##### Table of Contents



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 June 30, 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 1701 East 7th Street, P.O. Box 2, Washington, Iowa 52353
 (319) 653-2890
 þ o
 o Yes o No
  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
    
    
    11Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    21Item 4. Controls And Procedures
    
    
    21PART II. OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    23Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    23Item 3. Defaults Upon Senior Securities
    
    
    23Item 4. Removed and Reserved
    
    
    23Item 5 Other Information
    
    
    23Item 6. Exhibits
    
    
    23SIGNATURES
    
    
    24Exhibit 3.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Unaudited Financial Statements
 Iowa Renewable Energy, LLC
 Unaudited Balance Sheets
 June 30,
    
    
    September 30,2010
    
    
    2009AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,027,014
    
    
    $
    649,297Due from broker
    
    
    310,390
    
    
    
    477,059Accounts receivable
    
    
    10,338
    
    
    
    1,090,753Federal incentive receivable
    
    
    
    
    
    
    146,182Inventory
    
    
    348,206
    
    
    
    3,265,653Prepaids and other assets
    
    
    37,632
    
    
    
    117,3501,733,580
    
    
    
    5,746,294Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,742,442
    
    
    
    40,742,442Office building, furniture and fixtures
    
    
    572,769
    
    
    
    572,769Equipment and vehicles
    
    
    240,241
    
    
    
    240,24141,975,452
    
    
    
    41,975,452Accumulated
depreciation
    
    
    (7,951,484
    )
    
    
    (5,963,978
    )34,023,968
    
    
    
    36,011,474Other Assets:Cash, restricted by loan agreement
    
    
    1,073,122
    
    
    
    1,201,118Financing costs, net
    
    
    262,773
    
    
    
    339,0651,335,895
    
    
    
    1,540,183$
    37,093,443
    
    
    $
    43,297,951Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    27,470,981
    
    
    $
    30,005,576Accounts payable and accrued expenses
    
    
    337,545
    
    
    
    944,232Derivative financial instruments
    
    
    
    
    
    
    66,762Total current liabilities
    
    
    27,808,526
    
    
    
    31,016,570Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions, net of issuance
costs, units outstanding
June 30, 2010 and September 30, 2009 26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (13,880,505
    )
    
    
    (10,884,041
    )9,284,917
    
    
    
    12,281,381$
    37,093,443
    
    
    $
    43,297,951
   3




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Iowa Renewable Energy, LLC
 Unaudited Statements of Operations
 Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009Revenues:Sales
    
    $
    239,505
    
    
    $
    6,442,542
    
    
    $
    9,047,234
    
    
    $
    17,740,070Federal incentives
    
    
    
    
    
    
    772,524
    
    
    
    187,632
    
    
    
    2,691,060239,505
    
    
    
    7,215,066
    
    
    
    9,234,866
    
    
    
    20,431,130Cost of sales
    
    
    1,101,383
    
    
    
    6,698,271
    
    
    
    11,099,854
    
    
    
    21,179,322Gross profit (loss)
    
    
    (861,878
    )
    
    
    516,795
    
    
    
    (1,864,988
    )
    
    
    (748,192
    )Operating expenses:General and administrative
    
    
    111,545
    
    
    
    353,040
    
    
    
    679,497
    
    
    
    1,022,339Depreciation
    
    
    9,500
    
    
    
    9,500
    
    
    
    28,500
    
    
    
    28,500121,045
    
    
    
    362,540
    
    
    
    707,997
    
    
    
    1,050,839Income
(loss) before other income (expense)
    
    
    (982,923
    )
    
    
    154,255
    
    
    
    (2,572,985
    )
    
    
    (1,799,031
    )Other income (expense):Other income
    
    
    5,424
    
    
    
    5,562
    
    
    
    401,205
    
    
    
    26,788Interest expense
    
    
    (265,574
    )
    
    
    (293,185
    )
    
    
    (824,684
    )
    
    
    (975,123
    )Net (loss)
    
    $
    (1,243,073
    )
    
    $
    (133,368
    )
    
    $
    (2,996,464
    )
    
    $
    (2,747,366
    )Weighted average units outstanding
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,331Net (loss) per unit  basic and diluted
    
    $
    (47.21
    )
    
    $
    (5.07
    )
    
    $
    (113.80
    )
    
    $
    (104.34
    )
   4




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Iowa Renewable Energy, LLC
 Unaudited Statements of Cash Flows
 Nine Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009Cash Flows from Operating Activities:Net (loss)
    
    $
    (2,996,464
    )
    
    $
    (2,747,366
    )Adjustments to reconcile net (loss) to net cash
provided by operating activities:Depreciation
    
    
    1,987,506
    
    
    
    1,987,506Amortization
    
    
    76,292
    
    
    
    76,293Unrealized (gain) loss on derivative financial
instruments
    
    
    (66,762
    )
    
    
    65,511Change in working capital components:(Increase) decrease in due from broker
    
    
    166,669
    
    
    
    (101,141
    )Decrease in accounts receivable
    
    
    1,226,597
    
    
    
    2,929,525Decrease in inventory
    
    
    2,917,447
    
    
    
    2,108,443Decrease in prepaids and other assets
    
    
    79,718
    
    
    
    27,976(Decrease) in accounts payable and accrued expenses
    
    
    (606,687
    )
    
    
    (1,208,165
    )Net cash provided by operating activities
    
    
    2,784,316
    
    
    
    3,138,582Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    
    
    
    
    (58,265
    )(Increase) decrease in cash restricted
    
    
    127,996
    
    
    
    (399,448
    )Net cash (used in) investing activities
    
    
    127,996
    
    
    
    (457,713
    )Cash Flows from Financing Activity,
payment on long-term borrowings
    
    
    (2,534,595
    )
    
    
    (2,572,371
    )Net increase in cash and cash equivalents
    
    
    377,717
    
    
    
    108,498Cash and cash equivalents:Beginning
    
    
    649,297
    
    
    
    189,474Ending
    
    $
    1,027,014
    
    
    $
    297,972Supplemental Disclosure of Cash Flow Information,
cash payments for interest
    
    $
    758,038
    
    
    $
    644,074
   5




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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
 Federal incentive payments and receivables
  6




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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Inventory
 Raw material
    
    $
    105,127Finished goods
    
    
    243,079$
    348,206
 Property and equipment
 YearsPlant and process equipment
    
    
    10 - 20Office building
    
    
    10 - 20Office equipment
    
    
    3 - 7Other equipment
    
    
    3 - 7
   Derivative instruments Derivatives and Hedging
  Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2010
    
    
    June 30, 2009
    
    
    June 30, 2010
    
    
    June 30, 2009Realized (gain) loss
    
    $
    25,818
    
    
    $
    78,732
    
    
    $
    96,378
    
    
    $
    (590,856
    )Change in unrealized (gain) loss
    
    
    (26,360
    )
    
    
    (38,194
    )
    
    
    (66,762
    )
    
    
    65,511Net (gain) loss
    
    $
    (542
    )
    
    $
    40,538
    
    
    $
    29,616
    
    
    $
    (525,345
    )
 Financing costs
  7




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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Revenue recognition
 Cost of sales
 Three Months ended 6/30/10
    
    
    Three Months ended 6/30/09
    
    
    Nine Months Ended 6/30/10
    
    
    Nine Months Ended 6/30/09Cost of Revenue/Sales
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soybean oil, animal fats,
chemicals, etc.)
    
    $
    227,783
    
    
    
    20.68
    %
    
    $
    5,123,683
    
    
    
    76.49
    %
    
    $
    7,944,529
    
    
    
    71.57
    %
    
    $
    17,272,714
    
    
    
    81.55
    %Plant wages and salaries
    
    
    68,848
    
    
    
    6.25
    
    
    
    204,265
    
    
    
    3.05
    
    
    
    251,267
    
    
    
    2.26
    
    
    
    579,133
    
    
    
    2.73Utilities and waste disposal
    
    
    48,259
    
    
    
    4.38
    
    
    
    350,838
    
    
    
    5.24
    
    
    
    395,218
    
    
    
    3.56
    
    
    
    876,620
    
    
    
    4.14Fees-procurement, operation mgmt
    
    
    
    
    
    
    
    
    
    
    33,541
    
    
    
    0.50
    
    
    
    34,250
    
    
    
    0.31
    
    
    
    90,938
    
    
    
    0.43(Gain) loss on derivative
financial instruments
    
    
    (542
    )
    
    
    (0.05
    )
    
    
    40,538
    
    
    
    0.61
    
    
    
    29,616
    
    
    
    0.27
    
    
    
    (525,345
    )
    
    
    (2.48
    )Depreciation
    
    
    653,002
    
    
    
    59.29
    
    
    
    653,002
    
    
    
    9.75
    
    
    
    1,959,006
    
    
    
    17.65
    
    
    
    1,959,006
    
    
    
    9.25Maintenance, supplies and
other expenses
    
    
    104,033
    
    
    
    9.45
    
    
    
    292,404
    
    
    
    4.36
    
    
    
    485,968
    
    
    
    4.38
    
    
    
    926,256
    
    
    
    4.38Total cost of revenue/sales
    
    $
    1,101,383
    
    
    
    100.00
    %
    
    $
    6,698,271
    
    
    
    100.00
    %
    
    $
    11,099,854
    
    
    
    100.00
    %
    
    $
    21,179,322
    
    
    
    100.00
    %
 Shipping and handling costs
 Income taxes
 Earnings (loss) per unit
 Note 2. Major Customer and Commitment
     8




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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
  Note 3. Long-Term Debt
 Note payable to MLIC Asset Holdings, LLC (A)
    
    $
    27,142,668Note payable to the Iowa Department of Economic Development
(B)
    
    
    80,000Note payable to the Iowa Department of Transportation (C)
    
    
    248,313$
    27,470,981
  (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. The note bears variable interest at prime plus 0.25% (3.50%
as of June 30, 2010) and is due in monthly principal and interest payments of $373,000.
 (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, 2010 of $80,000. 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 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.
 (C)
    
    The Company has a $132,000 loan agreement and a $168,000 forgivable loan agreement with
the Iowa Department of Transportation/Rail Development. The $132,000 loan bears an interest
rate of 3.67% for five years, due in semi-annual payments of $14,569 beginning December
2008 for a term of five years with a balance as of June 30, 2010 of $80,313. Borrowing
under this agreement is collateralized by substantially all of the Companys assets and is
not subordinate to the $34,715,000 of financial institution debt. The $168,000 loan is
forgivable at the end of the five year term provided all payments were made on the $132,000
loan.
    9




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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Note 4. Contingencies
  Note 5. Going Concern
     10




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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 Renewable Fuels Standard (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;
      11




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Overview
    12




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13




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Results of Operations for the Three Months Ended June 30, 2010 and 2009
  Three Months Ended
    
    
    Three Months EndedJune 30, 2010 (Unaudited)
    
    
    June 30, 2009 (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    239,505
    
    
    
    100.00
    %
    
    $
    7,215,066
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    1,101,383
    
    
    
    459.86
    %
    
    
    6,698,271
    
    
    
    92.84
    %Gross Profit (Loss)
    
    
    (861,878
    )
    
    
    (359.86
    %)
    
    
    516,795
    
    
    
    7.16
    %Operating Expenses
    
    
    121,045
    
    
    
    50.54
    %
    
    
    362,540
    
    
    
    5.02
    %Operating Income (Loss)
    
    
    (982,923
    )
    
    
    (410.40
    %)
    
    
    154,255
    
    
    
    2.14
    %Interest Income
    
    
    5,424
    
    
    
    2.26
    %
    
    
    5,562
    
    
    
    0.07
    %Interest Expense
    
    
    (265,574
    )
    
    
    (110.88
    %)
    
    
    (293,185
    )
    
    
    (4.06
    %)Net (Loss)
    
    
    (1,243,073
    )
    
    
    (519.02
    %)
    
    
    (133,368
    )
    
    
    (1.85
    %)
  Revenues
  Three Months Ended
    
    
    Three Months EndedJune 30, 2010
    
    
    June 30, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    239,505
    
    
    
    100.0
    %
    
    $
    6,961,248
    
    
    
    96.5
    %Glycerin Sales
    
    
    
    
    
    
    
    
    
    
    100,142
    
    
    
    1.4
    %Fatty Acid and
Soapstock Sales
    
    
    
    
    
    
    
    
    
    
    153,676
    
    
    
    2.1
    %Total Sales Revenue
    
    $
    239,505
    
    
    
    100.0
    %
    
    $
    7,215,066
    
    
    
    100.0
    %
    14




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15




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Cost of Goods Sold
     16




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Operating Expenses
  Other Income (Expenses)
  Results of Operations for the Nine Months Ended June 30, 2010 and 2009
  Nine Months Ended June 30, 2010
    
    
    Nine Months Ended June 30, 2009(Unaudited)
    
    
    (Unaudited)Income Statement Data
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentRevenues
    
    $
    9,234,866
    
    
    
    100.00
    %
    
    $
    20,431,130
    
    
    
    100.00
    %Cost of Goods Sold
    
    
    11,099,854
    
    
    
    120.20
    %
    
    
    21,179,322
    
    
    
    103.66
    %Gross (Loss)
    
    
    (1,864,988
    )
    
    
    (20.20
    %)
    
    
    (748,192
    )
    
    
    (3.66
    %)Operating Expenses
    
    
    707,997
    
    
    
    7.67
    %
    
    
    1,050,839
    
    
    
    5.15
    %Operating (Loss)
    
    
    (2,572,985
    )
    
    
    (27.86
    %)
    
    
    (1,799,031
    )
    
    
    (8.81
    %)Other Income
    
    
    401,205
    
    
    
    4.34
    %
    
    
    26,788
    
    
    
    0.13
    %Interest Expense
    
    
    (824,684
    )
    
    
    (8.93
    %)
    
    
    (975,123
    )
    
    
    (4.77
    %)Net Loss
    
    
    (2,996,464
    )
    
    
    (32.45
    %)
    
    $
    (2,747,366
    )
    
    
    (13.45
    %)
  17




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Revenues
  Nine Months Ended June 30, 2010
    
    
    Nine Months Ended June 30, 2009Revenue Source
    
    Amount
    
    
    % of Revenues
    
    
    Amount
    
    
    % of RevenuesBiodiesel Sales
    
    $
    9,008,578
    
    
    
    97.5
    %
    
    $
    19,769,573
    
    
    
    96.8
    %Glycerin Sales
    
    
    169,511
    
    
    
    1.8
    %
    
    
    421,304
    
    
    
    2.0
    %Fatty Acid and
Soapstock Sales
    
    
    56,777
    
    
    
    0.7
    %
    
    
    240,253
    
    
    
    1.2
    %Total Revenues
    
    $
    9,234,866
    
    
    
    100.0
    %
    
    $
    20,431,130
    
    
    
    100.0
    %
  Cost of Goods Sold
  Operating Expense
  Interest Expense
  Changes in Financial Condition for the Three Months Ended June 30, 2010
  June 30, 2010
    
    
    September 30, 2009Current Assets
    
    $
    1,733,580
    
    
    $
    5,746,294Total Assets
    
    $
    37,093,443
    
    
    $
    43,297,951Current Liabilities
    
    $
    27,808,526
    
    
    $
    31,016,570Members Equity
    
    $
    9,284,917
    
    
    $
    12,281,381
  18




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Current Assets
  Current Liabilities
  Members Equity
  Liquidity and Capital Resources
 Cash Flow from Operating Activities
  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
   19




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Grants and Government Programs
   Additional Debt Financing
   20




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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
  
 Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4.
    
    Controls And Procedures
   21




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##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings.
      22




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##### Table of Contents



Item 1A.
    
    Risk Factors.
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3.
    
    Defaults Upon Senior Securities.
  
 Item 4.
    
    (Removed and Reserved).
 
 Item 5.
    
    Other Information.
  
 Item 6.
    
    Exhibits
  Exhibit
    
    
    
    Method ofNo.
    
    Description
    
    Filing3.2
    
    
    Second Amended and Restated Operating Agreement
    
    
    *10.1
    
    
    Management Services Agreement between WMG Services
LLC and Iowa Renewable Energy, LLC dated January
27, 2010.+
    
    
    131.1
    
    
    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.(1)
    
    Incorporated by reference to the quarterly report on Form 10-Q filed on February 16, 2010.(+)
    
    Confidential Treatment Requested.  23




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##### Table of Contents



SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate: August 16, 2010
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate: August 16, 2010
    /s/ J. William PimJ. William PimChief Financial Officer  24