Western Iowa Energy, L.L.C. 10-Q 2009 Q3 Quarterly report

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 fiscal quarter ended September 30, 2009.

OR

o Transition report under Section 13 or 15(d) of the Exchange Act.

For the transition period from                    to                    .

COMMISSION FILE NUMBER 00051965

WESTERN IOWA ENERGY, LLC

(Exact name of registrant as specified in its charter)

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
(Address of principal executive offices)

(712) 664-2173
(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.þ Yeso No

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). þ Yeso No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large Accelerated Filero Accelerated Filero Non-Accelerated Filerþ Smaller Reporting Companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).o Yesþ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

As of October 1, 2009, there were 26,447 membership units outstanding.

INDEX

PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis or Plan of Operation	20
Item 3. Quantitative and Qualitative Disclosures About Market Risks	29
Item 4T. Controls and Procedures	31
PART II — OTHER INFORMATION	31
Item 1. Legal Proceedings	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3. Defaults Upon Senior Securities	33
Item 4. Submission of Matters to a Vote of Security Holders	33
Item 5. Other Information	33
Item 6. Exhibits	33
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN IOWA ENERGY, LLC

BALANCE SHEETS

	September 30,		December 31,
	2009		2008
	(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	75,706	$	66,400
Margin deposits		139,712		285,295
Derivative instruments		23,958		61,360
Trade accounts receivable — related party		2,606,423		1,428,521
Other receivables		115,678		163,470
Incentive receivables		215,882		312,019
Inventory		3,224,747		4,510,457
Prepaid expenses		211,892		222,476
Total current assets		6,613,998		7,049,998
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements		1,364,842		1,364,842
Office building and equipment		645,542		645,542
Plant and process equipment		33,827,128		33,683,185
Construction in progress		9,610		17,513
Total, at cost		35,847,122		35,711,082
Less accumulated depreciation		7,114,439		5,451,621
Total property, plant and equipment		28,732,683		30,259,461
OTHER ASSETS
Land options		596		596
Other investments		107,198		80,895
Loan origination fees, net of amortization		73,878		87,451
Total other assets		181,672		168,942
TOTAL ASSETS	$	35,528,353	$	37,478,401
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Accounts payable:
Trade	$	1,417,637	$	794,345
Related party		103,379		28,480
Current portion of long-term debt		1,909,722		2,729,110
Accrued interest		21,582		33,372
Accrued wages and benefits		108,039		71,570
Accrued payroll taxes		4,267		4,059
Accrued expenses — related party		14,656		117,620
Other current liabilities		50,473		46,079
Total current liabilities		3,629,755		3,824,635
LONG-TERM LIABILITIES
Long-term debt, less current portion above		4,740,277		6,725,056
Total liabilities		8,370,032		10,549,691
MEMBERS’ EQUITY
Contributed capital		23,516,376		23,516,376
Retained earnings		3,641,945		3,412,334
Total members’ equity		27,158,321		26,928,710
TOTAL LIABILITIES AND MEMBERS’ EQUITY	$	35,528,353	$	37,478,401

See accompanying notes.

3

WESTERN IOWA ENERGY, LLC

STATEMENTS OF OPERATIONS(UNAUDITED)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2009			September 30, 2008			September 30, 2009			September 30, 2008
REVENUES
Related parties	$	16,026,679		$	24,164,179		$	28,848,407		$	63,421,838
Incentive funds		1,011,205			2,074,436			3,055,599			8,447,601
Total revenues		17,037,884			26,238,615			31,904,006			71,869,439
COST OF SALES		15,430,919			24,146,046			30,222,543			65,524,809
Gross profit		1,606,965			2,092,569			1,681,463			6,344,630
OPERATING EXPENSES
Consulting and professional fees		152,300			40,238			526,936			205,823
Office and administrative expenses		389,135			537,128			1,019,562			1,480,403
Total operating expenses		541,435			577,366			1,546,498			1,686,226
OTHER INCOME (EXPENSE)
Interest income		1,338			3,782			2,690			8,561
Interest expense		(79,356	)		(141,206	)		(256,303	)		(642,379	)
Grant income		131,525			—			231,525			—
Patronage dividends		—			—			116,734			156,404
Total other income (expense)		53,507			(137,424	)		94,646			(477,414	)
NET INCOME	$	1,119,037		$	1,377,779		$	229,611		$	4,180,990
BASIC AND DILUTED EARNINGS PER UNIT	$	42.31		$	52.10		$	8.68		$	158.09
WEIGHTED AVERAGE UNITS OUTSTANDING, BASIC AND DILUTED		26,447			26,447			26,447			26,447

See accompanying notes.

4

WESTERN IOWA ENERGY, LLC

STATEMENTS OF CASH FLOWS(UNAUDITED)

	Nine Months Ended			Nine Months Ended
	September 30, 2009			September 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	229,611		$	4,180,990
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		1,676,391			1,651,444
Provision for bad debts		—			58,424
Non cash portion of patronage dividends		(26,303	)		(47,085	)
Non cash forgiveness of debt		(100,000	)		—
Effects of changes in operating assets and liabilities
Margin deposits		145,583			632,694
Trade accounts receivable — related party		(1,177,902	)		3,517,057
Other receivables		47,792			(177,024	)
Incentive receivables		96,137			81,211
Inventory		1,285,710			1,098,532
Derivative instruments		37,402			(2,107,872	)
Prepaid expenses and other assets		10,584			(170,571	)
Accounts payable		698,191			(2,070,516	)
Accrued interest		(11,790	)		(55,295	)
Accrued wages and benefits		36,469			35,339
Accrued payroll taxes		208			1,614
Accrued expenses — related party		(102,964	)		266,872
Other current liabilities		4,394			37,444
Net cash provided by operating activities		2,849,513			6,933,258
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment, including construction in progress		(136,040	)		(266,254	)
Net cash used in investing activities		(136,040	)		(266,254	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on revolving line of credit		—			(3,800,000	)
Proceeds from long-term debt		9,077,000			4,582,566
Payments on long-term debt		(11,781,167	)		(7,176,733	)
Net cash used in financing activities		(2,704,167	)		(6,394,167	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		9,306			272,837
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		66,400			32,048
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	75,706		$	304,885

See accompanying notes.

5

WESTERN IOWA ENERGY, LLC

NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Western Iowa Energy, LLC located in Wall Lake, Iowa was organized on September 21, 2004 to own and operate a 30 million gallon biodiesel plant for the production of fuel grade biodiesel. The Company’s fiscal year ends on December 31. Significant accounting policies followed by the Company are presented below.

Use of Estimates in Preparing Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Basis of Accounting

The Company uses the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. This method recognizes revenues as earned and expenses as incurred.

In the opinion of management, all adjustments have been made that are necessary to fairly present the financial position, results of operations and cash flows of the Company.

These financial statements should be read in conjunction with the financial statements and notes included in the Company’s financial statements for the year ended December 31, 2008.

Revenue Recognition

Revenue from the production of biodiesel and related products is recorded upon transfer of the risks and rewards of ownership and delivery to customers. Interest income is recognized as earned. Patronage dividends are recognized when received.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company maintains its accounts primarily at one financial institution. At times throughout the year, the Company’s cash and equivalents balances may exceed amounts insured by the Federal Deposit Insurance Corporation.

6

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Accounts Receivable

Accounts receivable are presented at face value, net of the allowance for doubtful accounts. The allowance for doubtful accounts is established through provisions charged against income and is maintained at a level believed adequate by management to absorb estimated bad debts based on historical experience and current economic conditions. Management has established an allowance for doubtful accounts of $105,712 at September 30, 2009 and December 31, 2008.

The Company’s policy is to charge simple interest on trade receivables past due balances; accrual of interest is discontinued when management believes collection is doubtful. Receivables are considered past due based upon payment terms set forth at the date of the related sale. The Company has no receivables accruing interest at September 30, 2009 and December 31, 2008.

Derivative Instruments and Hedging Activities

SFAS No. 133, which was primarily codified into Topic 815,Derivatives and Hedging,in the ASC (Accounting Standards Codification), requires a company to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted from ASC 815 as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchase or normal sales are documented as such, and exempted from the accounting and reporting requirements of ASC 815. The Company has entered into agreements to purchase soybean oil for anticipated production needs. These contracts are considered normal purchase contracts and exempted from ASC 815.

Inventories

Inventory is stated at the lower of cost, determined on a first in, first out basis, or market value.

Property, Plant, and Equipment

Property and equipment are stated at cost. Significant additions are capitalized, while expenditures for maintenance, repairs and minor renewals are charged to operations when incurred.

Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets determined as follows:

	Years
Land improvements		20–40
Office building		5–40
Office equipment		5–20
Plant and process equipment		10–40

7

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Property, Plant, and Equipment(Continued)

The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset may not be recoverable. An impairment loss is recorded when the sum of the future cash flows is less than the carrying amount of the asset. The amount of the loss is determined by comparing the fair market values of the asset to the carrying amount of the asset.

Loan Origination Fees

Loan origination fees are stated at cost and are amortized on the straight-line method over the life of the loan agreements. Amortization commenced as the Company borrowed funds on the loans. Amortization for the three and nine months ended September 30, 2009 and 2008 was $4,524 and $13,573, respectively.

Other Investments

Other investments consist of investments in the capital stock and patron equities of the Company’s primary lenders. The investments are stated at cost and adjusted for non cash patronage equities received.

Other Income

Other income consists of amounts received from unaffiliated organizations to assist in the organization and development of the Company. Amounts are recorded as other income when there is no obligation to repay the organization.

Income Taxes

The Company is organized as a limited liability company under state law and is treated as a partnership for income tax purposes. Under this type of organization, the Company’s earnings pass through to the partners and are taxed at the partner level. Accordingly, no income tax provision has been calculated. Differences between financial statement basis of assets and tax basis of assets is related to capitalization and amortization of organization and start-up costs for tax purposes, whereas these costs are expensed for financial statement purposes, and the difference between the recorded amounts of financial statement and tax depreciation.

Earnings (Loss) Per Unit

Earnings (loss) per unit are calculated based on the period of time units have been issued and outstanding. For purposes of calculating diluted earnings per capital unit, units subscribed for but not issued are included in the computation of outstanding capital units based on the treasury stock method. As of September 30, 2009 and 2008, there was not a difference between basic and diluted earnings per unit as there were no units subscribed.

8

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Cost of Sales

The primary components of cost of sales from the production of biodiesel products are, raw materials (soybean oil, animal fats, hydrochloric acid, methanol, and sodium methylate), energy (natural gas and electricity), labor and depreciation on process equipment.

Shipping and Handling Costs

Shipping and handling costs are expensed as incurred and are included in the cost of sales.

Environmental Liabilities

The Company’s operations are subject to federal, state and local environmental laws and regulations. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its location. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health, and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage; and to limit the financial liability which could result from such events. Environmental liabilities are recorded when the liability is probable and the costs can be reasonably estimated.

Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:

Current assets and current liabilities— The carrying value approximates fair value due to the short maturity of these items.

Long-term debt— The carrying amount of long-term obligations approximated fair value based on estimated interest rates for comparable debt.

New Accounting Standards

In June 2009, the FASB issued SFAS No. 168,The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which was primarily codified into Topic 105,Generally Accepted Accounting Standards,in the ASC. This standard will become the single source of authoritative nongovernmental U.S. generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. This standard reorganizes the thousands of GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included is the relevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections. This guidance will be effective for financial statements issued for reporting periods that end after September 15, 2009. Beginning in the third quarter of 2009, this guidance impacts the Company’s financial statements and related disclosures as all references to authoritative accounting literature reflect the newly adopted codification.

9

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

New Accounting Standards(Continued)

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities- an amendment of SFAS No. 133, which was primarily codified into Topic 815,Derivatives and Hedging,in the ASC. This guidance expands the disclosures about an entity’s derivative and hedging activities. The guidance was effective for fiscal years and interim periods beginning after November 15, 2008, which was January 1, 2009 for the Company. The Company’s enhanced disclosures are included in Note 12.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1 and APB 28-1,Interim Disclosures about Fair Value of Financial Instruments, which was primarily codified into Topic 825,Financial Instruments,in the ASC. This standard extends the disclosure requirements concerning the fair value of financial instruments to interim financial statements of publicly traded companies. This guidance is effective for interim or annual financial periods ending after June 15, 2009. The Company adopted the guidance as of April 1, 2009. The adoption of ASC 825 did not have a material effect on its financial statements and related disclosures.

In May 2009, the FASB issued SFAS No. 165,Subsequent Events, which was primarily codified into Topic 855,Subsequent Events,in the ASC. This guidance establishes principles and requirements for subsequent events. Specifically, it sets forth guidance pertaining to the period after the balance sheet date during which management should consider events or transactions for potential recognition or disclosure, circumstances under which an event or transaction would be recognized after the balance sheet date and the required disclosures that should be made about events or transactions that occurred after the balance sheet date. This guidance is effective for interim or annual financial periods ending after June 15, 2009. The Company adopted the guidance as of April 1, 2009. The adoption of ASC 855 did not have a material effect on its financial statements and related disclosures.

NOTE 2 — INCENTIVE PAYMENTS AND RECEIVABLE

Revenue from federal incentive programs is recorded when the Company has sold blended biodiesel and satisfied the reporting requirements under the applicable program. When it is uncertain that the Company will receive full allocation and payment due under the federal incentive program, it derives an estimate of the incentive revenue for the relevant period based on various factors including the most recently used payment factor applied to the program. The estimate is subject to change as management becomes aware of increases or decreases in the amount of funding available under the incentive programs or other factors that affect funding or allocation of funds under such programs. The amount of incentives receivable at September 30, 2009 and December 31, 2008 was $215,882 and $312,019, respectively.

10

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 3 — INVENTORY

Inventory consists of the following:

	September 30,		December 31,
	2009		2008
Raw material	$	635,389	$	496,028
Work in process		508,026		541,530
Finished goods		2,081,332		3,472,899
Total	$	3,224,747	$	4,510,457

NOTE 4 — LAND OPTION

The Company entered into two land option agreements with a member to purchase approximately 73 acres of land for $2,000 per acre payable in units of ownership in the Company. The Company was required to pay option consideration in the amount of $2,000. The options extend to December 31, 2009 to purchase any part of the property or it shall expire automatically and be null and void and the option consideration shall be forfeited. In June 2005, the Company exercised one of the options and partially exercised the other for the purchase of approximately 39 acres of land. The Company issued 81 member units totaling $76,950 in exchange for the land. As of September 30, 2009, the Company has a remaining option to purchase approximately 34 acres.

NOTE 5 — DEBT AND FINANCING

Long-Term Debt

Long-term obligations of the Company are summarized as follows:

	September 30,		December 31,
	2009		2008
Note payable to Farm Credit Services of America and CoBank under term note agreement — see details below	$	2,800,000	$	4,150,000
Note payable to Farm Credit Services of America and CoBank under reducing revolving credit note — see details below		3,080,000		4,350,000
Note payable to the Iowa Department of Economic Development — see details below		215,000		337,500
Note payable to Glidden Rural Electric Cooperative — see details below		554,999		616,666
Total		6,649,999		9,454,166
Less current portion		1,909,722		2,729,110
Long-term portion	$	4,740,277	$	6,725,056

11

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 5 — DEBT AND FINANCING(CONTINUED)

Long-Term Debt(Continued)

The estimated future maturities of long-term debt at September 30, 2009 are as follows:

2010	$	1,909,722
2011		1,112,222
2012		112,222
2013		209,722
2014		1,212,222
Thereafter		2,093,889
Total	$	6,649,999

The Company has available loan commitments from Farm Credit Services of America and CoBank totaling $18,000,000 as of September 30, 2009 and December 31, 2008. The commitments consist of a $10,000,000 term note, a $7,430,000 reducing revolving credit note and a $570,000 letter of credit. As of September 30, 2009 and December 31, 2008, the balance outstanding under the term note was $2,800,000 and $4,150,000, respectively. Principal payments of $450,000 as amended, are required under the term loan and commenced December 20, 2006 and due each quarter thereafter, with a final payment due no later than December 20, 2011. As of September 30, 2009 and December 31, 2008, the balance outstanding under the reducing revolving credit note was $3,080,000 and $4,350,000, respectively. Advances under the reducing revolving credit note are available through the life of the commitment. The commitment reduces by $900,000 semi-annually beginning July 1, 2012 and continuing through January 1, 2016, with a final reduction at the expiration of the commitment on July 1, 2016, at which time any outstanding balance shall be due and payable in full. The notes require interest payments based on unpaid principal. The agreements provide for several different interest rate options including variable and fixed options (3.75% and 4.00% variable on the term note and revolving credit note, as of September 30, 2009 and December 31, 2008, respectively). The variable interest rate options are based on Libor or the agent’s base rate and include adjustments for performance which is based on the Company’s debt to net worth ratio, measured quarterly. The Company has issued a $650,000 irrevocable letter of credit through CoBank in favor of Glidden Rural Electric Cooperative. The notes are secured by essentially all of the Company’s assets. At September 30, 2009, the Company had $4,350,000 of available borrowings under the reducing revolving credit note.

The loan agreements with Farm Credit and CoBank contain various covenants pertaining to minimum working capital and minimum net worth requirements. The Company was not in compliance with the minimum net worth requirement for the period ending May 31, 2009 and obtained waiver for said violation. As of December 31, 2008 and for all other periods in 2009, except as noted above, the Company believes it is in compliance with said covenants.

12

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 5 — DEBT AND FINANCING(CONTINUED)

The Company was awarded $400,000 from the Iowa Department of Economic Development (IDED) consisting of a $300,000 zero interest deferred loan and a $100,000 forgivable loan, the balance of which was $215,000 and $337,500 at September 30, 2009 and December 31, 2008, respectively. The zero interest deferred loan requires monthly installments of $2,500 beginning January 2008, with remaining unpaid principal due at maturity, December, 2012. The Company was required to satisfy the terms of the agreement to receive a permanent waiver of the forgivable loan. In April 2009, the Company received notice from the IDED that the Company had satisfied the terms of the agreement and had forgiven the forgivable loan. The forgiveness of the loan is reflected in other income in the accompanying statement of operations for the nine months ended September 30, 2009. The loan is secured by a security agreement including essentially all of the Company’s assets.

In July 2006, the Company entered into a rural development loan agreement under the Rural Electrification Act of 1936 with Glidden Rural Electric Cooperative. The original loan amount was $740,000 and requires monthly installments of $6,851, including no interest commencing July 31, 2007. The loan is to be paid in full on or before the tenth anniversary date of the first advance of funds. The Company has issued an irrevocable letter of credit through CoBank in favor of Glidden Rural Electric Cooperative as security for the note.

NOTE 6 — MEMBERS’ EQUITY

The Company’s operating agreement provides that the net profits or losses of the Company will be allocated to the members in proportion to the membership units held. Members will not have any right to take part in the management or control of the Company. Each membership unit entitles the member to one vote on any matter which the member is entitled to vote. Transfers of membership units are prohibited except as provided in the operating agreement.

NOTE 7 — CASH FLOW DISCLOSURES

Supplemental disclosure for interest paid:

	Nine		Nine
	Months		Months
	Ended		Ended
	September 30,		September 30,
	2009		2008
Cash paid for interest	$	268,093	$	697,674

NOTE 8 — RELATED PARTY TRANSACTIONS

The Company’s general contractor (Renewable Energy Group, LLC) used to construct the plant is an entity related to West Central Coop who was originally contracted to provide the management and operational services for the Company. Renewable Energy Group, LLC was also issued member units in July 2006 and December 2006 in exchange for a reduction in the construction payable. In July 2006, West Central Coop and Renewable Energy Group, LLC joined forces and created Renewable Energy Group, Inc. (REG, Inc.). On September 21, 2006, the Company consented to the assignment of the contract to construct the facility and the management and operational services agreement to REG, Inc.

13

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 8 — RELATED PARTY TRANSACTIONS(CONTINUED)

The Company incurred management and operational service fees, feed stock procurement fees and marketing fees with West Central Coop and REG, Inc. For the three and nine months ended September 30, 2009, the Company incurred service fees of $200,212 and $370,657, respectively. For the three months and nine months ended September 30, 2008, the Company incurred service fees of $203,548 and $541,528, respectively. The Company also purchases feed stock from West Central Coop and Bunge North America, Inc. an entity related by common ownership in REG, Inc. For the nine months ended September 30, 2009 and 2008, the Company purchased feed stocks of $757,377 and $11,963,414, respectively, from these related parties. The amount payable to REG, Inc. and Bunge North America, Inc. as of September 30, 2009 and December 31, 2008 was $103,379 and $28,480, respectively.

The Company has recorded expense of $14,656 and $266,872 for the net income bonus payable to REG, Inc. for the nine months ended September 30, 2009 and 2008, respectively. The amount is included in accrued expenses in the accompanying balance sheet.

On April 7, 2009, the Company received from REG, Inc., a notice of termination of its management and operational services agreement. The notification from REG, Inc. states that it shall constitute such twelve month advance termination notice required by the terms of the agreement.

NOTE 9 — LEASE COMMITMENTS

During July 2006, the Company entered into an operating lease agreement for rail equipment which expires in 2011. The lease agreement has a monthly payment amount of $2,969. The following is a schedule of future minimum lease payments under a non-cancelable lease at September 30, 2009:

2010	$	35,627
2011		35,627
Total	$	71,254

Lease expense for the three months and nine months ended September 30, 2009 and 2008 was $8,907 and $17,814, respectively.

NOTE 10 — RETIREMENT AND SAVINGS PLAN

The Company has a 401(k) retirement and savings plan, which is available to substantially all employees. The participants may contribute up to 18% of their compensation. The Company’s matching contribution is discretionary for each plan year. The Company contributions for the nine months ended September 30, 2009 and 2008, was $15,498 and $21,952, respectively.

14

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 11 — FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective January 1, 2008, the company adopted FASB Statement No. 157 (FAS 157), “Fair Value Measurements,” which was primarily codified into Topic 820,Fair Value Measurements and Disclosures,in the ASC. This guidance provides a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, the guidance sets forth a definition of fair value and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The adoption of this guidance had an immaterial impact on the company’s financial statements. The guidance defines levels within the hierarchy as follows:

• Level 1—Unadjusted quoted prices for identical assets and liabilities in active markets;

• Level 2—Quoted prices for similar assets and liabilities in active markets (other than those included in Level 1) which are observable for the asset or liability, either directly or indirectly; and

• Level 3—Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The following table sets forth financial assets and liabilities measured at fair value in the consolidated statement of financial position and the respective levels to which the fair value measurements are classified within the fair value hierarchy as of September 30, 2009:

					Significant
			Quoted Prices in		Other		Significant
			Active Markets for		Observable		Unobservable
	September 30,		Identical Assets		Input		Inputs
	2009		(Level 1)		(Level 2)		(Level 3)
Financial assets:
Commodity derivatives	$	23,958	$	23,958	$	—	$	—

The Company enters into various commodity derivative instruments, including forward contracts, futures, options and swaps. The fair value of the Company’s derivatives are determined using unadjusted quoted prices for identical instruments on the applicable exchange in which the Company transacts. When quoted prices for identical instruments are not available, the Company uses forward price curves derived from market price quotations. Market price quotations are obtained from independent brokers, exchanges, direct communication with market participants and actual transactions executed by the Company.

NOTE 12 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Effective January 1, 2009, the company prospectively implemented the provisions of SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS 161), which was primarily codified into Topic 815Derivatives and Hedgingin the ASC. This guidance enhances the disclosure requirements of SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities(SFAS 133), to provide users of financial statements with a better understanding of the objectives of a company’s derivative use and the risks managed.

15

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 12 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES(CONTINUED)

Objectives and Strategies for Holding Derivative Instruments

In the ordinary course of business, the company enters into contractual arrangements (derivatives) as a means of managing exposure to changes in biodiesel prices and feedstock costs under established procedures and controls. The company has established a variety of approved derivative instruments to be utilized in each risk management program, as well as varying levels of exposure coverage and time horizons based on an assessment of risk factors related to each hedging program. As part of its trading activity, the Company uses futures, option and swap contracts offered through regulated commodity exchanges to reduce risk and is exposed to risk of loss in the market value of biodiesel inventories and input costs.

Commodity Risk Management

Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of feedstocks and biodiesel prices. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with feedstocks and commodity exposures. These agreements will expire throughout 2009.

Accounting for Derivative Instruments and Hedging Activities

All derivatives are designated as non-hedge derivatives. Although the contracts may be effective economic hedges of specified risks, they do not meet the hedge accounting criteria of ASC 815. At September 30, 2009 and December 31, 2008 the Company had net derivative assets of $23,958 and $61,360 related to these instruments, with the related mark-to-market effects included in “Cost of sales” in the statements operations.

The following tables provide information on the location and amounts of derivative fair values in the balance sheet and derivative gains and losses in the statement of operations:

Fair Value of Derivative Instruments

	Balance Sheet	Asset Derivatives		Liability Derivatives
	Classification	September 30, 2009		September 30, 2009
Derivatives not designated as hedging:
Commodity contracts — Heat Oil options and swaps	Current assets	$	23,958	$	—

16

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 12 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES(CONTINUED)

Fair Value of Derivative Instruments(Continued)

During the nine months ended September 30, 2009, net realized and unrealized losses on derivative transactions were recognized in the statement of income as follows:

	Location of net loss	Net income (loss)
	recognized in	recognized in
Derivatives not designated as	earnings on	income on derivative
hedging instruments	derivative activities	activities
Commodity contracts — Soybean oil futures and Heat Oil options and swaps	Cost of sales	$	(696,484	)

The Company recorded an increase to cost of sales of $(551,190) related to derivative contracts for the nine months ending September 30, 2008.

NOTE 13 — UNCERTAINTIES

The Company has produced biodiesel for sale to customers since June of 2006. During that time, crude oil has ranged in price from the mid-$30 per barrel to a high of $147 per barrel on the NYMEX. We also have experienced a wide swing in the price of soybean oil: between 25¢ per pound and 70¢ per pound. Because the Company is able to process multiple feed stocks, they have been able to process lesser expensive animal fats and vegetable oils into biodiesel that meets ASTM D 6751 standards. As a result, for the year ended December 31, 2008, the Company’s net income was $1,842,709; and for the nine months ended September 30, 2009, the Company’s net income was $229,611. In addition, during the calendar year of 2008 and the first three quarters of 2009, the Company repaid $3.8 million of its seasonal loan and approximately $3.4 million of its long-term obligations.

During the Company’s short history, we have had to deal with the lack of a direct correlation between the cost of its inputs and the selling price of the products that it produces. On the input side, it has to work within the Agricultural market; and on the output side, it has to work within the Energy market. Historically, there has been no consistent relationship between those two markets. Because of the relationship of our business within differing markets, it is necessary that our management stays abreast of the varying market conditions to determine the economic relationship that exists at any given time and under certain market conditions. Because of the subjectivity involved with the determination and relationships of market conditions, the uncertainties are exacerbated. The flexibility of the production facilities to process varying feed stocks adds to the Company’s ability to respond to the varying market conditions and to reduce some of the market uncertainties.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. Due to certain items discussed above, our ability to continue to generate positive cash flow is uncertain.

17

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 14 — GAIN CONTINGENCIES

The Company’s primary customer and marketer (REG, Inc.) has agreed to an arbitration hearing with a European customer. The Company and REG, Inc. allege breach of contract as the customer failed to take delivery of the Company’s product. The Company’s portion of damages associated with arbitration hearing is $1,054,488. At this time, no estimate can be made as to the time or the amount, if any, of the ultimate recovery. As such no revenues have been recorded in the accompanying statement of operations for the nine months ended September 30, 2009 relating to estimated damages recoverable. Revenues will be recorded at which time the actual damages are determinable, which will likely occur upon receipt.

In September 2009, the Company received notification of a fund award from the United States Department of Agriculture under the Advanced Biofuel Producers Program. The funds reserved for the Company are approximately $326,000. Due to the uncertainty of the allocation of the funding, no estimate can be made at this time as to the amount of ultimate recovery. As such no revenues have been recorded in the accompanying statement of operations for the nine months ended September 30, 2009 relating to the funds awarded. Revenues will be recorded at which time the fund award is determinable, which will likely occur upon receipt.

NOTE 15 — ASSET PURCHASE AGREEMENT

On May 11, 2009, the Company, entered into an asset purchase agreement with Renewable Energy Group, Inc., (“REG”), REG Newco, Inc., (“Newco”), and REG Wall Lake, LLC, a wholly owned subsidiary of Newco (“Wall Lake”) (collectively, with REG and Newco, the “REG Parties”) pursuant to which Wall Lake will acquire substantially all of the Company’s assets, assume certain liabilities, and thereafter operate the Company’s biodiesel production facility (the “transaction”). The Company’s assets that are to be acquired by Wall Lake under the asset purchase agreement include, without limitation, all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims of the Company related to its biodiesel production business. The liabilities to be assumed by Wall Lake under the asset purchase agreement include, without limitation, accounts payable incurred in the ordinary course of business and certain indebtedness of the Company. In addition to this transaction, the asset purchase agreement contemplates the simultaneous closing of several other transactions, including REG’s merger with and into a wholly-owned subsidiary of Newco, with REG being the surviving entity, the acquisition by REG Newton, LLC, a wholly-owned subsidiary of Newco (“Newton”), of substantially all of the assets of, and Newton’s assumption of certain liabilities of, Central Iowa Energy, LLC, (“CIE”), and the merger of Blackhawk Biofuels, LLC, (“Blackhawk”) with and into REG Danville, LLC, a wholly-owned subsidiary of Newco (“Danville”), with Danville being the surviving entity.

Upon closing of and in consideration of the transaction, the Company’s unitholders will receive an aggregate of 6,963,377 shares of common stock of Newco and 259,012 shares of preferred stock of Newco. These shares of Newco common stock and preferred stock will be distributed to unitholders in proportion to each unitholder’s respective ownership interest. Upon closing of the transaction and the other common plan transactions, the Company’s unitholders will hold in the aggregate approximately 1.89% of the total issued and outstanding shares of Newco preferred stock and approximately 19.04% of the issued and outstanding shares of Newco common stock.

18

WESTERN IOWA ENERGY, LLC
NOTES TO FINANCIAL STATEMENTS
September 30, 2009

NOTE 15 — ASSET PURCHASE AGREEMENT(CONTINUED)

The closing of the transaction is conditioned upon the receipt of certain regulatory approvals, the approval of the Company’s unitholders, and the approval of the unitholders and shareholders of the REG Parties, among other things. Approval of the transaction and the asset purchase agreement requires the affirmative vote of unitholders holding a majority of the outstanding membership interests; provided, however, that the affirmative vote of unitholders holding no less than 75% of the outstanding membership interests will be required to approve the liquidation, dissolution and winding up of the Company, which is part of the transaction contemplated in the asset purchase agreement. If the transaction is duly approved by the Company’s unitholders and all other conditions to closing are satisfied, the Company intends to liquidate, windup and dissolve and terminate its existence as soon as practicable following closing of the transactions and the asset purchase agreement, but in no case more than 30 days following such closing. Until the Company is dissolved and its existence is terminated, Newco will pay certain mutually agreeable ongoing costs related to the Company.

The Company and the REG Parties have made representations, warranties, and covenants in the asset purchase agreement. The Company has, among other things, agreed to conduct its business in the ordinary course of business consistent with past practice during the interim period between the date of execution of the asset purchase agreement and the date of closing thereof and not to engage in certain kinds of transactions during such interim period, subject to certain exceptions, not to solicit proposals relating to alternative business combination transactions or participate in discussions or negotiations regarding an alternative business combination transaction, and subject to certain exceptions, not to approve, recommend, or propose publicly any alternative business combination transaction or enter into any agreement or letter of intent related to an alternative business combination transaction. In addition to the receipt of the approval of the unitholders of the Company and the unitholders and shareholders of the REG Parties, each party’s obligation to consummate the transaction is subject to a number of other conditions.

Upon closing under the asset purchase agreement, the Company and REG will each release and discharge the other and their respective officers, directors, and affiliates, from all obligations under the management and operational services agreement, between the Company and REG.

NOTE 16 — SUBSEQUENT EVENTS

Management evaluated subsequent events through November 12, 2009, the date the financial statements were available to be issued. Events or transactions occurring after September 30, 2009 but prior to November 12, 2009 that provided additional evidence about conditions that existed at September 30, 2009, have been recognized in the financial statements for the period ended September 30, 2009. Events or transactions that provided evidence about conditions that did not exist at September 30, 2009 but arose before the financial statements were available to be issued have not been recognized in the financial statements for the period ended September 30, 2009.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the period ended September 30, 2009, compared to the same period in fiscal year 2008. This discussion should be read in conjunction with the financial statements and notes and the information contained in the Company’s Annual Report on form 10-K for the fiscal year ended December 31, 2008.

Cautionary Statements Regarding Forward Looking Statements

This report contains historical information, as well as forward-looking statements. These forward-looking statements include any statements that involve known and unknown risks and relate to future events and our expectations regarding future performance or conditions. Words such as “may,” “should,” “anticipate,” “believe,” “expect,” “will,” “plan,” “future,” “intend,” “could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements, and others we may make from time to time, are subject to a number of risks and uncertainties. Many factors could cause actual results to differ materially from those projected in forward-looking statements. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to:

• Overcapacity within the biodiesel industry resulting in increased competition and costs for feedstock and/or decreased prices for our biodiesel and glycerin;

• Competition with other manufacturers in the biodiesel industry;

• The availability and adequacy of our cash flow to meet our requirements;

• Results of our hedging strategies;

• Changes in interest rates and the availability of credit to support capital improvements, development, expansion, and operations;

• Decrease in the demand for biodiesel;

• Changes in plant production capacity or technical difficulties in operating the plant;

• Actual biodiesel and glycerin production varying from expectations;

• Availability and cost of products and raw materials, particularly soybean oil and animal fats;

• 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;

• Fluctuations in petroleum prices;

• Competition from alternative fuels and alternative fuel additives;

• Changes in our business strategy, capital improvement, or development plans;

• Consequences of the domestic and global economic downturn and recent financial crisis;

• Our ability to generate free cash flow to invest in our business and service our debt;

• Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil, or transportation industries;

• Changes in the environmental regulations or in our ability to comply with the environmental regulations that apply to our plant operations;

• Changes and advances in biodiesel production technology;

• Our ability to continue to export our biodiesel;

• Changes in federal, state, or local incentives for biodiesel production;

• Changes to the rules related to the Renewable Fuels Standard;

• The imposition of tariffs or other duties on biodiesel imported into Europe;

• Our ability to comply with the financial covenants in our loan agreements;

• The closing, or the failure to close, of the transaction contemplated by the asset purchase agreement entered into by the Company’s board of directors with REG and other parties affiliated with REG; and

• Other factors described elsewhere in this report.

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The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We do not undertake any duty to update forward-looking statements after the date they are made or to conform them to actual results or to changes in circumstances or expectations. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

Overview

Western Iowa Energy, LLC (“WIE”) is an Iowa limited liability company formed on September 21, 2004, for the purpose of developing, constructing, and operating a biodiesel manufacturing facility in Sac County, Iowa. References to “we,” “us,” and “our” refer to Western Iowa Energy, LLC. Since May 2006, we have been engaged in the production of biodiesel and glycerin. We derive our revenues from the sale and distribution of our biodiesel and glycerin.

Our plant is capable of producing biodiesel from both vegetable oils and animal fats. When utilizing refined vegetable oils, such as soybean oil and canola oil, our plant has a approximate production capacity of 30 million gallons of biodiesel per year. Our facility is also capable of pretreating crude vegetable oils and animal fats for use in the biodiesel production process. Our pretreatment systems permit us to use lower-cost feedstock, such as choice white grease, in place of higher-cost feedstock, such as soybean oil, to optimize our profits. When utilizing crude vegetable oils or animal fats, our plant has an approximate production capacity of 27 million gallons of biodiesel per year. This reduced production capacity results from the additional processing that is required for producing biodiesel from vegetable oils and animal fats.

REG, Inc. (“REG”) manages and directs general operations of our plant. Pursuant to our Agreement with REG, we incurred management and operational service fees of $370,657 and $541,528 for the nine months ended September 30, 2009 and September 30, 2008, respectively. The amount payable as of September 30, 2009 was $103,379. On April 7, 2009, REG provided twelve months written notice of its intent to terminate its management and operational services agreement (“MOSA”) with us. On May 11, 2009, we entered into an Asset Purchase Agreement with REG providing for the sale of substantially all of our assets. On August 7, 2009, we entered into an Amended and Restated Asset Purchase Agreement with REG. The specifics of the Asset Purchase Agreement and the Amended and Restated Asset Purchase Agreement are discussed in detail under“Liquidity and Capital Resources —Amended and Restated Asset Purchase Agreement with Renewable Energy Group, Inc.” Despite entering into the Asset Purchase Agreement and the Amended and Restated Asset Purchase Agreement with REG, WIE remains in control of the plant and continues to produce biodiesel until such time, if ever, that the sale to REG closes.

Our revenues are derived from the sale and distribution of our biodiesel and glycerin throughout the continental United States and overseas. We rely upon REG to procure our feedstock and market our biodiesel and glycerin. Through REG, we have been exporting some of our biodiesel internationally when we believe export sales will return greater profits than domestic biodiesel sales.

The prices at which we sell our biodiesel and glycerin largely drive our operating results and our feedstock and operating costs. A number of factors generally impact our revenues, including the available supply and demand for biodiesel, the price of diesel fuel (with which biodiesel prices often correlate), general economic conditions, the weather, our dependence on one major customer who markets and distributes our products, the intensely competitive nature of our industry, the extensive environmental laws that regulate our industry, possible legislation at the federal, state and/or local level, and changes in federal biodiesel tax incentives.

21

The primary components of cost of goods sold from the production of biodiesel are feedstock (primarily soybean oil and animal fats) and other raw materials (methanol and other chemicals), energy (natural gas and electricity), labor, and depreciation on process equipment. The cost of feedstock is the largest single component of the cost of biodiesel production, typically accounting for 70-90% of the overall cost of producing biodiesel. Our plant is capable of utilizing animal fats to produce biodiesel and, like soybean oil, animal fat prices have increased over the past several years. The primary animal fat that we used during the three months ended September 30, 2009 was choice white grease. During this period, approximately 69% of our total feedstock usage consisted of choice white grease, which represents a decrease from the same period during 2008 when 81% of our total feedstock usage was choice white grease. Based on our experience, we expect the demand for animal fat-based biodiesel to decrease during the winter months of November and December as a result of cold-flow concerns related to animal fat-based biodiesel. Management has noted, however, that biodiesel sales contracts for the upcoming winter months indicate a higher level of demand this year than in previous winters, which may be the result of an increased level of confidence in animal fat-based biodiesel among biodiesel users.

Changes in the price or supply of feedstock are subject to and determined by market forces and other factors over which we have no control. Because biodiesel prices correlate strongly to diesel fuel prices, it is difficult for biodiesel producers to pass along increased input costs to customers. We have experienced a large variation in the cost of our feedstocks since we began operation. In addition, we have also seen large variations in prices within the energy complex. The profitability of our operation is dependent upon the correlation between the agricultural market and the energy market.

During the second quarter of 2009, we operated on an as-ordered basis. We have operated on an as-ordered basis since November 2007. Under our as-ordered production philosophy, we produce biodiesel when an order has been placed and pursuant to our forecasted demand for biodiesel. This helps us to ensure that our finished inventory does not significantly exceed the contracts for sale that we have at any given time. During the third quarter of 2009, we operated at an average of approximately 76.5% of our crude animal fats production capacity. We expect to continue to operate on an as-ordered basis during the next fiscal quarter or until the date of closing under the Amended and Restated Asset Purchase Agreement with REG. We cannot guarantee continued orders for our biodiesel and, as a result, we may operate at a lower capacity than anticipated.

Results of Operations for the Three Months Ended September 30, 2009 and 2008

The following table shows the results of our operations for the three months ended September 30, 2009 and 2008, and the percentage of revenues, cost of sales, operating expenses, and other items to total revenues in our statement of operations:

	Three Months Ended					Three Months Ended
	September 30, 2009					September 30, 2008
	(Unaudited)					(Unaudited)
Statement of Operations Data	Amount		%			Amount			%
Revenues	$	17,037,884		100.00	%	$	26,238,615			100.00	%
Cost of Sales	$	15,430,919		90.57	%	$	24,146,046			92.02	%
Gross Profit (Loss)	$	1,606,965		9.43	%	$	2,092,569			7.98	%
Operating Expenses	$	541,435		3.18	%	$	577,366			2.21	%
Other Income (Expense)	$	53,507		0.31	%	$	(137,424	)		(0.52	%)
Net Income (Loss)	$	1,119,037		6.57	%	$	1,377,779			5.25	%

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Revenues

Our revenues from operations come primarily from our sales of biodiesel and, to a lesser extent, our sales of crude glycerin, fatty acids, and soapstock. The following table shows the sources of our revenues for the three months ended September 30, 2009 and 2008:

	Three Months Ended					Three Months Ended
	September 30, 2009					September 30, 2008
			% of					% of
Revenue Sources	Amount		Revenues			Amount		Revenues
Biodiesel Sales	$	16,477,362		96.71	%	$	25,367,193		97.67	%
Glycerin Sales	$	194,850		1.14	%	$	361,034		1.38	%
Fatty Acid Sales and Soapstock Sales	$	365,672		2.15	%	$	510,388		1.95	%
Total Revenues	$	17,037,884		100.0	%	$	26,238,615		100	%

Revenues from operations for the three months ended September 30, 2009 decreased by approximately 34% compared to revenues from operations for the three months ended September 30, 2008, even though sales volumes were about the same. The decrease in revenues from period to period is due primarily to a decrease in the average price per gallon we received for the biodiesel sold. In addition, our production during the three months ended September 30, 2009 was approximately 7% lower than our production during the same period in 2008 as we reduced our inventory in preparation for decreased demand during the winter months. The average biodiesel sale price we received for the three months ended September 30, 2009 was $1.56 less per gallon, or approximately 35% lower than the price per gallon received for the three months ended September 30, 2008. The decrease in the number of biodiesel gallons sold for the three months ended September 30, 2009 compared to the same period in 2008 is due primarily to the decrease in the price of petroleum diesel and the lack of sales to Europe.

Revenue from sales of glycerin decreased by approximately 46% in the three months ended September 30, 2009 compared to the three months ended September 30, 2008 due to the reduced selling price. As of September 30, 2009, the average sale price for our glycerin has decreased by about 46% from its levels at September 30, 2008, or a decrease of $0.026 per pound. Revenue from sales of fatty acids has decreased 29% for the three months ended September 30, 2009 compared to the three months ended September 30, 2008 due to the reduced selling price, which decreased 43% or $ 0.134 per lb.

Included within our net sales of biodiesel are incentive funds we received from the federal government for sales of 99.9% biodiesel. The amount of incentive revenues for the fiscal quarter ended September 30, 2009 was $1,011,205 as compared to $2,074,436 for the same quarter of 2008. This decrease in incentive funds received from period to period is largely a result of a change in product mix sold from period to period as the sales shifted more to B100 rather than B99.9 blends.

Over the past year, biodiesel prices have remained fairly consistent following a significant decrease in the price of biodiesel during the late part of the summer in 2008, which resulted from declining energy prices. In general, biodiesel prices correlate to diesel fuel prices. According to the Energy Information Administration, Midwest diesel prices reached a peak of $4.70 per gallon during the week of July 14, 2008, but declined to $3.66 per gallon as of October 13, 2008. As of October 12, 2009, Midwest diesel prices had declined to $2.59 per gallon, representing a decrease of 29% over the past year. As a result, we have seen declines in the price of biodiesel over the same period. According to the USDA’s Weekly Ag Energy Round-Up report, which does not take into account the $1.00 tax credit for B100 available to biodiesel producers, the price for B100 biodiesel in Iowa was approximately $3.01 to $3.31 per gallon for the week of October 16, 2009, compared with a price of $3.30 to $3.72 one year earlier, a decrease of approximately 10%.

The demand for biodiesel for the first nine months of the year has been reduced mainly due to a corresponding reduction in demand for all distillate products. Based on our experience, we expect the demand for animal fat-based biodiesel to decrease during the winter months of November and December as a result of cold-flow concerns related to animal fat-based biodiesel. Management has noted, however, that biodiesel sales contracts for the upcoming winter months indicate a higher level of demand this year than in previous winters, which may be the result of an increased level of confidence in animal fat-based biodiesel among biodiesel users. Due to continued uncertainty related to the methods of administering the Renewable Fuels Standard (“RFS”), management has not included the increased demand resulting from the RFS in its projections for the balance of 2009.

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A greater supply of biodiesel on the market from increased utilization of existing capacity could make it difficult for us to market our products at profitable prices. As of June 22, 2009, the National Biodiesel Board estimated that national biodiesel production capacity was approximately 2.69 billion gallons per year, but that biodiesel producers are utilizing only an extremely limited amount of this capacity. In fact, despite the significant production capacity, the National Biodiesel Board reports that U.S. biodiesel producers produced only 700 million gallons of biodiesel in 2008. Many biodiesel plants do not operate at full capacity due in part to the fact that total production capacity significantly exceeds demand. Accordingly, there is no assurance that the RFS will significantly increase demand for biodiesel or that additional production of biodiesel and biomass-based diesel will not outstrip any additional demand for biodiesel that the RFS might generate. If the demand for biodiesel does not grow at or exceed the pace of increases in supply, we expect the price for biodiesel to decline in the long-term.

Cost of Sales

Our cost of sales for our products decreased as a percentage of our revenues from 92.02% of our revenues for the three months ended September 30, 2008, to 90.57% of our revenues for the three months ended September 30, 2009. This decrease is primarily due to the decline in the cost of our feedstocks from the previous year.

Increased demand for animal fats or soybean oil from increased biodiesel production or other factors could push animal fat and soybean oil prices higher than currently anticipated. Animal fat prices peaked in the summer of 2008, and have since fallen as domestic and global economic conditions have worsened. Although prices for animal fats have declined from their recent peak, animal fat prices are nonetheless higher than their historical average. Our animal fat costs for the three months ended September 30, 2009 were approximately 40% lower than animal fat costs for the same period in 2008. As of September 30, 2009, the price we paid for our primary animal fat, choice white grease, was 26.1 cents per pound. By contrast, as of September 30, 2008, we paid 39.4 cents per pound for choice white grease. Currently, animal fats prices remain less than soybean oil prices. We anticipate that we will utilize less animal fats as we move into the fall and winter months due to increased cold-flow concerns. Although price fluctuations for soybean oil have been extremely volatile in recent months, we began using soybean oil in September to fulfill contracts that require its use in the winter months.

The cost of methanol, another input into the biodiesel production process, has decreased from record-level highs caused by a shortage of methanol during the first quarter of 2008. During the three months ended September 30, 2009, we paid approximately 51% less per pound of methanol than we paid during the same period in 2008. We expect this decrease in the price of methanol to continue to have a positive impact on our cost of goods sold in the future.

For the last several years, natural gas prices have exceeded historical averages, although in 2009 these prices have decreased to more normal levels. During the three months ended September 30, 2009, we paid approximately 55% less per therm for natural gas than we paid during the same period in 2008, which should continue to positively impact our profit margins going forward. WIE has taken a proactive approach in the price we pay for natural gas. WIE works with a third party that purchases natural gas for the City of Wall Lake to purchase and schedule natural gas more economically and efficiently. We have also negotiated a lower transportation rate with the City of Wall Lake. We believe that these measures have saved WIE approximately 15% to 20% in its cost of natural gas as part of the overall decrease we have experienced.

Operating Expense

Our operating expenses as a percentage of revenues were higher for the three-month period ended September 30, 2009 than they were for the three-month period ended September 30, 2008. This increase was due to our lower production levels while our fixed costs remained the same. We expect that going forward our operating expenses will remain consistent if plant production levels remain consistent or as projected. If our level of production decreases, however, our operating expenses as a percentage of revenue may increase as a result of fixed costs that do not decrease in correlation with our level of production.

Other Income (Expenses)

Our other income and expenses for the three months ended September 30, 2009, decreased from a net other expense of $137,424, or 0.52% of revenues, as of September 30, 2008, to a net other income of $53,507, or 0.31% of revenues, as of September 30, 2009. This change resulted primarily from a reduction in our interest expense from $141,206 for the three months ended September 30, 2008, to $79,356 for the three months ended September 30, 2009. The reduction in our interest expense resulted primarily from reducing the outstanding balance under our revolving line of credit, and paying down our term loan by $1,800,000. The change also resulted from our receipt of grant income in the amount of $131,525 from the Iowa Department of Economic Development’s New Jobs Training Program during the three months ended September 30, 2009.

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Results of Operations for the Nine Months Ended September 30, 2009 and 2008

The following table shows the results of our operations for the nine months ended September 30, 2009 and 2008, and the percentage of revenues, cost of sales, operating expenses, and other items to total revenues in our statement of operations:

	Nine Months Ended					Nine Months Ended
	September 30, 2009					September 30, 2008
	(Unaudited)					(Unaudited)
Statement of Operations Data	Amount		%			Amount			%
Revenues	$	31,904,006		100.00	%	$	71,869,439			100.00	%
Cost of Sales	$	30,222,543		94.73	%	$	65,524,809			91.17	%
Gross Profit (Loss)	$	1,681,463		5.27	%	$	6,344,630			8.83	%
Operating Expenses	$	1,546,498		4.85	%	$	1,686,226			2.34	%
Other Income (Expense)	$	94,646		0.30	%	$	(477,414	)		(0.66	%)
Net Income (Loss)	$	229,611		0.72	%	$	4,180,990			5.83	%

Revenues

Our revenues from operations come primarily from our sales of biodiesel and, to a lesser extent, our sales of crude glycerin, fatty acids, and soapstock. The following table shows the sources of our revenues for the nine months ended September 30, 2009 and 2008:

	Nine Months Ended					Nine Months Ended
	September 30, 2009					September 30, 2008
			% of					% of
Revenue Sources	Amount		Revenues			Amount		Revenues
Biodiesel Sales	$	30,706,418		96.25	%	$	69,266,632		96.38	%
Glycerin Sales	$	534,058		1.67	%	$	1,632,637		2.27	%
Fatty Acid Sales and Soapstock Sales	$	663,530		2.08	%	$	970,170		1.35	%
Total Revenues	$	31,904,006		100.0	%	$	71,869,439		100	%

Revenues from operations for the nine months ended September 30, 2009 decreased by approximately 55% compared to revenues from operations for the nine months ended September 30, 2008. The decrease in revenues from period to period is due to a decrease in the average price per gallon we received for biodiesel sold, a decrease in the sales price of glycerin, and a decrease in our production of biodiesel. We reduced our production because of a decrease in the demand for biodiesel, which has resulted from the decline in the price of petroleum diesel and the lack of sales to Europe. The amount of incentive funds that we received from the federal government for sales of 99.9% biodiesel also decreased during the nine months ended September 30, 2009 compared to the same period in 2008 because of the decrease in the number of gallons of biodiesel sold from period to period.

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Cost of Sales

Our cost of sales for our products increased as a percentage of our revenues from 91.17% of our revenues for the nine months ended September 30, 2008, to 94.73% of our revenues for the nine months ended September 30, 2009. This increase is primarily due to our lower production and sale of biodiesel while our fixed costs remained the same.

Operating Expense

Our operating expenses as a percentage of revenues were higher for the nine-month period ended September 30, 2009 than they were for the nine-month period ended September 30, 2008. This increase was due to our lower production levels while fixed costs remained the same.

Other Income (Expenses)

Our other income and expenses for the nine months ended September 30, 2009, increased from a net other expense of $477,414 or 0.66% of revenues, as of September 30, 2008, to a net other income of $94,646, or 0.30% of revenues, as of September 30, 2009. This change resulted primarily from a reduction in our interest expense from $642,379 for the nine months ended September 30, 2008, to $256,303 for the nine months ended September 30, 2009. The reduction in our interest expense resulted primarily from reducing the outstanding balance under our revolving line of credit,and paying down our term loan by $1,800,000. The change also resulted from our receipt of grant income in the amount of $231,525 during the nine months ended September 30, 2009.

Changes in Financial Condition for the Nine Months Ended September 30, 2009

The following table highlights the changes in our financial condition for the nine months ended September 30, 2009:

	September 30,		December 31,
	2009		2008
Current Assets	$	6,613,998	$	7,049,998
Current Liabilities	$	3,629,755	$	3,824,635
Long-Term Debt	$	4,740,277	$	6,725,056
Members’ Equity	$	27,158,321	$	26,928,710

Current Assets. The decrease in current assets from $7,049,998 as of December 31, 2008, to $6,613,998 as of September 30, 2009, is a direct result of decreased inventory and a decrease in incentive receivables.

Current Liabilities. Our current liabilities decreased by $194,880 during the nine months ended September 30, 2009 as compared to December 31, 2008, due to a decrease in the free cash flow accrual to CoBank and accrued profit share to REG. Our trade accounts payable were $1,417,637 at September 30, 2009 compared to $794,345 at December 31, 2008.

Long-Term Debt. The decrease in our long-term debt, net of current maturities, at September 30, 2009, as compared to December 31, 2008, was due to a decrease in the balance under our term note and our reducing revolving credit note with Farm Credit Services. As of September 30, 2009, we had made payments totaling $1,350,000 to Farm Credit Services, satisfying all 2009 quarterly payments to date under our loan agreement.

Members’ Equity. Members’ contributions for September 30, 2009 and December 31, 2008 are $23,516,376. Retained earnings as of September 30, 2009 are $3,641,945 compared to $3,412,334 at December 31, 2008 due to net income during the nine months ended September 30, 2009. Total members’ equity as of September 30, 2009, increased by $229,611 as compared to December 31, 2008.

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Liquidity and Capital Resources

Cash Flows

The following table shows cash flows for the nine months ended September 30, 2009 and 2008:

	2009			2008
Net cash provided by (used in) operating activities	$	2,849,513		$	6,933,258
Net cash used in investing activities	$	(136,040	)	$	(266,254	)
Net cash provided by (used in) financing activities	$	(2,704,167	)	$	(6,394,167	)
Net increase in cash and equivalents	$	9,306		$	272,837

Operating Cash Flows

For the nine months ended September 30, 2009, cash provided by operating activities decreased by $4,083,745 compared to the nine months ended September 30, 2008. This decrease was primarily the result of reduced profit during the period. Our capital needs are being adequately met through cash from our operating activities and our current credit facilities.

Investing Cash Flows

For the nine months ended September 30, 2009, cash used in investing activities decreased by $130,214 compared to the nine months ended September 30, 2008. This decrease in cash used resulted from a decrease in expenditures for property, plant, and equipment during the nine months ended September 30, 2009.

Financing Cash Flows

For the nine months ended September 30, 2009, cash used in financing activities decreased by $3,690,000, compared to the nine months ended September 30, 2008. This decrease resulted from proceeds from our long-term debt in the amount of $9,077,000 and payments on our long-term debt in the amount of $11,781,167.

Indebtedness

Short-Term Debt Sources

We maintained a supplemental line of credit with Farm Credit Services of America, FLCA (“Farm Credit”) to finance short-term working capital requirements. The aggregate amount available under the supplemental revolving loan was the lesser of (1) $4,000,000 or (2) the borrowing base as calculated pursuant to our credit facility with Farm Credit. The credit facility with Farm Credit provided several different interest options for the supplemental line of credit and we paid interest on the unpaid balance of the line in accordance with the interest rate option selected at the time we requested a draw on the line. The supplemental line of credit was set to expire on July 1, 2009. On May 11, 2009, WIE cancelled the supplemental line of credit, which was a condition to Farm Credit’s consent to the consolidation with REG, which is discussed below. CoBank, as administrative agent for Farm Credit under our Master Loan Agreement with Farm Credit, granted its consent to the consolidation on May 11, 2009. WIE had no outstanding balance on the supplemental line of credit at the time of its cancellation.

In addition, we have obtained a $650,000 declining balance standby irrevocable letter of credit through CoBank in favor of Glidden Rural Electric Cooperative (“Glidden REC”) as security for our loan with Glidden REC. The letter of credit was set to expire on June 30, 2009, but was extended for a period of one year at the lower amount of $570,000. The letter of credit will now expire on June 30, 2010.

Long-Term Debt Sources

On June 6, 2005, we closed on $18,000,000 of long-term debt financing with Farm Credit pursuant to a Master Loan Agreement (“MLA”). Our financing agreement with Farm Credit provides for a term loan in the amount of $10,000,000 pursuant to a Construction and Term Loan Supplement to the MLA (the “Term Loan Supplement”). It also provides for a revolving term loan in an amount not to exceed $8,000,000 pursuant to a Construction and Revolving Term Loan Supplement to the MLA (the “Revolving Loan Supplement”). As of September 30, 2009, the balance outstanding on our term loan is $2,800,000. At September 30, 2009, the balance outstanding under the revolving term loan was $3,080,000.

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On July 13, 2006, we entered into a Rural Development Loan Agreement with the Glidden REC for a $740,000 no interest loan to fund operating expenses for the plant. Pursuant to the terms of the agreement and an associated Promissory Note, the loan is to be repaid in monthly installments of $6,851 beginning on July 31, 2007, and continuing on the last day of each month thereafter until the principal sum has been paid in full or before the final maturity date of the promissory note which shall be on the tenth anniversary of the first advance of funds. The outstanding balance of the loan as of September 30, 2009 was $554,999.

We have obtained subordinated debt financing of approximately $400,000 from the Iowa Department of Economic Development (“IDED”). The subordinated debt financing included a $300,000 zero-interest deferred loan and a $100,000 forgivable loan. The zero-interest deferred loan requires monthly installments of $2,500 beginning January 2008 with remaining unpaid principal due in December 2012. To receive a permanent waiver of the forgivable loan we were required to meet certain production and operations criteria. On April 30, 2009, IDED notified WIE that WIE had satisfied all conditions of the forgivable loan and that IDED had forgiven the balance outstanding under the forgivable loan. The balance that is outstanding on the zero-interest deferred loan at September 30, 2009 is $215,000.

Amended and Restated Asset Purchase Agreement with Renewable Energy Group, Inc.

On August 7, 2009 the Company entered into an Amended and Restated Asset Purchase Agreement with REG, REG Newco, Inc., a Delaware corporation (“Newco”), and REG Wall Lake, LLC, a wholly-owned subsidiary of Newco and an Iowa limited liability company (“REG Wall Lake”), having an effective date of May 11, 2009 (the “Amended and Restated Asset Purchase Agreement”) which supersedes the original Asset Purchase Agreement between the parties dated May 11, 2009 and pursuant to which the Company anticipates consolidating its business and operations with REG under Newco (the “Transaction”). REG currently provides biodiesel plant management, feedstock procurement and product marketing services under our MOSA. The proposed consolidation will occur through the acquisition by REG Wall Lake of substantially all of the Company’s assets and certain liabilities. The Amended and Restated Asset Purchase Agreement also contemplates the potential consolidation of the business and operations of two other biodiesel plants, Central Iowa Energy, LLC (“CIE”) and Blackhawk Biofuels, LLC (“Blackhawk”), under Newco.

Under the Amended and Restated Asset Purchase Agreement, the Company will receive in consideration of the Transaction an aggregate of 7,097,562 shares of Common Stock of Newco and 264,003 shares of Preferred Stock of Newco (subject to adjustment for fractional shares for distribution to unit holders as provided below). Based on the assumption that the Transaction and the other consolidation transactions involving CIE and Blackhawk close, the Company will hold in the aggregate approximately 1.92% of the total issued and outstanding shares of Newco Preferred Stock and approximately 19.11% of the issued and outstanding shares of Newco Common Stock. The Company expects to distribute two percent of these Newco shares to its financial advisor for certain financial advisory services rendered in connection with the Transaction and the Company may also be required to liquidate or hold back additional Newco shares to satisfy any creditors of the Company that remain following the close of the Transaction. It is expected that the balance of the Company’s Newco shares will be distributed to the Company’s unit holders in proportion to their respective positive capital account balances in connection with the Company’s anticipated dissolution, liquidation and winding up following the close of the Transaction. The Company plans to seek unit holder approval of the Company’s dissolution, liquidation and winding up at the same time it seeks unit holder approval of the Transaction; however, such approval is not a condition to closing of the Transaction. If the requisite unit holder approval for the Company’s dissolution, liquidation and winding up is not obtained at the time the Transaction is approved by the unit holders, the Company expects to seek such unit holder approval at a later date, although there can be no assurances that it will be obtained. Upon receipt of the requisite unit holder approval, the Company plans to dissolve, liquidate, wind up and terminate its existence as soon as is reasonably practicable. Until the Company is dissolved and its existence is terminated, Newco has agreed to pay certain mutually agreeable ongoing costs related to the Company for a period up to six months following closing of the Transaction.

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The closing of the Transaction is subject to a variety of conditions to closing, including without limitation the receipt of certain regulatory approvals and the approval of the Transaction by the Company’s unit holders and REG’s shareholders. Closing of the Transaction is conditioned upon REG’s consolidation with Newco but not upon the closing of the CIE or Blackhawk consolidations. There can be no assurances that the Transaction will ever close. A copy of the Amended and Restated Asset Purchase Agreement was filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2009. The foregoing description of the Amended and Restated Asset Purchase Agreement is qualified in its entirety by reference to the full text of the Amended and Restated Asset Purchase Agreement.

Critical Accounting Estimates

Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The following is a discussion of what we believe to be the most critical of these policies and methods.

Inventories.Inventories are stated at the lower of cost or market value. Costs are determined using the first-in, first-out method.

Long-Lived Assets.Depreciation and amortization of our property, plant, and equipment is provided on the straight-line method by charges to operations at rates based upon the expected useful lives of individual or groups of assets. Economic circumstances or other factors may cause management’s estimates of expected useful lives to differ from actual.

Long-lived assets, including property, plant and equipment, and investments are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to our estimated fair market value based on the best information available. Considerable management judgment is necessary to estimate discounted future cash flows and may differ from actual cash flows.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risks.

We are exposed to the impact of market fluctuations associated with interest rates and commodity prices as discussed below. We have no exposure to foreign currency risk as we conduct all of our business in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. We consider market risk to be the potential loss arising from adverse changes in market rates and prices. We do not enter into these contracts as hedges for accounting purposes pursuant to the requirements of SFAS 133,Accounting for Derivative Instruments and Hedging Activities.

Our risk management committee oversees our risk management practices and provides open communication among management, REG, and the board of directors regarding market risk. The risk management committee takes an active role in the risk management process and has developed policies and procedures that require specific administrative and business functions to assist in the identification, assessment, and control of various risks.

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our revolving line of credit and supplemental revolving loan with Farm Credit. Specifically, we have $5,880,000 outstanding in variable rate debt as of September 30, 2009. The specifics of the line of credit and revolving loan are discussed in detail in “Item 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS – Liquidity and Capital Resources,Indebtedness.”

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Below is a sensitivity analysis we prepared regarding our income exposure to changes in interest rates. The sensitivity analysis below shows the anticipated effect on our income from a 10% adverse change in interest rates for a one-year period.

Outstanding Variable		Interest Rate at			Adverse 10% Change in			Annual Adverse Change
Rate Debt at 9/30/09		September 30, 2009			Interest Rates			to Income
$	2,800,000		3.75	%		4.13	%	$	11,200
$	3,080,000		3.75	%		4.13	%	$	12,320

Commodity Price Risk

We are also exposed to market risk from commodity prices. Exposure to commodity price risk results from our dependence on animal fats, soybean oil, and natural gas in the biodiesel production process. We are also exposed to biodiesel and glycerin price risks as our revenues consist primarily of biodiesel sales and glycerin sales. Currently, we seek to minimize the risks from fluctuations in the price of soybean oil and biodiesel by using derivative instruments such as cash, futures, and option contracts for soybean oil and home heating oil. There is currently no futures market for biodiesel. Instead, we use home heating oil derivatives. Home heating oil is high sulfur diesel, which is the closest commodity to biodiesel for which there is a futures market. Currently, we are unable to manage our price risk for animal fats as there are no futures contracts available for animal fats, and animal fats suppliers are, to date, unwilling to enter into long-term contracts for animal fats.

In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. The extent to which we enter into cash, futures, or option contracts varies substantially from time to time based on a number of factors, including supply and demand factors affecting the needs of customers or suppliers to purchase biodiesel or glycerin or to sell us raw materials on a fixed basis, our views as to future market trends, seasonal factors and the costs of futures contracts.

Although we believe our hedge positions accomplish an economic hedge against our future purchases, they are not designated as such for hedge accounting purposes, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. As the current market price of our hedge positions changes, the gains and losses are immediately recognized in our cost of goods sold. The immediate recognition of hedging gains and losses can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged. At September 30, 2009 and December 31, 2008, we recorded a net asset for derivative instruments of $23,958 and $61,360, respectively.

Several variables could affect the extent to which price fluctuations in the cost of soybean oil and biodiesel impact our derivative instruments. However, it is unlikely that commodity cash prices will have the greatest impact on the derivative instruments with delivery dates nearest the current cash price. As we move forward, additional protection may be necessary. As the prices of these hedged commodities move in reaction to market trends and information, our statement of operations will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on the market movements, crop prospects, and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term growth for the Company.

A sensitivity analysis has been prepared to estimate our exposure to soybean oil and biodiesel price risk. The table presents the net fair value of our derivative instruments as of September 30, 2009 and September 30, 2008, and the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The fair value of the positions is a summation of the fair values calculated by valuing each net position at quoted market prices as of the applicable date. The results of this analysis, which may differ from actual results, are as follows:

			Effect of
			Hypothetical
			Adverse Change -
	Fair Value		Market Risk
September 30, 2009	$	4,092,754	$	409,275
September 30, 2008	$	2,080,633	$	208,063

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Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Principal Executive Officer, William J. Horan, and our Principal Financial and Accounting Officer, Joe Neppl. Based on their evaluation of our disclosure controls and procedures, they have concluded that during the period covered by this report, such disclosure controls and procedures were effective and they identified no material weaknesses in such disclosure controls and procedures. During their evaluation of our disclosure controls and procedures for the fiscal year ended December 31, 2008, however, they determined that the financial statements prepared for that fiscal year failed to account for a change in our SEC reporting status from the previous fiscal year. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may have been considered to be “material weaknesses.” Management therefore concluded that our internal control over financial reporting was not effective as of December 31, 2008. Management contacted our accounting firm to ensure that future financial statements comply with the specific requirements for issuers of our reporting status. Management has observed no additional material weaknesses in our disclosure controls and procedures during the three months ended September 30, 2009.

Changes in Internal Controls

Except as set forth above, there have been no changes in our internal control over financial reporting that occurred during our fiscal quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors

Risk factors are discussed in our annual report on Form 10-K. The risks described in our annual report on Form 10-K are not the only risks facing us. The following Risk Factors are provided to supplement and update the Risk Factors previously disclosed in our annual report on Form 10-K. The Risk Factors set forth below should be read in conjunction with the considerations set forth above in“MANAGEMENT’S DISCUSSION AND ANALYSIS”and the risk factors set forth in our annual report on Form 10-K.

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REG’s termination of the MOSA could cause a material adverse effect on our ability to produce, sell, and market biodiesel.REG currently manages and directs the general operations of our plant pursuant to a Management and Operational Services Agreement (“MOSA”). Pursuant to the MOSA, REG provides us with overall management, sales and marketing, and feedstock and chemical procurement services. We are very reliant on REG for these services, as we have no relationships with any other parties with respect to the performance of these services. However, on April 7, 2009, REG provided twelve months written notice of its intent to terminate the MOSA. The Company expects the MOSA to terminate as of May 1, 2010. REG indicated that its determination to terminate the MOSA stems from changes in the biodiesel market generally since the parties originally entered into the MOSA. The Company, REG, and certain entities affiliated with REG subsequently entered into an agreement for a proposed asset purchase transaction pursuant to which an REG affiliate proposes to acquire substantially all of the Company’s assets and assume certain liabilities of the Company. In the event the proposed asset purchase transaction is consummated, the Company does not expect to enter into another MOSA agreement. However, in the event the proposed asset purchase transaction is not consummated, the Company’s inability to negotiate a new MOSA with REG on mutually beneficial terms could have a material adverse effect on the Company due to its significant reliance on REG for the management of the plant, procurement of inputs necessary to produce biodiesel, the sales and marketing of the biodiesel and co-products produced at its plant, and other administrative functions performed by REG. In such event, the Company may be forced to find one or more alternative persons to provide the management, procurement, and sales and marketing services previously performed by REG under the MOSA; however, there can be no assurance that the Company would be able to contract with another third party to provide management, sales, and marketing services on terms favorable to the Company, or at all. Any lack of a provider for these services would have a negative impact on our revenues. Accordingly, REG’s termination of the MOSA could adversely affect the Company’s ability to generate revenues and the Company’s members could lose some or all of their investment.

The asset purchase agreement entered into by the Company’s board of directors, REG, and certain other REG affiliates is subject to a variety of closing conditions and may not close.On August 7, 2009 the Company entered into an Amended and Restated Asset Purchase Agreement pursuant to which the Company will consolidate its business and operations with REG under a newly formed holding company, REG Newco, Inc., a Delaware corporation. The Company thereafter intends to dissolve, liquidate and wind up as soon as immediately practicable following the receipt of the requisite unit holder approval for the same and the close of the consolidation transaction. The proposed consolidation transaction, however, is subject to multiple closing conditions, including certain regulatory approvals and the approval of the Company’s unit holders and REG’s shareholders, among other conditions. In the event that any one or more of the conditions to closing are not satisfied or any event giving rise to a party’s right to terminate the agreement arises, the consolidation transaction may not close.

Even if the transactions contemplated by the asset purchase agreement are consummated, the combined company may not successfully integrate the businesses of REG, CIE, WIE, and Blackhawk and may not realize the anticipated benefits of the consolidation.Achieving the anticipated potential benefits of the consolidation will depend in part on the successful integration of the operations and personnel of REG, CIE, WIE, and Blackhawk in a timely and efficient manner to minimize the impact on customers, employees, and management. The combined company will face significant challenges in integrating the organizations and operations in a timely and efficient manner. Some of the challenges involved in this integration include:

• demonstrating to the customers of REG, CIE, WIE, and Blackhawk that the consolidation will not result in adverse changes in biodiesel quality, customer service standards, or business focus;

• consolidating and rationalizing corporate administrative infrastructures;

• coordinating sales and marketing efforts to effectively communicate the expanded capabilities of the combined company;

• coordinating the supply chains; and

• preserving important relationships and resolving potential conflicts that may arise.

This integration will be a complex, time-consuming, and expensive process and may harm REG’s, CIE’s, WIE’s, or Blackhawk’s business, financial condition, and results of operations. It is not certain that Newco can successfully integrate REG, CIE, WIE, and Blackhawk in a timely manner, or at all, or that any of the anticipated potential benefits of the consolidation will be realized. Failure to do so could have a material adverse effect on the revenues, expenses, and the operating results and cash resources of the combined company and could result in the Company’s members not achieving the anticipated potential benefits of the consolidation.

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The EPA’s recent finding that soy-based biodiesel does not meet the requirements under the RFS to reduce greenhouse emissions could reduce demand for soy-based biodiesel and reduce our profitability.The EPA recently issued findings that soy-based biodiesel fails to meet targets for reducing greenhouse emissions, as required under the RFS. The RFS requires that biodiesel reduce greenhouse gas emissions by 40 to 50% when compared to conventional diesel in order to count towards the RFS mandate. The EPA found soy-based biodiesel to reduce greenhouse gas emissions by only 22%. If soy-based biodiesel does not count towards the RFS, demand for biodiesel made from soy oil will likely be reduced. If animal fat-based biodiesel demand increases as a result, animal fat prices may increase to the extent that we cannot produce animal fat-based biodiesel profitably. The results could significantly harm our revenues and financial performance and reduce the value of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.The following exhibits are included herein:

Exhibit No.	Exhibit
31.1	Certificate Pursuant to 17 CFR 240.15d-14(a).
31.2	Certificate Pursuant to 17 CFR 240.15d-14(a).
32.1	Certificate Pursuant to 18 U.S.C. § 1350.
32.2	Certificate Pursuant to 18 U.S.C. § 1350.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	WESTERN IOWA ENERGY, LLC
Date: November 16, 2009	/s/ William J. Horan
	William J. Horan
	Chairman, President and Director
	(Principal Executive Officer)
Date: November 16, 2009	/s/ Joe Neppl
	Joe Neppl
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

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