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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 December 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
    
    20-3386000(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1701 East 7th Street, P.O. Box 2, Washington, Iowa 52353
 (319) 653-2890
 þ o
 o o
  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
    
    
    13Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    23Item 4. Controls And Procedures
    
    
    23PART II. OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Removed and Reserved
    
    
    24Item 5 Other Information
    
    
    24Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Exhibit 10.1Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Unaudited Financial Statements
 Iowa Renewable Energy, LLC
 Unaudited Balance Sheets
 December 31,
    
    
    September 30,2010
    
    
    2010AssetsCurrent Assets:Cash and cash equivalents
    
    $
    305,964
    
    
    $
    479,309Due from broker
    
    
    310,390
    
    
    
    310,390Inventory
    
    
    269,644
    
    
    
    372,547Prepaids and other assets
    
    
    51,930
    
    
    
    71,641937,928
    
    
    
    1,233,887Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,742,442
    
    
    
    40,742,442Office building, furniture and fixtures
    
    
    588,965
    
    
    
    588,965Equipment and vehicles
    
    
    240,241
    
    
    
    240,24141,991,648
    
    
    
    41,991,648Accumulated depreciation
    
    
    (9,273,612
    )
    
    
    (8,615,336
    )32,718,036
    
    
    
    33,376,312Other Assets:Cash, restricted by loan agreement
    
    
    371,055
    
    
    
    730,288Financing costs, net
    
    
    216,220
    
    
    
    338,174587,275
    
    
    
    1,068,462$
    34,243,239
    
    
    $
    35,678,661Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    27,434,667
    
    
    $
    27,457,729Accounts payable and accrued expenses
    
    
    410,238
    
    
    
    311,607Total current liabilities
    
    
    27,844,905
    
    
    
    27,769,336Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions, net of issuance costs, units
outstanding December 31, 2010 and September 30, 2010 26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (16,767,088
    )
    
    
    (15,256,097
    )6,398,334
    
    
    
    7,909,325$
    34,243,239
    
    
    $
    35,678,661
   3




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Iowa Renewable Energy, LLC
 Unaudited Statements of Operations
 Three Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009Revenues:Sales
    
    $
    70,426
    
    
    $
    8,455,587Federal incentives
    
    
    
    
    
    
    187,63270,426
    
    
    
    8,643,219Cost of sales
    
    
    1,022,490
    
    
    
    8,765,323Gross (loss)
    
    
    (952,064
    )
    
    
    (122,104
    )Operating expenses:General and administrative
    
    
    95,863
    
    
    
    350,817Depreciation
    
    
    9,500
    
    
    
    9,500105,363
    
    
    
    360,317(Loss) before other income (expense)
    
    
    (1,057,427
    )
    
    
    (482,421
    )Other income (expense):Interest and other income
    
    
    96,152
    
    
    
    391,182Interest expense
    
    
    (549,716
    )
    
    
    (303,565
    )Net (loss)
    
    $
    (1,510,991
    )
    
    $
    (394,804
    )Weighted average units outstanding
    
    
    26,331
    
    
    
    26,331Net (loss) per unit  basic and diluted
    
    $
    (57.38
    )
    
    $
    (14.99
    )
   4




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Iowa Renewable Energy, LLC
 Unaudited Statements of Cash Flows
 Three Months EndedDecember 31,
    
    
    December 31,2010
    
    
    2009Cash Flows from Operating Activities:Net (loss)
    
    $
    (1,510,991
    )
    
    $
    (394,804
    )Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:Depreciation
    
    
    658,276
    
    
    
    662,502Amortization
    
    
    121,954
    
    
    
    25,430Unrealized (gain) loss on derivative financial instruments
    
    
    
    
    
    
    (42,604
    )Change in working capital components:Decrease in due from broker
    
    
    
    
    
    
    137,661(Increase) in accounts receivable
    
    
    
    
    
    
    (162,363
    )Decrease in inventory
    
    
    102,903
    
    
    
    2,461,266Decrease in prepaids and other assets
    
    
    19,711
    
    
    
    69,408Increase (decrease) in accounts payable and accrued expenses
    
    
    98,631
    
    
    
    (305,605
    )Net cash provided by (used in) operating activities
    
    
    (509,516
    )
    
    
    2,450,891Cash Flows from Investing Activity,
(increase) decrease in cash restricted
    
    
    359,233
    
    
    
    (24,778
    )Cash Flows from Financing Activity,
payment on long-term borrowings
    
    
    (23,062
    )
    
    
    (1,044,525
    )Net increase (decrease) in cash and cash equivalents
    
    
    (173,345
    )
    
    
    1,381,588Cash and cash equivalents:Beginning
    
    
    479,309
    
    
    
    649,297Ending
    
    $
    305,964
    
    
    $
    2,030,885Supplemental
Disclosure of Cash Flow Information, cash payments for interest
    
    $
    383,753
    
    
    $
    303,518
   5




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note. 1 Nature of Business and Significant Accounting Policies
 Nature of business:
  Basis of presentation:
  Significant accounting policies:
 Use of estimates
 Concentrations of credit risk
 Cash and cash equivalents
 Restricted cash
 Accounts receivable
  6




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Inventory
 December 31, 2010
    
    
    September 30, 2010Raw material
    
    $
    126,520
    
    
    $
    111,951Finished goods
    
    
    143,124
    
    
    
    261,596$
    269,644
    
    
    $
    372,547
 Organizational costs and startup costs
 Property and equipment
 YearsPlant and process equipment
    
    
    10-20Office building
    
    
    10-20Office equipment
    
    
    3-7Other equipment
    
    
    3-7
   Financing costs
 Derivative instruments
  7




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Three Months EndedDecember 31, 2010
    
    
    December 31, 2009Realized (gain) loss
    
    $
    
    
    
    $
    62,466Changed in unrealized (gain) loss
    
    
    
    
    
    
    (42,604
    )Net (gain) loss
    
    $
    
    
    
    $
    24,862
  Revenue recognition
 Federal incentive payments and receivables
 Cost of sales
 Three Months Ended December 312010
    
    
    2009Cost of Revenue/Sales
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soy oil, chemicals, etc.)
    
    $
    109,308
    
    
    
    10.69
    %
    
    $
    7,488,096
    
    
    
    85.43
    %Plant wages and salaries
    
    
    81,505
    
    
    
    7.97
    
    
    
    116,395
    
    
    
    1.33Utilities and waste disposal
    
    
    61,633
    
    
    
    6.03
    
    
    
    244,628
    
    
    
    2.79Fees-procurement
    
    
    
    
    
    
    
    
    
    
    34,250
    
    
    
    0.39Loss on derivative financial instruments
    
    
    
    
    
    
    
    
    
    
    24,862
    
    
    
    0.28Depreciation
    
    
    648,775
    
    
    
    63.45
    
    
    
    653,002
    
    
    
    7.45Maint., supplies and other expenses
    
    
    121,269
    
    
    
    11.86
    
    
    
    204,090
    
    
    
    2.33Total cost of revenue/sales
    
    $
    1,022,490
    
    
    
    100.00
    %
    
    $
    8,765,323
    
    
    
    100.00
    %
 Shipping and handling costs
 Income taxes
 (Loss) per unit
  8




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 2. Major Customer and Related Party
      Note 3. Members Equity
     9




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Note 4. Long-Term Debt
  Note payable to MLIC Asset Holdings, LLC for construction loan (A)
    
    $
    27,142,668Note payable to the Iowa Department of Economic Development (B)
    
    
    55,000Note payable to the Iowa Department of Transportation (C)
    
    
    236,998$
    27,434,667
 (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. Previously, the note bore interest at prime plus .25% and was due in
monthly principal and interest payments of $373,000. The loan is secured by substantially all
assets of the Company. The Company violated the debt covenants and on April 2, 2009 received a
written notice of default from the lender. In conjunction with the line of credit discussed
below, the Lender has agreed until February 1, 2011 to allow the Company to defer principal
payments on the term debt, interest payments related to the term loan will be charged against
the debt service reserve fund, and the Company has been granted a forbearance on the covenant
requirements of the term loan, specifically, section 5.02 (m)-(q). In place of the covenants,
the Company has additional reporting requirements which accelerate their monthly reporting and
provide additional cash flow information to the lender. While this does represent additional
external reporting the information provided is data that is currently captured and reported
internally. The forbearance also accelerates the maturity date for the entire loan to
September 5, 2011 and increases the interest rate to 6.0% plus the one month LIBOR rate in
effect two New York Banking Days prior to the beginning of each calendar month (6.26% as of
December 31, 2010). New York Banking Days is defined as any day other than Saturday or Sunday
that a commercial bank is open for business in New York, New York. The LIBOR margin will be
adjusted every six months based on a schedule set in the agreement based on the Companys
leverage ratio at that time. Effective February 1, 2011, the Company entered into an
additional Amendment and Note Modification with MLIC to extend the maturity date and
forbearance of the note through January 2, 2012.In addition to the debt service reserve and capital improvements reserve discussed in Note
1, the Company is required to deposit in a sinking fund one-third of all monthly projected
EBITDA shall be applied to reduce loan principal. At the point the outstanding principal
loan balance is reduced to $20,182,750 no additional sinking fund deposits will be required.(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 December 31, 2010 and September 30, 2010 of $55,000 and $65,000, respectively. 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. On November 18, 2010 the Company requested from the IDED a
deferral of payments for the period January 1, 2011 through June 30, 2011. On December 16,
2010 the IDED board approved the deferral request with the requirement of a 6.0% interest
accrual on the loan for that period. The Companys Board approved the interest related to the
deferral at the December 21, 2010 Board meeting.(C)
    
    The Company has a $132,000 loan agreement and a $168,000 forgivable grant agreement with the
Iowa Department of Transportation. The $132,000 loan bears interest at 3.67% beginning June
2008 and is due
in semi-annual payments of $14,569 beginning December 2008 for a term of 60 months. The
balance at December 31, 2010 and September 30, 2010 was $68,978 and $82,061,
respectively. Borrowings under this agreement are collateralized by substantially all of the
Companys assets and is not subordinate to the $34,715,000 of financial instrument debt. The
$168,000 grant is forgivable upon completion of the loan agreement.  10




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Note 5. Lease Commitment and Other Contingencies
   Note 6. Going Concern and Managements Plans
   11




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
   12




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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;
       13




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Overview
     14




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Results of Operations for the Three Months Ended December 31, 2010 and 2009
  Three Months Ended
    
    
    Three Months EndedDecember 31, 2010 (Unaudited)
    
    
    December 31, 2009 (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    70,426
    
    
    
    100.0
    %
    
    $
    8,643,219
    
    
    
    100.0
    %Cost of Goods Sold
    
    
    1,022,490
    
    
    
    1,451.9
    %
    
    
    8,765,323
    
    
    
    101.4
    %Gross (Loss)
    
    
    (952,064
    )
    
    
    (1,351.9
    %)
    
    
    (122,104
    )
    
    
    (1.4
    %)Operating Expenses
    
    
    105,363
    
    
    
    149.6
    %
    
    
    360,317
    
    
    
    4.2
    %Operating (Loss)
    
    
    (1,057,427
    )
    
    
    (1,501.5
    %)
    
    
    (482,421
    )
    
    
    (5.6
    %)Other Income
    
    
    96,152
    
    
    
    136.5
    %
    
    
    391,182
    
    
    
    4.5
    %Interest Expense
    
    
    (549,716
    )
    
    
    (780.6
    %)
    
    
    (303,565
    )
    
    
    (3.5
    %)Net (Loss)
    
    
    (1,510,991
    )
    
    
    (2,145.5
    %)
    
    
    (394,804
    )
    
    
    (4.6
    %)
   15




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Revenues
  Three Months Ended
    
    
    Three Months EndedDecember 31, 2010
    
    
    December 31, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    58,214
    
    
    
    82.7
    %
    
    $
    8,469,443
    
    
    
    97.9
    %Glycerin Sales
    
    
    12,212
    
    
    
    17.3
    %
    
    
    116,999
    
    
    
    1.4
    %Fatty Acid and Soapstock Sales
    
    
    
    
    
    
    
    
    
    
    56,777
    
    
    
    0.7
    %Total Sales Revenue
    
    $
    70,426
    
    
    
    100.0
    %
    
    $
    8,643,219
    
    
    
    100.0
    %
      16




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18




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Cost of Goods Sold
     Derivative
Instruments and Hedging Activities
  19




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Operating Expenses
  Other Income (Expenses)
 
 Changes in Financial Condition for the Three Months Ended December 31, 2010
  December 31, 2010
    
    
    September 30, 2010Current Assets
    
    $
    937,928
    
    
    $
    1,233,887Total Assets
    
    $
    34,243,239
    
    
    $
    35,678,661Current Liabilities
    
    $
    27,844,905
    
    
    $
    27,769,336Members Equity
    
    $
    6,398,334
    
    
    $
    7,909,325
 Current Assets
  Current Liabilities
  Members Equity
  Liquidity and Capital Resources
 Cash Flow from Operating Activities
   20




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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
       21




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Grants and Government Programs
   Distribution to Unit Holders
  Critical Accounting Estimates
  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
   22




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Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
    
    Controls And Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
  
 Item 1A.
    
    Risk Factors.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
   23




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Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    Removed and Reserved.
 
 Item 5.
    
    Other Information.
 rd
  
 Item 6.
    
    Exhibits
  Exhibit No.
    
    Description
    
    Method of Filing10.1
    
    First Addendum to Loan Agreement between MLIC
Asset Holdings LLC, Federation Bank and
Washington State Bank and Iowa Renewable
Energy, LLC dated February 1, 2011.
    
    *10.2
    
    Second Addendum to Third Amendment to
Construction-Term Loan Agreement between MLIC
Asset Holdings LLC, successor-in-interest to
Outsource Services Management, LLC,
successor-in-interest to the Federal Deposit
Insurance Corporation as receiver of
BankFirst and Iowa Renewable Energy, LLC
dated February 1, 2011.
    
    *31.1
    
    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.  24




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SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate:      February 14, 2011
    /s/ Michael BohannanMichael BohannanChairman and President Date:      February 14, 2011
    /s/ J. William PimJ. William PimChief Financial Officer  25