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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 000-52428
 IOWA RENEWABLE ENERGY, LLC
  Iowa
(State or other jurisdiction of 
incorporation or organization)
    
    20-3386000
(I.R.S. Employer Identification No.)
 1701 East 7 th Street
P.O. Box 2
Washington, Iowa 52353
 (319) 653-2890
  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
    
    
    12Item 3(A)T.
Controls and Procedures
    
    
    22PART II. OTHER INFORMATION
    
    
    23Item 1. Legal Proceedings
    
    
    23Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 3. Defaults Upon Senior Securities
    
    
    24Item 4. Submission of Matters to Security Holders
    
    
    24Item 5. Other Information
    
    
    25Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26Exhibit 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
 March 31,
    
    
    September 30,2008
    
    
    2007AssetsCurrent Assets:Cash and cash equivalents
    
    $
    2,529,099
    
    
    $
    725,522Cash  restricted by loan agreement
    
    
    868,636
    
    
    
    Due from broker
    
    
    258,822
    
    
    
    1,337,860Accounts receivable
    
    
    2,150,049
    
    
    
    5,614,315Federal incentive receivable
    
    
    1,057,863
    
    
    
    822,228Derivative financial instruments
    
    
    176,140
    
    
    
    Inventory
    
    
    6,467,835
    
    
    
    3,815,722Prepaids and other assets
    
    
    17,451
    
    
    
    37,03213,525,895
    
    
    
    12,352,679Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,650,689
    
    
    
    41,464,111Office building, furniture and fixtures
    
    
    572,632
    
    
    
    572,665Equipment and vehicles
    
    
    226,424
    
    
    
    226,42441,869,745
    
    
    
    42,683,200Accumulated depreciation
    
    
    (1,988,966
    )
    
    
    (663,962
    )39,880,779
    
    
    
    42,019,238Other Assets, financing costs, net
    
    
    491,651
    
    
    
    542,513$
    53,898,325
    
    
    $
    54,914,430Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    34,826,561
    
    
    $
    33,342,558Accounts payable and accrued expenses
    
    
    1,905,891
    
    
    
    1,374,711Derivative financial instruments
    
    
    
    
    
    
    510,247Construction retainage
    
    
    
    
    
    
    300,000Total current liabilities
    
    
    36,732,452
    
    
    
    35,527,516Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions, net of issuance costs, units
outstanding 2007 26,331; 2006 26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (5,999,549
    )
    
    
    (3,778,508
    )17,165,873
    
    
    
    19,386,914$
    53,898,325
    
    
    $
    54,914,430
   3




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Iowa Renewable Energy, LLC
 Unaudited Statements of Operations
Quarter and Six Month Periods Ended March 31, 2008 and 2007
 Three months
    
    
    Three months
    
    
    Six months
    
    
    Six monthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedMarch 31, 2008
    
    
    March 31, 2007
    
    
    March 31, 2008
    
    
    March 31, 2007Revenues:Sales
    
    $
    9,096,075
    
    
    $
    
    
    
    $
    20,406,684
    
    
    $
    Federal incentives
    
    
    1,554,180
    
    
    
    
    
    
    
    3,147,986
    
    
    
    10,650,255
    
    
    
    
    
    
    
    23,554,670
    
    
    
    Cost of sales
    
    
    10,202,668
    
    
    
    
    
    
    
    23,827,937
    
    
    
    Gross profit (loss)
    
    
    447,587
    
    
    
    
    
    
    
    (273,267
    )
    
    
    Operating expenses:General and administrative
    
    
    233,474
    
    
    
    150,145
    
    
    
    650,747
    
    
    
    199,523Depreciation
    
    
    9,500
    
    
    
    380
    
    
    
    19,000
    
    
    
    761242,974
    
    
    
    150,525
    
    
    
    669,747
    
    
    
    200,284Operating income (loss)
    
    
    204,613
    
    
    
    (150,525
    )
    
    
    (943,014
    )
    
    
    (200,284
    )Other income (expense):Interest income
    
    
    26,922
    
    
    
    63,843
    
    
    
    53,946
    
    
    
    138,831Interest expense
    
    
    (598,691
    )
    
    
    
    
    
    
    (1,331,973
    )
    
    
    Net (loss)
    
    $
    (367,156
    )
    
    $
    (86,682
    )
    
    $
    (2,221,041
    )
    
    $
    (61,453
    )Weighted average units outstanding
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,150Net (loss) per unit  basic and diluted
    
    $
    (13.94
    )
    
    $
    (3.29
    )
    
    $
    (84.35
    )
    
    $
    (2.35
    )
   4




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Iowa Renewable Energy, LLC
 Unaudited Statements of Cash Flows
Six Months Ended March 31, 2008 and 2007
 March 31, 2008
    
    
    March 31, 2007Cash Flows from Operating Activities:Net (loss)
    
    $
    (2,221,041
    )
    
    $
    (61,453
    )Adjustments to reconcile net (loss) to net cash
provided by operating activities:Depreciation
    
    
    1,325,004
    
    
    
    761Amortization
    
    
    50,862
    
    
    
    Unrealized (gain) on derivative financial instruments
    
    
    (686,387
    )
    
    
    Change in working capital components:Decrease in due from broker
    
    
    1,079,038
    
    
    
    Decrease in accounts receivable
    
    
    3,228,631
    
    
    
    (Increase) in inventory
    
    
    (2,652,113
    )
    
    
    Decrease in prepaids and other assets
    
    
    19,581
    
    
    
    Increase in accounts payable and accrued expenses
    
    
    531,180
    
    
    
    5,940Net cash provided by (used in) operating activities
    
    
    674,755
    
    
    
    (54,752
    )Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    (300,000
    )
    
    
    (17,294,710
    )Sales tax and utility refund from construction of property and equipment
    
    
    813,455
    
    
    
    (Increase) decrease in cash restricted
    
    
    (868,636
    )
    
    
    5,263,792Net cash (used in) investing activities
    
    
    (355,181
    )
    
    
    (12,030,918
    )Cash Flows from Financing Activities:Issuance of membership units, on exercise of unit options
    
    
    
    
    
    
    550,000Payments for financing costs
    
    
    
    
    
    
    (552,515
    )Proceeds from long-term borrowings
    
    
    2,017,442
    
    
    
    12,163,731Payment on long-term borrowings
    
    
    (533,439
    )
    
    
    (25,000
    )Net cash provided by financing activities
    
    
    1,484,003
    
    
    
    12,136,216Net increase in cash and cash equivalents
    
    
    1,803,577
    
    
    
    50,546Cash and cash equivalents:Beginning
    
    
    725,522
    
    
    
    473,505Ending
    
    $
    2,529,099
    
    
    $
    524,051
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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:
 Use of estimates
 Concentrations of credit risk
 Cash and cash equivalents
 Restricted cash
 Accounts receivable
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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Federal incentive payments and receivables
 Inventory
 Raw material
    
    $
    3,091,112Finished goods
    
    
    3,172,529Deposits on inventory in transit
    
    
    204,194$
    6,467,835
 Property and equipment
 YearsPlant and process equipment
    
    
    10-20Office building
    
    
    10-20Office equipment
    
    
    3-7Other equipment
    
    
    3-7
  Derivative instruments Accounting for Derivative Instruments and Hedging Activities
  Financing costs
 Revenue recognition
  7




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Cost of sales
 Three Months ended 3/31/08
    
    
    Six Months Ended 3/31/08Cost of Revenue/Sales
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soybean oil,
chemicals, etc.)
    
    $
    9,224,082
    
    
    
    90.41
    %
    
    $
    19,632,291
    
    
    
    82.39
    %Plant wages and salaries
    
    
    239,370
    
    
    
    2.35
    
    
    
    459,883
    
    
    
    1.93Utilities and waste disposal
    
    
    308,529
    
    
    
    3.02
    
    
    
    557,641
    
    
    
    2.34Fees-marketing, sales, procurement
    
    
    154,353
    
    
    
    1.51
    
    
    
    339,866
    
    
    
    1.43Accrual for contract transfer
    
    
    75,000
    
    
    
    0.74
    
    
    
    75,000
    
    
    
    0.32Realized and unrealized (gain)
loss on derivative financial
instruments
    
    
    (621,034
    )
    
    
    (6.09
    )
    
    
    1,182,851
    
    
    
    4.96Depreciation
    
    
    653,002
    
    
    
    6.40
    
    
    
    1,306,004
    
    
    
    5.48Maintenance, supplies and other
expenses
    
    
    169,366
    
    
    
    1.66
    
    
    
    274,401
    
    
    
    1.15Total cost of sales
    
    $
    10,202,668
    
    
    
    100.00
    %
    
    $
    23,827,937
    
    
    
    100.00
    %
  Shipping and handling costs
 Income taxes
 Earnings (loss) per unit
 Note 2. Major Customer
     8




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note
3. Long-Term Debt
  Note payable to Marshall Bank Group for construction loan (A)
    
    $
    34,211,561Note payable to the Iowa Department of Economic Development (B)
    
    
    315,000Note payable to the Iowa Department of Transportation (C)
    
    
    300,000$
    34,826,561
  Debt service reserve:
 Capital improvements reserve:
 Sinking fund:
      9




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
 Note 4. Lease Commitments and Additional Contingencies
  Year ending September 30:2008
    
    $
    24,6512009
    
    
    32,8682010
    
    
    3,300$
    60,819
 Note 5. Related Party Transactions
   Note 6. Pending Accounting Pronouncements
    10




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Iowa Renewable Energy, LLC
 Notes to Unaudited Financial Statements
  Note 7. Going Concern
   Note 8. Subsequent Events
   11




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Item 2. Managements Discussion and Analysis or Plan of Operations
 Forward Looking Statements
  
    
    Changes in the availability and price of feedstock;
    
    Failure to comply with our loan covenants;
    
    Continued and increased temporary shutdowns of plant operations;
    
    Our ability to raise additional capital if necessary;
    
    The availability of credit and our ability to borrow additional amounts;
    
    Changes in our business strategy, management, capital improvement and development
plans;
    
    Changes in plant production capacity or technical difficulties in operating the plant;
    
    Overcapacity within the biodiesel industry leading to a decline in biodiesel prices;
    
    Increases or decreases in the supply and demand for biodiesel, including anticipated
significant increases in supply from new biodiesel plants and expansions of existing
biodiesel plants;
    
    Changes in environmental regulations that apply to our plant operations;
    
    Changes in general economic conditions or the occurrence of certain events causing an
economic impact in the agriculture, oil or automobile industries;
    
    Changes in the availability and price of natural gas;
    
    Any potential financial instability of our marketing and management company;
    
    Increases or decreases in the supply and demand for glycerin leading to a decline in
prices; and
    
    Changes and advances in biodiesel production technology.
   12




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Overview
   
    
    The inability to obtain adequate amounts of feedstock in a timely manner;
    
    The inability to obtain adequate amounts of feedstock at profitable prices;
    
    Lack of demand for biodiesel;
    
    Lack of biodiesel contracts at profitable prices; and
    
    Inadequate funds to obtain feedstock due to having to pay for feedstock prior
to obtaining payments from our biodiesel sales.
  
    
    We anticipate the price of soybean oil will decrease because more acres of land
are being planted with soybeans this year, according to the April 2008 Oil Crops
Report from the United States Department of Agriculture (USDA);
    
    We anticipate the demand for biodiesel made from animal fats (which is currently
less expensive than soybean oil, although prices have been increasing) will
increase in the warmer summer months, because the higher gel temperature of
biodiesel made from animal fats will not be an issue;
    
    We anticipate we will be able to obtain adequate amounts of feedstock in the
future by exploring the possibility to produce biodiesel from feedstocks other than
soybean oil and animal fats. For example, we are exploring the use of corn oil as a
feedstock and our plant is capable of using many other types of oils and fats;
    
    We anticipate demand for biodiesel in foreign countries will increase, resulting
in the ability for us to obtain more export contracts;
    
    We anticipate domestic demand for biodiesel will increase due the Renewable
Fuels Standard requirements for increased use of alternative fuels; and
    
    We anticipate we will experience less delay in getting paid for sales of our
biodiesel because our marketer, REG, has informed us that we will now
be paid for sales of biodiesel within 7 days of truck shipment and 15 days of rail
shipment.
    13




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
    
    Continued scaled back biodiesel production, rather than the increased production
we anticipate;
    
    Continued temporary shut downs of the biodiesel plant, rather than the increased
production we anticipate;
    
    Producing biodiesel on a toll basis, where we would produce biodiesel using raw
materials provided by someone else;
    
    Selling additional membership units;
    
    Entering into strategic opportunities with other biodiesel plants;
    
    Selling our preprocessed animal fats to biodiesel plants that do not have the
technology to process animal fats;
    
    Increase our line of credit with the Marshall Bankfirst Corporation (Marshall);
    
    Obtain an additional operating loan; or
    
    Amend our term loan with Marshall to allow interest only payments.
   Plan of Operations for the Next 12 Months
 Plant Operations
   14




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Permitting
  Permit:
    
    Status:VOC Emissions from Equipment Leaks 
Permit- Operation
    
    We have 18 months following the
start of production to draft a plan
for the air operations permit and we
have started that process.Superfund Amendments and
Reauthorization Act (SARA) Section
313 Form R
    
    We will be required to file Form R
prior to July 1, 2008 for the year
2007. We have a process in place for
filing this report.
 Operating Budget and Financing of Plant Operations
   Administration and Employees
  Trends and Uncertainties Impacting the Biodiesel Industry and Our Future Operations
   15




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
    
    additional rail capacity and rail tank 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.
  Commodity Price Risk Protection
     18




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Results of Operations
 Financial Summary and Analysis of the Quarter Ended March 31, 2008
  Quarter EndedMarch 31, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    10,650,255
    
    
    
    100.00
    %Cost of Sales
    
    $
    10,202,668
    
    
    
    95.8
    %Gross Profit
    
    $
    447,587
    
    
    
    4.2
    %Operating Expense
    
    $
    242,974
    
    
    
    2.3
    %Operating Income
    
    $
    204,613
    
    
    
    1.9
    %Interest Income
    
    $
    26,922
    
    
    
    0.3
    %Interest Expense
    
    $
    (598,691
    )
    
    
    (5.6
    )%Net Income (Loss)
    
    $
    (367,156
    )
    
    
    (3.4
    )%
  Revenues
  Cost of Goods Sold
   19




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Operating Expense
  Interest Income (Expense)
  Cash Flows
 Cash Flow from Operating Activities
  Cash Flow from Investing Activities
  Cash Flow from Financing Activities
  Summary of Critical Accounting Policies
  Revenue Recognition
   20




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Derivative Instruments and Hedging Activities
  Off-balance Sheet Arrangements
  Liquidity and Capital Resources
  Use of Capital
    Sources of Funds
   21




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Research and Development
  Costs and Effects of Compliance with Environmental Laws
   
 Item 3(A)T. Controls And Procedures
   22




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  There are doubts about our ability to continue as a going concern and if we are unable to
continue our business, our units may have little or no value.
 Doubts about our ability to continue as a going concern may make it difficult to obtain
additional funds in the future.
 We are experiencing liquidity issues which could require us to cease operations.
 Our reliance upon REG could damage our profitability if REG is unable to continue its
business.
  23




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REG, the company which is responsible for procuring our inputs, may acquire soybean oil from
parties related to REG.
 
 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.
  Affirmative
    
    
    Against
    
    
    AbstainEdwin Hershberger
    
    
    7237
    
    
    
    75
    
    
    
    715John Heisdorffer
    
    
    6613
    
    
    
    300
    
    
    
    665William Horan
    
    
    5872
    
    
    
    565
    
    
    
    850Jim Hanshaw
    
    
    5781
    
    
    
    1457
    
    
    
    690
   24




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Item 5. Other Information.
  
 Item 6. Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing31.1
    
    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.  25




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SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate: May 15, 2008
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate: May 15, 2008
    /s/ J. William PimJ. William PimChief Financial Officer  26




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EXHIBIT INDEX
 Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing31.1
    
    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
    
    
    *
 
   27