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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, 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
    
    71-0988301(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 3426 EAST 28 TH STREET N.
NEWTON, IOWA 50208
 (641) 791-1010
 þ o
  Large Accelerated Filer o
    
    Accelerated filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting company þ
 o þ




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##### 



INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1. Unaudited Financial Statements
    
    
       3Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    13Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4T. Controls And Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    29Item 1A. Risk Factors
    
    
    29Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Submission of Matters to Security Holders
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURES
    
    
       30Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Unaudited Financial Statements
 CENTRAL IOWA ENERGY, LLC
  December 31,
    
    
    September 30,2008
    
    
    2008(Unaudited)ASSETSCurrent AssetsCash and equivalents
    
    $
    1,145,548
    
    
    $
    690,509Due from Broker
    
    
    9,122
    
    
    
    218,680Trade accounts receivable  related party,
less allowance for doubtful accounts of
$1,021,916 and $0 in 2008 and 2007,
respectively
    
    
    185,223
    
    
    
    1,200,587Federal incentive receivable
    
    
    61,333
    
    
    
    457,218Prepaid expenses
    
    
    61,275
    
    
    
    62,610Derivative instruments
    
    
    402,239
    
    
    
    70,556Inventories
    
    
    2,844,684
    
    
    
    7,776,472Total current assets
    
    
    4,709,424
    
    
    
    10,476,632Property and EquipmentLand and improvements
    
    
    7,680,111
    
    
    
    7,680,111Office equipment
    
    
    40,603
    
    
    
    40,603Office building
    
    
    629,300
    
    
    
    629,300Plant and process equipment
    
    
    32,686,083
    
    
    
    32,593,225Construction in Process
    
    
    
    
    
    
    47,08341,036,097
    
    
    
    40,990,322Less accumulated depreciation
    
    
    4,444,852
    
    
    
    3,798,838Net property and equipment
    
    
    36,591,245
    
    
    
    37,191,484Other AssetsFinancing costs, net of amortization
    
    
    287,076
    
    
    
    307,046Restricted cash
    
    
    400,000
    
    
    
    Total Assets
    
    $
    41,987,745
    
    
    $
    47,975,162LIABILITIES AND EQUITYCurrent LiabilitiesCurrent maturities of long-term debt
    
    $
    24,229,945
    
    
    $
    24,811,856Revolving line of credit
    
    
    1,850,000
    
    
    
    3,000,000Accounts payable
    
    
    180,920
    
    
    
    1,111,983Accounts payable  related party
    
    
    45,420
    
    
    
    423,041Accrued interest payable
    
    
    148,140
    
    
    
    162,146Accrued expenses
    
    
    249,924
    
    
    
    278,012Total current liabilities
    
    
    26,704,349
    
    
    
    29,787,038Long-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
    
    
    (9,310,724
    )
    
    
    (6,405,996
    )Total members equity
    
    
    14,538,396
    
    
    
    17,443,124Total Liabilities and Members Equity
    
    $
    41,987,745
    
    
    $
    47,975,162
  3




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CENTRAL IOWA ENERGY, LLC
  Three Months Ended
    
    
    Three Months EndedDecember 31,
 2008
    
    
    December 31,
 2007(Unaudited)
    
    
    (Unaudited)RevenuesSales to related party
    
    $
    5,097,513
    
    
    $
    14,335,057Federal incentives
    

    
    600,856
    
    
    
    3,476,8245,698,369
    
    
    
    17,811,881Cost of Goods Sold
    
    
    7,485,160
    
    
    
    19,073,941Gross Profit (Loss)
    
    
    (1,786,791
    )
    
    
    (1,262,060
    )Operating ExpensesProfessional fees
    
    
    136,759
    
    
    
    88,604General and administrative
    
    
    433,958
    
    
    
    551,745Total
    
    
    570,717
    
    
    
    640,349Operating Income (Loss)
    
    
    (2,357,508
    )
    
    
    (1,902,409
    )Other Income (Expenses)Interest income
    
    
    4,950
    
    
    
    16,365Interest (expense)
    
    
    (552,170
    )
    
    
    (609,504
    )Total
    
    
    (547,220
    )
    
    
    (593,139
    )Net Profit (Loss)
    
    $
    (2,904,728
    )
    
    $
    (2,495,548
    )Weighted Average Units Outstanding
    
    
    26,672
    
    
    
    26,672Net Income (Loss) Per Unit 
Basic and Diluted
    
    $
    (108.91
    )
    
    $
    (93.56
    )
   4




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CENTRAL IOWA ENERGY, LLC
  Three Months Ended
    
    
    Three Months EndedDecember 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash Flows from Operating ActivitiesNet (loss)
    
    $
    (2,904,728
    )
    
    $
    (2,495,548
    )Adjustments to reconcile net (loss) to net cash provided by
(used in) operating activities:Depreciation and amortization
    
    
    665,984
    
    
    
    637,849Change in assets and liabilitiesDue from Broker
    
    
    209,558
    
    
    
    (1,002,058
    )Accounts receivable
    
    
    1,015,364
    
    
    
    (306,920
    )Other receivable
    
    
    395,885
    
    
    
    13,226Inventories
    
    
    4,931,788
    
    
    
    677,440Prepaid expenses
    
    
    1,335
    
    
    
    (188,140
    )Derivative instruments
    
    
    (331,683
    )
    
    
    1,238,980Accounts payable
    
    
    (1,308,684
    )
    
    
    559,246Accrued expenses
    
    
    (28,088
    )
    
    
    56,673Accrued interest payable
    
    
    (14,006
    )
    
    
    (17,597
    )Net cash provided by (used in) operating activities
    
    
    2,632,725
    
    
    
    (826,849
    )Cash Flows from Investing ActivitiesCapital expenditures
    
    
    (45,775
    )
    
    
    Increase in restricted cash
    
    
    (400,000
    )
    
    
    Sales tax refund from equipment purchases
    
    
    
    
    
    
    461,517Net cash provided by (used in) investing activities
    
    
    (445,775
    )
    
    
    461,517Cash Flows from Financing ActivitiesPayments on revolving line of credit
    
    
    (1,150,000
    )
    
    
    Payments for long-term debt
    
    
    (581,911
    )
    
    
    (499,978
    )Net cash (used in) financing activities
    
    
    (1,731,911
    )
    
    
    (499,978
    )Net Increase (Decrease) in Cash
    
    
    455,039
    
    
    
    (865,310
    )Cash and cash equivalents  Beginning of Period
    
    
    690,509
    
    
    
    2,268,725Cash and cash equivalents  End of Period
    
    $
    1,145,548
    
    
    $
    1,403,415Supplemental Disclosure of Cash Flow Information,Cash payments for interest, net of amount capitalized
    
    $
    546,207
    
    
    $
    617,344
   5




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 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 
   6




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
  INVENTORIES 
 DERIVATIVE INSTRUMENTS  Accounting for Derivative Instruments and Hedging Activities
  PROPERTY AND EQUIPMENT 
  Land improvements
    
    15-20 yearsOffice building
    
    10-20 yearsOffice equipment
    
    5 yearsPlant and process equipment
    
    10-20 years
   7




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CENTRAL IOWA ENERGY, LLC

NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
 FINANCING COSTS 
 FAIR VALUE OF FINANCIAL INSTRUMENTS 
 DEFERRED GRANT FINANCING 
 INCOME TAXES 
 RECLASSIFICATIONS 
 NOTE B: INVENTORIES
  2008
    
    
    2007Raw materials
    
    $
    272,639
    
    
    $
    2,188,134Work in process
    
    
    34,549
    
    
    
    141,182Finished goods
    
    
    2,537,496
    
    
    
    2,890,178Total
    
    $
    2,844,684
    
    
    $
    5,219,494
 NOTE C: RELATED PARTY TRANSACTIONS
   8




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
   NOTE D: REVOLVING LINE OF CREDIT
  NOTE E: LONG-TERM DEBT
  2008Mortgage Term Note payable to F & M Bank  Iowa  See details below
    
    $
    18,802,899Iowa Department of Economic Development  See details below
    
    
    355,000Term 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.
    
    
    72,046$
    24,229,945
   9




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
        NOTE F: RETIREMENT PLAN
  NOTE G: COMMITMENTS AND CONTINGENCIES
 Purchase Contracts
   10




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
 Utility Contracts
    Contingencies
  NOTE H: GOING CONCERN
    11




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CENTRAL IOWA ENERGY, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 2008 and 2007
    
    
    Raising equity through one or more private placement offerings or state registered
offering of the Companys membership units;
    
    Seeking additional sources of short-term debt financing and credit facilities;
    
    Refinancing the current debt financing and credit facilities; or
    
    Seeking strategic business opportunities, including with other biodiesel plants;
     12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results 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 continue to export our biodiesel;
 
    
    The imposition of tariffs or other duties on biodiesel imported into Europe;
 
    
    Current unfavorable domestic and international economic conditions;
 
    
    Our ability to generate profits; and
 
    
    Other factors described elsewhere in this report.
  Overview
  BQ-9000 BQ-9000
   14




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Liquidity and Capital Resources  Liquidity Constraints and Additional
Equity Capital and Debt Financing
 Results of Operations for the Three Months Ended December 31, 2008 and 2007
  Three Months Ended December 31,
    
    
    Three Months Ended December 31,2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    5,698,369
    
    
    
    100.00
    %
    
    $
    17,811,881
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    7,485,160
    
    
    
    131.36
    %
    
    
    19,073,941
    
    
    
    107.09
    %Gross Profit (Loss)
    
    
    (1,786,791
    )
    
    
    (31.36
    %)
    
    
    (1,262,060
    )
    
    
    (7.09
    %)Operating Expenses
    
    
    570,717
    
    
    
    10.01
    %
    
    
    640,349
    
    
    
    3.60
    %Operating Income (Loss)
    
    
    (2,357,508
    )
    
    
    41.37
    %
    
    
    (1,902,409
    )
    
    
    (10.68
    %)Other Income (Expense)
    
    
    (547,220
    )
    
    
    (9.60
    %)
    
    
    (593,139
    )
    
    
    (3.33
    %)Net Income (Loss)
    
    
    (2,904,728
    )
    
    
    (50.97
    %)
    
    
    (2,495,548
    )
    
    
    (14.01
    %)
   16




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Revenues
  Three Months Ended December 31,
    
    
    Three Months Ended December 31,2008
    
    
    2007Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    5,510,837
    
    
    
    97
    %
    
    $
    17,041,991
    
    
    
    96
    %Glycerin Sales
    
    
    98,171
    
    
    
    2
    %
    
    
    639,825
    
    
    
    3
    %Fatty Acid and Soapstock Sales
    
    
    89,361
    
    
    
    1
    %
    
    
    130,065
    
    
    
    1
    %Total Revenues
    
    
    5,698,369
    
    
    
    100
    %
    
    
    17,811,881
    
    
    
    100
    %
     17




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Liquidity and Capital Resources
    18




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Cost of Goods Sold
    19




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Commodity Risk Protection
 Operating Expenses
  Other Income (Expenses)
  Changes in Financial Condition
  December 31,
    
    
    September 30,2008
    
    
    2008Current Assets
    
    $
    4,709,424
    
    
    $
    10,476,632Current Liabilities
    
    $
    26,704,349
    
    
    $
    29,787,038Members Equity
    
    $
    14,538,396
    
    
    $
    17,443,124
 Current Assets
 Current Liabilities
 Members Equity
  21




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Liquidity and Capital Resources
 Cash Flow from Operating Activities .
 Cash Flow from Investing Activities . Liquidity and Capital Resources  Government
Programs and Grants
 Cash Flow from Financing Activities .
 Short Term and Long-Term Debt Sources
  th Wall Street Journal
   22




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
    
    Our failure to pay any installments of principal or interest, fees, expenses charges
or other amounts payable under the financing agreements or to make any deposit of funds
required under the financing agreements;
 
    
    The failure of any representation or warranty made by the Company or its agents in
connection with the financing agreements to be correct in any material respect when
made;
 
    
    Our failure to perform or observe any term, covenant or agreement contained in the
financing agreements;
 
    
    Taking any action prohibited by the financing agreements;
 
    
    Failure to deliver financial statements, compliance certificates or other documents
required to be submitted under the financing agreements within the applicable
timeframes;
 
    
    Our inability to pay our debts as such debts become due, or we admit in writing our
inability to pay our debts generally;
 
    
    An assignment for the general benefit of creditors, or the institution, with respect
to the Company, of any bankruptcy or insolvency proceedings or any proceeding seeking
the liquidation, winding up, reorganization or similar relief, and the failure of any
such proceedings instituted against the Company to be dismissed within a period of 30
days or our authorization of any of these actions;
 
    
    Our dissolution, suspension or discontinuation of doing business; or
 
    
    Our breach or default under, or the termination of, a material contract of the
Company.
  Failure to Comply with Loan Covenants and Events of Default
  th
  24




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th
  
    
    acceleration of the unpaid principal balance under the loan agreements and all
accrued interest thereon and all other amounts payable thereunder;
 
    
    withholding of any one or more advances to which the Company may otherwise be
entitled under the financing agreements, or termination of the lenders obligation to
make any advances under the financing agreements;
 
    
    appointment of a receiver to take possession of the collateral securing the loans
from our lender, including without limitation, our real estate, plant, and equipment;
 
    
    requiring the Company to pledge to the lender as additional security immediately
available funds equal to the maximum amount available to be drawn under all outstanding
letters of credit under our financing agreements;
 
    
    foreclosure on the lenders mortgage on and security interest in the Companys
property securing our loans, including our real estate, improvements, equipment and
other assets and personal property; and
 
    
    any and all other rights and remedies afforded to the Lender under applicable law or
equity.
     25




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Liquidity Constraints and Receipt of Additional Equity Capital and Debt Financing
  
    
    Raising equity through one or more private placement offerings or a state
registered offering of the Companys membership units;
 
    
    Seeking additional sources of short-term debt financing and credit facilities;
 
    
    Refinancing our current debt financing and credit facilities; or
 
    
    Seeking strategic business opportunities, including with other biodiesel plants.
  Failure
to Comply with Loan Covenants and Events of Default.
     26




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Government Programs and Grants
 Short Term and Long-Term Debt Sources Failure to Comply with Loan Covenants and Events of Default
  Commodity Price Risk Protection
     27




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Distribution to Unit Holders
  Critical Accounting Estimates
  Revenue Recognition
  Derivative Instruments and Hedging Activities
 Accounting for Derivative Instruments and
Hedging Activities
 Off-Balance Sheet Arrangements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4T. Controls And Procedures
    28




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  
 Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
 Liquidity and Capital Resources  Failure to Comply with Loan
Covenants and Events of Default
 
 Item 4. Submission of Matters to Security Holders.
  
 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
  29




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SIGNATURES
  CENTRAL IOWA ENERGY, LLCDate: February 17, 2009
    /s/ John E. Van ZeeJohn E. Van ZeePresident and Chief Executive Officer
(Principal Executive Officer)Date: February 17, 2009
    /s/ Kimberly SmithKimberly SmithChief Financial Officer
(Principal Financial and Accounting Officer)  30




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EXHIBIT INDEX
 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
  31