabilities                                                                                                                                                                                                       |             |              |             |   |            
|Accounts payable and accrued liabilities                                                                                                                                                                                  | $           | 1,932,670    |             | $ | 1,037,511  
|Deferred consideration                                                                                                                                                                                                    |             | 600,000      |             |   | 600,000    
|Automobile loans                                                                                                                                                                                                          |             | -            |             |   | 14,383     
|Total Current Liabilities                                                                                                                                                                                                 |             | 2,532,670    |             |   | 1,651,894  
|                                                                                                                                                                                                                          |             |              |             |   |            
|                                                                                                                                                                                                                          |             |              |             |   |            
|Deferred credit on asset purchase                                                                                                                                                                                         |             | 252,000      |             |   | -          
|                                                                                                                                                                                                                          |             |              |             |   |            
|Commitment and contingencies                                                                                                                                                                                              |             | -            |             |   | -          
|                                                                                                                                                                                                                          |             |              |             |   |            
|Stockholders' Equity                                                                                                                                                                                                      |             |              |             |   |            
|Preferred stock:                                                                                                                                                                                                          |             |              |             |   |            
|Authorized: 100,000,000 shares with par value of $0.001 per share issued and outstanding: 2 shares, as of July 31, 2009 and October 31, 2008, respectively                                                                |             | -            |             |   | -          
|Common stock:                                                                                                                                                                                                             |             |              |             |   |            
|Authorized: 500,000,000 shares with par value of $0.001per share, issued 8,004,689 and 6,804,689 shares, respectively, outstanding 7,704,689 and 6,804,689 shares, as of July 31, 2009 and October 31, 2008, respectively |             | 7,705        |             |   | 6,805      
|Additional paid in capital                                                                                                                                                                                                |             | 29,183,897   |             |   | 26,430,096 
|Accumulated other comprehensive income (loss) - foreign currency translation adjustment                                                                                                                                   |             | 220,696      |             |   | (3,531)    
|Deficit accumulated during development stage                                                                                                                                                                              |             | (13,710,186) |             |   | (5,230,570)
|Total stockholders' equity                                                                                                                                                                                                |             | 15,702,113   |             |   | 21,202,800 
|                                                                                                                                                                                                                          |             |              |             |   |            
|Total Liabilities and Stockholders' Equity                                                                                                                                                                                | $           | 18,486,782   |             | $ | 22,854,694 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.





2



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|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |              |  |  |  |  |  |  |  |  |  | 
|---------------------------------------------------------------------- | ----------------------------------- | ----------- | ---------------------------------- | - | ----------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- |  | - | ------------ |  |  |  |  |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                                             |                                     |             |                                    |   |                                                                         |  |      |             |      |  
|(A Development Stage Enterprise)                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |  
|Condensed Consolidated Statements of Operations                        |                                     |             |                                    |   |                                                                         |  |      |            
|(Unaudited)                                                            |                                     |             |                                    |   |                                                                         |  |      |             |      |  
|                                                                       | For the Three Months Ended
July 31, |             | For the Nine Months Ended
July 31, |   | For the Period
from March 9,
2007 (date of
inception)
through
April 30,
|                                                                       | 2009                                |             | 2008                               |   | 2009                                                                    |  | 2008 |             | 2009
|Revenues                                                               | $                                   | 1,613,925   |                                    | $ | -                                                                       |  | $    | 1,613,925   |      | $ | -           |  | $ | 1,613,925   
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Cost of goods sold                                                     |                                     | 2,208,239   |                                    |   | -                                                                       |  |      | 2,208,239   |      |   | -           |  |   | 2,208,239   
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Gross Profit (Loss)                                                    |                                     | (594,314)   |                                    |   | -                                                                       |  |      | (594,314)   |      |   | -           |  |   | (594,314)   
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Operating expenses                                                     |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Professional fees                                                      |                                     | 373,472     |                                    |   | 67,207                                                                  |  |      | 1,336,464   |      |   | 115,972     |  |   | 1,987,212   
|Payroll and administrative expenses                                    |                                     | 897,177     |                                    |   | 119,992                                                                 |  |      | 2,805,983   |      |   | 202,080     |  |   | 3,723,989   
|Bank charges                                                           |                                     | 7,067       |                                    |   | 150                                                                     |  |      | 12,632      |      |   | 1,406       |  |   | 17,019      
|Consulting expenses                                                    |                                     | 516,266     |                                    |   | 672,446                                                                 |  |      | 1,771,705   |      |   | 2,015,831   |  |   | 4,560,540   
|Depreciation expense                                                   |                                     | 4,818       |                                    |   | 3,008                                                                   |  |      | 19,068      |      |   | 9,025       |  |   | 38,204      
|Asset impairment loss                                                  |                                     | -           |                                    |   | -                                                                       |  |      | -           |      |   | -           |  |   | 807,224     
|Farming costs                                                          |                                     | -           |                                    |   | -                                                                       |  |      | 17,500      |      |   | -           |  |   | 54,633      
|Project costs                                                          |                                     | 787,279     |                                    |   | -                                                                       |  |      | 1,253,183   |      |   | -           |  |   | 1,253,183   
|Office and sundry                                                      |                                     | 174,338     |                                    |   | 7,896                                                                   |  |      | 231,199     |      |   | 21,184      |  |   | 292,118     
|Rent expense                                                           |                                     | 141,109     |                                    |   | 4,200                                                                   |  |      | 198,831     |      |   | 16,900      |  |   | 228,531     
|Telephone and communications                                           |                                     | 17,963      |                                    |   | 4,610                                                                   |  |      | 34,109      |      |   | 11,959      |  |   | 56,226      
|Travel expense                                                         |                                     | 187,173     |                                    |   | 32,568                                                                  |  |      | 402,018     |      |   | 130,768     |  |   | 1,063,125   
|Total operating expenses                                               |                                     | 3,106,661   |                                    |   | 912,077                                                                 |  |      | 8,082,691   |      |   | 2,525,125   |  |   | 14,082,003  
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Loss from operations                                                   |                                     | (3,700,975) |                                    |   | (912,077)                                                               |  |      | (8,677,005) |      |   | (2,525,125) |  |   | (14,676,317)
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Other income (expense)                                                 |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Interest income                                                        |                                     | 6,385       |                                    |   | 71,327                                                                  |  |      | 81,535      |      |   | 367,952     |  |   | 558,197     
|Interest expense                                                       |                                     | (1,725)     |                                    |   | -                                                                       |  |      | (2,883)     |      |   | (819)       |  |   | (7,517)     
|Gain on sale of assets                                                 |                                     | 7,753       |                                    |   | -                                                                       |  |      | 118,738     |      |   | -           |  |   | 118,738     
|Forgiveness of debt                                                    |                                     | -           |                                    |   | -                                                                       |  |      | -           |      |   | 296,714     |  |   | 296,714     
|Total other income (expense)                                           |                                     | 12,412      |                                    |   | 71,327                                                                  |  |      | 197,389     |      |   | 663,847     |  |   | 966,131     
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Net loss before provision for income taxes                             |                                     | (3,688,563) |                                    |   | (840,750)                                                               |  |      | (8,479,616) |      |   | (1,861,278) |  |   | (13,710,186)
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Income taxes (benefit)                                                 |                                     | -           |                                    |   | -                                                                       |  |      | -           |      |   | -           |  |   | -           
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Net loss                                                               | $                                   | (3,688,563) |                                    |   | (840,750)                                                               |  | $    | (8,479,616) |      |   | (1,861,278) |  | $ | (13,710,186)
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Basic and diluted loss per share                                       | $                                   | (0.48)      |                                    |   | (0.13)                                                                  |  | $    | (1.16)      |      |   | (0.29)      |  | $ | (2.28)      
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Weighted average number of basic and diluted common shares outstanding |                                     | 7,704,689   |                                    |   | 6,675,053                                                               |  |      | 7,292,601   |      |   | 6,402,853   |  |   | 6,002,470   
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|                                                                       |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Comprehensive loss:                                                    |                                     |             |                                    |   |                                                                         |  |      |             |      |   |             |  |   |             
|Net loss                                                               | $                                   | (3,688,563) |                                    |   | (840,750)                                                               |  | $    | (8,479,616) |      |   | (1,861,278) |  | $ | (13,710,186)
|Foreign currency translation                                           |                                     | 12,998      |                                    |   | -                                                                       |  |      | 224,227     |      |   | -           |  |   | 220,696     
|Comprehensive loss                                                     | $                                   | (3,675,565) |                                    |   | (840,750)                                                               |  | $    | (8,255,389) |      |   | (1,861,278) |  | $ | (13,489,490)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.





3



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|                                                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------- |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                                                  |  |  |  |  |  |  |  |  |  |  |  | 
|(A Development Stage Enterprise)                                            |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|Condensed Consolidated Statements of Stockholders' Equity                   |  |  |  |  |  |  |  | 
|(Unaudited)                                                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|                                                                            |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 
|For the Period from March 9, 2007 (date of inception) through July 31, 2009 |  |  |  | 



|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|------------------------------------------------------------------- | --------------- |  | ------------ | - | ---------- | ----------- | ---------- | - | ------------- |  | ------- | ---------- | ----------- | ----------- | ------------ | ----------- | ------------- | ------- |  | - | -----------
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             | Deficit     |              | Accumulated |               |         | 
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             | Accumulated |              | Other       |               |         | 
|                                                                    | Preferred Stock |  | Common Stock |   | Additional |             | During the |   | Comprehensive |  | Total  
|                                                                    | Number of       |  |              |   |            | Number of   |            |   |               |  | Paid In |            | Development |             | Income /     |             | Stockholders
|                                                                    | Shares          |  | Par Value    |   | Shares     |             | Par Value  |   | Capital       |  | Stage   |            | (Loss)      |             | Equity      
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Balance at inception (March 9, 2007), adjusted for recapitalization | -               |  | $            | - |            | 5,629,716   |            | $ | 5,630         |  | $       | (5,630)    |             | $           | -            |             | $             | -       |  | $ | -          
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for cash                                              | -               |  |              | - |            | 1,197,029   |            |   | 1,197         |  |         | 1,998,803  |             |             | -            |             |               | -       |  |   |            
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Net loss                                                            | -               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | (965,731)    |             |               | -       |  |   | (965,731)  
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Balance, October 31, 2007                                           | -               |  |              | - |            | 6,826,745   |            |   | 6,827         |  |         | 1,993,173  |             |             | (965,731)    |             |               | -       |  |   | 1,034,269  
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for services prior to reverse merger                  | -               |  |              | - |            | 1,197,030   |            |   | 1,197         |  |         | 245,303    |             |             | -            |             |               | -       |  |   | 246,500    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Effect of reverse merger and assumption of liabilities              | -               |  |              | - |            | -           |            |   | -             |  |         | (270,185)  |             |             | -            |             |               | -       |  |   | (270,185)  
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for cash in December 2007 at $13.77 per share, net    | -               |  |              | - |            | 1,657,881   |            |   | 1,658         |  |         | 22,827,364 |             |             | -            |             |               | -       |  |   | 22,829,022 
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for fees in December 2007                             | 2               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | -            |             |               | -       |  |   | -          
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares returned for cancellation in December 2007                   | -               |  |              | - |            | (3,008,028) |            |   | (3,008)       |  |         | 3,008      |             |             | -            |             |               | -       |  |   | -          
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for cash in July 2008 at $15.26 per share, net        | -               |  |              | - |            | 131,061     |            |   | 131           |  |         | 1,631,433  |             |             | -            |             |               | -       |  |   | 1,631,564  
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Foreign currency translation adjustment                             | -               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | -            |             |               | (3,531) |  |   | (3,531)    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Net loss                                                            | -               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | (4,264,839)  |             |               |         |  |   | (4,264,839)
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Balance, October 31, 2008                                           | 2               |  | $            | - |            | 6,804,689   |            | $ | 6,805         |  | $       | 26,430,096 |             | $           | (5,230,570)  |             | $             | (3,531) |  | $ | 21,202,800 
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Stock warrants issued for compensation                              | -               |  |              | - |            | -           |            |   | -             |  |         | 1,404,283  |             |             | -            |             |               | -       |  |   | 1,404,283  
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Shares issued for asset acquisition March 5, 2009                   | -               |  |              | - |            | 900,000     |            |   | 900           |  |         | 755,100    |             |             | -            |             |               | -       |  |   | 756,000    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Warrants issued for asset acquisition March 5, 2009                 | -               |  |              | - |            | -           |            |   | -             |  |         | 131,335    |             |             | -            |             |               | -       |  |   | 131,335    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Stock warrants issued for services April 6, 2009                    | -               |  |              | - |            | -           |            |   | -             |  |         | 463,083    |             |             | -            |             |               | -       |  |   | 463,083    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Foreign currency translation adjustment                             | -               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | -            |             |               | 224,227 |  |   | 224,227    
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Net loss                                                            | -               |  |              | - |            | -           |            |   | -             |  |         | -          |             |             | (8,479,616)  |             |               |         |  |   | (8,479,616)
|                                                                    |                 |  |              |   |            |             |            |   |               |  |         |            |             |             |              |             |               |         |  |   |            
|Balance, July 31, 2009                                              | 2               |  | $            | - |            | 7,704,689   |            | $ | 7,705         |  | $       | 29,183,898 |             | $           | (13,710,186) |             | $             | 220,696 |  | $ | 15,702,113 



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.







4



---



|                                                |  |  |  |  |  | 
|----------------------------------------------- |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                      |  |  |  |  |  | 
|(A Development Stage Enterprise)                |  |  |  |  |  | 
|Condensed Consolidated Statements of Cash Flows |  |  |  |  |  | 
|(Unaudited)                                     |  |  |  |  |  | 



|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|-------------------------------------------------------------------------- | ---------------------------------- | ------------ | ---------------------------------- | - | ---------------------------------------------------------------------- |  | - | ------------
|                                                                           | For the Nine Months Ended
July 31, |              | For the Nine
Months Ended
July 31, |   | For the Period
From March 9,
2007 (date of
inception) through
July 31,
|                                                                           | 2009                               |              | 2008                               |   | 2009                                                                  
|Cash flows from operating activities                                       |                                    |              |                                    |   |                                                                        |  |   |             
|Net loss                                                                   | $                                  | (8,479,616)  |                                    | $ | (1,861,278)                                                            |  | $ | (13,710,186)
|Adjustments to reconcile net loss to net cash used in operating activities |                                    |              |                                    |   |                                                                        |  |   |             
|Asset impairment loss                                                      |                                    | -            |                                    |   | -                                                                      |  |   | 807,224     
|Depreciation expense                                                       |                                    | 57,319       |                                    |   | 9,025                                                                  |  |   | 76,455      
|Forgiveness of debt                                                        |                                    | -            |                                    |   | (296,714)                                                              |  |   | (296,714)   
|Shares issued for services                                                 |                                    | -            |                                    |   | 246,500                                                                |  |   | 246,500     
|Stock warrants issued for compensation                                     |                                    | 1,867,366    |                                    |   | -                                                                      |  |   | 1,867,366   
|Reversal of capitalized cost and interest accruals - non-cash              |                                    | 71,605       |                                    |   | -                                                                      |  |   | 71,605      
|Gain on sale of assets                                                     |                                    | (118,738)    |                                    |   | -                                                                      |  |   | (118,738)   
|Changes in operating assets and liabilities                                |                                    |              |                                    |   |                                                                        |  |   |             
|Accounts receivable                                                        |                                    | (175,098)    |                                    |   |                                                                        |  |   | (175,098)   
|Value added tax refunds receivable                                         |                                    | (211,634)    |                                    |   | -                                                                      |  |   | (211,634)   
|Inventory                                                                  |                                    | (557,754)    |                                    |   |                                                                        |  |   | (557,754)   
|Prepaid expenses and other current assets                                  |                                    | 217,326      |                                    |   | 375,702                                                                |  |   | (253,385)   
|Accounts payable and accrued liabilities                                   |                                    | 724,293      |                                    |   | (200,000)                                                              |  |   | 1,746,804   
|Due to related parties                                                     |                                    | -            |                                    |   | 166,935                                                                |  |   | -           
|Net cash used in operating activities                                      |                                    | (6,604,931)  |                                    |   | (1,559,830)                                                            |  |   | (10,507,555)
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Cash flows from investing activities                                       |                                    |              |                                    |   |                                                                        |  |   |             
|Purchase of property and equipment and intangible assets                   |                                    | (4,884,276)  |                                    |   | (5,528,734)                                                            |  |   | (10,657,748)
|Plant construction costs                                                   |                                    | (131,217)    |                                    |   | (1,870,490)                                                            |  |   | (1,882,495) 
|Proceeds from sale of assets                                               |                                    | 118,738      |                                    |   | -                                                                      |  |   | 118,738     
|Cash in escrow                                                             |                                    | (275,000)    |                                    |   | (3,204,433)                                                            |  |   | (275,000)   
|Cash acquired in reverse merger                                            |                                    | -            |                                    |   | 51,544                                                                 |  |   | 51,544      
|Issuance of note receivable                                                |                                    | (100,000)    |                                    |   | -                                                                      |  |   | (100,000)   
|Net cash used in investing activities                                      |                                    | (5,271,755)  |                                    |   | (10,552,113)                                                           |  |   | (12,744,961)
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Cash flows from financing activities                                       |                                    |              |                                    |   |                                                                        |  |   |             
|Issuance of common stock, net of issuance costs                            |                                    | -            |                                    |   | 24,396,522                                                             |  |   | 26,460,586  
|Repayment of automobile loans                                              |                                    | (14,383)     |                                    |   | (16,350)                                                               |  |   | (40,821)    
|Repayment of directors loan                                                |                                    | -            |                                    |   | (10,015)                                                               |  |   | (10,015)    
|Net cash (used in) provided by financing activities                        |                                    | (14,383)     |                                    |   | 24,370,157                                                             |  |   | 26,409,750  
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Effects of accumulated foreign exchange on cash                            |                                    | 3,834        |                                    |   | -                                                                      |  |   | 303         
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Net (decrease) increase in cash and cash equivalents                       |                                    | (11,887,235) |                                    |   | 12,258,214                                                             |  |   | 3,157,537   
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Cash and cash equivalents at beginning of period                           |                                    | 15,044,772   |                                    |   | 492,271                                                                |  |   | -           
|                                                                           |                                    |              |                                    |   |                                                                        |  |   |             
|Cash and cash equivalents at end of period                                 | $                                  | 3,157,537    |                                    | $ | 12,750,485                                                             |  | $ | 3,157,537   







5



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|                                                |  |  |  |  |  | 
|----------------------------------------------- |  |  |  |  |  | 
|Four Rivers BioEnergy Inc.                      |  |  |  |  |  | 
|(A Development Stage Enterprise)                |  |  |  |  |  | 
|Condensed Consolidated Statements of Cash Flows |  |  |  |  |  | 
|(Unaudited)                                     |  |  |  |  |  | 



|                                                                |   |                                    |  |   |                                    |  |   |                                                                       
|--------------------------------------------------------------- | - | ---------------------------------- |  | - | ---------------------------------- |  | - | ----------------------------------------------------------------------
|                                                                |   | For the Nine
Months Ended
July 31, |  |   | For the Nine
Months Ended
July 31, |  |   | For the Period
From March 9,
2007 (date of
inception) through
July 31,
|                                                                |   | 2009                               |  |   | 2008                               |  |   | 2009                                                                  
|Supplemental cash flow information                              |   |                                    |  |   |                                    |  |   |                                                                       
|Interest paid                                                   | $ | 2,883                              |  | $ | 819                                |  | $ | 7,517                                                                 
|Income taxes paid                                               | $ | -                                  |  | $ | -                                  |  | $ | -                                                                     
|                                                                |   |                                    |  |   |                                    |  |   |                                                                       
|Non-cash financing and investing activity                       |   |                                    |  |   |                                    |  |   |                                                                       
|Property and equipment purchased on credit and automobile loans | $ | -                                  |  | $ | 600,000                            |  | $ | 640,821                                                               
|Issuance of common stock for property and equipment             | $ | 1,008,000                          |  | $ | -                                  |  | $ | 1,008,000                                                             
|Issuance of warrants for property and equipment                 | $ | 131,335                            |  | $ | -                                  |  | $ | 131,335                                                               
|Liabilities assumed in purchase of property and equipment       | $ | 266,609                            |  | $ | -                                  |  | $ | 266,609                                                               
|Loan receivable applied to asset purchase                       | $ | 100,000                            |  | $ | -                                  |  | $ | 100,000                                                               
|Prepaid expenses applied to asset purchase                      | $ | 150,000                            |  | $ | -                                  |  | $ | 150,000                                                               



The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.







6



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Four Rivers BioEnergy Inc.

(A Development Stage Company)

Notes to Unaudited Condensed Consolidated Financial Statements

July 31, 2009 and 2008



Note 1 - Nature of Operations and Going Concern



General



The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC). Certain information and note disclosures normally included in annual consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. It is the opinion of management that all adjustments considered necessary for a fair presentation have been included, and that all such adjustments are of a normal recurring nature.



The results for the three and nine month periods ended July 31, 2009 is not necessarily indicative of the results to be expected for any subsequent quarter or the entire year ending October 31, 2009.



These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended October 31, 2008, included in the Companys annual report on Form10-K filed with the SEC on February 13, 2009.



The consolidated financial statements as October 31, 2008 have been derived from the audited consolidated financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.



Nature of Operations



We were incorporated under the name Med-Tech Solutions, Inc. (which we refer to as MTSI) in the State of Nevada on May 28, 2004, and we changed the name on January 25, 2008 to Four Rivers BioEnergy Inc. (which we refer to as Four Rivers or the Company and as the context requires, includes its subsidiaries).  On March 26, 2007, the Company entered into an Acquisition Agreement (the Agreement) with The Four Rivers BioEnergy Company Inc., a Kentucky corporation (which we refer to as 4Rivers), and all of the shareholders of 4Rivers to acquire 4Rivers by share purchase and share exchange.  Pursuant to the Agreement, MTSI acquired the entire issued and outstanding shares of common stock of 4Rivers in two stages: (a) on March 26, 2007, 15% was acquired in exchange for an investment by MTSI in cash into 4Rivers of $2,000,000; and (b) on December 4, 2007, the remaining 85% were acquired by the issuance of 2,392,059 shares of MTSIs common stock to the shareholders of 4Rivers.  4Rivers has a wholly-owned subsidiary incorporated in the United Kingdom, The Four Rivers BioEthanol Company Limited (4Rivers UK), which currently has no operations.  On December 4, 2007, as a condition of the acquisition, the Company raised $22,829,022, net of expenses, through a private placement of 1,657,881 shares of common stock.  On July 30, 2008, the Company raised an additional $1,631,564, net of expenses, in a private placement of 131,061 shares of common stock.  As a further condition of the Agreement, the Company received 3,655,087 shares of common stock (647,059 shares were received in October 2007 and 3,008,028 shares were received during the first quarter ended January 31, 2008) for cancellation held by certain former stockholders and former management of  MTSI.  In addition, the former director agreed to waive his prior loans extended to the then MTSI amounting to $296,714. Upon consummation of the acquisition, 4Rivers and 4Rivers UK became the only two wholly-owned subsidiaries of the Company.



The Company is engaged primarily in the building of a network of logistically and technologically differentiated, profitable Bio-Energy plants across the United States, United Kingdom and potentially elsewhere.  The Company intends to achieve this objective through acquisition, expansion, improvement, consolidation and green field development of Bio-Energy plants. During the third quarter of fiscal 2009, we began generating revenue through the operations of our northeast England plant on a trial basis as an initial stage to fully commercialize our biodiesel products.





7



---



Since the conclusion of the funding in December 2007, the Company has developed two primary elements of focus within its overall Bio-Energy strategy.  The Company, through its subsidiaries, plans to construct, own and manage a facility in Kentucky for the production of bio-ethanol and bio-diesel products and for the sale and distribution of such products and by-products (the Kentucky Plant). The Company is also operating the Biodiesel plant acquired in April 2009 (see Note 4) on a trial basis commencing during the third quarter of fiscal 2009. In addition, in view of the prevailing market conditions within the bio-energy industry, the Company is evaluating and intends to exploit the opportunities that may arise to acquire existing bio-energy facilities and related enterprises that are either overleveraged, not operating or operating inefficiently, incomplete or otherwise troubled.  The Company believes that with its internal expertise and know-how, it could complete, operate and/or improve those types of opportunities.



Out of the financings described above, the Company has incurred expenditures being mainly focused on land purchases in Kentucky, development and design of the proposed Kentucky Plant, expenses related to financings, costs related to asset acquisitions, costs relating to potential future merger and acquisition activity and general overhead expenses. The Company will continue to explore different options to raise capital to provide maximum flexibility to enable it to execute against its strategies and to pursue a careful cash management strategy to maintain its flexibility.



Going Concern



The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company is a development stage company and has not commenced planned principal operations. As shown in the accompanying unaudited consolidated financial statements, the Company has only recently begun generating revenue on a trial basis as an initial stage to fuly commercialize its biodiesel products and has incurred recurring losses for the period from March 9, 2007 (date of inception) through July 31, 2009.  Additionally, the Company has negative cash flows from operations since date of inception and has an accumulated deficit of $13,710,186 at July 31, 2009. These factors raise substantial doubt about the Companys ability to continue as a going concern.



The Companys ability to continue existence is dependent upon commencing its planned operations, managements ability to develop and achieve profitable operations and/or upon obtaining additional financing.  The Company intends to fund its construction and acquisition endeavors and operations through equity and debt financing arrangements.  The Company is actively seeking to raise equity and or debt capital to be used for operations, and it has appointed third party lead advisors who are currently seeking to assist the Company raise equity and or debt finance.  This financing may be made directly into the parent or by way of direct investment into a special purpose vehicle in which the Company will hold a stake, although at this stage it is not known what form the investment may take.  However, there can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements.  The outcome of these matters cannot be predicted at this time.



There can be no assurance that any additional financings will be available to the Company on satisfactory terms and conditions, if at all.  In the event we are unable to continue as a going concern, we may elect or be required to seek protection from our creditors by filing a voluntary petition in bankruptcy or may be subject to an involuntary petition in bankruptcy. To date, management has not considered this alternative, nor does management view it as a likely occurrence.



The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.







8



---

Note 2 - Summary of Significant Accounting Policies



Use of estimates



The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.



Development Stage Company



The Company is considered to be in the Development Stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. During the third quarter of fiscal 2009 the Company began generating revenue through the operations of its northeast England plant on a trial basis. However, the product is being produced in controlled batches for specific orders from targeted customers; this testing stage enables the Company to ensure that the Plant is able to scale production to meet increased orders with no loss of product quality.  The Company is simultaneously developing a sustainable feedstock supply and off-take strategy for the Plant.  Consequently, the Company will remain as a development stage entity until it is confident that the Plant is capable of producing biodiesel at specified certification consistently, in large volumes, across a wide distribution of customers.  The Company has not generated material revenues to date and has incurred significant expenses and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from March 9, 2007 (date of inception) through July 31, 2009, the Company has accumulated losses of $13,710,186.



Principles of consolidation



The consolidated financial statements include the accounts of Four Rivers BioEnergy Inc., The Four Rivers BioEnergy Company Inc., The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited.  All significant intercompany transactions and balances have been eliminated in consolidation.



Revenue Recognition



For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred.



Accounts Receivable



Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.  Allowance for doubtful accounts of accounts receivable was $0 as of July 31, 2009 and October 31, 2008.







9



---

Inventory



The Company values its inventory at the lower of cost (first-in, first-out) or market. The Company uses estimates and judgments regarding the valuation of inventory to properly value inventory. Inventory adjustments, if necessary, are made for the difference between the cost of the inventory and the estimated market value and charged to cost of goods sold in the period in which the facts that give rise to the adjustments become known.



Cost of goods sold



Cost of sales includes cost of raw materials, direct wages, other direct costs, production related depreciation, loss on stock during the production process and shipping costs.



Foreign currency translation



The Companys functional and reporting currency is the United States Dollar.  The functional currency of the Companys subsidiaries, The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited is their local currency (Great British Pound  GBP). In accordance with SFAS No. 52, "Foreign Currency Translation," monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the period or for year end. The translation adjustments are deferred as a separate component of stockholders equity, captioned accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.



Property and equipment



Property and equipment is stated at cost less accumulated depreciation.  Depreciation is provided on the straight line basis over the estimated useful lives of the assets as follows:



Automobiles

3 years

Office equipment

3-4 years

Plant and equipment

5 years



Expenditures for repair and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.



Depreciation of the biodiesel plant assets acquired in the acquisition described in Note 4 commenced in the third quarter of fiscal 2009. Depreciation of the Kreido assets acquired in the acquisition described in Note 4 has not commenced since those assets have not yet been placed in service. Depreciation on those assets is expected to commence in fiscal 2010.



Intangible Assets



Intangible assets consist of patents, patent applications and trademarks. These patents and patent applications cover the intellectual property underlying our technology. The assets are recorded at cost. The intangible assets will be amortized on the straight line basis over their estimated useful lives. Management is assessing the estimated useful lives of the intangible assets acquired in the acquisitions described in Note 4 and amortization will commence in fiscal 2010.







10



---

Impairment of Long-Lived Assets



The Company follows SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted discounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived assets and certain identifiable intangibles will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less disposal costs.



Basic and diluted loss per share



In accordance with SFAS No. 128  Earnings Per Share, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities were not included in the calculation of the diluted loss per share as their effect would be anti-dilutive.  The diluted net loss per share for the three and nine month periods ended July 31, 2009 do not reflect the effects of 1,025,000 shares potentially issuable upon the exercise of the Companys stock warrants (calculated using the treasury method).



Concentrations of Credit Risk



The Company maintains cash and cash equivalents with major financial institutions. Cash held in US bank institutions is insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 at each institution.  Cash held in UK bank accounts is insured by the Financial Services Authority (FSA) up to £50,000 (approximately $82,000) at each institution.  At times, such amounts may exceed the FDIC and FSA limits. The aggregate uninsured cash bank balances were approximately $2,494,000 at July 31, 2009. The Company has not experienced any loss on these accounts.  The balances are maintained in demand accounts to minimize risk.



Economic Dependency



During the three and nine month periods July 31, 2009, $1,569,334 or 97% of the total revenues was derived from one customer.  Total accounts receivable of $182,946, or 99% of total accounts receivable was due from this customer.  The loss of this customer could have a material adverse impact on our consolidated financial position, results of operations and cash flows.



During the three and nine month period July 31, 2009, $671,942 or 17% of the total raw material purchases was derived from one supplier. There were no other purchases from a single supplier that accounted for greater than 10% of total purchases for the three and nine month periods ended July 31, 2009.



Fair value of financial instruments



In May 2009, the Company adopted FASB Staff Position (FSP) No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1) for its interim period ended July 31, 2009. FSP FAS 107-1 and APB 28-1 requires disclosures about fair value of financial instruments as defined by SFAS No. 107, Disclosures About Fair Value of Financial Instruments (SFAS 107), for interim reporting periods of publicly traded companies as well as in annual financial statements.



Our short-term financial instruments, including cash, receivables, prepaid expenses and other assets and accounts payable, consist primarily of instruments without extended maturities, the fair value of which, based on managements estimates, reasonably approximate their book value.







11



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Segment information



SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information, changed the way public companies report information about segments of their business in their quarterly and annual reports issued to stockholders.  It also requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues and its major customers. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions how to allocate resources and assess performance. We have a single operating segment, the operations of our northeast England biodiesel plant on a trial basis as an initial stage to fully commercialize our biodiesel products. All revenue is derived from the United Kingdom.



Reclassifications



Certain amounts in the prior years consolidated financial statements and the related notes have been reclassified to conform to the current period presentation. These reclassifications have no effect on previously reported results of operations or loss per share.



Comprehensive Income (Loss)



The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income."  SFAS No. 130 establishes standards for the reporting and displaying of comprehensive income (loss) and its components.  Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. SFAS No. 130 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.



Stock-Based Compensation



The Company has adopted the fair value provisions of SFAS No. 123(R) "Share-Based Payment" which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to a Employee Stock Purchase Plan based on the estimated fair values.



We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.



Recent accounting pronouncements



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements ("SFAS No. 157"). The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.  The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. This statement had no impact on the Companys consolidated financial position, results of operations or cash flows. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delayed the effective date of SFAS No. 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until the fiscal years beginning after November 15, 2008.  We have not yet determined the impact that the implementation of FSP 157-2 will have on our non-financial assets and liabilities which are not recognized on a recurring basis; however, we do not anticipate the adoption of this standard will have a material impact on our consolidated financial position, results of operations or cash flows.





12



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In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS No. 159").  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS No. 159 is expected to expand the use of fair value measurement, which is consistent with the FASBs long-term measurement objectives for accounting for financial instruments.  SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. This statement had no impact on the Company's consolidated financial position, results of operations or cash flows.



In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141(R)"), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141(R) is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its consolidated financial position, results of operations and cash flows.



In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS No. 160"), which will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity within the consolidated balance sheet.  SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its consolidated financial position, results of operations and cash flows.



In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets.  We are required to adopt FSP 142-3 on November 1, 2009 and early adoption is prohibited.  The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption.  We are currently evaluating the impact of FSP 142-3 on our consolidated financial position, results of operations and cash flows.



In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS No. 115-2). FSP FAS No. 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter of fiscal 2009 had no impact on the Companys consolidated financial position or results of operations.



In April 2009, the FASB issued FSP FAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS No. 157-4). FSP FAS No. 157-4 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in SFAS No. 157, Fair Value Measurements. FSP FAS No. 157-4 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter of fiscal 2009 had no impact on the Companys consolidated financial position or results of operations.







13



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In April 2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS No. 107-1 and APB 28-1). This FSP amends FASB Statement No. 107, Disclosures about Fair Values of Financial Instruments, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. APB 28-1 also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. This standard is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter of fiscal 2009 had no impact on the Companys consolidated financial position or results of operations.



In May 2009, the FASB issued SFAS No. 165,Subsequent Events(SFAS No. 165). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 will be effective for interim and annual financial periods ending after June 15, 2009. The Company adopted SFAS No. 165 during the quarter ended July 31, 2009 and evaluated subsequent events through the issuance date of the financial statements. SFAS No. 165 had no impact on the Companys consolidated financial position or results of operations.



In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers and Servicing of Financial Assets  an amendment of SFAS Statement No. 140 (SFAS No. 166). SFAS No. 166 will require more information about transferred of financial assets and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 is effective at the start of a companys first fiscal year beginning after November 15, 2009. We are currently evaluating the impact of SFAS No. 166 on our consolidated financial position, results of operations and cash flows.



In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 will change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under SFAS No. 167, determining whether a company is required to consolidate an entity will be based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. SFAS 167 is effective at the start of a companys first fiscal year beginning after November 15, 2009. We are currently evaluating the impact of SFAS No. 167 on our consolidated financial position, results of operations and cash flows.



In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principals  a replacement of FAS No.162 (SFAS No. 168). This statement establishes the Codification as the source of authoritative U.S. accounting and reporting standards recognized by the FASB for use in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification was the result of a project of FASB to organize and simplify all authoritative GAAP literature into one source. This statement is effective for interim reporting and annual periods ending after September 15, 2009. Accordingly, the Company will adopt SFAS No. 168 during the fourth quarter of fiscal 2009. The Company does not anticipate this statement to have a material impact on its consolidated financial position, results of operations or cash flows.



Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on our present or future consolidated financial statements.







14



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Note 3 - Reverse Merger



On March 26, 2007, MTSI entered into an Acquisition Agreement (the Agreement) with 4Rivers and 4Rivers then shareholders whereby MTSI agreed to acquire the entire issued and outstanding shares of the common stock of 4Rivers in two stages: (a) on March 26, 2007, 15% was acquired in exchange for an investment by MTSI in cash into 4Rivers of $2,000,000; and (b) on December 4, 2007, the remaining 85% were acquired by the issuance of 2,392,059 shares of MTSIs common stock to the shareholders of 4Rivers. Also on December 4, 2007, as a condition of the acquisition, the Company raised net proceeds of $22,829,022 through the issuance of 1,657,881 shares of its common stock through a private placement in connection with the acquisition. As a further condition of the Agreement, the Company received 3,655,087 shares of common stock (647,059 shares were received in October 2007 and 3,008,028 shares were received during the first quarter ended January 31, 2008) for cancellation held by certain stockholders and former management of MTSI.  In addition, the former director agreed to waive his prior loans to MTSI amounting to $296,714. Upon consummation of the acquisition, 4Rivers and 4Rivers UK became the only two wholly-owned subsidiaries of the Company.  Subsequent to the completion of the reverse acquisition, the Company amended its article of incorporation and changed its name to Four Rivers BioEnergy Inc.



The acquisition is accounted for as a reverse acquisition, since the stockholders of 4Rivers owned a majority of the Companys common stock immediately following the transaction and their management has assumed operational, management and governance control. The reverse acquisition transaction is recorded as a recapitalization of 4Rivers pursuant to which 4Rivers is treated as the surviving and continuing entity although the Company is the legal acquirer rather than a business combination.  The Company did not recognize goodwill or any intangible assets in connection with this transaction.  Accordingly, the Companys historical consolidated financial statements are those of 4Rivers and 4Rivers UK.



Effective with the reverse acquisition, all previously outstanding common stock owned by 4Rivers shareholders were exchanged for the Companys common stock. The value of the Companys common stock that was issued to 4Rivers shareholders was the historical cost of the Companys net tangible assets, which did not differ materially from its fair value.



All references to common stock, share and per share amounts have been retroactively restated to reflect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.



Note 4  Asset Acquisitions



During the second quarter of fiscal 2009 the Company completed two asset acquisition transactions.



Acquisition of Kreido Assets



On January 28, 2009, the Company, entered into an asset purchase and other related agreements with Kreido Biofuels, Inc., a Nevada corporation (Kreido), to acquire identified assets owned by Kreido, including certain machinery and intellectual property rights relating to the STT® technology developed by Kreido. The Company plans to commercialize the STT® technology for the production of bio-diesel fuel and other by-products. The transaction closed on March 5, 2009.



The aggregate cost of the assets was $5,042,668. Consideration paid includes $2,792,000 in cash, the assumption of certain of purchase orders and contracts, issuance of 1,200,000 shares of the Companys common stock (of which 300,000 shares are held in escrow as contingent consideration) and a warrant to purchase 200,000 shares of the Companys common stock at an exercise price of $8.00 per share with an expiration date of March 5, 2014. The warrant provides for anti-dilution adjustment in limited circumstances and piggyback registration rights with respect to the underlying shares of common stock.



The 300,000 escrowed shares will be held in escrow solely to cover the potential exercise of certain Kreido warrants that are exercisable by Kreido stockholders until January 12, 2012. If these warrants are not exercised the shares will be returned to the Company for cancellation.







15



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The Company has estimated the allocation of the cost of the assets acquired as follows:



|                            |  |  |  |   |           |   |          
|--------------------------- |  |  |  | - | --------- | - | ---------
|                            |  |  |  |   |           |   |          
|Plant and equipment         |  |  |  | $ | 4,313,955
|Intangible assets (Patents) |  |  |  |   | 728,713  
|                            |  |  |  |   |           | $ | 5,042,668



Upon completion of the valuation of the assets, the estimated allocation will be adjusted to the actual values.



The value of the 300,000 shares held in escrow has been recorded as a deferred credit on the balance sheet and will be classified as such until the contingency involving those shares has been resolved. If the shares are cancelled, then the deferred credit will be applied against the cost basis of the assets acquired.



Acquisition of Biodiesel Plant Assets



On April 6, 2009, the Company signed a series of related agreements for the acquisition of a biodiesel plant and other assets located near Blyth, Northumberland, in North East England. The acquisition of the plant and related assets is from the administrator under a pre-packaged acquisition out of insolvency.



The acquisition is of a completely constructed facility capable of producing approximately 35 million gallons per annum of biodiesel from a broad band of feedstocks, including waste cooking, other waste oils and virgin oils using technologies that are believed to be unique in the biodiesel industry. In addition, the acquisition includes 147 acres of land situated about two miles from a major slack water port facility at Blyth, Northumberland, England, security and office buildings, furniture and office equipment, and motor vehicles.



The asset acquisition has been made by the Company through a new holding company structure. The new holding company structure consists of a holding company, BF Group Holdings Limited, a United Kingdom formed company (BF Group), and several subsidiaries to own the land in freehold and leasehold, plant, patents and intellectual property and other assets and to operate those assets, as appropriate, for greatest operational, financing, income and tax efficiency.  The Company has an 85% equity interest in BF Group.



The Company, BlueCrest Strategic Limited (BlueCrest), Elettra Sviluppo S.R.L. and BF Group have entered into a Subscription and Shareholders Agreement governing the Companys acquisition of 85% of BF Group, the Companys funding obligations and certain continuing relationships among all the equity owners of BF Group.  In addition to the other terms, the shareholders agreement provides for (i) drag along rights entitling the Company to sell the entire share capital of BF Group, (ii) tag along rights for the other equity owners to sell their 15% equity interest along with any sale by the Company, (iii) an option to the Company to acquire the 15% ownership interest not owned by the Company at any time for the lower of £75,000,000 (approximately US$110,000,000) or the fair market value if in connection with a disposal, (iv) a covenant that future capital provided by the Company will not dilute the 15% ownership interest of the other equity owners, (v) pre-emptive rights to the parties for participation in both equity and debt infusions into BF Group or its subsidiaries, and (vi) the creation of an employee incentive plan for BF Group that is non-dilutive to the 15% ownership interest.  BlueCrest also was issued a warrant (Warrant) to purchase up to 200,000 shares of common stock of the Company at $8.00 per share, expiring December 31, 2012, as compensation for various services in connection with the formation of the holding company structure and with the transaction. Under a put option agreement between the Company and BlueCrest, the latter will also have the right to put its 13.75% interest in BF Group to Four Rivers for $1,600,000. The put option is contingent on the exercise of the warrant by BlueCrest. Upon future exercise of the warrant by BlueCrest, the Company will record a liability for the put option.



The total cost of the acquisition of the biodiesel plant and other assets was $809,277, all of which is allocated to plant and equipment. Upon completion of the valuation of the assets, the estimated allocation will be adjusted to the actual values for land and depreciable assets.







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Minority interest, representing the minority shareholders proportionate share of the equity of the Companys subsidiary, BF Group Holdings Limited, is adjusted for the minority interest shareholders shares of the earnings or loss of BF Group Holdings Limited.  The minority interest was 15% and 0% at July 31, 2009 and October 31, 2008, respectively.  Losses applicable to the minority interest in BF Group Holdings Limited exceeded the minority interest in its equity capital.  Such excess and any further losses applicable to the minority interest will be charged against the Companys consolidated deficit accumulated during the development stage, as there is no obligation of the minority shareholders to fund such losses.  Accordingly, the Company has not recorded a minority interest at July 31, 2009.  However, if future earnings do materialize prior to the adoption of SFAS No. 160, Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51, which is effective on November 1, 2009, the Companys consolidated deficit accumulated during the development stage would be credited to the extent of such losses previously absorbed.



Note 5 - Inventory



Inventory at July 31, 2009 and October 31, 2008 consists of the following:



|                |               |         |                  |   |  
|--------------- | ------------- | ------- | ---------------- | - | -
|                | July 31,
2009 |         | October 31,
2008
|                | (unaudited)   |         |                  |  
|Raw materials   | $             | 349,782 |                  | $ | -
|Work in process |               | 99,943  |                  |   | -
|Finished goods  |               | 141,637 |                  |   | -
|                | $             | 591,362 |                  | $ | -



Note 6 - Property and Equipment



A breakdown of the Companys main items of property and equipment are given in the table below:



|                                          |               |            |                  |   |          
|----------------------------------------- | ------------- | ---------- | ---------------- | - | ---------
|                                          | July 31,
2009 |            | October 31,
2008
|                                          | (unaudited)   |            |                 
|Land and improvements                     | $             | 5,811,240  |                  | $ | 5,811,240
|Plant and equipment                       |               | 5,815,306  |                  |   | -        
|Office equipment                          |               | 40,048     |                  |   | 22,697   
|Automobiles                               |               | 91,599     |                  |   | 48,132   
|Cost basis                                | $             | 11,758,193 |                  | $ | 5,882,069
|Accumulated depreciation and amortization |               | (77,900)   |                  |   | (19,136) 
|Carrying value                            | $             | 11,680,293 |                  | $ | 5,862,933



Depreciation expense was $43,069 and $3,008 for the three month periods ended July 31, 2009 and 2008, respectively, of which $38,251 and $0, respectively, was included as part of cost of goods sold.



Depreciation expense was $57,319 and $9,025 for the nine month periods ended July 31, 2009 and 2008, respectively, of which $38,251 and $0, respectively, was included as part of cost of goods sold.



Note 7 - Related Party Transactions



The Company has contracted with P.C.F. Solutions Limited (PCF), a private Limited Company, of which Mr. Stephen Padgett, our Executive Vice President, is a director and majority shareholder. Under the terms of the agreement, PCF provides the Company with services of employees within PCF at agreed rates. The Company incurred consulting services through PCF totaling $139,875 and $29,500 for the three month periods ended July 31, 2009 and 2008, respectively, and $336,625 and $61,500 for the nine month periods ended July 31, 2009 and 2008, respectively. The Company has paid Mr. Padgetts salary for the nine month period ended July 31, 2008 directly, and up to the period ended January 31, 2009.







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The Company has contracted with The ARM Partnership (ARM), a private partnership of which Mr. Martin Thorp, our Chief Financial Officer, is a principal.  Under the terms of the agreement ARM provides the Company with the services of another ARM partner at agreed rates. The Company incurred consulting services through ARM Partnership totaling $108,000 and $54,165 for the three month periods ended July 31, 2009 and 2008, respectively and $324,000 and $113,665 for the nine month periods ended July 31, 2009 and 2008, respectively. Effective September 2008, the Company engaged Mr. Robert Galvin, a partner of ARM, as the Companys Secretary. The compensation for Messrs. Thorp and Galvin services is being paid by the Company to ARM.



The Company has entered into consulting agreements with outside contractors who are also the Companys stockholders and a director. The Agreements are generally for a term of one year or less from inception and renewable unless either the Company or Consultant terminates such agreement by written notice.  The Company incurred  $516,266 and $672,446 in fees to these individuals for the three month periods ended July 31, 2009 and 2008, respectively, $1,771,705 and $2,015,831 for the nine month periods ended July 31, 2009 and 2008, respectively, and $4,560,540 for the period from March 9, 2007 (date of inception) through July 31, 2009, in a consulting role.



Note 8 - Stockholders Equity



The Company is authorized to issue 100,000,000 shares of preferred stock of which two shares were issued and outstanding at July 31, 2009 (Series A Preferred).



The Company is authorized to issue 500,000,000 shares of common stock, with par value of $.001 per share.  As of July 31, 2009 and October 31, 2008, there were 8,004,689 and 6,804,689 shares of common stock issued, respectively, of which 300,000 shares are held in escrow as contingent consideration for the acquisition of the Kreido assets that are not accounted for as outstanding at July 31, 2009. Accordingly, there are 7,704,689 and 6,804,689 shares of common stock outstanding at July 31, 2009 and October 31, 2008, respectively.



On March 5, 2009, the Company issued a total of 200,000 common stock warrants to Kreido as partial consideration for the asset acquisition described in Note 4. The warrants have an exercise price of $8.00 per share and expire if unexercised on March 5, 2014. The warrants vested upon issue. The warrants were valued at $131,335 using the Black-Scholes method based on the following assumptions:  (1) risk free interest rate of 1.82%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 154%; and (4) an expected life of the options of 5 years.



On April 6, 2009, the Company granted a total of 200,000 common stock warrants to BlueCrest as compensation for various services in connection with the formation of the holding company structure and with the biodiesel plant transaction described in Note 4. The warrants have an exercise price of $8.00 per share and expire if unexercised on December 31, 2012. The warrants vested upon grant. We have recorded an expense of $463,083 related to the fair value of the options, using the Black-Scholes method based on the following assumptions:  (1) risk free interest rate of 1.37%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 157%; and (4) an expected life of the options of 3.75 years.



On November 19, 2008, the Company granted an aggregate of 625,000 warrants to certain officers, consultants and employees as compensation for service. The warrants have an exercise price of $2.45 per share and expire, if unexercised, on November 19, 2015. The warrants vested upon grant. We have recorded an expense of $1,404,283 related to the fair value of the options, using the Black-Scholes method based on the following assumptions:  (1) risk free interest rate of 2.64%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 128%; and (4) an expected life of the options of 7 years.



On December 4, 2007, the Company raised $22,829,022, net of expenses, through a private placement of 1,657,881 shares of common stock.







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On January 25, 2008, the Company obtained the approval of its shareholders to change the name of the Company to Four Rivers BioEnergy Inc. and effect a one-for-17 reverse stock split.  The Board of Directors filed the charter amendment on January 25, 2008 and the changes were effective on filing.  The OTC Bulletin Board effected for trading purposes the change on January 29, 2008.  As of that date, the common stock commenced trading under the symbol FRBE.OB. As a result of the reverse split, the aggregate number of outstanding shares was reduced from 113,449,883 shares to approximately 6,673,523 shares, subject to the issuance of additional shares to be issued to provide for the rounding up of fractional shares.  There were 6,673,628 shares issued and outstanding as a result of an additional 105 shares issued for rounding up of fractional shares.  All references in the consolidated financial statements and notes to financial statements to numbers of shares and share amounts have been retroactively restated to reflect the reverse split, unless explicitly stated otherwise.



The reverse split applied to all issued and outstanding shares of common stock at the effective date of the reverse split. The Companys total number of authorized shares was not affected by the reverse split and remained as 500,000,000 shares in common stock and 100,000,000 shares in preferred stock.



On July 30, 2008, the Company raised an additional $1,631,564, net of expenses in a private placement of 131,061 shares of common stock.



Note 9  Options and Warrants



Warrants



The following table summarizes the warrants outstanding and exercisable for the shares of the Company's common stock issued to certain officers, consultants and employees of the Company. These warrants possess all of the conditions required for equity classification and therefore are classified as equity.



|                     |  |                      |  |                                                     |  |                                 |  |                    |  |                                
|-------------------- |  | -------------------- |  | --------------------------------------------------- |  | ------------------------------- |  | ------------------ |  | -------------------------------
|                     |  |                      |  |                                                     |  |                                 |  |                    |  |                                
|Warrants Outstanding |  | Warrants Exercisable
|Exercise Price       |  | Number Outstanding   |  | Weighted Average Remaining Contractual Life (Years) |  | Weighted Average Exercise Price |  | Number Exercisable |  | Weighted Average Exercise Price
|$ 2.45               |  | 625,000              |  | 6.31                                                |  | $ 2.45                          |  | 625,000            |  | $ 2.45                         
|$ 8.00               |  | 400,000              |  | 4.01                                                |  | $ 8.00                          |  | 400,000            |  | $ 8.00                         
|                     |  | 1,025,000            |  |                                                     |  |                                 |  | 1,025,000          |  |                                



Transactions involving warrants are summarized as follows:



|                                |  |                  |           |                                  |   |     
|------------------------------- |  | ---------------- | --------- | -------------------------------- | - | ----
|                                |  |                  |           |                                  |   |     
|                                |  | Number of Shares |           | Weighted Average Price Per Share
|Balance, November 1, 2007       |  |                  | -         |                                  | $ | -   
|Issued                          |  |                  | -         |                                  |   | -   
|Exercised                       |  |                  | -         |                                  |   | -   
|Canceled / Forfeited / Expired  |  |                  | -         |                                  |   | -   
|Outstanding at October 31, 2008 |  |                  | -         |                                  |   | -   
|Issued                          |  |                  | 1,025,000 |                                  |   | 4.62
|Exercised                       |  |                  | -         |                                  |   | -   
|Canceled / Forfeited / Expired  |  |                  | -         |                                  |   | -   
|Outstanding at July 31, 2009    |  |                  | 1,025,000 |                                  | $ | 4.62









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Item 2.  Managements Discussion and Analysis or Plan of Operations.

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in this report.



Overview



We were originally incorporated under the name Med-Tech Solutions, Inc. (which we refer to as MTSI) in the State of Nevada on May 28, 2004, and we changed the name on January 25, 2008 to Four Rivers BioEnergy Inc. (which we refer to as Four Rivers or the Company and as the context requires, includes its subsidiaries).  On March 26, 2007, the Company entered into an Acquisition Agreement (the Agreement) with The Four Rivers BioEnergy Company Inc., a Kentucky corporation (which we refer to as 4Rivers), and all of the shareholders of 4Rivers to acquire 4Rivers by share purchase and share exchange.  As a further condition of the Agreement, the Company received 3,655,087 shares of common stock (647,059 shares were received in October 2007 and 3,008,028 shares were received during the first quarter ended January 31, 2008) for cancellation held by certain stockholders and former management of MTSI.  In addition, a former director agreed to waive his prior loans extended to MTSI amounting to $296,714.  Upon consummation of the acquisition, 4Rivers and its wholly owned subsidiary, 4Rivers UK became wholly-owned subsidiaries of the Company.



Pursuant to the Agreement, MTSI acquired the entire issued and outstanding shares of common stock of 4Rivers in two stages: (a) on March 26, 2007, 15% was acquired in exchange for an investment by MTSI in cash into 4Rivers of $2,000,000; and (b) on December 4, 2007, the remaining 85% were acquired by the issuance of 2,392,059 shares of MTSIs common stock to the shareholders of 4Rivers.  4Rivers had a wholly owned subsidiary incorporated in the United Kingdom, The Four Rivers BioEthanol Company Limited (4Rivers UK), which currently has no operations.



On December 4, 2007, as a condition of the acquisition, the Company raised $22,829,022, net of expenses, through a private placement of 1,657,881 shares of common stock.  On July 30, 2008, the Company raised an additional $1,631,564, net of expenses, in a private placement of 131,061 shares of common stock.



The acquisition was accounted for as a reverse acquisition, rather than a business combination since the stockholders of 4Rivers owned a majority of the Companys common stock immediately following the transaction and their management has assumed operational, management and governance control. The reverse acquisition transaction is recorded as a recapitalization of 4Rivers pursuant to which 4Rivers is treated as the surviving and continuing entity although the Company is the legal acquirer. The Company did not recognize goodwill or any intangible assets in connection with this transaction.  Accordingly, the Companys historical consolidated financial statements are those of 4Rivers and 4Rivers UK.



Four Rivers is engaged primarily in the building of a network of logistically and technologically differentiated BioEnergy plants across the United States, United Kingdom, and potentially elsewhere.  Four Rivers intends to achieve this objective through acquisition, expansion, improvement, consolidation and green field development of BioEnergy plants.



The Company has begun implementing plans to achieve the objective described above by prudently deploying some of the cash raised by way of private placement, together with new issues of its common stock and stock warrants, to make certain carefully selected purchases of parcels of specialized plant and equipment and technology from financially distressed BioEnergy businesses at deep discounts to the cost of building and creating those assets.







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The Company has also taken the opportunity to employ or enter into consulting agreements with key experts associated with those acquired specialized assets and technologies, who further deepen the skill base of the existing team of individuals within the Company.



The conversion of these acquired assets and technologies into profitable, revenue generating business operations, and the integration of acquired know-how, expertise and intellectual property across the Companys operations is a central part of our management teams ongoing activities.



The Company has identified, through a lengthy and intense period of acquisition search and industry networking, several other BioEnergy assets, technologies and businesses which are available to acquire at deep discounts for cash and/or equity and which, if acquired outright or in joint venture or partnership with others, would be relevant to the implementation of its overall BioEnergy strategy to achieve revenue generation, operating profitability, diversity and risk management. However, it is unlikely that the Company will be able to consummate a for cash acquisition without additional financing, which the ability to obtain can not be assured.  Several opportunities are currently being discussed and negotiated with the asset owners and the Company is simultaneously in discussion with potential financiers and joint venture partners to enable it to consummate such possible transactions. The twin activity of (a) the identification and negotiation of asset and/or business acquisitions and (b) the raising of finance to allow the Company to consummate such transactions is an ongoing and important tenet of the Companys overall strategy.



The Company believes that the BioEnergy industry presents major opportunities and is well placed to capitalize on these opportunities with its strength in the depth and expertise of its management team and its increasing portfolio of acquired specialist assets, technologies and people.



Plan of Operation



During the second quarter of fiscal 2009 the Company announced the completion of two separate asset purchase transactions.  Both of these transactions have brought to the Company unique capability in terms of additions to our existing team of expert people; acquired specialized assets capable, with our teams know-how and expertise, of being converted and extended into complete operational plants for limited additional capital and unique technologies relevant to the BioEnergy industry and the Companys overall strategy.



Both transactions involved the acquisition of certain assets and technologies at a deep discount to the sellers book value of these assets acquired and, in the opinion of management, to the replacement cost and value in the overall context of the Companys overall strategy and objectives. In addition, the Company issued common stock and warrants as part of the overall consideration thereby reducing the cash outlay and preserving the Companys limited cash reserves.



Asset Acquisition - Kreido



On March 5, 2009, the Company acquired certain assets of Kreido Biofuels, Inc., a Nevada corporation (Kreido), including certain equipment, materials and machinery and intellectual property rights relating to the STT® technology developed by Kreido. The Company plans to commercialize the STT® technology for the production of bio-diesel fuel and other products in the chemical and pharmaceutical industries.  The purchase price of the assets acquired from the sellers was $5,042,668, a discount of approximately $9 millionfrom the carrying value of these assets.



Management plan to deploy these assets in several ways including introducing into other biodiesel plants, including the biodiesel plant acquired and described below, to achieve substantial efficiency improvements in the biodiesel production process; and/or to sell, lease or otherwise partner with other biodiesel manufacturers to derive value through the use of the STT® reactors, know-how and technology.







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The STT® technology has wide application outside the biodiesel area and the Company is currently exploring various opportunities and commercial arrangements, including possible licensing arrangements or technology sales, to derive value from such opportunities as a separate subsidiary revenue stream without distracting in any way from the Companys core BioEnergy strategy.



Asset Acquisition  Biodiesel Plant



On April 6, 2009, the Company signed a series of related agreements for the acquisition of a biodiesel plant and other assets located near Blyth, Northumberland, in North East England. The acquisition of the plant and related assets was from the administrator under a pre-packaged acquisition out of insolvency working with the principal creditor and the administrator.  The acquisition was of a completely constructed facility capable of producing approximately 35 million gallons per year (mgpy) of biodiesel from a broad band of feed-stocks, including waste cooking oils, other waste oils and virgin oils using technologies that are believed to be unique in the biodiesel industry. In addition, the acquisition included 147 acres of land situated about two miles from the port of Blyth, Northumberland, England, security and office buildings, furniture and office equipment, and motor vehicles.



The purchase price of the assets acquired from the administrator under a pre-packaged acquisition out of insolvency was $809,227 (translated at July 31, 2009), a discount of approximately $24 million from the carrying value of these assets.



There are several aspects of the acquired plant and know-how that differentiates it from other biodiesel assets, particularly in terms of its ability to efficiently utilize a very wide range of feedstocks, including waste oils. Management plans to exploit these factors to (a) build the acquired plant into a viable, differentiated business and (b) share the know-how across other potential acquisition targets if and when these arise to provide commercial advantages to them. Further, management intends to deploy aspects of the previously acquired STT® technology and assets to make further improvements at the UK Biodiesel Plant, (the Plant).  Finally, the asset purchase included, at no incremental cost, a substantial amount of redundant assets, including pipes, tanks and equipment capable of increasing the size of the biodiesel plant, and significant amounts of unused land potentially capable of being used for industrial purposes, all of which the Company will explore ways to use for value in due course.



During the reporting period ended July 31, 2009, plant operations were recommenced and several projects undertaken to enable quality production. In addition the plants management recommenced commercial activity in the form of an initially low volume feedstock acquisition strategy and small batch production. In this start up period from the time of the asset acquisition, the Plant incurred operating losses of $2,749,461 on revenues of $1,613,925 in the same period.  The product is initially being produced in small, controlled batches for specific orders from targeted customers; this testing stage enables the Company to ensure that the plant is able to scale production to meet increased orders with no loss of product quality.  The Company is simultaneously developing a sustainable feedstock supply and off-take strategy of the finished product, for the Plant.  After this initial period of testing and restarting the Plant, management is now comfortable with the Plants ability to produce and sell high quality bio diesel consistently and in commercially viable volumes and to secure appropriate quantity of feedstock.  However, the Plant requires additional investment in the form of working capital and capital expenditure on plant improvement and expansion to operate the Plant profitably and to its full commercial potential. We currently do not have adequate funds on hand nor any financing available to allow us to make the investments necessary to enable the Plant to operate at a profitable level. If we are unable to obtain such funds, the Plant may never operate at a profitable level.



Kentucky Facility



The Company acquired approximately 437 acres of strategically and logistically important land suitable for the development of a multi-product, integrated Bio-energy facility on a site located on the Tennessee River approximately 12 miles upriver of Paducah near Calvert City, Marshall County, Kentucky.  This land has recently been independently valued at $6.1 million and is held on the Companys balance sheet at approximately $5.8 million.







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Originally, the Company had intended to raise sufficient funding to develop and construct a differentiated, 130 mgpy corn based dry mill fuel grade Bio-ethanol plant with front end fractionation, a 35 mgpy soy oil based Bio-diesel plant and the application of technologies such as anaerobic digestion systems to produce renewable energy.



However, the cost of developing and constructing bio-energy plants is substantially more when compared to the cost of acquiring similar type assets in the market (including acquisition cost, working and investment capital to get the asset to highly profitable state).  In addition there is continued difficulty in raising capital due to the volatility in the financial markets as a result of the current global economic crises.  Consequently, the Company is now undertaking a strategic review of the original plans for the Kentucky facility, to determine its options, and determine a way forward so as to maximize shareholder value.  The outcome of this review is expected to be completed during the fourth quarter ending October 31, 2009.



Future plans



We plan to deploy our management teams combined industry, technical, merger and acquisition (M&A), restructuring and corporate finance expertise to target and acquire undervalued and/or distressed assets, provided that they are carefully selected and qualified, and then  apply our operational improvement plans to materially enhance the performance of those assets.  Our objective is to create a large, profitable next generation BioEnergy business.  We believe that our strategy offers substantial opportunity to build capital value in the current climate, particularly given (a) the present opportunity to acquire undervalued and/or underperforming assets and improve on them; and (b) the medium to longer term outlook for BioEnergy as an alternative form of energy supply and the relatively weak state of the market which is likely to lead to under supply in 2010.



To effect the planned M&A strategy in full, the Company requires substantial funds to acquire and develop these assets and it is currently working with advisers with a view to securing additional financing.  This may be made available through industry and/or financial partnerships and joint ventures, special purpose financing vehicles, structured acquisition finance arrangements, private placements of equity, debt and blended debt and equity instruments.  In addition, the Company anticipates that it may issue share and/or loan capital to vendors as a means of securing target acquisitions and to fund development. However, there can be no assurance that the Company will be able to obtain the funds necessary to implement this strategy, especially given the current state of the world financial markets.



Comparison of the three and nine month periods ended July 31, 2009 and 2008 and for the period from March 9, 2007 (date of inception) through July 31, 2009



Results of Operations



We have incurred a net loss of $3,668,563 and $8,479,616 for the three and nine month periods ended July 31, 2009, respectively, which includes certain nonrecurring items such as a charge for the fair value of warrants issued for compensation and consulting services amounting to $0 and $1,867,366 which are non-cash accounting charges; and losses attributable to the UK Biodiesel Plant during the period of restarting the Plant, preparing it for production, testing and commercialization of $2,253,766 and $2,749,461 for the three and nine month periods ended July 31, 2009, respectively. In addition the Company has incurred project specific legal and professional costs associated with its merger and acquisition and corporate finance activity amounting to approximately of $97,847 and $197,149 for the three and nine month periods ended July 31, 2009, respectively.







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The net loss for the nine month period ended July 31, 2009 comprises the following:



|                                                                                                       |                                      |          
|------------------------------------------------------------------------------------------------------ | ------------------------------------ | ---------
|                                                                                                       | Nine month
period ended
July 31,2009
|Losses attributable to UK Biodiesel Plant                                                              | $                                    | 2,749,461
|Non-recurring, non cash accounting charge for warrants issued for compensation and consulting services | $                                    | 1,867,366
|Non-recurring fees for corporate finance advice                                                        | $                                    | 475,000  
|Professional charges related to acquisition advice, corporate finance and compliance activity.         | $                                    | 1,336,464
|General operating expenses                                                                             | $                                    | 2,051,325



This compares to a net loss of $840,750 and $1,861,278 for the three and nine month periods ended July 31, 2008, respectively; and we have incurred a net loss of $13,710,186 for the period from March 9, 2007 (date of inception) through July 31, 2009.



Revenues



We have generated revenues of $1,613,925 for the three and nine month period ended July 31, 2009 from the sale of biodiesel at our Biodiesel Plant based in Blyth, Northumberland in North East England on a trial basis as an initial stage to fully commercialize our biodiesel products.  The product is being produced in controlled batches for specific orders from targeted customers; this testing stage enables the Company to ensure that the Plant is able to scale production to meet increased orders with no loss of product quality.  The Company is simultaneously developing a sustainable feedstock supply and off-take strategy for the Plant.  Consequently, the Company will remain as a development stage entity until the Plant is producing biodiesel at specified certification consistently, in large volumes, across a wide distribution of customers.



Gross Profit (Loss)



The Company recorded a negative gross profit of $594,314 during the three and nine months period ended July 31, 2009 from the activities of its Biodiesel Plant in the UK.  As explained above, the Plant has been through a period of re-starting operations and initial production testing at low volumes. This phase is now largely complete but the plant will continue to experience losses until such time as volume can be increased to commercial levels, which is dependent upon raising further capital to improve and expand the plant and ramp up volume through investment in working capital.



Operating Expenses



The Company incurred operating expenses of $3,106,661and $8,082,691 for the three and nine months ended July 31, 2009, respectively, as compared to $912,077 and $2,525,125 for the three and nine months ended July 31, 2008, respectively. For the period from March 9, 2007 (inception) to July 31, 2009, the Company incurred aggregate operating expenses of $14,082,003.







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The main components of the operating expenses during the three and nine month periods ended July 31, 2009 compared to the three and nine months ended July 31, 2008; and for the period from inception (March 9, 2007) to July 31, 2009 were as follows:



|                                                          |                                    |         |                                   |   |                                                                           |  |      |           |      |   |           |  |   |          
|--------------------------------------------------------- | ---------------------------------- | ------- | --------------------------------- | - | ------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | ---------
|                                                          | Three month periods ended July 31, |         | Nine month periods ended
July 31, |   | For the Period
from March 9,
2007 (date of
inception)
through
to July 31,
|                                                          | 2009                               |         | 2008                              |   | 2009                                                                      |  | 2008 |           | 2009
|Consulting expense (note 1)                               | $                                  | 516,266 |                                   | $ | 672,446                                                                   |  | $    | 1,771,705 |      | $ | 2,015,831 |  | $ | 4,560,540
|Payroll and administrative expenses (note 2)              | $                                  | 897,177 |                                   | $ | 119,992                                                                   |  | $    | 2,805,983 |      | $ | 202,080   |  | $ | 3,723,989
|Professional fees (note 3)                                | $                                  | 373,472 |                                   | $ | 67,207                                                                    |  | $    | 1,336,464 |      | $ | 115,972   |  | $ | 1,987,212
|Rent, office related, telecoms and miscellaneous (note 4) | $                                  | 333,410 |                                   | $ | 16,706                                                                    |  | $    | 464,139   |      | $ | 50,043    |  | $ | 576,875  
|Travel, accommodation and subsistence expenses (note 5)   | $                                  | 187,173 |                                   | $ | 32,568                                                                    |  | $    | 402,018   |      | $ | 130,768   |  | $ | 1,063,125
|Impairment on land and land options (note 6)              | $                                  | -       |                                   | $ | -                                                                         |  | $    | -         |      | $ | -         |  | $ | 807,224  
|Project costs (note 7)                                    | $                                  | 787,279 |                                   | $ | -                                                                         |  | $    | 1,253,183 |      | $ | -         |  | $ | 1,253,183



1. Consulting expenses included contractors and consultants who were engaged in the management and development of the business and the Kentucky Project. In the nine month period ended July 31, 2009, consulting expenses included a non-recurring amount of approximately $475,000 paid to International Capital Partners SA (ICP) in consideration for marketing and preparation of the Company for finance raising activity.  The apparent decrease in recurring consulting expenses between the three and nine month periods ended July 31, 2009 and 2008 of $156,180 and $244,126 respectively, arises mainly as a result of certain consultants becoming employees during the fiscal year ended October 31, 2009.  For the period from March 9, 2007 (date of inception) through July 31, 2009, total consulting expense amounted to $4,560,540.



2. Payroll and administrative expenses amounted to $897,177 and $2,805,983 for the three and nine month periods ended July 31, 2009, respectively, as compared to $119,992 and $202,080 for the three and nine month periods ended July 31, 2008, respectively. As explained in (1) above, during fiscal year ended October 31, 2009, certain individuals, previously consultants to the Company, became employees.  Additionally, in the nine month period ended July 31, 2009 these expenses included non-recurring non-cash accounting charge expense item in respect of certain warrants issued to a director, an employee and certain consultants which amounted to $1,404,283.



3. Professional fees increased to $373,472 and $1,336,464 for the three and nine month periods ended July 31, 2009, respectively, as compared to $67,207 and $115,972 for the three and nine month periods ended July 31, 2008, respectively, an increase of $306,265 and $1,220,492, respectively.  This was mainly due to increased legal, audit and compliance related fees incurred in line with the overall growth in the development of the Company, and for increased merger and acquisition activity.  From March 9, 2007 (date of inception) through July 31, 2009 professional fees amounted to $1,987,212.



4. Rent, office related, telecom and miscellaneous expenses increased by $316,704 and $414,096 for the three and nine month periods ended July 31, 2009 and 2008, respectively.  This was due mainly to increased activity within the business in general. Total expenses for the period from March 9, 2007 (date of inception) through July 31, 2009 amounted to $576,875.



5. Travel expenses consisted of travel, accommodation and subsistence expenses and increased by $154,605 and $271,250 for the three and nine month periods ended July 31, 2009 and 2008, respectively, caused primarily by the need for increased travel related to our merger and acquisition activity.  Total travel expenses for the period from March 9, 2007 (date of inception) through July 31, 2009 amounted to $1,063,125.



6. During the three and nine month periods ended July 31, 2009 and 2008, there were no impairments recorded.   As at the fiscal year ended October 31, 2008 the Company incurred asset impairment expenses totaling $807,224.  These asset impairment expenses consist of an impairment of $532,224 on the land value based on an independent appraisal performed on the land; and the write-off of land options of $275,000 over specific land plots, which have proven to be non-essential and therefore allowed to lapse.





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7. Project costs relate to expenditures incurred subsequent to the two asset acquisitions made during the three month period ended July 31, 2009, amounted to $787,279 and $1,253,183 respectively.  These costs include consulting fees, rent, insurance, travel, accommodation and subsistence expenses, utilities, effluent and site costs which have been incurred whilst the Company prepares the assets to be put into production.  These costs have been classified as project costs for management tracking purposes. Management will review the detail of these project costs and will reclassify these operating expenses where applicable for future reporting.  The reclassifications, if any will have no effect on current and previously reported results of operations or loss per share.



Other Income (Expense)



Other income (expense) was $12,412 and $197,389 for the three and nine months ended July 31, 2009, respectively, as opposed to $71,327 and $663,847 for the three and nine months ended July 31, 2008. Other income (expense) for the three and nine months ended July 31, 2009 was comprised primarily of interest income of $6,385 and $81,535, respectively, and a gain on the sale of assets of $7,753 and $118,738, respectively. Other income (expense) for the three months ended July 31, 2008 was comprised primarily of interest income of $71,327 and, for the nine months ended July 31, 2008, interest income of $367,952 and forgiveness of debt of $296,714. The decrease in interest income for the periods ended July 31, 2009, as compared to the prior periods, was mainly due to the combination of higher cash balances held on deposit in the period ended July 31, 2008 and of the reduced interest rates currently attracting to money held on deposit in the period July 31, 2009. For the period from March 9, 2007 (inception) through July 31, 2009, other income (expense) was $966,131.



Liquidity and Capital Resources



The Company will need substantial amounts of capital to implement its strategies.  Given the currently unsettled state of the capital markets and credit markets, there is no assurance that the Company will be able to sell any of its securities or raise the amount of capital that it seeks for acquisitions or for the proposed expansion and commercialization of the UK biodiesel plant, the commercialization of the purchased STT technology and assets or for bio-fuels related development on the Kentucky land.  Even if financing is available, it may not be on terms that are acceptable to the Company.  In addition, the Company does not have any determined sources for the full amount of funding required to implement its entire acquisition strategy or for the design, procurement, construction and commissioning of the proposed Kentucky Plant or the UK Biodiesel Plant and working capital required to operate the UK Biodiesel Plant at volumes that are profitable. There is no assurance that any or all of the funding will be obtainable as desired or needed to build the Kentucky Plant or to fully develop and commercialize the UK Biodiesel Plant. This isespecially true in light of the lack of available capital as a result of the current global economic crisis.



If the Company is unable to raise the necessary capital at the times it requires such funding, it may have to materially change its business plan, including not building the proposed Kentucky Plant and/or not fully developing and commercializing the UK Biodiesel Plant, delaying implementation of some or all aspects of its business plan or curtailing or abandoning its business plan. The Company is a speculative investment and investors may lose all of their investment.



Since inception, the Company has financed itself primarily by the sale of its equity securities. The Company raised $2,000,000 on March 26, 2007, $22,829,022 (net of issuance costs) on December 4, 2007, and $1,631,564 (net of issuance costs) on July 30, 2008, by way of three separate private placements of shares of common stock. The total funds raised of $26,460,586 have been used principally as follows: (a) $10,657,748 to acquire land, plant property and equipment; (b) $1,882,495 on plant under construction, and (c) to fund the cost of operations.  At July 31, 2009, the Company had available cash balances of $3,157,537 which are held in interest bearing bank accounts.



At July 31, 2009, cash was $3,157,537 and we had other current assets of $1,384,349, which comprised of restricted cash of $275,000 held in an escrow account and other current assets of $1,109,349, and current liabilities of $2,532,670, which consist of accounts payable and accrued expenses, and deferred consideration. We attribute our net loss to having insufficient revenues to sustain our operating costs as we are a development stage company. At October 31, 2008, our fiscal year end, cash was $15,044,772, and we had prepaid expenses of $470,711 and current liabilities of $1,651,894.





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During the nine month period ended July 31, 2009, the Company made significant cash expenditures for property and equipment amounting to $4,155,563 comprised mainly of plant and machinery.  In addition the Company purchased intangible assets amounting to $728,713 during the same period.



In comparison, during the nine month period ended July 31, 2008, the Company made purchases of property and equipment amounting to $5,528,734, comprised almost entirely of land and a relatively insignificant amount of equipment, costing $4,928,734 in cash and $600,000 purchased on credit.



During the period from March 9, 2007 (date of inception) through July 31, 2009, the Company purchased property and equipment, comprised of land amounting to $6,343,465, ($5,743,465 in cash and $600,000 purchased on credits).  These land purchases acquired on credit of $600,000 were financed by deferred consideration (which carries an option on the part of the vendor to call for settlement in shares of the Company, as further explained in the accompanying unaudited consolidated financial statements).  The Company also acquired plant, machinery and automobiles amounting to $4,314,283.   During the same period, the Company incurred plant construction costs of $1,882,495.  In addition, the Company financed its automobiles purchase with automobile loans amounting to $40,821.



Net Cash Used in Operating Activities



Cash utilized in operating activities was $6,604,931 for the nine month period ended July 31, 2009, as compared to $1,559,830 for the nine month period ended July 31, 2008.  The increase of $5,045,101 was primarily due to (a) a net increase in payroll and consulting expense amounting to $2,359,777 primarily due to growth and increased activity within the Company, (b) legal and professional costs increasing by $1,220,492 as a result of increased compliance and reporting costs and in connection with increased level of merger and acquisition activity, (c) Project costs related to the expenditure made subsequent to the two asset acquisitions made during the nine month period ended July 31, 2009 amounting to $1,253,183, (d) the off set balance of $211,649 reduction mainly due to other general operating expenses.  Total cash utilized in operating activities was $10,507,555 from March 9, 2007 (date of inception) through July 31, 2009.



Net Cash Used in Investing Activities



During the nine month period ended July 31, 2009, the Company used net cash in investing activities of $5,271,755 primarily used for the purchase of certain assets amounting to $4,884,276. During the same period ended July 31,  2008,  the Company used net cash in investing activities of $10,552,113 principally used for purchasing property and equipment $5,528,734 and plant construction costs $1,870,490, also money was deposited into escrow to purchase land, which was subsequently returned as the Company decided not to proceed with the proposed purchase.  During the period from March 9, 2007 (date of inception) through July 31, 2009, the Company used net cash in investing activities of $12,744,961.



Net Cash Provided by Financing Activities



During the nine month period ended July 31, 2009, the Company did not receive any cash from financing activities as compared to cash received of $24,396,522 during the nine month period ended July 31, 2008 as a result of planned private placements. During the period from March 9, 2007 (date of inception) through July 31, 2009, the Company received net cash provided by financing activities of $26,460,586 primarily from private placements.



Because of the current economic climate in the United States and the costs facing the bio-energy industry, there have been a number of opportunities to acquire assets for the production of bio-energy products, distribution and related businesses, some of which are in distressed situations. Management is making itself aware of various acquisition opportunities as they become available, and from time to time, actively exploring those that present a complimentary or unique acquisition situation.  At the same time, the Company is continuing to pursue building its proposed Kentucky facility (although it has recently undertaken a strategic review of its plans for the Kentucky facility) and to fully develop and commercialize its UK Biodiesel Plant acquired in April 2009.







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The Company will only commit to capital expenditures for any of its planned projects or an acquisition opportunity as and when adequate capital or new lines of financing are made available to it. There is no assurance that the Company will be able to obtain any financing or enter into any form of credit arrangement.  Although it may be offered such financing, the terms may not be acceptable to the Company.  If the Company is not able to secure financing or it is offered on unacceptable terms, then its business plan and acquisition strategy may have to be modified or curtailed or certain aspects terminated.  There is no assurance that even with financing, the Company will be able to achieve its goals or complete an acquisition.



The accompanying unaudited condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  However, we have incurred recurring losses for the period from March 9, 2007 (date of inception) through July 31, 2009.  Additionally, we have had negative cash flows from operations since date of inception and have an accumulated deficit of $13,710,186 at July 31, 2009. These factors raise substantial doubt about our ability to continue as a going concern.  Our ability to continue as a going concern will be dependent upon our ability to generate sufficient cash flow from our planned operations to meet our obligations on a timely basis, to obtain additional financing, and ultimately attain profitability. We currently have no sources of financing available and we do not expect to earn any net income in the near term, although as part of our continuing management focus, we are continuously seeking new sources of capital.  Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.



Critical Accounting Policies and Estimates



Significant Accounting Policies



Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our consolidated financial condition and results of operations, we view certain of these policies as critical.  Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.



We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.



General



The Companys consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue, if any, and expenses, and the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.  Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors.  Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.



An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the consolidated financial statements. Management believes the following critical accounting policies reflect the significant estimates and assumptions used in the preparation of the consolidated financial statements.







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Development Stage Company



The Company is considered to be in the Development Stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises.



During the reporting period ended July 31, 2009, the Company recorded revenues of $1,613,925 from the sale of product made by the UK Biodiesel Plant on a trial basis.  The product is being produced in controlled batches for specific orders from targeted customers; this testing stage enables the Company to ensure that the Plant is able to scale production to meet increased orders with no loss of product quality.  The Company is simultaneously developing a sustainable feedstock supply and off-take strategy for the Plant.  Consequently, the Company will remain as a development stage entity until it is confident that the Plant is capable of producing biodiesel at specified certification consistently, in large volumes, across a wide distribution of customers.



Going Concern



The consolidated financial statements have been prepared on the going concern basis, which assumes the realization of assets and liquidation of liabilities in the normal course of operations. If we were not to continue as a going concern, we would likely not be able to realize on our assets at values comparable to the carrying value or the fair value estimates reflected in the balances set out in the preparation of the consolidated financial statements. The Company is actively seeking to raise equity and/or debt capital to be used for operations, and it has appointed third party lead advisors who are currently seeking to assist the Company raise equity and or debt financing.  This financing may be made directly into the Company or by way of direct investment into a special purpose vehicle in which the Company will hold a stake, although at this stage it is not known what form the investment may take.  There can be no assurances that we will be successful in generating additional cash from equity or other sources to be used for operations. The consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.



Principles of Consolidation



The consolidated financial statements include the accounts of Four Rivers BioEnergy Inc., The Four Rivers BioEnergy Company Inc., The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited.  All significant intercompany transactions and balances have been eliminated in consolidation.



Stock-Based Compensation



The Company has adopted the fair value provisions of SFAS No. 123(R) "Share-Based Payment" which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors including employee stock options and employee stock purchases related to a Employee Stock Purchase Plan based on the estimated fair values.



We use the fair value method for equity instruments granted to non-employees (if any) and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.







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Impairment of Long-Lived Assets



The Company follows SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144). SFAS No. 144 requires that long-lived assets and certain identifiable intangibles held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses, or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted discounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived assets and certain identifiable intangibles will be adjusted, based on estimates of future discounted cash flows resulting from the use and ultimate disposition of the asset.  SFAS No. 144 also requires assets to be disposed of be reported at the lower of the carrying amount or the fair value less disposal costs.



Foreign Currency Translation



The Companys functional and reporting currency is the United States Dollar.  The functional currency of the Companys subsidiaries, The Four Rivers BioEthanol Company Limited and BF Group Holdings Limited is in its local currency (Great British Pound  GBP). In accordance with SFAS No. 52 "Foreign Currency Translation," monetary assets and liabilities are translated into U.S. Dollars at balance sheet date and revenue and expense accounts are translated at the average exchange rate for the year or for the period end.  The translation adjustments are deferred as a separate component of stockholders equity, captioned accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations.



Revenue Recognition



For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which superseded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred.



Accounts Receivable



Trade receivables are carried at their estimated collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current financial condition.



Inventory



The Company values its inventory at the lower of cost (first-in, first-out) or market. The Company uses estimates and judgments regarding the valuation of inventory to properly value inventory. Inventory adjustments, if necessary, are made for the difference between the cost of the inventory and the estimated market value and charged to cost of goods sold in the period in which the facts that give rise to the adjustments become known.







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Cost of goods sold



Cost of sales includes cost of raw materials, direct wages, other direct costs, production related depreciation, loss on stock during the production process and shipping costs.



Recent accounting pronouncements



In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value measurements.  SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements.  SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements.  The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. This statement had no impact on the Companys consolidated financial position, results of operations or cash flows. In February 2008, the FASB issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157 (FSP 157-2), which delayed the effective date of SFAS No. 157 for all non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis, until the fiscal years beginning after November 15, 2008.  We have not yet determined the impact that the implementation of FSP 157-2 will have on our non-financial assets and liabilities which are not recognized on a recurring basis; however, we do not anticipate the adoption of this standard will have a material impact on our consolidated financial position, results of operations or cash flows.



In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities - Including an amendment of FASB Statement No. 115" ("SFAS No. 159").  This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.  SFAS No. 159 is expected to expand the use of fair value measurement, which is consistent with the FASBs long-term measurement objectives for accounting for financial instruments.  SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007, although earlier adoption is permitted. This statement had no impact on the Company's consolidated financial position, results of operations or cash flows.



In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS No. 141(R)"), which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in an acquiree, including the recognition and measurement of goodwill acquired in a business combination. SFAS No. 141(R) is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its consolidated financial position, results of operations or cash flows.



In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interest in Consolidated Financial Statements, an amendment of ARB No. 51" ("SFAS No. 160"), which will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity within the consolidated balance sheet.  SFAS No. 160 is effective as of the beginning of the first fiscal year beginning on or after December 15, 2008.  Earlier adoption is prohibited and the Company is currently evaluating the effect, if any, that the adoption will have on its consolidated financial position, results of operations or cash flows.







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In April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets.  We are required to adopt FSP 142-3 on November 1, 2009 and early adoption is prohibited.  The guidance in FSP 142-3 for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after adoption, and the disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, adoption.  We are currently evaluating the impact of FSP 142-3 on our consolidated financial position, results of operations or cash flows.



In April 2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS No. 115-2). FSP FAS No. 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This FSP is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter ended July 31, 2009 had no impact on the Companys consolidated financial position, or results of operations.



In April 2009, the FASB issued FSP FAS No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS No. 157-4). FSP FAS No. 157-4 provides additional guidance in determining whether the market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes as defined in SFAS No. 157, Fair Value Measurements. FSP FAS No. 157-4 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter ended July 31, 2009 had no impact on the Companys consolidated financial position, or results of operations.



In April 2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS No. 107-1 and APB 28-1). This FSP amends FASB Statement No. 107, Disclosures about Fair Values of Financial Instruments, to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. APB 28-1 also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all interim financial statements. This standard is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The adoption of this standard during the third quarter ended July 31, 2009 had no impact on the Companys consolidated financial position, or results of operations.



In May 2009, the FASB issued SFAS No. 165,Subsequent Events(SFAS No. 165). SFAS No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 will be effective for interim and annual financial periods ending after June 15, 2009. The Company adopted SFAS No. 165 during the quarter ended July 31, 2009 and evaluated subsequent events through the issuance date of the financial statements. SFAS No. 165 had no impact on the Companys consolidated financial position or results of operations.



In June 2009, the FASB issued SFAS No. 166, Accounting for Transfers and Servicing of Financial Assets  an amendment of SFAS Statement No. 140 (SFAS No. 166). SFAS No. 166 will require more information about transferred of financial assets and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 is effective at the start of a companys first fiscal year beginning after November 15, 2009.







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In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R) (SFAS No. 167). SFAS No. 167 will change how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. Under SFAS No. 167, determining whether a company is required to consolidate an entity will be based on, among other things, an entity's purpose and design and a company's ability to direct the activities of the entity that most significantly impact the entity's economic performance. SFAS 167 is effective at the start of a companys first fiscal year beginning after November 15, 2009.



In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principals  a replacement of FAS No.162 (SFAS No. 168). This statement establishes the Codification as the source of authoritative U.S. accounting and reporting standards recognized by the FASB for use in the preparation of financial statements of nongovernmental entities that are presented in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The Codification was the result of a project of FASB to organize and simplify all authoritative GAAP literature into one source. This statement is effective for interim reporting and annual periods ending after September 15, 2009. Accordingly, the Company will adopt SFAS No. 168 during the fourth quarter of fiscal 2009. The Company does not anticipate this statement to have a material impact on its consolidated financial position, results of operations or cash flows.



Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on our present or future consolidated financial statements.



Off-Balance Sheet Arrangements



None.



Contractual Obligations



None.



Item 3.  Quantitative and Qualitative Disclosures About Market Risk.



Market risk sensitive instruments include all financial or commodity instruments and other financial instruments (such as investments and debt) that are sensitive to future changes in interest rates, current exchange rates, commodity prices or other market factors. We are exposed to market risk related to changes in interest rates, which could adversely affect the value of our current assets and liabilities. At July 31, 2009, we had cash and cash equivalents consisting of cash on hand and highly liquid money market and demand savings accounts with original terms to maturity of less than 90 days. We do not believe that our results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to our cash and cash equivalents, given our current ability to hold our liquid investments to maturity.



Item 4.  Controls and Procedures.



Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in the Companys reports filed or submitted under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Companys reports filed under the Exchange Act is accumulated and communicated to management, including  our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.





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Evaluation Of Disclosure Controls And Procedures



As of the end of the period covered by this report, management carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are, as of the dates of the financial statements reflected in this Form 10-Q, effective to ensure that the information required to be disclosed by us that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms.



Limitations on Effectiveness of Controls and Procedures



Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.  These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.  Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.



Changes In Internal Controls Over Financial Reporting



In connection with the evaluation of our internal controls, our principal executive officer and principal financial officer have determined that during the period covered by this report, there have been no changes to our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.



PART II  OTHER INFORMATION



Item 1.  Legal Proceedings.



None



Item 1A.  Risk Factors.



There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended October 31, 2008.



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



None.



Item 3.  Defaults Upon Senior Securities.



None.







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



None



Item 5.  Other Information.



None



Item 6. Exhibits.



|        |  |                                                                                                                                                                                                                          
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                              
|31.1    |  | Certification of the Companys Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrants Quarterly Report on Form 10-Q for the quarter ended July 31, 2009.
|        |  |                                                                                                                                                                                                                          
|31.2    |  | Certification of the Companys Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrants Quarterly Report on Form 10-Q for the quarter ended July 31, 2009.
|        |  |                                                                                                                                                                                                                          
|32.1    |  | Certification of the Companys Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.                     













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SIGNATURES

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

| |                           
| | --------------------------
| | FOUR RIVERS BIOENERGY INC.





|                         |     |                                                                 
|------------------------ | --- | ----------------------------------------------------------------
|Date: September 11, 2009 | By: | /s/ Gary Hudson                                                 
|                         |     | Name:  Gary Hudson
Title:  President and Chief Executive Officer
|                         |     |                                                                 
|Date: September 11, 2009 | By: | /s/ Martin Thorp                                                
|                         |     | Name:  Martin Thorp
Title:  Chief Financial Officer             







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