##### 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, 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
    
    
    24Item 6. Exhibits
    
    
    24SIGNATURES
    
    
    25Exhibit 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 30,2008
    
    
    2007AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,332,443
    
    
    $
    725,522Cash  restricted by loan agreement
    
    
    1,015,862
    
    
    
    Due from Broker
    
    
    518,588
    
    
    
    1,337,860Accounts receivable
    
    
    4,137,111
    
    
    
    5,614,315Federal incentive receivable
    
    
    405,514
    
    
    
    822,228Inventory
    
    
    6,386,623
    
    
    
    3,815,722Prepaids and other assets
    
    
    4,628
    
    
    
    37,03213,800,769
    
    
    
    12,352,679Property and Equipment:Land
    
    
    420,000
    
    
    
    420,000Plant and processing equipment
    
    
    40,673,235
    
    
    
    41,464,111Office building, furniture and fixtures
    
    
    572,632
    
    
    
    572,665Equipment and vehicles
    
    
    226,424
    
    
    
    226,42441,892,291
    
    
    
    42,683,200Accumulated depreciation
    
    
    (2,651,468
    )
    
    
    (663,962
    )39,240,823
    
    
    
    42,019,238Other Assets, financing costs, net
    
    
    466,221
    
    
    
    542,513$
    53,507,813
    
    
    $
    54,914,430Liabilities and Members EquityCurrent Liabilities:Current maturities of long-term debt
    
    $
    34,054,762
    
    
    $
    33,342,558Accounts payable and accrued expenses
    
    
    2,537,040
    
    
    
    1,374,711Derivative financial instruments
    
    
    219,790
    
    
    
    510,247Construction retainage
    
    
    
    
    
    
    300,000Total current liabilities
    
    
    36,811,592
    
    
    
    35,527,516Long-Term Debt
    
    
    
    
    
    
    CommitmentsMembers Equity:Member contributions, net of issuance
costs, units
outstanding of $26,331
    
    
    23,165,422
    
    
    
    23,165,422Accumulated (deficit)
    
    
    (6,469,201
    )
    
    
    (3,778,508
    )16,696,221
    
    
    
    19,386,914$
    53,507,813
    
    
    $
    54,914,430
   3




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Iowa Renewable Energy, LLC
 Unaudited Statements of Operations
Three and Nine Month Periods Ended June 30, 2008 and 2007
 Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2008
    
    
    June 30, 2007
    
    
    June 30, 2008
    
    
    June 30, 2007Revenues:Sales
    
    $
    19,285,520
    
    
    $
    
    
    
    $
    39,692,204
    
    
    $
    Federal incentives
    
    
    1,358,243
    
    
    
    
    
    
    
    4,506,229
    
    
    
    20,643,763
    
    
    
    
    
    
    
    44,198,433
    
    
    
    Cost of sales
    
    
    20,202,262
    
    
    
    (228,057
    )
    
    
    44,083,029
    
    
    
    (228,057
    )Gross profit
    
    
    441,501
    
    
    
    228,057
    
    
    
    115,404
    
    
    
    228,057Operating expenses:General and administrative
    
    
    439,936
    
    
    
    241,447
    
    
    
    1,037,853
    
    
    
    440,970Depreciation
    
    
    9,500
    
    
    
    381
    
    
    
    28,500
    
    
    
    1,142449,436
    
    
    
    241,828
    
    
    
    1,066,353
    
    
    
    442,112(Loss) before other income
(expense)
    
    
    (7,935
    )
    
    
    (13,771
    )
    
    
    (950,949
    )
    
    
    (214,055
    )Other income (expense):Interest income
    
    
    18,610
    
    
    
    57,261
    
    
    
    72,556
    
    
    
    196,092Interest expense
    
    
    (480,327
    )
    
    
    
    
    
    
    (1,812,300
    )
    
    
    Net income (loss)
    
    $
    (469,652
    )
    
    $
    43,490
    
    
    $
    (2,690,693
    )
    
    $
    (17,963
    )Weighted average units outstanding
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,331
    
    
    
    26,210Net income (loss) per unit  basic and diluted
    
    $
    (17.84
    )
    
    $
    1.65
    
    
    $
    (102.19
    )
    
    $
    (0.69
    )
   4




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Iowa Renewable Energy, LLC
 Unaudited Statements of Cash Flows
Nine Months Ended June 30, 2008 and 2007
 June 30, 2008
    
    
    June 30, 2007Cash Flows from Operating Activities:Net (loss)
    
    $
    (2,690,693
    )
    
    $
    (17,963
    )Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities:Depreciation
    
    
    1,987,506
    
    
    
    1,142Amortization
    
    
    76,292
    
    
    
    Unrealized (gain) or loss on derivative financial instruments
    
    
    (290,457
    )
    
    
    1,220,690Change in working capital components:(Increase) decrease in due from broker
    
    
    819,272
    
    
    
    (2,448,748
    )Decrease in accounts receivable
    
    
    1,893,918
    
    
    
    (Increase) in inventory
    
    
    (2,570,901
    )
    
    
    (1,174,856
    )(Increase) decrease in prepaids and other assets
    
    
    32,404
    
    
    
    (27,573
    )Increase in accounts payable and accrued expenses
    
    
    1,162,329
    
    
    
    412,242Net cash provided by (used in) operating activities
    
    
    419,670
    
    
    
    (2,035,066
    )Cash Flows from Investing Activities:Purchase and construction of property and equipment
    
    
    (322,546
    )
    
    
    (27,001,564
    )Sales tax and utility refund from construction of property and
equipment
    
    
    813,455
    
    
    
    (Increase) decrease in cash restricted
    
    
    (1,015,862
    )
    
    
    6,263,792Net cash (used in) investing activities
    
    
    (524,953
    )
    
    
    (20,737,772
    )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
    
    
    
    25,852,075Payment on long-term borrowings
    
    
    (1,305,238
    )
    
    
    (40,000
    )Net cash provided by financing activities
    
    
    712,204
    
    
    
    25,809,560Net increase in cash and cash equivalents
    
    
    606,921
    
    
    
    3,036,722Cash and cash equivalents:Beginning
    
    
    725,522
    
    
    
    473,505Ending
    
    $
    1,332,443
    
    
    $
    3,510,227
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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
    
    $
    3,576,070Finished goods
    
    
    2,405,039Deposits on inventory in transit
    
    
    405,514$
    6,386,623
 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
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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Three Months Ended June 30,
    
    
    Nine Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Realized (gain) loss
    
    $
    (83,503
    )
    
    $
    (1,448,747
    )
    
    $
    1,785,735
    
    
    $
    (1,448,747
    )Change in unrealized (gain) loss
    
    
    395,930
    
    
    
    1,220,690
    
    
    
    (290,457
    )
    
    
    1,220,690Net (gain) loss
    
    $
    312,427
    
    
    $
    (228,057
    )
    
    $
    1,495,278
    
    
    $
    (228,057
    )
 Financing costs
 Revenue recognition
 Cost of sales
 Three Months ended June 30, 2008
    
    
    Nine Months Ended June 30, 2008Cost of Revenue/Sales
    
    Dollars
    
    
    Percentage
    
    
    Dollars
    
    
    PercentageInput costs (soybean oil, animal fats, chemicals, etc.)
    
    $
    18,209,472
    
    
    
    90.14
    %
    
    $
    38,045,120
    
    
    
    86.30
    %Plant wages and salaries
    
    
    252,149
    
    
    
    1.25
    
    
    
    762,398
    
    
    
    1.73Utilities and waste disposal
    
    
    555,272
    
    
    
    2.75
    
    
    
    1,103,881
    
    
    
    2.50Fees-procurement, operation mgmt
    
    
    106,849
    
    
    
    0.53
    
    
    
    255,914
    
    
    
    0.58Loss on derivative financial instruments
    
    
    312,427
    
    
    
    1.55
    
    
    
    1,495,278
    
    
    
    3.39Depreciation
    
    
    653,002
    
    
    
    3.23
    
    
    
    1,959,006
    
    
    
    4.44Maintenance, supplies and other expenses
    
    
    113,091
    
    
    
    0.55
    
    
    
    461,432
    
    
    
    1.06Total cost of revenue/sales
    
    $
    20,202,262
    
    
    
    100.00
    %
    
    $
    44,083,029
    
    
    
    100.00
    %
 Shipping and handling costs
 Income taxes
 Earnings (loss) per unit
 Reclassifications
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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Note 2. Major Customer
    Note 3. Long-Term Debt
  Note payable to Marshall Bank Group for construction loan (A)
    
    $
    33,454,762Note payable to the Iowa Department of Economic Development (B)
    
    
    300,000Note payable to the Iowa Department of Transportation (C)
    
    
    300,000$
    34,054,762
 (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 0.75% (5.25%
as of June 30, 2008).Debt service reserve: Commencing one month following the conversion date, the
Company shall make monthly deposits to a debt service reserve until such time as the balance
equals $1,319,265. Monthly deposits shall consist of not less than one-third of all
available monthly projected EBITDA.Capital improvements reserve: Commencing one month after the conversion date, the
Company shall make deposits into a custodial account held by the Lender. The fund will be
used to fund capital improvements. During the term of the loan, the capital improvements
reserve must be maintained at $125,000.Sinking fund: Commencing one month after the conversion date, one-third of all
monthly projected EBITDA shall be applied to reduce loan principal. At the point the
outstanding principal loan balance is reduced to $20,182,750 no additional sinking fund
deposits will be required.(B)
    
    The Company has a $300,000 loan agreement and a $100,000 forgivable loan agreement with
the Iowa Department of Economic Development. The $300,000 loan is noninterest-bearing and
due in monthly payments of $5,000 beginning December 2006 for a term of 60 months with a
balance as of June 30, 2008 of $200,000. 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.The $100,000 loan will be forgiven if the Company complies with certain employment and
production criteria defined in the agreement. In the event of noncompliance or default, the
loan will be repaid over a two year period starting with the date of noncompliance,
including interest at 6%.(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, 2008 of $132,000. 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. Lease Commitments and Additional Contingencies
  Year ending September 30:2008
    
    $
    8,2172009
    
    
    32,8682010
    
    
    3,300$
    44,385
   Note 5. Related Party Transactions
    10




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Iowa Renewable Energy, LLC
Notes to Unaudited Financial Statements
 Note 6. Pending Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115
 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB statement No. 133
 Note 7. Going Concern
    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 agricultural, oil or transportation industries;
    
    Changes in the availability and price of natural gas;
    
    Any potential financial instability of our marketing and management company;
    
    Changes in the price of petroleum diesel;
    
    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 while
waiting for payments from our biodiesel sales.
    
    
    Entering into strategic opportunities with other biodiesel plants;
 
    
    Continued scaled back biodiesel production, rather than the increased production
we anticipate;
 
    
    Continued temporary shutdowns 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;
 
    
    Selling our preprocessed animal fats to biodiesel plants that do not have the
technology to process animal fats; or
 
    
    Amend our term loan with the bank to allow interest only payments.
  13




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Plan of Operations for the Next 12 Months
 Plant Operations
  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.
 Operating Budget and Financing of Plant Operations
    14




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Administration and Employees
  Trends and Uncertainties Impacting the Biodiesel Industry and Our Future Operations
     15




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agri-biodiesel, RISK FACTORS
    16




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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
    17




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Results of Operations for the Three Months Ended June 30, 2008
 Financial Summary and Analysis of the Quarter Ended June 30, 2008
  Quarter EndedJune 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    20,643,763
    
    
    
    100.00
    %Cost of Sales
    
    $
    20,202,262
    
    
    
    97.86
    %Gross Profit
    
    $
    441,501
    
    
    
    2.14
    %Operating Expense
    
    $
    449,436
    
    
    
    2.18
    %Operating Income (Loss)
    
    $
    (7,935
    )
    
    
    (0.04
    )%Interest Income
    
    $
    18,610
    
    
    
    0.09
    %Interest Expense
    
    $
    (480,327
    )
    
    
    (2.33
    )%Net Income (Loss)
    
    $
    (469,652
    )
    
    
    (2.28
    )%
   18




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Revenues
  Cost of Goods Sold
   Operating Expense
  Interest Income (Expense)
  Results of Operations for the Nine Months Ended June 30, 2008
 Financial Summary and Analysis of the Nine Months Ended June 30, 2008
  Nine Months EndedJune 30, 2008Income Statement Data
    
    Amount
    
    
    PercentRevenues
    
    $
    44,198,433
    
    
    
    100.00
    %Cost of Sales
    
    $
    44,083,029
    
    
    
    99.74
    %Gross Profit
    
    $
    115,404
    
    
    
    0.26
    %Operating Expense
    
    $
    1,066,353
    
    
    
    2.42
    %Operating Income (Loss)
    
    $
    (950,949
    )
    
    
    (2.16
    )%Interest Income
    
    $
    72,556
    
    
    
    0.16
    %Interest Expense
    
    $
    (1,812,300
    )
    
    
    (4.10
    )%Net Income (Loss)
    
    $
    (2,690,693
    )
    
    
    (6.10
    )%
  19




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Revenues
  Cost of Goods Sold
  Operating Expense
  Interest Income (Expense)
  Cash Flows
 Cash Flow from Operating Activities
  Cash Flow from Investing Activities
  Cash Flow from Financing Activities
   20




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Summary of Critical Accounting Policies
  Revenue Recognition
  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.
 Form 10-KSB Form 10-KSB.
 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. non-compliance
 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.
 Because of the high cost of soybean oil, we are attempting to use other feedstocks to produce
our biodiesel, which may have risks and disadvantages of which we are not yet fully aware.
 An investigation by the European Commission into whether the U.S. biodiesel industry has been engaging in unfair trade practices could lead to the imposition of duties or tariffs on
biodiesel imported into Europe, which could cause a significant decrease in our
revenues.
  23




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The VEETC, a federal biodiesel tax credit on which we currently rely could expire on December
31, 2008, causing a material adverse affect on our future 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.
  
 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.  24




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SIGNATURES
  IOWA RENEWABLE ENERGY, LLCDate: August 14, 2008
    
    /s/ Michael BohannanMichael BohannanChairman and PresidentDate: August 14, 2008
    
    /s/ Ron LutovskyRon LutovskyChief Financial Officer
  25




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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
    
    *
 (*)
    
    Filed herewith.  26