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UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934.
 For the quarter ended March 31, 2008
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from
 _____ 
to
 _____
 Commission file number 000-52429
 CENTRAL IOWA ENERGY, LLC
  Iowa
(State or other jurisdiction of 
incorporation or organization)
    
    71-0988301
(I.R.S. Employer Identification No.)
 3426 EAST 28 TH STREET N.
NEWTON, IOWA 50208
 (641) 791-1010
 þ o
 o þ
   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
    
    
    13Item 3A(T).
Controls and Procedures
    
    
    29PART II. OTHER INFORMATION
    
    
    30Item 1. Legal Proceedings
    
    
    30Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3. Defaults Upon Senior Securities
    
    
    32Item 4. Submission of Matters to Security Holders
    
    
    32Item 5. Other Information
    
    
    33Item 6. Exhibits
    
    
    33SIGNATURES
    
    
    33Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I. FINANCIAL INFORMATION
 
 Item 1. Unaudited Financial Statements
 CENTRAL IOWA ENERGY, LLC
  March 31,
    
    
    September 30,2008
    
    
    2007(Unaudited)ASSETSCurrent AssetsCash and equivalents
    
    $
    550,545
    
    
    $
    2,268,725Due from Broker
    
    
    243,097
    
    
    
    326,072Trade accounts receivable  related party
    
    
    775,275
    
    
    
    1,159,184Federal incentive receivable
    
    
    1,453,936
    
    
    
    1,049,262Sales tax refund receivable
    
    
    
    
    
    
    461,517Prepaid expenses
    
    
    135,444
    
    
    
    105,851Inventories
    
    
    9,175,298
    
    
    
    5,896,934Total current assets
    
    
    12,333,595
    
    
    
    11,267,545Property and EquipmentLand and improvements
    
    
    7,680,111
    
    
    
    7,680,111Office equipment
    
    
    40,603
    
    
    
    40,603Office building
    
    
    629,300
    
    
    
    629,300Plant and process equipment
    
    
    32,563,620
    
    
    
    32,563,62040,913,634
    
    
    
    40,913,634Less accumulated depreciation
    
    
    2,514,679
    
    
    
    1,248,326Net property and equipment
    
    
    38,398,955
    
    
    
    39,665,308Other AssetsFinancing costs, net of amortization
    
    
    364,242
    
    
    
    383,755Total Assets
    
    $
    51,096,792
    
    
    $
    51,316,608LIABILITIES AND EQUITYCurrent LiabilitiesCurrent maturities of long-term debt
    
    $
    25,975,160
    
    
    $
    26,641,539Revolving line of credit
    
    
    4,100,000
    
    
    
    1,600,000Derivative instruments
    
    
    345,459
    
    
    
    719,482Accounts payable
    
    
    3,292,263
    
    
    
    1,096,370Accounts payable  related party
    
    
    438,997
    
    
    
    365,125Accrued interest payable
    
    
    158,299
    
    
    
    204,092Accrued expenses
    
    
    224,726
    
    
    
    87,438Total current liabilities
    
    
    34,534,904
    
    
    
    30,714,046Long-Term Debt, less current maturities
    
    
    
    
    
    
    Deferred Grant Financing
    
    
    745,000
    
    
    
    745,000Commitments and ContingenciesMembers EquityMember contributions, net of costs related to capital contributions,
26,672 units outstanding
    
    
    23,849,120
    
    
    
    23,849,120Deficit accumulated
    
    
    (8,032,232
    )
    
    
    (3,991,558
    )Total members equity
    
    
    15,816,888
    
    
    
    19,857,562Total Liabilities and Members Equity
    
    $
    51,096,792
    
    
    $
    51,316,608
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CENTRAL IOWA ENERGY, LLC
  Three Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)RevenuesSales to related party
    
    $
    12,932,544
    
    
    $
    Federal incentives
    
    
    2,142,651
    
    
    
    15,075,195
    
    
    
    Cost of Goods Sold
    
    
    15,214,944
    
    
    
    Gross (Loss)
    
    
    (139,749
    )
    
    
    Operating ExpensesProfessional fees
    
    
    91,690
    
    
    
    102,444General and administrative
    
    
    774,433
    
    
    
    269,543Total
    
    
    866,123
    
    
    
    371,987Operating (Loss)
    
    
    (1,005,872
    )
    
    
    (371,987
    )Other Income (Expenses)Interest income
    
    
    4,953
    
    
    
    6,759Interest (expense)
    
    
    (544,207
    )
    
    
    Total
    
    
    (539,254
    )
    
    
    6,759Net (Loss)
    
    $
    (1,545,126
    )
    
    $
    (365,228
    )Weighted Average Units Outstanding
    
    
    26,672
    
    
    
    25,647Net (Loss) Per Unit  Basic and Diluted
    
    $
    (57.93
    )
    
    $
    (14.24
    )
   4




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CENTRAL IOWA ENERGY, LLC
  Six Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)RevenuesSales to related party
    
    $
    27,350,523
    
    
    $
    Federal incentives
    
    
    5,619,475
    
    
    
    32,969,998
    
    
    
    Cost of Goods Sold
    
    
    34,323,532
    
    
    
    Gross (Loss)
    
    
    (1,353,534
    )
    
    
    Operating ExpensesProfessional fees
    
    
    180,294
    
    
    
    127,154General and administrative
    
    
    1,374,453
    
    
    
    285,319Total
    
    
    1,554,747
    
    
    
    412,473Operating (Loss)
    
    
    (2,908,281
    )
    
    
    (412,473
    )Other Income (Expenses)Interest income
    
    
    21,318
    
    
    
    10,833Interest (expense)
    
    
    (1,153,711
    )
    
    
    Total
    
    
    (1,132,393
    )
    
    
    10,833Net (Loss)
    
    $
    (4,040,674
    )
    
    $
    (401,640
    )Weighted Average Units Outstanding
    
    
    26,672
    
    
    
    25,509Net (Loss) Per Unit  Basic and Diluted
    
    $
    (151.49
    )
    
    $
    (15.75
    )
   5




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CENTRAL IOWA ENERGY, LLC
  Six Months Ended
    
    
    Six Months EndedMarch 31,
    
    
    March 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet (loss)
    
    $
    (4,040,674
    )
    
    $
    (401,640
    )Adjustments to reconcile net (loss) to net cash
from operations:Depreciation and amortization
    
    
    1,285,866
    
    
    
    3,717Membership units earned but not issued
    
    
    
    
    
    
    10,000Change in assets and liabilitiesDue from broker
    
    
    82,975
    
    
    
    Accounts receivable
    
    
    383,909
    
    
    
    Other receivable
    
    
    (404,674
    )
    
    
    Inventories
    
    
    (3,278,364
    )
    
    
    (391,158
    )Prepaid expenses
    
    
    (29,593
    )
    
    
    (89,636
    )Derivative instruments
    
    
    (374,023
    )
    
    
    Accounts payable
    
    
    2,269,765
    
    
    
    590,516Accrued expenses
    
    
    137,288
    
    
    
    Accrued interest payable
    
    
    (45,793
    )
    
    
    Net cash (used in) operating activities
    
    
    (4,013,318
    )
    
    
    (278,201
    )Cash Flows from Investing ActivitiesCapital expenditures
    
    
    
    
    
    
    (14,745,989
    )Sales tax refund from equipment purchases
    
    
    461,517
    
    
    
    Purchase of land
    
    
    
    
    
    
    (25,582
    )Net cash provided by (used in) investing activities
    
    
    461,517
    
    
    
    (14,771,571
    )Cash Flows from Financing Activities(Decrease) in checks drawn in excess of bank balance
    
    
    
    
    
    
    (216,613
    )Proceeds on revolving line of credit
    
    
    2,500,000
    
    
    
    Proceeds from long-term debt
    
    
    400,000
    
    
    
    16,009,920Payments for long-term debt
    
    
    (1,066,379
    )
    
    
    Payments for financing costs
    
    
    
    
    
    
    (79,009
    )Member contributions
    
    
    
    
    
    
    600,000Other
    
    
    
    
    
    
    (30,000
    )Net cash provided by financing activities
    
    
    1,833,621
    
    
    
    16,284,298Net Increase (Decrease) in Cash
    
    
    (1,718,180
    )
    
    
    1,234,526Cash and cash equivalents  Beginning of Period
    
    
    2,268,725
    
    
    
    Cash and cash equivalents  End of Period
    
    $
    550,545
    
    
    $
    1,234,526Supplemental Disclosure of Cash Flow Information,Cash payments for interest, net of amount capitalized
    
    $
    1,179,991
    
    
    $
    Supplemental Disclosure of Noncash
Investing and Financing ActivitiesConstruction costs in accounts payable
    
    $
    
    
    
    $
    3,469,927Amortization of financing costs included in construction in progress
    
    $
    
    
    
    $
    22,316Financing costs included in accounts payable
    
    $
    
    
    
    $
    3,797Accrued interest included in construction in progress
    
    $
    
    
    
    $
    293,913
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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
 NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 PRINCIPAL BUSINESS ACTIVITY 
 BASIS OF PRESENTATION 
  USE OF ESTIMATES 
 REVENUE RECOGNITION 
 FEDERAL INCENTIVE PAYMENTS AND RECEIVABLES 
 CASH AND EQUIVALENTS 
  ACCOUNTS RECEIVABLE 
   7




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
 INVENTORIES 
 DERIVATIVE INSTRUMENTS  Accounting for Derivative Instruments and Hedging Activities
  Three Months
    
    
    Six MonthsRealized loss
    
    $
    1,300,434
    
    
    $
    2,022,607Change in unrealized loss
    
    
    (864,957
    )
    
    
    374,023$
    435,477
    
    
    $
    2,396,630
 PROPERTY AND EQUIPMENT 
 Land improvements
    
    15-20 yearsOffice building
    
    10-20 yearsOffice equipment
    
    5 yearsPlant and process equipment
    
    10-20 years
  FINANCING COSTS 
 FAIR VALUE OF FINANCIAL INSTRUMENTS  over-the-counter
  8




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
 DEFERRED GRANT FINANCING 
 NOTE B: INVENTORIES
  Raw materials
    
    $
    2,753,646Work in process
    
    
    155,988Finished goods
    
    
    6,265,664Total
    
    $
    9,175,298
 NOTE C: RELATED PARTY TRANSACTIONS
  NOTE D: REVOLVING LINE OF CREDIT
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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
 NOTE E: LONG-TERM DEBT
  Mortgage Term Note payable to F & M Bank  Iowa  See details below
    
    $
    20,478,405Iowa Department of Economic Development  See details below
    
    
    400,000Term Revolving Note payable to F & M Bank  Iowa  See details below
    
    
    5,000,000Equipment capital lease, due in monthly installments of $3,345
through August 2010 with a final option payment of $11,500 for the
purchase of the equipment.
    
    
    96,755$
    25,975,160
       NOTE F: RETIREMENT PLAN
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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
 NOTE G: COMMITMENTS AND CONTINGENCIES
 Purchase Contracts
  Utility Contracts
    NOTE H: GOING CONCERN
    11




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2008 and 2007
    12




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Item 2. Managements Discussion and Analysis or Plan of Operations
 Cautionary Statements Regarding Forward Looking Statements
 RISK FACTORS
 
    
    Changes in interest rates or the availability of credit;
    
    Our ability to raise additional equity capital proceeds;
    
    Overcapacity within the biodiesel industry resulting in increased competition and costs for feedstock
and/or decreased prices for our biodiesel and glycerin;
    
    Decrease in the demand for biodiesel;
    
    Actual biodiesel and glycerin production varying from expectations;
    
    Availability and cost of products and raw materials, particularly soybean oil, animal fats, and methanol;
    
    Changes in the price and market for biodiesel and its co-products, such as glycerin;
    
    Our ability to market and our reliance on third parties to market our products;
    
    Changes in or elimination of governmental laws, tariffs, trade or other controls or enforcement
practices such as:
 
    
    national, state or local energy policy;
    
    federal and state biodiesel tax incentives;
    
    legislation establishing a renewable fuel standard 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;
 
    
    Total U.S. consumption of diesel fuel;
    
    Fluctuations in petroleum and diesel prices;
    
    Changes in plant production capacity or technical difficulties in operating the plant;
    
    Changes in our business strategy, capital improvements or development plans;
    
    Results of our hedging strategies;
    
    Competition with other manufacturers in the biodiesel industry;
    
    Our ability to generate free cash flow to invest in our business and service our debt;
    
    Our liability resulting from litigation;
    
    Our ability to retain key employees and maintain labor relations;
  13




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
    
    Changes and advances in biodiesel production technology;
    
    Competition from alternative fuels and alternative fuel additives;
    
    Failure to comply with loan covenants contained in our financing agreements;
    
    Our ability to generate profits; and
    
    Other factors described elsewhere in this report
  Overview
      14




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Plan of Operations for the Next 12 Months
  th Liquidity and Capital Resources  Events of
Default .
 Plant Operations
    15




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Operating Budget and Financing of Plant Operations
 Trends and
Uncertainties Impacting the Biodiesel Industry and Our Future Operations
 Liquidity and Capital Resources  Debt Financing
 Liquidity and
Capital Resources  Events of Default.
  16




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Plant Management, Feedstock Procurement and Marketing
  Feedstock Procurement
 
    
    Provide analysis and audit of feedstock suppliers;
    
    Purchase feedstocks at competitive prices meeting specifications and in
quantities adequate to satisfy the production schedule of our plant;
    
    Negotiate for discounts on feedstocks, where obtainable;
    
    Arrange for transportation, logistics, and scheduling of feedstock deliveries;
and
    
    Provide analysis and audit of bulk transportation providers.
 Chemical Inputs Procurement
 
    
    Perform due diligence requirements for investigation of suppliers of the
chemical inputs;
    
    Provide analysis and audit of chemical suppliers and bulk transportation
suppliers;
    
    Purchase chemical inputs at competitive prices meeting specifications for use
in our plant;
    
    Negotiate for discounts on the purchase of chemical inputs, where obtainable;
    
    Procure adequate chemical inputs to meet our production schedules; and
    
    Arrange for transportation, logistics, and scheduling services for chemical
input deliveries by suppliers.
 Sales and Marketing
 
    
    Market analysis of biodiesel supply and demand;
    
    Market access to REGs developed biodiesel distribution channels;
    
    Analysis and audit of biodiesel customers, including for creditworthiness, and
bulk transportation providers;
    
    Marketing specialists and sales representatives to attain and establish sales
opportunities and relationships for our products;
    
    Arrangements for transportation, logistics, and scheduling of biodiesel
shipments;
    
    Arrangements for leased tankers for rail shipments, where advantageous;
    
    Oversight and reconciliation of shipments, invoicing and payments on a weekly
basis; and
    
    Provide invoicing and accounts receivable management for biodiesel shipments.
 Administrative Services
 
    
    Accounting;
    
    Human Resources;
    
    Information Technology;
    
    Payroll; and
    
    Communications.
  17




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
    
    Utilize his or her ongoing best efforts to successfully and profitably
manage the plant in our best interests;
    
    Develop an annual budget for presentation to and approval of our board;
    
    Attend meetings of our board and provide information upon its request;
    
    Insure that all raw product costs are minimized and that all finished
product revenues are maximized;
    
    Work with us to formulate our mission and goals;
    
    Manage the plants resources to efficiently achieve such mission and goals;
    
    Manage our duties and rights under agreements with third parties relating to
the plant;
    
    Assist with regulatory affairs monitoring and compliance;
    
    Hire, terminate and replace plant personnel as necessary, and in all cases
in accordance with the policies of our board;
    
    Management of governmental relations, including the United States Department
of Agricultures biodiesel programs; and
    
    Perform such other duties as may be agreed upon.
  
    
    Plan and schedule biodiesel production to meet our needs and marketing
goals;
    
    Monitor and improve quality control;
    
    Oversee facility and equipment maintenance;
    
    Assist with budgeting and the monitoring of labor and other expenses in the
operation;
    
    Implement processing changes and new technologies as they evolve, and plan
for new projects relating to biodiesel production; and
    
    Perform such other duties as may be agreed upon.
     18




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Energy Management
   Administration and Employees
   Permitting and Costs and Effects of Compliance with Environmental Laws
    19




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Research and Development
  Commodity Price Risk Protection
     Trends and Uncertainties Impacting the Biodiesel Industry and Our Future Operations
   20




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
    
    additional rail capacity and rail cars;
    
    additional storage facilities for biodiesel;
    
    increases in truck fleets capable of transporting biodiesel within localized markets;
    
    expansion in refining and blending facilities to handle biodiesel; and
    
    growth in service stations equipped to handle biodiesel fuels.
   22




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Liquidity and Capital Resources
 Events of Default .
 Debt Financing
   23




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24




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Loan Covenants
 Events of Default.
 Events of Default . th th
 Events of Default
   25




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th
 Additional Equity Capital
  Government Programs and Grants
 Events of
Default
  26




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Distribution to Unit Holders
  Results of Operations
  Quarter EndedMarch 31, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    15,075,195
    
    
    
    100.00
    %Cost of Goods Sold
    
    $
    15,214,944
    
    
    
    100.93
    %Gross (Loss)
    
    $
    (139,749
    )
    
    
    0.93
    %Operating Expenses
    
    $
    866,123
    
    
    
    5.75
    %Operating (Loss)
    
    $
    (1,005,872
    )
    
    
    6.67
    %Other Income (Expense)
    
    $
    (539,254
    )
    
    
    3.58
    %Net (Loss)
    
    $
    (1,545,126
    )
    
    
    10.25
    %
  Revenues
   27




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Cost of Goods Sold
  Commodity Risk Protection
 Trends and Uncertainties Impacting the Biodiesel Industry and Our Future Operations
   Operating Expenses
  Other Income (Expenses)
  Cash Flows
 Cash Flow from Operating Activities.
  28




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Cash Flow from Investing Activities.
 Cash Flow from Financing Activities.
 Critical Accounting Estimates
  Revenue Recognition
  Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and
Hedging Activities
 Off-Balance Sheet Arrangements
  
 Item 3A(T). Controls And Procedures
   29




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
 MANAGEMENTS DISCUSSION AND ANALYSIS
 The loans agreements under which we obtained financing for the construction of our biodiesel
plant contain restrictive covenants, including one with which we have failed to comply for the
period ended March 31, 2008.
 Liquidity and Capital Resources
 Our reliance upon REG could damage our profitability if REG is unable to continue its
business.
  We may be unable to raise the additional equity capital necessary to cure our default under
our loan agreements.
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Our auditors doubts about our ability to continue as a going concern and current market
conditions may make it difficult to raise any desired capital in the future .
 Trends and
Uncertainties Impacting the Biodiesel Industry and our Plan of Operations
 We may be unable to obtain additional debt facilities in the event our board of directors
determines that additional credit is necessary.
  REG, the company which is responsible for procuring our inputs, may acquire soybean oil from
parties related to REG.
   31




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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to Security Holders.
   Nominee Name
    
    Group
    
    Votes CastJames Johnston
    
    I
    
    
    10,042Craig Hamilton
    
    I
    
    
    10,162Don Huyser
    
    I
    
    
    10,057Tom Schroeder
    
    I
    
    
    9,687Denny Mauser
    
    II
    
    
    9,987Jeremie Parr
    
    II
    
    
    10,042William Talsma
    
    II
    
    
    10,067John Van Zee
    
    II
    
    
    10, 137Warren Bush
    
    III
    
    
    9,762William Horan
    
    III
    
    
    10,042Dean Lane
    
    III
    
    
    10,032Scot Farver
    
    III
    
    
    10,212
  32




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For
    
    
    Against
    
    
    AbstainProposal No. 1
    
    
    8668
    
    
    
    1259
    
    
    
    350Proposal No. 2
    
    
    8881
    
    
    
    1016
    
    
    
    380
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
  ExhibitNo.
    
    Description31.1
    
    
    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 135032.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350
 
 SIGNATURES
  CENTRAL IOWA ENERGY, LLCDate: May 15, 2008
    
    /s/ John E. Van Zee

John E. Van ZeePresident and Chief Executive Officer(Principal Executive Officer)Date: May 15, 2008
    
    /s/ Kimberly Smith

Kimberly SmithChief Financial Officer(Principal Financial and Accounting Officer)
  33