##### Table of Contents



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 June 30, 2007
 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.
    
    Financial Statements
    
    
    3Item 2.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    12PART II. OTHER INFORMATION
    
    
    22Item 1.
    
    Legal Proceedings
    
    
    22Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.
    
    Defaults Upon Senior Securities
    
    
    22Item 4.
    
    Submission of Matters to Security Holders
    
    
    22Item 5.
    
    Other Information
    
    
    22Item 6.
    
    Exhibits
    
    
    23SIGNATURES
    
    
    23Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Iowa Renewable Energy, LLC
(A Development Stage Company)
 Unaudited Balance Sheet
 June 30,
    
    
    September 30,2007
    
    
    2006AssetsCurrent Assets:Cash and cash equivalents
    
    $
    3,510,227
    
    
    $
    473,505Cash, restricted by loan agreement
    
    
    4,000,000
    
    
    
    Due from Broker
    
    
    2,448,748
    
    
    
    Inventory
    
    
    1,174,856
    
    
    
    Prepaids and other assets
    
    
    27,573
    
    
    
    11,161,404
    
    
    
    473,505Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Construction in progress
    
    
    41,467,473
    
    
    
    15,065,424Office equipment
    
    
    8,986
    
    
    
    2,325Equipment
    
    
    4,566
    
    
    
    4,56641,901,025
    
    
    
    15,492,315Accumulated depreciation
    
    
    (2,602
    )
    
    
    (1,460
    )41,898,423
    
    
    
    15,490,855Other Assets:Cash, restricted for construction of property and equipment
    
    
    
    
    
    
    10,263,792Financing costs, net
    
    
    567,945
    
    
    
    83,245567,945
    
    
    
    10,347,037$
    53,627,772
    
    
    $
    26,311,397Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    60,000
    
    
    $
    40,000Accounts payable and accrued expenses
    
    
    591,984
    
    
    
    10,345Derivative financial instruments
    
    
    1,220,690
    
    
    
    Construction payable, including retainage of
June 2007 $2,006,336; September 2006 $737,500
    
    
    3,289,458
    
    
    
    4,119,524Total current liabilities
    
    
    5,162,132
    
    
    
    4,169,869Long-Term Debt
    
    
    26,152,075
    
    
    
    360,000CommitmentsMembers Equity:Member contributions, net of issuance costs, units
outstanding June 2007 26,331; September 2006 25,231
    
    
    23,165,422
    
    
    
    22,615,422(Deficit) accumulated during the development stage
    
    
    (851,857
    )
    
    
    (833,894
    )22,313,565
    
    
    
    21,781,528$
    53,627,772
    
    
    $
    26,311,397
   3




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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Unaudited Statements of Operations
 April 14, 2005Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine Months
    
    
    (Date ofEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Expenses:Consulting fees
    
    
    
    
    
    
    616
    
    
    
    
    
    
    
    344,365
    
    
    
    457,344Project coordinator
    
    
    1,440
    
    
    
    13,000
    
    
    
    27,514
    
    
    
    31,000
    
    
    
    71,810General and administrative
    
    
    240,007
    
    
    
    7,375
    
    
    
    413,456
    
    
    
    27,009
    
    
    
    464,988Equity based compensation
    
    
    
    
    
    
    225,000
    
    
    
    
    
    
    
    375,000
    
    
    
    600,000Depreciation
    
    
    381
    
    
    
    349
    
    
    
    1,142
    
    
    
    1,047
    
    
    
    2,602241,828
    
    
    
    246,340
    
    
    
    442,112
    
    
    
    778,421
    
    
    
    1,596,744(Loss) before other income
    
    
    (241,828
    )
    
    
    (246,340
    )
    
    
    (442,112
    )
    
    
    (778,421
    )
    
    
    (1,596,744
    )Other income:Gain on derivative financial instruments, net
    
    
    228,057
    
    
    
    
    
    
    
    228,057
    
    
    
    
    
    
    
    228,057Interest
    
    
    57,261
    
    
    
    113,188
    
    
    
    196,092
    
    
    
    119,877
    
    
    
    516,830Net income (loss)
    
    $
    43,490
    
    
    $
    (133,152
    )
    
    $
    (17,963
    )
    
    $
    (658,544
    )
    
    $
    (851,857
    )Weighted average units outstanding
    
    
    26,331
    
    
    
    18,845
    
    
    
    26,210
    
    
    
    9,098
    
    
    
    18,461Net income (loss) per unit  basic and diluted
    
    $
    1.65
    
    
    $
    (7.07
    )
    
    $
    (0.69
    )
    
    $
    (72.38
    )
    
    $
    (46.14
    )
   4




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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Unaudited Statements of Members Equity (Deficit)
For Period from April 14, 2005 (Date of Inception) to  June 30, 2007
 Balance, April 14, 2005 (date of inception)
    
    $
    Issuance of 220 membership units at $500 per unit
in September 2005
    
    
    110,000Net (loss)
    
    
    (112,961
    )Balance (deficit), September 30, 2005
    
    
    (2,961
    )Issuance of 260 membership units at $500 per unit
in October 2005
    
    
    130,000Issuance of 500 membership units for consulting services
in October 2005
    
    
    250,000Issuance of 4,880 membership units at $500 per unit
in November 2005
    
    
    2,440,000Issuance of 19,371 membership units at $1,000 per
unit in May 2006
    
    
    19,371,000Offering costs
    
    
    (285,578
    )Amortization of equity based compensation
    
    
    600,000Net (loss)
    
    
    (720,933
    )Balance, September 30, 2006
    
    
    21,781,528Net (loss)
    
    
    (17,963
    )Issuance of 1,100 membership units at $500 per unit
October 2006
    
    
    550,000Balance, June 30, 2007
    
    $
    22,313,565
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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Unaudited Statements of Cash Flows
 April 14, 2005Nine Months
    
    
    Nine Months
    
    
    (Date ofEnded
    
    
    Ended
    
    
    Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2006Cash Flows from Operating Activities:Net (loss)
    
    $
    (17,963
    )
    
    $
    (658,544
    )
    
    $
    (851,857
    )Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,142
    
    
    
    1,047
    
    
    
    2,602Units issued for consulting services
    
    
    
    
    
    
    250,000
    
    
    
    250,000Equity based compensation
    
    
    
    
    
    
    375,000
    
    
    
    600,000Unrealized loss on derivative financial instruments
    
    
    1,220,690
    
    
    
    
    
    
    
    1,220,690Change in working capital components:(Increase) in due from broker
    
    
    (2,448,748
    )
    
    
    
    
    
    
    (2,448,748
    )(Increase) in inventory
    
    
    (1,174,856
    )
    
    
    
    
    
    
    (1,174,856
    )(Increase) in prepaids and other assets
    
    
    (27,573
    )
    
    
    
    
    
    
    (27,573
    )Increase in accounts payable and accrued expenses
    
    
    412,242
    
    
    
    (1,358
    )
    
    
    422,587Net cash provided by (used in) operating activities
    
    
    (2,035,066
    )
    
    
    (33,855
    )
    
    
    (2,007,155
    )Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    (27,001,564
    )
    
    
    (2,145,924
    )
    
    
    (38,374,355
    )(Increase) decrease in cash restricted
    
    
    6,263,792
    
    
    
    
    
    
    
    (4,000,000
    )Net cash (used in) investing activities
    
    
    (20,737,772
    )
    
    
    (2,145,924
    )
    
    
    (42,374,355
    )Cash Flows from Financing Activities:Issuance of membership units
    
    
    550,000
    
    
    
    21,941,000
    
    
    
    22,601,000Payments for offering costs
    
    
    
    
    
    
    (274,760
    )
    
    
    (285,578
    )Payments for financing costs
    
    
    (552,515
    )
    
    
    (25,000
    )
    
    
    (635,760
    )Proceeds from short-term borrowings
    
    
    
    
    
    
    
    
    
    
    1,052,146Payment on short-term borrowings
    
    
    
    
    
    
    25,000
    
    
    
    (1,052,146
    )Payment on long-term borrowings
    
    
    (40,000
    )
    
    
    
    
    
    
    (40,000
    )Proceeds from long-term borrowings
    
    
    25,852,075
    
    
    
    
    
    
    
    26,252,075Net cash provided by financing activities
    
    
    25,809,560
    
    
    
    21,666,240
    
    
    
    47,891,737Net increase in cash and cash equivalents
    
    
    3,036,722
    
    
    
    19,486,461
    
    
    
    3,510,227Cash and cash equivalents:Beginning
    
    
    473,505
    
    
    
    9,710
    
    
    
    Ending
    
    $
    3,510,227
    
    
    $
    19,496,171
    
    
    $
    3,510,227Supplemental Disclosure of Noncash Operating and
Financing Activities:Construction in progress included in accounts payable
    
    $
    3,289,458
    
    
    $
    
    
    
    $
    3,289,458Amortized financing costs included in construction in process
    
    
    67,815
    
    
    
    
    
    
    
    67,815Accrued interest included in construction in process
    
    
    169,397
    
    
    
    
    
    
    
    169,397
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Iowa Renewable Energy, LLC
(A Development Stage Company)
 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
 Inventory
 Derivative instruments
  7




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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Notes to Unaudited Financial Statements
  Financing costs
 Property and equipment
 YearsOffice equipment
    
    3 - 7Equipment
    
    3 - 7Lab equipment
    
    7 - 20Buildings
    
    20 - 40
  Income taxes
 Earnings (loss) per unit
 Unit options Accounting for Stock Issued to Employees,
 Accounting for Stock-Based
Compensation, .
  8




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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Notes to Unaudited Financial Statements
   April 14, 2005Three Months
    
    
    Nine Months
    
    
    (Date ofEnded
    
    
    Ended
    
    
    Inception) toJune 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2006
    
    
    2007Net Loss:As Reported
    
    $
    (133,152
    )
    
    $
    (658,544
    )
    
    $
    (853,710
    )Deduct total stock-based compensation expense
determined under the minimum value based
method for all awards
    
    
    (6,546
    )
    
    
    (10,910
    )
    
    
    (17,456
    )Pro forma
    
    $
    (139,698
    )
    
    $
    (669,454
    )
    
    $
    (871,166
    )Loss per unit:As reported
    
    $
    (7.07
    )
    
    $
    (72.38
    )
    
    $
    (46.14
    )Pro forma
    
    
    (7.41
    )
    
    
    (73.58
    )
    
    
    (47.19
    )
 Share-Based Payment
 Note 2. Members Equity
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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Notes to Unaudited Financial Statements
   Note 3. Long-Term Debt
  Note payable to Marshall Bank Group for construction loan (A)
    
    $
    26,152,075Note payable to the Iowa Department of Economic Development (B)
    
    
    360,00026,512,075Less current maturities
    
    
    60,000$
    26,452,075
 
 (A)
    
    On October 26, 2006, the Company entered into a $34,715,000 construction-term loan
agreement which will be used to complete the biodiesel project. The loan consists of two
phases: a construction phase where the Company will make periodic requests for fund
advances to meet construction obligations and at the completion of construction the loan
will convert to a senior debt instrument. The note bears interest at prime plus .75%
(9.00% as of June 30, 2007).(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 June 30, 2007 of $275,000. 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 is forgivable upon the completion of 36
months of the 60 month term.  Note 4. Lease Commitments
  Note 5. Commitments and Contingencies
   10




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Iowa Renewable Energy, LLC
(A Development Stage Company)
 Notes to Unaudited Financial Statements
   Note 6. Working Capital Reserve (Hedge)
   11




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Item 2. Managements Discussion and Analysis or Plan of Operations
 Forward Looking Statements
  
    
    Overcapacity within the biodiesel industry;
    
    Availability and costs of feedstock, particularly vegetable oils and animal fats;
    
    Changes in the price and market for biodiesel and glycerin;
    
    Our ability to market and our reliance on third parties to market our products;
    
    Actual biodiesel and glycerin production varying from expectations;
    
    Changes in or elimination of governmental laws, tariffs, trade or other controls or
enforcement practices such as national, state or local energy policy; federal biodiesel tax
incentives; or environmental laws and regulations that apply to our plant operations and
their enforcement;
    
    Changes in the weather or general economic conditions impacting the availability and
price of vegetable oils and animal fats;
    
    Total U.S. consumption of diesel;
    
    Weather changes, strikes, transportation or production problems causing supply
interruptions or shortages affecting the availability and price of feedstock;
    
    Changes in plant production capacity or technical difficulties in operating the plant;
    
    Results of our hedging strategies;
    
    Changes in our business strategy, capital improvements or development plans;
    
    Changes in interest rates or the availability of credit;
    
    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;
    
    Changes and advances in biodiesel production technology;
    
    Competition from alternative fuels; and
    
    Other factors described elsewhere in this report.
  12




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Overview
       Plan of Operations for the Next 12 Months
   13




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Plant Operations
   Permitting
  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;
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
    
    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.
   
    
    To utilize their ongoing best efforts to successfully and profitably manage
the plant in our best interests;
    
    Development of 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;
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
    
    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 USDAs biodiesel programs; and
    
    Such other duties as may be agreed upon.
   
    
    Planning and scheduling 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
    
    Such other duties as may be agreed upon.
  
    
    Monthly Fee. For the first six months in which our biodiesel is sold, we will
pay a monthly fee of 5.7 cents per gallon of biodiesel sold by REG. For the
first month after the initial period, we will pay 5.7 cents per gallon for any biodiesel
that was produced but not sold during the initial period in addition to 5.7 cents per
gallon for all biodiesel we produced in the first month after the initial period.
Thereafter, we will pay a monthly fee of 5.7 cents per gallon of biodiesel produced at our
plant.
    
    Net Income Bonus. We will pay an annual bonus to REG based on the amount of our
annual net income, as that term is defined in the agreement. REGs bonus may range from 0%
to 6% of our annual net income, depending on our performance, but will not exceed the
amount of $1,000,000.
 th
  Administration and Employees
   16




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Trends and Uncertainties Impacting the Biodiesel Industry and Our Operations
 Growth and Increased Competition in the Biodiesel Industry
 If biodiesel production capacity continues to expand
at its current pace, and demand does not grow to meet the available supply, excess production
capacity will result.
   
    
    there were 148 active plants with an annual production capacity of 1.39 billion
gallons annually;
    
    another 96 plants are currently under construction and an additional 5 plants
are expanding their existing operations;
    
    the additional combined capacity of these plants under construction is
estimated at 1.89 billion gallons per year;
    
    biodiesel plants are operating or have been proposed in at least 46 states; and
    
    currently, there are 12 operating biodiesel plants in Iowa.
   17




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Increased Prices and Decreased Production of Feedstock
  Critical Accounting Estimates
  Off-balance Sheet Arrangements
  Liquidity and Capital Resources
   18




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Use of Capital
   Sources of Funds
  Percent ofSource of Funds
    
    
    
    
    
    TotalMember Equity, Intrastate Offering ($1,000 per unit)
    
    $
    19,371,000
    
    
    
    33.56
    %Member Equity, Directors Exercised Options ($500 per unit)
    
    $
    550,000
    
    
    
    0.95
    %Member Equity, Seed Capital ($500 per unit)
    
    $
    2,680,000
    
    
    
    4.65
    %Debt Financing
    
    $
    34,715,000
    
    
    
    60.15
    %Loan/Grant Funding (IDED)
    
    $
    400,000
    
    
    
    0.69
    %Total Sources of Funds
    
    $
    57,716,000
    (1)
    
    
    100.00
    %
 
 (1)
    
    This amount excludes no cash equity compensation recognized by our company in connection with
the units paid to The Biodiesel Group as compensation under their consulting agreement with
the company and its directors unit option plan. Equity Financing
  Debt Financing
 The Wall Street Journal The Wall Street Journal The Wall Street Journal
  19




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Government Programs and Grants
   20




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Factored Receivables
  Research and Development
  Costs and Effects of Compliance with Environmental Laws
   Item 3. Controls And Procedures
    21




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  The decreasing availability and increasing price of soybean oil may hinder our ability to
profitably produce biodiesel and may result in plant shut downs and decreased revenues.
  
 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.
  
 Item 5. Other Information.
   22




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Item 6. Exhibits
  Exhibit
    
    
    
    MethodNo.
    
    Description
    
    of Filing10.1
    
    Amendment to Management and
Operational Services Agreement, dated August 3, 2007
    
    *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. 
 SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate:
August 14, 2007
    
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate:
August 14, 2007
    
    /s/ J. William PimJ. William PimTreasurer
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