##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarter ended March 31, 2010
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from  to
 Commission file number 000-52428
 IOWA RENEWABLE ENERGY, LLC
  Iowa
(State or other jurisdiction of 
incorporation or organization)
    
    20-3386000
(I.R.S. Employer Identification No.)
 1701 East 7th Street, P.O. Box 2, Washington, Iowa 52353
 (319) 653-2890
 þ o
 o Yes o No
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Unaudited Financial Statements
    
    
    3Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4T. Controls And Procedures
    
    
    21PART II. OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Removed and Reserved
    
    
    23Item 5 Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Unaudited Financial Statements
 Iowa Renewable Energy, LLC
 Unaudited Balance Sheets
March 31, 2010 and September 30, 2009
 March 31,
    
    
    September 30,2010
    
    
    2009AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,536,308
    
    
    $
    649,297Due from broker
    
    
    336,208
    
    
    
    477,059Accounts receivable
    
    
    5,677
    
    
    
    1,090,753Federal incentive receivable
    
    
    
    
    
    
    146,182Inventory
    
    
    575,988
    
    
    
    3,265,653Prepaids and other assets
    
    
    22,197
    
    
    
    117,3502,476,378
    
    
    
    5,746,294Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,742,442
    
    
    
    40,742,442Office building, furniture and fixtures
    
    
    572,769
    
    
    
    572,769Equipment and vehicles
    
    
    240,241
    
    
    
    240,24141,975,452
    
    
    
    41,975,452Accumulated depreciation
    
    
    (7,288,982
    )
    
    
    (5,963,978
    )34,686,470
    
    
    
    36,011,474Other Assets:Cash, restricted by loan agreement
    
    
    1,496,854
    
    
    
    1,201,118Financing costs, net
    
    
    288,204
    
    
    
    339,0651,785,058
    
    
    
    1,540,183$
    38,947,906
    
    
    $
    43,297,951Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    28,020,974
    
    
    $
    30,005,576Accounts payable and accrued expenses
    
    
    372,582
    
    
    
    944,232Derivative financial instruments
    
    
    26,360
    
    
    
    66,762Total current liabilities
    
    
    28,419,916
    
    
    
    31,016,570Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions, net of issuance costs, units outstanding
March 31, 2010 and September 30, 2009 26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (12,637,432
    )
    
    
    (10,884,041
    )10,527,990
    
    
    
    12,281,381$
    38,947,906
    
    
    $
    43,297,951
   3




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##### Table of Contents



Iowa Renewable Energy, LLC
 Unaudited Statements of Operations
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009Revenues:Sales
    
    $
    352,142
    
    
    $
    1,395,832
    
    
    $
    8,807,729
    
    
    $
    11,297,528Federal incentives
    
    
    
    
    
    
    532,249
    
    
    
    187,632
    
    
    
    1,918,536352,142
    
    
    
    1,928,081
    
    
    
    8,995,361
    
    
    
    13,216,064Cost of sales
    
    
    1,233,148
    
    
    
    2,709,976
    
    
    
    9,998,471
    
    
    
    14,481,051Gross (loss)
    
    
    (881,006
    )
    
    
    (781,895
    )
    
    
    (1,003,110
    )
    
    
    (1,264,987
    )Operating expenses:General and administrative
    
    
    217,135
    
    
    
    212,701
    
    
    
    567,952
    
    
    
    669,299Depreciation
    
    
    9,500
    
    
    
    9,500
    
    
    
    19,000
    
    
    
    19,000226,635
    
    
    
    222,201
    
    
    
    586,952
    
    
    
    688,299(Loss) before other income (expense)
    
    
    (1,107,641
    )
    
    
    (1,004,096
    )
    
    
    (1,590,062
    )
    
    
    (1,953,286
    )Other income (expense):Other income
    
    
    4,599
    
    
    
    8,127
    
    
    
    395,781
    
    
    
    21,226Interest expense
    
    
    (255,545
    )
    
    
    (301,279
    )
    
    
    (559,110
    )
    
    
    (681,937
    )Net (loss)
    
    $
    (1,358,587
    )
    
    $
    (1,297,248
    )
    
    $
    (1,753,391
    )
    
    $
    (2,613,997
    )Weighted average units outstanding
    
    $
    26,331
    
    
    $
    26,331
    
    
    $
    26,331
    
    
    $
    26,331Net (loss) per unit  basic and diluted
    
    $
    (51.60
    )
    
    $
    (49.27
    )
    
    $
    (66.59
    )
    
    $
    (99.27
    )
   4




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##### Table of Contents



Iowa Renewable Energy, LLC
 Unaudited Statements of Cash Flows
 Six Months EndedMarch 31,
    
    
    March 31,2010
    
    
    2009Cash Flows from Operating Activities:Net (loss)
    
    $
    (1,753,391
    )
    
    $
    (2,613,997
    )Adjustments to reconcile net (loss) to net cash
provided by operating activities:Depreciation
    
    
    1,325,004
    
    
    
    1,325,004Amortization
    
    
    50,861
    
    
    
    50,862Unrealized (gain) loss on derivative financial instruments
    
    
    (40,402
    )
    
    
    103,705Change in working capital components:(Increase) decrease in due from broker
    
    
    140,851
    
    
    
    (685,823
    )Decrease in accounts receivable
    
    
    1,231,258
    
    
    
    4,369,340Decrease in inventory
    
    
    2,689,665
    
    
    
    2,973,825Decrease in prepaids and other assets
    
    
    95,153
    
    
    
    18,491(Decrease) in accounts payable and accrued expenses
    
    
    (571,650
    )
    
    
    (1,906,384
    )Net cash provided by operating activities
    
    
    3,167,349
    
    
    
    3,635,023Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    
    
    
    
    (58,265
    )(Increase) in cash restricted
    
    
    (295,736
    )
    
    
    (399,448
    )Net cash (used in) investing activities
    
    
    (295,736
    )
    
    
    (457,713
    )Cash Flows from Financing Activity,
payment on long-term borrowings
    
    
    (1,984,602
    )
    
    
    (1,727,522
    )Net increase in cash and cash equivalents
    
    
    887,011
    
    
    
    1,449,788Cash and cash equivalents:Beginning
    
    
    649,297
    
    
    
    189,474Ending
    
    $
    1,536,308
    
    
    $
    1,639,262Supplemental Disclosure of Cash Flow Information,
cash payments for interest
    
    $
    510,957
    
    
    $
    644,074
   5




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##### Table of Contents



Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 1. Nature of Business, Basis of Presentation and Significant Accounting Policies
 Nature of business:
  Basis of presentation:
  Significant accounting policies:
        6




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Raw material
    
    $
    114,288Finished goods
    
    
    461,700$
    575,988
  YearsPlant and process equipment
    
    10 - 20Office building
    
    10 - 20Office equipment
    
    3 - 7Other equipment
    
    3 - 7
   Derivatives and Hedging
  Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009Realized (gain) loss
    
    $
    3,094
    
    
    $
    (59,340
    )
    
    $
    70,560
    
    
    $
    (669,588
    )Change in unrealized (gain) loss
    
    
    2,202
    
    
    
    27,044
    
    
    
    (40,402
    )
    
    
    103,705Net (gain) loss
    
    $
    5,296
    
    
    $
    (32,296
    )
    
    $
    30,158
    
    
    $
    (565,883
    )
    7




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##### Table of Contents



Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Three Months Ended
    
    
    Three Months Ended
    
    
    Six Months Ended
    
    
    Six Months EndedMarch 31, 2010
    
    
    March 31, 2009
    
    
    March 31, 2010
    
    
    March 31, 2009Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    Percentage
    
    
    Dollar
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soybean oil, animal fats,
chemicals, etc.)
    
    $
    228,650
    
    
    
    18.54
    %
    
    $
    1,584,524
    
    
    
    58.47
    %
    
    $
    7,716,746
    
    
    
    77.18
    %
    
    $
    12,149,031
    
    
    
    83.90
    %Plant wages and salaries
    
    
    66,024
    
    
    
    5.35
    
    
    
    178,391
    
    
    
    6.58
    
    
    
    182,419
    
    
    
    1.82
    
    
    
    374,868
    
    
    
    2.59Utilities and waste disposal
    
    
    102,331
    
    
    
    8.30
    
    
    
    148,037
    
    
    
    5.46
    
    
    
    346,959
    
    
    
    3.47
    
    
    
    525,784
    
    
    
    3.63Fees-procurement, operation mgmt
    
    
    
    
    
    
    
    
    
    
    8,613
    
    
    
    0.32
    
    
    
    34,250
    
    
    
    0.34
    
    
    
    57,397
    
    
    
    0.40(Gain) loss on derivative financial
instruments
    
    
    5,296
    
    
    
    0.43
    
    
    
    (32,296
    )
    
    
    (1.19
    )
    
    
    30,158
    
    
    
    0.30
    
    
    
    (565,883
    )
    
    
    (3.91
    )Depreciation
    
    
    653,002
    
    
    
    52.95
    
    
    
    653,002
    
    
    
    24.10
    
    
    
    1,306,004
    
    
    
    13.06
    
    
    
    1,306,004
    
    
    
    9.02Maintenance, supplies and other expenses
    
    
    177,845
    
    
    
    14.43
    
    
    
    169,705
    
    
    
    6.26
    
    
    
    381,935
    
    
    
    3.83
    
    
    
    633,850
    
    
    
    4.37Total cost of revenue/sales
    
    $
    1,233,148
    
    
    
    100.00
    %
    
    $
    2,709,976
    
    
    
    100.00
    %
    
    $
    9,998,471
    
    
    
    100.00
    %
    
    $
    14,481,051
    
    
    
    100.00
    %
    Note 2. Major Customer and Commitment
   8




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
    Note 3. Long-Term Debt
  Note payable to MLIC Asset Holdings, LLC (A)
    
    $
    27,663,092Note payable to the Iowa Department of Economic Development (B)
    
    
    95,000Note payable to the Iowa Department of Transportation (C)
    
    
    262,882$
    28,020,974
 (A)
    
    On October 26, 2006, the Company entered into a $34,715,000 construction-term loan
agreement which was used to complete the biodiesel project. The loan consisted of two
phases: a construction phase where the Company made periodic requests for fund advances
to meet construction obligations and at the completion of construction the loan converted
to a senior debt instrument. The note bears variable interest at prime plus 0.25% (3.50%
as of March 31, 2010) and is due in monthly principal and interest payments of $373,000.(B)
    
    The Company has a $300,000 loan agreement and a $100,000 forgivable loan agreement with
the Iowa Department of Economic Development. The $300,000 loan is noninterest-bearing and
due in monthly payments of $5,000 beginning December 2006 for a term of 60 months with a
balance as of March 31, 2010 of $95,000. Borrowings under this agreement are collateralized
by substantially all of the Companys assets and will be subordinate to the $34,715,000 of
financial institution debt. The $100,000 loan was forgiven during the quarter ended
December 31, 2009 as the Company met the employment and production criteria defined in the
agreement. The forgiveness was included in other income on the statement of operations.(C)
    
    The Company has a $132,000 loan agreement and a $168,000 forgivable loan agreement with
the Iowa Department of Transportation/Rail Development. The $132,000 loan bears an interest
rate of 3.67% for five years, due in semi-annual payments of $14,569 beginning December
2008 for a term of five years with a balance as of March 31, 2010 of $94,882. Borrowing
under this agreement is collateralized by substantially all of the Companys assets and is
not subordinate to the $34,715,000 of financial institution debt. The $168,000 loan is
forgivable at the end of the five year term provided all payments were made on the $132,000
loan.  9




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Note 4. Contingencies
  Note 5. Going Concern
    10




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Conditions and Results of Operations
  Forward Looking Statements
              
    
    national, state or local energy policy;
    
    federal and state biodiesel tax incentives;
    
    the RFS or other legislation mandating the use of biodiesel or other lubricity additives; or
    
    environmental laws and regulations that apply to our plant operations and their enforcement;
     11




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Overview
     12




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Results of Operations for the Three Months Ended March 31, 2010 and 2009
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010 (Unaudited)
    
    
    March 31, 2009 (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    352,142
    
    
    
    100.00
    %
    
    $
    1,928,081
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    1,233,148
    
    
    
    350.18
    %
    
    
    2,709,976
    
    
    
    140.55
    %Gross (Loss)
    
    
    (881,006
    )
    
    
    (250.18
    %)
    
    
    (781,895
    )
    
    
    (40.55
    %)Operating Expenses
    
    
    226,635
    
    
    
    64.36
    %
    
    
    222,201
    
    
    
    11.52
    %Operating (Loss)
    
    
    (1,107,641
    )
    
    
    (314.54
    %)
    
    
    (1,004,096
    )
    
    
    (52.07
    %)Other Income
    
    
    4,599
    
    
    
    1.31
    %
    
    
    8,127
    
    
    
    0.42
    %Interest Expense
    
    
    (255,545
    )
    
    
    (72.57
    %)
    
    
    (301,279
    )
    
    
    (15.63
    %)Net (Loss)
    
    $
    (1,358,587
    )
    
    
    (385.81
    %)
    
    $
    (1,297,248
    )
    
    
    (67.28
    %)
  13




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Revenues
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    299,631
    
    
    
    85.1
    %
    
    $
    1,843,900
    
    
    
    95.7
    %Glycerin Sales
    
    $
    52,511
    
    
    
    14.9
    %
    
    
    65,311
    
    
    
    3.3
    %Fatty Acid and Soapstock Sales
    
    $
    0
    
    
    
    0.0
    %
    
    
    18,869
    
    
    
    1.0
    %Total Sales Revenue
    
    $
    352,142
    
    
    
    100.0
    %
    
    $
    1,928,081
    
    
    
    100.0
    %
     14




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15




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Cost of Goods Sold
     16




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Operating Expenses
  Other Income (Expenses)
  Results of Operations for the Six Months Ended March 31, 2010 and 2009
  Six Months Ended
    
    
    Six Months EndedMarch 31, 2010 (Unaudited)
    
    
    March 31, 2009 (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    8,995,361
    
    
    
    100.00
    %
    
    $
    13,216,064
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    9,998,471
    
    
    
    115.15
    %
    
    
    14,481,051
    
    
    
    109.57
    %Gross (Loss)
    
    
    (1,003,110
    )
    
    
    (111.15
    %)
    
    
    (1,264,987
    )
    
    
    (9.57
    %)Operating Expenses
    
    
    586,952
    
    
    
    6.53
    %
    
    
    688,299
    
    
    
    5.21
    %Operating (Loss)
    
    
    (1,590,062
    )
    
    
    (17.68
    %)
    
    
    (1,953,286
    )
    
    
    (14.78
    %)Other Income
    
    
    395,781
    
    
    
    4.40
    %
    
    
    21,226
    
    
    
    0.16
    %Interest Expense
    
    
    (559,110
    )
    
    
    (6.22
    %)
    
    
    (681,937
    )
    
    
    (5.16
    %)Net Loss
    
    $
    (1,753,391
    )
    
    
    (19.49
    %)
    
    $
    (2,613,997
    )
    
    
    (19.78
    %)
  17




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Revenues
  Six Months Ended 
March 31, 2010
    
    
    Six Months Ended 
March 31, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    8,769,073
    
    
    
    97.5
    %
    
    $
    12,808,325
    
    
    
    96.9
    %Glycerin Sales
    
    
    169,511
    
    
    
    1.9
    %
    
    
    321,162
    
    
    
    2.4
    %Fatty Acid and
Soapstock Sales
    
    
    56,777
    
    
    
    0.6
    %
    
    
    86,576
    
    
    
    0.7
    %Total Revenues
    
    $
    8,995,361
    
    
    
    100.0
    %
    
    $
    13,216,064
    
    
    
    100.0
    %
  Cost of Goods Sold
  Operating Expense
  Interest Expense
  Changes
in Financial Condition for the Six Months Ended March 31, 2010
  March 31, 2010
    
    
    September 30, 2009Current Assets
    
    
    2,476,378
    
    
    
    5,746,294Total Assets
    
    
    38,947,906
    
    
    
    43,297,951Current Liabilities
    
    
    28,419,916
    
    
    
    31,016,570Members Equity
    
    
    10,527,990
    
    
    
    12,281,381
 Current Assets
  Current Liabilities
   18




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Members Equity
  Liquidity and Capital Resources
 Cash Flow from Operating Activities
  Cash Flow used in Investing Activities
  Cash Flow provided by (used in) Financing Activities
  Short-Term and Long-Term Debt Sources
  The Wall Street Journal
    19




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Grants and Government Programs
   Additional Debt Financing
  Distribution to Unit Holders
  Critical Accounting Estimates
   20




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Revenue Recognition
  Derivative Instruments and Hedging Activities
 Accounting Standards Codification (ASC) Topic No. 815, Derivatives and Hedging Activities
 Impairment of Long-Lived Assets
  Off-balance Sheet Arrangements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
    
    Controls And Procedures
       21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
       22




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##### Table of Contents



Item 1A.
    
    Risk Factors.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
   
 Item 4.
    
    (Removed and Reserved).
 
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing10.1
    
    
    Management Services Agreement between WMG Services
LLC and Iowa Renewable Energy, LLC dated January
27, 2010.+
    
    
    131.1
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    
    *31.2
    
    
    Certificate pursuant to 17 CFR 240 13a-14(a)
    
    
    *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
    
    
    *
 (*)
    
    Filed herewith.(1)
    
    Incorporated by reference to the quarterly report on Form 10-Q filed on February 16, 2010.(+)
    
    Confidential Treatment Requested.  23




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##### Table of Contents



SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate: May 17, 2010
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate: May 17, 2010
    /s/ Todd WillsonTodd WillsonChief Financial Officer  24