##### 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, 2006
 OR
 o
    
    Transition report under Section 13 or 15(d) of the Exchange Act.
 For the transition period from _______ to _________
 Commission file number 000-51965
 WESTERN IOWA ENERGY, LLC
  Iowa
    
    41-2143913(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 1220 S. CENTER STREET, P.O. BOX 399
WALL LAKE, IOWA 51466
 (712) 664-2173
 £ T
  £ T
   £ T




---



##### Table of Contents



INDEX
 Page No.PART I. FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Item 2.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    15Item 3.
    
    Controls and Procedures
    
    
    23PART II. OTHER INFORMATION
    
    
    23Item 1.
    
    Legal Proceedings
    
    
    23Item 1A.
    
    Risk Factors
    
    
    24Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    25Item 3.
    
    Defaults Upon Senior Securities
    
    
    25Item 4.
    
    Submission of Matters to Security Holders
    
    
    25Item 5.
    
    Other Information
    
    
    25Item 6.
    
    Exhibits
    
    
    25Statused Revolving Credit Supplement AgreementIndustry Track AgreementAssignment and Pledge AgreementLetter AgreementSection 302 CertificationSection 302 CertificationSection 1350 CertificationSection 1350 Certification
 2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 WESTERN IOWA ENERGY, LLC
BALANCE SHEET
June 30, 2006
 ASSETSCURRENT ASSETSCash
    
    $
    58,647Trade accounts receivable  related party
    
    
    489,107Incentive receivable
    
    
    144,478Other receivables  related party
    
    
    90,000Inventory
    
    
    3,987,796Prepaid expenses
    
    
    18,500Total current assets
    
    
    4,788,528PROPERTY, PLANT AND EQUIPMENTLand and land improvements
    
    
    1,285,784Office building
    
    
    556,929Office equipment
    
    
    70,775Plant and process equipment
    
    
    21,777,112Construction in progress
    
    
    11,044,722Total, at cost
    
    
    34,735,322Less accumulated depreciation
    
    
    296,406Total property, plant and equipment
    
    
    34,438,916OTHER ASSETSLand options
    
    
    596Other investments
    
    
    2,000Loan origination fees, net of accumulated amortization of $5,205
    
    
    132,691Total other assets
    
    
    135,287TOTAL ASSETS
    
    $
    39,362,731LIABILITIES AND MEMBERS EQUITYCURRENT LIABILITIESAccounts payable:Trade
    
    $
    1,030,826Related party
    
    
    13,872Construction  related party
    
    
    1,981,728Current portion of long-term debt
    
    
    1,365,000Accrued interest
    
    
    91,156Accrued wages
    
    
    14,039Accrued payroll taxes
    
    
    22,484Total current liabilities
    
    
    4,519,105LONG-TERM LIABILITIESLong-term debt, less current portion above
    
    
    12,493,674Total liabilities
    
    
    17,012,779MEMBERS EQUITYContributed capital
    
    
    22,516,376Accumulated deficit
    
    
    (166,424
    )Total members equity
    
    
    22,349,952TOTAL LIABILITIES AND MEMBERS EQUITY
    
    $
    39,362,731
 
 3




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
STATEMENTS OF OPERATIONS
 Three Months
    
    
    Six Months
    
    
    Three Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2006
    
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2005REVENUESRelated parties
    
    $
    489,107
    
    
    $
    489,107
    
    
    $
    
    
    
    $
    Incentive funds
    
    
    144,478
    
    
    
    144,478
    
    
    
    
    
    
    
    633,585
    
    
    
    633,585
    
    
    
    
    
    
    
    Cost of Sales
    
    
    491,581
    
    
    
    491,581
    
    
    
    
    
    
    
    Gross profit
    
    
    142,004
    
    
    
    142,004
    
    
    
    
    
    
    
    OPERATING EXPENSESOrganization costs
    
    
    
    
    
    
    
    
    
    
    20,303
    
    
    
    42,534Consulting and professional fees
    
    
    48,005
    
    
    
    89,703
    
    
    
    3,211
    
    
    
    35,273Office and administrative expenses
    
    
    127,462
    
    
    
    240,805
    
    
    
    19,407
    
    
    
    53,030Total operating expenses
    
    
    175,467
    
    
    
    330,508
    
    
    
    42,921
    
    
    
    130,837OTHER INCOME (EXPENSE)Interest and dividend income
    
    
    3,853
    
    
    
    39,499
    
    
    
    91,853
    
    
    
    92,747Interest expense
    
    
    (48
    )
    
    
    (186
    )
    
    
    (187
    )
    
    
    (322
    )Gain on sale of asset
    
    
    2,800
    
    
    
    2,800
    
    
    
    
    
    
    
    Other income
    
    
    5,000
    
    
    
    15,300
    
    
    
    7,225
    
    
    
    9,725Total other income
    
    
    11,605
    
    
    
    57,413
    
    
    
    98,891
    
    
    
    102,150NET INCOME (LOSS)
    
    $
    (21,858
    )
    
    $
    (131,091
    )
    
    $
    55,970
    
    
    $
    (28,687
    )BASIC AND DILUTEDEARNINGS (LOSS) PER UNIT
    
    $
    (1
    )
    
    $
    (5
    )
    
    $
    26
    
    
    $
    (11
    )WEIGHTED AVERAGE UNITSOUTSTANDING, BASICAND DILUTED
    
    
    25,447
    
    
    
    25,447
    
    
    
    2,159
    
    
    
    2,577
 
 4




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
STATEMENTS OF CASH FLOWS
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2006
    
    
    June 30, 2005CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (131,091
    )
    
    $
    (28,687
    )Adjustments to reconcile net loss to net cashused in operating activitiesDepreciation and amortization
    
    
    297,272
    
    
    
    5,154Gain on sale of asset
    
    
    (2,800
    )
    
    
    Effects of changes in operating assets and liabilitiesPrepaid legal expenses
    
    
    
    
    
    
    25,235Trade accounts receivable  related party
    
    
    (489,107
    )
    
    
    Incentive receivable
    
    
    (144,478
    )
    
    
    Other receivables  related party
    
    
    (90,000
    )
    
    
    Inventory
    
    
    (3,987,796
    )
    
    
    Prepaid expenses
    
    
    (18,500
    )
    
    
    Accounts payable
    
    
    1,044,436
    
    
    
    (23,798
    )Accrued interest
    
    
    91,156
    
    
    
    Accrued wages
    
    
    14,039
    
    
    
    Accrued payroll taxes
    
    
    21,445
    
    
    
    655Net cash used in operating activities
    
    
    (3,395,424
    )
    
    
    (21,441
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment
    
    
    (15,351,816
    )
    
    
    (64,314
    )Deposits on construction costs
    
    
    
    
    
    
    (900,000
    )Proceeds from sale of asset
    
    
    33,600
    
    
    
    Purchase of land options
    
    
    
    
    
    
    (1,000
    )Purchase of capital stock of lenders
    
    
    
    
    
    
    (1,000
    )Net cash used in investing activities
    
    
    (15,318,216
    )
    
    
    (966,314
    )CASH FLOWS FROM FINANCING ACTIVITIESLoan origination fees
    
    
    (2,307
    )
    
    
    (135,000
    )Cost of raising capital
    
    
    
    
    
    
    (194,185
    )Proceeds from long-term debt
    
    
    13,858,674
    
    
    
    28,105Payments on long-term debt
    
    
    (19,775
    )
    
    
    (3,759
    )Capital contributions
    
    
    
    
    
    
    21,749,950Net cash provided by financing activities
    
    
    13,836,592
    
    
    
    21,445,111NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (4,877,048
    )
    
    
    20,457,356CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    4,935,695
    
    
    
    660,390CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    58,647
    
    
    $
    21,117,746
 
 5




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
June 30, 2006
  USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS
  BASIS OF ACCOUNTING
    REVENUE RECOGNITION
  CASH AND CASH EQUIVALENTS
  ACCOUNTS RECEIVABLE
   6




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
June 30, 2006
 DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   PROPERTY, PLANT, AND EQUIPMENT
   YearsLand improvements
    
    
    20-40Office building
    
    
    5-40Office equipment
    
    
    5-20Plant and process equipment
    
    
    10-40
    LOAN ORIGINATION FEES
  7




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
June 30, 2006
 OTHER INVESTMENTS
  OTHER INCOME
  INCOME TAXES
  EARNINGS PER UNIT
  COST OF SALES
  SHIPPING AND HANDLING COSTS
  8




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 1  INCENTIVE RECEIVABLE
  NOTE 2  INVENTORY
   Raw material
    
    $
    1,274,886Work in progress
    
    
    1,340,692Finished goods
    
    
    1,372,218Total
    
    $
    3,987,796
 NOTE 3  LAND OPTION
  NOTE 4  LONG-TERM DEBT AND FINANCING
  Note payable to the Iowa Department of Economic Development  see details below.
    
    $
    400,000Notes payable to Farm Credit Services of America and CoBank  see details below.
    
    
    13,458,674Total
    
    
    13,858,674Less current portion
    
    
    1,365,000Long-term portion
    
    $
    12,493,674
 9




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 4  LONG-TERM DEBT AND FINANCING
  2007
    
    $
    1,365,0002008
    
    
    1,830,0002009
    
    
    1,840,2212010
    
    
    1,847,4922011
    
    
    1,849,038Thereafter
    
    
    5,126,923Total
    
    $
    13,858,674
     10




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 5  MEMBERS EQUITY AND SUBSEQUENT EVENT
      NOTE 6  CONCENTRATION OF CREDIT RISK
  11




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 7 - CASH FLOW DISCLOSURES
  Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005Cash paid for interest, net of capitalized interest of
$258,946 for 2006
    
    $
    186
    
    
    $
    322
  Six Months Ended
    
    
    Six Months EndedJune 30, 2006
    
    
    June 30, 2005Construction in progress in accounts payable
    
    $
    1,981,728
    
    
    $
    
 NOTE 8  RELATED PARTY TRANSACTIONS
     NOTE 9  COMMITMENTS AND CONTINGENCIES
   12




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 9  COMMITMENTS AND CONTINGENCIES
  
    
    $14,000 per month in pre-production fees for the General Manager and $11,000
for the Operations Manager beginning three months prior to the estimated start up date for
production and ceasing after payment of the fees for the month in which product is produced
for sale.
    
    Management fees equal to one and one-third cents per gallon of biodiesel
produced.
    
    Feed stock procurement fees equal to one-tenth of a cent per pound of feed
stock procured for production.
    
    Chemical input procurement fee equal to one-fifth of a cent per gallon of biodiesel produced.
    
    Biodiesel marketing fees equal to one cent per each gallon of biodiesel sold.
    
    Glycerin and fatty acids fee equal to one-fifth cent per gallon of biodiesel sold.
    
    A yearly net income bonus equal to six percent of the Companys adjusted net
income. Adjusted net income is defined as the Companys net income for the fiscal year
before any deduction or allowance for income taxes, determined in accordance with generally
accepted accounting principles. Net income is also adjusted to exclude the following: the
receipt of government payments under bioenergy and related programs, gains or losses
realized on the sale or disposition of capital assets and any reduction for the income
bonus paid or accrued to West Central as part of the agreement. The cost of soybean oil
purchased during the year and used in the production of bio-diesel is a component in
calculating net income. The fluctuation between the market price and the contract price
prior to delivery of soybean oil on a contract does not affect the calculation of the
income bonus to West Central.
  NOTE 10  LEASE COMMITMENTS
  2007
    
    $
    35,4112008
    
    
    35,4112009
    
    
    35,4112010
    
    
    35,4112011
    
    
    35,410Total
    
    $
    177,054
 13




---



##### Table of Contents



WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
June 30, 2006
 NOTE 11  FAIR VALUE OF FINANCIAL INSTRUMENTS
  14




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operations
 Forward Looking Statements
  
    
    Competition with other manufacturers in the biodiesel industry;
    
    Overcapacity within the biodiesel industry;
    
    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;
    
    Changes in the price and market for biodiesel and its co-products;
    
    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 biodiesel tax incentives;-
    legislation establishing a renewable fuel standard or other legislation mandating the use of biodiesel or other oxygenate 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 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;
    
    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;
 15




---



##### Table of Contents




    
    Competition from alternative fuels and alternative fuel additives; and
    
    Other factors described elsewhere in this report.
  Overview
       Plan of Operations for the Next 12 Months
  16




---



##### Table of Contents



Plant Operations
   
    
    General Manager and Operations Manager Pre-Production Fee.$14,000 per month for
the General Managers services and $11,000 per month for the Operations Managers services
during pre-production. West Central Cooperative did not provide us
with an Operation Manager during Pre-Production.
    
    General Manager and Operations Manager. We will pay $0.0133 per gallon of
biodiesel produced per month from the plant during the month for which the fee is
computed.
    
    Feedstocks Procurement Fee. We will pay 1/10 of $0.01 per pound of feedstock
procured payable monthly.
    
    Chemical Procurement Fee. We will pay 1/5 of $0.01 per gallon of biodiesel produced payable monthly.
    
    Biodiesel Marketing Fees. We will pay $0.01 for each gallon of biodiesel marketed.
    
    Glycerin and Fatty Acids Marketing Fee. We will pay 1/5 of $0.01 for each
gallon of biodiesel marketed as a glycerin and fatty acids marketing fee.
    
    Net Income Bonus. We will pay a yearly income bonus equal to 6% of our net
income as defined in the agreement.
   17




---



##### Table of Contents



Completion of Construction
   Procurement of Inputs and Marketing of Finished Product
  Feedstocks Procurement
 
    
    Provide analysis and audit of feedstock suppliers;
    
    Purchase feedstock at competitive prices meeting specifications and in
adequate quantities to fill the production schedule of our plant;
    
    Review on a monthly basis the average prices we pay for feedstocks, including
comparisons to industry averages;
    
    Provide us with the specifications for feedstocks being required of suppliers;
 18




---



##### Table of Contents




    
    Negotiate for discounts where obtainable on feedstocks;
    
    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;
    
    Provide us with the specifications for chemical inputs being required of suppliers;
    
    Purchase chemical inputs at competitive prices meeting specifications for use in our plant;
    
    Review on a monthly basis the average prices we paid for chemical inputs,
including comparisons to industry averages;
    
    Negotiate for discounts where obtainable on chemicals;
    
    Procure adequate chemical inputs to meet our production schedules;
    
    Provide analysis and audit of bulk transportation suppliers; 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 West Central developed biodiesel distribution channels;
    
    Analysis and audit of biodiesel customers including for creditworthiness;
    
    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;
    
    Where advantageous, arrange for leased tankers for rail shipments;
    
    Analyze and audit bulk transportation providers;
    
    Oversee reconciliation of shipments, invoicing and payments on a weekly basis; and
    
    Provide invoicing and accounts receivable management for biodiesel shipments.
  Administration and Employees
  Trends and Uncertainties Impacting the Biodiesel Industry and Our Future Operations
  19




---



##### Table of Contents




    
    additional rail capacity and rail 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.
  20




---



##### Table of Contents



Critical Accounting Estimates
  Off-balance Sheet Arrangements
  Liquidity and Capital Resources
  Use of Capital
   Sources of Funds
  21




---



##### Table of Contents



Debt
Financing
   th
 Issuance
of Additional Units
  Grants
and Government Programs
  
    
    Authority to receive a property tax abatement from the City of Wall Lake at
85% of the tax on the property without the abatement for 15 years followed by
an abatement at 75% of the tax on the property with the abatement for 5 years.
    
    An investment tax credit equal to $2,990,400 (this Iowa tax credit may be
passed through to unit holders and carried forward for up to 7 years by them
until depleted);
    
    Funding for training new employees through a supplemental new jobs
withholding credit equal to one and one-half percent (1.5%) of the gross wages
of the new jobs created by the project; and
    
    A refund of one hundred percent (100%) of the sales, service and use taxes
paid to contractors and subcontractors during the construction phase of the
project (excluding local option sales taxes on intangible property, furniture
and furnishings).
 22




---



##### Table of Contents



Research and Development
  Costs and Effects of Compliance with Environmental Laws
   
 Item 3. Controls and Procedures
    
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  23




---



##### Table of Contents



Item 1A. Risk Factors.
  Any operational disruption in our facility could result in a reduction of our sales volumes and
could cause us to incur substantial losses.
  Growth in the sale and distribution of biodiesel is dependent on the changes to and expansion of
related infrastructure which may not occur on a timely basis, if at all, and our operations could
be adversely affected by infrastructure disruptions.
  
    
    additional rail capacity and rail 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.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  24




---



##### Table of Contents



Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters to Security Holders.
  Total Outstanding Membership Units:
    
    
    15,998Units Voting for 7 Director Seats:
    
    
    11,206Units Voted for 9 Director Seats:
    
    
    3,024Units Voted for 12 Director Seats:
    
    
    651Disqualified Votes:
    
    
    1,117
 
 Item 5. Other Information.
  
 Item 6. Exhibits.
  Exhibit No.
    
    Exhibit10.1
    
    Statused Revolving Credit Supplement Agreement between Farm Credit Services, FLCA and Western
Iowa Energy dated August 3, 2006.10.2
    
    Industry Track Agreement between Chicago Central and Pacific Railroad Company and Western
Iowa Energy, LLC dated June 5, 2006.10.3
    
    Assignment and Pledge Agreement10.4
    
    Letter Agreement between Renewable Energy Group, LLC and Western Iowa Energy, LLC regarding
the issuance of 1,000 membership units to Renewable Energy Group, LLC.31.1
    
    Certificate Pursuant to 17 CFR 240.12(a)-14(a)31.2
    
    Certificate Pursuant to 17 CFR 240.12(a)-14(a)32.1
    
    Certificate Pursuant to 18 U.S.C. Section 135032.2
    
    Certificate Pursuant to 18 U.S.C. Section 1350
 25




---



##### Table of Contents



SIGNATURES
  WESTERN IOWA ENERGY, LLCDate   8/18/06

/s/ John GeakeJohn GeakePresident and Chief Executive Officer
(Principal Executive Officer)Date
8/18/06
    /s/ Warren BushWarren BushTreasurer
(Principal Financial and Accounting Officer) 26