GRBK 10-Q Quarterly Report Sept. 30, 2010

GREEN BRICK PARTNERS, INC.

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10-Q 1 v201154_10q.htm Unassociated Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2010

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

For the transition period from to

Commission file number: 001-33530

BIOFUEL ENERGY CORP.

(Exact name of registrant as specified in its charter)

Delaware		20-5952523
(State of incorporation)		(I.R.S. employer identification number)

1600 Broadway, Suite 2200
Denver, Colorado		80202
(Address of principal executive offices)		(Zip Code)

(303) 640-6500

(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, a non-accelerated filer or a smaller reporting company. See 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 ¨		Smaller reporting company x

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

Number of shares of common stock outstanding as of November 8, 2010: 25,465,728 exclusive of 809,606 shares held in treasury.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying interim consolidated financial statements of BioFuel Energy Corp. (the “Company”) have been prepared in conformity with accounting principles generally accepted in the United States of America. The statements are unaudited but reflect all adjustments which, in the opinion of management, are necessary to fairly present the Company’s financial position and results of operations. All such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative of the results for the full year. For further information, refer to the financial statements and notes presented in the Company’s Annual Report on Form 10-K for the twelve months ended December 31, 2009 (filed with the Securities and Exchange Commission on March 30, 2010).

BioFuel Energy Corp.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

	September 30,			December 31,
	2010			2009
Assets
Current assets
Cash and equivalents	$	10,895		$	6,109
Accounts receivable		21,442			23,745
Inventories		19,159			20,885
Prepaid expenses		1,937			2,529
Other current assets		1,995			325
Total current assets		55,428			53,593
Property, plant and equipment, net		266,364			284,362
Debt issuance costs, net		5,320			6,472
Other assets		2,591			2,348
Total assets	$	329,703		$	346,775

Liabilities and equity
Current liabilities
Accounts payable	$	10,511		$	8,066
Current portion of long-term debt		32,635			30,174
Derivative financial instrument		—			315
Current portion of tax increment financing		338			318
Other current liabilities		2,944			1,957
Total current liabilities		46,428			40,830
Long-term debt, net of current portion		218,377			220,754
Tax increment financing, net of current portion		5,527			5,591
Other non-current liabilities		4,277			1,705
Total liabilities		274,609			268,880
Commitments and contingencies
Equity
BioFuel Energy Corp. stockholders’ equity
Preferred stock, $0.01 par value; 5.0 million shares authorized and no shares outstanding at September 30, 2010 and December 31, 2009		—			—
Common stock, $0.01 par value; 100.0 million shares authorized and 26,275,334 shares outstanding at September 30, 2010 and 25,932,741 shares outstanding at December 31, 2009		262			259
Class B common stock, $0.01 par value; 50.0 million shares authorized and 7,111,985 shares outstanding at September 30, 2010 and 7,448,585 shares outstanding at December 31, 2009		71			74
Less common stock held in treasury, at cost, 809,606 shares at September 30, 2010 and December 31, 2009		(4,316	)		(4,316	)
Additional paid-in capital		138,322			137,037
Accumulated other comprehensive loss		—			(242	)
Accumulated deficit		(79,513	)		(60,577	)
Total BioFuel Energy Corp. stockholders’ equity		54,826			72,235
Noncontrolling interest		268			5,660
Total equity		55,094			77,895
Total liabilities and equity	$	329,703		$	346,775

The accompanying notes are an integral part of these financial statements.

BioFuel Energy Corp.

Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Net sales	$	114,747		$	91,138		$	312,031		$	295,096
Cost of goods sold		110,140			89,039			318,336			298,911
Gross profit (loss)		4,607			2,099			(6,305	)		(3,815	)
General and administrative expenses:
Compensation expense		1,606			1,467			5,152			4,551
Other		1,976			4,420			4,642			8,210
Operating income (loss)		1,025			(3,788	)		(16,099	)		(16,576	)
Other income (expense):
Interest income		—			13			—			74
Interest expense		(2,783	)		(4,598	)		(8,061	)		(12,036	)
Other non-operating expense		—			—			—			(1	)
Loss before income taxes		(1,758	)		(8,373	)		(24,160	)		(28,539	)
Income tax provision (benefit)		—			—			—			—
Net loss		(1,758	)		(8,373	)		(24,160	)		(28,539	)
Less: Net loss attributable to the noncontrolling interest		381			2,139			5,224			8,061
Net loss attributable to BioFuel Energy Corp. common shareholders	$	(1,377	)	$	(6,234	)	$	(18,936	)	$	(20,478	)

Loss per share - basic and diluted attributable to BioFuel Energy Corp. common shareholders	$	(0.05	)	$	(0.26	)	$	(0.75	)	$	(0.87	)

Weighted average shares outstanding – basic and diluted		25,449			24,397			25,411			23,418

The accompanying notes are an integral part of these financial statements.

BioFuel Energy Corp.

Consolidated Statement of Changes in Equity

(in thousands, except share data)

(Unaudited)

																					Accumulated
							Class B									Additional					Other
	Common Stock						Common Stock						Treasury			Paid-in		Accumulated			Comprehensive			Noncontrolling			Total
	Shares			Amount			Shares			Amount			Stock			Capital		Deficit			Loss			Interest			Equity
Balance at December 31, 2008		23,318,636		$	233			10,082,248		$	101		$	(4,316	)	$	134,360	$	(46,947	)	$	(2,741	)	$	14,069		$	94,759

Stock based compensation		—			—			—			—			—			413		—			—			—			413
Exchange of Class B shares to common		2,633,663			27			(2,633,663	)		(27	)		—			2,263		—			(121	)		(2,142	)		—
Issuance of restricted stock, (net of forfeitures)		(19,558	)		(1	)		—			—			—			1		—			—			—			—
Comprehensive loss:		—
Hedging settlements		—			—			—			—			—			—		—			2,321			853			3,174
Change in derivative financial instrument fair value		—			—			—			—			—			—		—			299			(1,048	)		(749	)
Net loss		—			—			—			—			—			—		(13,630	)		—			(6,072	)		(19,702	)

Total comprehensive loss																												(17,277	)
Balance at December 31, 2009		25,932,741			259			7,448,585			74			(4,316	)		137,037		(60,577	)		(242	)		5,660			77,895

Stock based compensation		—			—			—			—			—			1,044		—			—			—			1,044
Exchange of Class B shares to common		336,600			3			(336,600	)		(3	)		—			241		—			(5	)		(236	)		—
Issuance of restricted stock, (net of forfeitures)		5,993			—			—			—			—			—		—			—			—			—
Comprehensive loss:
Hedging settlements		—			—			—			—			—			—		—			155			42			197
Change in derivative financial instrument fair value		—			—			—			—			—			—		—			92			26			118
Net loss		—			—			—			—			—			—		(18,936	)		—			(5,224	)		(24,160	)

Total comprehensive loss																												(23,845	)
Balance at September 30, 2010		26,275,334		$	262			7,111,985		$	71		$	(4,316	)	$	138,322	$	(79,513	)	$	—		$	268		$	55,094

The accompanying notes are an integral part of these financial statements.

BioFuel Energy Corp.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2010			2009

Cash flows from operating activities
Net loss	$	(24,160	)	$	(28,539	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock based compensation expense		1,044			284
Depreciation and amortization		21,335			20,988
Loss on disposal of assets		1,702			-
Changes in operating assets and liabilities:
Accounts receivable		2,303			506
Inventories		1,726			1,220
Prepaid expenses		592			740
Accounts payable		2,781			(4,183	)
Other current liabilities		987			(1,330	)
Other assets and liabilities		3,478			(380	)
Net cash provided by (used in) operating activities		11,788			(10,694	)

Cash flows from investing activities
Capital expenditures (including payment of construction retainage)		(4,179	)		(12,570	)
Proceeds from insurance claim		-			300
Redemption of certificates of deposit		-			2,159
Net cash used in investing activities		(4,179	)		(10,111	)

Cash flows from financing activities
Proceeds from issuance of debt		27,514			20,387
Repayment of debt		(27,450	)		(4,383	)
Withdrawal from debt service reserve		-			1,615
Repayment of notes payable and capital leases		(804	)		(718	)
Repayment of tax increment financing		(34	)		(228	)
Payment of equity offering costs		(981	)		—
Payment of debt issuance costs		(1,068	)		—
Net cash provided by (used in) financing activities		(2,823	)		16,673
Net increase (decrease) in cash and equivalents		4,786			(4,132	)
Cash and equivalents, beginning of period		6,109			12,299

Cash and equivalents, end of period	$	10,895		$	8,167

Cash paid for taxes	$	5		$	8

Cash paid for interest	$	5,925		$	10,993

Non-cash investing and financing activities:
Additions to property, plant and equipment unpaid during period	$	11		$	324
Additions to property, plant and equipment financed with notes payable and capital lease	$	-		$	445

The accompanying notes are an integral part of these financial statements.

BioFuel Energy Corp.

Notes to Unaudited Consolidated Financial Statements

1.	Organization, Nature of Business, and Basis of Presentation

Organization and Nature of Business

BioFuel Energy Corp. (the “Company”, “we”, “our” or “us”) produces and sells ethanol and distillers grain through its two ethanol production facilities located in Wood River, Nebraska (“Wood River”) and Fairmont, Minnesota (“Fairmont”). Both facilities, with a combined annual nameplate production capacity of approximately 230 million gallons per year (“Mmgy”), based on the maximum amount of permitted denaturant, commenced start-up and began commercial operations in June 2008. At each location, Cargill, Incorporated (“Cargill”), with whom we have an extensive commercial relationship, has a strong local presence and owns adjacent grain storage and handling facilities. We work closely with Cargill, one of the world’s leading agribusiness companies. Cargill provides corn procurement services, purchases the ethanol and distillers grain we produce and provides transportation logistics for our two plants under long-term contracts. In addition, we lease their adjacent grain storage and handling facilities. Our operations and cash flows are subject to wide and unpredictable fluctuations due to changes in commodity prices, specifically, the price of our main commodity input, corn, relative to the price of our main commodity product, ethanol, which is known in the industry as the “crush spread”. Since we have commenced operations, we have from time to time entered into derivative financial instruments such as futures contracts, swaps and option contracts with the objective of limiting our exposure to changes in commodities prices, and we may enter into these types of instruments in the future. However, we are currently able to engage in such hedging activities only on a limited basis due to our lack of financial resources, and we may not have the financial resources to increase or conduct any of these hedging activities in the future.

We were incorporated as a Delaware corporation on April 11, 2006 to invest solely in BioFuel Energy, LLC (the “LLC”), a limited liability company organized on January 25, 2006 to build and operate ethanol production facilities in the Midwestern United States. The Company’s headquarters are located in Denver, Colorado.

At September 30, 2010, the Company owned 78.7% of the LLC membership units with the remaining 21.3% owned by the historical equity investors of the LLC. The Class B common shares of the Company are held by the historical equity investors of the LLC, who held 7,111,985 membership units in the LLC as of September 30, 2010 that, together with the corresponding Class B shares, can be exchanged for newly issued shares of common stock of the Company on a one-for-one basis. During the nine months ended September 30, 2010, unit holders exchanged 336,600 membership units in the LLC for common stock of the Company. LLC membership units held by the historical equity investors are recorded as noncontrolling interest on the consolidated balance sheets. Holders of shares of Class B common stock have no economic rights but are entitled to one vote for each share held. Shares of Class B common stock are retired upon exchange of the related membership units in the LLC.

The aggregate book value of the assets of the LLC at September 30, 2010 and December 31, 2009 was $334.6 million and $354.3 million, respectively, and such assets are collateral for the LLC’s subsidiaries’ obligations under our Senior Debt facility with a group of lenders (see Note 5 – Long-Term Debt). Our Senior Debt facility also imposes restrictions on the ability of the LLC’s subsidiaries that own and operate our Wood River and Fairmont plants to pay dividends or make other distributions to us, which restricts our ability to pay dividends.

Basis of Presentation and Going Concern Considerations

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate our continuation as a going concern. Our results of operations and financial condition depend substantially on the crush spread. The prices of these commodities are volatile and beyond our control. As a result of the volatility of the prices for these and other items, our results fluctuate substantially and in ways that are largely beyond our control. For example, we were profitable in the fourth quarter of 2009 but incurred significant losses during the first half of 2010 when crush spreads contracted significantly. However, crush spreads improved during the third quarter of 2010 and therefore, as shown in the accompanying consolidated financial statements, the Company’s net losses narrowed to $1.8 million during the three months ended September 30, 2010. We cannot predict when or if crush spreads will narrow. In the event crush spreads narrow, we may choose to curtail operations at our plants or cease operations altogether. In addition, we may expend all of our other sources of liquidity, in which event we would not be able to pay principal or interest on our debt, which would lead to an event of default under our debt agreements and, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, require us to seek relief through a filing under the U.S. Bankruptcy Code. We expect fluctuations in the crush spread to continue. Any future reduction in the crush spread may also cause our operating margins to deteriorate to an extent that would result in an impairment charge, in addition to causing the consequences described above.

As shown in the accompanying consolidated financial statements, the Company has experienced declining liquidity and as of September 30, 2010 has $32.6 million of long-term debt due within the next year, including a $19.4 million Bridge Loan (see Note 5 – Long-Term Debt) which matures on March 24, 2011. We are restricted by the terms of our Senior Debt facility from using the funds generated by our operating subsidiaries to repay the Bridge Loan. Therefore, even if we generate positive cash flow from operations, under the terms of our Senior Debt facility, we cannot use that cash flow to repay the Bridge Loan. In connection with the Bridge Loan agreement, on September 24, 2010, the Company entered into a Rights Offering Letter Agreement (see Note 7 – Stockholders’ Equity) with the Bridge Loan lenders, who are our two largest stockholders, pursuant to which the Company agreed to use its commercially reasonable best efforts to commence and complete a rights offering. The LLC also intends to commence and complete a concurrent private placement of LLC interests. If the rights offering and the LLC’s concurrent private placement do not generate sufficient proceeds to repay the Bridge Loan, we may not have sufficient liquidity to repay the Bridge Loan when it becomes due. If we are unable to generate sufficient proceeds from the rights offering and the LLC’s concurrent private placement to repay the Bridge Loan, we may seek new capital from other sources. We cannot assure you that we will be successful in achieving any of these initiatives or, even if successful, that these initiatives will be sufficient to address our limited liquidity and the pending maturity of the Bridge Loan. In addition, if we do not repay the Bridge Loan in full on or before March 24, 2011, we will be required to issue to the Bridge Loan lenders warrants to purchase shares of our common stock equal to 15% of our outstanding shares as of such date at a price of $0.01 per share. If we are unable to raise sufficient proceeds from the rights offering, the LLC’s concurrent private placement, or from other sources, we may be unable to continue as a going concern, which could potentially force us to seek relief through a filing under the U.S. Bankruptcy Code. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above conditions raise substantial doubt about the Company’s ability to do so. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, including possible impairment in the carrying value of our property, plant and equipment, or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

2.	Summary of Significant Accounting Policies

Principles of Consolidation and Noncontrolling Interest

The accompanying consolidated financial statements include the Company, the LLC and its wholly owned subsidiaries: BFE Holdings, LLC; BFE Operating Company, LLC; Buffalo Lake Energy, LLC; and Pioneer Trail Energy, LLC. All inter-company balances and transactions have been eliminated in consolidation. The Company treats all exchanges of LLC membership units for Company common stock as equity transactions, with any difference between the fair value of the Company’s common stock and the amount by which the noncontrolling interest is adjusted being recognized in equity.

Use of Estimates

Preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosures in the accompanying notes at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

The Company sells 100% of its ethanol and distillers grain products to Cargill under the terms of marketing agreements whereby Cargill has agreed to purchase all ethanol and distillers grain produced at our ethanol plants through September 2016. Revenue is recognized when risk of loss and title transfers upon shipment of ethanol and distillers grain to Cargill. In accordance with our agreements with Cargill, the Company records its revenues based on the amounts payable by Cargill to us at the time of our sales of ethanol and distillers grain to them. The amount payable by Cargill for ethanol is equal to the average delivered price per gallon received by the marketing pool from Cargill’s customers, less average transportation and storage charges incurred by Cargill, and less a commission. The amount payable by Cargill for distillers grain is equal to the market price of distillers grain at the time of sale less a commission.

Cost of Goods Sold

Cost of goods sold primarily includes costs of raw materials (primarily corn from Cargill and natural gas), purchasing and receiving costs, inspection costs, shipping costs, other distribution expenses, plant management, certain compensation costs and general facility overhead charges, including depreciation expense.

General and Administrative Expenses

General and administrative expenses consist of salaries and benefits paid to our management and administrative employees, expenses relating to third party services, insurance, travel, office rent, marketing and other expenses, including certain expenses associated with being a public company, such as fees paid to our independent auditors associated with our annual audit and quarterly reviews, directors’ fees, and listing and transfer agent fees.

Cash and Equivalents

Cash and equivalents include highly liquid investments with an original maturity of three months or less. Cash equivalents are currently comprised of money market mutual funds. At September 30, 2010, we had $10.9 million held at three financial institutions, which is in excess of FDIC insurance limits.

Accounts Receivable

Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history and current economic conditions. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction to bad debt expense when received. As of September 30, 2010 and December 31, 2009, Cargill was our only customer and no allowance was considered necessary.

Concentrations of Credit Risk

Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk, whether on- or off-balance sheet, that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below.

During the three and nine months ended September 30, 2010 and September 30, 2009, the Company recorded sales to Cargill representing 100% of total net sales. As of September 30, 2010 and December 31, 2009, the LLC, through its subsidiaries, had receivables from Cargill of $21.4 million and $23.7 million, respectively, representing 100% of total accounts receivable.

The LLC, through its subsidiaries, purchases corn, its largest cost component in producing ethanol, from Cargill. During the three and nine months ended September 30, 2010, corn purchases from Cargill totaled $83.0 million and $217.8 million, respectively. During the three and nine months ended September 30, 2009, corn purchases from Cargill totaled $60.6 million and $208.0 million, respectively. As of September 30, 2010 and December 31, 2009, the LLC, through its subsidiaries, had payables to Cargill of $6.8 million and $2.1 million, respectively, related to corn purchases.

Inventories

Raw materials inventories, which consist primarily of corn, denaturant, supplies and chemicals, and work in process inventories are valued at the lower-of-cost-or-market, with cost determined on a first-in, first-out basis. Finished goods inventories consist of ethanol and distillers grain and are stated at lower of average cost or market.

A summary of inventories is as follows (in thousands):

	September 30,		December 31,
	2010		2009

Raw materials	$	12,481	$	12,292
Work in process		3,540		2,883
Finished goods		3,138		5,710
	$	19,159	$	20,885

Derivative Instruments and Hedging Activities

Derivatives are recognized on the balance sheet at their fair value and are included in the accompanying balance sheets as “derivative financial instruments”. On the date the derivative contract is entered into, the Company may designate the derivative as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flow” hedge). Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income, net of tax effect, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable rate asset or liability are recorded in earnings). Changes in the fair value of undesignated derivative instruments or derivatives that do not qualify for hedge accounting are recognized in current period operations. The Company designated its interest rate swap at December 31, 2009 as a cash flow hedge. The value of the interest rate swap was recorded on the balance sheet as a liability under derivative financial instruments, while the unrealized gain/loss on the change in the fair value has been recorded in other comprehensive income (loss). The statement of operations impact of these hedges is included in interest expense. See Note 8 for additional required disclosure.

Accounting guidance for derivatives requires a company to evaluate contracts to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempted as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. The Company’s contracts for corn and natural gas that meet these requirements and are designated as normal purchases are exempted from the derivative accounting and reporting requirements.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. All costs related to purchasing and developing land or the engineering, design and construction of a plant are capitalized. Maintenance, repairs and minor replacements are charged to operating expenses while major replacements and improvements are capitalized. Depreciation is computed by the straight line method over the following estimated useful lives:

	Years
Land improvements		20-30
Buildings and improvements		7-40
Machinery and equipment:
Railroad equipment		20-39
Facility equipment		20-39
Other		5-7
Office furniture and equipment		3-10

Debt Issuance Costs

Debt issuance costs are stated at cost, less accumulated amortization. Debt issuance costs included in noncurrent assets represent costs incurred related to the Company’s senior debt, subordinated debt and tax increment financing agreements. Debt issuance costs included in other current assets total $1,014,000 and represent costs incurred related to the bridge loan. These costs are being amortized through interest expense over the term of the related debt. Estimated future debt issuance cost amortization as of September 30, 2010 is as follows (in thousands):

Remainder of 2010	$	848
2011		1,846
2012		1,294
2013		1,248
2014		973
Thereafter		125
Total	$	6,334

Impairment of Long-Lived Assets

Recoverability is measured by comparing the carrying value of an asset with estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the risk involved, quoted market prices or appraised values, depending on the nature of the assets. As of September 30, 2010, at the current crush spread, cash flow from operations suggests the carrying values of the Company’s long-lived assets are recoverable. Therefore no recoverability test was performed.

Stock-Based Compensation

Expense associated with stock-based awards and other forms of equity compensation is based on fair value at grant and recognized on a straight line basis in the financial statements over the requisite service period, if any, for those awards that are expected to vest.

Asset Retirement Obligations

Asset retirement obligations are recognized when a contractual or legal obligation exists and a reasonable estimate of the amount can be made. Changes to the asset retirement obligation resulting from revisions to the timing or the amount of the original undiscounted cash flow estimates shall be recognized as an increase or decrease to both the carrying amount of the asset retirement obligation and the related asset retirement cost capitalized as part of the related property, plant, and equipment. At September 30, 2010, the Company had accrued asset retirement obligation liabilities of $137,000 and $173,000 for its plants at Wood River and Fairmont, respectively. At December 31, 2009, the Company had accrued asset retirement obligation liabilities of $134,000 and $168,000 for its plants at Wood River and Fairmont, respectively.

The asset retirement obligations accrued for Wood River relate to the obligations in our contracts with Cargill and Union Pacific Railroad (“Union Pacific”). According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator may be required at Cargill’s discretion to be removed at the end of the lease. In addition, according to the contract with Union Pacific, the buildings that are built near their land in Wood River may be required at Union Pacific’s request to be removed at the end of our contract with them. The asset retirement obligations accrued for Fairmont relate to the obligations in our contracts with Cargill and in our water permit issued by the state of Minnesota. According to the grain elevator lease with Cargill, the equipment that is adjacent to the grain elevator being leased may be required at Cargill’s discretion to be removed at the end of the lease. In addition, the water permit in Fairmont requires that we secure all above ground storage tanks whenever we discontinue the use of our equipment for an extended period of time in Fairmont. The estimated costs of these obligations have been accrued at the current net present value of these obligations at the end of an estimated 20 year life for each of the plants. These liabilities have corresponding assets recorded in property, plant and equipment, which are being depreciated over 20 years.

Income Taxes

The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company regularly reviews historical and anticipated future pre-tax results of operations to determine whether the Company will be able to realize the benefit of its deferred tax assets. A valuation allowance is required to reduce the potential deferred tax asset when it is more likely than not that all or some portion of the potential deferred tax asset will not be realized due to the lack of sufficient taxable income. The Company establishes reserves for uncertain tax positions that reflect its best estimate of deductions and credits that may not be sustained. As the Company has incurred losses since its inception and expects to continue to incur tax losses for the foreseeable future, we will provide a valuation allowance against all deferred tax assets until the Company believes that such assets will be realized. The Company includes interest on tax deficiencies and income tax penalties in the provision for income taxes.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and equivalents, accounts receivable, and accounts payable are carried at cost, which approximates their fair value because of the short-term maturity of these instruments. The derivative financial instruments are carried at fair value. The fair value of the Company’s senior debt and notes payable (excluding the Cargill note payable) approximates their carrying amounts based on anticipated interest rates that management believes would currently be available to the Company for similar issues of debt, taking into account the current credit risk of the Company and other market factors. The Company is unable to determine a fair value of its subordinated debt, its note payable to Cargill, and its bridge loan debt due to the nature of the relationships between the parties and the Company.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of the unrealized changes in the fair value on the Company’s financial instruments designated as cash flow hedges. The financial instrument liabilities are recorded at fair value. The effective portion of any changes in the fair value is recorded as other comprehensive income (loss) while the ineffective portion of any changes in the fair value is recorded as interest expense.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2010			2009			2010			2009

Net loss	$	(1,758	)	$	(8,373	)	$	(24,160	)	$	(28,539	)
Hedging settlements		—			988			197			2,842
Change in derivative financial instrument fair value		—			(141	)		118			(720	)
Comprehensive loss		(1,758	)		(7,526	)		(23,845	)		(26,417	)
Comprehensive loss attributable to noncontrolling interest		381			1,928			5,156			8,325
Comprehensive loss attributable to BioFuel Energy Corp. common shareholders	$	(1,377	)	$	(5,598	)	$	(18,689	)	$	(18,092	)

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. Each of our plants is considered its own unique operating segment under these criteria. However, when two or more operating segments have similar economic characteristics, accounting guidance allows for them to be aggregated into a single operating segment for purposes of financial reporting. Our two plants are very similar in all characteristics and accordingly, the Company presents a single reportable segment, the manufacture of fuel-grade ethanol and the co-products of the ethanol production process.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, our management believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

3.	Property, Plant and Equipment

Property, plant and equipment, stated at cost, consist of the following at September 30, 2010 and December 31, 2009, respectively (in thousands):

	September 30,			December 31,
	2010			2009

Land and land improvements	$	19,639		$	19,639
Construction in progress		259			2,449
Buildings and improvements		49,823			49,771
Machinery and equipment		246,203			242,191
Office furniture and equipment		6,088			6,075
		322,012			320,125
Accumulated depreciation		(55,648	)		(35,763	)
Property, plant and equipment, net	$	266,364		$	284,362

Depreciation expense related to property, plant and equipment was $6,768,000 and $20,139,000 for the three and nine months ended September 30, 2010, respectively, and was $6,669,000 and $19,823,000 for the three and nine months ended September 30, 2009, respectively.

4.	Earnings Per Share

Basic earnings per share are computed by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per share are calculated using the treasury stock method and includes the effect of all dilutive securities, including stock options, restricted stock and Class B common shares. For those periods in which the Company incurred a net loss, the inclusion of the potentially dilutive shares in the computation of diluted weighted average shares outstanding would have been anti-dilutive to the Company’s loss per share, and, accordingly, all potentially dilutive shares have been excluded from the computation of diluted weighted average shares outstanding in those periods.

For both the three and nine months ended September 30, 2010, 1,792,545 shares issuable upon the exercise of stock options have been excluded from the computation of diluted earnings per share as the exercise price exceeded the average price of the Company’s shares during the period. For both the three and nine months ended September 30, 2009, 334,075 shares issuable upon the exercise of stock options have been excluded from the computation of diluted earnings per share as the exercise price exceeded the average price of the Company’s shares during the period.

A summary of the reconciliation of basic weighted average shares outstanding to diluted weighted average shares outstanding follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Weighted average common shares outstanding - basic		25,449,313			24,397,327			25,410,844			23,418,419

Potentially dilutive common stock equivalents
Class B common shares		7,111,985			8,149,431			7,142,781			9,115,731
Stock options		55,000			—			55,000			—
Restricted stock		16,028			28,564			19,562			43,801
		7,183,013			8,177,995			7,217,343			9,159,532

		32,632,326			32,575,322			32,628,187			32,577,951

Less anti-dilutive common stock equivalents		(7,183,013	)		(8,177,995	)		(7,217,343	)		(9,159,532	)

Weighted average common shares outstanding - diluted		25,449,313			24,397,327			25,410,844			23,418,419

5.	Long-Term Debt

The following table summarizes long-term debt (in thousands):

	September 30,			December 31,
	2010			2009
Term (formerly construction) loans	$	192,530		$	195,387
Subordinated debt		21,139			20,315
Bridge loan		19,421			—
Working capital loans		—			16,500
Notes payable		15,422			16,196
Capital leases		2,500			2,530
		251,012			250,928
Less current portion		(32,635	)		(30,174	)
Long-term portion	$	218,377		$	220,754

In September 2006, certain subsidiaries of the LLC (the “Operating Subsidiaries”) entered into a Senior Secured Credit Facility providing for the availability of $230.0 million of borrowings (“Senior Debt facility”) with a syndicate of lenders to finance the construction of our ethanol plants. Neither the Company nor the LLC is a borrower under the Senior Debt facility, although the equity interests and assets of our subsidiaries are pledged as collateral to secure the debt under the facility.

The Senior Debt facility initially consisted of two construction loans, which together totaled $210.0 million of available borrowings, and working capital loans of up to $20.0 million. No principal payments were required until the construction loans were converted to term loans, which occurred on September 29, 2009. Thereafter, principal payments are payable quarterly at a minimum amount of $3,150,000, with additional pre-payments to be made out of available cash flow.

The Operating Subsidiaries began making quarterly principal payments on September 30, 2009, and as of September 30, 2010 there remained $192.5 million in aggregate principal amount outstanding under the Senior Debt facility. These term loans mature in September 2014.

The Senior Debt facility also included a working capital facility of up to $20.0 million, which had a maturity date of September 25, 2010. On September 24, 2010, the Company paid off the outstanding working capital facility balance of $17.9 million with proceeds from a Bridge Loan, as described below.

Interest rates on the Senior Debt facility are, at management’s option, set at: i) a base rate, which is the higher of the federal funds rate plus 0.5% or the administrative agent’s prime rate, in each case plus a margin of 2.0%; or ii) at LIBOR plus 3.0%. Interest on base rate loans is payable quarterly and, depending on the LIBOR rate elected, as frequently as monthly on LIBOR loans, but no less frequently than quarterly. The weighted average interest rate in effect on the borrowings at September 30, 2010 was 3.3%.

The Senior Debt facility is secured by a first priority lien on all right, title and interest in and to the Wood River and Fairmont plants and any accounts receivable or property associated with those plants and a pledge of all of our equity interests in the Operating Subsidiaries. The Operating Subsidiaries have established collateral deposit accounts maintained by an agent of the banks, into which our revenues are deposited, subject to security interests to secure any outstanding obligations under the Senior Debt facility. These funds are then allocated into various sweep accounts held by the collateral agent, including accounts that provide funds for the operating expenses of the Operating Subsidiaries. The collateral accounts have various provisions, including historical and prospective debt service coverage ratios and debt service reserve requirements, which determine whether there is, and the amount of, cash available to the LLC from the collateral accounts each month. The terms of the Senior Debt facility also include covenants that impose certain limitations on, among other things, the ability of the Operating Subsidiaries to incur additional debt, grant liens or encumbrances, declare or pay dividends or distributions, conduct asset sales or other dispositions, merge or consolidate, and conduct transactions with affiliates. The terms of the Senior Debt facility also include customary events of default including failure to meet payment obligations, failure to pay financial obligations, failure of the Operating Subsidiaries of the LLC to remain solvent and failure to obtain or maintain required governmental approvals. Under the terms of separate management services agreements between our Operating Subsidiaries and the LLC, the Operating Subsidiaries pay a monthly management fee of $834,000 to the LLC to cover salaries, rent, and other operating expenses of the LLC, which payments are unaffected by the terms of the Senior Debt facility or the collateral accounts.

Debt issuance fees and expenses of $8.5 million ($4.0 million, net of accumulated amortization) have been incurred in connection with the Senior Debt facility through September 30, 2010. These costs have been deferred and are being amortized and expensed as interest over the term of the Senior Debt facility.

The LLC is the borrower of subordinated debt (“Subordinated Debt”) under a loan agreement dated September 25, 2006, entered into with certain affiliates of Greenlight Capital, Inc. and Third Point LLC (the “Sub Lenders”), both of which are related parties, the proceeds of which were used to fund a portion of the development and construction of our plants and for general corporate purposes. The entire principal balance, if any, plus all accrued and unpaid interest will be due in March 2015. Once repaid, the Subordinated Debt may not be re-borrowed. The Subordinated Debt is secured by the subsidiary equity interests owned by the LLC and are fully and unconditionally guaranteed by all of the LLC’s subsidiaries, which guarantees are subordinated to the obligations of these subsidiaries under our Senior Debt facility. A default under our Senior Debt facility would also constitute a default under our Subordinated Debt and would entitle the lenders to accelerate the repayment of amounts outstanding.

The LLC did not make the scheduled quarterly interest payments that were due on September 30, 2008 and December 31, 2008. Under the terms of the Subordinated Debt, the failure to pay interest when due is an event of default. In January 2009, the LLC and the Sub Lenders entered into a waiver and amendment agreement to the loan agreement (“Waiver and Amendment”). Under the Waiver and Amendment, an initial payment of $2.0 million, which was made on January 16, 2009, was made to pay the $767,000 of accrued interest due September 30, 2008 and to reduce outstanding principal by $1,233,000. Effective upon the $2.0 million initial payment, the Sub Lenders waived the defaults and any associated penalty interest relating to the LLC’s failure to make the September 30, 2008 and the December 31, 2008 quarterly interest payments. Effective December 1, 2008, interest on the Subordinated Debt began accruing at a 5.0% annual rate, a rate that will apply until the debt with Cargill (under an agreement entered into simultaneously) has been paid in full, at which time the rate will revert to a 15.0% annual rate and quarterly payments in arrears are required. As of September 30, 2010, the LLC had $21.1 million outstanding under the Subordinated Debt. As long as the debt with Cargill remains outstanding, future payments to the Sub Lenders are contingent upon available cash being received by the LLC, as defined in the Waiver and Amendment. The Subordinated Debt is secured by the equity of the subsidiaries of the LLC owning the Wood River and Fairmont plant sites and fully and unconditionally guaranteed by those subsidiaries, which guarantees are subordinated to the obligations of the subsidiaries under our Senior Debt facility. A default under our Senior Debt facility would also constitute a default under our Subordinated Debt and would entitle the lenders to accelerate the repayment of amounts outstanding.

Debt issuance fees and expenses of $5.5 million ($1.2 million, net of accumulated amortization) have been incurred in connection with the Subordinated Debt at September 30, 2010. Debt issuance costs associated with the Subordinated Debt have been deferred and are being amortized and expensed as interest over the term of the agreement.

In January 2009, the LLC and Cargill entered into an agreement (“Cargill Agreement”) which finalized the payment terms for $17.4 million owed to Cargill (“Cargill Debt”) by the LLC related to hedging losses with respect to corn hedging contracts that had been liquidated in the third quarter of 2008. The Cargill Agreement required an initial payment of $3.0 million on the outstanding balance, which was paid on December 5, 2008. Upon the initial payment of $3.0 million, Cargill also forgave $3.0 million. Effective December 1, 2008, interest on the Cargill Debt began accruing at a 5.0% annual rate compounded quarterly. Future payments to Cargill of both principal and interest are contingent upon the receipt by the LLC of available cash, as defined in the Cargill Agreement. Cargill will forgive, on a dollar for dollar basis, a further $2.8 million as it receives the next $2.8 million of principal payments. The Cargill Debt is being accounted for as a troubled debt restructuring. As the future cash payments specified by the terms of the Cargill Agreement exceed the carrying amount of the debt before the $3.0 million was forgiven, the carrying amount of the debt was not reduced and no gain was recorded. As future payments are made, the LLC will determine, based on the timing of payments, whether or not any gain should be recorded.

On September 24, 2010, the Company entered into a loan agreement (the “Bridge Loan Agreement”) with Greenlight Capital, Inc. and certain of its affiliates (collectively, the “Greenlight Parties”) and an affiliate of Third Point LLC (“Third Point” and, together with the Greenlight Parties, the “Bridge Loan Lenders”) pursuant to which the Company borrowed $19.4 million (the "Bridge Loan"). The proceeds of the Bridge Loan were used (i) to repay the $17.9 million in outstanding working capital loans under the Senior Debt facility, and (ii) to pay the fees and expenses of the transaction, which were a bridge loan funding fee of $0.8 million and a backstop commitment fee pursuant to the Rights Offering Letter Agreement of $0.7 million. The bridge loan funding fee and the backstop commitment fee are included in other current assets. The Bridge Loan is secured by a pledge of the Company's equity interest in the LLC. The Bridge Loan matures on March 24, 2011 and in the event the Bridge Loan is not paid in full on or before the maturity date, the Company will issue warrants to the Bridge Loan Lenders exercisable for an aggregate of 15% of the Company's common stock on a fully diluted basis as of the date the warrant is issued at an exercise price of $0.01 per share.

The Bridge Loan bears interest at a rate of 12.5% per annum, and if the Bridge Loan is not paid in full on or before the maturity date, the Bridge Loan will bear interest at a rate of 14.5% per annum. Under the Bridge Loan Agreement, the Company must comply with its obligations under the Rights Offering Letter Agreement, including the obligation to use its commercially reasonable best efforts to conduct a rights offering to the owners of its common stock (the “Rights Offering”). In connection therewith, the LLC intends to conduct a concurrent private placement of LLC membership interests (see Note 7 – Stockholders’ Equity).

The Bridge Loan Agreement contains customary affirmative covenants for facilities of this type, including covenants pertaining to the delivery of financial statements, notices of default and certain other information, maintenance of business and insurance, collateral matters and compliance with laws, as well as customary negative covenants for facilities of this type, including limitations on the incurrence of indebtedness and liens, mergers and certain other fundamental changes, loans and investments, acquisitions, transactions with affiliates, dispositions of assets, payments of dividends and other restricted payments and changes in the Company's line of business.

The Bridge Loan Agreement contains default provisions that include a material breach of the Rights Offering Letter Agreement and others that are customary for facilities of this type, which are subject to customary grace periods and materiality thresholds, including, among other things, defaults related to payment failures, failure to comply with covenants, misrepresentations, defaults under other material indebtedness, the occurrence of a “change of control”, bankruptcy and related events, material judgments, specified changes in control of the Company and invalidity of the loan documents. If an event of default occurs under the Bridge Loan Agreement, the lenders may, among other things, declare the Bridge Loan immediately payable and foreclose on the collateral. The Bridge Loan Agreement requires prepayments with the proceeds from certain sales of assets, the Rights Offering and any substitute transaction. The Bridge Loan may be prepaid without penalty or premium.

The LLC, through its subsidiary that constructed the Fairmont plant, has entered into an agreement with the local utility pursuant to which the utility has built and owns and operates a substation and distribution facility in order to supply electricity to the plant. The LLC is paying a fixed facilities charge based on the cost of the substation and distribution facility of $34,000 per month, over the 30-year term of the agreement. This fixed facilities charge is being accounted for as a capital lease in the accompanying financial statements. The agreement also includes a $25,000 monthly minimum energy charge that also began in the first quarter of 2008.

Notes payable relate to certain financing agreements in place at each of our sites, as well as the Cargill Debt. The subsidiaries of the LLC that constructed the plants entered into financing agreements in the first quarter of 2008 for the purchase of certain rolling stock equipment to be used at the facilities for $748,000. The notes have fixed interest rates (weighted average rate of approximately 5.6%) and require 48 monthly payments of principal and interest, maturing in the first and second quarter of 2012. In addition, the subsidiary of the LLC that constructed the Wood River facility has entered into a note payable for $2,220,000 with a fixed interest rate of 11.8% for the purchase of our natural gas pipeline. The note requires 36 monthly payments of principal and interest and matures in the first quarter of 2011. In addition, the subsidiary of the LLC that constructed the Wood River facility has entered into a note payable for $419,000 with the City of Wood River for special assessments related to street, water, and sanitary improvements at our Wood River facility. This note requires ten annual payments of $58,000, including interest at 6.5% per annum, and matures in 2018.

The following table summarizes the aggregate maturities of our long-term debt as of September 30, 2010 (in thousands):

Remainder of 2010	$	3,421
2011		32,418
2012		12,705
2013		12,648
2014		151,631
Thereafter		38,189
Total	$	251,012

6. Tax Increment Financing

In February 2007, the subsidiary of the LLC that constructed the Wood River plant received $6.0 million from the proceeds of a tax increment revenue note issued by the City of Wood River, Nebraska. The proceeds funded improvements to property owned by the subsidiary. The City of Wood River will pay the principal and interest of the note from the incremental increase in the property taxes related to the improvements made to the property. The interest rate on the note is 7.85%. The proceeds have been recorded as a liability which is reduced as the subsidiary of the LLC remits property taxes to the City of Wood River, which began in 2008 and will continue through 2021.

The LLC has guaranteed the principal and interest of the tax increment revenue note if, for any reason, the City of Wood River fails to make the required payments to the holder of the note or the subsidiary of the LLC fails to make the required payments to the City of Wood River. Semiannual principal payments on the tax increment revenue note began in June 2008. Due to lower than anticipated assessed property values, the subsidiary of the LLC was required to pay $468,000 in 2009 and $34,000 during the nine months ended September 30, 2010 as a portion of the note payments.

The following table summarizes the aggregate maturities of the tax increment financing debt as of September 30, 2010 (in thousands):

Remainder of 2010	$	274
2011		343
2012		370
2013		399
2014		431
Thereafter		4,048
Total	$	5,865

7. Stockholders’ Equity

Rights Offering and LLC Concurrent Private Placement

In connection with the Bridge Loan Agreement, on September 24, 2010, the Company entered into a Rights Offering Letter Agreement (the "Rights Offering Letter Agreement") with the Bridge Loan Lenders pursuant to which the Company agreed to use its commercially reasonable best efforts to commence the Rights Offering. The Rights Offering will entail a distribution to our common stockholders of rights to purchase depositary shares representing fractional interests in a new series of Series A Non-Voting Convertible Preferred Stock. Concurrent with the Rights Offering, the LLC will conduct a private placement of LLC interests. The LLC’s concurrent private placement will be structured so as to provide the holders of the membership interests in the LLC (other than BioFuel Energy Corp.) with a private placement that is economically equivalent to the Rights Offering. The combined offering size of the Rights Offering and the concurrent private placement is anticipated to be approximately $44.0 million. The Company would use the proceeds of the Rights Offering and the LLC’s concurrent private placement to (i) repay in full the Bridge Loan, (ii) repay in full its obligations under the Subordinated Debt, (iii) repay certain amounts owed to Cargill, and (iv) pay certain fees and expenses incurred in connection with the Rights Offering and the LLC’s concurrent private placement.

The provisions of the Rights Offering Letter Agreement permit the Company to solicit, participate in, initiate or facilitate discussions or negotiations with, or provide any information to, any person or group of persons concerning any alternative equity financing or other transaction (a “Substitute Transaction”) that would result in the (a) repayment in full of all amounts outstanding under the Bridge Loan Agreement, (b) repayment in full of all amounts under the Subordinated Debt and (c) repay certain amounts owed to Cargill. If the Company signs a definitive agreement relating to a Substitute Transaction, it will pay the Bridge Loan Lenders a termination fee of $350,000.

The Bridge Loan Lenders agreed to (i) participate in the Rights Offering for their full pro rata share (the "Basic Commitment") and (ii) purchase all of the available depositary shares not otherwise sold in the Rights Offering (the "Backstop Commitment"). Notwithstanding the foregoing, the Rights Offering Letter Agreement provides that (a) the Bridge Loan Lenders may reduce the number of depositary shares that the Bridge Loan Lenders would otherwise be obligated to purchase pursuant to the Basic Commitment and/or Backstop Commitment or (b) the Company may reduce the aggregate number of depositary shares offered in the Rights Offering in the event the Bridge Loan Lenders determine, in their sole discretion, but after consultation with the Company, that the consummation of the Rights Offering, the Basic Commitment and/or the Backstop Commitment would result in adverse tax, legal or regulatory consequences to the Company or any of the Bridge Loan Lenders. In the event of a backstop reduction, the Rights Offering would proceed with the Company and the Bridge Loan Lenders using their commercially reasonable best efforts to structure and consummate an alternative transaction to take the place of the issuance of the depositary shares not purchased in the Rights Offering. In consideration of the Backstop Commitment for a combined $40 million Rights Offering, the Company paid the Bridge Loan Lenders $0.7 million on September 24, 2010. If the amount of the Rights Offering is increased above $40 million, an additional fee of 4% of the excess will be payable to the Bridge Loan Lenders).

Stock Repurchase Plan

On October 15, 2007, the Company announced the adoption of a stock repurchase plan authorizing the repurchase of up to $7.5 million of the Company’s common stock. Purchases will be funded out of cash on hand and made from time to time in the open market. From the inception of the buyback program through September 30, 2010, the Company had repurchased 809,606 shares at an average price of $5.30 per share, leaving $3,184,000 available under the repurchase plan. The shares repurchased are being held as treasury stock. As of September 30, 2010, there were no plans to repurchase any additional shares.

Dividends

The Company has not declared any dividends on its common stock and does not anticipate paying dividends in the foreseeable future. In addition, the terms of the Senior Debt facility contain restrictions on the ability of the LLC to pay dividends or other distributions, which will restrict the Company’s ability to pay dividends in the future.

8. Derivative Financial Instruments

Prior to March 31, 2010, we used interest rate swaps to manage the economic effect of variable interest obligations associated with our floating rate Senior Debt facility so that the interest payable on a portion of the principal value of the Senior Debt facility effectively becomes fixed at a certain rate, thereby reducing the impact of future interest rate changes on our future interest expense. The unrealized losses on these interest rate swaps are included in accumulated other comprehensive income (loss) and the corresponding fair value liabilities are included in the current portion of derivative financial instrument liability in our consolidated balance sheet. The monthly interest settlements are reclassified from other comprehensive income (loss) to interest expense as they are settled each month. The full amount of accumulated other comprehensive income (loss) at December 31, 2009 related to one interest rate swap and was reclassified to the statement of operations in the first two months of 2010 as it expired. See Note 5 for further discussion of interest rates on the Senior Debt facility.

The effects of derivative instruments on our consolidated financial statements were as follows as of September 30, 2010 and December 31, 2009 and for the three and nine months ended September 30, 2010 and September 30, 2009 (in thousands) (amounts presented exclude any income tax effects and have not been adjusted for the amount attributable to the noncontrolling interest):

Fair Values of Derivative Instruments

		Liability Derivatives
		Fair Value at
	Consolidated Balance Sheet Location	September 30, 2010		December 31, 2009

Derivative designated as hedging instrument:
Interest rate contract	Derivative financial instrument (current liabilities)	$	-	$	315

Effect of Derivative Instruments on the Consolidated Statement of Operations

		Three Months Ended					Nine Months Ended
Consolidated Statements of Operations Location		September 30, 2010		September 30, 2009			September 30, 2010			September 30, 2009
		gain (loss)		gain (loss)			gain (loss)			gain (loss)
Derivative not designated as hedging instrument:
Commodity contract	Net sales	$	-	$	-		$	230		$	-
Derivative designated as hedging instrument:
Interest rate contract	Interest expense		-		(988	)		(197	)		(2,842	)
	Net amount recognized in earnings	$	-	$	(988	)	$	33		$	(2,842	)

Effective January 1, 2008, the Company adopted the framework for measuring fair value and the expanded disclosures about fair value measurements. In accordance with these provisions, we have categorized our financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy as set forth below. If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded on the Company’s consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access at the measurement date. We currently do not have any Level 1 financial assets or liabilities.

Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. Level 2 inputs include the following:

Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds which trade infrequently);

Inputs other than quoted prices that are observable for substantially the full term of the asset or liability (examples include interest rate and currency swaps); and

Inputs that are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability (examples include certain securities and derivatives).

(in thousands)	September 30,		December 31,
Level 2	2010		2009
Financial Liabilities:
Interest rate contract	$	—	$	(315	)
Total liabilities	$	—	$	(315	)

Total net position	$	—	$	(315	)

The fair value of our interest rate swap was derived from market data, primarily market rates for Eurodollar futures and adjusted for credit risk.

Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. We currently do not have any Level 3 financial assets or liabilities.

9. Stock-Based Compensation

The following table summarizes the stock based compensation incurred by the Company:

	Three Months Ended, September 30				Nine Months Ended, September 30
(in thousands)	2010		2009		2010		2009
Stock options	$	327	$	64	$	1,017	$	190
Restricted stock		6		3		27		94
Total	$	333	$	67	$	1,044	$	284

2007 Equity Incentive Compensation Plan

Immediately prior to the Company’s initial public offering, the Company adopted the 2007 Equity Incentive Compensation Plan (“2007 Plan”). The 2007 Plan provides for the grant of options intended to qualify as incentive stock options, non-qualified stock options, stock appreciation rights or restricted stock awards and any other equity-based or equity-related awards. The 2007 Plan is administered by the Compensation Committee of the Board of Directors. Subject to adjustment for changes in capitalization, the aggregate number of shares that may be delivered pursuant to awards under the 2007 Plan is 3,000,000 and the term of the Plan is ten years, expiring in June 2017.

Stock Options — Except as otherwise directed by the Compensation Committee, the exercise price for options cannot be less than the fair market value of our common stock on the grant date. Other than the stock options issued to Directors, the options will generally vest and become exercisable with respect to 30%, 30% and 40% of the shares of our common stock subject to such options on each of the first three anniversaries of the grant date. Compensation expense related to these options is expensed on a straight line basis over the three year vesting period. Options issued to Directors generally vest and become exercisable on the first anniversary of the grant date. All stock options have a five year term from the date of grant.

During the three and nine months ended September 30, 2010, the Company issued 5,000 and 768,932 stock options, respectively, under the 2007 Plan to certain of our employees and our non-employee Directors with a per share exercise price equal to the market price of the stock on the date of grant. During the three and nine months ended September 30, 2009, the Company issued 0 and 30,000 stock options, respectively, under the 2007 Plan to certain of our non-employee Directors with a per share exercise price equal to the market price of the stock on the date of grant. The determination of the fair value of the stock option awards, using the Black-Scholes model, incorporated the assumptions in the following table for stock options granted during the nine months ended September 30, 2010. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant over the expected term. Expected volatility is calculated by considering, among other things, the expected volatilities of public companies engaged in the ethanol industry.

The weighted average variables used in calculating fair value and the resulting compensation expense in the nine months ended September 30, 2010 are as follows:

Expected stock price volatility		151.3	%
Expected life (in years)		3.2
Risk-free interest rate		2.3	%
Expected dividend yield		0.0	%
Expected forfeiture rate		28.0	%
Weighted average grant date fair value	$	2.27

A summary of the status of outstanding stock options at September 30, 2010 and the changes during the nine months ended September 30, 2010 is as follows:

				Weighted		Weighted				Unrecognized
				Average		Average		Aggregate		Remaining
				Exercise		Remaining		Intrinsic		Compensation
	Shares			Price		Life (years)		Value		Expense
Options outstanding, January 1, 2010		1,196,900		$	4.00
Granted		768,932			2.73
Exercised		-			-
Forfeited		(118,287	)		7.19
Options outstanding, September 30, 2010		1,847,545		$	3.27		4.1	$	40,900
Options vested or expected to vest at September 30, 2010		1,285,897		$	3.38		4.0	$	39,008	$	1,743,023
Options exercisable, September 30, 2010		290,414		$	4.62		3.2	$	31,500

Restricted Stock - During the three and nine months ended September 30, 2010, the Company granted 2,500 and 15,000 shares, respectively, to its non-employee Directors under the 2007 Plan. During the three and nine months ended September 30, 2009, the Company granted 0 and 15,000 shares, respectively, to its non-employee Directors under the 2007 Plan.

A summary of the restricted stock activity during the nine months ended September 30, 2010 is as follows:

				Weighted
				Average				Unrecognized
				Grant Date		Aggregate		Remaining
				Fair Value		Intrinsic		Compensation
	Shares			per Award		Value		Expense
Restricted stock outstanding, January 1, 2010		24,962		$	4.63
Granted		15,000			1.68
Vested		(17,040	)		1.90
Cancelled or expired		(6,507	)		10.50
Restricted stock outstanding, September 30, 2010		16,415		$	2.44	$	32,666
Restricted stock expected to vest at September 30, 2010		12,318		$	2.42	$	24,513	$	22,376

The remaining unrecognized option and restricted stock expense will be recognized over 2.1 and 0.7 years, respectively. After considering the stock option and restricted stock awards issued and outstanding, the Company had 1,052,636 shares of common stock available for future grant under our 2007 Plan at September 30, 2010.

10. Income Taxes

The Company has not recognized any income tax provision (benefit) for the three and nine months ended September 30, 2010 and September 30, 2009.

The U.S. statutory federal income tax rate is reconciled to the Company’s effective income tax rate as follows:

	Three Months Ended, September 30,						Nine Months Ended, September 30,
	2010			2009			2010			2009
Statutory U.S. federal income tax rate		(34.0	)%		(34.0	)%		(34.0	)%		(34.0)	%
Expected state tax benefit, net		(3.6	)%		(3.6	)%		(3.6	)%		(3.6)	%
Valuation allowance		37.6	%		37.6	%		37.6	%		37.6	%
		0.0	%		0.0	%		0.0	%		0.0	%

The effects of temporary differences and other items that give rise to deferred tax assets and liabilities are presented below (in thousands).

	September 30,			December 31,
	2010			2009
Deferred tax assets:
Capitalized start up costs	$	3,877		$	4,216
Net unrealized loss on derivatives		-			36
Stock options		402			179
Net operating loss carryover		58,612			48,879
Other		31			33
Deferred tax asset		62,922			53,343
Valuation allowance		(30,946	)		(24,130	)

Deferred tax liabilities:
Property, plant and equipment		(31,976	)		(29,213	)
Deferred tax liabilities		(31,976	)		(29,213	)

Net deferred tax asset	$	—		$	—

The Company assesses the recoverability of deferred tax assets and the need for a valuation allowance on an ongoing basis. In making this assessment, management considers all available positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred tax assets will be realized in future periods. This assessment requires significant judgment and estimates involving current and deferred income taxes, tax attributes relating to the interpretation of various tax laws, historical bases of tax attributes associated with certain assets and limitations surrounding the realization of deferred tax assets.

As of September 30, 2010, the net operating loss carryforward is $156 million, which will begin to expire if not used by December 31, 2028. The U.S. federal statute of limitations remains open for our 2006 and subsequent tax years.

11. Employee Benefit Plan

401(k) Plan

The LLC sponsors a 401(k) profit sharing and savings plan for its employees. Employee participation in this plan is voluntary. Prior to January 1, 2010, contributions to the plan by the LLC were discretionary and were made on an annual basis at year end. Effective January 1, 2010, the LLC began matching up to 3% of eligible employee contributions on a biweekly basis. For the three and nine months ended September 30, 2010, contributions to the plan by the LLC totaled $67,000 and $198,000, respectively. For the three and nine months ended September 30, 2009 there were no contributions to the plan by the LLC.

12. Commitments and Contingencies

The LLC, through its subsidiaries, entered into two operating lease agreements with Cargill. Cargill’s grain handling and storage facilities, located adjacent to the Wood River and Fairmont plants, are being leased for 20 years, which began in September 2008 for both plants. Minimum annual payments are $800,000 for the Fairmont plant and $1,000,000 for the Wood River plant so long as the associated corn supply agreements with Cargill remain in effect. Should the Company not maintain its corn supply agreements with Cargill, the minimum annual payments under each lease increase to $1,200,000 and $1,500,000, respectively. The leases contain escalation clauses which are based on the percentage change in the Midwest Consumer Price Index. The escalation clauses are considered to be contingent rent and, accordingly, are not included in minimum lease payments. Rent expense is recognized on a straight line basis over the terms of the leases. Events of default under the leases include failure to fulfill monetary or non-monetary obligations and insolvency. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two operating lease agreements were modified, for a period of one year, to defer a portion of the monthly lease payments. The deferred lease payments were to be paid back to Cargill over a two year period beginning September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a letter agreement (“Letter Agreement”) whereby (i) effective October 2010 the minimum annual payments under the leases were reduced to $50,000 for the Fairmont plant and $250,000 for the Wood River plant and (ii) repayment of the deferred lease payments have been deferred for an indefinite period of time.

Subsidiaries of the LLC entered into agreements to lease a total of 825 railroad cars. Pursuant to these lease agreements, which began in the second quarter of 2008, these subsidiaries will pay an average of approximately $7.4 million per year for ten years. Monthly rental charges escalate if modifications of the cars are required by governmental authorities or mileage exceeds 30,000 miles in any calendar year. Rent expense is recognized on a straight line basis over the terms of the leases. Events of default under the leases include failure to fulfill monetary or non-monetary obligations and insolvency.

In April 2008, the LLC entered into a five year lease that began July 1, 2008 for office space for its corporate headquarters. Rent expense is being recognized on a straight line basis over the term of the lease.

Future minimum operating lease payments at September 30, 2010 are as follows (in thousands):

Remainder of 2010	$	2,221
2011		8,211
2012		8,036
2013		7,996
2014		7,776
Thereafter		29,080
Total	$	63,320

Rent expense recorded for the three and nine months ended September 30, 2010 totaled $2,334,000 and $6,919,000, respectively. Rent expense recorded for the three and nine months ended September 30, 2009 totaled $2,366,000 and $7,080,000, respectively.

The LLC, through its subsidiary that constructed the Wood River plant, has entered into agreements with electric utilities pursuant to which the electric utilities built, own and operate substation and distribution facilities in order to supply electricity to the plants. For its Wood River plant, the LLC paid the utility $1.5 million for the cost of the substation and distribution facility, which was recorded as property, plant and equipment. The balance of the utilities direct capital costs is being recovered from monthly demand charges of approximately $124,000 per month for three years which began in the second quarter of 2008.

Pursuant to long-term agreements, Cargill is the exclusive supplier of corn to the Wood River and Fairmont plants for twenty years commencing September 2008. The price of corn purchased under these agreements is based on a formula including cost plus an origination fee of $0.045 per bushel. The minimum annual origination fee payable to Cargill per plant under the agreements is $1.2 million. The agreements contain events of default that include failure to pay, willful misconduct, purchase of corn from another supplier, insolvency or the termination of the associated grain facility lease. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two corn supply agreements were modified, for a period of one year, extending payment terms for our corn purchases which payment terms were to revert back to the original terms on September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a Letter Agreement whereby the extended payment terms for our corn purchases will remain in effect for the remainder of the two corn supply agreements.

At September 30, 2010, the LLC, through its subsidiaries, had contracted to purchase 6,957,000 bushels of corn to be delivered between October 2010 and October 2011 at our Fairmont location, and 8,858,000 bushels of corn to be delivered between October 2010 and March 2012 at our Wood River location. These purchase commitments represent 16% and 14% of the projected corn requirements during those periods for Fairmont and Wood River, respectively. The purchase price of the corn will be determined at the time of delivery. At September 30, 2010, the LLC, through its subsidiaries, had contracted for future ethanol deliveries valued at $4.3 million between October 2010 and December 2010 for each of our plants. These sales commitments represent 10% of the projected ethanol sales during the period at each plant. These normal purchase and sale commitments are not marked to market or recorded in the consolidated balance sheet.

Cargill has agreed to purchase all ethanol and distillers grain produced at the Wood River and Fairmont plants through September 2016. Under the terms of the ethanol marketing agreements, the Wood River and Fairmont plants will generally participate in a marketing pool where all parties receive the same net price. That price initially was the average delivered price per gallon received by the marketing pool less average transportation and storage charges and less a 1% commission. In certain circumstances, the plants may elect not to participate in the marketing pool. Minimum annual commissions are payable to Cargill and initially represented 1% of Cargill’s average selling price for 82.5 million gallons of ethanol from each plant. Under the distillers grain marketing agreements, the Wood River and Fairmont plants will receive the market value at time of sale less a commission. Minimum annual commissions are payable to Cargill and range from $500,000 to $700,000 depending upon certain factors as specified in the agreement. The marketing agreements contain events of default that include failure to pay, willful misconduct and insolvency. Effective September 1, 2009, the subsidiaries and Cargill entered into Omnibus Agreements whereby the two ethanol marketing agreements were modified, for a period of one year, to defer a portion of the monthly ethanol commission payments. The deferred commission payments were to be paid to Cargill over a two year period beginning September 1, 2010. On September 23, 2010 the subsidiaries and Cargill entered into a Letter Agreement whereby (i) effective September 24, 2010 the ethanol commissions were reduced to $0.01 per gallon and the distillers grain commissions were reduced accordingly and (ii) repayment of the deferred commission payments have been deferred for an indefinite period of time.

The Company is not currently a party to any material legal, administrative or regulatory proceedings that have arisen in the ordinary course of business or otherwise that would result in loss contingencies.

13. Noncontrolling Interest

Noncontrolling interest consists of equity issued to members of the LLC. Under its original LLC agreement, the LLC was authorized to issue 9,357,500 Class A; 950,000 Class B; 425,000 Class M; 2,683,125 Class C; and 894,375 Class D Units. Class M, C and D Units were considered “profits interests” for which no cash consideration was received upon issuance. In accordance with the LLC agreement, all classes of the LLC’s equity units were converted to one class of LLC equity upon the Company’s initial public offering in June 2007. As provided in the LLC agreement, the exchange ratio of the various existing classes of equity for the single class of equity was based on the Company’s initial public offering price of $10.50 per share and the resulting implied valuation of the Company. The exchange resulted in the issuance of 17,957,896 LLC membership units and Class B common shares. Each LLC membership unit combined with a share of Class B common stock is exchangeable at the holder’s option into one share of Company common stock. The LLC may make distributions to members as determined by the Company.

Exchange of LLC Units

LLC membership units, when combined with the Class B shares, can be exchanged for newly issued shares of common stock of the Company on a one-for-one basis. The following table summarizes the exchange activity since the Company’s initial public offering:

LLC Membership Units and Class B common shares outstanding at initial public offering, June 2007	17,957,896

LLC Membership Units and Class B common shares exchanged in 2007	(561,210	)

LLC Membership Units and Class B common shares exchanged in 2008	(7,314,438	)

LLC Membership Units and Class B common shares exchanged in 2009	(2,633,663	)

LLC Membership Units and Class B common shares exchanged in the nine months ended September 30, 2010	(336,600	)

Remaining LLC Membership Units and Class B common shares at September 30, 2010	7,111,985

At the time of its initial public offering, the Company owned 28.9% of the LLC membership units of the LLC. At September 30, 2010, the Company owned 78.7% of the LLC membership units. The noncontrolling interest will continue to be reported until all Class B common shares and LLC membership units have been exchanged for the Company’s common stock.

The table below shows the effects of the changes in BioFuel Energy Corp.’s ownership interest in LLC on the equity attributable to BioFuel Energy Corp.’s common shareholders for the three and nine months ended September 30, 2010 and September 30, 2009 (in thousands):

Net Loss Attributable to BioFuel Energy Corp.’s Common Shareholders and

Transfers (to) from the Noncontrolling Interest

	Three Months Ended, September 30						Nine Months Ended, September 30
	2010			2009			2010			2009

Net income (loss) attributable to BioFuel Energy Corp.	$	(1,377	)	$	(6,234	)	$	(18,936	)	$	(20,478	)
Transfers (to) from the noncontrolling interest
Increase in BioFuel Energy Corp.’s stockholders equity from issuance of common shares in exchange for Class B common shares and units of BioFuel Energy, LLC		-			-			236			1,794
Net transfers (to) from noncontrolling interest		-			-			236			1,794
Change in equity from net loss attributable to BioFuel Energy Corp. and transfers (to) from noncontrolling interest	$	(1,377	)	$	(6,234	)	$	(18,700	)	$	(18,684	)

Tax Benefit Sharing Agreement

Membership units in the LLC combined with the related Class B common shares held by the historical equity investors may be exchanged in the future for shares of our common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications. The LLC will make an election under Section 754 of the IRS Code effective for each taxable year in which an exchange of membership units and Class B shares for common shares occurs, which may result in an adjustment to the tax basis of the assets owned by the LLC at the time of the exchange. Increases in tax basis, if any, would reduce the amount of tax that the Company would otherwise be required to pay in the future, although the IRS may challenge all or part of the tax basis increases, and a court could sustain such a challenge. The Company has entered into tax benefit sharing agreements with its historical LLC investors that will provide for a sharing of these tax benefits, if any, between the Company and the historical LLC equity investors. Under these agreements, the Company will make a payment to an exchanging LLC member of 85% of the amount of cash savings, if any, in U.S. federal, state and local income taxes the Company actually realizes as a result of this increase in tax basis. The Company and its common stockholders will benefit from the remaining 15% of cash savings, if any, in income taxes realized. For purposes of the tax benefit sharing agreement, cash savings in income tax will be computed by comparing the Company’s actual income tax liability to the amount of such taxes the Company would have been required to pay had there been no increase in the tax basis in the assets of the LLC as a result of the exchanges. The term of the tax benefit sharing agreement commenced on the Company’s initial public offering in June 2007 and will continue until all such tax benefits have been utilized or expired, unless a change of control occurs and the Company exercises its resulting right to terminate the tax benefit sharing agreement for an amount based on agreed payments remaining to be made under the agreement.

True Up Agreement

At the time of formation of the LLC, the founders agreed with certain of our principal stockholders as to the relative ownership interests in the Company of our management members and affiliates of Greenlight Capital, Inc. (“Greenlight”) and Third Point LLC (“Third Point”). Certain management members and affiliates of Greenlight and Third Point agreed to exchange LLC membership interests, shares of common stock or cash at a future date, referred to as the “true-up date”, depending on the Company’s performance. This provision functions by providing management with additional value if the Company’s value improves and by reducing management’s interest in the Company if its value decreases, subject to a predetermined rate of return accruing to Greenlight and Third Point. In particular, if the value of the Company increases from the time of the initial public offering to the “true-up date”, the management members will be entitled to receive LLC membership units, shares of common stock or cash from the affiliates of Greenlight and Third Point. On the other hand, if the value of the Company decreases from the time of the initial public offering to the “true-up date” or if a predetermined rate of return is not met, the affiliates of Greenlight and Third Point will be entitled to receive LLC membership units or shares of common stock from the management members.

The “true-up date” will be the earlier of (1) the date on which the Greenlight and Third Point affiliates sell a number of shares of our common stock equal to or greater than the number of shares of common stock or Class B common stock received by them at the time of our initial public offering in respect of their original investment in the LLC, and (2) five years from the date of the initial public offering which is June 2012. On the “true-up date”, the LLC’s value will be determined, based on the prices at which the Greenlight and Third Point affiliates sold shares of our common stock prior to that date, with any remaining shares (or LLC membership units exchangeable for shares) held by them deemed to have been sold at the then-current trading price. If the number of LLC membership units held by the management members at the time of the offering is greater than the number of LLC membership units the management members would have been entitled to in connection with the “true-up” valuation, the management members will be obligated to deliver to the Greenlight and Third Point affiliates a portion of their LLC membership units or an equivalent number of shares of common stock. Conversely, if the number of LLC membership units the management members held at the time of the offering is less than the number of LLC membership units the management members would have been entitled to in connection with the “true-up” valuation, the Greenlight and Third Point affiliates will be obligated to deliver, at their option, to the management members a portion of their LLC membership interests or an equivalent amount of cash or shares of common stock. In no event will any management member be required to deliver more than 50% of the membership units in the LLC, or an equivalent number of shares of common stock, held on the date of the initial public offering, provided that Mr. Thomas J. Edelman may be required to deliver up to 100% of his LLC membership units, or an equivalent amount of cash or number of shares of common stock. No new shares will be issued as a result of the true-up. As a result there will be no impact on our public shareholders, but rather a redistribution of shares among certain members of our management group and our two largest investors, Greenlight and Third Point. This agreement was considered a modification of the awards granted to the participating management members; however, no incremental fair value was created as a result of the modification.

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

You should read the following discussion in conjunction with the unaudited consolidated financial statements and the accompanying notes included in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Specifically, forward-looking statements may be preceded by, followed by or may include such words as “estimate”, “plan”, “project”, “forecast”, “intend”, “expect”, “is to be”, “anticipate”, “goal”, “believe”, “seek”, “target” or other similar expressions. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this Form 10-Q, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, we undertake no obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events. Our actual results may differ materially from those discussed in or implied by any of the forward-looking statements as a result of various factors, including but not limited to those listed elsewhere in this Form 10-Q and those listed in our Annual Report on Form 10-K for the year ended December 31, 2009 or in other documents we have filed with the Securities and Exchange Commission.

Overview

BioFuel Energy Corp. produces and sells ethanol and distillers grain through its two ethanol production facilities located in Wood River, Nebraska and Fairmont, Minnesota. Each of these plants has a nameplate capacity, based on the maximum amount of permitted denaturant, of approximately 115 million gallons per year (“Mmgy”). We work closely with Cargill, Inc., one of the world’s leading agribusiness companies and a related party, with whom we have an extensive commercial relationship. The two plant locations were selected primarily based on access to corn supplies, the availability of rail transportation and natural gas and Cargill’s competitive position in the area. At each location, Cargill has a strong local presence and owns adjacent grain storage and handling facilities, which we lease from them. Cargill provides corn procurement services, markets the ethanol and distillers grain we produce and provides transportation logistics for our two plants under long-term contracts.

We are a holding company with no operations of our own, and are the sole managing member of BioFuel Energy, LLC, or the LLC, which is itself a holding company and indirectly owns all of our operating assets. The Company’s ethanol plants are owned and operated by the Operating Subsidiaries of the LLC.

Going Concern and Liquidity Considerations

Our results of operations and financial condition depend substantially on the price of our main commodity input, corn, relative to the price of our main commodity product, ethanol, which is known in the industry as the “crush spread.” The prices of these commodities are volatile and beyond our control. As a result of the volatility of the prices for these and other items, our results fluctuate substantially and in ways that are largely beyond our control. For example, from October 1, 2008 to September 30, 2010, the Chicago Board of Trade (CBOT) price of corn has fluctuated from a low of $3.01 per bushel in September 2009 to a high of $5.22 per bushel in September 2010 and averaged $3.79 per bushel during this period, while CBOT ethanol prices have fluctuated from a low of $1.40 per gallon in December 2008 to a high of $2.16 per gallon in December 2009 and averaged $1.69 per gallon during this same period. We were profitable in the fourth quarter of 2009, when crush spreads were more favorable, but incurred significant losses during the first half of 2010 when crush spreads contracted significantly. However, crush spreads improved during the third quarter of 2010 and therefore, as reported in the unaudited consolidated financial statements included elsewhere in this report, the Company’s net losses narrowed to $1.8 million during the three months ended September 30, 2010. Since we commenced operations, we have from time to time entered into derivative financial instruments such as futures contracts, swaps and option contracts with the objective of limiting our exposure to changes in commodities prices. However, we are currently able to engage in such hedging activities only on a limited basis due to our lack of financial resources, and we may not have the financial resources to increase or conduct any of these hedging activities in the future.

We cannot predict when or if crush spreads will narrow. We have experienced periods during which narrow crush spreads have greatly diminished or, in some instances eliminated, our daily gross operating margins at the plant level, which adversely affected our results of operations and caused our operating cash flow to decrease below the amount needed to service our debt on a sustained basis. In the event crush spreads narrow, we may choose to curtail operations at our plants or cease operations altogether. In addition, we may expend all of our available sources of liquidity, in which event we would not be able to pay principal or interest on our debt, which would lead to an event of default under our debt agreements and, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, require us to seek relief through a filing under the U.S. Bankruptcy Code. See “—Liquidity and capital resources.” We expect fluctuations in the crush spread to continue. Any future reduction in the crush spread may also cause our operating margins to deteriorate to an extent that would result in an impairment charge, in addition to causing the consequences described above. See “—Summary of critical accounting policies and significant estimates—Recoverability of property, plant and equipment.”

As of September 30, 2010, the Company had $32.6 million of long-term debt due within the next year, including a $19.4 million Bridge Loan (See “—Liquidity and capital resources—Bridge Loan facility”) which matures on March 24, 2011. We are restricted by the terms of our Senior Debt facility from using the funds generated by our operating subsidiaries to repay the Bridge Loan. Therefore, even if we generate positive cash flow from operations, under the terms of our Senior Debt facility, we cannot use that cash flow to repay the Bridge Loan. In connection with the Bridge Loan agreement, on September 24, 2010, the Company entered into a Rights Offering Letter Agreement (See “—Liquidity and capital resources—Rights Offering and LLC Concurrent Private Placement”) with the Bridge Loan Lenders, who are our two largest stockholders, pursuant to which the Company agreed to use its commercially reasonable best efforts to commence and complete a rights offering. The LLC also intends to commence and complete a concurrent private placement of LLC interests. If the rights offering and the LLC’s concurrent private placement do not generate sufficient proceeds to repay the Bridge Loan, we may not have sufficient liquidity to repay the Bridge Loan when it becomes due. If we are unable to generate sufficient proceeds from the rights offering and the LLC’s concurrent private placement to repay the Bridge Loan, we may seek new capital from other sources. We cannot assure you that we will be successful in achieving any of these initiatives or, even if successful, that these initiatives will be sufficient to address our limited liquidity and the pending maturity of the Bridge Loan. In addition, if we do not repay the Bridge Loan in full on or before March 24, 2011, we will be required to issue to the Bridge Loan Lenders warrants to purchase shares of our common stock equal to 15% of our outstanding shares as of such date at a price of $0.01 per share and the interest rate on the Bridge Loan will increase to a rate of 14.5% per annum. If we are unable to raise sufficient proceeds from the rights offering, the LLC’s concurrent private placement, or from other sources, we may be unable to continue as a going concern, which could potentially force us to seek relief through a filing under the U.S. Bankruptcy Code.

Basis for Consolidation

At September 30, 2010, the Company owned 78.7% of the LLC and the remainder was owned by some of our historical equity investors. As a result, the Company consolidates the results of the LLC. The amount of income or loss allocable to the 21.3% holders is reported as noncontrolling interest in our consolidated statements of operations. The Class B common shares of the Company are held by the historical equity investors of the LLC, who held 7,111,985 membership units in the LLC as of September 30, 2010 that, together with the corresponding Class B shares, can be exchanged for newly issued shares of common stock of the Company on a one-for-one basis. As of December 31, 2009, the unit holders owned 7,448,585 membership units, or 22.9% of the membership units in the LLC. During the nine months ended September 30, 2010, unit holders exchanged 336,600 membership units in the LLC (together with the corresponding shares of Class B common stock) for shares of our common stock, substantially all of which are eligible for sale under Rule 144 promulgated under the Securities Act of 1933 upon lapse of a six-month holding period.

Revenues

Our primary source of revenue is the sale of ethanol. The selling prices we realize for our ethanol are largely determined by the market supply and demand for ethanol, which, in turn, is influenced by industry factors over which we have little control. Ethanol prices are extremely volatile.

We also receive revenue from the sale of distillers grain, which is a residual co-product of the processed corn used in the production of ethanol and is sold as animal feed. The selling prices we realize for our distillers grain are largely determined by the market supply and demand, primarily from livestock operators and marketing companies in the U.S. and internationally. Distillers grain is sold by the ton and, based upon the amount of moisture retained in the product, can either be sold “wet” or “dry”.

Cost of goods sold and gross profit (loss)

Our gross profit (loss) is derived from our revenues less our cost of goods sold. Our cost of goods sold is affected primarily by the cost of corn and natural gas. The prices of both corn and natural gas are volatile and can vary as a result of a wide variety of factors, including weather, market demand, regulation and general economic conditions, all of which are outside of our control.

Corn is our most significant raw material cost. Historically, rising corn prices result in lower profit margins because ethanol producers are unable to pass along increased corn costs to customers. The price and availability of corn is influenced by weather conditions and other factors affecting crop yields, farmer planting decisions and general economic, market and regulatory factors. These factors include government policies and subsidies with respect to agriculture and international trade, and global and local demand and supply for corn and for other agricultural commodities for which it may be substituted, such as soybeans. Historically, the cash price we pay for corn, relative to the spot price of corn, tends to rise during the spring planting season in May and June as the local basis (i.e., discount) contracts, and tends to decrease relative to the spot price during the fall harvest in October and November as the local basis expands.

We also purchase natural gas to power steam generation in our ethanol production process and as fuel for our dryers to dry our distillers grain. Natural gas represents our second largest operating cost after corn, and natural gas prices are extremely volatile. Historically, the spot price of natural gas tends to be highest during the heating and cooling seasons and tends to decrease during the spring and fall.

Corn procurement fees paid to Cargill are included in our cost of goods sold. Other cost of goods sold primarily consists of our cost of chemicals and enzymes, electricity, depreciation, manufacturing overhead and rail car lease expenses.

General and administrative expenses

General and administrative expenses consist of salaries and benefits paid to our management and administrative employees, expenses relating to third party services, insurance, travel, office rent, marketing and other expenses, including expenses associated with being a public company, such as fees paid to our independent auditors associated with our annual audit and quarterly reviews, directors’ fees, and listing and transfer agent fees.

Results of operations

The following discussion summarizes the significant factors affecting the consolidated operating results of the Company for the three and nine months ended September 30, 2010 and September 30, 2009. This discussion should be read in conjunction with the unaudited consolidated financial statements and notes to the unaudited consolidated financial statements contained in this Form 10-Q.

The following table sets forth net sales, expenses and net loss, as well as the percentage relationship to net sales of certain items in our consolidated statements of operations:

	Three Months Ended										Nine Months Ended
	September 30, 2010					September 30, 2009					September 30, 2010					September 30, 2009
	(unaudited)										(unaudited)
	(dollars in thousands)										(dollars in thousands)
Net sales	$	114,747		100.0	%	$	91,138		100.0	%	$	312,031		100.0	%	$	295,096		100.0	%
Cost of goods sold		110,140		96.0			89,039		97.7			318,336		102.0			298,911		101.3
Gross profit (loss)		4,607		4.0			2,099		2.3			(6,305	)	(2.0	)		(3,815	)	(1.3	)
General and administrative expenses		3,582		3.1			5,887		6.5			9,794		3.1			12,761		4.3
Operating income (loss)		1,025		0.9			(3,788	)	(4.2	)		(16,099	)	(5.1	)		(16,576	)	(5.6	)
Other expense		(2,783	)	(2.4	)		(4,585	)	(5.0	)		(8,061	)	(2.6	)		(11,963	)	(4.1	)
Net loss		(1,758	)	(1.5	)		(8,373	)	(9.2	)		(24,160	)	(7.7	)		(28,539	)	(9.7	)
Less: Net loss attributable to the noncontrolling interest		381		0.3			2,139		2.4			5,224		1.6			8,061		2.8
Net loss attributable to BioFuel Energy Corp. common shareholders	$	(1,377	)	(1.2	) %	$	(6,234	)	(6.8	) %	$	(18,936	)	(6.1	)%	$	(20,478	)	(6.9	)%

The following table sets forth key operational data for the three and nine months ended September 30, 2010 and September 30, 2009 that we believe are important indicators of our results of operations:

	Three Months Ended				Nine Months Ended
	September 30, 2010		September 30, 2009		September 30, 2010		September 30, 2009
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Ethanol sold (gallons, in thousands)		56,185		51,557		167,733		162,568
Dry distillers grains sold (tons, in thousands)		131.3		117.3		377.4		360.8
Wet distillers grains sold (tons, in thousands)		65.5		84.3		266.3		283.1
Average price of ethanol sold (per gallon)	$	1.84	$	1.56	$	1.64	$	1.54
Average price of dry distillers grains sold (per ton)	$	88.10	$	84.25	$	92.72	$	108.05
Average price of wet distillers grains sold (per ton)	$	22.26	$	23.08	$	22.80	$	34.34
Average corn cost (per bushel)	$	3.83	$	3.14	$	3.66	$	3.58

Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009

Net Sales: Net Sales were $114,747,000 for the three months ended September 30, 2010 compared to $91,138,000 for the three months ended September 30, 2009, an increase of $23,609,000 or 25.9%. This increase was attributable to an increase in ethanol revenues of $22,463,000 and an increase in distillers grains revenues of $1,146,000. The increase in ethanol revenue was due to both an increase in the per unit price we received and the quantity of ethanol sold. Higher sales volumes resulted from higher production volumes for the three months ended September 30, 2010 compared to the same period in the prior year.

Cost of goods sold: The following table sets forth the components of cost of goods sold for the three months ended September 30, 2010 and September 30, 2009:

	Three Months Ended September 30,
	2010				2009
	Amount		Per Gallon of Ethanol		Amount		Per Gallon of Ethanol
	(amounts in thousands)
Corn	$	78,215	$	1.39	$	60,456	$	1.17
Natural gas		7,788	$	0.14		5,359	$	0.10
Denaturant		1,935	$	0.03		1,817	$	0.04
Electricity		3,636	$	0.07		3,300	$	0.07
Chemicals and enzymes		4,156	$	0.07		3,528	$	0.07
General operating expenses		7,938	$	0.14		8,219	$	0.16
Depreciation		6,472	$	0.12		6,360	$	0.12
Cost of goods sold	$	110,140			$	89,039

Cost of goods sold was $110,140,000 for the three months ended September 30, 2010 compared to $89,039,000 for the three months ended September 30, 2009, an increase of $21,101,000 or 23.7%. The increase was primarily attributable to a $17,759,000 increase in the cost of corn and $2,429,000 in higher natural gas costs. The increase in corn cost was attributable to an increase in the price per bushel paid for com, partially offset by an increase in yield, that is, in the amount of ethanol we were able to produce per bushel of corn used. The increase in natural gas cost was attributable to a higher price per million of British Thermal Units (“Mmbtu”).

General and administrative expenses: General and administrative expenses decreased $2,305,000 or 39.2%, to $3,582,000 for the three months ended September 30, 2010, compared to $5,887,000 for the three months ended September 30, 2009. The decrease was primarily due to $3,205,000 of legal and financial advisory expenses, primarily related to the Company’s negotiations with the lenders under the Senior Debt facility concerning restructuring and loan conversion, which were incurred during the three months ended September 30, 2009. During the three months ended September 30, 2010, the Company incurred $942,000 of legal and financial advisory expenses related to negotiations with those lenders.

Other income (expense): Interest expense was $2,783,000 for the three months ended September 30, 2010, compared to $4,598,000 for the three months ended September 30, 2009, a decrease of $1,815,000 or 39.5%. During the three months ended September 30, 2009, the Company paid $988,000 relating to two interest rate swaps, both of which were in effect for the entire quarter. These interest rate swaps were not in effect during the three months ended September 30, 2010. The remainder of the decrease was primarily attributable to a $1,050,000 decrease in interest on the Senior Debt facility as a result of the higher default interest rate the Company was required to pay for the three months ended September 30, 2009, which was not in effect during the three months ended September 30, 2010.

Noncontrolling Interest: The net loss attributable to the noncontrolling interest decreased $1,758,000 to $381,000 for the three months ended September 30, 2010, compared to $2,139,000 for the three months ended September 30, 2009. The decrease was attributable to the Company’s net loss decreasing from $8,373,000 for the three months ended September 30, 2009 to $1,758,000 for the three months ended September 30, 2010, which was offset by a decrease in the percentage ownership of the noncontrolling interest from 25.0% at September 30, 2009 to 21.3% at September 30, 2010.

Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009

Net Sales: Net Sales were $312,031,000 for the nine months ended September 30, 2010 compared to $295,096,000 for the nine months ended September 30, 2009, an increase of $16,935,000 or 5.7%. This increase was attributable to an increase in ethanol revenues of $24,497,000, which was partially offset by a decrease in distillers revenues of $7,562,000. The increase in ethanol revenue was due to both an increase in the per unit price we received and the quantity of ethanol sold. Higher sales volumes resulted from higher production volumes for the nine months ended September 30, 2010 compared to the same period in the prior year. The decrease in distillers grains revenue was primarily due to a decrease in the per unit price we received.

Cost of goods sold: The following table sets forth the components of cost of goods sold for the nine months ended September 30, 2010 and September 30, 2009:

	Nine Months Ended September 30,
	2010				2009
	Amount		Per Gallon of Ethanol		Amount		Per Gallon of Ethanol
	(amounts in thousands)
Corn	$	219,071	$	1.31	$	211,736	$	1.30
Natural gas		25,007	$	0.15		18,493	$	0.11
Denaturant		6,465	$	0.04		4,934	$	0.03
Electricity		10,093	$	0.06		9,293	$	0.06
Chemicals and enzymes		12,130	$	0.07		12,677	$	0.08
General operating expenses		26,333	$	0.16		22,868	$	0.14
Depreciation		19,237	$	0.11		18,910	$	0.12
Cost of goods sold	$	318,336			$	298,911

Cost of goods sold was $318,336,000 for the nine months ended September 30, 2010 compared to $298,911,000 for the nine months ended September 30, 2009, an increase of $19,425,000 or 6.5%. The increase was primarily attributable to a $7,335,000 increase in the cost of corn, a $6,514,000 increase in natural gas costs, and a $3,465,000 increase in general operating expense costs. The increase in corn cost was attributable to an increase in the price per bushel paid for com, partially offset by an increase in yield, that is, in the amount of ethanol we were able to produce per bushel of corn used. The increase in natural gas cost was attributable to a higher price per Mmbtu while the increase in general operating expenses resulted primarily from an increase in repairs and maintenance costs of $1,921,000.

General and administrative expenses: General and administrative expenses decreased $2,967,000 or 23.3%, to $9,794,000 for the nine months ended September 30, 2010, compared to $12,761,000 for the nine months ended September 30, 2009. The decrease was primarily due to a decrease in legal and financial advisory expenses of $3,912,000, partially offset by an increase in share based compensation expense of $760,000. The legal and financial advisory expenses incurred during the nine months ended September 30, 2009 primarily related to the Company’s negotiations with the lenders under the Senior Debt facility concerning restructuring and loan conversion and totaled $4,854,000. During the nine months ended September 30, 2010, the Company incurred $942,000 of legal and financial advisory expenses related to negotiations with those lenders.

Other income (expense): Interest expense was $8,061,000 for the nine months ended September 30, 2010, compared to $12,036,000 for the nine months ended September 30, 2009, a decrease of $3,975,000 or 33.0%. During the nine months ended September 30, 2009, the Company paid $2,841,000 relating to two interest rate swaps, both of which were in effect for the entire period. During the nine months ended September 30, 2010, the Company paid $197,000 as only one swap remained in effect for the first two months of the period. The remaining decrease was primarily attributable to a $1,400,000 decrease as a result of the higher default interest rate the Company was required to pay on the Senior Debt facility for the period of June 2009 through September 2009, which was not in effect during the nine months ended September 30, 2010.

Noncontrolling Interest: The net loss attributable to the noncontrolling interest decreased $2,837,000 to $5,224,000 for the nine months ended September 30, 2010, compared to $8,061,000 for the nine months ended September 30, 2009. The decrease was attributable to a decrease in the percentage ownership of the noncontrolling interest during those periods, in addition to the Company’s net loss decreasing from $28,539,000 for the nine months ended September 30, 2009 to $24,160,000 for the nine months ended September 30, 2010.

Liquidity and capital resources

Our cash flows from operating, investing and financing activities during the nine months ended September 30, 2010 and September 30, 2009 are summarized below (in thousands):

	Nine Months Ended
	September 30, 2010			September 30, 2009
Cash provided by (used in):
Operating activities	$	11,788		$	(10,694	)
Investing activities		(4,179	)		(10,111	)
Financing activities		(2,823	)		16,673
Net increase (decrease) in cash and equivalents	$	4,786		$	(4,132	)

Cash provided by (used in) operating activities. Net cash provided by operating activities was $11,788,000 for the nine months ended September 30, 2010, compared to net cash used in operating activities of $10,694,000 for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, the amount was primarily comprised of a net loss of $24,160,000 which was offset by working capital sources of $11,867,000 and non-cash charges of $24,081,000, which were primarily depreciation and amortization. Working capital sources primarily related to decreases in accounts receivable and inventories and increases in accounts payable. For the nine months ended September 30, 2009, the amount was primarily comprised of a net loss of $28,539,000, and working capital uses of $3,427,000, which were partially offset by non-cash charges of $21,272,000, which were primarily depreciation and amortization.

Cash used in investing activities. Net cash used in investing activities was $4,179,000 for the nine months ended September 30, 2010, compared to $10,111,000 for the nine months ended September 30, 2009. The net cash used in investing activities during the nine months ended September 30, 2010 was for various capital expenditure projects at the plants. The net cash used in investing activities during the nine months ended September 30, 2009 was primarily comprised of the payment of the construction retainage to TIC, the general contractor that constructed our two plants, which totaled $9,407,000, and $3,163,000 for various capital expenditures at the plants.

Cash provided by (used in) financing activities. Net cash used in financing activities was $2,823,000 for the nine months ended September 30, 2010, compared to net cash provided by financing activities of $16,673,000 for the nine months ended September 30, 2009. For the nine months ended September 30, 2010, the amount was primarily comprised of $6,593,000 of borrowings under our term loan facility, $1,500,000 of borrowings under our working capital facility, and $19,421,000 of borrowings under our bridge loan, which were offset by $9,450,000 in payments under our term loan facility, $18,000,000 in payments under our working capital facility, $804,000 in payments of notes payable and capital leases, and $2,049,000 in payments for debt and equity issuance costs. For the nine months ended September 30, 2009 the amount was primarily comprised of $3,000,000 of borrowings under our working capital facility and $17,387,000 in borrowings under our term loan (formerly construction loan) facility, which were partially offset by $1,233,000 in payments on the Subordinated Debt, $3,150,000 in payments under the term loan facility, and $718,000 in payments of notes payable and capital leases.

Our principal sources of liquidity at September 30, 2010 consisted of cash and equivalents of $10,895,000. Under an amendment to our corn supply agreement with Cargill, we may also extend payment terms for corn which as of September 30, 2010 would provide approximately another $3,200,000 in liquidity.

As noted elsewhere in this report, crush spreads narrowed during the first half of 2010, resulting in lower margins and decreased liquidity. Our principal liquidity needs are expected to be funding our plant operations, capital expenditures, debt service requirements, and general corporate purposes. Although the crush spread improved in the third quarter of 2010, we cannot predict when or if crush spreads will fluctuate again or if the current margins will improve or worsen. In the event crush spreads narrow, we may choose to curtail or cease operations at our plants. In addition, we have fully utilized our debt service reserve availability under our Senior Debt facility and we may expend all of our other sources of liquidity, in which event we would not be able to pay principal or interest on our debt. This would lead to an event of default under our debt agreements and, in the absence of forbearance, debt service abeyance or other accommodations from our lenders, require us to cease operating altogether.

Senior Debt facility

In September 2006, the Operating Subsidiaries entered into the Senior Debt facility providing for the availability of $230.0 million of borrowings with a syndicate of lenders to finance the construction of our ethanol plants. Neither the Company nor the LLC is a borrower under the Senior Debt facility, although the equity interests and assets of our subsidiaries are pledged as collateral to secure the debt under the facility.

The Senior Debt facility also included a working capital facility of up to $20.0 million, which had a maturity date of September 25, 2010. On September 24, 2010, the Company paid off the $17.9 million outstanding working capital facility balance with proceeds from a Bridge Loan, as described below.

Subordinated Debt agreement

The LLC is the borrower of Subordinated Debt under a loan agreement dated September 25, 2006, entered into with certain affiliates of Greenlight Capital, Inc. and Third Point LLC, both of which are related parties, the proceeds of which were used to fund a portion of the development and construction of our plants and for general corporate purposes. The entire principal balance, if any, plus all accrued and unpaid interest will be due in March 2015. Once repaid, the Subordinated Debt may not be re-borrowed. The Subordinated Debt is secured by the subsidiary equity interests owned by the LLC and are fully and unconditionally guaranteed by all of the LLC’s subsidiaries, which guarantees are subordinated to the obligations of these subsidiaries under our Senior Debt facility. A default under our Senior Debt facility would also constitute a default under our Subordinated Debt and would entitle the lenders to accelerate the repayment of amounts outstanding.

In January 2009, the LLC and the Subordinated Debt lenders entered into a waiver and amendment agreement to the Subordinated Debt agreement. Under the waiver and amendment, interest on the Subordinated Debt began accruing at a 5.0% annual rate compounded quarterly, a rate that will apply until the debt owed to Cargill, under an agreement entered into simultaneously, has been paid in full, at which time the rate will revert to a 15.0% annual rate and quarterly payments in arrears are required. As long as the debt to Cargill remains outstanding, future payments to the Subordinated Debt lenders will be contingent upon available cash (as defined in both agreements) being received by the LLC. As of September 30, 2010, the LLC had $21.1 million outstanding under its Subordinated Debt facility.

Debt issuance fees and expenses of $5.5 million ($1.2 million, net of accumulated amortization) have been incurred in connection with the Subordinated Debt through September 30, 2010. Debt issuance costs associated with the Subordinated Debt have been deferred and are being amortized and expensed over the term of the agreement.

Cargill debt agreement

In January 2009, the LLC and Cargill entered into the Cargill Agreement which finalized the payment terms for $17.4 million owed to Cargill by the LLC related to hedging losses with respect to corn hedging contracts that had been liquidated in the third quarter of 2008. The Cargill Agreement required an initial payment of $3.0 million on the outstanding balance, which was paid on December 5, 2008. Upon the initial payment of $3.0 million, Cargill also forgave $3.0 million. Effective December 1, 2008, interest on the Cargill Debt began accruing at a 5.0% annual rate compounded quarterly. Future payments to Cargill of both principal and interest are contingent upon the receipt by the LLC of available cash, as defined in the Cargill Agreement. Cargill will forgive, on a dollar for dollar basis, a further $2.8 million as it receives the next $2.8 million of principal payments. The Cargill Debt is being accounted for as a troubled debt restructuring. As the future cash payments specified by the terms of the Cargill Agreement exceed the carrying amount of the debt before the $3.0 million was forgiven, the carrying amount of the debt was not reduced and no gain was recorded. As future payments are made, the LLC will determine, based on the timing of payments, whether or not any gain should be recorded.

Bridge Loan facility

On September 24, 2010, the Company entered into a loan agreement (the “Bridge Loan Agreement”) with Greenlight Capital, Inc. and certain of its affiliates (collectively, the “Greenlight Parties”) and an affiliate of Third Point LLC (“Third Point” and, together with the Greenlight Parties, the “Bridge Loan Lenders”) pursuant to which the Company borrowed $19.4 million (the "Bridge Loan"). The proceeds of the Bridge Loan were used (i) to repay the $17.9 million in outstanding working capital loans under the Senior Debt facility, and (ii) to pay the fees and expenses of the transaction, which were a bridge loan funding fee of $0.8 million and a backstop commitment fee pursuant to the Rights Offering Letter Agreement of $0.7 million. The Bridge Loan is secured by a pledge of the Company's equity interest in the LLC. The Bridge Loan matures on March 24, 2011 and in the event the Bridge Loan is not paid in full on or before the maturity date, the Company will issue warrants to the Bridge Loan Lenders exercisable for an aggregate of 15% of the Company's common stock on a fully diluted basis as of the date the warrant is issued at an exercise price of $0.01 per share.

The Bridge Loan bears interest at a rate of 12.5% per annum, and if the Bridge Loan is not paid in full on or before the maturity date, the Bridge Loan will bear interest at a rate of 14.5% per annum. Under the Bridge Loan Agreement, the Company must comply with its obligations under the Rights Offering Letter Agreement, including the obligation to use its commercially reasonable best efforts to conduct the Rights Offering. In connection therewith, the LLC intends to conduct a concurrent private placement of LLC membership interests. See “—Rights Offering and LLC Concurrent Private Placement.”

The Bridge Loan Agreement contains default provisions that include a material breach of the Rights Offering Letter Agreement and others that are customary for facilities of this type, which are subject to customary grace periods and materiality thresholds, including, among other things, defaults related to payment failures, failure to comply with covenants, misrepresentations, defaults under other material indebtedness, the occurrence of a “change of control”, bankruptcy and related events, material judgments, specified changes in control of the Company and invalidity of the loan documents. If an event of default occurs under the Bridge Loan Agreement, the lenders may, among other things, declare the Bridge Loan immediately payable and foreclose on the collateral. The Bridge Loan Agreement requires prepayments with the proceeds from certain sales of assets, the Rights Offering and any Substitute Transaction. The Bridge Loan may be prepaid without penalty or premium.

Capital lease

Notes payable

Tax increment financing

In February 2007, the subsidiary of the LLC that constructed the Wood River plant received $6.0 million from the proceeds of a tax increment revenue note issued by the City of Wood River, Nebraska. The proceeds funded improvements to property owned by the subsidiary. The City of Wood River will pay the principal and interest of the note from the incremental increase in the property taxes related to the improvements made to the property. The proceeds have been recorded as a liability which is reduced as the subsidiary of the LLC remits property taxes to the City of Wood River, which began in 2008 and will continue through 2021.

Rights Offering and LLC Concurrent Private Placement

In connection with the Bridge Loan Agreement, on September 24, 2010, the Company entered into the Rights Offering Letter Agreement with the Bridge Loan Lenders pursuant to which the Company agreed to use its commercially reasonable best efforts to commence the Rights Offering. The Rights Offering will entail a distribution to our common stockholders of rights to purchase depositary shares representing fractional interests in a new series of Series A Non-Voting Convertible Preferred Stock. Concurrent with the Rights Offering, the LLC will conduct a private placement of LLC interests. The LLC’s concurrent private placement will be structured so as to provide the holders of the membership interests in the LLC (other than BioFuel Energy Corp.) with a private placement that is economically equivalent to the Rights Offering. The combined offering size of the Rights Offering and the concurrent private placement is anticipated to be approximately $44.0 million. The Company would use the proceeds of the Rights Offering and the LLC’s concurrent private placement to (i) repay in full the Bridge Loan, (ii) repay in full its obligations under the Subordinated Debt, (iii) repay certain amounts owed to Cargill, and (iv) pay certain fees and expenses incurred in connection with the Rights Offering and the LLC’s concurrent private placement.

The provisions of the Rights Offering Letter Agreement permit the Company to solicit, participate in, initiate or facilitate discussions or negotiations with, or provide any information to, any person or group of persons concerning a Substitute Transaction that would result in the (a) repayment in full of all amounts outstanding under the Bridge Loan Agreement, (b) repayment in full of all amounts under the Subordinated Debt and (c) repay certain amounts owed to Cargill. If the Company signs a definitive agreement relating to a Substitute Transaction, it will pay the Bridge Loan Lenders a termination fee of $350,000.

The Bridge Loan Lenders agreed to (i) participate in the Rights Offering for their full pro rata share pursuant to the Basic Commitment and (ii) purchase all of the available depositary shares not otherwise sold in the Rights Offering pursuant to the Backstop Commitment. Notwithstanding the foregoing, the Rights Offering Letter Agreement provides that (a) the Bridge Loan Lenders may reduce the number of depositary shares that the Bridge Loan Lenders would otherwise be obligated to purchase pursuant to the Basic Commitment and/or Backstop Commitment or (b) the Company may reduce the aggregate number of depositary shares offered in the Rights Offering in the event the Bridge Loan Lenders determine, in their sole discretion, but after consultation with the Company, that the consummation of the Rights Offering, the Basic Commitment and/or the Backstop Commitment would result in adverse tax, legal or regulatory consequences to the Company or any of the Bridge Loan Lenders. In the event of a backstop reduction, the Rights Offering would proceed with the Company and the Bridge Loan Lenders using their commercially reasonable best efforts to structure and consummate an alternative transaction to take the place of the issuance of the depositary shares not purchased in the Rights Offering. In consideration of the Backstop Commitment for a combined $40 million Rights Offering, the Company paid the Bridge Loan Lenders $0.7 million on September 24, 2010. If the amount of the Rights Offering is increased above $40 million, an additional fee of 4% of the excess will be payable to the Bridge Loan Lenders.

Off-balance sheet arrangements

Except for our operating leases, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Summary of critical accounting policies and significant estimates

The consolidated financial statements of BioFuel Energy Corp. included in this Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States. Note 2 to these consolidated financial statements contains a summary of our significant accounting policies, certain of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based on judgments by management using its knowledge and experience about the past and current events and assumptions regarding future events, all of which we consider to be reasonable. These judgments and estimates reflect the effects of matters that are inherently uncertain and that affect the carrying value of our assets and liabilities, the disclosure of contingent liabilities and reported amounts of expenses during the reporting period.

The accounting estimates and assumptions discussed in this section are those that we believe involve significant judgments and the most uncertainty. Changes in these estimates or assumptions could materially affect our financial position and results of operations and are therefore important to an understanding of our consolidated financial statements.

Recoverability of property, plant and equipment

The Company has two asset groups, its ethanol facility in Fairmont and its ethanol facility in Wood River, which are evaluated separately when considering whether the carrying value of these assets has been impaired. The Company continually monitors whether or not events or circumstances exist that would warrant impairment testing of its long-lived assets. In evaluating whether impairment testing should be performed, the Company considers several factors including projected production volumes at its facilities, projected ethanol and distillers grain prices that we expect to receive, and projected corn and natural gas costs we expect to incur. In the ethanol industry, operating margins, and consequently undiscounted future cash flows, are primarily driven by the crush spread. In the event that the crush spread is sufficiently depressed to result in negative operating cash flow at its facilities, the Company will evaluate whether or not an impairment of the carrying value of its long-lives assets has occurred. Recoverability is measured by comparing the carrying value of an asset with estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the risk involved, quoted market prices or appraised values, depending on the nature of the assets. As of September 30, 2010, at the current crush spread, cash flow from operations suggests the carrying values of the Company’s long-lived assets are recoverable. Therefore no recoverability test was performed.

Income Taxes

The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company regularly reviews historical and anticipated future pre-tax results of operations to determine whether the Company will be able to realize the benefit of its deferred tax assets. A valuation allowance is required to reduce the potential deferred tax asset when it is more likely than not that all or some portion of the potential deferred tax asset will not be realized due to the lack of sufficient taxable income. The most significant component of our deferred tax asset balance relates to our net operating loss and credit carryforwards. The Company may reduce the aggregate number of depositary shares offered in the Rights Offering in the event the Bridge Loan Lenders determine, in their sole discretion, but after consultation with the Company, that the consummation of the Rights Offering, the Basic Commitment and/or the Backstop Commitment would result in adverse tax consequences to the Company, including limiting our ability to use our net operating loss and credit carryforwards. As the Company has incurred losses since its inception and expects to continue to incur tax losses for the foreseeable future, we will provide a valuation allowance against all deferred tax assets until the Company believes that such assets will be realized.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. Unless otherwise discussed, our management believes that the impact of recently issued standards that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are subject to significant risks relating to the prices of four primary commodities: corn and natural gas, our principal production inputs, and ethanol and distillers grain, our principal products. These commodities are also subject to geographic basis differentials, which can vary considerably. In recent years, ethanol prices have been primarily influenced by gasoline prices, the availability of other gasoline additives and federal, state and local laws, regulations, subsidies and tariffs. Distillers grain prices tend to be influenced by the prices of alternative animal feeds. However, in the short to intermediate term, logistical issues may have a significant impact on ethanol prices. In addition, the acceptance by livestock operators of the anticipated sharp increase in quantities of distillers grain production as new ethanol plants become operational could significantly depress its price.

We expect that lower ethanol prices will tend to result in lower profit margins even when corn prices decrease due to the significance of fixed costs. The price of ethanol is subject to wide fluctuations due to domestic and international supply and demand, infrastructure, government policies, including subsidies and tariffs, and numerous other factors. Ethanol prices are extremely volatile. From October 1, 2008 to September 30, 2010, the CBOT ethanol prices have fluctuated from a low of $1.40 per gallon in December 2008 to a high of $2.16 per gallon in December 2009 and averaged $1.69 per gallon during this period.

We expect that lower distillers grain prices will tend to result in lower profit margins. The selling prices we realize for our distillers grain are largely determined by market supply and demand, primarily from livestock operators and marketing companies in the U.S. and internationally. Distillers grain is sold by the ton and can either be sold “wet” or “dry”.

We anticipate that higher corn prices will tend to result in lower profit margins, as it is unlikely that such an increase in costs can be passed on to ethanol customers. The availability as well as the price of corn is subject to wide fluctuations due to weather, carry-over supplies from the previous year or years, current crop yields, government agriculture policies, international supply and demand and numerous other factors. Using recent corn prices of $4.75 per bushel, we estimate that corn will represent approximately 77% of our operating costs. Historically, the spot price of corn tends to rise during the spring planting season in May and June and tends to decrease during the fall harvest in October and November. From October 1, 2008 to September 30, 2010 the CBOT price of corn has fluctuated from a low of $3.01 per bushel in September 2009 to a high of $5.22 per bushel in September 2010 and averaged $3.79 per bushel during this period.

Higher natural gas prices will tend to reduce our profit margin, as it is unlikely that such an increase in costs can be passed on to ethanol customers. Natural gas prices and availability are affected by weather, overall economic conditions, oil prices and numerous other factors. Using recent corn prices of $4.75 per bushel and recent natural gas prices of $4.00 per Mmbtu, we estimate that natural gas will represent approximately 6% of our operating costs. Historically, the spot price of natural gas tends to be highest during the heating and cooling seasons and tends to decrease during the spring and fall. From October 1, 2008 to September 30, 2010, the Nymex price of natural gas has fluctuated from a low of $2.51 per Mmbtu in September 2009 to a high of $7.73 per Mmbtu in October 2008 and averaged $4.59 per Mmbtu during this period.

To reduce the risks implicit in price fluctuations of these four principal commodities and variations in interest rates, we plan to continuously monitor these markets and to hedge a portion of our exposure, provided we have the financial resources to do so. In hedging, we may buy or sell exchange-traded commodities futures or options, or enter into swaps or other hedging arrangements. While there is an active futures market for corn and natural gas, the futures market for ethanol is still in its infancy and very illiquid, and we do not believe a futures market for distillers grain currently exists. Although we will attempt to link our hedging activities such that sales of ethanol and distillers grain match pricing of corn and natural gas, there is a limited ability to do this against the current forward or futures market for ethanol and corn. Consequently, our hedging of ethanol and distillers grain may be limited or have limited effectiveness due to the nature of these markets. Due to the Company’s limited liquidity resources and the potential for required postings of significant cash collateral or margin deposits resulting from changes in commodity prices associated with hedging activities, the Company is currently unable to hedge with third-party brokers. We also may vary the amount of hedging activities we undertake, and may choose to not engage in hedging transactions at all. As a result, our operations and financial position may be adversely affected by increases in the price of corn or natural gas or decreases in the price of ethanol or unleaded gasoline.

We have prepared a sensitivity analysis as set forth below to estimate our exposure to market risk with respect to our projected corn and natural gas requirements and our ethanol and distillers grain sales for the last three months of 2010. Market risk related to these factors is estimated as the potential change in pre-tax income, resulting from a hypothetical 10% adverse change in the cost of our corn and natural gas requirements and the selling price of our ethanol and distillers grain sales based on current prices as of September 30, 2010, excluding activity we may undertake related to corn and natural gas forward and futures contracts used to hedge our market risk. Actual results may vary from these amounts due to various factors including significant increases or decreases in the LLC’s production capacity during the last three months of 2010.

	Volume Requirements		Units	Price per Unit at September 30, 2010		Hypothetical Adverse Change in Price			Change in Three months ended December 31, 2010 Pre-tax Income
	(in millions)								(in millions)

Ethanol		58.1	Gallons	$	1.99		10	%	$	(11.6	)
Dry Distillers		0.1	Tons	$	118.83		10	%	$	(1.2	)
Wet Distillers		0.1	Tons	$	38.00		10	%	$	(0.4	)
Corn		20.7	Bushels	$	4.56		10	%	$	(9.4	)
Natural Gas		1.6	Mmbtu	$	4.08		10	%	$	(0.7	)

We are subject to interest rate risk in connection with our Senior Debt facility. Under the facility, our bank borrowings bear interest at a floating rate based, at our option, on LIBOR or an alternate base rate. As of September 30, 2010, we had borrowed $192.5 million under our Senior Debt facility. A hypothetical 100 basis points increase in interest rates under our Senior Debt facility would result in an increase of $1,925,000 on our annual interest expense.

At September 30, 2010, we had $10.9 million of cash and equivalents invested in both standard cash accounts and money market mutual funds held at three financial institutions, which is in excess of FDIC insurance limits. The money market mutual funds are not invested in any auction rate securities.

ITEM 4. CONTROLS AND PROCEDURES

Controls and Procedures

The Company’s management carried out an evaluation, as required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as of the end of our last fiscal quarter. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report on Form 10-Q, such that the information relating to the Company and its consolidated subsidiaries required to be disclosed in our Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Office and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

In addition, the Company’s management carried out an evaluation, as required by Rule 13a-15(d) of the Exchange Act, with the participation of our Chief Executive Officer and our Chief Financial Officer, of changes in the Company’s internal control over financial reporting. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that no change in internal control over financial reporting occurred during the quarter ended September 30, 2010, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A.

RISK FACTORS

There have been no material changes to the risks to our business from those described under the caption “Risk Factors” in our Registration Statement on Form S-1 filed with the SEC on October 18, 2010.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The sales of the securities of the registrant listed below were not registered under the Securities Act because they were sold in transactions exempt from registration pursuant to Section 4(2) of the Securities Act.

Warrants under Bridge Loan Agreement

On September 24, 2010, we entered into a loan agreement (which we refer to as the “Bridge Loan Agreement”) with Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd., Greenlight Reinsurance, Ltd. (which we refer to collectively as the “Greenlight Parties”) and Third Point Loan LLC (which we refer to as “Third Point” and, together with the Greenlight Parties, as the “Backstop Parties”) and Greenlight APE, LLC, as administrative agent, pursuant to which we borrowed $19,421,000 (which we refer to as the “Bridge Loan”). The Bridge Loan matures on March 24, 2011, and in the event the Bridge Loan is not paid in full on or before that date, the Bridge Loan Agreement provides that we will issue warrants to the Backstop Parties exercisable at an exercise price of $0.01 per share for an aggregate of 15% of our common stock on a fully diluted basis as of the date the warrants are issued. A form of warrant is included in the Bridge Loan Agreement, which is incorporated by reference as Exhibit 10.1 to this quarterly report.

Cargill Stock Payment

On September 23, 2010, we entered into a letter agreement with Cargill, Incorporated (“Cargill”), Cargill Commodity Services, Inc., BFE Operating Company, LLC, Pioneer Trail Energy, LLC and Buffalo Lake Energy, LLC (which we refer to as the “Cargill Letter”).

We and Cargill agreed in the Cargill Letter that upon successful completion of our planned rights offering (i) we will pay Cargill $2,800,828 (which we refer to as the “Cargill Cash Payment”) pursuant to the terms of the agreement dated January 14, 2009 by and between us and Cargill (which we refer to as the “Settlement Agreement”) and, as contemplated by the Settlement Agreement, Cargill will forgive a like amount of the payable under the Settlement Agreement and (ii) upon receipt of the Cargill Cash Payment, Cargill will forgive the remaining payable under the Settlement Agreement in exchange for depositary shares in an amount equal to approximately $6,000,000 (which we refer to as the “Cargill Stock Payment”).

The depositary shares that will make up the Cargill Stock Payment will be issued to Cargill on the 12th business day following the consummation of the planned rights offering and will be valued at a per share price equal to the average of the volume weighted averages of the trading prices of our common stock, as such prices are reported on The Nasdaq Global Market, for the 10 consecutive trading days ending on the second trading day immediately preceding the date such depositary shares are issued to Cargill. The depositary shares to be issued to Cargill will therefore be issued after the depositary shares that will be issued upon expiration of the rights offering but will have the same rights and preferences as the depositary shares that will be issued upon expiration of the rights offering. The depositary shares to be issued to Cargill are not being registered or sold in the rights offering. In order to issue the depositary shares that will make up the Cargill Stock Payment, we expect to issue and deposit with the depositary a number of additional shares of Series A Non-Voting Convertible Preferred Stock that corresponds to the aggregate fractional interests in shares of Series A Non-Voting Convertible Preferred Stock that the newly issued depositary shares represent. In the event that an insufficient number of authorized shares of Series A Non-Voting Convertible Preferred Stock are available for such issuance and deposit with the depositary, we expect to establish an alternative method for satisfying the Cargill Stock Payment that is satisfactory to us, Cargill and the Backstop Parties.

Backstop Commitment

In connection with the Bridge Loan Agreement, on September 24, 2010, we entered into a Rights Offering Letter Agreement (the “Rights Offering Letter Agreement”) with the Backstop Parties.

Subject to the terms and conditions set forth in the Rights Offering Letter Agreement, the Backstop Parties have agreed to purchase immediately prior to expiration of the planned rights offering all of the available depositary shares not otherwise sold in the rights offering following the exercise of all other holders’ basic subscription privileges and over-subscription privileges (which we refer to as the “Backstop Commitment”). The price per depositary share paid by the Backstop Parties pursuant to the Backstop Commitment will be equal to the price paid by the other holders in the rights offering. Any depositary shares purchased pursuant to the Backstop Commitment will be purchased directly from us. The number of depositary shares subject to purchase by the Backstop Parties pursuant to the Backstop Commitment is subject to reduction in certain circumstances as described in the prospectus included in the registration statement we filed with the SEC on October 18, 2010.

ITEM 6.		EXHIBITS .

Exhibit Number		Exhibit

3.1		Amended and Restated Certificate of Incorporation of BioFuel Energy Corp., incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2007.

3.2		BioFuel Energy Corp. Bylaws, as Amended and Restated, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 23, 2009.

10.1		Loan Agreement dated as of September 24, 2010, by and among BioFuel Energy Corp., Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd., Greenlight Reinsurance, Ltd. and Third Point Loan LLC and Greenlight APE, LLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.2		Rights Offering Letter Agreement dated as of September 24, 2010, by and among BioFuel Energy Corp., Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd., Greenlight Reinsurance, Ltd. and Third Point Loan LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.3		Voting Agreement dated as of September 24, 2010 by Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd. and Greenlight Reinsurance, Ltd. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.4		Voting Agreement dated as of September 24, 2010 by Third Point Loan LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.5		Letter Agreement dated as of September 23, 2010, by and among BioFuel Energy Corp., BFE Operating Company, LLC, Pioneer Trail Energy, LLC, Buffalo Lake Energy, LLC, Cargill, Incorporated and Cargill Commodity Services, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.6		Waiver Letter, dated September 24, 2010, by Scott H. Pearce, President and Chief Executive Officer, Kelly G. Maguire, Executive Vice President and Chief Financial Officer, Doug Anderson, Vice President of Operations, and Mark Zoeller, Vice President and General Counsel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed September 30, 2010).

10.7		Executive Employment Agreement dated as of August 31, 2010 between BioFuel Energy, LLC and Scott H. Pearce, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.8		Executive Employment Agreement dated as of August 31, 2010 between BioFuel Energy, LLC and Kelly G. Maguire, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.9		Offer of Continued Employment dated as of August 31, 2010 between BioFuel Energy, LLC and Doug Anderson, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.10		Offer of Continued Employment dated as of August 31, 2010 between BioFuel Energy, LLC and Mark Zoeller, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

31.1		Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

31.2		Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

32.1		Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

32.2		Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

99.1		Press Release Announcing Results for Third Quarter of 2010.

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.

	BIOFUEL ENERGY CORP.
	(Registrant)

Date: November 11, 2010	By:	/s/ Scott H. Pearce
	Scott H. Pearce,
	President,
	Chief Executive Officer and Director

Date: November 11, 2010	By:	/s/ Kelly G. Maguire
	Kelly G. Maguire,
	Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit Number		Exhibit

3.1		Amended and Restated Certificate of Incorporation of BioFuel Energy Corp., incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 19, 2007.

3.2		BioFuel Energy Corp. Bylaws, as Amended and Restated, incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 23, 2009.

10.1		Loan Agreement dated as of September 24, 2010, by and among BioFuel Energy Corp., Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd., Greenlight Reinsurance, Ltd. and Third Point Loan LLC and Greenlight APE, LLC, as administrative agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.2		Rights Offering Letter Agreement dated as of September 24, 2010, by and among BioFuel Energy Corp., Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd., Greenlight Reinsurance, Ltd. and Third Point Loan LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.3		Voting Agreement dated as of September 24, 2010 by Greenlight Capital, LP, Greenlight Capital Qualified, LP, Greenlight Capital (Gold), LP, Greenlight Capital Offshore Partners, Greenlight Capital Offshore Master (Gold), Ltd. and Greenlight Reinsurance, Ltd. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.4		Voting Agreement dated as of September 24, 2010 by Third Point Loan LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.5		Letter Agreement dated as of September 23, 2010, by and among BioFuel Energy Corp., BFE Operating Company, LLC, Pioneer Trail Energy, LLC, Buffalo Lake Energy, LLC, Cargill, Incorporated and Cargill Commodity Services, Inc. (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed September 27, 2010).

10.6		Waiver Letter, dated September 24, 2010, by Scott H. Pearce, President and Chief Executive Officer, Kelly G. Maguire, Executive Vice President and Chief Financial Officer, Doug Anderson, Vice President of Operations, and Mark Zoeller, Vice President and General Counsel (incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed September 30, 2010).

10.7		Executive Employment Agreement dated as of August 31, 2010 between BioFuel Energy, LLC and Scott H. Pearce, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.8		Executive Employment Agreement dated as of August 31, 2010 between BioFuel Energy, LLC and Kelly G. Maguire, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.9		Offer of Continued Employment dated as of August 31, 2010 between BioFuel Energy, LLC and Doug Anderson, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

10.10		Offer of Continued Employment dated as of August 31, 2010 between BioFuel Energy, LLC and Mark Zoeller, incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on September 3, 2010.

31.1		Certification of the Company’s Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

31.2		Certification of the Company’s Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 7241).

32.1		Certification of the Company’s Chief Executive Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

32.2		Certification of the Company’s Chief Financial Officer Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).

99.1		Press Release Announcing Results for Third Quarter of 2010.

TABLE OF CONTENTS

Part I. Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II. Other Information Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

GRBK 10-Q Quarter ended Sept. 30, 2010