10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2010

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 333-161187

RENEWABLE ENERGY GROUP, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	26-4785427
(State of other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

416 South Bell Avenue Ames, Iowa 50010

(Address of principal executive offices)

(515) 239-8000

(Registrant’s telephone number, including area code)

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.    YES  x    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).    YES  ¨    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, 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 filer	¨	Accelerated filer	¨
Non-accelerated filer	x	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

As of September 30, 2010, there was no public trading market for the Company’s common stock. There were 33,129,553 shares of the Company’s common stock and 13,455,522 shares of the Company’s preferred stock outstanding on September 30, 2010.

Item 1. Condensed Consolidated Financial Statements

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

	September 30, 2010			December 31, 2009
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	11,486		$	5,855
Restricted cash		674			2,156
Accounts receivable, net (includes amounts owed by related parties of $486 and $2,328 as of September 30, 2010 and December 31, 2009, respectively)		9,046			12,162
Inventories		13,119			12,840
Prepaid expenses and other assets (includes amounts paid to related parties of $269 as of December 31, 2009)		4,948			4,689
Total current assets		39,273			37,702
Property, plant and equipment, net		167,124			124,429
Property, plant and equipment, net - Seneca Landlord, LLC		42,811			—
Goodwill		85,139			16,080
Intangible assets, net		6,070			7,203
Deferred income taxes		1,500			1,500
Investments		4,358			6,149
Other assets		9,082			7,495
Restricted cash		2,307			—
TOTAL ASSETS	$	357,664		$	200,558
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit	$	6,240		$	350
Current maturities of notes payable		2,904			2,756
Accounts payable (includes amounts owed to related parties of $5,122 and $5,415 as of September 30, 2010 and December 31, 2009, respectively)		11,628			14,133
Accrued expenses and other liabilities		3,792			4,197
Deferred revenue		881			5,480
Total current liabilities		25,445			26,916
Unfavorable lease obligation		11,576			11,783
Preferred stock embedded conversion feature derivatives		46,556			4,104
Seneca Holdco liability, at fair value		8,708			—
Notes payable		48,324			25,749
Notes payable - Seneca Landlord, LLC		36,250			—
Other liabilities		7,479			10,015
Total liabilities		184,338			78,567
COMMITMENTS AND CONTINGENCIES
Redeemable preferred stock ($.0001 par value; 60,000,000 shares authorized; 13,455,522 and 12,464,357 shares outstanding at September 30, 2010 and December 31, 2009, respectively; redemption amount $222,016 and $247,587 at September 30, 2010 and December 31, 2009, respectively)		116,810			149,122
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock ($.0001 par value; 140,000,000 shares authorized; 33,129,553 and 19,575,117 shares outstanding at September 30, 2010 and December 31, 2009, respectively)		3			2
Common stock - additional paid-in-capital		87,375			15,676
Warrants - additional paid-in-capital		4,820			4,619
Accumulated deficit		(35,682	)		(60,905	)
Total stockholders’ equity (deficit)		56,516			(40,608	)
Noncontrolling interests		—			13,477
Total equity (deficit)		56,516			(27,131	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	357,664		$	200,558

See notes to condensed consolidated financial statements.

2

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(IN THOUSANDS)

	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
REVENUES:
Biodiesel sales	$	62,285		$	29,687		$	139,170		$	65,778
Biodiesel sales - related parties		680			6,245			2,939			10,032
Biodiesel government incentives		—			6,041			3,674			13,572
		62,965			41,973			145,783			89,382
Services		131			408			529			1,659
Services - related parties		26			308			636			744
		63,122			42,689			146,948			91,785
COSTS OF GOODS SOLD:
Biodiesel		20,882			18,856			49,119			60,666
Biodiesel - related parties		35,687			21,640			83,399			31,048
Services		68			217			310			970
Services - related parties		—			—			291			—
		56,637			40,713			133,119			92,684
GROSS PROFIT (LOSS)		6,485			1,976			13,829			(899	)
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
(includes related party amounts of $445 and $1,259 for the three and nine months ended September 30, 2010, respectively and $695 and $1,350 for the three and nine months ended September 30, 2009, respectively)		5,782			7,643			16,599			19,916
GAIN ON SALE OF ASSETS - related party		—			(2,254	)		—			(2,254	)
IMPAIRMENT OF ASSETS		7,336			—			7,477			—
INCOME (LOSS) FROM OPERATIONS		(6,633	)		(3,413	)		(10,247	)		(18,561	)
OTHER INCOME (EXPENSE), NET:
Change in fair value of preferred stock conversion feature embedded derivatives		1,996			(2,548	)		6,997			(1,429	)
Change in fair value of interest rate swap		103			(17	)		291			254
Change in fair value of Seneca Holdco liability		(1,773	)		—			(2,144	)		—
Other income (includes related party amounts of $38 and $355 for the three and nine months ended September 30, 2009, respectively)		340			120			429			2,132
Interest expense (includes related party amounts of $73 and $277 for the three and nine months ended September 30, 2010, respectively, and $9 for the three and nine months ended September 30, 2009)		(1,483	)		(545	)		(3,218	)		(1,830	)
Interest income (includes related party amounts of $180 for the nine months ended September 30, 2010)		6			2			189			15
Impairment of investments		—			—			(400	)		—
		(811	)		(2,988	)		2,144			(858	)
LOSS BEFORE INCOME TAXES AND
LOSS FROM EQUITY INVESTMENTS		(7,444	)		(6,401	)		(8,103	)		(19,419	)
INCOME TAX BENEFIT		—			1,637			3,728			4,875
LOSS FROM EQUITY INVESTMENTS		(173	)		(199	)		(554	)		(570	)
NET LOSS		(7,617	)		(4,963	)		(4,929	)		(15,114	)
LESS - NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		—			1,448			—			6,350
NET LOSS ATTRIBUTABLE TO THE COMPANY		(7,617	)		(3,515	)		(4,929	)		(8,764	)
EFFECTS OF RECAPITALIZATION		—			—			8,521			—
LESS - ACCRETION OF PREFERRED STOCK TO REDEMPTION VALUE		(5,367	)		(11,560	)		(21,613	)		(31,337	)
NET LOSS ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS	$	(12,984	)	$	(15,075	)	$	(18,021	)	$	(40,101	)

See notes to condensed consolidated financial statements.

3

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT) (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (IN THOUSANDS EXCEPT SHARE AMOUNTS)

							Company Stockholders’ Equity (Deficit)
	Redeemable Preferred Stock Shares			Redeemable Preferred Stock			Common Stock Shares			Common Stock			Common Stock  - - Additional Paid-in Capital			Warrants  - - Additional Paid-in Capital			Retained Earnings (accumulated deficit)			Noncontrolling Interest			Total
BALANCE, December 31, 2008		12,434,004		$	104,607			19,305,117		$	2		$	57,160		$	4,619		$	—		$	20,237		$	82,018
Issuance of preferred stock		30,353			334			—			—			—			—			—			—			—
Issuance of common stock		—			—			270,000			—			1,368			—			—			—			1,368
Stock compensation expense		—			—			—			—			2,495			—			—			—			2,495
Accretion of preferred stock to redemption value		—			31,337			—			—			(31,337	)		—			—			—			(31,337	)
Net loss		—			—			—			—			—			—			(8,764	)		(6,350	)		(15,114	)
BALANCE, September 30, 2009		12,464,357		$	136,278			19,575,117		$	2		$	29,686		$	4,619		$	(8,764	)	$	13,887		$	39,430
BALANCE, December 31, 2009		12,464,357		$	149,122			19,575,117		$	2		$	15,676		$	4,619		$	(60,905	)	$	13,477		$	(27,131	)
Derecognition of REG Holdco preferred stock, common stock, and common stock warrants		(12,464,357	)		(158,475	)		(19,575,117	)		(2	)		(6,323	)		(4,619	)		—			—			(10,944	)
Issuance of preferred stock, common stock, and common stock warrants to REG Holdco, net of $52,394 for embedded derivatives		13,164,357			102,287			18,875,117			2			14,221			4,619			—			—			18,842
Issuance of common stock in acquisitions, net of $862 for issue cost		—			—			13,754,436			1			79,304			—			—			—			79,305
Issuance of preferred stock in acquisitions, net of $1,158 for embedded derivatives		291,165			2,263			—			—			—			—			—			—			—
Issuance of warrants in acquisitions		—			—			—			—			—			1,269			—			—			1,269
Issuance of common stock		—			—			500,000			—			3,015			—			—			—			3,015
Conversion of warrants to restricted stock units		—			—			—			—			1,068			(1,068	)		—			—			—
Blackhawk Biofuels LLC deconsolidation and transition adjustment		—			—			—			—			1,192			—			30,152			(13,477	)		17,867
Stock compensation expense		—			—			—			—			835			—			—			—			835
Accretion of preferred stock to redemption value		—			21,613			—			—			(21,613	)		—			—			—			(21,613	)
Net loss		—			—			—			—			—			—			(4,929	)		—			(4,929	)
BALANCE, September 30, 2010		13,455,522		$	116,810			33,129,553		$	3		$	87,375		$	4,820		$	(35,682	)	$	—		$	56,516

See notes to condensed consolidated financial statements.

4

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(IN THOUSANDS)

	Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,929	)	$	(15,114	)
Adjustments to reconcile net loss to net cashflows from operating activities:
Depreciation expense		3,673			3,284
Amortization expense		369			923
Gain on sale of property, plant & equipment		—			(2,254	)
Provision (benefit) for doubtful accounts		64			(1,480	)
Stock compensation expense		491			2,495
Loss from equity method investees		554			570
Deferred tax benefit		(3,728	)		(4,875	)
Impairment of intangible assets		7,336			—
Impairment of investments		400			—
Impairment of long lived assets		141			—
Change in fair value of preferred stock conversion feature embedded derivatives		(6,997	)		1,429
Change in fair value of Seneca Holdco liability		2,044			—
Distributions receved from equity method investees		50			60
Expense settled with stock issuance		—			334
Changes in asset and liabilities, net of effects from mergers and acquisitions:
Accounts receivable		4,709			(721	)
Inventories		(71	)		3,933
Prepaid expenses and other assets		666			3,787
Accounts payable		(5,913	)		243
Accrued expenses and other liabilities		143			(1,316	)
Deferred revenue		(4,599	)		—
Billings in excess of costs and estimated earnings on uncompleted contracts		—			(111	)
Net cash flows from operating activities		(5,597	)		(8,813	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of property, plant and equipment		(3,929	)		(6,728	)
Proceeds from the sale of fixed assets		320			3,032
Change in restricted cash		(525	)		4,687
Deconsolidation of Blackhawk		(206	)		—
Cash provided through Blackhawk acquisition		1			—
Cash provided through Central Iowa Energy acquisition		403			—
Net cash flows from investing activities		(3,936	)		991
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit		5,500			880
Repayments on line of credit		(160	)		(1,757	)
Cash paid on notes payable		(1,205	)		(325	)
Cash proceeds from investment in Seneca Landlord		4,000			—
Cash received from issuance of common stock to ARES Corporation		8,000			—
Cash paid for issuance cost of common stock		(280	)		—
Cash paid for debt issuance costs		(691	)		—
Net cash flows from financing activities		15,164			(1,202	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		5,631			(9,024	)
CASH AND CASH EQUIVALENTS, Beginning of period		5,855			15,311
CASH AND CASH EQUIVALENTS, End of period	$	11,486		$	6,287

(continued)

5

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(IN THOUSANDS)

	Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for income taxes	$	579		$	2,823
Cash paid for interest	$	3,000		$	1,621
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Effects of recapitalization	$	8,521
Accretion of preferred stock to redemption value	$	21,613		$	31,337
Amounts included in period-end accounts payable for:
Purchases of property, plant and equipment	$	47		$	49
Removal of cost method investee as a result of consolidation	$	1,000
Issuance of common stock for debt financing cost	$	3,015
Removal of equity method investee as a result of consolidation	$	3,969
Property, plant and equipment acquired through the assumption of liabilities	$	39,314
Issuance of restricted stock units for equity issuance cost	$	582
Assets (liabilities) acquired through the issuance of stock:
Cash	$	8,404		$	—
Restricted cash		2,302			—
Other current assets		1,342			—
Property, plant, and equipment		89,597			—
Goodwill		69,059			—
Intangible assets		5,895			—
Other noncurrent assets		231			1,359
Line of credit		(900	)		—
Other current liabilities		(5,548	)		—
Debt		(72,668	)		—
Other noncurrent liabilities		(11,729	)		—
Fair value of contingent consideration		(2,868	)		—
	$	83,117		$	1,359

See “Note 7 - Variable Interest Entities” for noncash items related to the deconsolidation of Blackhawk

(concluded)

6

RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - Unaudited

For The Nine Months Ended September 30, 2010 and 2009

(In Thousands, Except Share and Per Share Amounts)

NOTE 1 — ORGANIZATION, PRESENTATION, AND NATURE OF THE BUSINESS

On February 26, 2010, Renewable Energy Group, Inc. (the Company) (formerly known as REG Newco, Inc.) completed its acquisitions of REG Biofuels, Inc. (Biofuels) (formerly known as Renewable Energy Group, Inc. and REG Intermediate Holdco, Inc.) and Blackhawk Biofuels, LLC (Blackhawk) and on March 8, 2010 the Company completed its asset purchase of Central Iowa Energy, LLC (CIE) (collectively, the Acquisitions).

On February 26, 2010, a wholly owned subsidiary of the Company was merged with and into Biofuels (the Biofuels Merger). As a result of the Biofuels Merger, each share of Biofuels’ common stock issued and outstanding immediately prior to the effective time was converted into the right to receive one share of the Company’s common stock, $0.0001 par value per share (the Common Stock), and each share of the Biofuels’ preferred stock issued and outstanding immediately prior to the effective time was converted into the right to receive one share of the Company’s Series A Preferred Stock, $0.0001 par value per share (the Series A Preferred Stock).

Also on February 26, 2010, a wholly owned subsidiary of the Company was merged with and into Blackhawk (the Blackhawk Merger). Blackhawk was renamed REG Danville, LLC (REG Danville) immediately following the merger. As a result of the Blackhawk Merger, each outstanding Blackhawk Series A Unit (other than such units held by Biofuels or any affiliate of Biofuels) was converted into 0.4479 shares of Common Stock and 0.0088 shares of Series A Preferred Stock. Each outstanding warrant for the purchase of series A units of Blackhawk became a warrant for the purchase of shares of Common Stock, with the number of shares warrant exchange ratio and exercise price per share adjusted based on the 0.4479 common shares exchange ratio. The former members of Blackhawk received 132,680 shares of Series A Preferred Stock, 6,753,311 shares of Common Stock and 335,924 warrants.

On March 8, 2010, the Company acquired substantially all of the assets and liabilities of CIE (CIE Asset Purchase) in exchange for an aggregate of 4,252,830 shares of Common Stock and 158,485 shares of Series A Preferred Stock. The assets and liabilities were acquired from CIE by REG Newton, LLC (REG Newton), a wholly owned subsidiary of the Company.

On April 9, 2010, the Company entered into a series of agreements related to the asset purchase agreement with Nova Biosource Fuels, Inc. See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition and their accounting treatment.

On July 16, 2010, the Company acquired certain assets from Tellurian Biodiesel, Inc. (Tellurian) and American BDF, LLC (ABDF). ABDF was a joint venture owned by Golden State Service Industries, Restaurant Technologies, Inc. (RTI) and Tellurian Biodiesel. See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition.

On September 21, 2010, the Company acquired substantially all of the assets of Clovis Biodiesel, LLC (Clovis), a wholly owned subsidiary of ARES Corporation, and received $8,000 cash in exchange for the Company’s Common Stock. See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition.

Prior to February 26, 2010, the Company refers to the business, results of operations and cash flows of Biofuels, which is considered the accounting predecessor to the Company. For the period after February 26, 2010, the Company refers to the business, results of operations and cash flows of Renewable Energy Group, Inc. (formerly, REG Newco, Inc.) and its consolidated subsidiaries, including Biofuels, REG Danville, and REG Newton.

Nature of Business

As of September 30, 2010, the Company owned biodiesel production facilities with a total of 182 million gallons per year (mmgy) of production capacity, which includes a 60 mmgy biodiesel facility in Seneca, Illinois leased by the Company from a consolidated variable interest entity (see Note 6 – Acquisitions and Equity Transactions).

In 2007, the Company commenced construction of a 60 mmgy production capacity facility near New Orleans, Louisiana and a 60 mmgy production capacity facility in Emporia, Kansas. In 2008, the Company halted construction of these facilities as a result of conditions in the biodiesel industry and the credit markets. The Company continues to pursue financing and intends to finish the New Orleans, Louisiana facility, which is approximately 50% complete, and the facility in Emporia, Kansas, which is approximately 20% complete, when industry conditions improve and financing becomes available. In September 2010, the Company purchased the assets of Clovis which includes a partially completed 15 mmgy biodiesel plant located in Clovis, New Mexico. The plant is approximately 70% complete. The Company continues to be in discussions with lenders in an effort to obtain financing for facilities under construction and capital improvement projects. The city incentive package for the Emporia construction project has been renewed for an additional three years starting July 1, 2010. Additionally, as a result of halting construction, the Company performed an analysis to evaluate if the assets under construction were impaired. Based on the projected gross cash flows of the projects, if the projects were to be completed, the Company determined that no impairment has occurred.

7

As of September 30, 2010, the Company managed one other biodiesel production facility owned primarily by an independent investment group with an aggregate of 30 mmgy capacity (hereafter referred to as Network Plant). For this facility, the Company has entered into an agreement to manage the facility while the investment group determines how to raise capital for production facility upgrades. In 2009, the Company provided notice to five networks facilities that it would be terminating services under the Management and Operational Services Agreement (MOSA) twelve months from the date notice was provided as permitted by the MOSAs. Of the five cancellation notices given in 2009, three facilities did not renew their MOSA, the Company is still in negotiations with one facility regarding continued services and another facility was purchased through an asset purchase agreement.

The biodiesel industry and the Company’s business have relied on the continuation of certain federal and state incentives and mandates. The federal biodiesel tax credit expired on December 31, 2009, and, as of the date of the financial statements, Congress has not yet acted to reinstate the credit. As a result, the incentives to the biodiesel industry may not continue beyond the expired date or, if they continue, the incentives may not be at the same level. The failure to reenact, revocation or amend the federal incentive program could adversely affect the financial results of the Company. Revenues include amounts related to federal subsidies and regulatory support totaling $0 and $3,674 for the three and nine months ended September 30, 2010, respectively, and $6,041 and $13,572 for the three and nine months ended September 30, 2009, respectively. The Company does not expect to have biodiesel tax credit revenues until the reinstatement of the credit.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying Condensed Consolidated Financial Statements include the accounts of the Company consolidated with the accounts of all of its subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally, a controlling financial interest reflects ownership of a majority of the voting interests. Other factors considered in determining whether a controlling financial interest is held include whether the Company possesses the authority to purchase or sell assets or make other operating decisions that significantly affect the entity’s results of operations and whether the Company is the primary beneficiary of the economic benefits and financial risks of the entity. Intercompany accounts and transactions have been eliminated.

Cash and Cash Equivalents

Cash and cash equivalents consists of money market funds and demand deposits with financial institutions. The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

The Company has corrected the presentation of borrowings and repayments on its line of credit for 2009. Related amounts had previously been presented on a net basis, rather than on a gross basis as required in accordance with ASC Topic 230, Statement of Cash Flows (formerly SFAS No. 95, Statement of Cash Flows). The correction had no effect on net cash from financing activities.

8

Restricted Cash

Restricted cash consists of project funds and debt reserve funds related to various Company entities totaling $2,981 and $2,156 as of September 30, 2010 and December 31, 2009, respectively, which have been restricted in accordance with the terms of loan agreements. The Company classifies restricted cash between current and non-current assets based on the length of time the restricted cash will be utilized.

Accounts Receivable

Accounts receivable are carried on a gross basis, less allowance for doubtful accounts. Management estimates the allowance for doubtful accounts based on existing economic conditions, the financial conditions of customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for doubtful accounts only after reasonable collection attempts have been exhausted.

Inventories

Inventories consist of raw materials, work in process and finished goods and are valued at the lower of cost or market. Inventory values as of September 30, 2010 and December 31, 2009 include adjustments to reduce inventory to the lower of cost or market in the amount of $47 and $194, respectively. Cost is determined based on the first-in, first-out method.

Derivative Instruments and Hedging Activities

The Company has entered into derivatives to hedge its exposure to price risk related to feedstock inventory and biodiesel finished goods inventory. Additionally, the Company has entered into an interest rate swap with the objective of managing risk caused by fluctuations in interest rates associated with the REG Danville note payable.

These derivative contracts are accounted for in accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815), as amended. ASC Topic 815 requires that an entity recognize and record all derivatives on the balance sheet at fair value. All of the Company’s derivatives are designated as non-hedge derivatives and are utilized to manage cash flow. Although the contracts may be effective economic hedges of specified risks, they are not designated as, nor accounted for, as hedging instruments. Unrealized gains and losses on futures and options contracts used to hedge feedstock purchases or biodiesel inventory are recognized as a component of biodiesel costs of goods sold, and therefore are reflected in current results of operations. Unrealized gains and losses on the interest rate swap are recorded in change in fair value of interest rate swap in the Company’s statements of operations.

Valuation of Preferred Stock Conversion Feature Embedded Derivatives

As stated in “Note 1 – Organization, Presentation and Nature of the Business”, in connection with the Biofuels Merger, all outstanding shares of Biofuels preferred stock were converted into Company Series A Preferred Stock.

The Series A Preferred Stock terms provide for voluntary and, under certain circumstances, automatic conversion of the Series A Preferred Stock to Common Stock based on a prescribed formula. In addition, shares of Series A Preferred Stock are subject to redemption at the election of the holder beginning February 26, 2014. The redemption price is equal to the greater of (i) an amount equal to $13.75 per share of Series A Preferred Stock plus any and all accrued dividends, not to exceed $16.50 per share, or (ii) the fair market value of the Series A Preferred Stock. Under ASC Topic 815, the Company is required to bifurcate and account for as a separate liability certain derivatives embedded in its contractual obligations. An “embedded derivative” is a provision within a contract, or other instrument, that affects some or all of the cash flows or the value of that contract, similar to a derivative instrument. Essentially, the embedded provision within the contract contains all of the attributes of a free-standing derivative, such as an underlying market variable, a notional amount or payment provision, and can be settled “net,” but the contract, in its entirety, does not meet the ASC Topic 815 definition of a derivative.

The Company has determined that the conversion feature of the Series A Preferred Stock is an embedded derivative because the redemption feature allows the holder to redeem Series A Preferred Stock for cash at a price which can vary based on the fair market value of the Series A Preferred Stock, which effectively provides the holders with a mechanism to “net settle” the conversion option. Consequently, the embedded conversion option must be bifurcated and accounted for separately because the economic characteristics of this conversion option are not considered to be clearly and closely related to the economic characteristics of the Series A Preferred Stock, which is considered more akin to a debt instrument than equity.

Upon issuance of the Series A Preferred Stock, the Company recorded a liability representing the estimated fair value of the right of holders of the Series A Preferred Stock to receive the fair market value of the Common Stock issuable upon conversion of the Series A Preferred Stock on the redemption date. This liability is adjusted each quarter based on changes in the estimated fair value of such right, and a corresponding income or expense is recorded in change in fair value of the Series A Preferred Stock conversion feature embedded derivatives in the Company’s statements of operations.

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The Company uses the option pricing method to value the embedded derivative. The Company used the Black-Scholes options pricing model to estimate the fair value of the conversion option embedded in each series of Biofuels preferred stock prior to February 26, 2010 and the Series A Preferred Stock as of and subsequent to February 26, 2010. The Black-Scholes options pricing model requires the development and use of highly subjective assumptions. These assumptions include the expected volatility of the value of the Company’s equity, the expected conversion date, an appropriate risk-free interest rate, and the estimated fair value of the Company’s equity. The expected volatility of the Company’s equity is estimated based on the volatility of the value of the equity of publicly traded companies in a similar industry and general stage of development as the Company. The expected term of the conversion option is based on the period remaining until the contractually stipulated redemption date of February 26, 2014. The risk-free interest rate is based on the yield on U.S. Treasury STRIPs with a remaining term equal to the expected term of the conversion option. The development of the estimated fair value of the Company’s equity is discussed below in “Valuation of the Company’s Equity.”

The significant assumptions utilized in the Company’s valuation of the embedded derivative are as follows:

	September 30, 2010			February 26, 2010			December 31, 2009
Expected volatility		40.00	%		40.00	%		50.00	%
Risk-free rate		3.40	%		4.40	%		0.89	%

Valuation of Seneca Holdco Liability

Associated with the Company’s transaction with Nova Biosource Fuels, LLC (See Note 6 – Acquisitions and Equity Transactions), the Company has the option to purchase (Call Option) and Seneca Holdco, LLC has the option to require the Company to purchase (Put Option) the membership interest of Seneca Landlord, LLC whose assets consist primarily of a biodiesel plant located in Seneca, Illinois. Both the Put Option and the Call Option have a term of seven years and are exercisable by either party at a price based on a pre-defined formula. The Company has valued the amounts financed by Seneca Holdco, LLC, the Put Option, and the Call Option using an option pricing model. The fair values of the Put Option and the Call Option were estimated using an option pricing model, and represent the probability weighted present value of the gain that is realized upon exercise of each option. The option pricing model requires the development and use of highly subjective assumptions. These assumptions include (i) the value of the Company’s equity, (ii) expectations regarding future changes in the value of the Company’s equity, (iii) expectations about the probability of either option being exercised, including the Company’s ability to list its securities on an exchange or complete a public offering, and (iv) an appropriate risk-free rate. Company management considered current public equity markets, relevant regulatory issues, industry conditions and the Company’s position within the industry when estimating the probability that the Company will raise additional capital. Differences in the estimated probability and timing of this event may significantly impact the fair value assigned to the Seneca Holdco Liability as management has determined it is not likely that the Put Option will become exercisable in the absence of this event.

The significant assumptions utilized in the Company’s valuation of the Seneca Holdco liability are as follows:

	September 30, 2010			April 9, 2010
Expected volatility		40.00	%		50.00	%
Risk-free rate		3.40	%		4.60	%
Probability of IPO		70.00	%		60.00	%

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Preferred Stock Accretion

Beginning October 1, 2007, the date that the Company determined that there was a more than remote likelihood that the then issued and outstanding preferred stock would become redeemable, the Company commenced accretion of the carrying value of the preferred stock over the period until the earliest redemption date, which was August 1, 2011, to the Biofuels preferred stock’s redemption value, plus accrued but unpaid dividends using the effective interest method. This determination was based upon the current state of the public equity markets which was restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability. Prior to October 1, 2007, the Company had determined that it was not probable that the preferred stock would become redeemable; therefore, the carrying value was not adjusted in accordance with ASC Topic 480-10-S99, Classification and Measurement of Redeemable Securities.

On February 26, 2010, the date the Company determined that there was a more than remote likelihood that the Series A Preferred Stock would become redeemable, the Company commenced accretion of the carrying value of the Series A Preferred Stock over the period until the earliest redemption date (February 26, 2014) to the Series A Preferred Stock’s redemption value, plus accrued but unpaid dividends using the effective interest method. This determination was based upon the current state of the public equity markets which is restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability.

Accretion of $5,367 and $21,613 for the three and nine months ended September 30, 2010, respectively, and $11,560 and $31,337 for the three and nine months ended September 30, 2009, respectively, has been recognized as a reduction to income available to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99.

Valuation of the Company’s Equity

The Company considered three generally accepted valuation approaches to estimate the fair value of the aggregate equity of the Company: the income approach, the market approach and the cost approach. Ultimately, the estimated fair value of the aggregate equity of the Company was developed using the Income Approach—Discounted Cash Flow (DCF) method. The value derived using this approach was supported by a variation of the Market Approach, specifically comparisons of the implied multiples derived using the DCF method to the multiples of various metrics calculated for guideline public companies.

Material underlying assumptions in the DCF analysis include the gallons produced and managed, gross margin per gallon, expected long-term growth rates and an appropriate discount rate. Gallons produced and managed as well as the gross margin per gallon were determined based on historical and forward-looking market data.

The discount rate used in the DCF analysis is based on macroeconomic, industry and Company-specific factors and reflects the perceived degree of risk associated with realizing the projected cash flows. The selected discount rate represents the weighted average rate of return that a market participant investor would require on an investment in the Company’s debt and equity. The percent of total capital assumed to be comprised of debt and equity when developing the weighted average cost of capital was based on a review of the capital structures of the Company’s publicly traded industry peers. The cost of debt was estimated utilizing the adjusted average 20-Year B-rated corporate bond rate during the previous 12 months representing a reasonable market participant rate based on the Company’s publicly traded industry peers. The Company’s cost of equity was estimated utilizing the capital asset pricing model, which develops an estimated market rate of return based on the appropriate risk-free rate adjusted for the risk of the biofuel industry relative to the market as a whole, an equity risk premium and a company specific risk premium. The risk premiums included in the discount rate were based on historical and forward looking market data.

Discount rates utilized in the Company’s DCF model are as follows:

	September 30, 2010			February 26, 2010			December 31, 2009
Discount rate		16.00	%		15.00	%		13.00	%

Valuations derived from this model are subject to ongoing verification and review. Selection of inputs involves management’s judgment and may impact net income. This analysis is done on a regular basis and takes into account factors that have changed from the time of the last Common Stock issuance. Other factors affecting our assessment of price include recent purchases or sales of our Common Stock, if available.

Non-monetary Exchanges

The Company records assets acquired and liabilities assumed through the exchange of non-monetary assets based on the fair value of the assets and liabilities acquired or the fair value of the consideration exchanged, whichever is more readily determinable.

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Property, Plant and Equipment

Property, plant and equipment is recorded at cost, including applicable construction-period interest, less accumulated depreciation. Maintenance and repairs are expensed as incurred. Depreciation expense is computed on a straight-line method based upon estimated useful lives of the assets. Estimated useful lives are as follows:

Automobiles and trucks	5 years
Computers and office equipment	5 years
Office furniture and fixtures	7 years
Machinery and equipment	10-30 years
Leasehold improvements	the lesser of the lease term or 30 years
Buildings and improvements	30-40 years

Goodwill

The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Goodwill is reviewed for impairment by reporting unit annually on July 31 or between annual periods when management believes impairment indicators exist. If the carrying value of the reporting unit goodwill is considered impaired, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the reporting unit goodwill. Fair value is determined using a discounted cash flow methodology involving a significant level of judgment in the assumptions used. Changes to the Company’s strategy or market conditions could significantly impact these judgments and require adjustments to recorded amounts of goodwill. There was no impairment of goodwill recorded in the periods presented.

The following table summarizes goodwill for the Company’s business segments:

	Biodiesel		Services		Total
Ending balance - December 31, 2008	$	—	$	16,080	$	16,080
Acquisitions		—		—		—
Ending balance - September 30, 2009	$	—	$	16,080	$	16,080
Ending balance - December 31, 2009	$	—	$	16,080	$	16,080
Blackhawk Biofuels acquisition		43,896		—		43,896
CIE acquisition		25,163		—		25,163
Ending balance - September 30, 2010	$	69,059	$	16,080	$	85,139

Impairment of assets

During the three months ended September 2010, a raw material supply agreement with the New Orleans and Emporia facilities was cancelled by the counter-party. The original agreement was recorded as an intangible asset in the amount of $7,025 and as a result was charged off during the three months ended September 30, 2010. The Company also impaired deferred financing cost related to the New Orleans project GoZone bonds. The Company determined that it was not probable that the GoZone bond allocation would be extended past the December 14, 2010 deadline or that the bonds would be issued prior to the deadline. The amount of the impairment for the three months ended September 30, 2010 was $311.

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Revenue Recognition

The Company recognizes revenues from the following sources:

• the sale of biodiesel and its co-products — both purchased and produced by the Company

• fees received from federal and state incentive programs for renewable fuels

• fees received for the marketing and sales of biodiesel produced by third parties and from managing operations of third party facilities

Biodiesel sales revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable and collectability can be reasonably assured.

Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured, and the sale of product giving rise to the incentive has been recognized.

Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other services are recognized as services are provided. The Company also has performance based incentive agreements that are included as management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable and collectability is reasonably assured.

The Company acts as a sales agent for certain third parties, thus the Company recognizes revenues on a net basis in accordance with ASC Topic 605-45, Revenue Recognition (ASC Topic 605-45).

Stock-Based Compensation

The Company has two stock incentive plans. On July 31, 2006, the Biofuels Board of Directors (Biofuels Board) approved the 2006 Stock Incentive Plan. On May 6, 2009, the Company Board of Directors (Company Board) approved the 2009 Stock Incentive Plan. Eligible award recipients are employees, non-employee directors and advisors. The Company accounted for stock-based compensation in accordance with ASC Topic 718, Stock Compensation (ASC Topic 718). Compensation expense was recorded for stock options and restricted stock units awarded to employees and non-employee directors in return for service. The expense was measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period.

Income Taxes

The Company recognizes deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, the carrying amount of deferred tax assets are reviewed to determine whether the establishment of a valuation allowance is necessary. If it is more-likely-than-not that all or a portion of the Company’s deferred tax assets will not be realized, based on all available evidence, a deferred tax valuation allowance would be established. Consideration is given to positive and negative evidence related to the realization of the deferred tax assets. Significant judgment is required in making this assessment. As of September 30, 2010, the Company had net deferred income tax assets of $42,250 with an offsetting valuation allowance of $40,750, which results in a net deferred tax asset of $1,500. The net amount is offset by an accrued liability for uncertain tax benefits in the amount of $1,500.

In evaluating the available evidence, the Company considers, among other factors, historical financial performance, expectation of future earnings, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused, tax planning strategies and timing of reversals of temporary differences. In evaluating losses, the Company considers the nature, frequency and severity of losses in light of the conditions giving rise to those losses. As of December 31, 2009, the Company concluded that the 2008 and 2009 book and tax losses that result in cumulative losses represent negative evidence. This evidence combined with the uncertainty surrounding the future availability of the federal blender’s credit that expired on December 31, 2009 and has yet to be renewed provides negative evidence that cannot be overcome by positive and objectively verifiable evidence. Based on this evaluation, the Company concluded as of December 31, 2009, a valuation allowance was required for the entire amount of the net deferred tax assets since positive, objectively verifiable evidence was not available to prove that it was more likely than not that the Company would be able to realize these assets.

During the three and nine months ended September 30, 2010 the Company did not record an income tax benefit or expense related to its operations as all amounts were offset by a related change in the valuation allowance. Deferred tax liabilities were recorded during the nine months ended September 30, 2010 as a result of the Blackhawk Merger and CIE Asset Purchase. As the deferred tax liabilities were recorded, the resulting decrease in net deferred tax assets required a lower valuation allowance. The release of the associated valuation allowance resulted in an income tax benefit.

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Prior to deconsolidation on January 1, 2010 and the Blackhawk Merger, Blackhawk was treated as a partnership for federal and state income tax purposes and generally did not incur income taxes. Instead, its earnings and losses were included in the income tax returns of its members. Therefore, no provision or liability for federal or state income taxes was included in the consolidated financial statements of the Company as of December 31, 2009 aside from its pro-rata share determined based on its ownership interest.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and reported amounts of revenues and expenses during the reporting periods. These estimates are based on information that is currently available to management and on various assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ from those estimates.

New Accounting Pronouncements

In June 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends ASC Topic 810, Consolidations (ASU No. 2009-17). This Statement requires a qualitative analysis to determine the primary beneficiary of a Variable Interest Entity (VIE). The analysis identifies the primary beneficiary as the enterprise that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. The Statement also requires additional disclosures about an enterprise’s involvement in a VIE. The effective date is the beginning of fiscal year 2010. The Company adopted this statement effective January 1, 2010 which resulted in the deconsolidation of Blackhawk and additional disclosure requirements. See “Note 7 – Variable Interest Entities” for additional information.

In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (ASU 2010-06), which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales issuances, and settlements related to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-06 is in effect for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. The adoption of this guidance did not have a material effect on the Company’s financial statements and the Company does not anticipate the remaining disclosures will have a material effect on the Company’s financial statements.

NOTE 3 — STOCKHOLDERS’ EQUITY OF THE COMPANY

Common Stock

On February 26, 2010, the Company filed its restated certification of incorporation with the Secretary of State of Delaware. The restated certificate of incorporation authorized 140,000,000 shares of Common Stock at a par value of $0.0001 per share. See “Note 6 – Acquisitions and Equity Transactions” for information related to Common Stock issued in connection with the Acquisitions.

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders. Subject to preferences that may apply to shares of outstanding Series A Preferred Stock as outlined below, the holders of outstanding shares of the Common Stock are entitled to receive dividends. After the payment of all preferential amounts required to the holders of Series A Preferred Stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among the holders of Common Stock.

Common Stock Issued During 2010:

On February 26, 2010, the Company issued 6,753,311 shares of Common Stock to the shareholders of Blackhawk in exchange for outstanding shares of Blackhawk.

On March 8, 2010, the Company issued 4,252,830 shares of Common Stock to CIE and to Houlihan Smith & Company in connection with the purchase of substantially all CIE company assets.

On April 9, 2010, the Company issued 500,000 shares of Common Stock to West LB in connection with the issuance of a Revolving Credit Agreement to the Company.

On July 16, 2010, the Company issued 598,295 shares of Common Stock in connection with the purchase of substantially all Tellurian LLC and ABDF company assets.

On September 21, the Company issued 2,150,000 shares of Common Stock to ARES Corporation in connection with the purchase of substantially all the assets held by Clovis Biodiesel, LLC and cash.

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Common Stock Warrants

Under the Company’s outstanding warrants, the holder may purchase the number of shares of Common Stock underlying each warrant held for a purchase price ranging from $2.23 to $11.00 per share. The warrant holder may “net exercise” the warrants and use the common shares received upon exercise of the warrants outstanding as the consideration for payment of the exercise price.

The warrant holders are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination, or other recapitalization.

NOTE 4 — REDEEMABLE PREFERRED STOCK

The Company’s restated certificate of incorporation filed on February 26, 2010 authorizes 60,000,000 shares of preferred stock with a par value of $0.0001. The Company Board has the discretion, subject to the approval of certain shareholders, as to the designation of voting rights, dividend rights, redemption price, liquidation preference and other provisions of each issuance. See “Note 6 – Acquisitions and Equity Transactions” for information related to the cancellation of all outstanding Biofuels preferred stock on February 26, 2010 and the issuance of Series A Preferred Stock in connection with the Acquisitions.

Dividend Provisions

The holders of the Series A Preferred Stock accrue dividends at the rate of $0.88 per share per annum. Dividends are cumulative, accrue on a daily basis from the date of issuance and compound annually from the date of issuance. If dividends on the Series A Preferred Stock have not been paid or declared, the deficiency shall be paid or declared before any dividend is declared for Common Stock. Dividends in arrears do not bear interest. Holders of the Series A Preferred Stock are allowed to participate in the dividends to common stockholders in the event that dividends on Common Stock exceed that of the Series A Preferred Stock as if the Series A Preferred Stock had been converted to Common Stock at the beginning of the year. Holders of at least seventy-five percent of the outstanding shares of the Series A Preferred Stock that were issued in exchange for shares of the Series A, Series AA, Series B or Series BB Biofuels Preferred Stock, pursuant to the Biofuels Merger agreement (Preferred Supermajority) may vote to waive the timing or amount of any dividend payment. The Company has not declared any dividends on the Series A Preferred Stock outstanding. Dividends previously accrued on the Biofuels preferred stock were forgone in connection with the Biofuels Merger and issuance of the Series A Preferred Stock. There were $7,034 of the Series A Preferred Stock dividends in arrears as of September 30, 2010 and $33,388 of Biofuels preferred stock dividends in arrears as of December 31, 2009.

Liquidation Rights

Upon the occurrence of a voluntary or involuntary liquidation (including consolidations, mergers or sale of assets as defined by the preferred stock agreement), if the remaining net assets of the Company are sufficient, the holders of the Series A Preferred Stock shall be paid no less than liquidation value plus all dividends in arrears (whether or not declared), out of the assets of the Company legally available for distribution to its stockholders, before any payment or distribution is made to any holders of Common Stock.

If upon any liquidation or dissolution, the remaining net assets of the Company are insufficient to pay the amount that the Series A Preferred Stock holders are due as indicated above, the holders of Series A Preferred Stock will share ratably in any distribution of the remaining assets of the Company.

Conversion Rights

All shares of the Series A Preferred Stock will be converted into shares of Common Stock at the then applicable conversion ratio on the date:

a) of a closing of the sale of shares of Common Stock at a level at or exceeding $22.00, in a Qualified Public Offering (QPO), requiring aggregate proceeds to the Company of at least $40 million, or

b) specified in a written contract or agreement of the Preferred Supermajority, or

c) the shares of Common Stock have a closing price on NASDAQ or any national securities exchange in excess of $24.75 per share for ninety (90) consecutive trading days with an average daily trading volume on such trading days of at least US $8,000.

Voting Rights

Each holder of the Series A Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into which the Series A Preferred Stock held by such holder are convertible.

Additionally, the Company is prohibited, without obtaining the approval of the Preferred Supermajority from performing certain activities including, but not limited to, amending shareholder agreements, redeeming or purchasing any outstanding shares of the Company, declaring dividends, making certain capital expenditures and merging or consolidating with other entities.

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Redemption Rights

On or after February 26, 2014, the Preferred Supermajority may require that the Company redeem all or part of the issued and outstanding shares of the Series A Preferred Stock out of funds lawfully available; provided, however, that any such redemptions equal in the aggregate $5,000. The redemption price is the greater of the fair market value per share at the date of the redemption election or $13.75 per share of the Series A Preferred Stock, plus accrued and unpaid preferred stock dividends, not to exceed $16.50 per share.

Preferred Stock Issued During 2010:

On February 26, 2010, the Company exchanged 700,000 shares of Common Stock issued to USRG HoldCo V LLC, Ohana Holdings LLC, ED&F Man Holdings B.V. and others for 700,000 shares of Series A Preferred Stock.

The Company applied the guidance in EITF Topic No. D-42: The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock (codified to ASC 260-10 S99-2) in regards to the exchange of common shares for preferred shares and the exchange of one series of preferred shares for a different series of preferred shares.

The Company compared the fair value of the preferred shares issued to the carrying amount of the preferred and common shares that were redeemed. The excess of the carrying amount of preferred and common share that were redeemed over the fair value of the preferred shares issued was recorded as an increase in additional paid-in capital and was added to net earnings available to common shareholders.

On February 26, 2010, the Company issued 132,680 shares of Series A Preferred Stock to the shareholders of Blackhawk in exchange for the outstanding Series A Units of Blackhawk.

On March 8, 2010, the Company issued 158,485 shares of Series A Preferred Stock to CIE and to Houlihan Smith & Company in connection with the purchase of substantially all of CIE company assets.

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NOTE 5 — BLACKHAWK

On May 9, 2008 the Company was party to a transaction, whereby Blackhawk purchased a 45 mmgy biodiesel production facility under construction located in Danville, Illinois from Biofuels Company of America, LLC. Blackhawk received the plant assets under construction and assumed a term construction loan with principal outstanding of $24,650 in exchange for $5,250 in cash and 1,980,488 shares of Common Stock of the Company set forth in the purchase agreement at $10.25 per share. Additionally, the Company issued 127,273 shares of Series B Preferred Stock with a per share value of $11.00 as established in the purchase agreement, to Bunge North America, Inc. (Bunge) on behalf of Blackhawk. In exchange for the Series B Preferred Stock Blackhawk entered into a soy oil supply agreement with Bunge. In exchange for the Biofuels Common and Biofuels Preferred Stock issued, the Company received a subordinated convertible note from Blackhawk with a par value of $21,700.

According to the terms of the agreement, the outstanding principal may be payable in cash or Blackhawk membership units as determined at the Company’s sole discretion. Principal is due upon maturity on May 9, 2013 and may be prepaid at any time at the election of Blackhawk. Additionally, the Company may elect to convert the outstanding principal to membership units of Blackhawk upon successful completion of an IPO, change in control of the Company, or May 9, 2011. Interest on the note is accrued at a rate equal to the 30 day LIBOR plus a spread of 500 basis points that is payable in cash or membership units of Blackhawk at Blackhawk’s sole discretion.

Simultaneously with this transaction the Company entered into a MOSA with Blackhawk to manage the operations of the newly acquired plant as well as a design-build agreement to perform construction services retrofitting the plant to produce biodiesel using alternative feedstocks. Finally, the Company received 51,563 warrants to purchase membership units in Blackhawk at $0.01 per share at anytime with no scheduled expiration. The warrants were received by the Company as compensation for providing a guarantee of $1.5 million in indebtedness of Blackhawk under the term construction loan and they vest 20% per year after the date of issuance until fully vested.

The Company held 1,000,000 membership units of Blackhawk as of May 9, 2008 and has subsequently received an additional 327,017 units, 658,052 units and 145,307 units in 2008, 2009 and 2010, respectively, in lieu of interest on the subordinated convertible note. The Company’s interest represents ownership interests in Blackhawk of 11.6% and 12.4% as of December 31, 2009 and February 26, 2010, respectively.

Prior to January 1, 2010, the Company consolidated Blackhawk according to the then requirements of ASC Topic 810 as they were determined to be the primary beneficiary (PB). The Company determined it was the PB as it holds significant variable interests resulting in it receiving the majority of Blackhawk’s expected losses or the majority of its expected residual returns. Variable interests in Blackhawk held by the Company are the subordinated convertible note, membership units, guaranty of indebtedness of up to $1,500, warrants, MOSA, and the design-build agreement.

As a result of the consolidation, all accounts of Blackhawk have been included with the Company’s financial statements as of May 9, 2008, the date of the transaction. As required by ASC Topic 810 the assets, including cash of $2,225, and liabilities consolidated by the Company were recorded at their relative fair values. The fair value of the Biofuels Common and Biofuels Preferred Stock transferred as consideration was determined as further discussed in “Note 2 – Summary of Significant Accounting Policies” and is summarized as follows:

	Fair Value		Fair Value Per Share
Common	$	1,763	$	0.89
Series B Preferred		1,231	$	9.67
Total	$	2,994

The assets and liabilities consolidated by the Company from Blackhawk did not represent a business as defined in ASC Topic 805, Business Combinations, therefore no goodwill was recorded. Accordingly, the Company consolidated Blackhawk and accounts for the membership units not held by the Company as a noncontrolling interest.

On January 1, 2010, the Company deconsolidated Blackhawk as a result of adopting ASU No. 2009-17, as it was determined that the Company was no longer the PB (Blackhawk Deconsolidation). Although the financial arrangements mentioned above resulted in the Company holding substantial variable interests in Blackhawk, they did not give the Company the power to direct the activities that most significantly impact Blackhawk’s economic performance. Consequently, subsequent to adopting this accounting pronouncement, the Company deconsolidated Blackhawk. See “Note 7 – Variable Interest Entities” for additional information. Upon deconsolidation, an equity investment in Blackhawk of $3,969 and a subordinated convertible note receivable of $24,298 were recognized at fair value using the option available under ASC Topic 825, Financial Instruments, and the previously consolidated amounts were removed from the consolidated balance sheet. The difference between the amounts recognized at fair value and the removal of the previously consolidated amounts was recorded to retained earnings (accumulated deficit).

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On February 26, 2010, the Company completed the Blackhawk Merger. See “Note 6 – Acquisitions and Equity Transactions” for additional information regarding the accounting for the Blackhawk Merger.

NOTE 6 — ACQUISITIONS AND EQUITY TRANSACTIONS

On February 26, 2010, the Company completed its mergers with Biofuels and Blackhawk and on March 8, 2010 the Company completed the asset purchase of CIE. The Company also completed the asset purchase of Nova Biosource Fuels, Inc. on April 8, 2010, an asset purchase of Tellurian and ABDF on July 16, 2010 and an asset purchase of Clovis Biodiesel on September 21, 2010.

REG Biofuels, Inc.

On February 26, 2010, the Company completed its merger with Biofuels.

Pursuant to the Second Amended and Restated Agreement and Plan of Merger, executed November 20, 2009, dated and effective as of the original execution date, May 11, 2009, REG Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company was merged with and into Biofuels. Upon consummation of the merger, Biofuels became a wholly owned subsidiary of the Company. At the closing, each share of Biofuels’ Common Stock issued and outstanding immediately prior to the effective time was converted into the right to receive one share of the Common Stock, $0.0001 par value per share, and each share of Biofuels’ preferred stock issued and outstanding immediately prior to the effective time was converted into the right to receive one share of the Series A Preferred Stock, $0.0001 par value per share.

The Company accounted for the Biofuels Merger as a business combination in accordance with ASC Topic 805. When accounting for the exchange of shares between entities under common control, the entity that receives the net assets shall initially recognize the assets and liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of transfer.

As the transaction was accounted for with carryover basis, no goodwill was recognized in conjunction with the Biofuels Merger, and no significant contingent assets or liabilities were acquired or assumed in the Biofuels Merger.

Blackhawk Biofuels LLC

On February 26, 2010, the Company completed the Blackhawk Merger.

Pursuant to the Second Amended and Restated Agreement and Plan of Merger, executed November 21, 2009, dated and effective as of the original execution date, May 11, 2009, REG Danville, LLC, a wholly owned subsidiary of the Company, was merged with and into Blackhawk. Upon consummation of the merger, Blackhawk became a wholly owned subsidiary of the Company and changed its name to REG Danville, LLC. Pursuant to the Blackhawk Merger, each outstanding Blackhawk Series A Units (other than such units held by Biofuels or any affiliate of Biofuels) was converted into 0.4479 shares of Common Stock and 0.0088 shares of Series A Preferred Stock. Each outstanding warrant for the purchase of series A units of Blackhawk became exercisable for the purchase of shares of Common Stock, with the number of shares and exercise price per share adjusted appropriately based on the 0.4479 shares exchange ratio. The former members of Blackhawk have received 132,680 shares of Series A Preferred Stock and 6,753,311 shares of Common Stock.

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The following table summarizes the final allocations of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition:

	Allocation at February 26, 2010
Assets (liabilities) acquired:
Cash	$	1
Restricted cash		2,002
Other current assets		859
Property, plant and equipment		55,253
Goodwill		43,896
Other noncurrent assets		231
Line of credit		(350	)
Other current liabilities		(3,621	)
Notes payable		(48,743	)
Other noncurrent liabilities		(6,507	)
Fair value of common and preferred stock issued	$	43,021

The acquisition price is summarized as follows:

	Value at February 26, 2010
	Fair Value		Fair Value per Share
Fair value of stock issued:
Warrants	$	1,269	$	3.78
Common Stock		40,721	$	6.03
Series A Preferred		1,031	$	7.77
Total	$	43,021

Since all of REG Danville’s revenues for the period from February 26, 2010 through September 30, 2010 consisted entirely of tolling fees from REG Marketing & Logistics Group, LLC (REG Marketing), they were eliminated on a consolidated basis. The net loss generated by REG Danville for the three and nine months ended September 30, 2010 included in the condensed consolidated statement of operations was $2,615 and $6,652, respectively.

Central Iowa Energy LLC

On March 8, 2010, the Company completed its acquisition of substantially all of the assets of CIE.

Pursuant to the Second Amended and Restated Asset Purchase Agreement, executed November 20, 2009, dated and effective as of the original execution date, May 8, 2009, REG Newton, LLC, a wholly owned subsidiary of the Company, acquired substantially all assets and liabilities of CIE. At closing, the Company delivered to CIE an aggregate of 158,485 shares of Series A Preferred Stock and 4,252,830 shares of Common Stock.

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The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition:

	Allocation at March 8,  2010
Assets (liabilities) acquired:
Cash	$	403
Restricted cash		300
Other current assets		483
Property, plant and equipment		32,153
Goodwill		25,163
Line of credit		(550	)
Other current liabilities		(1,927	)
Notes payable		(23,925	)
Other noncurrent liabilities		(5,222	)
Fair value of common and preferred stock issued	$	26,878

The acquisition price is summarized as follows:

	Final Value at March 8, 2010
	Fair Value		Fair Value per Share
Fair value of stock issued:
Common Stock	$	25,645	$	6.03
Series A Preferred		1,233	$	7.77
Total	$	26,878

Since all of REG Newton’s revenues for the period from March 8, 2010 through September 30, 2010 consisted entirely of contract manufacturing fees from REG Marketing, they were eliminated on a consolidated basis. The net loss generated by REG Newton for the three and nine months ended September 30, 2010 included in the condensed consolidated statement of operations was $833 and $2,151, respectively.

The following pro forma condensed combined results of operations assume that the Blackhawk Merger and CIE Asset Acquisition were completed as of January 1, 2010 and January 1, 2009, respectively:

	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
Revenues	$	63,122		$	42,877		$	147,102		$	94,872
Net loss	$	(7,617	)	$	(6,836	)	$	(7,974	)	$	(20,144	)

Nova Biosource Fuels, Inc.

On April 8, 2010, the Company entered into a series of agreements related to the asset purchase agreement with Nova Biosource Fuels, Inc. In September 2009, the United States Bankruptcy Court for the District of Delaware entered an order authorizing the sale of assets by Nova Biofuels Seneca, LLC (Nova Seneca) and Nova Biosource Technologies, LLC, (Nova Technologies), to a wholly owned subsidiary of Biofuels, pursuant to terms of an Asset Purchase Agreement, dated as of September 23, 2009 (the Nova Asset Purchase Agreement). The assets of Nova Seneca and Nova Technologies (the Seneca Assets), including the 60 mmgy biodiesel facility located in Seneca, Illinois (Seneca Facility) was acquired from Chapter 11 debtors in possession initially by the Company and immediately thereafter was sold to an entity owned by three significant stockholders of the Company or their affiliates: Bunge North America, Inc., USRG Holdco V, LLC and West Central Cooperative. These stockholder parties facilitated the transactions described above by, among other things, creating Seneca Landlord, LLC (Landlord) agreeing to invest $4,000 for repairs to the Seneca Facility and in consideration therefore received guarantees of certain payments and other obligations from the Company described below.

REG Seneca and Landlord entered into a Lease Agreement that governs REG Seneca’s lease of the Seneca Facility from Landlord. The Lease has a term of 7 years on a net lease basis covering the debt service on $36,250 of mortgage indebtedness against the Seneca Facility, as well as taxes, utilities, maintenance and other operating expenses.

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REG Seneca will pay Landlord a $600 per year fee (Fee), payable $150 per quarter, which is guaranteed by the Company. During the term of the lease, Seneca Holdco has a put option to the Company of the Landlord equity interests after one year, April 8, 2011, provided the Company has a minimum excess net working capital (as defined) of 1.5 times the put/call price. During this time, the Company also has a call option of the Landlord equity interests. The put/call price is the greater of three times the initial investment or an amount yielding a 35% internal rate of return. If the put/call is exercised within three years, the Fee and distributions in the first three years are credited to the put/call price. At the time the put or call is exercised, the Company will issue 150,000 shares of Common Stock to Seneca Holdco.

The Company determined that the Seneca Assets do not constitute a business as defined under ASC Topic 805 on the basis that the Seneca Assets are not an integrated set of activities or assets that are capable of being conducted or managed in a manner that would provide any economic benefit or return to the Company. As a result, the Company accounted for the purchase of the Seneca Assets as an asset acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition, and no significant contingent assets or liabilities were acquired or assumed in the acquisition.

See “Note 7 – Variable Interest Entities” for information on the accounting of the aforementioned transaction.

Tellurian Biodiesel, Inc. and American BDF, LLC

On July 16, 2010, the Company issued 598,295 shares and up to an additional 731,250 shares of Common Stock for certain assets of Tellurian and ABDF. Tellurian was a California-based biodiesel company and marketer. ABDF was a joint venture owned by Golden State Service Industries, RTI and Tellurian and previously focused on building a national array of small biodiesel plants that would convert used cooking oil into high quality, sustainable biodiesel. The purchase connects RTI’s national used cooking oil collection system, with more than 16,000 installations, with the Company’s national network of biodiesel manufacturing facilities.

As of the date the financial statements were issued for the three months ended September 30, 2010, the Company was still in the process of allocating the fair value of the Common Stock issued to the assets obtained from Tellurian and ABDF. The actual allocation to be recorded will be based on the final estimation of the fair value of the assets received.

The following table summarizes the preliminary allocation of the fair value of the Common Stock issued to the fair values of the assets acquired:

	Preliminary Allocation  at July 16, 2010
Assets acquired:
Intangible asset	$	5,895
Fair value of earnout liability		(2,868	)
Fair value of common stock issued	$	3,027

The fair value of the Common Stock issued is summarized as follows:

	Value at July 16, 2010
	Fair Value		Fair Value per Share
Fair value of stock issued:
Common Stock	$	3,027	$	5.06

Clovis Biodiesel, LLC

On September 21, 2010, REG Clovis, LLC, a wholly owned subsidiary of the Company, acquired substantially all assets of Clovis Biodiesel, LLC, a wholly owned subsidiary of the ARES Corporation. At closing, the Company delivered to ARES Corporation 2,150,000 shares of Common Stock in exchange for the assets of Clovis and $8,000 cash.

The Company determined that the Clovis assets do not constitute a business as defined under ASC Topic 805 on the basis that the Clovis assets are not an integrated set of activities or assets that are capable of being conducted or managed in a manner that would provide any economic benefit or return to the Company. As a result, the Company accounted for the purchase of the Clovis assets as an asset acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition, and no significant contingent assets or liabilities were acquired or assumed in the acquisition.

As of the date the financial statements were issued for the three months ended September 30, 2010, the allocation of the recorded amounts of Clovis consideration transferred and the recognized amounts of the assets acquired were determined based on the fair value of Common Stock exchanged.

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The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities assumed at the date of acquisition:

	Final Allocation at September 21, 2010
Assets acquired:
Cash	$	8,000
Property, plant and equipment		2,191
Fair value of common stock issued	$	10,191

The final acquisition price is summarized as follows:

	Final Value at September 21, 2010
	Fair Value		Fair Value per Share
Fair value of stock issued:
Common Stock	$	10,191	$	4.74

NOTE 7 — VARIABLE INTEREST ENTITIES

In June 2009, the FASB amended its guidance on accounting for VIEs through the issuance of ASU No. 2009-17. The new accounting guidance resulted in a change in our accounting policy effective January 1, 2010. Among other things, the new guidance requires a qualitative analysis to determine the PB of a VIE, requires continuous assessments of whether an enterprise is the PB of a VIE and amends certain guidance for determining whether an entity is a VIE. Under the new guidance, a VIE must be consolidated if the enterprise has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. This new accounting guidance was effective for the Company on January 1, 2010 and was applied prospectively.

On January 1, 2010, the Company deconsolidated Blackhawk after performing a reassessment under this new guidance. Blackhawk had previously been consolidated due to the variable interests held by the Company. Variable interests in Blackhawk held by the Company as of January 1, 2010 included a subordinated convertible note, membership units, guaranty of indebtedness of up to $1,500, warrants and the MOSA. Although these financial arrangements resulted in the Company holding substantial variable interests in Blackhawk, they did not empower the Company to direct the activities that most significantly impact Blackhawk’s economic performance. Consequently, subsequent to this change in accounting policy, the Company deconsolidated Blackhawk.

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Upon deconsolidation the Company has accounted for its interests in Blackhawk using the fair value options available under ASC Topic 825, Financial Instruments, since January 1, 2010. The following table represents the deconsolidating entries as of January 1, 2010:

	As Reported January  1, 2010			Adjusted			As Adopted
ASSETS
CURRENT ASSETS:
Cash	$	5,855		$	(206	)	$	5,649
Restricted cash		2,156			(2,002	)		154
Current assets		29,691			1,098			30,789
Total current assets		37,702			(1,110	)		36,592
Property, plant and equipment, net		124,429			(43,209	)		81,220
Goodwill		16,080			—			16,080
Noncurrent assets		22,347			27,731			50,078
TOTAL ASSETS	$	200,558		$	(16,588	)	$	183,970
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit	$	350		$	(350	)	$	—
Current maturities of notes payable		2,756			(815	)		1,941
Current liabilities		23,810			(1,144	)		22,666
Total current liabilities		26,916			(2,309	)		24,607
Notes payable		25,749			(23,630	)		2,119
Other liabilities		25,902			(8,516	)		17,386
Total liabilities		78,567			(34,455	)		44,112
Redeemable preferred stock		149,122			—			149,122
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock		2			—			2
Common stock - additional paid-in-capital		15,676			1,192			16,868
Warrants - additional paid-in-capital		4,619			—			4,619
Retained earnings (accumulated deficit)		(60,905	)		30,152			(30,753	)
Total stockholders’ equity (deficit)		(40,608	)		31,344			(9,264	)
Noncontrolling interests		13,477			(13,477	)		—
Total equity (deficit)		(27,131	)		17,867			(9,264	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	200,558		$	(16,588	)	$	183,970

The Company has invested in four network plants owned by independent investment groups. Those companies are SoyMor Biodiesel, LLC (SoyMor), Western Iowa Energy, LLC (WIE), Western Dubuque Biodiesel, LLC (WDB) and East Fork Biodiesel, LLC (EFB). See “Note 9 – Investments” for the investment amounts and the related condensed financial information of these investments. The Company evaluated each investment and determined we do not hold an interest in any of our investments in network plants that would give us the power to direct the activities that most significantly impact the economic performance of the network plant. As a result, the Company is not the PB and does not consolidate these VIE’s.

The Company has 50% ownership in 416 S. Bell, a joint venture where control is equally shared. The Company determined that neither partner in the joint venture has the power to direct the activities that most significantly impact the economic performance of the joint venture individually. As a result, the Company is not the PB and does not consolidate this VIE.

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The carrying values and maximum exposure for all unconsolidated VIE’s as of September 30, 2010 are as follows:

Investment:	Investments		Maximum Exposure
SoyMor	$	1,170	$	1,198
WIE		576		641
WDB		2,009		2,015
416 S Bell		603		3,012
	$	4,358	$	6,866

On April 8, 2010, the Company determined that Landlord was a VIE and was consolidated into the Company’s financial statements as it is the PB (ASC Topic 810). See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition. The Company has a put/call option with Seneca Holdco to purchase Landlord and currently leases the plant for production of biodiesel, both of which represent a variable interest in Landlord that are significant to the VIE. Although the Company does not have an ownership interest in Seneca Holdco, it was determined that the Company is the PB due to the related party nature of the entities involved; the Company’s ability to direct the activities that most significantly impact Landlord’s economic performance; and the design of Landlord that ultimately gives the Company the majority of the benefit from the use of Seneca’s assets. The Company has elected the fair value option available under ASC Topic 825 on the $4,000 investment made by Seneca Holdco and the associated put and call options (the Seneca Holdco Liability). Changes in the fair value after the date of the transaction will be recorded in earnings. Those assets are owned by, and those liabilities are obligations of, Landlord, not the Company.

As of the date the financial statements were issued for the three months ended September 30, 2010, the Company was still in the process of determining the fair value of the assets acquired and liabilities assumed. The actual valuation of the net assets acquired will be based on the final fair value valuation. The following table summarizes the preliminary allocation of the purchase price to the fair values of the assets and liabilities recorded by the Company as a result of the transaction and subsequent consolidation of Landlord:

	Preliminary Allocation  at April 8, 2010
Assets (liabilities) acquired:
Restricted cash	$	4,000
Property, plant and equipment		39,314
Current liabilities		(400	)
Seneca Holdco liability		(6,664	)
Notes payable		(36,250	)
Fair value of consideration	$	—

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NOTE 8 — INVENTORIES

Inventories consist of the following:

	September 30, 2010		December 31, 2009
Raw materials	$	3,303	$	743
Work in process		170		22
Finished goods		9,646		12,075
Total	$	13,119	$	12,840

NOTE 9 — INVESTMENTS

Investments consist of the following:

	September 30, 2010					December 31, 2009
	Ownership			Balance		Ownership			Balance
Investment and accumulated earnings in:
SoyMor		9	%	$	1,170		9	%	$	1,354
WIE (a)		2	%		576		2	%		602
WDB (b)		8	%		2,009		8	%		2,195
416 S Bell		50	%		603		50	%		598
CIE (c)							4	%		1,000
EFB (d)		4	%		—		4	%		400
Total (e)				$	4,358				$	6,149

(a) As of May 2010, the investment was converted from an equity method to cost method investment due to the Company no longer having the ability to significantly influence the operations of WIE.

(b) As of August 2010, the investment was converted from an equity method to cost method investment due to the Company no longer having the ability to significantly influence the operations of WDB.

(c) During the first quarter of 2010, the Company purchased Central Iowa Energy LLC (See Note 6 – Acquisitions and Equity Transactions). Through the purchase price allocation, the Company eliminated its investment in Central Iowa Energy.

(d) As of June 2010, the Company impaired the remaining investment amount of $400.

(e) The investments include deferred tax assets of $677, fully offset by a valuation allowance.

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The condensed financial information of equity method investments is as follows:

							September 30, 2010			December 31, 2009
CONDENSED BALANCE SHEET:
Total current assets							$	884		$	15,530
Total noncurrent assets							$	23,957		$	90,846
Total current liabilities							$	579		$	31,260
Total noncurrent liabilities							$	5,626		$	9,303
CONDENSED STATEMENT OF OPERATIONS:
	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
Sales	$	229		$	22,231		$	6,607		$	41,309
Costs of goods sold		(142	)		(21,274	)		(5,343	)		(40,299	)
Operating and other expenses		(765	)		(1,708	)		(6,039	)		(4,873	)
Net loss	$	(678	)	$	(751	)	$	(4,775	)	$	(3,863	)

NOTE 10 — ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following:

	September 30, 2010		December 31, 2009
Accrued property taxes	$	834	$	792
Accrued employee compensation		1,236		858
Accrued interest		272		193
Unfavorable lease obligation, current portion		1,129		1,829
Other		321		525
Total	$	3,792	$	4,197

Other noncurrent liabilities consist of the following:

	September 30, 2010		December 31, 2009
Fair value of interest rate swap	$	790	$	1,031
Liability for unrecognized tax benefits		1,500		1,500
Deferred grant revenue		745		—
Straight-line lease liability		1,576		—
Earnout liability		2,868		—
Deferred credit related to investment in Blackhawk		—		7,484
Total	$	7,479	$	10,015

As a result of the merger with Blackhawk on February 26, 2010, the Company recognized a deferred tax asset and an associated deferred credit related to excess taxable basis over book basis on its investment in Blackhawk. The Company reflected the related amounts on its consolidated balance sheet as of December 31, 2009 as the acquisition represented a recognizable subsequent event that will reverse in the foreseeable future. The deferred credit was reversed through retained earnings (accumulated deficit) on January 1, 2010 upon adoption of ASU 2009-17 resulting in the deconsolidation of Blackhawk.

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The unfavorable lease obligation consists of the following:

	September 30, 2010			December 31, 2009
Unfavorable lease obligation	$	13,612		$	13,612
Accumulated amortization		(907	)		—
Total unfavorable lease obligation		12,705			13,612
Current portion		(1,129	)		(1,829	)
	$	11,576		$	11,783

The unfavorable lease obligation is amortized over the contractual period the Company is required to make rental payments under the lease.

An amortization benefit (expense) of $282 and $907 for the three and nine months ended September 30, 2010, respectively, and $(257) and $(571) for the three and nine months ended September 30, 2009, respectively, for noncurrent liabilities is included in the cost of biodiesel sales.

Estimated amortization benefit as of September 30, 2010 for the fiscal year ending December 31 is as follows:

2010	$	284
2011		1,129
2012		1,129
2013		1,129
2014		1,129
Thereafter		7,905
	$	12,705

On May 1, 2010, the Company amended its lease of a terminal facility in Houston, Texas. The amended agreement is through December 2021 and changes the monthly lease payment. For the year ending December 31, 2010, the fixed payment is reduced from $515 to $165. For the year ending December 31, 2011, the fixed monthly lease payment will increase on a quarterly basis throughout the year resulting in monthly lease payments of $215, $275, $350 and $450. From January 1, 2012, and continuing thereafter, the monthly lease payment will be $515, subject to escalation, on an annual basis, utilizing the producer price index. Due to the scheduled increase in lease payments over the life of the lease, the Company is recording a straight-line lease liability related to the monthly payments pursuant to ASC Topic 840, Leases (ASC Topic 840). The straight-line lease liability is recorded in other liabilities on the condensed balance sheet.

NOTE 11 — BORROWINGS

On February 26, 2010, in connection with the Blackhawk Merger, one of the Company’s subsidiaries, REG Danville, assumed a $24,600 term loan. The term loan matures November 2011. The Illinois Finance Authority guarantees 61% of the term loan and the remaining amount is secured by the Danville facility. The term loan bears interest at a fluctuating rate per annum equal to the LIBOR rate plus the applicable margin of 400 basis points through September 30, 2010 and December 31, 2009 (effective rate at September 30, 2010 and December 31, 2009 was 4.26% and 4.23%, respectively). Amounts outstanding on the term loan were $24,039 and $24,445 as of September 30, 2010 and December 31, 2009, respectively. Until June 30, 2010, REG Danville was required to make only monthly payments of accrued interest. Beginning on July 1, 2010, REG Danville is required to make monthly principal payments equal to $135 plus accrued interest. In addition to these monthly payments, as the result of an amendment to the loan agreement, REG Danville is required to make annual principal payments equal to 50% of REG Danville’s Excess Cash Flow, or the 50% Excess Payment, with respect to each fiscal year until $2,500 has been paid from the Excess Cash Flow. Excess Cash Flow is equal to EBITDA less certain cash payments made during the period including principal payments, lease payments, interest payments, tax payments, approved distributions and capital expenditures. Excess Cash Flow is measured annually; therefore, no amounts have yet been paid. Thereafter, REG Danville is required to make annual payments equal to 25% of its Excess Cash Flow.

REG Danville also has a revolving line-of-credit with a current borrowing capacity of $190 which expires on November 30, 2010. The revolving line of credit accrues interest at the prime rate plus 25 basis points or the 30 day LIBOR plus 300 basis points as determined at the election of REG Danville at the time of borrowing and is secured by all plant assets owned by REG Danville. Borrowings outstanding under the line-of-credit were $190 and $350 as of September 30, 2010 and December 31, 2009, respectively. On September 30, 2010, REG Danville amended the term loan and revolving line-of-credit to reduce the line-of-credit to $190, provide for repayment terms on the revolving credit line and extend the due date. REG Danville is required to make $20 payments on a weekly basis until the balance is paid in full.

In March 2010, REG Newton obtained a revolving line-of-credit (AgStar Line) with an aggregate borrowing capacity of $2,350 which will expire on March 7, 2011. The revolving line of credit accrues interest at 30 day LIBOR or 2.00%, whichever is higher, plus 300 basis points (effective rate at September 30, 2010 of 5.00%). Borrowings outstanding under the line-of-credit were $550 as of September 30, 2010.

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In March 2010, as part of the CIE Asset Purchase, REG Newton assumed the term debt of CIE and refinanced the term debt (AgStar Loan). Amounts outstanding as of September 30, 2010 of $23,611 require interest to be accrued based on 30 day LIBOR or 2.00%, whichever is higher, plus 300 basis points (effective rate at September 30, 2010 of 5.00%). The debt is secured by all plant assets owned by REG Newton. The Company has guaranteed the obligations under the AgStar Line and has a limited guarantee related to the obligations under the AgStar Loan; which provide that the company will not be liable for more than the unpaid interest on the AgStar Loan that has accrued during an 18-month period beginning on March 8, 2010. REG Newton is required to make interest only payments on a monthly basis through September 2011. Beginning in October 2011, REG Newton will be required to make principal and interest payments until the maturity date of March 8, 2013. Under the AgStar Loan, REG Newton is required to maintain a debt service reserve account (Debt Reserve) equal to 12-monthly payments of principal and interest on the AgStar Loan. Beginning on January 1, 2011 and at each fiscal year end thereafter until such time as the balance in the Debt Reserve contains the required 12-months of payments, REG Newton must deposit an amount equal to its Excess Cash Flow, which is defined in the AgStar Loan agreement as EBITDA, less the sum of required debt payments, interest expense, any increase in working capital from the prior year until working capital exceeds $6,000, up to $500 in maintenance capital expenditure, allowed distributions and payments to fund the Debt Reserve. Also beginning on January 1, 2011, provided that REG Newton is in compliance with the working capital ratios and the Debt Reserve is funded, REG Newton must make an annual payment equal to 50% of its Excess Cash Flow calculated based upon the prior year’s audited financial statements within 120 days of the fiscal year end. See “Note 18 – Subsequent Events” for a description of amendment entered into by REG Newton for the AgStar Loan.

On April 9, 2010, REG Marketing & Logistics Group, LLC and REG Services, together with the Company as guarantor, (the WestLB Loan Parties) entered into a Revolving Credit Agreement (WestLB Revolver) with WestLB AG (WestLB). The initial available credit amount under the WestLB Revolver is $10,000 with additional lender increases up to a maximum commitment of $18,000. Advances under the WestLB Revolver are limited to the amount of certain qualifying assets of the WestLB Loan Parties that secure amounts borrowed. The WestLB Revolver requires the WestLB Loan Parties to maintain compliance with certain financial covenants. The term of the WestLB Revolver is two years. The interest rate varies depending on the loan type designation and is either 2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for base rate loans or 3.0% over adjusted LIBOR for Eurodollar loans (effective rate at September 30, 2010 of 3.26%). The WestLB Revolver is secured by assets and ownership interests of REG Marketing & Logistics Group, LLC and REG Services. Borrowings outstanding under the line-of-credit were $5,500 as of September 30, 2010.

On April 9, 2010, Landlord entered into a note payable agreement with West LB. The balance of the note as of September 30, 2010 is $36,250. The note requires that interest be accrued at different rates based on whether it is a Base Rate Loan or Eurodollar loan at either 2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for Base Rate loans or 3.0% over adjusted LIBOR for Eurodollar loans. The loan was a Base Rate Loan through September 30, 2010 (effective rate at September 30, 2010 of 3.26%). Interest is paid monthly. Principal payments have been deferred until February 2012. At that time, Landlord will be required to make estimated monthly principal payments of $201 with remaining unpaid principal due at maturity on April 8, 2017. The note payable is secured by the property located at the Seneca location.

The Company was in compliance with all restrictive financial covenants associated with its borrowings as of September 30, 2010 with exception to the REG Newton AgStar Loan. REG Newton received an amendment from the bank that cured the financial covenants on the AgStar Loan.

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Maturities of the borrowings are as follows for the years ending September 30:

2011	$	2,904
2012		25,296
2013		25,079
2014		2,767
2015		2,759
Thereafter		28,673
Total		87,478
Less: current portion		(2,904	)
	$	84,574

NOTE 12 — STOCK-BASED COMPENSATION

Renewable Energy Group:

On July 31, 2006, the Biofuels Board approved the 2006 Stock Incentive Plan (the 2006 Plan). The 2006 Plan provides for 2,500,000 shares of Biofuels Common Stock to be available for option grants. Option grants are awarded at the discretion of the Board. Options expire ten years from the date of the grant. There are no performance conditions associated with the options.

The Biofuels Common Stock options are generally protected from anti-dilution via adjustments for any stock dividends, stock split, combination or other recapitalization.

On May 6, 2009, the Company’s Board approved the 2009 Stock Incentive Plan (the 2009 Plan). The 2009 Plan provides for 5,400,000 shares of Company Common Stock to be made issuable or distributable under the plan. Restricted stock or restricted stock units may be awarded under the plan at the discretion of the Board. Restricted stock units may not be sold, transferred, pledged, assigned, or otherwise alienated until the lapse of the period of restriction. The restrictions will lapse with respect to the restricted stock units upon vesting, at which point each restricted stock unit (RSU) will be immediately converted into one share of common stock. The restricted stock units have no conversion price.

In connection with a change of control, Biofuels, at its discretion, may cancel options in exchange for a payment per share in cash of an amount equal to the excess, if any, of the change of control price per share over the exercise price of the option. On August 18, 2010, the Biofuels Board cancelled the stock options held by company employees. This cancellation was concurrent with the issuance of the restricted stock units under the 2009 Plan. The remaining options held by non-employees were assumed by the Company and will remain outstanding under the 2009 Plan with the same conditions as under the 2006 Plan.

The following table summarizes information about Biofuels Common Stock options granted, exercised, forfeited, vested and exercisable:.

	Amount of Options			Weighted Average Exercise Price		Weighted Average Contractual Term
Options outstanding - December 31, 2009		2,208,552		$	9.54		6.8 years
Forfeited		(20,500	)
Cancelled		(1,959,236	)
Options outstanding - September 30, 2010		228,816		$	9.50		6.1 years
Options exercisable - September 30, 2010		228,816		$	9.50		6.1 years

All stock options that remain outstanding are fully vested and exercisable.

There was no intrinsic value of options granted, exercised or outstanding during the periods presented.

On August 18, 2010, the Company Board approved the distribution of restricted stock units to employees of the Company. The cancellation of the 2006 Plan stock options and issuance of the restricted stock units was accounted for in accordance with ASC Topic 718. We followed modification accounting which requires the Company to recognize expense based upon the excess fair value of the new awards over the original awards as determined on the modification date. The excess fair value was calculated based upon the difference between the fair value of the restricted stock unit price at issuance and the fair value of the stock options cancelled utilizing the Black-Scholes options pricing model as of the same date.

The 2009 Plan is generally protected from anti-dilution via adjustments for any stock dividends, stock split, combination or other recapitalization.

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The following table summarizes information about the Company’s Common Stock restricted stock units granted, exercised, forfeited, vested and exercisable:

	Amount of Awards		Weighted Average Issue Price
Awards outstanding - December 31, 2009		—
Issued		2,621,723	$	4.74
Awards outstanding -September 30, 2010		2,621,723	$	4.74

The restricted stock units issued will cliff vest at the earlier of expressly provided service or performance conditions. The service period for these RSU awards is a three year period from the grant date. The performance conditions provide for immediate vesting upon various conditions including a change in control or other common stock liquidity events. The Company is recording the stock compensation expense over the three year service period.

Stock-based compensation cost relating to the stock options and restricted stock units were $423 and $491 for the three and nine months ended September 30, 2010, respectively and $715 and $2,495 for the three and nine months ended September 30, 2009, respectively. The stock-based compensation costs were included as a component of selling, general and administrative expenses. The remaining expense yet to be recorded for the restricted stock unit awards is $9,554 over a period of 2.9 years.

Blackhawk:

Blackhawk had an equity-based compensation plan which provided for the issuance of options to purchase an aggregate of 650,000 units of Blackhawk to members of the Blackhawk Board of Managers, for the purpose of providing services to facilitate the construction and planned future operations of the plant. Options to purchase the entire 650,000 units were issued on June 30, 2006. The options are exercisable at a purchase price of $1.00 per unit at any time from and after the date on which the plant commences operations (vesting date) and will continue for a period of one year following such date, after which all such rights shall terminate. During December 2008, Blackhawk commenced operations and at that time the unit options were fully vested.

On May 9, 2008, Blackhawk issued an option for the purchase of an additional 100,000 units to an outside consultant for services related to the project. This option is exercisable at a purchase price of $2.00 per unit at any time from and after the date on which the plant commences operations and will continue for a period of seven years following such date, after which all such rights shall terminate.

On February 26, 2010, the Blackhawk stock-based compensation plan was cancelled due to the merger with the Company. The outstanding options at the time of the merger were converted into Common Stock warrants of the Company.

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NOTE 13 — RELATED PARTY TRANSACTIONS

Related parties include certain investors as well as entities in which the company has an equity method investment or an investment combined with a MOSA or board seat. Investors defined as related parties include (i) the investor having ten percent or more ownership, including convertible preferred stock, in the Company or (ii) the investor holding a board seat on the Company’s Board of Directors.

Summary of Related Party Transactions

		Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
	Revenues - Biodiesel sales	$	680	(a)	$	6,245	(a)	$	2,939	(a)	$	10,032	(a	)
	Revenues - Services	$	26	(b)	$	308	(b)	$	636	(b)	$	744	(b	)
	Cost of goods sold - Biodiesel	$	35,687	(c)	$	21,640	(c)	$	83,399	(c)	$	31,048	(c	)
	Cost of goods sold - Services	$	—	(d)	$	—	(d)	$	291	(d)	$	—	(d	)
	Selling, general, and administrative expenses	$	445	(e)	$	695	(e)	$	1,259	(e)	$	1,350	(e	)
	Other income	$	—	(f)	$	38	(f)	$	—	(f)	$	355	(f	)
	Interest expense	$	73	(g)	$	9	(g)	$	277	(g)	$	9	(g	)
	Interest income	$	—	(h)	$	—	(h)	$	180	(h)	$	—	(h	)
	Proceeds from the sale of long lived assets	$	—	(i)	$	—	(i)	$	—	(i)	$	3,032	(i	)
(a)	Represents transactions with related parties as follows:
	West Central	$	7		$	5		$	12		$	8
	E D & F Man		673			6,240			2,927			9,984
	Network Plants		—			—			—			40
		$	680		$	6,245		$	2,939		$	10,032
(b)	Represents transactions with Network Plants
(c)	Represents transactions with related parties as follows:
	West Central	$	4,779		$	5,799		$	11,225		$	14,908
	Network plants		—			—			1,493			—
	Bunge		30,908			15,837			70,681			15,837
	E D & F Man		—			4			—			303
		$	35,687		$	21,640		$	83,399		$	31,048
(d)	Represents transactions with Network Plants
(e)	Represents transactions with related parties as follows:
	West Central	$	42		$	45		$	135		$	284
	416 S. Bell, LLC		86			172			258			517
	Bunge		304			411			776			411
	E D & F Man		13			67			90			138
		$	445		$	695		$	1,259		$	1,350
(f)	Represents transactions with ED&F Man
(g)	Represents transactions with related parties as follows:
	West Central	$	14		$	—		$	91		$	—
	Bunge		59			9			186			9
		$	73		$	9		$	277		$	9
(h)	Represents transactions with Blackhawk Biofuels
(i)	Represents transactions with ED&F Man

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Summary of Related Party Balances

		As of September 30, 2010				As of December 31, 2009
	Accounts receivable	$	486	(a	)	$	2,328	(a	)
	Prepaid inventory	$	—	(b	)	$	269	(b	)
	Accounts payable	$	5,122	(c	)	$	5,415	(c	)
(a)	Represents balances with related parties as follows:
	West Central	$	132			$	123
	Network Plants		101				1,065
	Bunge		—				24
	E D & F Man		253				1,116
		$	486			$	2,328
(b)	Represents balances with Bunge
(c)	Represents balances with related parties as follows:
	West Central	$	2,740			$	2,951
	Network Plants		44				2,293
	Bunge		2,273				127
	E D & F Man		65				44
		$	5,122			$	5,415

West Central Cooperative

The Company purchases once-refined soy oil from West Central. Purchases from West Central were $4,779 and $11,225 for the three and nine months ended September 30, 2010, respectively. The Company’s purchases were $5,799 and $14,908 for the three and nine months ended September 30, 2009, respectively. The Company also had co-product sales which totaled $7 and $12 for the three and nine months ended September 30, 2010, respectively, and $5 and $8 for the three and nine months ended September 30, 2009, respectively.

West Central leases the land under the Company’s production facility at Ralston, Iowa to the Company at an annual cost of one dollar. The Company is responsible for the property taxes, insurance, utilities and repairs for the facility relating to this lease. The lease has an initial term of twenty years and the Company has options to renew the lease for an additional thirty years.

At the time of the signing of the contribution agreement, the Company executed an asset use agreement with West Central to provide the use of certain assets, such as office space, maintenance equipment and utilities. The agreement requires the Company to pay West Central its proportionate share of certain costs incurred by West Central. This agreement has the same term as the land lease. Selling, general and administrative expenses included in the statement of operations related to this agreement totaled $10 and $30 for the three and nine months ended September 30, 2010, respectively, and $10 and $30 for the three and nine months ended September 30, 2009, respectively.

At the time of the signing of the contribution agreement, the Company entered into a contract for services with West Central, to provide certain corporate and administrative services such as human resources, information technology, and accounting. The agreement requires the Company to pay West Central the proportionate share of the costs associated with the provision of services, plus a 15% margin. The agreement had an initial one-year term and is cancellable thereafter upon six months notice by either party. Selling, general, and administrative expenses included in the statement of operations related to this agreement totaled $32 and $105 for the three and nine months ended September 30, 2010, respectively, and $35 and $254 for the three and nine months ended September 30, 2009, respectively.

In addition to the amounts above, the Company recorded interest expense of and $14 and $91 for the three and nine months ended September 30, 2010, respectively.

Accounts receivable includes net balances due from West Central of $132 and $123 at September 30, 2010 and December 31, 2009, respectively. Accounts payable includes net balances due to West Central of $2,740 and $2,951 at September 30, 2010 and December 31, 2009, respectively.

Bunge North America

The Company purchases feedstocks for the production of biodiesel. Purchases from Bunge were $30,908 and $70,681 for the three and nine months ended September 30, 2010, respectively, and $15,837 for the three and nine months ended September 30, 2009, respectively.

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During July 2009, the Company entered into an agreement for Bunge to provide services related to the procurement of raw materials and the purchase and resale of biodiesel produced by the Company. The agreement is a three-year term and either party has the ability to cancel the agreement after the term ends. Selling, general and administrative expenses included in the statement of operations related to this agreement totaled $120 and $360 for the three and nine months ended September 30, 2010, respectively, and $341 for the three and nine months ended September 30, 2009. The Company incurred $59 and $186 in interest expense for the three and nine months end September 30, 2010, respectively, and $9 for the three and nine months ended September 30, 2009, respectively, related to the purchase and resale of biodiesel. Also, as part of the agreement, the Company is required to pay an incentive fee to Bunge for meeting certain hedging goals utilizing Bunge’s advice. The Company incurred $184 and $416 in incentive fees for the three and nine months ended September 30, 2010, respectively, and $70 for the three and nine months ended September 30, 2009, respectively.

The Company has accounts receivable due from Bunge of $0 and $24 as of September 30, 2010 and December 31, 2009, respectively. The Company has prepaid inventory balance of $0 and $269 as of September 30, 2010 and December 31, 2009, respectively. The Company has accounts payable due to Bunge of $2,273 and $127 as of September 30, 2010 and December 31, 2009, respectively.

E D & F Man Holdings Ltd.

In August 2006, at the time of the initial closing of its preferred stock investment, the Company entered into a glycerin marketing agreement and various terminal lease agreements with one of E D & F’s then wholly owned subsidiaries, Westway Feed Products, Inc. (Westway). Under the glycerin marketing agreement, Westway has an exclusive right to market the glycerin produced at each of the Company’s owned and managed facilities. For the three and nine months ended September 30, 2010, fees of $13 and $90, respectively, were paid according to the agreement. For the three and nine months ended September 30, 2009, fees of $67 and $138, respectively, were paid. This contract has a term of five years and automatically renews in one-year periods thereafter unless terminated by either party. The Company also has entered into a master terminal lease agreement and several leases for terminals with another wholly-owned subsidiary of E D & F, Westway Terminal Company, Inc. These leases have terms ranging from one month to four years. The Company leased two terminals for aggregate fees of $0 during the three and nine months ended September 30, 2010, respectively, and $4 and $303 during the three and nine months ended September 30, 2009, respectively. Additionally, the Company received $0 in terminal lease revenue from Westway during the three and nine months ended September 30, 2010, respectively, and $38 and $355 during the three and nine months ended September 30, 2009, respectively, related to its terminal facility located in Stockton, California. In July 2009, the Company sold the Stockton terminal facility to Westway for $3.0 million in cash.

The Company also entered into a tolling agreement with E D & F for biodiesel to be produced out of the Company’s Houston, Texas biodiesel production facility. Revenues on biodiesel from this toll agreement and from other biodiesel sales were $673 and $2,927 for the three and nine months ended September 30, 2010, respectively, and $6,240 and $8,344 for the three and nine months ended September 30, 2009, respectively. Additionally, revenues from raw material sales totaled $0 for the three and nine months ended September 30, 2010, respectively, and $0 and $1,640 for the three and nine months ended September 30, 2009, respectively.

The Company had accounts receivable due from E D & F Man of $253 and $1,116 as of September 30, 2010 and December 31, 2009, respectively. The Company had accounts payable due to E D & F Man of $65 and $44 as of September 30, 2010 and December 31, 2009, respectively.

Network Plants

The Company receives certain fees for the marketing and sale of product produced by and the management of the Network Plants’ operations, in which the Company has also invested. As an additional incentive to the Company and additional compensation for the marketing, sales and management services being rendered, the Network Plants pay a bonus to the Company on an annual basis equal to a percentage of the net income of the Network Plant, as defined by the management agreement. Total related party management service revenues recognized by the Company related to investees were $26 and $636 for the three and nine months ended September 30, 2010, respectively, and $308 and $744 for the three and nine months ended September 30, 2009, respectively. Additionally, revenues from biodiesel sales totaled $0 for the three and nine months ended September 30, 2010, respectively, and $0 and $40 for the three and nine months ended September 30, 2009, respectively. The Company also incurred fees related to the production of biodiesel in the amount of $0 and $1,493 for the three and nine months ended September 30, 2010, respectively.

The Company had accounts receivable due from the Network Plants of $101 and $1,065 at September 30, 2010 and December 31, 2009, respectively. The Company had accounts payable due to the Network Plants of $44 and $2,293 at September 30, 2010 and December 31, 2009, respectively.

416 S. Bell, LLC

The Company rents a building for administrative uses under an operating lease from 416 S. Bell, LLC. Rent payments made under this lease totaled $86 and $258 for the three and nine months ended September 30, 2010, respectively, and $172 and $517 for the three and nine months ended September 30, 2009, respectively.

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NOTE 14 — DERIVATIVE INSTRUMENTS

From time to time the Company enters into derivative transactions to hedge its exposure to interest rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.

As of September 30, 2010, the Company has entered into heating oil and soy oil derivative instruments and an interest rate swap agreement. The Company has entered into heating oil and soy oil commodity-based derivatives in order to protect gross profit margins from potentially adverse effects of price volatility on biodiesel sales where the prices are set at a future date. As of September 30, 2010, the Company had 429 open commodity contracts. In addition, the Company manages interest rate risk associated with the REG Danville variable interest rate note payable using a fixed rate swap. The interest rate swap agreement has an outstanding notional value of $21,363 as of September 30, 2010. The agreement effectively fixes the variable component of the interest rate on the Term Loan at 3.67% through November 2011. The fair value of the interest rate swap agreement was $790 and $1,031 at September 30, 2010 and December 31, 2009, respectively, and is recorded in the other noncurrent liabilities. The interest rate swap was not designated as an accounting hedge under ASC Topic 815 and thus all gains and losses are recorded currently in earnings.

ASC 815 requires all derivative financial instruments to be recorded on the balance sheet at fair value. The Company’s derivatives are not designated as hedges and are utilized to manage cash flow. The changes in fair value of the derivative instruments are recorded through earnings in the period of change.

REG Danville’s interest rate swap contains a credit support arrangement that is directly linked to the notes payable with the same counterparty. Therefore, the interest rate swap counterparty would have access to the debt service fund or other collateral posted by REG Danville as a result of any failure to perform under the interest rate swap agreement. As of September 30, 2010, the Company posted $3,105 of collateral associated with its commodity-based derivatives with a net liability position of $595.

The Company’s preferred stock embedded conversion feature is further discussed in “Note 2 – Summary of Significant Accounting Policies”.

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The following tables provide details regarding the Company’s derivative financial instruments:

	As of December 31, 2009
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Embedded derivative				Preferred stock embedded conversion feature derivatives	$	4,104
Interest rate swap				Other liabilities		1,031
Commodity derivatives	Prepaid expenses and other assets	$	47	Prepaid expenses and other assets		300
Total derivatives		$	47		$	5,435
	As of September 30, 2010
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Embedded derivative				Preferred stock embedded conversion feature derivatives	$	46,556
Interest rate swap				Other liabilities		790
Commodity derivatives	Prepaid expenses and other assets	$	409	Prepaid expenses and other assets		1,004
Total derivatives		$	409		$	48,350

		Three Months Ended September 30, 2010		Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010		Nine Months Ended September 30, 2009
	Location of Gain (Loss) Recognized in Income	Amount of Gain Recognized in Income on Derivatives		Amount of Gain (Loss) Recognized in Income on Derivatives			Amount of Gain Recognized in Income on Derivatives		Amount of Gain (Loss) Recognized in Income on Derivatives
Embedded derivative	Change in fair value of preferred stock conversion feature embedded derivatives	$	1,996	$	(2,548	)	$	6,997	$	(1,429	)
Interest rate swap	Change in fair value of interest rate swap		103		(17	)		291		254
Commodity derivatives	Cost of goods sold - Biodiesel		435		447			933		(475	)
Total		$	2,534	$	(2,118	)	$	8,221	$	(1,650	)

NOTE 15 — FAIR VALUE MEASUREMENT

ASC Topic 820 establishes a framework for measuring fair value in GAAP and expands disclosures about fair market value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering assumptions, ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1 — Quoted prices for identical instruments in active markets.

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• Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations, in which all significant inputs are observable in active markets.

• Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

In addition, ASC Topic 820 requires disclosures about the use of fair value to measure assets and liabilities to enable the assessment of inputs used to develop fair value measures, and for unobservable inputs, to determine the effects of the measurements on earnings.

A summary of assets (liabilities) measured at fair value as of December 31, 2009 and September 30, 2010 is as follows:

	As of December 31, 2009
	Total			Level 1		Level 2			Level 3
Preferred stock embedded derivatives	$	(4,104	)	$	—	$	—		$	(4,104	)
Interest rate swap	$	(1,031	)		—		(1,031	)		—
Commodity derivatives	$	(253	)		—		(253	)		—
	$	(5,388	)	$	—	$	(1,284	)	$	(4,104	)
	As of September 30, 2010
	Total			Level 1		Level 2			Level 3
Preferred stock embedded derivatives	$	(46,556	)	$	—	$	—		$	(46,556	)
Interest rate swap	$	(790	)		—		(790	)		—
Seneca Holdco liability	$	(8,708	)		—		—			(8,708	)
Earnout liability	$	(2,868	)		—		—			(2,868	)
Commodity derivatives	$	(595	)		—		(595	)		—
	$	(59,517	)	$	—	$	(1,385	)	$	(58,132	)

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The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine months ended September 30, 2010:

	Preferred Stock Embedded Derivatives			Seneca Holdco Liability			Earnout Liability			Blackhawk Subordinated Debt			Blackhawk Unit Interest
Ending balance - December 31, 2008	$	(1,765	)	$	—		$	—		$	—		$	—
Total unrealized gains (losses)		799			—			—			—			—
Purchases, issuance, and settlements, net		—			—			—			—			—
Ending balance - March 31, 2009		(966	)		—			—			—			—
Total unrealized gains (losses)		320			—			—			—			—
Purchases, issuance, and settlements, net		—			—			—			—			—
Ending balance - June 30, 2009		(646	)		—			—			—			—
Total unrealized gains (losses)		—			—			—			—			—
Purchases, issuance, and settlements, net		—			—			—			—			—
Ending balance - September 30, 2009	$	(646	)	$	—		$	—		$	—		$	—
Ending balance - December 31, 2009	$	(4,104	)	$	—		$	—		$	—		$	—
Total unrealized gains (losses)		—			—			—			—			—
Deconsolidation of Blackhawk		—			—			—			24,298			3,678
Purchases, issuance, and settlements, net		(49,448	)		—			—			—			291
Purchase accounting consolidation		—			—			—			(24,298	)		(3,969	)
Ending balance - March 31, 2010		(53,552	)		—			—			—			—
Total unrealized gains (losses)		5,001			(371	)		—			—			—
Purchases, issuance, and settlements, net		(1	)		(7,096	)		—			—			—
Ending balance - June 30, 2010		(48,552	)		(7,467	)		—			—			—
Total unrealized gains (losses)		1,996			(1,673	)		—			—			—
Purchases, issuance, and settlements, net		—			432			(2,868	)		—			—
Ending balance - September 30, 2010	$	(46,556	)	$	(8,708	)	$	(2,868	)	$	—		$	—

The company used the following methods and assumptions to estimate fair value of its financial instruments:

Valuation of Preferred Stock embedded conversion feature derivatives: The estimated fair value of the derivative instruments embedded in the Company’s outstanding preferred stock is determined using the option pricing method to allocate the fair value of the underlying stock to the various components comprising the security, including the embedded derivative. The allocation was performed based on each class of preferred stock’s liquidation preference and relative seniority. Derivative liabilities are adjusted to reflect fair value at each period end. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments.

Interest rate swap: The fair value of the interest swap was determined based on a discounted cash flow approach using market observable swap curves.

Commodity derivatives: The instruments held by the Company consist primarily of futures contracts, swap agreements, purchased put options, and written call options. The fair value of contracts based on quoted prices of identical assets in an active exchange-traded market is reflected in Level 1. Contracts whose fair value is determined based on quoted prices of similar contracts in over-the-counter markets are reflected in Level 2.

Seneca Holdco liability: The liability represents the combination of the Call Option and the Put Option related to the purchase of membership interest of Seneca Landlord, LLC. The fair value of the Seneca Holdco liability is determined using an option pricing model and represents the probability weighted present value of the gain that is realized upon exercise of each option.

Notes payable and lines of credit: The fair value of long-term debt and lines of credit was established using discounted cash flow calculations and current market rates.

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The estimated fair values of the Company’s financial instruments, which are not recorded at fair value on a recurring basis, are as follows as of September 30, 2010 and December 31, 2009:

	September 30, 2010						December 31, 2009
	Asset (Liability) Carrying Amount			Estimated Fair Value			Asset (Liability) Carrying Amount			Estimated Fair Value
Financial Assets:
Restricted cash	$	2,981		$	2,981		$	2,156		$	2,156
Financial Liabilities:
Notes payable and lines of credit		(93,718	)		(93,865	)		(28,855	)		(29,124	)

NOTE 16 — OPERATING SEGMENTS

The Company reports its operating segments based on services provided to customers, which includes Biodiesel, Services and Corporate and Other activities. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company has chosen to differentiate the operating segments based on the products and services each segment offers.

The Biodiesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks and methanol into biodiesel. The Biodiesel segment also includes the Company’s purchases and resale of biodiesel produced by third parties. Revenue is derived from the sale of the processed biodiesel, related byproducts and renewable energy government incentive payments. The Services segment offers services for managing the construction of biodiesel production facilities and managing ongoing operations of third party plants and collects fees related to the services provided. The Company does not allocate items that are of a non-operating nature or corporate expenses to the business segments. Intersegment revenues are reported by the Services segment which manages the construction and operations of facilities included in the Biodiesel segment. Revenues are recorded by the Services segment at cost. Corporate expenses consist of corporate office expenses including compensation, benefits, occupancy and other administrative costs, including management service expenses.

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The following table represents the significant items by operating segment for the results of operations for the three months and nine months ended September 30, 2010 and September 30, 2009 and as of September 30, 2010 and December 31, 2009:

	Three Months Ended September 30, 2010			Three Months Ended September 30, 2009			Nine Months Ended September 30, 2010			Nine Months Ended September 30, 2009
Net sales:
Biodiesel	$	62,965		$	41,973		$	145,783		$	89,382
Services		2,725			769			6,941			4,784
Intersegment revenues		(2,568	)		(53	)		(5,776	)		(2,381	)
	$	63,122		$	42,689		$	146,948		$	91,785
Loss before income taxes and loss from equity investments:
Biodiesel	$	6,396		$	1,477		$	13,265		$	(2,332	)
Services		89			499			564			1,433
Corporate and other (a)		(13,929	)		(8,377	)		(21,932	)		(18,520	)
	$	(7,444	)	$	(6,401	)	$	(8,103	)	$	(19,419	)
Depreciation and amortization expense, net:
Biodiesel	$	1,744		$	1,499		$	4,042		$	4,207
Purchases of property, plant, and equipment:
Biodiesel	$	1,865		$	1,068		$	3,929		$	6,728
							September 30, 2010			December 31, 2009
Goodwill:
Biodiesel							$	69,059		$	—
Services								16,080			16,080
							$	85,139		$	16,080
Assets:
Biodiesel							$	293,464		$	147,807
Services								20,799			17,829
Corporate and other (b)								43,401			34,922
							$	357,664		$	200,558

(a) Corporate and other includes income/(expense) not associated with the business segments, such as corporate general and administrative expenses, shared service expenses, interest expense and interest income, all reflected on an accrual basis of accounting.

(b) Corporate and other includes cash and other assets not associated with the business segments, including investments.

NOTE 17 — COMMITMENTS AND CONTINGENCIES

On May 8, 2009 the Company entered into a series of agreements with one of its shareholders, Bunge, whereby Bunge would purchase raw material inputs for later resale to the Company and use in producing biodiesel. Additionally, the agreements provide for Bunge to purchase biodiesel produced by the Company for resale to the Company’s customers. These agreements provide financing for the Company’s raw material and finished goods inventory not to exceed aggregate amounts outstanding of $10,000. In exchange for this financing, Bunge will receive fees equal to the greater of 30 day LIBOR plus 7.5% or 10% as determined based on the amount of inventory financed, plus a monthly service fee of $40 and incentive fees not to exceed $1,500 per annum. As of September 30, 2010 and December 31, 2009, there was $184 and $86, respectively, in incentive fees due to Bunge.

The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

NOTE 18 — SUBSEQUENT EVENTS

The Company has performed an evaluation of subsequent events through the date the financial statements were issued.

On November 15, 2010, REG Newton amended the loan agreement to revise certain financial covenants. In exchange for these revisions, REG Newton agreed to begin reduced principal payments early within two months after the enactment of the reinstated tax credit. The amount of the reduced principal payments would be $82.

* * * * * *

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements regarding Renewable Energy Group, Inc., or we or the Company, that involve risks and uncertainties such as anticipated financial performance, business prospects, technological developments, products, possible strategic initiatives and similar matters. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,” “plan,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These forward looking statements include, but are not limited to, statements about costs or difficulties related to the integration of the businesses or assets and liabilities of REG Biofuels, Inc., (formerly known as Renewable Energy Group, Inc. and REG Intermediate Holdco, Inc.), or Biofuels, Central Iowa Energy, LLC, or CIE, Blackhawk Biofuels, LLC, or Blackhawk, Tellurian Biodiesel, Inc., or Tellurian, American BDF, LLC, or ABDF, or Clovis Biodiesel, LLC, or Clovis; anticipated production facilities, including expected locations, completion date, production capacity, diversified feedstock capability, capital expenditures, and the ratio of debt and equity financing; existing or proposed legislation affecting the biodiesel industry; facilities under development progressing to the construction and operational stages; the market for biodiesel and potential biodiesel consumers; expectations regarding expenses and sales; anticipated cash needs and estimates regarding capital requirements and needs for additional financing and; anticipated trends and challenges in our business and the biodiesel market. These statements reflect current views with respect to future events and are based on assumptions and subject to risks and uncertainties. We note that a variety of factors could cause actual results and experience to differ materially from the anticipated results or expectations expressed in our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report.

We encourage you to read this Management’s Discussion and Analysis of Financial Condition and Results of Operations in conjunction with the accompanying condensed consolidated financial statements and related notes.

Overview

As of September 30, 2010, we owned four completed biodiesel production facilities: a 12 million gallon per year, or mmgy, facility in Ralston, Iowa, a 35 mmgy facility near Houston, Texas, or the Houston Facility, a 45 mmgy facility in Danville, Illinois and a 30 mmgy facility in Newton, Iowa. In April 2010, we signed a seven year lease with a 60 mmgy facility in Seneca, Illinois to bring total production capacity to 182 mmgy. In addition to these five plants, we began construction of two 60 mmgy production capacity facilities in 2007, one in New Orleans, Louisiana and the other in Emporia, Kansas. In February 2008, we halted construction of these facilities as a result of conditions in the biodiesel industry and our inability to obtain financing necessary to complete construction of the facility. The New Orleans facility is approximately 50% complete and the Emporia facility is approximately 20% complete. We continue to pursue a variety of options with respect to financing the completion of construction of these two facilities. In addition, during third quarter 2010, we acquired a 15 mmgy biodiesel production facility in Clovis, New Mexico which is approximately 70% complete. We plan to complete this facility once we obtain project financing.

As of September 30, 2010, we provide limited operational services to one biodiesel production facility owned by a third party group of investors, for which we had previously provided more extensive operational services. . As of September 30, 2010, this facility was not operating. We continue to be in discussions with the facility owners with regards to future services. We also provide biodiesel facility construction management services to third parties. We are currently providing these services internally for construction activities at the Seneca facility.

Recent Developments

Prior to February 26, 2010, the “Company,” “we” “us” “our” and similar references refers to the business, results of operations and cash flows of Biofuels, formerly Renewable Energy Group, Inc., which is considered the accounting predecessor to Renewable Energy Group, Inc., formerly, REG Newco, Inc. After February 26, 2010, such references refer to the business, results of operations and cash flows of Renewable Energy Group, Inc., and its consolidated subsidiaries, including Biofuels, REG Danville, LLC, or REG Danville, and REG Newton, LLC or REG Newton.

On February 26, 2010, we acquired Blackhawk, referred to as the Blackhawk Merger, and Biofuels, referred to as the Biofuels Merger. Subsequent to the Blackhawk Merger, Blackhawk changed its name to REG Danville. On March 8, 2010, one of our wholly owned subsidiaries, REG Newton, acquired substantially all of the assets and liabilities of CIE, which is referred to as the CIE Asset Acquisition.

In connection with these transactions, we agreed to issue 30,043,005 shares of our Common Stock, $0.0001 par value per share, or the Common Stock, and 13,461,539 shares of our Series A Preferred Stock, $0.0001 par value per share, or the Series A Preferred Stock including shares issued to one of our subsidiaries relating to our ownership interest in CIE. For additional information regarding these transactions, see “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements.

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On April 8, 2010, we closed a transaction in which our wholly-owned subsidiary REG Seneca, LLC, or REG Seneca, agreed to lease and operate a 60 mmgy biodiesel production facility located in Seneca, Illinois and certain related assets. The facility is owned by Seneca Landlord, LLC, or Landlord, which, because of the lease, put/call option and related party entity ownership, is considered a variable interest entity and is consolidated for financial statement purposes. For additional information regarding this transaction, the Seneca Transaction, see “Note 6 – Acquisitions and Equity Transactions” and “Note 7 – Variable Interest Entities” to our consolidated financial statements.

On July 16, 2010, the Company issued 598,295 shares and up to an additional 731,250 shares of Common Stock for certain assets of Tellurian and ABDF. Tellurian was a California-based biodiesel company and marketer. ABDF was a joint venture owned by Golden State Service Industries, Restaurant Technologies, Inc., or RTI, and Tellurian and previously focused on building a national array of small biodiesel plants that would convert used cooking oil into high quality, sustainable biodiesel. The purchase connects RTI’s national used cooking oil collection system, with more than 16,000 installations, with the Company’s national network of biodiesel manufacturing facilities. For additional information regarding this transaction, see “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements.

On September 21, 2010, we acquired a 15 mmgy biodiesel production facility in Clovis, New Mexico, or the Clovis Facility, from ARES Corporation who also invested an additional $8 million in cash in exchange for Common Stock. In exchange for the Clovis Facility and $8 million in cash, we issued 2,150,000 shares of common stock. The Clovis Facility is 70% complete. For additional information regarding this transaction, see “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements.

The Federal Volumetric Ethanol Excise Tax Credit, referred to as the blenders’ tax credit, provided a $1.00 tax credit per gallon of pure biodiesel, or B100, to the first blender of biodiesel with petroleum based diesel fuel. The blenders’ tax credit expired on December 31, 2009 and as of the date of the financial statements, had not been reenacted. As a result, our sales for 2010 are almost entirely B100. During April 2010, we temporarily stopped producing biodiesel at our Newton facility and our Ralston facility due to reduced demand for biodiesel because of the lack of reinstatement of the blender’s tax credit. At the end of April, our Newton facility began production again. During May, our Ralston facility began producing at a reduced production level. During June, we stopped producing biodiesel at our Houston Facility, which remains idle.

The Energy Independence and Security Act of 2007 created the Renewable Fuels Standard. On July 1, 2010, an updated Renewable Fuels Standard program, or RFS2, was implemented. RFS2 mandates volume requirements for the amount of biomass-based diesel that must be utilized each year. Under the program, obligated parties—including petroleum refiners and fuel importers—must show compliance with these standards. Currently, biodiesel meets two categories of an obligated party’s required volume obligation—biomass-based diesel and advanced biofuel. Today, biodiesel is the only commercially-available advanced biofuel that meets the RFS2 standard based on its greenhouse gas emissions reductions score. Consistent with the RFS2 program, the Environmental Protection Agency, or EPA, announced it would require the domestic use of 800 million gallons of biodiesel in 2011 and one billion by 2012. Currently the American Petroleum Institute, or API, has filed a lawsuit against the EPA relating to timing of enforcement of RFS2. If API prevails in the lawsuit, the obligation for 2011 could be substantially reduced from the current requirement.

Segments

We derive revenue from two reportable business segments: Biodiesel and Services.

Biodiesel Segment

Our Biodiesel segment includes:

• our operations of our wholly-owned biodiesel production facilities, currently consisting of production facilities located in:

• Ralston, Iowa;

• Houston, Texas;

• as of February 26, 2010, Danville, Illinois;

• as of March 8, 2010, Newton, Iowa; and,

• as of April 8, 2010, Seneca, Illinois, which began production in August 2010;

• purchases and resale of biodiesel produced by third parties; and

• toll manufacturing activities we service for third parties.

We derive a small portion of our revenues from the sale of glycerin and fatty acids, which are co-products of the biodiesel production process and from the sale of Renewable Identification Numbers, or RINS. In 2009 and through September 30, 2010, our revenues from the sale of co-products and RINS were less than five percent of the total Biodiesel segment revenues.

Services Segment

Our Services segment includes:

• biodiesel facility management and operational services, whereby we provide day-to-day management and operational services to biodiesel production facilities; and

• construction management services, whereby we act as the construction manager and general contractor for the construction of biodiesel production facilities.

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Our facility operations management services provided to owners of biodiesel production facilities involve a broad range of activities. Under our Management Operations Services Agreement, or MOSA, that we enter into with a facility owner, we typically receive a monthly fee based on gallons of biodiesel produced or marketed and we are eligible for a bonus based on the facility’s net income. Our MOSAs generally have had a three-year or five-year term. We do not recognize revenue from the sale of biodiesel produced at managed facilities, which we sell for the account of the member-owner as we act as an agent for these transactions. In 2009, we provided notice to five network facilities, including CIE, that we would be terminating our services under the MOSAs twelve months from the date notice was provided as permitted by the MOSAs. As of September 30, 2010, we acquired the assets of CIE, we had ceased providing services to three of these facilities and remain in discussions and provide limited services to the other facility. We do not anticipate that these non-renewals will have a significant impact on our financial statements.

Our construction management services primarily include assistance with pre-construction planning, such as site selection and permitting, facility and process design and engineering, engagement of subcontractors to perform construction activity and supply biodiesel processing equipment, and project management services. Because we do not have internal construction capabilities and do not manufacture biodiesel processing equipment, we rely on our prime subcontractors, Todd & Sargent and its joint venture with the Weitz Company, TSW, to fulfill the bulk of our obligations to our customers. Payments to these prime subcontractors represent most of the costs of goods sold for our Services segment.

Demand for our construction management and facility operations services depends on capital spending by potential customers and existing customers, which is directly affected by trends in the biodiesel industry. Due to the current economic climate, overcapacity in the biodiesel industry and reduced demand for biodiesel, REG did not receive any new orders for new facility construction services in 2009 or the first nine months of 2010. During the first quarter of 2009, we were completing our engagement to upgrade the facility in Danville, Illinois. This revenue was eliminated for financial reporting purposes, in 2009, as a result of our previous consolidation of Blackhawk’s financial statements – see “Note 5 – Blackhawk” to our consolidated financial statements. During second quarter of 2010, REG agreed to manage construction of the upgrades to the Seneca Facility. This revenue was eliminated for financial reporting purposes, in 2010, as a result of our consolidation of Seneca Landlord – see “Note 7 – Variable Interest Entities” to our consolidated financial statements. We anticipate revenues derived from construction management services will be minimal in future periods until conditions in the biodiesel industry improve.

Components of Revenues and Expenses

We derive revenues in our Biodiesel segment from the following sources:

• sales of biodiesel produced at our wholly-owned facilities, including transportation, storage and insurance costs to the extent paid for by our customers;

• fees from toll manufacturing arrangements with ED&F Man at our Houston Facility;

• revenues from our sale of biodiesel produced by third parties through toll manufacturing arrangements with us;

• resale of finished biodiesel acquired from others;

• sales of glycerin, other co-products of the biodiesel production process and RINS; and

• incentive payments from federal and state governments, including the federal biodiesel blenders’ tax credit, now expired, which we received directly when we sold our biodiesel blended with petroleum diesel, primarily as B99, a one percent petroleum diesel mix with biodiesel, rather than in pure form or B100.

We derive revenues in our Services segment from the following sources:

• fees received from member-owned facilities in our network for operations management services that we provide for biodiesel production facilities, typically based on production rates and profitability of the member-owned facility; and

• amounts received for services performed by us in our role as general contractor and construction manager for biodiesel production facilities.

Cost of goods sold for our Biodiesel segment includes:

• with respect to our wholly-owned production facilities, expenses incurred for feedstocks, catalysts and other chemicals used in the production process, facility leases, utilities, depreciation, salaries and other indirect expenses related to the production process, and, when required by our customers, transportation, storage and insurance;

• with respect to biodiesel acquired from third parties produced under toll manufacturing arrangements, expenses incurred for feedstocks, catalysts and other chemicals used in the production process, and toll processing fees paid to the facility producing the biodiesel;

• changes during the applicable accounting period in the market value of derivative and hedging instruments, such as exchange traded contracts, related to feedstocks and commodity fuel products; and

• the purchase price of finished biodiesel acquired from third parties on the spot market, and related expenses for transportation, storage, insurance, labor and other indirect expenses.

Cost of goods sold for our Services segment includes:

• our facility management and operations activities, primarily salary expenses for the services of management employees for each facility and others who provide procurement, marketing and various administrative functions; and

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• our construction management services activities, primarily our payments to subcontractors constructing the production facility and providing the biodiesel processing equipment, and, to a much lesser extent, salaries and related expenses for our employees involved in the construction process.

Selling, general and administrative expense consists of expenses generally involving corporate overhead functions and operations at our Ames, Iowa headquarters.

Other income (expense), net is primarily comprised of the changes in fair value of the embedded derivative related to the Series A Preferred Stock conversion feature, changes in fair value of interest rate swap, interest expense, interest income, the impairment of investments we made in biodiesel plants owned by third parties and the changes in valuation of Seneca Holdco liability.

Accounting for Investments

We use the equity method of accounting to account for the operating results of entities over which we have significant influence. We consider significant influence to include our previous significant operational influence due to our management of biodiesel operations at a member-owned facility and participation by one of our employees on the member-owned facility’s board of directors. This currently includes SoyMor Biodiesel, LLC. We expect to use the equity method to account for our equity interests in all entities with which we execute a MOSA and have board participation. Additionally, we use the equity method of accounting to account for the operating results of 416 S Bell, LLC. Under the equity method, we recognize our proportionate share of the net income (loss) of each entity in the line item “Loss from equity method investees.”

We use the cost method of accounting to account for our investment in three previous member plants, East Fork Biodiesel, LLC, or EFB, after May, 2010, Western Iowa Energy, LLC, or WIE and after August 2010, Western Dubuque Biodiesel, LLC, or WDB. Because we do not have the ability to influence the operating and financial decisions of EFB, WIE, or WDB and do not maintain a position on the board of directors, the investment is accounted for using the cost method. Under the cost method, the initial investment is recorded at cost and assessed for impairment. There was $0.4 million impairment recorded during the nine month periods ended September 30, 2010, relating to EFB, which fully impaired the remaining investment. There has been no impairment of the WIE or WDB investments.

In June 2009, the Financial Accounting Standards Board, or “FASB”, amended its guidance on accounting for variable interest entities, or VIEs. As of January 1, 2010, the Company evaluated each investment and determined we do not hold a controlling interest in any of our investments in network plants that would empower us to direct the activities that most significantly impact economic performance. As a result, we are not the primary beneficiary and do not consolidate these VIE’s. See “Note 7 – Variable Interest Entities” to our consolidated financial statements for more information.

For additional information with regards to prior accounting treatment for now acquired investments including Blackhawk and CIE, please see “Note 5 – Blackhawk”, “Note 6 – Acquisitions and Equity Transactions” and “Note 7 – Variable Interest Entities” to our consolidated financial statements.

Risk Management

The profitability of the biodiesel production business largely depends on the spread between prices for feedstocks and for biodiesel fuel. We actively monitor changes in prices of these commodities and attempt to manage a portion of the risks of these price fluctuations. However, the extent to which we engage in risk management activities varies substantially from time to time, depending on market conditions and other factors. Adverse price movements for these commodity products directly affect our operating results. As a result of our recent acquisitions, our exposure to these risks has increased. In addition to our expertise in managing risks related to biodiesel production, we receive input from others with risk management expertise and utilize research conducted by outside firms to provide additional market information in forming our risk management strategies.

We manage feedstock supply risks related to biodiesel production in a number of ways, including through long-term supply contracts with soybean processors. Most of the feedstock requirements for our Ralston facility, REG Ralston, LLC, or REG Ralston, are supplied under a three year agreement with West Central Cooperative, or West Central. West Central has notified REG that it intended to terminate the current agreement with REG Ralston as it expired on July 8, 2010. We are currently purchasing under and expect to renegotiate terms similar to the expired agreement with West Central. The purchase price for soybean oil under this agreement will be indexed to prevailing Chicago Board of Trade, or CBOT, soybean oil market prices with a negotiated market basis. We utilize futures contracts and options to hedge, or lock in, the cost of portions of our future soybean oil requirements generally for varying periods up to one year.

We also use animal fat as a feedstock to produce biodiesel. We have increased our use of animal fat as a result of the tolling arrangements with plants with animal fat processing capabilities and the acquisition of REG Danville and REG Newton. We also arranged for purchases of a significant volume of animal fat to supply our network facilities. We utilize several varieties of animal fat, including but not limited to poultry fat, choice white grease, tallow and yellow grease. We manage animal fat supply risks related to biodiesel production through supply contracts with animal fat suppliers/producers. There is no established futures market for animal fat. The purchase price for animal fat is generally set on a negotiated flat price basis or spread to a prevailing market price reported by the USDA price sheet. Our limited efforts to hedge against changing animal fat prices have involved entering into futures contracts or options on other commodity products, such as soybean oil or heating oil. However, these products do not always experience the same price movements as animal fats, making risk management for these feedstocks challenging.

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Our ability to mitigate our risk of falling biodiesel prices is limited. We have entered into forward contracts to supply biodiesel. However, pricing under these forward sales contracts generally has been indexed to prevailing market prices, as fixed price contracts for long periods on acceptable terms have generally not been available. There is no established market for biodiesel futures. Our efforts to hedge against falling biodiesel prices, which have been relatively limited to date, generally involve entering into futures contracts and options on other commodity products, such as diesel fuel and heating oil. However, these products do not always experience the same price movements as biodiesel. Changes in the value of these futures or options instruments are recognized in current income or loss.

See “Critical Accounting Policies—Derivative Instruments and Hedging Activities”.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, equities, revenues and expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making the judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from the estimates.

We believe the following critical accounting policies affect our more significant judgments used in the preparation of our consolidated financial statements:

Revenue recognition.

We recognize revenues from the following sources:

• the sale of biodiesel and its co-products including RINS – both purchased and produced by us at owned manufacturing facilities, and leased manufacturing facilities;

• fees received under toll manufacturing agreements with third parties;

• fees received from federal and state incentive programs for renewable fuels;

• fees from construction and project management; and

• fees received for the marketing and sales of biodiesel produced by third parties.

Biodiesel sales revenues are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable, and collectability can be reasonably assured.

Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of biodiesel produced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has been fixed or is determinable, and collectability can be reasonably assured.

Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable, collectability is reasonably assured, and the sale of product giving rise to the incentive has been recognized.

Historically, we have provided consulting and construction services under turnkey contracts. These jobs require design and engineering effort for a specific customer purchasing a unique facility. We record revenue on these fixed-price contracts on the percentage of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward completion and revenue recognition. The total contract price includes the original contract plus any executed change orders only when the amounts have been received or awarded.

Contract cost includes all direct labor and benefits, materials unique to or installed in the project and subcontract costs. Contract accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule and technical issues. We routinely review estimates related to contracts and reflect revisions to profitability in earnings on a current basis. If a current estimate of total contract cost indicates an ultimate loss on a contract, we would recognize the projected loss in full when it is first determined. We recognize additional contract revenue related to claims when the claim is probable and legally enforceable.

Changes relating to executed change orders, job performance, construction efficiency, weather conditions, and other factors affecting estimated profitability may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.

Billings in excess of costs and estimated earnings on uncompleted contracts represents amounts billed to customers prior to providing related construction services.

Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants, and from other services are recognized as services are provided. We also have performance-based incentive agreements that are included as management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable and collectability is reasonably assured.

We act as a sales agent for certain third parties and recognize revenues on a net basis in accordance with ASC Topic 605-45, “Revenue Recognition”.

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Impairment of Long-Lived Assets and Certain Identifiable Intangibles. We review long-lived assets, including property, plant and equipment and definite-lived intangible assets, for impairment in accordance with ASC Topic 360-10, “Property, Plant, and Equipment”. Asset impairment charges are recorded for long-lived assets and intangible assets subject to amortization when events and circumstances indicate that such assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than their carrying amounts. If estimated future undiscounted cash flows are not sufficient to recover the carrying value of the assets, an impairment charge is recorded for the amount by which the carrying amount of the assets exceeds its fair value. Fair value is determined by management estimates using discounted cash flow calculations. The estimate of cash flows arising from the future use of the asset that are used in the impairment analysis requires judgment regarding what we would expect to recover from the future use of the asset. Changes in judgment that could significantly alter the calculation of the fair value or the recoverable amount of the asset may result from, but are not limited to, significant changes in the regulatory environment, the business climate, management’s plans, legal factors, commodity prices, and the use of the asset or the physical condition of the asset. There was $0 and $7.4 million impairment recorded during the nine month periods ended September 30, 2009 and 2010, respectively.

Goodwill asset valuation. While goodwill is not amortized, it is subject to periodic reviews for impairment. As required by ASC Topic 350, “Intangibles—Goodwill and Other”, we review the carrying value of goodwill for impairment annually on July 31 or when we believe impairment indicators exist. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined utilizing a discounted cash flow methodology. Additionally, we review the carrying value of goodwill whenever events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. Changes in estimates of future cash flows caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of the reporting unit’s goodwill asset and result in an impairment charge. There was no impairment recorded in the periods presented.

Income taxes. We recognize deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, valuation allowances are established if necessary to reduce deferred tax assets to amounts expected to be realized.

Prior to the Blackhawk Merger, Blackhawk was treated as a partnership for federal and state income tax purposes and generally did not incur income taxes. Instead, its earnings and losses were included in the income tax returns of its members. Therefore, no provision or liability for federal or state income taxes was included in our consolidated financial statements aside from its pro-rata share determined based on its ownership interest for the year ending December 31, 2009 and the period ending February 26, 2010 prior to acquisition.

We utilize the asset and liability method of accounting for deferred income taxes, which requires that deferred tax assets and liabilities be recorded to reflect the future tax consequences of temporary timing differences between the tax and financial statement basis of assets and liabilities. On December 31, 2009, we determined that it is unlikely that the assets will be fully realized in the future based on available evidence; therefore, a full valuation allowance was established against the assets. On a quarterly basis, any deferred tax assets are reviewed to determine the probability of realizing the assets. At September 30, 2010, we had net deferred income tax assets of approximately $42.3 million with a valuation allowance of $40.8 million, which resulted in a net deferred tax asset of $1.5 million and is offset by an accrued liability for uncertain tax benefits. We believe there is a reasonable basis in the tax law for all of the positions we take on the various federal and state tax returns we file. However, in recognition of the fact that various taxing authorities may not agree with our position on certain issues, we expect to establish and maintain tax reserves. As of September 30, 2010, we had a net deferred tax liability of $1.5 million relating to uncertain tax benefits.

Derivatives instruments and hedging activities. The Financial Accounting Standards Board issued ASC Topic 815-40, “Derivatives and Hedging” or ASC 815-40. ASC 815-40 established accounting and reporting standards for derivative instruments and required that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. REG utilizes options and futures contracts to hedge feedstock purchases and biodiesel sales contracts. We have designated the derivatives as non-hedge derivatives that are utilized to manage cash flow. Additionally, REG has entered into an interest rate swap with the objective of managing risk caused by fluctuations in market interest rate risks associated with the REG Danville loan. Unrealized gains and losses on the options and futures contracts are therefore recognized as a component of biodiesel cost of goods sold, and are reflected in current results of operations. Unrealized gains and losses on the interest rate swap are recorded in other income or expense, net.

Consolidations. As of June 30, 2010, we determined the acquisition price of Blackhawk and CIE. For the Blackhawk Merger and CIE Asset Purchase Agreement, the allocation of the recorded amounts of consideration transferred and the recognized amounts of the assets acquired and liabilities assumed are based on the final appraisals and evaluation and estimations of fair value as of the acquisition date. We determined the goodwill recorded was $43.9 million and $25.2 million for REG Danville and REG Newton, respectively.

On April 8, 2010, we determined that Landlord was a Variable Interest Entity, or VIE, and will be consolidated into our financial statements as we are the primary beneficiary (ASC Topic 810, “Consolidations”). We have a put/call option with Seneca Holdco, LLC, or Seneca Holdco to purchase Landlord and we currently lease the plant for production of biodiesel, both of which represent a variable interest in Landlord that are significant to the VIE. Although we do not have an ownership interest in Seneca Holdco, we determined that we are the primary beneficiary due to the related party nature of the entities involved; our ability to direct the activities that most significantly impact Landlord’s economic performance; and the design of Landlord that ultimately gives us the majority of the benefit from the use of Seneca’s assets. We have elected the fair value option available under ASC Topic 825, “Financial Instruments” on the $4.0 million investment made by Seneca Holdco and the associated put and call options. Changes in the fair value after the date of the transaction will be recorded in earnings. Those assets are owned by and those liabilities are obligations of Landlord, which we have consolidated as the primary beneficiary.

See “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements for a description of the acquisitions.

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Valuation of Preferred Stock Embedded Derivatives. The terms of the Series A Preferred Stock provide for voluntary and, under certain circumstances, automatic conversion of the Series A Preferred Stock to Common Stock based on a prescribed formula. In addition, shares of Series A Preferred Stock are subject to redemption at the election of the holder beginning February 26, 2014. The redemption price is equal to the greater of (i) an amount equal to $13.75 per share of Series A Preferred Stock plus any and all accrued dividends, not exceeding $16.50 per share, and (ii) the fair market value of the Series A Preferred Stock. Under ASC Topic 815-40, we are required to bifurcate and account for as a separate liability certain derivatives embedded in our contractual obligations. An “embedded derivative” is a provision within a contract, or other instrument, that affects some or all of the cash flows or the value of that contract, similar to a derivative instrument. Essentially, the embedded terms contain all of the attributes of a free-standing derivative, such as an underlying market value, a notional amount or payment provision, and can be settled “net,” but the contract, in its entirety, does not meet the ASC 815-40 definition of a derivative. For a description of the redemption and liquidation rights associated with Series A Preferred Stock, see “Note 4 – Redeemable Preferred Stock” to our consolidated financial statements.

We have determined that the conversion feature of Series A Preferred Stock is an embedded derivative because the redemption feature allows the holder to redeem Series A Preferred Stock for cash at a price which can vary based on the fair market value of the Series A Preferred Stock, which effectively provides the holders of the Series A Preferred Stock with a mechanism to “net settle” the conversion option. Consequently, the embedded conversion option must be bifurcated and accounted for separately because the economic characteristics of this conversion option are not considered to be clearly and closely related to the economic characteristics of the Series A Preferred Stock, which is a considered more akin to a debt instrument than equity.

Upon issuance of Series A Preferred Stock, we recorded a liability representing the estimated fair value of the right of preferred holders to receive the fair market value of the Common Stock issuable upon conversion of the Series A Preferred Stock on the redemption date. This liability is adjusted each quarter based on changes in the estimated fair value of such right, and a corresponding income or expense is recorded as Other Income in our statements of operations.

We use the option pricing method to value the embedded derivative. We use the Black-Scholes options pricing model to estimate the fair value of the conversion option embedded in the Series A Preferred Stock. The Black-Scholes options pricing model requires the development and use of highly subjective assumptions. These assumptions include the expected volatility of the value of our equity, the expected conversion date, an appropriate risk-free interest rate, and the estimated fair value of our equity. The expected volatility of our equity is estimated based on the volatility of the value of the equity of publicly traded companies in a similar industry and general stage of development as us. The expected term of the conversion option is based on the period remaining until the contractually stipulated redemption date of February 26, 2014. The risk-free interest rate is based on the yield on U.S. Treasury STRIPs with a remaining term equal to the expected term of the conversion option. The development of the estimated fair value of our equity is discussed below in the “Valuation of the Company’s Equity.”

The significant assumptions utilized in our valuation of the embedded derivative are as follows:

	September 30, 2010			February 26, 2010			December 31, 2009
Expected volatility		40.00	%		40.00	%		50.00	%
Risk-free rate		3.40	%		4.40	%		0.89	%

The estimated fair values of the conversion feature embedded in the Series A Preferred Stock is recorded as a derivative liability. The derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as change in fair value of Series A Preferred Stock embedded derivative. The impact of the change in the value of the embedded derivative is not included in the determination of taxable income.

Valuation of Seneca Holdco Liability. Associated with our transaction with Nova Biosource Fuels, LLC (See “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements), we have the option to purchase (Call Option) and Seneca Holdco has the option to require us to purchase (Put Option) the membership interest of Landlord whose assets consist primarily of a biodiesel plant located in Seneca, Illinois. Both the Put Option and the Call Option have a term of seven years and are exercisable by either party at a price based on a pre-defined formula. We have valued the amounts financed by Seneca Holdco, the Put Option, and the Call Option using an option pricing model. The fair values of the Put Option and the Call Option were estimated using an option pricing model, and represent the probability weighted present value of the gain that is realized upon exercise of each option. The option pricing model requires the development and use of highly subjective assumptions. These assumptions include (i) the value of our equity, (ii) expectations regarding future changes in the value of the our equity, (iii) expectations about the probability of either option being exercised, including the our ability to list our securities on an exchange or complete a public offering, and (iv) an appropriate risk-free rate. We considered current public equity markets, relevant regulatory issues, biodiesel industry conditions and our position within the industry when estimating the probability that we will raise additional capital. Differences in the estimated probability and timing of this event may significantly impact the fair value assigned to the Seneca Holdco Liability as we determined it is not likely that the Put Option will become exercisable in the absence of this event.

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The significant assumptions utilized in our valuation of the Seneca Holdco liability are as follows:

	September 30, 2010			April 9, 2010
Expected volatility		40.00	%		50.00	%
Risk-free rate		3.40	%		4.60	%
Probability of IPO		70.00	%		60.00	%

Preferred Stock Accretion. Beginning October 1, 2007, the date that the Company determined that there was a more than remote likelihood that the Biofuels preferred stock would become redeemable, the Company commenced accretion of the carrying value of the Biofuels preferred stock over the period until the earliest redemption date, which was August 1, 2011, to the Biofuels preferred stock’s redemption value, plus accrued but unpaid dividends using the effective interest method. This determination was based upon the current state of the public equity markets which was restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability. Prior to October 1, 2007, the Company had determined that it was not probable that the Biofuels preferred stock would become redeemable; therefore, the carrying value was not adjusted in accordance with ASC Topic 480-10-S99, “Classification and Measurement of Redeemable Securities”.

On February 26, 2010, after issuance of the Series A Preferred Stock, the Company determined that there was a more than remote likelihood that the Series A Preferred Stock would become redeemable, the Company commenced accretion of the carrying value of the Series A Preferred Stock over the period until the earliest redemption date (February 26, 2014) to the Series A Preferred Stock’s redemption value, plus dividends using the effective interest method. This determination was based upon the current state of the public equity markets which is restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability.

Accretion of $5.4 million and $21.6 million for the three and nine months ended September 30, 2010, respectively, and $11.6 million and $31.3 million for the three and nine months ended September 30, 2009, respectively, has been recognized as a reduction to income available to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99.

Valuation of the Company’s Equity. We considered three generally accepted valuation approaches to estimate the fair value of our aggregate equity: the income approach, the market approach, and the cost approach. Ultimately, the estimated fair value of our aggregate equity is developed using the Income Approach – Discounted Cash Flow, or DCF, method. The value derived using this approach is supported by a variation of the Market Approach, specifically comparisons of the implied multiples derived using the DCF method to the multiples of various metrics calculated for guideline public companies.

Material underlying assumptions in the DCF analysis include the gallons produced and managed, gross margin per gallon, expected long-term growth rates, and an appropriate discount rate. Gallons produced and managed as well as the gross margin per gallon were determined based on historical and forward-looking market data.

The discount rate used in the DCF analysis is based on macroeconomic, industry, and company-specific factors and reflects the perceived degree of risk associated with realizing the projected cash flows. The selected discount rate represents the weighted average rate of return that a market participant investor would require on an investment in our debt and equity. The percent of total capital assumed to be comprised of debt and equity when developing the weighted average cost of capital was based on a review of the capital structures of our publicly traded industry peers. The cost of debt was estimated utilizing the adjusted average 20-Year B-rated corporate bond rate during the previous 12 months representing a reasonable market participant rate based on our publicly traded industry peers. Our cost of equity was estimated utilizing the capital asset pricing model, which develops an estimated market rate of return based on the appropriate risk-free rate adjusted for the risk of the industry relative to the market as a whole, an equity risk premium, and a company specific risk premium. The risk premiums included in the discount rate were based on historical and forward looking market data.

Discount rates utilized in our DCF model are as follows:

	September 30, 2010			February 26, 2010			December 31, 2009
Discount rate		16.00	%		15.00	%		13.00	%

Valuations derived from this model are subject to ongoing internal and external verification and review. Selection of inputs involves management’s judgment and may impact net income. This analysis is done on a regular basis and takes into account factors that have changed from the time of the last Common Stock issuance. Other factors affecting our assessment of price include recent purchases or sales of Common Stock, if available.

Stock based compensation. We have two stock incentive plans. Biofuels maintains a stock-based compensation program for employees and directors under the 2006 Stock Option Plan, or the 2006 Plan. The 2006 Plan was approved by the Biofuels Board of Directors, or Biofuels Board, on July 31, 2006. We maintain a stock-based compensation program for employees and directors under the 2009 Stock Option Plan, or the 2009 Plan. The 2009 Plan was approved by the Board of Directors, on May 6, 2009. Eligible award recipients are employees, non-employee directors and advisors. We account for stock-based compensation in accordance with ASC Topic 718, “Stock Compensation”. On August 18, 2010, the Biofuels Board cancelled the stock options held by employees. This cancellation was concurrent with the issuance of the restricted stock units under the 2009

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Stock Incentive Plan. The remaining options held by non-employees were assumed by the Company and will remain outstanding under the 2009 Stock Incentive Plan with the same conditions as under the 2006 Plan. Compensation expense was recorded for stock options and restricted stock units awarded to employees and non-employee directors in return for service. The total compensation cost was measured at the grant-date fair value of the award less the fair value of any modified awards at the date of modification and is recognized as compensation expense over the vesting period. We record expense based upon the vesting schedule of the awards.

Results of Operations

Three and nine months ended September 30, 2010 and three and nine months ended September 30, 2009

Set forth below is a summary of certain unaudited financial information (in thousands) for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenues
Biodiesel		62,965			35,932			142,109			75,810
Biodiesel government incentives		—			6,041			3,674			13,572
Total Biodiesel		62,965			41,973			145,783			89,382
Services		157			716			1,165			2,403
Total		63,122			42,689			146,948			91,785
Cost of Goods Sold
Biodiesel		56,569			40,496			132,518			91,714
Services		68			217			601			970
Total		56,637			40,713			133,119			92,684
Gross Profit (Loss)		6,485			1,976			13,829			(899	)
Selling, general and administrative expenses		5,782			7,643			16,599			19,916
Gain on sale of assets – related party		—			(2,254	)		—			(2,254	)
Impairment of assets		7,336			—			7,477			—
Operating Income (Loss)		(6,633	)		(3,413	)		(10,247	)		(18,561	)
Other income (expense)		(811	)		(2,988	)		2,144			(858	)
Income tax benefit		—			1,637			3,728			4,875
Loss from equity investments		(173	)		(199	)		(554	)		(570	)
Net Loss		(7,617	)		(4,963	)		(4,929	)		(15,114	)
Net loss attributable to non-controlling interests		—			1,448			—			6,350
Net Loss Attributable to REG		(7,617	)		(3,515	)		(4,929	)		(8,764	)
Effects of recapitalization		—			—			8,521			—
Less - accretion of preferred stock to redemption value		(5,367	)		(11,560	)		(21,613	)		(31,337	)
Net Loss Attributable to the Company’s Common Shareholders		(12,984	)		(15,075	)		(18,021	)		(40,101	)

During 2009, Blackhawk was consolidated in our financial results. During first quarter 2010, Blackhawk was excluded from our financial results until the date of the Blackhawk Merger, February 26, 2010. After February 26, 2010, Blackhawk was included in our financial results. See “Note 5 – Blackhawk” and “Note 7 – Variable Interest Entities” on the consolidated financial statements for additional information relating to the Blackhawk consolidation.

Revenues. Our total revenues increased $20.4 million, or 48%, and $55.1 million, or 60%, to $63.1 million and $146.9 million for the three and nine months ended September 30, 2010, respectively, from $42.7 million and $91.8 million for the three and nine months ended September 30, 2009. This increase was due to an increase in biodiesel revenues, offset by a small decrease in service revenues, as follows:

Biodiesel. Biodiesel revenues including government incentives increased $21.0 million, or 50%, and $56.4 million, or 63%, to $63.0 million and $145.8 million during the three and nine months ended September 30, 2010, respectively, from $42.0 million and $89.4 million for the three and nine months ended September 30, 2009, respectively. This increase in biodiesel revenues was due to an increase in both selling price and gallons sold. As a result of higher energy prices during the first three quarters of 2010, the average sales price increased $0.43, or 15%, and $0.67, or 27%, to $3.21 and $3.17, respectively, during the three and nine months ended September 30, 2010, compared to $2.78 and $2.50 during the three and nine months ended September 30, 2009. The following table summarizes the gallons sold (in millions):

	Three Months  Ending September 30				Nine Months  Ending September 30
	2009		2010		2009		2010
REG Ralston		2.7		1.4		7.9		4.5
Tolling Arrangements with Newton facility		2.3		4.4		3.4		9.2
Tolling Arrangements with Danville facility		6.8		9.5		10.2		21.0
Blackhawk		—		—		0.7		—
Third Party Purchases		1.3		0.6		2.2		1.3
REG Seneca		—		1.9		—		1.9
REG Houston		—		—		5.5		—
Gallons Sold		13.1		17.8		29.9		37.9
REG Houston Gallons Tolled for Others		5.4		2.0		9.3		8.2
Total Gallons Sold		18.5		19.8		39.2		46.1

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Gallons sold increased 27% from 29.9 million gallons during the first nine months of 2009 to 37.9 million gallons during the first nine months of 2010, excluding gallons under tolling arrangements with others at our Houston Facility. We have increased production based on additional demand for our product as a result of the implementation of RFS2. The increase in gallons sold was primarily the result of biodiesel produced previously by Blackhawk, now REG Danville, under a tolling arrangement with us which was not in effect during the first quarter of 2009 and 5.8 million gallons during first nine months of 2010 as a result of biodiesel previously produced by CIE, now REG Newton, under a tolling arrangement with us, under which fewer gallons had been produced during the first nine months of 2009. Tolling arrangements were in place at both the Newton and Danville Facilities prior to and after the CIE Asset Acquisition and Blackhawk Merger; therefore, gallons sold from those facilities were sold on our behalf over the entire period. We also began producing at REG Seneca. The increases in gallons sold during 2010 were partially offset by slight decreases in production at REG Ralston, in production at REG Houston on its own behalf and in third party purchases. Feedstock limited processing capabilities at REG Ralston and REG Houston were the main reason for the reduced production. During the first nine months of 2010 under a tolling arrangement, REG Houston shipped 8.2 million gallons compared to 9.3 million gallons during the same period of 2009. As a result of these shipments, we earned toll fees of $0.33 per gallon, $2.7 million total revenue, during the nine months ended September 30, 2010, and $0.39 per gallon, $3.6 million total revenue, during the nine months ended September 30, 2009.

Services. Services revenues decreased $0.5 million, or 78%, and $1.2 million, or 52%, to $0.2 million and $1.2 million for the three and nine months ended September 30, 2010, from $0.7 million and $2.4 million for the three and nine months ended September 30, 2009. Our revenues generated from management services provided to network facilities decreased during first nine months 2010 due to decreased production at the network plants driven by the expiration of the blender’s tax credit and due to the termination of the external MOSA arrangements by September 30, 2010.

Cost of goods sold. Our cost of goods sold increased $15.9 million, or 39%, and $40.4 million, or 44%, to $56.6 million and $133.1 million for the three and nine months ended September 30, 2010, from $40.7 million and $92.7 million for the three and nine months ended September 30, 2009, respectively. This increase was primarily due to costs associated with the increase in gallons sold in the 2010 period and as follows:

Biodiesel. Biodiesel cost of goods sold increased $16.1 million, or 40%, and $40.8 million, or 44%, to $56.6 million and $132.5 million for the three and nine months ended September 30, 2010, compared to $40.5 million and $91.7 million for the three and nine months ended September 30, 2009, respectively. The increase in cost of goods sold is primarily the result of additional gallons sold in the 2010 period as outlined above and an increase in feedstock prices. Average animal fat costs for the nine months ended September 30, 2010 and 2009 were $0.28 and $0.24 per pound, respectively. Average soybean oil costs for the nine months ended September 30, 2010 and 2009 were $0.37 and $0.33 per pound, respectively. We had gains of $0.4 million and $0.9 million from hedging activity in the three and nine months ended September 30, 2010, compared to a gain of $0.4 million and loss of $0.5 million from hedging arrangements in the three and nine months ended September 30, 2009, respectively.

Services. Cost of services decreased $0.1 million, or 69%, and $0.4 million, or 38%, to $0.1 million and $0.6 million for the three and nine months ended September 30, 2010, from $0.2 million and $1.0 million for the three and nine months ended September 30, 2009, respectively. We had limited construction activity in the first three quarters of 2010 and minimal associated costs. Costs incurred to perform services under the MOSAs decreased due to a reduction in wages during first nine months of 2010.

Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $5.8 million and $16.6 million for the three and nine months ended September 30, 2010, respectively, compared to $7.6 million and $19.9 million for the three and nine months ended September 30, 2009. SG&A expenses decreased $1.8 million, or 24%, and $3.3 million, or 17%, for the three and nine months ended September 30, 2010 as a result of several factors. The increase was primarily due to our 2009 expenses including the consolidation of Blackhawk SG&A expenses, which although still included in expenses during 2010, have been greatly reduced due to the completion of the Blackhawk Merger and start up of the facility. SG&A was further reduced by other cost cutting measures undertaken by management during 2010, which reduced wages by $1.8 million and a reduction of information technology expenses by $0.9 million during the nine months ended September 30, 2010. These savings were partially offset by professional expenses, which increased $0.7 million for the nine months ending September 30, 2010 compared to the same period in 2009. The increase was almost entirely related to the closing of several merger and acquisition transactions, including the Biofuels Merger, Blackhawk Merger, CIE Asset Acquisition, the Seneca Transaction, the Tellurian Transaction and the purchase of the Clovis Facility during 2010.

Gain on sale of assets – related party. In July 2009, we sold the Stockton terminal facility to Westway for $3.0 million in cash. We recognized a gain on the sale of this asset of $2.3 million. We had no similar sales in 2010.

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Impairment of Long Lived and Intangible Assets. During the three months ended September 2010, the raw material supply agreements for the New Orleans and Emporia facilities were cancelled. The original agreements were recorded as an intangible asset in the amount of $7.0 million. As a result of the cancellations the full amount was charged off during the three months ended September 30, 2010. We also impaired deferred financing cost related to the New Orleans project GoZone bonds because we determined that it was unlikely that the GoZone bond allocation would be extended past the December 14, 2010 deadline or that the bonds would be issued prior to the deadline. The amount of the impairment for the three months ended September 30, 2010 was $0.3 million.

Other income (expense), net. Other expense was $0.8 million and other income was $2.1 million for the three and nine months ended September 30, 2010. Other expense was $3.0 million and $0.9 million during the three and nine months ended September 20, 2009. Other income is primarily comprised of the changes in fair value of the Series A Preferred Stock conversion feature embedded derivative, changes in fair value of Seneca Holdco liability, interest expense, interest income, and the other non-operating items. The change in fair value of the Series A Preferred Stock conversion feature embedded derivative resulted in $2.0 million and $7.0 million income for the three and nine months ended September 30, 2010, compared to expense of $2.5 million and $1.4 million for the three and nine months ended September 30, 2009, respectively. The changes in the fair value of the Seneca Holdco liability for the three and nine months ending September 30, 2010, were expenses of $1.8 million and $2.1 million respectively. Interest expense increased $1.0 million and $1.4 million to $1.5 million and $3.2 million, respectively, for the three and nine months ended September 30, 2010, from $0.5 million and $1.8 million for the three and nine months ended September 30, 2009. This increase was primarily attributable to the Blackhawk Merger and the CIE Asset Acquisition during the first quarter of 2010 and the Seneca Transaction during the second quarter of 2010. Other income during first half of 2009 included $1.4 million of miscellaneous income relating to release of an escrow related to REG’s Stockton terminal facility that occurred in the first half of 2009 and grant income of $0.3 million relating to a research grant received from the State of Iowa.

Income tax (expense) benefit. We recorded no income tax benefit or expense for the three months ending September 30, 2010 due to the full valuation allowance against the income tax expense. Income tax benefit was $3.7 million for the nine months ended September 30, 2010, compared to income tax benefit of $1.6 million and $4.9 million for the three and nine months ended September 20, 2009, respectively. Deferred tax liabilities were recorded as a result of the Blackhawk Merger and CIE Asset Purchase. As the deferred tax liabilities were recorded, the resulting decrease in net deferred tax assets required a lower valuation allowance. The release of the associated valuation allowance resulted in an income tax benefit.

Loss from equity investments. Loss from equity investments was $0.6 million for the first nine months of 2010 and 2009.

Non-controlling interest. Net loss from non-controlling interests was $1.4 million and $6.4 million for the three and nine months ended September 30, 2009, respectively, resulting from the consolidation of Blackhawk in 2009. In 2010, there was no income or loss from non-controlling interest due to our acquisition of Blackhawk.

Effects of Recapitalization. Net effects of recapitalization were $8.5 million for the nine months ended September 30, 2010. This is a one-time item due to the Biofuels Merger share issuances.

Preferred stock accretion. Preferred stock accretion was $5.4 million and $21.6 million for the three and nine months ended September 30, 2010, compared to $11.6 million and $31.3 million for the three and nine months ended September 30, 2009. The accretion amount increases as the redemption date becomes closer due to the use of the effective interest rate method. Accretion during 2009 was higher based on the previous redemption date of August 1, 2011. During the first nine months of 2010, we accreted two months of the previously issued Biofuels preferred stock (redemption date of August 1, 2011) and seven months of newly issued Series A Preferred Stock (redemption date February 26, 2014). Monthly accretion expense decreased after the Biofuels Merger as a result of the new redemption amount and redemption date.

Liquidity and Capital Resources

Sources of liquidity. Since inception, a significant portion of our operations have been financed through the sale of our capital stock. From 2006 through September 30, 2010, we received cash proceeds of $129.1 million from private sales of preferred stock and Common Stock. At September 30, 2010, we had cash and cash equivalents of $11.5 million, total assets of $357.7 million, and debt of $93.7 million.

On February 26, 2010, in connection with the Blackhawk Merger, one of our subsidiaries, REG Danville, assumed a $24.6 million term loan and a $5.0 million revolving credit line with Fifth Third Bank. As of September 30, 2010, there was $24.0 million of principal outstanding under the term loan and $0.2 million outstanding under the revolving credit line. The Illinois Finance Authority guarantees 61% of the term loan and the remaining amount is secured by our Danville facility. The term loan bears interest at a fluctuating rate per annum equal to LIBOR plus the applicable margin of 4%. Until June 30, 2010, REG Danville was required to make only monthly payments of accrued interest. Beginning on July 1, 2010, REG Danville was required to make monthly principal payments equal to $135,083 plus accrued interest. In addition to these monthly payments, as a result of the amendment to the loan agreement, REG Danville is required to make annual principal payments equal to 50% of REG Danville’s Excess Cash Flow, or the 50% Excess Payment, with respect to each fiscal year until $2.5 million has been paid from the Excess Cash Flow. Excess Cash Flow is equal to EBITDA less certain cash payments made during the period including principal payments, lease payments, interest payments, tax payments, approved distributions and capital expenditures. Excess Cash Flow is measured annually; therefore, no amounts have yet been paid. Thereafter, REG Danville is required to make annual payments equal to 25% of its Excess Cash Flow. REG Danville is subject to various loan covenants that restrict its ability to take certain actions, including prohibiting it from paying any dividend to us until the 50% Excess Payment is made and certain financial ratios are met. On September 30, 2010, REG Danville amended the term loan and revolving credit line to reduce the revolving credit line to $0.2 million, provide for repayment terms on the revolving credit line and extend the due date. The amendment also clarified some administrative items including definitions on the term loan. As of September 30, 2010, REG Danville was in compliance with the term loan agreement and revolving credit line. The term loan matures on November 3, 2011 and the revolving credit line expires on November 30, 2010.

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On March 8, 2010, in connection with the CIE acquisition, one of our subsidiaries, REG Newton, refinanced a $23.6 million term loan, or the AgStar Loan, and obtained a $2.4 million line of credit, or the AgStar Line, with AgStar Financial Service, PCA, or AgStar. As of September 30, 2010, there was $23.6 million of principal outstanding under the AgStar Loan and $0.6 million of principal outstanding under the AgStar Line. These amounts are secured by our Newton facility. We have guaranteed the obligations under the AgStar Line and have a limited guarantee related to the obligations under the AgStar Loan; which provides that we will not be liable for more than the unpaid interest, if any, on the AgStar Loan that has accrued during an 18-month period beginning on March 8, 2010. The AgStar Loan bears interest at 3% plus the greater of (i) LIBOR or (ii) two percent. Until October 1, 2011, REG Newton is required to pay only accrued interest on the AgStar Loan. Beginning on October 1, 2011, equal monthly payments of principal and accrued interest are due based on a 12-year amortization period. Under the AgStar Loan, REG Newton is required to maintain a debt service reserve account, or the Debt Reserve, equal to 12-monthly payments of principal and interest on the AgStar Loan. Beginning on January 1, 2011 and at each fiscal year end thereafter until such time as the balance in the Debt Reserve contains the required 12-months of payments, REG Newton must deposit an amount equal to its Excess Cash Flow, which is defined in the AgStar Loan agreement as EBITDA, less the sum of required debt payments, interest expense, any increase in working capital from the prior year until working capital exceeds $6.0 million, up to $0.5 million in maintenance capital expenditure, allowed distributions and payments to fund the Debt Reserve. In the event any amounts are past due, AgStar may withdraw such amounts from the Debt Reserve. Also beginning on January 1, 2011, provided that REG Newton is in compliance with the working capital ratios and the Debt Reserve is funded, REG Newton must make an annual payment equal to 50% of its Excess Cash Flow calculated based upon the prior year’s audited financial statements within 120 days of the fiscal year end. REG Newton is subject to various standard loan covenants that restrict its ability to take certain actions, including prohibiting REG Newton from making any cash distributions to us in excess of 35% of REG Newton’s net income for the prior year. On November 15, 2010, REG Newton amended the loan agreement to revise certain financial covenants. In exchange for these revisions, REG Newton agreed to begin reduced principal payments early within two months after the enactment of the reinstated tax credit. The AgStar Loan matures on March 8, 2013 and the AgStar Line expires on March 7, 2011.

During July 2009, we and certain subsidiaries entered into an agreement with Bunge for Bunge to provide services related to the procurement of raw materials and the purchase and resale of biodiesel produced. The agreement provides for Bunge to purchase up to $10.0 million in feedstock for, and biodiesel from, us. In September 2009, we entered into an extended payment terms agreement with West Central to provide up to $3.0 million in outstanding payables for up to 45 days. Both of these agreements provided additional working capital resources to us. As of September 30, 2010 we had $5.5 million outstanding under these agreements.

Certain of our subsidiaries, and REG as guarantor, entered into a Revolving Credit Agreement, or the WestLB Revolver, dated as of April 8, 2010, with WestLB, AG. The initial available credit amount under the WestLB Revolver is $10 million with additional lender increases up to a maximum commitment of $18 million. Advances under the WestLB Revolver are limited to the amount of certain of our qualifying assets that secure amounts borrowed. The WestLB Revolver requires that we maintain compliance with certain financial covenants. The term of the WestLB Revolver is two years. The interest rate varies depending on the loan type designation and is either 2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for Base Rate loans or 3.0% over adjusted LIBOR for Eurodollar loans. The WestLB Revolver is secured by assets and ownership interests of our subsidiaries. See “Note 11—Borrowings” to our consolidated financial statements for additional information. As of September 30, 2010, we had approximately $5.5 million outstanding under the WestLB Revolver.

As a result of the Seneca Transaction, we received from Seneca Holdco, which is owned by three of our investors, an investment of $4.0 million in Landlord, the company that owns the Seneca biodiesel production facility, the Seneca Facility, at closing to pay for repairs to the Seneca facility. Landlord leases the Seneca Facility to REG Seneca, on a triple net basis with rent being set at an amount to cover debt service and other expenses. REG Seneca will pay Seneca Landlord a $0.6 million per year fee, payable $150,000 per quarter, which is guaranteed by us. See “Note 7 – Variable Interest Entities” to our consolidated financial statements for additional information.

On April 8, 2010, Landlord entered into a note payable agreement with West LB. The note requires that interest be accrued at different rates based on whether it is a Base Rate Loan or Eurodollar loan at either 2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for Base Rate loans or 3.0% over adjusted LIBOR for Eurodollar loans. The loan was a Eurodollar loan as of September 30, 2010. The effective rate at September 30, 2010 was 3.25%. Interest is paid monthly. Principal payments have been deferred until February 2012. At that time, Landlord will be required to make monthly principal payments of $201,389 with remaining unpaid principal due at maturity on April 8, 2017. The note payable is secured by the property located at the Seneca, IL location. The balance of the note as of September 30, 2010 is $36.3 million.

REG Newton was not incompliance with a financial covenant as of September 30, 2010 on the AgStar Loan. Subsequently, REG Newton and AgStar agreed to amend the loan document to cure this financial covenant. With that exception, we and our subsidiaries were in compliance with all restrictive financial covenants associated with the borrowings as of September 30, 2010.

We continue to be in discussions with lenders in an effort to obtain financing for facilities under construction and capital improvement projects for our operating facilities. Since these discussions are ongoing, we are uncertain when or if financing will be available. We are seeking to enter into equity and debt financing arrangements to meet our projected financial needs for operations, upgrades to existing plants and for completion of the New Orleans, Louisiana facility, the Emporia, Kansas facility and the Clovis, New Mexico facility. The financing may consist of common or preferred stock, debt, project financing or a combination of these financing techniques. Additional debt would likely increase our leverage and interest costs and would likely be secured by certain of our assets. Additional equity or equity-linked financings would likely have a dilutive effect on our existing shareholders. It is likely that the terms of any project financing would include customary financial and other covenants on our project subsidiaries, including restrictions on the ability to make distributions, to guarantee indebtedness, and to incur liens on the plants of such subsidiaries.

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Cash flow. The following table presents information regarding REG’s cash flows and cash and cash equivalents for the years ended December 31, 2007, 2008, and 2009 and for the nine months ended September 30, 2009 and 2010:

	Year Ended December 31,									Nine months Ended September 30,
	2009			2008			2007			2010			2009
	(in thousands)
Net cash flows from operating activities	$	(8,209	)	$	(3,636	)	$	(6,921	)	$	(5,597	)	$	(8,813	)
Net cash flows from investing activities		371			(26,173	)		(52,898	)		(3,936	)		991
Net cash flows from financing activities		(1,618	)		26,155			25,086			15,164			(1,202	)
Net change in cash and cash equivalents		(9,456	)		(3,654	)		(34,733	)		5,631			(9,024	)
Cash and cash equivalents, end of period	$	5,855		$	15,311		$	18,965		$	11,486		$	6,287

Operating activities. Net cash used in operating activities was $5.6 million and $8.8 million for the nine months ended September 30, 2010 and 2009, respectively. For the nine months ended September 30, 2010, net loss was $4.9 million which includes non-cash charges for impairment of intangible assets of $7.3 million, depreciation expense of $3.7 million and non-cash change in the Seneca Holdco liability of $2.0 million. These charges were offset by non-cash benefits including a $3.7 million increase for changes in the deferred tax benefit and a $7.0 million change in the fair value of preferred stock conversion feature embedded derivative. We also used $5.1 million to increase net working capital, which resulted in a net cash use from operations of $5.6 million.

The net use of cash from operating activities during the nine months ended September 30, 2009, of $8.8 million resulted primarily from a $15.1 million net loss from operations, as well as changes to deferred taxes of $4.9 million, a $2.3 million gain on the sale of property, and changes in allowance for doubtful accounts of $1.5 million. These cash uses were partially offset by net working capital decrease of $5.9 million and non-cash depreciation and stock-based compensation expenses totaling $3.3 million and $2.5 million, respectively.

Investing activities. Net cash used for investing activities for the nine months ended September 30, 2010 was $3.9 million, consisting of an cash used to pay for Seneca construction of $3.9 million. Net cash provided from investing activities for the nine months ended September 30, 2009 was $1.0 million, as $6.7 million in facility construction costs for Danville were partially offset by receipt of $4.7 million from a construction escrow fund related to REG Danville’s construction. We also received $3.0 for the sale of our Stockton terminal facility to Westway.

Financing activities. Net cash provided from financing activities for the nine months ended September 30, 2010 was $15.2 million, which represents $8.0 million cash investment from ARES Corporation, $4.0 million cash proceeds received from the Seneca investors and $5.5 million in borrowings on our line of credit. This was partially offset by principal payments in connection with the note payable and cash paid for debt issuance. Net cash used in financing activities for the nine months ended September 30, 2009 was $1.2 million, which consisted of the payoff of the WestLB borrowings of $1.3 million, pay down of notes payable of $0.3 million and changes in the balance of the REG Danville line of credit for a net result of $0.5 million.

Capital expenditures. We plan to make significant capital expenditures when debt or equity financing becomes available to complete construction of three facilities, one in New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico, with aggregate production capacity of 135 mmgy. We estimate completion of the New Orleans facility will require approximately $60 million in additional capital. Completion of the Emporia facility will require an additional $54 million and completion of the Clovis Facility will require an estimated $8 million. Additional construction expenditures will be required for the Seneca facility, most of which have been funded through the cash provided by the Seneca investors, but some will be funded through the operation of the facility. We also plan to undertake various facility upgrades when funding becomes available to further expand processing capabilities at our existing facilities, most significantly the Houston Facility.

Off-Balance Sheet Arrangements

REG has no off-balance sheet arrangements.

Recent Accounting Pronouncements

In June 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which amends ASC Topic 810, “Consolidations”. This Statement requires a qualitative analysis to determine the primary beneficiary of a VIE. The analysis identifies the primary beneficiary as the enterprise that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could be significant to the VIE. The Statement also requires additional disclosures about an enterprise’s involvement in a VIE. The effective date is the beginning of fiscal year 2010. The Company adopted this statement effective January 1, 2010, which resulted in the deconsolidation of Blackhawk and additional disclosure requirements. See “Note 7 – Variable Interest Entities” to our consolidated financial statements for additional information.

In January 2010, the FASB issued Accounting Standards Update, or ASU, No. 2010-06, “Fair Value Measurements and Disclosures”, ASU 2010-06, which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales issuances, and settlements related to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010. The adoption of this guidance did not have a material effect on the Company’s financial statements and the Company does not anticipate the remaining disclosures will have a material effect on the Company’s financial statements.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objectives of REG’s investment activity are to preserve principal, provide liquidity and maximize income without significantly increasing risk. Some of the securities REG invests in are subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, REG maintains its portfolio of cash equivalents in short-term investments in money market funds.

Over the period from January 2005 through September 2010, average diesel prices based on Platts reported pricing for Group 3 (Midwest) have ranged from approximately $3.81 per gallon reported in September 2008 to approximately $1.21 per gallon in March 2009, with prices averaging $2.10 per gallon during this period. Over the period from January 2005 through September 2010, soybean oil prices (based on closing sales prices on the CBOT nearby futures, for crude soybean oil) have ranged from $0.6416 per pound in September 2008 to $0.1972 per pound in January 2005, with closing sales prices averaging $0.3477 per pound during this period. Over the period from January 2005 through September 2010, animal fat prices (based on prices from The Jacobsen Missouri River, for choice white grease) have ranged from $0.4892 per pound in July 2008 to $0.1226 per pound in May 2006, with sales prices averaging $0.2291 per pound during this period.

Higher feedstock prices or lower biodiesel prices result in lower profit margins and, therefore, represent unfavorable market conditions. Traditionally, REG has not been able to pass along increased feedstock prices to its biodiesel customers. The availability and price of feedstocks are subject to wide fluctuations due to unpredictable factors such as weather conditions during the growing season, kill ratios, carry-over from the previous crop year and current crop year yield, governmental policies with respect to agriculture, and supply and demand.

REG has prepared a sensitivity analysis to estimate its exposure to market risk with respect to its soybean oil requirements, fat requirements and sales contracts and the related exchange-traded contracts for 2009. Market risk is estimated as the potential loss in fair value, resulting from a hypothetical 10.0% adverse change in the fair value of its soybean oil and animal fat requirements and biodiesel sales. The results of this analysis, which may differ from actual results, are as follows:

	2009 Volume (in millions)		Units		Hypothetical Adverse Change in Price			Change in Annual Gross Profit (in millions)		Percentage Change in Gross Profit
Biodiesel		42.9		gallons		10.0	%	$	10.9		370.9	%
Animal Fats		141.0		pounds		10.0	%	$	3.6		120.7	%
Soybean Oil		121.1		pounds		10.0	%	$	3.5		119.2	%

Interest Rate Risk

We are subject to interest rate risk in connection with REG Ralston’s loan with a $2.4 million outstanding balance made from the proceeds of Variable Rate Demand Industrial Development Revenue Bonds, or the IFA Bonds, issued by the Iowa Finance Authority to finance our Ralston facility. The IFA Bonds bear interest at a variable rate determined by the remarketing agent from time to time as the rate necessary to produce a bid for the purchase of all of the Bonds at a price equal to the principal amount thereof plus any accrued interest at the time of determination, but not in excess of 10% per annum. The interest rate on the bonds was 0.47% for the last week of September 2010. A hypothetical increase in interest rate of 10% would not have a material effect on REG’s annual interest expense.

We are subject to interest rate risk relating to REG Danville’s $24.6 million term debt financing with Fifth Third Bank and its $5.0 million revolving line of credit from Fifth Third Bank. The term loan bears interest at a fluctuating rate based on a range of rates above 30-day LIBOR and will mature on November 3, 2011. Interest will accrue on the outstanding balance of the term loan at the 30 day LIBOR plus 400. Interest accrued on the outstanding balance of the loan at September 30, 2010 at 4.26%. The revolving line of credit will accrue interest at REG Danville’s choice of the 30-day LIBOR rate plus 300 basis points or the Lender’s prime rate plus 25 basis points and is due in monthly payments. At September 30, 2010, we accrued interest at the 30-day LIBOR plus 300 basis points on the outstanding balance which totaled 4.26%.

Blackhawk entered into an interest rate swap agreement in connection with the aforementioned term loan in May 2008. The agreement was assumed by REG Danville. The swap agreement effectively fixes the interest rate at 3.67% on a notional amount of approximately $21.4 million of REG Danville’s term loan through November 2011. The fair value of the interest rate swap agreement was $1.0 million and $0.8 million at both December 31, 2009 and September 30, 2010, respectively, and is recorded in other noncurrent liabilities. The interest rate swap agreement is not designated as a cash flow or fair value hedge. Gains and losses based on the fair value change in the interest rate swap agreement are recognized in the statement of operations as a change in the fair value of interest rate swap agreement. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

REG Newton is subject to interest rate risk relating to its $23.6 million term debt financing and its $2.4 million revolving line of credit both from AgStar. Interest will accrue on the outstanding balance of the term loan at 30 day LIBOR or 2.00%, whichever is higher, plus 300 basis points (effective rate at September 30, 2010 of 5.00%). The revolving line of credit accrues interest at 30 day LIBOR or 2.00%, whichever is higher, plus 300 basis points (effective rate at September 30, 2010 of 5.00%). A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

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REG Seneca is subject to interest rate risk relating to its lease payments for the facility. The lease provides that REG Seneca will pay rent in the amount of the interest payments due to WestLB from Seneca Landlord, LLC. The note requires that interest be accrued at different rates based on whether it is a Base Rate Loan or Eurodollar loan. Each Base Rate Loan shall accrue interest at a rate per annum equal to 2% plus the higher of (i) the Federal Funds Effective Rate plus 0.5% and (ii) the rate of interest in effect for such day as publicly announced from time to time by WestLB as its “prime rate”. Each Eurodollar Loan shall accrue interest at a rate per annum equal to 3.0% plus the greater of (a) one and one half percent (1.5%) per annum, and (b) the rate per annum obtained by dividing (x) LIBOR for such Interest Period and Eurodollar Loan, by (y) a percentage equal to (i) 100% minus (ii) the Eurodollar Reserve Percentage for such Interest Period. The loan is a Eurodollar Loan through September 30, 2010 (effective rate at September 30, 2010 of 3.26%). Interest is paid monthly. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

REG Marketing and Logistics Group, LLC and REG Services Group, LLC, together the WestLB Loan Parties, are subject to interest rate risk relating to their $10.0 million revolving line of credit from WestLB. The note requires that interest be accrued at different rates based on whether it is a Base Rate Loan or Eurodollar loan. Each Base Rate Loan shall accrue interest at a rate per annum equal to 2% plus the higher of (i) the Federal Funds Effective Rate plus 0.5% and (ii) the rate of interest in effect for such day as publicly announced from time to time by WestLB as its “prime rate”. Each Eurodollar Loan shall accrue interest at a rate per annum equal to 3.0% plus the greater of (a) one and one half percent (1.5%) per annum, and (b) the rate per annum obtained by dividing (x) LIBOR for such Interest Period and Eurodollar Loan, by (y) a percentage equal to (i) 100% minus (ii) the Eurodollar Reserve Percentage for such Interest Period. The loan is a Eurodollar Loan through September 30, 2010 (effective rate at September 30, 2010 of 3.26%). Interest is paid monthly. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.

Inflation

To date, inflation has not significantly affected REG’s operating results, though costs for construction, labor, taxes, repairs, maintenance and insurance are all subject to inflationary pressures. Inflationary pressure in the future could affect REG’s ability to maintain its production facilities adequately, build new biodiesel production facilities and expand its existing facilities as well as the demand for its facility construction management and operations management services.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain a system of disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Subject to the limitations noted above, management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of September 30, 2010. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2010 because of the material weaknesses identified in our risk factor on page 55 of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010.

Changes in Internal Control Over Financial Reporting

We are in an ongoing process of strengthening and improving internal controls. Specific actions include:

• The documentation of an entity-level fraud risk assessment and the development of a delegation of authority policy.

• The addition of resources with relevant expertise and experience to improve our controls related to the financial close and reporting process. We have improved the timeliness and accuracy of the financial and reporting process, including SEC external reporting requirements.

• The implementation of an online change management tracking tool and documentation of information security and change control policies. We follow a specific process for documenting, testing, approving and implementing changes to the information systems environments.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We believe there is no pending or threatened litigation that would have a material adverse effect on our financial position, operations or liquidity.

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ITEM 1A. RISK FACTORS

We have updated the following risk factors to reflect changes during the quarter ended September 30, 2010 that we believe to be material to the risk factors set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, filed with the Securities and Exchange Commission. Other risks that we face are more fully described in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2010. See Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, entitled “Risk Factors.”

Loss of favorable tax benefits and other governmental incentives for biodiesel production or consumption could impair our ability to operate at a profit and substantially harm our revenues and operating margins.

The biodiesel industry has been substantially aided by federal and state tax credits and incentives. Because biodiesel has historically been more expensive to produce than diesel fuel, the biodiesel industry has depended on governmental incentives that have effectively brought the price of biodiesel more in line with the price of diesel fuel to the end user. These incentives have supported a market for biodiesel that might not exist without the incentives. For example, Illinois offers a 6.25% sales tax abatement for B11 (diesel fuel comprised of 11% biodiesel and 89% petroleum-based diesel) blends and Iowa offers a $0.03 income tax credit to petroleum marketers of B2 (diesel fuel comprised of 2% biodiesel and 98% petroleum-based diesel) blends.

Federal and state incentives have also been put in place to encourage the use of biodiesel, which, if discontinued, would also harm our ability to sell biodiesel profitably. The biodiesel industry currently operates without the benefit of the blenders’ tax credit. It is uncertain what action, if any, Congress may take with respect to the blenders’ credit in 2010 or when such action might be effective. In 2007, Congress enacted the Energy Independence and Security Act, requiring a specific amount of renewable fuel to be used in motor vehicle fuel nationwide. On July 1, 2010, an updated Renewable Fuels Standard program, or RFS2, was implemented. RFS2 provides volume requirements for the amount of biomass-based diesel that must be utilized each year. Currently the American Petroleum Institute, or API, has filed a lawsuit against the EPA relating to timing of enforcement of RFS2. If API prevails in the lawsuit, the obligation for 2011 could be substantially reduced from the current requirement. If this were to occur, demand for our product may be sufficiently reduced and our revenues could be harmed.

Numerous states have adopted incentives or requirements to encourage renewable fuel use, including the use of biodiesel. In Illinois, there is a fuel tax abatement for retailers who sell B11 or higher blends. In Iowa, fuel distributors receive an incentive for B2 or higher blends. Many states have adopted and/or implemented biodiesel blend requirements. Oregon has implemented B2 biodiesel blend requirements with potential for B5 requirements. Washington’s renewable fuels standard calls for two percent of all diesel fuel consumed in the state to be biodiesel. Minnesota requires a B5 blend for all diesel fuel. New Mexico, Pennsylvania, Massachusetts and Louisiana have all adopted biodiesel blend requirement legislation language. In addition, several Northeast states including Connecticut and Massachusetts and the City of New York have adopted language to require biodiesel in home heating oil. Any repeal, substantial modification or waiver of the renewable fuels mandate or other environmental regulations at the federal or state level could reduce the demand for biodiesel and have a material adverse effect on our results of operations and financial condition. Further, our future ability to raise debt or equity capital may be impaired, delayed or impossible due to a gap in continuous government support for biodiesel.

Our gross margins are principally dependent on the spread between feedstock costs and biodiesel prices. If the cost of feedstock increases and the price of biodiesel does not proportionately increase or if the price of biodiesel decreases and the cost of feedstock does not proportionately decrease, our gross margins will decrease and our results of operations will be harmed.

Our gross margins depend principally on the spread between feedstock costs and biodiesel prices.

The spread between biodiesel prices and soybean oil prices has varied significantly during recent periods. Although actual yields vary depending on feedstock quality, the average monthly spread between the price per gallon of pure biodiesel, or B100, as reported by The Jacobsen Publishing Company, or Jacobsen, and the price of crude soybean oil used to make one gallon of biodiesel, based on the nearby futures contract as reported on the Chicago Board of Trade, or CBOT, was $0.48 per gallon in 2007, $0.58 per gallon in 2008, $0.38 in 2009 and $.39 per gallon through September 30, 2010. As a result of particularly high soybean oil prices in 2007 and 2008, we have become more dependent on animal fat as a feedstock. Through September 30, 2010, approximately 20% of our total feedstock usage was vegetable oil and 80% animal fat compared to approximately 24% of our total feedstock usage was vegetable oil and 76% animal fat for 2009. The supply of animal fat is affected by seasonality, the amount of slaughter kills in the United States and demand for animal fat from other markets, such as feed rations. The price of choice white grease, a common animal fat used to make biodiesel, can vary greatly. During 2008 and 2009, the average monthly spread between the price per gallon of B100 and the price of choice white grease used to make one gallon of biodiesel as reported by Jacobsen, was $1.83 and $1.23, respectively, assuming 8.0 pounds of choice white grease yields one gallon of biodiesel. Through September 30, 2010 the average monthly spread was $1.04.

Another feedstock, inedible corn oil extracted from distillers’ grain, which typically bears a lower price than soybean oil, is not generally available in quantities sufficient for our operations. At present, there are a limited number of ethanol plants with the corn oil extraction equipment to extract the corn oil that can be used in biodiesel production. If more ethanol plants do not implement the extraction equipment or if ethanol plants remain idle, we may not have the ability to supplement our feedstock requirements with significant amounts of corn oil. We also use used cooking oil, or UCO, as a feedstock for biodiesel production. The market for UCO as a feedstock for biodiesel is still developing and supply is constrained. This constraint may lead to volatile UCO prices, which in turn could adversely affect our profit margins on biodiesel produced from UCO.

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The competition for feedstocks utilized in the biodiesel industry is significant and we compete for feedstock with many different companies, many of which have greater resources than we do. Furthermore, biodiesel mandates in other parts of the world have increased global competition for feedstocks and for certain feedstocks in particular. Consequently, the price of feedstocks may rise and adversely affect our profit margins and threaten the viability of our operations. Biodiesel is marketed primarily as an additive or alternative to petroleum-based diesel fuel, and as a result biodiesel prices are primarily influenced by the price of petroleum-based diesel fuel, rather than biodiesel production costs. This lack of correlation between biodiesel production costs and product prices means that generally we will be unable to pass increased feedstock costs on to our customers. Any decrease in the spread between biodiesel prices and feedstock costs, whether as a result of an increase in feedstock prices or a reduction in biodiesel prices, would adversely affect our financial performance and cash flow.

Certain subsidiaries have substantial indebtedness which could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or the biodiesel industry or may require us to dispose of some or all of our assets.

Several of our subsidiaries have a significant amount of indebtedness, some of which we have guaranteed. At September 30, 2010, our total term debt was $93.7 million, including consolidated debt from Seneca Landlord, LLC. Our level of indebtedness could restrict our operations and make it more difficult for us to satisfy our debt obligations or obtain additional working capital borrowings to fund operations. In connection with the Seneca Facility transaction, one of our subsidiaries leases the Seneca Facility from its owners under a lease agreement. If a termination of the Seneca Facility lease is due to breach by our subsidiary, then we would be required to issue to the Seneca Facility owners a three year note in the principal amount of $4.0 million plus certain adjustments, which would add to our total debt outstanding.

The significant amount of indebtedness of these subsidiaries could:

• require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the availability of our cash flow to fund working capital and capital expenditures, and for other general corporate purposes. For example, we are required to pay a certain portion of our excess cash flow at our Danville, Newton and Seneca facilities to their respective lenders annually, which will reduce the cash flow that we receive from these facilities;

• increase our vulnerability to general adverse economic and biodiesel industry conditions;

• limit our flexibility in planning for, or reacting to, changes in our business and the biodiesel industry, which may place us at a competitive disadvantage compared to our competitors that have less debt; and

• limit, along with the financial and other restrictive covenants in the indebtedness, among other things, our ability to borrow additional funds.

In the event we are not able to generate sufficient revenues to fund operations, we may be required to seek third party financing. Such financing is not currently available to us. In the event we are unable to satisfy our debt obligations or fund our working capital requirements, we may need to cease operations or sell or liquidate our assets.

We have unfinished plants and planned plant upgrades that require capital that we may not be able to raise.

We have three unfinished plants, one in New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico, that we expect to complete in order to commence production at these facilities. We also have various upgrades planned for our other facilities. In order to complete these facilities or upgrade our facilities as planned, we will require additional capital. While we intend to finance a portion of these capital expenditures from our cash flow from operations, we will need to raise a significant amount of capital for these projects in the form of new debt or equity. If market conditions prevent us from obtaining such capital on satisfactory terms, or if such capital is otherwise unavailable, or if we encounter cost overruns on these projects such that we have insufficient capital, we may have to postpone completion of these projects indefinitely, which may adversely affect our future revenue and cash flow.

We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our business and management.

In 2010, we acquired REG Biofuels, Inc, Blackhawk Biofuels, LLC, Central Iowa Energy, LLC, Tellurian Biodiesel, Inc., American BDF, LLC, a partially complete facility in Clovis, New Mexico and entered into a seven year lease on the Seneca, Illinois Facility. We may, in the future, acquire additional companies, products or technologies. We may not realize the anticipated benefits of any or all of these transactions and each transaction has numerous risks. These risks include:

• difficulty in integrating the operations and personnel of the acquired company;

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• difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or services;

• difficulty in maintaining controls, procedures and policies during the transition and integration;

• entry into markets in which we have no or limited direct prior experience and where competitors in such markets have stronger market positions;

• disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;

• difficulty integrating the acquired company’s accounting, management information, human resources and other administrative systems;

• inability to retain key technical and managerial personnel of the acquired business;

• inability to retain key customers, distributors, vendors and other business partners of the acquired business;

• inability to achieve the financial and strategic goals for the acquired and combined businesses;

• inability to take advantage of anticipated tax benefits as a result of unforeseen difficulties in our integration activities;

• incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;

• potential additional exposure to fluctuations in currency exchange rates;

• potential impairment of our relationships with employees, customers, partners, distributors or third-party providers of our technologies, products or services;

• potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of an acquired company or technology, including but not limited to, issues with the acquired company’s intellectual property, product quality or product architecture, data back-up and security, revenue recognition or other accounting practices, employee, customer or partner issues or legal and financial contingencies;

• exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition, including but not limited to, claims from terminated employees, customers, former stockholders or other third parties;

• incurring significant exit charges if products or services acquired in business combinations are unsuccessful;

• potential inability to assert that internal controls over financial reporting are effective;

• potential inability to obtain, or obtain in a timely manner, approvals from governmental authorities, which could delay or prevent such acquisitions;

• potential delay in customer and distributor purchasing decisions due to uncertainty about the direction of our product and service offerings; and

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• potential incompatibility of business cultures.

The aforementioned risks apply to our acquisitions mentioned above. Mergers and acquisitions are inherently risky, and ultimately, if we do not complete an announced acquisition transaction or integrate an acquired business successfully and in a timely manner, we may not realize the benefits of the acquisition to the extent anticipated.

We have guaranteed certain payment obligations and are subject to a put/call right related to our recent transaction involving a 60 million gallon per year biodiesel production facility located in Seneca, Illinois that we agreed to operate, or the Seneca Facility.

Under the terms of the agreements with the owners of a 60 million gallon per year biodiesel production facility located in Seneca, Illinois that we operate, or the Seneca Facility, we have guaranteed the payments by Seneca Landlord, LLC of $150,000 per quarter to the Seneca Holdco, LLC. We have paid these fees for the prior quarters. If Seneca Landlord, LLC does not generate sufficient revenues from which it could satisfy its obligations to pay the investor fee, we may have to continue to fund future investment fees. Furthermore, the Seneca Facility owners have a right to put its ownership interests to us after April 8, 2011, provided we have a minimum excess net working capital of 1.5 times the put/call price, which is the greater of three times the initial investment or a 35% internal rate of return on the initial investment. If Seneca Landlord, LLC fails to make the required payments and we are required to make the payments pursuant to our guarantee, or we are required to purchase the Seneca Facility ownership interests pursuant to the put right, it will reduce our available cash on hand to use for other purposes, including debt repayment or payment of other operating expenses.

Two customers accounted for a meaningful percent of revenue and a loss of these customers would have an adverse impact on our total revenue.

One customer accounted for 24% of our total revenue in 2009 and 30% of our total revenue in the first three quarters of 2010 and another customer accounted for 11% of our total revenue in 2009 and 3% of our total revenue in the first three quarters of 2010. In the event we lose either of these customers and cannot replace the lost revenue with revenue from other customers, our revenue would decline which would negatively affect our profitability.

ITEM 6. EXHIBITS

(A) Exhibits:

Exhibit No.	Description
10.1	Agreement for Purchase and Sale of Assets and Common Stock by and among ARES Corporation, Clovis Biodiesel, LLC, REG Clovis, LLC and Renewable Energy Group, Inc. dated August 24, 2010.
31.1	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1	Certification of the Chief Executive Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Chief Financial Officer pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: November 15, 2010

RENEWABLE ENERGY GROUP, INC.
By:	/s/ Jeffrey Stroburg
	Jeffrey Stroburg
	Chief Executive Officer and Director
By:	/s/ Chad Stone
	Chad Stone
	Principal Financial Officer
By:	/s/ Natalie Lischer
	Natalie Lischer
	Principal Accounting Officer

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EX-10.1

Exhibit 10.1

AGREEMENT FOR PURCHASE AND SALE OF ASSETS AND COMMON

STOCK

By and Among

ARES CORPORATION,

CLOVIS BIODIESEL, LLC,

REG CLOVIS, LLC

AND

RENEWABLE ENERGY GROUP, INC.,

Dated as of August 24, 2010

Table of Contents

			Page
Article I		Definitions		6
	Section 1.1	Definitions		6
	Section 1.2	Other Terms		15
	Section 1.3	Interpretation		15
Article II		Purchase and Sale of Assets and Common Stock		16
	Section 2.1	Purchase and Sale of Assets		16
	Section 2.2	Excluded Assets		17
	Section 2.3	Assumption of Liabilities		18
	Section 2.4	Excluded Liabilities		18
	Section 2.5	Parent Investment		19
	Section 2.6	Consideration; Taxes; Allocation		19
	Section 2.7	Bulk Sales Laws		20
	Section 2.8	Proration of Certain Expenses		20
Article III		Closing		21
	Section 3.1	Closing		21
	Section 3.2	Procedure at Closing		21
Article IV		Representations as to Seller		21
	Section 4.1	Organization and Existence		21
	Section 4.2	Noncontravention		22
	Section 4.3	No Litigation		22
	Section 4.4	Consents		22
	Section 4.5	Subsidiaries		22
	Section 4.6	Organizational Documents; Books and Records, Managers		23
	Section 4.7	Financial Statements		23
	Section 4.8	Changes; Undisclosed Liabilities; Absence of Material Adverse Effect		23
	Section 4.9	Tax Matters		25
	Section 4.10	Compliance with Law		25
	Section 4.11	Contracts and Commitments		25
	Section 4.12	Title to Assets		26
	Section 4.13	Real Property		27
	Section 4.14	Employee Matters		29
	Section 4.15	Benefit Plans		29
	Section 4.16	Intellectual Property		30
	Section 4.17	Environmental Compliance		30
	Section 4.18	Insurance		32
	Section 4.19	Governmental Authorizations and Permits		32
	Section 4.20	Sale of Goods		32
	Section 4.21	Brokers		32
Article V		Representations as to Parent		32

	Section 5.1	Organization and Standing	32
	Section 5.2	Authority; Authorization; Capacity	32
	Section 5.3	Enforceability	33
	Section 5.4	Noncontravention	33
	Section 5.5	Governmental Approvals	33
	Section 5.6	Ownership of Seller Membership Interests	33
	Section 5.7	Investment Agreement	33
Article VI		Representations of Buyer and REG	34
	Section 6.1	Organization and Existence	34
	Section 6.2	Authority; Authorization; Capacity	34
	Section 6.3	Enforceability	34
	Section 6.4	Noncontravention	34
	Section 6.5	Governmental Approvals	35
	Section 6.6	Capitalization	35
	Section 6.7	Valid Issuance of Common Stock	36
	Section 6.8	SEC Reports; Financial Statements	36
	Section 6.9	Undisclosed Liabilities; Absence of Material Adverse Effect	36
	Section 6.10	No Litigation	37
	Section 6.11	Consents	37
	Section 6.12	Organizational Documents; Books and Records	37
	Section 6.13	Tax Matters	37
	Section 6.14	Compliance with Law	38
	Section 6.15	Compliance with Other Instruments	38
	Section 6.16	Intellectual Property Rights	38
	Section 6.17	Environmental Compliance	38
	Section 6.18	Insurance	40
	Section 6.19	Brokers	40
	Section 6.20	Transactions with Affiliates and Employees	40
	Section 6.21	Actions	40
Article VII		Covenants	40
	Section 7.1	Access to Information	40
	Section 7.2	Pre-Closing Activities	41
	Section 7.3	Efforts to Consummate	43
	Section 7.4	Exclusive Dealing	43
	Section 7.5	Publicity	43
	Section 7.6	Intercompany Accounts and Agreements	44
	Section 7.7	No Assumption of Liabilities	44
	Section 7.8	Environmental Matters	44
	Section 7.9	Advisor to REG	44
	Section 7.10	Engineering Services from Parent	44
Article VIII		Conditions to Closing	45
	Section 8.1	Conditions to Obligations of REG and Buyer at the Closing	45
	Section 8.2	Conditions to Obligations of Parent and Seller at the Closing	47

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	Section 8.3	Items to be Delivered at Closing	48
	Section 8.4	Further Actions and Assurances	50
Article IX		Survival; Indemnification	51
	Section 9.1	Survival	51
	Section 9.2	Indemnification in Favor of REG and Buyer	51
	Section 9.3	Indemnification by REG and Buyer	52
	Section 9.4	Third Party Claims	52
	Section 9.5	Limits on Indemnification	53
	Section 9.6	Investigation, Disclosure or Knowledge	55
	Section 9.7	Exclusive Remedy	55
	Section 9.8	Tax Treatment of Indemnity Payments	55
Article X		Termination; Effect of Termination	55
	Section 10.1	Termination	55
	Section 10.2	Effect of Termination	56
Article XI		Risk of Loss	56
	Section 11.1	Pre-Closing Risk of Loss	56
	Section 11.2	Use of Insurance Proceeds	56
	Section 11.3	Casualty Event Not a Major Casualty	56
	Section 11.4	Major Casualty; Fair Market Value Determination	57
Article XII		Miscellaneous	58
	Section 12.1	Notices	58
	Section 12.2	No Waiver; Modifications in Writing	59
	Section 12.3	Binding Effect on Successors and Assigns	59
	Section 12.4	No Third Party Beneficiaries	59
	Section 12.5	Counterparts; Facsimile Signatures	59
	Section 12.6	Severability	59
	Section 12.7	Expenses	60
	Section 12.8	Entire Agreement	60
	Section 12.9	Governing Law; Choice of Jurisdiction	60
	Section 12.10	Waiver of Jury Trial	60

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List of Exhibits

Exhibit A – Form of Investment Agreement

Exhibit B – Form of Confidentiality and Noncompetition Agreement

Exhibit C – Form of Addendum to Stockholder Agreement

Exhibit D – Form of Registration Rights Agreement

Exhibit E – Form of Bill of Sale

Exhibit F – Form of Assignment and Assumption Agreement

Exhibit G – Form of Patent Assignment Agreement

List of Schedules

Seller Disclosure Schedule

Schedule 2.2(a) -	Excluded Contracts
Schedule 4.4 -	Consents
Schedule 4.6 -	Managers, Directors, Officers and Executives
Schedule 4.8(a) -	Changes
Schedule 4.8(b) -	Undisclosed Liabilities
Schedule 4.10 -	Compliance with Law
Schedule 4.11(a)(i) -	Contracts
Schedule 4.11(a)(ii) -	Assumed Contracts
Schedule 4.11(b) -	Contract Obligations
Schedule 4.11(c) -	Contract Claims
Schedule 4.12(a)(i) -	Seller Assets
Schedule 4.12(a)(ii) -	Purchased Assets
Schedule 4.12(b) -	Title to Purchased Assets
Schedule 4.12(e) -	Inventory
Schedule 4.13(a) -	Real Property
Schedule 4.13(c) -	Utilities
Schedule 4.15(a) -	Employee Benefit Plans
Schedule 4.16 -	Intellectual Property
Schedule 4.17 -	Environmental Matters
Schedule 4.18 -	Insurance Policies
Schedule 4.19 -	Governmental Authorizations and Permits
Schedule 4.20 -	Sale of Goods
Parent Disclosure Schedule
Schedule 5.4(c) -	Parent Consents
Buyer Disclosure Schedule
Schedule 6.6(b) -	Lock Up Exceptions
Schedule 6.8 -	Financial Statements
Schedule 6.9 -	Undisclosed Liabilities
Schedule 6.10 -	Litigation

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Schedule 6.11 -	Consents
Schedule 6.14 -	Compliance with Law
Schedule 6.17 -	Environmental Matters
Schedule 6.18 -	Insurance
Schedule 6.19 -	Brokers

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AGREEMENT FOR PURCHASE AND SALE OF ASSETS AND COMMON STOCK

This Agreement for Purchase and Sale of Assets and Common Stock is made and entered into as of the 24th day of August, 2010 (the “Effective Date”), by and among ARES Corporation, a California corporation (“Parent”), Clovis Biodiesel, LLC, a Delaware limited liability company (“Seller”), REG Clovis, LLC, an Iowa limited liability company (“Buyer”), and Renewable Energy Group, Inc., a Delaware corporation (“REG”).

RECITALS

A. Seller owns a biodiesel production facility partially constructed and not currently under construction located at Clovis, New Mexico (the “Facility”).

B. Parent is the sole member of ARES Energy Development, LLC, a Delaware limited liability company (“AED”). AED is the sole member of Seller. Parent and Seller desire to sell, transfer and assign to REG, and REG desires to acquire and assume from Parent and Seller, substantially all of the assets of Seller by and through Buyer, all as more specifically provided in this Agreement.

C. In exchange for the Purchased Assets and the Parent Investment, Parent desires to purchase from REG, and REG desires to sell to Parent, shares of REG Common Stock, all in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the respective representations, warranties, covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Parent, Seller, Buyer and REG agree as follows:

ARTICLE I

DEFINITIONS

1.1 Definitions. Without limiting the effect of any other terms defined in the text of this Agreement, the following words shall have the meaning given them in this Article I:

“’470 Patent Application” means U.S. Patent Application No. 12/345,470 currently pending before the U.S. Patent and Trademark Office.

“Addendum to Stockholder Agreement” shall have the meaning set forth in Section 8.3(a)(iii).

“AED” shall have the meaning set forth in the Recitals.

“Affiliate” means, with respect to a specified Person, (a) any Entity of which such Person is an executive officer, director, partner, trustee or other fiduciary or is directly or indirectly the beneficial owner of 20% or more of any class of equity security thereof or other financial interest therein; (b) if such Person is an individual, any relative or spouse of such individual, or any

6

relative of such spouse (such relative being related to the individual in question within the second degree) and any Entity of which any such relative, spouse, or relative of spouse is an executive officer, director, general partner, trustee or other fiduciary or is directly or indirectly the beneficial owner of 20% or more of any class of equity security thereof or other financial interest therein; (c) if such Person is an Entity, any director, executive officer, partner, trustee or other fiduciary or any direct or indirect beneficial owner of 20% or more of any class of equity security of, or other financial interest in, such Entity; or (d) any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with the Person specified. For purposes of this definition, “executive officer” means the president, any vice president in charge of a principal business unit, division or function such as sales, administration, research and development, or finance, and any other officer, employee or other Person who performs a policy making function or has the same duties as those of a president or vice president. For purposes of this definition, “control” (including “controlling”, “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

“Agreement” means this Purchase Agreement, including the schedules and exhibits attached hereto, which are hereby incorporated herein.

“Appraisal Notice” shall have the meaning set forth in Section 11.4(c).

“Arbiter” shall have the meaning set forth in Section 2.6(c).

“Ashley” shall have the meaning set forth in this Section 1.1 under the definition of “Knowledge” or “Known”.

“Assets” means all cash and cash equivalents, securities, vehicles, contracts (including, but not limited to, the Contracts), furniture, equipment, Intellectual Property Assets, Real Property (including owned real property and any leasehold interests in real property), personal property, Books and Records, and other assets (including tax credits) owned, leased or licensed.

“Assignment and Assumption Agreement” shall have the meaning set forth in Section 8.3(a)(viii).

“Assumed Contracts” shall have the meaning set forth in Section 4.11(a)(ii).

“Assumed Liabilities” shall have the meaning set forth in Section 2.3.

“Books and Records” of a Person means, whether stored electronically or in hard copy, all files, documents, instruments, papers, books and records material to the ownership, business or condition of such Person, including financial statements, Tax Returns and related work papers and letters from accountants, budgets, ledgers, journals, deeds, title policies, minute books, membership interest certificates and books, membership interest transfer ledgers, Contracts, Governmental Authorizations, customers lists, computer files and programs, retrieval programs, operating data and plans and environmental studies and plans, if any, and all architectural and engineering drawings and plans related to the Facility.

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“Business” means the design, development and construction of biodiesel production facilities and the production, storage, transport and sale of biodiesel and business incidental thereto.

“Buyer” shall have the meaning set forth in the preamble of this Agreement.

“Buyer Disclosure Schedule” means the disclosure schedule of Buyer and REG delivered to Parent and Seller pursuant hereto.

“Buyer’s Environmental Assessment” shall have the meaning set forth in Section 7.8(a).

“Buyer Indemnified Parties” shall have the meaning set forth in Section 9.2.

“Buyer Material Adverse Effect” means a Material Adverse Effect on Buyer, REG and its Subsidiaries, considered as a whole, or the Business conducted or proposed to be conducted by Buyer, REG and its Subsidiaries, considered as a whole.

“Casualty Event” shall have the meaning set forth in Section 11.1.

“Closing” shall have the meaning set forth in Section 3.1.

“Closing Date” shall have the meaning set forth in Section 3.1.

“Code” shall mean the Internal Revenue Code of 1986, as amended.

“Contracts” means all contracts of Seller or related to the Business, including the Assumed Contracts.

“Copyrights” shall have the meaning set forth in this Section 1.1 under the definition of “Intellectual Property Assets.”

“Disagreeing Party” shall have the meaning set forth in Section 11.4(c).

“Effective Date” shall have the meaning set forth in the preamble of this Agreement.

“Employee Benefit Plans” shall have the meaning set forth in Section 4.15(a).

“Encumbrance” means any lien, pledge, hypothecation, charge, security interest, encumbrance, voting trust, claim, burden, covenant, infringement, interference, proxy, option, right of first refusal, defect, impediment, exception, condition, restriction, reservation, limitation, impairment, restriction on or condition to the voting of any security, restriction on the transfer of any security or other asset, restriction on the receipt of any income derived from any security or other asset, and restriction on the possession, use, exercise or transfer of any other attribute of ownership, whether based on or arising from common law, constitutional provision, statute or contract.

“Entity” means any limited liability company, general partnership, limited partnership, corporation, joint venture, joint stock association, estate, trust, cooperative, foundation, union,

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syndicate, consortium, enterprise, association, organization or other entity of any kind or nature, including any Governmental Authority.

“Environmental Costs and Liabilities” means, with respect to any Person, all Liabilities and Remedial Actions incurred as a result of any claim or demand by any other Person or in response to any violation of Environmental Law or to the extent based upon, related to, or arising under or pursuant to any Environmental Law, Environmental Permit, Order or agreement with any Governmental Authority or other Person, or which relates to any environmental, health or safety condition, violation of Environmental Law or a Release or threatened Release of Hazardous Materials, whether known or unknown, accrued or contingent, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute.

“Environmental Law” means any foreign, federal, state or local law (including common law), statute, code, ordinance, rule, regulation or other legal requirement or obligation in any way relating to pollution, odors, noise, or the protection of human health and safety, the environment or natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. § 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Clean Water Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. § 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.), as each has been amended and the regulations promulgated pursuant thereto.

“Environmental Permit” means any Permit required by Environmental Laws for the operation of the Business.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor law, and all rules, regulations, rulings and interpretations adopted by the IRS or the Department of Labor thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Assets” shall have the meaning set forth in Section 2.2.

“Excluded Contracts” shall have the meaning set forth in Section 2.2(a).

“Excluded Liabilities” shall have the meaning set forth in Section 2.4.

“Facility” shall have the meaning set forth in the Recitals.

“Fair Market Value” shall have the meaning set forth in Section 11.4(b).

“Furniture and Equipment” means all furniture, furnishings, equipment, vehicles, leasehold improvements not deemed real estate by applicable Laws, and other tangible personal property, including all artwork, desks, chairs, tables, hardware, copiers, telephone lines and numbers, telecopy machines and other telecommunication equipment, cubicles and miscellaneous office furnishings and supplies.

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“GAAP” means generally accepted United States accounting principles, consistently applied.

“Governmental Authority” means any foreign governmental authority, the United States of America, any state of the United States, any local authority and any political subdivision of any of the foregoing, any multi-national organization or body, any agency, department, commission, board, bureau, court or other authority thereof, or any quasi-governmental or private body exercising, or purporting to exercise, any executive, legislative, judicial, administrative, police, regulatory or taxing authority or power of any nature.

“Governmental Authorization” means any permit (including environmental permits), license, franchise, approval, certificate, consent, ratification, permission, confirmation, endorsement, waiver, certification, registration, qualification or other authorization issued, granted, given or otherwise made available by or under the authority of any Governmental Authority or pursuant to any Legal Requirement.

“Hazardous Material” means any substance, material or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” or words of similar meaning or effect, including petroleum and its by-products, asbestos, polychlorinated biphenyls, radon, mold or other fungi and urea formaldehyde insulation.

“Indemnified Party” means the applicable Buyer Indemnified Party or Parent Indemnified Party asserting a claim pursuant to Article IX.

“Indemnifying Party” means the party against whom a claim is being asserted pursuant to Article IX.

“Intellectual Property Assets” means (i) all legal and fictitious business names, trade names and brand names, and all foreign and domestic registered and unregistered trademarks, service marks and applications (collectively, “Marks”), (ii) all foreign and domestic patents and patent applications (collectively, “Patents”), including, without limitation, the ‘470 Patent Application, (iii) all copyrights in both published works and unpublished works (collectively, “Copyrights”), and (iv) all inventions (whether patentable or unpatentable and whether or not reduced to practice), software, documentation, processes, formulas, patterns, designs, know how, trade secrets, confidential information, technical information, formulae, algorithms, procedures, methods, techniques, ideas, research and development, technical data, programs, subroutines, tools, materials, specifications, process technology, plans, drawings and blue prints, apparatus, creations, improvements, works or authorship and other similar materials, and all recordings, graphs, drawings, reports, analyses, and other writings and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology, that are used in, incorporated in, embodied in, displayed by or related to, or are used in connection with the foregoing that is owned by Seller or an Affiliate of Seller and related to the Business or used by Seller in connection with the Business.

“IRS” means the United States Internal Revenue Service.

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“Knowledge” or “Known” - An individual shall be deemed to have “knowledge” of or to have “known” a particular fact or other matter if such individual is actually aware of such fact or other matter. Parent shall be deemed to have “knowledge” of or to have “known” a particular fact or other matter if any of the following individuals are actually aware of such fact or other matter: Richard Stuart, Ph.D, Douglas Schmidt, Kevin Rubright and Tom Michael Ashley (“Ashley”). Buyer shall be deemed to have “knowledge” of or to have “known” a particular fact or other matter if any of the following individuals are actually aware of such fact or other matter: Jeffrey Stroburg and Daniel J. Oh.

“Law” means any federal, state or local law (including common law), statute, code, ordinance, rule, regulation or other legal requirement or obligation.

“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, mediations, investigations, inquiries, proceedings or claims (including counterclaims) by or before a Governmental Authority or arbitration panel.

“Legal Requirement” means any Law, decree, requirement, Order, treaty, proclamation, convention, rule or regulation (or interpretation of any of the foregoing) of, and the terms of any Governmental Authorization issued by, any Governmental Authority, including, not limited to, Environmental Laws and those in respect of employment, employment practices, labor, terms and conditions of employment, wages and hours.

“Lender” shall have the meaning set forth in Section 8.1(h).

“Liability” means any debt, loss, damage, adverse claim, fines, penalties, liability or obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, matured or unmatured, determined or determinable, disputed or undisputed, liquidated or unliquidated, or due or to become due, and whether in contract, tort, strict liability or otherwise), and including all costs and expenses relating thereto (including all fees, disbursements and expenses of legal counsel, experts, engineers and consultants and costs of investigation).

“Losses” shall have the meaning set forth in Section 9.2.

“Marks” shall have the meaning set forth in this Section 1.1 under the definition of “Intellectual Property Assets.”

“Material Adverse Effect” means any material adverse change in the overall condition of a party, taking into consideration all factors including, but not limited to, the financial condition, properties, assets, liabilities, business, operations, results of operations and prospects of that party taken as a whole; provided, however, that in determining whether there has been a Material Adverse Effect, any adverse effects shall be disregarded that result primarily from or are attributable to (A) general economic conditions or general conditions in the biodiesel or feedstock industries, (B) national or international political or social conditions, including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack, (C) changes in financial, banking or securities markets (including any disruption thereof and any decline in the price of any security or any market index), (D) changes in GAAP, (E) changes in Legal

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Requirements, or (F) the failure, in and of itself, by the party to meet any internal or published projections, forecasts or revenue or earnings predictions for any period ending on or after the date of this Agreement.

“Noncompetition Agreement” shall have the meaning set forth in Section 8.3(a)(ii).

“Notices” shall have the meaning set forth in Section 12.1(a).

“Order” means any order, judgment, injunction, edict, decree, ruling, pronouncement, determination, decision, opinion, sentence, subpoena, writ or award issued, made, entered or rendered by any court, administrative agency or other Governmental Authority or by any arbitrator.

“Organizational Documents” means the articles or certificate of incorporation and bylaws for a corporation, and the articles of organization or certificate of formation and operating agreement for a limited liability company, and all other documents necessary to meet the Legal Requirements for organization of the applicable Entity type in its state of organization.

“Outside Date” shall have the meaning set forth in Section 10.1(b).

“Parent” shall have the meaning set forth in the preamble of this Agreement.

“Parent Indemnified Party” shall have the meaning set forth in Section 9.3.

“Parent Investment” means Eight Million Dollars ($8,000,000).

“Patent Assignment Agreement” shall have the meaning set forth in Section 8.3(a)(xiii).

“Patents” shall have the meaning set forth in this Section 1.1 under the definition of “Intellectual Property Assets.”

“Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Authority.

“Permitted Liens” means (i) mechanics’ liens, workmen’s liens, carriers’ liens, repairmen’s liens, landlord’s liens, vendor’s liens, liens for master’s or crew’s wages or other like liens arising or incurred in the ordinary course of business in respect of obligations that are not overdue or are being contested in good faith and for which adequate reserves have been established, (ii) statutory liens for Taxes, assessments and other similar governmental charges that are not yet due or are being contested in good faith and for which adequate reserves have been established, (iii) liens incurred or deposits made to secure the performance of bids, contracts, statutory obligations, surety and appeal bonds incurred in the ordinary course of business, (iv) liens that arise under zoning, land use and other similar imperfections of title that arise in the ordinary course of business and that, individually or in the aggregate, do not materially affect the applicable party’s business as presently conducted or the value or marketability of such title, (v) liens in the ordinary course that do not materially impair the applicable party’s use of the property or asset, or (vi) those liens, if any, permitted to be imposed by the other party to this Agreement.

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“Person” means any individual, Entity or Governmental Authority.

“Proceeding” means any action, suit, litigation, arbitration, lawsuit, claim, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination, investigation, challenge, controversy or dispute commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Authority or any arbitrator.

“Purchase Price” shall have the meaning set forth in Section 2.6(a).

“Purchased Assets” shall have the meaning set forth in Section 2.1.

“Real Property” means the real property owned or leased by Seller and as further described in Section 4.13.

“REG” shall have the meaning set forth in the preamble.

“REG Common Stock” means shares of the common stock, par value $0.0001 per share, of REG.

“REG Financial Statements” shall have the meaning set forth in Section 6.8.

“REG Governing Documents” means the Certificate of Incorporation of REG, the Bylaws of REG, the Certificate of Designation of Series and Determination of Rights and Preferences of Series A Convertible Preferred Stock of REG, the Stockholder Agreement (as proposed to be amended by the First Amendment to Stockholder Agreement substantially in the form previously provided to Seller and Parent) and all registration rights agreements between REG and stockholders of REG in existence as of the Effective Date.

“REG Intellectual Property Rights” shall have the meaning set forth in Section 6.16.

“REG Shares” shall have the meaning set forth in Section 6.6.

“Registration Rights Agreement” shall have the meaning set forth in Section 8.3(a)(iv).

“Release” means any release, spill, emission, leaking, pumping, pouring, injection, deposit, dumping, emptying, disposal, discharge, dispersal, leaching or migration into the indoor or outdoor environment, or into or out of any property.

“Remedial Action” means all actions including any capital expenditures undertaken to (i) clean up, remove, treat or in any other way address any Hazardous Material; (ii) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment; (iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; or (iv) correct a condition of noncompliance with Environmental Laws.

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“Representatives” means the Affiliates, shareholders, members, trustees, managers, directors, officers, agents or representatives, including, without limitation, any investment banks, attorney or accountant designated as a representative by a party to this Agreement.

“Required Consents” shall have the meaning set forth in Section 7.3(a).

“SEC” means the Securities and Exchange Commission.

“SEC Reports” shall mean all reports required to be filed under the Securities Act and the Exchange Act, including pursuant to Sections 13(a) and 15(d) of the Exchange Act.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Seller” shall have the meaning set forth in the Recitals.

“Seller Assets” shall have the meaning set forth in Section 4.12(a)(i).

“Seller Disclosure Schedule” means the disclosure schedule of Parent and Seller delivered to REG and Buyer pursuant hereto.

“Seller Employee Benefit Plans” shall have the meaning set forth in Section 4.15(a).

“Seller Financial Statements” shall have the meaning set forth in Section 4.7.

“Seller Material Adverse Effect” means a Material Adverse Effect on the Purchased Assets, considered as a whole.

“Stockholder Agreement” means the Stockholder Agreement dated as of February 26, 2010, by and among REG and certain stockholders of REG.

“Stuart” shall have the meaning set forth in Section 7.9.

“Subsidiary” means, with respect to any Person, any other Person of which (i) a majority of the outstanding share capital, voting securities or other equity interests are owned, directly or indirectly, by such Person or (ii) such Person is entitled, directly or indirectly, to appoint a majority of the board of directors or managers or comparable supervisory body of the other Person.

“Tax” means any tax (including without limitation any income tax, franchise tax, capital gains tax, gross receipts tax, license tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, environmental tax, inventory tax, occupancy tax, severance tax, withholding tax, payroll tax, employment tax, gift tax, estate tax or inheritance tax), levy, assessment, tariff, impost, imposition, toll, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Governmental Authority or payable pursuant to any tax-sharing agreement or pursuant to any other contract

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relating to the sharing or payment of any such tax, levy, assessment, tariff, impost, imposition, toll, duty, deficiency or fee.

“Tax Allocation” shall have the meaning set forth in Section 2.6(c).

“Taxing Authority” means the IRS and any other Governmental Authority responsible for the administration of any Tax.

“Tax Return” means any return (including any information return), report, claim for refund, statement, declaration, schedule, notice, notification, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax, and including any amendment thereof.

“Third Party Claim” shall have the meaning set forth in Section 9.4(a).

“Technology” shall have the meaning set forth in this Section 1.1 under the definition of “Intellectual Property Assets.”

“Transaction Documents” means the agreements and instruments contemplated hereby or thereby.

1.2 Other Terms. Other terms may be defined elsewhere in the text of this Agreement and, unless otherwise indicated, shall have such meaning throughout this Agreement.

1.3 Interpretation. As used in this Agreement, the word “including” means without limitation, the word “or” is not exclusive and the words “herein,” “hereof,” “hereby,” “hereto,” “hereunder” and the like refer to this Agreement as a whole. Each defined term used in this Agreement shall have a comparable meaning when used in its plural or singular form. Unless the context otherwise requires, references herein: (a) to Articles, Sections, Exhibits and Schedules mean the Articles and Sections of and the Exhibits and Schedules attached to this Agreement, (b) to an agreement, instrument or document means such agreement, instrument or document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by this Agreement and (c) to a statute means such statute as amended as of the Effective Date and includes any successor legislation thereto effective as of the Effective Date. The headings and captions used in this Agreement, in any Schedule or Exhibit hereto, in the table of contents or in any index hereto are for convenience of reference only and do not constitute a part of this Agreement and shall not be deemed to limit, characterize or in any way affect any provision of this Agreement or any Schedule or Exhibit hereto, and all provisions of this Agreement and the Schedules and Exhibits hereto shall be enforced and construed as if no caption or heading had been used herein or therein. Any capitalized terms used in any Schedule or Exhibit attached hereto and not otherwise defined therein shall have the meanings set forth in this Agreement (or, in the absence of any ascribed meaning, the meaning customarily ascribed to any such term in Seller’s industry or in general commercial usage). The Schedules and Exhibits referred to herein shall be construed with and as

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an integral part of this Agreement to the same extent as if they were set forth verbatim herein. The parties have participated jointly in the negotiation and drafting of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. All references to dollars (or the symbol “$”) contained herein shall be deemed to refer to United States dollars.

ARTICLE II

PURCHASE AND SALE OF ASSETS AND COMMON STOCK

2.1 Purchase and Sale of Assets. On the terms and subject to the conditions set forth in this Agreement, at the Closing Buyer shall purchase, acquire and accept from Seller, and Seller shall, and Parent shall cause Seller to, sell, transfer, assign, convey and deliver to Buyer all of Seller’s right, title and interest in, to and under the Purchased Assets, free and clear of all Encumbrances except for Permitted Liens. “Purchased Assets” shall mean all of the assets, properties, contractual rights, goodwill, going concern value, if any, rights and claims of Seller or any Affiliate of Seller related to the Business on the Closing Date, wherever situated and of whatever kind and nature, real or personal, tangible or intangible, whether or not reflected on the Books and Records of Seller (other than Excluded Assets), including each of the following assets:

(a) all tangible personal property used or useful in the Business by Seller or any Affiliate of Seller, including Furniture and Equipment;

(b) all prepaid charges and expenses, including any prepaid rent, of Seller;

(c) all rights of Seller under all Real Property (whether owned or leased), together with all improvements, fixtures and other appurtenances thereto and rights in respect thereof;

(d) the Intellectual Property Assets used or useful in the Business by Seller or any Affiliate of Seller, including, without limitation, the rights to the technology and patent application for the patent relating to the technology to be used at the Facility that has been applied for by Parent;

(e) all rights of Seller under the Assumed Contracts, including all claims or causes of action with respect to the Assumed Contracts;

(f) all Books and Records of Seller and all other documents of Seller or any Affiliate of Seller that are related to the development, design or construction of the Purchased Assets or to the Intellectual Property Assets, whether or not physically located on any of Seller’s Real Property, but excluding those documents referred to in Section 2.2(c) below;

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(g) all Permits, including Environmental Permits, related to the Business or the Purchased Assets obtained by Seller or any Affiliate of Seller and all rights and incidents of interest therein;

(h) all raw materials, supplies, parts, components and construction materials owned by Seller or any Affiliate of Seller and used or to be used in connection with the Business;

(i) all rights of Seller under non-disclosure or confidentiality, non-compete or non-solicitation agreements with former employees, employees and agents of Seller or with third parties to the extent relating to the Purchased Assets (or any portion thereof);

(j) all rights of Seller or any Affiliate of Seller under or pursuant to all warranties, representations and guaranties made by suppliers, manufacturers and contractors to the extent relating to products sold or services provided to Seller or any Affiliate of Seller in connection with the Business or to the extent affecting any Purchased Asset;

(k) all work-in-process or construction in process, if any;

(l) all other assets reflected on Seller Financial Statements;

(m) all claims, choses-in-action and rights in litigation and settlements in respect thereof;

(n) all third-party property and casualty insurance proceeds, and all rights to third-party property and casualty insurance proceeds, in each case to the extent received or receivable in respect of the Business;

(o) all incentives from any Governmental Authority related to the Facility; and

(p) all goodwill and other intangible assets, if any, associated with the Business owned by Seller or any Affiliate of Seller, including the goodwill associated with the Intellectual Property Assets of Seller.

2.2 Excluded Assets. Nothing herein contained shall be deemed to sell, transfer, assign or convey the Excluded Assets to REG or Buyer, and Seller shall retain right, title and interest to, in and under the Excluded Assets. “Excluded Assets” shall mean each of the following assets:

(a) the contracts set forth Schedule 2.2(a) of the Seller Disclosure Schedule (the “Excluded Contracts”);

(b) all cash and accounts receivable;

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(c) all Books and Records of Seller as pertain to ownership, organization or existence of Seller and duplicate copies of such records as are necessary to enable Seller to file tax returns and reports and to fulfill its reporting obligations under applicable securities Laws;

(d) all membership interests (units) or other equity securities of Seller; and

(e) proprietary models, the use of which is not limited to biodiesel plant design.

2.3 Assumption of Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the Closing Buyer shall assume, effective as of the Closing, all Liabilities of Seller under the Assumed Contracts excluding the Excluded Liabilities (collectively, the “Assumed Liabilities”).

2.4 Excluded Liabilities. Neither REG nor Buyer will assume or be liable for any Excluded Liabilities. Seller shall timely perform, satisfy and discharge in accordance with their respective terms all Excluded Liabilities. “Excluded Liabilities” shall mean all Liabilities of Seller arising out of, relating to or otherwise in respect of the Business on or before the Closing Date and all other Liabilities of Seller other than the Assumed Liabilities. Excluded Liabilities shall include, but not be limited to, the following Liabilities and in no event shall REG or Buyer assume any liability for the matters set out in this Section 2.4:

(a) all Liabilities arising out of, relating to or with respect to (i) the employment or performance of services, or termination of employment or services, by Seller of any of its Affiliates of any individual on or before the Closing Date; (ii) workers’ compensation claims against Seller that relate to the period on or before the Closing Date, irrespective of whether such claims are made prior to or after the Closing, and (iii) any Employee Benefit Plan;

(b) all Liabilities arising out of, under or in connection with Excluded Contracts and, with respect to Assumed Contracts, Liabilities in respect of a breach by or default of Seller accruing under such Contracts with respect to any period prior to Closing;

(c) all Liabilities for (i) Taxes of Seller or any Subsidiary (or any predecessor thereof), (ii) Taxes that relate to the Purchased Assets or the Assumed Liabilities for taxable periods (or portions thereof) ending on or before the Closing Date, including, without limitation, Taxes allocable to Seller pursuant to this Agreement, and (iii) payments under any Tax allocation, sharing or similar agreement (whether oral or written);

(d) all Liabilities in respect of any pending or threatened Legal Proceeding, or any claim arising out of, relating to or otherwise in respect of (i) the operation of the Business to the extent such Legal Proceeding or claim relates to such operation on or prior to the Closing Date, except as provided in Section 2.3(f) hereof, or (ii) any Excluded Asset;

(e) all Environmental Costs and Liabilities of Seller or relating to the Purchased Assets;

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(f) all Liabilities or obligations of Seller relating to the business, operations, assets or Liabilities of any Subsidiary or former Subsidiary of Seller based upon, relating to or arising out of events, actions or failures to act prior to the Closing Date; and

(g) all Liabilities of Seller or its officers or directors to the holders of the membership or other equity interests of Seller.

2.5 Parent Investment. On the Closing Date, Parent shall transfer and convey to REG the Parent Investment by wire transfer of immediately available funds to such account as designated by REG.

2.6 Consideration; Taxes; Allocation.

(a) Consideration. In consideration of the purchase, sale and investment described in Sections 2.1 and 2.5 hereof, REG shall issue and deliver to Parent, free and clear of any Encumbrances except as provided in this Agreement, the Investment Agreement and the Stockholder Agreement and under applicable state and federal securities Laws, Two Million One Hundred Fifty Thousand (2,150,000) shares of REG Common Stock, by delivery of REG Common Stock certificates from REG’s transfer agent to Parent (the “Purchase Price”).

(b) Taxes.

(i) All transfer, documentary, sales, use, value added, gross receipts, stamp, registration or other similar transfer Taxes incurred in connection with the transfer and sale of the Assumed Contracts and Purchased Assets as contemplated by the terms of this Agreement, including all recording or filing fees, notarial fees and other similar costs of Closing, that may be imposed, payable, collectible or incurred shall be borne by Parent and Seller.

(ii) All transfer, documentary, sales, use, value added, gross receipts, stamp, registration or other similar transfer Taxes incurred in connection with the transfer and sale of the REG Common Stock as contemplated by the terms of this Agreement, including all recording or filing fees, notarial fees and other similar costs of Closing, that may be imposed, payable, collectible or incurred shall be borne by Buyer and REG.

(iii) Buyer and Parent shall furnish or cause to be furnished to each other, upon request, as promptly as practical, such information (including reasonable access to books and records) and assistance as is reasonably necessary for the filing of any Tax Return, the payment of any Taxes, the conduct of any Tax audit, and for the prosecution or defense of any Proceeding relating to any Tax matter. Any Tax audit or other Tax Proceeding shall be deemed a Third Party Claim subject to the procedures set forth in Section 9.4.

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(c) Allocation of Purchase Price. Within thirty (30) days following the Closing Date, REG shall deliver to Parent a draft of Internal Revenue Service Form 8594 containing REG’s proposed allocation, pursuant to Section 1060 of the Code, of (i) the value of the Purchase Price less (ii) the Parent Investment plus (iii) any liabilities assumed by Buyer (the “Tax Allocation”). Parent shall have fifteen (15) days following receipt of the REG’s proposed Tax Allocation to notify REG in writing of any objections thereto. If Parent does not so object, the Tax Allocation as proposed by REG shall be deemed accepted by Parent for all purposes hereunder and shall be conclusive and binding on the parties. If Parent objects to any portion of REG’s proposed Tax Allocation within the required time period, the parties shall in good faith attempt to resolve any dispute and, if the parties so resolve all disputes, REG’s proposed Tax Allocation, as amended to the extent necessary to reflect the resolution of the dispute, shall be conclusive and binding on the parties. If the parties do not reach agreement in resolving the dispute within fifteen (15) days after notice of objection is given by the Parent to REG, the parties shall submit the dispute to a an independent accounting firm which is mutually agreeable to the parties (the “Arbiter”) for resolution. If the parties cannot agree on the selection of an independent accounting firm to act as Arbiter, the parties shall request the American Arbitration Association to appoint such an Arbiter, and such appointment shall be conclusive and binding on the parties. Promptly, but no later than twenty (20) days after acceptance of appointment as Arbiter, the Arbiter shall determine (it being understood that in making such determination, the Arbiter shall be functioning as an expert and not as an arbitrator), based solely on written submissions by REG and Parent, and not by independent review, only those issues in dispute and shall render a written report as to the resolution of the dispute and the resulting Tax Allocation, which shall be conclusive and binding on the parties. The fees, costs and expenses of the Arbiter shall be borne equally by REG and Parent. Following final determination of the Tax Allocation pursuant to this Section 2.6(c), Parent, Seller, Buyer and REG shall make consistent use of the Tax Allocation for all Tax purposes and on all filings, declarations and reports with the IRS in respect thereof and shall not take any position inconsistent therewith in any examination of any Tax Return, in any refund claim, in any litigation or investigation or before any Taxing Authority, except as required by applicable Law.

2.7 Bulk-Sales Laws. Buyer hereby waives compliance by Seller with the requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer; provided, however, that, except with respect to the Assumed Liabilities, Parent and Seller agree (a) to pay and discharge when due or to contest or litigate all claims of creditors which are asserted against REG, Buyer or the Purchased Assets by reason of such noncompliance, (b) to indemnify, defend and hold harmless REG and Buyer from and against any and all such claims and (c) to take promptly all necessary action to remove any Lien which is placed on the Purchased Assets by reason of such noncompliance.

2.8 Proration of Certain Expenses. Subject to Section 2.4(c) and Section 2.6(b)(i)-(ii) with respect to Taxes, all expenses and other payments (including utilities) in respect of the Purchased Assets and all rents and other payments (including any prepaid amounts) due or accrued through the Closing Date shall be prorated between Seller, on the one hand, and Buyer,

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on the other hand, as of the Closing Date and shall be settled between Seller and Buyer at Closing with an appropriate net payment between Seller and Buyer. Seller shall be responsible for all rents (including any percentage rent, additional rent and any accrued tax and operating expense reimbursements and escalations), charges and other payments of any kind accruing during any period under the real property leases or any such other leases up to and including the Closing Date. To the extent assumed by Buyer, Buyer shall be responsible for all such rents, charges and other payments accruing during any period under the real property leases or any such other leases after the Closing Date.

ARTICLE III

CLOSING

3.1 Closing. The closing of the purchase, sale and investment provided for in Sections 2.1-2.5 of this Agreement (the “Closing”) shall take place at the offices of Nyemaster, Goode, West, Hansell & O’Brien, P.C., counsel to REG and Buyer, in Des Moines, Iowa, at 10:00 a.m. local time on the first date on which all of the applicable conditions to closing set forth in Sections 8.1 and 8.2 have been satisfied or waived, or such other date and time to which the parties mutually agree (the “Closing Date”).

3.2 Procedure at Closing. At the Closing, REG, Buyer, Parent and Seller agree that the following shall occur:

(a) Each of the conditions precedent (as applicable) in Section 8.1 shall have been satisfied, or such condition(s) shall have been expressly waived in writing by REG and Buyer, and Parent and Seller shall deliver to REG and Buyer all of the documents required in Section 8.3(a).

(b) Each of the conditions precedent (as applicable) in Section 8.2 shall have been satisfied, or such condition(s) shall have been expressly waived in writing by Parent and Seller, and REG and Buyer shall deliver to Parent and Seller all of the documents required in Section 8.3(b).

(c) All of the documents and instruments delivered at the Closing shall be in form and substance, and shall be executed and delivered in a manner, reasonably satisfactory to the parties’ respective counsel.

ARTICLE IV

REPRESENTATIONS AS TO SELLER

Parent and Seller, jointly and severally, represent and warrant to REG and Buyer as of the date hereof as follows, except as disclosed in the Seller Disclosure Schedule (with disclosure under any section of the Seller Disclosure Schedule being deemed disclosure to all of the sections of this Article IV to the extent the applicability of such disclosure to another section for which it is intended to serve as disclosure is reasonably apparent):

4.1 Organization and Existence.

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(a) Seller is a limited liability company duly organized and validly existing under the Laws of the state of its organization and has all requisite limited liability company power and authority to own its property and carry on its business as now conducted, and except as does not have or could not reasonably be expected to have a Seller Material Adverse Effect, all Governmental Authorizations and governmental approvals necessary therefor, including, without limitation, all qualifications and other approvals necessary to do business as a foreign corporation in each jurisdiction in which Seller is required to be so qualified. Seller has at all times been operated in material compliance with Seller’s Organizational Documents.

(b) Seller has the requisite limited liability company power and authority to execute and deliver this Agreement and the documents contemplated hereby to which Seller is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated by this Agreement and the documents contemplated hereby. The execution, delivery and performance by Seller of this Agreement and the other documents contemplated hereby to which Seller is a party and the consummation by Seller of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary limited liability company action.

4.2 Noncontravention. Neither the execution and delivery of this Agreement and the documents contemplated hereby, nor the consummation by Seller of the transactions contemplated hereby or thereby, nor compliance by Seller with any of the provisions hereof or thereof, will (a) violate any provision of Seller’s Organizational Documents or any resolutions adopted by the members or mangers of Seller, (b) result in a violation of any Governmental Authorization or Order of any court or Governmental Authority, or any Law or Legal Requirement applicable to Seller, (c) conflict with, result in a breach of, or constitute (or, with due notice or lapse of time or both, would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which Seller or any of the Purchased Assets is bound, or (d) result in the creation or imposition of any lien (other than Permitted Liens), charge, restriction, claim or Encumbrance of any nature whatsoever upon Seller or any of the Purchased Assets.

4.3 No Litigation. There are no Proceedings pending or, to the Knowledge of Parent, threatened against Seller or involving any of the Purchased Assets. Neither Seller nor any of the Purchased Assets is subject to any Order. There are no Proceedings pending, or to the Knowledge of Parent, threatened seeking to restrain, prohibit, or obtain damages in connection with this Agreement or the transactions contemplated hereby.

4.4 Consents. Except as set forth in Schedule 4.4 of the Seller Disclosure Schedule, no consent, approval or authorization of, or notice to, or any filings or registrations with, any Person is necessary to be obtained or made by or on behalf of Parent or Seller in connection with the consummation of the transactions contemplated by this Agreement except, in each case, for those consents, approvals, authorizations or filings that have been obtained, given, or made, as the case may be, and that are unconditional and in full force and effect.

4.5 Subsidiaries. Seller does not own, directly or indirectly, any interest in any other Entity.

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4.6 Organizational Documents; Books and Records; Managers. Parent has delivered to REG and Buyer true and correct copies of the Organizational Documents of Seller, including all amendments thereto, as in effect on the Effective Date, and in each case certified by manager(s) of Seller. Parent has provided or made available to REG and Buyer true and correct copies of the records and minute books of Seller currently in effect as of the Effective Date. The records and minute books, or equivalent records and documents, of Seller, have been kept and maintained in all material respects as required by applicable Legal Requirements, and contain true, correct and complete copies of the Organizational Documents, minutes of meetings and consents in lieu of meetings of the manager(s) of Seller (and any committees thereof, whether permanent or temporary) and of its equity owners, and such records accurately reflect all transactions referred to in such minutes and consents through the Effective Date. Schedule 4.6 sets forth a list of the managers, directors, officers and executives of Seller.

4.7 Financial Statements. Parent has delivered to REG and Buyer the unaudited financial statements of Seller for the year ended December 31, 2009 consisting of a balance sheet and income statement and the unaudited financial statements of Seller for the period ending June 30, 2010 (collectively, the “Seller Financial Statements”). The Seller Financial Statements were prepared in accordance with GAAP (except that they do not contain all the notes that may be required by GAAP and the June 30, 2010 financial statements are subject to normal, recurring year-end adjustments consistent with past practice, the effects of which are not individually or in the aggregate material) applied on a consistent basis during the periods involved and present fairly the financial condition, results of operations and statements of cash flows of Seller as of the dates and for the periods indicated, and are true, accurate and complete in all material respects.

4.8 Changes; Undisclosed Liabilities; Absence of Material Adverse Effect.

(a) Changes. Except as set forth in Schedule 4.8(a) of the Seller Disclosure Schedule, since the date of the most recent Seller Financial Statements, there has not been:

(i) any change in the financial condition, assets, liabilities, results of operations, revenues, expenses or business prospects of Seller which, individually or in the aggregate, does have or could reasonably be expected to have a Seller Material Adverse Effect;

(ii) any damage, destruction or loss of a Seller Asset (whether or not covered by insurance), which individually exceeds $20,000 or in the aggregate exceeds $50,000 in value;

(iii) any increase in the compensation rate by Seller of their directors, officers, agents or employees over their compensation rate, or any bonus, percentage compensation, service award or other similar benefit, granted, made or accrued to or to the credit of any such directors, officers, agents or employees, or any Employee Benefit Plan by Seller, or

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any employment agreement or deferred compensation arrangement entered into between Seller and any of their respective officers, directors, agents, employees or consultants;

(iv) any amendment, modification or termination by Seller or any third party of any material contract, agreement, lease, license, permit or other business arrangement with Seller;

(v) any sale, lease, exchange, mortgage, pledge, encumbrance, transfer or other disposition of any of the property or assets of Seller, except payments of current liabilities in the ordinary course of business;

(vi) any material debt, obligation or liability created or incurred by Seller, except current liabilities incurred in the ordinary course of business;

(vii) to the Knowledge of Parent, any act or omission to do any act which would cause the breach of any material term or material obligation applicable to Seller under any Contract;

(viii) any execution, creation, amendment or termination of any material contract, agreement or license or any other transaction relating to Seller or the Seller Assets, except in the ordinary course of business of Seller or except as otherwise agreed to in writing by REG, Buyer and Parent;

(ix) any notice of any litigation or claim relating to Seller or the Assets;

(x) any waiver or release of any material right or claim with respect to Seller or any of the Seller Assets;

(xi) any mortgage, pledge or other encumbrance on any Real Property or Asset other than Permitted Exceptions;

(xii) any other transaction out of the ordinary and normal course of business of Seller; or

(xiii) any agreement by Parent or Seller to do any of the foregoing.

(b) Undisclosed Liabilities. Neither Seller nor any of the Assets are subject to any material debt, liability or obligation, whether accrued, absolute, contingent or otherwise, of a type that would be required to be reflected on a consolidated balance sheet prepared in accordance with GAAP (including required footnotes), other than (i) as reflected in Seller Financial Statements, (ii) accounts payable for goods or services received by Seller incurred in the ordinary course of business consistent with past

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practice since the date of the Seller Financial Statements and (iii) as set forth on Schedule 4.8(b) of the Seller Disclosure Schedule.

(c) Material Adverse Changes. Since the date of the most recent Seller Financial Statements, there has not been, and no event that reasonably could be anticipated to have, a Seller Material Adverse Effect.

4.9 Tax Matters. True, correct and complete copies of all federal, state, local and foreign Tax Returns which have been filed by Seller have been delivered to REG and Buyer. Seller has filed or caused to be filed on or before their due date all Tax Returns that it is required to file and has paid all Taxes due and payable on such Tax Returns or on any assessments made against Seller or any of the Assets and all other Taxes imposed on Seller or any of the Assets (except for Tax Returns for which valid extensions have been obtained and are in force). All such Tax Returns were and will be accurate, correct and complete in all material respects and were prepared in the manner required by applicable Laws. For all periods (or portions thereof) ending on or before the Closing Date for which Tax Returns are not yet due, Seller has either paid or adequately reserved for Taxes accrued for such periods. There are no Tax liens upon any of the Assets, other than liens for Taxes not yet due and payable and there is no threatened audit, dispute or claim that might result in a lien on any of the Assets. There are no audits, disputes, claims or threatened assessments concerning any Tax liability of Seller or that are related to the Assets. Seller withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, or other third party. Seller made all deposits required with respect to Taxes due and payable by Seller. Seller has not elected to be taxed, or to the Knowledge of Parent is taxed, as a corporation for income tax purposes.

4.10 Compliance with Law. Except as set forth on Schedule 4.10 of the Seller Disclosure Schedule and except as does not have or could not reasonably be expected to have, a Seller Material Adverse Effect, Seller is, and at all times since its formation has been, in compliance with all Legal Requirements applicable to Seller, or to the ownership or operation of the Assets or the operation of its business, and has no basis to expect, nor has it received any Order, notice, or other communication from any Governmental Authority of any alleged, actual, or potential material violation and/or failure to materially comply with any Legal Requirement applicable to Seller or to the ownership or operation of the Assets.

4.11 Contracts and Commitments.

(a) Contracts of Seller.

(i) Set forth on Schedule 4.11(a)(i) of the Seller Disclosure Schedule is a list of all material contracts, agreements, instruments, arrangements, or understandings, whether written or oral, to which Seller is a party or by which any of the Assets are bound (referred to herein as the “Contracts”), each of which are valid and in full force and effect and constitute the legal, valid, and binding obligations of Seller, and true and correct copies of which have been provided or made available to REG and Buyer.

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(ii) Set forth on Schedule 4.11(a)(ii) of the Seller Disclosure Schedule is a list of all contracts, agreements, instruments, arrangements, or understandings, whether written or oral, to which Parent or Seller is a party and which are included in the Purchased Assets (the “Assumed Contracts”), each of which are valid and in full force and effect and constitute the legal, valid, and binding obligations of Parent or Seller, and true and correct copies of which have been provided or made available to the REG and Buyer.

(b) Seller (i) has performed all the obligations required to be performed by it to date in all material respects (or has received a valid, enforceable and irrevocable written waiver with respect to its non-performance) under each Contract and (ii) has received no notice of default and is not in default in any material respect (or, with due notice or lapse of time or both, would be in default) under any Contract. Except as set forth on Schedule 4.11(b) of the Seller Disclosure Schedule, Seller does not have a present expectation or intention of terminating or not materially performing any of its obligations under any Contract, and neither Parent nor Seller have any Knowledge of any breach or threatened breach by another party to any Contract.

(c) Except as set forth on Schedule 4.11(c) of the Seller Disclosure Schedule, (i) no previous or current party to any Contract has given written notice to either Seller or Parent of, or made any written claim with respect to, a desire or intention to exercise any optional termination, cancellation, non-renewal or acceleration right thereunder, and neither Seller nor Parent have any Knowledge of any notice of, or claim with respect to, any such desire or intention and (ii) neither Seller nor Parent have given written notice to any previous or current party to any Contract of, nor made any written claim with respect to, a desire or intention to exercise any optional termination, cancellation, non-renewal or acceleration right thereunder.

4.12 Title to Assets.

(a) Ownership of Assets.

(i) A complete and accurate description of all material Assets owned, leased or licensed by Seller (the “Seller Assets”) is set forth on Schedule 4.12(a)(i) of the Seller Disclosure Schedule. Seller has good and marketable title to Seller Assets owned by it free and clear of all Encumbrances other than Permitted Liens. With respect to those Seller Assets that are leased, Seller is in compliance in all material respects with each such lease and holds a valid leasehold interest, free and clear of all Encumbrances other than Permitted Liens.

(ii) A complete and accurate description of the Purchased Assets is set forth on Schedule 4.12(a)(ii) of the Seller Disclosure Schedule. Seller or an Affiliate of Seller has good and marketable title to the Purchased Assets free and clear of all Encumbrances other than Permitted Liens. With respect to those Purchased Assets that are leased,

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Seller or such Affiliate of Seller party thereto is in compliance in all material respects with each such lease and holds a valid leasehold interest, free and clear of all Encumbrances other than Permitted Liens.

(b) All Assets. The Seller Assets and the Purchased Assets constitute all of the assets, properties and rights which are reflected in the Seller Financial Statements and which are used or useful by Seller or any Affiliate of Seller in connection with the conduct of the Business as of the Effective Date. Except as set forth on Schedule 4.12(b) of the Seller Disclosure Schedule, Seller holds of record, owns beneficially and has good title to the Purchased Assets. At the Closing and upon transfer to Buyer upon Closing, Buyer shall hold of record, own beneficially and have good title to the Purchased Assets, and the Purchased Assets will be free and clear of Encumbrances other than Permitted Liens.

(c) Condition of Assets. Seller has properly maintained the Facility in its partially completed condition in a manner reasonably intended to preserve its value and future operability; provided, however, that (i) the Purchased Assets shall otherwise be purchased on an “As-Is,” “Where-Is” basis, (ii) no implied representations or warranties are intended or made in connection with condition, order, repair or operating condition of the Purchased Assets (including without limitation any implied warranty of merchantability or fitness for a particular purpose), and (iii) Buyer acknowledges that it has had a reasonable opportunity to make and has made a physical inspection of the Facility and an independent investigation of all aspects of the Purchased Assets that it deemed appropriate, and no condition which was readily observable during an inspection conducted by Buyer with reasonable diligence under the circumstances, without the necessity of conducting any testing, shall constitute a breach of the representation in this sentence. Buyer, and not Seller or Parent, assumes any and all costs to repair and maintain the Purchased Assets except as provided in the first sentence of this Section 4.12(c).

(d) Accounts Receivable. Seller does not have any accounts receivable.

(e) Inventory. Except as set forth on Schedule 4.12(e), Seller does not have any inventory.

4.13 Real Property.

(a) Schedule 4.13(a) of the Seller Disclosure Schedule contains a legal description of each parcel of Real Property owned or leased as of the Effective Date by Seller. Neither Seller nor Parent owns, occupies, or uses any real property or any right, title or interest therein, including options to purchase or lease, used in connection with, or necessary for, the operation of the Business of Seller as proposed to be conducted by Seller, other than the Real Property. Except as set forth in Schedule 4.13(a) of the Seller Disclosure Schedule neither Seller nor Parent has granted to any third party a right to use or occupy any portion of the Real Property nor are there any parties in possession of any portion of the Real Property, whether as tenants, subtenants, trespassers or otherwise, except Seller.

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(b) Seller has a valid leasehold interest to the Real Property that it occupies or intends to occupy pursuant to a lease, free and clear of all Encumbrances, except Permitted Liens. Seller has paid, discharged or reserved for, all lawful claims against Seller that, if unpaid, could become an Encumbrance against the Real Property or any portion thereof.

(c) With respect to each parcel of Real Property and the buildings, structures, improvements and fixtures thereon, to the Knowledge of Parent:

(i) No condemnation or eminent domain taking of the Real Property, or any portion thereof, has occurred. There is no pending, threatened or contemplated, appropriation, condemnation, eminent domain or like proceeding affecting the Real Property or any part thereof or of any sale or other disposition of the Real Property or any part thereof in lieu of condemnation.

(ii) Except for assessments occurring on a regular basis or that may arise as a result of the transactions contemplated by this Agreement in accordance with applicable Legal Requirements, there is no pending or contemplated reassessment of any parcel included in the Real Property that is reasonably expected to increase the real estate tax assessment for such properties.

(iii) There is no pending or contemplated proceeding to rezone any parcel of the Real Property. The uses for which each parcel of the Real Property are zoned do not restrict, or in any manner impair, the current use of the Real Property or the proposed use by Seller in the Business. Neither Parent nor Seller has received notice of any violation of any applicable zoning Law, regulation or other Legal Requirement, related to or affecting the Real Property.

(iv) All buildings, structures and other improvements on the Real Property, including but not limited to driveways, out-buildings, landscaped areas and sewer systems, and all means of access to the Real Property, are located completely within the boundary lines of the Real Property and do not encroach upon or under the property of any other Person or entity. No buildings, structures or improvements constructed on the property of any other Person encroach upon or under the Real Property.

(v) The proposed use of the Real Property, or any portion thereof, in the Business does not violate or conflict with (i) any covenants, conditions or restrictions applicable thereto or (ii) the terms and provisions of any contractual obligations relating thereto.

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(vi) None of the Real Property is subject to any right of first offer, right of first refusal, option or other agreement for the sale or lease thereof.

(vii) Seller has good and valid rights of ingress and egress to and from all of the Real Property (including between separate parcels included within the Real Property) from and to rail lines, rail spurs, pipelines, if any, and the public street systems for all usual street, road, shipping, transport, storage and utility purposes and other purposes necessary or incidental to the operation of the Business.

(viii) Except as disclosed on Schedule 4.13(c) of the Seller Disclosure Schedule, all utilities required for or useful in the operation of the Business either enter the Real Property through adjoining streets and roads, or if they pass through adjoining private land, they do so in accordance with valid public easements. All necessary utilities (including without limitation, water, sewer, electricity and telephone facilities) are available to the Real Property and there exists no proposed limitation in or reduction of the quality or quantity of utility services to be furnished to the Real Property. Permanent adequate sewage and water systems and connections are available to the Real Property in connection with the proposed use by Seller in the Business.

(ix) No Proceeding is pending or threatened to revoke, suspend, modify or limit any of the permits required under applicable Legal Requirements with respect to Seller’s ownership of, leasehold interest in, and use and occupancy of, the Real Property. No Permit will be subject to revocation, suspension, modification or limitation as a result of this Agreement or the consummation of the transactions contemplated hereby.

4.14 Employee Matters. No employee of Parent or Seller is entitled to any payment in connection with the consummation of the transactions contemplated by this Agreement. Seller is not a party to any collective bargaining agreements or union contracts. Seller has not received notice of any claim that it has not complied with any Laws relating to the employment of labor, including any provisions thereof relating to wages, hours, collective bargaining, the payment of social security and similar taxes, equal employment opportunity, employment discrimination, or employment safety, or that Seller is liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing.

4.15 Benefit Plans.

(a) Schedule 4.15(a) of the Seller Disclosure Schedule sets forth a true, correct and complete list of each of Seller’s Employee Benefit Plans (the “Seller Employee Benefit Plans”). Except as set forth on Schedule 4.15(a) of the Seller Disclosure Schedule, Seller does not have any liabilities in respect of, or under, any employee benefit plan (as such term is defined in Section 3(3) of ERISA), any employee pension benefit plan (as such term is defined in Section 3(2) of ERISA, including without

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limitation any multiemployer pension plan within the meaning of Section 3(37) of ERISA), any deferred compensation arrangement, any bonus, incentive compensation, employment agreement, severance agreement, or any other similar type of plan, program or arrangement providing for employee benefits (“Employee Benefit Plans”). Each Seller Employee Benefit Plan that provides deferred compensation subject to Section 409A of the Code complies or has been operated in good faith compliance with Section 409A of the Code (and has so complied or been operated in good faith compliance for the entire period during which Section 409A of the Code has applied to such Parent Employee Benefit Plan).

(b) The consummation of the transactions contemplated by this Agreement will not result in Seller incurring any liability under any Employee Benefit Plans, including but not limited to, severance, bonus or other compensation obligations to any person, service provider or contractor of Seller or any of its Affiliates. In addition, none of the Assets are subject to a lien under Section 412(n) of the Code with respect to the funding of any employee benefit plan (as such term is defined in Section 3(3) of ERISA).

(c) Each Seller Employee Benefit Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS, or is embodied in a prototype document that has received an opinion letter from the IRS, and materially meets the requirements for qualification thereunder. Neither Parent nor Seller nor any Seller Employee Benefit Plan provides for the continuation of medical or health benefits or death benefits or life insurance benefits after an employee’s termination of employment (including retirement) except for continuation of coverage required pursuant to Section 4980B of the Code and Part 6 of Title I of ERISA and the regulations thereunder, and similar state or local Laws.

4.16 Intellectual Property. Schedule 4.16 of the Seller Disclosure Schedule sets forth all Copyrights, Patents and Marks that Seller or Parent owns, uses or licenses in the Business. The Intellectual Property Assets constitute all such assets necessary to operate the Business of Seller as presently conducted. To the Knowledge of Parent, there is no intellectual property of any third party that infringes any of the Intellectual Property Assets owned or used by Seller. To the Knowledge of Parent, none of the Intellectual Property Assets owned by or used by Seller infringes upon or is alleged to infringe upon, any intellectual property right of any other person or entity.

4.17 Environmental Compliance. Except as set forth on Schedule 4.17 of the Seller Disclosure Schedule and except as could not reasonably be expected to have a Seller Material Adverse Effect:

(a) the operations of Seller, with respect to the Business, are and have been in compliance in all material respects with all applicable Environmental Laws, which compliance includes obtaining, maintaining in good standing and complying with all Environmental Permits necessary to operate the Business except for non-compliance that would not reasonably be expected to result in the Business incurring material Environmental Costs and Liabilities and no action or proceeding is pending or, to the Knowledge of Seller, threatened to revoke, modify or terminate any such Environmental Permit, which is necessary and material to the operation of the Business, and, to the

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Knowledge of Seller, no facts, circumstances or conditions currently exist that could adversely affect such continued material compliance with Environmental Laws and Environmental Permits or require currently unbudgeted capital expenditures to achieve or maintain such continued material compliance with Environmental Laws and Environmental Permits;

(b) with respect to the Business, Seller is not the subject of any outstanding written Order or contract with any Governmental Authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a Hazardous Material related to the Facility, Real Property, Purchased Assets or the Business;

(c) no claim is pending or to the Knowledge of Parent, threatened against Seller, alleging, with respect to the Facility, Real Property, Purchased Assets or the Business, that Seller may be in violation of any Environmental Law or any Environmental Permit or may have any Liability under any Environmental Law including, but not limited to, claims relating to noise or odors, other than such claims that are routine in nature and would not, individually or in the aggregate, result in the Business incurring material Environmental Costs and Liabilities;

(d) to the Knowledge of Parent, no facts, circumstances or conditions exist with respect to the Facility, Real Property, Purchased Assets or the Business or any property currently or formerly owned, operated or leased by Seller or any property to which Seller arranged for the disposal or treatment of Hazardous Materials that could reasonably be expected to result in the Business incurring unbudgeted material Environmental Costs or Liabilities;

(e) to the Knowledge of Parent, there are no investigations of the Business, or currently or previously owned, operated or leased property of Seller pending or threatened which could reasonably be expected to lead to the imposition of any material Environmental Costs or Liabilities or Encumbrances under Environmental Law;

(f) the transactions contemplated hereunder do not require the consent of or filings with any Governmental Authority with jurisdiction over Seller and environmental matters;

(g) there is not located at any of the Real Property, or at any property previously owned, operated or leased by Seller during Seller’s ownership, operation or lease, any (i) underground storage tanks, (ii) landfill, (iii) surface impoundment, (iv) asbestos-containing material or (v) equipment containing polychlorinated biphenyls;

(h) Seller with respect to the Business has no residual liability with respect to abandoned or former properties, including any obligation to remove or demolish on-site structures or close wastewater lagoons or ponds, and, to the Knowledge of Seller, no Real Property has any structures or features, including abandoned buildings or wastewater lagoons or ponds (other than those being used in compliance with Environmental Laws) requiring removal, demolition, or closure; and

(i) Seller has made available to REG and Buyer all material environmentally related audits, studies, reports, analyses and results of investigations that have been performed with respect to any currently or previously owned, leased or operated

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properties of Seller or material documentation relating to pending or threatened claims or investigations pursuant to Environmental Laws, to the extent such materials are in the possession, custody or control of Seller.

4.18 Insurance. Schedule 4.18 of the Seller Disclosure Schedule sets forth a list of all insurance policies owned or held by Seller or by Parent for the benefit of Seller and true, correct and complete copies of all such insurance policies have been delivered or made available to REG and Buyer. All policies of fire, liability, workmen’s compensation, and other forms of insurance owned or held by Seller or Parent on behalf of Seller: (a) are sufficient for compliance in all material respects with all Legal Requirements and of all agreements of Seller, (b) are valid and outstanding policies, and (c) provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are required by any agreements pertaining to Seller or the Assets.

4.19 Governmental Authorizations and Permits. Listed on Schedule 4.19 of the Seller Disclosure Schedule is a true, correct and complete listing of (a) all Governmental Authorizations related to the Facility that Seller or Parent has obtained to date, (b) all Governmental Authorizations related to the Facility that Seller or Parent has applied for but which have not been issued, and (c) to the Knowledge of Parent, all material Governmental Authorizations that are required in order for Seller to construct and operate the Facility. No application for a Governmental Authorization that has been submitted by or on behalf of Seller has been rejected and neither Parent nor Seller has received written notice that any necessary Governmental Authorization or Permit that has not been issued will not be issued

4.20 Sale of Goods. Except as set forth on Schedule 4.20, Seller has not sold any goods, merchandise and products since its organization.

4.21 Brokers. Neither Parent nor Seller has paid or become obligated to pay any fee or commission to any broker, finder, intermediary, advisor, consultant, or appraiser for or on account of the transactions contemplated by this Agreement.

ARTICLE V

REPRESENTATIONS AS TO PARENT

Parent represents and warrants to REG and Buyer as of the date hereof as follows:

5.1 Organization and Standing. Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of California. Parent has all requisite corporate power and authority to own its property and carry on its businesses as now conducted, and except as does not have or could not reasonably be expected to have a Seller Material Adverse Effect, all Governmental Authorizations and governmental approvals necessary therefor, including, without limitation, all qualifications and other approvals necessary to do business as a foreign corporation in each jurisdiction in which it is required to be so qualified. Parent has at all times been operated in material compliance with its Organizational Documents.

5.2 Authority; Authorization; Capacity. Parent has the requisite corporate power and authority to execute and deliver this Agreement and the documents contemplated hereby to

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which Parent is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated by this Agreement and the documents contemplated hereby. The execution, delivery and performance by Parent of this Agreement and the other documents contemplated hereby to which Parent is a party and the consummation by Parent of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action.

5.3 Enforceability. This Agreement and the other documents contemplated hereby to which Parent is a party have been duly executed and delivered by Parent and are valid and binding obligations of Parent, enforceable against Parent in accordance with the terms hereof and thereof, except as enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance and other similar Laws affecting creditors’ rights generally and by general principles of equity.

5.4 Noncontravention. Neither the execution, delivery or performance by Parent of this Agreement and the documents contemplated hereby, nor the consummation by Parent of the transactions contemplated hereby, nor compliance by Parent with any of the provisions hereof or thereof will (a) violate, or result in the violation of, any provision of its Organizational Documents or any resolutions adopted by its shareholders or board of directors, (b) result in a violation of any Governmental Authorization or Order, or any Law or Legal Requirement, in each case applicable to Parent or Parent’s assets or properties or (c) except as set forth on Schedule 5.4(c) of the Seller Disclosure Schedule, conflict with, result in the breach of, or constitute (or, with due notice or lapse of time or both, would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which Parent is bound, or (d) result in the creation or imposition of any lien (other than Permitted Liens), charge, restriction, claim or Encumbrance of any nature whatsoever upon Parent.

5.5 Governmental Approvals. No filing by Parent with, and no permit, authorization, consent or approval, in each case, of or with respect to Parent, of any Governmental Authority is necessary for, the consummation by Parent of the transactions contemplated hereby, except for those consents, approvals, notices, filings, or registrations that have been obtained, given, or made, as the case may be, and that are unconditional and in full force and effect.

5.6 Ownership of Seller Membership Interests. Parent owns one hundred percent of the outstanding membership interests of AED, and AED owns one hundred percent of the outstanding membership interests in Seller.

5.7 Investment Agreement. Parent acknowledges and understands it will be receiving REG Common Stock based on certain representations and warranties made by Parent, and agrees to execute and deliver to REG an Investment Agreement in the form attached hereto as Exhibit A (the “Investment Agreement”).

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ARTICLE VI

REPRESENTATIONS OF BUYER AND REG

Buyer and REG, jointly and severally, represent and warrant to Parent and Seller as of the date hereof as follows:

6.1 Organization and Existence. Buyer is a limited liability company duly organized and validly existing under the Laws of the State of Iowa. REG is a corporation duly organized and validly existing under the Laws of the State of Delaware. Buyer and REG have all requisite limited liability company or corporate power and authority to own their property and carry on their businesses as now conducted, and except as do not have or could not reasonably be expected to have a Buyer Material Adverse Effect, all Governmental Authorizations and governmental approvals necessary therefor, including, without limitation, all qualifications and other approvals necessary to do business as foreign corporations in each jurisdiction in which they are required to be so qualified. Buyer and REG have at all times been operated in material compliance with their Organizational Documents.

6.2 Authority; Authorization; Capacity. Each of REG and Buyer have the requisite corporate or limited liability company power and authority to execute and deliver this Agreement and the documents contemplated hereby to which it is a party, to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated by this Agreement and the documents contemplated hereby. The execution, delivery and performance by REG and Buyer of this Agreement and the other documents contemplated hereby to which REG or Buyer is a party and the consummation by REG or Buyer of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate or limited liability company action.

6.3 Enforceability. This Agreement and the other documents contemplated hereby to which REG or Buyer is a party have been duly executed and delivered by REG and Buyer, respectively, and are valid and binding obligations of REG and Buyer, enforceable against REG and Buyer in accordance with the terms hereof and thereof, except as enforceability may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance and other similar Laws affecting creditors’ rights generally and by general principles of equity.

6.4 Noncontravention. Neither the execution, delivery or performance by REG or Buyer of this Agreement and the documents contemplated hereby, nor the consummation by REG or Buyer of the transactions contemplated hereby, nor compliance by REG or Buyer with any of the provisions hereof or thereof will (a) violate, or result in the violation of, any provision of its Organizational Documents or any resolutions adopted by its stockholders, members, board of directors, board of managers, partners, trustee or other governing body, (b) result in a violation of any Governmental Authorization or Order, or any Law or Legal Requirement, applicable to REG or Buyer or REG’s or Buyer’s assets or properties or (c) conflict with, result in a breach of, or constitute (or, with due notice or lapse of time or both, would constitute) a default under, or give rise to any right of termination, acceleration or cancellation under, any indenture, agreement, contract, license, arrangement, understanding, evidence of indebtedness, note, lease or other instrument to which Buyer or REG is bound, or (d) result in the creation or

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imposition of any lien (other than Permitted Liens), charge, restriction, claim or Encumbrance of any nature whatsoever upon Buyer or REG.

6.5 Governmental Approvals. No filing by REG or Buyer with, and no permit, authorization, consent or approval, in each case, of or with respect to REG or Buyer, of any Governmental Authority is necessary for, the consummation by Parent of the transactions contemplated hereby, except for those consents, approvals, notices, filings, or registrations that have been obtained, given, or made, as the case may be, and that are unconditional and in full force and effect.

6.6 Capitalization.

(a) The authorized capital stock of REG consists of 140,000,000 shares of common stock par value $0.0001 and 60,000,000 shares of preferred stock par value $0.0001, 14,000,000 shares of which have been designated Series A Preferred Stock. At the close of business on the Effective Date, (i) 30,979,553 shares of REG Common Stock were issued and outstanding and (ii) 13,455,522 shares of Series A Preferred Stock were issued and outstanding (collectively, the REG Common Stock and REG preferred stock, the “REG Shares”). All issued and outstanding REG Shares are duly authorized and validly issued, were not issued in violation of any person’s preemptive rights, and are fully paid and nonassessable. There are 228,816 issued and outstanding options to purchase shares of REG Common Stock pursuant to stock option agreements, 2,368,188 shares of restricted stock units issued under the REG 2009 Stock Incentive Plan, issued and outstanding warrants to purchase 1,313,359 shares of REG Common Stock, and 731,250 shares of REG Common Stock reserved for issuance as additional incentive consideration pursuant to that certain Asset Purchase Agreement dated as of July 16, 2010 by and among American BDF, LLC, REG, REG Biofuels, Inc., Golden State Service Industries, Inc., Restaurant Technologies, Inc. and Tellurian Biodiesel, Inc. Except as set forth in this Section 6.6, Schedule 6.6(a) of the Buyer Disclosure Schedule and the REG Governing Documents, (i) there are no outstanding subscriptions, options, warrants, conversion rights or other rights, securities, agreements or commitments obligating REG to issue, sell or otherwise dispose of capital stock of REG, or any securities or obligations convertible into, or exercisable or exchangeable for, any such capital stock, (ii) there are no voting trusts or other agreements or understandings to which REG or any other person is a party with respect to voting of REG Shares; (iii) REG is not party to nor bound by any outstanding restrictions, options or other obligations, agreements or commitments to sell, repurchase, redeem or acquire any outstanding REG Shares or other equity securities of REG, and (iv) to the extent not covered in subsection (i)-(iii) above, there are no other agreements of any nature regarding REG Shares, including, without limitation, any registration rights agreements or members’ agreements. REG Shares have been offered, sold and delivered by REG in compliance with all applicable Laws. REG Shares were not issued in breach or in violation of any rights, agreements, arrangements or commitments under any Law or REG Governing Documents.

(b) Except as set forth on Schedule 6.6(b) of the Buyer Disclosure Schedule, all outstanding securities of REG, including, without limitation, all outstanding shares of the

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capital stock of REG, all shares of the capital stock of REG issuable upon the conversion or exercise of all convertible or exercisable securities and all other securities that REG is obligated to issue, are subject to a one hundred eighty (180) day lock up restriction upon an initial public offering of REG’s securities pursuant to a registration statement filed with the SEC pursuant to the Securities Act to the extent and as provided in Section 3(b) of the Stockholder Agreement.

6.7 Valid Issuance of Common Stock. The REG Shares being purchased by the Parent hereunder, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free of restrictions on transfer other than restrictions on transfer under the REG Governing Documents and under applicable state and federal securities laws.

6.8 SEC Reports; Financial Statements. REG has filed all SEC Reports required to be filed by it on a timely basis or has timely filed a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. REG has not received any material correspondence from the SEC concerning the SEC Reports. No securities issued by REG presently trade on an established trading market. The financial statements of REG included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. REG has previously delivered to Parent true, correct and complete copies of the audited financial statements of REG for the year ended December 31, 2009 and unaudited financial statements for the quarter ended March 31, 2010 as filed with the SEC, and unaudited financial statements for the quarter ended June 30, 2010 as filed with the SEC (collectively, the “REG Financial Statements”). Except as set forth on Schedule 6.8 of the Buyer Disclosure Schedule, the REG Financial Statements were prepared in accordance with GAAP (except that the unaudited financial statements do not contain all the notes that may be required by GAAP and are subject to normal, recurring year-end adjustments consistent with past practice, the effects of which are not individually or in the aggregate material) applied on a consistent basis during the periods involved, and present fairly the financial condition, results of operations and statements of cash flows of REG as of the dates and for the periods indicated, and are true, accurate and complete in all material respects.

6.9 Undisclosed Liabilities; Absence of Material Adverse Effect.

(a) Undisclosed Liabilities. REG is not subject to any material debt, liability or obligation, whether accrued, absolute, contingent or otherwise, of a type that would be required to be reflected on a consolidated balance sheet prepared in accordance with GAAP (including required footnotes), other than (i) as reflected in the REG Financial Statements, (ii) accounts payable for goods or services received by REG incurred in the ordinary course of business consistent with past practice since the last date of the REG

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Financial Statements and (iii) as set forth on Schedule 6.9 of the Buyer Disclosure Schedule.

(b) Material Adverse Changes. Since the date of the most recent REG Financial Statements, there has not been, and no event that reasonably could be anticipated to have, a Buyer Material Adverse Effect.

6.10 No Litigation. Except as set forth on Schedule 6.10, there are no Proceedings pending or, to the Knowledge of REG, threatened against REG or Buyer except as could not reasonably be expected to have a Buyer Material Adverse Effect. Neither REG nor Buyer is subject to any Order. There are no Proceedings pending, or to the Knowledge of REG, threatened seeking to restrain, prohibit, or obtain damages in connection with this Agreement or the transactions contemplated hereby.

6.11 Consents. Except as set forth in Schedule 6.11 of the Buyer Disclosure Schedule, no consent, approval or authorization of, or notice to, or any filings or registrations with, any Person is necessary to be obtained or made by or on behalf of REG or Buyer in connection with the consummation of the transactions contemplated by this Agreement except, in each case, for those consents, approvals, authorizations or filings that have been obtained, given, or made, as the case may be, and that are unconditional and in full force and effect.

6.12 Organizational Documents; Books and Records. REG has delivered to Parent true and correct copies of the Organizational Documents of REG, including all amendments thereto, as in effect on the Effective Date, and in each case certified by its officer(s). REG has provided or made available to Parent true and correct copies of the records and minute books of REG currently in effect as of the Effective Date. The records and minute books, or equivalent records and documents, of REG, have been kept and maintained in all material respects as required by applicable Legal Requirements, and contain true, correct and complete copies of the Organizational Documents, minutes of meetings and consents in lieu of meetings of the manager(s) of REG (and any committees thereof, whether permanent or temporary) and of its equity owners, and such records accurately reflect all transactions referred to in such minutes and consents through the Effective Date.

6.13 Tax Matters. REG and its Subsidiaries have filed or caused to be filed on or before their due date all Tax Returns that they are required to file and have paid all Taxes due and payable on such Tax Returns or on any assessments made against REG and its Subsidiaries and all other Taxes imposed on REG and its Subsidiaries (except for Tax Returns for which valid extensions have been obtained and are in force) except as does not have, or could not reasonably be expected to have, a Buyer Material Adverse Effect. All such Tax Returns were and will be accurate, correct and complete in all material respects and were prepared in the manner required by applicable Laws. For all periods (or portions thereof) ending on or before the date of the most recent REG Financial Statements for which Tax Returns are not yet due, REG has either paid or adequately reserved for Taxes accrued for such periods. There are no Tax liens upon any of the assets or REG and its Subsidiaries, other than liens for Taxes not yet due and payable, and there is no threatened audit, dispute or claim that might result in a lien on any of the assets of REG or its Subsidiaries. There are no audits, disputes, claims or threatened assessments concerning any Tax liability of REG or its Subsidiaries. REG and its Subsidiaries withheld and

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paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, or other third party. REG and its Subsidiaries made all deposits required with respect to Taxes due and payable by REG and its Subsidiaries.

6.14 Compliance with Law. Except as set forth on Schedule 6.14 of the Buyer Disclosure Schedule and except as does not have, or could not reasonably be expected to have, a Buyer Material Adverse Effect, REG and its Subsidiaries are, and at all times since their formation have been, in compliance with all Legal Requirements applicable to REG , or to the ownership or operation of their assets or the operation of their businesses, and have no basis to expect, nor has REG or any Subsidiary of REG received, any Order, notice, or other communication from any Governmental Authority of any alleged, actual, or potential material violation and/or failure to materially comply with any Legal Requirement applicable to REG or any Subsidiary of REG, or to the ownership or operation of their assets or Businesses.

6.15 Compliance With Other Instruments. REG is not in violation or default of any provision of its Organizational Documents, or except as does not have, or could not reasonably be expected to have, a Buyer Material Adverse Effect, of any material instrument, judgment, order, writ, decree or contract to which it is a party or by which it is bound, or, to its Knowledge and except as does not have, or could not reasonably be expected to have, a Buyer Material Adverse Effect, of any provision of any material federal or state statute, rule or regulation applicable to REG.

6.16 Intellectual Property Rights. REG and its Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have could, individually or in the aggregate, have or reasonably be expected to result in a Buyer Material Adverse Effect (collectively, the “REG Intellectual Property Rights”). Neither REG nor any Subsidiary of REG has received a written notice that any of the REG Intellectual Property Rights violates or infringes upon the rights of any Person. Except as set forth in the SEC Reports, to the Knowledge of the REG, all REG Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the REG Intellectual Property Rights except as does not have, or could not reasonably be expected to have, a Buyer Material Adverse Effect.

6.17 Environmental Compliance. Except as set forth on Schedule 6.17 of the Buyer Disclosure Schedule and except as could not reasonably be expected to have a Buyer Material Adverse Effect:

(a) the operations of REG and its Subsidiaries are and have been in compliance in all material respects with all applicable Environmental Laws, which compliance includes obtaining, maintaining in good standing and complying with all Environmental Permits necessary to operate the businesses and facilities of REG and its Subsidiaries except for non-compliance that would not reasonably be expected to result in REG or any Subsidiary incurring material Environmental Costs and Liabilities, and no

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action or proceeding is pending or, to the Knowledge of REG, threatened to revoke, modify or terminate any such Environmental Permit, which is necessary and material to the operation of any facility or business of REG or any Subsidiary of REG, and, to the Knowledge of REG, no facts, circumstances or conditions currently exist that could adversely affect such continued material compliance with Environmental Laws and Environmental Permits or require currently unbudgeted capital expenditures to achieve or maintain such continued material compliance with Environmental Laws and Environmental Permits;

(b) neither REG nor any Subsidiary of REG is the subject of any outstanding written Order or contract with any Governmental Authority or Person respecting (i) Environmental Laws, (ii) Remedial Action or (iii) any Release or threatened Release of a Hazardous Material related to any facility, real property, assets or business;

(c) no claim is pending or to the Knowledge of REG, threatened against REG or any Subsidiary of REG, alleging, with respect to any facility, real property, asset or business, that REG or any Subsidiary of REG may be in violation of any Environmental Law or any Environmental Permit or may have any Liability under any Environmental Law including, but not limited to, claims relating to noise or odors, other than such claims that are routine in nature and would not, individually or in the aggregate, result in any material Environmental Costs and Liabilities;

(d) to the Knowledge of REG, no facts, circumstances or conditions exist with respect to any facility, real property assets or business of REG or any Subsidiary of REG, or any property currently or formerly owned, operated or leased by REG or any Subsidiary of REG or any property to which REG or any Subsidiary of REG arranged for the disposal or treatment of Hazardous Materials, that could reasonably be expected to result in the Business incurring unbudgeted material Environmental Costs or Liabilities;

(e) to the Knowledge of REG, there are no investigations of the business, or currently or previously owned, operated or leased property of REG or any Subsidiary of REG, pending or threatened which could reasonably be expected to lead to the imposition of any material Environmental Costs or Liabilities or Encumbrances under Environmental Law;

(f) there is not located at any of the real property owned, leased or operated by REG or any Subsidiary of REG, or at any property previously owned, operated or leased by REG or any Subsidiary of REG during the ownership, operation or lease of the property by REG or any Subsidiary of REG, any (i) underground storage tanks, (ii) landfill, (iii) surface impoundment, (iv) asbestos-containing material or (v) equipment containing polychlorinated biphenyls; and

(g) Neither REG nor any Subsidiary of REG has any residual liability with respect to abandoned or former properties, including any obligation to remove or demolish on-site structures or close wastewater lagoons or ponds, and, to the Knowledge of REG, no real property owned, leased or operated by REG or any Subsidiary of REG

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has any structures or features, including abandoned buildings or wastewater lagoons or ponds (other than those being used in compliance with Environmental Laws) requiring removal, demolition, or closure.

6.18 Insurance. Schedule 6.18 of the Buyer Disclosure Schedule sets forth a list of all insurance policies owned or held by REG and its Subsidiaries. All policies of fire, liability, workmen’s compensation, and other forms of insurance owned or held by REG or any Subsidiary of REG: (a) are sufficient for compliance in all material respects with all Legal Requirements and of all agreements of REG or any Subsidiary of REG, (b) are valid and outstanding policies, and (c) provide adequate insurance coverage in at least such amounts and against at least such risks (but including in any event public liability) as are required by any agreements pertaining to REG and its Subsidiaries.

6.19 Brokers. Except as set forth in Schedule 6.19 of the Buyer Disclosure Schedule, neither REG nor any Subsidiary of REG has paid or become obligated to pay any fee or commission to any broker, finder, intermediary, advisor, consultant, or appraiser for or on account of the transactions contemplated by this Agreement.

6.20 Transactions With Affiliates and Employees. Except as (a) set forth in the SEC Reports, (b) approved by the disinterested directors of REG or (c) on terms and conditions which would be no less favorable to REG than would be obtainable in arms’ length transactions between unrelated parties, none of the officers or directors of REG or any Subsidiary of REG and, to the Knowledge of REG, none of the employees of REG or any Subsidiary is presently a party to any transaction with REG or any Subsidiary of REG (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Knowledge of REG, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.]

6.21 Actions. As of the Effective Date, REG has not engaged in the past three (3) months in any discussion (i) with any representative of any corporation or corporations regarding the consolidation or merger of REG with or into any such corporation or corporations, (ii) with any corporation, partnership, association or other business entity or any individual regarding the sale, conveyance or disposition of all or substantially all of the assets of REG or a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of REG is disposed of, or (iii) regarding any other form of acquisition, liquidation, dissolution or winding up of REG.

ARTICLE VII

COVENANTS

7.1 Access to Information. From and after the date of this Agreement and until the Closing or the termination of this Agreement pursuant to Article X hereof, Parent and Seller will give to REG and Buyer and their authorized Representatives reasonable access during normal

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business hours to the offices, Books and Records, returns, contracts, commitments, facilities and accountants of Seller and Parent insofar as it relates to Seller, the Business or the Purchased Assets, and will furnish and make available to the REG and Buyer and their authorized Representatives all such documents and copies of documents and all such additional financial and operating data and other information pertaining to the business and affairs of the Seller and the Purchased Assets as REG and Buyer and their authorized Representatives may reasonably request for purposes of Buyer conducting due diligence activities; provided, however, that the activities of REG and Buyer and their Representatives shall be conducted in such a manner as not to interfere unreasonably with the operation of the business of Parent. From and after Closing, REG and Buyer and their authorized Representatives shall have reasonable access to, and the right to make copies at Buyer’s expense, during normal business hours of any Books and Records of Seller or Parent which have not been transferred to Buyer and which are necessary for preparation of financial statements or Tax Returns of Seller and for any other proper business purpose of Seller. Such Books and Records shall be retained by Parent for at least seven (7) years from the Closing Date unless Parent gives REG and Buyer thirty (30) days prior written notice of Parent’s intention to destroy or dispose of such Books and Records and provides REG and Buyer the reasonable opportunity to take possession of such Books and Records prior to such destruction or disposition. From and after the date of this Agreement and until the Closing or the termination of this Agreement pursuant to Article X hereof, REG and Buyer will give to Parent and its authorized Representatives reasonable access during normal business hours to the offices, books and records, returns, contracts, commitments, facilities and accountants of REG and Buyer and their Subsidiaries, and will furnish and make available to the Parent and its authorized Representatives all such documents and copies of documents and all such additional financial and operating data and other information pertaining to the business and affairs of REG and Buyer and their Subsidiaries as Parent and its authorized Representatives may reasonably request for purposes of Parent conducting due diligence activities; provided, however, that the activities of Parent and its Representatives shall be conducted in such a manner as not to interfere unreasonably with the operation of the business of REG, Buyer or their Subsidiaries. From and after Closing, Parent and its authorized Representatives shall have reasonable access to, and the right to make copies at Buyer’s expense, during normal business hours of any Books and Records of REG and Buyer which are necessary for preparation of financial statements or Tax Returns of Parent and for any other proper business purpose of Parent. Such Books and Records shall be retained by REG and Buyer for at least seven (7) years from the Closing Date unless REG or Buyer gives Parent thirty (30) days prior written notice of REG’s or Buyer’s intention to destroy or dispose of such Books and Records and provides Parent the reasonable opportunity to take possession of such Books and Records prior to such destruction or disposition.

7.2 Pre-Closing Activities.

(a) Except as otherwise permitted or required by this Agreement, prior to the Closing Date, Parent and Seller covenant that Parent and Seller shall not without the consent of REG and Buyer:

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(i) engage in any practice, take any action, or enter into any transaction outside the ordinary course of business consistent with the past practices of Seller;

(ii) amend the Organizational Documents of Seller;

(iii)(1) grant any increase in the aggregate compensation of officers and directors of Seller or make any increase in the compensation of employees of Seller outside the ordinary course of business consistent with past practice of Seller, except as required by any contract or agreement existing on Effective Date, (2) grant any bonus to any employee, director or consultant of Seller, except as required by any contract or agreement existing on the Effective Date, or (3) enter into any retention, deferred compensation, bonus or other incentive compensation, profit sharing, option, equity purchase, pension, retirement, medical, hospitalization, life or other insurance or other employee benefit plan for the benefit of the officers, directors, and/or employees of Seller;

(iv) subject any of the Real Property or Seller Assets (whether tangible or intangible) to any Encumbrances, except for Permitted Liens;

(v) acquire any properties or assets or sell, assign, transfer, convey, lease or otherwise dispose of any of the Real Property or Seller Assets;

(vi) enter into or agree to any construction agreement or change orders with respect to any construction, engineering or similar agreement or make any changes in the Facility;

(vii) hire or terminate any employee, consultant or independent contractor of Seller; or

(viii) agree or commit to do any of the foregoing.

(b) Except as otherwise permitted or required by this Agreement or as consented to by REG and Buyer, from and after the date of this Agreement and up to and including the Closing Date, Parent and Seller covenant and agree that Seller will:

(i) perform all of Seller’s obligations under the Contracts, including the payment of all payments as and when they are due;

(ii) maintain its assets and properties in existing repair in accordance with past practices; and

(iii) pay and discharge all costs and expenses of carrying on its operations and of maintaining and operating its assets and properties as

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they become due and pay and discharge any such costs and expenses which at the date hereof are past due, unless contested in good faith.

(c) Except as otherwise permitted or required by this Agreement, prior to the Closing Date, REG and Buyer covenant that REG and Buyer shall not without the consent of Parent and Seller:

(i) engage in any practice, take any action, or enter into any transaction outside the ordinary course of business consistent with the past practices of REG except as would not reasonably be expected to have a Buyer Material Adverse Effect;

(ii) amend the Organizational Documents of REG; or

(iii) agree or commit to do any of the foregoing.

7.3 Efforts to Consummate. Each party hereto shall use its commercially reasonable efforts to take, or cause to be taken, all lawful and reasonable actions within such party’s control and to do, or cause to be done, all lawful and reasonable things within such party’s control necessary to fulfill the conditions precedent to the obligations of the other party(ies) hereunder and to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement and to cooperate with each other in connection with the foregoing. Without limiting the generality of the foregoing, Parent, Seller, REG and Buyer shall cooperate to obtain those third party consents and other items set forth on Schedule 4.4 of the Seller Disclosure Schedule (the “Required Consents”).

7.4 Exclusive Dealing. From the date of this Agreement until the earlier of (a) the Closing Date, or (b) the date this Agreement is terminated in accordance with the provisions hereof, neither Parent nor Seller or their respective Representatives will take any action to solicit the making of any Acquisition Proposal or engage in substantive discussions or negotiations with any Person with respect thereto. For purposes of this Agreement, “Acquisition Proposal” means any oral or written offer from a third party for, or any written indication of interest by a third party in, any purchase or issuance of any membership interests in Seller or the purchase of all or any material part of the Seller Assets or Real Property of Seller (other than the sale or other disposition of such Seller Assets or Real Property in the ordinary course of business consistent with past practice of Seller) or any merger or consolidation of Seller.

7.5 Publicity. No party to this Agreement or any Affiliate or Representative thereof shall issue any press release or make any public announcement relating to the terms or existence of this Agreement prior to or following the Closing without the prior approval of the other parties hereto (which approval shall not be unreasonably withheld); provided, however, that any party may make any public disclosure it believes in good faith is required by applicable Legal Requirements or any listing agreement concerning publicly-traded securities, in which case the disclosing party shall use commercially reasonable efforts to advise the other parties prior to making the disclosure.

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7.6 Intercompany Accounts and Agreements. As of the Closing, all intercompany accounts between Parent, on the one hand, and Seller, on the other hand, will be cancelled and all intercompany agreements between Parent, on the one hand, and Seller, on the other hand, will be terminated, with no remaining right, obligation or liability of Parent, Seller, REG or Buyer or Affiliates of Parent, Seller, REG or Buyer.

7.7 No Assumption of Liabilities. Neither REG nor Buyer assumes any liabilities of Parent or Seller or with respect to the Assets and Parent and Seller, jointly and severally, shall defend, indemnify and hold REG and Buyer harmless from all liabilities of Parent and Seller and with respect to the Seller Assets, except with respect to the future obligations of Parent or Seller assumed by Buyer under the Assumed Contracts from and after the Closing as provided in the assignment and assumption agreement to be executed by Parent and Buyer at the Closing.

7.8 Environmental Matters.

(a) Seller shall permit REG and Buyer and their environmental consultant to conduct, at the expense of REG and Buyer, such investigations (including investigations known as “Phase I” Environmental Site Assessments and, only if mutually agreed to by Parent, Seller, REG and Buyer, “Phase II” Environmental Site Assessments) of the environmental conditions of the Real Property and the operations on the Real Property (subject to any limitations contained in valid, previously executed leases) as REG and Buyer, in their reasonable discretion, shall deem necessary or prudent (“Buyer’s Environmental Assessment”). Buyer’s Environmental Assessment shall be conducted, at Parent’s expense, by a qualified environmental consulting firm, possessing reasonable levels of insurance, in compliance with applicable Laws and in a manner that minimizes the disruption of the operations of Seller. REG and Buyer shall provide copies of reports and results of all investigations conducted by or on behalf of REG and Buyer to Parent promptly after receipt thereof. Buyer shall be responsible for the repair of any damage (except as a result of any pre-existing contamination) caused by such investigations and shall restore the affected property or reimburse Seller for such damage and the repair and restoration thereof as reasonably determined by Seller.

(b) Parent and Seller shall promptly file or cooperate with REG and Buyer in filing all materials required by Environmental Laws as a result of or in furtherance of the transactions contemplated hereunder, including, but not limited to any notifications or approvals required under environmental property transfer laws, and all requests required or necessary for the transfer or re-issuance of Environmental Permits required to conduct the Business after the Closing Date. REG and Buyer shall cooperate in all reasonable respects with Parent and Seller with respect to such filings and Environmental permit activities.

7.9 Advisor to REG. Subject to the mutual agreement of Parent, REG and Richard Stuart (“Stuart”), Stuart shall be made an advisor to REG in the area of government affairs and, in due course, will receive a grant of restricted stock units of REG commensurate with other similarly situated advisors once REG develops and adopts its restricted stock unit plan.

7.10 Engineering Services from Parent. Parent shall provide REG with engineering and technical support after the Closing on an as-needed and as-requested basis at no cost to REG to aid in the completion, upgrade, start-up and operation of the Facility; provided, however that the

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obligation to provide services pursuant to this Section shall terminate on the earlier of (a) the date four (4) years after the Closing Date, and (b) the date when the value of the services provided pursuant to this Section, determined using Parent’s lowest commercially reasonable rates in effect when the services are rendered for its most favored non-governmental customer/client, equals Seventy-Five Thousand Dollars ($75,000.00). Such engineering services shall be delivered in a timely, diligent and workmanlike manner and limited to the following: (w) general engineering/ownership transition and knowledge transfer related to the design for the Facility by Parent or its Affiliates, (x) assistance with knowledge transfer related to any design element for the Facility by Parent or its Affiliates that may be upgraded or redesigned, (y) assistance with start-up regarding the elements of the plant design that are based on the design for the Facility by Parent or its Affiliates, and (z) assistance with operational matters related to elements of the Facility designed by Parent or its Affiliates.

ARTICLE VIII

CONDITIONS TO CLOSING

8.1 Conditions to Obligations of REG and Buyer at the Closing. The obligations of REG and Buyer to consummate the transactions contemplated by this Agreement at the Closing are subject to the satisfaction at or prior to the Closing of each of the following conditions precedent, any one or more of which REG and Buyer may, in their sole discretion, waive or modify in whole or in part:

(a) Except with respect to a Casualty Event as provided in Article XI hereof, the representations and warranties of Parent and Seller contained in Articles IV and V qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the Effective Date and on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date); provided, however, in the event of any breach of a representation or warranty by Parent or Seller set forth in this Agreement, the condition set forth in this Section 8.1(a) shall be deemed satisfied unless the effect of all such breaches of representations and warranties taken together could reasonably be expected to have a Seller Material Adverse Effect or a Material Adverse Effect on the Business proposed to be conducted by Seller upon completion of the Facility.

(b) Parent and Seller shall have performed and complied in all material respects with all of the agreements and covenants required under this Agreement to be performed or complied with by either of them prior to or at the Closing.

(c) Parent and Seller shall have delivered to REG and Buyer a certificate, executed by a duly authorized officer in his or her capacity as such, certifying that the conditions specified in Sections 8.1(a) and 8.1(b) have been satisfied.

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(d) There shall not be in force any Order by or before any Governmental Authority of competent jurisdiction restraining, enjoining, prohibiting, invalidating or otherwise preventing the consummation of the transactions contemplated hereby.

(e) REG and Buyer shall have received all of the items to be delivered to REG or Buyer pursuant to this Agreement at or prior to the Closing, including, but not limited to, those items to be delivered to REG or Buyer pursuant to the applicable Section 8.3(a).

(f) No suit, action or other proceeding shall have been instituted or threatened before any court or other Governmental Authority to restrain or prohibit the consummation of the transactions to take place at the Closing or to obtain damages or other relief in connection with this Agreement.

(g) All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to REG’s counsel, and REG shall have received all such counterpart original and certified or other copies of such documents as it may reasonably request. This may include, without limitation, good standing certificates and certification by the Parent’s Secretary regarding Parent and Seller’s Organizational Documents and board of director, manager, stockholder and member resolutions relating to this transaction.

(h) Parent shall have received the written consent and commitment to lend from Bank of the West (“Lender”) or other funding source to the execution, delivery and performance of this Agreement by Parent and Seller on or before August 31, 2010, and Parent shall have promptly notified REG when consent from Lender is received by Parent; provided, however, in the event such consent and commitment is not received by Parent from Lender or other funding source on or before August 31, 2010, REG and Buyer shall have thirty (30) days to exercise their right to terminate this Agreement for failure to meet the conditions set forth in this Section 8.1(h); and further provided that the failure of REG and Buyer to exercise their right to terminate within the applicable time frame in this Section 8.1(h) shall be deemed a waiver of the condition in this Section 8.1(h).

(i) REG and Buyer shall have received Buyer’s Environmental Site Assessment, which shall not indicate any conditions of significant environmental concern as determined by REG and Buyer in their sole and absolute discretion; provided, however, on or before thirty (30) days from the Effective Date REG and Buyer shall have received Buyer’s Phase I Environmental Site Assessment and made a decision whether to perform a Phase II Environmental Site Assessment.

Any waiver by REG and Buyer of any of the foregoing conditions precedent shall not constitute or be deemed to be a waiver by REG and Buyer of any breach or default of this Agreement or any agreement or instrument contemplated hereby by Parent, and REG and Buyer shall be entitled to all of REG’s and Buyer’s rights and remedies against Parent for any breach or default of this Agreement or any agreement or instrument contemplated hereby by Parent

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notwithstanding any such waiver by REG and Buyer or the closing of the transactions contemplated by this Agreement.

8.2 Conditions to Obligations of Parent and Seller at the Closing. The obligations of Parent and Seller to consummate the transactions contemplated by this Agreement at the Closing are subject to the satisfaction at or prior to the Closing of each of the following conditions precedent, any one or more of which Parent may, in its sole discretion, waive or modify in whole or in part:

(a) The representations and warranties of REG and Buyer contained in Article VI qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, as of the Effective Date and on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, on and as of such earlier date); provided, however, in the event of any breach of a representation or warranty by REG or Buyer set forth in this Agreement, the condition set forth in this Section 8.2(a) shall be deemed satisfied unless the effect of all such breaches of representations and warranties taken together could reasonably be expected to have a Buyer Material Adverse Effect.

(b) REG and Buyer shall have performed and complied in all material respects with all of the agreements and covenants required under this Agreement to be performed or complied with by REG and Buyer prior to or at the Closing.

(c) REG and Buyer shall have delivered to the Parent a certificate, executed by a duly authorized officer in his or her capacity as such, certifying that the conditions specified in Sections 8.2(a) and 8.2(b) have been satisfied.

(d) There shall not be in force any Order by or before any Governmental Authority of competent jurisdiction restraining, enjoining, prohibiting, invalidating or otherwise preventing the consummation of the transactions contemplated hereby.

(e) Parent and Seller shall have received all of the items to be delivered to Parent and Seller pursuant to this Agreement at or prior to the Closing, including, but not limited to, those items to be delivered to the Parent pursuant to the Section 8.3(b).

(f) No suit, action or other proceeding shall have been instituted or threatened before any court or other governmental body by any governmental body or public authority to restrain or prohibit the consummation of the transactions to take place at the Closing or to obtain damages or other relief in connection with this Agreement.

(g) All corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Parent’s counsel, and Parent shall have received all such counterpart original and certified or other copies of such documents as it may

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reasonably request. This may include, without limitation, good standing certificates and certification by the REG’s Secretary regarding REG’s Organizational Documents and board of director and stockholder resolutions relating to this transaction.

(h) Parent shall have received from Nyemaster Goode, P.C., counsel for REG and Buyer, an opinion regarding due organization of REG and covering the matters set forth in Sections 6.2, 6.4, 6.7 and 6.11, dated as of the Closing.

(i) Seller and Parent shall have received the written consent and commitment to lend of the Lender or other funding source described in Section 8.1(h).

Any waiver by Parent of any of the foregoing conditions precedent shall not constitute or be deemed to be a waiver by Parent of any breach or default of this Agreement or any agreement or instrument contemplated hereby by REG or Buyer, and Parent shall be entitled to all of Parent’s rights and remedies against REG and Buyer for any breach or default of this Agreement or any agreement or instrument contemplated hereby by REG or Buyer notwithstanding any such waiver by Parent or the closing of the transactions contemplated by this Agreement.

8.3 Items to be Delivered at Closing.

(a) By Parent and Seller to REG and Buyer at Closing. At the Closing, Parent and Seller shall deliver to REG and/or Buyer the following:

(i) Wire transfer of the Parent Investment as set forth in Section 2.5.

(ii) The Confidentiality and Noncompetition Agreement in the form attached hereto as Exhibit B (the “Noncompetition Agreement”) executed by Parent and Seller.

(iii) The Addendum to Stockholder Agreement in the form attached hereto as Exhibit C (the “Addendum to Stockholder Agreement”) executed by Parent.

(iv) The Registration Rights Agreement in the form attached hereto as Exhibit D (the “Registration Rights Agreement”) executed by Parent.

(v) Certified copies of the resolutions adopted by the Board of Directors of Parent and the board of managers and requisite members of Seller authorizing transfer of the Purchased Assets pursuant to the terms of this Agreement.

(vi) The certificate by an officer of Parent and Seller pursuant to Section 8.1(c).

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(vii) A Bill of Sale with respect to the Purchased Assets in the form attached hereto as Exhibit E and other documents and instruments of transfer reasonably requested by Buyer or Buyer’s title company, including, but not limited to, any certifications, gap and lien indemnities and title and survey affidavits, commonly delivered in transactions involving the sale of real property in which title insurance is purchased, as may be requested by the title company in connection with the issuance of title insurance for Buyer or its lenders, together with copies of formation documents, incumbency certificates, certificates of good standing and consents or resolutions as are reasonably requested by said title company.

(viii) An Assignment and Assumption Agreement executed by Parent with respect to the Assumed Contracts in the form attached hereto as Exhibit F (the “Assignment and Assumption Agreement”).

(ix) The Investment Agreement pursuant to Section 5.7.

(x) A binding commitment from a title company of Buyer’s choice, the costs of which will be borne by Seller and Parent (except for special endorsements or enhancements, the cost of which shall be borne by Buyer and REG), to issue a policy of title insurance on such Real Property in an amount to be mutually agreed, which shall show title thereto to be in the condition represented by Parent and Seller herein, shall contain exceptions only for Permitted Liens, and shall show no rights of occupancy or use by third parties and no encroachments.

(xi) An ALTA/ACSM Class A Land Title Survey from a surveyor of Buyer’s choice, with respect to the Real Property, which reflects the location of all improvements and easements and that all improvements are located with the boundaries of the Real Property and that no encroachments exist, the cost of which surveys shall be borne by Seller.

(xii) A duly executed general warranty deed in the form appropriate for New Mexico.

(xiii) Duly executed assignments of the registrations and applications included in the Intellectual Property Assets, in a form reasonably acceptable to REG and Buyer and suitable for recording in the U.S. Patent and Trademark Office, U.S. Copyright Office or equivalent foreign agency, as applicable, and general assignments of all other Intellectual Property Assets, including, without limitation, a Patent Assignment Agreement executed by Ashley and Parent with respect to the ‘470 Patent Application in the form attached hereto as Exhibit G (the “Patent Assignment Agreement”).

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(xiv) All instruments and documents necessary to release any and all Encumbrances, other than Permitted Liens, on the Purchased Assets, including appropriate UCC financing statement amendments (termination statements).

(xv) Such other customary documents as may be reasonably requested by Buyer related to the transactions contemplated by this Agreement.

(b) By REG and Buyer to Parent and Seller at the Closing. At the Closing, REG and Buyer, as the case may be, shall deliver to Parent the following:

(i) Certificates representing the shares of REG Common Stock as provided in Section 2.6(a).

(ii) The Addendum to Stockholder Agreement executed by REG.

(iii) The Registration Rights Agreement executed by REG.

(iv) Certified copies of the resolutions adopted by the Board of Directors of REG and board of managers of Buyer authorizing the execution, delivery and performance of this Agreement.

(v) The certificate by an officer of REG and Buyer pursuant to Section 8.2(c).

(vi) The Assignment and Assumption Agreement executed by Buyer.

(vii) The Patent Assignment Agreement executed by REG.

(viii) Such other customary documents as may be reasonably requested by Parent related to the transactions contemplated by this Agreement.

8.4 Further Actions and Assurances.

(a) At the Closing, Parent, Seller, REG and Buyer shall take all other actions and execute and deliver such other documents, certificates and agreements as are necessary or appropriate to fully effectuate the intent and purposes of this Agreement and the agreements and instruments contemplated hereby, including, without limitation, those necessary or appropriate to put Buyer in actual and complete possession and operating control of the Purchased Assets, and all books, records and other data relating to its assets, liabilities, business and operations.

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(b) Parent and Seller also shall, from time to time after the Closing, at the request of REG and Buyer and without further consideration, execute and deliver such other instruments of sale, assignment, conveyance and transfer and take all such other action as REG and Buyer may reasonably request to more effectively sell, assign, convey and transfer to and vest in REG, Buyer or REG’s Affiliates or Subsidiaries good and marketable title to and possession of the Purchased Assets in accordance with the terms of this Agreement.

(c) REG and Buyer also shall, from time to time after the Closing, at the request of Parent and without further consideration, execute and deliver such other instruments of sale, assignment, conveyance and transfer and take all such other action as Parent may reasonably request to more effectively issue and sell to and vest in Parent good and marketable title to and possession of the REG Common Stock in accordance with the terms of this Agreement.

ARTICLE IX

SURVIVAL; INDEMNIFICATION

9.1 Survival.

(a) All representations, warranties, covenants and obligations in the Agreement, the Seller Disclosure Schedule, the Buyer Disclosure Schedule, the certificates delivered pursuant to Article VIII and any other certificate delivered pursuant to this Agreement shall survive the Closing and the consummation of the transactions contemplated hereby, subject to Section 9.1(b).

(b) The representations and warranties contained in Articles IV, V and VI (as modified by the Seller Disclosure Schedule and Buyer Disclosure Schedule), the certificates delivered pursuant to Article VIII and any other certificate delivered pursuant to this Agreement shall survive for a period of twelve (12) months from the Closing Date. All other obligations of the parties hereto shall survive indefinitely.

9.2 Indemnification in Favor of REG and Buyer. Subject to the provisions of this Article IX, Parent and Seller, jointly and severally, shall save, defend, indemnify and hold harmless REG, Buyer, and their Representatives, successors and assigns of each of the foregoing (the “Buyer Indemnified Parties”) from and against any and all losses, damages, liabilities, deficiencies, claims, diminution of value, interest, awards, judgments, penalties, costs and expenses (including attorneys’ fees, costs and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) (hereinafter collectively, “Losses”), asserted against, incurred, sustained or suffered by any of the Buyer Indemnified Parties as a result of, arising out of or relating to:

(a) any breach of any representation or warranty made by Parent or Seller in Articles IV or V of this Agreement or in any schedule, certificate or other document

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delivered by Parent pursuant hereto or in connection with the transactions contemplated hereby;

(b) any breach of any covenant or agreement by Parent or Seller in this Agreement or any schedule, certificate or other document delivered by Parent or Seller pursuant hereto or in connection with the transactions contemplated hereby; and

(c) the Excluded Liabilities.

9.3 Indemnification by REG and Buyer. Subject to the provisions of this Article IX, REG and Buyer, jointly and severally, shall save, defend, indemnify and hold harmless Parent, Seller and their Representatives, successors and assigns (the “Parent Indemnified Parties”) from and against any and all Losses asserted against, incurred, sustained or suffered by any of the Parent Indemnified Parties as a result of, arising out of or relating to:

(a) any breach of any representation or warranty made by REG or Buyer contained in Article VI of this Agreement or in any schedule, certificate or other document delivered by REG or Buyer pursuant hereto or in connection with the transactions contemplated hereby; and

(b) any breach of any covenant or agreement by REG or Buyer contained in this Agreement or in any schedule, certificate or other document delivered pursuant hereto or in connection with the transactions contemplated hereby.

9.4 Third Party Claims.

(a) In order for an Indemnified Party to be entitled to any indemnification provided for under this Agreement in respect of, arising out of or involving a Loss or a claim or demand made by any third Person against the Indemnified Party (a “Third Party Claim”), such Indemnified Party shall deliver written notice thereof to the applicable Indemnifying Party; provided, however, that no delay or failure on the part of an Indemnified Party in notifying the Indemnifying Party, shall relieve an Indemnifying Party from its obligations hereunder unless the Indemnifying Party is thereby materially prejudiced (and then solely to the extent of such prejudice).

(b) If the Indemnifying Party acknowledges, in writing, its obligation to indemnify the Indemnified Party against any and all Losses that may result from a Third Party Claim pursuant to the terms of this Agreement, the Indemnifying Party shall have the right, upon written notice to the Indemnified Party within fifteen (15) days of receipt of notice from the Indemnified Party of the commencement of such Third Party Claim, to assume the defense thereof at the expense of the Indemnifying Party with counsel selected by the Indemnifying Party and satisfactory to the Indemnified Party. If the Indemnifying Party does not expressly elect to assume the defense of such Third Party Claim within the time period and otherwise in accordance with the first sentence of this Section 9.4(b), the Indemnified Party shall have the sole right to assume the defense of and to settle such Third Party Claim. The Indemnifying Party shall, at the Indemnifying

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Party’s expense, cooperate with the Indemnified Party in such defense and make available to the Indemnified Party all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party shall not, without the prior written consent of the Indemnified Party, enter into any settlement or compromise or consent to the entry of any judgment with respect to such Third Party Claim if such settlement, compromise or judgment (i) involves a finding or admission of wrongdoing, (ii) does not include an unconditional written release by the claimant or plaintiff of the Indemnified Party from all liability in respect of such Third Party Claim or (iii) imposes equitable remedies or any obligation on the Indemnified Party other than solely the payment of money damages for which the Indemnified Party will be indemnified hereunder.

(c) The Indemnifying Party shall not be entitled to require that any action be made or brought against any other Person before action is brought or claim is made against it hereunder by the Indemnified Party.

(d) Each Indemnifying Party hereby consents to the nonexclusive jurisdiction of any court in which a Proceeding in respect of a Third Party Claim is brought against any Indemnified Party for purposes of any claim that an Indemnified Party may have under this Agreement with respect to such Proceeding or the matters alleged therein and agrees that process may be served on each Indemnifying Party with respect to such claim anywhere.

9.5 Limits on Indemnification. Notwithstanding any provision of this Agreement to the contrary:

(a) Parent and Seller shall have no liability under Section 9.2 hereof:

(i) unless the aggregate amount of Losses incurred by the Indemnified Party exceed $50,000, and, in such event, Parent and Seller shall be required to pay the entire amount of all such Losses subject to Section 9.5(a)(ii) below; or

(ii) in excess of $1,000,000;

provided, however, that the limitations set forth in the foregoing clauses (i) and (ii) shall not apply the case of indemnifiable Losses arising out of a breach of any of the representations and warranties in Sections 4.1(b) or 5.2 hereof.

(b) REG and Buyer shall have no liability under Section 9.3 hereof:

(i) unless the aggregate amount of Losses incurred by the Indemnified Party exceed $80,000, and, in such event, REG and Buyer shall be

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required to pay the entire amount of all such Losses subject to Section 9.5(b)(ii) below; or

(ii) (A) in excess of $8,000,000 with respect to claims asserted by Seller or Parent from the Closing Date through the date that is 120 days following the Closing Date; (B) in excess of $6,000,000 with respect to claims asserted by Seller or Parent from 121 days following the Closing Date through the date that is 240 days following the Closing Date; or (C) in excess of $4,000,000 with respect to claims asserted by Seller or Parent after 240 days following the Closing Date;

provided, however, that the limitations set forth in the foregoing clauses (i) and (ii) shall not apply the case of indemnifiable Losses arising out of a breach of any of the representations and warranties in Section 6.2 hereof.

(c) The Indemnified Party may not make a claim for indemnification under Section 9.2(a) or Section 9.3(a), as the case may be, for breach by the Indemnifying Party of a particular representation or warranty after the expiration of the survival period thereof specified in Section 9.1 with respect to such representation or warranty unless notice of such claim was provided to the Indemnifying Party prior to expiration of the applicable survival period.

(d) Each Indemnifying Party acknowledges and agrees that for purposes hereof, Losses shall be calculated based on the amount of Loss that remains after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by an Indemnified Party from any third party with respect thereto.

(e) THE SOLE AND EXCLUSIVE LIABILITY AND RESPONSIBILITY OF EACH INDEMNIFYING PARTY TO ANY INDEMNIFIED PARTY UNDER THIS AGREEMENT, AND THE SOLE AND EXCLUSIVE REMEDY OF ANY INDEMNIFIED PARTY AGAINST ANY INDEMNIFYING PARTY UNDER THIS AGREEMENT SHALL BE AS SET FORTH IN THIS ARTICLE IX. TO THE EXTENT THAT ANY INDEMNIFIED PARTY HAS ANY LOSSES FOR WHICH IT MAY ASSERT ANY OTHER RIGHT TO INDEMNIFICATION, CONTRIBUTION OR RECOVERY FROM ANY INDEMNIFYING PARTY (WHETHER UNDER THIS AGREEMENT OR UNDER ANY COMMON LAW THEORY OR ANY LEGAL REQUIREMENT), SUCH INDEMNIFYING PARTY HEREBY WAIVES, RELEASES AND AGREES NOT TO ASSERT SUCH RIGHT, AND SUCH PARTY AGREES TO CAUSE EACH OF ITS RESPECTIVE INDEMNIFIED PARTIES TO WAIVE, RELEASE AND AGREE NOT TO ASSERT SUCH RIGHT, REGARDLESS OF THE THEORY UPON WHICH ANY CLAIM MAY BE BASED, WHETHER CONTRACT, EQUITY, TORT, WARRANTY, STRICT LIABILITY OR ANY OTHER THEORY OF LIABILITY.

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(f) NOTWITHSTANDING ANYTHING TO THE CONTRARY ELSEWHERE IN THIS AGREEMENT, NO INDEMNIFYING PARTY SHALL, IN ANY EVENT, BE LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES; PROVIDED THAT THIRD PARTY CLAIMS THAT INCLUDE ANY OF THE FOREGOING TYPES OF DAMAGES SHALL NOT BE LIMITED BY THIS SECTION 9.5(f) AND SUCH DAMAGES SHALL BE DEEMED “LOSSES” FOR ALL PURPOSES OF THIS ARTICLE IX.

(g) THE FOREGOING INDEMNITIES ARE INTENDED TO BE ENFORCEABLE AGAINST THE PARTIES IN ACCORDANCE WITH THE EXPRESS TERMS AND SCOPE THEREOF NOTWITHSTANDING ANY EXPRESS NEGLIGENCE RULE, DOCTRINE RELATING TO INDEMNIFICATION FOR STRICT LIABILITY OR ANY SIMILAR DIRECTIVE THAT WOULD PROHIBIT OR OTHERWISE LIMIT INDEMNITIES BECAUSE OF THE NEGLIGENCE (WHETHER SOLE, CONCURRENT, ACTIVE OR PASSIVE) OR OTHER FAULT OR STRICT LIABILITY OF ANY OF THE INDEMNIFIED PARTIES.

9.6 Investigation, Disclosure or Knowledge. Notwithstanding any provision contained herein to the contrary, no Indemnified Party shall be entitled to indemnity or other remedy for any Losses arising out of or relating to any breach of any representation, warranty or covenant contained herein if such Indemnified Party had Knowledge of such breach on the date hereof.

9.7 Exclusive Remedy. The indemnification provisions set forth in this Article IX shall be the exclusive remedy of REG and Buyer with respect to breaches of representations, warranties and covenants of Parent or Seller pursuant to this Agreement and shall be the exclusive remedy of Parent and Seller with respect to breaches of representations, warranties and covenants of REG or Buyer pursuant to this Agreement; provided, however, that nothing in this Agreement shall be deemed a waiver by any party of any right to specific performance or injunctive relief.

9.8 Tax Treatment of Indemnity Payments. The parties hereto and each Indemnified Party and Indemnifying Party agree to treat any indemnity payment made pursuant to this Article IX as an adjustment to the Purchase Price for federal, state, local and foreign income tax purposes unless a contrary treatment is required under applicable Law.

ARTICLE X

TERMINATION; EFFECT OF TERMINATION

10.1 Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by the mutual written consent of Parent, Seller, REG and Buyer;

(b) by REG or Buyer by giving written notice to Parent and Seller at any time after October 31, 2010 (the “Outside Date”) if the Closing shall not have occurred on or before the Outside Date by reason of the failure of any condition precedent

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under Section 8.1 hereof or if any such condition becomes impossible to fulfill (in each case, unless the failure or impossibility results primarily from REG or Buyer breaching any representation, warranty, covenant or agreement contained in this Agreement); or

(c) by Parent or Seller by giving written notice to REG and Buyer at any time after the Outside Date if the Closing shall not have occurred on or before the Outside Date by reason of the failure of any condition precedent under Section 8.2 hereof or if any such condition becomes impossible to fulfill (in each case, unless the failure or impossibility results primarily from Parent or Seller breaching any representation, warranty, covenant or agreement contained in this Agreement).

10.2 Effect of Termination. Termination of this Agreement pursuant to Section 10.1 shall terminate all obligations of the parties hereunder, without liability of any party to any other party (except for the liability of any party then in breach), except for the obligations under Section 7.7, Article IX, this Section 10.2 and Sections 12.1, 12.7, 12.9 and 12.10.

ARTICLE XI

RISK OF LOSS

11.1 Pre-Closing Risk of Loss. The risk of loss, damage or destruction to the Purchased Assets from fire or other casualty or cause (each, a “Casualty Event”), shall be borne by Seller at all times up to the Closing. It shall be the responsibility of Seller prior to the Closing to use reasonable commercial efforts to repair or cause to be repaired and to restore the affected property to its condition prior to any such loss, damage or destruction subject to Sections 11.3 and 11.4 of this Agreement. For the purposes of this Agreement, “Major Casualty” means the loss, damage or destruction to the Purchased Assets from a Casualty Event such that the Purchased Assets cannot be repaired or restored to their condition prior to any such loss, damage or destruction within sixty (60) days of the Casualty Event.

11.2 Use of Insurance Proceeds. In the event of loss, damage or destruction due to a Casualty Event, the proceeds of any claim for any loss payable under any insurance policy with respect thereto shall be used to repair, replace or restore any such property to its former condition subject to Sections 11.3 and 11.4 of this Agreement.

11.3 Casualty Event Not a Major Casualty. In the event of loss, damage or destruction from a Casualty Event that does not constitute a Major Casualty and any Purchased Asset suffering loss, damage or destruction is not repaired, replaced, or restored prior to the Closing, REG and Buyer, at their sole option, and as their sole remedy with respect to any of the foregoing, upon written notice to Parent and Seller: (a) may elect to postpone Closing until such time as the Purchased Asset has been repaired, replaced, or restored, or (b) may elect to consummate the Closing and accept the Purchased Asset in its then condition, in which event Seller shall assign to Buyer all proceeds of insurance theretofore, or to be, received, covering the Purchased Asset involved; and if REG and Buyer shall extend the time for Closing pursuant to clause (a) above, and the repairs, replacements, or restorations are not completed within sixty (60) days after the date on which all of the conditions set forth in Article VIII have been satisfied

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or waived (other than conditions which by their nature are to be satisfied at Closing), REG and Buyer may elect at that time to (x) consummate the Closing and accept the Purchased Asset in its then condition, in which event Seller shall assign to Buyer all proceeds of insurance theretofore, or to be, received, covering the Purchased Asset involved, or (y) terminate this Agreement by giving written notice thereof to Parent and Seller, without any party having any liability or obligation under or in respect of this Agreement except for the liability of any party then in breach.

11.4 Major Casualty; Fair Market Value Determination.

(a) Major Casualty. In the event of a Major Casualty, REG and Buyer may, at their sole option and upon written notice to Parent and Seller within thirty (30) days of the Casualty Event, terminate this Agreement without any party having any liability or obligation under or in respect of this Agreement except for the liability of any party then in breach. If REG and Buyer fail to exercise their option to terminate in the event of a Major Casualty and if the conditions to Closing set forth in Article VIII hereof have been satisfied or waived (other than conditions which by their nature are to be satisfied at Closing), the parties shall be obligated to close pursuant to the terms of this Agreement, including, but not limited to, payment of the Parent Investment to REG, delivery of the Purchased Assets in their damaged condition to Buyer and delivery of the Purchase Price to Parent, and the insurance proceeds for any loss payable under any insurance policy with respect to the Casualty Event shall be divided between REG and Buyer on the one hand and Parent and Seller on the other as follows: (i) REG and Buyer shall receive the insurance proceeds in an amount equal to the Fair Market Value of the damaged Purchased Assets, but in no event more than $5,000,000, and (ii) Seller and Parent shall receive all remaining insurance proceeds, if any, that exceed the Fair Market Value of the Purchased Assets. The determination of Fair Market Value and payment of insurance proceeds may be settled after Closing.

(b) Fair Market Value Determination. For the purposes of this Section 11.4, the “Fair Market Value” of the Purchased Assets shall be the fair market value of the Purchased Assets as of the date immediately prior to the Casualty Event constituting a Major Casualty as determined by a qualified independent appraiser mutually agreed upon by the parties promptly upon the occurrence of the Major Casualty, and whose costs shall be shared equally by REG and Parent.

(c) Disagreement on FMV Determination. If either REG or Parent (the “Disagreeing Party”) disagrees with the Fair Market Value determination made pursuant to Section 11.4(b), the Disagreeing Party shall give the other parties to this Agreement written notice of such disagreement (“Appraisal Notice”) within ten (10) days of receipt of written notice of the Fair Market Value determination. Within ten (10) days of the Appraisal Notice, the Disagreeing Party shall engage a qualified independent appraiser, at the Disagreeing Party’s sole expense, to promptly appraise the fair market value of the Purchased Assets as of the date immediately prior to the Casualty Event constituting a Major Casualty. The average of the two appraised values made pursuant to this Section shall be the fair market value of the Purchased Assets for the purposes of the determination of Fair Market Value; provided, however, in the event one of the two appraised values as so determined is ten percent (10%) or more greater than the other such appraised value, (i) the two previously selected appraisers shall select a third

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qualified independent appraiser within ten (10) days after the determination of the disparity of ten percent (10%) or more in the appraised values; (ii) the third appraiser so selected shall promptly after the deadline for the selection of the third appraiser, make a determination of the fair market value of the Purchased Assets as of the date immediately prior to the Casualty Event constituting a Major Casualty; and (iii) the average of the two closest appraisals from among the three appraisals shall be the fair market value of the Purchase Assets for purposes of the determination of Fair Market Value. If a third appraiser is selected, REG and Parent shall share equally the fees and expenses of the third appraiser.

ARTICLE XII

MISCELLANEOUS

12.1 Notices.

(a) All notices, demands, requests, and other communications desired or required to be given hereunder (“Notices”), shall be in writing and shall be given by: (i) hand-delivery to the address for Notices; (ii) delivery by overnight courier service to the address for Notices; or (iii) sending the same by United States mail, postage prepaid, certified mail, return receipt requested, addressed to the address for Notices.

(b) All Notices shall be deemed given and effective upon the earlier to occur of: (i) the hand-delivery of such Notice to the address for Notices; (ii) one business day after the deposit of such Notice with an overnight courier service by the time deadline for next day delivery addressed to the address for Notices; or (iii) three business days after depositing the Notice in the United States mail as set forth in (a) above. All Notices shall be addressed to the following addresses:

(i)	If to REG or Buyer,
	to:	Renewable Energy Group, Inc.
		Attention: Jeffrey Stroburg, Chairman
		416 S. Bell Avenue
		PO Box 888
		Ames, IA 50010
	with a copy to:	Wilcox Polking Gerken Schwarzkopf &
		Copeland, P.C.
		Attention: John Gerken, Esq.
		115 E. Lincolnway Street, Suite 200
		Jefferson, Iowa 50129
(ii)	If to Parent or Seller,
	to:	ARES Corporation
		Attention: Richard Stuart, Chief     Executive Officer
		1440 Chapin Ave., Suite 390
		Burlingame, CA 94010

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with a copy to:	Carr McClellan Ingersoll Thompson &
	Horn Professional Law Corporation
	Attention: Edward J. Willig, Esq.
	216 Park Road
	Burlingame, CA 94010

or to such other persons or at such other place as any party hereto may by Notice designate as a place for service of Notice; provided, however, that the “copy to” Notice to be given as set forth above is a courtesy copy only; and a Notice given to such person is not sufficient to effect giving a Notice to the principal party, nor does a failure to give such a courtesy copy of a Notice constitute a failure to give Notice to the principal party.

12.2 No Waiver; Modifications in Writing. No failure or delay on the part of any party in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to any party at law or in equity or otherwise. No amendment, modification, supplement, termination or waiver of or to any provision of this Agreement, or consent to any departure therefrom, shall be effective unless the same shall be in writing and signed by or on behalf of the party to be charged with the enforcement thereof. Any amendment, modification or supplement of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

12.3 Binding Effect on Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that none of the parties to this Agreement may assign their rights or obligations hereunder without the prior written consent of the other parties.

12.4 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto, the other Buyer Indemnified Parties, the other Parent Indemnified Parties, and their respective successors and permitted assigns any rights, remedies, liabilities or obligations under or by reason of this Agreement.

12.5 Counterparts; Facsimile Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and in making proof hereof, it shall not be necessary to produce or account for more than one such counterpart. Any signature page delivered pursuant to this Agreement or any agreement contemplated hereby via facsimile shall be binding to the same extent as an original signature. Any party who delivers such a signature page agrees to later deliver an original counterpart to any party who requests it.

12.6 Severability. In the event any provision of this Agreement is held invalid, illegal or unenforceable, in whole or in part, the remaining provisions of this Agreement shall not be

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affected thereby and shall continue to be valid and enforceable. In the event any provision of this Agreement is held to be unenforceable as written, but enforceable if modified, then such provision shall be deemed to be amended to such extent as shall be necessary for such provision to be enforceable and it shall be enforced to that extent.

12.7 Expenses. Except as otherwise expressly provided in this Agreement, each of the parties hereto shall bear its own expenses in connection with the negotiation, execution and performance of this Agreement and the agreements and the transactions contemplated hereby.

12.8 Entire Agreement. This Agreement, all exhibits and schedules hereto, the Nondisclosure Agreement dated May 17, 2010 between REG and Parent and the certificates and other documents delivered pursuant hereto constitute the entire agreement between the parties hereto pertaining to the subject matters hereof and supersede all negotiations, preliminary agreements and all prior or contemporaneous discussions and understandings of the parties hereto in connection with the subject matters hereof. All exhibits and schedules are incorporated into this Agreement as if set forth in their entirety and constitute a part hereof.

12.9 GOVERNING LAW; Choice of Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. Each of the parties hereby irrevocably submits to the exclusive jurisdiction of, and each party hereby irrevocably agrees that all claims with respect to any action or proceeding arising out of or relating to this Agreement shall be heard and determined only in, any United States Federal or Delaware state court sitting in the State of Delaware. Each of the parties irrevocably waives any objection, including, without limitation, any objection to the laying of venue or based on the grounds of forum non conveniens, that it may now or hereafter have to the bringing of such action or proceeding in such respective jurisdictions. Each of the parties irrevocably consents to the service of any and all process in any such action or proceeding by the delivery of copies of such process to each party, at its address specified for notices to be given hereunder, or by certified mail direct to such address.

12.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY UNCONDITIONALLY WAIVES ANY RIGHT TO A JURY TRIAL WITH RESPECT TO AND IN ANY ACTION, PROCEEDING, CLAIM, COUNTERCLAIM, DEMAND OR OTHER MATTER WHATSOEVER ARISING OUT OF THIS AGREEMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED BY THIS AGREEMENT.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the Effective Date.

REG:	PARENT:
RENEWABLE ENERGY GROUP, INC.	ARES CORPORATION
By  /s/ Daniel Oh	By  /s/ Richard J. Stuart
Name:  Daniel Oh	Name:  Richard J. Stuart
Title:  President	Title:  Pres. & CEO
BUYER:	SELLER:
REG CLOVIS, LLC	CLOVIS BIODIESEL, LLC
By  /s/ Daniel Oh	By:	ARES Energy Development, LLC
Name:  Daniel Oh		a Delaware limited liability company
Title:  President		Manager of Clovis Biodiesel, LLC
		By: ARES Corporation
		a California corporation
		Manager of ARES Energy Development, LLC
		By:  /s/ Richard J. Stuart
		Name:   Richard J. Stuart
		Title:   President

SIGNATURE PAGE TO PURCHASE AND SALE AGREEMENT

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EX-31.1

Exhibit 31.1

I, Jeffrey Stroburg, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Renewable Energy Group, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 15, 2010

/s/ Jeffrey Stroburg

Jeffrey Stroburg

Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Chad Stone, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Renewable Energy Group, Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 15, 2010

/s/ Chad Stone

Chad Stone

Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATIONS

I, Jeffrey Stroburg, Chief Executive Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Quarterly Report on Form 10-Q of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 15, 2010

/s/ Jeffrey Stroburg

Jeffrey Stroburg

Chief Executive Officer

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATIONS

I, Chad Stone, Chief Financial Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Quarterly Report on Form 10-Q of the Company (the “Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 15, 2010

/s/ Chad Stone

Chad Stone

Chief Financial Officer